Amendment of the Law
Motion made, and Question proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.—(Mr Philip Hammond.)
This is a Budget of utter complacency about the state of our economy, utter complacency about the crisis facing our public services, and complacency about the reality of daily life for millions of people in this country. It is entirely out of touch with the reality of life for millions.
This morning, over 1 million workers will have woken up not knowing whether they will work today, tomorrow or next week. Millions more workers know that their next pay packet will not be enough to make ends meet. Millions are struggling to pay rent or a mortgage, with private renters on average paying nearly half their income in rent. Yesterday, more than 3,000 people in this country will have queued up at food banks to feed themselves and their families. Last night, over 4,000 people will have slept rough on the streets of this country. And the Chancellor makes his boast about a strong economy.
But who is reaping the rewards of this economy? For millions, it is simply not working. It is not working for the NHS, which is in its worst crisis ever, with funding being cut next year. It is not working for our children’s schools, where pupil funding continues to be cut. It is not working for our neighbourhoods, which have lost 20,000 police officers, leaving the force in a perilous state in many parts of the country. It is not working for our public services and the dedicated people who work in them—nurses, firefighters and teachers; no pay rise in seven years for them—or for people with disabilities, who are twice as likely to be living in poverty, and whom this Government are denying the support that the courts say they need.
There are 4 million children living in poverty, and that figure will rise by another 1 million in the coming years. The economy is not working for the thousands of young people who cannot get anywhere to live, cannot get on the housing ladder and, in many cases, cannot leave the parental home. Parents of grown-up children whom they would expect to be debt-free by now are having to bail out student debt, or are trying to help them with a deposit to get housing, if they can manage it. A million elderly people—I will come on to this again—are being denied the social care that they need due to the £4.6 billion of cuts made by the Chancellor’s Government, with the support of the Lib Dems, over the past five years. The economy is not working for pensioners, for whom the security of the triple lock remains in doubt.
This is the reality facing Britain today: a Government cutting services and the living standards of the many, to continue to fund the tax cuts of the few. Some people are doing very well under the Conservative Government. The chief executives of big companies are now paid 180 times more than the average worker and being taxed less. Big corporations are making higher profits and being taxed less. Speculators are making more and being taxed less. The wealthiest families are taxed less due to cuts in inheritance tax. All that adds up to £70 billion of tax giveaways over the next five years to those who need it the least. This Government have the wrong priorities.
Let me give three examples. The pain of losing a child is unimaginable for most of us, but for those who do lose a child, their pain is worsened by the stress of having to pay for their own child’s funeral. I pay tribute to my hon. Friend the Member for Swansea East (Carolyn Harris) for her campaign to establish a children’s funeral fund, but far from establishing such a fund, which would cost just £10 million a year, the Government are instead cutting support for bereaved families—three in four bereaved families will receive less. That is utterly heartless.
Despite generous tax giveaways at the top end, there was no money either for the 160,000 people with disabilities whom a court has ruled deserve a higher rate of personal independence payments. These are people with debilitating mental health conditions such as dementia, schizophrenia and post-traumatic stress disorder. The Prime Minister came to office talking about fighting “burning injustices”. Less than nine months later, she seems to have forgotten all about them, because none of them is being fought today.
Low pay holds people back and is holding our country back. We are the only major developed country in which economic growth has returned yet workers are worse off. Wages are still below 2008 levels. Inflation is rising and there is an urgent need to address the pressure on people’s incomes. Personal debts are rising massively and there are rising energy bills, and the costs of the weekly shop, transport and housing are all rising.
The Chancellor faced a series of tests as to whether he would stand on the same side as the people or not. He could have raised the minimum wage to the level of the living wage—the real living wage of £10 an hour—as we, the Labour party, have pledged to do. That would give a pay rise to 6 million people in this country, 62% of whom are women. He failed to do that.
Since 2010, millions of public sector workers have endured a pay freeze and then a pay cap. The dedicated public servants who keep our services going have lost over 9% of their real wages, or will have done by 2020. The Chancellor could have ended the public sector pay cap, as we have pledged to do, and given a pay rise to the 5 million dedicated public servants whom we all rely on—day in, day out—in our hospitals, our health service in general and our local government. He failed to do that. It is an insult to say that they deserve falling living standards when we all know that those in the public sector are working harder than ever, covering the jobs of those who have gone.
There is a crisis, too, in job security. Millions of workers do not know whether they will be working from one day to the next. Millions of workers do not know how many hours they will be working this week or next week. Just imagine what it is like to try to plan your life if you do not know what your income is going to be from one week to the next. That is the reality—[Interruption.]
Order. Can I just say to Members on the Government Benches that I want to hear the Leader of the Opposition? I do not want him to be shouted down. You might not be interested, but our constituents out there want to hear what the alternative is, so please—[Interruption.] If the Whip wants to be funny, he can go and get a cup of tea now. Let us show the same respect that was given to the Chancellor of the Exchequer.
Thank you, Mr Deputy Speaker.
There is nothing funny about being one of the 900,000 workers on zero-hours contracts, 55% of whom are women. The Chancellor could have announced a ban on zero-hours contracts, as we have pledged to do, but again he failed. Zero-hours contracts are only the tip of the iceberg, with 4.5 million workers in Britain in insecure work, 2.3 million working variable shift patterns and 1.1 million on temporary contracts. We have long argued for a clampdown on bogus self-employment, but today the Chancellor seems to have put the burden on self-employed workers instead. There has to be a something-for-something deal, so I hope the Chancellor will bring forward extra social security in return. One policy that Labour backs is extending statutory maternity pay to self- employed women, which is likely to cost just £10 million a year.
Low pay and insecure work have consequences for us all. In reality, we all pay for low pay. A million working households have to claim housing benefit. Let me repeat that figure: 1 million working households have to claim housing benefit because their wages are not enough to pay the rent. There are 3 million working families who rely on tax credits simply to make ends meet. This is modern Britain.
The most effective way of boosting wages and increasing job security is, as all studies show, to improve collective bargaining through a trade union. Those are words that the Chancellor did not use in his speech; instead, the Trade Union Act 2016 will further shackle unions and perpetuate the chronic low pay that costs us all a lot of money through in-work benefits. We will promote collective bargaining and repeal the Trade Union Act. This is a Chancellor and a Government who are not on the side of the workers, and not on the side of the taxpayers who pick up the bill for low pay and insecure work.
On International Women’s Day, did the Chancellor deliver a Budget that works for women? According to House of Commons Library analysis that was commissioned by my hon. Friend the Member for Rotherham (Sarah Champion), who is doing a brilliant job speaking up for women from our Front Bench, 86% of the savings to the Treasury from tax and benefit changes have fallen on women. Women’s lives have been made more difficult through successive policies of this Government. Women are struggling with more caring responsibilities due to the continuing state of emergency in social care. The WASPI women born in the 1950s are, with little notice, having to face a crisis in their retirement that they could not possibly have predicted. Some 54,000 women a year are forced out of their jobs through maternity discrimination, but they cannot afford this Government’s extortionate fees to take their employer to a tribunal in search of justice.
Women up and down the country will have to wait another 60 years before the gender pay gap is closed. Hundreds of women are being turned away from domestic violence shelters every year due to a lack of space or appropriate services, or simply because the shelters have closed. Mothers who are already struggling are being put under more pressure through cuts to universal credit and tax credits. As if it was not bad enough to cut benefits to children whose only crime is to be born third or fourth in a family, as of next month, most shamefully, women will have to prove that their third child is a product of rape if they wish to qualify for child tax credits for that child. I pay tribute to my hon. Friend the Member for Rotherham and to the hon. Member for Glasgow Central (Alison Thewliss) for their campaigning on this issue, and I hope that the Chancellor will reverse that cut.
This country has a housing crisis—a crisis of supply and of affordability. Since 2010, house building has fallen to its lowest rate in peacetime since the 1920s. The building of social homes for rent is at its lowest level for a quarter of a century. Did the Chancellor empower councils to tackle the housing crisis by allowing them to borrow to build council housing, as we have pledged to do? No. Have the Government replaced council houses sold under the right to buy, as they promised? No; just one in six have been replaced. And was there any commitment to return to councils the £800 million of right to buy proceeds that the Treasury has taken back, which would be enough to build 12,000 homes? No. Did the Chancellor scrap the unfair bedroom tax, as we have pledged to do? No. Did he reverse housing benefit cuts that would take away support from 10,000 young people? No, despite opposition from Shelter, Crisis, Centrepoint and even the hon. Member for Enfield, Southgate (Mr Burrowes), who has correctly described the policy as “catastrophic”.
Last week, the Institute for Government said that there were “clear warning signs” of the damaging impact of the Government’s cuts on schools, prisons, and health and social care. This Government have taken a sledgehammer to public services in recent years, yet the Chancellor now expects praise for patching up a small part of that damage. This Budget did not provide the funding necessary now to deal with the crisis in our NHS, which the British Medical Association reckons needs an extra £10 billion. The Budget did not provide the funding necessary to end now the state of emergency in social care, which needs £2 billion a year just to plug the gaps, according to the King’s Fund. Those needs will not be met by £2 billion over three years—the money is needed now. More than a million people, mainly elderly people, are desperate for social care and still cannot get it. The money ought to be made available now.
This Government duck the really tough choices, such as asking corporations to pay a little more in tax. Not every local authority can just text Nick and get the deal it wants. Other council services are suffering as well. Our communities are stronger when we have good libraries. They are valuable for children, obviously, but also for the entire community. However, 67 libraries closed last year because of local government underfunding, and 700 Sure Start centres closed because of a lack of local authority funding, denying the life chances that a Labour Government delivered with the opening of Sure Start centres in the 1990s. Six hundred youth centres have closed as well. These painful decisions are being taken by councils not because they want to do it, but because they just do not have enough money even to keep essential services running, following the slashing of their budgets year on year. And it goes on—this affects our communities and lives in so many ways. Last year, councils proposed the sell-off of school playing fields with the equivalent size of 500 football pitches— 500 pitches unavailable for young people to indulge in sport. Surely it is our duty as a community to ensure that all our young people, wherever they live, have a decent chance to grow up with a library, a playing field and a Sure Start centre. It is not a lot to ask.
The Chancellor boasts of a strong economy, but he abandoned the previous Chancellor’s targets, so let me give a more realistic context for today’s figures. The deficit was going to be eradicated in 2015—do we all remember the long-term economic plan?—and debt was going to peak at 80% of GDP and then start falling. Our economy is not prepared for Brexit. It still suffers from underinvestment, an over-reliance on consumer spending, and wholly unsustainable levels of personal and household debt. Investment must be evenly spread around our country. Despite today’s announcements, London continues to receive six times as much investment as the north-east. Labour is backing a fair funding formula for investment so that every area gets its fair share of capital spending. What has been announced today does not achieve that. The Government cannot build a northern powerhouse or a midlands engine if investment does not follow the soundbite.
Our country spends 1.7% of GDP on research and development, which is well below the OECD average. The strongest economies spend over 3%. In the immediate term, the Chancellor must focus his attention—he did not have much to say about this—on the precarious future of skilled workers’ jobs at Vauxhall in Ellesmere Port and Luton, and at Ford in Bridgend. Exporting businesses would have more confidence if the Government clearly committed to negotiating for tariff and impediment-free access to the single market and dropped the reckless threat of turning Britain into a tax haven on the shores of Europe.
One of the biggest challenges facing our country is environmental—climate change. The Government are failing to lead and failing to drive a mission-led industrial strategy, which our Business, Energy and Industrial Strategy Committee has recommended. The Chancellor failed to make energy efficiency a national infrastructure priority. There was no commitment to establish zero-carbon standards on new buildings, and he was unclear about investment in public transport that will definitely reduce pollution. The poor air quality is appalling. It is killing thousands of people in this country and taking away the life chances of many children who grow up alongside polluted roads. The good work being done by Labour’s London Mayor, Sadiq Khan, and by the Welsh Labour Government has rightly recognised air quality as a public health crisis, particularly for children. We have to deal with this crisis urgently.
There cannot be an industrial strategy or productivity gains without serious investment in skills. Adult skills training has been cut by 54% and further education by 14%. The small amounts committed today are long overdue, but woefully insufficient. The schools budget is being cut by 8% over the coming years. Does the Chancellor want fewer teachers and teaching assistants, larger classes or shorter school days? Which is it? I agree with the Prime Minister that every child deserves a decent education and every community deserves a decent school, but we should achieve that by working with communities to provide those schools, not by plonking in selective schools that communities are not demanding. The money announced by the Prime Minister yesterday for new grammar schools is, frankly, a vanity project. The Government should cancel this gimmick and reject selection and segregation. Why do they not honour their own 2015 manifesto pledge to protect per pupil funding, which has clearly not happened?
This Budget lacks ambition for this country and fairness. It demonstrates again this Government’s appalling priorities: another year of tax breaks for the few and public service cuts for the many. When the Prime Minister took office, she said:
“If you’re one of those families, if you’re just managing, I want to address you directly.”
This Budget did not address them; it failed them. This Budget does nothing to tackle low pay, nothing to solve the state of emergency that persists for the many people who demand and need health and social care now, and nothing to make a fair economy that truly works for everyone. It is built on unfairness and on a failure to tackle unfairness in our society.
I do not think that there is a great deal of concord in the House about that speech, but I think that there is some agreement across the House about a number of things that the Chancellor said. In fact, I think that there has been a quiet consensus in this place for steady deficit reduction ever since Alistair Darling’s Budget of 2010, and I am delighted that the Chancellor is persisting with that reduction.
Before picking up on a few of the measures, particularly those that affect small businesses, I want to make one point about overall fiscal policy. The Chancellor does not have much room for manoeuvre. He is pretty heavily boxed in, and I see him nodding in agreement. On the spending side, three quarters of public spending is covered by manifesto pledges, so every round of savings has to fall on a progressively smaller area, which makes it painful for it to absorb. On the tax side, he is just as constrained. In fact, he is even more constrained, because he has inherited the tax lock—the statutory prohibition on any reduction or increase in a number of taxes—and a commitment to reduce corporation tax to 15%. That puts over 80% of revenue beyond his reach should he need to raise more money later. Of course, there is also the fuel duty freeze—I think it is a freeze—that was announced in the autumn statement. All those tax and spending pledges are the fallout of an electoral bidding war, but dealing with that is a matter for another day.
I want to pick up on a few detailed measures that we just heard about, particularly on those, as I said, that affect small businesses, because I am particularly concerned about them. I was delighted to hear some good news, but first it is worth going through the list of things that small businesses are having to deal with at the moment: the doubling of insurance premium tax that was announced last year; automatic enrolment for pensions; the extra cost of the living wage; the infrastructure levy; the revaluation of rates—I will come on to the proposals that have just been announced in a moment—and the “Making tax digital” plan. In addition, there are the proposals for class 4 national insurance contributions.
The right hon. Gentleman is providing a good analysis so far. On the increase in national insurance contributions for the self-employed, does he think that the Chancellor needs to explain why he is breaking a 2015 general election manifesto pledge?
The Chancellor set out his reasons quite carefully. He thinks that there is a strong argument for matching what people get out of NICs on the receipt side to the contribution side. I will look carefully at the hon. Gentleman’s point about the specific manifesto pledge, about which the Chancellor and I will no doubt have a further discussion when he comes before the Treasury Committee.
The Chancellor announced some quite important changes to “Making tax digital”, and we need to be clear about the problem that he seeks to address. Until today’s statement, several million people, mostly small traders, would have been required by law from 2018 to fill in their tax returns electronically for the first time. Some of those traders will not even have a smartphone, let alone a computer. The plan’s effect would have been to impose a massive, unfair burden on small businesses and some of the smallest traders, so it is good news that the Chancellor made a concession today, one which appears to be aligned with at least one of the suggestions made in a Treasury Committee report on this subject. The most important thing that the Chancellor is doing is keeping the starting threshold for another year at the VAT threshold of £83,000. That is the good news, but the not so good news is that the relief is only for a year.
May I ask the Chancellor to consider phasing in the lower threshold over a run of three or four years? He has suggested a lower threshold of £10,000, which seems extremely low—he looks puzzled, but he will find that that is what HMRC has been talking about. Dropping the VAT threshold dramatically from £83,000, or whatever it becomes, in one year strikes me as unreasonable. Of course I understand why the Chancellor is doing that—he needs the money—and I am sure that HMRC has told him that there is a huge amount of money waiting to be collected. He is nodding in agreement with that, too.
I think that I am right to say that HMRC previously suggested that £2 billion of uncollected tax is available, but I doubt that figure, and so does the Treasury Committee. If the Chancellor is brutal about introducing the measure, he might not got very much money. Some businesses will go into the grey economy, and some will cease trading altogether, so the pot of gold might not be there at all.
I agree with the right hon. Gentleman that merely delaying by a year is insufficient. Does he agree that the Chancellor should enact the Treasury Committee’s other recommendations and that, unless he does, today’s Budget will be good news for accountants and bad news for small businesses?
The hon. Gentleman makes a powerful point, and of course I support his support for the proposals that we worked up together on “Making tax digital”. I will continue to make those points as vigorously as I can on behalf of the Committee, and I am sure that the Chancellor is listening. We should welcome his acknowledgment that the pre-existing proposals were not workable, and we have already had a bit of adjustment. Now that the door is ajar, perhaps we could have another conversation through the gap.
Like my right hon. Friend, I welcome the easing for businesses below the VAT threshold, but does he recognise that for those businesses over the VAT threshold, and they are not necessarily enormous businesses, that are struggling with some of the additional burdens that he mentioned, not least auto-enrolment, business rates and the changes to dividend taxation, particularly for owner-managers—I declare an interest as an owner-manager—accommodating the new system within the next 12 months will be a challenge and have a significant compliance cost?
My hon. Friend, who is also a member of the Treasury Committee, makes the point that modest or slightly larger businesses will also find the bureaucratic burden introduced by the “Making tax digital” proposals pretty tough. The Committee has taken a lot of evidence on that. In the very long run, digital returns will be the future, but the question is how we get there. This is a generational change, and it is important not to sour relations between small businesses and the Revenue, which can easily happen if we hit small businesses over the head in the hope of getting a bit of extra money in years 1 and 2, or years 2 and 3. With a little more caution, small businesses can be brought into the system and yield a higher long-term revenue because we have their co-operation.
The second change—I will not linger too long on this because I lingered on “Making tax digital”—is to business rates. The Chancellor has announced a welcome relief for those businesses hit by revaluation. He has announced three concessions, which will cost quite a bit of money taken collectively. The concessions are not only important but essential. The small businesses that are being hit by the business rate changes are the lifeblood of the local economy in all our constituencies, and the measures will give them some relief from the pressure.
The Red Book suggests that the Chancellor might consider proposals for more frequent revaluation of business rates. I am pleased about that, because the big problem is the cliff edge created by revaluations every five or seven years. In a nutshell, we require both more frequent revaluation and quicker appeals. We need both. It cannot be beyond the wit of man to devise a reform that can deliver them.
While I am thanking the Chancellor, I thank him for agreeing, as he did when he came before the Treasury Committee recently, to publish the distributional analysis of the Budget measures on a basis comparable to that published in the last Parliament. The Committee will look carefully at the distributional analysis and other tax measures, and it will do so in a slightly more considered and less rushed way than we have in the past.
In the spirit of thanking the Chancellor, will my right hon. Friend join me in thanking him for saying on page 35 of the Red Book that he wants to consult on introducing a new duty band for still cider just below the 7.5% band that targets white ciders? Many Members on both sides of the House will know that white cider is particularly damaging to young people and homeless people, and the consultation is a great signal of intent that we will get to grips with the issue, so that we do not have this harmful, damaging and too-cheap white cider on our high streets and particularly in our off-licences.
My hon. Friend has made his point, and he may well be right. I never talk about cider for long in the House of Commons because, whatever I say, I have always found that it results in a great deal of correspondence. I will avoid cider altogether.
I end on a couple of larger points about the backdrop to the Budget. The Chancellor is having to deal with two big risks. First among those, and by far the biggest, is the risk to the economic prosperity of our constituents and the stability of the west from the resurgence of economic nationalism. There is a bit of that in Britain and a great deal more elsewhere in the world. Protectionism has been on the rise for some time, and it is already affecting global growth. It is worth bearing in mind that global growth has been anaemic over the past five years compared with the average of the past 30 years, and that includes the effects of the financial crash. There is a big difference between those two numbers.
Global trade growth has been even weaker. Global trade is now declining as a share of world economic activity, and we should all be concerned about that. The link between prosperity and trade does not seem to have registered with President Trump, at least not yet. He has withdrawn from the Trans-Pacific Partnership, and the Transatlantic Trade and Investment Partnership looks to be in trouble. He has called the World Trade Organisation “a disaster,” and he is threatening to withdraw from that, too. But not the Prime Minister. She has made it clear that Britain should be the firmest advocate for free trade anywhere in the world, and she is right. If it were all to go wrong and we were to return to full-blooded protectionism, we would not have to look into a crystal ball; we could read the book of the 1930s.
Is the right hon. Gentleman disappointed, as I am, that the Chancellor did not mention that real wages and asset values were reduced at a stroke by 15% through devaluation? Although devaluation secures more exports in the short term, it will be offset by tariffs in the future. What are the prospects for trade when the single market hits us over the head with tariffs?
I will end with a word or two about Brexit, but I will not comment on the exchange rate except to say that devaluation makes the country poorer, but devaluations can come and go. We need to look at it as a shock absorber that the market has put in place as a consequence of the Brexit decision and in a much more long-term framework rather than judging it, as we are now, so soon after the event. Brexit does pose the risk of a trade shock.
If the hon. Lady will forgive me, I would rather wind up. I am sure she will want to make her own speech in a moment.
There certainly will be a trade shock if we revert to WTO rules, so I am pleased that the Prime Minister has made it clear that she is working for what she calls a “bold and ambitious” deal with the EU. Deep engagement, political and economic, from outside the EU almost certainly commands a majority in the House and in the country; cutting off Britain almost certainly does not. Hopefully all parties to the negotiations grasp the importance of securing a deal, but wanting a comprehensive deal and getting one in what will amount to 18 months of negotiations are not the same thing. Getting one will be a massive undertaking. Businesses know that, which is why many of them will not wait around to find out whether there will be a deal; they will protect themselves. They will start to move economic activity out before 2019 and the supply chains will start to adjust, too—to the UK’s detriment.
I shall make one further point. There is a straightforward way to safeguard the UK from the risk I have just described, and the UK must ask for it in the negotiations. It almost certainly requires only qualified majority voting, and it is available under article 50 of the treaty. The UK should make it clear, now, that after leaving the EU—that is, having repealed the European Communities Act 1972 —the UK’s first requirement is that a standstill on the implementation of the detailed terms of any deal should be put in place. That is a crucial ingredient to bring stability and certainty during the negotiations.
When the Conservatives first came into power in 2010, there was a 10% budget deficit, ballooning public debt and the second-lowest growth in the G7. That all amounted to a massive challenge. Now, the public finances are stronger—only after six years of hard work—but the two risks to which I have alluded could amount to a cocktail scarcely less difficult to handle, particularly if mistakes are made. The Chancellor has told us that he has taken a cautious approach by steadily reducing borrowing; I strongly support him in that, and he has my strong support to persist, even if he hits heavy weather.
