Amendment of the Law
Debate resumed (Order, 21 March).
Question again proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
Before I call the Chancellor of the Exchequer, I should inform the House that I have selected amendments (b) and (a), so both can be debated together with the Budget motions today. With the leave of the House, I will call the shadow Chancellor to move amendment (b) after the Chancellor has opened the debate. At the end of the day’s debate, the Question will first be put on amendment (b). As long as time permits before 7 pm, I shall then call the hon. Member for Dewsbury (Paula Sherriff) to move amendment (a) formally, and the Question on that amendment will be put. The House will then proceed to decide on the Budget resolutions.
Let me start by offering all our condolences to the victims, and their families, of the attacks in Belgium. The full details of this morning’s horrific attacks are still emerging, but we know that at least 13 people died in the attack at Brussels airport and that there are reports of multiple dead at Maelbeek metro station. As details of these horrific events continue to unfold, my thoughts and prayers, and indeed those of right hon. and hon. Members in all parts of the House, are with those who have lost loved ones or have been injured.
Earlier this morning, the Prime Minister chaired a meeting of Cobra attended by the Home Secretary, myself and others. The police have confirmed that, on a precautionary basis, they are increasing the policing presence at key locations, including transport hubs, to protect the public and provide reassurance. In London, the Metropolitan police have deployed additional officers to patrol key locations and the transport network, and Border Force efforts have been intensified.
It is too soon yet to comment on the details of these attacks, which are still emerging, but the Government would reiterate that the UK threat level remains at “severe”, meaning that an attack is highly likely. We would urge the British people to remain vigilant, and the Home Secretary will keep the House updated. But let us be clear: terrorists seek to threaten our values and our way of life, and they will never succeed. It is a reminder of what a precious thing our democracy is, and this Budget debate is part of that democratic process.
This is the first time in 20 years that a Chancellor has spoken on the last day of the Budget debate, and I think it is fair to say that we have had a livelier debate about this Budget than about many. Let us be clear: the key principles behind this Budget are that if we are going to deliver a strong and compassionate society for the next generation, we have to live within our means, we have to back business to create jobs and we have to make sure work pays by putting more money into the pockets of working people. That is what we committed to in our manifesto. That is what the British people elected us to deliver. That is what this Budget does, and that is what we are going to vote on tonight.
I will give way in a moment, but let me straightaway address the resignation of my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith). I am sorry that my right hon. Friend chose to leave the Government. Let me here, in this House, recognise his achievements in helping to make work pay, protecting the vulnerable and breaking the decades-old cycle of welfare dependency. Together, we had to confront a huge deficit and uncontrolled welfare spending. Of course, there is always robust discussion between the Treasury and the spending Departments when money needs to be saved. The decisions we make to keep our economy secure are always difficult, and where we do not get them right, I have always been prepared to listen and learn.
I am very proud that my right hon. Friend and I worked together longer than any two people who have done our jobs before us in any Government, and we have been part of the team that has reduced the number of people on out-of-work benefits to levels not seen for 40 years, reduced inequality, seen poverty fall, seen child poverty fall and seen pensioner poverty fall, and got a record number of people into work—a long-term economic plan and welfare reform delivering a fairer society for all.
I am grateful to the Chancellor for giving way. It is less than a week since he stood up to deliver the Budget and made that decision affecting disability independence payments—something that upset many hundreds of thousands of people across this country. He has made a welcome U-turn, but should not he now acknowledge that that decision was a mistake that he should say sorry for?
I am going to come on to speak about the disability benefits and our way forward, but I have made it very clear—I have just said it—that where we have made a mistake, where we have got things wrong, we listen and we learn. That is precisely what we have done. Where is the apology from the Labour party for the things that they got wrong? Why don’t they take a leaf out of that book? Why don’t they get up and apologise for the countless decisions that added to the deficit—that bankrupted our country?
The progress we have made on social justice did not happen by accident. It happened because we in this Government set out to turn our economy around, to control spending, to back business and, yes, to reform welfare.
I will give way in a moment to my former partner in the coalition Government that undertook many of these welfare reforms. The reform has meant difficult decisions to strengthen the incentives to find work and the sanctions for not doing so; to make sure that every hour extra that people work is rewarded, instead of seeing them trapped in dependency; and to cap benefit payments so that our welfare system is fair both to those who need it and to those who pay for it. It has not been easy, and it has often been opposed, but the truth is that many of the acts of progressive social change that we seek to achieve in government are difficult and they are opposed. In any democracy, you have to fight to make lasting improvements in society, and that is what we have done.
I thank the Chancellor for giving way, and I want to associate myself with the remarks that he made earlier about the appalling situation in Brussels.
Does the Chancellor agree with me that the one thing that is more dangerous for our economy than his remaining Chancellor is that we might leave the European Union; and does he agree that his being called out by his former colleague as acting not in the economic interests of the country, but in a short-term political way, introduces a risk that the referendum will be a referendum on him, not on the future of our role in Europe? Will he act in the national interest and resign?
I am grateful to the Chancellor for giving way. Is he aware that had he stuck with Labour’s plans for fuel duty, a litre of petrol would cost 18p more than it does? Has he assessed what impact that would have on the lowest-earning people in our society?
My hon. Friend is absolutely right. If we had stuck with the fuel duty escalator that we inherited from the last Government, it would have cost much more to fill up a car, which would have cost small businesses much more. We took action in this Budget to freeze fuel duty for the sixth year in a row, because we are on the side of working people.
I am coming on to talk about disability benefits, but my right hon. Friend is absolutely right to draw attention to the support we give—close to £50 billion—to disabled people. When we look just at the disability benefits, disability living allowance and personal independence payment, we see that that support has gone up from £13 billion when we came into office to £16 billion today, and it will go up to £18 billion in the future. As my excellent right hon. Friend for Preseli Pembrokeshire (Stephen Crabb), the new Welfare Secretary, made clear yesterday, we continue to give support to disabled people. I will come on to deal with that in detail.
The Chancellor boasted when he opened the debate that this was the first time a Chancellor had opened the final day of a Budget debate. He will know that that is because it is also the first time a Chancellor has had to drop the biggest revenue raiser in his Budget within two days of announcing it. The former Work and Pensions Secretary, who has just resigned and to whom the Chancellor paid great tribute, described the Budget as “deeply unfair” and “drifting” in a wrong direction that will divide the country, not unite it. He said all those words after the Chancellor announced that he was ditching the PIP cuts. Is the former Work and Pensions Secretary deluded?
I am glad that the right hon. Lady intervened, because I have done a little research and, frankly, I wish that when she was the Chief Secretary to the Treasury we had seen a few more revenue raisers in Budgets, such as savings in welfare and savings in public expenditure. During the period in which she was the Chief Secretary, the deficit went from £76 billion a year to £154 billion a year. The measures that my right hon. Friend and I have been taking over the last six years are to clear up the mess that she and her colleagues in government left.
I will give way to the right hon. Lady. I have said that when we have made a mistake, we have listened and learned. When is she going to apologise and say that she made mistakes and her colleagues made mistakes during that period in government, which is what we have been clearing up for the last six years?
The Chancellor did not address the issue of the unfairness of his Budget, so will he address the issue of the revenue behind his Budget? He has abandoned £4.4 billion in revenue raisers from his Budget. Where is that money going to come from, or will he change the scorecard that he set out?
I will tell you what is unfair: to saddle the next generation with debts you have no way of paying off. That is what the right hon. Lady did. [Interruption.] That is what she did. I will come on specifically to disability benefits, but let me tell her about fairness and what we have done over the last six years. We have taken action that means 500,000 fewer children are growing up in workless households than when she was at the Treasury, 1 million fewer people are on out-of-work benefits and over 2 million more people are in work than when we came to office. That is the social justice record we on this side of the House are proud of.
I am also proud that the work continues, and in this Budget we are taking further steps to build a stronger society. There is money and reform to improve our nation’s schools. There is action to reduce sugar intake and give our children better healthcare. There is support for the savings of low-income families. There is more help and housing for homeless people. There are personal allowance increases that will lift another 1 million of the low-paid out of income tax altogether, and there is an increased minimum wage ahead of the introduction of the first ever national living wage in just two weeks’ time. Those are all in the Budget we will debate today—all the actions of a compassionate, one nation Conservative Government determined to deliver both social justice and economic security.
The new Secretary of State for Work and Pensions said yesterday, in his first statement, that the Government would not be making any further cuts to welfare during this Parliament, but later on he said that there were “no plans” to make further cuts to welfare during this Parliament. Will the Chancellor now confirm, for the sake of disabled people and others, that there will be no further cuts to the welfare budget in this Parliament?
Yesterday, my right hon. Friend the Secretary of State gave exactly the Government’s position, which is that,
“we have no further plans to make welfare savings beyond the very substantial savings legislated for by Parliament two weeks ago, which we will…now focus on implementing.”—[Official Report, 21 March 2016; Vol. 607, c. 1268.]
I will now address the specific issue of welfare savings and disability, but I should have thought that the hon. Lady, when she got to her feet, might have thanked the Government for delivering the flood defence schemes that she asked for for her city, and which were in the Budget statement a week ago.
Let me turn to the disability benefits. We are proud that this Government are providing more support to the most disabled people. It was very clear that while the reforms proposed to personal independence payments two weeks ago drew on the work of an independent review, they did not command support. We have listened, and they will not go ahead. Even if they had, this Government are spending more on disabled people than the previous Labour Government ever did.
People have asked what this means for future support for disabled people, for our welfare cap and for the numbers in the Budget. Let me directly address all three points.
Let me address these points, and then I am happy to take interventions.
First, over 3 million disabled people are now in work, which is 300,000 more than just a couple of years ago. We are also providing more support than ever before for the most disabled people. The budget has risen, will continue to rise and is much greater than the one we inherited. We are going to take our time, listen, consult widely and continue to build a system of disability support that works much better with our health and social services. As my right hon. Friend the Secretary of State said in his excellent statement yesterday, we will continue to support disabled people, and we will work with him to make sure that we do.
Does the Chancellor agree with me that we can be a compassionate Conservative Government only if we have a strong, stable economy, with a reduced deficit, to enable us to protect the most vulnerable in society?
Let me deal with the measures we are taking to control spending, and then I will take some interventions.
The welfare cap is the instrument we have introduced to set out, in a transparent way to Parliament, what we aim to spend on welfare. It is independently judged by the Office for Budget Responsibility every autumn, which is when we either have to comply with the cap or explain to Parliament and the country why we have not done so. I find it incredible to hear Labour Members protesting about the welfare cap. It never existed at all under a Labour Government: there was no cap, no control on the largest area of Government spending, no transparency, no independent forecast, and as a result, welfare costs soared by 60% and the country was brought to the brink of bankruptcy.
On Friday afternoon a couple, Mr and Mrs Ford, came to visit me at my surgery. Mr Ford, who is in a wheelchair, is unable to feed himself, dress himself or do anything for himself. They live on £559 a month in PIP, plus £63 per week in carer’s allowance. They still have a mortgage to pay. They have clocked up 80 years of national insurance contributions between them. They ask the simple question, “How are we meant to cope?” They were in a real state of distress. Will the Chancellor please now apologise to such people for the distress that he has caused?
I have already said that we are not going ahead with those changes. [Interruption.] I have addressed these issues. The truth is that that family and many more families are getting increased support under this Government. We would not be able to provide any of that support unless we had a strong economy and we controlled public spending, because the people who suffer most when the economy—[Interruption.]
Order. I apologise for having to interrupt the Chancellor. [Interruption.] Order. Members are yelling—in some cases, from sedentary positions—very noisily. If people put questions to the Chancellor, they must leave him to respond. The same will go for Government Back Benchers when they no doubt challenge Members speaking from the Opposition Benches. Let us try to restore some sort of order to this debate.
Will the Chancellor confirm to the House that this Government are spending £2 billion more on support for the disabled, that inequality is at its lowest rate for 25 years according to the Institute for Fiscal Studies and that there are 2 million more people in work thanks to this Government? Is that not what we are doing for the vulnerable?
Let me make a little progress, and then I will give way again.
