House of Commons
Wednesday 16 March 2016
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Malawi: Development Support
1. What development support her Department plans to provide to Malawi over the current spending review period. 
The UK continues to provide essential support to Malawi in areas including health, education and economic development as well as life-saving humanitarian assistance for food-insecure households. We support increasing access to justice for women and vulnerable groups, increasing accountability and governance reforms.
Does the Secretary of State agree that domestic resource mobilisation is one of the best ways to ensure that poorer countries can fix their own problems? What conversations has she had with the Chancellor of the Exchequer to ensure that the new tax treaty between Malawi and the UK helps the people of Malawi in that respect?
The hon. Gentleman raises an important point, and the UK helped to establish the Addis tax initiative, which will see our country and many others, including in Africa, stepping up their support to develop tax systems. We do that in conjunction with Her Majesty’s Revenue and Customs. One of the first things I did in this role was establish a joint working group between the Department for International Development and HMRC to send HMRC officials out to countries such as Malawi to help with their tax systems. I can assure the hon. Gentleman that we work very closely with the Treasury.
On the tax treaty, may I ask the Secretary of State more broadly what role DFID will play as the tax treaty with Malawi is being renegotiated, particularly as regards supporting Malawi in its efforts to reduce poverty and develop more generally?
As the hon. Gentleman will be aware, HMRC leads on these negotiations, but they are progressing well and the House may be interested to know that the Government of Malawi issued a press statement on how they feel the negotiation is going. They talked about
“fruitful discussions to review and modernize the existing agreement”
and said that in their view:
“These discussions are progressing very well”.
I can assure the hon. Gentleman that we will continue to work alongside the Treasury to ensure that tax systems in the countries in which DFID works are developed so that in time they can self-fund their own development, releasing the UK from doing that.
But the UK’s current tax treaty with Malawi severely restricts the ability of the Government of Malawi to tax British firms operating there. Is this not a case of DFID giving with one hand while UK tax policies take away with the other?
I do not agree at all and, perhaps most importantly, neither do the Government of Malawi, who said:
“Whilst the current agreement is admittedly aged, there is no evidence that the agreement has motivated some British investors to deprive the Malawi Government of its revenues. On the contrary, both the Malawi Government and the British Government, as well as the nationals of the two countries, have evidently acted in good faith to ensure that neither party is exploited on the basis of the current agreement.”
But does the Secretary of State agree that the era of outdated and unscrutinised tax treaties that create opportunities for multinational tax avoidance must come to an end?
It is time that the international tax system worked more effectively so that countries such as Malawi can mobilise their own domestic resources, including tax. The hon. Lady will know that this particular treaty was last updated in 1978. The Government have taken the initiative to work with the Malawi Government to update this relatively old treaty and, as I have set out, those negotiations are going well. Of course, it sits alongside the rest of the work the Government have done on beneficial ownership and improving transparency in tax so that developing countries can get their fair share.
West Bank: Humanitarian Situation
2. What recent representations she has made to the Israeli government on the effect of home demolitions in the west bank on the humanitarian situation in that region. 
Their increase adds to the sum of human misery, undermines any prospect of a peace process and is contrary to international law. I have left the Israeli Government in no doubt about the strength of our disapproval; our embassy continues to do so.
I thank the Minister for his response. The latest figures from the UN, from early this month, show that there have been 400 demolitions since the start of the year, more than four times the rate of demolitions last year. The wave of demolitions is depriving Palestinians of their homes and their livelihoods and preventing European taxpayer-funded organisations from providing essential humanitarian support. As the British Government made representations when demolitions trebled, what more effective action or sanction will the Minister impose now that demolitions have quadrupled?
The hon. Lady is right that the rate of increase is now faster than at any time since calculations began to be made, and it is essential that the occupied territories, and in particular Area C, are governed in accordance with the fourth Geneva protocol. We will continue to make these representations to the Government. I know the hon. Lady wants to push me further, and I entirely understand the strength of her frustration and anger, but jaw jaw is better than war war.
Will the Minister join me in condemning incitement to violence or glorification of violence on either side?
Absolutely. We are wholly opposed to incitement, and when instances of incitement are brought to my attention, I go straight to the telephone to raise the matter with the chief executives of those organisations and make absolutely clear our fundamental disapproval, and our requirement that things are put right.
With any prospect of a two-state solution fast disappearing, it is of course right that we recognise Israel’s right to self-defence, but is it not also time that we recognised Palestine as a sovereign state?
We can only recognise Palestine once. It is essential, therefore, that we do so at a moment where we will have maximum impact on any peace process. That is a fine judgment.
What recent checks have the Government made in relation to support offered in the west bank to moneys that end up in the coffers of terrorist-supporting groups on the west bank?
Absolutely none of UK British aid, multilateral or bilateral, ends up in the hands of terrorists.
Overseas Development Assistance: Definition
3. What assessment she has made of the potential effect on the disbursement of UK aid of changes to the definition of overseas development assistance made by the OECD. 
The recent Development Assistance Committee high-level meeting on ODA modernisation was able to agree the first changes in the ODA definition in 40 years and reflect the changing nature of aid delivery. We do not expect a significant shift in the disbursement of UK aid because these changes align well with the UK’s focus on conflict, fragility and economic development.
Given the changes in definition and the increasing proportion of UK aid spent by Departments other than DFID, how will the Secretary of State ensure that UK aid continues to help the poorest in the world?
The hon. Gentleman will be reassured to know that the modernisation of the ODA definition had to be under consensus by a number of countries involved. In addition, the primary purpose that underpins aid—economic development and improving the welfare of the recipient country—remains in place. This was really about modernising the definition to reflect how aid is delivered today.
Given that so much poverty and misery is caused by conflict, is it not about time that the OECD definition of ODA included peacekeeping and anti-terrorist activity at the very least, as that bears down directly on poverty?
I agree with my hon. Friend. In fact, goal 16 of the sustainable development goals agreed in the UN in September 2015 was all about the need to improve not only peace but security. It is nonsensical for us to work so hard on tackling sexual violence in conflict and not be able to use our aid programmes to help work with the military to prevent that.
Given the changes to the definition of overseas development assistance, and given that there are still some 37 million people living worldwide with HIV and AIDS, as well as 2 million new infections each year, can the Secretary of State tell the House whether her Department’s spending on HIV and AIDS will be rising or falling over the comprehensive spending review period?
The hon. Gentleman will be aware that we plan to set out the results of our bilateral aid review over the coming weeks, but I can assure him that our support for multilateral mechanisms, such as the Global Fund, that do so much great work on tackling aid, will continue, and he will obviously be aware that HIV and AIDS particularly affect adolescent girls in a growing proportion, so it is important that we stay the course on this.
It is great to see the Benches so packed for DFID questions. The more money the UK spends on ODA through other Departments, the more pressure there will be on DFID to deliver on its existing commitments. What impact will the changing use of ODA have on staffing numbers and capacity at Abercrombie House in East Kilbride?
As I said to the hon. Member for Harrow West (Mr Thomas), we will set out the results of our bilateral aid review shortly. The point of the new aid strategy is to achieve a cross-Government approach to drive development in the countries that we work with. I did not think it was right that DFID was carrying out all that work on its own. It is important to get other Departments to work alongside us to tackle extreme poverty.
Global Fund to Fight Aids, Tuberculosis and Malaria
4. What assessment her Department has made of the effect of cost savings in the Global Fund to Fight Aids, Tuberculosis and Malaria on the work of that fund. 
The Global Fund is a fantastic success story. Every pound it saves on costs is a pound that can be put to better use saving lives. For example, a negotiated 38% reduction in the price of insecticide-treated bed nets since 2013 is projected to save $93 million over two years, equivalent to 40 million additional nets.
Will the Minister join me in congratulating a school in my constituency, Ysgol Esgob Morgan, on becoming the first in Wales to be awarded the Welsh primary geography quality mark gold, thanks in part to the DFID-funded global learning programme? Does he agree that every child growing up in the UK should have the chance to learn about the world around them, the facts of poverty and underdevelopment, and the potential to build a freer and more prosperous world?
I strongly agree with my hon. Friend. Through him, I congratulate the school in his constituency and the 4,500 schools across the country that participate in the global learning programme, which we are proud to support with funding of £21 million, because we believe strongly in the importance of development education to support school improvement.
Last week I had the pleasure of meeting Student Stop AIDS activists, who raised with me the crucial issue of access to medicines, in which the Global Fund plays a key role. Will the Minister set out the priorities for the World Health Assembly that is coming up shortly and the work that his Department will be doing to take forward that crucial issue?
The hon. Gentleman is right to point to the enormous success of the Global Fund in making it easier to access medicines. It is important to note that since 2002 the Global Fund has helped reduce deaths from the big three diseases by 40%—a staggering achievement—but there are still too many people dying unnecessarily from those awful diseases, which is why we look forward to a successful replenishment of that very important fund.
The all-party group on malaria, which I chair, is extremely concerned about resistance to anti-malarial drugs in south-east Asia. The Global Fund is doing a great deal of work on that. Can the Minister update the House on the progress of that work?
I congratulate my hon. Friend on his persistent and tireless work in this area. I was with the senior team at the Global Fund the other day in Geneva to discuss it. I have no doubt about its commitment in the face of that challenge. I hope my hon. Friend takes some pride in the fact that the British Government continue to lead in this area, with the recent refresh of the commitment to spend £500 million a year in the battle against malaria in all its forms.
TB is the world’s leading infectious killer. The Global Fund provides more than three quarters of international finance to fight that epidemic. As we approach World TB Day on 24 March, will the Minister call on all Governments around the world to come together to ensure that the Global Fund’s replenishment target of $13 billion is met as a minimum?
I thank the hon. Gentleman for throwing a spotlight on a huge killer, on which we are not making enough progress. We are proud that the UK is the third-largest donor to the fund that provides, as he said, 70% of the funding around the world to combat that disease. It is critical, therefore, that the replenishment of that fund is a success and that other countries step up to the mark so that we can bear down on that unacceptable death rate.
Yazidi Communities (Iraq, Turkey and Syria)
5. What support her Department is providing to Yazidi communities in Iraq, Turkey and Syria. 
Our response to the Syria crisis is a commitment of more than £2.3 billion, with an additional £79.5 million to Iraq. All our aid is distributed according to need, irrespective of creed or ethnicity.
Daesh is systematically targeting Yazidi children, forcing little girls into sexual slavery and conscripting young boys as child soldiers, yet there are reports from Turkey that support is not reaching some of the Yazidi refugee camps near the Syrian border. What steps is the Department taking to help ensure that children rescued from Daesh receive the support they need and that support reaches survivors in those camps?
The first thing is that we have gone to war with Daesh, and that is a very significant contributor. Equally, we are supporting the UNHCR and a number of organisations that are principally funded through the Iraqi national action plan and the Iraq pooled fund, to which we are the largest contributor.
Some of us met a delegation of Yazidis yesterday who explained the plight of almost 2,000 women still held captive. Would the Minister be willing to meet that delegation to hear at first hand of the difficulty they have in reaching help?
I have met a number of Yazidi delegations and, indeed, a number of representatives of other religions. I would be delighted to meet my right hon. Friend and her delegation.
I do not think we have actually had an answer from the Minister. Reports of thousands of Yazidi women being captured by Daesh and sold as slaves, many suffering serious sexual abuse, are harrowing. What measures are the UK Government taking to address that slave trade?
We are fighting Daesh. We are providing large sums of money to organisations that are delivering aid directly to Yazidi women and to children. I know it is frustrating—terrible things happen—but the hon. Lady cannot always blame Ministers.
What medical and psychological services are the Government able to provide to the women referred to in the previous question, who have been held as sex slaves?
We have sent a number of experts to the region specifically to deal with violence against women. The pooled fund, to which we are the largest contributor, provides maternal and child healthcare services, protection for women and girls, and livelihoods for female heads of households. The Iraqi national action plan delivers similar services, and we are dealing specifically with the needs of women in Dohuk, Kirkuk and the northern areas through the human rights and democracy fund.
Would the Minister describe what is happening to the Yazidis as genocide?
I believe that the decision as to what constitutes genocide is properly a judicial one. The International Criminal Court correspondent, Fatou Bensouda, has decided that, as Daesh is not a state party, this does not yet constitute genocide.
T1. If she will make a statement on her departmental responsibilities. 
This morning I arrived back from heading the UK delegation at the United Nations for the Commission on the Status of Women. I also took part as a member in the first meeting of the Secretary-General’s high-level panel on women’s economic empowerment. Women’s economic empowerment is the best poverty-tackling and global economy-boosting strategy out there.
Yesterday marked the fifth anniversary of the devastating Syria conflict. Since day one, the UK has been at the forefront of the response, and that has included hosting last month’s conference. [Interruption.]
Order. I understand the sense of anticipation, but I just gently remind the House that we are discussing policy affecting some of the most vulnerable people on the face of the planet, and I think we owe them some respect.
What assessment has the Secretary of State made of the humanitarian situation in Sri Lanka?
As the hon. Gentleman will be aware, the UK has been at the forefront of ensuring that there is humanitarian support in Sri Lanka, where necessary. He will also be aware of the role that the Prime Minister played in tackling the issues faced by Tamil communities in a part of the country where there had been long-standing conflict. Under the new Government, we hope to see Sri Lanka move forward to a more peaceful, democratic future.
T4. How much UK aid is currently given to Turkey, and are Ministers having any discussions to increase that figure? 
Since February 2012, DFID has allocated £35 million in Turkey. The country hosts about 2 million Syrian refugees, and we are helping it to support them, and indeed other displaced people, with food, education, and skills training. Looking ahead, we shall also contribute our share of the €3 billion EU-Turkey refugee facility.
Efforts that will address education are welcomed by Labour Members. However, to make substantial progress on achieving a good standard of education for all children in developing countries, we must address the barrier of child labour. In June 2015, UNICEF found that 13% of children aged five to 14 in developing countries are involved in child labour. What progress, therefore, is DFID making to help developing countries tackle the use of child labour?
The hon. Gentleman is right to mention the barriers that keep children out of school. DFID is working on many of them, not least female genital mutilation and child marriage. Many of the children he talks about are girls who often do unpaid work at home and on family farms.
T5. Bangladesh is a significant recipient of UK aid, yet last week the Conservative Party Human Rights Commission heard grave concerns about the shrinking civil society space there. What can Ministers do to help address this? 
I can assure my hon. Friend that DFID and Foreign Office officials, together with other donors, raise concerns about the space for civil society with Governments, including the Government of Bangladesh. This is an incredibly important area. Non-governmental organisations funded by UK aid are active in negotiating with Governments to protect the space for civil society to operate.
T2. Over 150 charities have raised concerns about the supposed anti-lobbying clause attached to new Government grants. Does the Minister not recognise that advocacy is an intrinsic duty of charities in raising issues associated with poverty and ill health across the world? 
I do not think these changes prevent charities from doing that, and they are often advocating the very same things as the UK Government in my area of international development. In fact, only yesterday I was at an event at the UN with charities combating child marriage.
T7. Senior Palestinian officials have condemned peace-building initiatives between Israelis and Palestinians, with one condemning football matches between Israeli and Palestinian youths as “normalisation of the Zionist enemy”. What representations has my right hon. Friend made to the Palestinian Authority to condemn these moves, and what moves is she making to build peace between Israel and Palestine? 
As my right hon. Friend the Minister set out earlier, we deplore incitement on both sides of the Israeli-Palestinian conflict. We monitor allegations of incitement very closely and raise instances with both leaderships.
T6. Has the Secretary of State given, or does she envisage giving, any aid to any country in the European Union? 
The hon. Gentleman will be aware that we have played our role in supporting refugees who have fled the Syrian conflict and are now arriving in the European Union, and it is right that we do so. However, he is also perhaps right to say that we should also look to those countries to provide the support that they can, too.
T9. AIDS remains the No. 1 global killer of women of reproductive age. What more can DIFD Ministers do to ensure that tackling this remains a priority for this Government? 
My hon. Friend is right. In fact, in 2013 statistics showed that an adolescent girl gets infected with HIV every two minutes. We very much put the empowerment of girls and women at the heart of our development agenda. We are the second largest funder of HIV prevention, care and treatment, and we have pledged up to £1 billion to the global fund.
T8. At the weekend, we saw pictures of a new-born Syrian baby being washed with just a bottle of water outside a crowded a tent in the Idomeni refugee camp in Greece, where more than 14,000 people are trapped as a result of the latest border closures. Will the Government work with other European states to ensure that there are safe and legal routes for refugees to claim asylum? 
I assure the hon. Lady that, from an international development perspective, we are working to support people caught up in those situations, and we are, of course, playing our role in resettlement through our vulnerable persons relocation scheme.
The Prime Minister was asked—
Q1. If he will list his official engagements for Wednesday 16 March. 
This morning I had meetings with ministerial colleagues and others, and in addition to my duties in this House I shall have further such meetings later today.
With unemployment falling by more than 60% and with more than 5,000 new apprenticeships, Redditch is doing well. I will hold my third jobs fair in the next few weeks, with 25 companies taking part. Does my right hon. Friend agree that we have made a good start but that we must not be complacent, and that, through the midlands engine, we must continue to get good quality jobs into our region?
I very much agree with my hon. Friend. If we look at the west midlands and today’s unemployment figures, we see that since 2010 the claimant count there has come down by 91,000 people. I am sure the House would also welcome an update on the unemployment figures out today. Employment in our country is at a new record high of 31.4 million people. Compared with 2010, there are now 2,370,000 more people in work than when I became Prime Minister, and the claimant county today is down 18,000 in the last month—figures that I am sure will be welcomed right across the House.
Could the Prime Minister tell the House how many people will die from respiratory disease as a result of air pollution before this country meets its legal obligations on air quality by 2025?
I do not have those figures to hand, but what I do know is that we need to make progress on air quality. That is why we have the new regulations on diesel engines, which are helping; the steady decarbonisation of our power sector, which will help; and very strong legislation already in place to make sure we have clean air, particularly in our cities.
May I help the Prime Minister? The sad truth is that 500,000 will die because of this country’s failure to comply with international law on air pollution. Perhaps he could answer another question: how much does air pollution cost our economy every year?
Of course it costs our economy billions, because people are being injured. That is why we have the new clean air zones, and emissions from cars are coming down. If I may give the right hon. Gentleman one example, if we deliver on our carbon reduction plan for electricity generation, we will see roughly an 85% reduction in carbon between 1990 and 2030. That will give us one of the best green records anywhere in the world.
The Royal College of Physicians estimates that air pollution costs our economy £20 billion a year. The failure to deal with air pollution is killing people. Only a few days ago, London faced a severe smog warning. The Prime Minister’s friend the Mayor of London has presided over a legal breach of air quality in the capital every day since 2012, so why cannot the Prime Minister hurry up action to make us comply with international law and, above all, help the health of the people of this country?
It was the Conservative Governments of the 1950s that passed the clean air Acts, and I am sure that it will be this Conservative Government who will take further action, including the clean air zones that we have and lower car emissions. Why are we able to do that? It is not only because we care about our environment, but because we have an economy that is strong enough to pay for those improvements, as we are just about to hear.
We all welcome the Clean Air Act 1956, but things have moved on a bit since. The Government are now threatened with being taken to court for their failure to comply with international law on air pollution. The Prime Minister is proposing to spend tens, possibly hundreds, of thousands of pounds of public money defending the indefensible. Why not instead invest that money in cleaner air and better air quality for everyone in this country?
We are investing money in clean air in our country. For instance, we are phasing out the use of coal-fired power stations far in advance of other European countries and blazing a trail in more renewable energy and the clean nuclear energy that we will be investing in. All those things will make a difference, but let me say again: you can only do this if you have a strong economy able to pay for these things.
If the Government and the Prime Minister are so keen on renewable and clean energy, can he explain why on Monday the House approved new legislation to allow communities a veto on clean energy projects such as onshore wind? I have a question from Amanda from Lancaster. She asks the Prime Minister this—[Interruption.] If I were him, I would listen. Will the Prime Minister offer the same right of veto to her community, and communities like hers across the country, of a veto on fracking?
We have a proper planning system for deciding these things. If the right hon. Gentleman wants to know what is happening in terms of renewable energy, I point out to him that 99% of the solar panels in this country have been installed since I became Prime Minister. That is the green record that we have. The United Kingdom now has the second largest ultra-low emission vehicle market anywhere in the European Union. We have seen one of the strongest rates of growth in renewable energy.
Is it not remarkable—five questions in, and no welcome for the fall in unemployment? No mention of the 31 million people now in work. No mention of the fact that we have got more women in work and more young people in work, and that more people are bringing home a salary—bringing home a wage—and paying less tax. Not a word from the party that I thought was meant to be the party of labour. This is the truth: the party of working people, getting people into work, is on this side of the House.
The Prime Minister once boasted that he led the greenest Government ever—no husky was safe from his cuddles. So will he explain why the Select Committee on Energy and Climate Change has produced a report that is damning when it comes to green energy, saying that major investors describe his policies as “risky” as a result of cuts and changes? Why are the Government so failing the renewable energy sector, clean air, investors, consumers and those who work in that industry?
Any proper look at the figures will find that the Government have a remarkable record on green energy. Let me take the Climate Action Network, which said that Britain is the second best country in the world for tackling climate change, after Denmark. That is our record. Since 2010, we have reduced greenhouse gases by 14%. We are over-delivering against all our carbon budgets. We secured the first truly global, legally binding agreement to tackle climate change, and we have got annual support for renewables more than doubling to over £10 billion by 2020. On renewable electricity, we are on track to deliver a target of at least 30% from renewable sources by 2020. Almost all of that will have happened under a Conservative-led Government. That is our record, and we are proud of it.
West Midlands: Economy and Public Sector
Q2. What assessment he has made of the (a) performance of the economy and (b) adequacy of provision of public sector services in the west midlands; and if he will make a statement. 
There are some very positive things going on in the west midlands economy, and today’s figures show that employment in the region is up by 140,000 since 2010. More than 108,000 businesses were created in the region between 2010 and 2014. Thanks to our long-term economic plan for the midlands engine, we have been able to invest in our public services in the west midlands, helping to build a strong NHS, reform our education system and give our police the resources they need.
Unemployment is down again in my beautiful Lichfield! And yesterday was an absolute first for the west midlands, when the whole region co-operated to present 33 investment schemes at an international conference in Cannes, which will create a further 178,000 jobs. What more can the Prime Minister do to support the midlands engine—apart from ensuring, of course, that we never get a Labour Government?
I am very glad my hon. Friend chose to be here rather than in Cannes. I am very relieved by that. He is right about the 33 schemes. Just last week, we had a £300 million signed between Chinese investors and CAD CAM Automotive that will create 1,000 jobs in Coventry. My right hon. Friend the Business Secretary was in Staffordshire with Nestlé to open a new coffee factory, bringing 400 jobs. We of course got that historic deal with the west midlands, which will see significant new powers devolved to the combined authority and the directly elected mayor. We are changing the way our country is run—devolving power, building the strength of our great cities—and Birmingham is the second city of our country.
There is widespread reporting that the UK Government are about to commit to send ground troops to Libya to train Government forces there. Is this true, and why has Parliament not been informed about it?
If we had any plans to send conventional forces for training in Libya we would of course come to this House and discuss them. What we want to see in Libya is the formation of a unity Government. There is progress with Prime Minister Siraj, who can now lead a Government of national accord. We will want to hear from him what assistance and help should be given in Libya. Countries such as Britain, France, America and Italy will definitely try to help that new Government, because right now Libya is a people smuggling route, which is bad for Europe and bad for us, and we also have the growth of Daesh in Libya, which is bad for us and bad for the rest of Europe. If we have any plans for troop training or troop deployment in a conventional sense we will of course come to the House and discuss them.
The UK spent 13 times more bombing Libya than it did on securing the peace after the overthrow of the hated Gaddafi regime. The critics of UK policy even include President Obama of the United States. Will the Prime Minister give a commitment to bring to Parliament the issue of any potential Libyan deployment of any British forces for approval before giving the green light for that to happen? Will he give that commitment—yes or no?
I am very happy to give that commitment, as we always do. I am very clear that it was right to take action to prevent the slaughter that Colonel Gaddafi would have carried out against his people in Benghazi. I believe that was right. Of course, Libya is in a state that is very concerning right now, and everyone has to take their responsibilities for that. What I would say is that after the conflict the British Government did support the training of Libyan troops, we did bring the Libyan Prime Minister to the G8 in Northern Ireland and we went to the United Nations and passed resolutions to help that Government, but so far we have not been able to bring about a Government of national accord that can bring some semblance of stability and peace to that country. Is it in our interest to help the Government do exactly that? Yes, it is, and we should be working with others to try to deliver that.
Q3. My constituency of Gower, which was won for the first time ever by the Conservatives, could be transformed, along with the rest of the region, by the Swansea Bay tidal lagoon. Having signed a £1.2 billion deal for Cardiff yesterday, will the Prime Minister give an absolute assurance that the Government review of tidal lagoons will do everything to ensure that the wider Swansea Bay tidal lagoon project fits the UK energy strategy, and does he recognise the economic potential it will bring to the Swansea bay region? 
I thank my hon. Friend. I remember visiting his constituency just after his excellent victory last year. I seem to remember that we went to a brewery for a mild celebration. He is right that tidal lagoons do have potential. Last month, we launched an independent review of tidal lagoon power to understand the technology better. We will look carefully at the findings of that review and continue working closely with the developers in order to make a decision on Swansea.
Q4. Wrexham and north Wales is a strong manufacturing and exporting region, but its growth is constrained by lack of access to airports in north-west England. The Office of Rail and Road is currently considering applications for rail paths from north Wales. Will the Prime Minister support a cross-party campaign for fairness for north Wales and for access to airports in north-west England?
The former Secretary of State for Wales, my right hon. Friend the Member for Clwyd West (Mr Jones), came to see me recently about this. I think there is a very strong argument for how we can better connect north Wales with the north-west of England and make sure we build on the economic strength of both, so I will look very carefully at what the hon. Gentleman says and what my right hon. Friend says about the potential for increasing rail capacity.
Q5. Last week, a High Court judge ruled in favour of a compulsory purchase order for the grade II* listed former north Wales hospital in Denbigh. Years of neglect by its offshore company owner resulted in the buildings being brought to the point of collapse. Thanks to groundbreaking work carried out by Denbighshire County Council and the Prince’s Regeneration Trust, their future should now be safeguarded. What can the Prime Minister do to prevent buildings such as these, which are deemed national assets, from falling into the hands of those who are not fit and proper guardians, particularly those outside the control of our judicial system? 
My hon. Friend makes an important point. I am aware of this case. While heritage is a devolved matter, it is great news that these buildings—I know how important they are—will be safeguarded. It is my understanding that they were bought way back in 1996 by a company and then left completely abandoned. As he says, that is no way to treat a grade II* listed building. That is why we have the powers in place for compulsory purchase orders. In this case, I think Denbighshire County Council was absolutely right to use them. Councils should have confidence in being prepared to use these measures when appropriate.
