Debate resumed (Order, 22 March).
Question again proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
In common with the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), I too drive a London taxi, and no reasonable offer will be refused.
This is the coalition Government’s fourth Budget—a Budget determined to stay the course and fill the sink-hole of debt left to us by the last Administration. Thanks to our actions, the deficit is down by a third—from 11% of gross domestic product under Labour to a forecast 7% this year. It is set to fall even lower to as little as 2% by 2017-18. All the while, we have kept interest rates at a record low and created 1.25 million new jobs while reducing the number of workless households by 250,000.
Local government, which accounts for a quarter of all public spending, is doing its bit to help to pay off Labour’s deficit—and the result? Since the general election, according to the Local Government Association’s own polling, residents’ satisfaction with their councils has increased. Ipsos MORI has found that two thirds of residents have not noticed any changes in the quality of council services. Well-run councils are making sensible savings, protecting front-line services and keeping council tax down. Of course more savings need to be made to pay off Labour’s debt, but we are on the side of people with gumption who protect and enhance public services, so this Budget is about rewarding aspiration and boosting growth; it is about helping businesses to create jobs, and about giving a leg up to wannabe home owners.
The housing market is critical to Britain’s economic success, yet one of the most tragic effects of Labour’s toxic legacy was its impact on that market. Whereas Margaret Thatcher gave a generation the hope of owning their own homes, Labour crushed their dreams, leaving us with a planning system bogged down by arcane rules and regulations, house building falling to its lowest peacetime rate since the 1920s, rising prices, falling mortgages, and tenants with no hope of buying. A lost generation of people were forced to stay where they were, living their best years in the hope that their lottery numbers might come up or the bank of mum and dad would bail them out. This is truly a toxic legacy.
As usual, the Secretary of State is making a very good case. If most people do not notice any difference in the service provided by local government despite all the cuts, does that serve as a lesson for central Government as well?
My hon. Friend makes a very reasonable point. My own Department in central Government has reduced its running costs by 41% in real terms, so we have led by example.
The Government have set about turning things around. This is a complex area, and the solution requires action on multiple fronts. We have taken three important steps. First, we are radically reforming the planning system to crank up the engine and get things moving. Secondly, we are giving builders certainty so that they can get Britain building. Thirdly, we are intervening dramatically to help people step on to the first rung of the housing ladder. It may be helpful if I set out our approach to each of those issues.
Will the Secretary of State tell me how under-occupancy relates to the mortgage relief schemes that the Treasury announced last week? If, for example, one individual buys a house with three bedrooms, will that person be subject to the under-occupancy tests that apply to those in social housing?
I think that only the Labour party would confuse taxation with entitlement to benefit. As the right hon. Gentleman knows, since coming to office we have made great play of the need to release a number of unoccupied houses, and thus far we have made quite a push towards that. Every household in the right hon. Gentleman’s constituency is now paying £900 to subsidise housing benefit. If his council wants to pay more, it can do so.
No. The right hon. Gentleman has had his chance to intervene, and his intervention was not very good.
Let me deal first with our reforms of the planning system. Labour’s top-down, centralist approach built nothing but resentment. Its regional strategies added a layer of red tape that paralysed planning. By the time of the general election, six years after Labour’s Planning and Compulsory Purchase Act 2004, only one in six councils had adopted a core strategy and only one in four had a five-year land supply.
Nor did Labour’s approach lead to better co-ordination. The regional spatial strategies of the unelected regional assemblies contradicted the regional economic strategies of the unelected regional development agencies. Fortunately, the Localism Act 2011 is now scrapping Labour’s regional planning. The national planning policy framework has streamlined 1,000 pages of confusing Whitehall guidance and placed local plans in pole position—safeguarding the green belt, introducing a new protection for valuable green spaces, amending bureaucratic change-of-use rules to make it easier to get redundant and empty buildings back into productive use, and kick-starting brownfield regeneration.
One innovation that has been introduced is a simplified planning system for business neighbourhoods, but very little progress seems to have been made in implementing that in Trafford Park, in my constituency. What will happen to speed up that process?
I will certainly have a look at the particular circumstances to which the hon. Lady refers. I have been pleased to see the growth in neighbourhood plans, which are analogous to what she is suggesting. Indeed, I visited a village in my constituency that is looking forward to introducing them. They give people and businesses a much bigger say.
I am grateful. City deals offer real flexibility for local communities, and we would like to work with the Department to secure a city deal for Telford. There is Homes and Communities Agency land on the ledger that could be shifted off, through a profit-sharing agreement with the Department, to make sure we get housing land and business development land. Is the Secretary of State willing to meet to talk about a city deal for Telford?
This is the second time the hon. Gentleman has asked whether I am willing to see him. I am; indeed, only this morning I sent out, at my own expense, for some high-quality tea and better biscuits for him. We are looking forward to seeing him.
Seven out of 10 councils have published a local plan, and the figure continues to rise. Nearly nine in 10 planning applications are approved—a 10-year high. Indications are that there are fewer planning appeals, meaning that local decision making is to the fore. The latest data from Glenigan show that planning approvals for new homes are up 62% year on year, and 33% up on the previous quarter.
However, brushing the cobwebs off the planning system is only part of the plan. As a result of Labour’s inaction, this country is crying out for more homes to meet that desperate demand, so this Government are helping to get development off the ground. Locally supported, once-mothballed large-scale sites—such as in Cranbrook, in Milton Keynes, in Eastern Quarry and in Wokingham—are now being kick-started. We should contrast that with Labour’s top-down eco-towns, which delivered not a single home.
Our programme is set to deliver 170,000 new affordable homes, almost 63,000 of which are already completed, by 2015. The Royal Institution of Chartered Surveyors says that home sales have reached their highest level in more than two and a half years, while builders from Barratt to Bovis say that Government schemes are driving increased sales, putting people back on the property path.
We can give moderate support to the expansion of the Firstbuy scheme, which sounds good. Indeed, I recently visited such a scheme on the old Jaguar site in my constituency, which has proved a great help. However, does the Secretary of State not agree that making the mortgage expansion scheme available to second home buyers would be quite obscene, given that we are imposing a bedroom tax on those who can ill afford it?
The hon. Gentleman makes a reasonable point, and if that were a way in which Mrs Pickles and I could obtain a second home in Frinton, it would indeed be a scandal, but that is certainly not the Government’s intention. However, in our endeavours to ensure that I do not end up with a nice little flat in Frinton, we have to be careful not to rule out people whose marriage has just broken down, or situations in which parents are acting as part-guarantors. By September, we will be able to satisfy the hon. Gentleman on this issue.
We know that the demand is there, but it is also clear that for many individuals in very good jobs the housing ladder simply remains out of reach. Under Labour the number of first-time buyers plummeted to a 30-year low. Labour’s 2005 manifesto promised 1 million more home owners, but home ownership fell by a third of a million in the last Parliament. The industry is clear about what lies at the root of the problem. The British Property Federation says:
“Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy”.
What does the Secretary of State think the mortgage guarantee scheme will do to house prices? Is there a danger of increased demand and no increase in supply, and prices going up?
The hon. Gentleman makes a reasonable point. However, housing prices are at a more reasonable level now, we will be increasing supply and of course there will be a check on the scheme, through the Bank of England, to see that it is renewed every three years. So the worries that he raises are not correct—
It is very kind of the right hon. Gentleman, who knows that I love intervening on him because I always get such a good response! It is supply that is wrong in this country; there is a national emergency in the supply of affordable housing. There are 1.5 million people on the minimum wage in this country. The waiting list in Kirklees has zoomed to having 17,500 people on it. These people do not have much money, they have little hope of ever buying their own home and they need a good affordable home now.
Of course they do, and it is a matter of regret that the number of affordable houses fell by 420,000-odd during Labour’s period in office, and we see a way in which we can achieve a number of affordable houses. As I said, we are well on track to deliver 170,000 and I hope that the hon. Gentleman will be pleased about that. I wish to make this contrast for him, because we have the benefit of the Leader of the Opposition’s remarks on Labour’s housing plans. He says:
“We didn’t do enough... I don’t have a solution for this, but in the end government has to invest in housing, and...it’s a massive challenge”.
I think we can all agree with that—we can all unite behind those principles—so where the last Administration wrung their hands, this Government are stepping in. In the past couple of years, we have made sure that first-time buyers and those looking to buy a brand-new property have been given a helping hand. We also reinvigorated the right to buy, building mixed communities, more affordable homes and giving social tenants a chance to move up the housing ladder. This Government believe in extending opportunity to everyone who works hard and wants to do so.
The Home Builders Federation has said:
“If people can’t buy, builders can’t build”.
It has also said that “people’s inability to buy” has been the biggest “constraint” on house building. That is why in the Budget we announced our help to buy scheme. It is here to help in two ways: it is offering an equitable loan and a mortgage guarantee.
Given that 60% of homes built in central London are being sold to overseas buyers, how does the Secretary of State think that the help to buy scheme will affect the prices of those properties and people’s ability to enter the housing market if he does not deal with that problem?
This scheme will not be available for foreign buyers; this is a scheme to help people from this country. That situation did not happen overnight, and the hon. Gentleman’s own Government signally failed to do anything about it. It is perhaps apposite for me to raise the issues to do with social housing.
As well as rewarding those who want to get on, we are taking tough action to tackle those who want a free ride and who are abusing the housing system. We are announcing today new measures to stop rogue landlords cashing in from renting homes to illegal migrants and we are also ensuring fair play in the allocation of taxpayer-funded social housing. We are tackling the widespread perception that the way social housing is allocated is unfair and favours foreign migrants over local people and members of the armed services.
It is true that one in 10 of all the new social housing tenancies in England go to a foreign migrant whereas in London one in five social housing tenancies belong to a foreign migrant. That is not fair to people who have worked hard and paid their taxes in Britain, so new rules will ensure that councils give priority to local people and to the armed forces when allocating social housing. That tough action will tackle the pull factors that led to unsustainable immigration under Labour and it will help community cohesion by ensuring fair play and removing the perception of unfairness that extremists exploit.
I am sure the right hon. Gentleman is very keen that the work force should be mobile and able to move around the country to where there is work. However, would that not make the person moving into an area no longer a local, meaning that they would not qualify for social housing?
As the hon. Lady knows, under this Government and the previous Government a number of schemes have enabled tenants in social housing to swap between local authorities. Those schemes will continue to operate.
We are offering a simple and proportionate response to housing needs. As my second favourite member of the Labour party, Lord Mandelson, remarked last week:
“I can’t quite remember which member of the government it was who claimed to have abolished boom and bust. Well, we abolished boom”.
Last week, Labour was again playing the politics of envy and division, attacking the fact that we are helping hard-working families in middle England, in both the north and the south. Let me be clear for Labour’s benefit. We are not about to introduce 110% or even 100% mortgages for those who cannot afford to pay, but 95% mortgages for people who, but for the financial crisis, could have put enough money aside.
The checks are in place. Applicants will need to prove they can repay the loan before they pick up the front door key. As I said to the hon. Member for Coventry North West (Mr Robinson), this is not a scheme for second home owners, but the rules need to be carefully worded so we do not slam the door on parents who want to do a bit for their kids or prevent people from rebuilding their lives after family breakdown. Unlike Labour, this Government have not given up on growing families who are in properties too small for their needs, buyers looking to make that first step, or tenants who believe they can aim higher. We will continue to work closely with the industry to do everything in our power to make sure home hopefuls realise their dreams.
Two schemes will be available. The first is the homebuy scheme, which will start from 1 April and is for new construction. From January next year, it will also be possible for buyers to purchase properties other than new builds.
The Government are giving the housing market a kick-start and are maintaining momentum on supply. On planning, we will be reducing planning burdens, making better use of empty buildings, bringing people back to live in town centres and supporting shops. There will be funding of more than £1 billion for thousands of new affordable and privately rented homes, for which we know there is demand. We are putting spades back into the ground and more workers back on site, and giving people more options over where they live.
We are also building on the success of our rejuvenated right to buy. Between July and September last year, numbers doubled, but we will go further. That is why we have put before Parliament regulations that will increase the discount for Londoners, where house prices are highest, to £100,000. The measure will come into effect from midnight tonight.
We are reducing waiting lists for tenants who are ready to move on. Under our schemes, new homes will be built to replace those sold. What is Labour’s response? The Local Government Association Labour group says that the new right to buy is
“a cynical move by the government which is in effect forcing a fire-sale of community assets.”
I am sorry that the shadow communities Minister, the hon. Member for Derby North (Chris Williamson), is not in the Chamber. He too attacked the scheme and bemoaned the fact that in the 1980s,
“we saw council houses being sold off in their millions, and now the Government are at it again.”—[Official Report, 6 March 2012; Vol. 541, c. 241WH.]
As the late Alan Freeman would have said, “Not half we ain’t.”
Labour are the enemies of aspiration. Every council tenant on every council estate who wanted to work hard and move up had the ladder of opportunity kicked away from them under Labour. It will be restored by the coalition. The Government have accepted Michael Heseltine’s proposals for devolving power to local areas, a natural extension of the measures in the Localism Act 2011. The Government are taking decisive action in favour of families with ambition.
The head of the CBI said that
“our call for a focus on the short-term boost of housing has been heeded, alongside an increase in longer-term big ticket infrastructure spending…by shifting £6 billion to housing and infrastructure, the Government has sowed the seeds for growth and jobs.”
The Budget is tackling Labour’s toxic legacy. It is prising open the door of opportunity and heralding a day long overdue, when those who have put everything into this country finally get the chance to own a little piece of the place they call home.
I commend the Budget to the House.
I draw the attention of the House to an indirect interest, declarable but not registerable, as my wife receives rental income from a property.
We welcome this opportunity to discuss the Budget and housing. The housing crisis has come upon us over many years—people living longer, a rising population, the breakdown of relationships and new families looking for a secure home. There is rising demand but not enough supply. The well housed—the majority—are affected only when they think about where their children can afford to live, whether they want to rent or to buy; while the younger generation, priced out of the market, see their dream of home ownership recede into the distance.
The Minister responsible for planning, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), expressed the consequences eloquently in his Policy Exchange speech earlier this year, when he talked about the misery of young families forced to grow up in tiny flats with no outside space, and working men and women in their 20s and 30s having to live with their parents or share bedrooms with friends. Doing something about that is a task for all of us. We have to harness land, money and consent to build the communities we need so that young people and families can build a better future.
Ministers have made big claims for what was announced in the Budget. Of course we welcome steps that will enable people to get a foot on the housing ladder, and where they work, we will support them; after all, helping people to get a home is exactly what we have been calling on the Government to do. But the proof will lie in the detail of the schemes and on progress in actually managing to build more homes. As always with the Secretary of State, the issue is not so much his stated intention as his delivery. Perhaps that explains why we have had four major housing launches over the past three years and more than 300 announcements on housing; and why, in his recent speech to the Conservative spring conference on what he had actually achieved, the Secretary of State devoted three words to building more houses, and 194 words to talking about closing down a bar in the basement of his Department.
In the past few days, headline after headline has queried the Government’s grasp of the detail of its latest scheme. The Chancellor did not seem to know, and neither did the Secretary of State for Business, Innovation and Skills, whether the scheme could indeed act as a spare-home subsidy, as my right hon. Friend the shadow Chancellor memorably christened it; whereas they certainly know that they are forcing social tenants out of their own homes because they have a spare room.
Let us begin by examining the facts about the Government’s record. Housing starts fell by 11% last year to 98,000. The number of private homes started was down; the number of local authority homes started was down; and the number of housing association homes started was down—indeed, the figure of 19,460 was the lowest for eight years.
I will happily confirm that we did not build enough council houses, although that began to change in 2007. Indeed, 70,000 affordable homes for which this Government have tried to take credit in their target of 170,000 were started by the Labour Government.
I urge my right hon. Friend to resist the temptation raised by the Secretary of State to be too political, and commend to him the partnership work of Labour Tameside council and New Charter housing trust, which together have set the ambition and the reality of producing one affordable home a day for the next three years. That is Labour in action.
I welcome the efforts that my hon. Friend has described. I said a moment ago that this is a responsibility for all of us, but I cannot promise to resist the temptations presented by the Secretary of State, given what he had to say.
Ministers do not want to talk about housing starts, because the figures are bad, so instead they want to focus on completions. Let us have a look at them. The facts are pretty stark. The number of completions in England in each of the first two years of the coalition Government was lower than in any one of the 13 years of the Labour Government. In other words, we completed more homes in every one of those years than the Government have managed in either year since they were elected. Indeed, the Secretary of State has the dubious distinction of presiding over the lowest level of completions by any peacetime Government since the mid-1920s. That is some achievement. No wonder the construction industry has been so hard hit. Eighty thousand construction workers are out of work, and output has fallen by 8.2%, contributing a great deal to the absence of growth in the British economy. The rate of home ownership has fallen, and there are 136,000 fewer home owners than when the Government came to power. That is hitting the youngest hardest, because the average age of a first-time buyer is now 37.
Official statistics from the Secretary of State’s Homes and Communities Agency show that affordable housing starts collapsed in the last financial year by 68%; homelessness and rough sleeping are up by a third since the election; the number of families with children and/or a pregnant woman housed in bed-and-breakfast accommodation for six weeks or more has risen by over 800% since the coalition came together; and 125 councils have had families in bed-and-breakfast accommodation for six weeks or more. As private rents have continued their relentless rise and incomes are squeezed, more people in work have to claim housing benefit to help them pay the rent.
I am struggling with an inconsistency on the Labour Benches. The former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said that housing was essentially a private sector operation and that the public sector need not be involved in it.
I simply say to the hon. Gentleman that if he cares to look at the record of the Labour Government, he will see that 2 million more homes were built during those 13 years, 500,000 of which were affordable homes that we provided, and 1 million more families were able to buy their own home. That stands in comparison to the Government’s miserable record over the past two years.
My hon. Friend is correct. That is a consequence of the 60% cut.
The number of people on housing benefit has gone up by 300,000, almost entirely accounted for by people in work. When the Prime Minister launched NewBuy, the previous scheme, in March last year, we were told that it would help 100,000 people to get a mortgage. A year on, how many people has it actually helped? The answer is 1,500. Firstbuy, which was slightly more successful, has helped 6,000 people against a target of 16,500.
Then there is the strange case of the remarkably reclusive infrastructure guarantee. It was launched by the Chancellor in the autumn statement. He said that he would set aside £10 billion for investment in housing. It sounded good and we supported it, but we now know that not a single penny of it has yet been used to support house building. The facts are clear: lots of promises, precious little delivered, and not a lot for the Secretary of State to crow about.
Many of my constituents are fed up with listening to Punch and Judy debates like this. They are getting tired of hearing, “They did this, but we didn’t do that.” Could we not offer the Government a proper agreement to discuss the way forward to deliver affordable housing now, because it is a national emergency? Is there not a possibility that the parties in this House could get together for a change?
Well, I have already told the Secretary of State that when he has proposals that will work and succeed, I will support them. If he wants the benefit of further advice from the Opposition, I would be happy to see him in his office, especially if he is buying the tea and biscuits himself.
If the hon. Gentleman will bear with me, I wish to make a little more progress.
I will now turn to the Budget. I have some questions to put to the Secretary of State. We know that the Government have a soft spot for people who earn a lot of money, but why is he proposing that his new deposit and mortgage scheme should be made available to anyone earning any amount, including millionaires, so that they can buy a house worth up to £600,000? Why is he changing the rules in that way, given that Firstbuy is currently only for those with family incomes below £60,000, and given that the Treasury document published last Wednesday states that the scheme is meant to help
“households struggling to save for the high mortgage deposits required by lenders”?
How many struggling top rate taxpayers does he expect to take advantage of the new scheme? No doubt they will be very grateful to him for his generosity.
In respect of the mortgage guarantee element of the help-to-buy scheme, can the Secretary of State clarify once and for all whether people who already own a property will be able to use it to buy a second home? He did not quite answer that earlier—[Interruption.] No, he did not. On Thursday, the Secretary of State for Business, Innovation and Skills could not answer the question. When asked, he simply said:
“The scheme has not yet been designed in detail.”—[Official Report, 21 March 2013; Vol. 560, c. 1102.]
At the same time, the Minister for Housing told “World at One” that second-home purchases would not be allowed. The BBC then reported that No. 10 had had to clarify the position. It seemed that the Housing Minister had been referring to another part of the help-to-buy scheme relating to equity loans. So yesterday we all turned on “The Andrew Marr Show” to watch the Chief Secretary to the Treasury, and far from ruling it out categorically, he said, in a formulation that the Secretary of State has repeated today:
“Our intention is not to help people to buy second homes”.
If the Government do not want it to happen, why do Ministers not simply make it clear that it is not going to happen? Otherwise, reminiscent of last year’s Budget, we will have fanfare followed by farce.
In the event that these schemes are over-subscribed, what criteria will be used to determine which applicants are going to get assistance? I listened very carefully to the Secretary of State when he said that foreign nationals would not be eligible for assistance from the scheme, but where in the Government’s scheme description does it say that foreign nationals will not be eligible? I have looked at the mortgage eligibility criteria, and they do not say that. Has he taken any advice on whether EU nationals who are resident in the UK will be barred by law from taking part in the scheme?
What estimate has the Secretary of State made of the impact that “help to buy” will have on the housing market, given that we know that it is the lack of supply that has led to high house prices? The Royal Institution of Chartered Surveyors has warned that the Government must be careful not to create “another housing bubble”. It seems that the scheme is not even a done deal with the lenders, because the Council of Mortgage Lenders has set out certain conditions that it wants to be met, or else, it warns, the scheme could be made “uneconomical”. How many additional homes, in total, does the Secretary of State think will be built as a result of the scheme?
Will my right hon. Friend also seek clarity on whether, in the event of a family break-up and a parent wishing to buy a home, that parent will be restricted in the number of bedrooms they can have in that home, or is aspiration only for some and not for others?
That is a very good question that has already been asked. I am very happy to give way to the Secretary of State if he wishes to answer it. Does he wish to answer? No, he does not.