Not proceeding with the PIP changes means that spending on disabled people will be just over £1 billion a year higher by the end of the decade than was set out in the Budget. This will be an important factor, but only one of many, that will affect the overall forecast for welfare that the OBR will make in the autumn—
I am going to make some progress.
At that point, we will assess the level of the cap. What my right hon. Friend the new Work and Pensions Secretary said yesterday, with my full support, is that we do not have further plans to make welfare savings to replace the £1 billion more we will spend on PIP. We made very substantial savings in the Welfare Reform and Work Act 2016, which has just passed through Parliament. We have now legislated for the £12 billion a year of working-age welfare savings we committed to in our manifesto, and we are now going to focus on implementing that.
Before I give way, let me say this about benefits to pensioners because it has been raised. People say to me that we are not saving enough from pensioners while, in the same breath, complaining about everything from long-term increases in the state pension age—to keep pace with rising life expectancy—to restrictions on the lifetime allowances for the largest pension pots. The truth is that we have made substantial savings from pensioner welfare—£500 billion of savings—which are vital to the long-term sustainability of our public finances, but we have made these savings in a way that enables us to go on giving people who have worked hard all their lives a decent, generous basic state pension. We committed to that in our manifesto, and I am not going to take it away from people.
Does the Chancellor accept that poorer people spend a much higher proportion, if not all, of their income, while richer people save? Does he not accept that his Budget, which has transferred money from poor people to rich people—it is a sheriff of Nottingham Budget, robbing the poor to pay the rich—will undermine growth and deficit reduction, which is wrong both morally and economically?
Under this Government, the richest 1% are paying a higher proportion of income tax receipts than in any single year of the last Labour Government whom the hon. Gentleman used to support when he was a Member of Parliament for Croydon—until he was replaced by a much better Member of Parliament for Croydon.
Let me make progress, and then perhaps I will take more interventions. On the Budget numbers, I find it ironic to receive all these expressions of concern from Labour Members about making the sums add up when they presided over the biggest single fiscal fiasco in the country’s history and have a black hole in their current plans so large that it would break the Hadron collider.
I will give way in a moment, but let me make this point. The central fiscal judgment of the Budget, and of this Government, is clear: borrowing has been cut from £155 billion when we came to office to £55 billion next year, and there have been falls every year; and higher spending on people with disabilities will be reflected in the autumn statement forecast, and we do not propose to make any further changes ahead of that. We can afford to absorb such changes when we are getting public spending under control, and we can make those changes and still achieve a sensible surplus of 0.5% of GDP by 2019-20. In short, we will go on delivering the economic security that this country elected us to provide.
If it has been relatively simple to absorb this change, why on earth did the Chancellor introduce it in the first place and frighten the life out of seriously disabled people in this country? People were terrified about what was being proposed, yet the Chancellor has just said that we can absorb this change easily. Why did he do it in the first place?
If we take no decisions to control welfare spending and public expenditure, we destroy the nation’s finances, and the people who suffer are precisely the most vulnerable in society. Yes, we have taken difficult decisions, but where we have not got them right, we have listened and we have learned. If we had not taken those decisions, the country would be in an even bigger mess than the one we inherited.
The Chancellor mentions security, including for the poor. Does he realise that until Monday, 340,000 people on PIP were worried that their benefits were going to be cut? If he just apologised and changed that, we could move on and discuss the economics.
I could not have been clearer. I said that we listened, we learned, we made a mistake, and we withdrew the proposals. The hon. Gentleman talks about days of the week, and Thursday would have been the day when Scotland separated from the United Kingdom if the nationalists had had their way. They would have plunged that new country into a fiscal crisis the likes of which few western countries have ever seen. They would have impoverished the Scottish people and driven businesses away. They based all their numbers on oil revenue forecasts that were totally fanciful, and it is time that they got up and apologised for leading the Scottish people into that potential trap. Thankfully, the Scottish people thought better.
I have given way twice to the right hon. Lady so I will now make progress and explain what we have done to clear up the mess she left. We took more decisions last week in the Budget, but we will also implement these decisions today to ensure that the work of reducing our deficit is done fairly, and that we ask more from the well-off. Look through the measures. They include provisions on dividends, lifetime pension allowances, stamp duty on second properties, banks and hedge funds, and a host of measures to tackle evasion and avoidance. The Institute for Fiscal Studies has been quoted a lot over the past four days in the Budget debates, and its head stated that
“the very highest earners have seen significant tax increases”.
I think that has been a reasonable thing to ask of the most well-off when faced with such a budget deficit, because we are all in this together.
On personal economic security, during the Chancellor’s Budget statement, my constituent Dan Ball, who is aged 19 and from Amington, tweeted to say, “This lifetime ISA—where can I get one?” Does that not demonstrate that young people up and down the country see in this Budget an opportunity for their generation to save?
My hon. Friend is right to raise his constituent’s concerns about where he can get hold of the new lifetime ISA. It will be coming in from April next year, but his constituent can open a Help to Buy ISA now, roll it into the new lifetime ISA when it becomes available, keep the Government bonus, choose to save for a home or a pension, and not have to face the agonising choice that so many people have faced in the past. It is part of a Budget that backs savers.
Let me make a little progress and then I will take more interventions. It is a classic socialist illusion to think that we can solve all society’s problems with taxes on the very richest, and it is the age-old excuse for not managing public spending or welfare costs. That brings me to a central point that I want to make to the House today: there is not some inherent conflict between delivering social justice and the savings required to deliver sound public finances—they are one and the same thing. Without sound public finances, there is no social justice.
I will give way in a moment to the Member for the taxi business.
It is the easiest thing in the world to do this job and say yes to every new demand for Government spending and to please all the people all of the time, but we know where that leads. We know that because before me we had a Chancellor who spent a whole decade going around the country saying yes to even more spending and ever higher welfare bills, and we know what happened then: it brought our country to the brink of collapse. That was not compassion; it was economic cruelty, and the people who paid the price are those who always pay the price when Government spending gets out of control and welfare bills spiral. It was not the politicians at the time who paid the price—no, they are happily sitting on the Opposition Benches; it was the poorest who paid the price and the most vulnerable who suffered. Those people lost their jobs and had their livelihoods snatched from them, and those are the people I am fighting for—real, decent, hard-working people, not numbers on a Treasury spreadsheet: people whose lives would be impoverished, and whose hopes and aspirations would be crushed, if we had gone on spending more and more than the country earns. Getting things right for those people is what I am all about, and that weighs on every decision that I have taken as Chancellor over the past six years. Those are the people whom we in the Conservative party have been elected to serve.
The Chancellor rightly talks about learning lessons, but it is also important to have clarity about the future. The Government line seems to be that there are no plans to further reduce the welfare budget, but yesterday the Secretary of State for Work and Pensions said in the House
“we will not be seeking alternative offsetting savings”,
“the Government will not be coming forward with further proposals for welfare savings.”—[Official Report, 21 March 2016; Vol. 607, c. 1279-86.]
Will there be further welfare cuts or not? What is the answer? The Chancellor has not offered any clarity this afternoon.
That is exactly the position set out by my right hon. Friend the Secretary of State, and agreed by me and the Prime Minister. We understand that if we do not control spending, we will have a fiscal crisis. Because we are controlling spending and have passed difficult welfare legislation in recent months, the deficit is coming down and we are delivering economic security.
My hon. Friend is absolutely right. The analysis shows that, had we not taken the decisions to reduce the structural deficit, we would have added £1 trillion further to our national debt. That is proof that we can never trust Labour with the nation’s public finances.
Let me make a little progress before I give way again.
We will go on driving down the budget deficit. We are down from borrowing £1 in every £4 when I became Chancellor to borrowing just £1 in every £14 next year. We will then be on to the security and good times of a budget surplus—a country earning more than it spends, and a generation that does not pass its debts on to its children and grandchildren. That is what we committed to do in the manifesto and what we were elected to do, and it is what this Budget delivers.
Finally, let me turn to the measures in the Budget that back enterprise and business. Again, I completely refute Opposition Members who say there is a choice between backing business and promoting social justice. We cannot have social justice without a strong economy, and we cannot have a strong economy unless we have a tax system that backs business and enterprise.
We inherited an unprecedented budget deficit. It is not just about controlling spending—the country has to earn more. Is it not the case that the only way to do that is to cut corporation tax and capital gains tax so that our entrepreneurs can go out into the world, compete and earn this country the living it needs?
My right hon. Friend spoke a lot last week about the next generation and Chancellors who always said yes. One thing he said yes to last week that was very much welcomed by many young people in Southampton and across the south was the backing of the new children’s hospital in Southampton with £2 million of match funding. That is what looking after the next generation looks like. May I say thank you on behalf of many people across the south?
My hon. Friend campaigned tirelessly for that extra money for the hospital in Southampton—he raised the matter countless times in the Chamber. That shows that, if Members persevere on getting the vital services for their local constituency, the Government listen and deliver for them in this Chamber.
Let me make a couple more points and then I will take another intervention.
Yesterday, the Leader of the Opposition stood at the Dispatch Box to reply to my right hon. Friend the Prime Minister. People have focused on what the Leader of the Opposition failed to say, but I am focused on what he did say. He said we should not be reducing taxes on business. In other words, he thinks the answer to the challenge of low productivity and of growth in an uncertain world is that taxes on business should be higher. I totally disagree with that approach. That is Labour’s answer these days: pile the taxes on business and increase the basic rate of income tax on working people, as they propose in Scotland. Again, the price would not be paid by Labour Members. It would be paid by the young people who cannot get jobs—they cannot get jobs in countries where business taxes are too high and where enterprise is stifled. It would be paid by people who work in our public services, whose resources would be drained as the economy became more and more uncompetitive. It would be paid by the whole country, as living standards declined and the nation got poorer.
If that is the Budget hon. Members want, they should vote in the No Lobby tonight. If they want a small business Budget that cuts taxes for small firms, takes 600,000 businesses out of paying business rates, and reforms commercial property tax so that small premises pay less, that is the Budget we are voting on tonight. If they want an enterprise Budget that boosts investment in our small and medium-sized firms, with lower CGT, dramatically reduces burdens on our vital oil and gas industry, and gives us the lowest headline business tax rates of any of our competitors, that is the Budget we are voting on tonight. If they want a one nation Budget that increases the resources for education, supports children’s healthcare, devolves power across our nation and builds infrastructure for our future, that is the Budget we are voting on tonight. If they want a Budget for working people that helps them to save for their future, freezes their fuel duty and cuts income tax so they keep more of the money they earn, that is the Budget we are voting on tonight.
It is a Budget that delivers security, that helps the next generation and that backs working people. It is a one nation, compassionate Conservative Budget, and I ask the House to support it tonight.
I beg to move amendment (b), in paragraph (2), after “tax”, insert—
“(except in relation to value added tax on insulation, solar panels and any other category of energy-saving material or their installation)”.
I and my party share the sentiments expressed by the Chancellor and those across the House in condemnation of what happened in Brussels today. Our thoughts and prayers are with the victims and their families. We support the security measures, of course, taken by the Government and say to the people of Belgium that we stand with them.
I am glad to see the Chancellor has at least turned up today. Let me make it clear from the outset that, in my view, and I believe the view of many others, the behaviour of the Chancellor over the last 11 days calls into question his fitness for the office he now holds. I also believe that it certainly calls into question his fitness for any leading office in government. What we have seen is not the actions of a Chancellor, a senior Government Minister, but the grubby, incompetent manipulations of a political chancer.
For the record, let us go back to last Friday week. The Chancellor personally forced through cuts in personal independence payments. The statement issued by the Government that Friday on PIPs was not a consultation and not a suggestion; it was a statement of policy. Personal independence payments are the benefits that, for many disabled people, make life worth living. They help them get to work. They help them have some normality in their lives. Often, they keep people out of residential care. The Chancellor was willing to cut away that vital support to some of the poorest and most disadvantaged members of our community. Do not tell us that we are all in this together.
Would it not at the very least help to dispel the impression that the Chancellor is acting in his own political interests, rather than in the national economic interest, if he made it clear today that he was not going to stand for the leadership of the Tory party so that he could concentrate on his job as Chancellor of the Exchequer?
