Debate resumed (Order,
Question again proposed,
(1) That 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.
The British economy is stagnating, unemployment is rising month by month, the Government’s deficit reduction plans have gone wildly off track, middle and lower-income families and pensioners are facing rising petrol prices, rising energy bills and falling living standards—and what did the Chancellor do in his Budget yesterday? Did he admit that his economic plan has failed? Did he act to kick-start the stalled recovery? Did he give any hope to young people facing long-term unemployment? Did he set out any vision of how, over the next 20 years, Britain can compete in the world and win the investment and skilled jobs we need? Did he ease the pressure on families by cutting fuel duty, or by cancelling perverse and unfair cuts to tax credits and child benefit? No. The centrepiece of the Chancellor’s Budget, his top priority, and the political imperative for this oh so political Chancellor, was to spend more than £3 billion next year cutting the top rate of income tax for existing top rate taxpayers. People earning more than £150,000 a year—300,000 of them—are getting an average tax cut of £10,000 a year. How out of touch can he get?
To add insult to injury, the Chancellor sprung another surprise tax rise by freezing the age-related personal allowance for 4.5 million pensioners and abolishing it entirely for soon-to-be pensioners. People on modest incomes who have worked hard and saved hard all their lives will be hit by the Chancellor’s tax grab on pensioners while he gives a £40,000 tax cut to 14,000 millionaires. What can we say about that?
I will in a second—I look forward to it.
As the Financial Times reports this morning:
“Some Tory backbenchers offered support for the measure”—
“although they refused to be identified for fear of alienating their elderly constituents.”
Perhaps in a second some of those Conservative Back Benchers will break cover and back the pensioners tax grab in the Budget, but they are right to be worried, because all across the country, the real electorate will be thinking, “A tax cut for millionaires, paid for by millions of families and pensioners across this country? Same old Tories: looking after their friends while families and pensioners pay the price.”
We will have to wait to see the details. There will be some winners and some losers, but the one thing that we can categorically confirm today is that thousands of pensioners in the hon. Lady’s constituency will lose up to £300 a year as a result of yesterday’s Budget. She did not say whether she supported that—hardly a clarion call of support for the Chancellor’s pensions tax grab.
I will make it absolutely clear: we will vote against the change in the Budget debates and I hope that he will join us in the Lobby. We will vote against it, but the Chancellor knows very well that I will not go through every tax rate, relief, allowance or spending commitment and make commitments for three years’ time. But if the election were called tomorrow, our manifesto would be clear—we would rescind the measure and the Government would go ahead with it. That is the difference.
I am a relative newcomer to the House, so can my right hon. Friend explain what he means when he says, “The same old Tories”?
The same old Tories who thought in 1988 that it was right to cut the top rate of tax for the richest people in our country and who now think that having a second Lawsonian Budget is a good idea. It is important to remember that after hubris comes nemesis. It did not take long for Nigel Lawson to find out the error of his ways.
We set two tests for this Budget. First, does it kick-start the recovery and boost growth and jobs? Secondly, is it fair? The Chancellor has failed them decisively. On growth and jobs, I remind the House what the Chancellor said a year ago in his Budget speech:
“we will create jobs and support families. We have put fuel into the tank of the British economy.”—[Hansard, 23 March 2011; Vol. 525, c. 966.]
Since then, our economy has ground to a halt and thousands of people have lost their jobs.
I remind the Chancellor of what he said in August, when Parliament was recalled:
“Those who spent the whole of the past year telling us to follow the American example…need to answer this simple question: why has the US economy grown more slowly than the UK economy”.—[Hansard, 11 August 2011; Vol. 531, c. 1108.]
What has happened since? Spurred on by the Obama stimulus, the US economy has been growing and unemployment falling. Here in Britain, our economy has flatlined and unemployment has been rising month after month. It does not look much of a safe haven to me.
What did we get in the Budget? We got a gaping hole when we so badly needed action to kick-start the recovery—Labour’s five-point plan for jobs and growth. We will not get the deficit down unless we have a plan for jobs and growth to get our economy moving and get people off the dole. When we needed a vision for the future, a modern industrial policy, what did we get? Roads privatisation and a credit-easing scheme that even the Office for Budget Responsibility says is not large enough to have any material impact.
Just look at the verdict from the OBR. The Chancellor claims it was a Budget for growth. But the OBR has downgraded its forecast for growth next year. What did it say about the ragbag of measures he announced? It said:
“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”
It will have no impact as a growth plan.
The Chancellor claimed that it was a Budget for jobs, but not only does the OBR expect to see unemployment rising, it has increased its forecast for unemployment compared to November by 100,000—100,000 more people out of work at the end of the forecast period. As for the budget deficit, the OBR forecast confirms that the Chancellor is now set to borrow £150 billion more in this Parliament compared to his forecast at the time of the spending review. So much for “expansionary fiscal contraction”. To put it politely, that is oxymoronic. In plain language, it is just moronic.
On fairness, the Chancellor has failed too. Twenty-four hours after the Chancellor rose in the House, the full reality of the Budget is sinking in. At a time when fuel and food bills are going up for families on middle and low incomes, the Chancellor has added to them all. Whatever he says about the personal tax allowance, a family with children earning £20,000 will lose £253 a
year from April. Nearly 4.5 million pensioners—
I am sorry for the stammer. Nearly 4.5 million pensioners who pay income tax will lose an average of £83 next April, and people turning 65 next year will lose up to £322.
At the very same time, the Budget gave a tax cut to the richest people in our country. The money could have been used to cut fuel duty or reverse perverse cuts to tax credits. It could have been used to put police officers on the beat. Instead, the Chancellor chose to cut taxes for the 300,000 top rate taxpayers.
I am just coming to the issue of the top rate of tax. The Chancellor tries to claim that the top rate of tax does not raise any money, and that he is raising in stamp duty and tax avoidance five times the cost of cutting the top rate of tax. But his own HMRC report makes the true position clear, in table A2 on page 51. It says that next year he will give £3.01 billion in tax cuts to existing and legitimate top rate taxpayers, paid more than £150,000. That is a fact. That is six times more in tax cuts to the richest than he is raising in the stamp duty and tax avoidance measures. He is gambling that this will then bring in £2.9 billion in new tax revenues from people currently not paying tax, without any hard evidence to justify that claim—an estimate that the OBR says in the Budget documentation is “highly uncertain” and could lead to a much higher cost.
The head of the OBR said last night:
“This is a judgement based on not even a full year’s data based in terms of how people have responded to the 50p rate, in particular in terms of those self assessment tax-payers.
The costing of these sorts of changes is by no means unarguable”.
Just a few weeks ago, the Institute for Fiscal Studies said:
“If the future of the 50p rate is to be determined on the basis of evidence...then Budget 2012 will be too soon to form a robust judgement.”
Another expert has said on these matters:
“Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this—all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt-hole will rush back to pay more tax but at a lower rate. Pull the other one.”
That was the Business Secretary speaking to the Liberal Democrat conference last September. Pull the other one indeed. A £3 billion tax cut giving £10,000 each to 300,000 taxpayers and we are supposed to believe that all these people in tax havens are suddenly going to say, “I want to pay more tax.” Let me say to the Chancellor, “Pull the other one, it’s got bells on.”
There will be a vote next week, and we will vote against the 50p change. It is the wrong tax cut at the wrong time. I have always said that no tax rate is set in stone, but how can anyone believe it is right to take tax credits from working families, child benefit from
middle-income families and more tax from pensioners, but give £10,000, on average, to every top rate taxpayer in the country? If there were a general election tomorrow, our manifesto would state clearly that we would reverse it. That is the clearest answer I will give.
I think we should leave people’s trust funds out of this. I will come back to that in a moment, but I will not press the Government on it.
The Chancellor took a reckless gamble on jobs and the economy, the Prime Minister and the Chancellor have taken a reckless gamble on NHS reform and police cuts, and now the Chancellor is taking a reckless gamble with the fairness of our tax system by handing out massive tax cuts to legitimate taxpayers in the hope—based on no evidence—that the cuts will pay for themselves by somehow bringing all the tax avoiders back into the fold. That is a fact.
Will the right hon. Gentleman confirm that under the previous Labour Government the 50p tax rate applied for just 37 miserable days and that for the rest of the time their tax on the highest income earners was lower than under the coalition Government?
In reply, let me quote what the Chancellor said in October 2010:
“The public must know that the burden is being fairly shared. That's why I said last year: we are all in this together. And I am clear…that those with the most, need to pay more. That is why… I have stuck with the 50p tax”—
the Chancellor of the Exchequer, Conservative party conference, October 2010. Eighteen months on, what has changed? The public still want the burden to be fairly shared, but far from keeping the top rate of tax, he is ditching it.
Let me read another quote. In October 2009, the Chancellor said:
“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs. I think we can all agree that would be grossly unfair.”
We can all agree on that. What has changed? What is the truth? It was all a con. The mask has slipped. To 200,000 families struggling on less than £17,000 a year, he says, “I’m going to cut your tax credits to make you work harder”, but to the highest earners, he says, “I’m going to cut your taxes because if I don’t, you won’t work hard and pay your taxes.” That is it. To make the poor work harder, the Chancellor makes them poorer. To make the rich work harder, he makes them richer. Does that not tell us everything we need to know about the Chancellor? He is cutting tax credits for the poor, cutting child benefit in the middle, cutting tax help for pensioners and cutting taxes at the top. That is his priority.
We all agree that, after the global financial crisis, tough choices need to be made on tax spending and pay to get the deficit down, and we all agree that it needs to be done fairly. Two years ago, the Chancellor said that he had a plan—with tax rises and spending cuts, the economy would grow and unemployment would fall—but he has had to come back to the House and announce further tax rises because his plan is not working. But who is paying more tax? The pensioners. And who is getting a tax cut? The millionaires. That is the reality.
The Liberal Democrats call this a Robin Hood Budget, but they have got it the wrong way around. Robin Hood took from the rich to give to the poor, but the Budget takes from lower and middle-income families to give to the rich. Do they not see? The Chancellor is not Robin Hood; he is the Sheriff of Nottingham. As for jobs and growth, he could not give a Friar Tuck. As for Maid Marian—trapped in the castle, desperate to escape—we all feel sorry for the Business Secretary, and not just because, as a result of the pensions tax grab, he is probably the only member of this millionaire Cabinet who will be not better off but worse off as a result of the Budget—possibly with the Justice Secretary as well. I am not sure. But he cannot say he was not warned.
The hon. Gentleman should have read the small print. It is fine for him to accuse me of not having read the Budget, but is the effect of the 50p tax cut in that chart? I think not. I have read it. He has not. It is not there. If it were, the benefits would be off the scale.
After that disastrous and woeful intervention, let me return to the Business Secretary. The Business Secretary cannot say that he was not warned. In fact, he did the warning. On deficit reduction, before the election, he said:
“The IFS is right to point out that cutting spending further this year would be extremely dangerous given the weakness of the economy.”
He also said that
“it’s very difficult to believe that large sudden cuts would do anything other than a great deal of harm”.
He was right in his analysis of the dangers of going too far, too fast, and he is right today. In his devastating leaked letter to the Prime Minister, he said that the Government were without a
“compelling vision of where the country is heading beyond sorting out the fiscal mess”.
So why has he signed up to this completely vision-free Budget?
I am going to read again what the Business Secretary said on the top rate of tax, because it is such a great quote:
“Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this—all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt-hole will rush back to pay more tax but at a lower rate. Pull the other one.”
I have to ask him then: why is he going to stand here today and defend a Budget that tries to do just that?
We all know what the Deputy Prime Minister said last September. Let me tell the House—if anyone is interested in what he says. He said:
“I do not believe that the priority at a time like this is to give a tax cut to a tiny, tiny number of people who are much, much better off than anybody else.”
Let us be honest. None of us is remotely surprised that the Deputy Prime Minister has completely capitulated, just as he did on VAT, tuition fees and the NHS, but the Business Secretary is another matter. He knows that our proposal to kick-start the recovery is right because he told the Chancellor to do it. He knows that our proposal to set up a business investment bank is right because he told the Prime Minister to do it. And he knows that cutting the top rate of tax now is the wrong priority, deeply unfair and a betrayal of his and his party’s values and progressive tradition.
We all know all we need to know about the Deputy Prime Minister, but we all had—and have—higher hopes for the Business Secretary. I have to say to him—and to his colleagues—that I understand the incredibly difficult position he is now in, but I have to ask him: what on earth would the Vince Cable of five years ago think of what he is doing now? As the sketch writer in The Independent wrote last week:
“Vince has been so hammered by events…It isn’t clear any more that he could ‘press the nuclear button’ hard enough to make it go off.”
Prove us all wrong, Vince—prove us all wrong.
The Chancellor used to say, “We’re all in this together.” Not any more. In tough times, the choices that this Tory-led Government are making tell us everything we need to know about them and how totally out of touch they are with what life is like in our country. Here are the facts. The Chancellor’s plan has failed. Trying to raise taxes and cut spending too far and too fast has backfired. The country needs a Budget for growth and jobs. Instead, we got more of the same, and with his tax cut for millionaires, he is piling insult upon injury for millions of families and pensioners across this country.
The central issue on which this Budget—and, indeed, the coalition Government—will be judged is how we cope with the fallout from the massive financial collapse and the destruction of wealth, with the loss of approximately 10% of our national income, and put the economy back on a sustainable path.
The shadow Chancellor made some very kind and considerate remarks, and I thank him for his concern about my personal finances. Perhaps I can take him back to a toe-curling interview he gave a few days ago, when he described his two-decade relationship with his former boss, mentor, guide and friend as “unbelievably debilitating”. That is relevant to this debate, because it gets to the heart of the problem of who is responsible for the legacy that we are having to manage. We inherited not merely a large fiscal deficit, but the largest in the G20 and the largest amount of household indebtedness of any developed country.
We inherited an economy in which the share of the banking sector—the banking assets—had doubled in Labour’s period of government, to become the largest of any major economy, and in which, simultaneously, the share of manufacturing had contracted by almost a half, from 18% to 10%. We have heard a long speech about equality and fairness, but we also inherited an economy in which, throughout Labour’s period of government, the share of income of the top 1% and the top 10% of the population inexorably rose, and in which wealth became progressively more unequal.
I will take the intervention in a moment.
A narrative has developed in which one man was responsible for this fiasco, but it was a genuine team effort, and the shadow Chancellor was an absolutely key member of that team. Being lectured now on how to manage an economy is a little bit like being given a talk on seamanship by the captain of the Costa Concordia—another believer in light-touch steering.
It was actually on the back of an uncontrolled housing boom. Personal indebtedness as a share of people’s incomes doubled in the period of the last Government. Of course the process of deregulation beforehand did not help, but the core increase—the fundamental problem of indebtedness—arose when the shadow Chancellor was a key decision maker in that Government.
I want to talk about the Government’s basic economic strategy, but before I do, I want to address the issue of unfairness and distribution. There were two allegations. One was that the policies have had a damaging effect on the so-called squeezed middle; the other was about the millionaires. Let me deal with each in turn. On the squeezed middle, if hon. Members look at the distribution charts, they will see that the squeezed middle has been squeezed a great deal less than the squeezed top. The major cash impact of the Budget was on low and middle-income families, as a result of lifting the threshold to over £9,200, with £220 for more than 20 million taxpayers. That was right, not just because of the fairness involved, but because it gives a significant economic stimulus, and at the margin—the 1 million people being lifted out of tax—it is a major incentive to work. The
policy also contrasts favourably with the strategy that the Labour Government adopted in office—which we discussed many times—of using tax credits. By increasing tax allowances in the way we have, we are giving people the freedom to choose how to spend their own money, not taking it from them and then giving it back to them, through a complex, means-tested system, with high marginal rates of withdrawal.
Is the Secretary of State disappointed that he lost the battle to rescind the cuts to working tax credit for couples working 16 hours, given that they do not benefit at all from raising the tax threshold, because they already do not pay tax? Did he lose that battle or did he not fight it?
The shift from a system based on tax credits to one based on tax allowances obviously benefits the middle and low-income population as a whole. The impact on particular groups depends on a variety of things, including the minimum wage, which we have just uprated, and the complex interaction of tax and tax credits.
However, let me turn to the point about pensioner income. I find it quite extraordinary to hear the shadow Chancellor expressing such alarm about the impact of the Budget on pensioners. I do not know whether he has looked at the scorecard, but it is clear. In 2012-13, the effect of the increase in the basic state pension and the pension credit minimum income guarantee will be to transfer £1.75 billion to pensioners. The impact of the changes on age-related allowances is £360 million—one fifth of the additional funding going to pensioners as a consequence of this Budget. When we look at the pensioner population, we of course see big differences. There are 5 million pensioners who do not pay tax, many of whom are poor, and who are not, of course, affected by the changes at all. There is a small group of people—frankly, my contemporaries—who have high retirement incomes and considerable asset wealth, and it is right in principle that they should pay a bit more. There is a group in between, as the shadow Chancellor rightly said, of people who are not wealthy and do not have particularly high incomes, but who could be affected to a limited extent, as a result of inflation eroding the value of the allowances—inflation is currently estimated at 2.5%. Those people will benefit enormously from the increase in the basic pension.
Let us just remind ourselves what is happening. We have an increase of £5.30 in the basic state pension for a single person. On top of the increase last year, we are talking about a £10 increase in the basic state pension, as a result of the protections that this Government have introduced. For many years, the pension steadily fell behind earnings as a result of de-linking, and, despite numerous promises, the previous Government did absolutely nothing about the problem. More and more pensioners were sucked into means-testing. This Government have corrected that problem. We have a triple lock system and, as a result of that, and of this Budget, the vast majority of pensioners on low and middle incomes will be considerably better off than they were before.
I am sorry; I do not follow the logic of the question. The Budget is of course fiscally neutral. I have just quoted figures, which the Office for Budget Responsibility has validated, which show that pensioners as a whole will gain five times as much from the increase in the pension and from pension tax credits as from the change in allowances.
What will the Secretary of State say to people who have saved into a pension all their working lives and who have only modest additional pension provision to rely on, but who will now, completely unexpectedly, see the reward for making that effort to save wiped away?
There is a genuine issue about pensioners with limited income, much of it savings income, which has been progressively ignored over the years. I have fought very hard in Parliament on the issue of annuities reform, as have many colleagues, particularly on the Government Benches. Many of the people the hon. Lady describes are annuitants who have been severely squeezed by the very low interest rates. Despite numerous appeals to the previous Government, absolutely nothing was done about annuity reform. We have made an absolute commitment to end compulsory annuitisation, which will offer far more practical help than any of the things that she and her colleagues are describing.
Let me turn to these millionaires. I agree with the Chancellor that the decision to cut the top rate of tax from 50p to 45p was economically the rational thing to do. I want to focus the debate not on symbols but on substance. I share the emotional reaction of the many people who are disgusted to hear pampered financiers whinging about their taxes. On an emotional level, nobody can sympathise with that. However, we have to deal with the practical realities that were burned on my consciousness as a result of sitting in my place on the Opposition Benches for 13 years, exchanging views on the top rate of tax with successive Labour Ministers from Blair to Brown to Balls. Year after year, they would tell the Liberal Democrats that it was economically stupid to raise the top rate of tax above 40%. That was their message, year after year. Then, a few weeks before the end of their Government—I think it was 57 days—they introduced the 50p rate in order to create a political dividing line. That decision had nothing whatever to do with economics. The point that they had been making over all those years was that raising the top rate in that way would raise relatively little revenue.
Despite the casuistry of the shadow Chancellor’s intervention a few moments ago, in trying to argue that vast sums of money had been sacrificed, line 3 of the scorecard makes it absolutely clear that we are talking about a revenue loss of £100 million a year. That figure has been endorsed by the Office for Budget Responsibility. The changes that have been introduced in the Budget, including increased taxation of high-value property, plugging loopholes and much tougher anti-avoidance rules, will bring in at least five times that amount.
The HMRC report states that, in 2013-14, the static cost—that is, the cost to existing top rate taxpayers—will be £3 billion, rising to £3.35 billion, then £3.7 billion and £4.2 billion. It then states that that will be offset by a behavioural impact of £2.9 billion, £3.2 billion, £3.6 billion and £4 billion, which I think is heroic. The document states that behavioural responses are often “highly uncertain”, and the Business Secretary himself said that such assumptions were utter nonsense. He said, “Pull the other one!” Is he now saying, “Mea culpa—I got it totally wrong”?
I am just trying to deal with the facts. I believe in evidence-based decision making. The information in the Budget document, which has been validated as the best central estimate by Robert Chote of the OBR, suggests that we are talking about a revenue loss of £100 million. I think that the right hon. Gentleman is fundamentally underestimating the financial significance of something that happened on an epic scale when his Government moved on the top rate, which involved simply switching from one year to another. The underlying impact on revenue has been independently estimated at £100 million.
The document from HMRC makes it absolutely clear in section A.19 that that is not HMRC’s view but the Government’s view. It was a ministerial decision on those estimates. But that does not take away from the fact that a £3 billion cost—£10,000 on average for top rate taxpayers—will be offset by a behavioural impact that is huge and, in the Business Secretary’s own words, absolute nonsense. Let us deal in the complexity of the facts, not the simplistic nonsense that the Chancellor told the House yesterday. Does the Business Secretary, with his integrity, look at those numbers—£2.9 billion, £3.2 billion, £3.6 billion and £4 billion—and say, “Yup, I agree”?
I think we are talking about integrity and statistics. Of course there has been a big change under this Government, compared with their predecessor. The numbers that the shadow Chancellor used to use were his own numbers. The numbers we are quoting here are independently verified by the Office for Budget Responsibility. We will analyse the underlying assumptions in those figures. The figures in the Budget document are absolutely unambiguous and they have been endorsed by an independent assessor—something that the right hon. Gentleman was never used to when he was in government—which confirms the value of the numbers that we have described.
Is not the shadow Chancellor’s knockabout class warfare much more to do with appeasing Labour’s union paymasters? The truth is that all the evidence shows that a competitive personal and corporate tax rate is a powerful driver of entrepreneurship. We proved in the 1980s, when we last had to dismantle Labour’s tax time bomb, that lower marginal rates of tax increased revenue. The announcement today from GlaxoSmithKline of inward investment in this country is a sign that this is working.