In many ways, the Chancellor did not disappoint us. We had the self-effacing jokes about spreadsheets and the spun lines about being stronger together, and then it went downhill. There was barely a mention of Brexit—the most momentous challenge facing the UK—and, more importantly, what the Chancellor would do to mitigate the damage that we expect as a consequence. Before I come to that, though, I had very much hoped to welcome a concrete package of measures for the oil and gas sector, and particularly for end-of-life fields; instead, we have been offered an options paper. One of my sharp-eyed assistants told me that that is exactly the same promise as the one made in 2016, so perhaps at some point the Chancellor will actually deliver the paper and set out some concrete measures.
I shall give way in a moment.
Although in passing the Chancellor mentioned fairness and, indeed, living standards, he did not dwell for very long—in fact, not at all—on the counter-analysis to his assertions, which is that child poverty will increase by 30% by 2021-22. That is entirely explained by the direct impact of tax and benefit reforms. He spoke about an increase to the minimum wage, which is of course welcome, but ignored the assessment that says that real average earnings are forecast to rise by less than 5% between now and 2020-21. In essence, that will mean more than a decade without real earnings growth.
On the subject of omissions from the Chancellor’s statement, the hon. Gentleman will know that hundreds of women have travelled to Westminster today from Scotland, Greater Manchester and all over the country to campaign against the unfairness of their not being properly informed about changes to their state pension. Does he agree that it is disrespectful to say the very least that on International Women’s Day those women fighting for justice on their pensions got no mention at all from the Chancellor of the Exchequer?
Not at the moment.
It is worth reminding ourselves how we got to where we are today. It is not all the fault of this Chancellor, but the Tory targets on debt, deficit and borrowing that were promised in 2010 simply were not met. I shall demonstrate the scale of the failure. We were told that debt would begin to fall as a share of GDP in 2014-15, that the current account would be in balance the following year, and that public sector net borrowing would be barely £20 billion in that same year. Of course, as many of us warned it would not at the time, that did not happen. Debt will not begin to fall as a share of GDP until 2018-19, the current account will not be in the black until the same year, and public sector net borrowing in 2015-16 was not the barely £20 billion promised, but £72 billion. In short, the Scottish National party argues that the first five years of Tory austerity failed, and we have little confidence that the second five years will be any better.
I turn to the present, and then the future. Last autumn, the Chancellor told us that net debt would peak at 90% of GDP, or £1.84 trillion—that is 12 zeros. Today, he gave us the startling news about the huge progress: it will now peak at £1.83 trillion. Borrowing is down a few hundred million for 2017-18, and the current budget, due to be in surplus by £18.5 billion in 2019-20, has barely changed. The forecasts are as bad as they were promised to be in the autumn and have barely changed from last spring.
What growth there is seems to be driven in large measure by an assessment of increased business investment of around 4% over the next few years. The Office for Budget Responsibility says that there will be
“a 0.1% fall in business investment in 2017, before uncertainty begins to dissipate”.
We are about to have article 50 invoked, followed by a tortuous 18-month to two-year negotiation, and the OBR and the Treasury are telling us that the uncertainty will dissipate sometime at the back end of this year. That almost beggars belief.
Can the hon. Gentleman explain why he and his party thought before and immediately after the referendum that there would be a sharp slowdown or recession this winter? Were they not completely wrong then, and are they not wrong now about article 50?
The right hon. Gentleman is completely wrong. I can say with absolute certainty that there was never, ever a threat of an immediate collapse. Indeed, I am on record as saying there would be no problem in week one, month one or year one, or even in year two or year three, which gets us to just beyond the negotiation. The danger was always the long-term risk of decreases in foreign direct investment and trade, and of loss of GDP from reduced migration, to which I shall turn because the Chancellor did not.
Much of the previous failure came about because the last Tory Government strangled the lifeblood from recovery by cutting too much or too quickly, with little or no regard to the consequences. That error was set in stone by the old fiscal charter and its requirement to run a permanent surplus quickly, almost irrespective of the economic conditions. The new fiscal charter, which was not really given a look-in today, is certainly more flexible than the last one, but it still targets a surplus early in the next Parliament. The numbers and the timescale look precarious. The forecasts for a current account surplus are tiny, not even reaching 1.5% of GDP in this Parliament. If there is any external shock or any capital flight, if we suffer more devaluation, which is quite likely, or if the negotiations go badly, the figures could fall apart very quickly indeed.
These numbers are being delivered before the full impact of a hard Tory Brexit are felt. We cannot even assess properly what the consequences of that will be, because the OBR tells us
“there is no meaningful basis for predicting the precise end-point of the negotiations as a basis for our forecast.”
That is a central assumption that pretends Brexit does not exist—a ridiculous thing to do with the invocation of article 50 looming.
The OBR’s central forecast is in rather stark contrast to what we already know. The Treasury had reported previously that the UK could lose up to £66 billion from a hard Brexit, and that GDP could fall by almost 10% if the UK reverted to WTO rules, which echoes what the Chair of the Treasury Committee said. Other assessments mirror that. The London School of Economics says:
“In the long run, reduced trade lowers productivity.”
That is a huge problem for the UK. It went on to say:
“That increases the cost of Brexit to a loss of between 6.5% and 9.5% of GDP.”
It puts a range of figures on that of between £4,500 and £6,500 per household.
Last year’s PricewaterhouseCoopers report suggested that employment could fall by 600,000. The figures for Scotland produced by the Fraser of Allander Institute suggest that a hard Tory Brexit could result in 80,000 lost Scottish jobs and a drop in wages averaging £2,000 in a decade. If we add to that the report by senior executives in the FTSE 500 saying that Brexit is already having a negative impact on business, and the British Chambers of Commerce reporting that half the businesses surveyed have already seen a hit to margins due to devaluation, we can see the scale of the problem. What we should have seen today is mitigation to match that.
To be fair to the Chancellor, he did move a little last autumn with announcements of additional support for capital investment and research and development. Today, he reiterated some of the R and D statements and put some flesh on the bone of other investment, no doubt taking his cue from the IMF, which had said previously that the Treasury had done enough to stabilise finances for the Government to embark on extra investment spending. However, the figures from last year’s autumn statement show public sector net investment falling in 2017-18 to 2018-19 and not recovering again until we are in the next Parliament. The figures today for public sector gross investment show them falling this coming year, 2017-18, to the forecast made only three and a half months ago. The money should be spent now to mitigate that rather than waiting for the OBR to say that the damage has been done.
However, it is not all about broken promises on debt, deficit and borrowing. It is not even about repeating the mistakes of the past on investment. We are now in such uncertain times that, to protect jobs and the current account, trade should be front and centre, but little was said about that today. The Red Book tells us already that the current account is in negative territory for the entire forecast period. The impact of net trade will be zero or a drag on GDP growth for almost every year in the forecast period. That is after an average 15% devaluation in sterling since the EU referendum.
That is precisely the point. The choices are that we grow and we take exports seriously, or we do what Tory Governments have always done, which is to sell off the family silver.
Growth is forecast to be based on heroic levels of business investment after the uncertainty of Brexit ends this year. It will be propped up by household consumption with a commensurate rise in household indebtedness, central Government investment, which I welcome, and fixed investment in private dwellings, but with house prices forecast to rise at two or three times the rise of inflation. The Budget report seems to make merit of that: people will feel wealthy, it says. We know what happens when prices fall, and we know what the impact is on youngsters trying to get on the property ladder. On household debt in particular, the Chancellor should have been much more aware of the concerns that, even after excluding mortgage payments, household debt has now reached record levels. This is not a balanced recovery.
However, it is the issue of trade that is most worrying. The figures are clear. The last full year for which we have figures—2015—saw a current account deficit of £80 billion, and a deficit in the trade in goods of £120 billion. At least the Chancellor did not repeat the claims of his predecessor that we could double exports by the end of this decade to £1 trillion. Perhaps he should enlighten the Secretary of State for International Trade, who still thinks that it is sensible to keep the target even though he does not believe that it can be met. This is not all the fault of this Chancellor. Many of these failings have been embedded in the UK economy for decades. It is not just about exports, but about support for innovation, which I welcome, and manufacturing as well as boosting productivity across the board.
We should have had specific plans today—the Chancellor has had enough time in office—for substantial GDP growth, not the less than 2% in every year for the forecast period, which is lower than the pre-crisis trend. We should have had measures to boost productivity. In Scotland, productivity is 4% higher than the 2007 level, compared with next to nothing in the UK. We should have had targeted support for high-growth export-focused small and medium-sized enterprises. The Chancellor should have taken more businesses out of business rates entirely in England rather than offering just a bit more help for a short period of time.
I welcome what the Chancellor said about education. If we tackle the attainment gap, we can get inclusive growth. We will not get inclusive growth if people are struggling to put food on the table because the welfare cap is squeezing people’s real incomes.
Earlier, the hon. Gentleman was talking about significant omissions. Does he share my deep concern about other omissions? There was nothing at all in this statement about the climate crisis; nothing about investing in green energy; nothing about energy efficiency; nothing about reversing the solar tax hike; and nothing about the public health emergency caused by air pollution. Does he agree that that is a reckless and irresponsible squandering of a vital opportunity?
The pattern that we have seen over the past few years confirms that. It is not just about the photovoltaics and the contracts for difference changes, which were not helpful, but all the other issues that the hon. Lady has raised too. She is right to keep on making those points.
One reason why the Government cannot fund their policies is to do with the yield from taxes. I believe in tax competition, but if we look at the corporation tax yield, we can see that it has flatlined and fallen in real terms for the past four years of the forecast period. In order to make amends today, or to make the numbers stack up, we have seen a scandalous attack on aspiration and on the self-employed by taxing more and making more changes to national insurance contributions to the tune of £4.2 billion or so. The party of aspiration is taxing those who are self-employed, pouring in active, real hard disincentives to starting businesses, to employing people, and to stepping out on one’s own. That is a decision that will come back to haunt this Chancellor.
Does the hon. Gentleman not agree that, if people work, they should be taxed equally? There is a non-level playing field when it comes to taxing people who are employed and taxing those who are self-employed. Does he think that that is fair or sustainable?
This is the problem with Tories. They talk about business as if they know it. They assume that every businessman is a multi-billionaire. When most self-employed business people start, they earn less than the minimum wage. If they can take out £1,000 or £2,000 in a dividend to help them make ends meet at the end of the year, that is the right thing for them to be able to do. If they become half a Microsoft in the future, they pay taxes, employ tens of thousands of people, and we all get to benefit. None of these people will now do that automatically. They will take a second look, have a pause, and wonder whether the risk is worth taking because of the disincentive put in place today.
I will not give way for the moment, because I want to make a little progress.
The Chancellor also announced some £350 million for Scotland. [Interruption.] I thought that he might want me to welcome that. The problem is that it is all smoke and mirrors. Even after today’s announcement, Scotland’s discretionary spending will still be down £1 billion between this year, 2016-17, and the end of this Parliament, and more than £2.5 billion down in the Tory decade since 2010. Every little helps, but we will not be putting out the bunting to celebrate the Chancellor’s largesse.
The key point I want to make is about Brexit. The hard Tory Brexit—the elephant in the room barely mentioned by the Chancellor—is approaching quickly. It means that we will revert to WTO rules, with all the tariffs and other regulatory barriers, if a better deal cannot be struck, and I have no confidence at all in this Government’s ability to deliver that deal.
Not at the moment.
There is no guarantee that a deal will be done. If the Chancellor expects that the plans outlined today can cope with the consequence of a cliff-edge Brexit, which the Prime Minister plans, then the whole Government are in for a very rude awakening.
Let us look at some facts. The economic value of EU citizens working in the UK is enormous. PricewaterhouseCoopers told us last year that the impact of migration restrictions alone due to Brexit could lead to a loss of over 1% of GDP. That 1% fall would more than halve the Government’s GDP growth forecasts for every single year of this forecast period, rendering them meaningless.
Just to put some colour into that, my hon. Friend the Member for Dundee West (Chris Law) today met representatives of the computer games industry, who said that 98.4% of the companies that responded to them had said that the Government should immediately guarantee the status of EU nationals working in the UK. That would have been, if not a fiscal measure, an active and positive economic one for the Chancellor to have announced today. It would have been an active and positive economic measure to guarantee that the UK would fully replace lost EU funding post-2020, specifically the less favoured area support scheme, particularly if the UK leaves the EU before the closure window in 2019. It would have been a positive economic measure today to confirm the UK’s intention to negotiate substantial and long transitional arrangements for the financial sector, to avoid the loss of jobs, income, headquarters and tax.
Was my hon. Friend as concerned as I was at the announcement just six days ago in the Irish press that since the Brexit vote over 100,000 UK companies have registered, or taken steps to register, offices in Ireland?
I am not shocked or surprised by that. What we need to do is ensure, certainly in Scotland, and in the UK if the Government can find the will to do it, that we make this country as attractive as possible as a place to continue to invest in and run businesses in, and for us that means staying in the single market and, frankly, staying in the EU.
Finally, I want to refer to announcements made in relation to the Budget over the past week. There was the decision to have extra departmental spending cuts, and the decision on personal independence payments and other welfare measures. The latter, we believe, demonstrates the real impact of the welfare cap in punishing the most vulnerable and balancing the books on the backs of the poor, confirming many predictions that the UK is set to become more unequal than it has been since the days of Margaret Thatcher, and further confirming that this Government have learnt nothing. They are tweaking the numbers to fit the ideology, driven by an austerity agenda and failing to realise that they cannot cut their way to growth. At its heart, the real tragedy of this Budget, only a week or so before article 50 is invoked, is that Brexit was the word that dared not speak its name, and this country is completely unprepared for the economic tsunami that this Government will unleash.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
The good news is in the forecasts. I am delighted that the Government have gone back to the forecasts they put to us in March 2016, when they rightly said that the UK economy would grow by 2% in 2016, and by little over 2% in 2017. I welcomed those forecasts at the time and held to them throughout the past year. I am delighted that the Treasury has now largely backed those more sensible forecasts.
However, we need to ask why the Treasury, the Office for Budget Responsibility, the Bank of England and many other independent forecasters got the forecasts so comprehensively wrong in the summer of 2016, and why the autumn statement forecasts were still so wrong at the end of last year. I wonder whether we need some efficiency improvements in their economic forecasting departments. Do we really need all those forecasters in the OBR, the Treasury and the Bank of England, if they are going to get it so comprehensively wrong and make the Chancellor’s job so difficult? He is trying to chart a consistent and stable course through a set of forecasts that are rather like a wild ride to some kind of nightmare world, only to discover that there is no nightmare but rather a good outlook.
The right hon. Gentleman says that we ought to get rid of forecasters in the OBR and the Bank of England if they get the forecasts wrong. Plenty of modellers and forecasters in the City of London got their forecasts wrong before the crash in 2008, but I am sure he does not believe that we should end the banking trade in the City of London.
I do not think that the hon. Lady was listening to what I said. I asked whether we have too many of them, because we do not need quite so many to get it wrong; I think that we could be more economical in getting it wrong, if that is what they persist in doing. Certainly, the official forecasters completely missed the banking crash of 2008-09, which some of us did not miss. Then, of course, they got the Brexit impact completely wrong. The Scottish National party is redefining what it believed at the time of the remain campaign. I remember quite clearly it supporting a campaign that said, in terms, that those official forecasts were right—that confidence would be damaged, and therefore consumer expenditure would fall, whereas it has actually gone up very strongly. It said that investment would collapse, but it did not, because the demand was there, and companies need to meet it.
I clearly remember being in the Treasury Committee when we interviewed the Chancellor, and clearly remember holding him to account for his bogus forecasts, which were clearly over the top, clearly bound to turn people off and clearly led to the wrong result on 23 June.
I am delighted that the hon. Gentleman shared my scepticism. I just wish that he had said rather more at the time when we were fighting the referendum campaign, because I do not remember him being on my side or making similarly helpful comments before people went to vote.
One of the difficulties I found when I was Minister with responsibility for construction was that statistics from the Office for National Statistics are often incomplete and based on only partial information. Does my right hon. Friend agree that if forecasts were more infrequent, we might get the numbers right more often?
That might be worth looking at. We need to consider why the forecasts went so comprehensively wrong on this occasion. We also need to probe further why they went so wrong in 2007-08, when they disrupted the world economy in the west. They disrupted the Labour Government very dramatically, because there was absolutely no foresight about the consequences of the actions they were taking over the banking system, first allowing it to expand too fast and then collapsing it far too quickly, with awful consequences, as we know. I am delighted that I can fully support the Government’s latest forecasts, because they are in line with where I have been throughout.
That brings me neatly to the monetary situation. The Government need to recognise that there is a new move afoot. We will probably see an interest rate rise in the United States of America next week, and we might see two or three rises of 25 basis points over the course of this year, because it recognises that its recovery is sufficiently advanced. There is quite a bit more inflation in the American system, and it needs to start to normalise interest rates a little more. We might even hear from the European Central Bank tomorrow that it is no longer thinking of cutting rates further; they are already negative. It might need to think in due course about tapering its rather generous quantitative easing programme.
We are moving into a world where interest rates tend to go upwards, rather than going downwards or staying stable. If we are too slow in responding to that mood, we will find undue pressure on the pound. I do not think that has anything to do with Brexit; I think it is to do with interest rate differentials. The pound started to fall away in the summer of 2015, and most of the devaluation we have seen to date actually took place by April last year, before the vote, but there has been more pressure in recent weeks. When people look at these interest rate differentials, they will say, “Why don’t I hold my money in dollars? Not only will I immediately get a pick-up in interest, but I think there will be further rate rises in America.” We need to factor that in. That is why I welcome the Government’s decision to increase public spending in certain areas. As a constituency MP, I want more money spent on social care. I represent a high-cost area of the country, where the shoe is pinching and there are more people needing that assistance. The Government were right to make a sensible contribution, and I look forward to seeing the details.
I am running out of time, so I cannot take any more interventions.
I welcome the decision to have more money for schools and the NHS, because there, too, my area has been poorly funded for many years. We are looking forward to getting a much better settlement for our schools under fairer funding, and I hope that there will be something for our schools as a result of the Chancellor’s sensible decision to make some increases. I think that colleagues will generally welcome the Government’s attention to schools, the NHS and social care funding. I hope that the rate relief fund will be generous, because I represent an area where there are likely to be substantial increases in the rates, but where businesses are not necessarily generating the extra turnover that makes it easy to pay those sharp increases. We particularly need to look after small and growing businesses. I hope that the fund will be well targeted and will deal with what will otherwise be a series of tough, hard cases.
I welcome the extra spending and relief on tax, because I am not as worried as some about the level of UK debt. We need to remember that the figures the Government are giving us are for the gross debt. They are saying that the debt, at 86% of GDP, is high and needs to be brought down, but of course quite a bit of that debt is owned by the Bank of England on our behalf, so we owe the money to ourselves. The adjusted figure is about 65%, which is a perfectly reasonable level, particularly at a time of very low interest rates. Whatever happens with advanced country monetary policies, we all think that interest rates will remain abnormally low for quite a long period of time—well below the averages we were used to before the banking crash.
This is not a bad time for the state to borrow, particularly if it is investing in projects that we need and that may have some return. We definitely need better transport and strengthened broadband, much of which can be done by private finance. We also need better flood control and, at the same time, more water reserves for the fast-growing areas of the country. We need a lot of extra housing, which brings with it the need for more provision of schools and hospitals.
If we are to carry on growing at something like the rate at which we have done in recent years, we have to accept that there is a backlog of infrastructure requirements—everything from roads to water supply, through to getting our broadband up to speed and sufficient in capacity. I want as much of that as possible to be financed in the private sector, and a lot can and will be, but the Government have an important role in all these areas. They have to offer licences and organise planning permissions. They may need to pump-prime. Parts of the networks may not be financially viable without Government money. That is certainly true of our road system, because we have a system that is free at the point of use, owned by the state in all its manifestations. As we need better roads, Her Majesty’s Government clearly need to invest a decent amount in roads.
I note that the Budget was mercifully short of measures on the tax side, although I am always in favour of measures that cut taxes, rather than increase them, and I would have welcomed rather more of those. The Chancellor understandably wishes to go to having one Budget a year, in the autumn. We look forward to a Budget that deals with taxation in the autumn. He has set out a number of ideas for consultation, or perhaps pre-announcements; I trust that there might be some modification to those by the time we get to the proper Budget in the autumn. I urge him to understand just how crucial flexibility is to our economy, and that flexibility comes from having so much, and a growing volume of, self-employment. We need to ensure that it is as easy as possible to get into self-employment, and that it is as worthwhile as possible when people are successful.
I always think it is a good idea to try to confine taxes, and certainly tax rises, to things that we do not approve of very much. We have quite a number of sin taxes, which are rather easier to sell to the public. We should not go out of our way to tax work, enterprise and success. I know we have to do some of that, because we need a lot of revenue for the range of public services we offer, but our taxes on those things are quite high enough. We might actually find that we raised more revenue from more work and more enterprise if the rates were lower, because there is definitely a beneficial effect if we can get our rates to a competitive level worldwide. We need to understand that other countries around the world are getting the idea of cutting tax rates. The new President of the United States of America is working with Republicans on the hill on a major set of tax proposals that could cut American corporate tax rates and income tax rates dramatically, which would give America an important competitive advantage and make it a much more attractive place for talent and inward investment. We need to bear that in mind as we go into our autumn Budget cycle here, because I want the UK to be the most competitive major economy in the world.
My last point, in response to the previous speaker from the Scottish National party, the hon. Member for Dundee East (Stewart Hosie), is that he should not start painting this picture of misery and collapse in three years’ time, given that there was no collapse immediately after the vote. Were we to end up on World Trade Organisation terms, we would collect £12 billion in tariff revenue, which we could give back to businesses and consumers here; other countries would collect only £5 billion in tariff revenue from our exports to them, so we would be better off financially in that transaction. We would also be better off because if countries placed large tariffs on food exports to us, which would be an extraordinary type of self-harm on their part, we would presumably substitute a lot of imported food from cheaper parts of the world.
The Chancellor spoke today about his determination to tackle the dangers lurking in the small print of contracts, so let us look at the small print of the Chancellor’s Budget. Inflation is up, wages are stagnating, household debt is rising, and the NHS and social care system are on their knees. Social care has been cut by £4.6 billion in the past five years. A £2 billion increase was announced today, but that is not enough to deal with an ageing population and the huge cuts faced by local authorities.
The issue of Europe is not even in the small print of the Budget; there was not a single mention by the Chancellor of the European Union or the negotiations that we presume will begin at the end of this month. There is increasing concern that a hard Tory Brexit, in which we fall back on WTO rules and tariffs, will further harm our exports and inward investment, yet there was nothing today to assure businesses and investors that we will have a system that works for them in the years ahead.
Today is International Women’s Day, but there is very little in the Budget that does anything at all to help women. It is women who have borne 86% of the cuts—benefit cuts and cuts to in-work benefits—and tax rises over the past few years. Some £80 billion a year has been taken out of the pockets of women over the past seven years under this Tory-led Government, yet the Budget does nothing to reverse that trend.
When it comes to household debt, the figures are startling. The whole forecast is dependent on consumers continuing to spend, but that consumption is based on consumers continuing to rack up the debts. Our savings ratio has been falling since 2010, and is now at a record low. Unsecured debt went up by 10% last year. The household debt to income ratio is now at 145%, up 6% in just one year.
