House of Commons
Wednesday 8 July 2015
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Syrian Children: Refugee Camps
The UK-led No Lost Generation initiative means that we fully back the Government of Lebanon’s Reaching All Children with Education plan. Our funding for education in Lebanon this year will increase from £10 million to £20 million, which will support the Lebanese Government’s efforts to double the number of Syrian children enrolled in Lebanese public schools.
Yes, I absolutely do. Education is vital for all children, but especially children who are refugees: they are children and they should be in school. Many of the children I have met have been through hugely distressing situations. When asked to draw pictures, they draw pictures of places that have been bombed. When they hear a supply plane go over their room, they dive underneath their desks for cover. Education is possibly their main chance of having some prospect of a successful life ahead of them, and that is why it is so important.
I welcome what the Secretary of State has said. Globally, just 1% of humanitarian aid is spent on education. Does she think that is acceptable? At this week’s Oslo summit, it has been suggested that there should be a global humanitarian fund for education in emergencies. Are the British Government willing to support that?
In fact, the UK has in many respects pioneered how we ensure that children caught up in emergencies still get the chance to be in school. I pay tribute to the Norwegians for taking up the issue, too. We want more funding in this area. It is absolutely vital if we are to go beyond just providing life-saving supplies today to helping to preserve the futures of children for tomorrow.
The main thing we are doing is to work hand-in-hand with the Lebanese Government, who have taken great steps over recent months to make sure that their schools can cope not only with their own children, but with a doubling in the number of Syrian refugee children who now need to use them. That means not just support for teachers, but support in schools, in their buildings and in textbooks as well.
The Secretary of State will be aware that the Lebanese Minister for Education said that Lebanon is facing a $100 million shortfall in the budget for educating Syrian refugee children. What representations has she made to her international counterparts to ensure Lebanon gets that $100 million?
The hon. Gentleman is quite right to raise that issue. As I have just said, the UK has already increased our investment. In fact, at the UN General Assembly last year, I held a pledge meeting to get international partners to fund more of the educational needs in both Lebanon and Jordan specifically. That raised $344 million at the time, but, as he set out, this is an ongoing requirement and the international community must step up to fund it.
Developing Countries: Private Sector Development
The Department for International Development’s private sector work has helped to mobilise £4 billion of investment, and we are expanding this work. We need to recognise that the private sector can often deliver development in ways that Governments and donors cannot. In fact, our development finance institution, CDC, reported last week that CDC-backed businesses directly and indirectly helped to create nearly 1.3 million jobs in 2014 alone.
I thank the Secretary of State for that answer. A recent Independent Commission for Aid Impact report on DFID’s private sector development stated:
“We found it impossible to identify how much DFID actually spends on PSD.”
Will the Secretary of State clarify how the £1.8 billion allocated for 2015-16 will actually be spent?
The strategic framework on economic development that we published several months ago gives the key pillars of work that we will invest in. As the hon. Lady points out, we are ramping up our investment in economic development. Later, we will have a question about migrants. If we are to stem the flow of migrants, it is vital that we do more to create jobs where those people are.
Thinking about the private sector in an alternative way, will my right hon. Friend ask our embassies and high commissions that operate in developing countries and have plants or offices in those places to source materials, including labour, as locally as possible and pay the relative living wage to those whom they employ?
That is a very sensible suggestion, which I will certainly pass on to the Foreign Secretary. We work hand in hand with the Foreign Office around the world, not least in countries such as Tanzania, with which we have a prosperity partnership that is helping to create jobs.
I recently met campaigners from Nigeria who told me that the privatisation of the country’s electricity system, which has been supported by DFID through projects worth £140 million over the past 12 years, has led to price rises, job losses and more blackouts. What evidence does DFID use when deciding to support privatisation as a means to improve the access to and affordability of public services such as electricity?
As the hon. Gentleman has, essentially, set out, investment in infrastructure, particularly energy infrastructure, is vital. The work in Nigeria has led to a doubling of the power supply that is available to Nigerian people and businesses, which I am sure he would support.
The ICAI report of May this year said:
“Collaboration between business and aid agencies has the potential to deliver major benefits for the poor”
of this world. However, the report also noted a “lack of clear targets” and oversight by the Department. Will my right hon. Friend indicate what she and her excellent officials are doing to remedy that?
We are developing our work with the private sector. I met John Cridland of the CBI yesterday to discuss how that ongoing work is progressing, and we both feel that the relationship between the Department and businesses has never been stronger. The relationship is evolving, but we are on the right path and I think that we should be proud of how far we have come.
Members on both sides of the House agree that decent work is the best route out of poverty, but last week, Radio 4’s “File on 4” revealed problems with a DFID programme in Nigeria. It alleged that the project exported rocks instead of leather products, and that it was used as a cover for export fraud and money laundering on an industrial scale. The right hon. Lady and her Department refused to speak to the programme makers, so will she tell the House what action she is taking as a result of those revelations?
The revelations were, as ever, not quite what they seemed. The export enhancement grant is not a mechanism that DFID is involved with at all; it is a Nigerian Government policy that was being misused and abused. We do work in the leather sector, but that work relates to helping local markets to develop. We became aware of issues with the export enhancement grant, and DFID worked with the Nigerian Government to encourage them, in the end, to shut it down, which they did about 12 months ago.
It is interesting that the right hon. Lady chose not to share that knowledge with the British public and had to say it here in the Commons. [Laughter.] Well, it is interesting that an answer was not given directly to the programme makers, but instead had to be dragged out of the Secretary of State. There is a lack of accountability, transparency and governance in another DFID project: the Private Infrastructure Development Group.
This year, DFID’s spending on private sector development will double to £1.8 billion, up to £400 million of which will be the UK’s contribution to the new Asian Infrastructure Investment Bank—China’s rival to the World Bank. What oversight and governance procedures has the right hon. Lady put in place to ensure that social and environmental standards and human rights are upheld in the work of the new bank?
The hon. Lady will be pleased to hear that we tried to make sure that the “File on 4” programme was well aware of the facts. It was aware of the facts and if she feels that the way in which they were presented gave her a misleading impression of the reality, that is an issue for her to follow up with the BBC. I obviously believe in freedom of the press. On the broader question, we are working to make sure that the new Asian Infrastructure Investment Bank has the same quality of safeguards that we expect in the World Bank. Treasury Officials are working very hard on that as well.
3. What her Department’s role is in tackling conditions in countries from which migrants are trying to reach Europe across the Mediterranean. (900803)
Last week I announced a package of initiatives that will provide emergency aid as well as jobs and education to help to address the root causes of the migrant crisis. This includes support worth £217 million to help some 2.5 million refugees and vulnerable people in Africa, and an additional £100 million to help those who have been displaced as a result of the Syria crisis.
Does my right hon. Friend believe that the number of people attempting to cross the Mediterranean would be far higher were it not for our aid programme that is helping to keep people in or near their own countries, thus preventing them from coming to Europe?
I believe that it does help. We know that people are moving to escape conflict as refugees, and to get jobs and a better future. Our work is upstream and is a long-term strategy, and our jobs agenda is providing jobs and better economic development to provide opportunities where people are. Our commitment to the Syrian crisis to date is £900 million, and as a result only 2% of the 11 million displaced Syrians have sought asylum in Europe.
8. A recent report by the Independent Commission for Aid Impact—the Government aid watchdog—gave Ministers an amber-red rating for their interventions in security and justice, and stated that they were not yet making“a real difference to fragile and conflict states”.Getting this issue right is crucial to solving some of the underlying reasons behind the migration crisis. What more is the Secretary of State doing to ensure that DFID funding is spent wisely? (900808)
The hon. Gentleman highlights a difficult area, and the issue of security and justice for a country such as Eritrea is one of the main drivers of people leaving that country. At the same time, our standards on human rights mean that we would not work with police forces, for example, if we thought that abuses were taking place while we were carrying out a programme. We try to strike the right balance and, as he mentions, tracking the results of that can be long term and not uncomplicated.
The Secretary of State has argued that so few Syrian refugees have sought safety in Europe because of aid sent to the region, but how does she square that with the increasing number of Syrians risking their lives to cross the Mediterranean?
As I said, that is a small proportion. The hon. Lady should be aware that the UN flash appeal, which is to encourage the international community to ensure the right level of support for refugees, is around 20% funded. We should not be surprised that the conditions that refugees end up living in are not good enough, and that they might want to seek a better life for themselves. We can be proud of the work that the UK is doing, but not enough other countries are joining us in that.
The Syrian crisis has created nearly 4 million refugees, yet fewer than 200 have settled back in the UK through the Syrian vulnerable persons relocation scheme. Given that, and the need for safe passage for those seeking asylum in this country, will the Minister say what discussions she has had with her counterparts at the Home Office to discuss expanding the numbers and the safety of those seeking asylum in the UK?
London Declaration on Neglected Tropical Diseases
The UK is delivering on the commitment we made and our programmes are protecting millions of people from these diseases. My right hon. Friend the Minister of State for International Development participated in the recent launch of the third progress report on the London declaration.
By funding the global trachoma mapping project—the largest such project ever attempted—will my right hon. Friend say what the Department aims to achieve and how the lessons learned from that project can be used in the ongoing fight against other neglected tropical diseases?
As I just mentioned, we have data from mapping the problem, and support from Sightsavers for the elimination of blindness and trachoma is also critical. The Government have put in £195 million, a large amount of money, through the 2012 process to help to tackle this disease, as well as many others.
Driving the best value for money is a top priority for the Government. Robust processes are in place for the 86% of aid spent by my Department. Business cases are required for all projects, and their performance is also appraised and monitored.
I am sure the Secretary of State will want to give an explanation for how she will ensure value for money in her Department. May I give her one project for which I could ensure value for money, where it takes four to five weeks to see a doctor, the roads are filled with potholes and the police are in crisis? I refer, of course, to that tribe inhabiting the frozen plains of the north, the Lincolnshire yellowbellies.
As ever, my hon. Friend makes his point very eloquently. I can assure him that my Department is probably the most scrutinised of any in government. We have the Select Committee on International Development, the aid watchdog and the Public Accounts Committee. I can assure him we are rising to that challenge.
Order. There is quite a lot of noise in the Chamber. I was not able to hear fully the Secretary of State’s very important answers. I want to hear the right hon. Gentleman. Let us have a bit of order for the Chairman of the Home Affairs Committee, Mr Keith Vaz.
Thank you, Mr Speaker. One of the best criteria for value for money for our projects is to stem the humanitarian crisis occurring in the Mediterranean. Last week, I visited a camp outside Rome station where I met a number of migrants. If they had been provided with jobs and economic development in north Africa, they would not have travelled. Will she please make that one of the criteria?
The right hon. Gentleman will be pleased to hear that just a few days ago I announced additional support that includes in Africa creating additional jobs and livelihoods. As he sets out, many of these migrants are in search of better economic opportunities. If they cannot find them where they are growing up they will look for them elsewhere. We should be very aware of that and work to tackle it.
Developing Countries: Climate Change
The UK Government are playing a leading role in tackling the effects of climate change in developing countries through the £3.87 billion international climate fund. The ICF focuses on reducing poverty by promoting low carbon growth, building resilience to the impacts of climate change and tackling deforestation.
Combating poverty and tackling climate change are two sides of the same coin, as the poorest are often those who are hit first and most harshly by climate change. What steps is the Minister taking to ensure environmental sustainability and combating climate change are fully integrated into all the relevant sustainable development goals?
The right hon. Gentleman is absolutely right when he says the two are completely linked. That is why the £3.87 billion fund from the UK is so important. He is right to say we need to find new ways of delivering better climate outcomes, including, for example, through the UK Government’s efforts in Energy Africa, a programme that will help to ensure clean energy for the 1.2 billion people who have no energy in their homes.
Last week, at the Overseas Development Institute, in a wide ranging speech, I recognised the high value we place on our partnerships with civil society organisations and announced work on strengthening our relationship further. Yesterday, I had the privilege of joining the Prime Minister at an event for courageous recipients of the Ebola medal. In Sierra Leone, we continue to adapt our approach, including transitioning over the running of Kerry Town treatment unit from the Ministry of Defence. I will attend the international conference on Ebola in New York later this week. Next week, I will be at the Financing for Development Conference in Addis.
Given the substantial financial support that DFID provides for education in Pakistan, what assurances has the Secretary of State received from the Government of Pakistan that freedom of speech and religious tolerance of minority faiths, including Christianity, are being taught in Pakistan’s schools?
T2. I am sure the Minister will join me in congratulating Malawi on reaching its 51st anniversary of independence this week. DFID’s aid tracker shows that funding to Malawi has reduced from a peak of more than £120 million in 2012-13 to just under £60 million this year. If DFID continues to cut its budget for Malawi, will he consider ways of assisting the Scottish Government in helping to maintain and grow their important links with the country? (900832)
I do not recognise the hon. Gentleman’s figures. We provide £72 million, plus another £10 million from the UK taxpayer through the Scottish Government, and that is just in bilateral aid; of course, there are then the multilateral and international programmes. In total, it probably adds up to more than £150 million to Malawi.
T3. On Monday, the British ambassador to Yemen said that 6 million Yemenis were on the verge of complete starvation. In the light of the ongoing commercial blockade of fuels and supplies to Yemen and the failure of the Geneva talks, what discussions are the Government having with the Saudi Arabian-led coalition to stop the violence and meet the increasingly desperate humanitarian need? (900833)
My hon. Friend is right to highlight the dire situation faced by millions of people living in Yemen. We are now urging the Governments of Saudi Arabia and Yemen to work with the UN so that we can get commercial shipping through a new inspections regime and have more humanitarian pauses during Ramadan.
T5. The movement of many thousands of refugees from Burundi into neighbouring countries is of real concern, but I understand that there are even larger internal movements away from Bujumbura and growing anxiety about the prospect of food and health crises in the months ahead. What discussions has the Secretary of State had with NGOs working in Burundi about action to tackle this worrying situation? (900835)
We have been discussing with civil society what steps we can take to help the situation in Burundi. As the hon. Lady knows, many countries in Africa routinely face refugee flows within and across their borders, which is why we are right to be doing the work we are on the ground.
T7. Ten years ago, 250,000 people gathered in Edinburgh as part of the Make Poverty History campaign to argue for aid, debt relief and trade justice. We have seen less progress on the third. What is the Secretary of State doing to ensure fair trade deals for the world’s poorest countries? (900837)
Scotland can be proud of the role it played in helping to shape that critical summit, which the Make Poverty History campaign supported. The hon. Gentleman is right that trade is a key mechanism for lifting people out of poverty, which is why the jobs agenda is now central to DFID’s work.
T6. How does last week’s Gaza resolution by the United Nations Human Rights Council help aid efforts when it draws an equivalence between Hamas, a proscribed terrorist organisation, and Israel, a democratic state defending itself against attacks on its citizens? (900836)
The UK is deeply concerned by the terrible human cost to both sides of the ongoing Israeli-Palestinian conflict, as underlined by the findings of the UN report that my hon. Friend refers to. We, along with our EU partners, voted in support of the resolution on the report last week. We would have preferred to see a text that gave more weight to Israel’s legitimate right to self-defence and to the threat that Israel faces from militant groups operating from inside Gaza, including Hamas.
T9. The Secretary of State will have seen coverage in the Daily Mail and other newspapers about four charities that are supported by her Department that are using aggressive fundraising tactics. No doubt she welcomes the decision by Oxfam to suspend all telephone fundraising in the UK while it investigates these claims of malpractice. What steps will she be taking to ensure that other charities embroiled in this case follow suit? (900839)
As I announced in my opening response to topical questions, we have a process under way within our Department, working with civil society both in the UK and internationally, to look at how we can strengthen that relationship. As part of that though, I believe there will also be a discussion around standards and commitments that NGOs can make to ensure that they are part of a strategy that we are delivering, but a good part and one that does not have reputational risk to it.
