This has been like the show, “Who Wants To Be A Millionaire?”—a question is asked, there is an advert break, and everybody is waiting for the answer. My quiz show might be called, “Who used to want to be a millionaire but now is a Member of Parliament?” I shall endeavour to continue after the commercial break in the spirit in which I started, by asking hon. Members to consider what growth in the economy means.
As a Johnny-come-lately to professional politics and prior to that having been in business for 30 years in various ways, successfully and, I have to say, unsuccessfully, it seems to me that growth often means something different to politicians, people who work in think-tanks, journalists and people who work in public affairs. For economists it is easy to consider growth as a statistic—0.5%, 0.8% or negative growth, on which Opposition Members and Government Members take different views.
For me, growth is a collective decision by individuals, whether they are business owners, people who want to start a business, or the management of a large company. In a capitalist society—there is a general consensus that the profit motive is what drives private enterprise—business people must make the decision to start or expand their business. Growth in the economy is the collection of such decisions. It is Government’s role and the role of this Budget to facilitate that.
Now. Unfortunately that was not the case with the situation we inherited, with a huge deficit and the economy plummeting. Opposition Members should remember what I said—that growth is not a statistic. If we are to get growth, it requires a collective series of decisions by people to expand their businesses and start other businesses.
The predecessors of the current Opposition believed in a different type of economy. They believed in a socialist economy. They believed that Governments, by nationalising businesses or taking investment decisions themselves, could make a fundamental decision, people would do things because they were told to do so by Government and the result would be a growing economy. Society has taken the decision—and this is the general consensus among nearly everyone in the House—that growth will come from private enterprise.
If growth comes from private enterprise, we must accept that that comes from people accepting all the aggravation, mortgaging their houses, setting up businesses, employing people and taking very little money out during much of the growth period of the business. What makes them want to do that is the fact that they want to get rich themselves. I am fine with that. If they pay their taxes—I am certainly against tax avoidance and all the legal and illegal schemes to do that—and if they employ people who pay their taxes, it is right that
they should keep the majority of what they earn. I hope that when criticising the reduction from 50% to 45%, hon. Members on both sides of the House will bear that in mind. I believe that that ambition is the core of growth in this country and I commend the Chancellor for progress in this respect.
We have heard quite a lot already about the economic situation. The context for the Budget is one of economic stagnation. The growth forecast produced last year for this year was for growth of 2.5% in 2012. The OBR’s estimate now of growth in 2012 is just 0.8%. The growth forecast for 2013 is also 0.8%. That is close to stagnation.
Unemployment is rising, the cost of living is rising, and it is particularly worrying that business investment appears to be collapsing. The OBR forecasts that business investment this year will drop 7%, from an estimate of 7.7% to 0.7%. That is connected with the OBR’s forecast for such meagre growth as there is to be, according to its estimate. A much larger share of this growth—three times larger—is to come from private consumption rather than from export-led growth. We have a demand crisis in the economy. I worry that the Chancellor is putting all his eggs in one basket, rather like Japan did in the 1990s, gambling everything on low interest rates as a way to stimulate the economy.
The hon. Gentleman talks about a demand crisis, but does he accept that some of the responsibility for that comes from the policies of the previous Government, which so substantially over-leveraged not just the Government, but the entire economy?
There is no doubt, and the hon. Gentleman is right to say, that not everything in the garden was rosy by 2010. That does not take away from the current Government their responsibility to stimulate the economy. On any metric, growth of 0.8% this year and next year is only very limited growth. On current estimates we will not return to 2007 GPD levels till 2013. That slump will be the longest since the 19th century—six years to get back to a previous level of GDP. That is indeed a slump, and this is a stagnation Budget.
As the hon. Gentleman knows, whatever the situation when this Government took office, they are now, by their own estimates, going to borrow £150 billion more than they estimated, so they are adding debt upon debt, with no growth to show for it.
As usual, my hon. Friend hits on the apposite point. Corporates do have an enormous cash pile, and we have to ask, why are they not investing? It is because they do not think there is anyone to buy their products; it is as simple as that.
Of course, no one is suggesting that this issue is all about one side, because it is not all about stimulating demand at the expense of cutting the deficit, but my and the Opposition’s view is that the Government have got the balance wrong. Confidence will not be restored if there is no growth in the economy.
I appreciate the hon. Gentleman giving way, but does he not agree that, actually, it is hard to say which comes first? He says that confidence comes from growth, but I say that growth comes from confidence. I think he has got it the wrong way around.
I thank the hon. Gentleman for his intervention, which will be the last one I take, given the time constraints. The lessons of history are that, unless we can make people feel that they have money in their pockets to spend and to stimulate growth and the economy, the chances are—the Japanese example is a perfect illustration of this—that we are unlikely to recover to pre-trend levels.
At this time of stagnation and austerity, what is the Government’s priority? Is it growth, jobs and helping the hard-pressed squeezed middle? No, it is a tax cut for millionaires. Some 14,000 millionaires will get a tax cut of £40,000 per year. The 300,000 payers of the 50%—[ Interruption. ]
Thank you, Madam Deputy Speaker. Hon. Gentlemen on the Conservative Benches are becoming rather vexed, and one does not have to wonder why, given the message that they are sending out to the electorate with this tax cut, which will cost more than £3 billion at a time, as the Government emphasise, of austerity.
Richard Harrington suggests that empirical evidence shows that the 50p tax does not raise any money, but there is no empirical evidence in the document presented by the Government. There is a series of estimates, based on a view of behavioural change, itself based on a view of human behaviour, which one would have thought would have at least been challenged by the financial crisis and all that it brought.
This Government are taking a gamble that the £3 billion that they would have had in the bank—in their coffers—will be almost cancelled out by millionaires from Monte Carlo and Caribbean boltholes rushing back to show their patriotism to this country by paying a slightly lower rate of tax. Those are not my words, but the words of the Business Secretary in a previous incarnation. This tax cut for millionaires is the wrong priority for this country at this time.
We have a crisis of employment—a crisis of youth unemployment, with 1 million in the UK and one in four in Scotland now unemployed. What we need are measures to get young people back into work, but how long are they meant to wait, to take the argument of Government Members? A national insurance holiday for small and medium-sized enterprises—that is what we need. A bank bonus tax to create 150,000 jobs for young people—that is what we need. A temporary VAT cut to stimulate the economy and help out hard-pressed motorists—that is what we need. And a VAT cut for home repairs and maintenance to stimulate that important sector of the economy—that is what we need.
Then we have the granny tax. Under the guise of simplification the Government have brought in a stealth tax on more than 4 million pensioners. Some 700,000 people turning 65 years old will lose more than £300 per year—[ Interruption. ] Someone shouts, “No one will pay more,” and there is a debate to be had about sharing burdens.
I am afraid that I have no more time to do so.
There is a debate to be had about sharing burdens across the generations, but to begin it with a stealth tax described as a “simplification” is surely not the way to encourage a healthy, long-term debate about that kind of distribution.
I finish on this point: wrong priorities, wrong values, wrong Government.
I welcome in particular the Budget’s emphasis on business and enterprise, because we have to be clear that there are no short cuts out of the financial mess left by the previous Government. We need new businesses to set up, and existing businesses to expand and export more products, in order to create the jobs of the future.
Susan Elan Jones said that there are no jobs for public sector people to go to, and that those who have been in the public sector cannot get jobs in the private sector, but we need those public sector employees to set up their own businesses, because I see a lot of talent in the public sector workers whom I meet in Cornwall. Many have experience of managing large projects, managing large teams of people, planning ahead and dealing with the public. They have many of the skills that they need to set up their own business and to create jobs for other people if they only had the confidence to do so.
I should also like to discuss the importance of supporting young people in setting up in business. I remember talking about 10 years ago to a businessman who said, “There is never a better time to start to run your own business than when you are young, when you have just left university. You should never put it off and think, ‘Well I will start up my own business later in life’; you should get on with it early.” It is therefore particularly important that we encourage enterprise at schools and get schools to engage in the various existing entrepreneurship schemes.
The announcement in the Budget to develop the idea of enterprise loans was particularly welcome, as it builds on the good work that the Government have already started with the enterprise allowances to help small businesses to set up.
Before the Budget I visited a large manufacturer in my constituency, or as large as they come in my constituency, called Teagle Machinery, based just outside Redruth. It is a fantastic success story in Cornwall: more than half of everything it produces is exported; the number of its employees has more than doubled over the past 10 years; it is winning orders in markets from Japan through to eastern Europe; and it is even now attempting to break into the market in Russia. It is an extraordinary success story, almost like Cornwall’s answer to JCB and proof that this country can still do traditional, high-quality manufacturing and engineering, and that we can be world beaters in that sector.
There are several measures in the Budget that companies such as Teagle in my constituency will welcome. There is the reduction in corporation tax, which my hon. Friend Mark Garnier touched on. It is important that we have a business-friendly tax system here and encourage businesses that want to invest in Europe to choose the UK, and the reduction to 24% and the further planned reductions to 22% by 2014 will be incredibly welcome.
The planned national loan guarantee scheme will be a major support for smaller businesses. We all have many businesses coming to us saying that they have difficulty accessing finance at the moment, and that scheme will bring into the market £20 billion of funding that will be affordable for small businesses and give lenders the safeguards they need to make the money available. That, too, is going to be incredibly welcome.
I particularly welcome also the efforts being made to increase export finance and the funding available for it, because Teagle specifically raised that issue with me. It gets some support from UK Trade and Investment to take part in trade fairs, but it would like to do more, and this country is quite successful with exports at the moment. In the past year, our exports to India have risen by 30% and to China by 15%, and our overall exports during the past couple of years have risen by 30%. We have to build on that, because it is through exports, manufacturing and creating wealth that we will get our economy back on its feet.
The Secretary of State for Transport touched on many transport issues, and the Government’s decision to maintain investment in infrastructure is especially welcome. In my area, in particular, there is a new link between Camborne and Redruth, which will unlock the potential of derelict mining land and create 6,000 new jobs over the next 20 years, half of them in the next five years. Projects like that will also help to get our businesses back on their feet and moving forward again.
A speech about Cornwall would be incomplete if it did not touch on fuel tax. I have argued consistently, and continue to do so, that fuel tax can be a regressive tax and that it hits peripheral areas particularly hard because their products have to be transported much further. What the Government have done so far on that
is particularly welcome. We must remember, as my hon. Friend Charlie Elphicke pointed out, that fuel tax is currently 10p lower than it would have been under the Labour party’s plans, which is very welcome. I am particularly encouraged to see what has been done to take forward the idea of a fuel price stabiliser and the pilots that have continued to be rolled out in rural areas with the rural rebate, which is particularly important to areas like Cornwall.