Unsecured debt, as the right hon. Gentleman knows, grew by 10% last year. That is not secured against anything solid at all. The household income ratio, which is back to being close to the levels of 2008, should sow seeds of doubt in all our minds about the sustainability of our economy. I am concerned about the ability of consumers to carry on bearing this burden. To do so, they will have to increase their debts or have real wage increases, but this Budget sees real wage growth contract sharply because of the sharp increases in inflation as a result of the depreciation of our currency. This is not an economy that is well placed to withstand the strains and shocks that lie ahead.
My argument today is that this dangerous reliance on borrowing and debt is directly connected to the Government’s failure to put wealth and opportunity in the hands of the many rather than just the few. While those on the Government Front Bench keep saying that they are on the side of ordinary people, they have not shown it in their actions today.
Last week, the Institute for Fiscal Studies reported that we are on course for a rapid rise in inequality over the next five years. The bottom 10% of the earnings distribution—those who already have the least—will see their incomes fall in the next few years, particularly due to cuts to universal credit. Meanwhile, those with the most—the top 10%—will see their take-home pay increase by 10%. That is a direct consequence of the Government’s failure to reverse our economy’s growing reliance on low-paid work and low productivity, with one in five people now paid less than the living wage, and deep cuts to in-work benefits, which make it harder for those families in work to make ends meet. That cannot be right.
However, that is not all. The Government have now ignored two independent court rulings by cutting access to disability benefits for over 160,000 people, which will save them £3.7 billion. There is no mention at all of that in the Budget. Switching people from disability living allowance to personal independence payments has also seen nearly 50,000 people lose their Motability cars because their benefits have been cut under the blatantly unfair changes to the assessment rules. That is not the sort of country I want to live in, and I do not think it is the sort of country our constituents want to live in either. Not only is this a betrayal of the hard-working majority the Government promised to put first, but it shows a callous disregard for the poorest and most vulnerable in all our communities. It is also not the way to build the better balanced and more broad-based economy we need to build for the more turbulent times we are bound to see ahead.
Let me set out a few areas where today’s decisions have been misjudged, and how the Government could have delivered a fairer Budget. First, the Government are going ahead with a £1 billion cut to inheritance tax for the richest people in our country. That money should instead be spent on expanding free childcare for families, particularly those on the lowest incomes. Almost half of this inheritance tax giveaway will go to London and the south-east; in fact, 96 of the top 100 constituencies that will benefit are in London and the south-east. But what about our constituencies in the north of England, Scotland, Wales and Northern Ireland—in the rest of the UK, which does not benefit by one penny from these cuts in inheritance tax?
The hon. and learned Lady will also know that the manifesto promise the Conservative party was elected on has been delayed time and again. If she really thinks that the support that will, we hope, come forward in September will be enough to help women get back to work and to deliver the high-quality childcare we need for all children, I am afraid she is deluded.
Cutting inheritance tax is unfair and misguided, and this blatantly unfair policy is further evidence of the Government’s warped sense of priorities at a time when we should be doing far more to help the millions of families struggling with childcare costs. Just one in 2,500 people in England and Wales will benefit from this cut, which will lift 26,000 of the richest families out of inheritance tax. This measure will only deepen the north-south divide, and it is another Tory policy benefiting the already well-off, when we could be investing in the future of all our people.
Secondly, I would like to turn to the issue of the self-employed. Today, the Chancellor made changes to national insurance contributions for the self-employed. I am all in favour of cracking down on bogus self-employment, especially when employers effectively force employees to become self-employed and to lose out on the security and benefits that go with being employed. I am also all in favour of cracking down on tax avoidance as a result of individuals incorporating rather than being direct employees.
However, I am worried about these changes. My back-of-the-envelope calculations suggest that a self-employed person on £20,000 a year will end up paying £20 extra a month because of these changes in national insurance. We also know from the Budget documents and from previous announcements in Budgets that the cuts to corporation tax are worth £3.8 billion and will primarily benefit the largest businesses, yet in this Budget, we are increasing taxes on the self-employed by £2 billion. That seems to be the wrong priority: we should be doing more to help the self-employed and small businesses, and less to help the big businesses already making large profits. In the Budget documents, the Chancellor also speaks about tax avoidance, but the tax avoidance measures amount to £810 million. Again, we have this huge discrepancy: we are taking £810 million from tax avoidance, but asking the self-employed to pay an extra £2 billion.
While it is right for the Chancellor to say that we should look at access to maternity and paternity benefits for the self-employed, what about the other benefits that people take for granted if they are direct employees, such as sickness benefits, out-of-work benefits and access to universal credit? Will the Chancellor look at access to those for the self-employed, as well as ensuring that the self-employed can get a mortgage and a private pension—things that too many self-employed people find are denied to them?
I am listening with interest to the hon. Lady. She made reference to a number of benefits; she might recall that in late 2013, the Labour party’s then shadow Secretary of State for Work and Pensions said that Labour would be tougher than the Tories on benefits. Is that still her party’s approach?
I am sure that the hon. Gentleman read that article; I said I would be tougher than the Tories in controlling the rising costs of benefits. For all the cuts we have seen from the Tories, the benefits bill keeps rising. Why is that? More young people are out of work, more is being spent on housing benefit because we are not building social housing, and one in five people is not paid a living wage. I will take no lectures at all from the Tories on controlling social security benefits; in fact, they have breached their social security cap, and they have had to come back to Parliament to explain themselves.
Thirdly, I welcome the announcement that the Government want to crack down on the small print in contracts, but I have a specific request, which the Minister at the Dispatch Box knows about. In 2013, Parliament capped charges on payday loans, resulting in a maximum charge of £24 a month if someone borrows £100. However, if someone goes overdrawn with their high street bank, they can be charged as much as £5 a day—almost £100 a month. If the Government are serious about protecting consumers from unscrupulous business practices, they should get tough on the banks that are using excessive overdraft charges to exploit customers, particularly those who are vulnerable and getting into debt.
Finally, I want to say something about grammar schools. The Budget documents say that the Government will spend £1 billion on new schools—presumably, those will be primarily grammar schools—but only £260 million on all other schools combined. How can that possibly be right? How can that new spending be fair and ensure that all our children get access to good schools? Instead of spending £25 million on bussing children to these new grammar schools, why do we not do more to ensure that all our children have the best possible start in life? That would be a fair Budget; that would be a Budget that addressed the concerns of all our constituents. We will not get it from the Conservatives; we will get it only from a Labour Government.
It is a pleasure to follow the hon. Member for Leeds West (Rachel Reeves), who spoke with greater passion, far greater clarity and much more intellectual and policy coherence than the leader of her party some moments ago.
This Budget is important for three key reasons. First, I have campaigned for a long time on avoidance, and I care deeply about the issue. Secondly, Brexit will touch and concern my constituency very deeply, and I will set out why we need to be ready on day one, two years hence, for all eventualities. Finally, I am going to talk about the cost of motoring and the need to make sure that we have a fair deal for car drivers. Given that 90% of all journeys in this country are made on our roads, it is important to be fair to people who travel on them.
On avoidance, I have long felt passionately that it is fair, right and proper to have a level playing field for internet retailers, big businesses, big multinationals and the like that trade in this country but do not contribute to the tax system, including Amazon, Apple, Google, Starbucks and all the rest of them. I have talked about this on many occasions. I am also deeply concerned that for too long there has been a serious problem with internet retailers from overseas—outside the European Union—not accounting for VAT and customs duties on their imports into the United Kingdom, and that needs to change. The Government calculate that that is worth about £2 billion; according to my calculation, the gap since 2005 is closer to £7 billion. Either way, it is a serious problem, and that gap needs to be closed. I welcome the fact that the National Audit Office is investigating this.
Does the hon. Gentleman agree that that problem simply hammers small businesses in the UK that are trying to do a good thing, and that it creates such an un-level playing field that it really is time for the Government to act?
The Chair of the Public Accounts Committee makes a powerful point. That is why I greatly welcome the call for evidence on the VAT split payment model in paragraph 3.49 on page 37 of the Red Book. I am glad that the Government are looking at this. That is absolutely right and absolutely welcome. The work of the many campaigners is encouraging the Government, Her Majesty’s Revenue and Customs, the Public Accounts Committee and the NAO to look at the situation closely. I am more confident than I have been for a very long time that we may yet see a more level playing field to enable British businesses to compete fairly and squarely against those from overseas in internet retail.
It is also important to have a level playing field for workers, be they employed or self-employed. I heard the remarks of the Leader of the Opposition and the SNP spokesman, the hon. Member for Dundee East (Stewart Hosie), about how appalling it all is. Surely, however, there should be a level playing field for the self-employed and the employed. That is something about which I feel quite strongly, and I think that the Chancellor was right to introduce measures to that effect today.
What will the hon. Gentleman say to the 10,000 self-employed people in my constituency and the 3,500 self-employed people in his constituency who read the Conservative manifesto, which pledged four times that there would be no increases in national insurance?
The hon. Lady knows that we have legislated to place a lock on class 1 national insurance contributions, VAT and income tax, but I think that class 4 contributions—as part of creating a more level playing field—are a different matter. For me, it is about fairness and pragmatism. The playing field is so skewed that social justice, fairness and doing the right thing must come first. I regret the fact that the Labour party does not seem to take that position or agree with it.
I would not usually intervene in such a situation, but I must say to the hon. Gentleman that self-employed people do not have equal access to in-work benefits such as holiday pay, sick pay, auto-enrolment and parental leave. How, then, can it be right to put up the tax on self-employed people?
It is absolutely fascinating, is it not? One moment, the Labour party and the trade unions say, “Isn’t it outrageous? We have got to stop the gig economy”, and the next moment they say, “Isn’t it outrageous? We have got to make sure we protect the self-employed.” There is no intellectual coherence in today’s Labour party. It is completely and utterly unfit for government.
Let me turn to the matter of Brexit. In my constituency of Dover last summer we had a taster of what will come if we are not ready. We saw queues of traffic all the way down the motorways, and some say that that was a tea party compared with what will happen if we are not ready. That is why I am making the case again today for more and faster investment in lorry parks off the M20, for widening and strengthening the M20, for dualling the A2 and for the lower Thames crossing. We need the infrastructure in the channel ports as well to make sure that we are ready on day one.
I know that there are Labour Members who look forward to that day, and who like to warn about it and, frankly, feast on it. I take a different view. We need to be ready and prepared so that the worst does not happen. That is why I call for investment to be brought forward, for the lower Thames crossing to be built quickly, and for us to get on with it. We should make an investment in the port of Dover that is similar to, and greater than, that which we have most graciously made in Calais in recent years. It is time we put Britain, and Britain’s border, at the forefront of our policy.
In addition, we need to be ready on day one if we do not get a deal. I hope that we will get a deal in two years’ time. I hope that the Commission will negotiate in good faith. So far, the way in which it has gone about dealing with legally non-existent liabilities makes me think that it will not necessarily do so. Even if we get a deal from the Commission, the European Parliament has to vote for it, and the European Parliament is in an even worse emotional place than the European Commission. After that, a qualified majority vote of the 27 will be required.
I hope that we will manage to do the deal, and I believe that this Government’s Prime Minister is the only leader who could possibly deliver such a deal, but it may be that we do not manage that in two years’ time, because on top of that we will have the French and German election cycles. We have to be ready if the European Union is unable to do a deal. Although we are ready and able, the European Union will not necessarily be, and if that is the case, we must make sure that we can maintain a seamless flow of trade. That is why I am also looking with industry experts at how to manage a seamless flow of traffic through Dover and Calais—we have very good relations with France and the French authorities at Calais—and how we can make that work.
It is important that Members from all parts of the House are heavily invested in making that work, because it needs to work for all of us. It will not be much good for Scottish Members if we have a queue at Dover, because they will not be able to get Scottish whisky out of the country by road at any great pace. It will not be very good for the northern powerhouse if it cannot get the things it needs to power itself. The midlands engine will conk out if it cannot get the components it needs at pace. That is why we all need to be invested in making sure that the channel ports continue to work. I will set out detailed proposals and ideas about what we can do, and we need to debate the matter to make sure that we are ready on day one. This matters to all of us in England, Scotland, Wales and the whole of the United Kingdom, and it matters to Ireland as well. We are all in this together, and we need it to work for the good of us all.
I am listening carefully to the hon. Gentleman, but does he not agree that after we trigger article 50, it will be for the other EU 27 member states to decide among themselves what is good for them and to stop other people leaving the EU? If we hold the line on migration, we will not be in the single market or the customs union, and that will be it. The people deserve a final say on the exit package, because that is not what they voted for.
The hon. Gentleman has long had a strong position on the matter. He knows as well as I do that people of this nation, whether he likes it or not, voted for an end to unchecked migration and an end to the billions of pounds for Brussels bureaucrats and to the payments to Brussels. Frankly, the vote meant that we would not be able to stay in the single market, because that aim was not compatible with the single market. Equally, it was clear that we would have to leave the customs union if we were to have a successful Department for International Trade. I am simply saying that if on day one no free trade deal has been agreed, we need to be ready to play our part. I believe that we can, should and must be, and I am setting out how we can help to deliver that for the good of this nation.
Finally, let me talk about motoring. I welcome the fact that we have had a freeze in fuel duty for more than seven years. I am proud of the work that has been done by the all-party group for fair fuel for motorists and hauliers, which I chair. My predecessor chairman, my hon. Friend the Member for Colne Valley (Jason McCartney), worked very hard on the matter. The freeze is great, because it means drivers spend £130 less. That is a good thing for the hard-working classes of modern Britain who travel by road, and as I said 90% of all journeys are by road.
It is important that we are fair and just to the owners of diesel cars. I hear people say, “We have got to put more taxes on the drivers of these cars,” but let us not forget that after Kyoto people were encouraged to buy such cars by the previous Government. It is right that we support those people to get replacement cars, if a replacement is necessary. It would be wrong to demonise them. We must make the right decisions. I think that we should increase the tax on gas guzzlers, but it is important that we are sensitive and careful.
We must also look at the statistics, which are clear. In London, diesel cars are 10% of the problem. We do not hear about polluting planes, which are also 10% of the problem. We do not hear about dirty diggers and construction sites, which are more than 10% of the problem. We do not hear about clapped-out London buses, which are 10% of the problem, or about ageing trains chuffing up fumes at various mainline stations, which are getting on for 10% of the problem. We need to look across the whole piece, rather than just picking 10% and saying, “Let’s bully these people and ignore the rest.” We need to deal with it holistically for the benefit of everyone, so that we all get fresher and cleaner air and can breathe more easily.
We need to invest more in roads to ease congestion, not to allow congestion to increase. It is very important to look beyond the strategic road network to the wider road network around the country. Regional bottlenecks and the problems of congestion across the country cost the country and the economy money. The air pollution problem also costs the country money. If we keep traffic flowing smoothly, we can reduce pollution. If we invest in the modern technology of the future—electric cars—we will reduce pollution. If we treat motorists fairly and encourage them to make the right decisions, we will reduce pollution. We can have a very positive future for motoring. Modern technology, modern vehicles, reduced pollution and effective roads will make our economy more successful and productive, and enable our children to have a better future in terms of economic prosperity and health.
It is always good to try to find an area of the Budget on which we can show that there is some common ground, so I want to say at the outset how much I am pleased that the Chancellor focused on the midlands engine. I will talk about that on another occasion.
I want to mention a couple of facts that particularly stand out. There is a shocking 20% cut in local authority spending from £8.2 billion in 2016-17 to £6.5 billion in the following year. A 20% drop in council funding in one year is incredibly difficult for local authorities to cope with, given the services that depend on that money. The other point, which was mentioned by my hon. Friend the Member for Leeds West (Rachel Reeves) —I very much associate myself with her analysis of the Budget statement—is the incongruence between the £1 billion given to free schools for capital spending, and the £260 million—only a quarter of that amount—provided for the thousands of other schools that our constituents and children use. I think that is typical of the Government’s priorities.
In the short time that I have, however, I want to talk about the two key issues that stand out for me in the Budget speech. One is the issue of the self-employed, and I will come on to that later. The other is the looming hurricane on the horizon, and the fact that the Government have decided not to veer around it, but to head straight towards it by failing to try to negotiate on our ability to stay in the single market. For a Chancellor of the Exchequer, at this point of the economic cycle, to fail even to mention Brexit—our imminent exit from the European Union—is incredible. For our potential exit from the single market not to be part of the core analysis of the economic outlook, let alone for him not to be finding ways to bolster our economy so that we are prepared for the storm, is a real betrayal of the interests of our economy and our constituents.
The hon. Gentleman clearly has not read the report on the Budget, because its very first sentence, on page 1, starts:
“As the UK begins the formal process of exiting the European Union”.
He can hardly argue that the Treasury Bench has not taken into account our departure from the EU, can he?
Why did the Chancellor not mention it in his speech? It is true, as somebody said recently, that this is a “mono-purpose” Government, and that everything has been blown out of the water because of Brexit. Why be so coy about it? They are pretending that it is not an issue, saying, “It’s fine. We’ll cope. Don’t worry, there’s nothing to see here.” But Brexit will be at the front and centre of our considerations.
Let us look at what has happened since sterling has been devalued so significantly. Consumer spending, which has propped up our economy so much in recent months, has started to feel the squeeze. Retail sales are already starting to head down. If we do not have consumers with such spending power—if living standards are squeezed, and wages do not keep pace with that—we should not be surprised if our economy starts to shudder. The OBR says on page 6 of its report that we will see a squeeze on GDP growth in the year ahead.
We know that we have a productivity problem, and at least the Chancellor acknowledged that, but unless we can find some way to catch up with the Germans and the French and to narrow the productivity gap—they produce in four days what our employees in this country take five days to produce—we will not generate the wages we need to ensure that there is growth and prosperity.
The uncertainty hanging over businesses that export and depend on trade for their income is immense. That is not just about market access, because services account for 80% of our economy, and whatever free trade agreements Ministers manage to get—they had jolly well better get a free trade agreement—such agreements tend not to deal with service sector trading issues. The National Institute of Economic and Social Research predicts that there may be a 61% fall in our trade in services, even with a free trade agreement. Ministers have got their work cut out, and I think it is astonishing that the Chancellor did not mention Brexit. That is the big issue in the Budget.
I hate to deflate the hon. Gentleman’s main argument, but the Chancellor did actually mention Brexit. In fact, in the second sentence of his Budget speech, he said: “As we start our negotiations to exit the European Union, this Budget takes forward our plan…for a brighter future.”
The Brexit analysis that should be in the Budget should take into account the drivers that produce economic growth. Brexit will affect consumers, as we know—the Chancellor did not touch on those issues. It will affect business investment—he did not touch on some of those issues. Trade will obviously be affected and, of course, public sector investment and public service expenditure will be radically affected by it. The reason I keep banging on about the impact on the financial services sector is that it generates £67 billion of revenue for our Exchequer. I need that in my constituency of Nottingham East to pay for the schools, hospitals and vital public services, and the Economic Secretary knows that. Brexit therefore has to be at the centre of our analysis and our policy expectations, and I am astonished that the Government are trying to skirt around it. They do not want to talk about it; they are hoping that it will just disappear.
Labour Members have to acknowledge that there is no magic money tree to deal with all the issues that lie ahead. We know that debt is very high and that borrowing is high. In fact, the Chancellor did not talk about the fact that he is projecting borrowing actually to rise—to go up—in the next financial year from £51 billion to £58 billion. We have to be very prudent and careful with taxpayers’ money. That is absolutely the case, and the OBR predicts real problems over the next 20, 30 or 40 years, because of the ageing population and health expenditure questions.
Just as there is no magic money tree, however, there is also no such thing as the “Have your cake and eat it” world outside the single market. I have to say to those on the fringes of politics and the hard Brexiteers who think they can continue our economic relationship with the 27 other European Union countries with no economic effect whatsoever that they are living in cloud cuckoo land. We should be doing all we can to salvage our relationship with the single market and to preserve the frictionless tariff-free trade that very much serves as the cornerstone of many of our industries, particularly manufacturing ones such as the car industry.
The other big issue I want to talk about is self-employment. There are 5 million self-employed people in this country, and I have 5,100 self-employed people in Nottingham East. They will have seen the Chancellor’s decision to break the solemn manifesto promise made at the last general election, when the Conservatives promised that there would be no increase in national insurance contributions. They have ripped up that promise. I feel that people will see the increase in national insurance contributions for the self-employed—it is not a 1% increase; it is going up to 11%—as a betrayal of the offer or promise that was made by the Conservatives at the last general election.
Those 5 million self-employed people have a number of disadvantages, relative to those with stable salaried employment contracts, that make their lives more precarious. These are the entrepreneurs who generate much of the wealth and prosperity that this country needs. As my hon. Friend the Member for Leeds West said, they do not necessarily have the opportunities of holiday pay and sick pay that exist in full-time salaried employment. They are less likely to be able to save for the long term and often do not have the company pensions and so forth that exist in other forms of employment. They face enormous risks if they fall ill, given the poor insurance coverage for loss of earnings. The self-employed also find it much harder to get a mortgage because their income is far less predictable than is the case for those on stable salaried contracts.
The hon. Gentleman is making a telling point about the self-employed. Is the change not also an attack on rural communities, where many people are not able to access employment and have to be self-employed?
That is exactly right.
The self-employed do not have the same security, which is why we have had the discrepancy in the levels of taxation historically. Nearly half of those who are self-employed in the UK are on low pay, compared with a fifth of those in employment. Social Market Foundation research suggests that 1.7 million self-employed people earn less than the national living wage, yet the Government’s new universal credit rules will cap self-employed recipients on the assumption that they receive the living wage over a standard working week, which is not necessarily the case in seasonal work and elsewhere.
The self-employed, who work longer despite earning less, and twice as many of whom work 50 hours each week than those in employment, will be paying a significant price. If they take home £27,000 of profit, they will be hit by an extra £30 a month because of this decision. I say to my hon. Friends that another change that the Chancellor announced—cutting the dividend allowance to just £2,000—is also a hit on the self-employed because the dividend allowance is part of how they derive their income.
It is a double whammy for the self-employed, who are hit by a broken promise from the Conservatives—they said they would not increase national insurance and they are doing so—and hit again by the cut in the dividend allowance. That will harm those running small businesses by really hitting their incomes and devalue the trust that should exist in politics. When politicians make a promise, they ought to be able to keep it. This erodes the trust that people have in the words of Ministers. I say on behalf of my 5,100 self-employed constituents in Nottingham East and the 5 million self-employed people nationwide, they will not forget this betrayal.
It is a great pleasure to follow the hon. Member for Nottingham East (Chris Leslie). It is also a pleasure to support the statement and the OBR’s “Economic and fiscal outlook”, which supports it and gives generally very good news and confounds many of the doomsayers who have been prognosticating so luridly over the past several months.
I say from the outset that, although I agree with the statement and some of the things that were announced, I have some small concerns about national insurance. On that matter, I find myself in agreement with the concerns expressed by the hon. Members for Nottingham East and for Leeds West (Rachel Reeves). It is very important to ensure that we do not disadvantage self-employed people. The Conservative party always has been and, I hope, always will be the party that supports white van man and—may I say on this particular day?—white van woman.
It is vital that in abolishing class 2 NICs and instituting class 4 NICs, we do not disadvantage those individuals covered by them. My back of a cigarette packet calculations support the concerns expressed by the hon. Lady. Her figures were more or less the same as mine. I hope very much that we will have some reassurance from Treasury Ministers that plumbers, electricians, plasterers and people of that sort will not be disadvantaged, particularly as we consider further measures to equilibrate them with employed people, such as those who have been described on parental benefits and the like, which of course ignore the fact that employed people have advantages that the self-employed very often do not.