The Prime Minister was asked—
As the Prime Minister and, indeed, the Chancellor know, quality is not the issue with our armed forces, but quantity is. Given that we used to spend regularly between 4% and 5% of GDP on defence when we last faced a threat on the continent and a major terrorist campaign, should we not be aiming at a 3% target, rather than the bare NATO minimum figure?
My right hon. Friend is right: we do face very severe threats in our world. The point I would make to him is that the only way to have strong defence is to have a strong economy. That is absolutely key. We made some very clear commitments about the size of our armed forces, about the successor to the Trident submarine and also about the vital equipment programme, where we have the aircraft carriers and the other equipment vital to our armed services that are coming through. Those things are only possible because we closed the deficit in our MOD and the mess that we found when we became the Government and we have a strong economy.
Ten years ago, the 7/7 bombers cruelly took 52 precious lives. We remember them, the families’ courage and the injured, and we defy the terrorists.
Last month the Prime Minister celebrated Magna Carta, which set out that those who govern must be constrained in their exercise of power to protect those they govern. Our Human Rights Act is the very embodiment of those values. If he accepts that in a democracy there needs to be an effective check on Executive power, even though at times it can be uncomfortable for Government, will he abandon his plans to water down the Human Rights Act?
First of all, may I very much agree with what the right hon. and learned Lady said about the 10-year anniversary of 7/7 and about the bravery and the dignity of those families that lost their loved ones? She, like me, took part in the commemorations yesterday, which I thought were fitting and a permanent reminder of the threat we face and the work we must do to face down the evil of these terrorists and their narrative of extremism.
The point that the right hon. and learned Lady made about Magna Carta demonstrates that there were human rights before the Human Rights Act. The point I would make is that our proposed reform is to have a British Bill of Rights, so that more of these judgments are made by British judges in British courts.
It is very important that we are unhesitating in our compliance with international standards on this; otherwise it gives a strong signal to other countries that we want to undermine those standards. However, there have been mixed messages from the Government. Last week, senior Government sources briefed the newspapers that the Prime Minister’s view was that withdrawal from the European convention on human rights
“is not going to happen”,
but the Home Secretary, the Justice Secretary and the Leader of the House have indicated that they want to leave. So can the Prime Minister make it absolutely clear that Britain will be staying in the European convention on human rights?
As I have said to the right hon. and learned Lady before, there is a danger in believing everything that you read in the newspapers. Our intention is very clear: it is to pass a British Bill of Rights, which we believe is compatible with our membership of the Council of Europe. As I have said at the Dispatch Box before—and no one should be in any doubt about this—issues such as prisoner voting should be decided in this House of Commons. I think that that is vital. So let us pass a British Bill of Rights, let us give more rights to enable those matters to be decided in British courts, and let us recognise that we had human rights in this country long before Labour’s Human Rights Act.
If, as the Prime Minister reassures us, we are staying in the European convention, we might as well keep the Human Rights Act, which at least allows us to enforce it in our courts.
Ten years ago, the United Kingdom was awarded the 2010 Olympics and Paralympics. When he took office, the Prime Minister promised that the games would result in an increase in participation in sport. Will he tell us whether the number of people taking part in sport has gone up or down since the Olympics?
Participation in sport has gone up since the Olympics, and it has been a success. We should all remember what an excellent Olympic games that was. We have also seen a real success in primary schools, where there is more PE activity, and the primary school sports partnerships are working very well.
I do not know what it says in the Prime Minister’s briefing folder, but he is completely wrong. The number of people taking part in sport has gone down since 2010, and children at school are doing less sport too. Does the Prime Minister agree that what we now need is a proper national strategy for sports participation, so that we do not miss the golden opportunity presented by the Olympics—an opportunity that his Government have so far squandered?
He may be esteemed by you, Mr Speaker, but some of us take a different view.
As a result of the PE and sport premium for schools, the average time spent on PE at primary level has increased to over two hours a week, 91% of schools have reported an increase in the quality of PE teaching, 96% of schools have reported—[Interruption.] I know that Labour Members do not like facts, but when they ask a factual question, they should welcome a factual answer. [Interruption.] I have got all day, Mr Speaker.
There is not much else on today, Mr Speaker.
More than eight in 10 schools are seeing a rise in the number of children taking part in sport. The Olympics were a success for Britain, sports participation has gone up, more is now happening in our schools, and we will build on that legacy.
The fact that we do not like is the fact that since the Olympics, participation in sport has gone down, especially among children. The Prime Minister should get out and sort that out.
In the English manifesto that was published by the Conservative party, the Prime Minister promised that before making changes in the constitution on English votes for English laws, he would
“Consult the House of Commons Procedure Committee prior to seeking approval from the whole House to the proposed Standing Order changes.”
When did he do that?
There have been consultations with the head of that Committee, and there is plenty of time—[Interruption.] I have to say to Labour Members that at least we published an English manifesto.
I think that there is a very simple choice for the House. For once, why do we not talk about the substance rather than the process? Post-devolution, we have a problem of unfairness: English MPs have no say on Scottish issues, yet Scottish MPs have a say on English issues. That is the problem. We are proposing a very simple measure, which is that legislation should not be passed on English matters against the will of English MPs. It is a very modest proposal. Is the right hon. and learned Lady really saying that the Labour party will oppose that proposal?
We agree there is a problem and we agree there needs to be change, but it has got to be done properly—constitutional change has got to be done properly. Indeed the Prime Minister said at last week’s Prime Minister’s questions:
“We will publish our proposals shortly and Parliament will have plenty of time to consider and vote on them”—[Official Report, 1 July 2015; Vol. 597, c.1471-72.]—
and he cannot have consulted the Procedure Committee because it has not even been set up yet. The Prime Minister should recognise the strength of feeling in all parts of the House about the proper processes to get to this change. He should consult properly, or he will be breaking a promise he made in his manifesto.
The right hon. and learned Lady talks about proper processes: we have published proposals, we are having a debate in Parliament, and there will be a vote in Parliament. The Labour party has got to get off the fence and tell us: “Do you support this modest proposal or not?” We are still waiting for an answer.
Does my right hon. Friend agree that rural businesses in my constituency such as BSW Timber, which he visited during the election campaign, are benefiting from this Government’s long-term economic plan? What more can his Government do to further promote apprenticeships and create jobs in all sectors of the vital rural economy?
First, may I welcome my hon. Friend to his place, and say how much I enjoyed the visit to his constituency and that specific business? It has taken on a lot of employees and apprentices in recent years, and the claimant count in his constituency is down by 54% since 2010. What more we can do is encourage companies like this one to invest in training and apprentices because that is key to our future. We have got to ensure we do that, and that will only happen if we stick to our long-term economic plan.
This week we commemorate the worst atrocity in Europe since the second world war: the Srebrenica genocide. In a genocidal act, 8,372 unarmed boys and men were taken out of what was supposed to be a United Nations safe area and were murdered. Will the Prime Minister commit to doing everything in his power to ensure that this genocidal act is remembered and do everything he can to get the international community to mark this as well?
I absolutely agree with the hon. Gentleman about this issue: it was the largest act of genocide since the holocaust on the mainland of Europe—as he said, 8,300 people were murdered. The first thing is to be very clear that it was genocide, and to say to people who question that that they are genocide deniers. I am very proud of the fact that Britain has the second largest set of commemorations and events to mark the anniversary of these dreadful events. We have also been holding the pen at the UN in drafting a resolution to try and bring the world together to make sure it is remembered in the right way, and we should continue to do all we can to keep this at the front and centre of European and world politics so people realise this was a genocide, and we must learn the lessons from it.
I commend the Prime Minister on his answer and his efforts, and the Welsh First Minister Carwyn Jones who is hosting a commemorative event in Cardiff today, and Scotland’s First Minister Nicola Sturgeon who is doing a commemorative event in Scotland on Friday, but Bosnia’s suffering has continued since the genocide and the end of the war. Unemployment in Bosnia is more than 40%, among young people it is over 75%, and more than half the young people of Bosnia are considering leaving the country. Will the Prime Minister do everything he can, together with European partners, to support political and economic progress for Bosnia and Herzegovina and give the people there real hope for a better future?
The hon. Gentleman is absolutely right, and that is why I met the Bosnian President this week to discuss some of those issues, as well as to talk about commemorating and remembering Srebrenica. What matters is making sure that the institutions in Bosnia work better, and the politicians work better together in understanding their past and their shared future. It is very important that we keep the door of access to the European Union open, but for that to happen the institutions need improving and issues need to be dealt with properly—corruption and problems need to be addressed. But there is no doubt in my mind that the pathway to membership of the European Union has helped in Bosnia, as it can help in the rest of the western Balkans, and it is vital that we keep that door open.
Q15. Seven-year-old Jagger Curtis from Romsey suffers from Duchenne muscular dystrophy. Every day that he waits for first NHS England and now the National Institute for Health and Care Excellence to make a decision about Translarna is a day that threatens his mobility. Last week’s decision to delay, potentially for up to five months, was a bitter blow. What action can my right hon. Friend take to make sure that NICE makes that decision with the utmost speed? (900830)
My hon. Friend rightly raises this issue, and I say to her that these are incredibly difficult decisions and we know how hard they are for patients and their families. I think it is right that it is expert clinicians at NHS England and not politicians who make these funding decisions, based on the available evidence. As she knows, NICE has not yet made a final decision on these drugs, so patients and their families, and other experts, can feed into its evidence-gathering and consultation process. She asks what we can do, and I think there are two things. First, when we have these drugs that cost over £400,000 per patient per year, it is right to ask some pretty challenging questions of the companies concerned and we should do so. Secondly, we must keep investing in our rare disease research and in genomics, and making sure that the NHS takes up these treatments rapidly. That is the sort of health service we want to build.
Q3. I put it to the Prime Minister again that in his manifesto for England, which was the only part of the UK where he won the election, he promised on English votes for English laws to:“Consult the House of Commons Procedure Committee prior to seeking approval from the whole House to the proposed Standing Order changes.”We all know that the Committee’s membership has not been agreed by the House and it will not meet until next week, and the EVEL vote will take place next Wednesday. Will the Prime Minister please tell us why he is breaking his manifesto promise? (900818)
We are consulting the whole of the House of Commons, and the whole of the House of Commons will have a vote. When it comes to have its vote, it might want to consider what the leader of the Scottish National party here said in 2007—you might find this interesting. He asked the then Prime Minister whether it is not
“completely iniquitous that although English MPs are not able to decide on matters in Scotland, Scottish MPs from the UK parties vote on matters that affect only England?” —[Official Report, 6 November 2007; Vol. 467, c. 25.]
That was the view. Given that our modest proposal would actually restrict the SNP from far fewer votes than its own self-denying ordinance does, I would think it should vote wholeheartedly with the Government on this modest proposal.
First, let me welcome my hon. Friend to her place. I do know her constituency well and I spent a lot of time there with her before the election. What I would say to her is that the offer of devolution is not limited to cities; we are just as open to proposals from towns, counties and districts. To help our high streets we need a strong economy; to press ahead with these local plans; and to have deregulation of the class orders that sometimes prevent development from taking place. I would also argue, in the case of market towns, that we should make parking easier—and, preferably, free.
Q4. The decision to pause indefinitely the electrification of the TransPennine rail line through Stalybridge and Mossley means that my constituents face many more years of delayed trains, cramped journeys and less frequent services. Are those really the characteristics of a northern powerhouse? (900819)
Is it not typical of the Labour party today that instead of trying to get behind the northern powerhouse and trying to build a balanced economy—[Interruption.] The hon. Gentleman says that there is an indefinite pause, but that is not the case. We will be pressing ahead with this investment, and it is right that the Labour party should be supporting it.
Q12. Will the Prime Minister lend his support to plans to extend the Robin Hood line in north Nottinghamshire, so that people living in former coalfield communities can get access to transport and employment, and those people who want to come as tourists can enjoy all that Sherwood forest has to offer? (900827)
Q5. Last Friday at Walsall football club stadium, there were tears, flowers and Walsall shirts and scarves as we remembered Joel Richards, aged 19, Adrian Evans, his uncle, and Patrick Evans, his grandfather, who were all Saddlers fans killed in Tunisia. Will the Prime Minister outline what steps he will take to ensure that bereaved families and the survivors of atrocities can have help immediately and in the future? (900820)
I thank the hon. Lady for her question. The thoughts and condolences of the whole House go out to the families of her constituents. I am glad to hear that Walsall football club is facilitating this very fitting tribute. I was very moved when I heard about it on television. As I announced to the House last week, I have asked the Cabinet Secretary for advice on a ministerial committee to ensure that work is properly co-ordinated across Government to support all those who have been affected. When I was talking to the victims of the 7/7 bombings yesterday, I was very struck by the way that they had been supported across many years in many different ways, covering all sorts of different issues in their own lives and the way they wanted to commemorate those terrible events in London. I want to ensure that we do it as well in the case of the Tunisian atrocities, and that is exactly what that committee will be set up to do.
May I associate myself with the Prime Minister’s remarks about the families of the victims of Tunisia, particularly the family of my constituent, Sue Davey? In the past three years, unemployment in Tamworth has fallen faster than anywhere else in the country. Will my right hon. Friend encourage high-tech firms such as Jaguar Land Rover and BMW to be the motors of the midlands engine, and remind the Labour party that Ed Balls’ comments that our long-term plan would choke off jobs and growth were just plain wrong?
I am delighted that Tamworth has that record, not least because it has such an association with Conservative Prime Ministers down the years and the Tamworth Manifesto. The point my hon. Friend makes is a good one. People who try to say that the jobs we have created are part-time and low paid should look at what is happening in places such as the west midlands where we see growth in manufacturing, engineering and jobs that have long-term successful careers attached to them, and we want more of that.
Q6. If the Prime Minister really is committed to the northern powerhouse, he will know that an essential element of that is improved transport connectivity between the key cities of Manchester and Leeds, and that is now under threat. Given the vague and evasive answer that he gave earlier, will he now join me in welcoming the Manchester Evening News campaign to get the electrification of the TransPennine line back on track? (900821)
I can certainly commit to that, because I said a minute ago that this is a pause and not a stop. We are absolutely committed to ensuring that the work goes ahead. We also want to get rid of the Pacer trains that were there all those years under Labour.
I am sure that there are all sorts of things to learn from the Greek experience. I fear for the future of that country. Obviously, we want Greece and the eurozone to come to an agreement, but we have to be prepared for all eventualities and to make sure that, whether it is helping British tourists, British businesses or British pensioners living in Greece, we have made all the plans and taken all the precautions that are necessary. My approach to negotiation is a little different from the Greek approach, which is why I have been to see every Prime Minister and President in Europe to talk through what Britain wants to see in terms of change in Europe, and change for our membership in Europe, and I believe that that will be successful.
We need to see a continued improvement in social care, and we need to continue to help pensioners. Pensioner poverty is at an all-time low because this party has kept its promises to uprate the basic state pension, to support pensioners’ benefits and to make sure that people have dignity in their old age.
My hon. Friend makes a very important point. I had a very good discussion with President Hollande last week. We have seen more action by the French police in arresting the ringleaders and trying to keep roads and ports open. As I have said at this Dispatch Box before, it is important that we do not engage in finger pointing with the French, but recognise that this is a shared problem. Our juxtaposed border controls in Calais work well for Britain and, I believe, can work well for France, and we should continue to work together to deal with this problem.
Q8. My constituents are still waiting for universal credit to be rolled out to them. In fact, they are still waiting for a timetable of planned rollout. We are about to hear about the latest stages of the Government’s welfare reforms. When will the Prime Minister finish the last one? (900823)
I make absolutely no apology for taking universal credit at a deliberate pace. Many of us in this House can remember what happened when Labour introduced tax credits in one go and people came to our constituency surgeries with problem after problem. It is quite right to roll out universal credit at a deliberate pace, but I can promise the hon. Lady that it will be coming to Bristol South soon.