Order. I made it clear earlier that attempts to shout the Chancellor down were unacceptable. That was made very, very clear and I do not think anybody would doubt or deny it. I make it similarly clear that no attempt in this Chamber will be successful if it is an attempt to shout down the shadow Chancellor. Get the message: it ain’t gonna happen.
On that Friday before last, there was outrage among disability groups—the Multiple Sclerosis Society, Parkinson’s UK and Disability Rights UK. Why? Because all of them, like many of us, had gone through that process of agreeing the criteria—at least coming to some compromise on what would constitute the criteria for access to this benefit. But the Chancellor moved the goalposts, those already agreed through consultation. Disabled people and their families have been sick with worry about the threats to their benefits.
The hon. Gentleman has called into question the morality of the leadership of my right hon. Friend the Chancellor, but would the hon. Gentleman please discuss with this House the morality that allows him to stand with bombers who murdered my friends in Northern Ireland and to question the integrity of the Chancellor? [Interruption.]
Order. Before we proceed further, perhaps I can just say to the House, on my own account and on the basis of sound procedural advice, that we must stick to the matter of the Budget. [Interruption.] Order. I do not require any comeback or any comment, agreement or disagreement. Let us proceed in a seemly manner with the debate. That is in the House’s interest, and that is what the country has a right to expect.
During the Chancellor’s opening speech, we heard him say that the Government have legislated to make £12 billion-worth of savings within the welfare budget. That means that this £4.4 billion attack on PIP was in addition, and it was based neither on social justice nor on compassion. Does that not show that this Government are mean-minded and prepared to attack people who have disabilities? It is not necessary to make these cuts in welfare and they should guarantee that they are not going to return with this cut.
No, I have given way enough—I will come back to the hon. Gentleman.
There is scheduled to be a 6% real-terms decline in spending on disability benefits between 2015 and 2020. After that Friday, when we reached the Wednesday of the Budget, we discovered that these cuts to disabled people were being made to pay for capital gains tax cuts benefiting the richest 5% in our society and for corporation tax cuts. Of course, a deep feeling of unfairness was felt in this House, among Members in all parts of it. I welcome the expression of concern by the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) during that period and his conversion to our cause of opposing these benefit cuts. But the first person to call attention to the scandalous targeting of people with disabilities was my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). She rightly said, in response to the announcement:
“In coming to this decision, the Tories are yet again ignoring the views of disabled people, carers and experts in the field, trying to press ahead with changes, just two years since the introduction of the system.”
After it became clear that the cuts to PIP were planned as a way to fund tax cuts for the wealthy, my right hon. Friend the leader of the Labour party made this issue a key part of his excellent response to the Budget last week, and he was not alone in doing so. My hon. Friends the Members for Ilford North (Wes Streeting) and for Nottingham East (Chris Leslie) were among several Opposition Members who pressed the Chancellor on the issue, as I did when opening the Budget debate last Thursday. I want to give thanks to everyone on our Benches and across the House who has helped to force this rethink and helped end the worry that thousands of disabled people have been experiencing in the past week.
The shadow Chancellor is right about U-turns being embarrassing, but I remember his embarrassing U-turn on the fiscal responsibility charter. Does he regard himself at the moment as a socialist or a Marxist, and does he agree that all that the politics of the far left offers people is an equal share of misery?
This is a debate about the threat of cuts facing some of the most vulnerable people in our society. This is not a time for engaging in student union politics in this Chamber.
By Friday of last week, the Chancellor was facing so much criticism that he needed to find someone to blame. So, in one of the most despicable acts we have witnessed in recent political history, the Chancellor sent out his large team of spin doctors to try to lay the blame on the former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green. That was a disgraceful act of betrayal of one of the Chancellor’s own Cabinet colleagues to save his own skin and his leadership hopes.
Order. [Interruption.] Order. Leave me to deal with this. Mr Cleverly, I have known you for years and you have always struck me as a very polite fellow. You are getting over-excited, young man. You will have an opportunity to intervene, perhaps in due course, but you don’t do it like that. Learn from a few old hands.
I am surprised that the shadow Chancellor is taken in by some of the crocodile tears from the Tories and this concern for the disabled. Surely he agrees that this is nothing to do with the Tories’ new-found concern for the disabled in this country—it is all about their euro civil war.
Let me move on. I appreciate the point made. The betrayal was why the right hon. Member for Chingford and Woodford Green resigned. I have not agreed with a single policy that he has brought forward, but I do not doubt his sincerity in the policies that he has pursued.
Does my hon. Friend not agree with the words of the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) that this Chancellor’s policies are
“in danger of drifting in a direction that divides society rather than unites it”?
Was the right hon. Gentleman not right when he said that?
I believe that the right hon. Gentleman’s interview on the Marr programme on Sunday expressed a profound concern that he had about the unfairness of the Budget, and we agreed with this. As I said, I have not agreed with a single policy he has pursued, but I do not doubt his sincerity. The right hon. Gentleman saw—
I will in a minute. There is no need to shout out so loud again.
The right hon. Gentleman saw the unfairness of the PIP cuts to disabled people in the Budget. As he said, it is a Budget that benefits high earners. He also saw himself being set up by his own Cabinet colleague.
The shadow Chancellor is right to say he does not agree with the former Secretary of State’s policies. Indeed, even with the U-turn on PIP disabled people are still left distressed by the reforms that will still be going through. Will he join me in urging the Chancellor and the new Secretary of State for Work and Pensions to look again at this very flawed process?
I thank the hon. Gentleman. He has been speaking now for 14 minutes. He has criticised Conservative Members for making this about politics and people, but I was just wondering when he will actually get around to talking about any of the Budget proposals.
The role of the Opposition is to hold the Government to account. We are holding this Chancellor to account for a potential attack on disabled people that I believe would have devastated their lives.
What I find most disgraceful through all of this is that there has been no word of apology from the Chancellor or any Conservative Member. Apologise, I say. I say apologise for the pain and anguish he has caused disabled people and their families in the past two weeks. We all make mistakes. I understand that. But when you make a mistake and correct it, you should at least apologise.
Does my hon. Friend share my view that the most distressing thing the former Secretary of State said this weekend was the point he made about
“it doesn’t matter because they don’t vote for us”?
Is there not a constant thread running through everything—from the bedroom tax to local government cuts to this Budget—that this is a deeply political Government who do not care unless people vote Tory?
The hon. Gentleman refers only to income tax. If he had looked at last weekend’s analysis of the overall cuts and what has happened with regard to tax and benefits, he would have seen that it is actually the poorest decile who are paying the most. The two groups hit hardest are young women with children and older women with caring responsibilities. Some 81% of the cuts are falling on women. This is a discriminatory Budget.
We are pleased that the Chancellor has found that the PIP cuts are a cut too far, even for this ideological Government. Does the shadow Chancellor agree that characterising all benefits claimants as workshy, stay-in-bed, lazy scroungers, which the Chancellor of the Exchequer has done on many occasions, contributes to an atmosphere in which it is acceptable to enrich the better off at the cost of the poorest among us?
That language has been used by the Conservative party. Let me return to the Budget. The hon. Member for Braintree (James Cleverly), who has now left us, asked me to return to the Budget, so let me press on.
Even worse, there is still no certainty about further welfare cuts. We were told yesterday by the new Secretary of State for Work and Pensions—this was repeated today—that there were to be no further cuts to welfare in this Parliament. Within minutes, the Treasury were briefing to correct the Secretary of State, as that then became “no planned cuts”. There is complete confusion—chaos on chaos. Nobody believes or has any confidence in the mealy-mouthed assurances that are being given today.
The shadow Chancellor will be aware that page 26 of the Red Book states that the Chancellor will set out plans to meet the welfare cap by this autumn, and that page 198 of the OBR report says that that will require further welfare savings of £3 billion a year. Did he hear the Chancellor say clearly this afternoon that he was going to ditch the plans for £3 billion a year of additional welfare cuts by the end of this Parliament?
I believe that the shadow Chancellor and the Leader of the Opposition, with whom I have served on Select Committees, are decent men. The shadow Chancellor said five minutes ago that he did not agree with a single policy introduced by the former Secretary of State for Work and Pensions during his time in office. Given the shadow Chancellor’s new fiscal responsibility, with the new rules he announced just a week or so ago, will he tell the House—people will be looking to him, because he is the shadow Chancellor—whether he would keep the welfare cap? If he cannot tell me that, will he tell me just one single saving that he could make from the welfare budget?
We supported the welfare cap. I find it ironic that that point is being made on behalf of a Government who are not meeting their own welfare cap. They are breaching it and then moving it up. They are moving the goalposts again.
Let us be clear that the £4.4 billion black hole in the Chancellor’s Budget means either further cuts in departmental budgets and to benefits, or stealth taxes. No solution has been announced today. We are told that all this will be resolved by the autumn. Between now and then, no public sector job, benefit or service will be safe.
The hon. Gentleman is right that the Chancellor has a £4.4 billion black hole that needs to be filled by cuts to public services or by stealth taxes, but that is in existence only because the Chancellor has set himself a false target. Does the hon. Gentleman agree that the real problem at the heart of the Chancellor’s credibility is the fiscal charter?
I am grateful for the hon. Gentleman’s intervention and I will come back to that point in due course. I realise we are under pressure of time, Mr Speaker, so I will try to be as brief as I can.
The Chancellor’s political manoeuvring has real consequences. The drama over Budget week has clouded a further astounding revelation about his behaviour. His former Government colleague David Laws revealed at the weekend that the Chancellor pressurised senior officials to reduce their estimates of the funding needed to maintain the NHS. We discovered that the Chancellor had forced through a cut of almost half the funding—this was independently assessed—needed by the NHS. The result is that the NHS and hospital trusts around the country cannot plan. They are facing a crisis: waiting times are rising, staff are under intense pressure and morale is at rock bottom. At the start of the year, the NHS recorded its worst ever performance as services struggled to cope with demand. It is now facing its biggest funding crisis for a generation and that is putting patient care at risk.
Does not the welfare cap, and support for it, suggest that if welfare spending goes up, we will have to revisit that spending? At that stage, would the shadow Chancellor cease to support the cap, or would he support measures to keep within it?
We support a welfare cap, and we believe we have better policies—building homes, for example, rather than spending money on housing benefit—that would enable us to meet it.
Nothing in the Budget says that the NHS can find £22 billion in savings over the next few years. The idea is pure fantasy written into the Budget. It is typical of this Chancellor to opt for spin and presentation over addressing the real problems. He needs to stop living in fantasy land and to start being honest with the public over his own numbers.
I have been extremely generous in giving way, but we are running out of time.
On schools, this was far from a Budget for the next generation, as the Chancellor claimed it was. Not only is the plan to turn every school in the country into an academy unpopular with parents and teachers, but we now know that schools face an 8% real-terms cut in their funding. This is the first time since the 1990s that schools’ funding has been cut.
As the hon. Member for Westmorland and Lonsdale (Tim Farron) said, at the heart of all this failure is the Chancellor’s economic incompetence. His huge mistake was to force through a fiscal rule that has proved to be unworkable. Against all sound economic advice, he put politics above economics and imposed a fiscal rule that now, like his Budget sums, simply does not add up. Virtually every target he set himself has been missed. On the deficit, which he promised would be eradicated last year, he has failed. The debt was supposed to be falling, but it is rising.
The former Work and Pensions Secretary described the cuts to PIP as deeply unfair when juxtaposed against tax cuts for the wealthy. Does my hon. Friend agree that the Chancellor should consider scrapping that tax decrease for the wealthy to help to fill the £4.4 billion black hole, which might help to improve his competence?
I want to finish the next section of my speech. I am straining your patience, Mr Speaker, so I shall press on.
The Chancellor is set to leave our children with £1.7 trillion of Government debt. Hundreds of billions have been borrowed on his watch. The welfare cap, which the hon. Member for East Antrim (Sammy Wilson) mentioned, is set to be breached each year until 2020. The OBR confirmed to the Treasury Committee that it would be breached by £20 billion over five years. The Chancellor has broken two of his own rules already. The third—the overall surplus—now hangs by a thread, and only with some seriously creative accounting will he meet it.
Meanwhile, across the country, the Chancellor’s economic approach is failing, as was evidenced by last week’s OBR report: forecast for growth—down; forecast for wages—down; forecast for productivity—down; and forecast for business investment—down again. Why will he not take responsibility for the last six years?
