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.

Hear, hear.

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.

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.

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.

Royal Assent

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

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.