I welcome my hon. Friend. It is important that we get this right. We saw a big increase in adoption during the last Parliament because of the changes that we made, and what we are putting on the table in this Parliament is not only extra money but the proposal to create regional adoption agencies so that counties and other adoption agencies can come together. What matters above all is finding a loving family and home for the child, rather than ensuring that it is in the precise geographical area where that child is in care.
Q10. I am sure that the Prime Minister had time to study the “Building Great Britons” report from the 1001 critical days all-party group earlier this year, which put the cost of perinatal mental illness and child maltreatment at £23 billion a year. Will he commit to focusing the welcome additional child and adolescent mental health services spending on a pre-troubled families programme which invests in strong attachments between parents and babies at the outset as the best way to secure well-rounded children brought up in strong, loving families? (900825)
My hon. Friend, who has great experience in these matters, makes a good point. We are looking at how to have proper parity between mental and physical health. Everything we can do to help to strengthen families should be part of our agenda of genuinely tackling poverty. We want to tackle the causes of poverty, and alongside worklessness, debt, addiction and the rest of it, family breakdown is a big cause of poverty, so the work he talks about is vital.
I think the priority for the country is to keep going with a growing economy that has seen 2 million more people in work, an economy that is going to see 3 million apprentices in the next Parliament, and an economy that is cutting taxes for hard-working people. That is the priority, and that is what the House is going to hear about in a minute or two.
Q11. Derbyshire is at the heart of the midlands engine, powering the economy of the country. Will the Prime Minister congratulate the workers of Bombardier on winning the £358 million contract to supply 45 more trains for London, securing local jobs for the next 35 years? (900826)
My hon. Friend is absolutely right. Just as the automotive industry has been so important for the west midlands, the growth in the train industry has been important for the east midlands in recent years, and the progress at Bombardier is truly impressive. I had the great pleasure of visiting the company earlier in the year, and was even allowed to drive a train. I was not very successful at that, but the company is doing very well: it is investing for the future, providing trains for our country, and pulling through jobs and skills for the whole region.
The truth is that the Labour party ignored the north for years, and Labour Members cannot bear the fact that it is a Conservative Prime Minister and a Conservative Chancellor sitting for a seat in the north-west who are putting those issues firmly on the agenda and funding them.
Ways and Means
Order. Before I call the Chancellor of the Exchequer, I remind hon. Members that copies of the Budget resolutions will be available to them in the Vote Office at the end of the Chancellor’s speech.
I also remind hon. Members that it is the norm not to intervene on the Chancellor of the Exchequer or the Leader of the Opposition, and the same convention applies to the spokesperson for the Scottish National party.
This is a Budget that puts security first. It is a Budget that recognises the hard work and the sacrifice of the British people over the past five years and says that we will not put that at risk; we have a job to do and we are here to get on with it. This will be a Budget for working people—a Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy to the higher wage, lower tax, lower welfare country we intend to create.
This is the new settlement. From a one nation Government, this is a one nation Budget that takes the necessary steps and follows a sensible path for the benefit of the whole of the United Kingdom. This is a Conservative Budget that can be delivered only because the British people trusted us to finish the job, because they know that the only way to have a strong NHS, strong schools and a strong defence is to build a strong economy. That is how we were elected, and that is exactly what we are now going to do.
The British economy that I report on today is fundamentally stronger than it was five years ago. We are growing faster than any other major advanced economy. Our businesses have created 2 million more jobs. Living standards are rising strongly. Our long-term economic plan is working. But the greatest mistake this country could make would be to think all our problems are solved. We have only to look at the crisis unfolding in Greece as I speak to realise that, if a country is not in control of its borrowing, the borrowing takes control of the country. Britain still spends too much; it borrows too much, and our weak productivity shows that we do not train enough, build enough or invest enough. This we are determined to change. We will be bold in transforming education, bold in reforming welfare, bold in delivering infrastructure and bold in building the northern powerhouse. We will be bold in backing the aspirations of working people. This is a big Budget for a country with big ambitions. It is a Budget that sets the way to secure Britain’s future.
Let me turn to the latest forecasts from our independent Office for Budget Responsibility. We thank Robert Chote and his colleagues for their hard work. We now have Budgets that fit the economic forecasts, instead of economic forecasts that were fixed to fit the Budget. At the March Budget, it was thought that the British economy had grown by 2.6% last year. We now know that it grew by 3%. But the global economic risks are rising. The US economy has slowed, so too has China, and even before the Greek crisis intensified this week, the forecasts for global growth had been revised down this year to 3.2%. It is all the more reason to get our own house in order.
For 2015, the OBR forecasts growth at 2.4%. That is faster than America, faster than Germany and twice as fast as France. For the second year in a row, Britain is expected to have the strongest economic growth of any major advanced economy in the world. In 2016, the OBR has growth unchanged at 2.3%, and then it is revised up to 2.4% in the following year—a level of strong, steady growth that it predicts for the rest of the decade. This growth is driven by stronger private consumption, and by stronger private investment, too. Indeed, business investment is now 31.9% higher than it was in 2010, and is revised up again this year. Now we need to see investment at home matched by exports abroad. Our decision to become a founder member of the new Asian Infrastructure Investment Bank is driven by our determination to connect Britain to the fastest-growing parts of the world, and our decision to seek reform to the EU is driven by our determination that this part of the world shall not price itself out of a prosperous future.
Higher investment leads to more jobs, which brings me to the OBR forecasts for employment. Over 2 million more people have the security of work as a result of this Government’s long-term economic plan. The OBR forecasts that under the current economic conditions, almost 1 million more jobs will be created over the next five years. Our ambition is to go further, and create 2 million more jobs on the road to full employment. To help achieve that progressive goal, we set out today how we will make work pay.
Jobs are not created by accident. They are created when businesses have confidence—the confidence to invest, to grow and to hire; confidence that comes because Britain is getting its house in order. So we seek to create a country that can truly pay its way. The budget deficit is now less than half the 10% we inherited, and economic security is returning, but all that progress is at risk if we do not finish the job. That means more than just eliminating the deficit; it means running a surplus to get our dangerously high levels of debt down.
That brings me to the first of the key judgments in this Budget—how fast do we cut the deficit? My answer is this: we should cut the deficit at the same pace as we did in the last Parliament. We should not go faster; we should not go slower. At this pace, the national debt is lower as a share of our national income in every future year than when I presented the Budget in March, and it is achieved without a rollercoaster ride in public spending.
This is why: first, our tax receipts are stronger than forecast, showing that the recovery is firmly entrenched; secondly, as a strong majority Government, we have been able to get on with making extra savings in this financial year; and thirdly, we can make faster progress in returning our banks, including RBS, to where they belong—the private sector. Indeed, the sale of Government assets this year will deliver the largest privatisation proceeds of all time, higher than the previous record in 1987. With stronger tax receipts, more asset sales and a strong Government who are getting on with the job, we can achieve a smoother path to the same destination, with a surplus a year later in 2019-20, but the national debt lower and that same surplus higher. For this is a Budget that puts economic security first.
Many difficult but necessary decisions are required to save money, and this will be done with moderation but determination. This is a one nation Government who do the best thing for the economy and the right thing for the country. This plan is reflected in the forecasts for debt and deficit produced today by the Office for Budget Responsibility. The deficit was 10.2% of national income in 2010. This year, it is forecast to fall to 3.7%—one third of the deficit we inherited. It then falls again to 2.2% in 2016-17, down to 1.2% the year after, and then to just 0.3% in 2018-19. The following year, 2019-20, we move into a budget surplus at 0.4%, which is then maintained the year after at 0.5% of GDP. In structural terms, the OBR judges that this will be the largest surplus in at least 40 years—Britain back in the black, and in its strongest position for almost half a century.
This is, of course, all reflected in the amount of cash Britain has to borrow each year. In 2010, Britain was borrowing a staggering and unsustainable £153 billion a year. In March, the OBR forecast that we would borrow less than half of that, or £75.3 billion, this year. In this Budget, it has revised borrowing down this year to £69.5 billion. Borrowing then falls to £43.1 billion next year, £24.3 billion in 2017-18, and down to just £6.4 billion the year after. In 2019-20, we move into a surplus higher than previously forecast of £10 billion, which rises to £11.6 billion the year after—Britain finally doing the responsible thing and raising more money than it spends.
Five years ago, we inherited a situation in which our national debt as a share of our national income was soaring. This year, that national debt share is falling, bringing to an end the longest continued rise in our national debt since the 17th century. It is falling now, and it continues to fall in every year of the forecast, down from 80.3% this year to 79.1% next year, then down again to 77.2% in 2017-18, 74.7% the year after, and 71.5% the year after that, before falling again to 68.5% in 2020-21. Britain has turned a corner and left the age of irresponsibility behind.
Having come this far, there can be no turning back. We should aim for a new settlement across the political spectrum where it is accepted that, without sound public finances, there is no economic security for working people; those who suffer when Governments run unsustainable deficits are not the richest, but the poorest; and therefore in normal economic times Governments should run an overall budget surplus, so that our country is better prepared for whatever storms lie ahead. In short, we should always fix the roof while the sun is shining.
Today, I publish the new fiscal charter that commits our country to that path of budget responsibility. While we move from deficit to surplus, this charter commits us to keeping debt falling as a share of GDP each and every year and to achieving that budget surplus by 2019-20. Thereafter, Governments will be required to maintain that surplus in normal times—in other words, when there is not a recession or a marked slowdown.
Only when the OBR judges that we have real GDP growth of less than 1% a year, as measured on a rolling four-quarter basis, will that surplus no longer be required. The Chancellor of the day will have to set out their plan with clear targets to restore the nation’s finances to health and the House of Commons will test the credibility of that plan and vote on those targets. This is sensible, pragmatic and keeps Britain secure. We will put the new fiscal charter to a vote in this House this autumn, and I invite broad cross-party support for it.
To meet the new charter, further difficult decisions need to be taken to live within our means. We will take these decisions in a balanced and fair way. I can confirm that the analysis produced today shows that the richest are paying a greater share of tax than they were at the start of the last Parliament. And more than that, we are continuing to devote a greater share of state support to the most vulnerable. As I said they would, those with the broadest shoulders are bearing the greatest burden, for we are all in this together. And in the last fortnight we have seen independent statistics showing that since 2010 child poverty is down, and so is inequality. That comes on top of a record number of women in work, and the gender pay gap at an all-time low—all good news that should be welcomed on both sides of the House.
The fiscal plan set out in the Budget requires around £37 billion of further consolidation over the Parliament. Today, I set out how we will find just under half of that—£17 billion. We have found annual savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance and planning and imbalances in the tax system. The other half will largely come from Government Departments through savings and cuts and will be set out at the spending review that the Chief Secretary and I will conduct this autumn. However, no year will see cuts as deep as those required in 2011-12 and 2012-13.
Of course, I am conscious that a huge amount has already been done to increase efficiency across Whitehall, with administrative budgets down by more than 40% in real terms, but there is still much more we can do. There is also a simple trade-off between pay and jobs in many public services. I know that there has already been a period of pay restraint, but we said last autumn that we would need to find commensurate savings in this Parliament, so to ensure that we have public services we can afford, and to protect more jobs, we will continue recent public sector pay awards with a rise of 1% per year for the next four years.
Public spending should reflect public priorities and we have to make choices. Our priority is the national health service. We will fund fully the plan the NHS has itself produced for its future, the Stevens plan. That plan requires very challenging efficiency savings across the health service, which must be found, but it also requires additional Government funding. Our balanced approach means that I can today confirm that the NHS will receive, in addition to the £2 billion we have already provided this year, a further £8 billion. That is £10 billion more a year in real terms by 2020. It is proof that you can only have a strong seven-day NHS if you have a strong economy, and it is proof that the NHS is only truly safe in Conservative hands.
I have set out the difficult choices we are going to face on Government spending and the priority we will accord to our national health service. I turn now to combating tax evasion, avoidance and aggressive tax planning. In Budget after Budget, we have done more to combat that than any Government before us. We inherited a system where bankers boasted of paying lower tax rates than their cleaners and some multinationals shifted all their profits offshore. We have stopped these blatant abuses that were allowed to flourish, and many others, but we promised the British people we would do more and find a further £5 billion a year, and I can confirm we have done so.
We are boosting HMRC’s capacity, with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders it pursues for prosecution and raising £7.2 billion in extra tax.
We are going to change the law to stop the use of losses that abuse our controlled foreign companies regime, and make sure investment fund managers pay the full capital gains tax rate on their carried interest.
We will stop corporates artificially increasing the value of stock for tax purposes, and to focus the employment allowance on employment we are restricting it so that companies where the director is the sole employee will no longer be able to claim.
We are consulting today on how to deal with the increasing abuse of the rules around disguised employment when working through a personal service company, and we are going to add tough new penalties to our general anti-abuse rule and name and shame serial users of failed avoidance schemes. These people should have nowhere to hide.
The non-domicile tax status is a long-standing feature of the UK tax system—in place since 1914—that plays an important role in allowing those from abroad to contribute to our economy before returning to their permanent home, and many countries have some version of this tax status.
Simply abolishing it altogether would, as Ed Balls correctly noted, probably cost the country money. Many of these people make a considerable contribution to our public life and to tax revenues, but there are some fundamental unfairnesses in the non-dom regime that I am putting a stop to today.
It is not fair that people who are born in the UK to parents who are domiciled here can later in life claim to be non-doms and live here. It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax. From now on they will pay the same tax as everyone else. Most fundamentally, it is not fair that people live in this country for very long periods of their lives benefit from our public services and yet operate under different tax rules from everyone else.
Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer. I am today abolishing permanent non-dom tax status. Anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains. We will consult to get the detail right. All these non-dom measures will come into effect in April 2017 and they will raise £1.5 billion in extra tax for the Exchequer over this Parliament. British people should pay British taxes in Britain, and now they will.
Turning to corporate tax rules, we will also broaden the base for corporation tax by removing, for future transactions only, the annual deduction for acquired reputational value. For big companies with profits over £20 million a year, we will bring forward corporation tax payment dates so that tax is paid closer to the point at which profits are earned. That is fair and more in line with what we are doing in personal tax, and it is what almost all other G7 nations do.
Banks make a key contribution to our economy, but they also need to make a fair contribution. It is important that they help pay down the debts built up during the banking crisis, but equally important that they go on creating jobs, not just in London but in Edinburgh, Leeds, Birmingham, Bournemouth and across the country. The new remit I am issuing today for the Financial Policy Committee highlights the importance of productive investment, innovation and competition in finance.
Our bank levy was introduced to raise revenue and increase the stability of balance sheets, and it has worked, but now it risks doing harm unless we change it. So I will, over the next six years, gradually reduce the bank levy rate, and after that make sure it no longer applies to worldwide balance sheets. But to maintain a fair contribution from the banks, I will introduce a new 8% surcharge on bank profits from 1 January next year. By getting this balance right, it means we will actually raise more money from the banks this Parliament, but at the same time make our country a more competitive place to do business.
We have also taken action to make sure that consumers get a better deal from another important industry: insurance. The costs of premiums are down for families, and today we are announcing a major review of the regulation of claims management companies and we will cap the charges they can apply to their customers.
Britain’s insurance premium tax is well below tax rates in many other countries. I am therefore today raising insurance premium tax, which applies to only one fifth of all premiums, to 9.5%, effective from this November. With these measures I am putting in place an approach for taxing banks and insurers over this Parliament which is sustainable, stable and fair.
In each year, we have been able to use money from the banking fines paid by those who represent the worst of values to support those in uniform who demonstrate the best of British values. Today we announce funding for the Defence Medical Welfare Service and the Royal Commonwealth Ex-Services League. We are supporting the incredibly courageous members of our special forces who are injured, and, in the 75th anniversary of the Victoria Cross and George Cross Association, quadrupling the annual annuity we pay to those who demonstrated the highest valour and whom I had the honour of meeting yesterday.
In the week of the poignant anniversary of the 7/7 attacks, we should recognise, too, that our victims of terrorism overseas have no permanent memorial. We will now fund one, as well as a specific memorial to those murdered in Tunisia. We are committing £50 million to expand the number of cadet units in our state schools to 500, prioritising schools in less affluent areas, and we are going to support the Children’s Air Ambulance by funding an extra helicopter.