Does the hon. Gentleman celebrate the fact that 1,700 of the lowest paid in my constituency will be taken out of tax altogether as a result of the Budget, and that 1.3 million of the lowest paid have already been taken out of tax altogether in this Parliament?
That is why we support the increase in the lower-rate threshold, but we have concerns that shifting the thresholds in that way actually benefits higher earners too much.
At the bottom of the Budget is a Chancellor who, as some have mentioned, is more interested in his political career than the welfare of disabled people, and more interested in becoming the leader of his party than in the health of our economy. He is not a Chancellor but a political chancer. I pay tribute to colleagues on both sides of the House who forced him to U-turn on his proposed cuts to disabled people.
This is not a one nation, compassionate Budget—nobody believes that—but a Budget shot through with unfairness at its heart. Even one of the Chancellor’s own Cabinet colleagues last week denounced it as fundamentally divisive and unfair. It is not a competent Budget. It fell apart within a couple of days, and the Chancellor still cannot explain how he will fill the £4 billion hole. This is not a Budget for the long term either—a long-term economic plan that lasts three days? It is a Budget built around short-term political tactics and it has backfired spectacularly. They used to say that a week was a long time in politics but, under this Chancellor, a weekend is the length of a long-term economic plan. What a failure!
This is not a Budget for the economy or the country, either, but one that is constructed around self-imposed austerity. It is about politics—incompetent politics at that —not economics, and it has blown up in the Chancellor’s face. For the sake of his party—he might think about that—and certainly for the sake of the country, it is time for him to go.
I congratulate my right hon. Friend the Chancellor on reviving the tradition of the Chancellor speaking on the last day of the Budget debate. It is one of the many things that my successor, Gordon Brown, should not have abandoned. I think we will agree it has enlivened the debate very considerably, compared with what usually happens. I also congratulate him on his extremely effective and spirited performance in defence of his Budget. He rightly took pleasure in his achievements so far in his term as Chancellor.
It is remarkable that we are having such a lively debate on the Budget at a time when, as we have just discovered from listening to the shadow Chancellor, there is absolutely no alternative economic strategy or policy on offer—no doubt my party will make up for that lack of challenge in its own curious way, but meanwhile I congratulate the Chancellor on where he has got so far.
In case the Chancellor is worried about the controversy surrounding the Budget, let me tell him that it is not unusual. I have been here so long that I have seen much worse. Geoffrey Howe’s 1981 Budget was extremely controversial, and passions ran higher, and far more seriously, than they have on this occasion. Nigel Lawson had his Budget speech interrupted, and the House was suspended because of disorder, when he tried to cut the taxes on the higher paid.
I had merely one defeat on a Finance Bill. I lost to a rebellion on the Floor of the House. My mitigation was that it was not my proposal—it was Norman Lamont who proposed VAT on domestic fuel—although I still think it was perfectly sensible. I immediately came back with more tax proposals to get the revenue I had lost, but my right hon. Friend is quite right to wait for events between now and the autumn statement and then to continue the fiscal discipline he has rightly maintained so far.
The right hon. and learned Gentleman probably knows that the Royal College of Physicians has announced that 40,000 people are dying a year, at a cost of £20 billion, from diesel emissions and pollution. Does he think the Chancellor should reconsider promoting green transport, public health and savings and rebalancing the tariffs on electric, diesel, hydrogen and petrol in order to save lives and money?
We have been extremely active on that front, but scientific knowledge is moving on. I remember when diesel was positively subsidised by Governments because it was thought to be more environmentally friendly. In a more appropriate debate, those issues are well worth pursuing. I understand the problem. I turn to what the Chancellor has to devote himself to: the Budget judgment and its implications for the economy. The Chancellor accepted, as he has to, that that is his principal responsibility. The Chancellor has the most difficult job in government, because he has to spend all his time challenging all the lobbies that demand extra expenditure and challenging his colleagues to find savings or improvements in the budgets of their Departments in order to close the gap.
What this Chancellor has not done is take a short-term view at any stage. That is why he has achieved such remarkable economic success. What I liked about his Budget speech was when he stressed how it was for future generations. What he said a few moments ago—a soundbite, if I may say so, which I had not heard before: there is no social justice without sound finance—is one of the best summations of one nation Conservatism I have heard for a very long time.
I am trying to be reasonably concise rather than too expansive. I apologise to the right hon. Member for Leicester East (Keith Vaz).
I tried to think of what I would have done had I been Chancellor in the present situation. Before the Budget was delivered, I expected a much tougher Budget. Thank the Lord that I am not in my right hon. Friend’s position; I never had to face problems of the kind that he inherited from his predecessor. My instincts are classic, traditional stuff for anyone for whom the iron of the Treasury has entered the soul. This is the first Budget after an election, we have not made fast enough progress in eliminating the deficit and debt, and we will not have sound future progress with a modern rebalanced economy unless we have done that, so my first thoughts would have been to get on with it.
I would have introduced a Budget, as I frequently did in my time, raising taxes and cutting public expenditure. I am glad to hear, for reasons that I shall return to later, that my right hon. Friend has committed himself to his continuing long-term objective, and has decided to pause. I thought this was going to be a popular Budget. People speculate as to why we chose an easier path. [Interruption.] The Chancellor has in the short term relaxed fiscal policy. It is good that the Bank of England is retaining a very relaxed monetary policy, but it will tighten it if we were to abandon fiscal discipline. In the short term, my right hon. Friend has lowered taxation and lowered Department spending targets for cuts. He has eased off on public spending and lowered taxation. I was surprised by that.
I assume that this was partly caused by the considerable uncertainty that the economy faces. No one has addressed that issue in any of these debates, although the Chancellor did in his Budget speech. The global economy is slowing down, and mainly as a consequence of that, the British economy is slowing down. The uncertainties for our economic prospects over 2016 are very concerning. There are many uncertainties, all of which would threaten most of the developed economies if things go wrong. We still do not know whether China, for example, is going to achieve a soft landing; I think it will. In the emerging markets—there are associated problems with emerging market debt—there is volatility and some unsoundness in the financial world.
And there is the risk of Brexit. I am very glad that the Governor of the Bank of England decided to reassure people by setting out publicly that he was prepared to take action if we had a flight of capital from this country should people be alarmed about the referendum. So far, such risk has led only to a big decline in the value of sterling and the freezing of most people’s investment plans. One would be a bit of an idiot to invest in the British economy in anything that had the slightest risk when we do not know what the circumstances and trading patterns are going to be in six months’ time.
I assume one reason why my right hon. Friend took a more relaxed view than a traditional Chancellor would have done and did not make those big spending cuts or increase taxation—in fact, he eased taxation for businesses and the low-paid—was to avoid the mistake of being too severe when circumstances might well worsen as the year goes on. That underlines the point that, in the long term, one cannot forecast and fix these kind of things further forward.
A great deal of the debate around the Budget centred on the forecasts and the Office for Budget Responsibility. The fact that the OBR’s forecasts keep changing so rapidly just underlines what I am saying about the uncertainties for the immediate future. Fortunately, thanks to my right hon. Friend, the British economy has been the fastest growing developed economy in the last 12 months, and we are probably less at risk than most others. However, the fact remains that this was a time to be cautious. Personally, I would have maintained the squeeze—it has all been put off until the latter half of this Parliament, and into the next if we are not careful—because so long as the economy continues to grow, and there is a reasonable prospect that it will, we should not be running a deficit of this percentage of GDP, piling up more debt for our successors.
My doubt is whether this pause was totally justified. I accept that it probably was; but certainly we must resume things. I listened to a shadow Chancellor who plainly does not have an idea in his head about how he would save any money or do anything other than continue spending and borrowing. It is totally profligate stuff, as we have seen very much in the past.
I am very glad that my right hon. Friend made the changes to business taxation. When I was in office, I put up taxes, but I never put up business taxes because I was trying to encourage growth. We still need to make our economy stronger, so it is welcome that the Chancellor stepped in, keeping our corporation tax level at a competitive rate. I particularly welcome the help he has given to small and medium-sized businesses. Encouraging business is, of course, the best way of protecting ourselves against economic risks for the future in this uncertain world.
My right hon. Friend has not been wholly generous towards big business. He and the Government have been leading in the OECD on attempts to tackle the problem of tax evasion and tax avoidance on the part of big multinational companies. He has incorporated the first serious attempt for a long time to attack the problems of tax relief on interest when it is exploited and misused, on royalties and on past losses. I get told a lot about how the Chancellor should be collecting more from big international companies, but no Government have done a blind thing about tackling this tax avoidance for the past 20 years. This Government are leading international discussion towards agreement, which is what is needed, and in this Budget, the Chancellor has started to act.
We are told that we are relieving tax on the rich, but everybody knows—I certainly know, and not just from the newspapers—that the Treasury has been looking at the idea of doing more on tax relief for the wealthy when they contribute to their pension funds. If they have very high earnings, tax relief on pension funds is the way of avoiding tax and it is a great way of ensuring that 45% tax is not paid on a very considerable part of one’s income. That was the case, but we have now put a cap on it. I feel that we are still rather too generous, but in today’s politics that was another lobby, and when someone leaked it, it was seen off by the pensions industry in about 10 days flat. So my right hon. Friend was not allowed—on that occasion, I suspect, because of fear about what would happen on this side of the House—to proceed with fairly modest changes in tax relief for the rich.
As far as other tax moves that my right hon. Friend has made, on personal allowances and the thresholds for the higher rate, because the higher paid—the rich—now pay such a huge proportion of tax, it is almost impossible for Chancellors to ease the tax burden on the low-paid and the ordinary citizen without it being possible to demonstrate mathematically that they have done quite a lot for the rich as well. If Chancellors bought that argument every year, they would never move the threshold at which people start to pay tax, and they would never raise the 40% rate for the people who are currently in modest jobs and find that they are subject to a marginal rate of 40% because Gordon Brown started the habit of freezing the threshold in order to secure stealth taxation. Raising these thresholds is welcome, and I am glad that my right hon. Friend felt able to do it.
Other measures should be seriously canvassed. The pensioner benefits, to which I am entitled, are discussed every now and again. I am always told that we have put things in a manifesto, but I have yet to meet a candidate or an elector who read the last general election manifesto, which, although it seems to contain considerable detail, was certainly not crucial to my constituency victory, or, I suspect, to anyone else’s. We have ruled out ever raising income tax, ever raising national insurance, ever raising VAT; we appear to have ruled out doing anything at all that would stop the very wealthiest people having free bus passes and receiving the winter fuel allowance. I am not going to advocate the breaking of manifesto pledges, but I know of no prosperous pensioners, and certainly none who are in full-time employment like me, who would object to, at the very least, those benefits being made taxable.
I think that there is a case for considering those measures and various alternatives, but I will not risk going into it any further, first for reasons of time, and secondly because, given today’s populist politics, I fear that if I do, some lobby yet unknown to me will descend on me in the next two or three days in order to mount a campaign, through our ridiculous media, to blow that case out of the water.
Of course we must judge the Budget on its own merits, and I understand why my right hon. Friend has got to where he is. No two Chancellors have ever done the same in respect of every measure. Within our system, a Chancellor makes an overall judgment, and this Chancellor retains my full confidence: I am prepared to support his judgment.
I have another reason for supporting my right hon. Friend’s judgment. As I have already said, the present Government are in a strange position. Absolutely no alternative proposition is being advanced by anyone outside. Some pundits, and, as a result, some politicians, seem to believe that we are wrong to maintain our target of a balanced budget over the cycle, or however we choose to put it. They suggest that, actually, there are no problems, and the answer is simply always to run a deficit, on and on and on. After all, it is free money. It is a bit troublesome that interest rates might return to normality one day, but meanwhile, just let it pile up: it will sort itself out.
People on the far right say “Tax cuts, that is all you want. Tax cuts will inspire such tremendous entrepreneurship that jobs will be created, wealth will be created, and it will all be paid back. You will not be in debt for long.” On the left, the argument is “Boost every welfare payment, increase public spending on every public service, and that will generate such demand from the grateful taxpayer recipients that they will pump it into the economy, and it will pay for itself.” That is Mickey Mouse economics, as practised by the last Labour Government, and it got us into this trouble that we are still—thanks to my right hon. Friend—getting out of now.