Finally, I want to talk a little about the tax thresholds, because the increase in the threshold to £9,200 a year is a major boost to areas such as Cornwall where a large number of people are on low incomes. It will take more than 20,000 people in Cornwall out of tax altogether and 24 million people across the country will benefit. There has been some discussion about the genesis of the proposal and which party came up with the idea first. My hon. Friend Mr Jackson touched on that, but I can vouch for the fact that in 2004, when I was working on policy ideas in the Conservative party, it was in fact Lord Saatchi who strongly pushed the idea of having a £10,000 threshold and taking people out of tax altogether. It is a Conservative proposal and always has been, and I am delighted that our Liberal Democrat colleagues have come around to our way of thinking.
This is a landmark Budget, because it has redefined the meaning of complacency. The Budget speech, in essence, was nothing more than a review of the previous week’s press, rather than a strategy for growth, although we did learn one thing: the Conservative party is a one-region party, not a one-nation party. The Lib Dems—I notice none of them is here at the moment—have followed such a crooked path since the general election that I am surprised they can now lie straight in bed.
Transport is a very important issue in Sedgefield. In the south-east corner of the constituency, Durham Tees Valley airport is doing its best to continue to serve the Tees valley, even though it has faced difficult times recently. I am pleased that the Minister responsible for aviation has agreed to meet MPs from the area to discuss the airport’s future, and I will be pleased to hear the Government’s plans for expanding runway capacity in the south-east, which would greatly help regional airports.
The Hitachi train building facility is due to start construction in my constituency at the back end of this year or the beginning of next year, and I hope that one day in years to come it will compare with Nissan for the number of private sector jobs it creates. I would like to record once again my thanks to the people of Newton Aycliffe, Sedgefield and the north-east who campaigned to ensure that this Government went ahead with the Labour Government’s plans for investing in new rolling stock to guarantee the Hitachi investment.
Beside the concerns about the future of the airport, the other great concern is the state of public transport in County Durham, especially local bus services. The lack of a credible bus service in the area, which has been restricted because of the cuts in central Government grant, is counter-productive. The local Jobcentre Plus has informed me that it knows that poor transport in
the area is making it difficult for people to get to work, and it is such a problem that it is thinking about buying bicycles so that people can make the journey to work. At present, nine jobseekers in Sedgefield are chasing every vacancy, and there are fewer public sector workers in Sedgefield than in the Prime Minister’s constituency.
Although the north-east has the highest proportion of public sector workers of any region in England—just under 26%—private sector jobs increased in the north-east between 2003 and 2008 by 9.2%, while public sector employment grew by 4.1%. In other words, private sector employment in the region was accelerating faster than public sector employment was before the international financial crisis. Therefore, public sector jobs were not crowding out private sector jobs.
As in other parts of the country, in the north-east 40% of households with dual incomes include someone who works in the public sector. The loss of significant public sector jobs and a public sector pay freeze can only exacerbate the loss of spending power in the region if those factors are joined by the localisation of public sector pay. I believe that the move in the direction of localised public sector pay is driven by ideology, rather than economic facts. It belies the fact that we can have national pay bargaining and still have flexibility within pay structures without hitting regions such as the north-east.
Concern about the localisation of public sector pay is not restricted to people in the public sector and trade unionists. The chairman of the Leighton Group, a technology company in the north-east, Mr Paul Callaghan, has warned:
“I’m very concerned about the negative impact on the North East economy of regional pay rates. Clearly we do not have regional pricing on gas, electricity, petrol and most other goods, so freezing of regional public sector pay must reduce demand for local goods and services, further dampening an already depressed economy. I have seen no credible research to show that this move will have anything but a negative impact on both the region’s private and public sector.”
Does my hon. Friend agree that taking £78 million out of the economy in a time of recession, which is what the TUC estimates regional pay would mean for the north east, is simply economic madness?
As I have said, I think that it is ideologically driven. The facts of the matter have been thought through, so my hon. Friend is quite right.
The previous Government turned their back on the wholesale devolution of pay determination at local level in 2003. A Treasury guidance note published in the autumn of 2003 stated:
“At the extreme, local pay in theory could mean devolved pay...to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”
Does my hon. Friend also agree that one of the risks of this approach is that it will have a further deflationary effect in areas where money being spent in the local economy is vital to ensuring proper growth?
It will end up increasing the division between the north and the south in this country. If the Government go forward with this proposal, I believe that it will prove the point that the Conservative party is no longer a one-nation party, but a one-region party.
I believe that the proposal would mean that poorer regions would be starved of talent. Social mobility would be restricted because of too much variance in pay rates, especially between the north and the south. There are many myths about local pay determination. For example, last year’s autumn statement said:
“While private sector pay is set in accordance with local labour markets, public sector pay is usually set on a national basis.”
The fact is that most large, multi-site private sector companies have national pay structures, among them retailers, banks and telecom companies. The Government give the impression that private sector pay is set by myriad individual-level decisions based on specific local labour market variations. In reality, large, multi-site, private sector companies operate with up to four or five bands or zones within a national framework.
The Government have put across the idea that there is significant regional pay variation outside the south-east and London, but there is much more similarity than difference. In practice, most retailers and banks that operate zonal-type pay systems have national pay structures outside the south-east and London without having to set different rates for sites in Durham, Doncaster or Daventry.
There is a myth that local labour market and cost-of-living factors have displaced skill-level qualifications in setting pay in the private sector. Even in small private sector organisations, skills and qualifications will be key factors, and there is plenty of evidence, according to Incomes Data Services, that international engineering companies with regional bases are using international salary data on skills and qualifications rather than local data for recruitment purposes. Human resources professionals in the private sector who work for companies with multiple sites around the country would say that national pay structures are important because they provide simplicity, avoid the costs of duplication, allow better payroll control, create consistency, and avoid poaching and leapfrogging.
Another myth states that geography is a key factor for determining pay, yet in fact the industrial sector is the key determinant. In the car industry, with different companies working in different locations such as Sunderland, east London, the west midlands, Merseyside, Oxford, Derbyshire, north Wales and Swindon, there is a great deal of similarity in pay levels. These manufacturers benchmark pay against each other and other successful manufacturing companies. Geographical pay differentiation within the UK is not a major factor for them, although global pay differentials can be a factor. Localisation of public sector pay will also open the way to greater cost in the public sector, as local management will need to expand to handle negotiations and to collate and analyse local labour market data. There could be more challenges over equal pay.
Complex localised pay systems are rare because of the resources involved. Official earnings data show that there is very little difference in earnings outside London and the south-east. There are two labour markets in the UK: the south-east and London, and the rest of the
country. Even zonal pay systems, which may cross regional boundaries, usually equate to the boundaries that I have mentioned and extend no further.
I do not believe that public sector jobs are squeezing out the private sector. Unemployment is highest in the north-east, with nine jobseekers chasing every vacancy. Thousands of jobs have been lost in the public sector, so why is not the private sector growing in the way anticipated? It is because there is a lack of growth and demand in the local economy. The Government’s plans for excessive localisation of public sector pay are misguided and ideologically driven, and they should not be implemented.
It is a great pleasure to follow Phil Wilson, who already outshines his predecessor in his integrity and sincerity, if not in his fame.
I apologise, Madam Deputy Speaker, to you and the House for the fact that unfortunately, owing to a constituency commitment, I will not be able to be here for the closing speeches. That is a great shame, because we have had a very stimulating debate across both sides of the House, with the opening speeches by my right hon. Friend the Secretary of State for Transport and by the shadow Minister, John Woodcock. The hon. Gentleman is standing in for the shadow Secretary of State, Maria Eagle, who became sick at a TUC conference. I think that this is the first time that a Labour Front Bencher has issued a health warning on their union paymasters. Let us hope that those health warnings will continue.
I will be going back to the great towns of Bedford and Kempston, whose people know that these are tough times but wanted to have a Budget that rewarded work, and the Chancellor of the Exchequer has delivered precisely that. The single most valuable part of this Budget for the people of my constituency is the raising of the personal allowance by over £1,000 so that the first £9,000 of a person’s income will not be liable for tax. That is a fantastic encouragement for people who are finding that their budgets are very tight.
Members on both sides of the House have expressed concerns about fuel duty, and I echo those concerns, because they duty does have a significant impact on personal budgets and on business. I would have liked the Government to do more, but I understand that they were unable to do so. I draw my hon. Friend the Economic Secretary’s attention to the campaign by my local newspaper, the Times and Citizen, which echoes what my hon. Friend Mark Garnier said about how petrol prices can vary significantly between different regions. The Times and Citizen found that in Bedford and Kempston, our fuel prices were 4p to 5p per litre higher than in other areas. If we cannot do anything about fuel duty, will my hon. Friend consider ways in which the Government can ensure that we do not face monopolistic positions on fuel duty in very localised situations? The Times and Citizen’s campaign has shown that the people of Bedford and Kempston care very much about that, and it can, in itself, have as much impact as a cut in fuel duty overall.
I should like to spend a couple of minutes on the deficit crisis, inter-generational debt and competitiveness. On the deficit crisis, it is excellent that the Government are looking for fiscal neutrality, but that is different from considering the overall level of public expenditure and public debt. Public expenditure is still going up, in cash terms and in real terms, and tax receipts are going up—from 35.8% of GDP in 2010-11 to 36.4% of GDP in 2014-15. We continue to be a high-public-spending, high-tax economy. I hope that the Government and the Chancellor will look at ways in which the overall balance can be brought down so that resources can be moved from the Government sector to the more productive private sector.
May I also urge caution on Ministers in the use of quantitative easing? Quantitative easing is a policy to overcome a credit-driven recession. It should not be a policy to support excessive public expenditure or the long-term erosion of the value of savings. It is pertinent to look at the “Debt and reserves management report 2011-12”, which shows that the Bank of England’s asset purchase facility holds more than 18% of Government gilts. That holding has, at some point, to be unwound, which will have inflationary consequences.
No, I am not calling for an increase in interest rates. I am calling for the Government to be clear, which I think they are, about the use of the quantitative easing policy. The results of that policy will, in a few years, have to be unwound. The level of their own gilts that the Government hold will have to be reduced. When that happens, interest rates will go up. We need to caution the Government to be aware, in setting the level of public expenditure, of what that level will mean. People will need an increase in pay due to the increase in the Government’s cost of borrowing. Foreign holdings have also increased, and are now at 31%. We now have the highest spread between five-year and 30-year gilts in terms of the risk premium. All those points should caution us about our deficit.