We need a lot of new affordable homes because of the decision taken by the Government nearly three years ago to slash the affordable housing budget, when £4 billion was taken away. We are then asked to be grateful to the Secretary of State when we hear in the Budget announcements that an additional £225 million will be made available, although it seems that only £125 million of it will be spent before 2015. That figure is dwarfed by the original £4 billion cut. We are told that this is a time for tough choices. A quarter of a billion pounds was identified by the Secretary of State to try to persuade councils to collect the bins in the way that he thinks is correct. It was such a failure that only one council took him up on his offer. A quarter of a billion pounds and one council: think how many affordable homes that money could have been used to build! If the Government want to be taken seriously on affordable housing, they have to will the means. That is why we called for the 4G auction proceeds and the bankers’ bonus tax repetition to be used to build 125,000 new affordable homes to get the economy moving.
The Secretary of State referred to councils. We know that he is presiding over cuts to the local authority sector that are bigger than in any other part of the public sector and that the cuts are being unfairly applied. Councils need as much money as they can find to help, in part, to build homes. When the Secretary of State was asked about these cuts earlier this year in front of the departmental Select Committee, he said that in his view the cuts were “modest”. In private, however, it seems that his views are rather different. When it was reported last month that the Chancellor was looking for further cuts from certain Departments, including CLG, The Times said that
“sources close to Mr Pickles”—
[Interruption.] It certainly was not me. The Times said that
“sources close to Mr Pickles made clear that he was not accepting the latest reductions, arguing that council services had already been cut to the bone.”
It seems, therefore, that the Secretary of State’s private views are rather different from his public views. We are used to hearing Liberal Democrats say one thing to one audience and another thing to another, but I am surprised that the Secretary of State is also doing so.
This is a familiar record. The Secretary of State, as the statistics show, is not very good at getting things done. It is not just me who thinks that; the Chancellor does, too. Apparently the Chancellor was in a fiery mood at the Cabinet meeting following the loss of the triple A credit rating and challenged Ministers about the poor rate of growth. The Daily Telegraph reported:
“Eric Pickles, the Communities and Local Government Secretary, was given a ‘dressing down’ for failings in the Government’s flagship enterprise zone programme, according to sources.
With less than a month until he unveils his Budget, the Chancellor criticised Mr Pickles over figures that show that one in three enterprise zones is failing to attract enough businesses. Mr Pickles is then said to have attempted to deflect the blame on to Vince Cable, the Business Secretary, by accusing him of failing to convince foreign businesses to invest in the schemes.”
It is a very familiar story: Cabinet members are so busy fighting and blaming each other that it is no wonder that they cannot sort out the problems facing the country.
The reforms to the national planning policy framework were supposed to streamline the planning system, but it seems that they have left councils less able to decide applications quickly. The national rate of decisions taken on major applications within 13 weeks has fallen from 62% in 2011 to 57% in 2012, and the same is true of minor applications determined within eight weeks, which are down from 72% to 69%, and the transition period is about to finish.
The planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford, said recently that he wants further relaxation of the planning laws. We would be very interested to hear what he has in mind.
I am grateful to the right hon. Gentleman for giving way. May I confirm for him that the relaxation of planning laws introduced by the new planning Minister has been incredibly helpful to my constituents? It has ensured that work on three brownfield sites is now going ahead, which will be a great boon to the people of Gloucester.
The right hon. Gentleman also made a point earlier about the Secretary of State’s problems with delivery. Given that the right hon. Gentleman agreed earlier with one of my Liberal Democrat friends that delivery was a problem for his party when it was in power, is it not better to focus on the Budget announcements and—
I am grateful to the hon. Member for Gloucester (Richard Graham) for agreeing that the Secretary of State is having problems with the delivery of housing. I have already indicated that we will support any measures that will help.
Councils will have to make proper assessments of their housing need. On the Prime Minister’s announcement today on council and social housing and migration, the Secretary of State knows that people cannot just get off a plane and get a council house. He will be familiar, of course, with section 160A of the Housing Act 1996, and he will know that councils already have the power to put in place allocation schemes, because the previous Labour Government issued guidance in 2009 and an increasing number of them are doing so. It would be helpful if we could get clarity about precisely what is being proposed, given that the housing lead of the Local Government Association, Councillor Mike Jones, who is a Conservative, has queried the need for the guidance, and given that this morning’s papers reported that the Government plan to impose an expectation on councils. How exactly is it possible to impose an expectation on councils? [Interruption.] I say to the planning Minister that I have a little bit more experience of Government than him—and it shows.
Ministers are looking to councils to identify housing need, but I say to them that the Growth and Infrastructure Bill will not assist councils in doing so, because clause 1 threatens to take away the power of local communities to decide whether housing is provided. The planning Minister, who is being very vocal, said that “vanishingly few” councils would be caught by that provision. However, to judge by the latest figures, as many as 21 local authorities could be stripped of their democratic accountability in taking decisions on housing planning applications if developers choose to go straight to the Planning Inspectorate.
How does the planning Minister think that will assist communities to take responsibility for housing provision? All of us have to face up to the need to provide more homes. That is the point that he has been making. However, is it better to let developers decide where houses should be built or to allow communities to take that responsibility for themselves?
I turn, finally, to one of the effects of what the Government are doing, which was not mentioned by the Chancellor in his speech on Wednesday. That is the effect that the decisions taken by the Chancellor, the Secretary of State for Communities and Local Government and the Secretary of State for Work and Pensions will have on people on low incomes and their homes. So far in this debate, we have talked about the need to build homes so that people can move into them. I want to turn to the problem of people being forced out of their homes because of the Government’s bedroom tax and the Secretary of State’s poll tax.
One consequence of what the Government are doing is likely to be rising rent arrears. That is exactly what councils and housing associations up and down the country are anticipating. Last week, the evidence from the universal credit pilot showed rising rent arrears. That is creating a lot of uncertainty, not least for housing associations. A number of them have had credit rating downgrades recently. If lenders think that housing associations will have difficulty collecting rent, it could put up their borrowing costs, which could impact on their balance sheets and their ability to borrow. Ultimately, it will affect their ability to build the homes that the Secretary of State says he wants to see. All of that will create huge challenges for families, councils and housing associations, not least because of the debt that people will get into.
At the very time when the Chancellor has decided that the most important thing to do is to cut the top rate of tax, the Secretary of State for Communities and Local Government has brought in his new poll tax and the Secretary of State for Work and Pensions has brought in the bedroom tax. What is so astonishing is that they are both singling out one group of people in our society. Whether they are working, seeking work or unable to work, the people who will be affected are those on the very lowest incomes, because that is why they get council tax benefit and housing benefit.
Given that the fundamental problem in the country is a lack of growth in the economy—the Chancellor’s crowning failure—have Ministers paused for a second to consider what impact those two taxes will have on the economy? All the evidence shows that when people who are on low incomes have money, they tend to spend it. In Leeds, £9.4 million—[Interruption.] I know that the planning Minister, who is chuntering from a sedentary position, does not want to hear this, but the people on the lowest incomes in Leeds are going to lose £9.4 million that they do not have because of rent increases and council tax rises.
Incredibly, last week the Secretary of State tried to blame local authorities for his policy, when he said that they
“seek to persecute and to tax the poor.”—[Official Report, 18 March 2013; Vol. 560, c. 611.]
That is extraordinary. The only person who is to blame is the Secretary of State. It is his legislation. He is the reason why bills are landing on people’s doorsteps that many of them will find hard to pay. Ministers know that people will do their best to stay in their own home—indeed, the Government’s assessment expects that to happen—because they want to stay with their friends, family and community.
Is my right hon. Friend interested in research just released by the Centre for Local Economic Strategies which shows that the Government’s welfare reforms, and the loss to family incomes, mean that on average 80% of money lost will be lost to the local economy as a result of reduced local shopping, reduced use of local transport, and reduced socialising?
My hon. Friend is absolutely right: the reforms will have a damaging economic impact and be bad for families who cannot afford it, although they will try to stay if they can because they value community, friends, neighbours and a sense of place. Ministers know that even if people downsize, there are not enough smaller properties for them to move into. That is why this is a tax: people cannot avoid it because they cannot move.
My hon. Friend is right on the first point, although I am not entirely sure that the occupants are claiming housing benefit. We wait to be informed.
People with disabilities will be forced to move and the new home will have to be adapted all over again. Divorced dads who are trying to keep in contact with their children will be told that they have to pay the bedroom tax on the spare bedroom where they stay at the weekend, but as we know, some people will have no choice but to move. The final absurdity—the Chief Secretary should be interested in this—is that if people do move to the right sized property in the private rented sector, because of higher rents the housing benefit bill is likely to be bigger than that paid on the social home from which the family was forced out.
I will conclude now, because many other Members want to speak. I have been generous in giving way but I want to finish on this point.
Last Friday a constituent came to see me in my surgery. He is a man in his late 50s who has worked for the past 42 years, until last December when he became unwell. He currently has to live on £71 a week and has just received a council tax bill for £108.25. He is not sure how he is going to pay it and he asked me—it is quite something when someone says this to a Member of Parliament, because we had not met before—“Can I tell you that I can no longer keep the heating on in my flat because it costs me £25 a week and I do not have the money to pay it?”
The Chancellor, the Secretary of State and other Ministers are fond of telling us that we have to make really tough decisions, but I wonder how difficult it was to decide to give those on highest incomes a tax reduction at the beginning of next month, while imposing a reduction in council tax benefit and the bedroom tax on people. They are taking money from those who are poor—that is what we are talking about—and giving it to those who are rich. That is why they should scrap the cut to council tax benefit and get rid of the bedroom tax.
The Secretary of State was full of his usual bravado and occasional bluster in what he had to say, but the cold hard reality of the collision of his policies with people’s lives shows that those policies are not well thought out and are incapable of being delivered. Because of that record, we have a promise of growth that has not materialised, a promise of localism that is not what it seems, and a promise of homes that have not been built. This Chancellor, this Secretary of State, and this Budget have nothing to offer the people of Britain.
The Chancellor is a fiscal Conservative and monetary activist, and as such he eschewed shock and awe measures in this Budget, opting instead for sensible targeted relief that is welcome on this side of the House. Cuts to income tax mean that by 2015 a large number of income tax payers will receive a £700 cut compared with their tax bill of 2010. On child care, average two-child families with working mothers and fathers will get £2,400. Fuel duty has been frozen, and it is the longest freeze for two decades. The national insurance contribution cut of £2,000 is equivalent to someone just under average median earnings being taken on at no national insurance cost to an employer.
I support the house building programme that we have heard about. As someone on the dry end of the Conservative party economically, I have heard the criticism that it is Fannie Mae all over again. People wonder whether there will be lots of defaults when the interest-free period runs out, and whether the policy could lead to higher house prices because of supply constraints. I am sure I will hear those concerns again, but the reality is that we need an injection of confidence into British households. There is no question but that the ability to get on the housing ladder, including the encouragement to spend money, because consumer spending frequently attends the purchase of a new house, is the kind of confidence that the British consumer wants at this stage of the economic cycle.
Does my hon. Friend recognise that the key issue is the blockage in getting money to people and giving them the ability to borrow it in the first place? We expect our banks to ensure that they not only rebuild their balance sheets, but lend money and make it available.
My hon. Friend makes an interesting point.
There were no shock-and-awe measures in the Budget, because the Chancellor is probably right to believe that we are not approaching a lost Japanese decade. Nevertheless, I am concerned about the Office for Budget Responsibility growth projections; it forecasts growth of 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017. The forecast turns on one central OBR assumption that might be wrong. The OBR assumes that there is quite a large negative output gap—that, in simple terms, there is a lot of slack in the economy. Forecasting or estimating the output gap is very difficult. If its assumption is wrong, and if the output gap is smaller than it says, a huge amount of the £120 billion a year last year and the coming year is structural rather than cyclical. If that is the case, we will need shock-and-awe measures—deeper cuts than those implied in the spending envelope and, yes, a fiscal stimulus in deeper tax cuts.
On the one hand the hon. Gentleman calls for deeper cuts, but on the other hand, he spoke a few moments ago of the importance of consumer spending. In an earlier intervention, the hon. Member for Stretford and Urmston (Kate Green) said that 90% of the money for which those who are being penalised by the bedroom tax are responsible circulates locally. Surely if the Government take money out of the economy, we will see not consumer-led spending, but further contraction in the economy and further gaps.
Perhaps the hon. Gentleman did not hear the second part of my statement, when I mentioned deeper cuts in public spending and a fiscal stimulus with deeper tax cuts.
If we do not have the growth we want in the economy in the next 12 or 18 months, I would like capital gains tax holidays of the kind suggested by my right hon. Friend the Member for Wokingham (Mr Redwood), to get investment moneys circulating. I also believe there could be a case for deeper cuts in corporation tax to approximate more closely the Irish model; Ireland has 12.5% corporation tax, which makes it more of a magnet for foreign direct investment.
That said, the Conservative party has indicated that it has the technology should we need to go further and faster in fiscal consolidation. The Conservative economic affairs committee, which is chaired by my right hon. Friend the Member for Wokingham, has discussed proposals from colleagues for a suspension of the carbon price. A key cost that is undoubtedly hampering business confidence is that, in 2011, about one fifth of the energy bill paid by small and medium-sized enterprises was attributable to green, renewable policies. Considering whether we want a holiday from that, and certainly not going further than European countries, would seem sensible.
On Budget day, the Chancellor said two important things about monetary policy. First, he explicitly said that the Financial Policy Committee must co-ordinate better in future, under Mark Carney, with the Monetary Policy Committee. At the moment, the regulators are pulling in different directions. The MPC has pumped in £375 billion by printing electronic money in exchange for purchasing gilts from the commercial banks, but that credit is not flowing into the real economy. On the other hand, the Financial Services Authority, and its successor body the FPC, are telling the banks not to lend any of that money and to rebuild their capital position to de-leverage. Those two impulses fight against each other and it is entirely sensible for the Chancellor to say that the FPC and the MPC must co-ordinate better.
Secondly, the Chancellor talked about forward policy guidance via thresholds to commit to looser monetary policy for a set period. That has had a good effect in Canada and the United States, and it will give British business the confidence that interest rates will not be jacked up just as the recovery begins and that economic activity will not be choked off.
I support the Budget with qualifications.
I shall follow up shortly the points made by the hon. Member for Bury St Edmunds (Mr Ruffley) on the Bank of England, but first I draw the attention of the House to my entry in the Register of Members’ Financial Interests.
The big problem we face at the moment is lack of growth. Here we are, five years since the crisis hit most western developed economies, yet contrary to what has happened in the past, there is absolutely no sign that growth will return to this country.
With due respect to the hon. Gentleman, I anticipated that predictable nonsense. I am grateful to him for intervening, however, not least because he has given me another minute in which to make my case.
As the Office for Budget Responsibility points out, the recession is taking far longer to come out of than any we have seen previously. The principal factor is that in 2007-08 we had a complete collapse of our GDP and that situation has not been recovered in the past five years. Frankly, on the evidence presented by the Chancellor last week, I see little evidence that it is going to happen. As a result, we are borrowing very large sums of money: £120 billion last year, this year and next year.
As I was saying before the hon. Gentleman interrupted, in the Chancellor’s forecasts, yet again in the back three years of the forecast period we see an expectation that growth will go from 2.7% to 2.8% in 2017. That is exactly the same profile that we have seen in each of the Chancellor’s Budgets and autumn statements. The problem is that these sunny uplands are moving to the right each time he stands up. I cannot for the life of me see why anything will be any different in 2017 from the bleak outlook we see today. The problem is that as long as we have low growth we will have high levels of borrowing, and debt is now expected to peak at 85% of our GDP. When we advocate a different approach, the Conservatives and the Liberals say that we are talking about borrowing more, but this Government are borrowing more than they ever imagined they would in 2010, and they are doing so not to invest in things such as infrastructure, but because of the price of their economic failure. That is what many of us have a problem with.
I am grateful to the hon. Gentleman for his intervention, but not in the way he intended, because that is nonsense too. Incidentally, in the leaked document from John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, the Scottish Government too faced up to some difficult decisions. The difference is that I and—to give them credit—the coalition Government were open about the difficulties we faced, whereas the Scottish National party wanted to keep them secret from the Scottish people.
It seems that the Chancellor has given up on doing anything. As I said last week, we are in the middle of a lost decade—it happened to Japan and it is happening to us now—and there is no sign that the Government have any idea how to get out of it. The Government’s Budget response on infrastructure is fine, but it does not come along for two or three years. On housing, I agreed with everything that my right hon. Friend the Member for Leeds Central (Hilary Benn), the shadow Secretary of State, said. The problem is that last week’s announcement is more likely to create yet another housing bubble by driving up asset prices. Indeed, some of it might even sow the seeds that gave rise to the sub-prime mortgage problem we saw in the United States, because we are suffering from an acute lack of housing in just about every town and city in the country.
I was encouraged by what the planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), said over the summer. Unless we break through this logjam and get more housing built, prices will go up and up and people will face the same difficulties they did in the past. The irony is that we are not prepared to build houses, but we are prepared, it seems, to finance the inflation of a bubble in housing prices. That is absolutely the wrong thing to do. The bedroom tax illustrates the problem; there simply are not the houses for people whose income is being cut to move to. That illustrates the need to improve our housing infrastructure, although the problem applies to transport and energy as well. I do not object to some measures in the Budget, but nothing in it is likely to get our economy going.
The hon. Member for Bury St Edmunds referred to the Bank of England and said that the Chancellor of the Exchequer had effectively said, “I can’t do anything further in fiscal terms. It’s all up to the Bank of England now.” Most Members have warmly welcomed the appointment of Mark Carney. I think he will be a very good Governor, but with the best will in the world we cannot expect him to do everything the Government are supposed to be doing. It is useful that we can tell the markets what we think will happen to interest rates. I suspect that most people do not expect them to rise for the next two or three years, although they might rise in the United States, given that the US Government are following a different policy from that being followed here and in Europe.
I do not think, however, that the sort of measures the Chancellor has in mind and which the new Governor might announce in relation to forward guidance will do the trick and get our economy going. I have said before that quantitative easing has played its role and stabilised the banking system—I have supported what has been done so far—but there is little evidence of what additional QE would do for our economy. The risk is that the money simply goes into the bank vaults, not into the wider economy. The Bank will play its part, but monetary policy and fiscal policy have to be complementary, otherwise they simply will not work.
Time does not allow me to mention the eurozone, other than to say that the last week has confirmed my suspicion that the eurozone is almost psychologically incapable of sorting out its problems. Unless it does so, it will hold back growth not only in this country, but elsewhere. At the same time, I am committed to this country remaining part of the European Union—that is very important—although we need to use our influence. Governments can make a difference. In 2008-09, through the G20, Governments from across the world, from communist China to the Republican-led United States, came together and we did what was necessary to support our economies. And guess what? Our economy was growing in 2010. Look at it now.
I am delighted to take part in this debate. It is a pleasure to follow the right hon. Member for Edinburgh South West (Mr Darling). Some of his remarks would have had more bite if he had not left us borrowing £428 million every day of 2010. It is a credit to this coalition Government that that figure has been substantially reduced.
As the first Liberal Democrat speaking in this debate, I would not be doing my duty if I did not praise the Chancellor for the decision to raise the income tax threshold to £10,000. This is a long sought-after victory, which I very much welcome, which will see 2.5 million taxpayers—many of them low-paid women—taken out of tax and 20 million taxpayers getting a £700 smaller tax bill than they did under Labour.
I want to use my time primarily to talk about two measures that appear on page 40 of the Red Book. The first is the major step forward announced on zero-carbon homes and the achievement of the target in 2016, which appears in paragraph 1.109. I am delighted to see that. I am delighted, too, to see that the intention is now to increase the standard of energy efficiency of new buildings from October this year. I very much look forward to the announcement by the Department for Communities and Local Government, which is prefigured in the Red Book. I also very much welcome the statement that a decision on allowable solutions will be taken by the summer; the construction industry is certainly ready for this measure. The Zero Carbon Hub has done the preparatory work and the Green Building Council has been pressing for it. I would like to think that the decision reported in the Red Book is at least in part a response to what they have said and to early-day motion 1004, which covers the same ground.
I asked the Prime Minister at Prime Minister’s Question Time last November whether the Government still intended to be the greenest Government ever. I was pleased that he replied emphatically, “Yes”. I was even more pleased when, in a speech to the Royal Society on 4 February, he reiterated the Government’s commitment. I want to say to the Chancellor, the Chief Secretary and the Secretary of State for Communities and Local Government that, given the Prime Minister’s support, there can be no excuse for delay. We need an urgent decision on the carbon price for offsite generation for zero-carbon homes. The Red Book says that the decision will be taken by the Department for Communities and Local Government. I am sure that the DCLG and Her Majesty’s Treasury can sort out their respective responsibilities, but can we ensure that there is no delay in taking that decision?
The second point I want to bring to the House’s attention is the excellent news of more investment in homes for rent, with £225 million and 15,000 starts planned before 2015. That comes on top of 170,000 new homes planned for rent and 150,000 decent homes brought up to standard. There are many positive features to our housing programme. Like everybody else in the Chamber, I wish it was going further and faster, but I do not believe we should listen for a moment to the shadow Secretary of State for Communities and Local Government and his complaints, when his Administration reduced the stock of affordable homes by 420,000 and sold so many homes without having a replacement policy—a policy that Labour itself now admits was a failure. I welcome these housing measures in the Budget, but there is still much more to do to improve the quality of our 20 million existing homes and to build the many more we need to the highest environmental standards. I look forward to the coalition making yet more progress in the remaining two and a half years before the general election.
Listening to Government Members this evening, one would think that there was no economic situation in 2008, but in fact it started in America because of the irresponsibility of the bankers—not only in this country, but in America. It is also worth reminding the House, when the Government try to blame those on the Labour Benches, that in his last four or five weeks as President, George Bush pumped billions into the American economy, because he realised right away that the fault lay with the American banks.
I remind Members, too, of the catastrophe associated with Lehman Brothers, with Fannie Mae and Freddie Mac, for example. We need to remind the Government of those aspects because the Government were very light, to say the least, when it came to dealing with the bankers who caused the problem in the first place. What they have tried to do is to blame the previous Government for things that they never understood at the time. I remember that when we were in government, their solution to the problem was “Oh, well, we have too much red tape and we must cut it”. I do not remember any Members now on the Government Benches providing any solutions whatever at the time, yet they are pretty good at coming here and trying to blame us for a situation that their friends, the bankers, caused in the first place.