As for my final reason for backing my right hon. Friend’s judgment, his record, after eight Budgets and six years, is absolutely amazing. I must concede, having been one of his competitors at one point, that he is far the most successful departmental Minister in this Government to date. If anyone had said, when he took over the state of affairs that he took over more than eight Budgets ago, that he would stand here, in charge of the fastest growing economy in the developed world, with near-full employment and with employment at record-breaking heights, able to demonstrate the steadily improving state of not only the public finances but the condition of the poor, as well as the alleviation of social problems across the country, that person would not have been believed. It is a quite remarkable performance.
So I back my right hon. Friend’s judgment. I am also delighted that he is helping us all to avert the risk of Brexit in the forthcoming referendum, because, if the public were so ill advised to vote for it, that would be the only thing that could really send this economic recovery off the rails in a big way.
Order. Before I call the spokesman for the Scottish National party, it may be convenient for the House to know that, owing to the level of demand among those wishing to contribute to the debate, a five-minute limit on Back-Bench speeches will have to take effect immediately after his own speech.
Let me begin by associating the SNP with the words of the Chancellor and the shadow Chancellor in expressing sympathy for the people of Belgium—Flemish, Walloon, and recent immigrants—at this tragic hour.
I must give the Chancellor his due. He gave us a bravura performance: in my view, a more assured and more interesting performance than we were given last week. However, I am always worried when he goes into his expansive, emotional mode. What is he hiding? We know what he hid last week, which was the fact that he would have to come back and tear up his Budget and create a new one, but what did he hide this week? He hid what he always hides and never addresses: the crucial issue of productivity. Without productivity growth, there can be no tax growth, no jobs growth and no wage growth. The truth is that, under this Chancellor, productivity has risen at an annual average of 0.1%. Since the top of the boom in 2007, the cumulative increase in UK productivity has been less than 1%. That is the Chancellor’s failure.
I have great respect for the Chancellor, but he is not a Chancellor who ever had a real job. He is not a Chancellor who ever worked in the private sector. He is not a Chancellor who ever had to lie awake at night—as I have, and as, I am sure, have many other Members on both sides of the House—and worry about how to pay the next wage bill. This Chancellor is an intellectual Chancellor: that is his problem.
Order. May I just say, for the benefit of the House, that moderation and good humour are the precepts of “Erskine May”. Members on both sides of the House can learn from the right hon. and learned Member for Rushcliffe (Mr Clarke), who has just given a textbook example of a robust speech made with good humour. Many Opposition Members can do the same, and new Members could learn from them.
Thank you, Mr Speaker. I serve on the Treasury Committee with the hon. Member for Croydon South (Chris Philp), and I did not take what he said personally.
If we do not get productivity, what happens? We do not get growth. The right hon. and learned Member for Rushcliffe (Mr Clarke) gave us a wise presentation, as he normally does, but he slipped up a little. He said that, under this Chancellor, the United Kingdom had experienced the fastest growth in the developed world. That is not true. As he phrased it, it is not true—unless, of course, Australia is not developed; unless, of course, the United States is not developed; unless, of course, Sweden is not developed; unless, of course, Korea is not developed; unless, of course, Spain is not developed. All those countries experienced faster GDP growth than the UK in 2015, largely because they experienced faster productivity growth. That is what this Chancellor has not delivered. That is not what this Budget contains. And that is this Budget’s weakness.
If we look at the failure of productivity growth in the UK under this Chancellor, we see that productivity is lagging in practically every commercial and industrial sector. Crucially, productivity has been falling by an average of 1% a year in the financial services industry—our flagship industry, our key service industry, the industry that is leading our service exports. This Chancellor has devoted a lot of time and effort to reconstructing the financial services sector—I grant him that—but what have we got? Falling productivity. According to the Office for National Statistics, productivity in the British financial sector, including insurance, is now behind the level of financial services productivity in France and Italy. That is not a great record, Chancellor. Here is the bottom line: if we do not have productivity growth, the cash economy will not grow, wages will not grow and income to the Treasury will therefore not grow.
I utterly accept that point. This is at the core of what I am saying. The kind of business rate cuts for small companies that the Chancellor has belatedly introduced in this Budget have long been available in Scotland. What has happened to productivity in Scotland? Despite the Scottish Government’s limited drivers for economic growth, productivity in Scotland has gone up 4.4% since the recession. That is more than four times what this Chancellor has managed to deliver. In Scotland, our limited tax powers have forced us to concentrate on the supply side, and my bill of fare against the Chancellor is that he does not do that. Yes, there are lots of bits and pieces in the Budget that I welcome—particularly the move to clamp down on transfer pricing in multinational companies—but in the end, there is no strategy. The Chancellor has no strategy apart from his rendezvous with 2020 and trying to run a budget surplus.
Does the hon. Gentleman accept that he is perhaps being a bit harsh? There are many supply-side measures in this Budget, including improved investment in infrastructure and the digital economy and cuts in corporation tax and business rates, all of which should help investment and therefore increase productivity.
Indeed, and I welcome all the supply-side measures, but—[Interruption.] Wait for it! We have had five Budgets in the past 15 months. Why did those measures not appear in the last four of them? In fact, if we count today as well as last week, we have had six Budgets in that time. Why did those measures not appear before? This is not about the Treasury officials, who are bright men and women; this is about the fact that there is no strategy apart from trying to run a budget surplus in a particular year, because the Chancellor knows that if he does not deliver in 2020, what is left of his reputation after this week will be in shreds.
I should like to draw the hon. Gentleman’s attention to page 2 of the Red Book. It states:
“This is precisely why the UK has been working through its long-term economic plan. Since 2010 the plan has been focussed on reducing the deficit, while delivering the supply side reforms necessary to improve long-term productivity growth.”
Will he at least concede that the Chancellor has in his Red Book precisely the kind of strategy that he is criticising him for not possessing?
I cannot accept that. There is a tension in the Chancellor’s mind. It is like good and evil sitting on either shoulder. One side is telling him to run a budget surplus, because that is an easy road to take. That is not badly thought out. Given the number of rules that Chancellors have thought up over the years and then failed to implement, running a budget surplus is an extremely simple rule. It is just too crude, however. That argument vies with the supply-side strategy.
Following on from the question from the hon. Member for Wycombe (Mr Baker), another friend from the Treasury Select Committee, let us look at what the Office for Budget Responsibility says in its report about how the Budget supply-side measures will work. It states:
“We also expect smaller positive contributions to potential output growth over the next five years from population growth, while average hours worked are expected to trend down over time.”
With a decrease in average hours, in input and in population growth, where is the productivity increase going to come from? I should like to hear the answer from the Chancellor.
Does the hon. Gentleman agree that we have such hopeless productivity growth because, first, our research and development is very low, by international standards, and secondly, so is infrastructure investment? Thirdly, the rights and security of people in work are now low, making it easier for them to be sacked. In Germany, where people can stay in work, employers have to invest in their productivity because they cannot get rid of them. Here, however, we are destroying rights and creating short-term, low-paid jobs, which is resulting in lower productivity.
I could not agree more with all three points, so I will just accept them.
The Red Book also shows that public sector net investment—capital investment in the public sector—is set to fall for the next four years. I have to ask Conservative Members this question. With industry in trouble and manufacturing contracting, as it has done in the past quarter, how will it help productivity if we have to cut public sector net investment in the capital side of the economy in order for the Chancellor to meet his rendezvous with destiny in 2020 and have his budget surplus? We need investment in capital in order to have productivity—that is where it comes from.
It is interesting to see what the OBR thinks we will have to do in order to get the books to balance. It believes that UK private sector business investment will have to make up the difference. It believes that private business investment will come to the rescue and contribute a quarter of the expenditure contribution to GDP growth in the period to 2020 in order to achieve the Chancellor’s fabled budget surplus. So, to make all the sums work, there has to be growth. Where is the growth coming from? According to the OBR, a quarter of all the potential expenditure in the economy between now and 2020 has to come from business investment. [Interruption.] Bear with me as I go through the numbers, because they are important. According to the OBR, business will have to contribute 0.6 percentage points each year to GDP in order for the economy to grow sufficiently to deliver the taxes to enable the Chancellor’s budget to come into balance.
There is only one problem. Historically, from 1990 to 2008—that is, throughout the boom period—the level of investment that British business managed to achieve as a percentage of GDP annually was 0.3, which is precisely half what the OBR thinks that business will have to invest between now and 2020 if the Chancellor’s numbers are to work. That is not going to happen.
The hon. Gentleman says that the Chancellor lacks strategy, but that is clearly not the case. He was clearly not listening to the same Budget speech that I was listening to. That speech included supply-side measures, with business taxes going down and infrastructure being improved. We are seeing massive Government investment in the northern powerhouse to tackle the challenges, and private sector investment is coming in on the back of it, including £1 billion of investment in Manchester airport over the next 10 years. Is not that the sort of leverage that the Government should be seeking?
If the hon. Gentleman had been listening carefully instead of following his script, he would understand that I am in favour of all the supply-side measures that we can get, because that is how we get growth. I am simply pointing out that the Budget figures that we have been presented with in the Red Book, alongside the OBR’s independent analysis, suggest that business investment will have to be double the level of its historical average, at a time when the global economy is slowing, in order for the Budget numbers to work. That is not going to happen.
The hon. Member for Macclesfield (David Rutley) made a reasonable point, however, and I shall follow on from it by asking: how do we boost business investment? The Budget includes a cut in corporation tax, yet our rate is already the lowest in the G20. How can a further cut produce any more inward investment? The incentive is already the biggest it is going to be, so cutting it even more at the margins will not increase incentive. That will just waste funds. Even with that—I have raised this in the House before—because there is so little outlet for investment at the moment, much of companies’ profits from reduced corporation tax is going into share buy-backs, which is a complete waste of time because it does not add to productivity.
The other tax issue in the Budget is the cut in capital gains tax. There is an argument for cutting capital gains tax, but here’s the point: which Chancellor raised capital gains tax in 2010? It was the Chancellor who is sitting there. Where is the long-term plan in raising it and then lowering it? The confusion of signals is exactly why businesses are not investing. They do not know what taxes will be from one Budget to another, which, at the moment, is every three months. [Interruption.]
I thank the hon. Gentleman for giving way. I was not seeking to make a point, but I will now. The Chancellor has clearly demonstrated that he has his public finances under control—[Interruption.] The deficit is massively down and he is now in a position to take forward the changes to which the hon. Member for East Lothian (George Kerevan) refers.
Order. The hon. Member for East Lothian (George Kerevan) has been on his feet for 15 minutes and is taking an awful lot of interventions—he is very generous like that —but over 40 Members want to speak and I do not think that I am going to get everybody in. If he limits the number of interventions he takes, I will be very grateful.
As ever, Madam Deputy Speaker, I am at your service and the service of the House. I will come to my final point, because I am sure that we will be discussing this at the next Budget in another three months.
The Chancellor talks about living beyond our means. He prioritises the budget surplus. He talks about intergenerational fairness. He says that if we do not get overall national debt down, it will be a burden on future generations. Let us test that and go back to the late 1940s and 1950s, when the national debt as a share of GDP was more than twice what it is now and was coasting at over 200% at one point. For most of the ’50s it was 150%, which is twice what we have at the moment. Where did it come from? It came from Governments, particularly Conservative Governments, borrowing money. Most of the rise in national debt did not come during world war two, but during the late ’40s and early ’50s as we tried to rebuild Britain’s infrastructure following the depredation of the war. Harold Macmillan was building a million houses a year. We invested and the national debt was pushed up.
Here is the thing: if huge national debts weigh heavily on future generations, let us look forward. What happened to baby boomers such as the right hon. and learned Member for Rushcliffe and me? Our generation has houses and pensions. We have benefited from state-funded investment in national infrastructure. The whole notion that investing and running up a budget deficit places a burden on future generations is not historically true. Did the economy grow fast in the ’50s and early ’60s? Yes, it did.