In every Budget, I also find an opportunity to fund the commemoration of famous events from our history and the buildings that symbolise them. This Budget is no exception. The RAF’s group fighter command centre in west London was the place where the battle of Britain was directed from and it badly needs repair. I want to thank the new Member my hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson) for bringing to my attention the dilapidated state of his campaign bunker. Let its renovation stand as a monument to the heroes of the battle of Britain and the days when aeroplanes flew freely over the skies of west London.
I turn now to the great economic challenge we face on productivity, for this is the key to delivering the financial security that families see when living standards rise. And it will ensure that Britain becomes what we want it to be—the most prosperous major economy in the world by the 2030s. That is within the grasp of our generation, provided we take the big decisions. On Friday we will set out our plan for productivity, to help realise this ambition. I want to thank my new Treasury colleague Jim O’Neill for his work as a world-leading economist in putting it together. Major British businesses, led by Sir Charlie Mayfield, have told me that they want to be part of the solution to this great challenge and we very much welcome that.
Let me today set out the key parts of that plan. First, on transport, four fifths of all journeys in this country are by road, yet we rank behind Puerto Rico and Namibia in the quality of our network. In the past 25 years, France has built more than 2,500 miles of motorway and we have built just 300. In the last Parliament I increased road spending, even in difficult times, and set out a plan for £15 billion of new roads for the rest of this decade, but we need a long-term solution if we are going to fix Britain’s poor roads.
Vehicle excise duty was used to fund our roads, but not any more. And because so many new cars now fall into the low carbon emission bands, by 2017 over three quarters of new cars will pay no VED at all in the first year. That is not sustainable and it is not fair. If someone can afford a brand new car, including some of the most expensive models available, they can pay no VED. If they can afford only an older, second-hand car, they have to pay more tax. Only a Labour Government could have designed something so regressive.
So this is what we will do. From 2017, for brand-new cars only, we will introduce new VED bands. The duty in the first year will be set according to emissions, like today, but updated for new technology. Thereafter there will be three duty bands: zero emission, standard and premium. For standard cars—that covers 95% of all cars sold in the UK—the charge will be £140 a year. That is less than the average £166 that motorists pay today. There will be no change to VED for existing cars: no one will pay more in tax than they do today for the car they already own. In total, we will only raise the same amount of revenue from VED in the future as we do today, but that revenue will be secure for the long term.
And I will return this tax to the use for which it was originally intended. I am creating a new roads fund. From the end of this decade, every single penny raised in vehicle excise duty in England will go into that fund to pay for the sustained investment our roads so badly need. We will engage with the devolved Administrations on how the money is allocated there. Tax paid on people’s cars will be used to improve the roads that they drive on. It is a major reform to improve the infrastructure and productivity of our economy, and deliver a fairer tax system for the motorist.
We will also consult on extending the deadline for new cars and motorbikes to have their first MOT test from three years to four years, which would save motorists over £100 million a year. I can also confirm that there will be no changes to the plans for fuel duty I set out in March: fuel duty will remain frozen this year.
Productivity means building more roads. It also means giving people the skills they need to secure a better job. It is to our national shame that we are almost the only advanced country in the world where the skills of our 16 to 24-year-olds are no better than those of our 55 to 64-year-olds. The education reforms we started in the last Parliament have begun to address this problem, and we are going further in this Parliament by tackling the coasting schools that simply are not good enough.
We have already doubled the number of apprenticeships to 2 million; now we are committed to 3 million more. To fund these apprenticeships and make sure they are of high quality we have to confront this truth: while many firms do a brilliant job training their workforces, too many large companies leave the training to others and take a free ride on the system, so we are going to take a radical and, frankly, long overdue approach.
We are going to introduce an apprenticeship levy on all large firms. Firms that offer apprenticeships can get more back than they put in. Britain’s great businesses will train up the next generation—3 million more apprenticeships with the security that will bring. The money will be directly controlled by employers, and we will work with business on how to do this. It is exactly the sort of bold step we need to take if Britain is going to raise its game.
Next, we have got to secure the success of our university sector, which is one of the jewels in the crown of the British economy. When we reformed student funding in the last Parliament, we were told by those who so opportunistically opposed us that it would put people from low-income backgrounds off going to university. Instead, we now see a record number of these students applying and succeeding. It is a triumph of progressive reform.
Now we are removing the artificial cap on student numbers, so we do not have to turn away from our universities people who want to go and who have the right grades. But we cannot afford to do this unless we tackle the cost of student maintenance grants, which is set to almost double to £3 billion over this decade. There is also a basic unfairness in asking taxpayers to fund the grants of people who are likely to earn a lot more than them.
The previous Labour Government actually abolished these grants, before reintroducing them. These grants have now become unaffordable. If we do not tackle this problem, our universities will become underfunded and our students will not get places. I am not prepared to let that happen, so from the 2016-17 academic year we will replace maintenance grants with loans for new students. The loans only have to be paid back once they earn over £21,000 a year. To ensure university is affordable to all students from all backgrounds, we will increase the maintenance loan available to £8,200, the highest amount of support ever provided.
To ensure our university system is sustainable, we will consult on freezing the loan repayment threshold for five years, and we will link the student fee cap to inflation for those institutions that can show they offer high-quality teaching. We will open the whole sector to new entrants who can deliver the highest standards. It is a major set of reforms to make sure Britain continues to have the best universities in the world. It is fair to students, fair to taxpayers and vital to secure our long-term economic future.
Britain’s weak productivity is also driven by the fact that too much of our economic strength is concentrated in this capital city. This is unhealthy and unproductive, and we must achieve a better settlement for the future, but not by pulling London down. One of the first pieces of advice I received in the Treasury was to cancel the plan for the Crick Institute, the Tate Modern extension and Crossrail, but I rejected that advice, because I have always believed it is to our nation’s great advantage that we have one of the world’s great capitals. Now we are working with the Mayor on what this city will need in the future, with projects such as Crossrail 2 and the exciting development of the Olympic village.
What really drives this Government is building up other parts of the United Kingdom as a balance to London’s strength. For Scotland, we are now delivering, as promised, major devolution of tax and welfare powers. Instead of complaining endlessly about process in Westminster, the SNP Scottish Government will soon have to answer the question, “You’ve got the powers, when are you going to use them?” In Wales, we are honouring our commitments to a funding floor and to more devolution there, and investing in important new infrastructure such as the M4 and the Great Western line. In Northern Ireland, we are working with all parties to deliver the Stormont House agreement and sustainable public finances there.
Devolution to the nations of the United Kingdom is well established. In my view, devolution within England has only just begun. Today, we go further in building the northern powerhouse. I can today announce that I have reached agreement with the leaders of the 10 councils of Greater Manchester to devolve further powers to that city. These include putting fire services under the control of the new Mayor, establishing a land commission in the city and further collaboration on children’s services and employment programmes.
The historic devolution that we have agreed with Greater Manchester in return for a directly elected Mayor is available to other cities that want to go down a similar path. I can also tell the House that we are now working towards deals with the Sheffield and Liverpool city regions and with Leeds, West Yorkshire and partner authorities on far-reaching devolution of power in return for the creation of directly elected Mayors. We have created Transport for the North, and I am now putting it on a statutory footing. I can announce £30 million of funding to this new body as it connects northern England together, with seamless Oyster-style ticketing across the region.
Next, with the Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Bromsgrove (Sajid Javid), we are pushing for more powers and responsibility to be devolved to the midlands—that engine of growth. The massive £7.2 billion investment in transport in the south-west is under way, and in the first of our new county deals, we are making progress on a major plan to give Cornwall a greater say over local decisions.
Across England, we are launching a new round of enterprise zones for smaller towns. To celebrate the Queen’s 90th birthday, a new set of prestigious regius professorships will be created in universities right across the country. To give more power to counties and to our new Mayors, we are going to give them the power to set the Sunday trading hours in their areas. Let us invest across our country, let people decide and let us put the power into the northern powerhouse.
Another key to raising the productivity of our country is building more homes and creating a fairer property market. This is a Government that are unwavering in their support for home ownership. That is why we are introducing the new Help to Buy ISA this autumn, that is why we are giving housing association tenants the right to buy and that is why we will set out further planning reforms on Friday.
Today, I will set out three important changes that will address unfairnesses in our taxation of property and put the security of home ownership first. First, we will create a more level playing field between those buying a home to let and those buying a home to live in. Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income whereas homebuyers cannot, and the better off the landlord, the more tax relief they get. For the wealthiest, for every pound of mortgage interest costs they incur, they get 45p back from the taxpayer. All this has contributed to the rapid growth in buy-to-let properties, which now account for over 15% of new mortgages, something the Bank of England warned us last week could pose a risk to our financial stability.
So we will act, but we will act in a proportionate and gradual way, because I know that many hard-working people who have saved and invested in property depend on the rental income they get. We will retain mortgage interest relief on residential property, but we will now restrict it to the basic rate of income tax. To help people to adjust, we will phase in the withdrawal of the higher rate reliefs over a four-year period, and only start withdrawal in April 2017.
Secondly, the rent-a-room relief is designed to help homeowners who rent out a room in their home. It is a good scheme, particularly in a world where more and more people are renting out rooms online, but the relief has been frozen at £4,250 for 18 years. Next year, we will raise it to £7,500.
The third change fulfils a long-standing promise that I made, and one that I was unable to fulfil in coalition. The left will never understand this, but we on the Conservative Benches know that the wish to pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance tax was designed to be paid by the very rich, yet today more families are pulled into the inheritance tax net than ever before, and the number is set to double over the next five years. It is not fair and we will act.
From 2017, we will phase in a new £175,000 allowance for someone’s home when they leave it to their children or grandchildren. That sits on top of the existing £325,000 threshold, which will be fixed until the end of 2020-21. Both allowances can be transferred to a spouse or partner. From today, we will make sure that those who choose to downsize do not lose any of the allowance from the property that they used to own, but we will taper the relief away for estates worth more than £2 million.
The result for families is this: they can pass up to £1 million on to their children free of inheritance tax. No more inheritance tax on family homes: aspiration supported, the tax paid only by the rich, the security of home ownership restored—promise made; promise delivered.
The cut in inheritance tax will be more than paid for by changes which we have set out to the pensions tax relief that we give to the highest earners. From next year, their annual allowance will be tapered away to a minimum of £10,000.
Our pension reforms have given huge freedom to people who have worked hard and saved hard all their lives. Many thousands of people are, with the free guidance service we offer, making use of those freedoms to access their savings instead of buying annuities. Now it is time that we looked at the other end of the age scale—at those who are starting to save for a pension. For the truth is that Britain is not saving enough, and that is something we need to fix in our economy too.
While we have taken important steps with our new single-tier pension and generous new ISA, I am open to further radical change. Pensions could be treated like ISAs: people pay in from taxed income, it is tax free when they take it out and in between it receives a top-up from the Government. That idea, and others like it, need careful and public consideration before we take any steps, so I am today publishing a Green Paper that asks questions, invites views and takes care not to prejudge the answer. Our goal is clear: we want to move from an economy built on debt to an economy built on the more secure and productive foundations of saving and long-term investment.
If Britain wants to produce more, it needs to invest more. Many small and medium-sized businesses have benefited from our enhanced annual investment allowance. The allowance was set at £100,000 when we came to office. It is higher now, but without action it will fall to just £25,000 at the end of the year. That would especially hit middle-sized companies in areas such as manufacturing and agriculture, which we want to do more to build up in Britain, so I can confirm that the annual investment allowance will not fall to £25,000, but will be set at £200,000 this year and in every single year. That is a major, permanent boost to the incentives for long-term investment by small and medium-sized firms in Britain.
The large reductions in tax on North sea oil and gas that I announced in March are going ahead, and today we broaden the types of investment that qualify for allowances. Now that we have a long-term framework for investment in renewable energy in place, we will remove the outdated climate change levy exemption for renewable electricity that has seen taxpayer money benefiting electricity generation abroad.
We cut corporation tax from 28% to 20% over the last Parliament—one of the biggest boosts British business has ever seen. We cannot take it lower than that while such strong incentives are created for people to self-incorporate and pay the lower rates of tax due on dividends. The dividend tax system was designed partly to offset double taxation on profits, but the system has not changed despite sharp reductions in corporation tax. Lower rates are rapidly creating opportunities for tax planning. Irreparable damage was done when a previous Chancellor abolished the payable credit and deprived pension funds of billions of pounds.
We have inherited a complex and archaic system, so I am today undertaking a major and long-overdue reform to simplify the taxation of dividends. The dividend tax credit will be replaced with a new tax-free allowance of £5,000 of dividend income for all taxpayers. The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%—an increase of 7.5% where dividend income exceeds £5,000. Dividends paid within pensions and ISAs will remain tax free and unaffected by these changes. Those who either pay themselves in dividends or have large shareholdings worth typically over £140,000 will pay more tax; 85% of those who receive dividends will see no change or will be better off; and over a million people will see their tax cut.
That is an important reform. It comes into operation next year, and with our personal allowance and our new personal savings allowance, it means that from April, on top of the new ISA, people will be able to receive up to £17,000 of income a year tax free. The reforms that I have announced to dividend taxation also allow us to do something more, and go further in creating a Britain that is one of the most competitive economies in the world.
There are those in this House who said we were wrong to cut corporation tax in the last Parliament, but it created millions more jobs, brought businesses back to Britain and increased much-needed investment, so I profoundly disagree with them. Now at 20% for large and small businesses alike, we have the joint lowest rate of corporation tax in the G20, so there are those who say we do not need to do more. I profoundly disagree with them too. This country cannot afford to stand still while others rush ahead. I am not prepared to see that happen.
Today, I announce that I am cutting it again. Britain’s corporation tax rate will fall to 19% in 2017 and 18% in 2020. We are giving businesses lower taxes that they can count on, so that they can grow with confidence, invest with confidence and create jobs with confidence. A new 18% rate of corporation tax—sending out loud and clear the message around the world that Britain is open for business.
If we are to build a more productive economy, and our country is to live within its means, we have to make this fundamental change: we have to move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy. For Britain is home to 1% of the world’s population, generates 4% of the world’s income, and yet pays out 7% of the world’s welfare spending. It is not fair to the taxpayers who are paying for it, and it needs to change.
Welfare spending is not sustainable and it crowds out spending on things such as education and infrastructure that are vital to securing the real welfare of the people. We legislated for savings of over £21 billion in the last Parliament, capped benefits for out-of-work families and started to introduce universal credit. Universal credit will transform the lives of those trapped in welfare dependency and deliver real social justice. It is the result of the Herculean efforts of my right hon. Friend the Secretary of State for Work and Pensions.
However, to live within our means as a country and better protect spending on public services, we need to find at least a further £12 billion of welfare savings. Let me set out the principles that we will follow and how they will be applied. First, the welfare system should always support the elderly, the vulnerable and disabled people. We will honour the commitments that we made to uprate the state pension by the triple lock and protect the other pensioner benefits. The BBC has agreed to take on responsibility for funding free TV licences for the over-75s. In return, we are able to give our valued public broadcaster a sustainable income for the long term.
In the last Parliament, we increased payments to the most disabled people, and we will not tax or means-test disability benefits. We will increase funding for domestic abuse victims and women’s refuge centres. We are also going to use the remaining funds available in our Equitable Life payment scheme, as it closes, to double the support that we give to those policyholders on pension credit who need this extra help most.
The second principle we will apply is that those who can work will be expected to look for work and take it when it is offered. The best route out of poverty is work. Our economic plan has created a record number of jobs, and now a third of a million fewer children are being brought up in workless families.
It is not acceptable that in an economy moving towards full employment, some young people leave school and go straight on to a life on benefits, so for those aged 18 to 21 we are introducing a new youth obligation that says that they must either earn or learn. We are also abolishing the automatic entitlement to housing benefit for 18 to 21-year-olds. Exceptions will be made for vulnerable people and other hard cases, but young people in the benefits system should face the same choices as other young people who go out to work and cannot yet afford to leave home.