It was the previous Conservative Government, and that has never been acknowledged, so the hon. Gentleman should not rewrite history.
Another interesting aspect of the present economic situation is that local government has taken the brunt—33.3%—of the cuts. People talk about growth, without realising that it is only through local government that growth will happen. It is worth noting that in the west midlands, for example, unemployment is probably the highest in the country with about 8.5% unemployed, while for young people up and down the country it is as high as 21%. Given those levels of youth unemployment over which this Chancellor is presiding, I think it is offensive when he talks about aspiration and the aspiration nation. The UK has the third worst level of youth unemployment in the developed world; of the OECD countries, only Spain and Greece have higher levels. Since the recession started, the UK has experienced the fastest rise in youth unemployment of the G8 countries.
Speaking about aspiration, the Chancellor is dividing people into “aspirants” who aspire to prosperity and others. It is as though he does not know or does not care that there is a national lack of job opportunities available to young people. It is simply disgraceful for the Chancellor to talk about aspiration when one in five young people leaving school might not find work. The Government need an extensive programme to create jobs for young people and should support them in finding those jobs and training them.
Let me deal with manufacturing. I have often spoken about the west midlands and its success in manufacturing, and I strongly believe that the manufacturing sector can drive local economies and boost growth. I was therefore alarmed at the Budget’s lack of discussion of manufacturing industry. The Chancellor’s only mention of it was his claim that for the first time in 40 years we are manufacturing for export more cars than we import. Well, that started under the Labour Government and certainly not under the present Government. The Government try to take the credit for the success of Jaguar Land Rover, but Labour Members know that the previous Labour Government supported that industry.
I will accept your ruling, Mr Deputy Speaker.
Why was there nothing in the Budget about manufacturing green technology? If that was the Budget’s intention, it could hardly be any less green than it is. This Government launch initiatives, but then seem to forget them. In 2001, the Chancellor of the Exchequer pledged that 100,000 people would be able to buy their own home; 18 months later, only 1,500 had done so. I hope that this will not be the fate of the schemes announced in last week’s Budget, too.
Public sector workers have had yet another 1% pay cut levied on them. As I understand the Chancellor’s Budget statement, this will probably last until 2015. I believe that 1.4 million public sector workers, including nurses, paramedics, midwives and prison staff, are affected by that policy. Those jobs are spread out across the country rather than being just London-based. Rather than cutting those people’s pay by 1%, putting more money in the pockets of these workers would be an excellent way to stimulate demand across the country. Instead, the Government are stifling those workers’ spending ability. Furthermore, a high proportion of women in the public sector will be affected. I fear that the Government’s approach will hurt working women disproportionately. It certainly does not encourage aspiration.
Cuts in funding for Coventry city council will hit the most vulnerable people in the city. The council’s community services director must make a third of its £63 million budget cuts by 2016. Last week cuts of £6 million were announced, which will mean the closure of day care centres used by hundreds of elderly and disabled people, the axing of subsidies for transport to day centres, the ending of housing-with-care bedsit schemes for the vulnerable, and the cutting of housing-related support that is currently provided for the elderly and disabled. Roughly 160 carers are expected to lose their jobs. It is predicted that thousands of elderly people will be affected, as well as people with learning disabilities, Alzheimer’s and mental health problems.
We should judge our society according to how we treat the most vulnerable, the old, the sick and the young, not according to how we treat our millionaires. We are failing fast, and this Budget will do nothing to help those people.
In the limited time available to me, I intend to explain why I welcome the measures in the Budget, and also why I consider the views of Opposition Members to be highly inconsistent.
Given the lack of growth in our largest trading nations, it is easy to understand why the Chancellor was left with so little room for manoeuvre. After all, growth projections in Germany and the United States—just two examples—have been downgraded. We need to recognise the context of the present position: the scale of debt inherited in 2010, the major issues that confront the eurozone, the local impact of the high prices of commodities such as oil, gas and food and the inflationary pressures that that involves, and the lack of growth in other nations.
My hon. Friend is absolutely right. I shall say more about Labour’s inconsistency later.
All the issues I have mentioned have had impacts on the living standards of families throughout the United Kingdom. Decisions such as these are difficult to take, but they must be seen in context.
What I welcome most is the Chancellor’s drive to create the most competitive of economic environments. That will attract investment, and will also continue to encourage the private sector in the UK to invest. The further reduction in corporation tax goes to the heart of a sustained economic recovery, and underlines the economic imbalance that we inherited. The 20% corporation tax rate means that we now compare exceptionally well with our major competitors. In Germany the rate is 29%, in France it is 33%, and in Italy it is 31%. Those are material considerations for anyone who is thinking about where to invest, and for any United Kingdom investor who is thinking of expanding. We should also bear in mind the uncompetitive position that we inherited. The increase in employers’ national insurance rates led to the term “jobs tax”, with which we are now familiar.
The ultimate judgment will come in the grades that the World Economic Forum confers on the competitiveness of the various nations. Having ranked fourth in 1997, we were dragged down to 13th by the Labour party. At last, however, we have recovered enough to rank eighth—and that happened before the announcement of the welcome changes in the Budget. Neither the 20% corporation tax rate nor the employers’ national insurance relief were taken into account.
Other Budget measures that I welcome include the “help to buy” mortgage guarantee schemes. That is an area of policy in which no Government would ideally become involved. However, bearing in mind the context I referred to earlier, the Chancellor had little choice other than to get involved. The scheme will provide a welcome boost to the construction and retail industries and various elements of the service sector, and it will make a significant difference to many families who want to buy their own home.
The hon. Gentleman recognises, I hope, that the economy needs to be kick-started. He always refers to the changes to the highest income tax rates and the 5% reduction that will take place next week. However, I remind him that the rate Labour introduced was temporary. If so, when was Labour planning to abandon it? The ultimate question that Labour Members have to answer is, will they reintroduce for the next general election the 50% rate that was in their manifesto? I will happily give way to the hon. Gentleman if he wants to intervene again. Obviously, he does not, because they are not prepared to say whether they will commit to doing that.
I am pleased that the homebuy scheme will be limited to three years because as I said, it is not a policy area that any Government would want to be involved with in perpetuity, because of some of the risks that have been highlighted. It simply is not a public sector initiative that any Government would want to undertake all the time.
If those who want to criticise such initiatives are to have any credibility, they need to offer some form of alternative. It is hard to believe the audacity shown by some Labour Members. Less than three years ago, they were responsible for, or were the loudest cheerleaders for, the policies that led us into this position, giving this country the most debt-ridden, overspent, unbalanced economy in modern history. Manufacturing had declined by more than 20%, public sector job numbers had ballooned and we had the highest debt level of any G20 nation. I notice that the Labour Members who were seeking to intervene and criticise earlier are now staring at their boots.
These initiatives are aimed at promoting growth and freezing or cutting spending. [Interruption.] The Labour critics really need to come up with some alternatives. Until they have accepted their responsibility, they will lack credibility and no one will listen. Even Lord Mandelson recognised that just last week. They came up with some sort of plans in the past. Spending the 4G auction money on 100,000 new affordable homes was one option; a two-year freeze on stamp duty was another. However, that money has already been used—on the national debt—so I look forward to hearing their alternatives.
This Budget will make a difference to families, and help to kick-start the housing sector and to make Britain’s economy much more competitive. I look forward to hearing the solutions that Labour Members will try—
I became a Member of this House in 1992, and I have to say that this is the worst Budget I can remember—that is, since last year’s omnishambles of the pasty tax and the caravan tax. It will do nothing to reverse the decline of the economy, nothing for jobs, nothing for taxpayers and nothing for those forced on to benefits by this Government’s policies. The February unemployment figures show that any decline in unemployment during the previous three-month period is now faltering.
In my constituency, the picture is bleak. There has been an increase in unemployment, including among those aged over 50, and the number of people on jobseeker’s allowance for more than 12 months has also increased. Those in their 50s, in particular, will suffer when they retire because they will be unable to build up an occupational pension and will have to rely on the state pension.
I recently visited one of my constituency’s Work programme providers. Advisers there told me that most of the jobs they were helping people into were part time and paid the minimum wage, involving basic skills and offering limited prospects. However, the bigger problem is that the number of people who have been unable to find work after 12 months has grown by more than a third during the past year.
The Chief Secretary to the Treasury, who is in his place, might be interested to hear about the effects of the Government’s policy on excise duty. The Chancellor has knocked a penny off a pint of beer, and he made a big deal of it. When I heard about that, I thought back to the days of Denis Healey, when a penny off a pint meant something. Today, it is the equivalent of 0.2% or 0.3% off the cost of a pint. In other words, someone would have to buy 200 to 300 pints to get an extra pint for their money, so it is hardly going to have a huge impact on the pub trade.
As far as I am aware, there are no wine producers in my constituency—although there are some who brew at home—but Scotch whisky is a major industry, as it is for the UK as a whole. It is worth £4 billion a year and employs more than 35,000 people across Scotland, yet the Chief Secretary and his Treasury cohorts have done nothing whatsoever to support it. When I entered Parliament in 1992, the average price of a bottle of Scotch was £10.42, of which VAT and excise duty accounted for 68%. The average price after this Budget will be £12.89, of which VAT and excise duty will account for 78%. In other words, since 1992 the price of a bottle of Scotch has increased by £2.47, but the amount of VAT and excise duty has increased by £2.95. The industry is therefore producing whisky more cheaply, yet the customer has to pay more. The beer industry complains about this issue, but imagine the uproar if it had to bear the same tax burden as the Scotch whisky industry has to bear.
The Chancellor has responded to public pressure on fuel duty, but has totally ignored air passenger duty. The aviation and tourist industries have complained—as have the travelling public, in mass numbers—about this unfair penalty on those who want to travel.
I do agree with the hon. Gentleman on this occasion; it is not very often I can say that. The Government are doing absolutely nothing for air passengers, the aviation industry and those who work in it. They continue with this tax, while our competitors throughout the world are laughing at us. The Government are prepared to examine other measures, but not the tax that affects not only my constituency but others throughout the United Kingdom.
The Chancellor says that he wants to boost house building, but how is the bedroom tax going to help to do that? Surely it will add to the confusion about the sort of housing stock we require. I predict that it will be worse than the poll tax for people in my constituency; indeed, I am already seeing signs of that. It will prove to be the Government’s Achilles heel, just as the poll tax was for Margaret Thatcher.
Future growth forecasts have had to be revised, and the Office for Budget Responsibility says that in 2015 most people will be worse off. All in all, the Budget offers the British people nothing other than more of the same failed policies of the last three years. The approach simply is not working, and the Government should own up to that and change tack today, for the sake of the UK economy as a whole.
Reflecting on it, this is the worst Budget I have witnessed since being elected in 1992.
I welcome this responsible Budget, which targets help to individuals and businesses intelligently. Our time is short, so I wish to focus on three points: personal allowances, the employment allowance and exports.
Like my right hon. Friend the Member for Hazel Grove (Andrew Stunell), I welcome the raising of personal allowances to £10,000. That is being delivered by a Conservative Chancellor and, as a result, more than 42,000 people in my constituency will be paying less tax and more than 4,000 will be taken out of paying tax altogether. Before the Budget, I suggested to the Treasury that we set an aspiration for future years that nobody on the minimum wage should pay income tax. I know that the Chief Secretary to the Treasury, who is not in his place, shares that aspiration. It will take some years to deliver and it will be an expensive measure, but it is fair and it is the right thing to do. I hope that aspiration will be set and I hope it will be in the 2015 Conservative manifesto.
Small and medium-sized businesses in my constituency welcome the employment allowance, which is a big boost to job creation. The private sector is the engine of growth, and Reading, the town I represent, is an economic powerhouse in the south-east. No matter what the Opposition may say, the private sector is creating jobs. This morning, I met the chief executive of Huawei, a Chinese IT and telecoms group, which is opening its head office in my constituency in the next few months. It is bringing hundreds of new jobs to Reading and creating several hundred more over the next few years.
In the past few weeks, Tesco has confirmed that it is starting recruitment at a new distribution centre in my constituency, and I am pleased that this brownfield redevelopment is taking place. I have been discussing it with Tesco and its advisers since 2011, and it means more than 1,000 new jobs in my constituency.
A couple of months ago, I met Ross Snape, the chief executive officer of United Asphalt, a successful independent business located in Theale in my constituency. He said:
“All too often we hear politicians and the press talking down the economy, which can have really negative effects on business and the decisions we make on investment and employing people…it is time to move on and face the challenges we have with confidence.”
I could not agree more. Many billions of pounds have been sitting on UK corporate balance sheets as deleveraging has been going on, but businesses based in my constituency have decided that it is now time to invest. They realise there are no easy fixes to the economy because of the problems that had built up.
My hon. Friend is giving good local examples of job creation. Does he agree that as the Budget contains one of the proposals relating to the single pot of funding, a recommendation of the Heseltine review, his local area will be helped to develop even further?
My hon. Friend is absolutely right about that proposal, which will help not only my local area, but other areas. It also advances the whole aspect of localism, on which this Government are very keen, as I am. As I was saying, companies in my constituency have decided that it is time to start investing, and I hope that many others up and down the country will follow suit.
The hon. Gentleman says that some companies are starting to invest, but is that not related to what Keynes and, latterly, Paul Krugman have said: in the absence of government doing anything substantial, recessions will sort themselves out in the end, but years of unnecessary pain will have been experienced by many people because of government inaction or wrong policies?
Thanks to the measures taken by this Government, the deficit is coming down, we have record employment and interest rates are at record lows. I would have thought the hon. Gentleman would welcome all those things, just as businesses in my constituency do.
The Chancellor made the point in his Budget statement that for the first time in more than two decades we are exporting more goods to non-EU countries than to EU ones, and I welcome that. The right hon. Member for Edinburgh South West (Mr Darling), for whom I have huge respect, said that there is no growth, but, as he well knows, there is growth; we are expanding our exports to some of the world’s key economies, which is a result of the policies that this Government have put in place and of the good work being done by UK Trade & Investment and the Foreign and Commonwealth Office.
Small and medium-sized businesses still tell us that there is a fear factor when they are looking to enter new markets. UKTI and the FCO have been great at targeting high-growth nations and opening new offices, but we need to turbo-charge that expansion. We need not only to target three, four or five cities in these huge economies such as India and Indonesia, but to go into the 15 or 20 top tier 1 and tier 2 cities. In those economies it is not only the national Governments who make decisions; the state governments make many of the big decisions on investment, which is why we need to turbo-charge our approach and get these offices across these countries quickly. The Government, together with UKTI, should provide practical help by taking on office space in these key cities, basing sector experts from the UK Government and UKTI there, and working with local enterprise partnerships to get out there and allow SMEs low-cost desk and office space for three, six or 12 months. The synergies that will be created as a result of all these companies coming together in one location, with sector focus and where we can also get local advisers involved, will do a huge amount to boost our exports. We want to go from having one in five SMEs exporting to having one in four, which is the European average. That will add billions of GDP to our economy. UKTI is doing a great job with the headstart scheme, but we need to build on such initiatives.
The final point I wish to make is about the local Labour party in Reading—
Of course not, Mr Deputy Speaker. What I wanted to say was about jobs. We have really good news coming out of Reading, but I never hear people from the local Labour party welcoming new jobs or celebrating business success. They do not do good news. They are anti-aspiration and anti-business, very much like many of the Opposition Members who have spoken in these Budget debates. Let me tell hon. Members what Geoff Foley in my constituency says about Labour Reading council:
“Reading Borough Council do not really give a thought to local businesses”—
Order. I am sure that Reading borough council knows exactly what it is talking about, but I am not sure that this is relevant to today’s Budget debate. I am being very generous and I think we are going to run out of time, so one quick mention of Reading without the Labour party would be helpful.
May I draw the House’s attention to my entry in the Register of Members’ Financial Interests?
I listened attentively to the Budget statement and tried to hear something that was positive, not just for exports, but for manufacturing, for business and for productive industries. There were just two things that we, of course, welcome: the £2,000 off national insurance contributions and the increase to 10% of the research and development credits for those investing, which I am pleased to say several companies in my constituency have already welcomed. The trouble is that those two things pale into insignificance when we look at the scale of the problem we face; they just are not going to tackle it.
The problem can best be measured by looking at the plan from 2010 and the Office for Budget Responsibility forecasts attached to it. Two crucial elements were going to support that plan and those forecasts. I recall saying in the debates that followed that they seemed to be the two most solid pillars on which the Government were building, but that, as far I could see, there was nothing underneath to support them or the OBR’s very optimistic forecasts. Those two elements were: manufacturing exports—exports on the visible account; and the increase in output from manufacturing. We were told to expect a 10%—I believe the figure given was 9.8%—increase in output from the business sector, but what have we had in the two years to the end of 2012? An increase of less than 5%—barely half what was projected. The hon. Member for Reading West (Alok Sharma) said that we are doing well on exports—I am not sure whether we were more interested in exports or Reading—but compared with what was projected and with what we need, the outcome in those two years has been terrible. I believe that the projected figure was 6% and we achieved minus 0.3% to December last year in the value and volume of exports.
I am not saying it is easy, but one thing I am sure about is that either the OBR has no idea about forecasts or we need to reconsider the OBR model, as it continually gets everything so wrong. My right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor, was kind enough to say that he thought the estimates were optimistic—that the sunny uplands kept moving to the right and that the further out the OBR went, the more optimistic it became, but that was the case from the very beginning and nothing has changed. We should now be in those sunlit uplands. I do not understand why the OBR, with its much-vaunted independence, continues to get things so hopelessly wrong. Somebody needs to rethink that model. It is not enough to take responsibility out of the Treasury and pop it somewhere down Victoria street—one should not think that that will put everything right. There we are; that is one problem.
One part of the Budget that I thought might lead to some positive movement concerned the construction industry and the house building sector in particular. In an intervention on the Secretary of State, I welcomed the Firstbuy initiative, and a development on the old Jaguar site in Coventry has made quite a contribution, but the extension of the mortgage scheme, which is much bigger, is—yet again—a measure that has not been thought through. The problem with this Government is that they are totally incapable of thinking anything through. They should not be consulting on whether millionaires can have subsidised mortgages for second homes. That should have been ruled out in principle right from the beginning, before the consultation began. Many things require consultation, but not that. I cannot imagine why it was left in as an option—well, I can; things were not thought through.
We are in real need with housing starts down 11%, 70,000 construction workers unemployed and the lowest house building programme since the ’20s. That is the scale of the problem and such tiny measures show that the Government are fiddling around the edges—fiddling while Rome burns, as it were. Central to it all is the attitude of the Treasury and the Chancellor. If the Chancellor has lost self-confidence to such an extent that it impacts on confidence in the business community and consumers in the UK, he must consider whether he any longer has the vision, courage and self-confidence—whether he ever had those things is, of course, another question—to do what is necessary and change course.
I am grateful to follow the hon. Member for Coventry North West (Mr Robinson). I think it was the late Harold Macmillan who talked about economists telling people this and that, and about statistics. However, there are some realities in this Budget, which other Members have referred to, and I will also do so in terms of the impact on my constituency.
Let me begin with the general point about the £10,000 income tax threshold for next year. That is reality; that is not statistical. It means that next year, 4,000 individuals in my constituency will not be paying tax. More important for hon. Members to understand is the fact that the average total family income across Lancashire is approximately £26,600, and next year those people will pay no tax on their first £10,000 of income. To me, that is a huge selling point in increasing confidence. People will be able to go out to work and the Government will promise that we will not touch the first £10,000. It seems remarkable that we are in such a state that we can say that that is marvellous, but compared with what has gone on before it is extremely good news for constituents across Lancaster and Fleetwood.
Fuel duty has been frozen. In a huge rural area such as my constituency, where people have no choice, whatever their income, but to be dependent on their car to travel to work and to the shops, the ending of Labour’s plans to increase fuel duty provides massive support for the local economy.
There is the new employment allowance. Most businesses in my area are small, made up of two or three—if not six—people. The national insurance promises in the Budget will be a massive fillip to new employment and to encouraging people to get out there, set up their own business and start moving with the support of this Government.
Hon. Members will bear with me while I discuss a local theme that they would expect me to mention: shale gas. Many hon. Members have looked at shale gas as the great nirvana and something that will fill the energy gap, but that will affect Lancashire. Let me underline yet again that we in Lancashire are still not satisfied that the regulatory regime is right. We welcome the Chancellor’s commitment to an office for unconventional gas and the tightening up of those regulations, but people in Lancashire need to see that the regulations are thorough and tight. Given that farmers still take water directly from the water table through boreholes, Members will be able to imagine the worries in parts of my constituency.
More important than that is the question of who will earn money from shale gas. Lancashire people are quite generous, like me, in their commitment—[Interruption.] Well, we are far more generous than the people from the other side of the Pennines. We are generous in our commitment to the United Kingdom and in our willingness to support it, but as the law stands, the people who own the land, including the farmers on whose land this fracking might—I still say might—take place will earn precious little from it.
The hon. Gentleman anticipates me and for once—in fact, not for the first time—we agree. If Lancashire is to be used to fill the energy gap and if Lancashire will see fracking across the county, we need to understand that it is not Texas and landowners in Lancashire do not own the mineral rights. The Chancellor will gain through the tax system, companies will gain through their profits and, presumably, the Duchy of Lancaster or the Crown Estate will gain through the tax on mineral rights, but the local councils will gain precious little. I was pleased that the Chancellor said in his Budget that there would be specific proposals to allow local communities to benefit, but I tell the Ministers on the Front Bench that Lancashire expects more than one or two parish hall roofs to be fixed. We want to see something that will return money to Lancashire when the gas has been fracked, if that fracking is to go ahead. I need to make that clear.
Finally, on infrastructure, hon. Members talked about growth. For me, the key point was the Chancellor’s phrase about “clearing the economic arteries”. In the north-west, that means something substantial and we have had that from this Government. We have had the biggest investment in rail for the last 30, 40 or 50 years. It was all right Opposition Members saying that that would happen in future—it is happening now. I point to my own station in Lancaster, where £8.5 million is already being spent to vary the signalling so that trains can turn around in Lancaster and more platforms can be used. That is the small-scale work. Only last week, the Department for Transport finally agreed the M6 link road, which will be a bypass for Lancaster to the port of Heysham. It will bring thousands of jobs through a scheme for which the first plans were produced in 1948—that is perhaps a lesson to us all. It has taken this coalition Government to agree the money to get things moving and get the growth.