Q6. Two weeks ago, in front of the Education Committee, the head of Ofsted, Sir Michael Wilshaw, said that “16-19 education should be done in a school-based environment, not in an FE institution.” He went on to say that some pupils who head off to a further education institution“do badly. They get lost, drop out”. Does the Prime Minister agree with him? 
I think we need a range of settings for A-levels and post-16 study. I would say this: there are a lot of secondary schools that would like to have a sixth form. I think there are great benefits, in particular for 11-year-olds going to secondary school who can look to the top of the school and see what girls and boys are achieving at 16, 17 and 18: what A-level choices they are making and what futures they are thinking of. For many people it is very inspiring to go a school with a sixth form, but let us encourage both. Let us have the choice. This is why the academisation of schools is so important, because it gives schools the ability to make these choices for our children.
Q7. In National Apprenticeship Week, I am sure the Prime Minister will join me in thanking employers who have created 6,500 apprenticeships in Gloucester since 2010, the Gloucester Citizen for its support, and all the apprentices themselves, including my first apprentice Laura Pearsall, who is now Gloucester’s youngest ever city councillor. Looking forward, will my right hon. Friend do all he can to hasten the introduction of associate nurses, who will be higher apprentices? They will make a huge difference to the NHS and our health sector more broadly. 
My hon. Friend is right. The south-west has delivered more than 280,000 apprenticeship starts since 2010, so it is absolutely pulling its weight—and well done to his constituents for doing that. He is also right about the introduction of associate nurses. We are working with Health Education England to offer another route into nursing, which I think will see an expansion of our NHS.
Q8. According to the statistics provided by the House Library, there are an estimated 280,000 problem gamblers in the United Kingdom. Will the Prime Minister indicate when the Government will take forward the 2010 report prepared for the Department for Culture, Media and Sport? Does he agree that the money from dormant betting accounts should be used to support those whose lives have been destroyed by gambling? 
We will study the report carefully. We did take some action in the previous Parliament in the planning system and on the way fixed odds betting terminals worked to deal with problem gambling. I am very happy to keep examining this issue and to act on the evidence. I will be discussing it with the Secretary of State for Culture, Media and Sport.
Q10. The systematic killing of Christians and other minority groups by the so-called Islamic State across the middle east has reached unprecedented proportions, so the action being taken by Her Majesty’s Government is just. What more will my right hon. Friend do, working with the international community, to halt this genocide being committed against Christians by what I would rather call the satanic state? 
My hon. Friend is absolutely right to draw attention to Daesh’s persecution of Christians and those of other faiths, including Muslims it disagrees with. We must keep to the plan. We have shrunk the amount of territory it holds in Iraq by about 40% and we are seeing progress in Syria as well, but this will take time, and we must show the patience and persistence to make sure we rid the world of this evil death cult.
Q9. The Prime Minister’s energy policy is a complete shambles and wholly dependent on the troubled and eye-wateringly expensive new nuclear plant at Hinkley Point. There is barely a plan A, let alone a plan B. Is the Prime Minister seeking to build the world’s most expensive power station or the world’s biggest white elephant? 
We are planning to continue with a successful energy policy that is seeing cheaper and lower carbon energy at the same time. The strength of the Hinkley Point deal is that there is no payment unless the power station goes ahead and is built efficiently by EDF. That will be good for our energy supplies because, if we want low-cost, low-carbon energy, we need strong nuclear energy at the heart of the system.
Q11. Antibiotic Research UK, situated in my constituency, is the world’s first charity to tackle antimicrobial resistance, which is a looming global danger of disaster-movie-style proportions. Will the Prime Minister agree to meet me to see how we can fund this vital research, so that this time it is not the Americans who save the world but the British? 
I am very happy to meet my hon. Friend, who is absolutely right to raise this issue. Owing to the growing resistance to antibiotics, which in many cases now do not work, we face a genuine medical emergency around the world. That is why Britain must put this issue squarely on the G20’s agenda; why it was a large part of our discussions with the Chinese during their state visit last year; and why we are investing £50 million in an innovation fund, working with the Chinese Government to take it forward. I hope that the organisation in my hon. Friend’s constituency can benefit from some of this research.
The Prime Minister will know that his Home Secretary is once again trying to deport Afghan interpreters seeking sanctuary in the UK. These brave people risked their lives serving our armed forces, yet they now face being sent back, where they will be at the mercy of the Taliban or have to join hundreds of thousands of people rotting in refugee camps. Is this how Britain should repay those who put their lives on the line for us? Instead, will the Prime Minister do the right thing and do whatever is possible to ensure that they are offered safe haven here?
The last Government, in which the hon. Gentleman’s party played a role, agreed a set of conditions for Afghan interpreters to come to the UK and be given sanctuary, but we also provided for a schemee so that those who wanted to stay and help rebuild their country could do so. I would still defend that scheme, even if his party has changed its mind.
Q12. My constituent Deborah Reid and her sister watched their mother Joan waste away in hospital due to inadequate care after a fall, as has been admitted by the consultant in charge. Last week, my right hon. Friend the Health Secretary hosted a global summit on patient safety and announced the creation of the new healthcare safety investigation branch. What more can the Government do to ensure that patient safety is at the heart of the NHS and to prevent such instances from occurring in the future? 
My hon. Friend is absolutely right to raise such cases, which are obviously horrendous and should be properly investigated, but, as she said, we then need to learn the lessons from them. I think we have made some progress. The proportion of patients being harmed in the NHS has dropped by over a third in the last two years, and MRSA bloodstream infections have fallen by over half in the last five years. My right hon. Friend the Health Secretary was absolutely right to hold the conference and to examine what other industries and practices have done to ensure a zero-accident safety culture. We have seen it in other walks of life, and it is time we applied it to the NHS.
Just eight days ago, Oliver Tetlow popped to the shops and was brutally shot dead. The community is shocked and saddened by the murder of an innocent young man, and has asked for more community local policing and greater youth engagement. Will the Prime Minister meet me and community champions to discuss how we can make our streets safer?
The hon. Lady raises a very important point. What we have seen in London is a reduction in gun crime. She refers to a tragic case, and our hearts go out to the family of the person she talked about, but as I say, we have seen a reduction—and more active policing in our communities and better intelligence policing for dealing with gun crimes. We must keep that up. I shall certainly arrange whatever meeting is best to ensure that the voices the hon. Lady mentions are listened to.
Q13. As my right hon. Friend will be aware, Highways England is consulting on a new lower Thames crossing, with the preferred option being so-called option C, which will divert 14% of traffic away from the existing Dartford crossing. Does my right hon. Friend agree that before spending billions on the new crossing, we should sort out the problem at the existing crossing, not only to help a greater number of motorists, but to address illegal levels of poor air quality and restore resilience to the M25 motorway network? Will he meet me to discuss these matters further? 
My hon. Friend makes an important point. As we discussed earlier, we need to tackle congestion and air quality. Stationary traffic is more polluting than moving traffic, so sorting out the problems at the existing Dartford crossing is important, but I believe we have to look at the options for a new crossing. As I understand it, two locations are now on the table as a result of early detailed work, and these are the best available options. Highways England has looked in detail at both locations, taking into account economic and community impact. We look forward to seeing what it recommends. When it does, I hope we can make progress. This is a vital set of arteries for our country’s economy, and we need the traffic to be flowing smoothly.
On reflection, was it wise of the Chancellor to bank on the theory of a £27 billion windfall when it has gone and vanished in the space of only the last three months?
We will be hearing quite a lot from the Chancellor in a minute or two. What I would say is that we have a fundamentally strong economy that is facing a very difficult set of world circumstances. Here in Britain, with unemployment at 5%, inflation at virtually 0%, unemployment figures showing a fall again today and wages growing at 2%, that is a better record than most other countries in the developed world can boast. A lot of that is down to the very clear plan set out by my right hon. Friend the Chancellor and followed these past six years.
Q14. Last week was English tourism week, and I was delighted to welcome an international delegation to the Eden Project to promote Cornwall as a destination for international tourists. Visitor numbers are up in Cornwall, but there is still more we can do to attract overseas visitors out of London and into the regions of our country. What more can the Government do to support the tourist industry and particularly to get more overseas visitors to come to Cornwall? 
My hon. Friend knows that, as far as I am concerned, there is nothing finer than getting out of London and down to Cornwall. There is no better place than Polzeath beach when the sun is setting, the waves are big and my phone is working—and the Daily Mail photographer has gone home. That helps. We need to get people who come to our country to visit the wonders of London also to spend some time outside London. That is what some of the new schemes that we have announced—the £40 million Discover England fund, for instance—are all about. I urge the authorities in Cornwall to make the most of it.
In 2014, we exported £12.8 billion-worth of food products, with 73% of the total going to other European states. It is no wonder that 71% of Food and Drink Federation members want us to avoid Brexit. Does the Prime Minister think that our prospect of further improving the export profile of food manufacturing will be strengthened by staying in the European Union?
The view from food manufacturers, farmers and indeed the wider business community, 81% of which said yesterday that they wanted to stay in a reformed Europe, is very clear. The arguments on food are particularly clear. Our farmers produce some of the cleanest and best food anywhere in the world, and they know that they have access to a market of 500 million consumers without tariffs, without quotas and without any problems. We should not put that at risk. When we look at some of the alternatives to being a part of the single market—a Canadian-style free trade deal, for example—we can see that there are restrictions. Quotas on beef are one example, and I do not want to see that applying to British farmers who have so much to be proud of.
Q15. Does my right hon. Friend agree that having an inspirational mentor can give young people opportunities from which they would never have benefited before? Can he tell me how the £14 million that the Government will be putting into a new national mentoring scheme will benefit some of the most disadvantaged children in our society? 
I absolutely agree with my right hon. Friend. I think that one of the most important things that our schools can seek to do in the future is encourage mentors from business, the public sector and charities into their schools to give that extra one-on-one help from which young people benefit so much. I visited a Harris academy in Southwark yesterday to see how well that is going. Every child who is studying for GCSEs who wants a mentor can have one, and I think that that makes a huge difference to those children’s life chances.
The £14 million that we are putting in should allow an extra 25,000 of the most disadvantaged people in our country to have a mentor, and I urge all schools to consider that. There are so many people in business, the public sector and charities who would love to take part and help young people to achieve their potential.
The Prime Minister likes to suggest that he is the champion of localism, but today his Government are seeking to gag local communities with a crass forced academies policy that will stamp out local consultation and dissent. Can he explain to the vast majority of parents and residents in Brighton and Hove who recently roundly rejected academy status for two local schools why their views will count for nothing in the future?
I would argue that academy schools represent true devolution, because the parents, the governors and the headteacher end up having full control of the school and are able to make decisions about its future. If that does not convince the hon. Lady, I ask her to look at the results. She will see that primary sponsored academies have better records and are improving faster, and she will see that 88% of converter academy schools have been rated good or outstanding. This is true devolution: making sure that every headteacher is in charge of his or her school and providing the great education that we want for our children.
My constituent Jacci Woodcock has been diagnosed with terminal breast cancer. She has shown outstanding courage in her fight against the disease, but unfortunately she did not receive support or compassion from her employer, who wanted to dismiss her through capability procedures. Now her former partner, Andy Bradley, is trying to have the house that they own together repossessed, leaving her homeless while she is dying. Does the Prime Minister agree that we require better protection for working people who are diagnosed with terminal illnesses, and will he join me, and Jacci, in supporting the changes outlined in the TUC’s Dying to Work campaign?
The points my hon. Friend has made are absolutely right, and I will look very carefully at the case that she has raised. The truth, in all these things, is that as well as clear rules, we need organisations—employers, housing associations, landlords or, indeed, trade unions—to act with genuine compassion, and to think of the person, the human being, at the other end of the telephone.
Ways and Means
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 them that it is not the norm to intervene on the Chancellor of the Exchequer or the Leader of the Opposition.
Today I report on an economy set to grow faster than any other major advanced economy in the world. I report on a labour market delivering the highest employment in our history, and I report on a deficit down by two thirds, falling each year, and, I can confirm today, on course for a budget surplus. The British economy is stronger because we confronted our country’s problems and took the difficult decisions. The British economy is growing because we did not seek short-term fixes, but pursued a long-term economic plan. The British economy is resilient because, whatever the challenge, however strong the headwinds, we have held to the course we set out.
I must tell the House that we face such a challenge now. Financial markets are turbulent; productivity growth across the west is too low; and the outlook for the global economy is weak. It makes for a dangerous cocktail of risks, but one that Britain is well prepared to handle if we act now so we do not pay later. Britain has learned to its cost what happens when you base your economic policy on the assumption that you have abolished boom and bust. Britain is not immune to slowdowns and shocks, but nor as a nation are we powerless. We have a choice. We can choose to add to the risk and uncertainty, or we can choose to be a force for stability. In this Budget we choose to put stability first. Britain can choose short-term fixes and more stimulus, as others are, or we can lead the world with long-term solutions to long-term problems.
In this Budget we choose the long term. We choose to put the next generation first. We choose, as Conservatives should always choose, sound public finances to deliver security, lower taxes on business and enterprise to create jobs, reform to improve schools, and investment to build homes and infrastructure, because we know that that is the only way to deliver real opportunity and social mobility. And as Conservatives, we know that the best way we can help working people is to help them to save and let them keep more of the money they earn. That is the path we have followed over the past five years, and it has given us one of the strongest economies in the world; and that is the path we will follow in the years ahead. In this Budget we redouble our efforts to make Britain fit for the future.
Let me turn to the economic forecasts. I want to thank Robert Chote and his team at the Office for Budget Responsibility. To make sure that they have available to them the best statistics in the world, I am today accepting all the recommendations of Sir Charlie Bean’s excellent report. I also want to take this moment to thank another great public servant, Sir Nicholas Macpherson. He has served as permanent secretary to the Treasury for 10 years, under three very different Chancellors, and throughout he has always demonstrated the great British civil service values of integrity and impartiality. He is here today to watch the last of the 34 Budgets he has worked on, and on behalf of the House and the dedicated officials in the Treasury, I thank him for his service.
The OBR tells us today that in every year of the forecast, our economy grows and so too does our productivity. But it has revised down growth in the world economy and in world trade. In its words, the outlook is “materially weaker”. It points to the turbulence in financial markets, slower growth in emerging economies such as China, and weak growth across the developed world. Around the globe, it notes that monetary policy, instead of normalising this year as expected, has been further loosened. We have seen the Bank of Japan join Sweden, Denmark, Switzerland and the European Central Bank with unprecedented negative interest rates.
The OBR also notes that this reflects concerns across the west about low productivity growth. The secretary-general of the OECD said last month that
“productivity growth...has been decelerating in a vast majority of countries”.
As a result, the most significant change the OBR has made since its November forecast is its decision to revise down potential UK productivity growth. The OBR had thought that what it describes as the
“drag from the financial crisis”
on our productivity would have eased by now, but the latest data show that it has not. The OBR acknowledges today that this revision is, in its words, a “highly uncertain” judgment call, but I back the OBR 100%. We saw under the last Labour Government what happened when a Chancellor of the Exchequer revised up the trend growth rate, spent money the country did not have and left it to the next generation to pick up the bill. I am not going to let that happen on my watch. These days, thanks to the fact that we have established independent forecasts, our country is confronted with the truth as economic challenges emerge, and can act on them before it is too late. We fix our plans to fit the figures; we do not fix the figures to fit the plans.
The IMF has warned us this month that the global economy is “at a delicate juncture” and faces a growing “risk of economic derailment”. Eight years ago, Britain was the worst prepared of any of the major economies for the crisis we then faced. Today, Britain is among the best prepared for whatever challenges may lie ahead. That is what our long-term economic plan has been all about.
When I became Chancellor, we borrowed £1 in every £4 we spent. Next year, it will be £1 in every £14. Our banks have doubled their capital ratios, we have doubled our foreign exchange reserves, and we have a clear, consistent and accountable monetary policy framework, admired around the world.
The hard work of fixing our economy is paying off. In 2014, we were the fastest-growing major advanced economy in the world. In 2015, we were ahead of everyone but America. So let me give the OBR’s latest forecasts for our economic growth in the face of the new assessment of productivity and the slowing global economy. Last year, GDP grew by 2.2%. The OBR now forecasts that it will grow by 2% this year, then 2.2% again in 2017, and then 2.1% in each of the three years after that. The House will want to know how this compares to other countries. I can confirm that, in these turbulent times, the latest international forecast expects Britain to grow faster this year than any other major advanced economy in the world.
The OBR is explicit today that its forecasts are predicated on Britain remaining in the European Union. Over the next few months, this country is going to debate the merits of leaving or remaining in the European Union, and I have many colleagues whom I respect greatly on both sides of this argument. The OBR correctly stays out of the political debate and does not assess the long-term costs and benefits of EU membership, but it does say this, and I quote directly:
“A vote to leave in the forthcoming referendum could usher in an extended period of uncertainty regarding the precise terms of the UK’s future relationship with the EU.”
It goes on to say:
“This could have negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets”.
Citing a number of external reports, the OBR says this:
“There appears to be a greater consensus that a vote to leave would result in a period of potentially disruptive uncertainty while the precise details of the UK’s new relationship with the EU were negotiated.”
The House knows my view. Britain will be stronger, safer and better off inside a reformed European Union. I believe we should not put at risk all the hard work that the British people have done to make our economy strong again. [Interruption.]
Order. We all want to hear what the Chancellor has to say. Some people may agree, some may disagree, but I want to hear him, the electorate want to hear him, and this country wants to hear him.
Let me turn to the OBR forecasts for the labour market. Since the autumn statement just four months ago, the businesses in our economy have created over 150,000 more jobs than the OBR expected. That is 150,000 extra families with the security of work, and that is 150,000 reasons to support our long-term economic plan. This morning, unemployment fell again, employment reached the highest level ever, and the data confirm that we have the lowest proportion of people claiming out-of-work benefits since November 1974.
Now the OBR is forecasting a million more jobs over this Parliament. We remember what our political opponents said in the last Parliament: they claimed 1 million jobs would be lost—instead, 2 million were created. When the jobs started coming, we were told that they were going to be low-skilled, but today we know that almost 90% of the new jobs are in skilled occupations. We were told the jobs were going to be part-time, but three quarters are full-time. We were told the jobs would all be in London, but the unemployment rate is falling fastest in the north-east, youth unemployment is falling fastest in the west midlands and employment is growing fastest in the north-west. And in today’s forecast, real wages continue to grow and outstrip inflation in each and every year.
The OBR forecasts lower inflation, at 0.7% this year and 1.6% next year. I am today confirming in a letter to the Governor of the Bank of England that the remit for the Monetary Policy Committee remains the symmetric consumer prices index inflation target of 2%. I am also publishing the new remit for the Financial Policy Committee, the body we created to keep an eye on emerging long-term risks in our financial system. I am asking it to be particularly vigilant in the face of current market turbulence, because in this Budget we act now so that we do not pay later.
That brings me to our approach to public spending and the OBR forecasts for our public finances. In every year since 2010, I have been told by the Opposition that now is not the right time to cut Government spending. When the economy is growing, I am told we can afford to spend more. When the economy is not growing, I am told we cannot afford not to. Today, I am publishing new analysis that shows that if we had not taken the action we did in 2010, and had listened instead to our opponents, cumulative borrowing would have been £930 billion more by the end of the decade than it is now forecast to be. If we had taken their advice, Britain would not have been one of the best-prepared economies for the current global uncertainties, we would have been one of the worst-prepared.
Now, the very same people are saying to us that we should spend more again—I reject that dangerous advice. The security of families and businesses depends on Britain living within its means. Last autumn’s spending review delivers a reduction in Government consumption that is judged by the OBR to be the most sustained undertaken in the last 100 years of British history, barring the periods of demobilisation after the first and second world wars. My spending plans in the last Parliament reduced the share of national income taken by the state from the unsustainable 45% we inherited to 40% today. My spending plans in this Parliament will see it fall to 36.9% by the end of this decade. In other words, the country will be spending no more than the country raises in taxes. And we are achieving that while at the same time increasing resources for our NHS and schools, building new infrastructure and increasing our security at home and abroad.
The OBR now tells us that the world has become more uncertain, so we have two options: we can ignore the latest information and spend more than the country can afford—that is precisely the mistake that was made a decade ago—or we can live in the world as it is, and cut our cloth accordingly. I say we act now so we do not pay later. So I am asking my right hon. Friends the Chief Secretary and the Paymaster General to undertake a further drive for efficiency and value for money. The aim is to save a further £3.5 billion in the year 2019-20. At less than half a percent of Government spending in four years’ time, that is more than achievable while maintaining the protections we have set out.
At the same time, we will continue to deliver sensible reforms to keep Britain living within its means. On welfare, last week my right hon. Friend the Secretary of State for Work and Pensions set out changes that will ensure that within the rising disability budget, support is better targeted at those who need it most. Let me confirm that this means the disability budget will still rise by more than £1 billion, and we will be spending more in real terms supporting disabled people than at any point under the last Labour Government.
On international aid, I am proud to be part of a Government that was the first to honour Britain’s commitment to spend 0.7% of national income on development. We will not spend more than that, so the Budget will be readjusted, saving £650 million in 2019-20.
We are also going to keep public sector pensions sustainable. We reformed them in the last Parliament, which will save more than £400 billion in the long term. To ensure that those pensions remain sustainable, we have carried out the regular revaluation of the discount rate, and the public sector employer contributions will rise as a result. This will not affect anyone’s pension, and will be affordable within spending plans that are benefiting from the fiscal windfall of lower inflation. Each of these decisions is a demonstration of our determination that the British economy will stay on course. We will not burden our children and grandchildren. This is a Budget for the next generation.
Let me now give the Office for Budget Responsibility’s forecasts for the debt and the deficit. The combination of our action to reduce borrowing this year, along with the revisions to our nominal GDP driven by lower inflation, have produced this paradoxical result. In cash terms, the national debt is lower than it was forecast to be in the autumn, but so too is the nominal size of our economy. We measure the fiscal target against debt to GDP, so that while debt as a percentage of GDP is above target and set to be higher in 2015-16 than the year before, compared with the forecast, the actual level of our national debt in cash is £9 billion lower. In the future, debt falls to 82.6% next year, then 81.3% in 2017-18, then 79.9% the year after. In 2019-20, it falls again to 77.2%, then down again the year after to 74.7%.
Let me turn to the forecast for the deficit. When I became Chancellor, the deficit that we inherited was forecast to reach 11.1% of national income—the highest level in the peacetime history of Britain. Thanks to our sustained action, the deficit is forecast to fall next year to just over a quarter of that, at 2.9%. In 2017-18, it falls to 1.9%. Then it falls again to 1% in 2018-19. In cash terms, in 2010, British borrowing was a totally unsustainable £150 billion a year. This year we are expected to borrow less than half that, at £72.2 billion. Indeed, our borrowing this year is actually lower than the OBR forecast at the autumn statement. Borrowing continues to fall—but not by as much as before—to £55.5 billion next year, £38.8 billion the year after, and £21.4 billion in 2018-19.
I know that there has been concern that the challenging economic times mean we would lose our surplus the following year, and that would have been the case if we had not taken further action today to control spending and make savings. But because we have acted decisively, in 2019-20 Britain is set to have a surplus of £10.4 billion. That surplus is then set to rise to £11 billion the year after. That is 0.5% of GDP in both years.
We said that we would take the action necessary to give Britain’s families economic security. We said that our country would not repeat the mistakes of the past and instead live within our means. Today, we maintain that commitment to long-term stability in challenging times. We have taken decisive action to achieve a £10 billion surplus. We act now, so that we do not pay later. We put the next generation first.
In every Budget I have given, action against tax avoidance and evasion has contributed to the repair of our public finances, and this Budget is no different. In the Red Book, we have set out in detail the action that we will take to: shut down disguised remuneration schemes; ensure that UK tax will be paid on UK property development; change the treatment of free plays for remote gaming providers; limit capital gains tax treatment on performance rewards; and cap exempt gains in the employee shareholder status.
Public sector organisations will have a new duty to ensure that those working for them pay the correct tax rather than giving a tax advantage to those who choose to contract their work through personal service companies. Loans to participators will be taxed at 32.5% to prevent tax avoidance, and we will tighten rules around the use of termination payments. Termination payments over £30,000 are already subject to income tax. From 2018, they will also attract employer national insurance. Taken altogether, the further steps in this Budget to stop tax evasion, prevent tax avoidance and tackle imbalances in the system will raise £12 billion for our country over this Parliament.
The Labour party talked about social justice, but left enormous loopholes in our tax system for the very richest to exploit. The independent statistics confirm that, under this Prime Minister, child poverty is down; pensioner poverty is down; inequality is down; and the gender pay gap has never been smaller.
The distributional analysis published today shows that the proportion of welfare and public services going to the poorest has been protected. I can report that the latest figures confirm that the richest 1% paid 28% of all income tax revenue—a higher proportion than in any single year of the previous Labour Government and proof that we are all in this together. [Interruption.]
Order. It is strange that we cannot hear your Chancellor of the Exchequer. I want to hear him, and I am sure that you do as well.
I can report solid steady growth; more jobs; lower inflation; and an economy on course for a surplus—and all done in a fair way. This is a Britain that is prepared for whatever the world throws at us, because we have stuck to our long-term economic plan.
Credible fiscal policy and effective monetary policy have only ever been part of our plan. A crucial ingredient has always been the lasting structural reforms needed to make our economy fit for the future. With new risks on the horizon, and with all western countries looking for ways to increase living standards, now is not the time to go easy on our structural reforms. It is time to redouble our efforts. My Budgets last year delivered key improvements to productivity, such as the apprenticeship levy, lower corporation tax and the national living wage.
My Budget this year sets out the further bold steps that we need to take: first, fundamental reform of the business tax system, with loopholes closed and reliefs and rates reduced, and the result a huge boost for small business and enterprise; secondly, a radical devolution of power so that more of the responsibility and the rewards of economic growth are in the hands of local communities; thirdly, major new commitments to the national infrastructure projects of the future; fourthly, confronting the obstacles that stand in the way of important improvements to education and our children’s future; and, fifthly, backing people who work hard and save. In short, this Budget puts the next generation first, and I will take each step in turn.
In the last Parliament I cut corporation tax dramatically, but I also introduced the diverted profits tax to catch those trying to shift profits overseas. As a result, Britain went from one of the least competitive business tax regimes to one of the most competitive—and we raised much more money for our public services. Today, the Financial Secretary and I are publishing a road map to make Britain’s business tax system fit for the future. It will deliver a low-tax regime that will attract the multinational businesses that we want to see in Britain, but ensure that they pay taxes here too—something that never happened under a Labour Government. It will level the playing field, which has been tilted against our small firms. The approach that we take is guided by the best practice set out by the OECD. This is work that Britain called for, Britain paid for and Britain will be among the very first to implement.
First, some multinationals deliberately over-borrow in the UK to fund activities abroad, and then deduct the interest bills against their UK profits. From April next year, we will restrict interest deductibility for the largest companies at 30% of UK earnings, while making sure that firms whose activities justify higher borrowing are protected with a group ratio rule.