It is certainly true. My hon. Friend’s central point, which was made very effectively by the Labour Government when they were in office, is that in
a highly mobile world, we have to take account of marginal rates of tax in comparable countries. The current top rate of marginal tax in Canada, Australia, France and Germany is around 45%, and that is the level to which we have moved.
Does the Secretary of State acknowledge that business leaders, who will benefit from the tax cut, said yesterday that the priority should have been to cut taxes for those on low and middle incomes in order to stimulate consumer spending? Does he agree that that should have been the priority, rather than cutting the 50% rate?
I do not know where the hon. Lady has been for the past 24 hours. The central feature of the Budget was a very large tax cut for exactly the group of people she describes, and it will have exactly the consequences that she describes.
Let me get back to the core issue, which exercises me and the shadow Chancellor. The basic economic strategy of the Government is to get back to a stable, sustainable form of economic growth. I want to address head-on his central criticism, which he has made many times. It can be summarised in the phrase “too much, too fast”. This Government have a deficit reduction programme that was developed following the autumn statement, and it involves removing the structural deficit over a period of six years.
The Darling plan, which the last Government set out, involved a deficit elimination programme of seven years. What I am not clear about, particularly in view of the stridency of the shadow Chancellor’s views, is: what is the Balls plan? Is it for seven years, eight, 10, 20 or never? What is the alternative speed of deficit reduction that the Opposition are urging on us?
We are acting, successfully, on good advice. A few weeks ago, the head of the International Monetary Fund, Christine Lagarde said:
“Those countries that have fiscal space, and that can slow down their fiscal consolidation efforts are very few, and I’m afraid Britain is not in that particular group.”
That is because of the sheer scale of the structural deficit that we inherited.
The Business Secretary is a former chief economist. He read out a quote from the head of the International Monetary Fund. On the previous day, the chief economist of the IMF said exactly the opposite—that if growth was “undershooting”, a country like Britain should
“slow the pace of deficit reduction”.
Is the Business Secretary really saying that he is ignoring the advice of Olivier Blanchard, the chief economist of the IMF? I would have thought that the right hon. Gentleman would have recognised Mr Blanchard’s economic credentials.
I think Mr Blanchard is very firmly on record as endorsing the strategy that we have adopted.
There is, of course, a fundamental dilemma, which any Government in this situation would face. If a deficit is cut very fast, it clearly has an impact on demand; and if it is cut too slowly, we lose the confidence of international creditors and markets. That is what we have not done. Unlike many eurozone countries that are now introducing budgets in panic and under pressure, we have introduced a politically and financially stable approach to deficit reduction. The underlying theme has to be one of financial discipline.
I cannot resist quoting an excellent statement of what this Government are about, and of what any Government should be about. It says that
“we must ensure we pass the test of fiscal credibility. If we don’t get this right, it doesn’t matter what we say about anything else.”
That was the shadow Chief Secretary, Rachel Reeves. She is absolutely right and has brought fiscal rigour to the Opposition Front Bench for the first time. I just wonder what kind of response she has made privately to some of the commitments that the shadow Chancellor, and indeed the Leader of the Opposition, have been making in the last few weeks. They have been promising to get rid of the fuel duty changes, child benefit changes, child tax credit changes and the changes to public sector pay. I think the total volume of commitments is something in the order of £30 billion. Before we proceed any further with a debate on the Budget, we need to have absolute clarity about which of those measures the Opposition are committed to and to which they are not—and if they are committed, we need to know what else they are going to cut to make way for them.
Let me summarise where we as a Government are proceeding. Unlike many other countries in Europe, we have not introduced our Budget in an environment of panic or under pressure from financial markets. Unlike in the United States, we do not have political paralysis; we have stable government. This is our strategy: we have, and we will retain, fiscal discipline and we will stimulate the economy. There has to be demand—the shadow Chancellor is absolutely right about that—but this is coming through monetary policy. In order to have a monetary policy that stimulates the economy, we need the confidence of the central bank. The central bank has made it absolutely clear that the Government have to be fully committed to fiscal discipline in order to allow that to happen. Thus we have a combination of low interest rates, quantitative easing, now credit easing and a substantial devaluation. This is where the stimulus to demand comes from.
The third element is fundamental: we are dealing with a broken banking system—something we inherited. The banking system was massively expanded under the last Government, but collapsed with disastrous consequences. There is a continuing problem of credit supply. That is a very real problem—and every small and medium-sized enterprise would tell the same story. We have introduced a whole series of initiatives. The Chancellor has taken this forward with credit easing, while my Department has a new programme building on the Breeden report relating to non-bank finance. I have no doubt that we shall have to come back to this, because the banking system is still not functioning, but this is at the heart of the economic crisis that we are
trying to manage. For the first time in our lifetimes, the financial system has collapsed—with disastrous consequences—and we are having to put that right.
The fourth and final element in the story is rebalancing the economy and putting it on a proper sustainable basis. That is why the Chancellor underlined in the Budget our commitment to the growth review and to improving infrastructure. We need to recognise that banks have to be properly regulated, which is why we have increased the bank levy, but in addition, we need to give backing to our successful industries, particularly our export industries—aerospace, creative industries, the oil and gas sector, and pharmaceuticals. Over the last few weeks and months, we have been correcting some of the long-standing errors of policy pursued by the Labour Government—the way in which, for example, public procurement took no account of supply chains; we are putting that right. We are beginning to see serious positive commitment by overseas investors—we are seeing it in the car industry and in pharmaceuticals—as a result of this industrial strategy.
Has the hon. Gentleman followed what is happening? The car industry, for example, has grown by approximately 20% over the last year, and all the major producers are investing in the UK.
Let me finish my summary. Hon. Members can make their points in their own speeches.
We are dealing with an extraordinarily dangerous and difficult situation. Quite apart from our own horrendous legacy, we have to contend with the threat of high oil prices and the currently stabilised but continuing crisis in the eurozone. As a consequence, our economic position is very difficult. The economy is not, of course, growingly rapidly. Ever since we came into office, I seem to recall the shadow Chancellor predicting a double-dip recession, which has not happened. This year, growth is not spectacular, but it is higher than Germany’s and significantly better than the eurozone’s.
We acknowledge that we undoubtedly have major problems to deal with. Unemployment is far too high, but it is the same rate as in the United States, which is often regarded as providing a role model of how to deal with a crisis. We recognise the seriousness of the problem; what we will be judged by is our effectiveness in digging this country out of the enormous economic hole that we inherited. We are on track to do it, and we will stick with the policies that we have adopted.
It is a pleasure to follow the Secretary of State, if only because he has confirmed me in my long-held prejudices about Liberal Democrat politicians. I think he redeemed himself in the last part of his speech about the financial services sector, which is where I would like to begin my remarks.
“We stand today at the end of a long cycle of excess borrowing: borrowing by financial institutions, by governments, by consumers and by businesses.”
The Chancellor made a similar point yesterday when he referred to the
“days of large deficits and the illusion of cheap finance.”—[Hansard, 21 March 2012; Vol. 542, c. 797.]
As we all move in the opposite direction, there are obvious dangers in the cumulative impact of collective repositioning. We should focus our attention on the significant differences between the output forecasts and the actual outcomes. The differences are striking. Corporate tax cuts, for example, marginally help corporate profitability; they do not of themselves stimulate growth or create jobs.
The second feature to focus on is the public expenditure cuts that have not yet taken place. In the autumn statement, a further £8 billion in cuts was announced for 2015-16 and a further £15 billion in cuts for 2016-17 —that £15 billion alone is equivalent to a 3p rise in VAT—and yesterday the Chancellor announced a further £10 billion in public expenditure cuts. This represents an unprecedented challenge.
In referring to external uncertainties, both the Chancellor yesterday and the Business Secretary today mentioned the eurozone and a spike in oil prices. I would add that the secrecy and complexity of the unregulated financial services sector in the United States is a further cause for concern, not least because of its size.
The overall Budget stance is fiscally neutral, but, of course, the impact of the Budget changes is cumulative. VAT is still at 20%. A combination of wage freezes and inflation will reduce real earnings—again, the effect is cumulative. A cut in the top rate of tax is useless for those who do not earn £150,000 a year—and most of us do not. Similarly, a change in lower income tax thresholds is useless for the one third of households that do not have anyone resident who pays income tax because they are too poor. The regressive impact of all this is even greater if the citizen’s housing costs are being driven up by 7% or more a year, which is what has happened to social housing rents. Again, the effect is cumulative.
Pensioners may appreciate the simplification of the age-related personal allowances, but not their collective loss of about £1 billion per year resulting from the freezing of those personal allowances. That does not hit the poorest; instead, it is a nasty assault on people who, in the main, are not particularly wealthy, but have tried to look after themselves in their retirement years. It is a sneaky and disreputable measure. Even the Government seem ashamed of it, since they coyly describe it as a “simplification” and, significantly, it is one of the few bits of the Budget that was not briefed beforehand.
The Chancellor said a lot about the money he is spending, but less about the public expenditure cuts that are going to pay for the fiscally neutral Budget stance. Given the times, it would be reasonable for the Government to look again at whether big-ticket items should be dropped as unaffordable. I urge them to think again about the Trident renewal programme. Why do we need to duplicate a strategic weapon that is already in NATO’s armoury? Nor am I convinced that the high-speed rail link between London and Birmingham is worth the expenditure in the current circumstances. I urge the Government to look at whether valuable tasks
carried out in the public sector can be discharged in less ponderous and more proportionate and cost-effective ways, rather than to look at abolition as the only way of making the savings.
In a significant move, the Chancellor announced a general anti-avoidance measure in the context of the move to the 45p top rate and the widespread avoidance of stamp duty on expensive houses. He announced other tax avoidance legislation as well. The obvious danger is that, having gone to the expense of setting up an anti-avoidance device, the avoider gets a taste for it. The lower rate at 45p is a certainty, but the effectiveness of the anti-avoidance devices is less certain. There are further dangers in a general anti-avoidance measure. If it is necessary, it should be focused on the rich and powerful, and not be used in a disproportionate way against small and medium-sized businesses.
My final point is about the impact of all this on the north-east of England. Our region is a net exporter. Whatever might be the case for the country more generally, a broadening and deepening of the private sector employment base of our region is the right way forward for us. The Government do not disagree with this point in principle, but the economic development structures they have put in place are the wrong ones for delivering the stated policy, and I urge the Government—and in particular the Business Secretary, whose responsibility this is—to consider the alternative Minister-led approach to regional economic development that I and other Members set out in our regional debate last year.
I also urge the Government not to go ahead with the regionalisation of public sector pay. This is a “blue herring.” As well as being manifestly unjust, it will cost more than it saves and will throw up a range of unintended and unwelcome consequences. It is a myth that high public sector pay is undermining the creation of less well-paid private sector jobs. I challenge anybody, both in this House and outside, to point out a job vacancy in the north-east of England for which no candidate can be found at the going rate. Why should public sector workers suffer austerity measures longer because of where they live? They are already on the receiving end of wage freezes, job losses, rent rises, general inflation and long-term reductions in their pensions—and are hit even harder if they are trying to help their children through university, and harder still if they have lost their tax credits. Between 2011 and 2015, the average public sector worker will see their wages increase by 2% while the consumer prices index increases by 14%. Now is not the time to depress demand in the most vulnerable regions of the United Kingdom. As well as both the uncertainties to which the Chancellor referred in his address and those to do with the transnational unregulated financial services sector, he has left us with a further set of uncertainties all of his own: the substantial public service cuts that are yet to come. Of course the poor are hurt by this Budget, but it is middle-income Britain that is disproportionately the loser.
Order. Before Mr Brown’s speech, I should have announced that there is an eight-minute time limit on speeches. He is so astute that I knew he would realise that, but I now say to the rest of you that there is an eight-minute limit.
I am grateful to have this opportunity to participate in the Budget debate, in order to highlight the financial and economic issues that are of concern to my constituents, and in particular to raise the topics of families, fairness and the future. I congratulate my right hon. Friend the Chancellor of the Exchequer on his Budget, which I believe is fair, innovative and effective. There are a lot of very good measures in it: tax cuts, help for business, increases in pensions and personal allowances, and investment in infrastructure. That is all good news for our country. For my constituents, the key concerns are the cost of living, keeping their jobs, taxation and dealing with the appalling economic mess left to us by the last, unlamented Labour Government.
This Budget goes a long way towards dealing with the issues facing the United Kingdom, and I believe it will be strongly supported across the country. It is good news for hard-working people on moderate and low incomes. It helps families and businesses, and, most importantly, it encourages aspiration.
Shortly, I shall address families, businesses and taxation, and how this Budget will assist and encourage our economic recovery. Before doing so, however, I want to state that the infrastructure plans announced in the Budget will create jobs and opportunities for businesses and enhance our economy. In particular, I welcome the Chancellor’s announcement of a possible new river crossing in east London. As my constituents and others travelling to and from south-east London know, the Blackwall tunnel is inadequate and congested and still prone to vehicles breaking down on the approach roads or in the tunnel.
My hon. Friend makes a valid point about the east Thames crossing. That will also be of great benefit to my constituents in Kent.
I am grateful for my hon. Friend’s support. As the Mayor of London has said, a new crossing at Silvertown is essential. It will enable commuters and business traffic to get to their destinations quicker, and it will relieve the pressures on the Blackwell tunnel. In order to ensure the regeneration of south-east London, such public sector projects and investment are essential, and I welcome the Government’s commitment to look further into this crossing and to support other investment to improve our infrastructure.
I commend my right hon. Friend the Chancellor on his measures on taxation and families. Conservatives instinctively believe in lower taxation, not only because it allows people to keep more of their own money, but because they then have more choice in how their money is spent. Government do not always know best. They have a role to play, but people will spend their own money more effectively; it is not for Government to do that or to tell people. Unlike the Labour party, which always believes in increasing taxation, we believe that people who have worked hard should have the opportunities to get on with their lives and careers, and to spend their money as they want. I therefore welcome the Chancellor’s aspiration to raise the personal tax allowance to £10,000 as soon as possible. That is good news for all working families on low incomes.
In government, Labour professed sympathy for working families on low incomes but did little to help them—in fact, Labour hindered. We did not hear anything in the shadow Chancellor’s speech about the failings of his Government. They allowed families to get worse off, and the increase in poverty was greater under Labour. This Government do not believe that people should be allowed to remain on benefits for ever because benefits are more attractive than working and earning. That is unacceptable. We are, therefore, grateful that we are changing the benefits regime and helping people with the tax regime, so that work does pay. That is fundamental.
Under this Government, great progress has been made in the past two years, with personal allowances going up by 25%. This year there is to be another rise and next year, in April 2013, there will be an additional rise in the personal allowance of £1,100. That is a real, positive advance for people on low incomes, allowing them to keep more of their money. I particularly welcome the fact that some 2 million people will no longer pay any income tax; they are on low incomes and they should not be paying income tax. It is the Conservative-led Government—a coalition Government—who are doing this, and I welcome the Business Secretary’s speech, which highlighted what the Government are doing and the logic behind it.
I note the hon. Gentleman’s welcome for families being lifted out of income tax. How does he react to the fact that 230,000 pensioners are being brought into the ambit of taxation for the first time by this Budget?
The whole aspect of what we are looking at is increasing pensions and helping pensioners. This Government have done a lot more than the Government whom the hon. Lady supported—they gave a miserable 75p increase in the pension a few years back. Our Government are putting up the pension this year by more than 5%, which is a record and an achievement for this Government. We will take no lectures from the hon. Lady, because her Government let pensioners down.
Nationally, a total of 24 million people will receive a tax cut thanks to this Budget. That is good news for individuals, for families and for the economy. This Conservative-led coalition is proceeding to help working people, and the Opposition do not give us credit. I was disappointed with the shadow Chancellor’s speech. I usually listen to him with great interest, but he did not allude to anything that Labour would do if it were in government or to Labour’s failures when it was in government.
The family is the backbone of our society, and the issue of child benefit is always difficult. Fairness remains the key, and the original changes proposed caused considerable difficulty. I am pleased that the Chancellor listened to our concerns, and those of constituents, that the proposed changes were not really acceptable. By amending the proposals and tapering the benefit from an annual income of £50,000, some 90% of families will continue to benefit from financial support during these difficult financial and economic times. This Government are listening and changing policies after representations have been made, and that is to the credit of the Chancellor and the Treasury team.
Red tape, bureaucracy and taxation all adversely affect businesses. I welcome the news that more is being done to support small businesses and manufacturing.
The investment in apprenticeships, lower corporation tax and extra support for start-ups will make a real difference. In addition, we heard the innovative idea of a student-style loan for young people to allow them to start up their own businesses, and I welcome the fact that the Chancellor is examining it. It would allow 18 to 24-year-olds who are keen on a business career to be helped. We all know that university is not for everybody; people may not want to go there and may want to go into business instead. So we need to provide the same sort of help for young entrepreneurs, whom we desperately need in this country, to enable them to go forward to make their name and their fortune. I welcome the fact that the Government are willing to examine that.
My constituency contains a number of innovative manufacturers, such as Texcel Technology in Thames road, Crayford, which I visited last month. I was really impressed with the dynamism of its leadership and its focus on high-tech products. I recently nominated it for the Made by Britain project. The NEPTUNE project, for which the company has provided power and switching solutions, will help to develop our understanding of the ocean and of many biological, chemical, physical and geological events that take place. I am pleased that such a successful firm in my constituency has designed and manufactured such innovative components for this international project. People at the firm were looking to the Government for some action and will be delighted with what the Government have proposed in the Budget to enable small firms like theirs to prosper and develop.
I know that the firm is concerned about regulations, bureaucracy and, of course, tax, so it will welcome the parts of the Budget dealing with business. Business is vital to our society; it makes the money and creates the wealth that allows us to invest in education, hospitals, all the other public services, pensions and all the rest that we want to invest in. If we do not allow business to flourish, we cannot make that wealth and we cannot have the taxes that come with it. This Government are focusing on those issues, to make sure that we are getting the wealth creation and the taxes from innovative small firms such as the one I mentioned.
We need to consider the whole of this Budget, as it works together as a rounded Budget, looking to the future. That is the great thing about what we saw yesterday from the Chancellor and the team; the Budget is looking to the future to make Britain better. It seeks to make Britain great again, as that will not come from the Opposition, after their 13 years. We remember how they “ended” boom and bust, and we remember all the things they had—the result was a disaster and it left us with the mess to clear up.
In conclusion, the Chancellor has been effective in looking to policies to solve our economic and financial situation. The Budget demonstrates that this Government are firmly on the side of those who aspire to do the right thing for themselves, their families, their businesses and this country, and I strongly back it.
Unlike Government Members, I am not in a rush to gush about how much this Budget does for families or firms in my own or anybody else’s constituency. However, I am also not here to pretend that everything in this Budget is bad, as it contains measures that will help some sectors and areas. Moving on general anti-abuse rules to deal with
tax avoidance is good in principle and welcome. Obviously, we have to see the exact detail to know whether the effects will match up to the stated intent. Similarly, tax simplification for small businesses is a good thing in principle, but again the devil will be in the detail, as it will be in respect of removing borderline anomalies. Many of us have been lobbied by our local chippies and others about removing some of those anomalies, but of course there is always the danger that we end up redrawing the margins in particular businesses or sectors.
The Budget makes new provisions for the carbon price floor. Coming from Northern Ireland, I am sorry that the Government have not seen fit to open a window to relieve the serious competitiveness and investment problems that will be caused to our generating industry, because, in the context of the single energy market in Ireland, the carbon price floor will, in effect, incentivise investment to go south of the border and not stay in the north.
There are other issues to address, such as fuel duty. Again, I regret that the Government have not done more to help firms and families, who have both been affected deeply by these problems. The Government have boasted greatly about the measures that they have taken to date to protect people from the price surge, but that surge protection is still needed and now is not the time to let it go on the assumption that the other tax changes that the Government have announced will somehow carry people through or forward.
Obviously, not least in the context of Northern Ireland, I support the further moves in relation to “above the line” research and development tax credits and the tax reliefs in the creative sector, not least in film and high-end television, where Northern Ireland has recently been doing well.
On corporation tax, we in Northern Ireland are faced with the highly competitive corporation tax rate on the other side of the border and we have been looking for reductions and modifications there. I have no argument in principle with moves to reduce corporation tax, but I wonder about the Government’s measures on the control of foreign companies and the full reform that is there. Previously, I have asked about the impact that that would have on the moves to restrict the incentives towards using tax havens, and I remain concerned that while the Government have perhaps redressed some of the concerns that have been raised about the possible loss to business and revenue in the UK, there will still be a loss to developing countries’ revenue, which they absolutely need, as a result of the measure.
The Government are making much, not just in the Budget but more widely, about what they are doing for business lending. We have all heard this before. All the measures that are made relying on quantitative easing and now credit easing depend on the banks. We are told about the £20 billion guarantee, so that some banks—those that opt into the scheme—might give businesses credit at 1% less than they would otherwise have given. If yet more billions are being spent just to make that marginal difference, one has to wonder whether that is the best way of gearing support towards growth and the economy. More direct uses of that money could yield a much readier growth impact.
On the tax side, we have the hit on pensioners, with the move in the allowance and more people being brought into taxation. At a time when we are again
encouraging people to save towards pensions and we again have a reform and recasting of the pension system, for the Government to come along and make another tweak that appears to hit pension provision and pension plans sends the wrong signal. It gives people the idea that the Government engage in jigger-pokery—that they encourage people to save pensions but that then when they do so they will be clobbered. It is just a bad and unnecessary measure at a time when we are trying to encourage people to save more for pensions. Other people whom we are asking to save for their pensions are middle-income earners: we are asking them to make strong provision for their pensions and to make provision for their children’s third-level education. Many of them are still being hit by the change to child benefit. That will hit some of those people’s capacity to save for their own pensions as well as to support their children.
The Chancellor has told us of the Adam Smith principles of tax being simple and predictable, supporting work and being fair, but the tax charges being introduced in relation to child benefit go completely against that. It is a very complicated and clumsy system that is going to cause problems, and not just for those families who are affected—it will cause serious problems for employers. It will not be long before employers’ bodies will be coming to Government and saying, “You have created a very serious problem here”—a much bigger problem than the 50p tax ever created for those firms in how they could incentivise rewards and repay people. The Chancellor also mentioned the £10 billion cut in welfare coming after the next election, which he has been framing as necessary if other cuts are to be sustained.