Here is my final point and my message for the Chancellor to reflect on: when trying to control public spending, what matters is what it is spent on. Harold Macmillan and the Conservative Governments of the 1950s invested in infrastructure. This Chancellor is borrowing to invest in current spending, which gets blown away by the wind, and if we do that, we fail. It is no wonder that the Chancellor wants his rendezvous with destiny in 2020. He wants to pretend that he can run a budget surplus. It may never happen. Even if it does for one year, it is unsustainable. The Chancellor does not understand business or how the economy works. He pretends he does and talks a good game, but he has not delivered productivity, which is the core thing that we need in this country.
It is a great pleasure to follow the hon. Member for East Lothian (George Kerevan), who always speaks so eloquently, but I must say that I disagree with absolutely every word he said. Boosting productivity is at the heart of this Government’s Budget, which is plain for everybody to see. My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) said that the global economy is slowing down and that we need to be fighting fit for the future. This Budget will help put Britain in that place.
I pay tribute to the Chancellor for delivering such a strong Budget, but what we should all do first is pay tribute to our nation’s wealth creators. It is they, not us sitting here in Parliament, who have put Britain back on top with one of the world’s strongest economies. They are the farmers whom I met last week in Hampshire. They are the partners who run the new John Lewis store in my constituency. They are small and medium-sized businesses up and down the country. They are people like Beryl Huntingdon, who runs Absolutely Offices, or Graham Murphy, who runs RDT. They are the people, innovators and entrepreneurs putting Britain back on top. We must acknowledge their immense hard work in getting our country into the position it is now in.
If the hon. Lady will forgive me, I want to make progress because of the number of people who want to contribute.
The Government have recognised their role in creating the right conditions for business success. They have created an environment in which businesses feel confident about investing by putting in place the right reductions in business and job taxes to encourage growth and success. They have put in place the right infrastructure investment—the £100 billion going into infrastructure over this Parliament, including Crossrail 2, which will do so much to reduce pressure on other parts of the rail network, such as the Wessex route, which affects many hon. Members and is well over capacity. The Budget is also investing in people, underlined by the commitment to 3 million new apprenticeships by 2020, including 5,000, some of which will be degree level, in my constituency at the Basingstoke College of Technology.
People are the biggest asset of most organisations. According to the CBI, some of the biggest challenges facing business in the UK today are retaining top talent and getting appropriately skilled staff. We may have record employment levels, which is to be applauded, and the highest number of women in work, but if we are to be fighting fit for the future, we must get the best out of every single member of our community. While much has been done, there is still more to do, particularly on women’s role in the workforce.
Record numbers of women are in work and the Chancellor is to be congratulated on that, particularly because of the investment he secured for doubling the amount of free childcare. There are 2 million women who would like to be in work and 1 million working women who would like to work more, but they cannot find the right jobs. Some 41% of women in this country work part time, many because they cannot get hold of the right flexible work that fits around their family and caring responsibilities. I gently draw the Chancellor’s attention to the second report of the Women and Equalities Committee, which is all about one of the Government’s great aspirations: to eliminate the gender pay gap in a generation. We can do that if all jobs are more flexible, if men are better able to share care in their family life, and if there are national pathways for women to get back into work.
I also draw the Chancellor’s attention to an Equality and Human Rights Commission report, published today, on the level of maternity discrimination that 77% of pregnant mothers and people on maternity leave are enduring. We are not making the best use of women in this country, and I would like the Government to pledge to take active steps to change the situation, so that all women can do a job that they want to do in order to make the biggest contribution they can to boosting productivity in this country.
I rise to speak to amendment (a), tabled in my name and those of the hon. Members for Glasgow Central (Alison Thewliss), for Berwick-upon-Tweed (Mrs Trevelyan) and for Leeds North West (Greg Mulholland). I served on the Finance Bill Committee with the hon. Member for Glasgow Central last year, and it was during that Bill’s passage that she and I first tabled amendments on this issue. I hope that we will finally see them reflected in legislation this year.
I thank the hon. Member for Berwick-upon-Tweed, who, as a Government Back Bencher, co-sponsored the amendment, and my right hon. and hon. Friends who have given their support, but it is the campaigning work of so many others outside this Chamber that has driven us forward, including more than 300,000 people who signed Laura Coryton’s petition on the issue. The campaign against the tampon tax will serve as an inspiration. It is an example of how grassroots campaigns and Back-Bench Members can make a positive change at the highest level.
It is one of the absurdities of our tax regime that tampons and sanitary towels are treated as luxuries, when periods are simply a fact of life for women. Last week, we heard appalling reports from food banks about how women, who were unable to afford tampons, were resorting to using newspapers and socks.
I do thank the Financial Secretary in the same way that I thank everybody who has supported this long-standing campaign.
It cannot be acceptable that women are having to use socks and newspapers as a substitute for sanitary protection. I hope that, as well as cutting prices across the board, we can ensure that all women have access to the protection that they need.
This campaign is not just about money. It is about time that we removed the stigma attached to the basic facts of women’s lives. The Prime Minister said yesterday that he will always remember explaining this issue to the 27 Heads of Government at the European Council. The fact that they had to address this issue directly is itself a great step forward for women.
I am glad that the Government have now taken on board the campaign’s message. It makes me the first Opposition Back-Bench MP successfully to move an amendment to a Budget resolution. If nothing else, I will at least achieve lasting fame as a parliamentary pub quiz answer. That does not mean that our work is done here. There are a couple of outstanding issues that I hope the Minister can address.
Most pressingly, there is the question over what will happen to those women’s charities that have benefited from the tampon tax fund since the autumn statement back in November. I hope the Minister will confirm today that even after the tax is scrapped he will continue to provide the financial support that they so desperately need.
We will also need to take the final step by legislating for the measure the Finance Bill, and at European level. It would be fitting if this House could pass those amendments before the referendum in June, and I hope that the Minister can commit to that timetable today. On the latter point, I hope that he will be back at the Dispatch Box tomorrow with the expected announcement of the EU VAT action plan.
There is also a challenge to ensure that women get the full benefit of the tax cut, and that the cut does not simply result in increased profits for the manufacturers and retailers of sanitary products. I am writing to them on that matter myself, and I encourage the Government to join me. Those companies might be able to provide part of the answer to the issue of future funding for women’s charities. I hope that it would not be too much of a test of our powers of persuasion to encourage them to advertise women’s charities on their packaging, and make donations themselves. Women have no choice but to pay companies for their products, and I hope that those companies will make the choice to help pay for our services.
I thank my honourable sister for giving way on this point. I thank her for her support and for the work that we have done on this. I fully support what she is suggesting about the charitable giving from the sale of packets of tampons and sanitary towels. Does she accept that the definition of sanitary products needs to be widened slightly to cover items such as breast pads for mothers who breast feed, maternity pads for women who have just had children and incontinence pads, which are not always available to people free of VAT?
I thank the hon. Lady for her intervention, and I very much look forward to campaigning with her on the issues that she has just mentioned.
This evening we have the opportunity to put right an historical injustice by making clear our intent to abolish VAT on female sanitary products. The amendment allows us to do just that, and I hope that the whole House will support it.
Thank you, Madam Deputy Speaker, for calling me to speak in this very important debate. It is a pleasure to follow the hon. Member for Dewsbury (Paula Sherriff), to whom I pay tribute. Given the mark that she has made on this place—I am pretty sure that I speak for the whole House in this regard—she will be more than just an answer in a future pub quiz. It is also a pleasure to follow my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). He is certainly still a big beast. He was a big beast in the Treasury and he is now turning out to be a bit of a national treasure on the Government Benches.
This Budget puts the next generation first—I have to declare an interest here, as I have three young children—and it continues our long-term plan to reduce the deficit and achieve a surplus, and sets out the long-term solutions to long-term problems to ensure that Britain is in a strong economic position for the future.
Thanks to the work of my constituency neighbour, my right hon. Friend the Chancellor, Britain is set to be the fastest-growing economy in the G7, with the Office for Budget Responsibility predicting growth rates in excess of 2% for the remainder of this Parliament. [Interruption.] We are still the envy of the European Union, and we are stronger together. The challenges that the country faces are growing: global stock markets have had the worst start to the year for 45 years, prospects for emerging markets have worsened, and the sharp fall in the price of oil and commodities has contributed to lower global growth.
Eight years ago, the UK was one of the worst prepared countries to face the financial crisis. Today, it is one of the best prepared. We have fixed the roof while the sun was shining. Against that backdrop of global uncertainty, this Budget delivers security for hard-working taxpayers. Small businesses are the engine room of our country. They account for 99% of all private sector businesses, employing 15 million people—60% of all private sector employment. The combined annual turnover of SMEs was £1.8 trillion last year, nearly half of all private sector turnover in the United Kingdom.
Along with many small businesses across Weaver Vale, I welcomed the announcement in last week’s statement that business rate relief would be doubled permanently. Businesses with a rateable value of £12,000 and below will receive 100% relief. Some 600,000 small businesses across the country will now pay no business rates whatsoever.
On that point, I also welcome the fact that, from 2017, 600,000 small businesses will be taken out of business rates, but it does not happen for a year. Retail business rate relief, which is worth £1,500, has also been abolished, but small shop owners will still have to pay that £1,500 for the next 12 months. Is that not disappointing?
I bow to the greater knowledge of the hon. Gentleman, who does a great job as a small business owner in Rochdale. We cannot do everything at the same time, but overall I welcome this Budget. I am sure that he, too, welcomes the overall message to small businesses as they receive help with those reliefs.
Businesses with a property rateable value between £12,000 and £15,000 will receive tapered relief. Two thousand properties in Halton Borough Council and 7,000 properties in Cheshire West and Chester have a rateable value of below £15,000 and will all benefit substantially from the changes.
Building a northern powerhouse and rebalancing the national economy is a core part of this Government’s economic strategy. In 2015, over half a million more businesses were established outside London and the south-east than in 2010. A third of new businesses are in the northern powerhouse, and the overwhelming evidence is that those new businesses are creating more and more jobs.
In my constituency of Weaver Vale, unemployment is down by 57% since 2010. Almost three quarters of the growth in employment has been in full-time jobs, and real wages are rising strongly. Since 2010, there have been around 4,000 new housing starts in Cheshire West and Chester, and just under 2,000 new starts in the Halton and Runcorn area.
Nationally, housing starts are at their highest levels since 2008, and are up by 91% when compared with the low point in 2009. Local authorities will be able to access the £1.2 billion starter home land fund to help prepare more brownfield sites for starter homes, such as the legacy brownfield sites from ICI in Northwich in my constituency. This Government are helping generations of younger people in their 20s and 30s to buy their first home. Crucially, they are protecting our green belt while at the same time helping more young people to get on the property ladder.
The UK was the fastest growing major advanced economy in 2014, the second fastest in 2015 and it is forecast by the OECD to be the fastest growing in 2016. Under Labour, £1 in every £4 spent by the Government was borrowed, which was absolutely outrageous. Now it is £1 in every £14. The deficit has been cut by two thirds, and we will run a surplus by the end of this Parliament.
This Budget moves Britain from a high-tax, high-welfare, low-wage economy to a high-wage, low-tax, low-welfare economy. Next year, the long-awaited Mersey gateway bridge will be opened by a Conservative Government—and a Conservative Chancellor has made that happen. That reminds the world, if it ever needed reminding, that Great Britain and the north of England are open for business.
I would like, if I may, to advance the argument made by the hon. Member for East Lothian (George Kerevan) about the downgrading of productivity. Productivity was the central economic challenge of this Parliament—so said the Chancellor last year. A failure to address the productivity gap between ourselves and our main economic rivals would undermine our competitiveness and reduce living standards, so to address that, the Government published their productivity plan in July 2015.
In our inquiry into the plan—our first in this Parliament—my Select Committee found it to be somewhat worthy but vague, and without the firm delivery and implementation measures needed truly to address the productivity challenge. Of course, it is difficult for any Government to turn around something as substantial and structural as the productivity gap, especially only nine months after the publication of their report, but the downgrade to productivity in last week’s Budget reinforces the Committee’s view that although many measures in the plan were welcome, collectively they did not constitute a radical departure or step change that would really help to boost productivity. Crucially, as the OBR stated in its report last week:
“Lower productivity growth means lower forecasts for labour income and company profits, and thus also for consumer spending and business investment. In aggregate, this reduces tax receipts significantly.”