Next, we are setting new hybrid mismatch rules to stop the complex structures that allow some multinationals to avoid paying any tax anywhere, or to deduct the same expenses in more than one country. Then, we are going to strengthen our withholding tax on the royalty payments that allow some firms to shift money to tax havens, and, lastly, we are going to modernise the way that we treat losses. We are going to allow firms to use losses more flexibly in a way that will help over 70,000 mostly British companies, but, with these new flexibilities in place, we will do what other countries do and restrict the maximum amount of profits that can be offset using past losses to 50%. This will apply only to the less than 1% of firms making profits over £5 million, and the existing rules for historic losses in the banking sector will be tightened to 25%.
We will maintain our plans to align tax payment dates for the largest companies more closely to when profits are earned, but we will give firms longer to adjust to these changes, which will now come into effect in April 2019. All these reforms to corporation tax will help create a modern tax code that better reflects the reality of the global economy. Together, they raise £9 billion in extra revenue for the Exchequer. But our policy is not to raise taxes on business. Our policy is to lower taxes on business. So, everything we collect from the largest firms who are trying to pay no tax will be used to help millions of firms who pay their fair share of tax.
I can confirm today that we are going to reduce the rate of corporation tax even further. That is the rate Britain’s profit-making companies, large and small, have to pay, and all the evidence shows that it is one of the most distortive and unproductive taxes there is. Corporation tax was 28% at the start of the last Parliament and we reduced it to 20% at the start of this one. Last summer, I set out a plan to cut it to 18% in the coming years. Today I am going further. By April 2020, it will fall to 17%. Britain is blazing a trail; let the rest of the world catch up.
Cutting corporation tax is only part of our plan for the future. I also want to address the great unfairness that many small businessmen and women feel when they compete against companies on the internet. Sites such as eBay and Amazon have provided an incredible platform for many new small British start-ups to reach large numbers of customers, but there has been a big rise in overseas suppliers storing goods in Britain and selling them online without paying VAT. That unfairly undercuts British businesses both on the internet and on the high street, and today I can announce that we are taking action to stop it.
That is the first thing we are doing to help our small firms. Secondly, we are going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet. Our tax system should be helping these people so I am introducing two new tax-free allowances, each worth £1,000 a year, for both trading and property income. There will be no forms to fill in, no tax to pay—it is a tax break for the digital age and at least half a million people will benefit.
On top of the two measures comes the biggest tax cut for business in this Budget. Business rates are the fixed cost that weigh down on many small enterprises. At present, small business rate relief is only permanently available to firms with a rateable value of less than £6,000. In the past, I have been able to double it for one year only. Today I am more than doubling it, and more than doubling it permanently. The new threshold for small business rate relief will rise from £6,000 to a maximum threshold of £15,000. I am also going to raise the threshold for the higher rate from £18,000 to £51,000.
Let me explain to the House what that means. From April next year, 600,000 small businesses will pay no business rates at all. That is an annual saving for them of up to nearly £6,000, forever. A further quarter of a million businesses will see their rates cut. In total, half of all British properties will see their business rates fall or be abolished altogether. To support all ratepayers, including larger stores who face tough competition and who employ so many people, we will radically simplify the administration of business rates, and from 2020, switch the uprating from the higher retail prices index to the lower consumer prices index. That is a permanent long-term saving for all businesses in Britain. A typical corner shop in Barnstaple will pay no business rates. A typical hairdresser in Leeds will pay no business rates. A typical newsagents in Nuneaton will pay no business rates.
This is a Budget which gets rid of loopholes for multinationals and gets rid of tax for small businesses. A £7 billion tax cut for our nation of shopkeepers. A tax system that says to the world: we are open for business. This is a Conservative Government that are on your side.
Just over a year ago, I reformed residential stamp duty. We moved from a distortive slab system to a much simpler slice system, and as a result 98% of homebuyers are paying the same or less and revenues from the expensive properties have risen. The International Monetary Fund welcomed the changes and suggests we do the same to commercial property, so that is what we are going to do, and in a way that helps our small firms. At the moment, a small firm can pay just £1 more for a property and face a tax bill three times as large. That makes no sense. So from now on, commercial stamp duty will have a zero rate band on purchases up to £150,000, a 2% rate on the next £100,000, and a 5% top rate above £250,000. There will also be a new 2% rate for those high-value leases with a net present value above £5 million.
This new tax regime comes into effect from midnight tonight. There are transitional rules for purchasers who have exchanged but not completed contracts before midnight. These reforms raise £500 million a year and while 9% will pay more, more than 90% will see their tax bills cut or stay the same. So, if you buy a pub in the midlands worth, say, £270,000, you would today pay over £8,000 in stamp duty. From tomorrow, you will pay just £3,000. It is a big tax cut for small firms, all in a Budget that backs small business.
Businesses also want a simpler tax system. I have asked Angela Knight and John Whiting at the Office of Tax Simplification to look at what more we can do to make the tax system work better for small firms and I am funding a dramatic improvement in the service that Her Majesty’s Revenue and Customs offers them. Many retailers have complained bitterly to me about the complexity of the carbon reduction commitment. It is not a commitment; it is a tax. I can tell the House that we are not going to reform it. Instead, I have decided to abolish it altogether. To make good the lost revenue, the climate change levy will rise from 2019. The most energy intensive industries, such as steel, remain completely protected, and I am extending the climate change agreements that help many others.
The Secretary of State for Energy and Climate Change and I are announcing £730 million in further auctions to back renewable technologies, and we are now inviting bids to help develop the next generation of small modular reactors. We are also going to help one of the most important and valued industries in our United Kingdom, which has been severely affected by global events. The oil and gas sector employs hundreds of thousands of people in Scotland and around our country. In my Budget a year ago, I made major reductions to its taxes but the oil price has continued to fall, so we need to act now for the long term. I am today cutting in half the supplementary charge on oil and gas from 20% to 10% and I am effectively abolishing petroleum revenue tax too, backing this key Scottish industry and supporting jobs right across Britain—[Interruption.]
Order. Mr Ellis, Mr Shelbrooke, just relax. There is more to come.
Both those major tax cuts will be backdated so that they are effective from 1 January this year and my hon. Friend the Exchequer Secretary will work with the industry to give them our full support.
We are only able to provide this kind of support to our oil and gas industry because of the broad shoulders of the United Kingdom. None of this support would have been remotely affordable if, in just eight days’ time, Scotland had broken away from the rest of the UK, as the nationalists wanted. Their own audit of Scotland’s public finances confirms that they would have struggled from the start with a fiscal crisis under the burden of the highest budget deficit in the western world. Thankfully, the Scottish people decided that we are better together in one United Kingdom.
Believing in our United Kingdom is not the same as believing that every decision should be taken here in Westminster and Whitehall, and that is the next step in this Budget’s plan to make Britain fit for the future. Because as Conservatives we know that if we want local communities to take responsibility for local growth, they have to be able to reap the rewards. This Government are delivering the most radical devolution of power in modern British history. We are devolving power to our nations. The Secretary of State for Scotland and I have agreed the new fiscal framework with the Scottish Government. We are also opening negotiations on a city deal with Edinburgh; we back the new V&A museum in Dundee; and in response to the powerful case made to me by Ruth Davidson we are providing new community facilities for local people in Helensburgh and the Royal Navy personnel nearby at Faslane, paid for by our LIBOR fines.
In Wales, we are committed to devolving new powers to the Assembly and yesterday the Secretary of State for Wales and the Chief Secretary to the Treasury signed a new billion-pound deal for the Cardiff region. We are opening a discussion on a city deal for Swansea and a growth deal for north Wales, so it is better connected to our northern powerhouse. I have listened to the case made by Welsh Conservative colleagues and I can announce today that from 2018 we are going to halve the price of the tolls on the Severn crossings.
The Secretary of State for Northern Ireland and I are working towards the devolution of corporation tax. I am also extending enhanced capital allowances to the enterprise zone in Coleraine and we will use over £4 million from LIBOR fines to help establish the first air ambulance service for Northern Ireland.
In this Budget we make major further advances in the devolution of power within England too. It was less than two years ago that I called for the creation of strong elected Mayors to help us build a northern powerhouse. Since then, powerful elected Mayors have been agreed for Manchester, Liverpool, Tees Valley, Newcastle and Sheffield. Over half the population of the northern powerhouse will be able to elect a Mayor accountable to them next year. We will have an elected Mayor for the West Midlands too.
These new devolution arrangements evolve and grow stronger. Today I can tell the House that the Secretary of State for Justice and I are transferring new powers over the criminal justice system to Greater Manchester. This is the kind of progressive social policy that this Government are proud to pioneer. I can also announce to the House that today, for the first time, we have reached agreement to establish new elected Mayors in our English counties and southern cities too. I want to thank my right hon. Friend the Secretary of State for Communities and Local Government and my Treasury colleague Jim O’Neill for their superhuman efforts. We have agreed a single powerful East Anglia combined authority, headed up by an elected Mayor and almost a billion pounds of new investment. We have also agreed a new West of England mayoral authority—and they too will see almost a billion pounds invested locally. The authorities of Greater Lincolnshire will have new powers, new funding and a new Mayor. North, south, east and west—the devolution revolution is taking hold.
When I became Chancellor, 80% of local government funding came in largely ring-fenced grants from central Government. It was the illusion of local democracy. By the end of this Parliament, 100% of local government resources will come from local government—raised locally, spent locally, invested locally. Our great capital city wants to lead the way. My friend the Mayor of London and my hon. Friend the Member for Richmond Park (Zac Goldsmith) passionately argue for the devolution of business rates. I can confirm today that the Greater London Authority will move towards full retention of its business rates from next April, three years early. Michael Heseltine has accepted our invitation to lead a Thames estuary growth commission and he will report to me with its ideas next year.
In every international survey of our country, our failure for a generation to build new housing and new transport has been identified as a major problem. But in this Government we are the builders. So today we are setting out measures to speed up our planning system, zone housing development and prepare the country for the arrival of 5G technology. My right hon. Friend the Business Secretary will be bringing forward our innovation proposals. And because we make savings in day-to-day spending we can accelerate capital investment and increase it as a share of GDP. All these are things that a country focused on its long-term future should be doing.
Our new stamp duty rates on additional properties will come into effect next month. I have listened to colleagues and the rates will apply to larger investors too. We are going to use receipts to support community housing trusts, including £20 million to help young families on to the housing ladder in the south-west of England. This is a brilliant idea from my hon. Friend the Member for Truro and Falmouth (Sarah Newton) and many other colleagues. And it is proof that when the south-west votes blue, their voice is heard loud here in Westminster.
Because under this Government we are not prepared to let people be left behind, I am also announcing a major new package of support worth over £115 million to support those who are homeless and to reduce rough sleeping.
Last year, I established a new National Infrastructure Commission to advise us all on the big long-term decisions we need to boost our productivity. I am sure everyone in the House will want to thank Andrew Adonis and his fellow commissioners for getting off to such a strong start. They have already produced three impressive reports. They recommend much stronger links across northern England. So we are giving the green light to High Speed 3 between Manchester and Leeds; we are finding new money to create a four-lane M62; and we will develop the case for a new tunnelled road from Manchester to Sheffield. My hon. Friends the Members for Carlisle (John Stevenson), for Penrith and The Border (Rory Stewart) and for Hexham (Guy Opperman) have told us not to neglect the north Pennines. So we will upgrade the A66 and the A69 too.
I said we would build the northern powerhouse. We have put in place the Mayors. We are building the roads. We are laying the track. We are making the northern powerhouse a reality and rebalancing our country.
I am also accepting the National Infrastructure Commission’s recommendations on energy and on London transport. The Government who are delivering Crossrail 1 will now commission Crossrail 2. I know this commitment to Crossrail 2 will be warmly welcomed by the Leader of the Opposition, the right hon. Member for Islington North (Jeremy Corbyn). It could have been designed just for him, because it is good for all those who live in north London and are heading south.
Across Britain this Budget invests in infrastructure—from a more resilient train line in the south-west, to the crossings at Ipswich and Lowestoft in the east that we promised—we are making our country stronger.
To respond to the increasing extreme weather events our country is facing I am today proposing further substantial increases in flood defences. That would not be affordable within existing budgets. So I am going to increase the standard rate of insurance premium tax by just half a per cent., and commit all the extra money we raise to flood defence spending. That is a £700 million boost to our resilience and flood defences. The urgent review already under way by the Secretary of State for Environment, Food and Rural Affairs and the Chancellor of the Duchy of Lancaster will determine how the money is best spent. But we can get started now. I have had many representations from colleagues across the House, including my hon. Friends the Members for Morley and Outwood (Andrea Jenkyns) and for Calder Valley (Craig Whittaker). So we are giving the go-ahead to the schemes for York, Leeds, Calder Valley, Carlisle and across Cumbria.
In this Budget we invest in our physical infrastructure and we invest in our cultural infrastructure too. I am supporting specific projects from the Hall for Cornwall in Truro, to £13 million for Hull to make a success as city of culture. Our cathedral repairs fund has been enormously successful so I am extending it with an additional £20 million, because there is one thing that is pretty clear these days—the Conservative party is a broad church. In the 400th anniversary of the great playwright’s death, I have heard the sonnets from the right hon. Member for Knowsley (Mr Howarth) and we commit to a new Shakespeare North theatre, on the site of the first indoor theatre outside our capital. My hon. Friend the Member for Newark (Robert Jenrick) has proposed that we introduce a new tax break for museums that develop exhibitions and take those exhibitions on tour. It is a great idea and we add that to our collection today.
We cut taxes for business. We devolve power. We develop our infrastructure. The next part of our plan to make Britain fit for the future is to improve the quality of our children’s education. Providing great schooling is the single most important thing we can do to help any child from a disadvantaged background succeed. It is also the single most important thing we can do to boost the long-term productivity of our economy, because our nation’s productivity is no more and no less than the combined talents and efforts of the people of these islands. That is why education reform has been so central to our mission since we came to office five years ago. Today we take these further steps.
First, I can announce that we are going to complete the task of setting schools free from local education bureaucracy, and we are going to do it in this Parliament. I am today providing extra funding so that by 2020 every primary and secondary school in England will be, or be in the process of becoming, an academy. Secondly, we are going to focus on the performance of schools in the north, where results have not been as strong as we would like. London’s school system has been turned around; we can do the same in the northern powerhouse and I have asked the outstanding Bradford headteacher, Sir Nick Weller, to provide us with a plan. Thirdly, we are going to look at teaching maths to 18 for all pupils.
Fourthly, we are going to introduce a fair national funding formula, and I am today committing £500 million to speed up its introduction. We will consult, and our objective is to get over 90% of the schools that will benefit on to the new formula by the end of this Parliament. The Conservative Government are delivering on their promise of fair funding for our schools. Tomorrow my right hon. Friend the Education Secretary will publish a White Paper setting out further improvements that we will make to the quality of education, because we will put the next generation first.
Doing the right thing for the next generation is what this Government and this Budget are about, no matter how difficult and controversial that is. We cannot have a long-term plan for the country unless we have a long-term plan for our children’s healthcare. Here are the facts that we know: five-year-old children are consuming their body weight in sugar every year. Experts predict that within a generation more than half of all boys and 70% of girls could be overweight or obese. Here is another fact that we all know: obesity drives disease. It increases the risk of cancer, diabetes and heart disease, and it costs our economy £27 billion a year. That is more than half the entire NHS pay-bill.
Here is another truth we all know: one of the biggest contributors to childhood obesity is sugary drinks. A can of cola typically has nine teaspoons of sugar in it. Some popular drinks have as many as 13 teaspoons. That can be more than double a child’s recommended added sugar intake. Let me give credit where credit is due. Many in the soft drinks industry recognise that there is a problem and have started to reformulate their products. Robinsons recently removed added sugar from many of its cordials and squashes. Sainsbury’s, Tesco and the Co-op have all committed to reduce sugar across their ranges. So industry can act, and with the right incentives I am sure it will.
I am not prepared to look back at my time here in this Parliament, doing this job, and say to my children's generation, “I’m sorry. We knew there was a problem with sugary drinks. We knew it caused disease, but we ducked the difficult decisions and we did nothing.” So today I can announce that we will introduce a new sugar levy on the soft drinks industry. Let me explain how it will work. It will be levied on the companies. It will be introduced in two years’ time to give companies plenty of space to change their product mix. It will be assessed on the volume of the sugar-sweetened drinks they produce or import. There will be two bands—one for total sugar content above 5 grams per 100 millilitres, and a second, higher band for the most sugary drinks with more than 8 grams per 100 millilitres. Pure fruit juices and milk-based drinks will be excluded, and we will ensure that the smallest producers are kept out of scope.
We will, of course, consult on implementation. We are introducing the levy on the industry which means that companies can reduce the sugar content of their products, as many already do. It means that they can promote low-sugar or no-sugar brands, as many already are. They can take these perfectly reasonable steps to help with children’s health. Of course, some may choose to pass the price on to consumers, and that will be their decision, and this would have an impact on consumption too. We as Conservatives understand that tax affects behaviour. So let us tax the things we want to reduce, not the things we want to encourage. The Office for Budget Responsibility estimates that this levy will raise £520 million, and that is tied directly to the second thing we are going to do today to help children’s health and wellbeing.
We are going to use the money from this new levy to double the amount of funding we dedicate to sport in every primary school. For secondary schools, we are going to fund longer school days for those that want to offer their pupils a wider range of activities, including extra sport. It will be voluntary for schools but compulsory for the pupils. There will be enough resources for a quarter of secondary schools to take part, but that is just the start. The devolved Administrations will receive equivalent funding through the Barnett formula and I hope they spend it on the next generation too.
I am also using the LIBOR funds specifically to help with children’s hospital services. Members across the House have asked for resources for children’s care in Manchester, Sheffield, Birmingham and Southampton, and we provide those funds today. We have a determination to improve the health of our children, a new levy on excessive sugar in soft drinks, the money used to double sport in our schools—a Britain fit for the future, a Government not afraid to put the next generation first.
Let me now turn to indirect taxes. Last autumn I said that we would use all the VAT we collect from sanitary products to support women’s charities. I want to thank the many Members here on all sides, in all parties, for the impressive proposals they have put forward. Today we allocate £12 million from the tampon tax to these charities across the UK, from Breast Cancer Care to the White Ribbon Campaign and many other causes. We will make substantial donations to the Rosa fund and to Comic Relief so that we reach many more grassroots causes.
I now turn to excise duties. When we took office, we inherited plans that would have seen fuel duty rise above inflation every year and cost motorists 18p extra a litre. We wholeheartedly rejected those plans and instead we took action to help working people. We froze fuel duty throughout the last Parliament—a tax cut worth nearly £7 billion a year. In the past 12 months, petrol prices have plummeted. That is why we pencilled in an inflation rise. But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms. Families paid the cost when oil prices rocketed; they should not be penalised when oil prices fall. We are the party for working people, so I can announce that fuel duty will be frozen for the sixth year in a row. That is a saving of £75 a year to the average driver and £270 a year to a small business with a van. It is the tax boost that keeps Britain on the move.
Tobacco duty will continue to rise, as set out in previous Budgets, by 2% above inflation from 6 pm tonight and hand-rolling tobacco will rise by an additional 3%. To continue our drive to improve public health, we will reform our tobacco regime to introduce an effective floor on the price of cigarettes and consult on increased sanctions for fraud.
I have always been clear that I want to support responsible drinkers and our nation’s pubs. Five years ago we inherited tax plans that would have ruined that industry. Instead, prompted by my hon. Friend the Member for Burton (Andrew Griffiths) and others, the action we took in the last Parliament on beer duty saved hundreds of pubs and thousands of jobs. Today I back our pubs again. I am freezing beer duty, and cider duty too. Scotch whisky accounts for a fifth of all the UK’s food and drink exports. So we back Scotland and back that vital industry too, with a freeze on whisky and other spirits duty this year. All other alcohol duties will rise by inflation, as planned.
There are some final measures that we need to take to boost enterprise, back the next generation, and help working people keep more of the money they earn. All these have been themes of this Budget. Let me start with enterprise. We Conservatives know that when it comes to growing the economy, alongside good infrastructure and great education we need to light the fires of enterprise, and our tax system can do more. To help the self-employed I am going to fulfil the manifesto commitment we made, and from 2018 abolish class 2 national insurance contributions altogether. That is a simpler tax system and a tax cut of over £130 for each of Britain’s 3 million-strong army of the self-employed.
Next, we want to help people to invest in our businesses and help them to create jobs. The best way to encourage that is to let them keep more of the rewards when that investment is successful. Our capital gains tax is now one of the highest in the developed world, when we want our taxes to be among the lowest. The headline rate of capital gains tax currently stands at 28%. Today I am cutting it to 20%. and I am cutting the capital gains tax paid by basic rate taxpayers from 18% to just 10%. The rates will come into effect in just three weeks’ time. The old rates will be kept in place for gains on residential property and carried interest. I am also introducing a brand-new 10% rate on long-term external investment in unlisted companies, up to a separate maximum £10 million of lifetime gains. In this Budget, we are putting rocket boosters on the backs of enterprise and productive investment.
In this Budget, I also want to help the next generation build up assets and save. The fundamental problem is that far too many young people in their 20s and 30s have no pension and few savings. Ask them and they will tell you why. It is because they find pensions too complicated and inflexible, and most young people face an agonising choice of either saving to buy a home or saving for their retirement. We can help by providing people with more information about the multiple pensions many have, and providing more tax relief on financial advice, and the Economic Secretary and I do both today.
We can also help those on the lowest incomes to save, and the Prime Minister announced our Help to Save plan on Monday. Over the past year, we have consulted widely on whether we should make compulsory changes to the pension tax system. But it was clear that there was no consensus. Indeed, the former Pensions Minister, the Liberal Democrat Steve Webb, said I was trying to abolish the lump sum. Instead, we are going to keep the lump sum and abolish the Liberal Democrats. [Laughter.] I am tempted to say it will take effect from midnight tonight.
My pension reforms have always been about giving people more—[Interruption.]
Order. Mr Opperman, you may have been an amateur jockey, but I do not want you to fall short on this Budget.
My pension reforms have always been about giving people more freedom and more choice. So, faced with the truth that young people are not saving enough, I am today providing a different answer to the same problem. We know people like ISAs—because they are simple. You save out of taxed income, everything you earn on your savings is tax-free, and it is tax-free when you withdraw it too. From April next year, I am going to increase the ISA limit from just over £15,000 to £20,000 a year for everyone.
For those under 40, many of whom have not had such a good deal from the pension system, I am introducing a completely new, flexible way for the next generation to save. It is called the lifetime ISA. Young people can put money in, get a Government bonus, and use it to either buy their first home or save for their retirement.
Here is how it will work. From April 2017, anyone under the age of 40 will be able to open a lifetime ISA and save up to £4,000 each year. For every £4 you save, the Government will give you £1. So put in £4,000 and the Government will give you £1,000. Every year. Until you are 50. You do not have to choose between saving for your first home or saving for your retirement. With the new lifetime ISA, the Government are giving you money to do both.
For the basic rate taxpayer, that is the equivalent of tax-free savings into a pension, and unlike a pension, you will not pay tax when you come to take the money out in retirement. For the self-employed, it is the kind of support they simply cannot get from the pensions system today.
Unlike a pension, you can access your money anytime without the bonus and with a small charge. And we are going to consult the industry on whether, like the American 401(k), you can return the money to the account to reclaim the bonus—so it is both generous and completely flexible. Those who have already taken out our enormously popular Help to Buy ISA will be able to roll it into the new lifetime ISA—and keep the Government match. A £20,000 ISA limit for everyone. A new lifetime ISA. A Budget that puts the next generation first.
I turn now to my final measures. This Government were elected to back working people. The best way to help working people is to let them keep more of the money they earn. When I became Chancellor, the tax-free personal allowance was less than £6,500. In two weeks’ time, it will rise to £11,000. We committed in our manifesto that it would reach £12,500 by the end of this Parliament. Today we take a major step towards that goal. From April next year, I am raising the tax-free personal allowance to £11,500. That is a tax cut for 31 million people. It means a typical basic rate taxpayer will be paying over £1,000 less income tax than when we came into government five years ago. And it means another 1.3 million of the lowest paid taken out of tax altogether—social justice delivered by Conservative means.
We made another commitment in our manifesto, and that was to increase the threshold at which people pay the higher rate of tax. That threshold stands at £42,385 today. I can tell the House that from April next year I am going to increase the higher rate threshold to £45,000. That is a tax cut of over £400 a year. It is going to lift over half a million people who should never have been paying the higher rate out of that higher rate band altogether. It is the biggest above-inflation cash increase since Nigel Lawson introduced the 40p rate over 30 years ago. A personal tax free allowance of £11,500. No one paying the 40p rate under £45,000. We were elected as a Government for working people. And we have delivered a Budget for working people.
Five years ago, we set out a long-term plan because we wanted to make sure that Britain never again was powerless in the face of global storms. We said then that we would do the hard work to take control of our destiny and put our own house in order. Five years later, our economy is strong, but the storm clouds are gathering again. Our response to this new challenge is clear. We act now so we do not pay later.
This is our Conservative Budget. One that reaches a surplus so the next generation does not have to pay our debts. One that reforms our tax system so the next generation inherits a strong economy. One that takes the imaginative steps so the next generation is better educated. One that takes bold decisions so that our children grow up fit and healthy.
This is a Budget that gets the investors investing, savers saving, businesses doing business, so that we build for working people a low-tax, enterprise Britain, secure at home, strong in the world. I commend to the House a Budget that puts the next generation first.
provisional collection of taxes
Motion made, and Question put forthwith (Standing order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Stamp duty land tax (calculating tax on non-residential and mixed transactions) (Motion no. 45.)
(b) Tobacco products duty (rates) (Motion no. 62.)
(c) Alcoholic liquor duties (rates) (Motion no. 63.)— (Mr Osborne.)
Question agreed to.
I shall now call upon the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”, and it is on this motion that the debate will take place today and on succeeding days. The Questions on this motion, and on the remaining motions, will be put at the end of Budget debate, on Tuesday 22 March.
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 Budget the Chancellor has just delivered is actually the culmination of six years of his failures. It is a Budget—[Interruption.]
Order. This corner of the Chamber by the Chair is not some kind of fairground attraction. We expect courtesy from both sides of the House whoever is speaking. I want to hear the Leader of the Opposition and, as I said before, I know that the public in this country want to hear what the Opposition have to say as well.
Thank you, Mr Deputy Speaker.
It is a recovery built on sand and a Budget of failure. The Chancellor has failed on the budget deficit, failed on debt, failed on investment, failed on productivity, failed on the trade deficit, failed on the welfare cap and failed to tackle inequality in this country. Today he has announced that growth is revised down last year, this year and every year he has forecast. Business investment is revised down and Government investment is revised down. It is a very good thing that the Chancellor is blaming the last Government—he was the Chancellor in the last Government.
This Budget has unfairness at its very core, paid for by those who can least afford it. The Chancellor could not have made his priorities clearer. While half a million people with disabilities are losing over £1 billion in personal independence payments, corporation tax is being cut and billions handed out in tax cuts to the very wealthy.