Will my hon. Friend comment on the initial speculation in today’s edition of T he T imes, which is hardly a bastion of left-wing politics, that those cuts might affect attendance allowance, means-tested disability living allowance or mean the taking away of carers’ allowance?
Of course, these cuts could affect anything. We were told when the Welfare Reform Bill went through Parliament that that was the final destination of welfare reform. Now it is clear from the Chancellor that it is simply a staging post for further cuts. We were told about the spoonful of sugar—the extra money going into making universal credit work in the transition period—but is it the Chancellor’s plan to remove some of that, and to pull back the extra investment that has gone into making universal credit work and more acceptable, or will other benefits such as those for people with disabilities be affected? We know that families with disabilities are already being squeezed. Are they going to suffer more?
In the light of people in the Chamber teasing others about what they will put in their next manifesto, will the Government parties tell us what they will be putting in their manifestos about the £10 billion-worth of further cuts in welfare? Who will be hit? There is no point in people asking one party what they are going to put in their manifesto unless others are going to follow through. The Government are saying that such cuts will be needed after the election; will they say during the election campaign where those cuts will be made?
May I follow up the very important point that my hon. Friend made about the reduction of £12 billion in welfare? Does he recall that last week when we had the debate on women’s rights in Westminster Hall a number of our friends from Northern Ireland outlined just how serious that problem was? Does he think they will be in receipt of cuts as well?
Absolutely; that is the fear that we must have. The Chancellor has put forth the signal that such cuts would be needed and would have to be factored into the next spending review. Although this House has discharged its duties on the Welfare Reform Bill, we must ask what the changes will be. Contrary to what the Chancellor has said about support for families, the Government's direction of travel in everything they do is putting more of a squeeze on families—both low-income families on benefits and middle-income families given the pressures that they are facing.
The Chancellor also used the Budget to frame questions about moving towards regional pay in the public sector. Speaking from the Opposition Benches, I want to say straightforwardly that I know that he is not the first Chancellor to toy with the idea of regional pay and tinkering with the framework. I have heard that from previous Chancellors and Prime Ministers, so I am not in denial. I was as opposed to it then as I am now. I was intrigued to hear the Chancellor say that he had submitted evidence to the independent pay review body, so I went to the Library to see what that evidence was and I have the “Dear pay review body chair” letter from the Chancellor. Some 11 pages of evidence were submitted. I am not saying that it is dodgy dossier stuff, but in the material that it sources it really is dubious dossier stuff. It shorthands academic studies, possibly doing a disservice to the academics who completed them, in saying that the evidence suggests that the quality of public services would directly benefit if public sector pay became more responsive to local labour markets. It claims that one study
“found that over one quarter of hospital targets were negatively associated with the public/private wage differential.”
It said that another study
“found that a 10 per cent increase in wages outside of the nursing sector was associated with a 7.4 percent increase in mortality rates from heart attacks.”
When that is the quality of evidence that the Government are submitting to the pay review body, we need to examine it further.
I remind the House of my interests on the Register of Members’ Financial Interests. One of the most remarkable things about the Opposition’s response to this Budget is that we have not heard a single pledge to reverse any of the changes being proposed. We have heard a lot of carping and that they are going to vote against some of the measures on Monday, but they are not actually going to change them should they ever come back to power. When they do carp, they seem to be carping on behalf of some rather strange interests. They want the top 10% of households to keep their child benefit. They want the better-off pensioners to keep their age-related allowances. Indeed, they want the super-rich to go on enjoying
some £65 million-worth of evasion of stamp duty and abuse of tax reliefs. That seems to me an extraordinary position for the Opposition to get into.
My hon. Friend is on to something. We note that the shadow Chancellor could not answer the questions on whether Labour would restore the age-related allowances, the changes to which its Members have been moaning about today.
Where I hope there is common ground across the House is that we all want a dynamic, high-growth economy. In my view, that can be built only on sound public finances, fully flexible labour markets and rising productivity in both the private and public sectors.
I shall begin with the public finances. I welcome confirmation in the Budget that we remain on track to eliminate the structural deficit, with the result that, even in difficult trading circumstances both in the eurozone and globally, the Chancellor was able to avoid big increases in taxation or further increases within this spending round. A broadly neutral Budget confirms that we are on course, but keeping our public finances on course will require continued firm control of public spending.
I note that in cash terms public spending continues to rise each successive year that is illustrated in the Red Book. It may be that we have to have a fresh look at some of the entrenched spending targets of the previous Government. We may well need to ask ourselves whether specific targets, for example on child poverty or climate change, are the best way of focusing our spending where it is most needed.
I welcome moves towards flexible labour markets and more local pay. Mark Durkan is right—this is not a new announcement. If you look back at the spending review of 2002, Mr Deputy Speaker, you will see that the then Government were committed to more flexible local and regional pay. You will find it in the Budget documents of 2003. You will also see it in the previous Prime Minister’s last Mansion House speech as Chancellor in 2006. Of course, the Labour Government did nothing about it; their union paymasters would not allow it. But local pay has applied for the past 25 years at least across the private sector, and it would be wrong to continue to rope off the public sector from the real differences in the associated costs of labour up and down the United Kingdom.
It is unfair to local businesses to have to compete for labour with public bodies and offices that pay well above the market rate. It is certainly unfair to the jobless in those labour markets, who are priced out of jobs as a result. I hope that the Chancellor will go on to tackle some of the other inequalities, such as the big differences in sickness pay between the public and private sectors and the real difficulties that young people under 25 have in getting that first job. One third of the unemployed are under 25. That is the legacy of the Labour party, and we have to do everything possible to help those people to get their first job, not least when at the moment we control their wages and other conditions that create so many disincentives for small companies to
take on a single extra member of staff. Why should the state make it so difficult for young people to get into employment?
The test of all the Budget measures in the end is whether they will improve our productivity, as so many Labour Budgets and so much Labour spending signally failed to do. The Office for National Statistics figures for 2010 say it all and are a good summary of 13 years of Labour government. In terms of GDP per hour, France is 18% more productive, Germany is 19% more productive and the United States is 24% more productive. That shows the importance of improving incentives at every level and it is why I welcome the new incentives for the lower paid and middle earners that will be created by the changes to the personal allowance. Taking 2 million people out of tax altogether in two years will improve those incentives. That is a coalition achievement in which both parties on this side of the House can take real pride.
Sound public finances, more flexible labour markets and higher productivity are the keys to the future and to the jobs that our children need. I welcome the progress being made in this Budget towards them.
The Chancellor’s Budget statement yesterday was for the entire country, but for so many individuals, households and communities, it will result in many different outcomes. I want to concentrate on the impact that it will have on my constituency and the Dumfries and Galloway region as a whole. Yesterday, local people were looking for indications of potential growth in the economy and potential creation of jobs.
In the past 20 months unemployment in my constituency has risen month after month. It is a sad reflection that youth unemployment is at its highest level since 1996. Dumfries and Galloway is a rural constituency, which means that the two largest employers are the national health service and the local council. The shedding of jobs in those two specific areas has now been going on for four years, and for those who think that everything north of the border is fine under a Scottish National party Government, let me tell them that that is four years of cuts in the public sector. Yet the block grant that we all talk about—that Barnett formula, the Barnett consequentials—has been reduced only in the financial year that is about to come to an end. So there has been a lot of pain in Scotland that sometimes people do not read about in the wider UK press. The pain of loss of income spreads into the local economy. It spreads on to the high street. I regret to say that some of the pressure on households in my constituency is down to the fact that it is very much a low wage economy.
So the Budget statement cannot be taken in isolation, although that is what we are here to discuss today. We need to look at what has happened and what is about to happen. My hon. Friend Mark Durkan said that the welfare cuts would have an impact. That is happening at the moment. Let no one be under any illusion that only the current coalition Government have introduced welfare cuts and reforms. Our Government did on three occasions. They were trying to make those adjustments that said to people, “Work does pay. There is an opportunity there, despite any disability that you have. There is help and support to get you back into the
workplace, perhaps not doing what you did in the past but it is there if you wish to seize the opportunity.” The big challenge will be in the next two weeks when so many households lose working tax credits. With the reductions in service provision through the voluntary sector that my local area has experienced, with welfare rights budgets being cut and with Citizens Advice services being cut, I am finding that more and more constituents are coming to my office for help and support.
Let me give the entire House a warning: colleagues had better batten down the hatches, because they are about to be inundated with households that are about to lose their working tax credit. The increase in tax allowance announced yesterday, which will mean £2 or £3 a week, will make not one iota of difference to households that will potentially lose £50, £60 or £70 a week. In no way whatsoever can the increase compensate for that.
The other point is that people will need to move from working 16 hours a week to 24 hours in order to avoid losing their tax credit. How on earth will that happen when people have voluntarily reduced their working hours over the past couple of years just to hold on to their jobs? Unfortunately, many of those people will be unable to keep a hold of their tax credit.
The granny tax grab, as it has been described today in the press, the changes to the age-related personal allowance, which when introduced took 680,000 pensioners out of tax altogether, is being done at the wrong time, if indeed it has to be done at all, with low interest rates and maturing annuities not delivering what people had expected.
In a rural locality fuel prices are vital, so I want to ask the Minister what has happened to the fair fuel stabiliser. FairFuelUK expected more from the coalition Government, who need to be honest about what has gone wrong. We were all inundated with e-mails from constituents about the report commissioned by FairFuelUK. I asked the Economic Secretary last week—she did not leak anything to me—what she and her officials thought of the report, but she said that she could not speak to me about it because the Budget was just a few days away. I would like to hear what Treasury Ministers and officials make of the report, because I have doubts about a 2.5p reduction in fuel duty creating 175,000 jobs; it verges on some sort of economic fantasy.
I would have loved to have seen, as I am sure would most of my constituents, an announcement yesterday of a temporary reversal in the VAT rise, because £450 extra for families would have been of real benefit to them and it would also have helped motorists. I am, and always have been, totally opposed to any kind of regional variations in these matters. I sat on the Committee that introduced the national minimum wage back in 1998 and—the Secretary of State for Business, Innovation and Skills is no longer in the Chamber—even then there were Liberal Democrat Members who wanted regional variations in the national minimum wage. It is not acceptable.
Does my hon. Friend recall that the hospitality and tourism industries, which I know are very important in his constituency, were warned that the national minimum wage would cost them jobs, and does he agree that the opposite was the case?
My right hon. Friend is absolutely right. In 1996 and 1997, when the Labour party was talking about a national minimum wage, the Conservative Government and others were saying that we would lose 1 million jobs as a result. In fact, the opposite happened and it created around 1.5 million jobs, especially in the service sector, so he touches on a relevant point.
My right hon. Friend mentions tourism, and it is on that point that I will bring my remarks to a close. I represent a rural constituency, and for many of my constituents using public transport is an absolute impossibility and they depend on their cars. The area is heavily dependent on agriculture and forestry. Hidden away on page A101 of “Overview of Tax Legislation and Rates” is the bombshell—it is a bombshell—that as of this October VAT will be levied on static holiday caravans. A £40,000 van will cost £48,000. There are many of these business in my constituency—nowhere in my constituency can someone be more than eight to 10 miles away from a static caravan site. Owners of these sites will find it much more difficult to upgrade and invest in their businesses and, importantly, those holidays will become much more expensive for hard-working families.
As a Liberal Democrat, I am as delighted as any of my colleagues or, indeed, any of our coalition colleagues by the further and faster move yesterday towards the realisation of our flagship tax policy—raising to £10,000 the threshold at which people start to pay tax. It was something that the shadow Chancellor would not acknowledge, and that was a little churlish. As the Liberal Democrat spokesperson for business, innovation and skills, however, I want, in the short time at my disposal, to focus on a small number of highlights and what the Budget means for business.
Much of the good news for business was announced in the autumn pre-Budget statement, and that is a good thing, because what business needs as much as anything is predictability, stability and simplicity. We knew that corporation tax was due to be cut to 25% this April, but I am sure the news that we will now cut it by a further 1 percentage point is good news that business will be able to deal with.
I also welcome simplifying on the basis of cash turnover the tax on our smallest businesses. What a difference that is going to make for them, as will integrating income tax and national insurance. Business has other things to worry about without collecting tax through two separate systems for the Government.
Despite the tough decisions that we had to take because of the “no money” legacy of the previous Government, we have managed to create an environment of low interest rates, and that has been vital to business. We only have to look over the channel at our European neighbours to see what a shocking state we could have been in if we had not been as tough and as firm as we have.
So, despite the tough going, we have been getting going and literally rebuilding our economy. The building trade has suffered badly during the recession, despite historically low mortgage rates, but we are helping, through the NewBuy system, by expanding the get Britain building fund to provide up-front finance to construction companies and by reforming planning.
For small businesses, the national loan guarantee scheme started operating this week, making £20 billion of guarantees available. That is all well and good as long as banks are prepared to lend, so it is important that their seeming intransigence is challenged by competition from alternative sources of finance, such as the £1 billion that we have made available to funds that lend directly to mid-cap businesses. We are also increasing funding to the business finance partnership by 20%.
The Green investment bank opens for business next month—a step towards our aspiration to become the greenest Government ever; greener business cars will get a series of tax breaks; and hauliers’ vehicle excise duty has been frozen. But most importantly, there will be £4.5 billion less in burdens on the motorist with the cancellation of the fuel duty escalator and the confirmation of the fair fuel stabiliser.
Business needs support in many ways. We are very clever and inventive—[ Interruption ] —all of us, as a nation—and we need to do much more on patent protection, but I welcome the cut in taxes on patents and was delighted to hear the news this morning that GlaxoSmithKline will now invest heavily in the UK and, as a result of that announcement, continue its valuable and lucrative life sciences work here.
The support for science announced yesterday was also very well received. The extension of tax credits to the creative industries, as well as to films, is also welcome. There was some banter yesterday when the Conservatives were compared to “Downton Abbey”, and perhaps the Labour party does include Wallace and Gromit, although which one out of the shadow Chancellor and the Leader of the Opposition is Wallace and which one is Gromit is something on which we have been speculating. As for the Liberal Democrats, let us not be left out. I fear that our signature film will be “Four Weddings and a Funeral” if we are not careful. [ Laughter. ] But these tax credits, joking apart, are most welcome.
Research and development tax credits make a big difference to companies, especially when they are deciding where to locate their R and D functions, so I welcome in particular the movement to above-the-line credits—a simpler system, which ensures that tax implications can be more easily factored into the decision-making process.
In a global world we really need to brush up on our technology and, especially, on our broadband speeds, so the provision for ultra-fast broadband and wi-fi in 10 cities, including my own of Birmingham, is very welcome, as is the extra help for smaller cities.
Overall, I am very happy with this coalition Budget. However, there is an issue on which the Chancellor and I disagree—the belief that we need a new airport in the south-east. Clearly, we need to be able to service all passenger requirements, but there is a pledge in our coalition agreement that there will be no new runway at Heathrow. Why does the Chancellor not raise his eyes a little further north? Birmingham airport’s runway is currently being extended and will be easily accessible when High Speed 2 comes in. It has spare capacity of 40 million passengers a year. In the midlands, we have the answer to the need for an English airport hub.
Our business focus is paying off. We are now in the top 10 most competitive places in the world to do business. However, we need to change the culture in this country. I am so concerned that too many young people
leave school unready and unprepared to earn a good living. We must tackle that issue. We must enthuse and open the eyes of our youngsters to the opportunities out there, including starting their own businesses. I fully back the idea of enterprise loans for young people. I started my first business venture at the age of 10, and I think that it is never too early to feel the excitement of doing it oneself. I commend the Budget to the House.
It is a great pity that the Chancellor is not here; I would love to look him in the eye and ask whether we are genuinely all in it together. He and I represent Cheshire constituencies, but I do not think that his position is quite the same as that of the good folk living in the Westminster ward—one of the country’s most disadvantaged—in my constituency. I would really like him to say to those people that he was in the same boat as them. That is manifestly not the case. The media have picked up on that and realised that the story that we were told yesterday is full of half-truths that present the facts differently from what is really happening on the ground.
In these tough times, what the Tory-led Government are doing tells us everything that we need to know about them. It proves that the Chancellor and Prime Minister are totally out of touch with what life is like for people in this country. At a time when bills are going up for families on middle and low incomes, the Chancellor has added to them all. Fuel duty is going up, even though petrol prices are at a record high.
I am glad that some Liberal Democrats are in the Chamber. In the west country, there is already a blog about the new pasty tax. The Lib Dems should watch out; that is not the only thing that they are under attack for. They will be the real losers on the issue of regional pay, raised by my hon. Friend Mr Brown and Mark Durkan. Areas where Liberal Democrats have traditionally been strong would duck out compared with places such as my county of Cheshire, which is also the Chancellor’s, or Oxfordshire, which is where the Prime Minister is. The Liberal Democrats have a real problem when they start looking at regional pay.
There is a debate to be had on regional pay, and my position is well known. On the sublimely fundamental and seriously important issue of pasty taxes in Cornwall, let me reassure the hon. Gentleman that we will be fighting them on the beaches.
So, when I go to Ann’s pasty shop, I’ll be all right, will I?
The Lib Dems are supposed to be strong on matters related to solar power. This morning, the chief executive of the Solar Trade Association said:
“We cannot understand why solar has been singled out for rough treatment on Capital Allowances when it is a popular technology which will soon reach grid parity and provide businesses with a real alternative to dependence on fossil fuels.”
Again, the Liberals have bought into something that is totally contrary to their own policy position. At the same time, the Budget gave a tax cut to the very richest people in our country, with just 14,000 people earning £1 million or more getting a Budget boost of over
£40,000 each year. No wonder the Centre for Policy Studies, which is advised by the Minister for Universities and Science, among others, says that the Budget amounted to small-scale tinkering, regional handouts, and a rearranging of the deckchairs. To be fair to the Minister, there is a lot that I do not agree with in the CPS’s press release. Nevertheless, the Government have chosen to cut taxes for 300,000 people earning over £150,000—the richest 1%. How can that be the priority now?
The Chancellor looked quite smug when he sat down yesterday, but I bet he did not feel so smug when he read today’s papers.
I had the pleasure of sitting in the Chamber yesterday to hear the Chancellor and the Leader of the Opposition, and then some of the later speeches. There was a lot of noise going backwards and forwards about the veracity of the figures on how much will be raised from the different wealth taxes. It is not that I do not trust Labour Members, but last night I thought that I would go and check the figures on Channel 4 FactCheck, which I think we all recognise is very accurate, and it confirmed independently that it estimated that five times more money would be raised from the very wealthy as a result of the various taxes.
Order. I hope that the hon. Gentleman is going to save something for his speech. I remind him that interventions are meant to be short.
Did you measure it?
Yes, I got the tape measure out. It said: “‘Granny tax’ hits 5m pensioners”. The papers referred to a £3 billion tax raid on pensioners over the next four years, and pointed out that nearly 4.5 million pensioners who pay income tax will lose an average of £83 per year next April and that people turning 65 next year will lose up to £322. As you are in the Chair and know me rather well, Mr Deputy Speaker, I suppose I should declare an interest, as it is my 63rd birthday tomorrow. Whatever the Chancellor says about increasing the income tax personal allowance, a family with children, earning just £20,000 will lose about £253 from this April. Shockingly, he slipped out that £3 billion tax raid on pensioners over the next four years. All this comes from a Government whose economic policies on growth, jobs and the deficit have utterly failed.
Of course, there have to be tough decisions on tax, spending and pay; otherwise, we would not get the deficit down. However, although the restoring of the cuts in the science budget is one of the few measures I agree with, a lot more funding is needed if we are to retain the quality of British science. I agree with Imran Khan, the director of CaSE—the Campaign for Science and Engineering—who said today:
“I suspect the Government realises that the multi-billion pound, 50% cut made to research capital in 2010 simply is not sustainable. Despite difficult times, they are trying to put it right, and it is not going to go unnoticed.
However, simply reversing the cuts isn’t going to be a game-changer for the UK. We need to be far more ambitious if we’re serious about having a high-tech future. The Chancellor should re-invest the windfall from the auction of 4G mobile spectrum, due later this year, into science and engineering.”
The Budget said nothing about that.
No I will not.
I also agree with the Engineering Employers Federation. Although it welcomed the changes to research and development tax credits, it stated:
“Whilst there are some helpful measures, they fail to send a strong enough signal to growing manufacturers”.
“small and medium-sized companies felt the Budget measures would ‘overwhelmingly benefit the biggest businesses’ and were disappointed he did not do more to boost confidence across the economy.”
Finally, as the shadow Chancellor said, the Chancellor’s plan has failed. Trying to raise taxes and cut spending too far has backfired. With his tax cut for millionaires, the Chancellor is piling insult upon injury for millions of families and pensioners across Britain. This is a Budget full of failed promises that will fail the country. I urge the House to vote against it on Monday.
I suggest to colleagues that it would be worth their while going through chapter 2 of the Red Book, because its 250 paragraphs contain all kinds of things, some of which are important and others of which are even more important.
As we all recognise, everything that we are discussing must be put in the context of the Government’s receipts and expenditure, which are shown on page 18. The attempt to close the gap between the two underlies everything that we are considering. Some of the matters in chapter 2 of the Red Book will not matter to many people, such as VAT being put on the rental of hairdressers’ chairs. Others have not been spotted by many, such as VAT relief being taken off alterations to listed buildings.
Anyone who has had dealings with English Heritage, as I have, will know that sometimes it is very helpful and that at other times it adds to the cost of what one is trying to do. If we have to take the VAT relief off alterations, perhaps we should consider giving VAT relief to the maintenance and repair of such buildings, or to a portion of those costs, because meeting the requirements of the listed buildings authorities can be expensive.
Paragraph 2.40 is on charitable giving. The Chancellor suggested that philanthropy in a person’s lifetime should be subject to a limit of 25% of their income in any year.