I do not have a university in my constituency, but I do have a further education college. I know that the principal of Wiltshire College will warmly welcome today’s announcement on T-levels. We have long ignored technical education in this country, to our great disadvantage, and I suspect that our poor productivity compared with our European competitors is in large part due to the fact that we have not skilled our workforce in the way we should since 1945. I therefore very much welcome this development.
I also welcome the funding for children who wish to access selective education. I think that the hon. Lady missed the point that it is money for children on free school meals, so it is not generally available. It is a measure that seeks to improve the chances of the poorest. I would have thought that the Labour party welcomed that. However, I oppose further grammar schools. They would not be good for areas like mine. I fear this development because its flipside is an increase in the number of secondary modern schools. That has not been positive in the past and I would not like to see it visited on areas such as mine in the future. I would be concerned if the measures announced today, which appear to advantage disproportionately free schools seeking to select their intake, introduced grammar schools by the back door.
I am particularly concerned for health and social care. I very much welcome the positive announcements that have been made today. By my reckoning, they mean £2.4 billion over three years for health and social care, which will be very helpful, over and above the announcements that have been made previously—in particular, the increase in the social care precept to 3%. To sound a cautionary note, I think that it would be wrong in principle if we were to shift from raising money for social care from general taxation, which is the current situation, to a system based on property. The reason for that is very obvious: the most disadvantaged areas are the least capable of sustaining that kind of tax burden. However, £2.4 billion over three years is a great deal of money.
I am particularly pleased that the Chancellor suggested in his statement that there will be more in his autumn statement, in particular to fund the capital costs of sustainability and transformation plans. Many of us in areas that will be profoundly affected by STPs are concerned that those capital costs simply are not being met. The revenue savings that are necessary over the years to guarantee the five year forward view will not be possible without the injection of significant sums, of which I hope this is the start. I therefore very much welcome the £300 million announced for those capital costs and look forward to even more in the autumn statement.
The £100 million announced for accident and emergency is extremely welcome. We have got off relatively lightly this winter—it has been a relatively mild winter—but we cannot expect that to be the case in future. I welcome the Chancellor’s ambition to get the money in place to deal with next winter’s pressures. That is ambitious and I hope that he can achieve that and a system of triage to ensure that people are treated appropriately and by the right practitioner. Luton and Dunstable hospital is an example of very best practice in that respect, and one that should be mirrored, copied and emulated elsewhere.
We are still left with a big problem: the future funding of our national health service. When William Beveridge made his report in the mid-1940s, he tried to address society’s five great evils as best he could and suggested that spending on healthcare would reduce over time the costs of the NHS. How wrong he was. That is an example of how we can get our predictions so badly wrong with devastating consequences. Clem Attlee’s Government rapidly realised that that was wrong, which led to Nye Bevan’s resignation in fairly short order over what became known as teeth and specs.
The fact of the matter is that the burden of disease is going up because of our ageing population, as are patients’ expectations. We welcome the ageing population and the increase in patient expectations. Innovations and medical advances are also increasing, but all that costs a great deal of money, which the OBR makes clear. It makes it clear that we need to find a great deal of money over the next several years—eye-watering sums—but what is happening now is important as well as the future. Compared with countries such as Germany, France and the Netherlands—countries with which most people in this country would wish to be compared—our healthcare outcomes are significantly worse. In my view, there is a causal link between the amount of money we are prepared to spend on healthcare and the outcomes we will eventually get. The amount of money we spend on healthcare is very much less than the amount spent in the aforementioned countries.
Ministers will rely on the OECD average and say that we are doing relatively well in that respect, which is perfectly true. However, the OECD contains countries such as Mexico, Turkey, Hungary and Poland. They are great countries but have healthcare economies that are surely less advanced than ours and that do not therefore present reasonable comparators. We find that poor little five-year-old Ashya King had to go to the Czech Republic for his proton beam therapy for medulloblastoma. That would strike most people in this country as being distinctly odd. We find that cancer drugs that are routinely available on the continent are not available here or, if they are available, that they take much longer to appear on the market than they take in comparable countries. We find that cancer staging is delayed in this country, with obvious consequences for people’s chances of survival. It is hardly surprising that the much-cited Commonwealth Fund puts the UK 10th out of 11 in terms of healthcare outcomes for conditions amenable to healthcare.
Last year, the Office for National Statistics perfectly reasonably tweaked the figures so that the UK health spend related better to the OECD methodology. That rolled in publicly funded social care costs, which is also perfectly reasonable, but it bumped up the UK spend on healthcare a few notches in the international league table—it went from 8.7% to 9.9%, and meant we overtook Spain, Portugal and Greece, but we are still well behind France, Germany and the Netherlands.
The question for me is how on earth we close that gap. Many right hon. and hon. Members have suggested that we ask a commission to examine the long-term future funding. We need that level of public conversation to enable us to examine how we will lever in the significant funds necessary to close that gap. I hope that just as we are having a Green Paper on social care, which is welcome, the Government are open to suggestions from the public on how we can fund healthcare through hypothecated taxation or the various other mechanisms open to them.
Today’s Budget makes promises on NHS investment and on investing in education, and promises to tackle businesses rates and look at the security and dignity of work, to quote the Chancellor. We have had promises to put areas in charge of their local economic destiny. Those headlines may seem appealing, but I want to unpick the figures behind them, starting with the national health service.
The Public Accounts Committee has spent a lot of time in the past year and a half raising concerns about the underinvestment and lack of a sustainable plan for the NHS, particularly in the light of the increasing demand of a growing ageing population. The figures speak for themselves. We need look only at the financial data for NHS England trusts and clinical commissioning groups in the past few years. The deficit for trusts increased from £91 million in 2013-14 to a whopping £2.5 billion in 2015-16. There were huge shenanigans as the Department of Health struggled to ensure that the books balanced. The measures were criticised by the National Audit Office and the Comptroller and Auditor General as one-off and unsustainable, as even the permanent secretary acknowledged.
The Public Accounts Committee is concerned about the funding. Any additional funding is welcome, but let us look at what the Chancellor has promised on social care. He promised £2 billion over three years—front loaded because £1 billion is available in 2017—but the Local Government Association, representing local authorities that have to spend the money on social care estimates that the current shortfall is £1.3 billion. Even the 2017 figure, then, is not enough, and it drops off after that.
It is an irony that this injection of cash follows a 10% reduction in social care funding since this Government came to power in 2010. The latest survey of local authority directors of social care says that only around a third believe that they can deliver their statutory duties this year—and it falls to 8% next year. Even with the injection of cash, I do not think that local government can have 100% confidence that social care can be delivered.
Let us look at the capital injection that the Chancellor promised for sustainability and transformation plans. That may be helpful—£300 million sounds like a lot of money—but if it is spread across the 44 STPs around England, it is very little to fund what might be needed. The fact that capital budgets were raided for resource funding in the last Budget settlement shows a contrary approach and a lack of planning. We keep seeing pots of money thrown at different parts of the NHS and social care system, but what we need is a long-term sustainable solution. I hope that the Treasury will watch closely as the Department of Health and local health bodies spend this money to make sure that it is spent as sustainably as possible. What we really need is that long-term settlement.
On education, I proudly represent the Borough of Hackney, which has excellent schools. We have some of the best results and some schools in the top 1% in the country. The Chancellor talks about focusing on the quality of our children’s education, but we are already doing that in Hackney—without a grammar school in sight. The focus on the creation of selective grammar schools is disappointing, partly because we can show what works in Hackney and other boroughs that have excellent education, but also because if we look at the existing free school programme, we see a real problem.
Let us debunk the myth that the Government are putting more money into education. Yes, they are in cash terms, but with pupil numbers increasing, this amounts to an effective cut per pupil of over 8%. That poses a key question about how the Government present their figures, as well as a key question about what price the Government place on choices.
In making this announcement, the concerns expressed in the NAO’s recent report on the capital funding of schools have not been taken into account. By 2015, the Department for Education had spent £1.8 billion on 305 free schools; winding back to what was promised, it was estimated that the Government would spend £900 million on 315 of them, so it has doubled in price already, and this compares with the total estimate for the existing programme of £9.7 billion by 2021.
The Education Funding Agency is one of the biggest purchasers of land nationally. We have a property market going on, with land prices often increasing because of a bidding war in which the EFA plays a role. If, as my hon. Friend the Member for Leeds West (Rachel Reeves) highlighted, we measure this, we find that the cost of improving other schools is substantial. The estimated bill for returning all school buildings in England to a satisfactory or better condition—satisfactory rather than very good—is £6.7 billion, with an estimated further £7.1 billion to bring parts of school buildings up to satisfactory or good conditions. This applies to a school that might be generally good but has an area that needs attention. I recognise that more school places might be needed in some parts of the country, but free schools are not always located in the areas of the greatest demographic need, and there are too many of them.
Does my hon. Friend agree that this means diverting funds from schools that badly need improvement? St Leonard’s School in the constituency of my hon. Friend the Member for City of Durham (Dr Blackman-Woods), for example, also serves some of my constituents, and it has been in need of capital improvements for many years, but the need will not be met because of the diversion of funds to free schools.
My hon. Friend raises an important point. It is a matter of concern when too many free schools do not fill their places and in many cases are not required to pay back to the Government—indeed to the taxpayer—for those empty spaces. Some 46 secondary free schools—a fifth or 21% of the total—are in local authority areas in which no new capacity is needed up to 2020. Free school places are also much more expensive than places provided by local authorities, mainly because of the land purchasing that the EFA is pursuing.
A place in a primary free school opening in 2014-15 cost an average of £14,400—a third more than one created by a local authority through a more planned programme. A place in a secondary free school cost £19,100, 50% more than a local authority place. Taxpayers’ money is being overspent, and it is not delivering results. We have seen a number of failures of free schools, and we have seen free schools undersubscribed. In Suffolk, for instance, more than half the total number of places in three free schools have not been filled. Two schools in Greater Manchester are also having problems. My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) mentioned Collective Spirit, which is set to be broken up because of educational and financial failings.
In Hackney, what has worked is good leadership, good education and committed pupils and parents. The structure of a school is much less important than those things. However, spending this amount of money on a hell-for-leather delivery of 500 schools, a numerical target that must be met by 2020 whatever the cost, is not sensible, and spending money on selective free schools—grammar schools—on top of that beggars belief.
Business rates are a big issue in my inner London constituency. There were more than 10,000 signatures to a petition from small businesses throughout east London that we presented to Downing Street yesterday. Those businesses are concerned about the impact of business rate increases of up to 250%. It is very difficult for someone who is running a bike shop, a coffee shop or a small jewellery company to increase prices to cover such overheads. The reliefs are welcome, but we need to know more about the long-term review and what it will mean for businesses. One year of relief will do no more than stave off problems and save them up for the future.
The problem is that the Government have banked that money in their local government settlement, and councils cannot then reduce business rates themselves. There is no magic pot of money, and they did not see this coming. In our area, we are proud of our diverse high streets with their many small independent businesses. More than 96% of businesses in my constituency employ fewer than six people, and most employ only one or two. Because they are so small, the business rate increases are a real issue for them.
My hon. Friend is right: these measures may be welcome, but they are temporary. The Government have said that they will compensate local authorities for any loss of income resulting from the changes. Will the Public Accounts Committee try to ensure that the compensation does not last for only one year or two years, but is permanently built into the system?
My hon. Friend has raised a very important point. In the coming weeks, the Public Accounts Committee will be looking into the proposal for retention of business rates, and how effective and efficient that would be. I will keep my hon. Friend and other Members informed, because this is a cross-party issue that concerns many of us. I welcome the changes, but I worry that they do not go far enough and that there may be hidden costs.
The Chancellor mentioned tax, but I was disappointed that he did not say whether the Government would be considering tax reliefs. The Public Accounts Committee does a fair amount of work on tax, as does the Treasury Committee. There are many tax reliefs out there that cost more than was budgeted for them, some of which lie fallow in the system for too long without challenge. When we have challenged HMRC to publish its list of reliefs, it has been very reluctant to do so. We find that extraordinary, because transparency would enable effective and serious change to take place. It is possible that, quite often, industries, individuals and companies point out that some of the tax reliefs are no longer fit for purpose. I believe that the black beer tax relief, which had been on the statute book for more than 100 years, was dropped only recently. Perhaps that is the pace at which some of these matters are considered, and perhaps we should urge the Government to think a bit faster about whether tax reliefs are delivering what they set out to deliver.
The Chancellor talked a great deal about the security and dignity of people at work. I echo what some of my hon. Friends have said about the impact on the self-employed, of whom there are a large number in my constituency, but I was particularly disappointed that the Chancellor did not refer to people in low-paid, part-time jobs. Many of them want to work more hours, but their employers do not create full-time jobs because of disincentives in the tax system and, in particular, the national insurance system.
Those people, many of whom are doing multiple part-time jobs, are at the difficult end of the scale. They are working hard, and they are paying tax because they are over the threshold, so they do not receive free benefits such as dental care. They are struggling to survive: “just about managing” barely covers it. They find it very hard to reach the next rung of the ladder. I think that it behoves the Treasury to have a close look at that situation, and I intend to take it up with the Minister outside the Chamber.
The national living wage is very welcome in my constituency, but we do need to look at the knock-on effects. It is already causing huge challenges—for example, in delivering social care. I hope the Treasury is working across government to look at how it can ameliorate the impact on the costs of provision in some sectors.
This is not a Budget that is really on the side of ordinary people, because of the impact on the self-employed, the lack of action on the lowest paid, the smoke and mirrors on funding for the NHS and social care, and the facts that there are too many short-term cash injections into the NHS, that it is not looking at the evidence before injecting more money into programmes like the free school programme and that there are no measures to support stability in low-paid jobs. The Budget therefore leaves many questions unanswered. In particular, there is the fact that, as many Members have pointed out, the Chancellor did not really address the elephant in the room: how will Brexit affect our economy and what measures will he take at the Treasury to make sure he provides a buffer?
The hon. Member for Hackney South and Shoreditch (Meg Hillier) lays down the challenge that not enough was said on Brexit, so let me try to put that right; it is a challenge I am happy to rise to. If one thinks back to just a few months ago, we were expecting this to be the “punishment Budget,” and that my right hon. Friend the Member for Tatton (Mr Osborne) was going to be telling us that it was all doom and gloom. I have looked up a quotation from one Mr Angel Gurría, the secretary-general of the OECD, which yesterday gave us a little good news. He said there would be a Brexit tax of £2,200 per person and went on to tell us:
“The costs are piling up, and we are still two months away from the referendum.”
He said it was getting worse and worse.
I rather feel as the diners must have felt at Belshazzar’s feast, when the words appeared written on the wall, “Mene, Mene, Tekel, Upharsin,” and Daniel came and translated them and said, “You have been weighed in the balances and found wanting.” After the feast they all went to bed and woke up the next morning, and instead of Darius the Mede having taken over, Belshazzar carried on as normal. It was business as normal, and that is what is so impressive about this Budget.
We are, indeed, in a period of transition with Brexit; we are heading out of the door, I am glad to say, in spite of their lordships’ obstructionism, but we are doing so from a position of extraordinary strength and remarkable stability. And that stability is deliberate and is part of Government policy.
It is worth looking at page 57 of the Red Book, because we see there the percentage of GDP that is anticipated to come in as public sector receipts. It will be consistently between 36% and 37.5% over the period we are looking at. If we look back over a much longer time period, all the way to Harold Wilson’s prime ministership, we see that public sector receipts remain in the region of 34.5% to 38.5%.
However detailed, pernickety and fiddly the changes in taxation, it is remarkably difficult to raise that taxation much above current levels, and therefore what we are talking about in this Budget is more a question of how the cloth is cut than whether there should be more taxation or not. Expenditure must then fit in with that, and to ensure that expenditure remains under control remains the business of government, whether they are this Conservative Government, they were the last coalition Government, or, heaven forfend, they are a socialist Government, should Labour ever manage to return from its current sorry state.
Does the hon. Gentleman not agree that the Brexit vote reduced the size of the cloth at a stroke? It shrank by 15% through devaluation—of the value of our economy, our wages, our savings and our assets. Moreover, after the short-term window of export growth because of that devaluation, we are going to face tariffs that clobber us again.
That really depends on how we measure our cloth. I am in favour of measuring my cloth in imperial measures—that is to say, pounds and ounces, inches and feet and so on, and therefore of using sterling as my base for measuring things. If we do that, our international assets have gone up enormously, because any dollar assets we hold are worth 15% more in pounds. That is more income coming in, and that helps reduce the current account deficit; it is good news for the British economy. Our exporters are 15% more competitive. That deals with any tariffs that may be imposed—if any are imposed. What is more, we are at the front of the queue for a trade deal with the strongest and biggest economy in the world, so, actually, post-Brexit we are fighting fit. The Chancellor of the Exchequer said that he would ensure that we were fighting fit, and we are. We are open for business with the world. With the continuing cuts in corporation tax, we are showing that we are absolutely willing to compete with anybody in attracting capital investment and that we are ready to do business in a way that investors will like.
May I sound for the hon. Gentleman two notes of caution? First, he has just said that post-Brexit we are fighting fit. May I remind him that we have not even triggered article 50 yet? We are a member state of the European Union and are likely to remain so for the next two years and two weeks. Secondly, he prays in aid the Red Book, but I cannot see in it—perhaps he can tell me otherwise—any forecasts caveated with a statement that when we do Brexit, the situation may change for the better or for the worse. There are no caveats at all.
The forecasts are taken from the OBR and if the hon. Gentleman looks at its rather thicker report, he will see its comments in relation to Brexit and trade deals. The OBR is still rather negative on trade deals and I think that it is wrong. I have the greatest respect for the OBR, because it is the one body that during the Brexit campaign behaved properly and within its remit and did not dabble its fingers into the politics of the Brexit debate. Its view is cautious on trade. It thinks that over the next 10 years, post-Brexit, our trade position will be less good. I happen to think that that is wrong.
The hon. Gentleman should give way not to me, but to the OBR, which he has been complimenting so much. Paragraph 4.6 on page 86 of its report states:
“Given the uncertainty regarding how the Government will respond to the choices and trade-offs with which it will be confronted in the negotiations, there is no meaningful basis for predicting the precise end-point on which to base for our forecast.”
That was broadly the point I was making—the OBR is quite cautious. I was not disputing that it is cautious, but I am not cautious. I am sorry to say that, much though I respect the OBR and much though I think it does its work diligently, it got it hopelessly wrong a year ago and had to raise its forecasts for GDP growth consistently, because it did not manage to get them right. It revised down the November autumn statement and has had to revise back up again now. I think it is a terrible mistake, though earlier I quoted holy scripture, to take forecasts from these people as holy writ. They are not.
This comes down to a question of judgment, both political and economic. The political judgment is on whether this Government are going to be competent to negotiate well and effectively. I have complete confidence that they will do that—that they will be able to negotiate in the councils of Europe more effectively than anybody else could on our behalf. The economic judgment is on the balance between what we get from the European Union and what we can do with the rest of the world. I expect that, if we trade more freely with the rest of the world, that will more than compensate for the risks that we may take in having harder terms of trade with the European Union.
Having taken up the challenge from the hon. Members for Hackney South and Shoreditch (Meg Hillier) and for Nottingham East (Chris Leslie), who both wanted a Government view on Brexit—I cannot claim to speak for the Government, but I can at least say something about Brexit—I want to go through some of the details. This Budget has some very good news about the deficit. Although £51.8 billion, the deficit for this year, is still a very large amount of money, as a percentage of GDP we are now back within the norms of the types of deficits that Governments can run with. That is not to say that I think having a deficit is a good thing in principle, but GDP growth is near 2.6% and this is about remaining steady with total debt and GDP. If we go no further than that, it is an amount that can be lived with. That is important, because although there is more to be done, the vast bulk of what was necessary to live within our means has now been done.
I want to make some little points about certain areas of concern. I would encourage the Government not to proceed with the personal injury discount rate reduction to minus 0.75%. The idea that awards against the Government should be calculated with a negative time cost of money is wrong. It would be better and cheaper for the Government to underwrite annual payments, rather than making lump-sum payments with a discount rate of a negative kind—[Interruption.] The hon. Member for Wolverhampton South West (Rob Marris) mutters that I do not understand this. I do understand it, and I know that the Government are obliged by law to do this, but they have the ability to introduce new laws in this House and can often do that as part of the Finance Bill.
We can set rates in a different way. We can set them, then adjust them for inflation at a lower initial rate, rather than having a payment based on a capital sum. Reducing the rate from 2.5% to minus 0.75% is a mistake and will result in an undue cost to the Exchequer.
I also have concerns about the probate tax. I see that it is likely to be judged by the national statistics people as a tax rather than as a charge, and I do not think it right that the Government should introduce stealth taxes. Probate charges should relate to the cost of the probate work, which is broadly irrelevant to the size of the estate. There might be some more work for bigger estates, but the difference will not necessarily be as large as has been proposed.
The biggest issue is national insurance contributions. I see the logic in what the Government want to do, because there is an unfairness between self-employment and employment, but the question is not so much one of revenue as of whether having a structure in the economy that encourages self-employment is beneficial overall, and whether that is a price worth paying. If we look at what has happened since 2008, we can see that unemployment in this country remained so low as we went through a deep and challenging session partly because of the great flexibility within our labour market. Part of that flexibility comes from self-employment, because employers do not have to take on all the risks of full employment, with all the benefits such as holiday and sickness pay that that entails. That means that the self-employed are a major contributor to the flexibility of the economy.
I very much doubt that increasing the national insurance contributions for the self-employed by 1% and subsequently 2% will fundamentally change the balance, but in economics, things often happen at the margins rather than being an easily identifiable inflection point when we are starting out. I would therefore be cautious about this change, and I urge the Government to look at the whole question of the relationship between national insurance and income tax in the round. National insurance represents about £130 billion of revenue. It is an enormously important source of funding for what the Government wish to do, but its relationship to income tax creates confusion and distortion within the system. This is just one of those distortions, and I am not sure that making a minor change at the edges is the right way to go about changing the relationship in taxation between the self-employed and the ordinarily employed. Those are the three minor cautions that I would offer on the Budget, but I remember a Conservative party slogan, “Britain’s on the right track, don’t turn back”, and that seems to me to be where we are.
The Chancellor started his Budget speech in an appropriate way by making a confession. He said that the commentators, including himself, his predecessor and many others in this House, had got it wrong when it came to the growth of the UK economy. In fact, he started by saying that the economy had “continued to confound the commentators with robust growth” since the historic vote to leave the European Union and that that growth was predicted to continue over the next number of years.
Several Members have already said that the Chancellor made no mention of Brexit, but many Members still feel that Brexit has been properly mentioned only if it is referred to in negative terms. They do not want to hear the good news that Brexit and the decision to leave the EU has not and will not destroy our economy. The Chancellor pointed out at the start of his statement that the Budget was designed to prepare the United Kingdom for a brighter future and to provide a stable platform for the negotiations. While I do not agree with everything in the Budget, we must accept that the spending on infrastructure development, innovation, research and development, and education, including the changes to technical education, is designed to make our economy more competitive and to enable us to take the opportunities that will be presented when we are free of the EU and therefore able to make trade deals with countries across the world. It is wrong to say that the Budget did not mention, does not cater for, or does not acknowledge the challenges that we will face when we leave the EU.