The Chancellor has said that he has to be judged on his record and by the tests he set himself. Six years ago, he promised a balanced structural current budget by 2015. It is now 2016—there is still no balanced budget. In 2010, he and the Prime Minister claimed, “We’re all in it together.” The Chancellor promised this House that the richest would
“pay more than the poorest, not just in terms of cash but as a proportion of income as well.”—[Official Report, 22 June 2010; Vol. 512, c. 179.]
So let me tell him how that has turned out. The Institute for Fiscal Studies—an independent organisation—found that “the poorest have” suffered “the greatest proportionate losses.” The Prime Minister told us recently that he was delivering “a strong economy” and “a sound plan”—but strong for who? Strong to support who, and sound for who, when 80% of the public spending cuts have fallen on women in our society? This Budget could have been a chance to demonstrate a real commitment to fairness and equality; yet again, the Chancellor has failed.
Five years ago—they were great words—the Chancellor promised
“a Britain carried aloft by the march of the makers”—[Official Report, 22 March 2011; Vol. 525, c. 966.]
Soaring rhetoric, yet despite the resilience, ingenuity and hard work of manufacturers, the manufacturing sector is now smaller that it was eight years ago. Last year, he told the Conservative conference, “We are the builders”, but ever since then the construction industry has been stagnating. This is the record of a Conservative Chancellor who has failed to balance the books, failed to balance out the pain and failed to rebalance our economy. It is no wonder that his close friend, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), is complaining that
“we were told for the next seven years things were looking great. Within one month of that forecast, we’re now being told that things are difficult”.
The gulf between what the Conservative Government expect from the wealthiest and what they demand from ordinary British taxpayers could not be greater. The “mate’s rates” deals for big corporations on tax deals is something they will be for ever remembered for. This is a Chancellor who has produced a Budget for hedge fund managers more than for small businesses. This is a Government—[Interruption.]
Mr Williamson—I do not know what it is but you always want to catch my attention. Let me assure you—you have got my attention, so let us make sure you do not get it again.
Thank you, Mr Deputy Speaker.
This is a Government who stood by as the steel industry bled. Skills, output and thousands of very skilled jobs have been lost, and communities ruined and damaged, by the inaction of the Government. The Chancellor set himself a £1 trillion export target; it is going to be missed by a lot more than a country mile. Instead of trade fuelling growth, as he promised, it is now holding back growth. He talked of the northern powerhouse. We now discover that 97% of the senior staff in the northern powerhouse have been outsourced to London—to the south. For all his talk of the northern powerhouse, the north-east accounts for less than 1% of Government infrastructure pipeline projects in construction. For all his rhetoric, there has been systematic under-investment in the north.
Across the country, local authorities—councils—are facing massive problems, with a 79% cut in their funding. Every library that has been closed, every elderly person left without proper care, and every swimming pool with reduced opening hours or closed altogether is a direct result of the Government underfunding our local authorities and councils.
Far from presiding over good-quality employment, he is the Chancellor who has presided over under- employment and insecurity, with nearly—[Interruption.]
Order. Certain people are testing my patience, so just think what your constituents are thinking out there as well. I want to hear the Leader of the Opposition and I expect you to hear the Leader of the Opposition. If you do not want to hear him, I am sure the Tea Room awaits. Perhaps there will be a phone call for Mr Hoare if he keeps shouting.
Thank you, Mr Deputy Speaker.
Security comes from knowing what your income is and knowing where your job is. If you are one of those nearly 1 million people on a zero-hours contract, you do not know what your income is: you do not have that security. We have the highest levels of in-work poverty on record and the largest number of people without security. They need regular wages that can end poverty and can bring about real security in their lives. Logically, low-paid jobs do not bring in the tax revenues that the Chancellor tells us he needs to balance his books. Household borrowing is once again being relied on to drive growth. Risky unsecured lending is growing at its fastest rate for the past eight years, and that is clearly not sustainable.
The renewables industry is vital to the future of our economy and our planet—indeed, our whole existence. It has been targeted for cuts, with thousands of jobs lost in the solar panel production industry. The Prime Minister, as we discussed earlier at Prime Minister’s Question Time, promised “the greenest Government ever”—here again, an abject failure. Science spending is also down, by £1 billion compared with 2010.
Home ownership is down under this Conservative Government. A whole generation is locked out of any prospect of owning their own home. This is the Chancellor who believes that a starter home costing £450,000 is affordable. It might be for some of his friends and for some Conservative Members, but not for those people who are trying to save for a deposit because they cannot get any other kind of house.
We have heard promises of garden cities before. Two years ago, the Chancellor pledged a garden city of 15,000 homes in Ebbsfleet, and many cheered that. His Ministers have been very busy ever since then—they have made 30 Ebbsfleet announcements, and they have managed to build 368 homes in Ebbsfleet. That is 12 homes for every press release. We obviously need a vast increase in press releases in order to get any homes built in Ebbsfleet, or indeed anywhere else.
While we welcome the money that will be put forward to tackle homelessness, it is the product of under-investment, underfunding of local authorities, not building enough council housing and not regulating the private rented sector. That is what has led to this crisis. We need to tackle the issue of homelessness by saying that everybody in our society deserves a safe roof over their head.
Child poverty is forecast to rise every year in this Parliament. What a damning indictment of this Government, and what a contrast to the last Labour Government, who managed to lift almost 1 million children out of poverty.
Eighty-one per cent of the tax increases and benefit cuts are falling on women, and the 19% gender pay gap persists. Despite the Chancellor’s protestations, it is a serious indictment that women are generally paid less than men for doing broadly similar work. It will require a Labour Government to address that.
The Government’s own social mobility commissioner said that
“there is a growing sense…that Britain’s best days are behind us rather than ahead”,
as the next generation expects to be worse off than the last. The Chancellor might have said a great deal about young people, but he failed to say anything about the debt levels that so many former students have; the high rents that young people have to pay; the lower levels of wages that young people get; and the sense of injustice and insecurity that so many young people in this country face and feel every day. It will again require a Labour Government to harness the enthusiasms, talent and energy of the young people of this country.
Investing in public services is vital to people’s wellbeing—I think we are all agreed on that, or at least I hope we are—yet every time the Chancellor fails, he cuts services, cuts jobs, sells assets and further privatises. That was very clear when we looked at the effects of the floods last year. Flood defences were cut by 27%. People’s homes in Yorkshire, Lancashire and Cumbria were ruined because of his Government’s neglect of river basin management and the flood defences that are so necessary.
Obviously, we welcome any money that is now going into flood defences, but I hope that that money will also be accompanied by a reversal of the cuts in the fire service that make it so difficult for our brilliant firefighters to protect people in their homes, and a reversal of the cuts in the Environment Agency that make it so hard for those brilliant engineers to protect our towns and cities, and for those local government workers who performed so brilliantly during the crisis in December and January in those areas that were flooded.
Our education service invests in people. It is a vital motor for the future wealth of this country, so why has there been a 35% drop in the adult skills budget under this Government? People surely need the opportunity to learn, and they should not have to go into debt in order to develop skills from which we as a community entirely benefit.
On the Chancellor’s announcement yesterday, there is not a shred of evidence to suggest that turning schools into academies boosts performance. There is nothing in the Budget to deal with the real issues of teacher shortages, the school place crisis and ballooning class sizes.
The Chancellor spoke at length about the issue of ill health among young children and the way in which sugar is consumed at such grotesque levels in society. I agree with him and welcome what he said. I am sure he will join me in welcoming the work done by many Members, including my right hon. Friend the Member for Leicester East (Keith Vaz), and by Jamie Oliver in helping to deal with the dreadful situation with children’s health. If we as a society cannot protect our children from high levels of sugar and all that goes with that, including later health crises of cancer and diabetes, we as a House will have failed the nation. I support the Chancellor’s proposals on sugar, and I hope all other Members do, too.
There is an issue, however, that faces the national health service: the deficit has widened to its highest level on record, waiting times are up and the NHS is in a critical condition. Hospital after hospital faces serious financial problems and is working out what to sell in order to balance its books. Our NHS should have the resources to concentrate on the health needs of the people; it should not have to get rid of resources in order to survive. The Public Accounts Committee reported only yesterday that NHS finances have
“deteriorated at a severe and rapid pace”.
I did not detect much in this Budget that is going to do much to resolve that crisis. The Chancellor has also cut public health budgets, mental health budgets and adult social care.
Earlier this month the Government forced through a £30 per week cut to disabled employment and support allowance claimants—[Interruption.]
Order. There are people having conversations on the Front Bench. If you need to have a conversation, I am sure there is plenty of room in the Tea Room for you.
Last week we learned that 500,000 people will lose up to £150 per week due to cuts to personal independence payments. I simply ask the Chancellor: if he can finance his Budget giveaways to different sectors, why can he not fund the need for dignity for the disabled people of this country?
The Chancellor said in the autumn statement that he had protected police budgets, but Sir Andrew Dilnot confirms that there has been a decrease in the police grant, while 18,000 police officers have lost their jobs. As my hon. Friend the Member for Brent Central (Dawn Butler) pointed out in her question to the Prime Minister earlier, in order to cut down on dangerous crime against vulnerable individuals we need community policing and community police officers. Eighteen thousand of them losing their jobs does not help. This Government have failed on the police, the national health service, social care, housing and education.
Public investment lays the foundations for future growth, as the OECD, the International Monetary Fund and the G20 all recognise. The CBI and the TUC are crying out for more infrastructure investment. It is Labour that will invest in the future—in a high-technology, high-skill, high-wage economy.
The investment commitments that the Chancellor has made today are, of course, welcome, but they are belated and nowhere near the scale this country needs. People will rightly fear that this is just another press release on the road to the non-delivery of crucial projects.
The chronic under-investment—both public and private—presided over by this Chancellor means that the productivity gap between Britain and the rest of the G7 is the widest it has been for a generation. Without productivity growth, which has been revised down further today, we cannot hope to improve living standards. The Labour party backs a strategic state that understands that businesses, public services, innovators and workers combine together to create wealth and drive sustainable growth.
The Chancellor adopted a counter productive fiscal rule. The Treasury Committee responded by saying that it was
“not convinced that the surplus rule is credible”,
and it is right. The Chancellor is locking Britain into an even deeper cycle of low investment, low productivity and low ambition. We will be making the positive case for Britain to remain in the European Union and all the solidarity that can bring.
Over the past six years, the Chancellor has set targets on the deficit, on debt, on productivity, on manufacturing and construction, and on exports. He has failed them all and he is failing Britain.
There are huge opportunities for this country to build on the talent and efforts of everyone, but the Chancellor is more concerned about protecting vested interests. The price of failure is being borne by some of the most vulnerable in our society. The disabled are being robbed of up to £150 a week. Those are not the actions of a responsible statesperson; they are the actions of a cruel and callous Government who side with the wrong people and punish the most vulnerable and the poorest in our society.
The Chancellor was defeated when he tried to make tax credit cuts from next month by the House opposing them, and by Labour Members and Cross Benchers in the Lords. The continuation of austerity that he has confirmed today, particularly in the area of local government spending, is a political choice, not an economic necessity. It locks us into a continued cycle of economic failure and personal misery. The Labour party will not stand by while more poverty and inequality blight this country. We will oppose those damaging choices and make the case for an economy in which prosperity is shared by all.
Let us harness the optimism, the enthusiasm, the hope and the energy of young people. Let us not burden them with debts and unaffordable housing, low-wage jobs and zero-hours contracts, but instead act in an intergenerational way to give young people the opportunities and the chances they want to build a better, freer, more equal and more content Britain. The Chancellor has proved that he is utterly incapable of doing so with his Budget today.
The Leader of the Opposition has made the most difficult speech of the parliamentary year. He is responding to a Budget that he has not seen. I have not seen it either, as a matter of fact. I would be interested to know whether he feels that that was the speech of a democratic socialist; I think it was. It was certainly spoken with great sincerity, but I wonder whether—he can nod and tell me whether he agrees or disagrees—he now accepts, as John Smith and Tony Blair did, that a capitalist economy, properly regulated, is the most powerful source of prosperity and growth yet invented.
Feel free to nod.
I am not going to put the right hon. Gentleman under any pressure.
The Chancellor deserves a great deal of credit for the recovery, and I have said so before; so does the Prime Minister—he has just slipped out of the Chamber—who has backed the Chancellor, I think, for the most part. The last six years have been extremely difficult at times, and it is a defining achievement for the Government that they have led the country out of the worst crisis in modern history and that they are now stabilising the public finances, which looked, and indeed were, completely out of control in 2010. We should not forget the scale of the challenge that beset the then coalition Government.
The Chancellor has talked about storm clouds gathering. I think he called it a “cocktail of risks”, coming particularly from abroad. He is certainly right about that. Emerging markets are slowing down, capital markets are faltering and the eurozone is edging back towards a serious crisis. If all that is sustained, the UK economy is going to take a hit. Of course, as the Office for Budget Responsibility has pointed out, the uncertainty in the short term about the EU referendum will not help either. We have seen all that reflected in the OBR’s forecasts, particularly on productivity. The Chancellor is right to be extremely cautious.
If I get time, I will say something briefly about the fiscal rules, and their merits or otherwise; there are some problems with the fiscal rules. I will also say whether fiscal policy should be so frequently adjusted to take account of forecasts as a consequence. I might say something, if I get time, about the way in which Budget measures are advertised so far in advance, which I am not sure is at all helpful.
First, I want to answer one central criticism of the recovery that is now under way—we did not hear so much of that from the Leader of the Opposition, although there were hints of it from time to time—and that is the assertion that the UK is in the grip of an unsustainable debt-driven, consumption-led recovery. Frankly, the statistics do not support that. Of course, one might say that the statistics are not worth much, because they have come from the Office for National Statistics and other sources, and we have discovered that they are of very little merit. Sir Charlie Bean is trying to improve statistics. They are the only figures we have got, however, and on the basis of the figures we have got, that claim, which is certainly widely made, does not hold up.
Investment has contributed a third of the total growth since the depths of the recession in the middle of 2009, despite accounting for only one seventh of GDP in recent years; that is the figure for the past five years. Debt as a proportion of household income has remained well below crisis levels, and recently productivity and real wage growth, which are the hallmarks of a sustainable recovery, are also showing signs of a pick up—something that the Chancellor did not emphasise in his speech—so I do not think that that argument holds up. Even if it were true that the recovery was very uneven as a consequence, that is what I would expect. The bigger the shock—this was a very big shock, the biggest in modern economic history—the more uneven the recovery is likely to be. Growth returns only a result of a fundamental reallocation of capital after a major crisis and more efficient use of that capital in the places to which it goes.
That process, this time, has been made particularly difficult by a profound weakness of the banking system. Firms, especially small and medium-sized enterprises, appear unable to obtain the capital they need to invest and grow even now. Again, that is something that the Chancellor did not emphasise. Although it is true that the average rate of interest for new advances is not very high—around 4%—the total stock of outstanding loans to SMEs tells its own story. It is falling, and has been falling pretty steadily for several years, even though the economy is recovering. That suggests that SMEs are not able, perhaps because of some form of rationing, to get the money that they need to grow and to sustain economic activity. That is a question that we need to come back to in the context of banking reform. Above all, we need desperately to get much more banking competition into the SME market and into the retail banking market.
I said that I would query the fiscal rules, and I am going to do so, as indeed has the Treasury Committee in an earlier report. The Chancellor was able to show a good deal of flexibility when it mattered in the last Parliament. His fiscal rules provided him with a good deal of leeway to adjust policy in response to the euro crisis, which was a heck of a shock to adjust to. He recently imposed three new restrictions on himself. First, there is this new surplus rule. Then there is the ring-fencing of three quarters of public spending. Now we also have the tax lock, which prevents rises in VAT, national insurance and income tax, which collectively account for three quarters of tax revenue.
Making fiscal rules all began with the efforts of Tony Blair and the former right hon. Member for Kirkcaldy and Cowdenbeath to restore credibility to Labour’s economic policy in the 1990s. Since 1997—I have taken a look at the fiscal rules and if somebody wants me to go through them all, I will, but that will only delay the House—I have worked out that we have had six, so the average life of those fiscal rules has been three and a half years. I am afraid that the record of this Government and the coalition Government is no better than that of their predecessors; actually, it is somewhat worse. There is some merit in the Government’s giving guidance to markets and the public about their intentions, particularly their long-term and strategic intentions, but the rules have been presented, as their names suggest, as something far more permanent. They are called guarantees, rules, mandates, charters or pledges. Of course, as each one has been broken, it has not done much for the quality of politics and political discourse, and it has not done anything for economic credibility. The Government’s fiscal credibility does not derive from the rules or the mandates; it comes from the fact that they have tackled the deficit and have got it down from 10% to about 3% or a bit more.
Parties on both sides of the House now have fiscal rules. The new Labour shadow Chancellor—I do not think he is new Labour himself, but he is the recently appointed shadow Chancellor—has recently come up with one of his own. Both parties are at it, but I do not think the rules of either of them are offering much.
Is not one of the problems faced by any Government the fact that the so-called independent forecasts by the OBR and the Bank of England are always wrong and that they are always changing them? Those forecasts can have more of an impact on the Budget than common-sense judgments about where the economy is going, because we are always dealing with the errors of the OBR.
That is exactly the point I was coming on to make. We have just seen that the Chancellor has been forced to adjust his short-term policy to take account of what the OBR is now saying. He has altered his plans of only four months ago, and so long as the rule remains in place, he will have to do so again after the next fiscal event. That is mainly why the Treasury Committee concluded—the Leader of the Opposition did not give the whole quote—that it was
“not convinced that the surplus rule is credible in its current form.”
There is merit in something that can give some guidance, but it must be something less than one of these cast-iron rules that turn out to be so brittle they get smashed the first time there is a problem.
There are the public expenditure rules. On public expenditure, the Government have ring-fenced about three quarters of public spending—health, schools, defence, international aid, pensions and child benefit. That is a heck of a lot. I will give an illustration of the effect of doing that. The Chancellor said that he needs to find only 50p in every £100, which I think he said will come mainly from value-for-money savings across the public spending framework. In fact, of course, three quarters of that framework is ring-fenced, so he really needs to get £2 in every £100 from the quarter from which he can raise it.
Then there is the tax rule. It says that the Government are committed, in law, not to increase VAT, income tax or national insurance contributions, which collectively amount to three quarters of Government revenue. I voted for that piece of declaratory legislation. I am not very keen on declaratory legislation, but I went through the Lobby for it. I must say, speaking personally—not on behalf of the Treasury Committee—that I would much rather have voted for legislation that prohibited Chancellors from tying their hands behind their backs in such a way, and I would like to limit hypothecation at the same time.
I will not detain the House for very much longer, except to say that the Budget measures will need very careful examination by the Treasury Committee. There is certainly quite a bit to examine, as there usually is every year. As the son of a shopkeeper, I cannot be anything but delighted to hear what has been said about class 2 national insurance contributions and small business rate relief. Although I will take a close look at that, it sounds as though that is exactly what is required. The reduction in corporation tax to 17% should not be underestimated. I would not mind betting that we will get some more revenue from that, quite independently of the anti-avoidance measures that are being pushed through.
The sugar tax has been limited to fizzy drinks and soft drinks. Speaking personally, if we are going to have a tax based on sugar, I wonder whether we should not consider widening that base in the longer run. After all, it is not just the sugar in drinks that is held to be harmful. Whether we always want to define tax bases on health grounds is another matter, but that bridge has been crossed now that such a levy has been introduced.
There are the cuts to the capital gains tax rates, the lifetime ISAs—they look very interesting and are certainly worth examining carefully—and of course the changes to income tax thresholds. There are quite a few other things, but those are the main ones for now. There is a lot for the Treasury Committee to examine with all this. We will get at it in the coming weeks and produce a report for consideration during the passage of the Finance Bill. There are quite a number of colleagues from the Committee in the Chamber at the moment.
We will score all the tax measures against whether they make the tax system simpler or more complex. We will reduce that assessment, on the basis of technical advice from the leading authorities in the field, to a number. Simplification is a mantra: everybody says we must have a simpler tax system, and every year Tolley’s tax guide expands. We must now, much more rigorously, start to create the conditions in which we can reverse that process. One of them is to flag up just how much more complex the tax system is becoming.
We will look carefully at the distributional impact of the measures. I regret that the Chancellor decided to change the basis of the assessment that the Government agreed to produce on the distributional effects. He originally, and very helpfully, published that in 2010, but he changed it in 2015, which I regret. We will look at that issue. Continuity of method, which he agreed to in evidence to us, is absolutely crucial.
Will the right hon. Gentleman give way?
I am about to wind up, but I will give way because the hon. Gentleman is a member of the Treasury Committee.
I am grateful to the Chairman of my Committee for giving way. He is talking about the distributional impact of the Budget. Does he not see it as a source of regret and deep concern that the biggest revenue raiser in this Red Book will be the cuts to personal independence payments for disabled people?
The hon. Gentleman has had a chance to look at the Red Book, but I have not. We will certainly examine the merits or otherwise of that important remark. I will make sure that he gets an opportunity to make his points when we cross-examine witnesses during our evidence sessions.
We will take a close look at the remit letters for the Bank of England. It is often taken for granted, but a very great deal of power has been transferred from the Treasury to the Bank of England on key questions. It is not just about interest rates, but about much more than that, particularly with quantitative easing in place and the financial stability aspect as well. We will examine that very carefully, and it is extremely important that we do so. With that, and of course the work we are doing on the economic and financial costs and benefits of membership of the EU prior to the referendum, there will be a very great deal for the Treasury Committee to do.
Several hon. Members rose—
Order. Before I call the SNP Front-Bench spokesman, I should tell everybody that the time limit after his speech will be 10 minutes.
As with every Budget, there are some things to welcome. I welcome what the Chancellor said about the European Union. He will not be surprised to get help on that from SNP Members, because we also believe that we are better off in. I also welcome some of what he said about tax evasion and avoidance, and the abolition of class 2 NICs.
When it comes to the self-employed and contractors—people who, in many cases, are taking their first step in forming a new business—I would make the point that the Red Book suggests that there will be £765 million in extra tax due to travel and subsistence changes. It would have been far better to review that regime entirely rather than simply going ahead and doing that.
I welcome the oil and gas changes. The changes to the supplementary charge and petroleum revenue tax are very welcome. I was slightly disappointed by the lack of strategic direction, with no mention of exploration or production allowances, but I am sure discussions are ongoing. Likewise, I welcome the freeze on whisky duty and the freeze on fuel duty, for which we have been calling.
It is one of the small measures, but may I say that we very much welcome the additional money for school sports? I do not know what the Barnett consequentials of that will be, but it provides a useful opportunity for SNP Members to welcome the creation, in the past week, of the 150th school sport hub in Scotland, delivering the necessary additional sport for children.
I have a small point of disagreement with the Chancellor. He prayed in aid the leader of the Scottish branch of the Tory party, to cheers from many Members on his side of the House. It is probably worth noting that, last May, she led the Conservatives to their worst UK election result in 150 years.
The Chancellor rather skipped over his record in the last Parliament on debt, deficit and borrowing. We know he did not meet a single one of his targets. He told us that debt would fall as a share of GDP by 2014-15, that the current account would be in balance this year and that public sector net borrowing would be barely £20 billion. That, of course, did not happen. We warned at the time that debt would not begin to fall as a share of GDP until later, that the current account would not be back in the black until 2017-18, and that public sector net borrowing for this year would be about four times what he promised.
Our judgment is that much of the Chancellor’s failure came about because he strangled the lifeblood from the recovery by cutting too much too quickly, with little or no regard to the consequences—an error he set in stone with the fiscal charter, with its requirement to run a permanent surplus almost irrespective of economic conditions or the effect that cutting more than necessary would have on the prospects for the economy. We have had a very quick look, and we listened to what the Chancellor said, and the current account will not now be back in the black until 2018-19. The targets keep getting pushed back—more broken promises. Borrowing will still be higher in four years’ time than he promised it would be this year. That is the scale of the failure on the key economic metrics. Even in this Parliament, when he has continually been warned about repeating the mistakes of the past, he has done the same today—in many ways with a vengeance.
Capital expenditure is a mixed bag, and I will come on to that. I do not expect the Chancellor to listen to me, but he should listen to the IMF and the OECD. The IMF said that he had done enough to stabilise the Government’s finances—that is questionable—for them to embark on extra investment spending should GDP growth slow. He should take that advice. Only in February, the OECD told him it was revising down its GDP forecast for this year and recommended a commitment to raising public investment, which would boost demand while remaining on a fiscally sustainable path. We would have expected him to listen. We are glad that there is a very modest rise in capital expenditure over the forecast period, but it is actually marked down this year compared with the forecast we got in the autumn statement last winter. That is not consistent with what needs to be done, or with the advice received from others.
It is not all about broken promises on debt, deficit and borrowing. We now have a Chancellor who has done this many times—he has set about replicating the errors he made with his borrowing figures in his trade and export figures for this Parliament. He said previously that he expected to be able to deliver an almost certainly unachievable doubling of exports by 2020, but the OBR told him last year, at the time of the autumn statement, that he would fall short by £350 billion. We looked at the autumn statement, and the impact of net trade on GDP growth will be negative from 2016 through to 2020, and there will be a deficit in the balance of trade current account for the entire period. I am disappointed, because action can be taken. The impact of net trade on GDP growth is no better or worse in every single year of the new forecast period, and the balance of payments current account is actually worse in every single year, even compared with last autumn’s forecast. In the past week or so, we had confirmation of a £92 billion trade deficit and a £125 billion deficit in the trade in goods.
To be fair, those failings are not all the fault of the Chancellor. Some have been embedded in the UK economy for decades, whether on exports, support for innovation and manufacturing, or boosting productivity. They are all inextricably linked. In many ways Labour is the biggest culprit, having lost more than 1 million manufacturing jobs during its time in office—and that was before the recession. But it is the current Government’s failure to address those problems that is really troubling. We would have expected concerted action today on innovation, manufacturing, productivity and work with academia—all the things we are falling behind on internationally, which has led to decline. Manufacturing was 30% of the economy in the 1970s, and today it is 10%; it provided more than 20% of all jobs in the 1980s, and today it is 8%; and it went from more than a quarter of all business investment in the 1990s to barely 15% today.
The Chancellor will argue that some of the tax cuts will allow businesses to keep and invest more of their own money, and I hope that is true, but if he were serious, we should have seen an increase in the budget of the Department for Business, Innovation and Skills. Instead, we have seen the Department’s budget being marked down every single year. We would have seen an announcement on support for innovation, because we know that since 2010 the science budget has been frozen in cash terms, with a real-terms drop of 10%. By 2012, publicly funded science fell to less than 0.5% of GDP, and we can see nothing today that will take us off the bottom of the G8 heap.
Will the hon. Gentleman give way?
There are no interventions in this speech.
Order. The hon. Gentleman is able to give way if he wishes to do so. The rule is for the first two speeches, after which it is up to the Member speaking. It is up to Stewart Hosie whether he gives way.
In that case, because it is the right hon. Gentleman, I will happily take the intervention.
I am very grateful. Is not the British problem not that we lack great universities, great ideas, great innovation, a large number of patents and a lot of start-ups, but a problem of getting smaller businesses to grow sufficiently and become big businesses that can export to France and Germany? How would the hon. Gentleman tackle that problem?