As the Secretary of State mentioned, there is still a great deal more for local councils to do. I am pleased that the Conservative councils in my area, Wyre borough council and Lancashire county council, have kept the council tax frozen. Not only that, but Lancashire has cut it by 2%—
The Budget the Chancellor delivered was not the Budget that my constituents or the city of Glasgow needed. The Budget Glasgow needs is one that gets the economy moving, helps people back into work and looks after the most vulnerable in our society. Instead, the Government are willing to give millionaires a £40,000 tax cut at the same time as 17,000 Glaswegians will have to cope with the impact of the bedroom tax. Thousands more will have to mitigate the damage to their family budget of the cuts to child tax credits, cuts to working tax credits and drastic cuts to the local services that many people rely upon. Wages are falling, jobs are being lost, household budgets are being squeezed and there is still no sign of a rethink. Just when will the Chancellor wake up and smell the Starbucks coffee?
Is the hon. Gentleman not disappointed, and should he not be ashamed, that he supports a Westminster Government over independence, so we have the bedroom tax imposed on Scotland? If he supported independence, we would not have the bedroom tax in Scotland at the moment.
That shows us the myth of the Scottish National party. The hon. Gentleman says that the only way to stop the bedroom tax is independence; the bedroom tax will be introduced on 1 April 2013, but according to the SNP timetable, independence day will be 31 March 2016. Members can work it out for themselves.
Plan A clearly is not working. For some time, the Opposition have been calling for additional infrastructure investment to boost the construction sector and we have been urging the Government to act. The Chancellor could have used the funds from the 4G auction to build 100,000 affordable homes, stimulate the economy and help tackle the housing crisis, but instead he decided that public services and public sector workers should bear the burden. Not content with imposing a 1% pay freeze until 2015, he has extended it to 2016. Given the rate of inflation, that is an effective pay cut for hundreds of thousands of people across the country.
With 80,000 construction workers out of work, construction output has fallen by 8.2%. The Government announced an extra £225 million for affordable housing, but only £125 million of that will be spent before 2015 according to the OBR, and it is dwarfed by the £4 billion cut in funding for affordable housing that the Chancellor made in his first Budget. Even after that investment the coalition Government’s record will still be a cut of around £10 billion in infrastructure projects.
It says everything about the Government’s attitude that they cut real-terms pay for millions of public sector workers, while giving the green light to slash corporation tax for big business. Research by the House of Commons Library, published today, confirms that the reductions in corporation tax will cost £29 billion in total, £10 billion over the life of the current Parliament alone. That policy enjoys the full support of the Scottish nationalists, who want to see a future independent Scotland at the front of a race to the bottom, a low tax country with an economy like Iceland—or perhaps like Ireland. I have not seen the latest Scottish Government press release, so I do not know which country they are modelling their assessment on this week.
No, I am suggesting that while people across the country—especially the most vulnerable—see their household income slashed and the poorest people are having to live in more difficult circumstances, the Government see their priority as giving millionaires a tax cut and cutting taxes for the biggest businesses in the country. I know whose side I am on. I am sad to say that I know whose side the hon. Gentleman is on, and I am sure people will punish him appropriately come the next general election.
I have given way twice already, but if I have any spare time at the end of my speech I might let the hon. Gentleman entertain the House.
The Chancellor claimed the Budget showed he was on the side of people who want to get on; instead it has shown just how out of touch this Government really are. The low-paid workers the Government say will pay less income tax will still be worse off at the end of the month, when that saving is clawed back many times over—clawed back through VAT, clawed back through cuts to tax credits and clawed back from thousands of my constituents through the scandalous bedroom tax.
Yes, the Liberal Democrats can celebrate lifting the threshold to £10,000, but household income for many families in that bracket will fall as a result of the Government’s measures. At the same time, the value of an average worker’s pay has fallen by more than £1,000 and persistently high inflation continues.
In these difficult economic times, the Chancellor should certainly accept our proposals for the funding for lending scheme to be enhanced to target small and medium-sized enterprises better by rewarding banks that expand SME lending regardless of their mortgage book. Now is the time when our banks should be supporting SMEs, not hitting them harder. Throughout my constituency, whether I am speaking to small or large businesses, they all make the same complaint: the banking sector is holding back investment in this country, not promoting it. If we can get our banks lending again and get people investing, we will get more people back to work and see growth and regeneration in some of the hardest-hit communities.
The Chancellor should seriously explore our proposals for new regional banks that are committed to their regions and in touch with local business, making it easier for firms to secure the capital investment they require to create the growth and jobs Britain needs. Sadly, my constituents continue to suffer, trapped between this coalition Government, who continue to look out for the wrong people, and a Holyrood Government, who are distracted by their referendum obsession and happy to double Tory cuts and pass them on to local government, washing their hands of all responsibility and removing £250 million from Glasgow’s economy. We heard earlier from one of the SNP Members that we should recognise that the fall in unemployment was thanks to action taken by the Scottish Government. It is amazing that when unemployment goes up, it is all Westminster’s fault but when it goes down it is all thanks to the Scottish Government. It cannot be both.
The reason why I and countless others in the House went into politics was to help build stronger communities, not to use the poorest and most vulnerable people as electoral or political dividing lines, writing off millions of people as a drain on the economy for electoral advantage. We want to help to create a sustainable economy to fund world-class public services, ensure that society’s resources are distributed equitably and protect the most vulnerable people in our communities.
Last Wednesday I sat and listened to the Chancellor lay out his vision for the coming years. It is a vision that I and, I am confident, the majority of people in Britain reject.
I want to talk about three things: mortgages and how we support them, how local authorities can help and what can be done on commercial lending.
We should strip out all the fancy schemes. I talked to some of the people I used to work with at Simply Finance, and apparently there are about 100 viable 90% loan-to-value schemes. The situation is not quite as bad as it was in the past, but the credit-scoring system for those mortgages tends to be so severe that only about 10% of applicants ever get a mortgage. My only concern about our new scheme is that we should make absolutely sure that it results in people being able to borrow money, rather than having their application turned down. The Opposition believe that the scheme will provide second homes for millionaires. I agree with the Secretary of State that that can be sorted out easily.
If mortgage schemes work, they increase demand, but if demand goes up without an increase in supply, prices will increase. I am sure that is not the intention. We need to develop and build houses. To ensure appropriate development while protecting our country’s green spaces, we must innovate. At Eastleigh borough council we work with developers to purchase properties that would not otherwise be bought. We then rent them out. It would be a real help if the Government could lift the borrowing cap on councils building new homes to rent, which would supply an economic boost and provide affordable homes. In places such as Eastleigh, 30% of every new development is reserved for affordable housing. We have 5,830 people on the housing list, so it is vital that we do something about it.
To achieve a significant increase in house building, we need to reverse the banks’ failure to fund it properly, especially for small and medium-sized builders. Before 2007, the inability of banks to assess the true risks resulted in massive losses. Now the situation is reversed. It is the same old story; the banks go from one extreme to another.
We need to co-ordinate our housing policies, our commercial and mortgage lending policies and our planning policies. There is no point in keeping them separate. Banks, local government and builders are all part of the same whole. I am confident that this Liberal Democrat-Conservative coalition can act accordingly, but we need to find a way for us all to work together.
Contrary to the Chancellor’s mantra, Britain’s return to recession was not made in Europe. It was made in Britain by the severe fiscal squeeze that the Chancellor launched nearly three years ago. Problems in the eurozone spell trouble for the UK economy—of course they do—but the Chancellor never mentions the fact that Britain has benefited from the recovery of the USA economy, which accounts for 20% of our trade, and is currently growing four times faster than the eurozone is slowing, because the USA took the route of economic stimulus and stuck to it. Britain set out on the same path under Labour after the banking crisis, and the economy began to pick up. However, the coalition veered off as soon as the Tories and Lib Dems took office, turning the road to recovery under Labour into the road to ruin.
Cutting too far and too fast means that the Chancellor has missed all his key targets. In the year that is ending, his target deficit—the cyclically adjusted current deficit as a share of gross domestic product—is twice what he originally said it would be. Next year, the Office for Budget Responsibility expects it to be four times what he planned. He has also missed his public sector debt target: instead of falling to 67% of GDP in 2015-16, under the Budget it will fall to 85% two years later, in 2017-18. That is a surreal definition of success: debt falling upwards. Salvador Dali would be proud.
Zero growth has forced the Chancellor to accept higher borrowing targets—more than £200 billion higher over five years than he planned in 2010. Most of the cuts that have been announced have yet to hit home. Cuts and austerity will continue Britain’s economic inertia, with more disastrous, scorched earth economics to come. Growth, not cuts, should be the priority. Sadly, there is plenty of spare capacity in the UK economy, which could easily grow quite quickly for a few years by taking up the slack, with borrowing, the deficit and debt falling. Jonathan Portes, former chief economist at the Cabinet Office, said:
“A few years of 3% growth—and given the amount of spare capacity in the UK economy, there is no reason that should be infeasible…—and much of the problem will simply vanish”.
Growth is the magic bullet for overcoming our deficit and debt problems.
Cuts have fuelled the recession because they have driven demand out of the economy. Getting the economy growing again, as I said, is the key to cutting the deficit, then stabilising and bringing down the debt burden. Once the economy is growing again, it will be much easier to deliver any remaining tax rises or spending cuts that may still be necessary because, as Jonathan Portes says, jobs will be plentiful, real incomes will rise and companies will invest again.
The Tory charge is that Labour would increase borrowing. The answer is, yes, in the short term, we would, but to reduce borrowing in the long term. Borrowing more today can mean borrowing less tomorrow by getting the economy growing again. President Obama’s 2009 stimulus package added to the US federal deficit in the short term, but as US interest rates fell, spending and output rose, and dole queues shortened. As a proportion of America’s expanding GDP, its overall deficit has shrunk every year since 2009, contrary to what has happened to our deficit. A budget boost that triggered real recovery in Britain could follow the same pattern, speeding up the growth of UK national income, cutting the deficit as a proportion of GDP and causing the debt burden to fall.
That is what the Budget should have been about, but old habits die hard as the coalition partners continue to peddle their big deceit. First, they said that the entire global banking crisis was caused by Labour recruiting far too many nurses, doctors, teachers and police officers, and that the trigger for the world financial collapse—sub-prime mortgage defaults in the USA—was all Labour’s fault. The second big deceit is their claim that today’s public sector deficit was caused by excessive Labour spending. To quote utterances of almost every Conservative MP as if on a dreary looped tape, too much Labour borrowing led to too much national debt, so the cuts are all Labour’s fault. They never admit the truth. They never say why, if spending was “out of control” and wildly excessive, the Chancellor in September 2007 committed a Tory Government to matching Labour’s public spending plans for the next three years, up to 2010.
The Chancellor knew only too well that Labour’s spending was affordable, otherwise he would not have signed up to that. The Tories never acknowledge that, until the global banking crisis, British Government debt was low, below that of France, Germany, the USA and Japan, and lower than when we took over from the Tories in 1997. Ten years of steady economic growth under Labour allowed us to pay down debt by the equivalent of £90 billion today, saving taxpayers some £3 billion a year in interest payments. We did fix the roof while the sun was shining.
Between 1997 and 2007, annual Labour borrowing averaged only one third of annual borrowing by the Thatcher and John Major Governments. This is the fourth dreadful Budget by a dreadful Government. It is the same old story from the same old Tories: Budget day blues for Britain. The Chancellor is playing a peculiar game of leapfrog with himself. Every Budget brings worse news. Every autumn statement confirms that things are worse than expected. The Government are failing on growth, failing to improve living standards, and failing on their debt, borrowing and deficit targets. They have got to make way for Labour.
The right hon. Gentleman has had his chance.
I absolutely relate to my hon. Friend the Member for Reading West (Alok Sharma) and his aspiration that everyone on the minimum wage should in due course pay no income tax. That was a magnificent announcement of Conservative and coalition policy to help those who work hardest on the lowest incomes, and we should all applaud it.
Secondly, the Leader of the Opposition made a great deal recently of apologising for Labour’s axing of the 10p rate, and he now wants to bring it back, but while he is busy executing a second U-turn on 10p tax, my constituents, especially the many thousands who will benefit from the changes in the Budget, prefer the simple Conservative and coalition approach of zero tax for the lowest paid.
The whole House should unite in applauding the Government for announcing an employment allowance of £2,000, which can be used by small businesses for apprentices or new employees who are older, and can help to continue to bring down youth unemployment, which in my constituency of Gloucester, as a result of all the new apprenticeships that started last year, fell by 18% in 2012. Ten days ago, during national apprenticeships week, I visited three new apprentices in Gloucester, in real estate, golf clubs and ski centres, and if ever there was an example of how apprenticeships have spread through previously unknown sectors those three new apprentices proved it. That is why the Government should go on supporting apprenticeships and bringing the young into employment.
Today, housing is at the core of the debate, and I believe that it is the key to growth stimulus, as it was after the recession of the 1930s and the recession of the second world war. The Centre for Cities rightly said in its recent note that
“there is one area where effective interventions have the potential to generate jobs and growth in the short term: housing.”
It went on to say that
“100,000 new houses…could boost Gross Domestic Product by 1% and support up to 150,000 jobs.”
The Centre for Cities, which recently moved Gloucester up the ratings for cities from 49th to 21st, is clearly a research institute to be followed closely, and I agree with its conclusions on the ratings and with its analysis on the importance of housing.
The right hon. Member for Leeds Central (Hilary Benn) said that he believed that the response to the Budget on housing was largely critical. He was right in one respect, as the National Housing Federation said:
“The Government should be focusing on unlocking investment to build more new homes”.
However, we cannot new build new homes unless there is a market for them, which is why the Government’s policy, through help to buy, of providing £3.5 billion for new homes, will make a significant difference to make sure that people can afford to buy those new homes. The National House Building Council said that it is
“great news that housing has been the centre piece of this Budget. This is a positive step for homebuilders and homeowners alike.”
Both Barratt and Persimmon welcomed the development, and Barratt said:
“We are now gearing up to meet the increase in inquiries that we expect to see.”
That is precisely why the help to buy scheme, which guarantees 20% of deposits on new homes, will make a significant difference.
There is one aspect on which I agree with the right hon. Member for Leeds Central and on which I hope the Government will be able to move faster: the need to restructure some of the arm’s length management organisations that provide social housing and enable them to use their balance sheets to build and regenerate, rather than just adding to the public sector borrowing requirement. My right hon. Friend the Financial Secretary to the Treasury knows well that I hope that that will move forward fast, and that discussions between the Homes and Communities Agency, the Department for Communities and Local Government and the Treasury, which have been ongoing on for almost 18 months, will move forward swiftly so that we can deliver new housing in the social sector to my constituents as soon as possible.
New housing worked in the 1930s and 1950s and it can work today, so let us get on with it and build those new homes as soon as possible so that the economic growth that the Centre for Cities research anticipates can happen as soon as possible. I will be supporting the Budget to achieve that.
I am grateful for the opportunity to speak in the debate. I intend to focus on three central issues emanating from the Budget: housing, infrastructure and employment practices.
Increasing the level of house building is vital to any economic recovery and to assisting families and young people to get on to the housing ladder, yet under this Government house building has fallen while rents have risen. Young people in Sunderland, where house prices are not as high as in other parts of the country, still face massive challenges in getting into the housing market. Those difficulties are augmented by the Government’s wider economic failures, and banks remain reluctant to give mortgages, even to financially secure applicants. Renters in Sunderland can only hope that the Government’s help to buy scheme will be more successful than the new homes bonus, which has led to housing starts falling by 11%, or the NewBuy scheme, which has helped just 1.5% of the 100,000 people who the Prime Minister claimed would be able to buy their home.
I welcome any action to help people get on to the housing ladder, but increasing credit without increasing supply will simply raise house prices, further widening the gap between those who own their own home and those who want to. Gentoo, the largest social housing provider in my constituency, manages over 29,000 properties in Sunderland, but it has over 22,000 people on its waiting list, and that is without taking into account new and emerging need. Simply put, Sunderland needs more homes.
In his Budget speech, the Chancellor used the phrase “work hard and get on” three times. What he does not understand is that people are working hard, despite stagnant wages, and they are getting on, despite cuts to vital services.
The Government are dithering on improving energy efficiency standards for new homes. Those delays are hugely damaging for investment in new homes and signal the Government’s abandonment of their “greenest ever” commitment.
I will now turn my attention to infrastructure and the Government’s response to the Heseltine report. Two things were clear from Lord Heseltine’s evidence to the Business, Innovation and Skills Committee: first, his passionate belief in the Government’s ability to boost growth, create jobs and raise living standards; and secondly, his concern about the Government’s direction and the fact that
“the UK does not have a strategy for growth and wealth creation”.
I agree that local leaders are best placed to understand the opportunities and obstacles to growth in their own communities. That the Chancellor has finally committed to investment in infrastructure projects is welcome, but those projects should have been announced in his first budget, not his fourth. I welcome the single local growth fund, but it will not be operational until 2015. We simply cannot wait that long. We cannot accept a five-year gap between the announcement of the abolition of the regional development agencies and the devolution of funds proposed by Lord Heseltine. We will not see economic growth until our regional economies are growing.
Where growth takes place matters, too. A report on foreign direct investment by the Institute for Public Policy Research North shows that since the Government announced the closure of the RDAs, FDI decreased by 31% in the north-east from 2010 to 2011, while it has increased in the south-east by 102%. We do not yet know the size of the “devolved pot”. Lord Heseltine recommended that a fund of £49 billion was needed, but Government sources now suggest that it will be in the low billions. The success of the Heseltine plan will be determined not by the quantity of recommendations that the Government will implement, but by the size and timing of the investment.
My final point in response to the Budget is on employment practices. The Chancellor looked particularly pleased to announce that the private sector had created 1.25 million new jobs since 2010. Although I welcome new jobs, I hope that my hon. Friend the Member for Dumfries and Galloway (Mr Brown) will get an answer to his question on what sectors those jobs are in and what hours people are working so we can understand better what is happening in the labour market, because I fear that many of the jobs are low-wage and low-hours. People on zero-hour contracts cannot take advantage of the Government’s child care help because they do not know when they will need child care. They cannot take advantage of the mortgage policies because they will not be eligible for mortgages.
It is vital that the Prime Minister and the Chancellor change course so that a lost Government do not lead to a lost decade.
I refer to my entry in the Register of Members’ Financial Interests.
I welcome the Budget on behalf of the almost 4,000 hard- working small and medium-sized enterprises in my constituency—companies such as Dutton Contractors in Middlewich, which I visited on Friday and had the privilege of opening two new warehouses for. It is a family business that was started in 1974 by the father, John Dutton, who is a farmer. It sells and transports building construction materials. The son, Richard Dutton, has so developed the business recently that it now has 80 employees. The decision in the Budget to further stop Labour’s planned fuel rises is worth £7 to every family each time they fill up a family car, but it is worth considerably more to companies such as Dutton Contractors, which has a fleet of vehicles, so it very much welcomes the Budget.
Dutton Contractors also welcomed the £2,000 national insurance allowance. It was also welcomed, in particular, by Neon Freight Ltd, which is based in Holmes Chapel. Honours go to Ian Mallon, the proprietor of that freight forwarding company, and currently its sole employee, for giving the fastest response to the Budget. He sent me an e-mail at 1.28 pm—the Chancellor can barely have sat down. The e-mail’s subject was, “Employers tax/Budget”, and it reads:
“Great news… please send my thanks to G.O… I will be taking on staff this year.”
That is what I call a result.
Having said that, however, I am disappointed that the Government appear once again to have done nothing to honour their manifesto commitment—it is a coalition commitment and certainly a Conservative manifesto commitment—to recognise marriage in the tax system through transferable tax allowances for couples where one partner stays at home. Many people are genuinely bemused that such an important commitment should remain completely untouched well into the second half of this Parliament. They are increasingly bemused by the announcement of the introduction of tax-free child care worth up to £1,200 every year for children aged up to 12, but obtainable only by either single parents working or couples where both partners work. The Prime Minister said:
“This is a boost direct to the pockets of hard-working families in what will be one of the biggest measures ever introduced to help with childcare costs.”
But do families with one parent who stays at home not work hard, too? That has not sent out a positive message to mothers and fathers who stay at home and commit themselves to parenting; it does not say to them, as I think we should, “We value you.”
My hon. Friend is absolutely right. I am not criticising the Government’s decision to support child care costs; I am saying that they have got the balance wrong by doing that while not at the same time honouring the coalition commitment for transferable tax allowances for married couples.
I have massive respect for those mothers and fathers who stay at home. I have never stayed at home to work and have always worked outside the home, but many parents do so sacrificially, and many parents in one-earner families, as Department for Work and Pensions figures clearly show, stay at home because they have to. Many have significant child care responsibilities for very young children, or care for sick or disabled relatives. It is interesting that the Government quoted OECD figures in support of its decision last week. Let me quote some OECD figures: the tax burden on a one-earner, married couple family on an average wage in the UK is now 42% greater than the OECD average.
I have raised this issue in respect of every Budget since I have been in this House. Two years ago, having tabled an appropriate amendment to the Finance Bill, I received from my hon. Friend the Exchequer Secretary to the Treasury a letter that said:
I am writing to about the new clause on transferable personal allowances for married couples that you have tabled for the Finance Bill. I agree entirely that marriage is a positive institution and it is clear from our manifesto that we believe this should be recognised in the tax system.
We are keen to send a clear message that family and marriage matters and that strong and healthy families help create a strong and healthy society. We must do more to support families and the tax system is one way in which this can be achieved…you can rest assured that our commitment to bringing forward these changes remains firm and that we are assessing various options with a range of different costs and will bring forward proposals at the appropriate time.”
I believe that that time is now. If we genuinely believe in choice—a word much trumpeted last week on the announcement of support for child care costs—we should not be making it more difficult for mothers to stay at home but should give them that choice, too. The Prime Minister has said:
“If we are going to get control of public spending in the long term…we should target the causes of higher spending, one of which is family breakdown. We should do far more to recognise the importance of families, commitment and marriage”.—[Official Report, 2 June 2010; Vol. 510, c. 429.]