Those facts come on the back of a significant level of debt in our economy. Opposition Members fail to realise that we are the most indebted major economy in the world. That is the legacy of the previous Government and the previous Chancellor. Those who were here yesterday would have seen the shadow Chancellor give an uncharacteristically short speech. He sat down and people were surprised, because there was more that he could have said. However, I think that his speech could have been shorter. It could have gone thus: “I am sorry. I am really sorry. I am sorry for my hubris in thinking that I could end boom and bust. I know now that that was achievable only by leveraging up the entire British economy and dumping the debts on our children and grandchildren.” That is the speech that the shadow Chancellor could have given yesterday. He could then have sat down, because that sums up what he left us to sort out.
The shadow Chancellor did not give that speech yesterday, so perhaps I can give him some advice. The next time he goes to a school, instead of looking for a photo opportunity of him playing football, he could go up to one of the schoolchildren and say, “Hey, I’m sorry.
I’m sorry that I shackled your potential with the debts that my monumentally short-sighted economic strategy created.” That is the truth of what he left behind.
Does the hon. Gentleman accept that that is rather a caricature of what happened during the global financial crisis? It was a global crisis. Surely the financial sector, and the banks in particular, have to take some responsibility for the debt that we face.
As always, I have a lot in common with the hon. Gentleman, but that is not the point. The point is that the damage was already being done in our national economy. It was the strategy of the previous Government to not be content with leveraging up their own debt; they required the leveraging up of household debt and corporate debt, as well as financial sector debt and Government debt. Debt was the answer in the period when they came up with the statement that they had ended boom and bust. That debt has to be paid for. It is two years since the Labour Government left office and there is not enough time to pay for the 10 years of the growth of debt in our economy. It will take a significant amount of time for us to de-leverage the economy in every sector. This Budget is part of that process.
That is a good question, which the hon. Gentleman should address to the Chancellor. I was not in Parliament at that time and I am not sure that that is what I would have said.
Much has been said about the granny tax. The one thing that grandparents want is what is best for their grandchildren. They understand that in tough times—this is because many of them have been through tough times—they have to give something to ensure that we will be stronger in future. That is what this Budget will deliver, and it is part of getting our economy balanced and back on the right track.
The hon. Gentleman mentioned personal debt, about which I share a great deal of concern. Is he aware that under the Government’s plans personal debt will rise, not fall, over the coming period?
I think the hon. Gentleman is referring to unsecured personal debt rather than overall levels of personal and household debt. There is much for the Government to do, such as examining excessive rises in credit card terms and penalties for people who have to take on unsecured debt, and I believe they intend to do it.
We need to do more about our deficit, and I suggest again that one thing we can do for the sake of general fairness is consider creating a future fund that takes the pension obligations of our public sector workers and puts them into a fully funded scheme. It would take 20 to 25 years to accomplish that, but Australia, New Zealand, France and Norway are doing it, and it would show that this generation in Parliament understands its responsibility to the next generation of Britons. If we added that to our fiscal responsibility, we would be doing the next generation a great favour.
Investment in transport is absolutely essential for the future of our economy, which means that we need support for transport now and for future projects. I regret that no support was announced in the Budget statement for the maintenance of bus services, which are often important in getting people to work. Rising bus fares are a great burden, and in many cases essential bus services are simply being stopped. Nor was there any short-term relief from ever-rising train fares. I regret the absence of any measures in those areas, which are so vital to people today.
There were some encouraging statements about future transport investment. In the short time that I have available, I want to ask some questions about the meaning behind some of those headline statements. They are encouraging, but a lot lies behind them.
I first wish to refer to rail. I very much welcome the increased commitment to rail electrification. I listened carefully to what was said about Wales, and we would like to know exactly when rail electrification will come to Swansea, which was not very clear. I also welcome the commitment to more electrification across the north of England, and particularly the statement that part of the northern hub had now been agreed to.
Will the Government give a firm commitment to investing half a billion pounds in the northern hub, which is a major scheme to improve rail services right across the north, including places such as Liverpool, Manchester, Leeds, Sheffield and Newcastle. That £0.5 billion investment would produce a £4 billion boost to northern economies. We are still being told that the value-for-money studies are continuing, to assess whether the whole scheme can be made available. I remind the Minister that the Government are quite rightly investing £15 billion in Crossrail and £5 billion in Thameslink, yet the proposed £0.5 billion for rail right across the north is subject to scrutiny that has not yet come to a conclusion. I should like to hear a firm commitment to the northern hub today.
Major questions have been raised about the disparities in transport investment in different parts of the country. The passenger transport executive found figures showing that three times as much per head was invested in transport in London and the south-east as in the rest of the country. The Institute for Public Policy Research North, examining the implications for transport investment of the autumn statement, in which welcome new investment was announced, found that £2,700 per head was being invested in London and only £5 a head in the north-east. I accept that our capital city needs continuing major investment in transport, but given the needs of the country as a whole it cannot be right to have such wide disparities.
Will the Economic Secretary consider publishing the impact of spending decisions on transport across the country and in the different regions? All parts of the country need investment, but it is simply not right for the interests of the country overall that we continue to have an overheated south-east, while other parts are without essential transport investment.
The Budget contained announcements on road investment. More investment in roads—appropriate roads—is required. We are told that there will be a
feasibility study on bringing private investment into our road system, but we need to know a great deal more about what that actually means. We are told that there will not be charges for existing roads, but would the widening of existing roads lead to charges? Is the policy not road charging through the back door, without the safeguards that were considered in the past when road charging as a national policy was under national discussion?
In previous discussions on road charging, it was always assumed—and indeed stated—that if road charges were levied, there would be a compensatory reduction in road taxation paid by the motorists, but it appears that under the Government’s new plans, that reduction in taxation will go to the private sector investors as an incentive to them, and will not accrue to the motorist. This is a major issue. It has been suggested that bringing more private sector investment into roads by leasing or selling our road system would be similar to privatisation of the water utilities—that is what the Prime Minister stated. If it is, it could well lead to a great hike in charges. However, the leasing or selling could be more akin to the Railtrack situation, when maintenance in infrastructure was severely reduced, with tragic consequences.
My hon. Friend mentions parallels with the water industry. Is she aware—many hon. Members may not be—that currently one third of household bills go, in perpetuity, on debt repayments for investment in the water sector?
I thank my hon. Friend for his comment—he makes an very important point and underlines the importance of looking at the policy in great detail. We are told that there will be a feasibility study, but we do not know exactly when that will take place, what it will include, or what kind of consultation there will be. Asking the private sector to own, run and lease our road system is a major step, and detailed scrutiny of exactly what it means for the future as well as the present is essential.
I am pleased that the Government have made statements on their renewed commitment to aviation. If we are to succeed as a country, it is vital that we maintain a successful hub airport. We cannot continue to lose out to our European rivals. It is essential that we build on the hub and do not allow it to decay. Investment in our regional airports is also important. They are important to local areas, but many of them are suffering economically because of the general economic situation. If the Government are interested in aviation for the future, they must look at our regional airports as well as maintaining that essential hub airport.
Hon. Members have been told in the past that there would be a Government aviation strategy that we could debate and consider. That is mentioned in the statement, but the situation is exceedingly vague. I ask the Minister please to tell us this: when will the Government publish their sustainable framework on aviation so that those very important issues can be considered and debated?
In the short time available to me today, I have raised a number of important issues that need proper consideration. I hope the Select Committee on Transport will look at those matters in detail. The whole House will want to
know exactly what those headline statements mean. Investment in transport infrastructure is essential for the economic future of the country, but that means the whole country. I hope the Government are committed to doing just that.
In my speech, I should like to give overall support to the general thrust and direction of my right hon. Friend the Chancellor’s Budget. In extremely difficult circumstances, he has produced a package that I believe will stand the test of time. Budgets too often unravel in a matter of days. Before I continue, I must apologise to the House and the Minister for not being able to be here for the winding-up speeches, but I have constituency appointments that I must honour.
This is the third day of the debate, and many of the points that are made will have been made many times over, so I should like in the main to look at the proposals from my constituency perspective.
Order. A lot of Members have apologised for not being present to hear the Minister. That is the convention of the House. I sincerely hope that the Minister will be here, however, because it does not look like any other Members will.
The local economy of my constituency is generally a low-paid one, with an average annual salary hovering around the £20,000 mark, so it would be wrong to say that I have been overwhelmed with demands for a reduction in the 50p tax rate. To be perfectly honest, no one has canvassed me on that, and that includes two millionaires—but that is an aside. We recognise the desirability of expanding an entrepreneurial economy, however, and on balance I think it is the right decision.
Most of my constituents are far more concerned about the cost of living—most notably petrol and energy costs—so as an officer of the all-party group on fair fuel for motorists and hauliers, I am disappointed that our recent efforts to persuade the Chancellor to postpone the next scheduled increase in petrol duty have not borne fruit. I acknowledge that much has been done on this since the election, but household budgets are being severely squeezed by the cost of motoring. Lincolnshire is a predominantly rural county with limited public transport, so people have little choice but to use their own cars. The FairFuelUK campaign has done much work to highlight this, and the recent report it commissioned from the Centre for Economics and Business Research provided considerable and compelling evidence of the benefits of lowering the burden not just to individuals but to the economy. Our campaign will continue.
Before raising another couple of concerns, I want to welcome the increase in the personal allowance to £9,205. This is a major step towards achieving the £10,000 target and has been warmly welcomed in my constituency, which, as I said, is a low-wage area. I also welcome the moves to lighten the burden regarding child benefit. It is a step in the right direction. It is not entirely what I had hoped for, but, again, I recognise the pressures on the Chancellor. It was interesting to note, in the debate a
day or two ago, the suggestion made by my hon. Friend Mr Leigh about a possible way forward.
It is notable that when the reporter from the local Grimsby Telegraph contacted me just after the Budget speech, their first question was not about the 50p tax rate or the impact on pensioners. Instead, it was, “What’s in it for regeneration?” Northern Lincolnshire urgently needs improvements to its infrastructure and public realm, and the Government have recognised the area’s bright future with an additional allocation of £6 million to the pan-Humber and Greater Lincolnshire enterprise partnerships.
I particularly welcome the forthcoming publication of the national planning policy framework speeding up the procedure for major applications, and note that the Red Book makes specific mention of the Able marine energy park in my constituency, which has been plagued by delay after delay from wildlife directives and a less-than-positive approach from some Government agencies. The specific commitment in the Red Book to change the culture of statutory bodies is therefore much needed. I also welcome the commitment to changing use class orders and the associated permitted development rights that will make it easier to change the use of buildings.