That is indeed one of the substantial issues, which is why our Government in Scotland have delivered the small business pledge. In return for assistance from Scottish Government agencies, the pledge requires those businesses to seek out and take export opportunities, and to innovate. We have delivered a £78 million fund for innovation to encourage 1,000 new inventions and to allow 1,200 businesses to liaise and work directly with academia. There are many practical ways to solve the problem that the right hon. Gentleman rightly identifies.
We will have to check the fine print about businesses that want to export, but in the Blue Book in the autumn, UKTI’s budget, after a slight rise for 2016-17, was cut by more than £20 million a year. Between 2018-19 and 2019-20, it will be flatlining in cash terms and falling again in real terms. We need to begin to tackle properly the underlying issue of poor productivity. From our perspective, that means delivering inclusive growth—essentially, a fairer and more equal society. We have seen the numbers, and we understand that it is not enough simply to grow the economy to fund public services. We must squeeze inequality out of the system to get the growth we need in the first place.
The Tories have never believed in that, and Labour failed on it for 13 years, and we have seen some of the mistakes repeated today. In the previous Parliament, discretionary consolidation—the balance of cuts and tax rises—went from a ratio of 4:1 to 9:1. What did we see today? Billions taken from people with disabilities, through changes to the personal independence payment, to fund an above-inflation increase in the 40p threshold. The 40p threshold did need to be addressed—I have said it for years—but to have an above-inflation rise while taking billions from the most disabled people in the country is disgraceful and economically wrong. The UK lost 9% of GDP growth due to rising inequality in the two decades from 1990, and the Chancellor is making the same mistakes again.
Some of the business measures that the Chancellor announced are to be welcomed. It was good that the Chancellor mentioned apprenticeships, but what he did not mention, of course, is that many firms—he should know this by now—already pay a 1.5% levy on payroll to the Engineering Construction Industry Training Board for training. The apprenticeship levy was simply an additional tax on jobs. I had hoped the Chancellor would reflect on the comments made following its introduction last year.
Likewise, the Chancellor told us last year that he was counting on a windfall of about £31 billion from the sale of banking, financial and commercial assets, but the OBR told us last year that it would be £24 billion, and there has been little change since then. Clearly, the Lloyds stock will still be privatised, and the Red Book refers, I think, to other sales, but there was absolutely nothing about an anticipated windfall, so it will be interesting to see whether he intends to sell off the family silver in a way that has gone unannounced today.
The Scottish Government’s ability to re-energise the Scottish economy cannot be hamstrung and hampered by decisions taken here. Before today’s statement, we expected that our discretionary budget this Parliament, taking into account the cuts already imposed, would be about £3.9 billion, or 12.5%, lower in real terms than it was in 2010. No matter what has been said, we expected capital spending to be £600 million lower in real terms than in 2010-11, and, based on the autumn statement, we expected that the departmental expenditure limits—DEL—budget would be increased by about 0.7% in cash terms, or a 1% real-terms reduction. We wait with interest to see what the number crunchers tell us the implications of the Budget will be.
This is all about political choices. We said at the election—and we hold to it—that a very modest, 0.5% real-terms increase in expenditure could have released money not just for investment but to make sure that those on benefits did not fall any further behind. That would have been a sensible, humane and productive thing to do, but the Chancellor and the Government have gone against that one more time. He might be able to sell it to some of his Back Benchers, but he has been unable to sell it in Scotland. I fear that that will continue to be the case.
It is a pleasure to be called so early in the debate. As I am trying to respond to a Budget without having as long to read it as I would normally expect, I now know how the Leader of the Opposition feels.
I welcome the many measures in the Budget that help hard-working people in Amber Valley. The further rise in the personal allowance is a welcome measure for which I have been campaigning for several years. We want someone living on the minimum wage—or the living wage, as it will be—to pay no income tax on their wages. The rise in the 40% tax band is also welcome and will help people who should never have been caught by that band—I think especially of one-earner families. I think we should aspire to increase the band still further.
I am happy about the slightly unexpected freeze in fuel duty. Many of us have been slowing preparing our constituents for a rise. I have been telling mine that perhaps the freezes are coming to an end, that it will have to increase and that this might be the year, so I welcome the freeze being continued, as fuel duty is a significant cost. The freeze will help families and small businesses to meet what is a significant bill.
I also welcome the measures targeted at the east midlands: the aerospace grants worth £15 million for the east midlands, including £7 million for Rolls-Royce in Derby; the changes to Midlands Connect to place it on a statutory footing; the funding for the M1 improvements so we get a smart motorway right through the east midlands up to Yorkshire; and an investment fund for the midlands of up to £250 million to help small businesses grow. Those welcome measures show that the Government recognise the importance of the midlands and the east midlands to the UK economy. The east midlands had the highest productivity growth throughout the last Parliament.
I also welcome the changes to business rates, especially for small businesses, which will help the high street in my constituency. Business rates are a significant cost for small businesses, and the long-term certainty of a permanent lower rate, rather than the annual uncertainty—“Will this be the last time we benefit from an exemption?”—will really help.
One thing that was not announced in the Budget, of course, was a devolution deal for the east midlands, the north midlands—or whatever we have been calling it in recent weeks. The deals announced today are a model for how the east midlands can go forward. I want to see a powerful voice in the east midlands to ensure we get our fair share of spending investment, to make the case for the east midlands as a great place to invest and to show that we can compete with the west midlands and south Yorkshire. To those disappointed that the deal has not been announced, I say that we should rethink our proposals. It would make for a far better bid, if Nottinghamshire, Leicestershire and Derbyshire could join together and come up with a three-county proposal, much like the East Anglian one. It would be more coherent economically, have a better chance of getting buy-in from people across the east midlands and be more likely to succeed, because the area would be based around the airport and the new HS2 station and would have the M1 running through the middle, and it would fit the great synergies between three big cities and the surrounding areas. I urge those in local government trying to negotiate a deal to rethink what they are asking for and to go for a three-county proposal.
Is my hon. Friend’s concern the lack of collaboration—or the weakness of collaboration—between the constituent areas or the lack of ambition? As we have seen in Birmingham and elsewhere, bold decisions are welcomed by Ministers.
The leaders of Nottinghamshire and Derbyshire have shown ambition in trying to find a deal that works outside the core cities, but there are always challenges, in areas where people do not all look to one city, in working out whether closer working or more competition is the right way forward. I think there is also a lack of trust in Derbyshire and a feeling that a Greater Nottingham bid would centralise too much in Nottinghamshire. A bid that covers three cities and three counties would look less focused on the biggest city and take a more strategic and sensible approach that could help the whole region to compete with neighbouring regions. To be fair, however, there has been a lot of ambition already to bring the counties together. We just need to find a situation that works. That we had to change the name from D2N2 to East Midlands and then to North Midlands suggests we have not got the geography right.
I come to a couple of areas on which major changes have been announced. The first is the pensions system. The Chancellor announced some welcome changes in the Budget. I like the idea of the Help to Save scheme—we appear to have help for everything now—to give people on low incomes a 50% bonus if they can save a certain amount for two years or longer, and I like the idea of the lifetime ISA and making pension saving a bit more flexible so that people can save when they can and then, if they need to—if they want to buy a house or need to do some repairs, or if they fall out of work and want to live on their savings—draw down the money and put it back later. That sort of system is more flexible, is better suited to how people live and can help people to manage the ebbs and flows in their financial situation.
We need to stand back and ask, “What are we trying to do in using taxpayers’ money to help people save?” We are in the slightly strange situation of compelling people—generally those on low incomes—to enrol on to a pension scheme, hoping they do not opt out and then giving them roughly a 25% bonus from the Exchequer on what goes into that scheme. We have now produced another savings vehicle—Help to Save—whereby we give them a 50% bonus if they save a certain amount for a certain period. For some people on low incomes, it might be better to be enrolled on to the latter—they would have a more flexible savings pot with a bigger taxpayer-funded bonus—than a pension scheme that locks the money away for a long time, which has high charges and which they cannot use flexibly when they need to.
We ought to consider giving employers the choice of auto-enrolling people on to the lifetime ISA, which might be a more flexible and attractive solution for people on low wages—the ones generally in auto-enrolment—who we are trying to help to save and have the right savings at the right time in their lives. We are going in the right direction, but we need to make sure that what we are strongly encouraging—not compelling—people to do makes sense now that there are different vehicles on the market.
The pensions dashboard, which is hidden away in the Red Book, will be of great use in getting the industry to produce one place where people can go to see what they have in their pensions and savings. It will mean they can see what they can have in their retirement and what more they need. I welcome the move to make that happen. It has long been talked about, and we have to assume it can be done, given how IT is used these days. I look forward to seeing it happen.
I want to make a few remarks about the corporation tax changes. There are some welcome measures here to crack down on tax avoidance and evasion, and I hope they can all be made to work as effectively as they can. We can do more to give the public confidence that our large businesses are complying with tax requirements. My sense is that most of them do, and it is only a small proportion that go in for the aggressive avoidance that we cannot accept. I urge the Government to look at the idea of making large companies publish their corporation tax returns when they file their statutory accounts, so that we can actually see in some high-level way how much tax each company says it owes and how they have got from what is in their accounts to the cash tax bill.
Given the amount of disclosures of their actual accounts we require from companies, this would not put much sensitive information in the public domain. The principle of taxpayer confidentiality applies to individuals but should not apply to large companies, which might disclose their income in any case. I believe this would bring greater confidence and it would show, I hope, that most of those companies are not doing anything that is not acceptable.
I welcome the changes to try to expand how withholding tax works on royalties. Our rules in that area have been somewhat outdated and they do not apply to all forms of royalty. Extending them to certain other payments and trying to ensure that we actually collect the tax has to make sense. We should be careful to draw this wide enough to ensure that we catch things such as know-how payments or payments for access to recipes or whatever else companies will try to say their payments are. If it is not a payment for a tangible service or product, it probably ought to fall in the royalty regime and the withholding tax ought to apply.
I am not entirely sure how we will get this through our tax treaty network or the EU interest in royalties directive without having to give zero rates to nearly everyone we pay royalties to. I guess the measures announced for how we deal with situations where royalties have flowed through a regime that we would accept into one about which we have concerns, particularly about how to ensure we collect the tax in those situations need to be worked through.
I welcome, too, the proposals to simplify loss release for companies that are having to spread them across a group of companies. Five years ago, I tabled an amendment to the Finance Bill to try to argue that the Government should look at a group tax return so that large groups would file one tax return for all their companies, rather than having to file many dozens. I thought that would help to tackle tax avoidance by taking away the scope for funding arrangements between those companies that do not have any economic effect. If we are to simplify how companies use losses, it would be easier to let them file one tax return to show their group profit, and have one loss offset, rather than try to find a way for a group to calculate these things in a strange way further confusing HMRC. I think HMRC will benefit from knowing exactly how much profit a group is declaring in one return, so that it can then be compared with real turnover.
The announced interest restrictions are a sensible idea. We have moved past a situation in which we can justify allowing large companies to borrow in the UK, claim tax relief for profits not earned here without paying tax and dividends that come back. We have to be careful to do this right. We have attracted a lot of head offices here by the generous exemption we chose to give. We do not want to lose them all, but we also do not want to make infrastructure spending far more expensive than it needs to be. That can justify high levels of interest; there is generally no income in the early days. I hope we can find an exemption to get right and for the private equity industry as well.
I have to notify the House, in accordance with the Royal Assent Act 1967 that Her Majesty has signified her Royal Assent to the following Acts and Measures:
Supply and Appropriation (Anticipation and Adjustments) Act 2016
Charities (Protection of Social Investment) Act 2016
Childcare Act 2016
Education and Adoption Act 2016
Welfare Reform and Work Act 2016
Safeguarding and Clergy Discipline Measure 2016
Diocesan Stipends Funds (Amendment) Measure 2016
Budget Resolutions and Economic Situation
We all look forward to poring over the details of today’s Budget, particularly to see the distributional analysis and to wait to hear from the IFS. Experience has taught us that, when it comes to this Chancellor, the devil is almost certainly in the detail. The Chancellor spoke a lot in his statement today about his record, on which I would like to focus the majority of my remarks.
I welcome today’s overall fall in unemployment—we all do—but unemployment in my Barnsley East constituency is actually going up. It rose again today for the second month in a row, which is a matter of huge concern locally. It highlights the weakness of the economic recovery, the fundamental variations that are taking place in different parts of the country and it shows once again why more jobs are needed in areas such as mine.
In former coalfields, including my own area, there are still not enough jobs. The recent report of the Centre for Regional Economic and Social Research, “The state of the coalfields”, highlighted that there are approximately 50 jobs for every 100 residents of working age across the former coalfields. The Government’s own figures show that the employment rate in my Barnsley East constituency remains lower than the national average.
Indeed, the picture that the Chancellor painted today about what is happening in our economy will seem like a million miles away from the day-to-day realities of life for very many people, including in my constituency. Despite all the Chancellor’s boasts about the employment rate, and for all the palpable nonsense about a “northern powerhouse”, there are still huge discrepancies across the country.
According to the Resolution Foundation, in Yorkshire and Humber the employment rate increased by just 0.2% from the financial crash to 2015. That compares with 3.3% in London. Young people have been left behind, with the same figures showing that nationally the employment rate for 18 to 24-year-olds actually decreased by 3.5% over the same period.
What about the jobs that have come? Let us look at the reality behind some of the headline figures. The truth is the jobs that have come are too often insecure and are low paid. The number of zero-hours contracts is now at a record high, with more than 800,000 workers on a zero-hours contract for their main job. In 2010, there were 168,000 people on zero-hours contracts. The percentage of people on a zero-hours contracts with no guaranteed hours is higher in Yorkshire and the Humber than it is across the rest of the UK. Again, young people are hit hardest, with 38% of all 16 to 24-year-olds employed on a zero-hours contract. It is no wonder that this age group is not saving: they cannot get the hours, so they cannot get the money in to pay the bills. They are still struggling. If we look at today’s figures, we again find a significant rise in part-time working. How often do we knock on doors or talk to people at our surgeries and hear people saying, “I just cannot get the hours.”? They are struggling because of that.
Will the hon. Gentleman give way?
I would like to make some progress, if the hon. Gentleman does not mind.
If the jobs that have come are more insecure, let us look at what has happened to living standards. According to the Resolution Foundation measure, there was an 8.9% fall in median pay for all employees between 2009 and 2015. For 22 to 29-year-olds, pay has fallen by 12% over the same period. Even using the Government’s own ONS figures, gross weekly pay for full-time workers in my constituency has actually fallen to £432.80 in 2015—a wage cut of more than £22 since 2010, and significantly below the national average.
We know that 29% of women earn less than the living wage, and the figure is 18% for male workers. We know that up to today, 81% of the savings made to the Treasury through the Chancellor’s tax and benefit changes since 2010 have come from women. According to the IFS analysis of the Chancellor’s last autumn statement, we know that when all of the tax and benefit changes are taken into consideration, 2.6 million working families will be on average £1,600 worse off by 2020.
Will the hon. Gentleman give way?
No, I am going to make some progress.
It tells us everything we need to know about this Government when they seek to redefine rather than reduce poverty. Three in 10 children in Barnsley East are living in poverty. How does that fit with “putting the next generation first”? Where under the previous Labour Government the number of children living in absolute poverty fell significantly, the number under this Government has risen significantly. That is why local campaigns in Barnsley, such as the one being led by my hon. Friend the Member for Barnsley Central (Dan Jarvis) on tackling child poverty, are so important.
We know that one of the biggest growth industries under this Chancellor has been in food banks. In 2010-11, just over 61,000 three-day emergency food packages were distributed to people in crisis across the country. Under this Chancellor in 2014-15, over 60,000 were distributed just in Yorkshire. The figure for the whole country is more than 1 million.
A bad situation is being made worse by the Chancellor’s approach to local government funding in particular. Not only is the Department for Communities and Local Government seen as a soft touch, but cuts for local government are presented as “cuts for town hall bosses”. Let me make clear what we are actually talking about. We are talking about cuts in social care, mental health and other vital local services. We are talking about jobs going, about cuts affecting libraries, museums and grassroots sport, and about cuts in support for fantastic organisations such as Barnsley Independent Alzheimers And Dementia Support, the local dementia charity of which I am a patron. We are also talking about cuts in Sure Start: we have lost more than 100 jobs in children’s centres in Barnsley because of this Government’s cuts.
It is not as if the axe has fallen on local government in a fair or equal way. Under this Chancellor, the idea that we are “all in it together” is just a really, really bad joke. More than one in five neighbourhoods in the Barnsley council area are ranked in the top 10% of the most deprived in England, yet analysis of the Government’s own local government finance settlements—verified by SIGOMA, the special interest group of municipal authorities, a cross-party body that represents local authorities in urban areas—shows that from 2011-12 to 2016-17, Barnsley council’s spending power will be cut by more than 26%, whereas that of the Prime Minister’s local authority, Oxfordshire County Council, will be cut by only 10%, and that of the Chancellor’s local authority, Cheshire East Council, by only 9%. Why should people in my constituency, an area with greater needs that is only a few miles from the south Yorkshire pit village where I was born, suffer bigger cuts than some of the most affluent areas in the country?
Why should women be hardest hit—women with children, and those who act as carers? Why should young people be held back? That is the reality, regardless of what the Chancellor said today. Does he not understand that every time he lets a young person down by allowing a children’s centre to close, it is not just a disaster for those young people and their working parents, but a disaster for the whole country? An opportunity denied to a young person means a talent wasted for the country. But of course the Chancellor does not understand that; if he did, he would have done something about it.
We heard a self-congratulatory victory roll from the Chancellor today, but it is clear that he is completely out of touch. This is a Chancellor who does not understand, or simply does not care about, the impact that his policies have on many people in very many parts of the country. The Chancellor talked a great deal about his record today, so let us be clear about it. His record is one of promises broken, his own targets missed, the lowest-paid working families worse off, the deliberate targeting of disabled people, young people let down, women hit hardest, the poorest parts of the country suffering the most, poverty deepening, and inequality widening. How on earth can that possibly accord with the nonsensical claim that this is a Government for working people?
If the picture that the Chancellor has painted in his Budget today seems a million miles away from the realities that many people face, that is because we have a Chancellor who lives in a world that is a million miles away from the realities that many people face.
I remind the House that, in the Register of Members’ Financial Interests, I have declared that I advise an industrial and an investment company.
I support the main measures in the Budget, and the thrust of the Budget statement. I strongly welcome the tax reductions. I am very pleased that the Chancellor is making progress in implementing our promises to take more people out of income tax altogether, and to take people out of 40% tax when they are on relatively modest incomes in comparison with the costs of housing and living in many parts of the country. The more progress we can make in that regard, the better.
I am delighted that I, and others, made representations on behalf of the North sea oil industry, that those representations have been well heard, and that substantial changes have been made. It is important for us to do all that we can to give that industry, which has been hit by the very low oil price, some momentum and some hope for the future. I am also very pleased about the capital gains tax changes, because I have campaigned for them for some time. I think we will find that they bring in more revenue, not less.
It is interesting to read the forecast in the Red Book that, by 2019-20, there will be a substantial increase in revenues from CGT at the lower rate, but there will be a period of no increases for two or three years. I find that a surprising profile, and I think it draws attention to an underlying problem. I do not think that the economic models and the tax forecasting system used by the Office for Budget Responsibility are fit for purpose. The OBR was obviously very wrong about the impact of the reduction in the 50p rate to 45p: there was a big surge in revenues which was not in the original forecast figures.
This is the background against which we meet today. Many of the changes that the Chancellor has had to make are simply a result of the OBR changing its mind over the very short period between the autumn statement and today, and deciding that the economic outlook is not as good as it thought it was at the end of last year. We have to ask why it has reached that conclusion.
Does the right hon. Gentleman think that the OBR has been any better at predicting the economy than the Treasury was before?
I do not think that there is very much difference. All economic forecasters experience difficulties in getting their forecasts right, but some of us are more humble about our expectations than these official forecasters. I think that the danger of having an official forecast is that too much credibility is given to it, and big decisions are then made on the back of it. When official forecasters are zinging the forecasts around every three or four months, it becomes difficult for any Chancellor to run a stable medium-term policy involving, for example, important spending items that matter a great deal to our constituents.
I urge the Chancellor to be a little more sceptical about the wisdom and virtue of the OBR forecasts. The one thing of which we can be sure is that, over the period during which we have had the OBR, it has always been wrong, but what is stunning is the degree of the error. The OBR itself kindly points that out to us on page 234 of its very readable book, saying that, on average, it has revised the underlying borrowing forecast by £46 billion for the review period in question on each occasion. Given that the figure is an average, it is clear that the forecast revision has been considerably higher. The OBR tends to make its biggest revisions in autumn statements, but it has given us quite a whopper on this occasion. When a Chancellor must face a £46 billion revision every time he has to do the sums, it makes the task of stable economic management much more difficult. This is one of those instances in which an idea that was intended to produce more stability has proved to be destabilising.
The same can be said, I am afraid, of the current Governor of the Bank of England. The Governor of the Bank of England is meant to provide stability and wisdom, but we have now heard four different mantras from this Governor about when interest rates are going to rise. That is a very important statistic, which informs the forecasts of the OBR.
First of all, the Governor said that interest rates would probably go up when unemployment fell below 7%. When it tumbled rapidly below 7%, the Governor changed his mind. I am glad that he did, but the fact remains that he changed his mind. He then said that when real wages started to go up, interest rates would probably go up as well, and I am pleased to say that almost as soon as he had said it, they started to go up. Then he changed his mind, in that he had apparently not meant what he said.
The Governor then said that the turn of the year, 2015-16, would be a witching hour, when interest rates might have to go up. Well, we roared through the end of the year and the beginning of the new year, and they did not go up. Again, I was pleased about that, because I think it might have been unhelpful if they had. However, that shows that people and institutions who should be good at providing stability can be very destabilising and very misleading, and it is all noise that the Chancellor has to deal with.
The one good thing about all this is that when these ridiculous forecasts are made by the OBR and the Governor of the Bank of England that we would be worse off if we left the European Union, we can completely ignore them. We know that those people are always wrong about the things in which they are meant to specialise, so why should we believe what they say about something that is more important?
Will the right hon. Gentleman illuminate us on the section of the Chancellor’s speech that dealt with the European Union? Will he share his thoughts with us?
I think that I am doing that now. The Chancellor quoted the OBR, and the one thing that I disagreed with profoundly in a very good Budget was the OBR’s forecast on what would happen with Brexit. [Laughter.] It is not funny. Labour Members might learn something if they listened. They have obviously closed their ears to any idea that an independent Britain could be rich, prosperous and free, but many of us think that we will be more rich, prosperous and free if we leave the EU.
Will the right hon. Gentleman give way?
I want to develop the argument a little more. As has already been pointed out, the forecast contains very worrying figures about the balance of payments deficit. And of course, were we to leave the EU, we would immediately have £10 billion at our disposal that we would no longer have to send abroad to be spent in rich countries on the continent. That is the net amount that goes to the continent. So our balance of payments would immediately improve by £10 billion a year if we did not have to make those contributions.
To cheer up Opposition Members even more, and to get them to change their vote, I can tell them that we and they would have the pleasure of spending £10 billion a year more in our own country—[Laughter.] Why is that funny? Why should not British taxpayers who have to pay £10 billion not have the advantage of spending it on things that they want instead of it being spent on new roads in France or Spain? I think my taxpayers want it to be spent here. That £10 billion a year could more than banish the austerity that Opposition Members claim has done some damage to our country. Looking at the figures, we can see that real public spending has gone up all the time under the coalition and the Conservative Government, but not by as much as it went up under previous Governments. If we had that £10 billion back to spend in the United Kingdom, we would have a better profile on public spending and on tax reductions.
Can my right hon. Friend be sure that any figure he quotes is accurate, given that he has just rubbished the OBR and the Bank of England? Presumably he has a list of other British institutions to which he would give the same treatment.
But of course. I have checked the Government’s very own net contribution figures, and it is very likely that they have got those figures right, because even the Government can count how much they have spent and how much they have had to give away to the rest of the European Union. That is the damage that is being done.
On the balance of payments, I would urge my right hon. Friends on the Front Bench to do more work on getting the balance of payments deficit down. Obviously, they will not all agree with me about taking the quick easy hit of getting our £10 billion back to make a big reduction in the deficit, but we need to understand that that deficit is entirely the result of an adverse goods trade with the rest of the European Union. We are in profit with the rest of the world and we are in profit in services, but we have a colossal manufacturing deficit with the rest of the EU. Some of that relates to the way in which France and Germany get round the EU rules to make sure that they can buy French or German products, whereas we in Britain apply the EU rules extremely fairly and end up buying a lot of foreign products from the continent.
It is also the case that the very dear energy that European policies require and enforce is doing a lot of damage to our steel industry, our ceramics industry and other high energy-using industries. It is a great tragedy that, despite higher domestic demand for steel, we are still unable always to use British steel in British public sector contracts. Surely we ought to have a fix to create more demand for our own domestic industries.
We also import massive amounts of timber, despite having a big state sector involvement in the timber industry in this country. Why cannot more be done to cut more of the timber we already have as a state resource to meet our domestic demand, along with replanting and extending the planting, given that many people would like more forests? Why cannot we have more managed timber, with the state having an influence over it? We could also do more with the tax system to encourage more private forestry. We have rather good growing conditions here, compared with some of the colder Nordic climates from which we import timber at the moment.
We also import energy, but we have no need to do so. We are an island of coal, oil and gas set in a sea of coal, oil and gas. We also have lots of natural renewables, particularly lots of potential water power. Why cannot we create an energy policy in which we do not need to rely on importing timber from Canada, electricity from France and energy from Norway?
I am pleased that the Budget is starting to tackle the issue of the oil industry offshore through tax changes. We need to do other work on that, and we also need to get on with gas extraction onshore. We will probably find further oil resources when we are prospecting for shale gas in the shale sands. We need to start bridging the gap on energy before it becomes even more damaging to our balance of payments.
On encouraging greater exports, would my right hon. Friend acknowledge that one of the challenges that small and medium-sized firms face is the availability and pricing of mid-sized capital to enable them to pursue longer-term export plans?
I am not sure that the cost of capital is a problem. The Government have already done certain things to try to deal with that through the investment bank and so forth. It is often the case that medium-sized companies probably need equity investment but are reluctant to give away control. That is a cultural issue that we have to deal with. Certainly for bigger companies there is nothing wrong with the long-term cost of borrowing if they have access to the bond market, because we have exceptionally low interest rates at the moment.
I am all in favour of the Government pressing on with large infrastructure projects if they make economic sense. The main ones that we need to reinforce are broadband and extra energy capacity. We are short not only of affordable energy but of energy of any kind. We do not want our economic recovery—which we have rightly been told is the fastest in the advanced world, on the historical and prospective figures—suddenly to come up against the constraint that there is not enough energy available to fuel the recovery.