This year, I again call on the Government, at the third time of asking—it sounds a bit like calling the banns of marriage, but that is quite appropriate—to insert a provision into the Finance Bill, this time by way of their own amendment, to introduce transferable allowances for married couples. That is quite simply the right and honourable thing to do.
As time is short and lots of hon. Members still want to speak, I will concentrate my remarks on two matters: something I was disappointed not to find in the Budget and something I was completely surprised to find in it.
The thing I was disappointed not to find was any change in the Government’s attitude to what has become known as the bedroom tax. I was not naive enough to think that they would make a complete volte face having realised it is such an insidious and wrong-headed policy, but I did think there might be some movement on the kinds of people in households who should be completely exempt. I am thinking of households with a profoundly disabled child or where a house has been specially adapted for someone with a disability. The Government say that people who have had their house adapted can apply for a discretionary housing payment, but it should not be at the discretion of the local authority to decide whether it is affordable to pay the rent on a house that has been specially adapted for an individual.
As someone who has had to adapt a number of houses, I know how difficult it is, how expensive it can be, and how upsetting it can be for the individual. I also know that very often the adaptations are made specifically for the individual, so if the family has to move out of their home as a result of not getting their housing benefit paid in full, the house will not necessarily be any good for any other disabled person. This is wrong-headed—it should never be discretionary. I hope that it is not too late for the Government to make sure that that group of people is exempt from the bedroom tax.
The thing I was surprised to see in the Budget was the change in the date for the introduction of the new single-tier pension. I recognise that this might be a bit academic for hon. Members in the Chamber today, but my Select Committee, the Work and Pensions Committee, was asked to carry out the pre-legislative scrutiny of the changes to the state pension. The Bill that was published had a start date of April 2017, and we had taken all our evidence on that basis. We had asked the industry whether it could be ready by April 2017 and asked the various user groups whether that was a reasonable time scale.
Having taken all that evidence and done the scrutiny work that the Government had asked us to do, it came as a complete surprise when we found in the Budget that the date was to be brought forward by a whole year and the measure will now be implemented from April 2016. It makes a mockery of the pre-legislative scrutiny process that we were not able to do our job properly and ask the right questions. Just a week before, the Minister responsible had said that there would be no slippage in the timetable and that April 2017 would be the implementation date.
One might think that perhaps, because the Budget was covered by all the usual purdah arrangements, the Government were unable to tell us that the measure was going to come in a year earlier, but the information was leaked and was all over the papers the Sunday before. Clearly, the Government knew they were going to change the date. This was obviously very tempting for the Chancellor given that some £5.9 billion is generated by bringing in the change to contracting out, because no one will be contracted out under the new single-tier pension. I am very angry, as you can tell, Mr Deputy Speaker, that this was landed on my Committee at the very last moment.
The Budget reaffirmed the Government’s economic strategy of focusing on reducing the deficit, restoring stability, rebalancing the economy and equipping the UK to compete globally. With over 1.25 million new private sector jobs created and the deficit reduced by a third since the general election, Great Britain is clearly on the right course.
There is one issue, however, that I would have liked my right hon. Friend the Chancellor of the Exchequer to address—tackling the severe inherited levels of air passenger duty. That was a missed opportunity to boost UK competitiveness further still, to reduce the cost of business travel to stimulate trade and investment, and to help hard-working families who want to visit their friends or family or to take a well-earned family holiday.
The previous Labour Government inherited a very modest level of APD and, over time, significantly increased the rates, particularly for long-haul travel. Since taking office, my right hon. Friend has recognised this problem by delivering a temporary one-year freeze and limiting increases to the level of inflation. While this action has been very welcome, we should be going further to undo Labour’s damage. Most countries do not charge an international air travel tax at all, but of the handful that do, the UK has by far the highest such tax—more than double that of the next highest charging country, which is Germany. Levying the world’s highest air passenger tax is not a sustainable position for an island nation seeking to increase international trade and to attract millions of new in-bound visitors.
There is significant public concern about APD. Hon. Members have received hundreds of e-mails from constituents, and over 200,000 people have contacted their Member of Parliament to say that APD rates are too high. However, public concern has not, until now, been supported by detailed and credible evidence. Four airlines, including Virgin Atlantic, which is headquartered in my constituency, and EasyJet, the majority of whose services go from London Gatwick airport, commissioned an independent report by PriceWaterhouseCoopers that provides that missing analysis. It makes interesting reading with regard to the nature of APD and its role in the UK economy. It finds that APD is the highest tax of its type in the world by a considerable margin; that it is a highly distortive tax that is at least as damaging to the economy—and probably more so on a pound for pound basis—than corporation tax, and second only to fuel duty among major UK taxes; and that UK businesses in aggregate pay about £500 million in APD each year.
The report’s main analysis relates to the impact on the economy and tax revenues if APD were to be abolished. The report’s modelling suggests that by abolishing APD the UK could boost its gross domestic product by 0.45% in the first year, with continuing benefits through to 2020. Abolishing APD would also increase investment by 6% and exports, including earnings from foreign tourism, by 5% between 2013 and 2015. Abolishing APD would pay for itself, with increased business growth leading to higher tax receipts from other sources, outweighing the lost APD revenue, and it would lead to the creation of up to 60,000 jobs between now and 2020. The report acknowledges that it is uncommon but not unprecedented for tax cuts to pay for themselves.
Even though this has been a step too far for this Budget, I hope that I have made the case that abolishing APD would have been a significant contributor to the UK economy and the Exchequer and to boosting growth in what was otherwise an excellent Budget for hard-working families and businesses in my constituency and throughout the country.
All of us who sat in the Chamber throughout last week’s Budget statement will be acutely aware of the context in which this debate is taking place. Global economic conditions remain extremely challenging and the impact on the UK economy has led to the downgrading of many of last year’s Budget predictions.
The people we represent, who listened to the statement outside this place, were realistic about the Budget, but they also hoped for measures that would encourage inward investment and growth; give businesses confidence and access to finance to create new jobs and help grow their export markets; ease the pressure on family budgets and small businesses alike; tackle inequality in society; and stimulate desperately needed growth.
Although talk of an aspiration nation is great rhetoric and a worthy aim, it is the job of Government not only to ensure that people are encouraged to have aspirations, but, if there is to be real improvement, to create the context in which they have the opportunities and support to fulfil them.
In the brief time available I want to focus on a few aspects of the Budget, welcoming some of the positive measures and highlighting a number of areas where more could be done.
I commend the Government for upholding their commitment to spending 0.7% of gross national income on international development. Given the current economic climate, it is understandable, though regrettable, that, despite the fact that this allocation represents a small fraction of overall Government expenditure, it comes under continuing pressure. However, by standing by the commitment, the UK is showing leadership in the international community. Aid well spent is a powerful tool to tackle severe global poverty, to assist some of the poorest nations in becoming more self-sustaining and to support global justice, human rights and security. Moreover, although it is spent abroad, it also contributes to protecting our own national interest.
In that vein, I also welcome the fact that at the same time as the Treasury is seeking to tackle tax avoidance in the UK—which we all welcome—it has also committed to prioritising dealing with international tax avoidance by UK companies, which is depriving many nations from the transition from aid to trade. I hope that it will be robust in its actions.
I also welcome the increase in the personal tax allowance, which will lift many of those in the lowest paid employment out of tax altogether. If it were part of a package of measures to tackle poverty more comprehensively, it would be even more welcome. However, as I noted last year, as an anti-poverty measure it is neither the most effective nor the most targeted approach. Although the poorest working families will benefit, raising the personal allowance will also benefit many others.
In the time remaining, I want to comment briefly on measures that will impact on Northern Ireland in particular. I welcome the reduction in corporation tax, which is a particularly sensitive issue given our land border with the Republic of Ireland, where corporation tax is significantly lower at 12.5%. Although it would not be a silver bullet, the devolution of corporation tax has been identified by industry, the Northern Ireland Affairs Committee and the Northern Ireland Executive as an important tool in stimulating the economy and attracting inward investment. The UK-wide reduction, though modest, is a step in the right direction and will also lower the potential cost to the Northern Ireland Assembly should this tax power be devolved, as many of us wish. It is disappointing that that devolution was not announced in the Budget. I trust that the Prime Minister will have more positive news for the First and Deputy First Ministers when he meets them to discuss the matter tomorrow.
The hon. Lady can be assured that virtually all the Northern Ireland Assembly parties support what she has just said. Does she agree that it is important that their meeting with the Prime Minister tomorrow has the endorsement of all major business groups, major community groups and people who are concerned about jobs and employment in Northern Ireland?
I agree entirely that they have that endorsement, and the Prime Minister’s Twitter feed today suggests that all of those sectors are engaged in lobbying activity.
Being geographically more remote adds to household bills and business costs. The cost of fuel, for example, is a particular pressure, with Northern Ireland consumers facing the highest petrol and diesel prices in the UK and some of the highest in Europe. This impacts on households, business and our international competitiveness, so I welcome the cancellation of the fuel duty increase that was planned for September. The cost of energy generation more widely is also greater in Northern Ireland and the exemption from the carbon price floor is a welcome measure for energy producers and consumers alike.
Regrettably, the Chancellor offered no good news on another significant cost of our peripherality—air passenger duty. I recognise the previous work done to devolve APD for direct long-haul flights from Northern Ireland, but if we are to support essential connectivity, reduce business costs and grow our inbound and outbound tourism sectors, both of which contribute significantly to the Northern Ireland and UK economy, the Treasury needs to look at the issue again. A recent report by PricewaterhouseCoopers, which has been referenced by the hon. Member for Crawley (Henry Smith), indicated that reducing or abolishing APD could stimulate growth and lead to the raising of more revenue, rather than less. The Treasury appears to have dismissed that analysis, but I urge it to do its own study on the impact of APD on growth.
There are many other issues that I would like to raise, but little further time to do so. In conclusion, talk of creating an aspiration nation is a good thing but, at a time when unemployment figures in Northern Ireland are at their highest for 15 years, taking action that will match aspiration with real opportunity is much more important. I remain to be convinced that this Budget will do that for the people whom I represent.
I hope that the hon. Member for Belfast East (Naomi Long) will forgive me if I do not follow on from what she said, but she spoke a lot of sense about air passenger duty and I agree with her.
One of the most powerful points made by the right hon. Member for Leeds Central (Hilary Benn), who led for the Opposition, was when he mentioned somebody who visited his constituency surgery only last week who, after serving in a job for 30 years, had been made unemployed. As it happens, I had a similar case of somebody who had served for 30 years but who had now, through no fault of her own, been made unemployed, could not find a job and was in negative equity. That brings home to all of us the human nature of what we are dealing with. Although we may bandy statistics across the House, we are dealing with a desperate situation—for which, by the way, I do not blame the Chancellor—and we should put at the forefront of our minds the appalling human tragedy of ordinary people who are being put out of work and who cannot find work.
In my view, the best way to recreate the conditions in which people can find work is to create a balanced economy that can recreate confidence. Unfortunately, our public spending is unbalanced: half of our £730 billion or £750 billion budget is taken up by health and welfare, which are ring-fenced, and that puts enormous stresses and strains on all other budgets.
Despite the attempt by the right hon. Member for Neath (Mr Hain), with characteristic chutzpah, to rewrite history, I am not sure that it is possible to argue that austerity has caused this recession when, in fact, we are spending more than ever before—despite the fact that the figures were manipulated for this Budget—and borrowing more than ever before. The central thrust of the Labour party’s argument, which is that the problems have been caused by this Government, does not add up and the British people do not think that it adds up. They want more positive suggestions from the Labour party that show what it would do better in the face of the desperate international situation.
Did my hon. Friend find it curious that the hon. Member for Coventry North West (Mr Robinson) seemed to be unclear about why our exports are effectively stagnant, when they had been expected to rise by 6%? Surely he must know that exports to the EU have fallen off a cliff while other exports have risen.
Absolutely. That shows the sort of difficulties in the Labour party’s arguments. If it is to form a Government, it must come up with a viable alternative.
I do not support cutting for the sake of cutting. If Tesco has a problem in its bread department, it sells bread more efficiently; it does not cut the number of loaves it sells. I agree about that, but the Labour party cannot give simplistic solutions based on more wasteful spending, nor can it constantly say that our problems would be solved if we restored the 50% tax band, when every study proves that it reduced revenues to the Treasury. As we know, the top 1% of earners pay 24% of all tax revenues. Labour has to come up with something more intellectual and rational if it is to convince the British people that it is ready for government.
The situation is dire. The incomes of 2007 will not be seen again until 2019. According to the Institute for Fiscal Studies, we will need a further £9 billion of cuts to public services after the next election. In 2015, there will be £70 billion more borrowing than was predicted in 2010. Any Budget giveaways—I accept that this Budget is politically astute—will be soaked up by inflation rising faster than wages. That point has already been made about the 1p cut in beer duty. One would have to drink five pints every night for seven nights to save 35p a week. I am not sure that will impress anybody. The cut in corporation tax is welcome, but that is only a small part of the total cost to business. Business rates have increased by 13% in three years and are the prime motivator against growth in the small business economy.
The problems that we face are difficult, complex and international. I am still firmly convinced that we need a strategy based on levelling taxation as much as is possible. The attempt to bring corporation tax more in line with small business tax is a first step. We should try to flatten all capital taxes and business taxes. We should then move on to income taxes and get rid of the plethora of allowances, which fuels an industry based on evasion and avoidance.
At first sight, the excellent scheme that the Chancellor is trying to bring together to help with home loans is very good if it does not lead to a property bubble. However, it is a bit like somebody climbing a ladder with loads of our money, throwing it over the edge and saying, “May the fittest come and get it.” It is a bit like the person rushing towards the pool of Bethesda.
It would be much better to have a flatter, simpler form of taxation so that people make their own decisions and do not rely on Government handouts, and so that we do not have a huge industry based on evasion and avoidance.
We are creating a special child care allowance for people who want to put their children into child care. That is great, but why have we not fulfilled our pledge to introduce a married person’s tax allowance?
We are out of line. I am quite prepared not to hold the Government to account on their solemn promise to bring in a married tax allowance if they get rid of the other allowances and restore universal child benefit and all the other things. They cannot have it both ways. They cannot make it tax and benefit advantageous for a mother—it is usually a mother—to go out to work if they do not help mothers who want to stay at home and add to the economy by looking after their own children. That is unfair and something has to be done about it.
We cannot carry on with Budgets that simply tweak things. We need a long-term strategy based on simplifying the tax system and on budgetary reform. We must remove as many of the allowances as possible. We must change the culture of constantly tweaking things with Budgets and instead look to the long term and create a more simplified and effective tax system.
Last Wednesday was my first Budget since entering the House and I had high expectations. [Laughter.] I know that shows my naivety. We all know how much our constituents are suffering financially as the economy continues to flatline, so I was expecting a Budget that would jump-start growth. I was hugely disappointed, and I believe that my disappointment was shared by the country.
We face the biggest housing crisis in a generation, but the Government’s housing and economic policies are making it worse. House building is crucial to this country, both to bring economic recovery and to get families on the housing ladder.
No, I am sorry.
Initially, I broadly welcomed the Government’s schemes to encourage people to buy new builds and to assist people with mortgage deposits. With the demise of building societies, banks have a virtual monopoly on mortgages. The percentage that is required for a deposit has been rising steadily, especially for first-time buyers. That has created an environment in which people who are more than able to pay for a mortgage cannot get one because the tens of thousands of pounds that they need for a deposit are unachievable.
However, I then started to consider the broader picture and the details of the schemes. First, it has been revealed that the Government’s mortgage scheme will not exclude people who are buying a second home. What about a third or a fourth home? How does that help people who are starting out? Not only are the Government pressing ahead with tax cuts for millionaires, it now seems that the mortgage scheme will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000. Secondly, what interest rate will be charged, or will it be an interest-free loan? Thirdly, is it right that the taxpayer will effectively be underwriting the banks? The state will be facilitating banks to make profits on these mortgages.
My main question is, where are all the new homes for people to buy? The Government’s schemes mean that more people will be trying to buy the same number of houses. That will just push up the cost of a house unless more homes are built. The Government announced an extra £225 million for affordable house building, but according to the OBR only £125 million will be spent before 2015. That figure is dwarfed by the £4 billion cut in the funding for affordable housing that the Chancellor made in his first Budget. That stopped a very successful affordable housing scheme in Rotherham that was run by Transform South Yorkshire.
House building is at its lowest rate since the 1920s and the situation is getting worse. Housing starts fell by 11% in 2012 to below 100,000. The impact of that is that the Government have put 80,000 construction workers out of work and construction output has fallen by 8.2%.
Labour has proposed some practical measures to address that problem. We called on the Chancellor to use the money raised from the 4G mobile auction to build thousands of affordable homes to stimulate the economy and tackle the housing crisis. To improve the housing stock, we recommended that VAT on home repairs, maintenance and improvements should be cut to just 5%. To help young people who want to get on to the property ladder, the CBI’s proposal of a housing individual savings account should be considered. We also advocate giving first-time buyers a stamp duty holiday on properties worth up to £250,000. Finally, I support Labour’s recommendation to bring forward long-term infrastructure investment in schools, roads and transport to get construction workers back to work and to strengthen our economy.
Those measures would boost growth, get builders back to work building the homes that we need, and create apprenticeships for young people. I urge the Government to look more closely at the details of their schemes and to find ways to build more affordable homes and genuinely help first-time buyers. We need action now to get Britain building and to kick-start our economy.
Overall, I think the Budget contains some helpful measures to help families with the cost of living, and it invests in the future of our economy within a responsible framework. As a Liberal Democrat, I am naturally proud of the rise in the personal allowance to £10,000 from April 2014—one year earlier than planned—which will give 24.5 million people a tax reduction of £700. I was also pleased at the introduction of the employment allowance, particularly for small and medium-sized enterprises. My constituents will certainly be pleased with the freeze in fuel duty, the scrapping of the beer duty escalator and the cut in duty on beer.
I wish to concentrate in my short speech on the overall £5.4 billion boost to housing, but I will make a slight digression to talk about child trust funds— I should declare that I am a grandparent with a granddaughter who has a child trust fund. I have received a number of representations on those funds recently, and I have been sent details from a campaign by Money Mail under the headline:
“The £34,000 curse of child trust funds: Six million children are barred from best savings deals”.
One could interpret that as stating that the next generation of young people might be deprived of a deposit for a house, and at the other end of the scale, for lower income people, there are clearly children with trust funds who are not receiving the levels of interest that they should in terms of equity. I wanted to raise that issue with my right hon. Friend the Chief Secretary to the Treasury who is sitting on the Front Bench.
The housing package is part of building a stronger economy and a fairer society, and includes a number of measures to support home ownership, new development and affordable housing. Over the past year or so, there has been agreement across the House that stimulating the construction sector is key to stimulating growth. It is a win-win situation with more jobs and more money created for our economy, without particularly sucking in imports. It is estimated that each extra home built each year creates jobs for three to four construction workers and those in associated industries, thereby improving business confidence.
During previous debates we have identified issues on the demand and supply sides of the housing market, and many have argued that the problem is not with planning as such. On the demand side, measures in the Budget have the potential to extend the supply of new houses, perhaps converting some of the hundreds of thousands of non-implemented planning applications into homes. Meeting the needs of those willing and able to buy, and the aspirations of those wishing to be home owners, is important, and will give this generation the same opportunities as my generation. At times tonight I have wondered whether the Labour party actually believes in encouraging home ownership.
Of course, home ownership is not the whole solution to our housing problem. I represent an area—Purbeck—that has a very high house-price-to-wages ratio and a high proportion of second homes. Although I am keen on the two schemes to stimulate mortgages, I am not keen on them subsidising second homes as that would make the situation in Purbeck and Dorset even worse. I like both schemes, however, because they involve first-time buyers and second steppers, and I think that we must put a shock through the whole market.
But—and there is a but—I think we have to do a lot more. I like the buy to rent stimulus, but we need to increase the supply of affordable housing over and above what we want to do and have done already. In the next phase we ought to look at the capacity of councils to borrow money for building housing, at direct building by councils, and at supporting arm’s length management organisations, which is incredibly important. An ALMO in my constituency is ready to start building but cannot get the borrowing capacity.
I welcome the opportunity to speak in this important debate, because the Budget last week revealed the true scale of the Government’s economic failure. As the next election grows closer, the Chancellor faced a test. He needed to boost household incomes and help cut the cost of essentials, but neither of those was forthcoming and his Budget failed to do enough for low-income households.
With an eye fixed firmly on the next general election, the Chancellor is pinning his hopes on a housing boom. His make-or-break blueprint for rebuilding the economy is unlikely to make a difference to the nation’s finances, as the focus has clearly shifted towards manifesto writing, positioning and early electioneering ahead of 2015. More than ever, taxpayers will now underwrite the mortgages of hundreds of thousands of home buyers, and take stakes in newly built houses in a multi-billion pound attempt to stimulate the struggling economy. However, he risks causing another unsustainable boom in the housing market, putting billions of pounds of taxpayers’ money at risk and offering little hope to hard-pressed working families who are struggling to get on the housing ladder for the first time.
We face the biggest housing crisis in a generation, but the Government’s housing and economic policies will make it worse by stoking house prices rather than helping families find a home. The Government have insisted that homes sold through the right to buy scheme will be replaced with more affordable housing on a one-for-one basis, but the Budget included £4.5 billion of funding for housing, with only £225 million of that to be spent on affordable homes. If we do not tackle the fact that we are still not building enough homes, we will create another housing bubble that will continue to push house prices out of reach of the majority.
Not only is the Chancellor pressing ahead with a tax cut for millionaires, it now seems that his mortgage scheme will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000. Surely people struggling to get a mortgage, and those who want to own their first home, must be the priority for help, rather than the small number who can afford to buy a second home. If the Government concentrated at least some effort on collecting taxes from international corporations that operate in this country, and closing some of the loopholes in the tax system, there would be more money to go around.