There are several things in the Budget that I particularly welcome. I will not go into all of them in detail in the short time available to me, but we have raised “Making tax digital” with the Treasury on a number of occasions, and the line in Westminster Hall debates has been much harder than what was announced today. I am glad that the Chancellor accepts that the strategy was going to create huge problems for many small businesses. I trust that the arguments for extending and delaying its introduction for one year will apply in future years because, as has been pointed out, many businesses do not have the necessary facilities or even access to the internet. They rely on accountants and would have found it either impossible or costly to meet the requirement.
I welcome the extra £200 million for innovative broadband initiatives. In rural areas such as my constituency, despite BT’s monopoly and the money that it has received, we still do not have proper broadband coverage. Indeed, innovation is sometimes stifled by BT’s monopoly and its control of the network. I hope that we will see innovation there.
I also welcome the £120 million that will be available to the Northern Ireland Executive. However, the attitude that Sinn Féin has adopted over the past couple of days means that anybody—including the Secretary of State for Northern Ireland—who does not accede to what they want is accused of waffle; their members then walk out. If we do not get the Assembly up and running, will the money be held? I fear that it may be some time before the Executive are in a position to spend that money, so will interest be added to it?
The forecast for growth still heavily depends on consumer spending, which depends on consumer borrowing. By 2021, consumer borrowing will reach 153% of household income, and I have a problem with the Government here. I understand that they have to control public spending and borrowing, but why is it okay for growth to be fuelled by high levels of consumer debt? In fact, consumer debt is twice the level of Government debt as a percentage of GDP. Why is it okay for consumers to continue borrowing to fuel growth, but not for the Government to accept that there may be arguments, in a low-interest-rate regime, for marginal increases in spending on the plenty of good infrastructure projects that could provide a good return for the economy through increased productivity?
As the hon. Gentleman may be aware, according to the Library briefing paper, an OECD working paper in 2012 found that
“when household debt levels rise above trend the likelihood of a recession increases.”
The International Monetary Fund found that recessions preceded by large increases in household debt were “more severe and protracted.” There are real dangers here.
There are real dangers. Consumer spending is a huge component of GDP, and of course we need buoyant consumer spending, which is one reason why the constant talking down of the economy is not good for future economic growth. At the same time, we have to recognise that focused public investment in the economy is, first, affordable and, secondly, desirable, yet the Chancellor seems to be resistant to undertaking such investment.
There is a strong case for saying that, especially given the way in which Government fixed capital spending is due to fall over the next year. Of course, as interest rates are low and are predicted to go up, now is the time to borrow and spend.
My second issue has been raised by a number of Members, but it needs to be restated, because it is so important to constituencies like mine, that there will be an increase in tax, through national insurance contributions, for the self-employed. I serve a constituency that is about half rural. Many of my constituents depend on self-employment for work. We have lost a number of jobs through big manufacturing closures over the past couple of years, and many of the people who lost their job have moved into self-employment. Local enterprise agencies in my constituency, according to figures they recently gave me, have encouraged some 1,400 people into self-employment through training. Many of those people start by taking a risk with their redundancy money. They work long hours for not a great deal of money, and they do not have the benefits and security that people in full-time employment have.
The Government say, “The system has been abused, so we have to level up the tax paid.” We do not do that in other areas of taxation. The BBC, for example, gets its top presenters to go into self-employment to avoid taxation. If that is an abuse, stop it, but do not impose additional costs on people who help to bring up the United Kingdom’s employment figures and bring down the unemployment figures by taking risks and going into self-employment. The Chancellor tried to downplay the amount of money involved, but many self-employed people are struggling at the margins because they are trying to get businesses up and running. The difference in taxation will be significant for them. The Government have got that one wrong. Hopefully, the issue will not come back to bite them; it has not been very well explained.
The last issue I shall raise is housing. One way to increase employment and, of course, productivity in the economy is by having a good housing stock that enables people to move around easily. However, if we look at the figures, we find that housing investment is due to fall by 50% this year and stay at a low level. The statistics attached to the Budget indicate that house prices will go up by more than twice the rate of inflation as a result. That will make the average house price around nine times the average salary, which will mean that many young people will never have the chance to own their own house. At the same time, the restrictions on buy to let mean there will be increased costs for the rental market. It is disappointing that the Chancellor did not make any proposals on how he will deal with the housing issue, because it is as much part of making the economy fit for the future as it is part of giving people the opportunity to have a decent home.
Like the hon. Member for East Antrim (Sammy Wilson), I welcome the overall message and direction of the Budget. I would not be so cruel as to say it was a boring Budget; perhaps we could say it was a sensible and cautious Budget. When, between Budgets, we think about what an ideal Budget would look like, most of us think it should basically be a sensible evolution of previous policies, and that we should not have expensive rabbits pulled out of hats for the purposes of political grandstanding, but when we get one of those Budgets, we cannot quite work out what to say about it, so we try to talk about—and moan about—all the things that are not in it.
It is absolutely right for the Government to carry on along the course they have previously set. We know that there will be uncertainty over the next two years while we work out precisely what deal we will get with the EU and its impact, so it would have been totally the wrong time to have made big tax cuts or spent loads of money; we might have found out in a couple of years that that was not the right thing to do.
We should welcome the fact that the Budget statement shows that the growth in the economy is stronger than we thought it would be even only three months ago, at the autumn statement, and that for the coming year it is back up to the 2% mark. Many people doubted that we would get to that mark by next year, so that is a welcome sign. The extra growth will allow the deficit to come back down by the end of the Parliament and fall as a percentage of GDP, which is what we promised.
We should note a couple of things about that trajectory. First, between this financial year and the end of the forecast period, tax receipts will rise by 20% to £802 billion in 2021-22. Given the level of growth and how much can be taken out of it, I suspect that that is an optimistic assumption. Secondly, public spending is set to rise over the same period by only 14.6%—I say only, but that is probably quite a large amount. That is how we close the deficit down: with higher tax receipts from economic growth than the increase in spending.
It is worth noting that the increase in public spending in the coming financial year will be 4%, which is quite high and in excess of inflation by quite a lot. It is pretty hard to say it is an austerity Budget when public spending will increase by 4% next year.
I shall spend the rest of my time talking about measures of particular interest to people in Amber Valley. It is probably easy to gloss over, as perhaps the Chancellor did, important measures such as the increase in the national living wage to £7.50, the rise in the personal allowance and the higher rate tax threshold, and all the childcare measures that are coming in. Those measures are extremely important for people’s everyday income, and contribute to the increase in households’ surplus income that we will see each year. It is welcome that wages are still going to increase at a higher rate than inflation.
I also welcome the various measures to mitigate the business rates revaluation. The official numbers show that business rates in Amber Valley will fall by just over 5% after the revaluation, but it is still right that there are measures to help the businesses with the individual highest rises. I welcome the discretionary fund, and I welcome the measure to support pubs by £1,000 a year. It is a pity that the beer duty freezes of recent years have stopped, but I guess that £1,000 off business rates will help with that.
I welcome the funding for the midlands engine and the potential for increased transport funding. I look forward to hearing how those funds will be spent to help the east midlands in particular. I am always a bit nervous when we talk about the midlands, because I tend to think that the west midlands believes that it is the midlands and that the east midlands is the east midlands.
I hope that a fair proportion of that midlands engine funding finds its way to the east side of the midlands. I especially welcome the measures to transform technical education—both the quality of it and the esteem in which it is held. It is really important in places such as Amber Valley that people can get quality technical education and the skills that they need to get a decently paid job. It is right that we do all we can to help people achieve that.
I welcome the increase in social care funding. I agree with the Chair of the Public Accounts Committee that in an ideal world it would have been done on a long-term basis, but there was a clear and compelling case for some short-term money to get us over the current situation. Ironically, my local county council sent a letter to all Derbyshire MPs during the Budget statement, calling for an increase of £2.3 billion over the rest of this Parliament. I am sure that it will be very glad to have an increase of £2.4 billion over the next three years. I suspect that that will not fix the problem; I am not sure how much money it would take to fix the issues that we have with social care completely, but it is, none the less, a welcome step until we can find a permanent solution.
I welcome the funding for NHS transformation plans. The one in Derbyshire has perhaps not had as much attention as it might have done. That is probably because the issues are quite complicated. There is a clear need for capital funding and for allowing the measures in the Budget to be effective. In the case of Amber Valley, I hope that the money that was promised to allow us to rebuild Heanor memorial hospital so that it may be used for more out-patient appointments can now be found, and that the project can be definitely confirmed. A key part of relieving the pressure on our hospitals is having more work done in the community, rather than in the hospitals themselves.
There is a lot of concern in my constituency about the strategy, “Making tax digital”. I always thought that it should not be applied to those companies operating below the VAT threshold. It may not be easy for businesses that do not regularly account for VAT to get accounting records for use under the strategy. I am not sure whether, in a year’s time, that situation will have changed greatly. I hope that there is some kind of delay while we work out the right solution for that level of business. May I also suggest that if we go ahead we make the scheme voluntary for those very small businesses? If there really are clear advantages for companies to keeping better records and knowing what their tax bill will be in real time, let them choose to opt in and find those benefits, rather than our trying to make them do it, as that would boost their confidence in the reform. I am not sure how many would choose to opt in, but perhaps it would help if we showed them that the benefits were there.
I have some concern about schools capital funding. I have no ideological objection to grammar schools and selection; if they can help to improve school standards in Amber Valley, let us give them a try. What I am not so sure about are the mechanisms for making that change. Amber Valley has issues with school standards. The league tables last year were pretty disappointing. I am not sure how areas such as mine get those new schools and therefore gain access to that funding. We have to find a plan that works for the areas that need to improve their educational standards and then fund it, rather than hoping that, somewhere, there are parents with enough money and time to do something—I certainly have seen no evidence of that. I look forward to the Government showing us how their plans will work to benefit areas such as mine.
Finally, I have a few remarks on self-employment. Clearly, a tax rise that discourages any kind of activity is not attractive, especially when our economy is quite reliant on self-employment. If we put it in context, though, we see that national insurance for people who are in employment is somewhere just under 26%, if we take into account employees and employers, so a rise to 11% for the self-employed is nothing like levelling out the situation. Although there are advantages that those in self-employment do not get, they do not equate to a gap of that size. None the less, that rise will be unwelcome news to people who are probably struggling and not getting all the rights to which they are entitled.
As it is International Women’s Day, I want to start my remarks by paying tribute to Mary Denness, one of the “headscarf revolutionaries” of Hessle Road in Hull, who sadly died a few days ago. She fought to improve safety in the trawling industry after many husbands, sons and brothers died while at work. She won that battle.
I want to quote another formidable woman, the late Barbara Castle, who said:
“In politics, guts is all.”
I pay tribute to the women of the WASPI lobby, who are here today, for their guts in standing up and saying that an injustice has been done to them, and in continuing to campaign. I am very disappointed that there is nothing in the Budget to deal with that injustice.
I want to make two points at the outset. First, I was very surprised indeed that the Chancellor made no mention of Brexit in his statement, given that it is the major issue facing the country. Secondly, the Government have clearly broken their party’s 2015 manifesto pledge by introducing the rise in national insurance contributions for the self-employed. They stated four times in their manifesto—I checked—that they would not raise those contributions. Many of the 9,200 self-employed people in my constituency—the hairdressers, plumbers and electricians—are already just about managing. They are part of the group of people the Prime Minister said she wanted to be on the side of. I think this is a real kick to that group.
I want to focus on three issues today. The first is social care. I welcome what the Chancellor said about the need for a review. Of course we need a review and a long-term strategy for dealing with social care. In my view, the time has come to set up a national care service akin to the national health service created in 1948. However, the announcement made by the Chancellor—to spend £1.2 billion in 2017-18, £800 million in 2018-19 and £400 million in 2019-20—will overall close only half the gap that we already know exists in social care, and there are no specifics on how the money will be distributed.
Disadvantaged areas such as Hull face a crisis in social care. We are the third most disadvantaged area in the country, we have more people in need of social care than other areas, and we have fewer people who are able to self-fund. The Government have so far introduced an increase in the council tax precept of up to 3% to deal with the demands on social care. In Kingston upon Hull, because of our low council tax base, that will raise only £8.01 per head. Contrast that with Kingston upon Thames, where it could raise £15.27 per head. Clearly that policy will not meet the needs of areas that have such a low council tax base. I want the Minister to set out some clear guarantees about the most disadvantaged areas getting funding from the pot of money that has been made available.
We know that in politics it is all about making choices. One policy area that I thought the Government could have looked at for filling the gap in social care has been put forward by the Women’s Budget Group. It has said how successive cuts in corporation tax by 2021 will amount to about £13 billion per annum, and it has compared and contrasted that with the cost of free social care for those with critical care needs, which would cost £14 billion. The Government could have taken different decisions about how they raise money and spend it than the ones set out in the Budget.
On investment in the north, the Red Book contains just one reference to the northern powerhouse and the north-south regional divide. It states:
“As set out in the Industrial Strategy green paper, the government’s ambition is to support growth in all areas of the UK. The government will shortly be announcing the Midlands Engine Strategy, and is continuing to build the Northern Powerhouse.”
The latest Treasury figures show that transport investment in London is £1,943 per head of population, but in Yorkshire and the Humber it is £190. There is a real gap in the investment going into the north. The Chancellor said that £90 million is being made available to “the north”. The north is such a large area. It just goes to show that the Government really do not have a handle on the needs—
And the money is for over four years, as my hon. Friend rightly points out.
No money was identified to help Hull, particularly with the electrification that we have been fighting for over many years, even though we put together our own plan to bring in private sector money. There was no mention of trying to assist with that. There was also no mention of devolution for Yorkshire and the Humber. That would obviously be a way of accessing funds, but no decision has been made about that.
On education and skills, we all want our children and young people to have access to the best high-quality education possible. The renewables industry is very important to Hull, so we want young people to come through with the skills for that industry. I am really disappointed that the money allocated for education is for the ideological pursuit of free schools and selective education, rather than ensuring that the schools we have are properly funded. There is likely to be a cut of £380 per pupil by 2020 in Hull; 8% of the budget is going. The announcement about busing children who are on free schools meals to selective schools does not help us because there are no selective schools in Hull. If the Government are serious about social mobility, that money would have been much better spent on nursery school funding. It was announced that there were 2.4 million apprenticeship starts in the last Parliament, but today is International Women’s Day, and we know that young women in apprenticeships are paid less and that there are fewer of them in science, technology, engineering and maths.
This Budget is a bit of a damp squib. Hull will have to carry on making its own luck, as it has done for many years. We have been fortunate with the City of Culture and the investment from Siemens. In the spirit of where I started—the headscarf revolutionaries—we will continue to battle for a fair deal for our city from this Government, because we are certainly not getting it at the moment.
It is always a pleasure to participate in a Budget debate, and that is no less the case today. It is an honour to be sitting close to a good friend of mine, my hon. Friend the Member for Fareham (Suella Fernandes), whom I have known for decades.
I am pleased to follow the hon. Member for Kingston upon Hull North (Diana Johnson), who characteristically made an impassioned speech for her constituents and for the north. However, it is only fair to say that, although there were not as many references to the northern powerhouse in this Budget, the autumn statement contained a policy and a statement about what the northern powerhouse would be doing in the years ahead. An investment programme of £90 million has been set out, which should be seen against the context of the hundreds of millions of pounds that are being invested in rail and roads across the north.
The hon. Gentleman is shaking his head vigorously. I would welcome an intervention, if he wants to speak. If we compare the narrative for the north created by the Conservative party in recent years with the Labour party’s woeful track record on infrastructure and its narrative for the north when it was in power, the truth is that we are heads and shoulders above what Labour put in place.
I hope to catch Madam Deputy Speaker’s eye shortly, and this topic will be a big part of my speech. I would just point out that not one penny piece has been invested in transport in north Wales by this Government; and after today, it still has not been invested.
There are interesting schemes ahead, which I am sure the hon. Gentleman is also working on, to try to improve the interconnectivity of rail in north Wales and in Cheshire. He is aware that we are moving those plans further forward. I look forward to hearing his speech.
The Budget statement highlights the resilience of the UK economy, and seeks to ensure that we build on the clarity, certainty and confidence that business needs as we seek to forge a new role for Britain on a truly global scale and stage. Our first task after the vote to leave the EU is to reassure the markets. Britain has to be seen, and is being seen, as welcoming. It remains firmly open for business, and the Chancellor has done an outstanding job today in that respect. We have already talked about infrastructure projects, which the Chancellor highlighted. Importantly, on skills—I look forward to saying more on this in a few minutes—we will deliver millions of quality apprenticeships during this Parliament, making sure there are 15 clear, meaningful career paths linked to defined industrial sectors. There is also action on science, as we saw in the autumn statement. Some £2 billion a year of extra funding is promised for science, which will make a huge difference to what we are seeking to achieve.
Overarching all of this has to be the need to control our public finances. It has been, and continues to be, a long and hard slog to reduce the deficit left to us by Labour in 2010. I therefore applaud the Chancellor’s commitment to continuing on a sensible path to a global Britain that pays its way in the world.
In leaving the EU, we can become a global champion of enterprise and free trade, but we must recognise that Brexit, combined with other world events, has created heightened uncertainty in the short term, and that requires national economic assumptions and policies to be revisited. In its latest quarterly small business index, the Federation of Small Businesses has found that, while confidence is improving—getting back to pre-referendum levels, according to the FSB’s chairman, Mike Cherry—actual investment intentions remain somewhat subdued in the face of an uncertain landscape.
The Government are therefore right to take measures to steady the ship and to revive confidence after the momentous vote to leave the EU. As we know, buoyant consumer confidence has boosted the economy by more than was predicted in the aftermath of the referendum, but we need long-term investment too. The Government stepped up to the plate with infrastructure projects that will boost the capacity of the economy—notably, in transport policy, and I have already talked about the extra £90 million of investment that is being made available to address pinch points in the north.
We now need to make sure that we boost business spending and much-needed business investment too. Some of that will come through leveraged funds—from projects the Government support or enable. The £1 billion investment in Manchester airport over the next 10 years is a classic example of how, by clarifying things and building confidence, the Government will encourage business to invest in these vital infrastructure projects.
Underlying the measures the Chancellor has taken today is the Prime Minister’s clear plan for leaving the EU, which will work hand in glove with the modern industrial strategy. That strategy is modern because it will create an economic environment that enables winners to emerge without being picked. It is a healthy mix of horizontal and sectoral measures that enables the Government and businesses to drive forward with determination and commitment.
Those actions are solid foundations for the clarity and certainty that businesses need, establishing strong links with the place-based, sub-regional strategies of local enterprise partnerships and combined authorities, with their newly devolved powers. This comprehensive, joined-up approach stands in stark contrast to the chaotic, sloganeering and uncosted spending plans we heard from the shadow Chancellor at the weekend and again from the Leader of the Opposition today—woeful!
The way our modern industrial strategy is shaped is just as important as the end result. The strategy needs to be not only ambitious but effective, and businesses must be fully engaged, so it is good to see that the Chancellor and the Secretary of State for Business, Energy and Industrial Strategy are taking the lead in developing stronger, more trusting relationships with many businesses. Establishing a modern industrial strategy in that way creates the clarity we need to counter uncertainty and to build confidence and trusting relationships so that we can seize the economic opportunities that lie ahead.
That rightly puts a clear focus on productivity. I was pleased to hear what the Chancellor said today about the national productivity investment fund, and particularly about investment in skills and the commitment to improving the reputation of technical skills, which has been left undone for decades. The new T-levels will be vital and will make a real difference to social mobility and life chances, regardless of where people live in the country.
In the spirit of improving productivity and life chances across the country, I also welcome the Chancellor’s action—this was not mentioned too much in his speech—to boost broadband, as set out on page 43 of the Red Book, where there are proposals for connection vouchers, which will be welcome in parts of the country that have felt overlooked in recent years.
I am pleased to see the Chancellor’s continued commitment to the northern powerhouse, despite the comments of the Opposition, and particularly to the Cheshire science corridor, which is pivotal to the growth that we want in constituencies in Macclesfield and across Cheshire. It is worth noting that the ONS has set out that R and D spending by businesses is much greater in the north-west than it is in London. We have a really solid base of investment in the private sector, as well as in the public sector, in the north-west. The single largest area of R and D expenditure for businesses is in pharmaceuticals, which are critical not just for the science corridor in Cheshire, but to ensure that the whole country achieves its full potential.
We must continue to foster and support the gross value added that is created by pharmaceutical manufacturing, which contributes massively to our country—more so than in any other country except Germany. Cheshire East has a higher GVA per head than east Surrey, and we want to see a similar improvement in productivity throughout the entire north-west. We will make sure that that happens through the innovative work that is being done in technical training. We must do more to improve skills. Setting out 15 clear career pathways for apprentices is vital and the new T-levels that are being talked about are very welcome, as is the £500 million investment in tech skills for 16 to 19-year-olds. That will help to transform their experience and help us to be ready for the challenges ahead. For those reasons, I give my full support to this very important Budget.
In his response to the Budget, the Leader of the Opposition set out an impressive list of spending commitments. Unfortunately, he ran out of time, so he was unable to spend much time on macroeconomic matters, wealth creation or setting out an alternative economic strategy.
The context of the Budget is that there are some good things in the economy. Growth has been better than many of us had expected, and better than most people forecast before the Brexit vote, were it to be a Brexit vote. The unemployment figures are singularly impressive: 2.6 million more jobs in the past seven years, one in five of them on zero-hours contracts, and the majority of those working part time do not wish to work full time. Inflation is up, and most economists say that a little bit of inflation is a good thing. The Government are prepared, quite rightly, to guarantee the triple lock on pensions only until 2020, because of their concern about intergenerational imbalance.
On the other side of the balance sheet, however, we have economic positives bought on a sea of debt. The Government have been spending money for the past seven years like a drunken sailor. The national debt has gone up almost 70% in the past seven years. We are still running a huge deficit on current expenditure, and the Government forecast that we will continue to do so. The Government have been sweating the infrastructure for the past seven years, so it is wearing out. We only need to look at all the potholes around the United Kingdom to see that.
The Government keep saying, “We are trying to cut debt for the benefit of the next generation,” when in fact they have loaded debt on the next generation—not only the national debt, which is up 70%, as I said, but student loans, which are a massive burden on the next generation, and of course the failure to address the market failure in housing across the United Kingdom has meant that the cost of renting or buying has shot up massively in the past seven years. Who does that hit the hardest? The next generation. It is nonsense to talk about lifting the economic burden on the next generation, because we have market failure.
The hon. Member for East Antrim (Sammy Wilson) said—to use my phrase, not his—that when we look at Brexit, we need to look at the silver linings: the things that we can do differently when we leave the European Union. There are some positives, and I say that as someone who thought we should remain in the European Union. We are not going to do so. Outside the European Union, we can adopt a more collectivist approach. We can have a bigger role for the state in our country. For example, we could have a state investment bank. In appropriate circumstances, the state could take equity stakes in our enterprises and could own patents—not just financing research and development, but owning patents—as a source of collective wealth for us in the future. The Budget does not address the imbalances of wealth and power in our society, which is what Labour Members want to use the economic levers of the state to do.