Enterprise loans are also a welcome development, particularly those aimed at young people. I was recently involved in the small business all-party group’s inquiry into entrepreneurship. It was notable that every witness pointed out the need to encourage the entrepreneurship in our young people that the economy so urgently needs. It is also notable that the Federation of Small Businesses is broadly supportive of the Budget proposals. As we all know, to a great extent it is small businesses that will be the engine of growth.
I want to comment briefly on the Opposition’s response to the Budget. Despite their playground attitude of pointing and calling us “the same old Tories”, it is notable that it was those same old Tories who have guided the country through most of its difficult periods. We also provided the opportunities for working-class people to buy their council homes. We have provided the economic conditions for some of the most notable periods of growth throughout our history. The Labour party’s renewed class warfare just does not wash, especially with people like me who come from a working-class background. The fact is that all people, whatever their station in life, benefit from a growing economy, and I believe that this Budget will do a great deal to bring that about.
The Budget was an opportunity to give hope to those who have seen their household budgets squeezed and their livelihoods destroyed by the Government’s economic policies. On Wednesday, however, we saw the Government’s priorities. They were to help the few, not the many; to help the millionaires, not the millions. The Government chose ideology, not fairness. The impact of the Tory-led Government’s austerity measures is plain to see: with rising prices, squeezed living standards and soaring unemployment, this is a return to the Thatcher years of the 1980s.
In Preston, unemployment has risen month by month. In February 2012, 3,733 people were claiming jobseeker’s allowance, which is double the figure under the Labour Government. We have seen an increase of 439 from February 2011—a 13% increase in a year—and an increase of 169 since January 2012, which represents a 5% increase in just one month. The most striking figure is the increase in long-term youth unemployment, and I fear that that will be the hallmark of this Government. Long-term youth unemployment in Preston has tripled in the last year.
This problem is not unique to my constituency; it is endemic across the country. Young people and families are the victims of the Government’s reckless austerity measures, which I fear will lead to a lost generation of young people. I ask the Minister and other Government Members how it can be fair that 14,000 people earning £1 million or more are getting a tax cut of over £40,000 a year when a family with children earning just £20,000 will lose £253 a year from this April. That is on top of the VAT rise, which is costing families an average of £450 per year. The Government’s priorities are clear: tax cuts for the few while others wallow in the mess created by the Government. To repeat a comment picked up on by Martin Vickers: these are the same old Tories.
This Budget is a tax raid on pensioners. In Preston, there are 5,894 people aged between 60 and 64. A large proportion of them will be the victims of the Chancellor’s decision to freeze personal allowance for pensioners, with those turning 65 next year set to lose up to £322. There are currently 16,622 pensioners in Preston, and a considerable percentage of them will have to pay this granny tax, along with 480,000 other income tax paying pensioners in the north-west of England. The economy in the north-west is already suffering.
The Budget also does nothing to help manufacturing. The Prime Minister and the Chancellor have made it clear that they envisage the rebalancing of our economy through manufacturing. For Preston and Lancashire, manufacturing is not only our heritage but our future. As a Lancashire MP, I am proud of the work that BAE Systems and the BAE work force have done over the generations. As we know, however, BAE has lost the contest for preferred partner with the Indian Government owing to the lack of activism on the part of this Government. In January, it was announced that French defence firm Dassault would be the Indian Government’s preferred partner for the building of their fighter jets, instead of BAE Systems with its Typhoon. In the White Paper “National Security Through Technology”, the Government have made it clear that they will no longer give British companies preferred status. If the British Government will not give that preferred status, why should the Indian Government give it to companies such as BAE? It beggars belief that the Government do not support British industry, but the Budget illustrates that fact.
The Budget shows no plans to support the nuclear industry. I hope the Government will look again at providing support to ensure that the Westinghouse AP1000 nuclear reactor is secured at Wylfa in Anglesey. This project would not only generate jobs in Anglesey, but create a Westinghouse service-based business with more than 200 jobs located in central Lancashire. This should have been the Budget for jobs and growth. Instead, it
was a battle of pure politics between the coalition partners, with the winners being the millionaires and the victims the ordinary hard-working people. If this Government were to have any credibility on jobs and growth, they should have used the Budget to support companies such as BAE Systems and Westinghouse at the Springfields plant near my constituency.
The Budget included announcements on transport. Preston is a major hub for Lancashire, connecting Lancashire to Scotland, London, Liverpool and Manchester. I welcome the fact that the Government are looking to add to the trans-Pennine rail route by upgrading and electrifying the Manchester to Preston line. Why, however, are the HS2 plans so timid? The Transport Secretary and her team should not be so timid in pushing forward HS2, which would provide greater capacity and reduce journey times between major cities. Instead of legislating for the first phase of the new high-speed line from London to Birmingham, taking forward HS2 as one project, beginning construction in the north as well as the south would have been the answer to solving the nation’s rail problems—instead of just looking after the south.
Labour Members remember the famous phrase, “We’re all in this together.” With youth unemployment at record highs and pensioners having had their money snatched by the Chancellor, there is nothing to excuse the callous and scandalous closure of the Remploy factory in Preston and others across the country. Where were the measures in this Budget to help the disabled? The systematic attacks on disabled people—whether it be through the removal of benefits or the closure of the Remploy factories—show that this Government have no shame about victimising the most vulnerable in our society.
This Budget provided a chance for a stimulus to jobs and growth in our country, and a chance to show the British people that the Government were on the side of ordinary hard-working families. Yet again, the country has been let down. This Budget will be celebrated by the few, but it will hurt the many.
It is a great pleasure to serve under your enlightened chairmanship of this debate, Mr Deputy Speaker.
The debate has focused much on the immediate challenges and some specific measures, but I want to focus on the big picture. This Budget has seen a tax cut for 24 million working people and a wide range of measures to help Britain earn its way in the world. After all, this Budget was part of a series of Budgets to tackle the challenge of how to turn this country around after years of economic mismanagement. Some of that requires difficult and controversial decisions to be taken, but the fruits of these labours are not in the next day’s headlines, but in preparing our country for the world we live in.
My generation does not have the certainties of an economic world in which our main competitors were in the west—indeed, in the north-west of the globe and centred around the north Atlantic. We must compete against the growing tigers of the east and the growing and rapidly developing economies of the south, yet our economy was left unprepared for that. We all know that
the fiscal situation was dire. Action has been taken over the past two years to deal with our debts, but we also need to ensure that we can earn our way in the world.
Understanding the international context might be helped by a few facts and figures, showing that we cannot any longer rely simply on trading with the old world to earn our living. Over the latest period, demand for UK exports by the European Union has been falling. Compared with January last year, the value of our trade with the EU is down £300 million, while exports to France fell by 14% and by 3.5% to Ireland. Those falls were more than offset by increases in exports to the rest of the world, however. Exports to the rest of the world are up 16% since January last year. Trade with China is up 30%, and trade to India is up 15%. There have also been rises in respect of economies with which we do not have much of a history of trade; our trade with South Korea, for instance, is up 145%. Our trade with our Commonwealth partner, South Africa, is up 57%, too. It is clear that our international trade patterns are changing rapidly, and we can no longer simply rely on Europe and north America to pull us through.
My hon. Friend is making a powerful speech. Will he join me in congratulating both UK Trade and Investment on its work in promoting British industry and the Foreign Office on expanding our embassy empire, which had shrunk under the last Government?
I compliment UKTI on the turnaround it is undergoing under Lord Green, the exceptional new trade Minister, who has vast experience and extensive contacts across the world. I commend the work he is doing both in the Department for Business, Innovation and Skills and with the Foreign Office, which is putting resources into the effort to increase our trade with the rest of the world, which has languished for so long.
I shall focus now on certain measures that I believe should be taken. Some of them might be controversial in the short term, but in the long term they will all prove to be beneficial and will change views. We must better inform people about the taxes they pay and the effects of those taxes. We also need a simpler and more attractive tax regime, to ensure that people want to create jobs in our country and international companies want to expand here.
We also need an active industrial policy. That is considered a controversial proposal by some of my party colleagues, but my argument is that the Government already put their imprint on the different sectors of the economy. Our financial services regulations are different from our pharmaceutical regulations, for instance. Also, Government decisions on where to put the roads that Opposition Members are happy to welcome has an impact on the rates of development in different parts of our country, and the development of High Speed 2 will, we hope, reduce the north-south divide. The Government have a sector-by-sector stamp, therefore, so we should use the power of Government where it can be a positive force, rather than simply say, “Government must get out of the way.”
The last Labour Government produced a defence industrial strategy, drafted by Lord Drayson, which included a development strategy for the industry.
The current “National Security through Technology” paper says British companies should not necessarily be given priority in defence procurement, however. What does the hon. Gentleman think about that?
Lord Drayson was an unusually good Labour Minister—I would favourably compare him with almost all the others. The defence strategy does, indeed, recognise the need to take into account the interests of our defence industries. That is an important part of the strategy, but not necessarily always the decisive factor.
Returning to the issue of tax, the Government should give a receipt to taxpayers. My hon. Friend Ben Gummer—another great Suffolk man—has pioneered that approach. We as individuals would not spend much money without asking for a receipt in return. For most people, their tax bill is the biggest item of expenditure, so such a receipt would be very important. It would also educate the public on the impact of their taxes.
We also need to know the impact of our taxes for policy making. It is extraordinary that the Labour party ignores the behavioural impact of high taxes. It is hardly surprising that it managed to mess up the public finances so comprehensively if it denies, as the shadow Chancellor does, the impact of high taxes on incentives and the amount of future tax money the Exchequer receives.
Secondly, we need a simple and attractive tax system, especially on corporation tax. All taxes are, eventually, paid by individuals, but it is companies that make so many decisions about where to locate jobs. So although a high corporation tax still falls on individuals, it puts companies off expanding or coming to Britain. By having an attractive corporation tax rate, we can attract companies to this country. Ultimately, the corporation tax would still be paid by UK residents, whether it was paid indirectly involving the companies or in any other way the tax is raised.
I cannot give way, as I have only a minute left. This denial of the impact of the 45p rate is surprising, given that the Labour party is not pledged to implement the old rate again.
The third point I shall make is the importance of an industrial policy. Whether we like it or not, the Government have a stamp in this area, so I am very supportive of the following: the announcement on help for our creative industries, which was warmly welcomed, as Britain’s creative industries are the biggest in the world; the enterprise zones; the research and development tax
credits; the moves on transport infrastructure, which has been talked about many times, where the start date for the work on the A11 has been announced and brought forward, and there is to be more road infrastructure, paid for both by the taxpayer and through innovative other means; and more for university research facilities. Let us contrast all that with what was called a “backwater”—the previous Government’s business Department. It all shows that the results of this Budget will be growth in the future, business confidence and a great deal of support in the months and years to come.