With the coalition’s axe in full swing, I am appalled that the Government place so much effort on reforming the benefits system and punishing the sick and most vulnerable in our society, while those at the very top have seen their incomes rise as never before. The financial sector is at the heart of the economy. Huge, multi-million pound payouts to “banksters”, while citizens cannot even afford to feed themselves, undermine any efforts to break with the past and are a timely reminder that the country is being run by the rich for the rich. As the rest of the country faces austerity, just an hour after the Chancellor delivered his Budget speech, Barclays bank paid nine fat cat bosses £40 million in share payments. That makes a complete mockery of claims that banks are cleaning up their act when it comes to their bonus culture.
At exactly the same time as the bedroom tax comes into force, the Government are prepared to give 13,000 millionaires, including the Prime Minister and the Chancellor, a tax cut of £100,000—£3 billion in total a year—while more than half a million households that are home to a disabled person will lose £700. That is simply not right.
The hon. Gentleman clearly indicates how his Government have got their priorities wrong.
It is time for this Government to recognise what is very much evident: that they have got this horribly wrong and need to think again before it is too late. We need a lasting change of direction by the Government, to one that demonstrates compassion, puts ordinary people first, and recognises the right priorities, or —ideally—a change of Government itself.
Few things are as natural as the aspiration to own a home, but for too many of our constituents, the aspiration is too often out of reach. The high cost of housing is one of the most frequently raised issues at my surgery. The problem affects not only would-be first-time buyers, but many going through family breakdown. The deposit typically required for a mortgage on even a small starter home is higher than many working families’ annual income. Without parental support, raising that sort of money can be nearly impossible. The “help to buy” schemes announced last week will help to put home ownership back within the reach of hundreds of thousands of our constituents.
I am delighted that the Chancellor is extending right to buy further, so that council tenants can buy the homes in which their families live and local authorities will receive receipts from the sales, to be used to build new social housing. I am proud that, while under Conservative leadership, Dudley built some of the first new council housing in the area for a generation. Right-to-buy receipts, and the doubling of the affordable homes guarantee programme, will mean that more councils and housing associations will be able to build new social housing for local residents.
Last week’s jobs figures showed another increase in the number of people in work—the number in Halesowen and Rowley Regis is now the highest ever—but the fact remains that many people aspire more than anything else to a job that will give them more independence and create a better life for themselves and their families. I remember from when I was setting up my own small businesses that nothing was more rewarding than being able to offer somebody their first job, or to offer work to a person who had been unemployed for some time. Hon. Members know that Governments cannot magically create sustainable jobs, but they have a responsibility to do everything possible to avoid putting barriers in the way of those who can. Every £1 that we add to non-wage costs represents an additional barrier to small and medium-sized businesses taking on extra employees. That is why I am pleased that the Chancellor has launched his scheme. The £2,000 employment allowance is a direct boost for new jobs. It will help to bring more people into work and open up a new set of possibilities and aspirations.
Shortly before the Budget, I attended the launch of the youth budget in Parliament with a number of other right hon. and hon. Members, including the Chancellor. Fourteen to 18-year-olds from around the country came together to discuss young people’s priorities, which were drawn up following a national vote. That generation wants to get on, and the conclusion they came to in their youth budget could not have been clearer: they want the Government to bring down the deficit more quickly.
The House spends a lot of time talking about the economic effects of unsustainable deficits. The continuing turmoil in the eurozone is a current reminder of the dangers of failing to address the deficit. However, the young people gathered together for the youth budget remind us that, as well as being economically foolish, it is morally wrong for one generation to expect the next to pay for its overspending.
Members on both sides of the House will recognise that growth remains weaker than had been hoped for or expected, as it does in most other developed countries. There was much in the Budget and the Chancellor’s autumn statement that will help wealth creators to deliver the economic activity that we need to provide growth, but there is also much to help to make things that little bit easier for the millions of families who are working hard to get on and build a better life for themselves and their families. I believe that those who strive and those who aspire will see this Budget as a Budget for them.
That speech, much of this debate and this Budget demonstrate the parallel universe in which the governing class in this country is living. Earlier in the debate, nearly four hours ago—it feels like four days—we had the full vaudeville, music hall treatment. They chuntered and they chortled and they laughed—how they laughed!—until their tummies wobbled about the state we are in.
But there were some genuinely funny moments, the funniest of which was when the Secretary of State said that the Budget had sowed the seeds of growth and jobs in this bleak midwinter, which has now frozen out the spring. In the very month in which 4,000 grandmothers and grandfathers froze to death in Britain—froze to death in Britain, in 2013—and the very month in which millions of our citizens had to make a choice between eating and turning on their heating, the Secretary of State believes that this Budget sowed seeds for growth and jobs. No seeds can grow in this climate; hon. and right hon. Gentlemen on the Government Benches should know that.
The truth is that this Budget, produced by a Cabinet of millionaires, governing in their own interests and the interests of a very narrow class, has lost the confidence of the country. Indeed, the political system and the political class as a whole have lost the confidence of the people, who see their own situation, with mass unemployment and poverty stalking the land. Bradford, my constituency, is an almost perfect example. Youth unemployment has tripled in two years; one in eight is unemployed; our child poverty statistics are the second worst in the country; our schools are the third worst in the country; our hospitals are the seventh worst in the country; our young people walk the shuttered-up streets without education, training or jobs; and the Government and others in the media cry surprise when the devil finds work for their idle hands.
The Government have done nothing for Bradford—the Budget does nothing for Bradford—because Bradford is entirely beyond their ken. [Interruption.] Do I know where Bradford is? I am the person who, just one year ago, won a landslide election result—a by-election of historic proportions. I defeated the Labour party and, the party of the hon. Member for Scarborough and Whitby (Mr Goodwill), precisely because it thinks that yah-boo politics of the type we have seen in the debate is sufficient to meet the gravity of this situation. He should come to his seat and join the debate.
Here is the truth of the matter: our country is in grave danger. It is a country on the slide, which cannot keep its pensioners warm in the winter time, but can fly around the world setting fire to other people’s countries, apparently at the drop of a hat. It is a country that cannot pay for its young people’s education without charging them £9,000 a year to take shelter from the economic winds and study at universities, thanks to the betrayal of the yellow Liberal Democrats.
I have only 15 seconds left. Do you know, Mr Deputy Speaker, how many times in this House just this afternoon the words “immigrant”, “foreigner”, “alien” and “foreign migrant” have been mentioned? There is no U-turn by the Government, but there is no deviation to the right so low that they will not make.
It is, of course, a pleasure to follow the hon. Member for Bradford West (George Galloway). His speech was an oratorical interlude that demonstrated his perspective on the world and suited his style: blacks, whites and no greys. Although he denies practising yah-boo politics, I am afraid to say that that was pretty much what we heard.
Today, we are concentrating primarily on housing, and I want to make a constructive contribution on the narrow issue of developing the construction industry, trying to kick-start the economy in the process and meeting desperate housing need. I welcome any intervention by the Government, including the Budget announcement on the promotion of home ownership for those seeking, in many cases in desperate circumstances, to get their first toe-hold on the housing ladder. In particular, I want to look at the special circumstances faced by many people living in rural areas.
My own part of the world is, of course, west Cornwall and the Isles of Scilly. Cornwall as a whole has seen the number of houses double in the past 40 years, yet housing problems for local people have become significantly worse. What we have learned in Cornwall applies to many other parts of the country that are attractive to wealthy people—we have many such places in Cornwall—who can afford second homes. On its own, building houses is not the problem. In places that are highly desirable to those with large wallets, something more sophisticated is required than merely heaving in a load more houses and turning the place into a developers’ paradise. There is a big mismatch between earnings levels and house prices in our area.
The hon. Gentleman’s area, like mine, has a number of second homes on coastal development routes. Does he agree that we need the Government to plug this massive loophole, so that people do not take advantage of what appears to be there at the moment and build large buy-to-let properties with a significant subsidy from the public purse?
I entirely agree. As the Government introduce their proposals, I hope that they will discount any chance of the loan guarantee being used to support the purchase of second homes, and that it will go only to families that otherwise would not be able to buy a first home of their own. After I was first elected in 1997, I campaigned against the policy that had been introduced by the Conservative Government of providing a 50% council tax discount for second homes. In that case, hundreds of millions of pounds were being used every year to subsidise the wealthy buying second homes, when thousands of local families could not afford their first. This Government are finishing off the job. I persuaded the previous Labour Government to remove as much as they possibly could of the second home council tax discount, and that was the right step forward.
Before I was elected to this House, I worked with housing associations and others to find a way of constructing a new lower rung on the housing ladder through shared equity and shared ownership schemes. The rural exceptions policy allowed exceptions to be made on the edges of villages and towns, where planning permission would not normally be granted, to meet local housing need. It allowed the schemes to go ahead and meant that the development price of land was significantly lower than would have been the case if they had been given unfettered permission to develop the land and build properties at prices that local people could not afford. The exceptions approach and shared ownership were clearly the way forward. The problem was that in rural areas only two lenders, Nationwide and Halifax, were prepared to put money into shared ownership developments.
A lot of lenders question whether they are prepared to put their money in and support local families who are trying to get on to the housing ladder. Such properties do not result in the level of default—the amount is 0.45% in shared ownership as a whole, which is significantly less than that for rural housing stock—that a lot of lenders pretend. If the Government are looking at ways to tighten the definition and develop their loan guarantee scheme so that it will apply to families who desperately need help, I urge them to look at the shared ownership sector. They should find ways to enable the situation to come to life, but not just on the first, initial purchase; they should try to ensure that on the second and subsequent purchase they can facilitate and work with housing associations so that these families can move on. The lack of confidence that this market can have a life of its own is holding it back.
I hope the Government will look at ways of having, in effect, a rural housing investment bank through this measure, and I hope that they will see this as a constructive contribution to the debate.
I am glad I met a man from St Ives on this journey, because I agree with much of what the hon. Member for St Ives (Andrew George) said about shared ownership.
I suppose it is because I have been in this House too long—there is usually a chorus after any Member says that—and because I have heard a lot of Budget and autumn statements that I have become more cynical about them as time goes on, but I want to start by saying that, as co-chair of the associate parliamentary manufacturing group, I believe that some of the concessions and planned changes affecting manufacturing industry in the autumn statement and the Budget were good for manufacturing, and were welcomed by people in the sector.
The Budget was supposed to be about aspiration. I would like that aspiration to be lifted much higher. Our country is changing fast, and my irritation with Budgets and autumn statements is that there seems to be no time for politicians to get together in a sensible way and think strategically about policy making and the direction of our country. Our country is changing fast. The social and economic structure is changing rapidly and fundamentally within my lifetime. I was talking recently to students at Northampton university, and their knowledge of the social structure of Britain is amazing. I asked them what percentage of people worked in manufacturing and some of them said 30% or 40%. They had no idea that about 9.5% of people work in manufacturing; it is 10.5% in Huddersfield. Some 30% work in what people call public services—education, health and local government —and roughly 60% work in private services.
Working in early years or later years care in private services means earning minimum wage or minimum wage plus. Working in retail and distribution also means earning minimum wage. No one can live the good life on minimum wage. I came into politics so that my constituents could live the good life. We all know the good life: we can put food on the table and have a nice house or flat, whether it is rented or bought through a mortgage. We all know the essential ingredients for a good life, but many of the good jobs that provided it, including in manufacturing, for example, have gone. They have been replaced by minimum wage jobs in retail and distribution, and in caring for patients.
Universities, apprentices and education were mentioned only once in the Budget, and that is a real worry. I care passionately about giving young people jobs and opportunities, and 90% of firms do not take on apprentices. That is a real concern and it was not addressed enough in the Budget.
Manufacturing is important in our country. My vision is of a high-skilled, high-paid Britain, but at the moment many of our people are heading towards a low-skilled, low-paid economy. In fact, those two can live side by side, and as Lord Heseltine told us, there is a grotesque change in our country that should be worrying every Member—the way in which London and the south-east are sucking the life out of our great towns and cities. The Budget has not addressed that, but we must address it if we are to get strategic policy right. This Budget did not do enough in that direction.
Does the hon. Gentleman also agree that demographic changes and the rising numbers of young people in certain communities make it even more important to have specific policies targeted at them in order to get them into workplaces and apprenticeships?
The hon. Gentleman knows of my passion for skills training and apprenticeships. We should abolish unemployment until the age of 25. The Netherlands did it, so why cannot we? There was not enough in the Budget to address youth unemployment. When I was a shadow Home Affairs Minister, I knew the importance of putting money into deterring young people from crime. If someone is not a criminal by the age of 25, they do not become one, so if we keep young people in employment, training or education until then, they never get into inter-generational worklessness.
Those are the sorts of bold policies I wanted in the Budget. I wanted higher aspiration and for my constituents to see us not lobbing insults at each other, but finding common cause to get the country ready for the 21st century and to make ours a society of high skills and high pay.
The announcement to help first-time home buyers is great, but the wording needs to be tight to prevent it from being misused as a licence for people to buy a second home or to add further to the buy-to-rent racket that has led to so much misery for those trapped in the private rented sector, while others have become property millionaires by sponging on funds from housing benefits paid for by taxpayers to help people who cannot afford to buy or who cannot get a council house. It would make more sense to spend this money on new council houses—or social housing as it is now known.
Next, there are mixed messages on alcohol tax and the coalition Government’s desire to tackle binge drinking and improve the health of the nation. One minute there is disagreement about whether there should be a minimum unit pricing of alcohol; then the Chancellor knocks 1p off the price of beer, rather than raising it by 3p, as would have happened under the ever-rising structure inherited from Labour. Thus the cost of a pint of beer has gone down by 4p on Labour’s pricing policy. This is not going to help tackle binge drinking or the growing health problems associated with excessive drinking.
We need a variable price structure to help traditional, community and village public houses, which would fit well with the coalition Government’s localism agenda and the last Government’s sustainable communities legislation. Tax on beer and lager should be raised significantly in the mega-pubs and to stop irresponsible discount pricing in supermarkets, but reduced in our neighbourhood public houses, which are closing at a rate of 18 a week, owing, in no small part, to the lack of a level playing field. It is these neighbourhood hostelries that, in the main, are less likely to cause antisocial problems. On 1 November last year, I told the House:
“We need to amend the tax levy on beer sold in our traditional public houses. We should have a tax-neutral approach to keep the Treasury happy and bring huge social benefits, including job retention and creation, rather than there being the loss of jobs that we continue to witness in the sector. Most publicans of neighbourhood and village public houses run responsible establishments. Their customers should be rewarded, not financially penalised because of the irresponsible marketing carried out by supermarkets and mega-drinking establishments.”—[Official Report, 1 November 2012; Vol. 552, c. 429.]
On tackling binge drinking and the often associated incidents of people being injured, deliberately or accidentally, from broken glasses or beer bottles, sometimes used as weapons in fights, I urge the Chancellor to give a tax discount to brewers who put their product in plastic bottles—more accurately polycarbonate bottles. Likewise, I urge him to encourage major drinks venues to use the same material for the glasses in which alcoholic drinks are served. This would dramatically reduce the number of people taken to hospital for injuries caused by broken beer bottles and glasses. I refer the House to the ten-minute rule Bill in the name of the hon. Member for Wrexham (Ian Lucas), which he brought in on 4 September last year. In his speech, he pointed out that according to the Home Office there are about 87,000 violent incidents involving glass every year. Just think how much it costs the NHS to deal with the vicious wounds inflicted.
I urge the Chancellor to introduce a levy on football television rights. There is already too much money sloshing around in professional football, and it is only going to get worse. The next television deal will bring in £5 billion to inflate still further the obscene payments to premiership footballers and a big creaming off by their parasitic agents. I suggest a 20% levy, which the Chancellor could ring-fence and direct to be spent, as a £1 billion Olympic legacy, on school and grass-roots sport.
Thank goodness we have not had a repeat of the pasty tax nonsense, although we are left with the unfairness of VAT being levied on the Subway toasted sandwich. I urge the Chancellor to try a little harder with his attempts to be the common man and axe the 20% tax on toasties and the like.
Finally, how about this for a new income stream? I am grateful to Mr Richard Spendlove, doyen of the BBC evening radio airways across the eastern counties, for this suggestion. He points out that people will pay a small fortune for so-called personalised or elite registration number plates for vehicles, so why not, he asks, re-issue all those abandoned and forgotten numbers from the early years of motoring? Whenever such live number plates come on the market, they can fetch as much as £4,300, which was the asking price yesterday for registration number 88 VR. Mr Spendlove suggests that the Driver and Vehicle Licensing Agency dusts down its records, identifies the tens of thousands of similar historic numbers that decades ago ended their days in the scrap yards of yesteryear and makes them available. The revenue generated could, I suggest, be used for road safety measures outside schools.
If the Chancellor wants to be popular, he should adopt all those suggestions.
To fill a Budget with populist gimmicks while wholly ignoring the economic fundamentals that are remorselessly driving this country into a semi-permanent stagnation is to degrade the high office of Chancellor. The home loans scheme has more than a whiff of sub-prime about it, luring those without the means to buy a house they cannot afford and thereby fuelling a housing bubble. The child care voucher is limited to where both parents are working and offers five times more to the richest fifth than the poorest fifth. And the penny off a pint of beer does not do much to compensate for the 9% cut in real wages that the OBR now expects by 2015 compared with 2009.
All this populist flannel misses the point. The real point is the total abandonment of any serious attempt in the Budget to tackle the fundamental problems of a desperately ailing economy. The tragedy for the people of this country is that during this depression we have Herbert Hoover at the controls, when the whole country is crying out for a Franklin Roosevelt. The harshly unrelenting facts of Britain’s inexorable decline speak for themselves. The OBR has been forced to halve the growth prediction this year, which it made only three months ago, from 1.2% to 0.6%. The deficit reduction—the ostensible aim of the whole brutal austerity machine—is going into reverse. The deficit now expected in 2014 is £120 billion—twice what it was expected to be just three years ago. By the time of the election in 2015, the Government will have been forced to borrow an extra £250 billion more than was forecast in 2010. With the plans in the Budget, any hope of the Chancellor’s achieving a firm and sustainable recovery is simply delusional.
The heart of any Budget is its macro-economic strategy. Uniquely, in this Budget, there was no credible strategy. The Chancellor’s policy is still so destructive and the failure so massive that it is difficult to avoid the conclusion that the real objective is not deficit reduction, but to dismantle the public sector and shrink the state. One simply has to ask, “Why is the Chancellor so wilfully blind to an alternative?”
An alternative must start from recognising that when the household and private sectors are deleveraging, there cannot be a recovery if the public sector does the same. It starts from recognising also that monetary policy alone—throwing £375 billion of quantitative easing at the banks, dropping interest rates to the floor and letting the exchange rate fall by 25%—cannot by itself produce growth; or, as Mark Carney would put it, not much “escape velocity” there. An alternative also starts from accepting that until the collapse in aggregate demand is tackled, there will be no recovery.
How can that be engineered and paid for? There has to be, initially, a public sector-driven investment programme in house building, infrastructure, energy, transport and low-carbon technology until such time as the private sector can take over. That can be paid for by borrowing £30 billion at the dirt-cheap interest rate of 0.5%, or £150 million a year, which would rapidly pay for itself by taking back into employment 1 million workers, whom it is currently costing the country £10 billion to keep on the dole. However, this does not have to involve any public borrowing at all. The nationalised banks, RBS and Lloyds, could be instructed to prioritise lending to key infrastructure manufacturing projects, or the ultra-rich—the 14,000 millionaires who are about to get a £2,000 a week tax give-away—could be capital gains taxed on the £155 billion of gains they have made over the last three years, according to The Sunday Times. Or, instead of hosing down the banks with another huge tranche of quantitative easing, the money could be diverted to direct investment in industry.
I very much welcome the opportunity to contribute to this Budget debate.
We have heard much in contributions from both sides of the House about the level of the housing supply and the building that is going on. I am happy to report that in Milton Keynes we are getting on with it. We have 28,000 housing permissions in place and the Government have intervened to unlock some of the developments that have been gummed up in the system for too long, thanks in part to our friend the great crested newt—which, for an endangered species, seems to appear with remarkable frequency whenever there is a planning application. Those housing developments are not part of the hated regional spatial strategy, but are now part of a locally decided and locally managed strategy, which is just one component of our successful growth strategy—not the old, blunt housing targets, but economic growth alongside housing growth and infrastructure planning.
I warmly welcome the measures in the Budget and earlier announcements that will underpin and enhance Milton Keynes’s position as the part of the country that will lead in the rebuilding of our economy. All right hon. and hon. Members will want to claim that their home area is the best and is leading the country, but I can cite three recent independent surveys that confirm that Milton Keynes is leading the way. In November, the Experian company ranked Milton Keynes as No. 1 in a survey of towns that will lead growth in this country. In each of the next four years, annual employment will grow by 2% and output will grow by 3%, and this is sustainable and balanced growth, not just in the retail and service sectors but in manufacturing and high-tech industries as well.
More recently, March’s economic outlook report by PricewaterhouseCoopers put Milton Keynes’s growth ahead of the UK average. Mike Robinson, partner at PwC, said that
“businesses should be encouraged to capitalise on the expected upturn in consumer spending and opportunities created by local infrastructure investment.”
Finally, just the other week the business location index—part of the inward investment guide to England—ranked Milton Keynes as the best place in Britain to do business, based on its scoring highly on economic, human resources, environmental and infrastructure indicators.
Companies House records show that more than 2,000 new businesses started up in Milton Keynes in the last year, up 10% on the year before. Our inward investment is booming. Milton Keynes is already home to 700 international companies, and that is growing. We have a winning formula that is based on our local factors and the UK’s competitive tax strategy. Our strong position will be underpinned and enhanced by the policies announced in the Budget and other measures. The city deal and the Heseltine proposal for a single pot of money to decentralise decision making will help, boosting our infrastructure, particularly with the east-west rail project, which will link Milton Keynes to Oxford and, ultimately, Cambridge and is forecast to generate 12,000 jobs in the local region.
Our apprenticeship schemes are doing well. We have already doubled the number of apprenticeships locally to 2,000—that will increase further—and not just in traditional sectors, but in accountancy, law and manufacturing. That will develop our skills base for the future and make us even more attractive to inward investors. Finally, the policies to help people buy their first home and go further up the housing ladder will ensure that our housing strategy is linked to what we need locally. Of course there are many challenges ahead, but Milton Keynes is doing well. This Budget gives us the tools to get on with the job.