I expect the Chancellor had great hopes for today’s Budget announcement, but the backdrop to the Budget has not been good for him, with growth forecasts going down. Today he has set out a Budget that bets the bank on an uplift in 2019. I have not yet had a chance to go through the Red Book, but I bet that there is more hidden pain for many of my constituents in the depths of this Budget.
I want to touch on a couple of the Chancellor’s points that I broadly welcome. On tax changes, the Public Accounts Committee, which I chair, has looked closely at the issue of multinational tax avoidance. Only recently, we were looking at the issue of VAT avoidance on marketplace platforms. I therefore welcome the Chancellor’s announcement that these issues are finally going to be tackled. He has also announced that he is reducing corporation tax to attract more multinationals to this country. Despite his promises, however, it is not at all clear that multinationals will pay more tax.
What we really need is tax transparency, and I echo the comments by the hon. Member for Amber Valley (Nigel Mills) on that point. I also commend to the Chancellor the 10-minute rule Bill unveiled yesterday by my right hon. Friend the Member for Don Valley (Caroline Flint). We as citizens and Members of Parliament cannot tell whether we will secure more tax from multinationals unless we have more information. I commend that Bill to the House, not just because the Chancellor should, if he has any sense, be listening to my right hon. Friend, but because the whole of the cross-party Public Accounts Committee has looked into this matter in great detail and supports her proposal. The Bill proposes a small change that would be well worth implementing.
Does the hon. Lady agree that the Chancellor’s decision to reduce the ability for debt interest to be taken off corporation tax bills from 100% to 30%, which is the German level of interest reduction, is a good thing and should help us to make some of our larger multinationals and British companies pay more corporation tax?
That certainly looks like a step in the right direction, but my point is that we need to be able to see exactly what companies are doing. Transparency is the other side of that coin. I know that the hon. Lady broadly agrees with that position.
One thing that the Chancellor did not mention in his speech today was the national health service, which we know is in financial crisis. Only yesterday, the Public Accounts Committee’s report on acute hospital trusts was published, but two other inquiries have taken place since we held that hearing and they show the real deep-seated financial problems in the NHS. There is a £22 billion black hole ahead, and the financing of our health service is all the wrong way round. In our hearing, we uncovered the fact that hospitals are setting their structures, budgets and staffing to meet the financial settlement that is passed down to them by the Department of Health. Then, inevitably, they have to backfill to meet the growing needs of patients by, for example, employing far more temporary staff on higher rates. They are therefore struggling to maintain their budgets.
That is being exacerbated by the push five years ago by the Chancellor—the self-same man who was at the Dispatch Box today—for 4% efficiency savings year on year in the NHS which has now come home to roost. In 2014-15, our acute trusts had a net deficit of £843 million. More than three quarters of our acute trusts are in deficit this year. Great work is being done to try to bring that figure down, but promises that NHS Improvement will bring in efficiencies to resolve the problems within a year are over-optimistic. Even the head of NHS England told our Committee that that was too steep an efficiency saving. He said that around 1% to 2% might be the right amount.
It is time that we had a national conversation and reached an agreement about how we are to fund our NHS. It is not good enough for Chancellors to treat it as a political football. The matter must be resolved. Demand is growing, and yet we are expecting so-called efficiency savings, which are undeliverable. I am unconvinced that the NHS is on a secure footing for the future. My Committee will continue to look rigorously at that and will provide reports to the Chancellor and the Secretary of State for Health so that they get the message. I hope that they take our comments as seriously as we mean them.
On education, we heard in a leak or trail for the Budget, which seems to be the common approach nowadays, that all schools in England will become academies. My borough of Hackney is no stranger to academies. When they were first unveiled, Hackney’s schools were among the worst in the country. I pay tribute to the Mayor of Hackney, Jules Pipe, who took what was on offer from the Government and turned it into something that realises the ambitions of Hackney’s young people. With the huge work of Hackney’s heads and teachers, our schools are now among the very best in the country.
In spite of our embracing academies, among other school models, they are not a simple solution. The structure is not what makes education good. We need good teaching and good leadership. That is what gets results. The constant recent changes to schools—curriculum change, structural change, funding change—mean more upheaval. Academy status is unsustainable in practice for small primary schools, which will force them into chains. That is a concern of not only the Public Accounts Committee, but the chief inspector of schools, Sir Michael Wilshaw, who has warned that academy chains are not a solution to the problem in their own right and can actually mask problems.
The Committee is also concerned about the many risks involved, particularly around accountability. For example, the Durand Academy has become a cause célèbre for how a lack of accountability can lead to bad management of the taxpayer pound. If a chain goes bust, that has a wider ripple effect. Even at this late stage, I ask the Secretary of State for Education to abandon this monolithic approach to school provision. It sounds like freedom of choice, but the Government are imposing a model that will absorb energy and take time away from the real issue: educating children for the future.
The Chancellor paraded his devolution credentials. I started my time in politics believing and have always believed that power should be devolved to and exercised by the most appropriate level. This is another area of concern for the Public Accounts Committee and I offer the Chancellor a word of caution. We need to follow the taxpayers’ money to ensure that they and Parliament know how it is being spent. As the money is devolved down the system, unless there are clear accountability frameworks and assurances from Government about how it is spent, that can provide a cover for waste and mismanagement. It can also be a cover for the Government’s underfunding of major regions of the country and major policy areas. For example, as health funding is devolved through devo-Manc, how do we know that the Government are giving enough money to Manchester to deliver healthcare for its people? How can we know that in any area of the UK? That is the problem, and it presents a challenge to the National Audit Office, a servant of Parliament, in helping us to do our job.
As for accountability, I visited Bristol with my hon. Friend the Member for Bristol South (Karin Smyth) and met the local enterprise partnership, an interesting body made up of many private sector individuals doing many good things in Bristol. The LEP covers five local authority areas, so if any projects fail in delivery, where does that risk fall? It falls on the council tax payers of each authority, not on the private sector partners who give up their time to try to support economic development in that area. I am not knocking people who want to contribute to the growth of their area, be they from the private sector, the public sector or wherever, but it is important to remember that taxpayers’ money is being spent and that it must be followed and well spent. Risk and accountability must be combined.
That brings me on to infrastructure. Again, the Chancellor paraded several measures, including Crossrail 2, which will be coming to my borough. I welcome the fact that the Hackney to Chelsea line will finally be delivered. However, on 1 January the Major Projects Authority merged with Infrastructure UK to create the Infrastructure and Projects Authority. The Public Accounts Committee has long been a champion of major project management, which is vital in the delivery of our future infrastructure. The MPA began to do a job on that, but if we do not have someone watching how projects are delivered, there is a big risk of waste along the way, particularly with long- running projects that can stretch across many Parliaments. The Public Accounts Committee has expressed its concern about the merger and worries that it represents a down- grading of project management over the importance of infrastructure development. While I want such development, I look to the Chief Secretary to the Treasury and urge him to watch the merger closely, because the MPA was an ally of the Treasury, the taxpayer and those of us with an interest in watching taxpayers’ money.
It does not pay to be poor under this Government. I represent one of the most divided authorities in the country. There is some great wealth, but a high level of poverty too. In reality, the Chancellor’s jobs growth relates to far too much low-wage, part-time work, which is just not enough to live on in Hackney, where the average house price is £500,000 and where private sector rents are soaring through the roof. Thanks to Government policy, even social housing will be out of the reach of many following the imposition of pay to stay and the bedroom tax on households that may have no financial resilience and uncertain work patterns, meaning that they may be in and out of claiming housing benefit. Such households can suddenly be hit by a tax on their extra bedroom of £14 a week, which can accumulate over time and cause real problems.
On childcare, many local childminders are finding that providing the places that the Government are requiring them to supply is unaffordable on the money that they are paying. Even when the Government say that they are helping, they are not helping many households in my borough.
Returning to education, the national funding review is important, but we must not cut funding to London schools and their pupils because those schools will then decline. We have seen success and must not jeopardise it. Bursaries for nursing students have been lost and we now have loans for further education, so the next rung of the ladder for the aspirant people at the bottom—they are aspirant in Hackney—has been knocked out by the Government, making getting on in life harder to do. The Government must start ruling for the entire nation. It is a tale of two nations and this Budget simply underlines that.
I am delighted to have caught your eye, Madam Deputy Speaker, and to welcome my right hon. Friend the Chancellor’s Budget and some of the excellent things it contains. I want to pick out important two statistics. First, as of today, we have a record number of people in employment. Contrary to what is often said, 62.66% of that has come from the high-skilled sector, so we are creating high-skilled jobs in this country. Secondly, I welcome the fact that in this tax year we will again become the highest-growth country of all the world’s major economies. That is a significant achievement by my right hon. Friend.
Having spent many hours on the Select Committee on the High Speed Rail (London – West Midlands) Bill over the past year, I have become something of a convert to the Chancellor’s way of thinking about the merit of transport infrastructure projects that are good value for money. I welcome to the Front Bench the Minister of State, Department for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), who is in charge of the HS2 project and who will no doubt pilot the Bill through the House in an excellent manner next week.
If this country is to compete in the 21st century, it needs a 21st-century system of transport. Through HS2 and other transport infrastructure projects, such as Crossrail 2, which the hon. Member for Hackney South and Shoreditch (Meg Hillier) mentioned, and the trans-Pennine rail tunnel, we are easing the burden on our congested roads and building some serious national expertise in areas such as tunnelling. That has enabled us to undertake some projects that we would not have been able to do just a year or two ago. As we have seen with the Thames tideway project in London, we have been able to bring the cost of such major projects down considerably. Competitiveness is the key to a successful economy. We are constantly competing in the global marketplace, whether we like it or not, and the economic decisions that the Chancellor has taken today reflect that reality.
I welcome some of the announcements to simplify our tax system, although we could go further. I particular welcome the measures to abolish class 2 national insurance contributions. However, as income tax and national insurance revenues are slightly larger than the sum required to pay the entire benefits bill, national insurance is still a big burden, particularly for the low-paid. I welcome my right hon. Friend’s measures today to accelerate taking the low-paid out of the tax system, moving the threshold from £11,000 to £11,500 and then to our goal of £12,000.
I come to a slightly discordant note, so I hope my colleagues on the Front Bench will bear with me on it. The VAT system that the Government have inherited is overly complicated. We zero-rate flapjacks but not cereal bars. We zero-rate paper books but not e-books. It was considered a productive use of somebody’s energy to write into the Government’s VAT guidelines—this is true, as hon. Members will see if they go online—that VAT must be applied to gingerbread men covered in chocolate at the standard rate unless
“this amounts to no more than a couple of dots for eyes”.
As some Members in the Chamber will be old enough to recall, the standard rate when VAT was introduced, following the old purchase tax rules, was 8%. It was then increased to 25% for certain items under Denis Healey, and today we find it at 20%. I say to my Front-Bench colleagues that the whole VAT situation needs a thorough review. The problem is that we are governed by the rules of the EU, believe it or not, and the VAT sixth directive, which makes this very difficult. We need to have a conversation with those in Europe if the British people vote to remain in the EU, which I hope they will not.
I sincerely welcome measures in the Budget to make us more competitive, particularly the fact that the Chancellor is going to accelerate the reduction of corporation tax so that it will be reduced to 17% by 2020. That is a really useful measure. Interestingly, chart 1.11 in the Red Book shows that America’s corporation tax is 40%, so it is amazing that its businesses are as competitive as they are. However, it is clear that our corporation tax is not moving quickly enough to keep up with the rapidly changing global nature of modern corporations, and that is leading to perverse outcomes that generate public concern, such as Google’s recent announcement that it was paying only £130 million in back tax. I hope that the newly announced diverted profits tax will improve the situation. As has been said, a number of other measures in the Budget are there to improve the tax generated by some of our big corporations, and I hope that my right hon. Friend the Chancellor is right that those measures will generate £9 billion by the end of this Parliament.
We need to invest more to support small and medium-sized enterprises and encourage them to start exporting. The balance of payments figures in the Red Book are worrying. We could rethink how the Government support companies that want to export for the first time, especially given that we are reducing corporation tax. Bearing in mind that it probably costs a minimum of £50,000 for a company to consider exporting to a new market, we could give companies a complete break on corporation tax for any activity that relates to exporting for the first time. We need to rethink the role of UK Trade & Investment, as our approach is clearly not working. We are not getting enough small and medium-sized companies exporting, so we need to rethink its role under the new chief executive. In some years UKTI’s budget has increased whereas in other years it has reduced, and we need to give it a stable environment in which to operate.
I welcome the Chancellor’s announcement on broadband. The Government plan to invest so that superfast broadband covers 90% of the UK by early 2016 and 95% by December 2017. The trouble is that those are national averages, and rural constituencies such as mine have a disproportionate number of homes and businesses that are not getting a realistic broadband speed to deal with both their business and their leisure in the 21st century.
We face a challenge on the universal service obligation, which has been committed to but which is currently weakly defined, and those of us who have constituents in very rural parts of England will struggle to see that commitment met. We need to continue to push the Chancellor and the Treasury to understand that a commitment will be required to make sure that every household in the UK has superfast broadband.
My hon. Friend has an even more rural constituency than I do, but we both have very rural constituencies, and she is spot on in what she says. We need to make sure that every house and every business gets a reasonable broadband speed as quickly as possible. I was coming on to say that we need to provide support for bespoke solutions, and I am sure that applies in her constituency, as it does in mine, where the Gigaclear contract, which was the first such contract in the country, will enable another 6,495 homes to have a reasonable broadband speed by 2017.
The Chancellor had a free shot about the EU, so I feel that I, as a humble Back Bencher, am entitled to have one, too. While I am talking about competitiveness, I must briefly mention our EU membership, as the issue has been receiving a small amount of attention lately. As a nation, we face a choice between remaining part of an institution that is fundamentally anti-competitive and is collapsing under the weight of its own bureaucracy, and seizing our own destiny and becoming a great trading nation once again, being fleet of foot, free of excessively burdensome regulation and able to make our own deals around the world.
As my right hon. Friend the Member for Wokingham (John Redwood) said, we will have an additional £10 billion net to spend if we leave. We will be part of a free and fair immigration system that allows us—this country, this Parliament—to attract and retain the best and brightest from countries such as India and China, without having to put in place arbitrary caps and restrictions simply to counteract the number of people coming from Europe, over which we currently have no control. Britain should be a place of equal opportunity for anyone who wants to come here with something to contribute, not simply a place for anyone who happens to reside in the EU. The recent EU deal with Turkey threatens to exacerbate the situation.
We live in uncertain times, as the OBR’s growth forecasts clearly show. The Chancellor has said that there are storm clouds gathering, both at home and abroad. The Government are right to push ahead with reducing the deficit. There are naysayers who tell us that a national deficit at 4% of GDP is sustainable, but I say to them that a national debt at 82% of GDP certainly is not. We inherited from the previous Government a rate that was higher than it had been at any time since the 1960s, so I welcome the measures taken in this Budget to reduce it to 74% of GDP by the end of this Parliament. Our debt interest payments alone are equal to the annual budget of the Ministry of Justice and the Home Office combined. Just imagine how much extra we would have to spend, or we could save on taxes, if we did not have to pay that debt. The high level of debt leaves us extremely vulnerable to global shocks that could put up interest rates. Serious efforts to tackle the deficit, so that we can start to bring down our debt, must be accompanied by a sustained effort to continue to reduce regulation, to simplify our outdated tax system, to reduce public expenditure, to get the best possible value for money, and to give us infrastructure fit for the 21st century and for one of the world’s best performing economies, if not the best performing.
I welcome the Chancellor’s steps today to discourage child sugar consumption. As there is a cross-party consensus on the need to take measures to prevent ill health, it is important that we welcome those steps.
As the stir in the media begins to dissolve over the next few hours, I suspect that many members of the public will spot some of the uglier measures and scarier facts in the Office for Budget Responsibility’s analysis and in the Red Book. The Chancellor clouded many of his announcements in jargon—he goes a little bit faster over some passages in his Budgets. It is the downgrading of economic growth, though, that will be of the most profound importance to many of those commenting on the Budget today. To downgrade expected growth this year from 2.4% to just 2% is a real blow to the Chancellor’s credibility when it comes to delivering economic performance. He has downgraded those figures not only for this year, but for every single year of this Parliament, which has a major effect on a whole series of Budget assumptions.
We already know that the Chancellor took a gamble in the spending review before Christmas. He found £27 billion down the back of a sofa through a series of ONS reclassifications, and he banked on that money, spent a lot of it and committed it in a number of different ways. Now that the money has not materialised, he has had to make a series of adjustments, which we are only just managing to spot in the fine print of the Red Book. I have not had a chance to go through the full details, but it is interesting to make a note of those adjustments.
I thank the former shadow Chancellor for giving way. I wonder whether he is remembering his days as a senior adviser to Gordon Brown. Surely he must know that the forecasts are now all done independently by the OBR. It is only sensible for the Treasury and the Chancellor to react to those independent forecasts, but to try to shoot the forecaster is fundamentally to misunderstand the nature of the Office for Budget Responsibility.
Oh dear, oh dear—a bad workman always blames his tools. It is interesting that the Chief Secretary to the Treasury does not fess up to the big changes that have been made with the raids on public sector pensions. Some £2 billion will be taken from public service workers across this country—that was not really emphasised in the Chancellor’s speech. A whopping £6 billion, or 60% of the £10 billion surplus that the Chancellor is still claiming will be achieved, will go on all sorts of shuffles in when corporation tax is paid. That will potentially be very disruptive to businesses and firms across the country.
On the economic forecast, there is a problem not just with growth but with productivity. Despite the fact that the Chancellor has published productivity plans, it is stark to see how productivity has been significantly downgraded in the OBR document. On page 46, we see that, whereas in 2010 real productivity had 21.9% of potential, it has now fallen to 14.4% of potential—a massive faltering of Britain’s performance on productivity. Although the Chancellor has paid lip service to that issue, he has consistently failed to orientate his Budget measures around those economic necessities.
We also need to look at what has been happening to earnings in this country. Again, the growth in average earnings is downgraded not just this year but for every year of this Parliament. Page 91 of the OBR document paints a gory picture of what is happening to average earnings. Of course, that economic outlook has an effect on the numbers in the tax and spending decisions that the Chancellor has to make.
Let us look at what the Chancellor has had to do to try to keep his promises. He is trying his best to stay on course to deliver a surplus at end of this Parliament, but he has already had to admit that he has broken his promise on the welfare cap, and today he has admitted that he is breaking his promise on the national debt. Public sector net debt is up every year in the forecast for this Parliament—a theme that runs through the whole Budget statement. The heroic assumption that the Chancellor is still going to get that £10 billion surplus at the end of the Parliament feels implausible not just to me but to many of the economic commentators who are analysing the Budget statement. As I have said, that surplus is predicated on a £2 billion raid on public service pensions and the £6 billion shuffle in when corporation tax will be realised.
Then we get to some of the other changes that the Chancellor has decided to make. He did not really dwell on this very much, but cutting capital gains tax from 28% to 20% is a phenomenal giveaway to the very wealthiest people in this country. It applies not to residential properties but to those who have an accretion of capital wealth. Their tax will come down significantly, with a giveaway next year of £630 million. In the same year, he will take £590 million—from where? From the disabled—from the personal independence payment section of the social security budget. That is a straight transfer from those in most need to the very wealthiest in society—a tycoon tax cut, as I think it will be known as the days go by and people realise what has been announced in the Budget.
There are other spending cuts in the small print of the Red Book. Poor old local government services, particularly in areas where not a lot of Conservative party members reside—you might be surprised at my cynicism, Madam Deputy Speaker. Local government services received £10.8 billion of funding this year, but that will be cut by a third to just £6.2 billion in the last year of this Parliament. Just imagine the effect on libraries, leisure services, housing, social services and social care. Of course the Government will say that local councils can put up council tax, but they should not think that local residents will not place that council tax increase entirely on the Chancellor’s shoulders. They are the ones who have to pay the price for the cut in local services.
The transport budget will be cut from £2 billion to £1.8 billion by the end of this Parliament. How on earth will that help with the productivity issues we have to address? I have talked about the clear problems that emerge from the OBR Blue Book, and transport is one of the most important areas of infrastructure spend, ensuring that people can get from A to B and that goods and services can flow to markets. All those obstacles and impediments to business will be made worse by the Chancellor’s attitude to transport.
The OBR goes on to say that this era of cuts and Tory austerity will continue not only for this Parliament—never mind the previous Parliament—but will bleed well into the next Parliament. The OBR says that to achieve the surplus they want, the Government need a much bigger cut in current departmental spending of £8.1 billion in 2020-21, compared with the £1.8 billion that they have to cut in 2019-20. There are all sorts of statistical shifts and shuffles going on, all revolving around the Chancellor’s target, and what is that about? Not just the Chancellor’s European referendum anxieties but the leadership challenge from the Mayor of London. Everything in this Budget has revolved around the Chancellor’s political predicament.
We have a Budget that exposes many of the anxieties people have had about this Chancellor’s attitude. It is eminently political, with all sorts of shuffles that do not really have anything to do with the best interests of the economy. With growth down, debt up, productivity faltering, implausible surplus forecasts and a tycoon tax cut—a capital gains tax giveaway paid for by disability independence payments—it is not a Budget of which Government Members should be proud.
With today’s Budget, the Chancellor has shown once again that this Government are on the side of the people of the United Kingdom. This is a Budget that puts the next generation first. It is a Budget of opportunity. We are creating a climate that allows our businesses to thrive, our children to have the best education and reach their potential, and people to keep more of their own money and plan for their own future.
The Budget brings excellent news for small businesses, which are the bedrock of our economy and our communities. The businesses in my constituency will be thrilled to hear that we are cutting their taxes. Thanks to the announcements made by the Chancellor this afternoon, small business rate relief has doubled, and the maximum threshold for relief has been increased from £12,000 to £15,000. This means that many businesses in Morley and Outwood will now never pay business rates ever again. The Government will also raise the threshold for the higher rate of business rates from £18,000 to £51,000, meaning that 250,000 small businesses in the UK will get a tax cut on their business rates bill.
We are cutting corporation tax further to 17% from 2020, which will support job creation, benefiting more than 1 million firms across the country, many of which will be located in my constituency. To boost enterprise, we have announced that we are also cutting the basic rate of capital gains tax to 10% and the higher rate to 20%, which will improve investment in business. We are reforming stamp duty on commercial properties, resulting in a tax break for small firms. This will remove the distortions in the property market and make it easier for small firms that want to move to bigger premises. As a result, 90% of transactions will have their tax bill cut or stay the same. It is excellent news that the Chancellor has decided to simplify and modernise business taxes, and that is essential in ensuring that we have a tax system that is competitive but fair. I am certain that my constituents will be pleased to hear that we are also modernising our tax rules, to close loopholes that have allowed far too many international companies to reduce their tax burdens to close to zero.
Will the hon. Lady give way?
I am sorry; I will move on.
I have worked in schools as a music teacher, so education is very important to me. Improving our schools so that our children get the best education in life is essential, and the opening up of opportunities for young people is a subject that is close to my heart. The reforms announced today are excellent and will give every young person the chance to succeed. In my constituency we have some excellent academies—Morley, Outwood and Woodkirk, to name but a few. That is why I am delighted to hear that we are providing more money, so that by 2020 every school in England will have become an academy or be in the process of conversion. We are going to shine a particular focus on performance in the north and look at the case for teaching some form of maths to 18 for all pupils. We are introducing a national fair funding formula, from which 90% of schools will benefit, and ensuring that we will see those benefits by the end of this Parliament.
What is important to me is that we will invest £20 million a year into new funding of the northern powerhouse schools strategy. That new funding will ensure that rapid action is taken to tackle unacceptable divides that have seen educational progress in some parts of the north lag behind the rest of the country for too long. In support of that, Sir Nick Weller will lead the preparation of a report into transforming education across the northern powerhouse.
The difficult choices made by this Government mean that we are now able to make decisions that benefit everybody, beginning by raising the tax-free allowance so that more people can keep what they earn. For the sixth consecutive year, drivers will see historically low prices at the pumps maintained, thanks to the Chancellor’s decision to continue the freeze on fuel duty, which has done so much to relieve the burden on families and businesses. As the Chancellor said, that landmark decision will save the average motorist £70 a year, which is a significant amount for families. In constituencies like mine, which have seen an historical under-investment in public transport, cars are a vital lifeline. This cut in duty will make it easy for my constituents to get around, to go to work and to shop, and I welcome it wholeheartedly.
For far too long, previous Governments neglected investment in the north. By contrast, under this Government, this Chancellor is making good on his promises to pump investment into the northern powerhouse, which will see historic improvements to our transport links. The M62, which passes through the heart of my constituency, is to be upgraded to a four-lane smart motorway. So often I talk to constituents who get stuck in the horrendous traffic that builds up on the M62, and my team commute down the road every day. I am totally behind the measures to unclog that vital link.
It is not just the roads that are being kick-started. The new High Speed 3 link from Manchester to Leeds will cut journey times for people from my constituency to travel between the two cities. I look forward to seeing more detailed proposals for the route and stations for that link, which will be a welcome boost to the economy in Yorkshire and the north-west. Britain is a nation of builders. The north is the beating heart of Britain’s industry and I am proud that the north will be building once more.
The Chancellor is also supporting our communities through the landmark decision to freeze duty on beers, spirits and most ciders. I know that residents in my constituency will welcome that this weekend, when they visit the annual Morley cricket club beer festival. As the Budget document tells us, changes to beer duty have already protected 19,000 jobs, and these further changes will continue to support our brilliant breweries. That will protect our local pubs, which are so often the heart of the community, and support the Scotch whisky industry.
Whereas some Members on the Opposition side of the House want to divide us along our internal borders, this Government are committed to supporting one nation, with measures that will benefit the whole country.
Will the hon. Lady try to explain or give her version of the section of the Chancellor’s speech regarding the EU?
A very good question. I am very supportive of what the Government have done. After all, it is the first time in 40 years that we are getting this referendum. I think that is all that matters. We have put it in the British public’s hands to decide on the future.
The floods over Christmas and at the start of the year were devastating to so many people, homes and businesses across the country. My constituency was lucky; we escaped major damage, with most of the affected areas being farmers’ fields. However, I am delighted that the Government have committed more money to our flood defences, including £35 million of new funding for phase 2 of the Leeds flood alleviation scheme. Leeds was hard hit in the recent floods. Many of my residents commute there every day, so that is welcome news. Thanks to our strong economic recovery, we have the tools available to help those affected by the floods.
We found out yesterday that the shadow Chancellor had previously listed his great influences as Marx, Lenin and Trotsky. With a new musical about the Leader of the Opposition coming out next month, I hoped he would not be singing the same tune. Unfortunately, it looks as though the Opposition are more of a tragedy than a comedy. The response from the Leader of the Opposition to the Chancellor’s statement confirmed that the Labour party should never be trusted with the nation’s finances. He said that we were not on the side of small businesses, yet we delivered tax cuts. He criticised the reduction of corporate tax rates, yet that will help businesses to grow and invest more into the economy, helping working people and the country as a whole and creating more jobs. Where the Government are setting out a clear plan for the future of the British economy, the Opposition are stuck in a Marxist dream-world where economic realities do not apply. They should never be given the opportunity to hold the levers of power again.