Productivity improvements require a long-term and sustained approach to business investment, yet the Red Book shows how much business investment—that engine that will power better competitiveness, increase wealth creation and employment generation and, ultimately, bring about higher wages and rising living standards—has stalled. Real business investment fell in the final quarter of last year. The manufacturing sector in our country is in recession. The OBR forecasts that business investment will be 2.6% in 2016, a massive 4.9 percentage points weaker than only four months ago at the time of the autumn statement.
The Government are not helping through their policies. The Chancellor should be encouraging firms to invest in the latest technology, plant and machinery to ensure that they can compete with the most modern kit anywhere in the world, as well as investing in research and innovation to ensure that British-based firms are coming forward with the goods, services and products that the world wants to buy.
Is that not exactly why the Chancellor has cut corporation tax and capital gains tax: to encourage companies of all sizes, particularly small and medium-sized businesses, to invest in research and development, new products and the jobs of the future?
I would suggest that the approach on capital gains tax is contrary to having a long-term economic plan, as it encourages short termism—people do not scale up, but sell out quickly. That is a major structural concern.
To a large extent, the Chancellor has done positive things in this Parliament to encourage investment. In particular, the changes to the annual investment allowances are very welcome and will allow firms to invest with greater certainty. Other countries, however, are doing much more, and Britain risks missing out. Addressing the huge disincentive in business rates for firms wanting to invest in new plant and machinery should have been at the very top of the Chancellor’s list, and although the changes to business rates for small businesses were welcome and constituted the largest tax cut of this Budget, it seems ridiculous that the Chancellor did not resolve the ludicrous situation whereby a firm faces a larger tax bill in the form of higher business rates by choosing to invest in new plant and machinery. For a Government who pledged to do all they can to rebalance the economy towards manufacturing and specifically, in the past six or seven months or so, to help the hard-hit British steel industry, the omission of that single measure from the Budget was a significant blow for industry, particularly the steel industry, which wanted the Government to give a favourable signal to invest.
It seems that there is only one club in the Conservative golf bag for tackling productivity, and that is tax alone. The Conservatives have to face up to infrastructure, to the low-wage economy and to the lack of housing. Owner occupancy is at a 20-year low and house building is low as well. Workers need houses, and if that growth does not happen, combined with infrastructure, productivity will remain low.
The hon. Gentleman makes an important point about infrastructure, and there was very little in the Budget to address that. Earlier, I mentioned the possibility of rebalancing. In 2012, we were promised an export-led recovery, and the Government announced proudly a target of £1 trillion of exports by 2020. I am all for ambition and for stretching targets, but given the Government’s limited ability to shift the needle on the value of exports by companies, that ambition seemed at best somewhat misplaced and, at worst, even very foolish.
The OBR stated last week that the Government will miss its target by 36%, which is £357 billion, and that net trade will actually be a drag on economic growth for every single year of this Parliament, but there was nothing in this Budget to boost exports. The word “exports” did not even pass the Chancellor’s lips in his statement on Wednesday and it was not mentioned again this morning. Does that mean that the Government have shelved that target? Will Ministers consider providing assistance and encouragement in the form of export vouchers so that firms from Britain can invest and export?
A further way to boost productivity is by investing in skills, and the flagship skills policy of this Government is the target of 3 million apprenticeships by 2020, funded through the apprenticeships levy. Now, only 2% of larger firms will pay that, so what will happen to the other 98% of firms, as well as the detail of the levy? We were promised by the Minister for Skills in the run-up to the Budget that all would be revealed, including this new shiny model, in the Chancellor’s Budget statement, but for a Budget billed as putting the next generation first, there was precious little detail about how the apprenticeships levy—only 12 months from its start—will operate in practice. As with exports, the word “apprenticeships” was not even mentioned by the Chancellor.
The hon. Gentleman makes an important point. My point is that by trying to ramp up the quantity of apprenticeships while making a major—possibly the major—change to the institutional architecture of apprenticeship delivery, the Government risk missing their target and that, as a result, the skills policy in this country will be affected adversely.
Budgets are rarely remembered past a couple of weeks or months. This one will be remembered, but for all the wrong reasons: incompetence, callousness, clumsiness and the resignation of a Cabinet Minister. It is also concerning that it will be remembered for downgraded productivity and a failure to address it, leading to lower economic growth, relatively falling living standards, lower tax receipts and deteriorating public finances. The Budget has helped to make this country somewhat poorer.
I rise to support the Budget and, in particular, to welcome the Government’s supply-side reforms. This has been a dramatic Budget, and I would be failing the Government if I did not concentrate on the areas of drama. First, on the disability reforms, the challenge before the Government is clear: to deliver a policy that we can all be proud to defend in our constituencies and in front of any objective scrutiny. I do not think we would have been able to do that if the Government had not wisely made the decisions that they have over the past few days.
When I look at page 150 of the OBR’s report, on the successive forecasts for spending on disability benefits, I can see that the Government’s envelope within which to deliver this humane disability policy is very clear. When we came to power in 2010, the Government were spending £12 billion on disability benefits, which rose to £16 billion by now, which is an increase of a third. The figure is forecast, with the reversal of the PIP measures, to reach £18 billion by 2020-21. It is clear that the Government have an envelope within which to work to ensure that we have a world-class policy that any of us can defend, even in an environment of fierce and partisan political attack.
I signed the two amendments on VAT to highlight the extent to which VAT is controlled by our membership of the European Union. Neither amendment has legislative effect. I congratulate the hon. Member for Dewsbury (Paula Sherriff) on her amendment, which, as she said, makes clear our intent to zero rate tampons and other sanitary products. Of course, both amendments are pursuant to Government policy, and this is the bitter irony of our membership of the EU. We had to have a dramatic row over VAT in the context of an EU referendum in order to secure the following commitment from the European Council:
“The European Council notes that the Commission intends to publish shortly a communication on an action plan on VAT. It welcomes the intention of the Commission to include proposals for increased flexibility for Member States with respect to reduced rates of VAT, which would provide the option to Member States of VAT zero rating for sanitary products.”
That is welcome, and it is clear that the Government’s policy and the House’s wish is that sanitary products should be zero-rated. It is welcome that the Government have secured this change of EU policy but, particularly as a participant in the campaign, I do not want us to have an EU membership referendum every time we want a different policy on our second largest tax.
Will my hon. Friend accept that British Governments have always supported the idea of having an EU framework on VAT? Otherwise, the problem is that there is pressure on Governments to compete with each other in lowering the tax on selected products when they think that their manufacturers or producers will benefit. Also, it is very difficult to operate an open trade area if everybody is going for competitively different tax rates. If we go too far down that path, the main beneficiaries are smugglers.
My right hon. and learned Friend raises some interesting points and, although I am grateful for the additional minute for my speech that he has given me, I cannot touch on all of them. He illustrates the difficulty of operating a customs union among interventionist nation states. The old doctrines of liberalism did not require that one got rid of non-trade barriers, for the most part. There were no non-trade barriers because laissez-faire was the norm. I abridge an argument that could be made at much greater length, but at the heart of the exchange that we have just had is the difficulty involved in interventionist nation states attempting to engage in free trade. In a world of globalisation, air travel and the internet, we need some degree of harmonisation on a global scale, provided that that enjoys democratic consent. That is probably a subject for another debate, but I am grateful to my right hon. and learned Friend for his intervention.
Until the VAT directive 2006/112/EC is changed, it will be technically unlawful under EU law for any amendment to be introduced in UK law, even if it is not applied and takes effect in the future. That is the situation that we face. It is similar to the situation concerning insulation products, on which a judgment in the European Court of Justice on 4 June 2015 ruled that
“The United Kingdom cannot apply, with respect to all housing, a reduced rate of VAT to the supply and installation of energy-saving materials, since that rate is reserved solely to transactions relating to social housing.”
That is the position in law while we are in the EU. Although I hear what my right hon. and learned Friend says, it is a fact that while we remain in the EU, we cannot control what is currently our second-biggest tax. I am grateful that we have had this opportunity to put this part of the EU membership debate on the public record and have it discussed in the media. I am particularly grateful that the Government will not be opposing either amendment. If there is a Division, I shall certainly vote for amendment (a) and I shall probably abstain on amendment (b).
Perhaps the most dramatic aspect of the Budget is a subject that I have talked about at every Budget. It is a subject that I mentioned in my maiden speech—the insane state of monetary policy all around the world. If the European Central Bank was printing €80 billion of new money every month in paper and shipping it around the continent in articulated lorries, it would already have destroyed faith in paper currency. Yet, because the process is one of buying Government and corporate bonds, we simply notice a recirculation of money and celebrate the coarse aggregate results. In 25 seconds, I cannot give a lecture on capital-based macro-economics—[Hon. Members: “Oh!”] If Opposition Members would like to call a Back-Bench debate on the subject in their own time, I would be glad to give them the lesson. I welcome this Budget, but its dramatic consequences will be felt much later as a result of easy money.
The Budget was a story of missed targets for the Chancellor and missed opportunities for our country and, like the Budget of 2012, it is rapidly turning into a total mess. I am pleased to see some of the U-turns, but much more is needed.
I associate myself with the remarks of my hon. Friend the Member for Hartlepool (Mr Wright), the Chair of the Business, Innovation and Skills Committee. He spoke powerfully about the importance of rebalancing our economy. That is greatly needed, especially after some of the numbers we saw in the Budget last week. As a result of the lower productivity, the lower exports and the other things my hon. Friend spoke about, economic growth has been revised down for every single year of this Parliament. A staggering £71 billion has been knocked off our tax revenues. As a result, the Government are now set to borrow an extra £38 billion over the next five years. That is why, after breaking his promise to clear the deficit in the last Parliament, the Chancellor has now broken his pledge to bring the debt down as a share of GDP in this Parliament as well.
Would the hon. Lady’s argument not have a lot more weight and credibility had her party—as she well knows because of her position on the Front Bench—not opposed every single one of the £83 billion-worth of welfare cuts that had to be made in the wake of the 2010 fiscal inheritance?
I wonder whether the hon. Gentleman still thinks we should go ahead with the cuts to personal independence payments. It certainly sounds like it from those remarks.
Let me deal with the specific issues surrounding personal independence payments and the impact that this Government have had on disabled people. While the fiasco is unfolding around us, let us remember the broader points. This is a Government—the Chancellor, the Prime Minister, the former Secretary of State for Work and Pensions and the current Secretary of State for Work and Pensions—who forced through the bedroom tax, affecting 500,000 people, the majority of them disabled, by about £700 a year. This is the Government who forced through the closure of the independent living fund. This is the Government who forced through cuts to employment and support allowance only last summer, affecting 500,000 people and worth about £30 a week or £1,500 a year. The U-turn on personal independence payments, although welcome, deals with only a fraction of the damage and the pain that the Government have caused to disabled people in all our constituencies.
Let us be clear what this U-turn means. The new Secretary of State for Work and Pensions came to the Chamber yesterday and said that the Government are not going back to the welfare bill and to disabled people for further cuts. But in the course of yesterday’s statement, that was watered down a little. The Government now have “no plans” to come back to the welfare budget and disability benefits. That is reminiscent of when they had no plans to increase VAT and all the other things they had no plans to do, until they did them and until they hurt the people who least need to be hurt.
When the Chief Secretary winds up the debate this evening, I would like to hear whether there are no plans, or whether the Government can guarantee that there will be no further cuts to the welfare budget or to the benefits of disabled people. We know that there is a black hole of £4.4 billion in the public finances. If it is not the wealthy and not disabled people, who is going to pay the price? Are there going to be further cuts to education, health, defence and our police? Will there be further increases in taxes—on VAT and taxes for ordinary working people? Something has to give and we need some answers about the black hole in the Budget that we are voting on, although we do not know what it means. What does it mean for all those different groups of people?