To make sure that work pays for parents, I confirm that from September 2017 all working parents of three and four year-olds will receive free childcare of up to 30 hours a week. Once again: a promise made; a promise delivered. As a result, we now expect parents—including lone parents—with a youngest child aged three to look for work if they want to claim universal credit. That is all part of our progressive goal of securing full employment in Britain.
We also want to increase employment among those who have health challenges but are capable of taking steps back to work. The employment and support allowance, introduced by the last Labour Government, was supposed to end some of the perverse incentives in the old incapacity benefit, but instead it has introduced new ones. One of those is that those who are placed in the work-related activity group receive more money a week than those on jobseeker’s allowance, but get nothing like the help to find suitable employment. The number of JSA claimants has fallen by 700,000 since 2010, while the number of incapacity benefits claimants has fallen by just 90,000. That is despite 61% of claimants on the ESA WRAG benefit saying that they want to work. Therefore, for future claimants only, we will align the ESA WRAG rate with the rate of jobseeker’s allowance. No current claimants will be affected by that change, and we will provide new funding for additional support to help claimants return to work.
The third principle that we apply to welfare is this: the whole working-age benefit system has to be put on a more sustainable footing. In 1980, working-age welfare accounted for 8% of all public spending. Today it is 13%. The original tax credit system, introduced by the last Labour Government, cost £1.1 billion in its first year. This year, that cost has reached £30 billion. We in Britain spend more on family benefits than Germany, France or Sweden—[Interruption.]
We in Britain spend more on family benefits than Germany, France or Sweden. It is, in the words of the right hon. Member for Birkenhead (Frank Field), the new Chair of the Work and Pensions Committee, simply “not sustainable”. As Alistair Darling has said, the sheer scale of tax credits is
“subsidising lower wages in a way that was never intended.”
Those who oppose any savings to tax credits will have to explain how on earth they propose to eliminate the deficit, let alone run a surplus and pay down debt.
We will take the following steps to put working-age benefits on a more financially sustainable footing. Since the crash, average earnings have risen by 11%, but most benefits have risen by 21%. To correct that, we will legislate to freeze working-age benefits for four years. That will include tax credits and local housing allowance, and it means that earnings growth will catch up and overtake the growth in benefits. Statutory payments such as maternity pay and the disability benefits—personal independence payment, disability living allowance and employment and support allowance group—will be excluded from the freeze.
We are also going to end the ratchet of ever higher housing benefit chasing up ever higher rents in the social housing sector. Those rents have increased by a staggering 20% since 2010. Rents paid in the social housing sector will not be frozen, but reduced by 1% a year for the next four years. That will be a welcome cut in rent for those tenants who pay it, and I am confident that housing associations and other landlords in the social sector will be able to play their part and deliver the efficiency savings needed.
We also need to focus tax credits and universal credit on those on lower incomes, if we are to keep the whole system affordable and support those most in need. From next year, we will reduce the level of earnings at which a household’s tax credits and universal credit start to be withdrawn. The income threshold in tax credits will be reduced from £6,420 to £3,850. Universal credit work allowances will be similarly reduced, and will no longer be awarded to non-disabled claimants without children. The rate at which a household’s tax credit award is reduced as it earns more will be increased by raising the taper rate to 48%. The income rise disregard will be reduced from £5,000 to £2,500—the same level at which it was originally set in 2003. Taken all together, the freeze in working-age benefits, the down-rating of social rents, and the focus of tax credits and universal credit on the lowest income households will reduce the welfare bill by £9 billion a year by 2019-20.
The fourth principle that we will apply to our welfare reform is this: the benefits system should not support lifestyles and rents that are not available to the taxpayers who pay for that system—[Interruption.]
We have already introduced a cap on the total amount of benefits that any out-of-work family can receive at £26,000. When we introduced that, it was opposed by Labour Members who said that it would drive tens of thousands of people out of their homes. Instead it encouraged tens of thousands into work. We will now go further, and reduce the benefits cap from £26,000 to £23,000 in London, and to £20,000 in the rest of the country. We will also require those on higher incomes living in social housing to pay rents at the market rate. It is not fair that families earning over £40,000 in London, or £30,000 elsewhere, should have their rents subsidised by other working people. We will turn support for mortgage interest payments from a benefit to a loan.
Another decision that most families make is how many children they have, conscious that each extra child costs the family more. In the current tax credit system, each extra child brings an additional payment of £2,780 a year. It is important to support families, but it is also important to be fair to the many working families who do not see their budgets rise by anything like that when they have more children. This is the balance that we will strike: in future we will limit the support provided through tax credits and universal credit to two children. Families who have a third or subsequent child after April 2017 will not receive additional tax credit or UC support for that child. Support provided to families who make a new claim for universal credit—[Interruption.]
Families who have a third or subsequent child after April 2017 will not receive additional tax credit or UC support for that child. Support provided to families who make a new claim to universal credit after that date will also be limited to two children, and we will make similar changes to housing benefit. There will be provisions for exceptional cases, including multiple births. In addition, those starting a family after April 2017 will no longer be eligible for the family element in tax credits, nor will new births and new claims be eligible for the first child premium in universal credit. We will make similar changes to housing benefit by removing the family premium for children born or claims made after April 2016. That approach means that no family sees a cash loss and, as promised, child benefit will be maintained. These changes to tax credits are not easy but they are fair, and they return tax credit spending to the level it was in 2007-08 in real terms.
When we came to office in 2010 this country had reached the point where a benefit that was intended to support lower income households was instead available to nine out of 10 families in this country. Now, our properly focused reformed tax credit system will provide support to five out of 10 families; a much more sustainable balance in our welfare system. Taken together, all the welfare reforms I have announced will save £12 billion by 2019-20 and will be legislated for in the year ahead, starting in the welfare reform and work Bill which will be published tomorrow.
We are moving Britain from a high welfare, high tax economy to a lower welfare, lower tax society. The best way to support working people is to let them keep more of the money they earn. We promised the British people at the election that we would introduce a tax lock to prohibit any increase in the main rates of income tax, national insurance and VAT for the next five years. We will not only keep that promise, but legislate for it in the coming weeks. Our priority is not to raise taxes on working people; it is to cut their taxes.
In the previous Parliament, we raised the tax-free personal allowance from the £6,500 left by the previous Labour Government to £10,600, taking almost 4 million of the lowest paid out of tax altogether. When we went to the British people this May, we said we would go much further. Our two commitments were these: we would raise the tax free personal allowance to £12,500, so that no one working 30 hours a week on the national minimum wage pays tax; and we would raise the threshold at which people pay the higher 40p rate of tax to £50,000. These were our priorities at the election and they are the priorities in this Budget, for we on this side deliver what we promise.
The rates of income tax in the Budget remain unchanged, but the thresholds do not. Today, I am taking the first major step towards delivering our promise: I am raising the tax-free personal allowance to £11,000 next year. That is £11,000 one can earn before paying any income tax at all, boosting wages by over £900 in total and a down payment on our goal of reaching £12,500. We will now legislate, so that after that the personal allowance will always rise in line with the minimum wage and we never ask the lowest paid in our society to pay income tax.
The higher rate threshold currently stands at £42,385. I am today raising it to £43,000 from next year. It marks a strong start to our commitment to raise the threshold to £50,000 and it will lift 130,000 people out of the higher rate of income tax altogether. A personal allowance of £11,000 and a higher rate threshold of £43,000: 29 million people paying less tax; a down payment for a country on the up.
I began this Budget statement by saying that I put security first. I have set out the steps we will take to deliver economic security for a country that lives within its means and a welfare system we can afford, but there is also the financial security of families and the national security of our country. I turn to that now.
The Prime Minister and I are not prepared to see the threats we face to both our country and our values go unchallenged. Britain has always been resolute in defence of liberty and the promotion of stability around the world. With this Government, it will always remain so. So today I commit additional resources to the defence and security of the realm. We recognise that in the modern world, the threats we face do not distinguish between different Whitehall budgets and nor should we. I will guarantee a real increase in the Defence budget every year and, on top of that, create a joint security fund of £1.5 billion a year by the end of the Parliament. Defence and intelligence services will have to demonstrate they are delivering real efficiency. The strategic defence and security review will allocate the money in the most effective way. I am also protecting our overall counter-terrorism effort, and I reaffirm our international aid budget that saves lives and supports our values around the world.
I said that this was a Budget that delivered security to the people of Britain and I said we had to choose our priorities. Well, today, this Government makes this choice: committing to our armed forces who fight to keep us free; committing to the intelligence agencies who keep us safe; committing to the values we hold dear and defend around the world; and committing today to meet the NATO pledge to spend 2% of our national income on defence, not just this year but every year of this decade. We will ensure that this commitment is properly measured, because we know that while those commitments do not come cheap the alternatives are far more costly.
Let me turn to the final measure of the Budget, which speaks to the values of this Government. We have been clear that we want Britain to move from a low wage, high tax, high welfare economy to a higher wage, lower tax, lower welfare society. I have set out my plans to move us to lower welfare and lower taxes. That leaves us with the challenge of higher wages. It cannot be right that we go on asking taxpayers to subsidise, through the tax credit system, the businesses who pay the lowest wages. Subsidised low pay contributes to our productivity problem and Conservatives are against unfair subsidies wherever we find them.
In the past five years, we have taken the tough choices to drive down our borrowing, to make our business taxes competitive and to reform welfare. It is because we have taken these difficult decisions, and overcome the opposition to them, that Britain is able to afford a pay rise. Let me be clear: Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new national living wage. We will set it to reach £9 an hour by 2020. The new national living wage will be compulsory. Working people aged 25 and over will receive it. It will start next April at the rate of £7.20. The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60% of median earnings by 2020. [Interruption.]
Mr Deputy Speaker, let me repeat myself, because I do not think the Opposition heard it. Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new national living wage. The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60% of median earnings by 2020. That is the minimum level of pay recommended in the report to the Resolution Foundation by Sir George Bain, the man the last Labour Government appointed as the first chair of the Low Pay Commission.
Let me address the impact on business and employment. The Office for Budget Responsibility today says that the new national living wage will have, in their words, only a “fractional” effect on jobs. The OBR has assessed the economic conditions of the country and all the policies in the Budget. It says that by 2020 there will be 60,000 fewer jobs as a result of the national living wage, but almost 1 million more jobs in total. It also estimates that the cost to business will amount to just 1% of corporate profits. To offset that, I have cut corporation tax to 18%. To help small firms, I will go further now and cut their national insurance contributions. From 2016, our new employment allowance will now be increased by 50% to £3,000. That means a firm will be able to employ four people full time on the national living wage and pay no national insurance at all.
Let me be clear on what this means for the low paid in our country: two and a half million people will get a direct pay rise. Those currently on the minimum wage will see their pay rise by over a third this Parliament, a cash increase for a full-time worker of over £5,000. In total, it is expected that 6 million people will see their pay increase as a consequence. Taken together with all the welfare savings and the tax cuts in this Budget, it means that a typical family, where someone is working full time on the minimum wage, will be better off.
This is the first Conservative Budget for 18 years. It was the Conservatives who first protected working people in the mills. It was the Conservatives who took great steps towards state education. It was the Conservatives who introduced equal votes for women. It was the Conservatives who gave working people the right to buy. So, of course, it is now the Conservatives who are transforming welfare and introducing the national living wage. This is the party for the working people of Britain.
The Budget today puts security first: the economic security of a country that lives within its means; the financial security of lower taxes and a new national living wage; the national security of a Britain that defends itself and its values. A plan for working people. One purpose, one policy, one nation.
I now call upon the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on this motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate on 14 July.
Budget Resolutions and Economic Situation
amendment of the law
Motion made, and Question proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.—(Mr Osborne.)
The Chancellor is said to be liberated without the ties of coalition holding him back, but what we have heard today suggests his rhetoric is liberated from reality. He calls it a Budget for working people. How can he make that claim while making working people worse off with—[Interruption.]
The Chancellor is making working people worse off by cutting tax credits and scrapping grants for the poorest students. He says he has a long-term economic plan, but what kind of economic plan is it when they are ducking it on Heathrow? He talks about the northern powerhouse, yet he has pulled the plug on rail investment, and as for one nation Britain, how can he even stand and say those words when, while cutting tax credits for working people, he has not done enough to stop tax avoidance?
More than seven years after the financial crisis, five of which were under this Tory Chancellor, the country is still dealing with the consequences and the recovery is still fragile. Today’s Budget documents show that growth has been revised down this year. Of course, however, tough decisions are needed to get the debt down, and had we been in government, we would have cut spending outside protected Departments and reduced the welfare bill, so there are measures in the Budget to which we will give serious consideration.
When in opposition, the temptation is to oppose everything the Government do—believe me, I feel that temptation—but we best serve this country by being a grown-up and constructive Opposition. We will fiercely oppose policies that hit working people and expose policies that are unworkable, but where the Government come forward with sensible ideas, we will be prepared to look at them. We will be a different kind of Opposition. In turn, I hope the Government will reflect on how they conduct themselves. The Chancellor is renowned for his political traps, games and tactics, but that is not what he should be doing. Normally, it is the Government who govern, while the Opposition play politics, but the Government are playing politics with this Budget. It is less about economic strategy and more about political tactics designed by the Chancellor to help him move next door.
The most important thing for working people is sustainable jobs in productive firms in a competitive economy, and productivity is key to the virtuous circle of increasing investment, higher skills, successful businesses and rising wages—that is the route not just to raising living standards but to getting the deficit down—but when it comes to productivity, the Chancellor’s record is poor. It is not as though people are not working hard, but the things that turn their work into high productivity—skills, investment and infrastructure—are not there for them, which is why the UK produces on average 30% less per hour than workers in Germany, France and the US and output per hour in this country is 17% below the average for the G7. That is the lowest we have been in the productivity league table since 1992. It is not enough just to publish a productivity plan later in the week; we have to do it.
Businesses are clear that infrastructure is vital to raising productivity. Whether roads, rail, airports, energy supplies, broadband or housing, a modern economy needs modern infrastructure, but the Chancellor has pulled the plug on the electrification of the railways and pulled the rug from under investment in renewable energy, and he has flunked it on airports; and people are weary of hearing the same old re-announcements on roads. They could resurface the A14 with the Treasury press releases about it—and no doubt there will be more.
To be one nation, we need every region to be productive, vibrant and powering ahead, not just some. The Chancellor has made much of his commitment to devolution, but we cannot build a productive economy on a political slogan. With last month’s cancellation of railway electrification, the great northern powerhouse is starting to look like the great northern power cut. He should tell the House today that he will reinstate the electrification of the Manchester-Leeds trans-Pennine service. Will he do that? Or are there more excuses, such as, when it comes to the railways, perhaps we have the wrong sort of Government on the track. He should also tell the House today that he will end the delay on the electrification of the midland main line, or let us hear no more boasts about one nation.
Will the Chancellor undertake to consult on his announcement on Sunday trading? He needs to consult on this fully with the British Retail Consortium, the Federation of Small Businesses, the Association of Convenience Stores, the unions whose members work in these stores and councils. He talks about empowering local government in his devolution plan and he mentions future new city deals, but over the last five years, local government has taken a disproportionate hit from his spending cuts, particularly in the north and the areas that most need economic regeneration. The 10 most deprived areas had their spending cut by 12 times the amount of the 10 least deprived areas. Local government is key to regeneration. It drives growth throughout different parts of the country, raising productivity and, crucially, rebalancing our economy, but we cannot empower local government if we impoverish it.
A key part of modernising infrastructure is building homes, but we have the biggest housing crisis for a generation. Home ownership is falling; we are building only half the homes we need; and the cost of renting or buying is soaring out of reach, especially in London and the south-east. We want people to be able to own their own homes—we want as many people as possible to fulfil that aspiration—but any credible housing policy must ease, rather than deepen, the housing crisis and enable more people to own their own homes. Although it is right to help people pass on their homes to their children, more important than inheritance tax relief for homes worth millions is helping millions more people own their own homes.