I can imagine circumstances in which someone would have a very high income in one year, perhaps through the sale of an asset that is not protected by capital gains tax relief. If somebody gets £1 million over and above their normal income and wants to give away two thirds of it, what is the Chancellor thinking of in saying that they can give away only a quarter? It seems to me that we ought to have the same ability to give away our earnings as we have to give away our assets in death.
I ask the Chancellor, when he has his consultation with philanthropists, to ask a number of well-known philanthropists—without giving their names—how they would react to that. For people with established charitable funds, such as Dame Vivien Duffield, who gives fantastic support to charity, there is no problem, but there is a problem for people who, by chance, have a very high income for one year or a number of years and who want to give away a lot of money. That is a matter that the House should consider, but I would like to hear the Government’s response to a consultation before taking up the matter further.
I also have a question, not for answer immediately, about the lifetime limit on savings for self-invested pensions. The limit has come down from £1.8 million to £1.5 million. That does not affect me personally—not on my salary. However, somebody who has got to £1.6 million can now write in and say, “Please protect this amount.” What happens if the value of their investment goes up by 15% in the next five years? Or by 150%? Will they lose 55% of that increase? They have to take the risk that the amount of money might go down, but if it goes up, the Chancellor will say, “I will have more than half of that.” I may misunderstand the provision, and I am not saying that it was new in yesterday’s Budget, but it does matter and we ought to give it some consideration.
I welcome the provisions on employee ownership and the enterprise management initiative, some of which are really interesting.
I am not absolutely certain that I understand the gift aid and charitable giving provisions completely, but they are to be welcomed. Simplification matters, and the headline title in the Red Book is, “A fairer, more efficient and simpler tax system”. I should like to talk about that.
Some of the accusations that the Opposition have made about the so-called granny tax are exaggerated, and we have to realise that we need to get more people to have more provision for their old age. The Government are right to say that £140 should be the minimum pension level, but we need to apologise to people who did not have the chance to receive that. They often worked for much longer than the current qualifying period, but get lower pensions and are more likely to have to get means-tested support. It is unfair to them when we make things better for people in the future, and we have to apologise to those most affected.
I want to ask the Minister why we use the retail prices index for some things that people have to pay and the consumer prices index for some things that people receive. People can rightly go through the Government’s provisions and ask whether there is a philosophy to that or whether it just what is now called fiscal consolidation, which means, “We’ll take all we can and pay out as little as we can”. That is a perfectly reasonable attitude for the Government to take, but would they like to say openly what the philosophy is?
I end by saying something about child benefit. I ran a campaign in the early 1970s to bring in family allowance for the first child, and I ran a campaign against Denis Healey when he said, “There’s no need to increase family allowance or child benefit—look at the married man’s tax allowance”. Half of that allowance went to people who had no children, and half of it went to people who had working spouses, so it was the least well directed way of supporting those caring for children.
Some of the arguments put forward over the past year, since we first heard about the proposal to cut child benefit for a certain number of people, have been grossly insulting. The idea that someone on £20,000 a year or less will support a person on £120,000 is nonsense. I saw one bit of paper suggesting that I could write to my constituents explaining why people with between £60,000 and £800,000 a year in earnings were being subsidised by the poor, but the difference between the taxation of someone earning £800,000 and someone earning £20,000 would pay for child benefit over and over again. The advantage of child benefit is that people register to get it when they are entitled, and stop getting it when their child ceases to be of eligible age. The amount of family formation, reformation and deformation, and the number of times people change or lose their jobs, will cause a lot of problems.
I say to the Government that whatever they get through this year against my wishes, they should not stick to this mistake. Amalgamating the value of the child tax allowance and the family allowance was right, and child benefit was the right way of doing it. It puts money in the purse more often than in the wallet. The Government are making a mistake, although less of a mistake than when the announcement was made a year ago. If they would like to have a serious debate about the matter, please count me in.
I agree with a lot of what my hon. Friend Mark Durkan said about welfare cuts, regional pay and the £25 billion that the Government will provide to allow some banks—five at the moment, I believe—to help businesses. I trust that banks at home will take up that offer as well, because it would make a lot of difference to companies there.
I know that this was a very difficult Budget for the Chancellor, but I believe that some better decisions could have been made than the ones that we heard yesterday. First, I would like to deal with the corporation tax cuts to 24% and then to 22% by 2014. The Northern Ireland perspective, of course, is that we are in direct competition with the Irish Republic for investment. A former chief executive of the Republic’s Industrial Development Agency once remarked:
“In the battle to attract overseas investment to Ireland, no financial weapon has been more important than tax in convincing new industry to locate here. It remains the IDA’s unique selling point, giving Ireland a critical advantage in winning new investment.”
The measure in the Budget, therefore, is certainly welcome from Northern Ireland’s perspective.
Of course, not every business in Northern Ireland is liable for corporation tax and in a position to benefit—only 3% of businesses pay it. Some 99% of our businesses in Northern Ireland are small businesses. The measure is welcome news for those who will benefit, but it will have
no impact on the overwhelming number of our businesses in our business community. That is why I welcome measures such as the proposal to allow the smallest businesses to move to a cash-based tax calculation. That simplification of the process could help up to 126,000 small businesses in Northern Ireland.
In the local press in Northern Ireland, the Federation of Small Businesses welcomed the Budget, but expressed disappointment that there were no plans to set up at the heart of government a small business administration to champion small businesses. Perhaps we will see that later.
I also welcome the devolution of air passenger duty, which will be included in the Finance (No. 4) Bill. That measure will allow the Northern Ireland Executive to set their own rate for long-haul direct flights—we have competed against the Republic of Ireland on that, so the measure will also help our investment strategy. The proposal for loans for young people to start their own businesses is another welcome part of the Budget.
Fuel duty, however, is one of the biggest problems that we have in Northern Ireland, especially for road hauliers. Because we rely so much on road transport to deliver our goods, fuel duty is causing a major problem. It is bitterly disappointing to people across the whole United Kingdom that the Government have decided to go ahead with the 3p duty increase, which will happen in August. I understand that in doing so, the Government will bring into their coffers somewhere in the region of £800 million from the motorist. Although the Government will get a lot of money from the measure, it will cause a lot of difficulty for those working people who must travel by car or another vehicle to their place of work. It is causing major difficulties.
I support what the hon. Gentleman says about fuel duty in Northern Ireland. In my many times there, the one thing that always struck me was the scarcity of railways. There just is no railway system, and therefore everything must go by road. It is very sad, but the duty has an impact on Northern Ireland.
I thank the hon. Gentleman for his comments. That is one difficulty we have in Northern Ireland because for 40 years of the troubles, the infrastructure investment was not there. We are only now playing catch-up. Perhaps some day when he comes across to the Province, we will have a new railway link from Belfast International to the centre of Belfast, which will be beneficial. It could be some way off, but perhaps we will achieve it.
Many people will welcome the tax credit measure to be introduced for the video games, animation and high-end TV industries. The Northern Ireland Executive have tried to promote that sector for some considerable time. Of course, Northern Ireland has seen significant investment in the sector, especially in film production. I hope there will be added benefits to be derived from this announcement. Recently, it was announced in the press that the series “The Game of Thrones”, which was made in Belfast, is to return shortly to film a new series.
In a passing comment, the Chancellor mentioned an enterprise zone for Northern Ireland. I would welcome that, if we could just find out from someone what is
meant by an enterprise zone in Northern Ireland. The Secretary of State tells us that it is an enterprise zone for the whole of Northern Ireland. When we tease it out, some will say that it is going back to the 1980s, when there were different enterprise zones across Northern Ireland. We are yet to have any beef on the bones, and we need that if we are to determine exactly what is meant..
One of the issues that has continually acted as a brake on business is the endless red tape and planning laws, and I welcome the announcement in the Budget that we will perhaps see a quicker response to businesses when they apply to expand their premises. Of course, it is a devolved matter for the Executive, but I am sure that the Minister in Northern Ireland will see fit to fall into line in order to create an environment that is helpful for businesses in Northern Ireland. We also have the dreaded dead hand of EU regulation. I urge the coalition to have a firm hand when it comes to all the directives and regulation that the EU imposes on businesses. That needs to be addressed and, frankly speaking, the coalition needs to tell the EU where to get off. This is the United Kingdom, and we make our own decisions for our businesses and companies.
Although there are some plusses in the Budget, there are of course some negatives, but I wish the Government well with it. I hope that the Government can turn around the fortunes of the United Kingdom, and that we can see the people of this United Kingdom having a better standard of living.
I am pleased to have an opportunity to contribute to this most important debate. Before I start, I put on record my appreciation to my right hon. Friend the Chancellor for his statement yesterday, for putting growth at the heart of the Budget, for unashamedly backing business, and for rewarding hard-working families. Those are the areas I want to focus on, but first I want to talk a little about the cut from 50% to 45% in the top rate of tax.
I have to say that I did not campaign for the cut and I was surprised to see it in the Budget, although that does not mean I do not welcome it. As a Conservative, I believe that all taxes should be as low as possible so that everyone can keep as much of their money as possible and spend it how they wish. But I recognise that at a time of national austerity, when public sector workers are experiencing a pay freeze and then very modest pay increases, and ordinary families are struggling with high fuel and energy prices, giving what appears to be a tax cut for the wealthiest in society seems to make no sense. Our hearts say this cannot be right, but if we use our heads, look at the hard facts and stop listening to the class war rhetoric of the Opposition, it begins to make a little more sense.
The 50% tax rate left Britain isolated as the country with the highest income tax rate in the G20—higher than our competitors such as the United States and countries in Europe. It made Britain a less attractive place for wealth and job creators to set up and do business. It encouraged the wealthiest in society to be more creative about where in the world they paid their tax. It saw £16 billion of income deliberately shifted into a previous tax year, meaning that the total take
from the 50% rate was only around £l billion. It did not raise the levels of income expected and it made Britain less competitive.
I think my hon. Friend has just done that.
The higher tax rate made Britain less competitive, and if we are less competitive, it means less growth, fewer jobs, reduced prospects for economic recovery and fewer tax cuts for the rest of us. Despite the perception, therefore, that this cut benefits the wealthiest, I believe that it benefits us all. Having a top rate of 50% rather than 45% raises only £100 million in direct tax, whereas the other Budget measures introduced yesterday raise five times that amount—£500 million.
We should not listen to Labour on this matter. Its aim is to reignite the class war and divide Britain along the lines of envy for its own political gain. I want to say to the people of South Basildon and East Thurrock, “Ask yourself this simple question: what is in the best interests of you and your family? If you answer economic growth, better job prospects, low interest rates or lower taxes, welcome this change, because it goes some way to delivering those aims.” On its own, however, it is only a small step. To achieve real growth, we need more, and I am pleased that we are getting more. The Chancellor both confirmed existing growth measures and announced new ones. As a member of the Science and Technology Committee, I am pleased that the science budget is receiving continued support. Investment in science and technology is vital if we are to emerge from financial austerity. New technologies, deployed for our own economic gain, can provide both jobs and growth. I therefore welcome the maintenance of the £4.6 billion science budget. I believe—I think the Chancellor does too—that science and technology form the basis of our future competitiveness.
Investment in sectors that Britain excels in is also vital. Investments such as in the Francis Crick Institute at St Pancras, the establishment of a UK centre for aerodynamics, which will encourage innovation in the aircraft industry and help design and commercialise new ideas for decades to come, and the £100 million of support, alongside the private sector, for investment in major new university research facilities are important parts of that support.
Also important are the changes to research and development tax credits to encourage businesses to invest in innovation and technology. We also need to improve links with small businesses and the research base to assist in the commercialisation of research and, I hope, capture the value that can come from that. These will be the key drivers of economic growth, and the Government should continue to strive to create the best possible operating environment in which this can take place to encourage greater investment and international interest. We want the international research community to see the UK as the best place to invest in science and technology. I am therefore pleased that the Science and
Technology Committee will be looking at how we can bridge the valley of death—the chasm between concept and commercialisation.
This goes wider than just science-based businesses, however. We want all businesses to see the UK as the best place to set up and do business, and I welcome the measures that the Chancellor has taken to ensure that this becomes a reality. The reductions in corporation tax, the introduction of corporation tax relief for video games, animation and high-end television, and the investment in broadband provision and infrastructure are all welcome additions to the growth programme.
Notwithstanding the 1% cut in corporation tax, what impact will the 5.6% rise in business rates have on growing businesses and economic growth?
Obviously, any rise in cost base will have an impact, but we are working hard to reduce that to the absolute minimum, and we are putting in place a framework around which businesses can grow that will mitigate the 5.6% rise.
We all welcome the investment in infrastructure, which will be a driver for growth, although I add the caveat that I and my constituents remain wholly unconvinced that an airport in the Thames estuary is the right solution to maintaining our hub status. I would therefore encourage the Government to listen to my hon. Friend Lorely Burt, who made a very good bid for that increased capacity in Birmingham.
I also want to put in a plea for small and medium-sized enterprises. In 2009, they accounted for 49% of private sector turnover. SMEs are vital to the economy. Cutting corporation tax, abolishing Labour’s job tax and offering support through the national loan guarantee scheme are all welcome, I am sure. However, if SMEs are to operate at their full potential, regulation, red tape and bureaucracy must be cut. They have been strangling the economy for too long. I am therefore encouraged to see measures that will allow greater freedoms for businesses in this area. My right hon. Friend the Chancellor’s announcement yesterday that he plans to reduce the number of UK SMEs required to undertake an audit and to reduce the burden of financial accounting for UK businesses has to be welcome. I hope that the consultation on a new cash basis for calculating tax, which the Federation of Small Businesses has welcomed, will benefit many small and micro-businesses, allowing them to concentrate on growing their businesses, rather than spending time, money and effort fulfilling requirements that were designed for much larger businesses.
As an expert, my hon. Friend will be able to confirm this, but I have heard that about 10% of what small businesses do is taken up with bureaucracy—filling in forms, and so on. Does he agree that we need to avoid that?
My hon. Friend makes a good point. It varies from sector to sector, but that is not an unrealistic figure.
Finally, in the short time I have left, I want to talk about jobs. Businesses are vital for growth, but they are equally vital for tackling unemployment. I am delighted to see that unemployment is beginning to stabilise.
Dealing with unemployment, through the building business and enterprise loans, will allow jobseekers to start their own businesses and unleash a new generation of entrepreneurs. However, we should not forget that our existing small and medium-sized enterprises have the potential to deliver sustained employment. We should redouble our efforts to create confidence for businesses to take on staff. I therefore reiterate my call to make it easier for firms to hire staff in the knowledge that employment regulation will support them if things do not work out.
As we emerge from the deepest recession in living memory, I applaud the Government’s commitment to addressing an over-leveraged economy, an unsustainable budget deficit and a broken model of growth, inherited from the previous Administration. Our plan of fiscal responsibility has allowed the UK to surge ahead of the curve. We have become a safe haven in the sovereign debt storm. As a result, we have been able to deliver record low interest rates for families, businesses and taxpayers, yet still remove millions of people from paying any tax at all, by increasing the tax threshold. Although we are not immune from events taking place on our own doorstep, we can—as this Government are demonstrating—steer this country out of a financial quagmire and deliver growth, employment and a future brighter than any alternative the Opposition may offer.
Just about the only announcement that was not flagged up in advance of the Budget yesterday was the £3 billion granny tax grab, which means that those men and women in my constituency who built Birmingham and Britain, who are coming up to retirement next year, will face a cut in what they had hoped and planned for of £314.
There are many laughable examples from the historical lexicon of the politically disingenuous—for example, the spokesman in the dying days of the Nixon Administration who said at the height of Watergate that “all statements heretofore issued are now considered to be inoperative”—but to describe this granny tax grab as “simplification” takes some beating. There is one thing that the Business Secretary and I have in common: we are both follicly challenged. Neither of us detains hairdressers for too long. Following yesterday’s Budget announcement, the next time I go to Imad’s, the barbers on Slade road, I will ask for my hair not to be cut, but to be “simplified”.
Why has this happened? Quite simply, it is a granny tax grab to fund a £40,000 tax cut for 14,000 millionaires.
I will contrast the record of our Government with the record of the hon. Gentleman’s Government, any time. After 13 years of a Labour Government, Britain was a stronger, fairer, better country. We have now been given a Bullingdon Budget whose first priority is millionaires, by a Cabinet who are oblivious to the consequences.
I am extremely grateful for that substantial promotion in my class standing. Will the hon. Gentleman explain why, when tax rates were cut in 1979 and again by Nigel Lawson, that led to more revenue coming in? This point has been ignored by the Labour party.
I stand corrected, Mr Deputy Speaker.
This Government are oblivious to the consequences of their actions. I am proud to represent Birmingham, Erdington. It is a constituency that is rich in talent but it is one of the 12 poorest in Britain. I see what too many Conservative Members shut their eyes to, which is the pain being felt in such constituencies as a consequence of the Government’s actions. Let us take as an example the hard-working Castle Vale family who have two wonderful children and earn just over £20,000. They face a £253 cut to their tax credits in April. Let us consider the one in four young people in Kingstanding who are unemployed. They are desperate for a job, but the Budget offers them no hope. Alongside the victims of the shameful changes to housing benefit and the changes in the Welfare Reform Act 2012, there are 1,333 households in my constituency who are now facing the iniquitous consequences of the bedroom tax.
Grotesque unfairness runs through everything that this Government do. For example, let us contrast how Birmingham and Wokingham have been treated. High-need, high-unemployment Birmingham has had £313 million of cuts to its local budget over the past two years, resulting in every citizen in Birmingham losing £164. In leafy Wokingham, the figure is £19. Whether we are talking about police budgets, fire budgets or the voluntary sector, why have the Government got it in for cities such as Birmingham? They should be standing by such cities; at a time of rising unemployment, they need more help, not less.
Now we are to have regional pay. I declare an interest, in that I have led many national bargaining arrangements in the national health service, in local government and in the Ministry of Defence. I worked with some Conservative Members when they performed various ministerial duties in that regard. For example, I was chair of the MOD unions at a time when a Conservative Minister was chair for the Government side. Anyone who has experience of national bargaining knows that it is efficient, that it is increasingly flexible in its approach and, crucially, that it is fair. The Government’s proposal will say to nurses, teachers, doctors, firefighters and home carers in Birmingham that they are worth less than their counterparts in Surrey.
Does the hon. Gentleman’s dislike of regional variations mean that he does not support his own party’s take on the possibility of regional benefits?
We would never introduce the kind of unfair flexibility—if I can call it that—that the Government are now promoting. The simple reality is that hard-hit areas will be hit even harder in the next stages, be they in Wales, the north-east, the north-west, Birmingham or Northern Ireland.
In the time remaining to me, let me deal with something that commanded but a passing reference in yesterday’s Budget—housing. We have the biggest housing crisis in a generation. Millions of people in Britain are in need of a decent home at a price that they can afford. About 2.8 million people are on council waiting lists, 30,000 of them in the city of Birmingham. Owing to the combination of this Government’s economic mismanagement and the failure of their housing policies, this crisis gets worse by the day.
House building was down by 11% over the first 18 months of this Government in comparison with the last 18 months of the Labour Government. It was the vainglorious boast of the Housing Minister who gives hubris a bad name that he would beat Labour “hands down” year on year, but that is not what is now happening. Homelessness is up, with families presenting themselves as homeless up by 14%. Rough sleeping is up 23%, yet it fell by 70% under the Labour Government. We have a mortgage market where millions struggle to get a mortgage. Scottish Widows estimates the average age of unassisted first-time buyers to be going up from 37 to 40 to 44. We have a private rented sector growing rapidly which is characterised by soaring rents and, all too often, abuse of tenants.
What, then, of the “housing revolution” announced by the Government in November last year? All I would say is that if we had a house for every press statement issued before and after that time, we would not have a housing crisis. The Prime Minister and the Deputy Prime Minister donned wellies and went to a building site to say that all would be well. What came out the following day, however, was that as a consequence of the £4 billion cut instituted by the Chancellor in October 2010, affordable house building had collapsed by 99% throughout England.
What of the new homes bonus? It is both inefficient and unfair, while our planning system is being thrown into chaos by the Government.
Under our Government, there were 2 million new homes, 1 million more mortgage holders and half a million more affordable homes, and 1.6 million homes were renovated under our decent homes programme. Has housing been at centre stage as much as it should have been under successive Governments for 25 years? No, but I will compare our record any time with the failure of this Government.
In conclusion, housing matters. Housing matters to the economy. Housing matters to health, as evidence of the damage done by poor or overcrowded housing confirms. Housing matters to educational attainment. Kids are held back at school because they live in damp or overcrowded housing. That is why urgent action on housing matters. That is what we did in 2008, after
the bankers’ collapse, with our kick-start programme, which had 110,000 homes built, creating 70,000 jobs and 3,000 apprenticeships. That is why we are absolutely right to say that we need a repeat of the bank bonus tax to build tens of thousands of homes, to create jobs for unemployed building workers and to create apprenticeships and hope for the young people of my constituency. I see the consequences of the Government’s actions every day, and I know what my constituency wants. It wants to put people back to work to build that which the community so badly needs—homes.
Listening to today’s debate, I have heard little from Opposition Members to dissuade me from the conclusion I arrived at yesterday after hearing the Chancellor’s speech: that this is a fiscally responsible and fair Budget, but one that continues to build the foundations for our long-term growth and prosperity. What the Government are doing for growth and prosperity will be the focus of my speech. First, however, I want to make a few comments about fiscal responsibility allied to fairness.
I am pleased that the Chancellor chose to stick to the plan—a framework within which all the Government’s decisions are being made. At the beginning of this Parliament, the Chancellor made the right decision, to pay the debts of the past and, after a decade of uncontrolled borrowing, to tighten our belts. It is encouraging that the Chancellor continues to stick to that plan, which was initially unfashionable but has now entered the international mainstream.
The task facing us is not easy, and it will continue to be challenging. The gap between how much we earn and therefore take in and how much we spend has fallen from £156 billion—an all-time high, set just before the coalition came to office—to £126 billion. We have therefore made a lot of progress in balancing the books, but we must not take our foot off the gas, which is why I am glad the Chancellor continues to stick to his plan in this Budget.
It is interesting that Opposition Members no longer call for a plan B. A year or so ago not a day would pass without their calling for that. They are no longer calling for it because plan A is working: the deficit is falling and we are beginning to see private sector-led job creation. That is why the Chancellor is right to stick to his plan and to focus on being fiscally responsible. Very few western Governments could these days have announced the Budget that he has just delivered, and he has been able to achieve that because of his past decisions.