This is a Budget of opportunity—[Interruption.]
Order. There seems to be a lot of noise for no apparent reason. If people are having conversations, they should not be having them here in the Chamber. If they want to intervene on the hon. Lady or challenge her, they should do that. This is about the debate, not about other things.
Thank you, Madam Deputy Speaker.
This is a Budget of opportunity, giving young people in our schools the opportunity to succeed, and giving businesses the opportunity to grow and prosper. The northern powerhouse and investment in the region will help us provide new jobs. Our planning laws will be reformed, which will give people the opportunity to own their own home. The Conservatives are the right party to take us into a positive future, with a strong economy and a budget surplus. For the first time in over four decades we are letting the British people decide on our future through the EU referendum. I am proud to be a Conservative and I commend the Chancellor on his Budget.
I want to speak today about tax avoidance and its impact on the UK economy and on the economies of the developing world. In this I follow the hon. Member for Amber Valley (Nigel Mills), who spoke earlier, and my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier). I hope that between us we will be the beginning of a chorus that is so loud that the Chancellor will not be able to ignore it.
I welcome the Chancellor’s announcement today about closing tax loopholes for big companies, but without transparency this will make little difference to a tax avoidance industry that is out of control here and across the globe. This Government and other western Governments around the world are presiding over a global economy in which inequality has reached crisis point, and today’s Budget will not make that any better. Oxfam’s “An Economy For the 1%” report tells us that the richest 1% now have more wealth than the rest of the world combined, that power and privilege are being used to skew the economic system to increase the gap between the richest and the rest, and that a global network of tax havens across the world, including here in the UK and in our Crown dependencies and overseas territories, contributes to the richest being able to hide $7.6 trillion, which is contributing to cuts in public expenditure here and across the world. Here in the UK that means longer NHS waiting lists, teacher shortages and decreasing levels of care for the elderly and frail, and it means that the poorest living in the developing world see every penny of international development funding wiped out by what is, in effect, stolen from them in tax avoidance.
Does my hon. Friend think it is an interesting contrast that the US chief executive of Google was paid a salary package of bonuses, shares and so on worth about £130 million, and Google’s tax settlement with HMRC for a 10-year period was around the same amount?
Yes, and I doubt whether he even sees the irony. I watched that session of the Select Committee. What I recall is that he could not even tell us what his salary was—it was so large, and it was made up of so many different kinds of dividends and so on, that he had no idea what his salary was.
There are 62 individuals who now have the same wealth as the poorest 3.5 billion people in the world. Those same 62 people have seen their wealth increase by $542 billion since 2010, while the poorest 3.5 billion people have seen their wealth fall by $l trillion over the same period. Those in the poorest 10% of the world’s population have seen their income rise by just $3 a year over five years, whereas 62 of the world’s richest people have seen their income rise by $500 billion over the same period.
As is always the case when we are talking about who is rich or poor, it is women who are at the bottom. Some 53 of the world’s richest people are men, and the countries with the largest inequalities have seen the gender gap widen in terms of not only income, but health, education, labour market participation and representation.
The current system of tax havens, with what has become an industry of tax avoidance across the globe, damages our economy in this country and economies across the world, and it needs to be addressed and closed down. It is absolutely clear that trickle-down economics does not work, except for the richest 1%, in which case it works beautifully for them and their mega-rich pals.
The Government’s view that low taxes for the richest individuals and for companies are somehow good for the rest of us is just plain wrong. If the Googles of this world, and the Vodafones, Starbucks, Amazons and the rest, paid their taxes properly, like the millions of hard-working people who understand that paying taxes is the cost of living in a civilised society, we could wipe out the deficit in the UK, and the poorest across the world could begin to see improvements in their grindingly poor lives.
Channel 4 revealed this year that Barclays, which had signed up to the banking code on taxation and therefore promised not to engage in tax avoidance, actually employed a range of tax avoidance schemes to dodge an estimated half a billion pounds in tax in the UK alone last year. That is the worst kind of hypocrisy.
When the bank’s tax avoidance practices were reported on by Channel 4, Barclays responded that it had
“voluntarily disclosed to HMRC in a spirit of…transparency that it had repurchased some of its debt in a tax efficient manner.”
Will the Chancellor’s announcements today change that? Without transparency in the system, I doubt it. Presumably, Barclays made that declaration fully understanding that its actions would result in fewer doctors, fewer nurses, fewer teachers and cuts for the poorest and most vulnerable in this country.
Boots the chemist, which earns every penny of its income in the UK, moved its headquarters from Nottingham to Zurich to avoid paying any tax in this country. Quite frankly, that should be illegal. I doubt very much whether, without transparency in the system, anything the Chancellor said today will change that, bring the Boots headquarters back to this country or make Boots pay its tax here.
Companies that are household names in the UK now routinely use a technique called transfer pricing, trading goods and services internally—within a network of the same multinational company’s subsidiaries, each of which is in a different jurisdiction—to avoid paying tax. Without transparency and routine, mandatory reporting, that will not change, even after what we have seen in today’s Budget.
When companies are caught out and their practices are highlighted, as happened recently with Facebook, they simply reach a sweetheart deal with HMRC, paying a tiny, tiny proportion of the tax they owe, while announcing to the world what good citizens they are because they now pay their tax.
Yesterday, Oxfam published a report called “Ending the Era of Tax Havens: Why the UK government must lead the way”, which pointed out that tax havens are at the heart of the inequality crisis, enabling corporations and wealthy individuals to dodge paying their share of tax. Oxfam analysed 200 of the world’s biggest companies and found that nine out of 10 have a presence in at least one tax haven, with corporate investment in those tax havens in 2014 almost four times bigger than it was 10 years ago. Tax avoidance in our largest companies has become routine and obscene, and it is growing.
Tax havens are estimated to cost poor countries at least $170 billion in lost tax revenues every year. They fuel the inequality crisis, leaving poor countries without the funds they need and effectively wiping out the benefits of any international development funding those countries receive. If we are to address that, the Government must require multinational companies to make country-by-country reports publicly available for each country in which they operate. The Government must also support efforts at European and international level to achieve that standard globally. That has not happened in today’s Budget.
I have great sympathy, as I mentioned in my speech, with the point about the avoidance of corporation tax by large corporations. Does the hon. Lady not agree that the real damage is in poor countries, where these corporations get away with paying no corporation tax whatever, while we are, at the same time, giving these countries foreign aid? We need to tackle this issue internationally, through the OECD, the G7 and the G20, which is exactly what the Chancellor has been trying to do.
I agreed with everything the hon. Gentleman said until he said that this is “exactly what the Chancellor has been trying to do”, because unless there is mandatory reporting, and it is transparent, it will not make any difference.
The Government need to ensure that the mechanisms for public country-by-country reporting benefit developing countries as well as the UK. We did not see that in today’s Budget. The Government must require the UK Crown dependencies and overseas territories to set clear timetables for public registries of beneficial ownership. After all, the Prime Minister promised this three years ago at the UK’s G7 summit in Lough Erne and has failed to deliver it, and again it is not in today’s Budget.
We cannot call ourselves decent people and cannot claim to be a decent country if we stand by and allow the inequalities that exist between the rich and the poor to grow. The British people understand the unfairness of the current situation, and they want it to change. They understand that despite opportunities such as today’s Budget to address some of this, the Chancellor has chosen not to do so. This country, and this world, is not short of wealth, and it makes no economic, political or moral sense to allow the current obscene situation to continue. It is wrong that 62 people have more wealth than the poorest 3.5 billion people on this planet, wrong that companies operating in the UK routinely avoid paying the tax they owe, and wrong that the Government and the Chancellor seem content to allow this to continue.
It is a great pleasure to speak in this important debate, not least because it covers two important subjects that I find of great interest—Europe and education. I intend to address them both.
First, let us canter through some of the statistics in the context of the changes that the Chancellor announced. The global economy is going through a very problematic period of adjustment. That has significant impacts on our own performance, and those are driving down some of the more ambitious assumptions made previously. That is why the OBR is so important. My right hon. Friend the Member for Wokingham (John Redwood) said that the OBR had been wrong on a scale of about £45 billion per year on anticipated debt. If we contrast that with the £8.5 billion that we pay to the European Union in net contributions, we see that it is a different scale of issue. However, that does not undermine the function of the OBR because it has to measure changes over a wide variety of different statistics, and does so remarkably well. We should salute that. We should also note that the Office for National Statistics is just as good at making predictions.
The Chancellor mentioned productivity—rightly, because that goes to the heart of the issue. He said that productivity growth is slackening. In this country we need even more productivity growth than we are seeing now because our deficit with other countries who are our competitors is quite significant. For example, the OECD says that we are 28% less productive than the Germans. That makes a difference when we set about exporting. If we are that different from the German economy in terms of productivity, then we are going to struggle with being competitive. We have to stop complaining about UKTI and stop worrying about what people are doing to us, and start recognising that we have to narrow this productivity gap.
The second point about productivity is that it matters in relation to life fulfilment, tackling poverty and so on, because the brutal fact is that if we are more productive through having greater skills and better deployment of training, we will get higher salaries and better wages. Through driving productivity increases in our economy, we will end poverty on the scale that has been mentioned today. That is our challenge, and it is a must-do. I am really pleased that the Chancellor is embedding it in this Budget. He has done so by addressing education, which I will turn to now.
More academies equals better schools. That is something that I believe and, I think, something that we will easily prove.
As the hon. Gentleman is probably aware, the Public Accounts Committee recently held a hearing on teacher training. We discovered that, after an eight-week course—sometimes it did not even last eight weeks—a staggering number of teachers who had not been qualified to teach certain subjects to a higher level qualified to teach them to our students and young people. Does he not think it is more important to sort out having qualified teachers in the classroom than to force every school into academy status?
I could not agree more with my fellow Select Committee Chair. That is obviously a priority, but that does not mean that it is not also important to have good schools that are led well by headteachers who are focused on the right culture, standards and quality staff. We should have more academies and make sure that they operate in a well-structured multi-academy trust.
I think I have set the cat among the pigeons. Go for it.
The hon. Gentleman knows as well as I do that, when we both sat on the Education Committee, we saw no evidence whatsoever—believe me, we looked for it—that academies improved standards more than maintained schools.
That was a year ago, when there were fewer academies. Now, 80% of academies are good or outstanding, which is a really impressive signal. We need to make sure that academies join up in multi-academy trusts.
Will the hon. Gentleman give way?
No, I will keep going now. I am really excited about the idea of including university technology colleges in MATs, because that will give greater choice. The Government have already allowed sixth-form colleges to be included in MATs. We need economies of scale in sixth-form provision, and increasing the number of MATs will do just that.
It is a scandal that, according to a national mathematics charity, 78% of our adult population do not reach level 2 maths. That is not acceptable and it is absolutely right that maths should be taught as a compulsory subject up to the age of 18. I have frequently said that we should have a national baccalaureate to do just that, and I urge the Government to point out to Sir Adrian Smith that that would be at least one way of making sure that 16 to 18-year-olds are taught maths. I remind the House that we are the only country in the western world in which maths is not a statutory subject up to the age of 18. That is not acceptable.
I know that this is of no interest to the Scottish nationalists, but the Government have rightly decided to make sure that our schools have fairer funding. When I was a member of the all-party parliamentary group on Yorkshire and northern Lincolnshire, I was not surprised that there were concerns about Yorkshire schools and that people wanted a commission to improve them, because there are a large number of coastal and rural schools. Such schools often suffer most with regard to funding, so it is absolutely right for the Government to tackle that.
I salute and welcome the decision taken on sugary drinks. I am also very pleased that the money from that tax will go towards encouraging more sports participation. My Education Committee will look at that in detail.
I want to mention three other issues before I move on to Europe. First, I think that devolution is a really good thing and I am really pleased that so many cities and counties are considering mayoral solutions. I think that is the way forward. Any structure considering devolution must ensure that it has the right accountability and governance system in place. That is what the Government seek to achieve. I hope that my own county of Gloucestershire—the entire county; I do not want anything to be chopped off—will be a successful devolved power with a suitable governance structure. That is the way to harness business, education and other public services, make sure that the planning system is consistent with the overall interests of the county, and deliver for the people. That is how we can really make a difference, and this Budget helps that process.
It is absolutely right that we continue to invest in infrastructure. I think the key thing is to signal a plan for investment that businesses can look to with some certainty and know that it is happening, so that they can start thinking about the people they need to recruit and the resources that they need. A common complaint of organisations such as the Institution of Civil Engineers is that we do not have the planning capacity to make the decisions that we should be making ahead of starting a project. Forward planning in infrastructure projects is absolutely great, and the Budget does that to some extent, although I think that more could be done.
I am really pleased to see that business rates are being changed so that smaller businesses will simply be exempted. That is good news for a constituency such as mine, where we have a large number of small businesses, many of them in the retail sector. Many are starting to develop really interesting technologies that have huge potential and that will get somewhere if they are given a proper chance. The changes in business rates are really very good.
Back to the European Union. We have to accept that the OBR is right to point out that if we leave the world’s largest single market at a stroke—that is effectively what article 50 will do—we will cause a huge amount of disruption to investment and trade. If anyone thinks that signing 66 new free trade agreements will be easy, quick or comprehensive, they are wrong. As we saw with the discussion about Canada, if we replicated the position of Canada, our situation would not be helpful in terms of motor cars or financial services. That is not a solution.
We should also remind ourselves that proportionally, Norway pays about the same as we do to be in the single market, with no control over anything and no special dispensation over any aspect of the single market. We complain about paying the same amount, per ratio, as Norway, yet right now we have influence. What does that influence do? It effectively created the single market in the 1980s and has expanded it now, and it will continue to ensure that Britain has a leadership role in the European Union, where we can forge a stronger, better place for trade and extend beyond the European Union. The idea that we are in the European Union and that therefore can go nowhere else is utter nonsense. Germans export to China. The Netherlands beats us when it comes to exports to India. We, not Europe, really have to think about where we export and how we do it, and about the productivity issue that I have raised.
Those are the economic reasons for staying in Europe, and I will largely confine myself to them. I am interested, too, in the fact that Mark Carney, the Governor of the Bank of England, has taken the time to consider the implications if we decide to leave. He has recognised that there would be difficulties in our banking system if that were to be the case, and he has taken pre-emptive action. That is a signal that we are taking a risk by considering leaving the European Union. Instead, we should make up our minds and stay in. From then on, we should use our power in the European Union and beyond to shape a Union that represents our interests, deals with more competition, forges more trade links and gives people in Europe as a whole more security—for their own safety and national safety—and economic opportunities. That is why it is important to remain in the European Union, and that is why the OBR, the Bank of England, the CBI and, plainly, the Chancellor of the Exchequer think that we should do so.
Several hon. Members rose—
Order. We have plenty of time for this debate, but, to make sure that everyone has a fair chance to speak, I am going to reduce the time limit to nine minutes.
May I first welcome a number of measures in the Budget? The rise in income tax thresholds is important for those in work who wish to keep their income and spend it as they, rather than the Government, see fit. The changes for savers are also important, especially for those on lower incomes and perhaps those who are self-employed, given the incentives. I would however point out that although the Government have presented some of the changes as important, especially the lifetime ISAs and the help for low-income savers, many people will still struggle to put aside the money for such initiatives. The change in business rates is important for small businesses that are struggling, especially in town centres, as are the promises to deal with tax avoidance. However, we have heard such promises before, and, very often, nothing has come of them.
Is the hon. Gentleman not concerned, as I am, that the whole tax-avoidance strategy is rhetoric, rather than reality, given that HMRC wants to close 90% of its offices, some of which are in Northern Ireland?
There has to be a connect between the promises that the Government make and the ability to deliver on them, whether through legislative changes or, indeed, through having the resources to deal with the issues.
The Northern Ireland Executive will benefit, from Barnett consequentials, to the tune of about £220 million over the comprehensive spending review period. Many people will welcome the fact that £5 million has been set aside to establish an air ambulance in Northern Ireland, for which we have called for a long time.
I want to deal with two areas. I will start where the hon. Member for Stroud (Neil Carmichael) finished, with the Chancellor’s references to the European Union. I notice that the Chancellor made fairly scant reference to it in his statement. Indeed, I think many people were probably surprised about that, given the way in which the Government have tried to drive this issue. On the other hand, I am not surprised, because what does he really have to say about retaining membership of the EU?
The Chancellor talks about struggling with the budget deficit and with the public finances, yet he is quite happy to give £10 billion a year to the EU. In the EU, the money is often so badly spent that its accounts are qualified every year. Such money goes on fraudulent activities; it disappears into black holes; it goes on vanity projects—[Interruption.] I notice that some of the most vociferous supporters of giving public funds to the EU are from the Labour party, while its Members are complaining about cuts in services for their own constituents.
The other point that the Chancellor has to address is that, although he will give £6 billion to companies in corporation tax cuts, he will, over the same period, take £7 billion more off them in environmental levies, most of which are driven by European directives. On the one hand he is giving money to businesses, and on the other, European directives ensure that he has to take it from them.
The hon. Member for Stroud got it wrong when he mentioned what the OBR has said about leaving the EU. The OBR has not been definite that certain things would happen. Indeed, its report says that leaving the EU “could usher in” uncertainty, “could have negative” impacts and
“might result in greater volatility in financial…markets”.
That is also what the Chancellor said. The ironic thing is that he had no sooner uttered his comments about threatening and slaughtering jobs, investment and everything else than, in his very next sentence, he pointed out that since the autumn statement—we have had all the uncertainty about the referendum and the fact that the United Kingdom might vote to leave the EU—the Government had
“created…150,000 more jobs than the OBR expected.”
There is all this volatility and uncertainty, yet in the face of a referendum businesses are not reflecting uncertainty or fear. Indeed, according to the Chancellor they are creating 150,000 more jobs than the OBR expected.
I just wondered whether the hon. Gentleman was aware that 80% of businesses in Northern Ireland want to stay in the European Union.
Of course, it depends on what survey we look at. Large firms benefit from the lobbying power they have to restrict innovation and the entry of small firms into markets. Small businesses are buried under regulations and strangled by the red tape that emanates from Europe.
The Chancellor carefully avoided talking too much about our membership of the EU, because there is not a good story to tell on that in budgetary terms. I notice that, so intent is he in ensuring that attention is not drawn to it, EU transactions are included with others in chart 1 of the executive summary—he does not want to highlight the exact amount of money we pay into the EU.
The second issue I want to deal with is inequality across the United Kingdom and across sectors of the population. Growth forecasts have been reduced for a whole range of reasons. Some of those reasons are outside the control of the Chancellor, but some are not. One way to improve growth is to borrow money for infrastructure projects. I find it inconceivable that the Government talk about not letting the level of debt go up when there are good infrastructure projects that would give a good rate of return. They are quite happy for debt to go up to finance consumer spending, which has been the main driver of growth. I would rather see growth driven by spending on infrastructure projects that increase productivity and give a return that generates tax revenues in the future, rather than putting individuals in jeopardy if there happens to be an increase in interest rates.
Will the hon. Gentleman give way?
I will not give way, if the hon. Gentleman does not mind, because I do not think I will get an extra minute.
We know from experience that when the growth forecast goes down the regions of the United Kingdom—Northern Ireland, the north-east, the north-west and Scotland—tend to experience the greatest impact. The figures in the Budget statement show growth rates for Northern Ireland to be half of those for London. Indeed, there are only two regions of the United Kingdom that exceeded the average growth in the past four years: London and the south-east. All other areas did not experience the same rate of growth. There is a strong case for saying that infrastructure investment could help to stimulate the economy in those other areas, so I am disappointed that not more infrastructure projects were announced in the Budget.
When funding is made available for research and innovation, I hope places such as Northern Ireland will not be excluded. Belfast’s Queen’s University’s excellent research has been a driver of growth and innovation for many businesses, helping them to get into export markets.
On inequality within income groups, the Government cannot ignore the fact that we are increasingly in danger of becoming a two-nation state. At the bottom of society, there are those without hope. Even the tax cut that means some of them will pay no income tax at all will benefit me as well as lower income groups. There needs to be a greater focus on people who find themselves without the skills, hope or income they need to do the day-to-day things they are required to do.
When I see the resources being devoted to a cut in capital gains tax, as opposed to those being taken away from people who are on, and cannot escape, benefits because of disability and so on, it illustrates to me how the Government have a long way to go and much thinking to do when it comes to dealing with those who are less fortunate and at the lower income end of the spectrum. It is they who need a leg up and more resources devoted to them.
It is an honour to follow the hon. Member for East Antrim (Sammy Wilson), who spoke with characteristic passion and commitment to his constituents.
I follow other Members who have welcomed the new sugar levy announced today. I have long campaigned hard to make sure we tackle public health challenges, particularly those facing young people and children. Individuals who get a chance to look at the sugar smart app will see how much sugar is in so many of the products we and our children consume. The levy is a positive step forward.
I am pleased to hear that the hon. Gentleman welcomes the sugar tax, as do I. I have long felt we should introduce it. The Chancellor referred to the next generation and the £27 billion we could save. The levy will bring savings to the NHS, change people’s attitudes and address levels of obesity. Does the hon. Gentleman agree that if ever there was a good reason for a sugar tax, that is it?
I completely agree. The hon. Gentleman and I have been involved in numerous debates about promoting outdoor recreation and physical activity—for older people as well as young people—and the levy is a positive step further forward. I pay tribute to the Government for taking forward its sport strategy and to the Under-Secretary of State for Health, my hon. Friend the Member for Battersea (Jane Ellison), for her work in taking forward a very proactive public health agenda.
On other areas of the Budget, I felt that the Chancellor set out a clear, strong package of measures to help go on delivering the long-term economic plan and to make Britain the best place in the world to start up and grow a business. I have long talked about the importance of an enterprise economy. To achieve one, we need to focus on some key groups of people who make that happen: the entrepreneurs, the exporters, the employers and, of course, the employees who help put the pieces of that jigsaw together to create the enterprising economy that we want to see in Macclesfield, Cheshire and right across the country.
In recent years, I have also been campaigning hard on behalf of the self-employed. It is fascinating to see how self-employment is moving forward. I have been working with Demos and the RSA on various policy initiatives in this area, and it is clear that there is a long-term trend towards more self-employment—4.6 million, up from about 4 million in 2010. It is clear from the RSA’s own work that the pull factor is bringing more people into self-employment; there is not just a push factor. On the back of that, it is important that we welcome the Chancellor’s announcement on abolishing class 2 national insurance completely, to simplify the tax system for the self-employed.
The Chancellor also talked a lot about productivity, which the Government are absolutely committed to improving. For decades, the UK’s productivity has lagged behind that of other major economies. We need to address that. As a result of the drag from the financial crisis, the OBR has forecast lower productivity in the UK, as the OECD has done in the vast the majority of countries. That is why the Chancellor is absolutely right to keep an unrelenting focus on productivity and to take the strong action we need to take to bolster our economy now and for the next generation.
Colleagues should turn to page 61 in the Red Book to see the vast array of activity being taken forward to encourage more investment: lower taxes to boost enterprise, investment in infrastructure, as called for by Opposition Members, and a strong focus on science and innovation, which I believe is vital for the country and certainly for Cheshire.
I join the long list of colleagues on the Government side—and, I hope, Opposition Members, too—who welcome the fact that the Chancellor has set out that business rates will be reduced, which will have a huge impact on many small businesses. Capital gains tax has been cut; corporation tax has been further reduced to 17%. Stamp duty is to be reformed, not just in the residential sector, but in the commercial sector. These are vital steps in ensuring that we improve opportunities for investment. When we drive productivity further forward, it means more jobs and more skilled employment, which, when combined with the national living wage, will lead to higher wages, too.
Is the hon. Gentleman aware that, as a result of the introduction of the living wage, most high street chains and supermarkets will cut their long-term staff salaries?
These are challenging issues. Clearly, there needs to be discussion between the employers and employees. The Government have made it clear that they will name and shame to highlight the organisations that are not going forward with the national living wage. We will have to wait and see, but it is a positive direction that the Government have set out, providing real opportunities to grow wages further beyond the 2% that we have seen in the last year.
The key to the long-term economic plan and the rebalancing of the economy is to ensure that we rebalance geographically as well. This Chancellor and this Conservative Government have set out a very clear narrative for the north—the first in decades. As with the long-standing challenges with productivity, we need to measure our expectations of what can be achieved now, and we should be resolutely ambitious about what can be achieved in the future.
The Treasury analysis of the opportunities from rebalancing the economy and putting more focus on the north suggests an additional £56 billion going into the northern economy over the next 15 years. That is a prize worth having, and a prize in which this Government are willing to invest. Of course the Chancellor and this Government have championed city deals and growth deals across the country, particularly in the northern powerhouse, and they have done the same today. This is a fundamental part of the Government’s reform agenda.
Local leaders and local partnerships are creating strategic partnerships, which are empowering a new scale of activity that is required to achieve the growth across the country that we want to see. Ambitious measures are being taken forward. For example, the creation of a northern transport strategy is vital. Within just two years, we have seen a fundamental transformation of our ambitions for the north—not just economically, but in terms of civic renewal.
Transport for the North will be put on a statutory footing, with a £50 million budget to 2020. There will be smart ticketing across rail services in the north, with £150 million promised for faster and more frequent train services with greater capacity. Strategic investment in High Speed 2 will have a huge impact on Crewe and Cheshire East, as well as on the north-west as a whole.
Today we heard more from the Chancellor about better links among the individual cities of the north that need to get better connected. That includes trans-Pennine rail services, better road links and making the M62 a smart motorway. There is talk now of building a case for a trans-Pennine tunnel between Manchester and Sheffield. These are fundamental and ambitious schemes. They are not just about Government funding, because private investment is being leveraged in as well. It is fantastic to know that Manchester airport has now had planning permission to take forward its £1 billion investment in a 10-year transformation programme that will be welcomed across the north-west.
Work is being taken forward to help create this northern powerhouse with the infrastructure and devolution that is required. It will connect northern cities to ensure that the sum is greater than the individual parts. In doing so, we can make sure that we create a globally significant economic entity. We hear of Randstad, Amsterdam, Rotterdam, The Hague and Utrecht working together, and the same applies to the Rhine and Ruhr, with Koln, Dusseldorf and Dortmund. They are stronger because they are better connected—and we have the same ambition for the north.
Success will not only be about infrastructure or devolution. We must ensure that we back the sectors that can help to drive our economic strength. That is why life sciences are so pivotal—not just in Macclesfield or Cheshire, where we are seeing an emerging life sciences corridor, but in helping the UK to continue to be a world-class centre of excellence in a leading role, creating clusters of high-skilled and high value-added jobs, as we are doing in Cheshire. I hear that clusters are likely to form in some other places down south. Oxford and Cambridge, I understand, also have some claims to be pretty good at science. The fact that we are taking scientific initiatives is critically important.