What businesses wanted from the Budget was substantial measures to improve the skills of the workforce. The Chancellor made further announcements on that today, but what he has said in the past he has not delivered. The number of young people starting apprenticeships is stagnating, not going up, while new apprenticeships are skewed towards lower levels, and businesses are crying out for higher skills levels. Anyway, much of the Government’s so-called apprenticeships programme is just a rebadging of existing in-work training. Businesses need to have the confidence to invest and they say they need longer-term certainty in the tax relief regime, but the Chancellor chops and changes tax reliefs, cutting them back one day so that he can boast about putting them up the next, and that is exactly what he has done again today.
With the higher productivity that we get from investment in infrastructure, people and industry, we get the sustainable jobs and rising wages that bring down the welfare bill. Indeed, one of the reasons why the national minimum wage was introduced by the Labour Government in the first place was to tackle the rising cost of in-work benefits. The Chancellor now claims that he wants a high-wage economy with lower welfare bills. Well, we all want that, but he is putting the cart before the horse. At the heart of his Budget is his announcement—heavily trailed in the press, but curiously not mentioned in the election campaign—to cut tax credits for working people. However, doing that without an across-the-board, effective plan for higher pay at the same time will make working people worse off. He is saying he will cut welfare, and wages will magically go up; we say get wages up first and the welfare bill will come down.
We heard the announcement about the national minimum wage and the living wage, but what—[Interruption.]
Clearly, what hon. Members do not understand and have not worked out yet is that, even with the higher national living wage that the Chancellor has announced, it will not be enough for a family to live on because of the cuts in tax credits. That is the actual situation.
When it comes to tax cuts, we support the rise in the higher rate threshold and in the personal allowance, but we will look at the detail to make sure the Chancellor is not up to his usual trick of giving with one hand and taking away with the other. When it comes to tax, the burden of deficit reduction should be borne by those with the broadest shoulders. Instead, he has chosen to put the heaviest burden on low-paid working people. He is claiming to have found £12 billion in welfare cuts but is aiming to get only half that amount from tax avoidance, and most of that is from our tax avoidance policies.
On welfare, we back measures to get people into work to achieve full employment and thereby get the social security bill down, and in our manifesto we committed to a benefit cap. However, the Chancellor promised to protect the most vulnerable and disabled from his welfare cuts, and if he goes to break those promises, we will oppose him every step of the way.
The Chancellor has now accepted a slowdown in his original pace of cuts. We will look at the details, but we will want to be sure that all this amounts to is not just hitting working families one year later. We have said we support pay restraint in the public sector, but it should be based on a fair process that is not casually disregarded but is fair to those on lower incomes. In 2010, the Chancellor made that promise to the lowest-paid workers in the public sector, and he did not keep it.
On the NHS, people will take Conservative promises with a pinch of salt when they come from a Government who have cut funding for GP services, cancer services and mental health services.
The Chancellor has talked about the surplus, which no one would disagree with when economic circumstances allow. We will look at the detail of the Chancellor’s proposed new fiscal rule, but simply legislating for it has more to do with politics than economics. Anyone can legislate for a surplus; the question is whether it can be delivered, and he has signally failed to keep his promises on that in the past.
The Chancellor claims that this is a Budget for working people, but it does not put working people first; it ducks the big decisions on infrastructure and fails to give businesses the productivity boost they need. In the light of the measures set out in the Budget, let us look at what the Office for Budget Responsibility says about productivity. It says that his Budget will not improve productivity. True to form, what this Chancellor says and what he does are two very different things. That is why it is down to us to ensure that when he says it is fair, it is fair, and that when he comes up with some new proposal, he consults in good faith to make sure it is workable.
Before the Chancellor makes more promises, he has to deliver on those he has already made. He says that he stands up for working people; what he does is make them worse off. He says he has a long-term economic plan; what he does is duck the big infrastructure projects. He talks one nation, but many of the measures announced today will make this country more divided. The hopes of millions of working people are more important than his hopes of being the future Tory leader. This Chancellor is personally ambitious, but when the economic recovery is still fragile, he should be ambitious not just for himself, but for the country.
I would like to start by thanking the House of Commons—[Interruption] —or what is left of it, as three-quarters of the House goes to lunch, and quite right too—for being kind enough to put me back in my job. I would also like to welcome not only the three returning members of the Select Committee on the Treasury but the seven newly elected members. We will be meeting very soon to examine the Budget.
I congratulate the right hon. and learned Member for Camberwell and Peckham (Ms Harman) on her speech. It is an extremely difficult speech to make—probably for anyone to make in the House of Commons—immediately after a Budget that she has not seen. Of course, it is a Budget that I have not seen either. I note that in her speech she did not challenge the central Budget judgment—that is, to tackle the deficit. She did not say the deficit was being reduced at too great a speed. Of course, the Chancellor has announced that the Budget will be balanced in a couple of years, according to OBR forecasts. If the Chancellor succeeds, he will be delivering the pace of deficit reduction that Alistair Darling sought in his March 2010 Budget, so I do not think this was ever a great economic experiment. Like the decision in 1976 fundamentally to change monetary policy after the International Monetary Fund came in, this is something that both parties are beginning, slowly, to agree on.
I am grateful to the right hon. Gentleman for giving way, because there is a party here that does not agree with the consensus that appears to be building up. Today’s Budget will go down as a pivotal moment in the dismantling of the welfare state, with the Government’s own advisers saying that slashing the benefits cap will throw 40,000 more children into poverty. Can he say whether that is a price worth paying, when even the IMF has told the Government that low borrowing costs make austerity unnecessary, with the costs of paying down the deficit in this way outweighing the benefits?
That was a very interesting short speech. The hon. Lady made some important points, which I will not have time to address, with almost all of which I profoundly disagree and with which—this is the point I was trying to make—I think a large proportion of the House now disagrees.
The new Committee has a heap of new things to look at as a result of this Budget: the Green Paper on pensions and savings, the £12 billion of cuts to the welfare bill, the living wage, the new fiscal target, the shake-up of Sunday trading laws, the inheritance tax threshold changes and the avoidance measures, among much else. We will do our very best to report back to the House on these issues, and as soon as we can.
The plain fact, which I think is widely—almost universally—accepted, is that the backdrop for this Budget is dramatically better than it was when the Chancellor stood up and the right hon. and learned Member for Camberwell and Peckham replied exactly five years ago. The Chancellor deserves a great deal of credit for having brought about that transformation in the country’s economic fortunes.
I think, though, that it is worth mentioning a few risks in the economy. The first, which I consider very important and to which the Chancellor alluded, is the euro crisis and the Greek problem, which has the potential to turn from a manageable challenge into a major catastrophe. Were Greece to default, the United Kingdom could not take for granted the relatively compressed bond yields that help to keep our debt service costs low. The second is the bursting of the stock market bubble in China. Thirdly, we shall have to adapt to the moment when interest rates start to rise, because it could prove a shock for those who have become too used to the idea that they can remain at an artificially low level.
That is without taking account of quantitative easing—£375 billion of it—which will have to be unwound. I want to put down a marker about QE, on behalf of Parliament. When it is unwound, it may make a profit or a loss, and that profit or loss will need to be examined by the House and the Treasury. It is a matter for us, and not exclusively for the Bank of England. Any losses that are borne by QE do not score against the Bank’s balance sheet; they score against taxpayers. I think it extremely important for the House to be closely involved when big decisions are made about QE.
Yes. We have a long way to go before we can fully restore a savings culture in this country. The savings ratio is still unacceptably low, much lower than it has been historically. There is a great deal more to do, and I think that the pensions and savings reform Green Paper will have a role in that.
Since my hon. Friend has—indirectly—raised this issue, let me add that, during the last Parliament, the Treasury Committee briefly examined the question of whether pensions could be treated like individual savings accounts. The idea did not find much favour in the press at the time, but I personally think that it merits careful consideration.
That is an interesting theoretical point. In fact, it travels under a very fancy name, “Ricardian equivalence”, and a heap of academic theory has been written about it. I greatly look forward to discussing it with the hon. Lady in the Treasury Committee, and I know that the other nine Committee members look forward to our exchanges as well.
The right hon. and learned Member for Camberwell and Peckham talked quite a bit about productivity. As the economy has begun to recover and growth has begun to return, people are saying that it is not the growth that they wanted. They are saying that it is in the wrong part of the country, that it is going to the wrong people, or—as we are hearing now—that it is not accompanied by productivity. That has been true so far, but it is important to bear in mind a few points about productivity.
First, we are recovering from the worst recession in economic history. There has been a 6% fall in output. A shock on that scale is huge for the economy to absorb, so of course that means that the recovery will be uneven. What really lies behind the recovery is a massive reallocation of capital as well as labour, across regions, across the labour market and across sectors of the economy, so we might well expect productivity not to move in line with that in previous recessions.
Secondly, in any case, much of the growth in the run-up to the crisis was fuelled by over-leveraged banks lending to over-leveraged households. That was unsustainable. Comparing productivity levels with what they might have been had growth continued at the pre-crisis rate is therefore highly misleading, because it means imagining that the unsustainable productivity levels could have been sustained, and we know that they could not have been. The peak levels of productivity are probably a chimera.
Thirdly, we should bear in mind the fact that lower productivity reflects much more flexibility in the labour market than many people had feared. Most had thought that unemployment would be much higher than it has turned out to be, perhaps 3 million or even 3.5 million. If the labour market had been less flexible, we would have had higher unemployment. We would also have had higher productivity, but I do not think there are many takers for that in the House, particularly now that we know how important it is to secure labour market participation among the young, on social as well as economic grounds.
There are other developments in the labour market that might affect the productivity statistics. For instance, productivity has been held down by rising rates of workforce participation among older people. That is an intended, and welcome, consequence of the Government’s pensions policy, and, to a degree, it represents the policy not only of the coalition Government, but of both Governments before that. So I think that, when all those factors are taken together, the productivity problem is not necessarily as serious as it initially appeared to be. However, I also think it important that the Chancellor’s measures bring about a pick-up.
One would expect marginal productivity to fall, but the fact is that there are 800,000 fewer people earning more than £20,000 a year than there were five years ago, in 2010. Is that not why the Government have had to borrow more in five years than Labour did in 13? Productivity is a catastrophe.
Responding to that would require me to do a bit of calculation on my feet, but I would guess that if it is part of the reason, it is only a very small part. Far more important has been the much higher level of overall labour participation. Millions of jobs are being created in the economy, which is a remarkable achievement.
I am most grateful to my right hon. Friend. He may not have had a chance to look at the financing arithmetic, but I am happy to tell him that since April, the forecast for the total financing is down by £14 billion. Will he join me in welcoming that, and in congratulating the Government on their progress on precisely the issue that was raised by the hon. Member for Swansea West (Geraint Davies)?
One of the advantages of not having to make a speech immediately after the Leader of the Opposition is that one does at least have a chance to read the Red Book beforehand. I am operating under something of a handicap. However, I look forward very much to reading it.
I shall make only a couple more points, in order not to detain the House for too long. One of them relates to the deficit. During the last Parliament, all economic and financial policy was overshadowed by the need to address that colossal deficit, but the economic and financial policy of this Parliament can and should be about much more, and we heard some of that from the Chancellor. It needs to be about nothing less than the economic revival of Britain in the 21st century. Taken together, this Budget, the forthcoming autumn statement, the spending review, and the Chancellor’s second Budget in eight months’ time will present the biggest opportunity for a generation to achieve that.
The Government have not made their job any easier by tying their hands on tax—as the Budget made clear—and on spending. Moreover, we have just been through an electoral bidding war, and a good deal of ground has been conceded—probably too much, in my view. Almost half of public expenditure is now ring-fenced by pledges to protect or increase spending on health, schools, foreign aid, pensions and child benefit, and that, of course, excludes the defence announcement that we have just heard. While it is understandable on political grounds, it could make economic management considerably more difficult in the years ahead. However, as I mentioned earlier, all sides now agree on the need for deficit reduction, although they disagree to some extent on how it can be accomplished. We heard a little about that from the right hon. and learned Member for Camberwell and Peckham.
Let me say a few words about taxable capacity. Some have suggested that taxes should be higher, rather than spending being cut, in order to keep the deficit reductions at broadly the same rate. It is important to realise, however, that it is not at all clear that by raising tax rates we necessarily get any more money; we might get less. It is salient that over the past 30 years, despite the best efforts of some Governments at times to collect a good deal more revenue, the UK’s tax take has remained stubbornly between 32% and 35% of GDP.
There is a ceiling to how much can in practice be collected in tax, and my guess is that the UK is quite close to that ceiling now. That derives not only from the fact that it is difficult to get taxes from very wealthy individuals—something to which the Chancellor alluded. The fuel protests in 2000 were a timely reminder for the political classes and the bureaucrats who advise them of how difficult it can be to raise taxes. In any case, we live in an age of global tax arbitrage: countries are competing for a slice of an increasingly footloose tax base, particularly in corporate taxation. Along with a number of other countries, we have launched an initiative to try to ensure that multinationals pay tax where their profits are earned, and that is a worthy ambition, but I wonder how much extra tax yield can be protected in this way. I note that the attempt to get the increase in yield from Swiss tax avoidance raised much less than was forecast at the time the Chancellor announced it.
Yes I do, and I think it is in better shape than it was. It is important to remember that HMRC is a much-maligned department. Have any of us ever met people who like taxmen and women? They are not the most popular bunch, and they are easy targets. They have certainly made their share of mistakes, but they are being asked to implement a difficult tax code, and they have been doing their best in very difficult circumstances.
Of course we need more supply-side reform: a simpler and less distortive tax system; deregulation; better regulation in some areas; simpler and less distortive taxes on energy; better education and transport systems; and more flexible labour markets. All these are necessary to release the energies of the British people and generate sustained improvements and growth in living standards.
The Chancellor’s decision—although he did not announce it today—to keep the Office of Tax Simplification and put it on a statutory footing is welcome. Fundamental reform of the tax system is long overdue. It is a scandal that Britain has the longest tax code in the world. “Tolley’s Tax Guide”, which seems to double in size every decade, now runs to 11,000 pages. With that length has come complexity. That is a massive burden on business. I draw that point to the attention of the hon. Member for Hornsey and Wood Green (Catherine West) who asked whether HMRC was fit for purpose.
The OTS recently published a list of 1,140 tax reliefs. A number of those could probably go. What is needed—and what has been needed in western economies, particularly ours, for decades—is fewer reliefs and lower taxes. We would be more likely to get the money in, there would be less scope for avoidance and the tax system would be less distortive of economic activity, and as a result the economy would grow more. This has not been done, however, because each relief has no doubt created its own, often vociferous, lobby group.
This is the first year of a Parliament, and it is in the first year of a Parliament that such special pleading can be faced down with intelligent tax reform. I hope we will see more of that in the next Budget in eight months’ time, building on what has been announced today.
The Chancellor has the opportunity to do some remarkable things in this parliamentary term if he has some good fortune: to balance the books; to reform and simplify the tax system; to complete fundamental reform of banking and the financial system, which he already has under way; to reduce the size of the state at least to the average of the first three years of Gordon Brown’s tenure as Chancellor; and above all to secure Britain’s long-term competitiveness. If he seizes that opportunity, it will be of enormous value to the country and his will come to be seen as one of the more remarkable tenures of any Chancellor of the Exchequer.
May I start by making a couple of brief observations? First, the Chancellor got his tone completely wrong when he seemed to suggest that only right-wing politicians understand the value of leaving things for one’s children. That was the wrong approach to take. Secondly, he got the tone wrong when he spoke about benefits paying for people’s lifestyles. I think if someone is aspirational and is striving, and is struggling on unemployment benefit of one form or another trying hard to get a job and to get by, that is not a lifestyle choice. Their lifestyle choice is to work and they should not be denigrated by someone who has never been short of a bob or two.