The hon. Gentleman says plan A is working. Does he agree that it must have been an oversight not to mention at the outset that it would result in damaging growth and therefore pushing up unemployment and the costs of some areas of borrowing?
It is precisely because plan A is working that in this Budget we can afford to lift 2 million people out of tax—2 million people who were penalised by the 10p tax introduced by the last Labour Government. Because plan A is working, 24 million of the 30 million workers in the UK can get a tax cut—a very important
tax cut in very difficult times. Jack Dromey said that he would compare his record with our record any day. I say to him that we are lifting 2 million of the poorest people out of tax, while the previous Labour Government penalised them. Our record certainly stands up to scrutiny on that.
Labour has now quietly dropped its plan B, and is instead opportunistically opposing our measure on the 50p tax rate. However, Labour does not say that it would reinstate that rate if it were elected to office tomorrow. It is also saying it would somehow give child benefit to higher rate tax payers.
If the need for deficit reduction was the justification for the temporary nature of the 50p tax rate and the withdrawal of child benefit, why has the 50p tax rate remained a temporary measure while the withdrawal of child benefit will be permanent?
All three main parties agreed that the 50p tax rate was to be a temporary measure. Also, we must ensure that any tax that is imposed actually raises the required revenue for the Government coffers. If it does not do so, it would be irresponsible of a Government to carry on with that tax just because it is good politics. It is right for the Government to set that tax at a rate that discourages avoidance and encourages people to pay.
Fairness must not be the only test of this Budget. Economic growth is also very important. In truth, the Chancellor has very limited room for manoeuvre, and it is good that we have nevertheless done quite a lot for hard-working people, giving back to them more of their hard-earned cash. However, only economic growth will lift the prosperity of all of us. Today, we focus on who are the winners and losers from this Budget, but growth is the most important theme.
I was therefore encouraged to hear the Business Secretary talk about access to finance from the banks. My party colleagues and I know that more borrowing, spending and debt is not the way to get economic growth and to create jobs. We believe that the way to achieve that is through encouraging a spirit of enterprise and adventure, but we cannot encourage that unless we ensure that finance gets into the real economy.
One of the biggest challenges we face in coming out of the 2008 financial crisis is the concentration in our banking system. Some 90% of small business lending is concentrated among five banks. No matter what they say, that means that there is little price competition and it is important that the Government do a lot to ensure that we can get money into the real economy. That is why I welcome credit easing, because by using the Government’s balance sheet to enable banks to borrow and lend to businesses, we enable a situation whereby even if a business had a 1% interest rate discount, it could refresh loans that may otherwise not be refreshed.
My hon. Friend is talking about credit easing and the use of banks. Does he not also think there is scope for considering alternative mechanisms to provide financing to our small businesses?
I very much agree with my hon. Friend that credit easing is a temporary measure. In the long term, the Government have to change the lending landscape for small businesses—that is the point I was driving at. We cannot continue to rely on five major banks, which is why I welcomed the business finance partnership, a £1.2 billion fund that the Government are using to support non-bank lending institutions that are closer to small businesses. Many of these are peer-to-peer lenders, such as MarketInvoice or Funding Circle, or more traditional institutions such as M&G Investments. It is absolutely right to diversify the lending landscape, so that businesses in my constituency and in many others do not just have to rely on the same bank manager and, more importantly, the computer, which will say no to them when they try to refresh a loan or get the credit that they need.
I welcome the fact that the Budget realises that debt finance should not be the only source of finance for businesses. Equity finance is very important, especially in the context of businesses that do not have the cash flows or the revenues to support debt. That is why I welcome a lot of the flexibility associated with the enterprise investment scheme, venture capital trusts and the seed enterprise investment scheme. Those are all schemes in the Budget that would not make the headlines; nobody is going to focus on them because they do not immediately tell people who are the winners and losers in the Budget. However, it is those measures that will ensure that individuals who want to take risk, to start businesses and to build up their companies are capable of doing so. Whether we are talking about The White Company, lastminute.com or The Body Shop, it is these British success stories that will get us out of where we are at the moment.
What would I like to see as the Chancellor reflects on his Budget, and I hope, takes it further? On the diversification of the lending landscape in this country, we need to be very careful not to stifle innovation as we examine banking regulation. So much of what we are doing on banking regulation is about dealing with the crisis of the past. We should make sure that, in doing so, we do not freeze our banking system in aspic so that new, enterprising and innovative companies that can get credit to small businesses fail to thrive. The Government have announced £20 billion of credit easing, but we probably need to consider doing more in that direction to help businesses.
Does the hon. Gentleman think that the massive downgrading in business investment growth forecasts over the medium term is a sign that plan A is working?
Anyone who has been in business before, as the hon. Gentleman has—he was an accountant—and as I have been, will know that one of the most important things is confidence. For businesses to gain confidence, they need to know, first, that the Government are going to create an environment of certainty in which they can operate. They also need to know that the Government are going to balance their books and to create the right environment in which to invest. Lowering corporation tax is a clear signal that we are going to be creating the right environment for businesses to operate in. I am confident that once we have that macro-economic framework right, businesses will have the confidence to invest. It is only through business investment that we
will generate the growth and the jobs that all Government Members want and are fighting for. The Chancellor is on the right side of this argument, because we cannot do this through more borrowing, more spending and more debt—that is more of the same and it is all I have heard from Labour Members today.
Mr Gyimah might be persuaded that plan A is working but I can tell him that, even if it is working in his constituency and the rest of Surrey, it certainly is not working in Scotland. I hope to demonstrate that in my remarks. The truth of the matter is that we appear to be living, even in this Chamber, in two different worlds. Let us ignore the fact that, despite all the efforts of the Government and all the leaks that we debated earlier, we face a Budget that represents the reality of what the coalition means. This Government and this Budget will be remembered for cutting the top rate of tax for the rich while putting the boot into pensioners. I have already spoken to a number of my constituents and I have absolutely no doubt that that is their view.
It might seem odd for me to refer to a Foreign Secretary during a Budget speech, but some hon. Members might recall that some years ago a young representative at the Conservative party conference—a 16-year-old by the name of William Hague—addressed the conference, saying:
“Half of you won’t be here in 30 or 40 years”.
That may well be true, but what are we seeing in the Budget for the half who are left? While £30,000 a year is freely given to millionaires, the Chancellor is seeking to end age-related tax allowances, despite the evidence from HMRC, which says that 4.4 million pensioners will be £83 a year worse off in the long term. How can anyone defend that and give us the kind of nonsense we have heard about the so-called class war?
Let me address the real economy in our constituencies, which I believe the Chancellor had a wonderful opportunity to address but missed. Unemployment is by far the biggest problem we are now facing, certainly in constituencies such as mine where there has been a 54% rise in long- term unemployment and an 80% increase in youth unemployment. A league table of every constituency in Britain was produced last week, relating alcohol abuse to mortality, and it is with great regret that I have to say that my constituency came out as No. 1. Almost every professional who was consulted on those figures made the point that we cannot ignore poverty and its implications; we cannot ignore unemployment and what it means; we cannot say to young people that there are no jobs for them, whatever educational qualifications they might have attained, and not expect the kind of reaction that I have just described. Nearly a quarter of 16 to 24-year-olds in the UK are unemployed. That is a wholly unacceptable statistic and I make the point that we are talking not just about statistics but about people.
We can see from the unemployment figures that are available that in the UK there was a 22,000 increase in unemployment among women in the last quarter alone. I am seeing that in my constituency. Women are the bedrock of our society, as we are rightly told. They are at the heart of our families, whom the Government in earlier days told us were one of their priorities. Well, there is little evidence for that.
We need to restore the future jobs fund—initiative after initiative has been annulled by this Government—and we need to look at new opportunities in fresh sunrise industries, which I am happy to say exist in my constituency, particularly in solar energy. I welcomed what my hon. Friend Andrew Miller said a few moments ago, but I did not welcome the Government’s change to feed-in tariffs, which is frankly too deep and too fast. Home owners who seek to go along with developments in this sector now face soaring energy costs, and burgeoning industries such as AVC Sky in my constituency face enormous difficulties, which is bad for home owners, bad for jobs and bad for growth. The Government’s rhetoric is simply not matched by their actions, especially when the Government tell us that they are the greenest Government ever.
Mr Deputy Speaker—I beg your pardon, Mr Speaker; I welcome you to the Chair. We saw at points during the Budget speech yesterday Liberal Democrat Members waving their Order Papers. Were they waving them at the kind of measures that I describe?
We were waving our Order Papers with delight at the fact that our coalition Government are bringing the tax threshold towards our £10,000 target faster than we could ever have hoped.
They were waving their Order Papers at some of the most miserable measures that I have heard in the House. They reminded me of Jim Callaghan’s comment when he found that the Scottish National party—which is not even represented here today—was working with Mrs Thatcher to bring down his Government. He referred to SNP Members as “Turkeys voting for an early Christmas”, and deservedly in their case.
I wrote to the Prime Minister recently to draw his attention to the fact that Korean shipbuilders are given preferred bidder status for Royal Navy tankers, with almost £500 million involved. It simply cannot be right that, as we defend our country, as we should, defence orders exclude British and especially Scottish firms that are willing, able and skilled enough to respond to the task. I want to ensure that highly skilled workers are kept working for our nation’s security and for our people’s safety.
I finish with a reference to the Chancellor’s announcement of a £12 billion cut in welfare—a shameful figure that the Liberal Democrats were also cheering. That is added to the Remploy closures, which have never been fully explained. Hundreds of disabled people will be thrown straight on the dole. Two thirds of Remploy factories will close. We are seeing on top of that changes in benefits that are very much to the disadvantage of people with disabilities and their carers and families. We are seeing disadvantages even to disabled children and their families. It is not fair, not acceptable, and the Government deserve to be rejected and hounded by the British people.
A little over a year ago I stood here and drew the Chancellor’s attention to the level of debt hanging over the heads of every single voter in my constituency. The amount—the generous legacy the Labour Government bequeathed to the people of Ealing and Acton—was an astonishing £37,000. I asked the Treasury team for reassurance that they were committed to putting that right. The answer was a resounding yes. Yesterday, a year on, the Chancellor’s Budget reconfirmed that. By sticking to his original plan he is reducing the structural deficit every day and lessening the burden on my constituents, their children and their children’s children.
Many of my constituents own their own businesses locally. The Budget will encourage them because it sends out the crystal-clear message that the Government are behind them and back aspiration, new ideas and creativity. Now these businesses know that from next month their corporation tax bill will be reduced to 24% and that it will drop still further to 22% by 2014, and hopefully 20% thereafter. They know that London’s coffers will be boosted to the tune of £70 million by a new development fund to attract new business and jobs and that the national loan guarantee scheme will step up to the plate and make bank loans easier by making them cheaper.
When those measures are allied to the reduction in the top rate of income tax to 45% from next year, it is clear that the Government are serious about supporting enterprise and encouraging aspiration. Long-term measures such as those help to instil confidence and encourage businesses to take the bold decisions needed to thrive. Only by allowing them to thrive will we create the conditions for growth and go some way to addressing the related problems of getting more of our young people into work and improving our communities.
Young people in my constituency can be encouraged, too. The Chancellor announced the introduction of enterprise loans to help 18 to 24-year-olds to set up and grow their own businesses. They will get the opportunity to pitch their ideas before a panel and, if they have a viable business plan, get a cash injection of between £5,000 and £10,000 to help them start up. So often it is the young, creative, positive ideas people who are stymied by a wall of red tape when they try to start up on their own. In the long term, schemes such as that can go some way to bridging the gap between great ideas and the start of a great business.
Already in my constituency I know of a number of set-ups that could benefit from that kind of scheme. The Doughnut Factory in Acton is supported by a number of organisations, including Action Acton and the university of West London. It is a creative hub where local entrepreneurs can rent affordable office space. Many of the young people based there would be eager to pitch their plans. I spent a happy morning there meeting a group of young, enthusiastic students, all looking to start their own businesses, the very people that that scheme is aimed at helping. It is just the latest in a raft of hugely positive measures that the Government have already introduced to help young people: the upcoming youth contract, the Work programme, a dramatic increase in apprenticeship places and the national citizen service for 16-year-olds, which is now entering into its second year.
The real headline news from the Budget has to be the largest real increase in the personal tax allowance for 30 years. An additional 840,000 people will be lifted out of income tax, meaning that altogether the Government will have taken 2 million people on the lowest incomes out of tax altogether. The personal tax allowance will go up to over £9,000, and we are well on our way to our target of taking everyone earning up to £10,000 out of tax. Of course, even those earning above that stand to benefit as well. That will help a great many of my hard-working constituents. It is also part of the Government’s overall strategy, sitting alongside the benefit reforms that ensure that work always pays.
London has done well out of the Budget. The Chancellor announced vital cash for London rail; £15 million for Transport for London, specifically for cycle safety; accelerated broadband; more support for the enterprise zones—please can we have one in west London?—new funds to help young people into work; and £70 million for the Mayor to help London businesses grow. As I have said, London has done well out of this Budget. Enterprise and aspiration have done well out of this Budget. In tough times, this is the right Budget for the country.
In my maiden speech almost two years ago, I highlighted my constituency’s strengths: our beautiful land and strong sense of community; a pride in our radical past of Chartism and of Nye Bevan, who established the NHS; and its hard-working people, who started our industrial revolution. I highlighted also its challenges and, particularly, high unemployment and a creaking infrastructure that is badly in need of significant investment. Sadly, unemployment is even higher now and, in particular, almost 20% of our 18 to 24-year-olds are on the dole—a shocking figure for young people.
In Blaenau Gwent there are 18 decent and talented people chasing every advertised vacancy, so job creation, transport infrastructure and growth are still top of our agenda. Sadly, the Budget showed that they are not the Government’s top priorities, and we see no coherent strategy for jobs and growth. The UK Government must do more. We need investment in jobs and growth, and we need it now.
The fact is that we are losing jobs faster than we are creating them. Everybody I speak to about regeneration in Blaenau Gwent, in the public and private sectors, stresses the importance of good transport links. Being in the east of Wales, we have good access to the rest of the UK, but we need adequate infrastructure—both road and rail—to deliver the benefits of that access, and that is why I am campaigning for both.
Work to improve the Heads of the Valleys road is under way, and, although the work is disruptive in the short term, when it is complete we will see the benefits. Thankfully it started before the Government proposed linking road improvements to new tolls. Welsh business would also be given a real boost if the Severn crossing’s toll was axed.
Rail electrification to Cardiff is going ahead, and that is good. The Ebbw Vale to Cardiff line was resurrected under Labour, and it is now so successful that carriages are jam-packed and locals call it the “Bombay Express”, but it needs a more frequent service and a line upgrade. In the Budget the Government state that they are working
with the Welsh Government on the electrification of the valley lines, with final proposals due this summer. The Ebbw Vale to Cardiff line must be included to give a boost to the place that, because of our high unemployment and related deprivation, needs it so much.
The Welsh Business Minister, Edwina Hart, has committed £2 million to the development of a world-class motor racing circuit in Blaenau Gwent, and that could lead to a £200 million investment and create 1,000 jobs —a real game changer for our area. I had hoped that the Chancellor would support this opportunity, hailed by some as the UK version of the famous German Nürburgring track, but from his statement yesterday it appears that Deeside in north Wales will be the only Welsh enterprise zone to benefit from enhanced capital allowances. Will the Minister please clear that up?
Such tax treatments are focused on plant and equipment costs, not on the infrastructure itself, but capital allowances need to attract individual as well as corporate investors. That would help kick-start those exciting automotive plans for Blaenau Gwent, and the Government should think much more creatively about enhanced capital allowances for business growth.
In the Welsh valleys we punch above our weight in terms of the number of brave men and women recruited to our armed services, so I welcome the measures in the Budget which improve military accommodation and help with council tax rebates and with forces families’ welfare. They are an important part of the military covenant and are supported by both sides of the House.
I should also comment on the Budget proposals affecting fuel prices. A stonemason in my constituency travels from job to job in his 4x4, but with the cost of fuel he thinks that he would be better off out of work, and that cannot be right. Many in Wales will also be fearful of the proposals for regional public sector pay, which would hit women hard in particular, and teachers and nurses especially.
Blaenau Gwent deserves more than this damp squib of a Budget. In the future can we see real Budget leadership on growth and improved transport infrastructure, and on support for business development and public health? Then Blaenau Gwent and Wales will be able to play their part in boosting our economy and make a further positive contribution to our UK budget.
It is a pleasure to take part in this debate and to listen to the contributions. I was particularly pleased to listen to the speech made by Jack Dromey, who is no longer in his place. In his usual articulate and erudite manner, he opposed every single measure that the Government had brought forward to cut the deficit. He opposed changes to welfare, to benefits and to housing, yet he had not a single idea about how his party would begin to cut the deficit—the terrible legacy that we were left by the last Government.
I pay tribute to the Chancellor and the Treasury team for yesterday’s Budget announcement. I wanted a Budget that was good for business and hard-working families, and I feel that I got that. Thousands of families will be lifted out of paying tax as a result of yesterday’s announcement. It is important that that measure is particularly beneficial to women, who tend more to be
part-time or low paid workers. A measure that lifts people out of paying tax is particularly helpful to the women in our society, and that is a good thing.
Now I come to the “but”, both as the MP for Burton and chair of the all-party group on beer. The Chancellor said that he intended to make no changes to the duty regime. That was a little disingenuous, shall we say, as he knew—and I knew, and brewers up and down the country knew—that that meant an increase of 5% on beer duty because of the continuation of Labour’s beer duty escalator. That is putting jobs and livelihoods at risk.
In the past four years, beer duty has increased by 42% in this country. Our beer duty is now the highest in Europe—eight times higher than France, 10 times higher than Spain and 11 times higher than Germany. We pay 40% of all Europe’s beer duty, yet we represent only 13% of its beer consumption.
We have seen a 52% increase in duty over recent years, yet only a 10% increase in revenue and, as a result, a 25% drop in beer sales in this country. Yet beer is a great British product. Some 80% of beer drunk in this country is brewed here. There are 800 breweries across the country, which employ people in all our constituencies. Compare that with the wine we drink, 90% of which is imported, and we see the unfairness of the current duty regime. Yesterday’s announcement will cost an average pub about £2,800. I commend the 106 MPs who signed the early-day motion in support of freezing beer duty.
I turn to the unfairness in how the system treats beer and cider. Cider pays half the duty of a 4% beer, and at high strength—8%—beer pays four times the duty on cider. That means that breweries and pubs suffer. The cider industry tells us that the reason is the increased costs in running an orchard and growing apples for cider.
Why, in the hon. Gentleman’s opinion, is there such discrimination in the coalition in favour of cider?
I assure my hon. Friend that I am not targeting cider; what I want is fairness in the system.
The presentation I mentioned, which is used by the makers of Stella Cidre, clearly states the differences in duty. It says that the duty per hectolitre paid on Stella Artois, at 5% strength, is £86.60, the duty paid on Strongbow is £36.01, and that there is a difference of £50.59. At the top it says: “Why cider? Favourable duty position resulting in margin opportunity”. As a result of our taxation system, we are penalising beer. Every time somebody chooses to have a pint of cider rather than a pint of beer, the Treasury loses 50p. All we are calling for is some fairness in the system.
Last week at Prime Minister’s Questions, I asked the Deputy Prime Minister what measures he had in place for beer, and he said that he wanted to support community pubs. The best way to do that is to give beer a break. We want a fair taxation system that recognises the importance that beer, as a lower-strength drink, can have in our society. We want recognition of the efforts that brewers are making in relation to responsible drinking and reducing the alcohol by volume of their products. I commend the Government for their work on the 2.8% strength beers that were introduced recently. We recognise that the community pub is at the heart of the big society and that it has an important part to play in all our communities. I urge the Treasury to look at this again and work out what we can do to give British beer and British pubs a fair break.
The Chancellor’s Budget speech painted a positive picture, in some ways, of what his policies are doing for the UK economy. However, although some businesses in my constituency are doing well, at the grass roots, among small businesses, I find a lot of people who are very worried about the future of their businesses, and that many of those who have been struggling to survive over the past year are now on the brink. I am sure that my constituency experience is typical of that of many Members in constituencies up and down the country.
That is why the Chancellor has made a dramatic mistake by rejecting Labour Members’ call for a temporary cut in VAT, which could have provided an immediate boost to businesses, created jobs and provided real relief for those on the lowest incomes. On the main street in my constituency, there are all sorts of shops, offices and other types of businesses, and I am genuinely worried that many of them are in great danger of going over the cliff edge if there is not an immediate boost to the economy such as a reduction in VAT. The temporary VAT reduction that Labour introduced at the end of its period in government certainly had that effect, and another temporary reduction would be an important boost for all types of businesses, but particularly small businesses, in my constituency and up and down the country.
The hon. Gentleman talks enthusiastically about businesses. Do not the measures in the Budget to cut corporation tax support business?
The measures on corporation tax will have a beneficial effect on some businesses, but not so much for the smallest businesses. I am particularly concerned about the small businesses in a fragile situation in many parts of my constituency, which does not, relatively speaking, have very high unemployment overall, although some areas do have high unemployment.
First, we need a general 2.5% reduction in VAT that would benefit all types of businesses, as well as relieving people on low incomes, in particular, from the difficulties in which they find themselves as a result of the general economic situation and the policies of this Government. We also need targeted cuts in VAT. It is extremely disappointing that yet again the Government have rejected the call, not only from Labour Members but from
organisations such as the Cut the VAT Coalition, which has called for VAT on home maintenance, repair and improvement work to be cut to 5%. That would not only be a boost for the depressed construction sector but would create work for joiners, plumbers, electricians and painters, and opportunities for young unemployed people looking for their first job.
Of course, one has ask how one would pay for a temporary cut in VAT. If the argument is that the top rate of tax is being cut because it will bring in more income by encouraging economic activity—a fairly dubious argument in my view—surely temporary cuts in VAT of the kind that I and my party have argued for are much more likely to lead to an immediate increase in economic activity than the cut to the top rate that is proposed in the Budget.