As the Chair of the Office for Budget Responsibility told us at the Treasury Committee meeting this morning, the issue is not just that there is a £4.4 billion black hole in the social security budget, but that the Government have failed to meet their welfare cap. They are going to fail in every year of this Parliament, by a staggering £20 billion—£20 billion more on social security spending in this Parliament than the Government set out, a further black hole in their public finances. Why did they get into this mess in the first place? It is because they wanted to cut taxes for the wealthiest in society. They wanted to cut capital gains tax, increase the threshold before people started paying the 40p rate of tax, and increase the ISA limit from £15,000 to £20,000 so that we can all save the full £20,000 a year tax free. That is great for those who have the money, but most of our constituents are lucky to earn £20,000 a year, let alone put it away in savings. That is why the Government raided the social security budget yet again to give tax cuts to their friends, the wealthiest and the most privileged in our society.
Last week’s Budget could have been different. For example, the Government could have put more money into infrastructure investment. In my constituency, we are paying a heavy price for the floods on 26 December. The Chancellor said earlier that I should have welcomed the money for flood defences, but in 2011 the Government cancelled a flood defence scheme in Leeds worth £135 million. Last week, they announced £35 million for Leeds. Well, I am sorry for not thanking the Chancellor, but an offer of £35 million rather than £135 million is not really worth the thanks, and the businesses in my constituency will pay a heavy price if the rains come again.
Last week, the Government announced £150 million for York, Calder Valley, Leeds and Cumbria. However, as I said, the scheme that was cancelled in Leeds was worth £135 million, and that £150 million is for flood defences, flood resilience and flood maintenance. Yet again, the Government are short-changing people who need them to step up to the mark, as our volunteers in York and Leeds and across the north of England did when the rains fell, the rivers rose and buildings—houses and businesses—were flooded.
Last week’s Budget could have been different. It could have been a different Budget for disabled people. It could have been a Budget that helped ordinary working people and the most vulnerable in our society. It could have been a Budget that put money into the northern powerhouse and the infrastructure that we need. However, it was a different Budget, because this Government have different priorities. That is why we need a Labour Government on the side of ordinary working people and the most vulnerable in our society.
The hon. Member for Leeds West (Rachel Reeves) made a strong case, but, unfortunately, it is desperately flawed. As she knows, the fact of the matter is that, in the 13 years of the Labour Government, the gap between the richest 10% and the poorest 10% widened. During her party’s period in government, we had record numbers of children in workless households, and unemployment, including youth unemployment, rose.
My hon. Friend is making a powerful point. During 13 years of Labour, many gaps were created, but particularly the north-south divide. Does he therefore welcome the Chancellor’s announcement of the High Speed 3 line from Manchester to Leeds, which will significantly cut train times—by 30 minutes?
I will not at the moment, but I might later.
The previous Labour Government, in very benign economic circumstances—mainly driven, of course, by debt and borrowing—failed to take those decisions.
I welcome the Budget in general terms—of course, I took issue with the Chancellor’s comments about Brexit, and I think the OBR’s anodyne comments on Brexit were misrepresented. However, there were some good things in the Budget, which was not a redistributive Budget from poor to rich, but largely a redistributive-neutral Budget, as the Institute for Fiscal Studies said.
I will not at the moment.
I welcome the lifetime ISA. I welcome the tax crackdown on offshore property developers and transfer pricing. It was good to see the changes in the personal allowance, which will take many of my constituents out of tax.
Indeed, my constituency is in a very fortunate position, and I pay tribute to the Chancellor for delivering nothing short of a jobs miracle. We have seen the largest reduction in youth unemployment in the history of my seat—and probably in England as a whole—at over 70%, and there has been a more than 60% reduction in adult unemployment. We also have record numbers of apprenticeships. That is taking people out of poverty. That is the great record of this Government.
The decision to resile from the commitment on PIP was absolutely right. There is a moral, social equity issue—[Hon. Members: “A U-turn.”] It is a U-turn—that was well spotted by Labour Members. However, it was absolutely right to make that decision. It was right for my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) to point up the juxtaposition of tax reductions for well-off people and the change in PIP. However, it ill behoves Labour Members to lecture the Government, when they voted against every welfare change in the last Parliament. What would they have done, and what would they do now? It is incumbent on the Opposition to come through with a coherent, comprehensive alternative on fiscal policy, public expenditure and tax.
Let me raise two issues that have caused me some concern with the Budget. The problem the Government have encountered, which we have discussed over the last few days, has given rise to a proper debate about intergenerational fairness. We need to look again at pensioner benefits. We cannot discuss welfare without looking at things such as the triple lock and pensioners benefits. I rarely agree with my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), but he is absolutely right that we cannot see these things in a vacuum, and it is important that we look again at means-testing and pensioner benefits. It is morally wrong to make large transfers of wealth from the young to the old. There has to be a consensus on this issue.
One suggestion I would make is that, if we are going to means-test pensioner benefits, we should perhaps link that to the most acute societal issue we have at the moment, which is adult social care. We should have co-ordination and integration between acute district hospitals and the provision of care and housing for older people. I think there are older pensioners who would understand that, and it is something the Treasury needs to go forward with and look at very seriously.
The second concern is that, as we speak, Cambridgeshire County Council—it is not my local authority, because Peterborough City Council is a unitary authority—is looking at the devolution plans for East Anglia. At the moment, those do not stack up. We have not had enough information—in some senses, I am reprising the comments of my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham) yesterday—and we need more. The proposal has been rushed to get it in the Budget statement. It needs to be finessed. We need to carry businesses with us. Neither local enterprise partnership agrees with it. The majority of councils are, at best, ambivalent, and that includes Cambridge City Council, which has rejected it. We need to look at this proposal again.
I will not at the moment.
It may be that there are synergies between Lowestoft and Peterborough, or between Norwich and Ipswich, but I have yet to see them. Let us have more information about funding, governance, infrastructure spending, the role of an executive mayor and what will happen to the existing local government structure. I am not against this in principle, but we cannot promise £30 billion of spending over the next 30 years without more facts. We need to see those, and that is the challenge I give to those on the Treasury Front Bench.
We learned many things from last week’s Budget, and we have learned perhaps even more from the fallout since. However, the overriding message we seem to be getting is that, six years into his job, the Chancellor cannot keep a promise and does not seem to learn from his past shambolic Budget mistakes. He promised to balance the books by last year, to get debt falling as a percentage of GDP each year and to keep welfare spending within his welfare cap, but on virtually all of his own fiscal targets, as the independent Office for Budget Responsibility confirmed last week, he has failed to deliver.
Of course, this Government’s shortcomings go much further than the Chancellor’s own meaningless targets. A mere six months ago, the Prime Minister told his party conference that he would govern according to “one nation, modern, compassionate” Conservatism. This is the same Prime Minister who last week cheered on a Budget that cut capital gains tax, raised the threshold for the 40p rate, further cut corporation tax, and would see the poorest losing about £1,500 a year in the next few years while some of the richest gain £200. To top it off, the Chancellor pledged to slash disability benefits by up to £1.3 billion a year, which the OBR estimated would lead to some 370,000 disabled people losing an average of £3,500 a year.
I want to give some context on the important point about capital gains tax that is being made by the Opposition. Jim Callaghan created capital gains tax when he was Chancellor in 1965, but it has always been lower under Labour Chancellors than under Conservative Chancellors. Even after this change, capital gains tax will be 2% higher under this Chancellor than it was under Alistair Darling, and indeed Gordon Brown in the previous Labour Government.
I do not understand the hon. Gentleman’s point. He is digressing on details of capital gains tax when the point I am clearly making is about the context in which the cut has been made, where the burden of this Budget very much falls on the poorest and the most vulnerable in our society. If that is compassionate Conservatism, bring the nasty party back!
I am pleased and relieved that the Government have backed down on this issue within less than a week. However, I am angry that those people who rely on the personal independence payment, including 1,100 people in Newcastle upon Tyne North, have endured days and weeks of huge anxiety about how they would cope if this level of support was cut. It is unforgivable. I remain equally concerned about how the existing reforms to PIP are quite clearly failing disabled people. Constituents continue to get in touch with me following my recent question to the Prime Minister because they have been told that they are no longer eligible for a Motability vehicle despite its clearly being the only means by which they can leave the house, or indeed get to work. The new PIP assessment is fundamentally flawed. I strongly urge the Work and Pensions Secretary and the Chief Secretary to the Treasury to revisit this issue with fresh eyes and look at reforming the current PIP changes before they embark on any further welfare reform.
Despite the Chancellor’s so-called
“revolution in the way we govern England”,
with the pledge last May to give local areas greater control over local transport, housing, skills and healthcare, it appears that he does not place the same faith in local communities when it comes to our schools. Last week’s Budget confirmed that, far from handing control to local communities, the Government are about to embark on the greatest ever centralisation of our schools system, which will see an end to the role, now a century old, of democratically accountable local authorities as the stewards of our children’s education. My Front-Bench colleagues have already highlighted the glaring black hole in the finances of this plan—£560 million—which raises questions about the extent to which the schools budget will be raided to make up the shortfall.
My hon. Friend mentions the schools budget. I do not know whether she is aware that in Coventry one or two academies are already in serious trouble because of falling numbers as a result of certain changes in the education budgets.
I appreciate my hon. Friend’s point. It is not just local academies that are in trouble—there are some much bigger and more serious questions that we need to raise. First, why are the Government doing this? There is no proof whatsoever that academies per se raise educational standards. It is a distraction that schools now need to focus on this rather than on their educational attainment. Secondly, how will the Government enable the local political leadership to drive up standards and work together, as happened so effectively with the London Challenge, if the power and decision making is so centralised in Whitehall?
Is the Department for Education even fit for purpose to deal with over 20,000 schools across the country—about 3,400 secondaries and almost 17,000 primaries? There are signs that it is already struggling with its current workload of 4,000 schools. As the Education Committee, of which I am a member, recently uncovered, the Department could not even deliver its annual accounts to Parliament in time and required a statutory extension, and there remains doubt as to when it will ever be able to present them. This mass rush to conversion will only add to the current mess. We need only look at the fiasco of the free schools application process, where there is no clear rhyme or reason to the Department’s decisions to authorise new schools.
We see a Department in disarray. Of particular concern for my constituents is how the forced academisation process will fit alongside the large-scale programme of house building that is planned for our area. As a result of the coalition’s national planning policy framework, some 21,000 new homes are expected to be built in Newcastle by 2030, a large proportion of which will be in my constituency. That will require new school capacity, but who will be the guiding mind that will match and create that new school capacity in an area that will be controlled by Whitehall? Newcastle City Council already finds itself in the impossible position of being unable to establish new community schools to cope with existing demand. How on earth will it be able to deliver the right school places across Newcastle upon Tyne North when every school is accountable to the Secretary of State?
Finally, in addition to the fact that apprenticeships were not mentioned in the Chancellor’s Budget even though we were promised that they would be, another glaring omission was the lack of any announcement about how the Government intend to protect our regional airports from the impact of devolving air passenger duty to Scotland. That is crucial to Newcastle airport, which supports 12,000 jobs in the region, and through which £300 million of goods are exported every year. All talk of a northern powerhouse will be completely undermined if the Chancellor fails to deal with the issue urgently.
It is a pleasure to follow the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). This Budget, like my right hon. Friend the Chancellor’s previous Budgets, helps to create jobs. That is the right thing to do, which is why I continue to support the strategy of lowering business taxes to encourage growth. The corporation tax cut will benefit 1 million companies in Britain, and the business rates measure will help 600,000 small businesses. Cutting capital gains tax, as my hon. Friend the Member for Newark (Robert Jenrick) has carefully laid out, will help to boost enterprise. Reforming stamp duty and abolishing national insurance contributions will help the smallest businesses of all.
The Government have my wholehearted support in putting the next generation first. Our philosophy in the Conservative party is that debt is the most unethical thing of all to leave to the next generation, and I am proud that we continue to pay down the country’s debts; to reduce spending that cannot possibly have the consent of those who are yet to come; and to steer towards a surplus, which will put the public finances in the strongest position for today’s youngest.
Making it feasible for young people to buy a home or to save in a pension is crucial to intergenerational fairness, which is why I think that the lifetime ISA in this Budget is a positive thing. It should be seen alongside all the other measures that are already helping people in every corner of this country to get their first home. Ultimately, building homes is the most important way to provide homes at a price that can be afforded, and I urge the Chancellor and Housing Ministers to continue to build.