We are performing well according to a number of key output measures. We are producing 16% of the top-quality published research findings on the basis of just 3.2% of the world’s R and D expenditure. That is a sign of strength in the sector, and it is important for the Government to get behind that sector as part of their ambitions for the northern powerhouse and for our long-term economic plan. They have an important role to play as a champion of science, a funder of science, and a facilitator of scientific endeavour. I welcome recent announcements, in the spending review and confirmed in the Red Book today, that the science budget will be protected in real terms until the end of the decade. As a result, we shall have a £6.9 billion research infrastructure by 2021, which means crucially that our party can deliver on its manifesto commitment to achieve record investment in the country’s scientific infrastructure.
Of course, funding and spending are not the only drivers of success. The lesson that we can learn from the last Labour Government is that it is important for Governments to spend well, and to encourage businesses in the private sector to invest too. That does not mean recycling old policies and adding shiny new words. Over the weekend, we heard the shadow Chancellor talk about the “fiscal credibility rule”. Within a matter of minutes, it was deemed by many members of his own party to have a complete lack of credibility, so I am sure that businesses will not be fooled. They recall the size of the deficit that was inherited in 2010, and they recall that corporation tax stood at 28% and national insurance was set to increase. They will not be fooled by the soft words of the hard left which is currently running the Labour party. This Government are absolutely committed to increasing productivity, focusing on science, and rebalancing our economic geography in favour of the north.
When the Chancellor of the Exchequer was appointed to his post nearly six years ago, he was faced with several challenges: a record deficit, an increasing number of welfare claimants, and the fallout from a banking crisis of a scale that had not been seen since the 1930s. Along with each of those challenges, the Chancellor was faced with an opportunity. He could have reformed the tax system, changed the terms of welfare forever, and restored confidence to our banking system. However, he wasted each of the opportunities that accompanied those major challenges.
For a start, the Chancellor failed to tackle the deficit by 2015, although in 2010 he had confidently predicted, at the Dispatch Box, that he would. The plan, we were told then, was to start paying off the national debt by the end of the last Parliament. In the emergency Budget statement that he delivered to the House on 22 June, he went so far as to claim:
“The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]
Here we are at the beginning of 2016-17, and the budget deficit stands at £72.2 billion. Now the Chancellor tells us, in all hope, that he will turn that into an absolute surplus of £10.4 billion in 2019-20. It is Cheltenham week, and I wonder who will win the wager that he will achieve that.
The only conclusion that can be reached is that austerity has failed to produce the growth and the tax receipts that we need if we are to end the deficit and begin to pay off the national debt. I believe that there are two solutions. We need tax reform in the short term to ensure that tax is collected efficiently and effectively, and we need to increase radically long-term investment in new and emerging businesses. The Chancellor is intent on cutting public services by £8.1 billion by 2020-21, but what is he doing to ensure that the large multinational companies that do business in our country pay their fair share of tax? Is it fair for a small business to face demands and eventual court action for non-payment of tax while a corporate giant like Google can negotiate with HMRC? Of course it is not.
The cases of Google and Facebook demonstrate that corporation tax has had its day. The UK Government raise about 7% of their revenue from corporation tax, but much of that would be collected as income tax on dividends even if corporation tax did not exist. Taxing companies locally on a fraction of their worldwide income calculated by reference to their domestic activity could be one solution to this issue. Alternatively, the Government could be bold and radical and abolish all tax incentives and other loopholes, making it almost impossible for anyone to avoid paying their fair share of tax.
The Chancellor should look at ways of spreading wealth to the regions that are traditionally reliant on the public sector, such as the north-east, Northern Ireland and, yes, Wales. As someone who travels across the Severn bridge on a weekly basis, it would be churlish of me not to welcome today’s announcement of the halving of the Severn bridge toll. However, I must qualify my welcome by saying that I wish the proposal had been for the maintenance-only toll for which my hon. Friend the Member for Newport East (Jessica Morden) has been campaigning for years. We look forward to hearing the details, but I really wish that, rather than the cut being introduced in 2018, businesses could benefit from it this evening or tomorrow.
HMRC estimates that in 2015-16 there are 3,000 additional rate taxpayers in Northern Ireland, 4,000 in the north-east and 5,000 in Wales. In Wales, additional rate taxpayers pay £302 million in income tax. I urge the Government to look at regional tax rates tailored to encourage people to start up businesses in areas such as Northern Ireland, Wales and the north-east. That would also encourage wealth creators to relocate to those areas.
However, tax reform will go only so far towards paying down the deficit. Whether the Government like it or not, they have to put their money where their mouth is. In the future, we will face challenges ranging from ageing to climate change to antibiotic resistance, and it will be our researchers and innovators who are at the forefront of sustaining our way of life, as the hon. Member for Macclesfield (David Rutley) has just mentioned. We have a responsibility to safeguard both the quality and the productivity of our science base to ensure that we are in a position to meet those challenges. In our increasingly knowledge-based economy, the pursuit of excellence in research and innovation will be at the heart of effective strategies for sustainable growth, increased productivity, competitiveness and the creation of high-value jobs. This is the nation that broke the Enigma code and discovered DNA. Our competitors across the world recognise the value of the knowledge economy and are investing heavily in science, technology, research and education. If we want to remain world leaders in tomorrow’s knowledge economy, it will not be enough to ring-fence the science budget. We need to increase it and invest more in it.
I turn now to the final challenge. Despite being given a mandate to reform welfare, the Government have failed to grasp the problem. Focusing on jobseeker’s allowance, they have peddled the myth that most of the money goes on unemployment or incapacity benefits. In fact, 47% of UK benefit spending—£74.22 billion a year—goes on vital state pensions, which is more than the £48.2 billion that the UK spends on servicing its debt. That is followed by expenditure on housing benefit of £16.94 billion and on disability living allowance of £12.57 billion. Jobseeker’s allowance is actually one of the smaller benefits, with £4.91 billion being spent in 2011-12, an increase of 7.6% on the previous year. We can no longer tinker around the edges of welfare reform. The budget is getting too huge. We need a cross-party report that all the major parties can sign up to—a modern-day Beveridge report, if you will—to seek solutions to how benefits can be delivered in a way that reflects the modern world.
Nothing rouses the anger of the British public more than the banks. Following the financial crash of 2008, banking reform was at the top of the agenda. Sadly, this Government have been found wanting. Just this week, HSBC announced plans to close its local branch in Risca in my constituency. Already, hundreds have signed a petition expressing their anger at the closure. On four occasions over the past five years, HSBC has threatened the Government that it will leave this country, yet it does not even think it important to consult the local community before closing a branch.
The Financial Conduct Authority launched a review into banking culture, but it has now been scrapped, despite the fact that customers and taxpayers are still paying the price for the failed culture in the banking sector that has been widely attributed to be one of the main causes of the crash and the scandals over LIBOR and price fixing. We need to introduce competition into the banking sector to finally challenge the dominance of the big six banks. A start could be made with real-time data sharing to help consumers and promote competition. It is vital that better and more accurate information is shared more quickly and that banks’ current account and credit card account data, which are currently excluded, should be shared if consumers want them to be. Banks have an incentive to stop those improvements. The case is strong for regulation to make safe and effective sharing happen.
As we have seen across the world, such as in the rise of Donald Trump and Bernie Sanders in America, the public desperately want change. The Government’s response, which has been the same since they were elected, is business as usual. To people all over the country, business as usual is just not good enough any more. The system has a sense of inherent unfairness. People who are not on benefits or rich enough to pay their way out of the system are fed up with the same old slogans. They are angry and they want change. This Budget is the latest in a long line of wasted opportunities. In the light of all the evidence, it is time for the Government to rip it all up and start again.
In broad terms, the Budget is extremely welcome. It continues the extremely sensible policies that the Chancellor set out as long ago as 2010, the essence of which is on page 127 of the Red Book, which sets out receipts and expenditure as percentages of GDP. Tax receipts will run at 35.7%, 36.3%, 36.9%, 36.9% and 37% of GDP over the next few years, which is in accordance with the normal long-run averages. Only in the highest years of tax receipts, going back to the 1970s, has taxation in this country managed to get as high as 38%. That sets out a limit for public expenditure if there is to be a balance, which it is obviously important to achieve when the economy is going well. We therefore see that public expenditure will be managed in line with the receipts that will come in, so that expenditure will be less than receipts by the end of the period.
That is absolutely what the Chancellor promised all those years ago when he said that he would mend the roof when the sun was shining. A glimmer of sun has come through the clouds of international crisis and the Chancellor has been busy on his ladder fixing the roof with his nails, his hammer and his wood. The process is now nearing completion, for which he deserves a great deal of credit.
Turning to the details of the Budget, the Chancellor also deserves much credit for his reforms of corporate taxation. It was Napoleon who first called us a nation of shopkeepers, and I noticed that the Chancellor quoted Napoleon in his speech. That may say something about his European ambitions, with which I am in less agreement, but we are indeed a nation of shopkeepers. Reducing the burdens of rates, VAT and bureaucracy is only to be welcomed and is thoroughly desirable. Ensuring that multinationals pay taxation according to law is also desirable, but it is always worth remembering that tax avoidance is perfectly legal. If tax is being avoided, it is for this House to change the law so that tax must be paid. It is not some moral virtue to pay more tax than the law requires, so removing loopholes is to be much commended.
I fully support the broad thrust of what the Chancellor is doing. He has got it right, and most of his tax measures are welcome, particularly his changes to personal taxation, an area in which I would like him to go further. Having made £8 billion from cutting the top rate of income tax from 50p to 45p in the pound, he should go further in an exuberant, Laffer-like fashion and cut it back to the rate at which Gordon Brown had it throughout his period as Chancellor.
The area with which I find the most disagreement is found on page 19 of the Red Book, which sets out the economic opportunities and risks linked to the UK’s membership of the European Union. [Interruption.] I am delighted that the nationalists, who so crave independence for themselves, none the less wish to be shackled to the European Union—it is one of their idiosyncrasies that many of us find so charming. If I may, I will deal with that extraordinarily tendentious page, strewn with errors, overstatement and over-egging the pudding. Let us start with the very first line, which states:
“Membership of the EU has increased the UK’s openness to trade and investment”.
That is entirely disputable. In fact, all our membership has done is put us in a customs union with very high levels of regulation and a high external tariff. The tariff on dairy products coming into this country is 42%, much to the disadvantage of our friends in New Zealand. So EU membership has not made us more open; it has closed us to some areas.
Page 19 continues with the statement:
“The UK’s full access to the single market…clearly increases the openness of the British economy”.
There is a word for that, and it is “balderdash”. What access to the single market does is put the dead hand of regulation on the 95% of British businesses that never trade with the continent. They are suffering from that regulation, and their business is made harder to do. This has nothing to do with openness; it is to do with burdens.
Then we get to a bit that I think shows the Chancellor’s wonderful and sophisticated sense of humour. He says:
“At the February 2016 European Council, the Prime Minister secured a new settlement for the UK in a reformed EU.”
It has to be said that the EU was most certainly not reformed at that Council, and our settlement in it was so small as to be hardly noticeable. At the same time it gave away our ability to veto any treaty for fiscal union to follow the monetary union. We said we would do nothing to obstruct that, so we gave away our strongest negotiating hand for nothing—for thin gruel.
It is always a pleasure to listen to the hon. Gentleman’s contributions in the House—we enjoy them very much. Does he agree that one thing the Prime Minister did not secure was anything for the fishing sector, and that he also secured very little for the farming community? Does he agree that the Prime Minister should have tried to get a settlement with those two things at the forefront of his agenda, to try to achieve things for those sectors? Those were just two sectors that he neglected.
I agree with the hon. Gentleman entirely that fishing and farming—the common fisheries policy and the common agricultural policy—are two of the great disasters of the European Union. The fact that they are not reformed and take so much of the budget—40% in the case of agriculture—is a considerable disgrace.
I was listening to my hon. Friend and waiting for farming to come up. Is he aware that the National Farmers Union in Shropshire and the NFU nationally want to remain in the EU, believing that being an active member of the EU is actually very good for British farming?
Oh the great panjandrums, all with glee, merrily gather to support the Government, in the hope of their knighthoods, their peerages and so on. But when I speak to Somerset farmers, the finest farmers in the land, I see that they value the independence of their nation above a cheap ride from Brussels. Furthermore, we pay into the CAP almost double what we get out, so our farmers could have more money if we were independent.
Will my hon. Friend give way?
I will not give way again, because I do not get a bonus minute for doing so and I need my minutes in this particular debate.
I want to get on to the third paragraph on page 19 of the Red Book, which talks of the “profound economic shock” that would be created by leaving. There is the over-egging of the pudding to which I was referring. The OBR is characteristically measured, saying that in the timescales with which it deals it is not possible to model any changes from leaving the European Union, but the Red Book says otherwise. It states that there will be years of uncertainty, but that assumes that our partners in Europe will lie and cheat. But they are our friends, or so the Government will have us believe, and article 50 of the treaty on the functioning of the European Union provides for a very straightforward two-year process for extracting ourselves, which my right hon. Friend the Prime Minister has said he will exercise if Brexit is successful. Again, what the Red Book says is exaggerated, wrong and bordering on the hysterical. It then goes on to talk about the single market in services, but that has still not been completed. It was something the Prime Minister was arguing for and did not get in the rather hopeless renegotiation he tried in Brussels not so long ago.
The final paragraph of page 19 states:
“Remaining in a reformed EU will make the UK stronger, safer and better off.”
[Interruption.] The Solicitor-General cheers from a sedentary position, as he has cheered these points since he was speaking to Edward Heath many years ago and thought that that was the way forward.
The EU fails in all that it does: it fails in the common agricultural policy; it fails in the common fisheries policy; and it fails in migration policy. The euro has been ruinous for those member states that have joined it. The idea that we are richer and securer with this disastrous project is cloud cuckoo land stuff. It is broad sunlit uplands for the UK economy if we deregulate, if we trade with the rest of the world, and if we look beyond this narrow European focus.
You will remember, Madam Deputy Speaker, that when Gordon Brown was Chancellor of the Exchequer, Conservatives complained that the Red Book, instead of being the austere document that set out the facts of the economy, was used to spin the Government’s view of the world. What a pity it is that this Red Book is following the Gordon Brown model of Red Books, rather than that higher tone that previous Tory Chancellors have followed.
I want to finish with one point on which I disagree with Her Majesty’s Government even more than I do over Europe—[Hon. Members: “Surely not!”] Surely, yes. I am talking about the outrageous proposals to bring my county of Somerset under the yoke of Bristol in this devolved metro Mayor system that none of my constituents want. We admire Bristol. We think Bristol is a fine and fabulous city, but it does not need to have Somerset money to subsidise it. It can live off its own. We tried all this with Avon. What Avon meant was that Somerset paid and Bristol spent. I am glad to say that the unitary authorities of the west of England area—what used to be known as Avon and will be Avon again if the Government have their way—will each individually be able to vote down this proposal. I will urge councillors in north-east Somerset—I know that councillors in north Somerset have previously rejected the same idea—to stand firm and not be bullied by the Government. They should not be seduced by £30 million a year, which is considerably less divided by four than the cuts that they have successfully implemented over the past six years. They must be bold and independent. I want independence for my nation, and I want independence for my county.
I am not Scottish; otherwise I hate to think what I might be saying in that regard. I am a Briton, and I am for the Union because my country is the United Kingdom. I want freedom for the United Kingdom and freedom for Somerset. I say no to devolution and no to European tyranny.
A “Just say no” speech then from the hon. Member for North East Somerset (Mr Rees-Mogg)!
I want to begin my comments not from where the hon. Gentleman finished his speech, but from where he began when he read out the figures that will get us to the promised surplus, which, according to the Chancellor ages ago, we should have reached. He said that we will get to the “sunlit uplands”, or, in the words of that great song:
“The sun will come out tomorrow.”
However, there is a pretence. The Chancellor is not the austerity iron Chancellor that we have been led to believe he is. He is a rule-breaking, U-turning, target-missing chancer, who is living on the never-never and who never passes his own tests. That is why I want to make my contribution today not on economics, but on cynicism. I am talking about the cynicism that people in this country will feel when they realise that this is a sham. In fact, my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) made the point quite well, too. She talked about how people had been promised a living wage, but how, in their pocket, there will be nothing of the sort.
That is not the only place in which the Chancellor has said one thing and done another. He told us that he had three targets in the last Parliament and they were all missed except one—the debt target. He said that debt would be falling, not rising, by the end of the last Parliament. Well, it was. Debt was falling, but only because he flogged off some assets to make it so.
The Chancellor opened his Budget speech by telling the House that he is acting now so that we do not pay later. The UK is paying in the region of £37 billion a year in debt interest alone, greater than the entire Scottish block grant. Does the. Lady agree that although the Chancellor believes that that deficit will soon be eliminated, he has conveniently ignored the massive public debt that has been racked up?
I thank the hon. Lady for that intervention. I have asked the Chancellor in this House on a number of occasions whether he believes that he will ever see a surplus, not a deficit, before he leaves the Treasury for the last time. I have never had an answer.
On debt, in the last Parliament we were told that it would be falling by the end of the Parliament and, technically, it was. That was the fig leaf that saved the Chancellor’s shame as he sold assets to ensure that the debt fell. In fact, the OBR made it clear in July that this fire sale would make the difference between debt rising and falling as a share of GDP in 2015-16. What we have heard today is the Chancellor’s most significant next failure, because it finally removes that fig leaf. He has failed all the tests he set himself.
This is not, as I said, about economics. It has nothing to do with whether I think the Chancellor picked the right debt target. This is about what he promised the British people. I ask Ministers not to deal so lightly with the promises they make to the British people. The British people deserve better than that.
On the deficit, we should be cynical about the Government’s claims. They swept to power in 2010, saying that they could easily close the budget gap in one Parliament. It has not taken them one and it looks set to take them two, but here is the detail we can see in the Red Book. My hon. Friend the Member for Nottingham East (Chris Leslie) said earlier that these were heroic assumptions, and they are, because 60% of the surplus the Government say that they can get comes from just changing the timing of corporation tax arrangements. This is a fiddle and a fix and the British people will be deeply cynical of a Government who come to this Dispatch Box and say that they have fixed the roof while the sun shone when they have done nothing of the sort. Why should we ever believe them again? They have breached the welfare cap that they said they would stick to; they lost our credit rating.
I have set out why we should be deeply cynical about what the Chancellor said today. It gives me no great pride to encourage people to be cynical about what politicians say; our democracy is one of the best in the world and people should be able to believe what we say. However, worse than what the Chancellor did say was what he did not say. He left out of today’s Budget some profoundly important subjects. First, on banks, would it surprise this House to realise that as we speak important financial institutions such as building societies are still being hammered by the bank levy when they did absolutely nothing to cause the crash and should be the future of financial institutions in this country?
On the Women Against State Pension Inequality campaign, there was nothing at all. Deathly silence for the thousands of women in this country who fought for everything in their time at work and are now being hammered as they retire. There was not a single word from the Chancellor about the WASPI campaign, despite the fact that my hon. Friend the Member for Pontypridd (Owen Smith), the shadow Secretary of State for Work and Pensions, generously proposed cross-party arrangements for transitional payments to those women.
On the NHS, I am equally worried. There was no mention at all of record deficits in the NHS. We should be worrying about not just the budget deficit that but the deficit in trusts up and down the country that make me fearful about whether we can keep the doors of A&Es open. People believed the Tories when they mounted that NHS campaign. They believed that they had changed. I think we know now that they have not changed at all.
On that subject, the Chancellor made not a single mention of child poverty today. When the Tories backed the Child Poverty Act in 2009 and 2010, did any of us really think that just five years later, they would try to rip it from the statute books? Did any of us think that politicians could be so cynical as to turn their backs on children in poverty—to tell parents they were going to get a national living wage but remove the support, through the social security system, that goes to families that makes sure no child in our country is poor? I really do not think the British people thought that when the Tories told them they had changed, they would so quickly turn their backs.
I believe it is a disgrace that the capital gains tax cut that will hand out money to the rich is worth more than the pledge that the Tories have made on childcare. Even though they came to the country in May and said, “Never mind what the Labour party has done, providing support for childcare for the first time in our country’s history; we can better that,” at the first opportunity, in their Budget, they are prepared to spend more money on making rich people richer than on helping get families to work. That is a disgrace, and it will make people wonder what they voted for.
I am sorry to make a speech not about the economics, or about whether we should invest, or about what particular part of our economy could improve its productivity. I am sorry not to be here talking about the brilliant opportunities our country has, whether they are in science, or in our young people’s learning and the businesses they will run in future. It pains me that our democracy is reduced to this kind of spin. But the Chancellor, unfortunately, has given me no choice. I read that Red Book and I remain very cynical.
I support this Budget. It puts the next generation first, it gets Britain fit for the future and it protects our economy against the numerous economic headwinds in the global economy. It is a Budget that is good for Britain and that is good for the Havant constituency.
This Chancellor has presided over the fastest-growing economy in the developed world. The deficit has been cut by two thirds and we have low and stable inflation and interest rates, and record employment. In my constituency, the number of jobseeker’s allowance claimants has fallen by over 50% since 2010. To put it simply, the long-term economic plan is working in this country.
Those strong fundamentals are all the more important in a world where the economic headwinds are facing our country. Asia faces a slowdown, the eurozone suffers from systemic weaknesses and the middle east and north Africa still face elements of turmoil. Those are real and credible threats to our economy, and this Chancellor has presided over a resilient, strong and growing economy.
But at the heart of our economy are not just numbers and statistics, important though they are. What is at the heart of our economic success story since 2010 is people—hard-working individuals, families, entrepreneurs, savers, strivers; all the great people we see in the towns, villages and cities represented across this House. All those groups are helped by the Budget. I particularly welcome the rise in the tax-free personal allowance to £11,500 by April 2017. That is a tax cut for 31 million hard-working people and helps them keep more of the money that they work hard to earn and save.
The higher rate threshold for income tax is also rising to £45,000, which will mean that middle-income earners in the Havant constituency and across the country will benefit. It is actually a £400 tax cut for those taxpayers. I also welcome the fact that fuel duty is frozen for the sixth year in a row, and as Members know from the Chancellor’s speech, that is a £270 duty cut for every business and a £75 cut for every driver. That will help the manufacturing businesses, the drivers and the hauliers in my constituency, at Langstone technology park, at New Lane and beyond.
Havant is also home to a wide range of small businesses and entrepreneurs—self-made people, who are the backbone of our local economy. Whether those people are in Hayling, Havant, Emsworth, Bedhampton or any other part of the Havant constituency, the small business reforms in this Budget will help them to make a more secure and prosperous future for themselves.
I declare an interest and refer the House to my entry in the Register of Members’ Financial Interests as the founder of two small businesses. I am a passionate supporter of small businesses, both in my constituency and across the country. For that reason, for example, I launched the first-ever Havant small business awards, and I welcome the support that Ministers have given me in doing that.
Small businesses in my constituency and self-employed people in Havant and across the country will benefit from the reforms announced by the Chancellor today. I particularly welcome the fact that corporation tax will be cut to 17%. That will support massive job creation both in my constituency and across the country. I welcome also the permanent doubling of the small business rate relief and the increase in the maximum threshold for relief. That means that 600,000 small business across the country will no longer pay any business rates at all. That is a welcome move for our economy at a critical time in our recovery. I welcome the abolition of national insurance for self-employed people. That is a £130 tax cut for the 3 million self-employed people across our enterprise nation in my constituency and beyond.
All the measures that I have mentioned and all those announced by the Chancellor this afternoon will help to attract new businesses to the Havant constituency. We are very lucky to be going through a period of rapid regeneration in Havant and I look forward to welcoming new businesses to Market Parade, Dunsbury Hill Farm, the Solent retail park and Langstone technology park. All those areas of strong economic activity will be booming as a result of the Chancellor’s Budget today.
Not only will the measures announced in the Budget help my constituency, but they will help this Government reach one of their major targets, which is to get our country into the top five in the world for doing business. We are already up to sixth place in the world in the World Bank’s ease of doing business index and in second place in the global innovation index, ahead of our major competitors, Germany, France, Japan, Australia and all the other countries that we are running against in the global race for success. Today’s Budget is welcome for small businesses, the self-employed and our country in the global race for success.
Finally, I draw the attention of the House to the measures in the Budget that help young people. This Budget truly puts the next generation first. I wish to highlight three measures in particular—first, the lifetime ISA, which will encourage a new generation of savers. As hon. Members will have heard in the Chancellor’s speech, for every £4 that a young saver under 40 deposits in a bank, the Government will top that up with another £1. That is good news for savers under 40, whether they are new graduates, apprentices, young professionals, young entrepreneurs or anyone who has just started a family. That will be a welcome top-up, helping to boost our savings culture across the Havant constituency and across the country.
Secondly, I welcome the Chancellor’s commitment to fairer school funding. Hampshire has traditionally been an underfunded local authority. I look forward to responding to the Government’s consultation. Many of the schools in Havant have received good Ofsted ratings in the past year, such as Purbrook Park School, Havant College, Havant Academy and Crookhorn College. Those schools will be helped by the increase in funding and I look forward to working with the Government to ensure that we get our fair share in Hampshire. The increased funding for schools in Havant will mean that social mobility is increased. As we run the global race for success, the most important thing we can do for our young people is give them a fantastic education. In the global race for success we cannot afford to leave behind the talents of any young person, and I am delighted that the increased funding that we will receive in Havant for our schools will help our young people achieve their potential.
Finally, I welcome the sugar levy. Before I came to this place, I had the pleasure of being involved as a trustee of one of Britain’s leading school breakfast club charities. I know that the hon. Member for Ilford North (Wes Streeting), who is no longer in his place, has supported the same charity. Together we have been working with some of Britain’s most deprived communities to try to tackle the obesity issues that some of those communities face. I look forward to the sugar levy playing a role in that. Encouraging more school sport and healthier lifestyles for young people is one of the benefits of this Budget.
In conclusion, this is a Budget that has strengthened Britain’s prosperity economy and boosted Britain’s opportunity society, helping our country get fit for the future. Because of those tough decisions that the Chancellor has taken, we have strong public finances, a growing economy and an entrepreneurial mindset. These Budget measures reinforce the success that this country has achieved since 2010. I particularly welcome, as I mentioned, the tax cuts, the lifetime ISA and the fairer school funding for Havant and other communities. I therefore join other hon. Members and the Chancellor in commending this Budget to the House.
My party—the Liberal Democrats, or those of us who are left—still feels very proud of the part it played in getting this country this far. The Chancellor said he wanted to abolish the Liberal Democrats, and given that he has failed to meet every other Budget target, that is the best news I have heard in months. In his more generous moments—I am sure he has some—he will acknowledge that Britain is in a stronger economic position today because of the choices we made.
Britain is now at a crossroads. The structural deficit will be gone next year, so the Chancellor is choosing to make unnecessary cuts to meet an unnecessary target. It is his choice to remove support from people with disabilities. It is his choice to cut universal credit. It is his choice to stand by as child poverty increases. The Liberal Democrats got this country to the crossroads, with the Government now, but the Chancellor has chosen the path into the mire.
An awful lot of what the Chancellor said today we have heard before: big promises from the Dispatch Box that are never met—less long-term plan, more short-term scam. This is a microwave Budget reheated again. We have transport projects delayed and abandoned, and housing projects stalled and unfunded.
Not only are flood-