It is only a matter of time, as the Whip says, so there is a top tip.
The reason I am pleased to follow the hon. Member for West Suffolk is because he promised to talk about some of the long-term reforms required in the economy. If we are to talk about the Budget, we need to talk about not only the long term, but the capacity in the economy right now, and that is where I will briefly focus my remarks.
Labour Members have examined the Budget in detail and we see a wasted opportunity. We required a Budget for jobs and for growth in the short term that would lead to our prosperity in the long term. Instead, we got a Budget that has fought over the spoils. Two years in to this Tory-led Government, we can see the effect that the coalition Government are having on our economic policy. Various Ministers and, indeed, Back Benchers, are fighting over, and leaking in the press, the measures in the Budget. They are fighting not over the scale of the fiscal challenge we face, but over what measures could be assigned to each individual party. It is almost as though, having slashed and burned, they are fighting over who wants to win the spoils for having scorched the earth.
The OBR has said:
“We have made no…material adjustments to the economy forecast as a result Budget 2012 policy announcements.”
The independent OBR accepts that growth will not be changed by this Budget. We all remember last year’s so-called “Budget for growth”, but we are still yet to see a strategy for getting growth in the economy, as the numbers clearly show: over this coming period, borrowing is to be more than £150 billion more than the Government announced just a year ago; the deficit reduction plan has gone from four years to seven; and the Government are trying conveniently to lay by the wayside promises that unemployment numbers would decrease in each and every year of this Parliament. What about the lie that the private sector will pick up where the public sector is being slashed away? We are being given a full body of evidence to prove that that is untrue. It is clear that in both policy and ideology the Government are struggling to get growth going because they are ignoring
the lessons of history, particularly the lesson that when the public sector is cut back too far and too fast, fiscal policy has a deflationary effect on the economy. There is a real problem, but unfortunately we have been trapped in a paradigm by this coalition Administration which they cannot get out of.
What are we seeing? A number of tiny interventions, programmes and schemes. Let me go through some of the most eye-catching ones. I was on the Public Bill Committee that considered the legislation introducing the national insurance holiday regime, but only 3.3% of the businesses that the Government said would be helped have been helped under that scheme, so it clearly is not working. We have a much better plan to recycle that money to make sure there is a proper cut in national insurance across the country. Credit easing is yet to help a single business. The business growth fund has six regional offices, with 50 jobs having been created, but there have been just six investments in businesses to get business moving. The export enterprise finance guarantee has helped just six exporters since it was introduced.
In the absence of a clear ideology to get growth growing in our economy what we see is hundreds of tiny measures, none of which is actually giving confidence to business to invest. Roosevelt talked about the alphabet laws when he came to power and about the scale of the challenge that he faced in the States in the 1930s. What we have from this Government is alphabet soup: a series of initiatives, all with long and good-sounding titles, but no actual significant movement in the economy to get growth going. What we are left with is just words, and now they take money out of the pockets of those who are most likely to spend and instead choose to put it in the pockets of millionaires and of people who are already very good at avoiding paying tax in the first place—people who are likely to save it, spend it abroad or spend it in areas that are not going to stimulate the economy. Even those people are calling for action in the economy to get growth growing and not necessarily to reward themselves when growth is not there currently.
Let us consider the situation in the US, where its leader has explicitly talked about the dangers of the austerity narrative and has specifically said that to cut too far, too fast would be detrimental to the US economy over time. And what do we see there? Unemployment falling month by month and significant growth in the economy, just as, funnily enough, there was in this country in this Government’s first few months because they inherited that from the previous Government. Most crucially, capacity in the US economy is being protected. Look at its auto business: many Republicans said it should be let go to the wall but the Democrats stepped up and said, “We will protect it.” Why? Because if capacity is protected in the economy, the ability to keep growth going is retained throughout. We have seen a big turnaround there.
When we go into periods of recession or depression, businesses try to hold on to their ability to manufacture or to keep going for as long as possible—perhaps for six, 12 or 18 months—without laying people off. After a while, however, when it is clear that no lifebelt is coming from the Government, businesses start to lay people off, so a 2,000-employee business becomes a 1,500-employee
business. That means that when the growth comes back, it is much harder to manufacture to the previous level. That is the legacy that the Government will leave us to pick up the pieces of—an economy with much less capacity to manufacture and grow to meet the long-term challenges we face. For all the talk of clearing up or picking up the pieces from the global financial crisis and the reforms that are required, we must remember that if our economy does not survive this period, we will not have the foundations for growth in the future.
It is a pleasure to follow Gavin Shuker; we have heard each other speak many times over the past few weeks.
When I was asked what I wanted to see in the Budget, my general response was “Not a lot.” The key thing is to keep a steady course and not scare the horses with a sharp change of direction, and that, as we can see from the Red Book, is the Chancellor’s main strategy. In the current financial year, the deficit is still about £126 billion, so there is no real scope for the Chancellor to take major expensive action. Looking forward to next year, we still see a deficit of about £90 billion, with public spending of £683 billion, which is nearly £2 billion a day. The most significant Budget measure for the coming financial year is the corporation tax cut, which is highly welcome. It is worth just under £400 million, which is about four hours-worth of public spending. There has not been scope, and there is no scope, for major changes in that situation.
What most investors want from the British tax regime is stability and predictability. That is the strategy the Government set out at the start of this Parliament, and I am glad they have stuck to it, and that when we hit the start of the new financial year in a couple of weeks’ time, there will be no major changes for everyone to understand over the next fortnight. Most of what will apply was well signalled and we all knew about it months ago. There has been detailed consultation on many of the major measures; others are to do with anti-avoidance, which clearly we cannot consult on, but they are more than welcome.
As the debate today was opened by the Secretary of State for Transport, it would be rude not to touch on a few transport issues. Like other Members, I welcome the investment in transport infrastructure. One thing that has not had much attention in this debate is the decision to set up the transport innovation centre. I am sure the Government will recognise the overwhelming case for it to be based in Derby, where we have Rolls-Royce, Toyota and Bombardier. I can think of nowhere else in the country where transport plays a greater role in the economy and where there are more people with the skills to make the centre work effectively.
In all the Government’s recent announcements about the electrification of rail lines, it is a pity that they missed out the east midlands main line. It serves a large part of the country and a number of deprived areas. We suffer from a much slower train service than the east coast or the west coast, which must have an effect on economic activity. In fact, to get to London for 9.30 this morning, it was quicker for me to catch a train to Tamworth and change to the west coast main line than
to stay on the east midlands line. There is an overwhelming economic case for electrifying the line and I hope that that will be brought forward.
As my hon. Friend Martin Vickers said, after three days of Budget debates most of the good points have been made. Obviously, I warmly welcome the increase in personal tax allowance for the lowest paid; it will affect 23 million people, which is a strong signal of where we think our values should be. Of all the money the Chancellor has at his disposal, the £3.3 billion annual cost when that measure takes effect shows where his focus and priorities lie.
I welcome the measures announced previously to try to get more finance to small and medium-sized businesses—the loan guarantee and credit-easing schemes. We hope the banks will take them on so that businesses around the country have access to the finance they need to grow and create jobs.
I shall spend the last few minutes of my speech talking about the importance of tax simplification, which was front and centre in the Budget. I especially commend the valuable work of the Office of Tax Simplification on this Budget and the previous one. I only hope that the Government, having seen the value of the work of the OTS, will commission it to do something more ambitious and look at how we can radically reform business taxation and corporation tax to make them simpler and to make the country even more attractive to investors.
The OTS recently produced a report on the taxation of the smallest businesses. I welcome the fact that the Chancellor went further than it recommended, in effect allowing businesses with turnover of up to £77,000 not to prepare detailed accounts, but just to pay tax on their cash surplus each year. If that coincides with VAT thresholds, businesses will know that if their turnover is less than about £77,000 they will not have to prepare detailed accounts for tax purposes or deal with VAT. That is a powerful message to send to the smallest businesses. I look forward to the consultation to see how that measure can be made to work. However, there is just one issue I want to raise. We all want the guy who is making a nice living for himself—perhaps a successful plumber—to be able to grow his business, and to take on someone to train. The risk is that if he does so, and takes his turnover beyond £77,000, he will suddenly be clobbered by having to register for VAT and going through the accounts process. We need to think about how we transition successful people who take on extra staff, which would tackle unemployment, and bring down the compliance level for them, but that is not to take away from what is a welcome measure.
A slightly less welcome review from the Office of Tax Simplification was the review on taxation of pensioners, which is where the Budget measure that has been most controversial—the changes to the personal allowances for people over a certain age—may have originated. Those of use that have argued for tax simplification have had to accept that whatever we try to change there will be some winners, who will be very grateful but probably very quiet, and some losers, who will be somewhat less grateful and no doubt quite a lot louder. Understandably, that is what has happened. When there is no fiscal room, there is no way of easing the burden on those that lose in the short term and to try and
spread that pain, although the increase in the state pension tackles some of that. But the change is a year away and there is scope to have a look at it.
I welcome the Budget. It sticks to the course that we need and takes our finances in the right direction, heading back towards stability. I think it will be a successful Budget for growth in this country.
It is a pleasure to follow Nigel Mills, not least because he aptly demonstrated the huge complacency that exists on the coalition Benches about the need for economic growth. However, I am sorry that the Secretary of State is not in her place, because I am extremely worried about her on two counts. The first is that she seems to be inhabiting a fantasy land where we are actually experiencing economic growth, and the second is that she seems completely unaware of the fact that we have had a global economic crisis in the past few years and so we need a growth plan to recover from it.
I would have liked to contribute something to the debate about transport, but alas I cannot, because I am afraid the Budget delivered absolutely nothing to meet the transport needs of my constituents. There was no support at all for buses, despite the fact that our bus network is in crisis. I know from my constituents that despite the fact that we have precious few jobs in the area, with 10 people chasing every job vacancy, people are losing jobs because they cannot get buses to work. Care workers—
Alas, I do not have a cable car, but that is a great idea for a new business in my constituency, although where it would take people from and to, I am not exactly sure.
There is no support for transport, despite the fact that business leaders in the north-east have expressed concern that a failure to invest in the region’s transport network could stifle long-term growth. They have made a point that without the right transport and energy supply infrastructure, the region could struggle to realise its full potential. I hope the Minister will take on board these matters in her comments.