Let me finish by referring to the contribution from the hon. Member for Bradford West (George Galloway). He criticised the Government for talking about sowing seeds in frozen weather. A horticulturalist will tell us that it is not only possible to sow seeds on frozen ground, but often desirable, because that can lead to the healthiest growth.
I thank you, Mr Deputy Speaker, for giving me the opportunity to speak in this Budget debate.
Like all right hon. and hon. Members, we waited to hear the Chancellor’s proposals that would kick-start the economy, lifting it out of the despair in which it finds itself. The Secretary of State for Communities and Local Government opened today’s debate, outlining Government policy in the Budget for a house building programme. I appreciate that our constituents across the United Kingdom have difficultly getting on to the housing ladder. Having listened to my colleagues here in England, I can say that there is undoubtedly a social housing build problem, with affordable housing described as a national emergency.
Members of Parliament from Northern Ireland have difficulty offering proposals to resolve the housing problem, because housing is devolved to the Northern Ireland Assembly. However, the Chancellor has offered some hope to homebuyers in the Budget, with interest-free loans of up to 20% of the value of a new build property. I appreciate that there is some confusion about the proposal, but I trust that homebuyers seeking to get on the housing ladder will not be lost in the midst of a policy that seems not to have been thought out before being announced.
On Budget day, my hon. Friend the Member for East Antrim (Sammy Wilson) rightly welcomed a number of acceptable announcements. He endorsed the decision to protect Government front-line services in health and education. He also acknowledged that the Government had recognised the key role that capital infrastructure enhancement plays in stimulating economic growth. That is important not only for short-term economic growth, but for our country’s long-term prosperity. However, we face a serious problem, with little or no economic growth across the United Kingdom but, sadly, no sign of it changing in the near future. We need to stimulate our economy. The Secretary of State told the House today that we needed to give business a leg up. To do so, we need to bring confidence back into the business community. Businesses need to be sure that the Government have a plan to take us out of the mess we are in. No one can deny that there is a lack of confidence. As a result, those who have money are not spending or making the investments in industry that we need so much in our economy.
Has the hon. Gentleman read the latest report from the Federation of Small Businesses bureau, which says that the level of enthusiasm and belief that we are heading towards a recovery is higher than it ever has been? Confidence is at an all-time high.
I thank the hon. Lady for her remarks. I think that if we really went out into the community, we would still find a lack of confidence. If confidence were out there, those who have the money—and some certainly do—would be investing. We need to get those people to spend that money within our economy. On the other side, there is not only a lack of confidence, but a lack of finance. Small and medium-sized businesses are being starved and crippled by denial of finance.
I do not believe that we should talk down our economy, but we must be realistic about the economic situation in our United Kingdom. We want inward investment and we need to kick-start the economy. I would certainly like to see the Chancellor giving more encouragement. Many businesses are crying out for finance. They go along to the banks, but no matter how many times the Chancellor and even the Prime Minister have assured us that they are encouraging the banks to give them the money, that needed money is not getting into the coffers of SMEs. We have got to do more about that.
My constituents welcome the cancellation of the 3p increase in fuel duty, which would have been an additional tax burden not only on businesses, but on virtually every other person and family in our community.
I thank my hon. Friend for that suggestion. In fact, that suggestion would have been profitable for the economy, especially bearing in mind that we in Northern Ireland already pay higher fuel prices than any other region of the United Kingdom. We also welcome the low cost of borrowing from the banks over a sustained period, but I have to say that there is another side to that because we should have some sympathy for many pensioners and other savers who depend on savings to supplement their income. They are suffering greatly from the very low interest rates.
I acknowledge the reduction of corporation tax to 20%, ensuring a single rate for businesses in April 2015. In welcoming this step, however, I would ask the Chancellor when corporation tax is going to be devolved to the Northern Ireland Assembly, particularly bearing in mind the fact that we compete with the Irish Republic, which has a 12.5% rate. We want to be able to compete on a level playing field, or better, to bring inward investment into our Province. Northern Ireland’s population has a strong work ethic, but we need policies that will build confidence, bring that inward investment and help industries in the local community to invest in the future.
Air passenger duty is another issue. I believe it is detrimental to our economy. I acknowledge that APD exists for transatlantic flights from Northern Ireland, but we need to challenge this, so I call on the Chancellor to reconsider his position. There is anger, too, over the millionaires’ tax cuts, while at the same time there is the hurt over the bedroom tax. Where will our constituents find the houses for the downsizing? It is easy to talk about these imaginary houses, but that offers no relief to families that face turmoil in getting a roof over their heads.
Before I go any further, I should like to declare that I retain an interest in a small communications company, which I set up before I was elected to this place, that gives advice to developers on how to manage planning procedures and the planning system. For the last 20 years, I have been following the whole issue of development and planning.
I very much welcome the Chancellor’s proposals to introduce “help to buy”, which I hope will stimulate our economy as well. To my mind, however, the planning process is not the issue that has created many of the problems for development. We need to unlock credit availability and make mortgages much more available, especially for those first-time buyers who cannot raid the bank of mum and dad.
I am not going to pretend that I am an economist or that I necessarily understand banking regulation or the complexities that go with it, but I think that we cannot ignore the reasons why we are in this mess. To my mind, it was Bill Clinton and the American Administration who, wanting to encourage the less well off, especially among the Afro-Caribbean community in the United States, to buy their own homes, consequently created a sub-prime market in the 1990s. By weakening financial regulation, the US and British Governments created a new class of specialised mortgage lenders that subcontracted their liability. By failing to put up interest rates, the US Federal Reserve and the Bank of England allowed the housing market to overheat. That is why we created this major crash.
In 2001, when the Labour Government created a budget deficit, they continued to make our problems much more disastrous than they needed to be, and they failed to control public expenditure, adding to our financial woes. In addition, the Bank of England failed to manage our inflation target and our monetary framework. Not only the Treasury, but the Office for Budgetary Responsibility have some way to go because they have failed to get their forecasts right in the process.
As my hon. Friends know, the Bank of England is responsible for managing the inflation target, but it is the Treasury that actually sets that target in the first place. For the last two years, I have been banging on and asking how those criteria have been set, but I have failed to get a reply. Plainly, something has gone very wrong indeed. The Bank of England is consistently failing to hit its inflation target. In producing a Budget, monetary policy cannot be divorced from the economics. In the years before the credit crunch, monetary conditions were too loose. There was an asset price bubble, house prices rose very sharply and if the banking crises had not erupted, general inflation would have been an even more serious problem. The Bank of England accommodated a serious asset price bubble with a huge and unsustainable level of domestic household debt. People have rightly criticised bank and financial market regulation, but much less attention has been given to defective central banking and overly loose monetary conditions that made possible the household borrowing and financial leverage.
I believe that the time has now come when the role of the central banks should be scrutinised properly. We must learn the lessons, the limitations and the defects of the inflation target regime. There has been a serious lack of transparency in the way the Bank of England conducts monetary policy. The details of its forecasting model, the assumptions it uses and the forecasts it generates have not been publicly available. Its public documents have been disappointing in respect of their clarity and presentation, and I am afraid that the inflation report has failed. I am firmly of the view that we need a proper review of the inflation target, how it is set out and how the central bank conducts its business.
They say, “If you tell a big enough lie and repeat it constantly, people will believe it”—and that is what the Tory-led Government have done. We are constantly told that the last Labour Government left the biggest debt in the developed world. That is an odd thing to say when the Chancellor admitted to the Treasury Committee in 2011 that he did not even know that the UK had the lowest debt in the G7.
Of course the UK will have a higher debt and deficit than some other countries, and Government Members often make a comparison with Greece, but Greece has a totally different economy from ours; we are the sixth largest in the world. Of course our debt will be higher than Greece’s, but the real figure to look at—one that relates to economic competence—is the ratio of GDP to national debt.
Let me remind the House—I know Government Members have a collective amnesia about this—that in 1997, when the Labour Government came to power, the national debt was 42% of GDP; after 11 years of the Labour Government and before the global recession of 2008, the ratio of GDP to national debt was 35%. That is a reduction of 11%, and it was not achieved by a Government who were financially incompetent. In fact, that Government achieved an even greater reduction than the Conservatives.
The second claim that we hear is that Labour created the biggest deficit in the developed world by overspending. If that was the case, why did Germany, Japan, the United States and other similar economies have a problem? Why did they have banking crises? Why were they not in deficit? We know the answer. We know that there were global economic problems. We know that the financial crisis began in the United States with the sub-prime mortgages. In fact, it was a former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), who took a bold initiative, saving our banking systems and, subsequently, saving half a million jobs as well.
Those are not just my views. The International Monetary Fund concluded that
“the UK experienced an increase in the deficit as result of a large loss in output/GDP caused by the global banking crisis and not even as result of the bank bailouts, fiscal stimulus and bringing forward of capital spending. It’s basic economics: when output falls the deficit increases.”
The deficit increase was not due to any of the actions taken by the Labour Government. In fact, all those actions made the economy better, and saved more jobs. In contrast, this Government’s policies over the past three years have done nothing to help the economy to grow.
Another reason for our financial loss was the fact that we are one of the main financial centres in the world. Given that there was a global banking crisis, of course we were likely to take the hit more than other countries. We should also bear in mind that up to 2008, while Labour was in power, the actual borrowing costs were low. Indeed, they are still low. That is because in the United Kingdom our bonds are strong and are performing well, because people know that the Bank of England is there to step in if there is any problem, and, of course, because over the last 300 years the UK has never defaulted on its debt. The Government try to blame austerity, saying, “We must introduce all these measures because we need to balance the books,” but the truth is that they are using austerity as a justification for downsizing the state, which, in ideological terms, the Conservative-led government have always wanted to do.
Even the Chancellor’s budget deficit programme is not working. Everyone knows that a budget deficit occurs when expenditure exceeds income, but one way of securing income is taxation, direct or indirect. When people are being laid off and are not working, they are paying no taxes. They are having to be supported by a benefits system, which is why—
It is not normally my habit to comment on earlier speeches, and I had intended to stick to the main ethos of what I was going to say, but I feel that I must draw something to the attention of the hon. Member for Bolton South East (Yasmin Qureshi). She began by talking about GDP ratios. Let me gently remind her that during the early years of the last Labour Government, they stuck to Conservative spending principles. Does she remember golden economic rules, and the end of boom and bust?
No; not 11 years later. [Interruption.] If Labour Members disagree, perhaps they will recall the views of Hamish McRae, the economist who writes for The Independent, who has commented on the issue at length. However, I digress.
The essence of today’s debate concerns housing policy. I am glad that the Government have confirmed that they will make up to £12 billion of guarantees available to support more than £130 billion of mortgages for new-build and existing homes in January for three years. I also welcome the Chancellor’s commitment to realigning the Government’s policy on the private rented sector by increasing the £200 million build to rent fund to more than £1 billion, and providing a £225 million funding boost to support a further 15,000 affordable homes in England by 2015.
Members on both sides of the House have made various points, but it might be wise at this juncture to refer not to politicians, but to housing and property experts. I do not know whether anyone has taken the time to read this week’s edition of Estates Gazette, which is the bible when it comes to real estate and housing issues. According to Richard Threlfall, KPMG’s head of infrastructure, building and construction,
“the Chancellor has thrown the UK house building industry a new lifeline.”
Nick Jopling, executive director of property at Grainger plc and chairman of the Urban Land Institute’s UK Residential Council, added:
“Stimulating the housing market through further mortgage support…will help improve transactions and liquidity in the market, which has for some time been constrained.”
Stewart Baseley, executive chairman of the Home Builders Federation, said:
“A lack of affordable mortgage availability remains the biggest constraint on housing supply”.
He also said:
“Government must be praised for its attempts to stimulate activity”.
Gerry Hughes, senior director at GVA, said:
“We welcome the healthy five fold increase in the Build to Rent fund. This will undoubtedly assist a sector that is struggling severely.”
I will cut my quotations short at this point, but let me emphasise that those are not the views of politicians, but the views of property professionals.
I think that last week’s Budget statement was seminal in many respects, and that the opening line was crucial. The Chancellor said:
“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.”—[Official Report, 20 March 2013; Vol. 560, c. 931.]
I believe that blue-collar workers out there, and the general population, understand the challenging economic climate, and agree that we need to tackle the deficit. The Chancellor stated that it had now been cut by one third, not one quarter, and that according to the Office for Budget Responsibility, we are on course to fulfil our fiscal mandate. However, tackling the deficit, although right and necessary, cannot be our only message. We need to reinforce and go further in regard to some of our flagship policies, taking low-paid workers out of tax and freezing fuel duty. Above all, blue-collar workers want to see more money in their wallets at the end of the month, and I believe that we are on course to achieve that. The Budget demonstrates that our priorities—the Government’s priorities—are in the right place.
The Leader of the Opposition often comes to the Dispatch Box and accuses the Government of being “out of touch”. The Budget shows that we are on the side of workers, of families, of people who want to get on and make a better life for themselves. It shows that the Government have their priorities at heart—the right priorities. Our priorities are in the right place when a Budget raises the personal tax allowance to £10,000 from April 2014, which means a tax cut for 24 million people. As a result, some people will pay £700 less in income tax than they did in 2010, and 2.7 million will be taken out of tax altogether. Our priorities are in the right place when fuel duty is being frozen once again, which makes this the longest freeze for over 20 years. Pump prices will be 13p lower than they would have been as a result of Labour’s plans, leaving the average motorist with £170 more in his or her pocket. We are helping the aspirational workers, but we are also helping the entrepreneurs, the risk-takers and the employers. The small business man has faced, and still faces, numerous challenges. Things are not easy, but, as a Government, we can help to make things easier, and help to make those businesses succeed. The fall in fuel duty will help them, too, but more importantly the package of business reforms will make a real difference in the pockets of businesses up and down the backbone of this country.
We will cut the jobs tax for every business by £2,000 in 2014. We are taking people out of tax: 450,000 small businesses—one third of all employers—will pay no jobs tax at all. I hope the Chancellor takes similar steps to increase the allowance in future Budgets. Taking more small businesses out of paying the jobs tax will provide a greater incentive to take on more workers during the continuing long-term rebalancing of our economy.
In talking about entrepreneurs and employers, I would like to commend the Government for cutting corporation tax even further. Under the previous Government, business taxes were at 28%. Now we have the lowest rate in the G7, and next month it will fall to 23%. When it reaches 20% in April 2015, we will have the lowest rate in the G20. This is great news for people who wish to invest and bring jobs to this country.
This is a Budget for aspiration and ambition and for all those who wish to work hard.
It is a pleasure to follow the hon. Member for Wolverhampton South West (Paul Uppal). He asked us about the debt to GDP percentage ratio. Looking at the 1996-97 financial year, after 10 years of a Labour Government we not only had a lower debt to GDP percentage ratio, but our deficit was lower.
In the rare years since the end of the second world war when there has been a surplus, not a deficit, it is Labour Governments who have traditionally delivered that. That proves we are much better at the national finances, as well as at providing for the people of this country.
My hon. Friend is absolutely right. Just last week, when listening to the Chancellor deliver his fourth Budget and its dreadful assessment of the state of the British economy, it was hard to believe that if everything had gone to plan for him and we had managed to pull off what he proposed in the emergency Budget, we would be well down the road to balancing the books and debt would be peaking this year as a percentage of GDP. Such a plan now seems nothing more than a fantasy.
Larry Summers, the distinguished American economist and Treasury Secretary under President Clinton, told a conference I attended last year about the response he gives when asked what one event would make him completely reassess everything he believes to be true about modern economics. He said that since 2010, his answer has been, “If the UK Government manage to bring about a rapid recovery through their deficit reduction plan.” I thought that was quite a bold statement when I first heard it, but of course, Mr Summers knew what he was talking about.
When the Chancellor took office in 2010 and first came to the House, he said we would have five years of pain to eradicate the deficit, but then we would have done it. Last week, he came back to the House to say that there will be another five years of pain, and then we will have eradicated the deficit—maybe. There has been almost no progress, but the pain for our constituents has been very real.
Stripping away all the partisanship in this Chamber, there are surely Government Members who thought last week, “What if we had done things slightly differently?” The truth behind all that misplaced rhetoric in 2010 about the UK being on the verge of bankruptcy or that we would be the next Greece, all but destroyed business and consumer confidence, before the measures in the emergency Budget were even on the statute book. When the Government’s agenda did bite, the combination of that, the collapse of confidence they had already fostered and the worsening eurozone produced an economic disaster. We all see the casualties of that every day in our constituencies. We needed more from this Budget.
There are three issues I would like to address in the brief time available to me, the first of which is manufacturing. I agree entirely with my hon. Friend the Member for Huddersfield (Mr Sheerman) that this Government have done some good things in that regard. I am pleased that there are Members on both sides of the House who, like me, are passionate about manufacturing, a sector in which a fifth of my constituents still work. However, the Budget speech made no mention of the “march of the makers”, and it did not address the two main issues that still remain: that such businesses cannot borrow money when they need to; and that they feel that the Government do not give them sufficient strategic direction, be it on renewable energy, High Speed 2, aviation policy or anything else. I hope the Chancellor has had time to read the excellent report by the former director of the Institute of Directors, Sir George Cox, on short-termism in the UK economy. I hope he will take on board its main recommendation: that we need to develop a coherent and workable modern industrial strategy if we are to remain competitive. I agree with Government Members when they say we are in a global race, but at the moment we do not even have a map of the course.
Secondly, despite the job creation record that Government Members like to emphasise, unemployment, particularly youth unemployment, is still a major problem. We know enough about the Work programme to know that it has not been a success. Due to the combination of a lack of jobs generally and an inadequate payments system, it has not had the impact it should have had. We had on the statute book a range of measures that were getting people back into work; the future jobs fund, for example, should never have been dropped. Much of the Government’s borrowing—they announced £245 billion on top of their 2010 figure—is paying for the costs of failure. It is not unreasonable to wonder what might have happened if we had invested a fraction of that sum in putting people back into work.
My third point is about the equity of the Government’s agenda and how things have been shared, because the lower down the income scale people are, the harder they have been hit. The contrast between the tax cut for millionaires in the next few days and the bedroom tax is startling. The latter is a tax on people struggling with their child’s disability, struggling with their own or their partner’s ill health, or struggling to be a good parent in the event of the breakdown of their relationship. The fact that it may lead to higher costs for the Exchequer, as families are forced to move into higher-cost private accommodation, flies in the face of all reason. On this measure, more than any other, we need another famous Budget U-turn.
Let me deal with some specific Budget measures. I welcome the concessions on fuel duty, which does have a real impact on household income, and the scrapping of the beer tax escalator, which will benefit real ale towns such as Stalybridge. The nod towards the Heseltine report is also good, but it could have gone so much further. Had the Government pursued the previous Government’s Total Place community budgeting reforms, they could have improved public services while saving billions of pounds. However, Lord Heseltine’s logic that regional leaders are best placed to determine spending which will lever in private sector investment is surely correct.
I also welcome the commitment to spend 0.7% of our GDP on international aid, and here I have the opportunity to qualify remarks that got me on to page 2 of The Sun a few weeks ago. I am a supporter of international aid, but we have to acknowledge that it is contentious to increase it when our constituents are facing hardship. I just want the focus to be on what aid will achieve, rather than simply patting ourselves on the back for what goes into it. That is a reasonable way to build support for aid among the British people.
There is no doubt that whoever was in charge right now would face difficult choices about where the pain that the British people face should lie. However, the deal we have to offer them is that the pain will be worth it, and that the distribution of that pain will be equitable and will show empathy with people’s lives. On all those criteria the Chancellor has failed, and it is surely time for a new approach.
In the short time I have—five minutes is a very short time—I will just rattle through a few points.
I welcome a large part of this Budget—it is very good news. It sounds more like a Conservative Budget, which is why the press have, on the whole, welcomed it; I believe that the Chancellor was transformed into a former Prime Minister, because there was a feeling that this is, at last, what the country needs. My question to our Front-Bench team, which they can perhaps answer later, is this: why has it taken nearly three years for us to do this? I suspect that their answer will be, “Because we are in a coalition.” I am a little tired of hearing that. I want a lot more blue narrative and less coalition narrative, because that is the way forward on sorting out our economy.
I welcome the reduction in taxes. Raising the income tax threshold to £10,000 is a wonderful way to go, but we should go further; how many constituents have we heard say, “If I do a bit more work, I will lose my benefits”? Let us give them income they have earned—let them keep it. Let us keep on that path, encouraging people back to work and off welfare. That is the right direction to take.
The beer escalator has gone—hurrah! A great friend of mine, who sadly had a heart attack, used to run the Hall and Woodhouse brewery in Blandford and before he died he said to me, “Richard, when you get into the House, please try to get rid of this beer escalator because we are losing thousands of jobs across the country as a consequence.” It is now gone—well done the coalition Government. I am absolutely delighted about that, and, in addition, 1p was taken off the pint of beer so we could all celebrate a bit on the night.
I am also delighted about the freezing of fuel duty. I am not going to be partisan and say that it would be much higher if we still had a Labour Government; it is frozen and that is good. But we should go much further and cut into that vast amount of tax that the Government take off the normal man and woman in this country, who, in many cases, simply cannot afford to fill up their car—the situation is ludicrous.
On the ceramics industry, I am delighted that the levy has been removed. May I put in a small request on behalf of the aggregate industry? A constituent of mine is paying £2 a tonne to take aggregate out of the ground, which is costing him £160,000 a year. That is a tax on a small family business employing 48 people in South Dorset that cannot afford that huge burden. Dare I say it—common sense must replace green taxes when jobs will be lost.
My concern is about the Government’s planned equitable loan, or mortgage guarantee—whatever we call it, those are the two arms of the new policy. I hope it works and that more houses are built as a result, but I am concerned that taxpayers’ money is being used to guarantee mortgages. If that goes wrong, we will not want to carry it with us in the years to come.
As for solutions, as a Conservative I believe that the supply side must be boosted. We must cut taxes further. As I have mentioned, we must get more people back to work by raising the welfare threshold. I believe that that is working extremely well in Sweden, although it went much against public opinion. We are still spending more than we earn and although we lecture the Opposition about what they did, we are doing the same thing. We must live within our means. We cannot go on printing money. Billions of pounds are being printed because there is no charge on interest. That is an inflationary move and could lead in months or years to come to interest rates rising. If that happens, our constituents, businesses and councils will be bust. It is as simple as that. We must tell the country the truth. We are in a hole and we must stop spending money we simply do not have.