On wealth creation, which I mentioned earlier, we welcome the spending on productivity announced in the autumn statement and rehashed again today, but the state ought to take a stake in some of that investment in STEM matters. Similarly, on broadband, the Chancellor glibly trotted out his encouragement for 5G today, which sounds great. There is not yet even a standard on 5G, but the Government keep banging on about it.
I welcome cutting down the number of skills qualifications from 13,000 or so to 15, because some of them, frankly, are Mickey Mouse qualifications. That continues the Government’s drive—their fetish—about having 3 million more apprenticeships. For many years, our country has been bad at workforce planning, as we can see in the NHS. Workforce planning in relation to skills for the future will be made worse by the Chancellor appropriating to himself powers over schools. We will have a worse school system in England, which will make skills provision and workforce planning worse.
The Budget totally failed to mention housing once not only in relation to its cost but as a driver of economic growth and an investment for the future. We should allow councils to borrow to build council houses—a state-owned asset that provides a return for us all for the future, as well as better lives for people. We should look at rebalancing the economy away from London and the south-east, as was mentioned by my hon. Friend the Member for Kingston upon Hull North (Diana Johnson), and we could do that with much better and targeted infrastructure spending.
On the taxation side, there were—as ever—many missed opportunities in this Budget. There will be fewer HMRC staff in fewer offices, which will increase the likelihood of tax avoidance continuing. We need stronger measures on financial wrongdoing—we have not had any—so that those doing wrong in the City go to prison; prison is the big disincentive. For example, wrongdoing in Mitie’s accounts has just been uncovered, which the Financial Reporting Council did nothing about.
We have missed the opportunity to address the whole structure—for the future, in a digital age—of taxation on businesses. We keep banging on about corporation tax, but the Chancellor should be investigating a turnover tax on business. Such a tax lessens the chance of tax avoidance. If it was done the right way, the Government could do away with business rates and corporation tax. If they wanted to be really inventive, they could even do away with employer’s national insurance contributions—a tax on job creation—and have a turnover tax, which is much fairer and taxes virtual companies, as well as bricks-and-mortar companies. It is not just me saying that from left field—I tell hon. Members that I am from left field—but the Federation of Small Businesses, which has floated the idea of a turnover tax in relation to business rates. We ought to align taxation for simplification purposes, so that instead of playing around—as the Chancellor did, with £2,500 or £5,000 on some dividend tax break—we should align the rate of tax on dividends with that on capital gains tax and income tax.
We should split up the banks that are too big to fail. The Chancellor has ducked that one; in fact, he is going into reverse and weakening financial protections for us all. The Government should have announced that they were abandoning the private finance initiative. They are still investing in these disastrous projects. These are missed opportunities for thinking big about the future, while in the context of Brexit—the whole world is going to change—the Chancellor is still looking backwards. He did not even mention Brexit because he just does not know what to do: he is a rabbit in the headlights.
It is a pleasure to follow the hon. Member for Wolverhampton South West (Rob Marris). I am pleased to speak in support of today’s Budget. It puts Britain in a strong position as we leave the European Union, and it positions Britain and areas like Havant to take advantage of the fourth industrial revolution, as new technologies transform economies and societies around the world, including our own.
I welcome the fact that the Budget is given against the backdrop of an economy that has shown itself to be extremely resilient, confounding expectations by performing strongly in 2016. Britain is one of the world’s fastest growing advanced economies, the deficit has been cut by more than two thirds, the growth forecast is up and there is record employment, with 2.7 million more people in employment than in 2010. This Budget builds on the huge progress and strength in the economy that this Government have delivered.
I welcome the £500 million of new funding for technical skills and the introduction of T-levels. Those measures will upskill the workforce, build an economy that works for everybody and, ultimately, boost productivity. They will prepare British workers to succeed in the economy of the future, which will be underpinned by the fourth industrial revolution. Of course, all those measures build on the Government’s strong track record in education and skills generally, from the new university technical colleges to the 2.9 million apprenticeship starts since 2010.
The new £500 million of funding is particularly necessary, given the impact of automation on the labour market. I will focus on that point for the rest of my speech. Historically, the impact of automation has largely been felt in blue collar industries, such as manufacturing and mining, that involve repetitive tasks. As we enter the fourth industrial revolution, which is characterised by increasingly capable automation, artificial intelligence and sophisticated robotics, jobs in a vast array of services will be affected.
We must not be Luddite or downbeat about that development. The emerging technologies that are part of the fourth industrial revolution can be harnessed to catalyse economic growth and generate long-term prosperity. Today’s Budget will help us to do that. In Britain, we have to be the first to seize this opportunity. That means taking a proactive, high-investment approach to the challenge of automation. This Budget will help us to do that.
The Bank of England has estimated that up to 15 million British jobs may be at risk of automation, suggesting profound structural changes in the nature of our labour market in the decades ahead in this new industrial age. The potential job losses are largely in roles where a pattern of work can be replicated by a clever algorithm, a ready supply of data or a ready supply of energy. That led Professor Mary Cummings, the director of Duke University’s humans and autonomy lab, to say, paradoxically, that
“the more certainty your job entails the more likely is to be automated out”.
However, Britain has cause to be optimistic because of the measures announced in the Budget.
From the printing press to the personal computer, and now to the advent of artificial intelligence, driverless cars, 3D printing, robotics and advanced manufacturing that we see today, Britain’s economic history has been a continuous story of technology substituting for human labour across all sectors of our economy, as increasingly sophisticated machines displace workers at a fraction of the cost. From farm automation to the big bang in the City, we have always embraced technology. That technological progress has also led to rising productivity gains, as new jobs are created in new industries. If we want the words “invented in Britain”, “manufactured in Britain” and “designed in Britain” to be our hallmark in the 21st century, we have to continue investing in skills and technical education. That is what this Budget does.
The answer to what John Maynard Keynes called “technological unemployment” has always been the same. Today’s Budget reaffirms our answer as a Conservative party: we have to embrace the efficiencies brought by innovation; we have to reach for the future; and we have to help people learn new skills, so that they can take up the jobs created by economic growth.
By mentioning John Maynard Keynes, the hon. Gentleman tempts me too much. Surely, John Maynard Keynes would have eschewed austerity and looked for a fiscal stimulus instead. That is what the Government, and particularly the previous Chancellor, should have been doing, rather than the austerity cult we have had for years.
I thank the hon. Gentleman. I think that John Maynard Keynes’s economic theory is now largely discredited. As Conservatives, we prefer a pro-innovation, free-market, low-tax economy that helps entrepreneurs and businesses to grow. As we enter the fourth industrial revolution, our job is not to hold things back and yearn for the past, but to reach for the future. That is what investing in skills and T-levels will do. That is why I am so pleased that the Government have decided to invest in T-levels and in streamlining the 15,000 courses down to just 15 routes that are linked to the needs of employers in a modern economy. I prefer Adam Smith to John Maynard Keynes. He is much more relevant to the modern economy that we want to build in this country, and he was a Scotsman.
As we move to a more automated digital economy based on the free market and innovation, the supply of workers with science, technology, engineering and maths skills—STEM skills—will be critical to Britain’s ability to compete in the world, harness the fourth industrial revolution to our benefit and project an image to the world as we leave the European Union of a bold, confident and technologically enabled modern country. The Budget helps because it helps our skills base to get fit for the future.
As we leave the EU, develop a new industrial strategy and adopt an outward-looking global trade policy, we must continue investing in skills and reforming our education system to ensure that people have the right skills to succeed in future. As we do that, we will build on a position of tremendous strength. We have world-class universities, sixth forms and further education colleges, including South Downs in my constituency; a strong base of scientific research; and an extra 1.8 million children going to good or outstanding schools since 2010.
We build on very strong foundations, but to equip Britain to lead the fourth industrial revolution we need fully to understand its implications on our labour force and skills base. Our approach must therefore be strategic and long term. I hope that Ministers in the Treasury and other Departments, including in the Department for Work and Pensions, will consider my proposals for a detailed review of the nation’s skills base to be conducted at the start of every Parliament—a future skills review backed by the Treasury. I hope that my hon. Friend the Financial Secretary considers that as a representation for the next Budget.
Just as the strategic defence and security review examines the country’s long-term security needs, and just as the comprehensive spending review sets out our long-term spending priorities, so a new national future skills review will help us to futureproof our economy and skills base. That future skills review will look above the horizon and examine our long-term skills needs. It will also identify the sectors and industries that are vulnerable to automation, and the opportunities for new technology to help drive economic growth. The review would give us valuable data to identify skills gaps, inform national policy making and help educational institutions to plan for the future, particularly to meet the needs of employers.
In the long term, a new wave of jobs will be created by businesses harnessing the power of the fourth industrial revolution. They will harness that power to expand and provide new jobs and products, from British-made 3D printers to British-designed driverless cars. Mastering and leading the fourth industrial revolution must begin with closing the skills gap, so that Britain’s workers are equipped to take up those new jobs. A first step is investing in skills, fully understanding the challenge of automation, and responding decisively and strategically through a skills review and new investment. Those are the steps that will get Britain to the future first.
I invite right hon. and hon. Members with an interest to the launch of the new all-party group on the fourth industrial revolution on 20 March, where the Chancellor will speak from the platform about how the Government are committed to helping to deliver an economy fit for the future. In the meantime, I am proud to support the Budget and will be delighted to support the Finance Bill as it progresses through the House because it helps Britain to futureproof its economy and improve its skills base.
It is a pleasure to follow the hon. Member for Havant (Mr Mak), who spoke about the fourth industrial revolution. We still have lessons to learn from the first.
This is the eighth Budget delivered by a Conservative Chancellor since 2010. Those of us who are old enough to remember will know that the first was rather cheekily called an emergency Budget. It said boldly that, by 2015, the deficit would be gone. Today, we heard that, by 2022, the deficit will be £19 billion. The Government have a record of failure. That target was set by the Government and they failed to meet it. They knew what the task ahead was, set a target and failed.
Strangely, I do not remember that; but the Government certainly got their excuses in early.
What we had from the Chancellor Alistair Darling in 2010 was a really excellent costed plan to reduce the deficit in a measured and sensible way. What we got from the Conservatives was an increase in VAT, deflation of the economy, stopping investment in infrastructure projects—a mess that has led to increased failure and decreased capacity delivering in the economy.
Let me make some progress.
I recently saw an example of the problems in our economy, and I want to talk about the difference between investment in the economy in the south-east of England and failure to invest in the economy in the rest of the country.
I recently had the great pleasure of going to Belfast. I flew from Manchester airport and I caught the excellent mini-bus from Wrexham station to the airport. It is really good, but holds only about 12 people. It got me there well. When I came back, I flew to London City airport, and from there I seamlessly drifted on to the docklands light railway, which came through investment in the local economy. I then moved seamlessly on to the Jubilee line, and I was here in 45 minutes. Wrexham is a 45-minute drive from Manchester airport, but can we get a rail connection to Manchester airport from north Wales, where some of the best businesses in the country are based? In the present system, that is absolutely impossible, and the reason for it relates to the 1980s, to where we need to look back.
In 1985, I was a newly qualified solicitor. I ran my own business and employed 12 people, so I do not need lectures from the Tories. When I started off, we had wonderful institutions such as the Halifax building society, the Leeds Permanent building society and Northern Rock—do Members remember them? They were all destroyed by demutualisation. Not only were they the main lenders to house buyers—to young people who wanted to start up new businesses; they were great regional institutions. The Halifax building society was an incredibly important regional institution. In the 1980s, those institutions were destroyed, and all the power was sucked into the south-east of England and the City. Now we have about three banks in the country from which everybody borrows. That is at the root of the problem we face.
The right hon. Member for Tatton (Mr Osborne) talked a good game: he talked about devolution and about the northern powerhouse—I was pleased to hear that. I am delighted to see that the Minister for the Northern Powerhouse has just arrived. He obviously got word that my speech was coming. It is really good to see him; he must come to Wrexham. If he does, I will look after him very well, as he knows. What we want in Wrexham, in north-east Wales and in Cheshire—the hon. Member for Macclesfield (David Rutley) is no longer in his place, but would benefit from this—is a local functioning infrastructure system that supports our local businesses.
As we have heard in the Chamber today, Germany is at the top of the list as the most efficient economy in the G7. Germany has lots of regional centres: Hamburg, Munich, Frankfurt, Düsseldorf, Stuttgart—I could go on. All those regional economies have regional banks, Sparkassen, which are required to invest in their local economies. I live in Wrexham, and if there were a Sparkasse there, I could pay my salary into it and I would know that the money was being invested in my local economy.
We need a fundamental reassessment of how to support local areas. Let me explain why. The private sector does not invest in this country’s regions. There is a market failure, as my hon. Friend the Member for Wolverhampton South West (Rob Marris) says. He made an excellent speech, and I am grateful that he is coming forward with sensible, radical economic thinking. We need new institutions through which local people can choose to invest in their local economy, because the present system is not working.
The only way of getting money from this Government—I am afraid it was the same with the Labour Government—is to go to the Treasury with a begging bowl and say, “We want some public investment in services in our area.” I have been an MP for 16 years and I have done this every year. It is very unsuccessful. It was announced today that over the next four years £200 million would be invested in public sector projects in Wales. Not one penny piece has been invested by the UK Government in transport projects in north Wales, although we have major businesses such as Airbus, and just over the border is General Motors, which needs Government support over the next few years in order to preserve jobs and be efficient. It is virtually impossible to get money from the Government, and it is virtually impossible to get private sector investment. That is because we do not have the institutional framework that enables us, if not to receive money from the Government, to borrow the money. I saw that in the 1980s in the north-east of England, where I was brought up.
I cannot give way; I have very little time.
In the 1970s, an excellent public transport system, the Tyne and Wear Metro, was built on Tyneside. That is what we need in north-east Wales. It was created by the Tyne and Weir passenger transport executive. Mrs Thatcher abolished that body because it was successful, and because it was a threat to her centralisation programme, which was a massive step. Not only was the private sector centralised; the public sector was centralised as well. What we need to see in this country is a radical change. We need to get away from the small-scale tinkering that took place today, and start investing in our local economy.
Let me end by mentioning a company in Wrexham called Dee Valley Water, It was doing an excellent job in Wrexham and Chester, but I am afraid that in the last three months, against the wishes of its own workforce and against the wishes of local people, it has been taken over by Severn Trent, which will now provide monopoly water services in our area. I cannot remember exactly what Severn Trent pays its chief executive, but it is either £2.4 million or £2.6 million, and we, the people who pay for water in the area, have to contribute to that sum. This was done over our heads: we had no say.
We need a change in the corporate governance system relating to businesses so that such obscenities end. We need the devolution of powers to local communities, which have been waiting for far too long. We have had centralisation under both Governments. The horrors of the 1980s need to be swept away, so that we can make real progress for our people.
It is a great pleasure to follow the hon. Member for Wrexham (Ian C. Lucas). I felt as though I were being given a history lesson rather than engaging in a Budget day debate. However, one part of the history was missing: the years between 1997 and 2010, when the hon. Gentleman sat on this side of the House as part of a Labour Government. If certain things were so bad, the Labour Government would surely have rushed to change them, but, of course, they did not.
As for the idea that there are “only three banks”, the hon. Gentleman might want to pay a visit to a branch of the Nationwide Building Society some time soon, or even visit the Coventry Building Society, which is not so well known throughout the country, but which now has customers in virtually every postcode district. It is also proud to say that it was the largest lender not to lose money on the sub-prime market.
However, it was not the history lesson on which I was planning to comment. I was planning to comment on what has been said so far in the Budget debate, and to welcome what we heard from the Chancellor earlier today. In particular, I note the growth projections. Given some of the prophecies of doom that we were hearing from all sides this time last year, when we were being told what might happen if we voted to leave the European Union, the rise in those projections is welcome.
I hear a heckle. It is true that we have not left yet, but most businesses do not look at what is happening immediately; they look at what will happen in a year’s time, or in two or three years’ time. The fact that businesses are still prepared to invest—and we have seen major investments coming into this country—shows that there is a confidence in the economy that has not been shaken by the vote, which is very positive.
I thank the hon. Gentleman. I realise that he has only just begun his speech. If he alludes to the shift in the growth projections in the Office for Budget Responsibility document, he also needs to know that, on page 87, the OBR has reduced its forecast for wages and salaries growth, and that on page 61 it has lowered its forecast for household disposable income.
I am sure that, as ever, the hon. Gentleman was seeking to be helpful with that intervention. Let us be blunt: the root of our economy is its size and overall growth. That is what we base our public services and funding on, and what we build our whole economic structure on, and it is strange to say that that is negative. Actually, we should be looking at things such as the living wage, and the fact that we are implementing and targeting tax changes for those on lower salaries; many people in my constituency of Torbay will benefit from that. I can understand, however, why there might be some uncertainty about the future among employers north of the border, particularly given the SNP Government’s intention to try to rip Scotland away from the single market of the United Kingdom. If anything is going to take growth down for Scottish companies, that will. [Interruption.] Well, we hear the shouting—
Canada exports 75% of its products to the United States of America. Is the hon. Gentleman arguing that a country should be united, with the same Government, with its chief export destination? That logic will ultimately lead to one global Government, as all countries will have to join with the country they are majorly exporting to. The hon. Gentleman is promoting a fallacy—a Tory fallacy, obviously.
It is interesting to hear the example of Canada; of course, there is a part of Canada called Quebec that rightly rejected nationalist arguments in two referendums, and I hope there will be a parallel situation in Scotland if the SNP is daft enough to call another referendum.
I say this about international trade and how we do well: I know the hon. Gentleman will be greatly looking forward to working as Chair of the International Trade Committee and as part of the United Kingdom to make sure we get the best deal we can out of Brexit. We will all look forward to receiving his Committee’s reports.
I will not give way again, because I have already given way twice in the first two minutes of my speech.
The Chancellor made a joke about spreadsheets and his nickname of “Spreadsheet Phil,” but what I quite liked were the tables, and in particular chart 1.2 showing the consistent reduction in unemployment. That again shows one thing that we have always known about Conservative Governments: we find unemployment a lot higher than it was when we left office, and then proceed to reduce it again while in office, giving more people the stability of an income, and making a difference.
To focus on the key issues for my constituency, I greatly welcome the additional funding for social care. I am a member of the Public Accounts Committee, and we published our report on the NHS and social care last week. There is clearly a need for a long-term debate about how we manage the future liabilities and pressures that will come on those services.
We debated what that means for the future of local government in the Local Government Finance Bill Committee. All of us want to know that when we or our loved ones reach our 70s, 80s or 90s—one of the greatest successes of the NHS is that more people are doing so—the social care will be there. [Interruption.] I will not be cruel enough to point to one particular Member who was making these comments—[Interruption.]—although I will mention the hon. Member for Wolverhampton South West (Rob Marris), who is chuntering from a sedentary position. To return to the subject, it is right that the Chancellor recognised that challenge, particularly in communities such as Torbay; we do need to make sure the funding is in place.
I would, however, disagree with some of the comments about having a national care service, because I want to see an integrated care service. If we were setting up the NHS and social care system today, we would not set it up with a split between local government and the national health service for services which we would all refer to as healthcare services.
I particularly welcome the measures on business rates. The discount for pubs is welcome, but I am keen that we must not penalise those who have been most successful. When we look at how we value these things in future, moving away from purely property taxes, we must not hit those who have been very successful, and there has been a debate about that in relation to pubs. The revaluation is broadly welcome, however. Torbay was not served well at all by the revaluation in 2008; our high street was clobbered with rates that are totally beyond likely rental incomes, particularly given that landlords end up offering discount “pay the business rates” deals rather than rent in order to get units occupied. The revaluations will see much of that corrected.
Looking ahead to the future, it is easy to say, “Let’s consider a fundamental change,” but as those of us on the Public Accounts Committee who had the pleasure of taking part in the inquiry into Google know, there is an issue with how we make sure that taxation follows the modern economy. It is much easier to say that a physical building on a high street or an industrial estate should pay x amount of tax, but that is more of a challenge with regard to websites based on overseas servers that allow companies to route their orders and billing and invoicing operations more easily. I hope we can have a sensible and positive cross-party debate about that.
I have two grammar schools in my constituency and one just outside it, so I welcome the support for them. The funding formula presents a challenge, in that a lower percentage of pupils in Torbay grammar schools are on free school meals than those in other secondary schools in the area. The plans to encourage them to increase that rate are welcome, and the three headteachers are absolutely committed to doing that. It is unlikely that we will see a new grammar school in the bay—that has always been clear—but Government support for them is welcome and positive.
Although I felt that going to university was the right choice for me, it is vital that we up-value technical education, so I was pleased to hear about the proposed T-levels. Tomorrow night I will be at the South Devon College apprenticeship awards, presenting awards to those who have done an apprenticeship. It is good to think about how we can get them more recognised. As has been said, they are solid qualifications that an employer can look at and understand in the same way as a degree, an A-level and a GCSE. They also have appropriate rigour. Some people think that a technical qualification is easier, but it is not. When I first spoke about encouraging degree-level apprenticeships, someone wrote on my Facebook page, “Is that like a YTS?” That just showed a complete lack of knowledge about how demanding a top-end apprenticeship is compared with quite a lot of university degrees. It is absolutely vital that people know what is available.
The Chancellor has put forward a solid and effective plan. I welcome the fact that we will continue to meet our manifesto pledges on allowances, particularly the basic allowance on income tax. I also welcome the overall tenor of the Budget: it is a positive statement about Britain’s economic future and many people will want to get behind it. We have only to look at this morning’s opinion polls to see that people have confidence in this Conservative Government and no confidence in the alternatives.
I am grateful to you, Madam Deputy Speaker, for the opportunity to take part in this debate. It can occasionally be a dangerous debate in which to speak. In my experience, Budgets that are welcomed on Wednesday are often damned by Sunday, but I do not know what would need to happen between now and Sunday for this one to be described as exciting.
Other Members have referred to Brexit as the elephant in the room. It is important that we understand and explain to those on the Treasury Bench why the Chancellor’s failure to address Brexit was so important. As a member of the Select Committee on Exiting the European Union, it is rarely necessary for me these days to stick my hand in my pocket to pay for bacon and eggs. Just about everybody wants to buy me breakfast to explain why Brexit is going to be so difficult for their sector. The one recurring message, whichever sector I speak to, whether it is the Corporation of London or farmers, crofters and fishermen in Orkney and Shetland, is that a hard Brexit and the determination to leave the single market and the customs union, possibly without securing a trade deal, which would leave us on World Trade Organisation rules, would be disastrous for them.
This is the first day since the Prime Minister made her speech at Mansion House on which the Chancellor of the Exchequer has had an opportunity to give some reassurance, and to tell the various sectors of our economy that there was an understanding of their position, but he failed to do that. His failure to say anything on the subject was culpable and could ultimately be catastrophic.
It was also disappointing for Opposition Members that the Chancellor seemed to have nothing to say about the need to tackle climate change. There are so many possible measures, many of which are not particularly expensive. There could have been more measures to encourage energy efficiency, and only a small amount of money would be necessary to develop renewable energy—most notably, in my constituency, through wave and tidal power generation—but there was absolutely no mention of those things. At a time when there are so many other pressures calling for the Government’s attention, it is more important than ever that the long-term issues—of which climate change is probably the most clamant—should not be forgotten.