I am interested in why you say that it is dubious to cut the rate from 50% to 45%, when in 13 years of your Government, you did not put it up from 40% to 50%.
I am extremely grateful to the hon. Gentleman, but I am not sure why he refers to my Government. There should be no reference to my Government in these matters.
I am sure that that is what the hon. Gentleman meant. It would be good in future if that is what he said.
Those points were covered earlier in the debate.
I want to highlight the problems for businesses my constituency. I say again that a cut in VAT would certainly make a difference for businesses in my constituency that are on the brink. Such a reduction in VAT would increase business activity, increase sales, increase the taxation income of the Exchequer and decrease unemployment, with a consequent cut in spending on benefits. The boost for smaller retailers and smaller companies in the construction sector would have other beneficial effects. From my constituency office, which is in a street that is still relatively well occupied, I can see shops and businesses closing and the resulting cycle of deterioration not only in the local economy, but in the local environment. I can see that happening in my constituency. That is why I believe that the temporary reduction in VAT that we have called for would be a great boost not just for business, but for the wider economy.
There were some announcements in the Budget that will benefit my constituency. There was confirmation that Edinburgh will be one of the cities that will benefit from superfast broadband and the green investment bank was also mentioned. However, those two announcements have been made a number of times already. The announcement about superfast broadband for Edinburgh and a number of other cities was made at the end of last year. The fact that the Chancellor chose to highlight those innovations again only goes to show the lack of imagination in the Budget when it comes to
growth. We could have had a Budget for jobs and growth. Instead, we had a Budget with very few specific policies. That is regrettable and it is bad for the country.
I hope that the Government will change course and reduce VAT, if not in this Budget, then at a later stage, to support smaller businesses in the construction sector, which would benefit greatly from such a change.
I am pleased to have the opportunity to speak in the Budget debate, because we had a significant Budget yesterday.
We have to consider what the Chancellor said in the Budget in the context of 10 years of Labour profligacy in public spending and in the context of the international economy. The Office for Budget Responsibility has been clear about the problems that face the British economy. There are structural problems caused by too much debt, which in turn was caused by too much spending. It is clear to everyone that spending more money or running a greater deficit would not help to get us out of this situation. The Government are doing what they set out to do and they are reducing the deficit. The Budget yesterday was a step in the right direction. We are trying to cut regulation and to encourage enterprise and aspiration. All that was clear in the Budget.
I would like to talk about tax cuts. The most significant tax cuts in yesterday’s Budget were not at the top end of the income scale, but at the lower end. It was an historic step to take hundreds of thousands of people out of taxation. It is striking that in this debate, the Labour party has made no comment about that. It has not given us the courtesy of saying that it agrees with the proposal, nor has it opposed it, yet it was the most significant move in the Budget.
There were other, perhaps more controversial moves, such as cutting taxes for wealthier citizens and subjects, which have created some debate. It is received wisdom, I think, that high taxes did not stimulate economic growth. Some Members will remember that there was a 98% super-tax in the 1970s, and we were a very highly taxed nation. Other Members were here when Nigel Lawson cut the top rate of tax from 60% to 40%. That was so successful that in 12 years, Labour did not touch it. It always accepted that 40% was a reasonable and good tax rate, not because it was friendly to the rich but because Labour’s leadership realised that there needed to be incentives to make the economy grow.
Indeed. I am very grateful to you, Mr Speaker, for putting me in my place. I will refer to him with proper courtesy with his title. The Budget in which he cut the top rate—the 1987 one, I believe—was the most significant in recent years, and only latterly have a series of political games been played and has the top rate been increased. Other Members have referred to that, and it is an elephant trap that the Government have mercifully dodged.
We have to consider the Budget in its national context, but also in an international context. It is no good our having worthy debates here without referring to what is
going on in the rest of the world. I was very pleased to see that the Chancellor had finally realised that aviation capacity in the south-east is a massively important issue. The fastest-growing cities in the world need to have more connections. We will not be able to make money or trade with them without connections, and the Chancellor’s step of recognising the problem is mature and bold.
While we are focusing on spending and regulation, we have to realise that other parts of the world such as China, India, Brazil and places in the middle east such as Dubai have favourable regimes for business. If we are to compete seriously with those countries and their regimes, we will have to do an awful lot more even than we are doing to make ourselves competitive.
The Budget was excellent and a step in the right direction, although we need to do more to meet the targets that we have set ourselves. The Office for Budget Responsibility has said that it is looking for 3% growth in 2015 and, to meet that, we will have work an awful lot harder.
I begin by apologising to you, Mr Speaker, to the respective Front Benchers and to other colleagues for the fact that I will not be here for the end of the debate. No discourtesy is intended, but I have a pressing constituency engagement.
As I listened to the tail end of the Business Secretary’s speech, I heard him outline the many problems confronting the economy and he cited the banks as one of the remaining problems. It strikes me that for that reason, it is important that Government Members try to appreciate that my constituents in Selly Oak, who work long hours for low pay or care for sick children or elderly relatives, will struggle to understand why one of the key tax give-aways in the Budget will amount to £325,000 a year for one of our leading bankers. He is hardly on his uppers, so people will find that very difficult to understand.
If the central argument about the 50p tax rate is that it has not raised much, that is because people have been avoiding it. The decision to cut the rate amounts to rewarding and reinforcing tax avoidance behaviour. What will prevent the group of people involved from trying to avoid the next band of tax? That is the problem—the Government are saying, “Because they avoided it, we’re going to reward them.”
I now turn to something that the Chancellor did not address. One of the most pressing problems of this age is youth unemployment—all hon. Members share that concern—and I was surprised the Chancellor did not take advantage of the opportunity in the Budget to do a bit more. The Government like to tell us about the number of apprenticeships, but most of those are not for people in the 16 to 18 age range. The vast majority that have been created tend to be for older people. There was an opportunity in the Budget to offer more incentives to small businesses to take on young people, but it was missed. Successful manufacturing companies in my patch such as B.H. Leake, Birmingham Powder Coatings and Cameron Price have all told me that they would like to take on a young person or apprentice, but they find the system extremely complex and apprenticeships difficult to fund. Something to improve that would have been welcome indeed.
I welcome the news on the loan guarantee. I hope the initiative is more successful than others. Quantitative easing has given the banks plenty of money; the problem is that they are still not passing it on to small companies. In the same vein, I welcome the proposals to give support to the computer games and animation industries. That is a really good thing that the Chancellor has done. I hope we get the details of how it will work soon, and that it will not turn out to be mired in complexity and red tape, because that would be a tremendous setback.
There is another area in which the Chancellor could have helped young people. National Express is keen on a travel card for young people. It has been in talks with the Government and was directed to the National Apprenticeship Service, which directed it to learning providers, who said, “We don’t have the budget. Go back to the NAS.” There is quite a lot of evidence that the cost of travel inhibits young people from finding the jobs they are looking for. Anything we can do on that front, Minister, would be most welcome.
I shall conclude by mentioning one other thing. I was relieved that the Chancellor said there will be a White Paper on social care. We cannot afford for that issue to be kicked into the long grass. If it is not tackled in the next year or so, it will not happen in this Parliament, and we will not address the problem.
I am grateful for the opportunity to contribute to this debate and congratulate the Government on their increase of the personal tax allowance. I believe that a defining characteristic of the coalition Government is that we are taking so many more people who can least afford it out of paying tax altogether. It is an achievement of which we can be proud, and which reflects on both parties in the coalition. The measure also reflects the fact that Government Members have the right values when it comes to deciding who carries the burden of paying for public services. It should not be the lowest paid. We need to reward work and encourage aspiration.
The Opposition response has been predictable and disappointing. I was reminded why I got involved in politics in the first place many years ago when I heard the language of class war and envy being expressed by Opposition Members. They say, “Same old Tories,” but I say, “Same old socialists.” We have heard today the final nail going into the coffin of new Labour. The socialists are back in charge.
Let us be clear. The Government inherited an economy in which the state was borrowing more than it could afford. We certainly were not living within our means. The Chancellor’s achievement is that he has been able to reduce borrowing and establish credibility in the eyes of the markets, with the result that we retain confidence and continue to benefit from low interest rates. Our constituents benefit from lower mortgages.
I wholeheartedly welcome the Government’s decision to issue a statement to each taxpayer to explain how much of their tax is going on various areas of spending. It will strengthen the accountability of Government to the taxpayers. We on these Benches never forget that it is taxpayer’s money and we need to make sure that
taxpayers have the opportunity to judge whether we are spending their money wisely and delivering the outcomes they wish to see.
What we really need now to move our economy on is a strategy for growth and job creation, and I wish to focus my remarks on those elements. I welcome the Government’s commitment to reviewing airport capacity in the south-east as that is clearly important for our international competitiveness. There has been a growing enthusiasm for a Thames estuary airport, most notably on the part of the Mayor of London. I have to put on notice my firm opposition to such a proposition. My objection is really that the Thames estuary reaches out to the rest of the world by ship and sea. In fact, the motto of the borough of Thurrock is “By Thames to all the Peoples of the World”. I want to retain the Thames estuary as a shipping centre, not as a centre for an airport.
The west London advocates of such an airport seem to think that north Kent and south Essex are economic wastelands waiting to be transformed, but nothing could be further from the truth. While the docks in east London have gone, they have moved east to accommodate the ever-larger ships. The ports in Thurrock are thriving and growing. The investment by DP World at Shell Haven and by Forth Ports at Tilbury docks mean that this sector will go from strength to strength. Within a couple of years, Thurrock will be the port capital of this country and it will strengthen the port of London and cement Thurrock’s role as a major logistics hub.
The debate about the future of a hub airport would have severe implications for Heathrow, if the new airport were constructed. The economic dislocation caused by such a move would be seismic. It would cost jobs and shift business: it would be displacement, not new economic activity. I hope very much that the review will consider what more can be done for Heathrow.
I totally agree with my hon. Friend about the inadvisability of a further airport in her lovely constituency. Does she agree that we already have the capacity in the west midlands—Birmingham international airport has 40 million spare passenger places?
I thank my hon. Friend for that intervention and I think a lot could be done by just increasing connectivity between existing airport capacity.
In the little time I have left I wish to address the issue of energy. The Chancellor has given notice that he will bring forward an energy strategy to look at what can be done to encourage more gas-fired power generation. I want to put on record a plea for biomass-fuelled generation to be given greater prominence in our energy mix. As part of a shift to more energy generation from renewables, we have had considerable emphasis on solar and wind, but when it comes to generating serious quantities of energy, biomass is clearly a great way forward. We are heading towards a situation in which a number of coal-fired stations will need to close due to their non-compliance with the large combustion plants directive from the EU. These stations are sitting on top of connections to the national grid and we could do much more to encourage energy companies to look at whether they can replace the redundant coal-fired plants with new plants that generate from biomass. That is something that the power station in Tilbury, run by RWE npower, is determined to do.
Opposition Members have mentioned regional pay. We already have regional pay. I live but two miles away from the boundary with London so public sector workers in my constituency are less well off than their London counterparts as they do not receive London weighting. We do not struggle to fill those public sector jobs. Public sector wages lag far behind those in the private sector in my constituency, and we need to encourage that elsewhere because we need to ensure that we are attracting the best talent into private sector jobs.
I am proud to be a socialist, although hopefully not such an old one.
The rich will get richer and the poor will get poorer—the Tory party has very clearly reverted to type, putting the needs of the wealthy first while abandoning the poor, whether they are working or not. Even the Chancellor’s favourite red-top newspaper, which today portrayed him as Wallace, agrees and says that he has put money in “The Wrong Trousers”. Yes, Mr Speaker, women wear trousers! The Prime Minister, himself a man with young children and a working wife, once promised that he would make this country the most family-friendly in Europe, but this week’s Budget will make life even more difficult for ordinary, hard-working families—not that he knows what it means to struggle to feed a family.
Yesterday, I met Terry Fullerton from Holme House prison immediately after the Budget. He pointed out that the tax cut for many of the super rich, such as bankers, celebrities and others, is about the same as the starting salary for a prison officer. It is also several thousand pounds more than the average annual wage in my constituency. That is not fair.
Brendan Cox, director of policy and advocacy at Save the Children, said that some had called it a Robin Hood Budget. He said:
“Robin Hood was known for hitting his target. If help to the poorest was his aim, the Chancellor will be known for missing his.”
The Institute for Fiscal Studies says that an average family will be £530 a year worse off after the Chancellor’s tax and benefit changes. On top of that, the poorest 20% of households will see their incomes fall by about 1.5% in 2012-13, scuppering any chances of meeting coalition targets of reducing child poverty.
Will my hon. Friend comment on the fact that, as detailed in the Budget, the cut in the 50% rate will mean the Exchequer forgoing £3 billion of income, whereas it would cost £500 million to reverse the cut to working tax credits for people about to lose it because they only work 16 hours a week? Which does he think is the better choice?
I am sure that my hon. Friend knows exactly what my choice would be—it would be on the part of working families.
I have mentioned the 1.5% cut. It might sound paltry, but even if it represents as little as £1 or less per week, it is still worth a lot for those on a low income who need to feed a family. It will also be the poorest families who are, or will be, hardest hit through the uprating of benefits in line with the consumer prices index rather
than the retail prices index, through higher food and fuel costs, through the freezes to child benefit and working tax credit, and through the time-limiting of employment and support allowance.
We must not forget that for low-paid workers inflation is not 3.4%, as it was yesterday, but nearer 10%, because they spend proportionately more on food, fuel and transport. The Government’s raising of the personal tax allowance is welcome but sadly does nothing to help the one third of the adult population, including part-time workers and pensioners, who are too poor to pay income tax, yet still have to face those same challenges.
Does my hon. Friend agree that the threat of £10 billion of further spending cuts to welfare after 2014 will only exacerbate the problems he is describing?
I agree with my hon. Friend. I have people streaming through the doors of my surgeries, and e-mailing and phoning my surgeries, saying how worried they are now, let alone about the impact of £10 billion of cuts in the future.
In the borough of Stockton-on-Tees, 23% of children already live in poverty, and the Child Poverty Action Group has highlighted that the jobs shortage in the north-east region, exacerbated by further public sector jobs losses, will lead to even greater rises in child poverty. Quite simply, unless parents can access and remain in work, the economy will struggle to return to sustained growth and child poverty levels will be hard to reduce.
The Government’s changes to tax credit rules mean that 2,500 families with more than 5,000 children in the Tees valley alone, working between 16 and 24 hours a week, will have to work at least 24 hours a week or lose that working tax credit. That is as much as £3,870. What research have the Secretary of State for Work and Pensions and the Government done to find out how many people will be able to find those extra hours? Surely he understands that it is deeply unfair that a family already on a low income will lose vital cash to feed their families because their employer cannot provide them with more hours.
What about women? Some 72% of the Government’s changes to tax and benefits adversely affect women, and with 46% of working women being employed in the public sector in the north-east, they are bearing the brunt of the Government’s enforced public sector job losses. The number of women in work across north-east England has already fallen by 19,000, with unemployment among women increasing at twice the rate of men in recent times. I saw no hope whatever in the Budget that the hundreds of young people in my constituency would get the help to secure long-term employment. The Chancellor spoke of skills, but not how they would be delivered. He certainly did not talk about jobs for those young people.
I have tried to concentrate on poverty and the substantial increase in the number of families and individuals who are now facing the toughest of times. We desperately need economic policies that will deliver the jobs and growth that our people need. We do not want to see more and more people forced out of work in the coming months. We do not want to see pensioners penalised by having their personal tax allowance frozen. We do not want to see any growth in the number of soup kitchens and food banks springing up across the country, including
at the New Life family centre in my constituency. We do not want to see women bear the brunt of the unfair cuts and rules being imposed on them. The Budget, read out to much cheering from the Tories and their Lib Dem allies yesterday, will not help to deliver any fairness whatever in our society; nor will it provide the platform on which to grow our economy.
I would like to congratulate the Chancellor and his team on producing an innovative Budget in difficult times, but none the less a Budget for business and hard-working families. We need more jobs, more employment and more businesses set-up, because we cannot borrow our way out of a crisis, as Labour would like us to do. Rather, we have to earn our way out of this situation.
I find it strange that Opposition Members are so miserable all the time. All they can do is pour scorn and misery on what is a very good Budget. There are so many things in the Budget that are good for Britain and good for hard-working families, but Opposition Members never seem to be able to see it. Nick Smith is no longer in his place, but I was pleased that he mentioned the measures dealing with future armed forces spending, such as the doubling of the service accommodation relief for families and the welfare grant, along with council tax relief. I am sure that everybody in the House, including Opposition Members, will welcome anything that helps our hard-working service people, who are out there fighting for this country. However, apart from the hon. Gentleman, I have not heard anybody else mention the fact that the Chancellor is doing that.
There are so many positive things in the Budget that it is difficult to pick them out.
The hon. Gentleman should not worry; I will try, although I am disappointed that I have only five minutes to do so.
The growing places fund for the local enterprise partnership in my area will bring in an additional £8.5 million, which will be a tremendous boost to the area. Nobody over there on the Opposition Benches really seems to be all that pleased about the largest increase in the personal allowance for 30 years, which I find staggering. I would have thought that they would support the measure, which will take a lot of people out of tax altogether; indeed, 24 million people in this country will benefit from that.
I do not know how you have calculated that for my constituency, because I am not even sure you know where it is. We are looking after pensioners. They will not be losing what you are talking about.
They are getting a bigger increase than ever from the triple lock, and we are increasing their allowances. There will possibly be a year when some people will have to pay slightly more tax, but not the majority. Most people will not be spending any more money, and they will certainly not be losing any more money next year compared with this year, so you might like to look a little more carefully at what we are doing.
I do apologise, Mr Speaker.
The change to child benefit is also something that we should welcome, as it shows that the Chancellor has listened to what people out there have been saying. There will not be a cliff edge, as people have suggested, and no one earning £50,000 or less will lose anything. Only when people earn more than £60,000, which is quite a lot of money, will they lose their child benefit.
What the Chancellor has done is prevented us from having to go through a huge amount of paperwork that would have cost the country an awful lot of money. People might say, “Oh, but we don’t live together. We used to, but we are no longer together.” There will be so many loopholes, but he has done a good thing by going up to £60,000. I think that the majority of people in this country would agree with that, although of course Labour Members will not.
I will not, as I do not have much time left.
We have not heard much about the rate of corporation tax going down significantly, yet that will benefit small businesses in particular. We need those businesses to thrive and to employ more people. The Chancellor has also introduced the new enterprise allowance and enterprise loans, which will help more people, particularly women, to start up businesses. That will give those businesses an opportunity to flourish and to take on more people to work for them.
No one has mentioned the fact that the national planning policy framework is to be published shortly. The increase in construction that that will bring will significantly help the country to move out of recession. There will be protections for the countryside, for the green belt, for national parks, for sites of special scientific interest and for areas of outstanding natural beauty, despite the doom-makers on the Opposition Benches trying to persuade people otherwise.
I am very pleased to see the introduction of an above-the-line research and development tax credit. In my area, Rolls-Royce, Toyota, JCB and Bombardier employ a lot of people from my constituency, and they
will benefit from such a measure. We must remember that Rolls-Royce is doing exceptionally well in the aerospace industry in our area. We have not heard much about the investment decision by GlaxoSmithKline, which is a direct result of the Government’s policies. It would not have decided to spend that money in this country if the Government had not come up with the solutions that they put forward yesterday.
I would, however, like to put in two pleas to the Ministers. I would like Derby and the area of Derbyshire around it to be considered as one of the areas that will benefit from high-speed broadband. There is a part of my constituency in Derby that used to be the largest private housing estate in Europe, and it has some of the slowest broadband speeds around. I would like to put in a bid for Derby to be a recipient of any improvements. I should also like to point out that the electrification of the midland main line was missing from the Budget statement. I would have liked to have heard that in this Budget, but perhaps it is in the pipeline and the Chancellor will bring forward those plans in the future.
This is a millionaires’ Budget delivered by a Cabinet dominated by millionaires. It is regressive in what it does with tax, but it is equally a Budget that will do little, if anything, to deliver the jobs and growth that the economy needs. Exactly a year ago, the Chancellor told the House that he had just
“put fuel into the tank of the British economy.”—[Hansard, 23 March 2011; Vol. 525, c. 966.]
He told us that we would see the economy turn the corner in this financial year, that positive growth figures were forecast, and that unemployment would stabilise as the private sector rose to the challenge as the public sector retracted.
I agree with my hon. Friend; unemployment already stands at 2.67 million, and youth unemployment is at a record level.
Despite the Chancellor’s predictions a year ago, things have turned out very differently in the real world. As we enter spring 2012, it is clear that the British economy is flatlining and, and the OBR is forecasting just 0.8% growth for 2012.
In effect, the economy will continue to flatline. The Government have conceded that they will overshoot their borrowing target by £150 billion. Consumer confidence is also at a record low. As people see their income squeezed while VAT increases push prices up and inflation runs ahead of wages, many are fearful for the future. VAT costs a family an average of £450 a year, and while the increase in personal allowances reduces tax for the low paid, that is completely outweighed by the VAT rise, cuts to tax credits and higher fuel duty—again, smoothed over by the Chancellor yesterday.
The major beneficiaries of this Budget are, of course, those 14,000 people earning £1 million or more, who are receiving a tax cut of more than £40,000 a year.
Some 300,000—just 2% of earners in the UK—will benefit overall from the cut of the top rate to 45%, yet just 4,000 houses a year are sold for more than £2 million. That means that the vast majority of those who gain from this tax cut for the richest will be totally unaffected by the rise in stamp duty to 7%.
What we hear from the Government is that if people are avoiding those taxes, we should just give up on it. Is there are any reason, however, in my hon. Friend’s opinion, why we cannot bring in measures to clamp down on tax avoidance while retaining the 50p tax rate?
I completely agree with my hon. Friend, and I shall come to the point a little later.
To put the tax reductions for top-rate earners in context, we need to understand that these are people who earn £2,900 a week—that is right, each week. That is more than an average worker in Sheffield earns in a month. It is quite ironic, is it not, that this Government should believe that the best way to make the poor work is to cut their income, while at the same time believing that the best way to get the rich to work harder is to boost their income. The reduction is also a massive gamble. As Jonathan Freedland points out in The Guardian, today, it is built on
“a hoped-for influx of returning top-rate taxpayers: to most people that looks like giving up hard cash in return for a wish.”