Order. There are to be no interventions on this speech as the hon. Member for Dundee East (Stewart Hosie) is the SNP Front-Bench spokesperson. May I also advise all Members that I will be aiming for about eight minutes for contributions after this speech?
Thank you, Mr Deputy Speaker.
Also, the Chancellor promised at the election that he would introduce a tax lock to prohibit any increase in the main rates of income tax, national insurance and VAT and would legislate for that. He is not a stupid man, and I gently say to him that legislating to stop tax rises is just a gimmick and no one is going to buy it.
We welcome the living wage announcement. That is very sensible, but it is worth pointing out that the living wage that was announced is currently lower than the living wage in play in Scotland and in London, so I ask the Chancellor directly to guarantee that the balance between the living wage introduced today and the welfare changes will ensure that nobody in work is worse off. He can nod if he agrees.
The Chancellor said a number of things today about productivity. He repeated these sentiments from the Mansion House speech:
“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”
We would agree with that; indeed, we would probably blame the Government for much of that. He went on to say in that speech, and again paraphrased this today:
“We will tackle each and every one of these weaknesses with the same determination we have brought to tackling the deficit”.
I hope the plans to tackle productivity are rather more successful than the plans to tackle the deficit and the debt and borrowing, where he failed to meet every single one of the targets he set for himself.
The Chancellor also restated the problems the economy faces today, and he is right to focus on the issue of productivity because, as has been said, the UK lags way behind the US, Germany, France and even Italy in GDP per hour worked. Even on a GDP per worker basis, it is still uncompetitive, and, as I am sure he knows, the situation in Scotland is broadly similar—with, sadly, both countries sitting boldly near the top of the third quartile of productivity for advanced economies. We all know what could be done if we could increase total factor productivity by even a fraction of 1%.
While I welcome the fact that the Chancellor has identified productivity as the major challenge we face—as did the Chief Secretary in the debate on 17 June—there was little in this Budget actually to fix the problem. There should have been a laser-like focus on innovation, internationalisation and investment in infrastructure and skills, and a solid determination to promote inclusive growth so that no one gets left behind, but there was very little of that. For example, on innovation, although the last autumn statement increased the amount available for research and development tax credits, this Government actually reduced the qualifying expenditure, and there was nothing in today’s statement or in the Red Book on R and D tax credits or any other mechanism to help encourage innovation.
On internationalisation—on exports—we heard warm words but no substance. We need to understand the scale of the problem we face: the deficit in the trade in goods last year was £121 billion; and the deficit on the total trade current account was a record £97.9 billion. We would have expected a series of specific measures in the Budget to tackle that challenge, not least because the contribution to GDP from net trade was forecast to be negative throughout the entire forecast period. As we have found from the Red Book today, it is now actually worse. We would have expected action on that as there are likely to be further obstacles, particularly in our trade to the EU, because of euro depreciation and the difficulties in Greece. But we heard nothing, not even about promoting exports to non-EU locations.
On investment, particularly in infrastructure—this is key—the Chancellor spoke about roads and hypothecating vehicle excise duty, but he did not repeat the claim previously made, not least by the Chief Secretary, that the Government would be investing £100 billion in infrastructure over this Parliament. I was intrigued, because the Red Book from March suggested more than £350 billion of capital investment— annually managed expenditure and departmental expenditure limit—across this Parliament. We have just checked whether that £100 billion figure previously used and ignored today was real, new money or camouflaged a cut. Lo and behold, total capital spend is down every single year in this Parliament. The rhetoric was fantastic and I enjoyed the performance, but the actuality is going to be pretty difficult when local bodies and Parliaments are taking decisions.
Finally, on the issue of inclusive growth, which is essential if we are to narrow the inequality gap and vital for stronger economic growth, how can this Government say with any credibility that they are tackling the issue of inequality, given the scale of welfare cuts proposed today? The cumulative impact on the welfare budget over the five years is approaching £50 billion. In essence, that is £50 billion from the poorest and most vulnerable in the country, and it simply adds to the burden on those already hit by changes to incapacity benefit, reductions to tax credits, the freeze on child benefit, the removal of disability living allowance and the overall benefit cap. Given that 2.3 million children are in poverty—if we include housing costs the figure is 3.7 million—perhaps the Chancellor would have been better off listening to the children’s commissioners across the UK when they said that families and children should be protected from the welfare cuts. Instead, he pressed on with the cuts to tax credits, which are damaging for millions throughout the UK and counterproductive to economic growth.
One would have thought that there might, by now, have been better recognition of the economic benefits of an equal society, but having forgone 9% or so of GDP growth between 1990 and 2010 because of rising inequality, it seems the UK Government are prepared to be irrational and counterproductive, and make precisely the same mistakes all over again. Until we can raise wages substantially by increasing investment, productivity, internationalisation and innovation, cutting tax credits simply cuts household income and increases in-work poverty.
Let me turn to the impact on Scotland. As our First Minister said in March, between 2009-10 and 2014-15, Scotland’s overall budget fell by about 11% in real terms, with capital expenditure down by about 34%. That means Scotland’s budget was cut by about £3.5 billion in real terms. The Chancellor said today that the cuts in this Parliament would be much the same, and so we expect, before we see the detailed numbers from the Chief Secretary, that the cuts to Scotland will be of the same quantum as we have seen over the past Parliament—yet more trouble lies ahead because of the indifference of this Chancellor.
Of course, the Chancellor has taken a number of small measures, and I agreed with some and felt he could have gone further on others. Let me deal briefly with the annual investment allowance. I very much welcome the fact that we no longer have a cliff-edge from £500,000 to £25,000, because we asked for that cliff-edge to be removed, but in the past eight years, with six rates, we have gone from £50,000 to £100,000 to £25,000 to £250,000 and to £500,000—a modest extension. The cliff-edge has now been stopped, and that is to be welcomed, but let us be clear that we are still talking about a decrease of £300,000 a year, and six rates in eight years ain’t no way to run a tax system.
May I welcome the freeze on fuel duty levels, not least because in March, April and May there were rises in petrol and diesel prices? The prices in Scotland for both were the highest in the UK, and our prices have been above the average throughout that period. Surely today was the opportunity to put in place a proper fuel duty regulator to provide some certainty in the future. The Chancellor said little about energy today, but this was an opportunity at last to end the connectivity inequity of the £25 KW charge to connect to the grid in the north of Scotland compared with the £5.20 KW subsidy in London. Such a move would at least have counteracted some of the damage done by the ludicrous decision in the last few weeks to remove the onshore wind subsidies.
On tax evasion and avoidance, I welcome what the Chancellor said about finding £5 billion more and the action on offshore trusts, on removing some of the exemptions for foreign-controlled companies and on the non-doms, but would it not have been better to go a little further and to have moved more in the direction of Revenue Scotland, to base the general anti-avoidance principle more on “artificiality” rather than “abuse and artificiality”? Such an approach would make it easier to prove where an abuse is taking place simply by dint of the structure being artificial. May I also welcome the move on carry losses—tackling the so-called Mayfair loophole? He is taking action on that and it is long overdue. Let us hope it does bring in the £250 million to £750 million that the UK appears to be sacrificing each year.
Let me say something about the 40p tax threshold. We have made the point in the past that now nearly 5 million people pay that tax rate, which is far too many. I am pleased that the Chancellor has moved modestly today, although if he wants to reach his target of £50,000, he is going to have to move more substantially. I urge caution on that, because it would be wrong to increase that threshold too fast while the same scale of welfare cuts are taking place.
On the Royal Bank of Scotland, I wish to say one thing on the sell-off of the stock: the taxpayer must get their money back at the end—that is important.
On student grants to loans, I have a direct point to make: if the transfer of grants to loans sees a reduction in overall English education spending, we will pay a great deal of attention as to whether that has a knock-on consequence for Scottish funding. We would imagine that that would not be certified as an English vote for English-only Members, Mr Deputy Speaker.
At this Budget’s heart was the change to the fiscal charter rules. We know that under the old rules of achieving the cyclically adjusted current balance by the end of the third year of the rolling, five-year forecast, with the supplementary target of having public sector net debt as a percentage of GDP falling, this Chancellor was preparing to cut more than he needed to run a balanced budget. He made the point today that deficit and debt are falling faster than he planned, and that is a good thing. He then went on to boast about running a £40 billion surplus. That implies substantially more cuts than he needs to make in order to run the economy in balance. We have said before that he had flexibility and he still has that, and we hope he will change his mind.
What we really heard today is a denial of the damage done in the last Parliament and a determination to repeat those mistakes, but this time with an ideological edge. It was less of a plan to boost productivity, which should have been at the heart of this Budget, and more a sermon from the high priest of an austerity cult—I was very careful there, Mr Deputy Speaker. This was not the Budget the country needed and it was not the Budget that those who have suffered most over the past five years should have had to endure. The Chancellor was right in one regard: it was a Conservative Budget, taking from the poor, giving to the rich. The Tories have done it again.
“To strive, to seek, to find and not to yield.” Those are wise words for a maiden speech and they sum up the first Conservative Budget since 1996. They are also the words of a former constituent, who was born and bred in the village of Somersby. His name was Alfred Lord Tennyson, and I hope that I will live up to those values in this place.
Let me take Members to my constituency. It is beautiful. We go from the rolling hills of the Lincolnshire Wolds—yes, Lincolnshire has hills—across some of the richest agricultural land in the country, to the miles of sweeping sandy beaches where half a million people holiday each year. There is the fine local architecture, including St James’s spire in Louth, which is celebrating its 500th anniversary this year.
This is the land of poetry, heroism and champions. Heroes include Sir John Franklin, who was a Spilsby resident and famous explorer. He travelled the world and perished when he was charting the Northwest Passage.
This part of the world also played a vital part in the second world war. The shadows of RAF bases, such as Binbrook, Manby and Strubby, surround us. The most famous of all is that of Woodhall Spa where Bomber Command was based and where, in 1943, the Lancasters flew on the Dambuster raids. I noted with interest during the Budget that the Chancellor was very generous to my hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson) with his Battle of Britain memorial. I will just mention that the Battle of Britain memorial flight flies from my constituency, so I shall be knocking on his door.
Today, the heroism continues, as fast jet pilots fly Typhoons from RAF Coningsby. They will be delighted at the Chancellor’s announcement that he will meet the NATO commitment of a 2% defence budget, and I am sure that this House will join me in thanking them and their families for their service to our country.
I am often asked whether there are enough women Members in the House of Commons. The good people of Louth made up their minds some time ago, in 1921, when they elected Margaret Wintringham. Mrs Wintringham ran a different campaign from my own, for she took a vow of silence and said not a word on the campaign trail—a difference that several constituents were keen to point out to me during the election—but I did not take her lead. I will not take her lead, and I look forward to being a strong voice for Louth and Horncastle when the time comes.
That brings me to my predecessor, Sir Peter Tapsell. As former Father of the House, he was well used to addressing the serried ranks of these Benches. He was a Member of this House for 54 years, or 19,730 days for the economists among us. He fought 14 general elections and one by-election, served under 10 Prime Ministers and was perhaps the first special adviser in his role as speech writer to Sir Anthony Eden. He also saved the British economy at least once. During one of the sterling crises of the 1960s, the then Labour Chancellor, Jim Callaghan, asked Sir Peter for help. Sir Peter had a think, rang the Sultan of Brunei—as you do—and persuaded him to buy £500 million of gilts, and the next morning the pound was saved. For anyone wondering, Sir Peter has not given me the telephone number of the Sultan of Brunei—sadly.
There is another former Member to whom I must pay tribute and that is my father. He showed me how much good can be done in this place, and made his maiden speech in the Budget debate of a new Conservative Government as well.
This Budget will be welcomed by my constituents who know that a thriving economy pays for the things that we care about, such as schools, hospitals and defence. They believe that our country must live within its means, and, like the Chancellor, that it must be done fairly. In my previous life, I prosecuted serious organised crime, including tax frauds worth tens and hundreds of millions of pounds. I saw at first hand how fraud and tax evasion have both political and economic ramifications. In one case, the fraud was so large that it threatened to alter another country’s GDP. I therefore welcome continuing efforts to ensure that everyone pays their fair share in tax.
Locally, I will work hard to help the rural and coastal economies in the constituency. There are challenges. The Louth and Horncastle constituency measures 531 square miles, yet there are only a few hundred metres of dual carriageway. It has 157 parishes, but no railway station. My constituency helps to feed the country, but there is fewer than one person per hectare. The small businesses that are the lifeblood of the local economy must not be put at a disadvantage simply because of the vast distances of the Lincolnshire countryside. My constituents are hard-working, resourceful and resilient. There are pockets of genuine deprivation, and my constituents need better roads, better broadband and the implementation of the long-term economic plan for Lincolnshire. They will particularly welcome the announcement regarding the national living wage, as the median salary in my constituency is £480 a week. That is an example of how this Budget and this Government will help my constituents.
Finally, there is one more constituent whom I must mention. Being the Queen’s Champion is an honour held by the Dymoke family of Scrivelsby since 1377. For 450 years, the Champion, clad in full armour, rode into the coronation banquet in Westminster Hall where he threw down his gauntlet to any challengers to the Monarch. Mr Deputy Speaker—[Interruption.] Forgive me, Madam Deputy Speaker, I had not noticed you had taken the Chair. The people of Louth will not forgive me.
I throw down my gauntlet and promise my constituents that I will be their parliamentary champion in the years ahead.
It is a real pleasure to follow the very accomplished maiden speech of the hon. Member for Louth and Horncastle (Victoria Atkins). It was a little light, lyrical relief after the Chancellor’s Budget statement. I am sure that the whole House wishes her well in following the many years of her predecessor and of her father in this House.
This was a Budget that was trailed by both the Prime Minister and the Chancellor last week as offering economic stability for the country and security for working people. Today, it was trumpeted by the Chancellor as a big Budget and a new settlement from a one nation Government. But this is a full fat Tory Government. They launch a frontal assault on the finances of many low income families. They change nothing of the structural weaknesses in the British economy. They deny the truth that weak growth has been the central problem of the past five years, and they disguise the fact that there are economic choices that could give us a different debate and a different direction for the future.
My right hon. and learned Friend, the Leader of the Opposition, said that there is always a temptation to oppose everything, and there is a lot to oppose in this Budget. Let me start by welcoming the action on the non-doms. Let me welcome the commitment fully to fund the Stevens plan for the NHS. Let me welcome the 2% commitment for defence spending; it matches what a Labour Government did in each and every one of our 13 years in power. Let me welcome also the new £9 national minimum wage for those over 25 in 2020, not least because I was on the National Minimum Wage Bill Committee and remember how hard it was fought and how strongly it was opposed by Conservative Members. I welcome their conversion to that cause.
The Chancellor likes to talk about growth figures for 2014. He did so again today in his statement. But one good year of growth does not absolve him from a poor economic record over his five years. Of all the G20 advanced countries in the world, only France, Italy and Japan have grown more slowly than the UK since 2010. The Chancellor has led the slowest economic recovery in Britain for over 100 years. Again, today, we saw the Office for Budget Responsibility revising down this year’s growth forecasts and keeping next year’s stable at a time when GDP per person is still lower than it was before the 2008 global banking crisis and recession hit, with most people still feeling their household finances getting worse, not better.
Why does that matter? Why is that our central problem? Weak growth means that there is less of our national income to go round, and productivity and wages are seriously depressed, which is why we have the worst and widest productivity gap in this country since 1992; the average earner is still £1,000 worse off in real terms than five years ago, and the minimum wage is worth less than it was in 2010. Weak growth means a more fragile economy—we are not saving enough, investing enough or exporting enough—which is why consumer debt is rising and we have the biggest balance of payments gap since records began in 1955.
The OBR has today revised down the growth forecast for this year. It is not 3% but 2.4%. Over the five years—which is how we should judge the Chancellor, over his term—it has been one of the weakest growth rates in any of the major economies and the weakest recovery in over 100 years.