I am not, however, one of those who think that a determination to tackle climate change means that we should turn our back on hydrocarbons. They remain an important part of our economy, particularly in my constituency in the Northern Isles. I was a little underwhelmed by the Chancellor’s offer of a discussion document, especially since it was the second such offer, but on reflection, and having heard a few other emerging details, I believe that this at least shows an understanding of the need to take continued, serious action to help the North sea oil and gas industry.
The Chancellor did not refer to it, but I understand that the Government have today laid before Parliament a statutory instrument—I have not yet had sight of it—to extend the definition of investment expenditure for certain categories of operating and leasing expenditure. That will be welcomed by the industry. [Interruption.] The Financial Secretary to the Treasury has just indicated that it will be backdated. This measure could have a significant effect on our continued exploitation of resources on the UK continental shelf. We will await the Government’s discussion document with interest and see what it says.
The real story that will emerge from this Budget is the Chancellor’s lack of understanding of small businesses. He is really out of touch, and at no time was that more transparent than when he spoke about the changes to national insurance contributions for self-employed people. There are abuses of self-employed status. In the so-called gig economy, employers such as Uber are taking people on as self-employed agents when they are, to all intents and purposes, employees. That needs to be tackled, and it is something that the Chancellor could usefully have taken on today.
In fact, the Chancellor has introduced a tax increase for some of the most hard-pressed people in our communities. I think he has done this because he just does not understand what life is like for people who work as builders, plumbers, window cleaners or hairdressers, and for the many others who will be affected by this change. He says that this is about levelling the playing field between employment and self-employment, but we all know that that playing field will never be level, and that fact has to be recognised in our tax structures. Self-employed people take risks, sometimes putting their house on the line. The reality is that if a sole trader does not work, they get no sick pay. If their business goes bust, no one will step in and give them a redundancy payment.
Does the right hon. Gentleman agree that millions of these people are, in essence, not self-employed by choice? They have just been let out by big companies to save those companies paying national insurance and all the other benefits. They have been left on their own in a position that they do not want to be in, and now they are being punished by the Government.
That was the point I was making about Uber and other companies that take on people as nominally self-employed agents, when to all intents and purposes they are employees. That must be tackled, but this Chancellor seems to have no great enthusiasm for tackling the big corporates. The change will not hurt them; it will hurt the small sole traders who are working in their own right, rather than as agents of a bigger corporate.
The right hon. Gentleman talked earlier about waking up tomorrow and having another look at the Budget; may I suggest that he does that with regard to this issue? According to the Chancellor’s figures—I do not know whether they are accurate—the increase will raise £146 million a year, and national insurance tax breaks for the self-employed are £5 billion a year. Proportionally, on the Chancellor’s figures, that is not a big increase.
That brings us back to the same crux of the problem, which is that we are treating everybody with self-employed status as though they were living in the same way, but they are manifestly not. There is a distinction to be drawn between risk-takers and entrepreneurs, and those who are effectively employed but are treated as self-employed. That is the issue, but it will not be tackled by today’s change.
Likewise, the digitisation of tax will affect many sole traders and small business people. It is welcome that the proposal has been delayed for a year, but we all know about the problems that will make it difficult and, frankly, I do not see many of them being resolved in a year. All we have done is kick the can down the road.
The Liberal Democrats welcome the extra money for social care, but I fear that it will ultimately be inadequate, and that we will be in the middle of another NHS winter crisis this time next year. I wonder how many more crises our NHS will be able to sustain while retaining good-quality staff and providing the service that we enjoy at present.
My final point is about spirits duty—[Interruption.] I do hope that I am not intruding on the shadow Chancellor.
I am an easy person to miss.
Spirits duty is being increased by 3.9%, which has already been rightly condemned by the Scotch Whisky Association. Not only will that affect an enormously important manufacturing sector for my constituency and for the Scottish and UK economies, but the effect will go beyond Scotch whisky. When I was first elected to the House in 2001, my constituency had what would be called one and a half whisky distilleries. We now have two full-time whisky distilleries and three gin distilleries. [Laughter.] I am not claiming responsibility or credit for that, but we all know that the market supplies when demand increases. The point is that that is typical of many areas of the country. It is a growth area with small, growing businesses that deserve support; they do not need to be clobbered in this way.
I must confess that I feel as though the Chancellor has dusted off the black polo neck that he apparently used to wear as a young man and has delivered to us a box of Milk Tray, such are the delights that we heard about this morning. I want to run through a few of them before I get to the coffee cream and the nutty centre, which may provide a little more grist to the mill.
On schools and skills, more money in the system is extremely welcome. I particularly welcome the formalisation of training in the new T-levels. A huge number of young people in my constituency will look to those new qualifications with glee and will be pleased to participate in them. Such careers are increasingly developing as an alternative to going to university. A lot of young people want to get straight into the workforce, so the qualifications will be extremely welcome.
Similarly, the new money for the social care system will be welcome in constituencies such as mine, where the average age is higher than the national average. I have a large number of older people, and they often get trapped in the health service and look to the Government to help them to transfer back home, and back to a happy life.
Although the vast majority of businesses in my constituency are seeing a reduction in their business rates bill—hooray!—some smaller pubs in which there has been particular investment, and that have had success in trading over the past few years, have been presented with quite large rises, notwithstanding the transitional relief available. It is extremely welcome that the Government are making more money available to those pubs, and a foaming pint will be raised to the Chancellor at The Wellington Arms in Baughurst this evening.
I will now pick out and welcome one or two of the more obscure items mentioned by the Chancellor that have not been part of the general debate. His commitment to science as part of the British economic mix over the next few years is extremely welcome. His predecessor had a similar commitment, but the current Chancellor has made a point of mentioning science in pretty much every announcement he has made.
The £300 million allocation towards more PhDs and more research into innovative technologies, particularly in academia, is extremely welcome, as is the crucial simplification of research and development tax credits. If we are to bring together the alchemy of private capital and publicly backed science, we need to make it as simple and as easy as possible, so the encouragement to companies to invest capital in order to take advantage of R and D tax credits in a simplified way is extremely welcome.
The Chancellor also announced a Green Paper on consumer markets, which will be critical over the coming years, because notwithstanding the fact that the internet has disrupted a number of consumer markets, including insurance and energy, there is too little uptake by consumers of the advantages that the internet provides in markets such as energy and telecoms. Some 90% of people have yet to consider switching their energy provider, but by doing so, they could save a huge amount of money. Those areas need to be looked at, and I will participate in the Green Paper with enthusiasm.
The NHS capital programme is absolutely key, and it is brilliant that we are getting more support. In North West Hampshire, we are looking at a whole new model of operation around a new critical treatment hospital at junction 7 of the M3. The clinical commissioning group is wrestling with the issue at the moment, so more resources to help it would be fantastic.
Finally, domestic violence is an issue with which we have struggled. When I was doing the policing job at City Hall, we were the world’s first major capital city to introduce a strategy to address violence against women and girls, and we did so with our own resources. That was followed shortly thereafter by the Government, under the leadership of the then Home Secretary, now Prime Minister. It is fantastic to see her ongoing commitment, through the Chancellor, to investing in this important area.
Now on to the coffee creams. I am grateful to the Financial Secretary—this is part of her responsibilities—and the Chancellor for listening to the howls of anguish about “Making tax digital”, the prospect of quarterly returns of information to the Inland Revenue, and the burden that would place on small businesses. The extra year for those below the VAT threshold is extremely welcome. Nevertheless, I am sure that the Financial Secretary will appreciate that many of the small businesses that will be left out of the easing of that obligation will now feel that they should be included. I hope that she and her colleague, the Chancellor of the Exchequer, will be open to more conversations about how the system can be improved.
I accept that the path, in reporting business taxation, should be towards digital, as there will be enormous savings for the Government and for businesses, but I encourage the Financial Secretary to listen to the professional and business organisations that still think the Government can go further to make the system work. I am more than happy to sit down with her to talk about that, but I am grateful for the fact that she has listened to the campaign by me and others.
Finally, it will come as an enormous relief to an awful lot of businesses that the predictions of doom and gloom before the referendum have not come to pass, and that the macroeconomic picture is improving, forecast by forecast. Every organisation, from the OECD and the OBR to the Bank of England and, indeed, a lot of private forecasters, have revised their ideas about the economy upwards with every month and quarter that passes. That is a great relief.
Yes. Of course, given the comparative economic situation in the EU, his words seem even more hollow.
The economic picture is looking better and better as each forecast is delivered. Having said that, I am enormously reassured by the Chancellor’s continued commitment to sorting out the deficit and trying to get our public debt under control. I know I am not the only person in the House who, on seeing the figures he presented, was reassured about the economy’s path but remained terrified by the level of our national debt and the speed with which it is growing. We accrue national debt of around £5,000 a second. We are spending enormous amounts of money over and above what we earn, and unless we get that under control, we will leave a dreadful legacy to our children and grandchildren. It would have been easy for the Chancellor to ease up a bit—to try to keep Members happy, or happier, by splurging a bit of money here and there and spending even more on the chocolate box—but the fact that he did not, and instead prioritised the notion that we should get our house in order, is enormously reassuring. In the early days of his chancellorship, he is showing great promise in helping us to turn the country around.
North West Hampshire is a part of the county of Hampshire, which is teeming with small businesses. We do not have that many large ones—one or two—but we have hundreds, if not thousands, of small businesses that are extremely sensitive to movements in the national economy. The fact that we are in the hands of a Chancellor who is committed to steering the economy on a steady path, without lurches one way or the other, will be an enormous reassurance to them and will set the course for future success.
I am pleased to follow the hon. Member for North West Hampshire (Kit Malthouse), with whom I am happy to serve on the Treasury Committee. I agreed entirely with what he said about science and about “Making tax digital”. He ended with some remarks about the forecast, which is where I shall begin.
I think everybody agrees that the most interesting thing about the Chancellor’s speech was what he did not say. The biggest economic change in the past year has been the 12% fall in the exchange rate since the Brexit vote. For the past six months, the uncertainty about our future trading relationship with the EU has damaged business investment, but it has not damaged consumption, which is why growth has continued faster than expected. Nevertheless, as the independent OBR’s forecast shows, that will not continue. As inflation rises, it will put a squeeze on real incomes. The boost we are currently seeing in export earnings is likely to be followed by a squeeze on margins for many businesses over the next few months. I notice that the Chancellor has put aside £26 billion, which is half what Michel Barnier says he will ask for in the negotiations. Meanwhile, public services are showing serious signs of strain, and we need to tackle the UK’s poor productivity record.
The best thing the Chancellor could do is to start to win battles on Brexit in the Cabinet. He needs to start to win the arguments on the customs union and on the need for harmonised regulation for industry on everything from medicines and chemicals to aviation and railway safety. It is uncertainty about those things that is causing the economic uncertainty and the fall in the exchange rate. New barriers will make real dents in our economic efficiency that we cannot afford, and they will be felt in lost jobs and lost opportunities.
The Chancellor’s money for productivity is welcome; this is a time not for short-term fixes but for long-term reform to address economic weaknesses and social discontent. His extra money for adult skills is welcome as far as it goes, but he is not yet offering maintenance loans for people in further education. Parity of esteem with higher education means parity of treatment.
On the money for schools, the Chancellor began by saying that education is the key to inclusive growth, but then went on to spend a lot of money on selective grammar schools—surely shome mistake. My constituents will be appalled by that move. In St Helen Auckland, where 48% of children are on free school meals, each child will get £609 less over the course of this Parliament. In Woodhouse Close, where 83% of children are on free school meals, there will be a cut of £571 per child. In Butterknowle, the cut is £1,881 per child. It is totally unfair to pour all the money into a tiny number of schools. The measures on school transport are unfair as well, as they do not take account of the long bus journeys that people have to make in rural areas.
The Resolution Foundation has published some interesting work recently, showing that the incomes of pensioners have overtaken those of working-age people. That problem will get worse over the next few months. We know that, for people in the bottom 10%, £1 in £6 is spent on food; for people in the top 10%, it is £1 in £12. At this moment, when we have higher inflation, the Government have decided to go ahead with a freeze on tax credits and child benefits, which are the income supports for the low-wage working poor. The Chancellor could have unfrozen those benefits to help millions of people had he not been committed to going ahead with inheritance tax cuts.
Absolutely. The Chancellor said very little about Brexit, the exchange rate or inflation. Those are the major changes in the economy over the past six months.
The Chancellor could have unfrozen those benefits that go to the low-paid working poor had he not been committed to going ahead with cuts to inheritance tax, capital gains tax and corporation tax. To cut corporation tax to 19% may be good for competitiveness, but to cut it to 17% is surely unnecessary at this moment.
I want to throw a lifeline of support to the Treasury team who seem somewhat embattled on the issue of national insurance. I do not know whether they want a lifeline from me, but I will offer it to them anyway. It is reasonable, on equity grounds, to even up the tax that is paid by people in employment and by those in self-employment. We need to look at that whole matter more closely.
I am pleased also that the Chancellor has eschewed the gimmicks of his predecessor. The commitment not to raise income tax and national insurance whatever the circumstance was exactly one such gimmick. However, if we are to look at national insurance, let us look at the fact that it kicks in at £8,000, below the personal allowance.
The one thing on which we all agree across the House is the importance of tackling tax avoidance. What the Chancellor did not say was that the largest amount of money that he is taking in—this is in the final section of the chapter—is an extra £500 million from tax credits, which amounts to another cut in tax credits. The Red Book says that it is a pre-announced cut, but it cannot be pre-announced because the extra savings of £500 million are new.
One of the problems with the Government’s productivity plan is that it is not sufficiently inclusive in respect of workers and people at the top, and of the regions. The Government should really start thinking about making this country more equal, both as an economic efficiency measure and as a social justice measure. The fact is that people with predictable and secure incomes can take on more commitments, and that in turn will boost the economy in the medium term.
“It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.” That is the theory of the great evolutionist, Charles Darwin. That theory is now very relevant, because we are facing a technological revolution. We have recently seen the rise and fall of various technologies, from Polaroid and PalmPilot to vinyl and video. The pace of change is so extreme that economists predict that two thirds of children starting school today will be in jobs that do not yet exist. The countries that can adapt and change will be the most successful.
As the Chancellor highlighted, in order to give our children the best opportunities we need to think carefully about how we train them. That training must not only encompass the ability to write, read and calculate, and include the capacity for thought, judgment and responsibility; it must also incorporate the practical, technical training needed to support our local economies.
As I represent an area with a thriving bio and agri-tech industry, I am delighted by the Chancellor’s focus on the importance of technical education, because his announcement in and of itself recognises the value of those skills. He is right to identify their worth, in circumstances where ICM Research states that employers rate higher apprentices as 25% more employable than others. His proposal to streamline such qualifications, putting them on a par with academic qualifications, makes them of equal weight and more comprehensible to employers. His announcement of £500 million a year to give 16 to 19-year-olds the necessary technical skills is also most welcome.
For many years we have talked about technical education. Today the Chancellor has given it the support and respect it deserves, but should we go further and be even more ambitious? Responding to change, linking up with business and inspiring innovation should start not as children leave their formal education but much earlier, in our primary and secondary schools. That needs to be facilitated by our dedicated teaching workforce. We need to link up our businesses with our teachers and to incentivise our innovative and technological industries to play a role in supporting, training and informing teachers of the work they are doing at the cutting edge of industry. When we fully embrace this, we will truly become a flexible, responsive and competitive country.
I am pleased to follow the hon. and learned Member for South East Cambridgeshire (Lucy Frazer), who made a shorter speech than I was expecting—it is always good to be ready to go when called to speak, Madam Deputy Speaker.
The Chancellor of the Exchequer undoubtedly has some laudable aims: he wants to support growth, have an economy that works for everyone, support infrastructure investment and improve productivity, but when he sat down after making his statement, I thought, “Is that it?” I share those objectives, because I want to support growth and aspiration, tackle poverty and improve public services, but his statement contained no strategy for how to achieve them. I believe that my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and the Labour party have a definitive plan to do that, rather than the smoke and mirrors we saw today from the Chancellor.
For example, the first item was supporting growth. I think that this year’s “golden pasty” for the quickest unravelling of a policy set out in the Budget will go to the rise in national insurance contributions—it might even be called the golden caravan, because that was also a policy that unravelled several years ago.
The Chancellor today announced a 2% to 5% increase in national insurance contributions for 5 million people. How does that support growth? Those 5 million people, including 3,000 in my constituency—7% of the workforce in my area of north Wales—are the hairdressers, window cleaners, builders, plumbers, electricians, small shopkeepers, gardeners and market traders who are taking risks, being entrepreneurial and not necessarily having the holidays that those in the employment of major companies would have. They are taking risks with their own capital and are not earning when they fall ill. Yet, in supporting business growth, the Chancellor has put an additional tax on those individuals, amounting to about £20 a month for someone earning £20,000, £30 a month for someone earning £27,000, £45 a month for those with a £35,000 income and £55 a month for those with a £42,000 income.
The golden pasty award relates to the Conservative party’s manifesto commitment not to raise national insurance contributions. People in my constituency will have put a cross next to the Conservative candidate’s name on the basis of no tax rises and no national insurance rises. If a Conservative Government have broken that promise, how can we trust them on anything else? The Financial Secretary to the Treasury has said that the changes were not to class 1 but to class 4 contributions, so it did not matter because that was not a manifesto commitment. I would like to see her explain that to the small businesses in the small towns in my constituency when I go back there this weekend.
I welcome the £435 million movement on rates, but it does not go far enough to deal with the impact on businesses in my constituency. For example, the Government have offered £1,000 to local pubs in constituencies such as mine. I was contacted last week by a pub whose rates on 1 April will have gone from £22,000 to £66,000. That is unbearable for a small business, and the Government should revisit that in due course if they can.
The Chancellor talked about investment in infrastructure. I want a growth deal for north Wales. In fact, the north Wales growth deal is mentioned in paragraph 4.29 of the Red Book, which says:
“The government…looks forward to…a North Wales Growth Deal.”
Exactly one year ago this month, the Secretary of State for Wales came to north Wales and said, “I want to push forward with a growth deal for north Wales. I want north Wales to come up with proposals for a growth deal.” Well, north Wales has come up with and submitted proposals for a growth deal.
North Wales sees the benefit to job creation of infrastructure investment in roads, transport and broadband. It wants the partnership between the state at local council, Welsh Government and UK Government level to make that growth deal happen, yet there is nothing in the Budget to support a growth deal but warm words. Why does this matter? It matters because the Government have promised in the Red Book a £200 million uplift to expenditure in Wales over the next four years. Let me put that into context. Inflation is currently running at 1.8%. The actual cost of that £200 million is about 1.3% of the total Welsh budget. Even with the Government’s figures on inflation—at 1.8% now, rising to 2.4% by 2017—the level of investment increase in the Welsh Government is below the rate of inflation. It will not meet the needs of our community. That matters because I want investment in infrastructure.
Before I came to London last Monday morning, I went to see a local £30 million investment by the Welsh Government and Flintshire County Council in a brand-new secondary school under the Building Schools for the Future programme, which is not now operational in England, but is operational under Labour’s Welsh Government. That £30 million is investment in schoolchildren and parents, but, conversely, it is actually investment in Galliford Try, a private sector building company, and in the people who make and paint schools. It is investment in carpets, computer technology and construction, all of which are done by the private sector. We can therefore boost local employment by public spending on infrastructure, as in the example of that school.
The £200 million is welcome, but let me finish by saying one thing: we will not be spending any of it on grammar schools in Wales, because the Labour Government believe in equality of opportunity and will invest that money in secondary education, supporting every pupil, rather than those who just happened to pass an exam at the age of 11.
What we have here is a Budget that sets out a transformational moment in our history. As many people have mentioned, we have spoken a lot about Brexit—about leaving the European Union—not just today, but over many of the weeks and months past. The idea that the Chancellor has somehow dodged the question is therefore frankly a little odd, in the same way that it would be odd to describe how we speak about democracy in that way—of course, the whole element is democratic. It is absolutely absurd to pick out bits and pretend they have not been picked on.
There are a few areas of the Budget I would like to pick out, which I am particularly keen on. The digital infrastructure budget of £740 million—much of it going into 5G and broadband—will be absolutely essential in constituencies such as mine. Rural communities such as mine have huge amounts of innovation and enterprise but little of the infrastructure to hold them together, and this money will allow them to communicate with not just each other but the world. As we open ourselves up to the world, and as the Department for International Trade makes such extraordinary efforts to link us very much to communities on the other side of the planet, it seems quite absurd that I could get 3G and 4G signals very easily in Kabul and Khartoum, but that, in Kent, getting a phone call at all is pretty tricky.
That money is very welcome, and so too is the spending on national roads infrastructure, because, of course, we do need to communicate internally. However, one area I have not heard enough about, which I would like to hear more about, is rail. So often, we focus on the economics of rail as though rail paid for itself through the ticket prices, but, of course, it does not. Trains pay for themselves not through the ticket prices paid by the travelling public but through the economic development they allow. I therefore hope very much that we will look again at rail infrastructure and look very seriously at how much more we can put in.
There are, of course, other areas. As an investor in a few start-ups in this country—I refer you to my entry in the Register of Members’ Financial Interests, Madam Deputy Speaker—I am pleased to see the £100 million for the global research talent pool and the £250 million of talent funding going to PhDs and suchlike. Attracting the best and the brightest to our community is about starting those businesses and generating that enterprise and innovation that will turn us into not just a more advanced, better and richer society but the think-tank and the start-up capital of the world, and I think that we can get there.
The case the hon. Gentleman is making about attracting the brightest and the best is a good one, and I agree with him on that, but does he agree that the Home Office has to play its part? In my constituency, I have two entrepreneurs who were brought here on entrepreneurial visas to start their business, and they are now being thrown out.
I am not going to comment, obviously, on the individual case the hon. Lady raises, but she is absolutely right that we will have to look with imagination at how we bring migrants into this country. As she will know, I was on the remain side of the argument, but many people on the leave side would say the same as I say now, which is that we must be open and much freer in how we look at this. Instead of focusing so much on European migration, we should perhaps go more global. I understand the argument, and I would rather have had freer European migration as well, but we are, as they say, where we are, and the vote has been cast. So, yes, the hon. Lady is absolutely right that the Home Office must play its part.
As we look through the various areas in which investment will happen, there are a few I would like to highlight a little more. First, I want to highlight the combating of domestic violence. Domestic Abuse Volunteer Support Services, which operates out of Tunbridge Wells, does a great deal to help victims of domestic violence to present themselves to court, to ensure that they get appropriate legal representation and to defend their interests properly against their abusers.
If we look in greater detail at devolution, we see that there is a lot of talk in the Red Book about city deals and about extra money going to Scotland, Wales and Northern Ireland, all of which I welcome, but there is not so much on devolution to Kent, for example. There is not so much on devolution to our boroughs and parishes, where a lot of our centralised efforts could be placed.
I want to highlight a few areas that contain perhaps a small element that I would work on. The Budget is not simply a collection of numbers; it is not an exercise in accounting; and it is not a spreadsheet. It is a political document, and it speaks to the areas in which we as a community, a Government and a nation wish to see investment and effort. It is a political work. That is why I find the emphasis on national insurance slightly concerning. I come from a political tradition that believes in small government and low taxes and that seeks to encourage entrepreneurship and enterprise. Although the figures that we are discussing are very minor—a percentage point here and there, or two over two years—they speak to a tone that is not entirely helpful, and in that I urge a rethink. We should be encouraging the self-employed, start-ups and people who are taking risks and carrying those risks themselves. We should recognise that through support, yes, but we should do so particularly through taxation.