Since when has tackling tax avoidance qualified as a tax increase for the rich?
Pensioners are also hard hit. The granny tax—the £3 billion raid on pensioners by freezing their personal allowance—will mean that people who turn 65 next year will lose out by £314. On average, 4.5 million pensioners will lose £84 a year from next April.
One has to ask what influence the Deputy Prime Minister has had on this Tory Budget, when the personal allowance increase delivers less than the recent increase in VAT, so it amounts to a tax cut for the rich. Let us not forget that the Chancellor has pencilled in more tax increases for after 2014 and a further £10 billion cut in welfare costs. To people out there, that means even further potential cuts to child benefit, pension credit and tax credit.
In difficult times—and these are difficult times for many families—a Budget needs to be fair, and it needs to give people hope. Is it fair that a one-earner family on £55,000 will lose much of their child benefit, while a couple on as much as £99,000 can keep every penny of it?
As for jobs and growth, as the Business Secretary has said, this Government do not have
“a compelling vision of where the country is heading”.
For once, I agree with the Business Secretary. There are no measures of substance in the Budget to help rebalance our economy, either geographically or structurally.
Last year, the Chancellor told us he had put fuel in the tank of the economy. Unfortunately, he put the wrong fuel in the tank and the economy has stalled. If he does not do something soon for the many in this country, the economy will not only continue to splutter along, failing to fire on all cylinders, but will continue irreparably to damage the lives of those who need jobs and growth to improve their life chances.
I welcome many aspects of the Conservative parts of this Budget, including its emphasis on the need to encourage small businesses, enterprise and research and development, and its encouragement of economic growth, which is the key to everything. I welcome the simpler cash accounts system, which will bring significant benefits to small businesses, and the R and D tax credit system, as well as the seed investment programme for start-ups, which is very important. The patent box arrangements will be very useful, too, as will the proposals for young enterprise loans. Indeed, I recently attended an event in my constituency at which young people from Alleyne’s school in Stone were selling produce, based on proper commercial principles. They were learning key enterprise skills, therefore, and it would be wonderful if they could have access to some loans as well, to enable them to continue in that virtuous direction.
I welcome the reductions in corporation tax. In fact, I believe we should aim to reduce it to 15% by 2020, as the Institute of Directors proposes. I also approve of the proposals to reorganise personal allowances. That will be enormously beneficial to many people. However, despite the statements made this morning, I remain slightly concerned about the situation of pensioners. I am not yet convinced on that issue, so I think we shall have to tease it out during our deliberations on the Finance Bill.
I remain deeply worried about fuel duty. I do not think we should increase it at all. At least £31 billion comes into the Exchequer as a result of that duty, and 60% of the price at the pump is represented by taxation. Therefore, more positive policies were required. I would have liked fuel duty to have been reduced, and certainly not increased.
There will be no economic growth unless we have proper private enterprise, as that is what pays for every penny received by the public sector. There is no money except for what comes from reasonably taxed private enterprise. We must therefore ensure that we are truly competitive, and if that requires reducing our tax rates, that is the direction in which we must go.
I am deeply concerned about the failure to deal with the problem of over-regulation. I have read the Red Book, and it does not fill me with a great deal of confidence. On page 43, under the heading “Exports and inward investment”, there are a few comments about export finance. The next heading on that page is:
“Making the UK the best place in Europe to start, finance and grow a business”.
The best place in the world, surely?
My hon. Friend anticipates what I was about to say: the UK should be the best place for businesses in the entire world, not just Europe.
That is very important. Especially given the current eurozone crisis, we cannot carry on kidding ourselves that our future depends on our trade with Europe. It is an important part of our trading relationships, but it is a failing part. Our balance of payments figures show that in just one year the deficit in our trade with the other European Union member states has risen from £14 billion to £46 billion. I understand the figures will be revised on
The previous Government put all their eggs in the European basket. This Government, to their credit, are beginning to refocus their trading relations with the rest of the world. We have a monumental opportunity to be able to get that straight in terms of—
Order. Time is up.
In the past 24 hours, many people have attempted to provide a description of this Budget. Some have compared it to Lord Lawson’s giveaway Budget in 1988, others to the orthodox Budget of Philip Snowden in 1931, but in entrenching the disastrous mistakes in fiscal policy of its two immediate predecessors perhaps this Budget will deserve to be known as the great stagnation Budget. Despite the measures unveiled by the Chancellor yesterday, the verdict of the Office for Budget Responsibility was that they will make no difference to the levels of growth in this country in the next two years.
Does my hon. Friend agree with The Guardian, which said this morning that the Liberals will live to regret the fact that they have moved so far away in principle from the Lloyd George Budget of 1909?
My hon. Friend is entirely right. Staggeringly, in that year the Liberals introduced one of the most progressive Budgets—the people’s Budget. This Budget certainly does not compare to that remotely; it is a highly regressive Budget, as the Institute for Fiscal Studies has confirmed this afternoon.
The effects of this Budget are likely to be 100,000 more job losses—20,000 more in the public sector; £150 billion more borrowing than that forecast in June 2010; and a substantial rise in inequality across the country. Having choked off growth in the past two years, and having weakened both public and private sector demand with austerity cuts that strip eight times more public consumption from the economy this year and nine times more next year than even the eurozone average, the Chancellor is presiding over the weakest recovery from recession since the 1870s.
In addition, as the OBR revealed yesterday, despite the Chancellor’s rhetoric on diversifying the economy and promoting manufacturing, his plan for growth is based on the share of private consumption more than trebling, from 12 to 37.5% this year alone; half of all the new growth in the next five years is forecast to come from consumption. This is not an export-led recovery, but debt-fuelled consumption to maintain stagnant output, at a time when consumer spending has fallen in the UK by 0.8% in the past year. Small wonder that the OECD has found that domestic demand in Britain has slumped. It rose by 2.7% in 2010, when Labour was in government, but fell by 0.2% this year, under this Chancellor. The figure is massively below the 2012 OECD average increase in economic demand of 1.4%. It shows the crisis of the lack of demand that is in our economy, which the Chancellor did not begin to tackle yesterday.
On growth, the Chancellor has given up on fiscal policy as a lever of driving demand, even when the credit ratings agencies, the International Monetary Fund and his US counterpart warn him not to. We face a jobs
crisis, and in a crisis of this magnitude, we need fiscal and monetary policy to work in concert to grow the economy out of a slump.
Is it not also the case that the current use of monetary policy to drive growth—quantitative easing—is driving the markets but not necessarily the growth that this country needs?
That is precisely the point that many small businesses up and down the country are making. What we should have had yesterday was a facility to securitise loans to small businesses and have them indemnified by the Treasury. That would mean that the quantitative easing money could flow directly from the Bank of England into small and medium-sized businesses, and not simply on to the balance sheets of the banks. That would have made a huge difference. As many businesses have said, the credit easing scheme launched by the Chancellor with great fanfare on Tuesday will barely scratch the surface of the £190 billion shortfall in credit financing from which our businesses are suffering at the moment.
The Chancellor is refusing to learn the lessons from Japan in the 1990s. He is placing all his eggs in the basket of long-term low interest rates, but in Japan that led only to a decade of stagnation because of similarly catastrophic mistakes in cutting spending too far and too fast.
Even on its own terms, the Budget was a failure for business, with levels of business investment £48 billion below their peak of 2008 and business investment growth having been slashed from 7.7% to just 0.7% in the OBR’s latest forecast. There should have been innovative ideas about promoting long-term investment; there should have been plans for a national investment bank; there should have been plans to bring forward more infrastructure spending; there should have been plans to enhance and boost the borrowing powers of the UK Green investment bank, which will not have those until 2016 because of the Chancellor’s failure on growth. But in yesterday’s Budget, sadly, there were no ideas that would really make a difference to business.
Shamefully, the Chancellor never even mentioned, much less produced, a plan to tackle youth unemployment. With 1 million young people out of work across the United Kingdom and with the figure approaching one in four in Scotland, he should have announced measures for a proper national insurance holiday for small and medium-sized firms employing young people. He should have repeated the bank bonus tax to help to create 150,000 youth jobs. He should have announced a temporary VAT cut, which would have boosted consumer demand, and he should have cut VAT for home repairs and maintenance to give the construction sector a much needed lift.
The test on which this Budget is found most wanting is that of fairness. We are told that the wealthiest 3% of the population require massive fiscal incentives to reward hard work, but it is a different approach when it comes to those on lower incomes or pensioners who have saved for their retirement. The poor are told to work harder and do extra hours of work that are not available in the depressed economy, but 14,000 millionaires will receive a permanent tax cut of £40,000. This Budget is highly regressive and I urge Members to vote against it on Monday.
We are told that the Chancellor has advised the Prime Minister on matters strategic, instead of focusing on the crisis of demand made in No. 11 Downing street—a flatlining economy, slumping business investment, rising unemployment and soaring inequality. The country will not forget that yesterday was the day when the part-time Chancellor produced a bit-part Budget.
I congratulate the Treasury team on a Budget that I believe will come to be seen as an historic Budget that will put Britain back on track for sustainable economic recovery. I want to say something in the time available about the problem we inherited, because it bears repeating, about the challenge we face and about the opportunity that I believe we can and should be optimistic and ambitious in tackling. The problem has been well chronicled, but the views and ignorance displayed by Opposition Members in this afternoon’s debate suggest that we need to repeat it for them.
We have inherited from the Labour party the worst deficit and debt crisis in this country’s peacetime history; a structural deficit that would have been a crisis alone; an annual deficit from Labour’s historical explosion in public spending; a crisis in the situation with debt as a percentage of gross domestic product; and interest payments that are set to rise, if we have not tackled them, by £76 billion a year—£1 in every £4 the Government spend. As a result, there is a deep fiscal crisis, with tax increases and restraint on public spending hitting every family in the country, and a legacy of rising unemployment because of the credit crunch and bank financing for small businesses. Most powerfully of all, and most damningly after 13 years, there was the unsustainable economic model—a labour boom fuelled on cheap credit and cheap immigrant labour and a consumer boom that Labour knew was unsustainable. Worst of all, perhaps, there is a deep crisis of trust and confidence in political economy and in the belief and faith that the Government can do anything about it.
The challenge is to restore some credibility and confidence, first, in the capital markets through the coalition’s programme for tackling the deficit, and secondly in the boardrooms and businesses of Britain that are the only true mechanism for sustainable recovery. There is also a need to restore credibility and confidence in relation to the entrepreneurs we will need to take the risks to drive growth and the citizens and consumers of this nation so they can have faith again. That requires a new economic model, which my right hon. Friend the Chancellor spoke passionately about yesterday—a model for sustainable recovery. We cannot borrow and spend our way out of a debt crisis.
Recovery needs to be sustainable not just in terms of avoiding the mistakes of boom and bust. We must produce the things that people around the world want to buy and we must have a clean economy in terms of resources and the environment. Recovery needs to be sustainable in the sense that our public services must be financed in a sustainable way. Every pound that we in this place claim as government money has to be earned by citizens and businesses and taken from them, and we should never forget it. At heart, that means that the coalition’s programme for a rebalanced economy must shift from over-dependence on the public sector to the
private sector, from London and the south-east to the cities and the regions and to the real businesses of this country that can drive sustainable growth. I congratulate the Treasury team on keeping interest rates low, paying off the debt and supporting business. We have the most competitive corporation tax regime.
I am going to plough on if I may. The move on the top rate of income tax from 50p to 45p has set a clear direction.
Will the hon. Gentleman at least acknowledge that a significant proportion of the private sector jobs created are part-time and in that sense are doing much less than he suggests to drive growth in the economy?
If my constituents were given the choice between a part-time job in a sustainable private sector business or a full-time job in the public sector that was not sustainable, I know which they would choose.
More than 600,000 new jobs have been created in the private sector since the election.
My hon. Friend makes an excellent point with which I entirely agree.
If I had only one small complaint about the Budget it was that, for reasons I well understand, the Government were unable to do anything to relieve the pain of rural fuel prices in areas such as my constituency, where the cost of living is an acute problem. I urge the Government to look at what might be done to relieve the effect of fuel prices on the rural economy.
I said that I would touch on why I believe that this country can begin to be optimistic about our future. The Government have begun to set out a credible and coherent plan for long-term economic recovery based on a model of trading again around the world. There is a high rate of growth in the emerging nations—the so-called BRIC nations, Brazil, Russia, India and China—and with the pace of globalisation and the explosion in those markets, if this country can set out a model of producing and selling the things that those countries need, we will be on the road to a secure recovery.
Last year saw the publication of the foresight report, which set out how the world population is rising to 9 billion, which will drive huge demand for life sciences such as food science, biomedicine and energy and environmental science. The Government have set out over the past 18 months a long-term strategy to unlock that science and research base and tackle the problems of sustainable development around the world. That is a sustainable model for us as well as for other countries.
There is a huge opportunity for the UK to trade on our great strengths and to unlock the power of the City and financial services sector to back and build the
companies and businesses of tomorrow in the sectors of tomorrow. So I support—it is worth repeating—the measures that the Government have taken, especially in the Department for Business, Innovation and Skills, including the Green investment bank, new sources of finance for infrastructure, the enterprise zones, the competitive tax regime and the £20 billion of credit easing, allied with the reforms to welfare, schools, universities and science and research. The Government are setting out a modern industrial policy for a modern innovation economy. Will it work, I hear you ask, Madam Deputy Speaker? Well, it is already working. The programme has been welcomed by the Office for Budget Responsibility, the Institute for Fiscal Studies, the World Bank and the International Monetary Fund. Even the BBC’s business editor last night said that the Budget had had the most positive response of any Budget he could recall. If any more proof were needed, today one of the world’s great businesses, GlaxoSmithKline, announced a major £500 million investment in the UK, directly citing yesterday’s Budget as a reason. It is an historic Budget that will put us on track for a long-term recovery.
My hon. Friend is showing her customary generosity in giving way. I anticipate that she might make the point that 70% of the cuts in tax credits will affect people in the lower half of the income scale, but the Resolution Foundation determined yesterday that 70% of the gain from the change in the personal allowance will go to people in the top half of the income scale.
My hon. Friend does indeed anticipate my first point. Although there is of course an attraction in lifting more people at the bottom of the wage spectrum out of tax, it makes little sense to introduce a measure that still favours more men than women when women have already lost out under previous Budgets and spending announcements.
On that point, which I dealt with briefly in my speech, is it not a great worry that female unemployment has risen by 22,000 in the past year, adding to the problems that were already there?
It is of deep concern to me, as I am sure it is to you, Madam Deputy Speaker, that female unemployment is now the highest it has been in a quarter of a century and that it was female unemployment that rose most rapidly in the last quarter, considerably outstripping what is happening to men.
I find it difficult to understand the fairness or logic of introducing a higher tax threshold that lifts some low-paid workers out of tax while at the same time disincentivising many other low-paid workers who are seeing their tax credits frozen or lost altogether if they cannot reach sufficient hours, to the extent that work will become hardly worthwhile for them at all. I cannot see the logic of the Government telling pensioners that on the one hand they will give to them through the triple lock, which I welcome, but with the other hand they will take
away from them by raising the threshold and bringing 230,000 of them into tax, while at the same time trying to take people in low-paid work out of tax.
I am struggling to understand how a Government who said that they wanted to be fair and to operate a system that was simple can have arrived at the decision they reached on child benefit, according to which a couple with an income just short of £100,000 will be able to keep all their child benefit but another couple where only one member of the household has an income, but it is in excess of £50,000, will not. How can that be fair? How can a system be simple when it starts to claw back at the rate of 1% for every £100? How will people know where they stand in relation to their child benefit entitlement, and where is the incentive to work more and earn more in such a context?
I am struggling to understand why a Government who want to be progressive, who say that that is their reason for moving away from universal child benefit, which I hugely regret—I want to put on record that I absolutely stand by universal child benefit—and who say that they think there needs to be more progressivity, as they see it, in the way they administer child benefit, then introduce less progressivity in income tax by cutting the top rate from 50p to 45p when, as the OBR has said, there is considerable uncertainty that such a measure will deliver the tax receipts that the Government seem to believe will be brought into the Exchequer. With respect, I think that the Chancellor was a little over-optimistic in his analysis of the OBR’s comments on the likely efficacy of that measure, and it is also unclear to business commentators that the measure will be good for our economy.
Let us be clear that our corporation tax, even before this Government took office, was by no means among the highest in the developed world. I am interested in how a Government who make great play of seeing small businesses as the future of increasing employment, who want to reduce corporation tax, who are on a downward trajectory in relation to it and who want to enable small businesses to employ more workers have failed to notice that the very smallest businesses are completely unaffected by the cut in corporation tax because they already have a tax rate of only 20%. What are the Government doing to support those businesses when what they would really like is effective measures on employers’ national insurance contributions, something that again the Government have managed to address only in a most limited way?
What we are doing for small businesses, which will alleviate many administrative difficulties, is introducing measures such as cash accounting on cash flow, so we are working hard to help them in every way we can. We are also amalgamating national insurance with the other forms of tax paid so that only one lot of tax is collected.
It is not that everything the Government are doing is necessarily bad, but overall it is woefully insufficient in relation to business and not what the smallest businesses have been talking to me—or I suspect to the hon. Lady in her constituency—about. They have been talking about employers’ national insurance contributions, business rates and their concerns about the rise in VAT, which means that there is pressure on
their turnover, but in the Chancellor’s statement yesterday the Government had nothing to say about any of those issues.
I should like to say a little about welfare and pensions. On welfare, I share with many of my right hon. and hon. Friends the deep concern that, after £18 billion of social security and tax credit cuts already from this Government, the lowest-income households in this country now face a further £10 billion of cuts. That will mean a hit on disability benefits and on the benefits that enable people to reach basic living standards. When the Government publish on people’s tax statements, as they say they will, a breakdown of where their spending has gone, I hope that they show in great detail who the losers are from that welfare spending. A broad-brush statement, “This is what is spent on welfare,” will not tell people that carers, the disabled and people raising children are actually the losers, so I hope that such information appears on the tax statements that the Government produce.
Finally, the Government propose to keep the state pension age under review in line with rising longevity. That, too, is a measure that will deliver greater inequality, because it will penalise most of all the poorest, who already have poorer health outcomes and poorer life expectancy, and those doing manual and hard, physical jobs. So buried in the detail there is considerable injustice, unfairness and inconsistency, and I shall vote against the Budget on Monday.
I welcome a Budget which shows that the coalition Government remain determined to tackle the deficit and to drive growth and job creation throughout the country, and that we will deliver tax cuts for millions of hard-working people and demand from the wealthiest in our society that they pay their fair share. This really is a Budget for millions of ordinary families throughout the country who are struggling to make ends meet, not a Budget for millionaires.
I welcome in particular, of course, the increase in the personal income tax threshold, the largest increase for a generation and a thoroughly progressive policy. It has gone from the front page of the Liberal Democrat manifesto and been turned into action under the coalition Government, and both parties deserve credit for introducing it. In terms of helping the families whom I represent in Cornwall, the measure sits alongside a freeze in council tax and the Government’s determination to tackle the injustice of water bills throughout the duchy. Some 19,300 people in Cornwall will be taken out of paying income tax, and more than 4,000 in my constituency alone will no longer pay it. I thoroughly commend the measure to the House and hope that in future years the Chancellor will be able to go further and faster.
Will the hon. Gentleman not at least acknowledge, as my hon. Friend Mr Bain said earlier, that the biggest beneficiaries of the increase in the tax allowance will be higher-income earners, not the lowest-income earners?
It is a bit rich when the Labour party talks about benefits to higher rate taxpayers, given that it abolished the 10p rate of tax, making 5 million of the
lowest paid pay more tax. The coalition Government are taking the lowest paid out of tax, and that is a better direction of travel for the people whom I represent—and, I am sure, those whom the hon. Lady represents as well.
I am also keen to welcome the measures in the Budget to drive business growth—the cutting of red tape on small and medium-sized firms; the introduction of cash accounting; the enterprise management incentive scheme; and the fact that the Government are making available £20 billion worth of additional funding to ensure that businesses across our country, from which will come the growth that will get us out of our financial difficulties, have the money to invest, expand and grow.
The hon. Gentleman has talked about investment. If the 50p tax rate had been retained, there would be more money for investment. The Chancellor said that the rate was making little impact on the amount of money coming into the Exchequer. If it was making so little money, could he not have just done away with it altogether—or is it actually a real source of income for the Government and the Exchequer?
Again, there is an obsession for a policy that Labour implemented only during the last 37 days of its Government. If it was so keen on the 50p rate, why did that not last for 13 years under Labour, rather than 37 days? This is nonsense from the Labour party.
Some of the measures to improve finance for small and medium-sized enterprises will build on some of the other mechanisms that the Government have introduced in Cornwall to try to drive the Cornish economy. I am thinking of the enterprise zone at Newquay airport, the Cornwall and Isles of Scilly local enterprise partnership, the fact that Cornwall will be the first county—not just in the United Kingdom, but across Europe—to have access to superfast broadband across its entire length, and the commitment to renewable energy generation as a way of driving some of the job creation of the future.
I also welcome the measures on housing growth that the Chancellor announced. Government and Opposition Members recognise that there is a serious housing crisis in the country. We need to get on and build our way out of it to ensure that we meet the aspirations of those, many from my generation, who simply want to start their lives with their partners, but are unable to do so because they do not have access to stable, decent and affordable accommodation.
In my remaining time, however, I would like to put a few concerns on the record. The first is about alcohol taxation. Duty on beer has gone up by 42% in the past four years. As my hon. Friend Andrew Griffiths, who is not in his seat, said earlier, the community pub is at the heart of many areas, including many of Cornwall’s villages. Community pubs serve a useful function, employing 300,000 young people across the country. When the Government bring forward their alcohol strategy, I hope to see some redress from the burden that beer taxation has taken on in recent years.
I am also concerned that air passenger duty has gone up by 360% over seven years. When I talk to the manager of Newquay airport, he tells me that that is having an impact on its ability to continue to drive custom.