What do we know from the analysis of the Budget so far? I have with me an extract from the Financial Times , which concludes that that it is a Budget “without economic significance”. It also says that the Government have absolutely no plans in place to change the unhappy outcome of the slump, and that includes, critically, no plans for the north-east of England. What we do know is that the unemployment figures for the north-east are much higher than those for the south-east: 10.6% in the north-east, compared with 6.6% in the south-east. IPPR North has said that it is the largest gap since the labour force survey began. One might have expected the Red Book reforms to prioritise the north-east in support for economic growth, but in fact there is only one mention of the north-east in its many pages dealing with growth, compared with seven mentions for London. I want to
see economic growth in London. It is our capital city and it is important that it is supported. However, that does not excuse giving no attention to the north-east apart from one mention of Newcastle. County Durham is not mentioned at all.
Does the hon. Lady accept that from the growing places fund, the north-east has been allocated more than £10 million, which is far more than is going into my region?
I will deal shortly with some of the measures that have been made available for the north-east.
Many measures in the Budget will have a negative impact on people’s income, including that of 8,000 families in County Durham, who will lose out from the changes in tax credits. There is no action to tackle youth unemployment, despite the fact that it is much higher by several percentage points in the north-east than elsewhere in the country. The Government should have set out a coherent strategy in the Budget to get the north-east economy back on track. Instead we have a measure to reduce regional pay, taking £78 million our of the north-east’s economy. There is no evidence to support the contention that the current position inflates public sector salaries or acts as a disincentive to the private sector.
Business leaders have been calling for some sort of holistic strategy, which we simply do not have. I say to Dr Coffey that there have been several small measures, but they are outside any coherent framework. Seventy-three per cent. of successful bids from the first two rounds of the regional growth fund, including 40% from the first round, have not yet been signed off. They are therefore not delivering anything for the north-east, and £14.25 million of the regional growth fund supports only 91 jobs. I emphasise to the hon. Lady and her colleagues that that is a drop in the ocean compared with what is needed.
We also have enterprise zones and local enterprise partnerships. In doing research for my speech today, I had to try to determine what was happening through two enterprise zones, two LEPs, two regional growth fund allocations, the business enterprise network in the north-east and the chamber of commerce. It is difficult to get a flavour of what is happening in the region, in great contrast with the position under the regional development agency, when it was easy to monitor the impact of what was happening with investment and jobs in the north-east. It is now extremely difficult to get that information.
Without a coherent framework and an overall strategy, the economy of the region is simply not growing and not enough investment is going into key sectors for economic growth, including those that had been identified under the RDA. It is not only me who is making that point; our business leaders say that, of all the policies the Chancellor could have introduced in the Budget that would have had an impact on the north-east, measures on investment allowance and employment taxes would have been the most important. They say
also that, although the target to double UK exports is commendable, there is absolutely no detail on how it will be achieved. Rather, Government Members have today given us a complete fantasy land, where they somehow think that the measures in the Budget are going to deliver growth for the north-east. But there is simply no plan.
We want instead to see measures to create jobs for young people, a tax on bankers’ bonuses which would create 5,500 jobs for 16 to 24-year-olds in the north-east and a temporary reversal of the Government’s VAT increase which would put £450 back into family budgets. Labour would give 58,000 small businesses in the region a tax break if they took on extra workers. That is the challenge I throw down to the Government today.
When I talk to businesses in my constituency in Cornwall—this goes for families as well; a party from Shortlanesend community primary in my constituency were just in the Gallery, so some young people from Cornwall have been here today—they tell me that, in such a part of the world where we are so far away from major markets, transport infrastructure is absolutely essential and vitally important.
I very much welcome, therefore, the Secretary of State’s introduction to the debate this morning, as it underlined the Government’s commitment to ensure that we invest in our vital transport infrastructure, which is important not only for individuals but for businesses—businesses that need to get their goods and services to market.
One area of transport, which we have not touched on today but that is very important to the nation, is shipping and ports. More than 90% of the value of goods entering this country enter on ships, as does 95% of everything that we consume in this country. Of course, it has to go through a port, otherwise we would not be able to export. My hon. Friend Matthew Hancock quite rightly reminded us of the huge importance of international trade to our great country. Growth will come from exporting more of our goods and services, and they will be exported by and large on ships. Therefore, ensuring that we have the right port infrastructure to support the growth of trade—and foreign trade—in and out of our country is vital.
I therefore welcome in particular as part of the Budget—a small but important part in this context—the Chancellor’s report back on his commitment in the autumn statement to look at the planning issues surrounding ports development. I see nodding those colleagues who represent ports, because whether one represents a small port, a relatively small port in terms of shipping turnover, as I do in Falmouth, or one of our great container ports, one realises that how port operators develop those businesses is a real issue.
My hon. Friend will be aware that the national ports planning policy framework was recently put before the House. Does she agree that it is a positive step forward, although we should perhaps support mankind a little more vigorously and the humble shellfish a little less?
I definitely agree that the framework is a big step forward, and protecting our precious marine environment, which supports the whole fishing industry and ecosystem of parts of the UK, is important, but we need to balance that with our economic growth, stability and jobs, which is really important too.
The Budget reports on the review that was set in train in the autumn statement in order to analyse the implementation in the UK of the EU habitats directive, to which I think my hon. Friend was referring, and which can create so many problems for our port operators. In reading through that review, I think there is a great deal to be welcomed. It has engaged with a range of stakeholders, all of whom acknowledged that the implementation of the habitats directive caused considerable problems for our ports operators, and many positive measures have been put in place in terms of collecting data.
Many disputes about planning applications arise because there is no accurate data, and a lot of work is going to be put into that area, and into ensuring that the various regulatory bodies—ultimately, the Marine Management Organisation will make the licensing decisions for our ports, but many are involved—engage earlier and more constructively with ports operators, which should make them more confident that proposals for development can go forward.
My hon. Friend and I have made common cause in trying to help those matters along, as we share similar issues. I understand that she welcomes much that was in the review, but does she share my concern that it missed the opportunity to look at certain regulations and determine whether we should have them at all? Indeed, the review’s terms of reference included looking through that and making appropriate representations to the Commission.
My hon. Friend makes a good point. I think that the review is a work in progress. The review team did not have much time, but I think they managed to cover a lot of ground. Certainly, if we look at the terms of reference the Chancellor gave them, we will see that there are things that subsequently have been passed over to the Law Commission for its consideration. I was somewhat perturbed to read in a footnote in the review document that the Government would consider the Law Commission’s recommendations “in due course”. I would like reassurance from the Chancellor that he will ensure, through the all-departmental working group he set up, that regulations are not standing in the way of economic growth and development of our ports, that this “in due course” is acted on speedily, because in due course without reform we will not have the ports to enable us to import our energy or the food and other vital materials we need. I would like to see that “in due course” in the footnote turned into something a little more urgent.
I think that eventually representations will have to be made at an EU level. Interestingly, the review showed that other European countries with ports have had experiences similar to ours when interpreting and implementing the habitats review. I am sure that all Members with ports in their constituencies or an interest in ensuring that Britain returns to being the great trading
nation it always has been will want to watch these things and help the Government constructively to tackle these issues.
With regard to other vital infrastructure, a number of colleagues, including my hon. Friends the Members for Bedford (Richard Fuller) and for Camborne and Redruth (George Eustice), mentioned that for those of us living in the more remote parts of the UK a lot of transport is by road, so fuel prices and levies on fuel are of great significance to us. All the goods and services and the great things that are manufactured in Cornwall need to be able to get to market in the rest of the country. Although I was disappointed that fuel levies will go up in August by 3p, I understand why, given the huge mess that the Government are trying to sort out and the economic legacy they were left. That is something we have to bear.
One thing I would like the Minister to consider is a recent precedent. We have heard from colleagues today about the extent to which we believe fuel companies are profiteering from customers in our parts of the world, where the price at the pump is 3p, 4p, or 5p more expensive than it is in other parts of the country. The Office of Fair Trading has the task of looking at whether there is a proper competitive market working in the region. The Department for Energy and Climate Change recently referred the fuel oil market to the OFT, because the winter before last many of us experienced the most appalling hikes in the price of fuel oil, which many people in remote, rural areas use to heat their homes. After the referral to the OFT, some very good work it did and the implementation of measures, we saw no repeat of such hikes last winter. With that recent precedent in mind, I think that the OFT could play a useful role in ensuring that our regional fuel markets are working efficiently. Based on that, hopefully we could see real pressure to reduce the profiteering that I believe is going on at the pump so that people in constituencies further away from the south-east of England will not feel the full impact of the 3p rise.
I welcome the measures in the Budget to support infrastructure. The investment in rail will affect not only HS2 but places such as Cornwall, and the connectedness of the remoter regions of the UK is vital to our economic future. I very much support and commend the Government’s single-minded focus on making sure that we have an infrastructure that is fit to get Britain working and Britain back to work.
Before I call the next speaker, I should say that the Front-Bench speeches will start at five past 2, and I want to make sure that everyone gets in, so I am dropping the time limit to six minutes. Interventions have been taking speeches up to nine minutes, so please think about whether it is really important to intervene.
It is a pleasure to follow Sarah Newton. She said that the Government are “single-minded”, but it is difficult to judge whether that is the case. I have been looking around and listening for contributions from the Liberal Democrats, but clearly
they would rather not be here to explain to the ghosts of Beveridge and Keynes the reactionary, failing austerity policies that they are signed up to.
In my constituency, we have had a very significant increase in unemployment in the past year. The number of jobseeker’s allowance claimants went up to 4,119 in February; that is 297 more than a year ago and a 7.8% increase in one year. According to the House of Commons Library, 7.6% of my constituents are unemployed, and the number of those claiming JSA for more than 12 months is up by 395 from 480 to 875—a huge increase. That is not unique in this country, but it is important that people understand the situation. I represent a London—an outer-London—constituency where 11.6 people are chasing every single job. Many of my constituents commute into central London to work, as they always have done, but the number of jobs available to them there is going down, whether they are public sector jobs or jobs in the financial services industry in sectors such as banking and insurance, which have not been taking people on.
We have particular problems that affect constituencies in London, and those problems should not be ignored by those who are suffering in a similar way in other parts of the country. Yes, there are a lot of millionaires in London. There are lots of people with £2 million, £3 million or £5 million houses, but there are also many poor people living in bed and breakfast accommodation or short-term rented accommodation. One of the real tragedies in London is that tens of thousands of people are in housing need. There was nothing in this Budget about helping to get people into work so as to get the economy moving again and deal with the chronic homelessness and housing problems that we experience in London and in other cities.
Only 56.3% of my constituents are in employment. That reflects demographic and other issues; for example, a large number of people are in education. Nevertheless, the figure is very low compared with other areas that have 70% or 75% employment. We need targeted measures to deal with those whose first language is not English, or women who have not previously been in the work force, in order to try to change the situation. Nothing in this Budget will deal with those problems; all we have instead is a policy of imposed austerity.