Does my right hon. Friend recall that in May 2010, when the Labour Government left office, the annualised growth rate was back to 1.8%, only a little below what we have now, and then it was wrecked by the incoming Chancellor sucking growth out of the economy?
My hon. Friend is right. If the Chancellor had not choked off Labour’s recovery, and the economy had carried on growing for five years at the rate at which it was growing under the last six months of the Labour Government, we would have had £100 billion of extra national income. That is a chunk of the national economy the size of Yorkshire taken out of what we produce as a country, with all the good jobs that go with it.
Weak growth means a double blow for the debt and deficit, with lower tax receipts and higher borrowing, which is why the Chancellor failed to deal with the deficit during the last Parliament. This year, we learn from the Red Book, in the year he promised to have removed the deficit, it stands at £69.5 billion, with borrowing revised up over the Parliament ahead.
We know from the last Parliament that growth weakened as the coalition halved public investment in infrastructure, reduced Government investment in R and D, slashed vital capital investment in affordable homes and cut further education. What we have heard today risks reinforcing, not rectifying, those failings. Nothing that we have heard today will deal with the central growth challenge. Investment spending brings more benefit than just short-term economic stimulus. It is vital in the long run as a sure-fire way to lock in higher productivity and growth, which is imperative for good jobs for the future. Without investment in roads, in rail, in research, in science, in skills, in energy and in communications, we simply will not create and keep the well-paying jobs we need in Britain. Those are vital for the opportunities that our children will have tomorrow. When the Chancellor fails on public investment, he is failing our children’s future. Just as his overall surplus rule would not work for a family looking for a mortgage to buy a home, a teenager looking to borrow to go to university or a business aiming to expand, it is counterproductive too for a country that needs to invest in its future.
The Chancellor is no fool. The problem is not his intellect; it is his ideology. In this open, global, competitive economy, to get strong, broad-based growth the state needs to play its part. Government can be a force for good, not just in distributing national income, but in creating it too. Public investment in the UK is lower than in the large majority of advanced economies—well below the OECD average and lower even than countries such as Estonia, Latvia and even Greece. At the same time, the cost of borrowing to invest is at a near-historic low, with the Government paying a yield of less than 2% on benchmark, or 10-year, gilts.
Business gets it. Business organisations are crying out for the Government to lead an investment and infrastructure revolution. But just as the Chancellor halved infrastructure investment over the last Parliament, we learned today that public sector net investment this year will be lower than last year, and it will be lower at the end of this Parliament than it was at the end of the last Parliament. Yet there are choices for the Chancellor; there are choices for the country. He could set strong but more balanced fiscal rules to govern the public finances, both to stamp out any deficit on current spending and to recognise that job-creating, growth-generating investment is vital.
Figures from the Institute for Fiscal Studies show that over the next five years the Government could double investment spending while freezing rather than cutting departmental spending in real terms, making no further cuts to tax credits or social security payments, and raising no taxes, yet still eliminate the current budget deficit and have debt falling by the end of the Parliament. We should be debating that sort of reasonable settlement today, but this Budget, this Chancellor and this Government are denying the public that debate and those alternatives.
Perhaps I can anticipate something that my right hon. Friend will not welcome in this Budget. Does he agree that, be it in south Yorkshire or north Staffordshire, if one member of a family with children is earning £25,000 and their partner is earning, part-time, £6,000, £7,000 or £8,000, that family is not rich, and if they are living in affordable housing the incentive is for one partner to reduce their hours or even give up work entirely? Does he agree that it is not right—it is an insult—for the Chancellor to say that their rents are being subsidised by other working people?
My hon. Friend is absolutely right and anticipates my point. What he says signals serious trouble for many people resulting from this Budget.
Just as there are alternatives at the macro level, there are alternatives at the policy level. The Chancellor wants £12 billion in social security cuts. It is the Tories’ choice to hit working and low-income families, when the Chancellor could have cut back even further on the tax reliefs for buy-to-let landlords, which at present cost the taxpayer about £11 billion a year. He could have chosen not to sell the public’s interest in RBS while it still means a £13 billion loss to the taxpayer. The Budget promises pain for many people who can do little to deal with the financial shortfall they will suffer. They are trapped by low wages and high rents. Many are only just coping now, and this is a Budget that will strike fear and desperation into their lives.
I got an email yesterday from Mrs Smith—let us call her Mrs Smith—of Rawmarsh. She says that she is “very worried” about the cuts to tax credits going ahead:
“I struggle as it is. I’m married with three children. I work long hours, and don’t see my family much as it is. I can’t afford to do my nursing as I can’t cut my hours down. I haven’t even taken my children on holiday in eight years”.
This welfare policy fails the head test as well as the heart test. Many of the cuts will punish poor families but not bring down the benefits bill because the Government are not getting to grips with the root causes of those welfare costs. We need a long-term plan now to control housing benefit costs, and we need to switch public spending from paying benefits to building homes on a big scale. In that way, we can build more affordable homes and make the Exchequer a profit in the long term through lower housing benefit bills.
This is a Budget with no compassion and little credibility, a Budget that risks repeating many of the mistakes of the last five years. Over the next five years, it will be our Labour task to prove that there is an alternative, not just as a protest, but as a programme for a different Labour Government from 2020.
Order. Before I call the next speaker, it has been pointed out that a vast number of people are trying to get in to this important debate. I do not want to impose a time limit, but if Members can keep to eight minutes and make very few and very short interventions, I think we can get everybody in. With that in mind, I call John Redwood.
I remind the House of my entry in the Register of Members’ Financial Interests, which reveals that I am an investment and business adviser to a couple of companies.
I congratulate my hon. Friend the Member for Louth and Horncastle (Victoria Atkins) on her excellent maiden speech, in which she gave us a very good portrait of her constituency. I have noted the need to beware of her arrival when she is in her armour; if she throws her gauntlet around, I think that I will be looking the other way. She will clearly be a champion for her area.
I welcome the emphasis on prosperity in the Budget. I want a party and a Government who drive more prosperity for everyone in our country, and I want that to benefit people on all income levels. I especially want to see more people get into work and find other routes out of low incomes and poverty. The Chancellor is right to say that Britain deserves a pay rise and that we need to reinforce that pay rise as people get it, or reinforce their success in getting into a job and getting a pay packet, with tax cuts. I want tax cuts for all, and I am glad that my right hon. Friend has made a start on the promises made in our Conservative manifesto.
It is crucial that, as the Chancellor goes about the task of getting rid of unemployment and poverty through supportive policies, people are better off. What I want to do when we get to the detail of the welfare cuts is to see what the impact is, because we need to look at the overall impact. If people are going from unemployment to work, staying in work, getting a pay rise or getting a tax cut, those are all positive things that will make them better off, and we need to make sure that they are not completely offset or badly damaged by the welfare changes he is making. I look forward to those more detailed debates.
The overall picture in the Budget is quite different from the picture of the next five years set out in the outgoing coalition Government Budget. There is nothing surprising about that. We now have the opportunity to think the strategy through, based on the success in getting the recovery this far in the last Parliament, and learning from the coalition’s experience of the difficulties of getting that recovery up to speed and getting productivity to come through as we would like. The Chancellor is right to make adjustments. People need to work smarter to be paid better. We need a pay rise but we have to earn it, and that is the purpose behind many of the measures.
The expenditure proposals in the March Budget were quite tight in the middle years of this Parliament, and the Chancellor seems to have reached that conclusion as well, because the Red Book sets out some quite big spending increases for those middle years. Current spend in 2016-17 will be £15 billion higher than the March forecast, and the 2017-18 current spend will be £25 billion higher. I think that will make things a bit easier. At the time of the March Budget, there was quite a lot of criticism that the numbers were tight, and the changes give us more scope. We have seen some of the benefit already in the defence statement, but there will be other benefits. We have rather more latitude.
By the end of this Parliament, on the plans set out today, we will be spending £69 billion a year more than we were in the last year of the last Parliament. No doubt, there will be arguments about whether or not that is a real cut. We had those arguments in the last Parliament, when there was a similar rise in spending. I argued that there would be no overall real cuts and was told I was wrong, but the subsequent figures showed that that is broadly what happened: we avoided overall real cuts, but within that, because health, education, the European Union contributions and overseas aid were priorities, some areas suffered, to balance the figures.
The way the deficit comes down is not through spending cuts, of course; it is through a large increase in tax revenues from a more prosperous and faster growing economy. The figures state that tax revenues will be £168 billion a year higher in the last year of this Parliament than in the last year of the coalition. I would have thought that that is a tax rise to suit all socialists. It is a large increase in taxation, but I am pleased that it will come not by raising the rates—indeed, if we raised rates, we would probably collect less money in many cases—but by growing the economy and by people being better off and so able to afford the taxes. By the end of the Parliament, tax revenues will be some £10 billion a year higher than was forecast as recently as March. That shows the improvement in prospects.
Has the right hon. Gentleman seen the OBR report, accompanying the Red Book, which states:
“We have revised borrowing up in 2016-17 and more significantly in 2017-18, while the surplus of £5.2 billion in 2018-19 that we forecast in March is now expected to be a deficit of £6.4 billion.”?
Is he comfortable with that?
I am perfectly comfortable with that. It is the direct result of easing the squeeze on spending to which various people objected in the past. The figures show the deficit coming down and being eliminated over the course of this Parliament, which is exactly what ought to be done. I wonder whether the hon. Gentleman’s new enthusiasm for that is personal, or whether it is just to tease me, but if it is personal enthusiasm, it is welcome to hear that the Labour party would now like to go faster in deficit reduction in the middle years of this Parliament than will happen under these proposals.
The economic background to the official forecasts shows that the growth figures are still pretty good and we have had a welcome upward revision to figures for the immediate past. We also see a welcome upward revision to the number of people in employment, which is fundamental to the whole strategy. There has been a modest deterioration in the balance of payments, which shows that there is more work to be done. The productivity work will link into that to make us more competitive. We have to earn our living, so we need more competitive products. All that growth and improved revenue is taking place despite higher interest rates—the forecast assumes a modest increase in interest rates compared with past forecasts.
On productivity—working smarter and working better —I welcome the scheme that the Chancellor outlined today. It will mean better roads and spending money on railways more wisely to get extra capacity in the parts of the system where we need it and increased efficiency. There will have to be a lot of work on energy, because we will need cheaper and more energy: as the march of the makers begins and the northern powerhouse cranks up, more electricity and more gas will be required. I hope that we will find cheaper ways to produce them than we have under the policies followed in recent years. It is important that we price people back into energy-intensive markets, rather than export all our energy-intensive business to other countries. It is no great win for those who want to cut carbon dioxide emissions if it is poured out of a factory in China rather than one in the United Kingdom. We need to be conscious of the need to be competitive in our energy generation.
We will need more on broadband, and clearly much more on housing, as many people have mentioned recently. I look forward to an investment-led recovery, with much more private sector investment coming in. We need to pay special attention to cheaper energy and to fix the railways, where we are spending too much and getting too little. It is not just a question of big investment programmes; it is a question of managing them better. Above all, we need to make sure that, as we implement the welfare reforms, everyone is better off and gets the benefits of tax cuts and higher wages.
Like the right hon. Member for Wokingham (John Redwood), I congratulate the hon. Member for Louth and Horncastle (Victoria Atkins) on her maiden speech. She replaces the former Father of the House, who held the attention of the House whenever he spoke. I am sure she will follow in his footsteps and do that, too.
Presenting the Budget today, the Chancellor was smug, self-confident and arrogant. He told us that we were the fastest-growing economy in the world, then proceeded to tell us that we would be on a downward trend for the next year and the year after. That needs to be looked at carefully. He spoke about cutting the deficit. We were told before the 2010 election that this Government and this Chancellor would eliminate the deficit completely by this year, but he has not been able to do so. He says now that he will reduce it by 2020. He reminds me of a good councillor friend of mine, Councillor Barbara Dring, who says that such promises are like pie crust—meant to be broken. The Chancellor has been good at doing that.
The Chancellor spoke about the nation’s finances, but in his speech today, he did not recognise the one serious issue affecting us all—the elephant in the room: the current situation in Greece and what effect the next couple of days of negotiation will have. Negotiations have been going on for a long time and there is no way forward. It would have been right for the Chancellor to tell the people today what his response to that would be.
I agree, but if the right hon. Gentleman is saying that there will be no effect on our financial institutions or on us as a nation, the people to whom he gives financial advice should have another look at that.
The Chancellor spoke about the wage freeze in the public sector for at least another four years. This is a real-terms reduction for those very important people who work in our services, particularly people in the national health service, and above all nurses. I have an interest to declare. Over the past four or five years, because of my personal health issues, they were at my service, supporting me through a very difficult time. When I was discharged, the duty nurse that day had worked for almost 11 hours, which she was not contracted to do, so that she could sort out the backlog that existed. For the Chancellor to keep those people at a 1% pay increase while he boasts about other things is a shame.
On apprenticeships and the proposed levy on large employers, if the Chancellor comes to my constituency, I will show him a brand-new centre set up by the Engineering Employers Federation, which I was fortunate enough to open. It has more than 330 full-time first-year students from members of the EEF in the west midlands, who are being properly trained. The issues relating to apprenticeships concern not only how we work with and support larger manufacturers, but how we deal with the smaller manufacturers—the people who have the skills. I know of a small company that is a world leader in submarine valves. It is a fantastic company, but it has had a huge problem trying to take new people on. It has had to keep people on past their retirement, so that they can hand down their skills to younger people. It does excellent work with Birmingham University. It is important for us to have that perspective when we talk about apprentices.
When we talk about apprenticeships in the engineering sector, the question is how companies afford the equipment that goes with that—lathes, millers, computer-controlled lathes and millers, and welding equipment, all of which is extremely costly. The EEF centre has obtained such equipment at huge cost because apprentices must be trained to use it if they are to be employed in the industry. We have had huge success with Jaguar Land Rover in Birmingham and the west midlands, but for us to supply the skills it needs, the Government must look at how we can support people who want to go back to real first-class engineering, which is what we should be engaged in.
The Chancellor has made a 40% cut in funding to adult colleges. We want people post-19 to be able to get apprenticeships, but colleges are having great difficulty operating with such a funding cut. The cut affects not just the post-19 age group, but the 16-to-19 group, because most specialist courses are run for both cohorts working together to provide a critical mass. Cutting the 19-plus funding affects 16 to 19-year-olds as well. Our colleges are at their wits’ end trying to meet those needs.
The Chancellor has made huge cuts to English for speakers of other languages provision. We have many people with the necessary skills, apart from spoken and written English. The more he cuts that provision, the more those people will stay on benefits, rather than working their way off benefits. Most of my colleges are proud to be working on giving people proper skills, but if the cuts continue, it will be difficult for them to do that.
The Chancellor announced that student grants are to be turned into loans. People in my constituency will be put off by more loans being imposed on them. What repayment do we get from those loans? It is all very well making such announcements, but the Chancellor has already had to sell the loan book to his friends. They bought it for a pittance before trying to recover some of the money owed. If a project is not working, we try to do something about it. That does not mean adding more to the loan book and selling it off to our friends, getting a better deal for them rather than for the people who need it and the universities.
A university in my constituency, Birmingham City University, decided unilaterally to move out of the constituency and seek a central location. We had a huge facility for the university, and we have had it for a long time. My predecessor, now Lord Rooker, formerly Jeff Rooker, attended that university, as did I, in engineering. [Interruption.] My hon. Friend the Member for Wolverhampton South West (Rob Marris) was also there. It is clearly a great seat of learning, as all these people were able to attend it. The chancellor unilaterally decided to up sticks and move to a different location at huge cost.
The changes to family tax credits will have a huge effect on my constituency and on people trying to make some sort of living by working. This Chancellor has succeeded in doing what his guru might have aspired to do. She took milk from the mouths of children. He has managed to take breakfast, lunch and dinner from the mouths of families and drive them to food banks. This is a Budget for a divided nation. It has given more to those who have more and taken from those who have less. It is a deplorable Budget, and I urge all fair-minded Members to vote against it.