I share the concern of my hon. Friend Mr Cash about fuel taxation in rural areas. An innovative scheme is being trialled in the Isles of Scilly and other places, but the Government need to consider again whether the balance is right.
I have two final points. I disagree with my hon. Friend Michael Fallon, who thinks that the introduction of regional pay will be a welcome move. Far from it—it runs the risk of institutionalising some of the inequalities in regions, such as Cornwall, with above-average housing costs and below-average wages. I have deep concerns about this proposal, as do my hon. Friends on the Liberal Democrat Benches.
Finally, I turn to an issue that is exercising my countrymen in Cornwall. There is some ambiguity about whether the increase to 20% in VAT on hot food will include pasties that are served from bakeries. The Minister will no doubt be aware that the pasty is not only a staple, hearty meal but, in effect, employs thousands of people and brings millions of pounds into the Cornish economy. Will he give some clarity on whether we can avoid a pasty tax?
The altruism of the high-paid is remarkable. If they are not paying tax because of successful avoidance measures, their delight at the rate reduction requires some explanation. Perhaps they agree with the Chancellor’s statement that they will pay more tax as a result; if so, their delight is clearly because they are ready to pay more tax than they were previously.
I wonder whether my hon. Friend has had an opportunity to consider what the Institute for Fiscal Studies has said this afternoon—that there is a one in three chance that the Treasury will recoup only 30% of the £2.9 billion in the Red Book that relates to behavioural changes and to people moving from the 50p to the 45p rate. Does not that bear out her point?
It definitely does.
Of course, that may not have been what people were cheering. They may have been cheering in relief at not having to do tiresome tax avoidance planning all the time. If the HMRC’s calculations are correct, high-paid employees are a bit like highway robbers who are holding a musket up to the rest of us and saying, “If you tax us, we are going to take our ball away and not play any more.”
Is my hon. Friend as concerned as I am that the Government seem to pay little attention to HMRC’s informed views?
Clearly, the Government see tax planning as a perfectly rational and sensible reaction to tax changes. However, if a working couple who are about to lose £3,000 in tax credits make a sensible and rational decision to stop work because that will make them better off, will they be seen as merely making a sensible and rational decision, or will they be seen as lazy, as scroungers, and as people who prefer to watch daytime television than hold down a job? If they make that
decision, which is rational for them, the outcome will be wholly irrational for the Government, because it will cost the Government more if that family stop work.
I have still not had a satisfactory response from the Government to a question I asked in an earlier intervention. I also asked it of the Deputy Prime Minister earlier this week, because he is fond of telling us that Government can do two things at once. Why can we not retain the 50p tax rate and deal with tax avoidance? Apparently, in the previous year, when people were expecting more tax, they brought their income forward, so presumably this year, knowing that the measure has only a year to run, they will be able to put their income back to the following year so that they do not have to pay more. If we know that such things are happening, why are we unable to find a means of stopping it? Perhaps people’s incomes should be looked at over two or three years to ensure that they cannot engage in these blatant tax avoidance games, which many people on lower incomes cannot do.
When we had the discussions some months ago about bankers’ bonuses and executive pay, the Secretary of State for Business, Innovation and Skills told us, “Well, these people are paying 50% tax.” Either they are paying it or they are not. One moment we are told that we do not need to bother doing more about bonuses and high pay because the tax rate is dealing with it and the next we are told, “It’s not bringing anything in, so we shouldn’t bother.” There is a lot of smoke and mirrors.
It is clear from the Red Book and it is even clear from the Daily Mail—I am hardly a friend of that paper—that the Exchequer plans to forgo £3 billion in making this change to the tax rate. It hopes to get that back through people willingly paying more tax in various ways and through the relatively small amount that is expected from the changes in stamp duty.
Since May 2010, we have been told regularly by the Government that the way to achieve economic growth is to cut the public sector, which has been stifling the private sector, and then the private sector will spring to life and replace the jobs that are lost. Two years on, we are still asking where those jobs are. Yesterday at Prime Minister’s questions, the Prime Minister told us yet again how good it is that so many private sector jobs have been created. The figure that he used was 600,000, which was repeated a few minutes ago by George Freeman.
More than a year ago, we were told that 500,000 jobs had been created since the election. Many commentators have made it clear that most of those jobs were created in the first six months of the financial year that started in 2010, and that the likeliest cause for their creation was the previous Government’s economic stimulus. The Government cannot keep recycling the figures. The number of times that the Prime Minister has talked about those 500,000 jobs is incredible. I accept that it has gone up slightly and he is now talking about 600,000 jobs. He should get a prize for recycling, even if he does not get a prize for job creation. If those jobs were created as a result of the economic stimulus, the Government should look again at whether they should continue to rule out such a stimulus.
Do we even know that those private sector jobs are completely new jobs? In my city, there has been a lot of outsourcing and people have moved positions through tendering processes. For example, 2,000 care workers in
Edinburgh will now be in the private sector because of the decisions that the council has taken. No doubt those jobs will move from the public sector side of the equation to the private sector side, but they are not new jobs that are driving economic growth. Once again, this is smoke and mirrors and there is no economic growth. That is the important point. If we do not get jobs and growth, we will not get out of the recession.
Order. I intend to start the winding-up speeches at 5.40. That gives us eight minutes. Members can work out for themselves whether they will share the time or not.
I will certainly attempt to share the time, Madam Deputy Speaker.
Although it is a great pleasure to follow Sheila Gilmore, I hope she does not mind me saying that the performance that I most enjoyed from her side of the House was that of the shadow Chancellor, whom Government Members think of with great affection. His performance reminded me of that of an ageing, end-of-the-pier show entertainer, rather like Archie Rice in the film “The Entertainer”, who was once a great character actor, but who, as he gets to the end of his career, has to reheat jokes to get more and more lame laughs. Members will remember that the last words of Archie Rice in “The Entertainer” were, “I’ve had enough.” That sums up our view of the shadow Chancellor.
I was at the Pickerings business breakfast in my constituency just a few days ago, where small and medium-sized enterprises, the engines of growth in my constituency, made three points to me: we need to deal with access to credit, we need to deal with the cost of business taxation, and we need to deal with the burden of bureaucracy that weighs them down. I will not go over the points that many hon. Members have made, but we have heard about the national loan guarantee scheme and Project Merlin, which is providing more money to businesses, allowing them to invest, create jobs and build growth. We have heard about the reduction in corporation tax from 26p to 24p, with a view to taking it to 22p and an aspiration to reduce it to 20p.
I will not, because I do not have much time.
The corporation tax reduction sends a message that this country and its businesses are open for business.
No, the hon. Lady has had enough time to get herself into Hansard. I am not going to give way to her.
The reduction in corporation tax also sends a message to business that the Government are on its side and want it to create the jobs that pay the taxes that fund the public services we want and need. It is unfortunate that
we have heard the shadow Chancellor today, and the shadow Chief Secretary bestriding the airwaves yesterday, saying that they would not have made the cut and would reintroduce corporation tax at 26p. What a message that sends to businesses in this country—that Labour has learned nothing and forgotten nothing from its mistakes. It does not want to kill the fatted calf; it wants to starve the entire herd.
I wish to give Ministers an important message about bureaucracy. Small and medium-sized enterprises have said to me that when they apply for a slice of the Government procurement pie, as the Government want them to do, they find the online application process time-consuming. For small businesses, time is a form of tax. I hope that my hon. Friend the Financial Secretary, who is in his place, will work with my right hon. Friend the Minister for the Cabinet Office continuously to streamline the process, with a view to reducing the time needed for initial online applications by just a few hours. That would help many small businesses apply for the slice of the Government procurement pie that we all know they need.
In the past, Chancellors have had a tin ear. Conservative Chancellors have made Budgets for accountants by accountants. The last Labour Government, after a reasonable start, began to write Budgets by spinners for spinners. It seems to me that Budgets should be made for the people. The Budget that we heard yesterday was an authentic Budget that spoke to the people. It spoke to the strivers, who want to get up, get on and make something of themselves. It spoke to the grafters, who are trying to build a business. It spoke to mums and dads who want their kids to grow up in a country that is free of crippling debt. It spoke to the aspirants, and I am happy to support it.
We have heard a number of Members today say that the Government have no industrial strategy and no strategy for jobs. I say that they should make that argument to the people who will benefit from the £500 million investment in this country that GlaxoSmithKline announced this morning following the Budget; to the people who will benefit from the 2,000 jobs being created by Nissan in Sunderland and around the country with the support of Government money; or to the clients and employees of companies such as WPP, one of the world’s largest communications networks, which will headquarter in the UK under this Government’s new lower tax regime, instead of Dublin, to where it flew under the last Government.
The Government are setting out a bold and ambitious industrial strategy to bring jobs to this country in the sectors in which we will see the highest levels of growth. That is why I particularly welcome the announcements that the tax credit for production in the video games industry will be brought back and that the film tax credit, which a Conservative Government introduced in the 1990s, will be extended to sectors such as animation and high-end TV production.
It is ridiculous that Julian Fellowes’s new series “Titanic” has been filmed in Hungary, instead of in Belfast, where there is a film production studio in the shipyards where the original ship was built. That shows how our system
has taken jobs and investment abroad instead of bringing them here. The changes will help big businesses, but also small animation companies such as Cognitive Media, which is based in Folkestone, in my constituency. It will help in the other creative clusters around the country where such jobs are providing necessary skills and employment. That is part of a strategy, with the Government supporting big investment in centres such as Tech City, where we will fulfil the Chancellor’s ambition to make Britain the technology capital of Europe and a leading player in the world. They will be a major driver for growth for our economy and new jobs in future.
I very much support the Government’s initiative to support the programme championed by Virgin to allow young people who want to set up their own business to borrow money to invest and start up on their own on the same terms as students can borrow money for tuition fees. That will be a great source of jobs for young people and give them the boost they need to get on to the job ladder.
May I begin by wishing my hon. Friend Andrew Miller a very happy birthday? He does not look a day over 75, which is just as well, because he is only 63 tomorrow.
With the greatest respect to my hon. Friend, his is not the biggest birthday of the week. Today marks the birthday of my mother. I hope the whole House wishes her a happy birthday—[Hon. Members: “Happy birthday!”] She will not thank me for saying this, but my mother was born in 1948, so she is absolutely being hit by the Chancellor’s Budget provisions. She will lose out along with another 4.4 million pensioners. She has worked hard all her life, and still works hard, and will be penalised for it.
This has been an interesting and informative debate and I have enjoyed it immensely. My right hon. Friend Mr Brown mentioned regional pay, which is also a big concern to me as a fellow north-east MP, as did my hon. Friends the Members for Dumfries and Galloway (Mr Brown) and for Ellesmere Port and Neston. My hon. Friend Steve McCabe rightly mentioned the importance of youth unemployment, and his fellow Brummie and neighbour, my hon. Friend Jack Dromey, stood up fiercely for housing, if not for hairdressers. My hon. Friend Alex Cunningham mentioned the importance of child poverty and my hon. Friend Kate Green mentioned the importance of ensuring that we tackle female unemployment.
I was interested in the points made by Mr Evennett on ensuring that the Budget provisions are fair and innovative. I agree with that. I want to ensure that work is incentivised, but he failed to mention the concept of fiscal drag, which will bring 300,000 people who are trying to work hard and do what is best into the higher tax rate.
interesting to see how she explains the fairness of the Budget to the 20,082 pensioners in her constituency.
In the opening paragraph of the financial statement yesterday afternoon, the Chancellor said that the Budget
“unashamedly backs business…and…is on the side of aspiration”.
The Opposition would want such a Budget, but if only yesterday’s Budget backed responsible business, rebalanced the economy in favour of manufacturing, built on the progress made by the previous Government on new industries and jobs, and put in place an active Government industrial policy that emphasised the need for Government procurement to establish a level playing field for British companies. Sadly, we did not get that.
We agree with the Chancellor that:
“We earn our way in the world if we stop being afraid to identify Britain’s strengths and reinforce them instead”.—[Hansard, 21 March 2012; Vol. 542, c. 793.]
We also agreed with him when he said in his Budget speech in 2011:
“Yes, we want the City of London to remain the world’s leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more.”—[Hansard, 23 March 2011; Vol. 525, c. 953-954.]
The problem is this: the Chancellor keeps saying these things—these important warm words—but does not do anything about them. It is little wonder that the Secretary of State for Business, Innovation and Skills was forced to write in his leaked letter to the Prime Minister that the Government had
“something…missing: a compelling vision of where the country is heading beyond sorting out the fiscal mess; and a clear and confident message about how we will earn our living in future”.
The fact of the matter is that the Budget is yet another missed opportunity by the Government to put in place the framework needed for a 21st century rebalanced economy. Terry Scuoler, chief executive of EEF, the manufacturers organisation, was right when he said last night:
“The Chancellor began positively by setting out his thoughts for a new economic model. But, by the end of his speech, the task of rebalancing our economy looked as daunting as ever.”
He added that the measures in the Budget
“fail to send a strong enough signal to growing manufacturers that now is the time to bring forward their investment plans and to do it here.”
Steve Radley, policy director of the EEF, reaffirmed this when he said:
“This year it doesn’t look as though we will be making…much progress to a new economic model because we are now looking at business investment driving much less of the economic growth”.
That is the key point of a Budget that is meant to be backing business.
In the 2010 Budget, the Chancellor forecast that business investment growth would be 10%, and 10.9% in 2013. Last year’s Budget downgraded this forecast to 8.9% in 2012 and 10.6% in 2013. But according to yesterday’s Red Book, business investment growth this year is not going to be 10% or 8.9% but 0.7%, and next year 6.4%, as my hon. Friend Mr Bain so rightly said. What on earth is the Chancellor doing with the British economy that he instils so little confidence in the business community? At a time when companies are sitting on record cash
piles—something like £750 billion—which could be used to invest and make the British economy more productive and more competitive, the Chancellor is failing to persuade them to invest in Britain now.
Business investment as a share of GDP has fallen sharply since this Government took office and is now, at less than 8% of GDP, at the lowest level for more than half a century. So much for yesterday being a Budget for business. It is little wonder that John Longworth, director general of the British Chambers of Commerce, has said that small and medium enterprises—the very bedrock of this country’s economy and the firms we need to nurture today to make them the big, successful global companies of tomorrow— will be disappointed that the Chancellor did not do more to boost confidence. An additional 1% cut in corporation tax does not make up for the 5.6% rise in business rates still going ahead next month, or for the lower allowances for capital investment and a lack of incentives to boost employment, particularly for young people.
There was nothing in the Budget on supply chain improvement, despite the fact that the Business Secretary, in his leaked letter, specifically argued that
“There is as yet little attention given to supply chain issues.”
With this Budget the Chancellor has once again shown how he is a roadblock to reform. He has missed an opportunity to make Britain more competitive and fairer, and to ensure our economy is more balanced and productive. His own Budget figures, backed up by the OBR, reveal that his tweaks and fiddling, his tinkering and meddling, his leaks and pre-announcements, will make little difference to Britain’s growth prospects and global competitiveness. This is in a month when the likes of Brazil are powering away from us in terms of competitiveness and the growth and size of their economy.
The Chancellor’s tax cuts for the privileged and most prosperous, paid for by tax increases for pensioners, reveal that he, the Prime Minister and the Deputy Prime Minister are looking after their own. The Chancellor’s favouring of Mayfair over Middlesbrough and Belgravia over Burnley, aided and abetted by his Liberal Democrat accessories, shows that he has the wrong values and the wrong priorities, and he is making the wrong decisions. What we—and, more importantly, Britain—needed was the Chancellor to make a Budget focused on growth, on long-term business support, on a modern industrial partnership between business and industry, and on fairness in tough times. He failed to deliver any of it.
I am grateful for the opportunity to respond to this debate. Over the course of the last two days, debate has been wide-ranging and there have been 60 Back-Bench speeches. At the heart of the debate is the Government’s determination to restore the UK to prosperity. As hon. Members are already aware, it is because of the decisive action that this Government have taken since the June Budget of 2010 that we have secured and maintained the stability of the UK economy, sheltering it from the turbulence that undermines our nearest neighbours and securing record low market interest rates that support families and businesses across the UK. Stability is a vital precondition for growth, and this Budget builds on those solid foundations, safeguarding a stable economy,
creating a fairer, more efficient and simpler tax system, and driving through the reforms to unleash the private sector enterprise and ambition that are critical to our recovery.
“The Chancellor has also painted a clearer vision of how the UK will earn its living in the future and, by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he has sent a powerful signal to companies to invest, do business and create jobs in the UK.”
Kevin Green, the chief executive of the Recruitment and Employment Confederation, said:
“Changes to corporation tax will encourage businesses to invest in their workforce. Plus, in continuing and speeding up year-on-year reductions the Chancellor creates certainty for businesses, which is so important in encouraging growth.”
This commitment to building a recovery through enterprise, private sector investment and export will help to unwind the imbalances and distortions that the previous Government built up, expanded and ignored, to everyone’s cost.
We will not return to growth fuelled by unsustainable debt, irresponsible spending and over-reliance on one sector and one region. I would have thought that Mr Wright would at least have recognised that when Labour was in office, despite the many billions of pounds spent on regional development agencies, the gap between the north and the south widened, not narrowed. That is the legacy that they left to this country. Rather than growth being dependent on debt-fuelled expansion, as in the Labour days, Britain will earn its way in the world. While the previous Government let the economy slip into a stupor of spending and competitive decay, we are reversing that decline and revitalising our ambition.
We face a challenge. The OBR has said, on this Budget and the autumn statement, that the scale of the problem we inherited from the previous Government was bigger than everyone thought. The scale of the boom was bigger and the scale of the bust was bigger. That is the legacy that we are tackling.
Critical to realising our goal are the far-reaching tax reforms that the Chancellor announced yesterday. We are committed to creating the most competitive tax system in the G20—a tax system that supports work, encourages growth and keeps our most successful businesses here in the UK. While the previous Government increased taxes on small businesses, we have cut the tax rate on small companies to 20%; while the previous Government wanted to increase national insurance on jobs, we have cut it; and while the previous Government sat idle as our competitiveness drained away, we have already taken action to reduce the headline rate of corporation tax to 23% by 2014, cutting one of the most important and growth-impeding taxes there is.
As the Chancellor announced yesterday, we are going even further by cutting the rate of corporation tax to 22% by 2014—a headline rate of corporation tax dramatically lower than that of our competitors. It is the lowest in the G7 and the fourth lowest in the G20. It is a sign that we are open for business, an invitation for investment and a spur for prosperity and job creation across the economy. That is also why we are cutting the 50p rate of income tax—a rate higher than in the US, France, Italy and Germany, and a rate that damaged our competitiveness while raising nothing in additional revenue. From April next year, the top rate of tax will be 45%, which will restore our competitiveness and galvanise our private sector.
I turn briefly to what the Government are doing to help protect pensioners. I want to make it clear that the Government have taken action to help pensioners. We have taken action to protect the winter fuel allowance, free prescriptions and eye testing, free television licences and free bus passes, and our triple lock on state pension uprating means that the basic state pension is £120 a year higher than it would have been had the previous Government remained in office. The triple lock means that from next month, the state pension will increase by an extra £5.30 a week—in cash terms, the biggest increase in the state pension that we have seen. We are freezing the age-related allowance in cash terms, but no pensioner will pay more in tax. This measure simplifies the tax system, moving everyone towards a simple tax system, where everyone has the same allowance. Even taking into account the change in age-related allowances, everyone will be better off as a consequence of the increase in the basic state pension.
However, there are other things that we need to do to secure future economic growth. As a number of my hon. Friends have said, we need to lift the layers of stifling bureaucracy that serve to suffocate growth. For too long, businesses have been trapped by a web of bureaucratic cynicism and nimbyism. If we want our most innovative and entrepreneurial businesses to lead our economic recovery, we have to match their can-do attitude. That is why the Budget announced a fundamental overhaul of the planning system, replacing 1,000 pages of guidance with just 50, and introducing a presumption in favour of sustainable development and a new planning guarantee, so that no decision should take more than 12 months, including appeals.
However, if businesses are to seize the opportunities to grow, we have to ensure that they have the finance they need to feed their ambition. If we want businesses to take the risk to invest, hire new workers and take a leap into the export market, we need to ensure that they have access to finance. In particular, it is critical that we support smaller businesses, which provide more than 50% of private sector jobs and 30% of private sector investment and have the potential to become the global leaders of tomorrow. That is why the Chancellor launched the national loan guarantee scheme earlier this week, to give smaller businesses with a turnover of up to £50 million access to cheaper loans. Through the scheme, the Government will provide guarantees on unsecured bank borrowing, enabling banks to borrow at a cheaper rate and pass on the full benefit to their customers. We have provided £5 billion of guarantees in the initial phase, with up to £20 billion of guarantees available in total.
It is this Government’s deficit-reduction strategy that has earned this country market credibility and low interest rates, and it is this Government who are ensuring that the full benefits of those low interest rates are passed on to businesses across the UK. Barclays, Santander, Lloyds and the Royal Bank of Scotland are already participating in the scheme—a new bank, Aldermore, has agreed to join in principle—helping thousands of small businesses across the UK. However, in addition to the national loan guarantee scheme, we are trying to broaden the range of sources of finance available to new businesses and tackle some of the issues in supply-chain financing, while also ensuring that other sources of finance are available to businesses. That is why we have launched the business finance partnership. I was delighted to see a large number of people coming forward to take part in the programme and ensure that more money is available to invest in small businesses. That is an important change to ensure that businesses are in a position to take advantage of the opportunities before us today.
It is this Government who are committed to making Britain the best place to start, grow and finance a business. It is this Government who are putting the ingenuity, innovation and enterprise of people and businesses at the heart of our recovery. This Government are releasing our ambitions for a private sector recovery, through a competitive top rate of tax, one of the lowest rates of business tax in the world, an overhaul of cumbersome planning rules and bold action to ensure access to finance for businesses to lead investment and job creation across the country.
Opposition Members had plenty of time to make their arguments. They should take responsibility for the problems that this country is having to deal with.
They left behind the deficit that this Government are sorting out. They left behind an economy that needs repairing and restoring. It is this Government who will ensure that the British economy will earn its way out of its problems.
The debate stood adjourned (
Ordered, That the debate be resumed tomorrow.