I came to the House today, as I always do, by public transport. I travelled from Ilford to Stratford on a very overcrowded train, on which it was impossible to get a seat. That is the normal routine for tens of thousands of my constituents every morning. When we get Crossrail in five, six or seven years’ time, it will make a huge difference. I welcome this Government’s commitment to carry on with the Crossrail project, which was started by the previous Government. As the chairman of the all-party Crossrail group, I have been involved in the campaign for many years. I believe that Crossrail is vital for the future not just of London, but of the whole country. I hope that the Government will take action to ensure that the Crossrail trains are built in this country, unlike the recent disaster over the Thameslink trains. I also support High Speed 2, which is vital for the prosperity of the whole country.
It is time for the Government to get off the fence— I made an intervention about this—on extra airport capacity for our capital city, otherwise we will lose out
to other countries in Europe on the transit opportunities of people flying across the Atlantic or flying in from Asia or the southern hemisphere. We need that capacity soon, and not through some fantasy island that will lead to the destruction of habitats and the killing of bird life. In my opinion, the additional capacity needs to be at Heathrow and possibly at other existing airports, rather than at the Mayor of London’s fantasy island.
I am grateful that I was able to catch your eye, Mr Deputy Speaker, in this Hopperesque corner of the Chamber. It is a pleasure to speak in this debate on the Budget and the economy.
During the general election, I made a speech on the economy in which I said that if three MPs were asked the same question on the economy, they would give three different answers. I should confess that I added that if one of the three was a Lib Dem, there might be four different answers. Of course, we are now in coalition, so that joke is probably politically incorrect.
It is day three of the Budget debate and we are beginning to understand the detail of the statement and the impact that the component policy changes will have. Labour are starting to cherry-pick aspects of the Budget, probably to create a distraction from their contribution to the state of the nation’s economy and the inheritance that we received. I can retort by praising the tax breaks for the digital economy, which will help Bournemouth especially because it is thriving in that area; the funds for the Dorset local enterprise partnership; and the raising of the personal tax allowance, which will remove many low-paid workers in Bournemouth from the tax system altogether.
As important as those points are, we should not lose sight of the implication in the Office for Budget Responsibility report that the shadow of the recession that Labour took us into still looms. The eurozone crisis is not over. Oil prices remain high, and could climb higher. Although it has been about four years since the collapse of Lehman Brothers and the run on Northern Rock, we are certainly not out of the woods. We must not forget the scale of the financial mess that we inherited.
Labour’s approach for a decade was to borrow money that the Government did not have. It allowed the banks to do the same by over-leveraging and lending to people who could not afford it. It is all very well for Labour to blame the rest of the world and the state of the global economy, citing Fannie Mae and Freddie Mac, but there were issues here in the UK for which the Labour Government were responsible. Bradford and Bingley was offering 150% mortgages. That was a UK responsibility. It was happening over here. We cannot blame that on the Americans or on the state of the global economy. Even with the knowledge that the recession was under way and was likely to get worse, Labour kept on spending.
I do not agree with that statement at all. It happened under the Labour Government’s watch, and they were responsible. Their Chancellor, who later
became the Prime Minister, inherited a stable economy. Indeed, in the first three years of the Labour Government, they actually balanced the books. Then in 2002, they overspent by £19 billion. By 2008 they had overspent by £68 billion, and by the following year they had ratcheted up a £152 billion deficit. That was after Lehman Brothers and Northern Rock. In their final year, they were still spending like there was no tomorrow, ratcheting up a decifit of £145 billion, taking us to an overall debt of close to £1 trillion. That is not good Government responsibility for the economy.
Not until we had a general election and an emergency Budget from our Chancellor, back in June 2010, was there some slowing down in Government spending. He introduced measures to protect the economy and set out a comprehensive strategy, including measures to control public finances and stimulate growth and tax reforms to increase our global competitiveness. Those measures were lacking under Labour, and Mike Gapes should ponder them.
I do not have time to go into the detail, but it would be helpful to break the Budget measures down into fiscal and monetary policy. Fiscal policy means the Government expenditure and taxation measures that have a direct effect on the distribution of income, demand and the level of economic activity. Two prime examples are the corporation tax cut, which will make us far more competitive, and the reduction in the top rate of tax to 45p so that Britain no longer has the highest rate in the G20.
In contrast, Labour introduced the 50p rate just before it left office, and it failed to raise the predicted revenues and undermined our competitiveness. Looking back in history, Labour seems to have had a love affair with high income tax rates over the past four decades. It was Wilson who put the top rate up to 83%, and Margaret Thatcher then reduced it to 60% in 1979 and 40% in 1989. What did Labour do when it came into office? It did not put the rate back up again; it kept it as it was. It recognised—certainly Tony Blair recognised—that to remain competitive, we had to have sensible tax rates.
I do not have time to dwell on monetary policy—the supply of money, the cost of money, the rate at which it is controlled, the price that the Government pay to borrow it and the total supply of money into the economy—but it has an impact on matters such as controlling our triple A rating and the price of borrowing. The Government have kept interest rates low and used selective quantitative easing, and that sound monetary policy is moving Britain forward.
This is a radical and reforming Budget that will help Britain earn its way in the world in continuing difficult times. Labour gave us a disastrous economic legacy, for which it is only now, sheepishly, apologising. It led to record debts and a halving of our manufacturing base, resulting in our coming within a whisker of losing our important triple A rating. The Government are at last balancing the books, reforming our tax system, supporting British business and staying on a course towards economic recovery. The OBR has revised upwards its growth forecast for this year. It is small, but nevertheless improving, and the OBR predicts that it will reach 2% in 2013. Labour has proved that we cannot borrow our way out of trouble. This Government are proving that we have to earn our way out.
Order. We have six speakers left, and I want to bring the Front Benchers in early, so I have to drop the time limit to five minutes. I also ask Members to try to ease up on the interventions, otherwise somebody will have to drop off the end of the speaking list.
This Budget plans for £155 billion of deficit reduction by 2016-17, including £126 billion of spending cuts. The amount of cuts being pushed up into the next Parliament has grown, so the Conservatives and Liberal Democrats are currently planning to go to the next election promising to cut spending by at least £47 billion in the first two years of the next Parliament, on top of the cuts continuing throughout this Parliament, while giving top earners a tax break.
The OBR has again downgraded its estimate of the economy’s sustainable growth rate. As of June 2010, it thought the rate over this Parliament would be 2.1% to 2.35%. The OBR still expects the sustainable growth rate to pick up over the next couple of years. It believes that 2.3% is doable with the Budget measures; I do not think so. Even if it is right, which it consistently has not been, the growth will be jobless growth, with a high dole bill to pay. The Chancellor, therefore, should be trying everything in his power to get the sustainable growth rate up, but he is not. At the moment, cutting spending is almost the only thing he is doing.
Although the OBR has made few changes to its headline growth forecast, it has changed the expected composition of that growth. The Government are keen on talking up exports and investment, but the OBR’s estimate is that the UK’s recovery will be dependent on the consumer. The OBR’s growth forecast for 2012 to 2016 is spilt into two categories only: private consumption and everything else. Quietly, private consumption is expected to be a crucial driver of Britain’s growth in the years ahead. In November, the OBR expected 12.5% of all growth in 2012 to come from private consumption. It has now revised that up to 37.5%. That is a massive change in just five months. Indeed, over the next five years to 2016, the OBR now expects more than half of all growth to come from private consumption. Hon. Members will remember that that is the “wrong” sort of growth, according to Government Members previously. The OBR believes that in four of the next five years, consumption will add more to gross domestic product than net trade, and consumption is expected to be a more important driver of growth and business investment in every year of the forecast.
For all the Government’s talk of exports and business investment-led recoveries, the forecast now suggests that they are banking on a return to consumer-led growth while simultaneously condemning it and laying absolutely no foundation for it. They privately count on consumer growth, yet politically condemn it. What tells us that consumer-led growth is not coming from current Government policy? According to the Office for National Statistics, hopes for growth from the wider UK economy in the first quarter of the year were dealt a further blow as retail sales volumes were revised down to 0.3% growth from an initial estimate of 0.9%.
The Chancellor also said the Budget is about business, but the real policy should have been getting UK businesses to part with their hoarded billions of pounds in cash, and getting banks to lend. The Chancellor has not addressed that hoarding. Today, BT paid off a considerable deficit regarding its pension scheme—£3 billion by the end of the month and nine annual payments of £325 million. BAE Systems has a £2.1 billion cash pile, but in the past two years has cut 22,000 jobs, including 3,000 in the UK, while returning £2.2 billion to shareholders. The story is similar at Apple and AMEC, which ended 2011 with £521 million of cash and unveiled a £400 million share buy-back programme.
It is a familiar tale across the country. Last year, shareholder dividends from listed companies jumped 19% to a record £67.8 billion, according to Capita Registrars, and are expected to hit a new high of £75 billion this year. After nearly two years of this Government, something has clearly gone wrong. The last 15 months saw the UK economy contract. Business investment is shrinking. In the final three months of 2011, it fell by 5.6%—the single biggest drag on growth, pulling the economy down by 0.5 percentage points. Business investment is still more than 15% below its pre-recession peak. Last year, the OBR forecast business investment to deliver 6.7% growth. It did not; it shrank 2%.
According to the Bank of England, 2012 is not looking encouraging either, despite the OBR’s hopes. The Bank’s most recent agents’ survey from February found:
“Investment intentions continued to weaken, suggesting little growth in spending on capital over the next twelve months”.
John Hawksworth, of PricewaterhouseCoopers, says that he cannot see a recovery in business investment until 2013. Simon Hayes, of Barclays Capital, says that the OBR’s projections require a level of spending not seen in 30 years. Most pointedly of all, BAE has made clear that business will not invest if it cannot make the returns. At the moment, the numbers simply do not add up.
Corporate balance sheets are brimming with cash. According to official data, UK companies are tucking away about £70 billion a year, which is twice as much as before the crisis. Some analysts have estimated the total stash of cash under the corporate mattress at £750 billion. Investing just £20 billion of that in the UK would deliver 1% of growth.
We need a Budget for households, but unfortunately the Government are wedded to supply-side economics. Until we have demand policies, that money simply will not be spent.
I thoroughly approve of the Budget. Raising tax thresholds to take people out of taxation is a thoroughly Conservative way of doing things, as people have more
money in their pockets to spend as they choose. One thing I would, however, like the Chancellor to consider for next year’s Budget is radically to increase the tax threshold at which people pay 40%, so that those on reasonably well-paid jobs can gain substantially as the economy improves.