That brings me to quarterly tax returns. I understand that the Chancellor has been generous in delaying their introduction by a year, but let us not kid ourselves that £85,000 a year is a particularly large turnover for a business; it is not. I would very much welcome a rethink about how we can assist those who do not have large budgets to pay accountants and who are not running businesses that will definitely generate millions in the future. We are talking about people who are experimenting. It may be two or three friends trying out an innovative idea, or two or three business partners experimenting with a new area of technology, who may indeed be the next Google but who are now in a garage somewhere in Manchester. It is worth thinking about what we can do to make sure that they have opportunities.
If we start putting burdens on businesses at a sum as low as £85,000, we will have to be careful that we do not discourage qualities that we Conservatives value—I know that the Chancellor, in his youth, demonstrated these—the innovation, the entrepreneurialism and the talent to succeed in this now-liberated Britain.
It is an honour to follow the hon. Member for Tonbridge and Malling (Tom Tugendhat). Bristol South has a proud industrial and economic heritage. It is part of the west of England economy, which contributes more than £10 million to the Treasury every year, but it is also home to some of the greatest health inequalities in England. The last Labour Government recognised the contribution made by the people of Bristol South to our prosperity. The last Labour Government invested in our future, in our young people and in the fabric of our city, but they also recognised the severe economic need that people faced. This Government continue to short-change the people of Bristol South, and today is no exception.
Let us consider the contrast between the 13 years of the last Labour Government and what has happened since 2010. In health, investment in doctors and nurses meant the shortest waiting times that NHS has ever experienced, with demonstrable improvements in health outcomes. The money allocated by the Labour Government meant that after more than 50 years of campaigning, the people in my community finally got the hospital that they had been waiting for—the excellent and well-appreciated South Bristol community hospital.
In education, teachers, support staff and teaching assistants improved educational outcomes for children. Every secondary school was rebuilt under Labour, with new classrooms, laboratories and other facilities in Bedminster Down and Ashton Park schools, as well as in schools in Whitchurch, Hengrove, Hartcliffe and Withywood. Families from across Bristol South benefited hugely from Sure Start, and a brand new £30 million state-of-the-art post-16 campus was an investment in our further education. Further education was thriving, with a wealth of adult skills opportunities.
But what has life been like since 2010? On health and social care, the Public Accounts Committee, of which I am a member, has asked for an end to the bickering about funding. The money is not enough for the programme of work that is expected, and the Government need to start being honest with the public about that. Today does not alter that position.
In education, our children face school funding cuts—every school in my constituency will lose out—and children’s services are under threat. Headteachers have told me their concerns about losing £1.9 million in cuts across the city, with a £1.8 million cut in the education services grant and a reduction in special needs funding as well. This Government have cut 40% from the adult skills budget, and there is now a gaping hole in adult training provision. We expected some social care money and that money is welcome, but over three years it is not enough. I look forward to the Green Paper, but it bodes ill that the Government have already said they do not want to talk about a death tax. Such talk will not help the future of older people in our society.
Under Labour, child benefit went up and child tax credits were introduced. We cut long-term unemployment and introduced the national minimum wage. Pensioners were lifted out of poverty, and children were lifted out of relative poverty. Now, under this Government, the one in five households in Bristol South that rely on tax credits have lost out. The Library has shown that the bedroom tax has cost Bristol South people some £3.6 million. Some 9% of people in my constituency are hard-working, entrepreneurial self-employed people, and today is a devastating blow for them.
With some hubris, the Chancellor said today that
“they don’t call it the ‘last’ Labour Government for nothing.”
I assure him and the people of Bristol South that the next Labour Government will once again reward their hard work, recognise their endeavour and deliver for them all.
I am pleased to respond to the Budget. I welcome the Chancellor’s commitment to consolidating the UK economy and investing in the next generation through education, skills and innovation.
I have two main points to make. First, support provided for ordinary families, children and young people is only possible because of a resilient economy. I am delighted by the various forecasts and upgrades that were set out at the beginning of the speech delivered by my right hon. Friend the Chancellor. As well as the OBR having updated growth this year from 1.4% to 2%, we should note the jobs miracle in this country and the upturn in employment since the Conservatives were elected to power in 2010. The fact that employment has risen from 70.2% to 74.6%, with a further two thirds of a million in work by 2021, has not happened by accident. It has happened because of a concerted effort to get people off welfare and into work and to create a jobs climate in which employment pays. Despite the higher than target inflation, real wages will also continue to rise in every year of the forecast.
The positive picture is further reflected in the predicted fall in public sector net borrowing and in relation to the debt we still face in this country. When Labour left office in 2010, we were borrowing £1 in every £5 we spent, which was unsustainable and irresponsible. This year, it is set to be £1 in every £15, so we are back on track towards living within our means.
All those elements contribute to and add up to a strong economy. Since the referendum, that strength has been undeniable. We heard today about Nissan and Google investing in the UK, but it goes much further. Despite the predictions this time last year about a recession, with a cost per family of £4,300, and of negative forecasts from the IMF, the IFS, the OECD and the Bank of England, the reality has been very different indeed. UK manufacturing has hit a two-and-a-half-year high, and services are seeing similar growth. The UK was the fastest-growing economy of the G7 last year, and PwC predicts that we will be the fastest-growing economy until 2050. Other companies are making significant commitments to the UK: Jaguar Land Rover, McDonald’s, Facebook, Adobe, IBM, Ford and Toyota have all made commitments to significant job creation and investment in the UK. I say that “Project Fear” is over and that it is time for “Project Cheer”.
Does my hon. Friend agree that the fact that economists and forecasters systematically underestimate the growth in the British economy reflects the fact that they cannot quite believe that the British people who voted so overwhelmingly for Brexit feel optimistic about the future and are therefore reacting in that way economically? That is what is driving growth forward. Does she think that if they embraced the idea that the British are optimistic about Brexit, they might get their forecasts a bit more accurate?
I agree entirely. The facts and figures and the behaviour in our economy since the referendum reflect the strength and resilience of our consumers, our economy and our businesses. That is laying the ground for a successful future as we leave the European Union.
My second point relates to education and skills. Education is the engine of aspiration and one of the core reasons that I am a Conservative. I believe in self-improvement, personal responsibility and hard work. This Conservative Government have notable achievements, such as 1.8 million children now being in good or outstanding schools. Of course, the job is not done. Much of that success can be linked to the free schools revolution. Today, we have seen £320 million of capital investment to create new free schools and extend this success story, which is empowering teachers and improving standards in schools. Some 70,000 new school places will be created following today’s announcement.
As someone who co-founded, set up and now chairs a free school, I am a fan of them. I have seen in the three years in which I have founded and chaired Michaela Community School, in an area of deprivation in inner-city London, how our teachers have been freed to pioneer new teaching methods and how they have gained more power and autonomy over their spending, curriculum and teaching methods. We are seeing fantastic results.
Free schools work. They perform above average: 28% of free schools inspected by Ofsted have been graded outstanding, compared with 14% of those maintained by the council. Free schools are popular among parents: secondary free schools attract, on average, 3.5 applicants per place, compared with 2.3 applications to maintained schools. Free schools are not just for the middle class: two thirds of free schools have opened in deprived areas. They are also cost-effective, as the National Audit Office found recently. Free schools signify a revolution in education, liberating teachers and communities to deliver high quality, high expectations and high standards for their children.
That leads me to selection and grammar schools. We know that grammar schools also work very well, with 90% of them being good or outstanding. The Select Committee on Education has examined considerable evidence of their effectiveness in achieving high progress rates for their children. In the Netherlands, selection takes place at 12 and it does better than us in the PISA tables, which shows that selection is compatible with good results. The Sutton Trust has showed that there would be no adverse effect on non-grammar schools and ResPublica recently commissioned an independent study that showed that a grammar school would have a transformative effect on a deprived area like Knowsley.
I am a Conservative because I believe in aspiration, in rewarding effort and in fairness. The Budget reflects those values and I am pleased to support it.
I congratulate the hon. Member for Fareham (Suella Fernandes) on her speech, which summed up the Conservative philosophy of rewarding effort. Today’s Budget puts that reputation in doubt. The Conservative party’s reputation for being on the side of business hangs by a thread tonight. Can anybody who fought the 2015 election, or any previous election, believe that today the Conservative party, the party of the small business, the party that worships at the altar of the daughter of a greengrocer from Lincolnshire, has put up national insurance by 11%? Somebody earning £27,000 a year will pay an extra £30 a month. That is the reality of what the Conservative party has done.
The Conservatives have gone further. They have decreased the threshold of the dividend on profits from £5,000 to £2,000, which is more money out of the small businessman’s pocket. We are not talking about Facebook, Costa, Google or Starbucks. We are talking about the painter, the decorator, the tradesman, the greengrocer and the IT set-up. Those people, day to day, run our economy. Can hon. Members imagine what that greengrocer’s daughter from Grantham would say? She would say: “Think again.” As much as Conservatives worship Lady Thatcher, she would not have endorsed the Budget today. She would not have endorsed that tax on small business people. Hon. Members have stood up today and said that they are Tories because they believe in effort and self-worth, and in taking a punt, as the former Prime Minister said once. Those people are being penalised for taking a punt. Unless they U-turn on this, never again can Conservatives say that theirs is the party of business or of small business. That is a cheek. Tonight in my constituency of Islwyn, 3,300 small business people will be directly affected by that change. So much for “Steady Phil” or “Spreadsheet Phil”, as the Chancellor is called.
More in hope than anything, I expected that this would be the most momentous Budget we would ever see in this country, but what did we get? The Chancellor seemed to totally forget that, on 23 June, this country voted for its desire to leave the European Union. We heard no mention of that in his speech. It is okay saying that he touched on it and is aware of it, but more damning is the Office for Budget Responsibility “Economic and fiscal outlook”, which states in paragraph 3.2 that the Government directed it to two recent statements that set out in greater length their objectives for exiting the European Union. Paragraph 3.3 states:
“While the Government has now set out some of its objectives more formally, there is understandably little detail about how it intends to achieve them. In many areas the policy outcome will depend not just on decisions made by the UK Government, but also on those of the parties that it will be negotiating with”.
In other words, nobody is any the wiser about what is happening.
At the same time, for all the lauding of the success of business and the economy, tucked away on page 8, paragraph 1.7, the Red Book says:
“Business investment fell 1.0% in Q4 2016, following a modest increase of 0.7% in Q3 2016. This resulted in a 1.5% decline in business investment in 2016. Private business surveys cited uncertainty about future demand and the outcome of the EU negotiations as weighing on activity and investment.”
The Prime Minister, who campaigned to stay in the European Union, is as much a prisoner of her Back Benchers as the rest of the Conservative party, but business needs to plan. Business needs five to 10 years to work out where it wants to go. That inertia helps no one. The worrying thing is that the Budget should not have lauded how great the Conservative party is at running the economy. It should have been a road map for how we leave the European Union. All we get, as usual, as we have seen in the debate, is the Tory party patting itself on the back and saying how wonderful it is doing.
I notice in the back of the Red Book that the Government say we have the biggest railway infrastructure developments since the Victorian age. The electrification of the rail lines to Wales, which is very important to my constituency for investment, is overspent by £1.2 billion. It is all very well talking about those projects, but the fact is that many have overrun and are overspent. The National Audit Office said that one third of infrastructure projects might not be achieved at all. When the Chancellor makes those announcements in future, I hope we have a report on whether the projects are still on track and whether they will be achieved.
For me, the Budget was a huge disappointment. I was expecting something better. Britain deserves better, and business above all deserves better than what it got today.
I am pleased to see the continued progress that the Government have been able to make in reducing the deficit from the enormous 9.9% of GDP that the coalition Government inherited in 2010, to a forecast 0.7% of GDP in 2020-21. It has taken longer than we thought, and we have faced stronger headwinds than we thought, but it is absolutely the right thing to be doing. As the Chancellor rightly reminded us, it is not right for this generation to load more and more debt on to the shoulders of our children and grandchildren, who will have restricted public spending in their time if we do not get on top of this and start to live within our means as a country.
I am pleased, too, that the Chancellor has continued his focus on increasing productivity—an area on which we have not focused enough in the past. The Chancellor was absolutely right to point out that the UK’s productivity is significantly worse than that of the average of our international competitors and much worse—some 35% worse—than that of Germany, which is one of our major competitors.
The way to improve productivity is to focus on skills and infrastructure in particular. It is excellent news that whereas we were 33rd in the world in the quality of our infrastructure—behind countries such as Namibia and Slovenia—we are now seventh in the world, and we must carry on trying to improve and move further up the league table. We should note and celebrate the success we have had in this area.
Productivity is also an issue of social justice. At the moment, British workers on lower rates of pay are having to work longer to produce the same as a German worker. If we can increase productivity, we can pay people more and they can work for less time and produce the same amount of wealth. That is why this issue matters so much.
The Government are absolutely right to focus their attention on artificial intelligence, robotics and battery technology, which is particularly important for the electric vehicles of the future that we will need to deal with the serious air quality issues that we face.
The Government are right, too, to focus their attention on better broadband connectivity and on the roll-out of national 5G, and indeed on ensuring that those people who live in rural areas have the ability to use their mobile phones—something that is still not possible in large areas of my constituency, although I am pleased to note that the Minister with responsibility for digital affairs has said that we should see a significant improvement by the end of this calendar year.
I was pleased, too, about the Chancellor’s emphasis on everyone paying their fair share of tax and about the fact that we have raised an extra £140 billion of tax revenues through clamping down on evasion, which is very welcome. I was, however, visited by someone about to set up a major business in my constituency in an area of service provision that can be found in every high street in the country. He told me only yesterday morning how the practice in that industry is to pay people cash in hand, and that when he has tried to recruit people as an above-the board legitimate business owner, they have complained about not being paid cash. Clearly, avoidance of tax, including VAT, is happening. I believe that we need to sustain a continued focus on this issue, so that a level playing field can be established for decent businesses that do the right thing. We need to make sure that we collect all the tax revenue that we should have.
The focus on T-levels is excellent. Although we have climbed the international league table on infrastructure, we are near the bottom of the international league table for technical education—notwithstanding the efforts of previous Governments in this area. This is absolutely the right thing to do, as is our focus on ensuring quality apprenticeships for the future.
I am very pleased about the extra investment in social care, and about the capital funds that will be provided to ensure that the NHS sustainability and transformation plans are successful. I am particularly pleased that the sterling work done by Luton and Dunstable hospital in its urgent care centre is to be replicated, so that similar GP urgent care will be available at accident and emergency departments in hospitals across England. I welcome the extra £216 million in capital funding for schools. I also welcome the transitional relief for business rates, although in my area the average business rate is set to fall by a very welcome 7.4%.
It is a pleasure to follow the hon. Member for South West Bedfordshire (Andrew Selous).
In my speech, I shall concentrate mostly on business rates. The Chancellor was right to say that the business rates scheme must better reflect the digital economy—firms such as Amazon have had an unfair advantage over high-street companies for far too long—but I suspect that some business people will be sceptical about the Chancellor’s announcement that he is to conduct a review of business rates. The previous Chancellor, the right hon. Member for Tatton (Mr Osborne), proposed a review in the run-up to the 2015 general election, but we have seen nothing of it.
We must also bear it in mind that the Chancellor is now trying to repair a business rates scheme which the Government damaged by refusing to carry out the previous revaluation. It is because they did not publish revaluation results in 2015, delaying until this year, that businesses in towns such as Rochdale had to carry a disproportionate burden for additional years when their rateable value had actually fallen as a result of the impact of the recession. Businesses in London, and particularly in the south-east, were advantaged by the revaluation cancellation. Businesses in Rochdale and similar towns will now be sceptical about the new £50 cap on any business rates increase, not least because no such limit was offered to them when they were experiencing difficulties in 2014, 2015 and 2016.
CAMRA, the Campaign for Real Ale, has been right to raise concerns about business rates affecting public houses. As Members will know, pubs’ business rates are based on turnover rather than rateable values. It does not matter whether they are profitable. In many respects, that is a tax on entrepreneurialism, because someone who builds up a business will pay a lot more in business rates. I think that those who conduct the review should consider looking into how pubs’ business rates are determined.
The Chancellor has announced a £1,000 discount for what we are told will be about 90% of pubs. While I am sure that that will be welcome, I suspect that it will not go very far, and that it will be “small beer” for pubs that face major business rate increases this year. The Baum in Rochdale, which was the national CAMRA pub of the year in 2012, faces a rateable value rise of a whopping 377%. I cannot help thinking that a £1,000 discount will not go that far in helping that business.
The Chancellor also announced a £300 million discretionary fund for local government. Rochdale council has already led the way in devising a business rates reduction scheme to help new independent retailers in our town centre, so I understand the logic, but we now need to see how that £300 million will be shared among local authorities across the country. If it follows other Government funding for councils, it could well fail to reach the parts of the country that really need it.
Talking of business rates and local government, I believe that the Government were right to adopt a 50% business rate retention scheme for local authorities, and I welcome the piloting of a 100% retention scheme. That should help to drive local economic development, and I hope that councils will step up to the mark. I would make the general observation that Surrey council’s situation is clearly a sweetheart deal; no other such authority has been offered that kind of deal so far.
Let me conclude by making a couple of brief points. First, there must be a proper review of the whole business rates scheme, including the Valuation Office Agency, which clearly is not fit for purpose. Secondly, I welcome councils retaining business rates, but the Government must now give local authorities more freedom over how they allocate, set and collect this tax. Thirdly, to avoid any more scepticism around business rates among business people, the Government need finally to overhaul them to the point where they are seen as fair and equitable across all towns and cities in the country, not just some.
May I begin, as a former Minister with responsibility for higher education, by welcoming the Government’s decision to award maintenance grants to those in part-time education? I also welcome the changes to business rate caps, the recognition that urgent action is needed to avoid a further meltdown in our health service and in social care, and the steps taken to boost technical education and improve its standing compared with that of our universities. I welcome the lifelong learning fund and the recognition that we are living longer; we will need to retrain and reskill throughout our careers, and we will certainly need to do much more to improve our skills base when we leave the single market.
It is difficult to celebrate massively overdue action on social care when the chair of the National Care Association says:
“We are now beyond the crisis point. We really are at the edge of the cliff now.”
When hospital beds are blocked by elderly patients with nowhere to go; when local authority budgets have been cut to the bone; when expenditure on social care has dropped by more than a fifth in real terms since 2005; and when £4.6 billion has been cut from social care budgets since 2010, it is difficult to be optimistic about this investment.
On technical education, the pledge to make vocational qualifications equal to A-levels or higher education was not fully explained by the Chancellor. This year, nine of the 10 most popular apprenticeships will be cut by between 27% and 43%. It is difficult to believe the spin about T-levels and streamlining qualifications when we have heard it all before. Less than 1% of apprenticeships are up to the Government’s much-vaunted new apprenticeships standards, first announced back in 2014.
A fund of up to £40 million to pilot new approaches to encouraging lifelong learning sounds good, but we need to put it in its proper context. The Association of Colleges has warned that adult education will disappear by 2020. The total number of adult learners is falling by over 10% a year, the number of adults getting a level 4 qualification has fallen by a staggering 75% in two years, and we have had a 40% cut to the adult skills budget between 2010 and 2015. We do not need a fund of a few million pounds; we need a rescue package to bring back night schools and bring back adult education.
The reason this is so important today is that we are about to trigger article 50. It is very simple: if we are to leave the single market, businesses will no longer be able to recruit from the continent to plug skills gaps. Much more will need to be done to reskill and retrain people in our country. We heard very little—in fact, nothing—about that in this Budget, because the emphasis was on young people, not adults.
The situation is already dire. Skills shortages account for a quarter of all job vacancies. Over two thirds of businesses are worried that they will not be able to find the talent to fill the jobs. We are living in an ageing society. In the modern economy, there is no such thing as a job for life; people will be changing jobs and careers for far longer. We should have heard more about those who have been left behind and have not benefited from globalisation. It is unrealistic to expect people with a mortgage and kids to drop everything and do a university course for £9,000 a year. Where was the articulation of the adult skills need in this country? We are talking about people who have lost out because of the loss of manufacturing and the hoarding of money in London and the south-east. There are no colleges for adults in seaside towns in particular. The Chancellor said nothing about that in his Budget statement.
This Budget is important because we are embarking on a journey that is so immense that the country has not really experienced anything like it, certainly not in my 45 years on the planet. The Chancellor talks about continuing to reduce the deficit, investing in the future and ensuring that we have a strong economy, but let us be clear: exiting the single market is the only show in town. It is the economic issue of our time; everything else is just window dressing. Growth, trade, inflation, public finances, jobs, wages and investment—every single aspect of our economy is vulnerable to Brexit and the leap into the great unknown outside the single market. That is the reality. That is where we are as we prepare to trigger article 50. To pretend otherwise is a totally ignorant view of what is going on. From what we have heard today, the Government have not grasped that.
Everything that the Chancellor talked about today should have been wrapped up in Brexit and the fact that we are leaving the single market. What do the Government mean when they brief the newspapers that they have put aside £60 billion? What are the consequences of having to put aside £60 billion? What does it mean for our surplus and our reserves? What impact does it have on the economy as a whole? The Chancellor said nothing about that. We have let the country down at this critical point in our history.
I want to address two issues, social care and business rates, which are related to inquiries undertaken by the Select Committee on Communities and Local Government.
On social care, the Chancellor mentioned the rising number of elderly people in this country. People are living longer, which is obviously to be welcomed. What he did not say, of course, is that cuts to local council budgets mean that they have reduced spending on social care by 7%, despite prioritising it since 2010. He did not mention the extra costs of the minimum wage or the Care Act 2014, or the fact that councils are now, in the words of the Comptroller and Auditor General, Amyas Morse, moving from doing more for less to doing “less for less”.
When our cross-party Committee looked at the issue, we had a range of forecasts for the gap in next year’s social care funding. Age UK believes that more than 1 million people in this country should be receiving social care but are not. That range of forecasts led the Committee to say that we need £1.5 billion to bridge the gap next year. Although I welcome the fact that the Chancellor recognises that more needs to be done, I am disappointed that the more he has identified is not sufficient to deal with the problem.
I am also disappointed that the Chancellor has not taken up another of our suggestions: that we ask the National Audit Office to undertake a review of the funding gap for the rest of this spending round. I do not believe that the extra £500 million that has been allocated for the next two years is sufficient, given that the Local Government Association says that the total gap in local government funding will be £5 billion by the end of this Parliament. We need the NAO to conduct an independent review.
I am pleased that the Government are prepared to undertake a long-term review of spending for social care, but I am disappointed that the Chancellor has, at the beginning, effectively ruled out one of the options. There are clearly a limited number of ways to raise money to fund social care properly in the long term. The money could be raised from general taxation, from people’s direct contributions to the care they receive, from a new system of discrete taxation through increased national insurance contributions, as happens in Germany, or from an increase in the tax on people’s estates when they die. The Chancellor ruled out the last of those options, even though people might be taxed on their estate, depending on whether they end up in residential care. That is an arbitrary tax. It depends on whether someone ends up in social care because they have dementia, for example, or whether they die of a heart attack without having needed that kind of care at all. The way in which someone’s life ends can determine whether their house and other assets make a contribution to the Treasury.