Lastly—how time flies—we must consider the ring-fencing of budgets. Surely austere times are not the time to ring-fence budgets. If any budget should be ring-fenced, it should be defence, in my view, but even the Ministry of Defence must be looked at. All budgets should be open to consideration and, if needs be, to being changed. On the whole, I welcome the Budget, but we have a lot further to go—and, please, may we have a lot more blue narrative in the future?
The UK economy continues to bump along the bottom with little or no growth in GDP and the revised OBR figure of only 0.6% growth for this year was a dark cloud over the whole Budget. In Wales, the situation is bleak, with the Office for National Statistics reporting 8,000 fewer jobs in the Welsh economy in the three months up to January. The austerity strategy set out in the 2010 comprehensive spending review aimed at the elimination of the deficit by the end of the Parliament has failed. The fiscal position is considerably worse than that forecast three years ago and worse even than that forecast this time last year—and that is with nearly 80% of the cuts yet to be delivered. We estimate that up to another 50,000 public sector jobs will lost in Wales in the coming years, following the 24,000 already lost. The Budget noted that Wales will get £161 million towards capital spending, but that conveniently masks the fact that there has already been a 40% cut to the capital spend budget from the CSR and that the re-allocation announced last week would come from strained revenue budgets.
Plaid Cymru welcomes some of the measures announced in the Budget. We welcome the freeze in fuel duty, but argue that it would be much better to have a long- term solution based on a stabilising mechanism. The announcement on when the £10,000 income tax personal allowance will be reached is welcome, as that is a long-standing Plaid Cymru policy. The £3 billion in infrastructure spending is also to be welcomed although, admittedly, it is a fraction of what is needed and was more of a political gesture than a serious economic intervention. We support the announcement of the introduction of an allowance of £2,000 a year from April 2014 for all businesses and charities to be offset against their employers’ national insurance contributions, as it will give businesses incentives to take on extra workers. We also support the move to change the terms of reference of the Monetary Policy Committee of the Bank of England to include a growth target. That is potentially the most significant announcement of the Budget and, again, is something that we have long called for.
I have some concerns about the second-home subsidy, not least because it would fuel another house price boom and after the inevitable crash, there will be serious consequences for the public finances.
There are several measures that Plaid Cymru would have liked to have seen included in the Budget. We wanted the Government to use the Budget and subsequent Finance Bill to implement the recommendations of the UK Government’s Commission on Devolution in Wales. We would have wanted the Government immediately to set about devolving minor taxes as well the income tax-sharing arrangements. We want the Treasury to implement the findings of the Welsh Government-commissioned Morgan report on devolved business rates, to incentivise Welsh local authorities to develop their local economy and expand their tax base. I will be tabling amendments to that effect to the Finance Bill, to test the will of the House.
The precedent for devolving taxes via the Budget was set with the devolution of air passenger duty to Northern Ireland in last year’s Finance Bill. On Thursday evening, I was amazed to see a senior Labour Assembly Member on the ITV political programme “Sharp End” dismiss the Finance Bill as an appropriate legislative vehicle to implement Silk. It just shows how visionless Labour has become in my country.
The measures I have just outlined would immediately trigger the borrowing powers—[Interruption.] That is the policy of the Labour party; they want borrowing powers in Wales. How will we get them without devolving fiscal levers? That just shows that Labour Members have no ideas.
The measures I outlined would immediately trigger the borrowing powers agreed during the bilateral negotiations between the Welsh and UK Governments, and are essential if Wales is to invest in infrastructure and create the economic boost that is so badly needed. We also want Wales to receive powers over corporation tax, as advocated by Silk, if they are devolved to Northern Ireland. Today, I read with interest in the Financial Times about the unanimous lobby for those powers in Northern Ireland, and the strong letter sent to the Prime Minister by the Northern Ireland CBI.
The tax cut for those earning more than £3,000, due to come into force next week, should have been overturned in the Budget. The renewal of Trident should be scrapped, thus saving £100 billion over its lifetime. A financial transaction tax, which would raise up to £20 billion per annum according to the Institute for Public Policy Research, should have been introduced. Plaid Cymru would have liked to see a mansion tax on domestic properties.
The Chancellor is boxed in by his own rhetoric and has run out of ideas. It is clear that the Treasury’s only economic strategy is to build up the barricades and hope that the rock star central banker can use monetary policy to turn things around.
I welcome the Budget. It is a Budget for business and I am pleased that it is particularly good for micro-businesses, which have done especially well.
Today, we are talking principally about housing, where what the Government have done is commendable, but unless people have jobs and earn good salaries they will not be able to take up those good initiatives. The highlight is the employment allowance. The national insurance win is £2,000 off the employer’s NI bill. In my book, the Government could not have done anything better. That really plays to the agenda of micro-businesses. It enables them to get started. A very small business will be able to take on its first employee.
Many of the smallest businesses are run by women, so the reduction in child care costs in 2015, when 20% of the costs for the under-12s will be met by Government, is very welcome. For the first time, there is something that will help women running their own business; it will help the self-employed, not just those who are employed.
Many small businesses are in rural communities, and fuel is a huge issue. The fuel duty freeze is absolutely what this country needs. In September, petrol prices will stay the same and that is welcome. Clearly, we need to look at making fuel duty and the price of petrol predictable. Perhaps in a future Budget there will be an opportunity to look at a proper stabiliser, whereby when the price of fuel goes up, the tax comes down. Stability is vital, especially for small businesses. Likewise, a rural rebate on fuel duty would be welcome in some of our more out of the way communities.
The measure that will take corporation tax down to 20% faster and align it with the small companies rate is very welcome. I encourage the Chancellor and his team to look at what we could do to make that even easier for the very smallest companies. Perhaps he would support my all-party group working with the Office of Tax Simplification on the concept of a new flat tax for the smallest businesses, through the format of the business structure, so that whether it is a company, a sole trader or a partnership, there is a new mechanism. I appreciate that corporation tax as currently structured cannot fall below 20% because it would then be at the same rate as income tax, which would give rise to all sorts of problems, including people rushing to incorporate when it was not the right thing for them.
Here is another thought for the Chancellor for his next Budget: for the very smallest businesses, business rates can really cause a problem. I should like to see in the next Budget an extension of small business rate relief until the election, as that would be extraordinarily welcome. The Government could also look at trying to show those businesses that are paying business rates what they get for their money. The Chancellor and his team have been keen to enable those of us who pay income tax to see where that income tax is going, but the same argument ought to be true of business rates. Many business people say to me, “But I don’t get my bins emptied in the same way that I can see is the case if I pay council tax.” We should look at where those business rates go, and show the value for money that businesses obtain in paying them.
I had an interesting meeting last week with the valuation office. I asked it whether there was a way of making the valuation process fairer and, as I understood the explanation, it appears that the technology is there to enable revaluation to take place more frequently. A frustration that businesses share with me is that because of the time line—there is a five-year gap—there is a big difference between when the valuation is made and when people have to pay the new rate. I would not wish to underestimate the challenge, and I appreciate that the multiplier makes that not entirely straightforward.
That, for me, is the key to getting the country to move forward—helping our micro-businesses—and I welcome what the Chancellor’s team have introduced. I am delighted. Well done, and I hope that the Chancellor will perhaps take on board some of the thoughts that I have set out for the next Budget.
I am very pleased to be able to participate in this debate, not least to demonstrate how little the Budget will do for the economy of the north-east. We need no further evidence of the failure of the Government’s economic policies than the forecast on growth and GDP outlined by the Office for Budget Responsibility.
In June 2010, the OBR forecast that growth in the UK would be 2.8%. In fact, as we know, it was minus 0.1 %. We have also recently heard that the growth forecast this year, bearing in mind that it is only March, has been cut in half from 1.2% to 0.6%. Given all of that, the Government needed to shake off their complacency and take responsibility for the flatlining economy that they have created. They should introduce measures that would support growth, both nationally and in areas that are suffering most under this incompetent Government, such as County Durham.
The number of job seekers in my Durham constituency has fallen by just 69 in a year, but it is still up by 450 since the general election. Some 25% of those claimants are young people, unable to take their first step on the career ladder. What is equally worrying is the types of jobs that have been created compared with those that have been lost. Information that I have received from the House of Commons Library shows that the new jobs that have been created are predominantly non-skilled or low-skilled. At the same time, the number of jobs in skilled trades and administration is falling—by 2,000 in the last period. That shows a worrying trend of downskilling the north-east economy, just as we need to up our game to compete with emerging economies internationally.
What did the Budget do to rectify that? Absolutely nothing. The North East chamber of commerce said:
“The Government has fallen short of providing the raft of measures that businesses and investors need in order to kick-start growth”.
Ed Cox, director of IPPR North, said:
“George Osborne has missed an opportunity today to enable the North to play its part in leading us out of our economic stagnation.”
We can look at two aspects of that, the first of which is housing in the north-east. Again, we heard a number of lip-service announcements made in the Budget. I am pleased that the Government finally seem to be waking up to the fact that there is a housing crisis, but they appear to be stoking demand for housing, rather than looking at how to increase supply urgently and drastically. The Chancellor—he is probably the only one who thinks this—says that the fundamental overhaul of planning laws is helping homes to be built and businesses to expand. I think that he is wrong on both counts. House building is falling and, as my right hon. Friend the Member for Leeds Central (Hilary Benn) said earlier, so is the speed with which planning decisions are being made. Research from the House of Commons Library confirms that no peacetime Government since the 1920s have presided over fewer housing completions than this Government have over the past two years. And it is getting worse; house starts fell in 2012 by 11% to below 100,000.
It does not get any better when we look at infrastructure. In their first three years, this Tory-led Government have spent £7.7 billion less in capital investment compared with the plans inherited from Labour, and over the course of this Parliament they are set to spend £2.1 billion less on capital investment than would have been spent under Labour’s plans. That has knock-on effects for constituencies such as mine, which are getting practically no investment whatsoever in the basic infrastructure to support either the housing that is urgently needed or the new roads and transport links that are necessary if we are to grow the economy.
It also does not get any better for families in my constituency. The measures in the Budget relating to child care will not come into effect until 2015. Families in my constituency need jobs, growth and hope now.
I am pleased to have the opportunity to contribute to this debate.
Last week’s Budget was a successful one politically. It worked because it identified that the cost of living affects all our constituents. I particularly welcome the fact that the Chancellor, by getting rid of the beer duty escalator and checking the fuel duty escalator put in by the previous Government, for example, recognised the rising cost of living for many of our constituents.
Before proceeding, I would like to refer to some of the remarks made by the right hon. Member for Edinburgh South West (Mr Darling), who, as we all know, was a prominent member of the previous Labour Government. He mentioned the fact that the OBR had consistently failed in its forecasts over the course of this Parliament. He also mentioned the fact that we are borrowing at record levels. That is all true. But what he did not mention, or make any apology for, was the share of responsibility that he and the previous Government must admit to in the creation of our largest peacetime deficit. People will look back on the period between 2001 and 2007 in this country as one of the most, if not the most, profligate and irresponsible periods in the management of our public finances.
If that is the case, why did the Conservative party support the Labour Government’s spending plans throughout that period? The Conservatives stopped supporting the spending plans only just before the global financial crisis. Can the hon. Gentleman explain what action he would not have taken to save the banks?
I happen to be a balanced budget Conservative. Even at the time, before I was elected to this House, I completely disavowed any move to stick to Labour’s spending. I thought that it was a big mistake at the time and I am quite happy to say that in this House. I think that it was entirely a mistake to do what the Labour Government did and run deficits at a time when the economy was growing at 3%. It was absolute madness to run deficits at 3% of GDP when the economy itself was growing at 3%. Not even the most starry-eyed Keynesian has ever suggested that we should be running deficits while the economy was expanding. As a direct consequence of this irresponsible period, in 2010 we were left with the largest peacetime deficit and the highest deficit-to-GDP ratio of any of the OECD countries. That period of stewardship marks the ultimate disgrace of the Labour party in terms of managing the national economy. We have now reached the point where we are borrowing £100 billion a year and the national debt is going up, as people have mentioned. As a consequence of this high level of deficit financing, we are going to leave a national debt in years to come that is higher than it has been for generations.
What serious proposals have Labour Members come up with during this four-day debate? Their answer is simply to borrow more money and to spend more money. They would accelerate our downward path and we would end up, as one economic commentator has said, with Club Med levels of debt similar to those of Portugal and Greece—without, unfortunately, the good weather. That is what Labour Members are leading this country towards. Members of the public will be absolutely astounded that Labour Members have expressed not one shred of remorse, regret or acknowledgement. They live in a world in which they did nothing wrong. Everything has been blamed on the coalition Government, who have tried to clear up the appalling mess—[Interruption.] Labour Members are chuntering from sedentary positions. They do not like to hear the facts.
People up and down the country realise and acknowledge that the Labour Government were entirely irresponsible. What solutions have the Labour Members come up with? Absolutely none. It is embarrassing to listen to some of their speeches. They talk about more growth despite the fact that the eurozone is flat on its back. They talk about more investment despite the fact that we are borrowing more money than we ever have before. When one asks them where this money is going to come from, they repeat, “The bankers’ bonus tax”, as though that would pay for absolutely everything they wish for, although it has already been spent about 100 times. It is depressing to see Labour Members, who fancy themselves as the next Government—they are very confident, I notice—offering such poor, ill-thought-through and pathetic solutions to a grave national crisis. People watching this debate at home will be appalled, frankly, by the level of argument, contribution and solutions that Labour Members have contributed.
I welcome this Budget. In very difficult times, the Chancellor has identified weaknesses and has managed to alleviate some of the distress that we suffer.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
It is a pleasure to follow the hon. Member for Spelthorne (Kwasi Kwarteng), who is now, we hear, a self-declared fan of a balanced Budget. No doubt his disappointment in his own Government has kept him out of the Chamber for the vast majority of today’s debate.
I do not know if you noticed, Mr Deputy Speaker, but on the day of the Budget this Chamber was colder than I have ever felt it before. It was as though a cold, chilly winter breeze was rolling through the Chamber as an ailing, failing, flailing Chancellor came to the Dispatch Box—but it was all too little, too late. I am so pleased to see the Business Secretary in his seat, because he will agree with me—or I will agree with him, most humbly—that the mistake that this Government made was to choke off the recovery. Just as the snow across this country is choking off the green shoots of spring, so this Government, by cutting too quickly and too deeply, have choked off the recovery.
What really chilled me to the bone was when the Chancellor spoke about an aspirational Britain, because I am old enough to remember aspirational Britain the first time around. It was aspiration for some, but not for others.
This Government are out of touch. I apologise for being late for today’s opening speech, Mr Deputy Speaker, but as a trustee of my local food bank my time was being taken up by people who are aspiring to put food on their table, aspiring to heat their homes and aspiring to stay in their homes.
No, thank you.
When people look back on this Government, they will see five wasted years. The two greatest evils that they have committed are the bedroom tax and the cut for millionaires. They still have time to make more mistakes, but this country will never forgive them for those measures because they go to the heart of this Government.
I want to make some pleas on behalf of my constituency.
No, thank you.
I want a more joined-up approach to government. Iberdrola is currently investing £10 billion in this country, but it is sitting on £3 billion because of the mess that is this Government’s energy policy. The coal-powered power station at Cockenzie in my constituency has closed and Iberdrola is not willing to invest until it gets some clarity from the Government. Some 1,000 construction jobs are on hold in my constituency, as are apprenticeships in a year when youth unemployment has risen by more than 7%. Will the Treasury team get together with the Department of Energy and Climate Change and get this in order, so that Iberdrola can invest in my constituency and the UK?
I pay tribute to my right hon. Friend the Member for Barking (Margaret Hodge) for the work that her Public Accounts Committee has done to let some sunshine on the disgraceful practice of tax avoidance in this country. I also praise the Government for meeting their commitment to spend 0.7% of our gross national income on development aid. I welcome that, but I want them to go further in the Finance Bill. There was outrage in this House and across the country at the practices of some companies headquartered overseas, and people in developing countries have the same right to be outraged if British companies do not pay their fair share of tax there. Will the Government take the opportunity provided by the Finance Bill to ensure clarity and transparency and that developing countries have the right to money that has been earned at the expense of their natural resources—the labour of their people—to be invested in their countries so that they can make their own choices? I hope that such a commitment will eventually be made.
The judgment on this Government has been set not by hon. Members, but by the Office for Budget Responsibility, the 200,000 children who will be in poverty at the end of this Government’s time in office who were not in poverty before, and the people who will be worse off in 2015 than they were in 2010. I urge the Government’s Front-Bench team to listen to the Opposition and to the people of this country, and to get their act together.
Last Wednesday’s Budget was more of the same. In spite of failing every economic test they have set themselves, the Government have just carried on regardless. I want to recap their economic journey and absolute failure over the past three years.
After signs of a recovery at the end of 2010, the economy has been flatlining and we will be lucky if we escape a triple-dip recession. Growth has been downgraded at every turn. Amazingly, just over three months since the autumn statement, the Government have had to halve their growth forecast for this year to 0.6%. Borrowing is up £250 billion since 2010 and the deficit will not be eradicated by 2015 as promised. In spite of the Government telling us how important austerity was to economic confidence and low interest rates, they have lost the confidence of Moody’s credit rating agency, which downgraded our triple A status, and we have been put on notice by two other agencies.
The Government have tried, as has happened again this afternoon, to blame everybody except themselves. They told us that austerity was the only way, only to receive a very embarrassing rebuke from the chair of the Office for Budget Responsibility, who said that public spending cuts wiped 1.4% from growth last year. We only have to look at how we are doing on growth compared with the other G20 nations. We are 18th out of 20. What the Government have been saying is absolute rubbish.
I could go on. Inflation, whether using the consumer prices index or the retail prices index, is well above the Bank of England’s 2% target. The Government have tried to say that we have more employment than ever before, but the rate of employment is lower than in 2008. One in 10 people is underemployed. Whatever indicator we go by, the Chancellor and the coalition Government are clearly failing. The public are starting to see that as well, with earnings falling by 2% a year in real terms. A recent poll showed that four out of five people feel that austerity is not working.
The Government are carrying on regardless. Is that really just down to economic incompetence? In the words of the Cambridge economist, Ha-Joon Chang,
“the coalition government isn’t as stupid or stubborn as it appears. It is sticking to its plan A because spending cuts are not about deficits but about rolling back the welfare state.”
If we look at this Budget, as with the other Budgets and autumn statements, we can see exactly what is happening.
The IFS analysis of the Budget shows that the Chancellor is funding some of his give-aways with underspends from across Whitehall Departments, including £2.2 billion of NHS savings. However, the IFS and others have shown that even with an increase in revenue from national insurance contributions, from 2015 we will need to make further public spending cuts or increase taxes to meet a £9 billion shortfall.
The housing measures are too little, too late. They reflect the Chancellor’s inability to sort out lending for mortgages, as well as for small businesses. Many people, including property developers, will welcome the measures, but I wonder what the impact will be on demand and on house prices at a time when earnings are still constrained. They have the potential to take us back to the financial conditions of 2008.
Most alarmingly, the Budget completely fails the anti-poverty test. The IFS, the Joseph Rowntree Foundation, the Child Poverty Action Group, the Resolution Foundation, the New Economics Foundation and others have concluded that the poorer people are, the worse off they will be following the Budget. Raising the personal allowance does little for the million lowest-paid workers, many of whom do not pay tax in any case. Some 682,000 working families who receive child tax credit earn less than £6,420. If next week’s welfare cuts are also taken into account, the lowest-earning taxpayers will receive an income boost of just 32p a week. Of course, that does not take into account the impact of the 20% VAT hike, the 26% rise in food prices or the 20% rise in energy prices.
The Chancellor’s distributional analysis shows that the cumulative impact of the tax, tax credit and benefit measures means a net reduction in income for the poorest 40% of households in the country. Although there is strong evidence that increasing the spending power of the poorest families is a way to boost the economy, the Government have failed to do that. This is about the Government’s choices and they have clearly failed.
Thank you, Mr Deputy Speaker, for allowing me to speak in this crucial debate.
While this country faces the biggest housing crisis in a generation, the Government are using the Budget to help their millionaire friends buy second homes. Once again, the Chancellor of the Exchequer has left hard-working people who are on lower wages struggling and hurting. Building new homes is central to this country’s economic recovery and to getting hard-working families on the housing ladder, yet in Budget after Budget the Government have come up far short of the mark. In this Budget, the Chancellor introduced “help to buy”. Last year, he introduced NewBuy. It is clear that the policies that have been introduced to help people get on the property ladder have failed and that they are not the solutions that the country urgently needs to end the housing crisis.
In my constituency of Ealing, Southall, families are desperately struggling to find suitable and affordable homes. Just last week I heard from a family who have been waiting more than a year to find a bigger and more suitable home for them and their three children. Sarah has been sharing a two-bedroom flat with her husband, her two sons—one of whom suffers from a severe form of Asperger’s—and her two-year-old daughter. They have been told that they will have to make do with their two-bedroom flat for the foreseeable future because no new housing is coming up.
More needs to be invested into building affordable homes to meet demand; that is a sound, logical and reasonable investment for the future of our housing market and economy. Building more housing is not only a solution to end this housing crisis, but an effective way of boosting growth. For every £1 invested by the public sector, 56p returns to the Treasury. Removing the cap on housing revenue account borrowing in London could add 0.5% to GDP—growth that is much needed. By investing in the capital’s housing infrastructure, more than 19,000 jobs would be created. Why will the Chancellor not invest in housing and growth?
Throughout the Budget the Government have repeated that they are committed to helping those who aspire to work hard and get on, to caring for families and helping them with the cost of living, and to creating more growth. Why, therefore, do they not commit to build more affordable homes, thereby creating more jobs and growth and allowing hard-working families to live in better conditions, rather than helping millionaires buy second homes through their slapdash flagship policy?
The Government had the opportunity to invest in housing, create more jobs and provide a decent living to all those working hard to achieve, and to allow children living in overcrowded accommodation to have a better education. If children have extra space in their house, they will get more education and an improved place in which to live; their health will be improved and they will be able to contribute more to society.