I want to concentrate on the benefits of the Budget to London. The myth is often put about by people from outside London that everyone is paid huge amounts of money in London. That is not so. With the increase in the personal allowance to £9,205, an additional 97,000 people in London will be taken out of income tax altogether, and overall 3 million taxpayers in London will benefit—more than half the working population of London will get a tax cut as a result of the Budget.
The increase in the Growing Places fund, to which I referred at business questions yesterday—the additional £70 million being put in the hands of the Mayor of London—will enable Boris Johnson, over the next four years, to create 200,000 new jobs for people not currently in employment. Even more importantly, the money will enable more and more young people to get and retain work. Furthermore, an extra 7,500 new jobs will be created as a direct result of the enhanced capital allowance for the Royal Docks enterprise zone. Even better, 1,600 of the jobs will be in high-value manufacturing, which is good news for Londoners all round.
The Secretary of State for Transport has told us about the improvement to railways and suburban journeys within London. The investment plan announced in the Budget will benefit Londoners overall. Already, every London local authority has frozen council tax, which is good news for hard-pressed families, and the Mayor of London has reduced his share of the council tax. Effectively, then, every family in London has had a council tax reduction overall. That was good news when the bills were released.
There is more. London will be one of the super-connected cities. The £25 million to deliver ultra-fast broadband will benefit 774,000 residents and 121,000 businesses. That will put London at the forefront and enable it to compete with the rest of the world’s greatest cities. It means that 318,000 people will benefit directly from ultra-fast broadband and wireless connectivity, and that we will be at the very heart of generating new jobs and new prosperity for this country.
I am grateful for the £15 million that will be spent on improving safety for cyclists in London. The increase in cycling in London is welcome, but the fact that people are in danger when they cycle has to be addressed. That is a key part of the Budget.
Finally, on the benefits to London, money has been set aside for the new east London crossings—a ferry, a tunnel and possibly a bridge. I have the honour of pushing the next Transport for London Bill through the House. The Bill will enable tolls to be collected for using the ferries and tunnels. I look forward to that and to the investment that is to be made.
All in all, then, the Budget benefits London and Londoners, and brings home to everyone the importance of the choice they make on
Well, what a Budget! People were hoping for a Robin Hood tax, but instead they got a Sheriff of Nottingham Budget—a Budget where the poor pay for tax cuts for the rich, and people at the bottom in terms of income, opportunity and aspiration pay the price for something that was not their fault.
Despite the claims of the Government parties, this is not the mess of the last Labour Government, either. When the banks imploded and affected the whole globe, the last Prime Minister had a choice: did he allow us to lose our homes, jobs and pensions, and the country to go into depression, or did he invest in infrastructure and ensure that our economy did not disintegrate? He rightly did the latter. Of course we must now pay down the deficit, but not at the expense of low and middle earners, not so deep and fast that we choke off growth, and not in a way that is totally unfair. The Budget has benefited people who got us into this mess and made the innocent pay. It is a Budget that has cut taxes for the richest. It has increased stamp duty on houses selling for more than £2 million, even though only 4,000 are sold each year. I wonder how many of those will now be sold for £1,999,999.
On transport, I welcome the further £130 million for the northern hub, but I will be even happier when the Secretary of State confirms that we will get the whole of the hub. Will she tell us today whether we will get the other £330 million that we need to complete the project? Will she also tell us whether there is to be any new rolling stock? Electrification and improvements to lines are more than welcome, but they are not much use without the right trains. We need an end to the nonsense of diesels running under wires.
The announcement of investment in rail was the only good news on transport for my constituents. The Government say that people should travel to get to work, but how? Train fares have gone up by 11%. Bus fares have also gone up and, according to the Campaign for Better Transport, one in five services have been cut. Fuel costs are at an all-time high. There was a moment of optimism during the Chancellor’s weasel words when he said that he did not propose any further changes to fuel duty, but he forgot to say that the duty would go up by 3% in August, and hard-pressed motorists might now have to pay for road tolling as well.
My surgery is already full of people who have nowhere else to turn—people who are losing their homes because they have lost their jobs or been off work because of illness, who are desperate because their long-saved-for pension funds have collapsed, who are losing their tax credits, and who are waiting weeks for their benefit when they lose their jobs and have no money for food.
I was told of a young man who was eating dog biscuits because that was the only food in the house. I was told of a 25-year-old lone parent with a young baby, who had no income whatever and had been relying on handouts from friends who could no longer support her. I heard about another lone parent with three young children being paid £47.50 a week in benefits. She was unable to survive on that and was about to lose her home. I also heard about a recently separated mother of three who was trying to set up a new home. She had
claimed benefits but, two months later, her claim had still not been processed. There are so many ordinary people, and so many stories of suffering and desperation. Ordinary people were already suffering before the Budget, but life is now going to get a whole lot worse, especially for the 270 working couples in Bolton West who are about to lose £3,870 a year.
I shall finish by reading an e-mail that I received yesterday from Nicola. She said:
“I’m currently living with my partner and two children. I work 16 hours a week and I’m currently receiving maternity pay. I’m aware that when the tax credit changes in April, we’ll need to be doing 24 hours between us. My partner has completed all the relevant work programmes but still can’t get a job, which leaves me to try and get the extra hours, but because I’m on maternity leave, even if I got the hours, they wouldn’t start till August. Surely I don’t have to give up my job, which would mean losing my maternity benefit, but how else can we survive?”
I hope that the Government are proud of themselves. It will no longer be “Love thy neighbour”; it will be, “Can you feed thy neighbour?” Actually, I do not hope that the Government are proud; I hope that they are ashamed that they have put money in the hands of the rich and taken food out of the mouths of the poor.
I welcome the Budget. I particularly welcome the reduction in the rate of corporation tax. By April 2014, it will be 22%, the lowest rate in the G7. As I have previously argued, I would like us to go further and reduce business taxes, in time, to 15%. With lower taxes comes greater corporate social responsibility, however. We need a new social compact: low taxes and low rates, but business must pay up.
We need a sense of social justice and of corporate social responsibility in the tax system, especially for multinationals that are quartered overseas. Let us take the case of Google. We can examine that example because Google’s numbers are publicly available, unlike those of many other companies, and it is unfair to single out Google, as the practice that I am about to describe is widespread. It took about £2.15 billion in revenue from the UK in 2010, making an estimated £700 million profit, yet it did not pay any tax. In fact, it declared a loss of £22 million. I am all for the silicon roundabout, but it should not be a magic roundabout, in which going around it twice means not paying any tax or going round it three times, like Google, means turning a massive profit into a tax loss. Even with this routing through Ireland, it is not as if the company is paying in America either, as the effective tax rate in the United States is 2.4%. As I say, we need to take much further action. We need to know more about what other companies are doing and how much they are paying to the UK.
I thus propose a tax compact. The first element is that business tax rates should be low, simple and attractive. Secondly, however, business should have a social responsibility to pay a fair share of taxes. Thirdly, tax avoidance must be dealt with firmly and rules changed to ensure that a fair share of tax is paid. Fourthly, the European Union should support member states in protecting their tax revenues rather than undermining them at every turn, with discrimination rules gone mad, as it does at the moment. Fifthly, every multinational
should publish the effective rate of tax paid on UK revenues, and no Government contract should be awarded unless a fair share of tax is paid in the UK.
These are my specific proposals. Tax is avoided by use of branch tax rules and by claiming to have a representative office and no tax presence. Used and abused are deductions of interest, royalties and management charges. We need to consider tightening the representative office rules so that people have a branch and pay a fair share of tax in the UK. We should consider tightening up on the abuse of the rules of deductions. We should consider tightening up on individuals who abuse personal service companies—and I do not mean only Ken Livingstone and a load of former Ministers, as there are many people up and down the country who have been abusing the tax system and avoiding paying tax in entirely unacceptable ways. Finally, we need reform in the European Union—first to the procurement rules and secondly to the tax rules—so that we can ensure that our tax base is protected and that people who work for the Government pay a fair share of tax to the Government on their fair profits.
Finally, on stamp duty avoidance, we need to consider an annual levy on all properties owned in a corporate wrapper—not just residential, but commercial properties should pay their fair share. I do not think that any stamp duty land tax or stamp duty predecessor was paid in relation to Canary Wharf. I think it is wrong that large commercial property companies do not pay their fair share as everyone else does. Everyone should pay a fair share of tax; that is what corporate social responsibility should be about. That is social justice. That is the deal in the tax compact: a lower rate of corporation tax, lower business taxes—but no playing the system.
This was presented as some kind of intelligent Budget that was taking the country forward and improving economic growth and opportunities. The whole narrative, however, unravelled within half an hour, when it became obvious that the Budget involved an attack on pensioners with the reduction in their tax-free allowances. We saw that the cut in the highest rate of taxation to 45% meant 14,000 people getting another £40,000 a year, while a great friend of the Government, Bob Diamond of Barclays bank, will alone receive £300,000 a year out of this Budget.
In a couple of weeks’ time, the benefit cuts will kick in—the housing benefit cap will have a big effect in my constituency—and the cuts in tax credits will kick in at the same time. Hidden away on page 87 of the Red Book is the revelation of a further £10.6 billion cut in welfare to be taken at some point over the next four years—yet it is utterly unspecific about where it is coming from, and utterly specific about what is going to be hit—on top of the £40 billion taken out of welfare budgets in the 2010 Budget, and all the cuts that have gone on since.
My hon. Friend Phil Wilson eloquently criticised and attacked the Government’s proposals on regional pay—and I absolutely agree with him. This will lead to a free-for-all in public sector pay
and will undermine the whole concept of national pay bargaining—something that has brought stability to the public sector over a long period.
The Secretary of State for Transport spoke about transport infrastructure in her opening speech. Bob Blackman would have us believe that everything is absolutely perfect in London. Under Mayor Johnson, however, fares have risen and continue to rise. As he is presiding over very high fares, he is storing up problems for the future. He is also trailing the idea of the fantasy island airport in the Thames. The Government seem to be embarrassed by that, so have delayed any rational discussion of airport policy in order not to embarrass Johnson ahead of the May mayoral election.
I suspect that at some point the Secretary of State will come to the House and announce that she needs a third runway at Heathrow after all. The airport’s policy requires that, and its massive recent advertising campaign will bring it about. I look forward to the somersaulting that will take place, and to the massive opposition that there will be to the proposal.
Johnson has spoken much about transport, but one of his first actions as Mayor was to cancel many of the step-free access programmes to stations in London, including three in my constituency: Finsbury Park, Highbury and Islington, and Archway. That has been copied in many other parts of London. To raise the fares on the buses and the underground, to reduce the opportunity for young people to travel, and to end former Mayor Livingstone’s good and progressive programme of improving step-free access to all our stations and to make all our transport system fully accessible is a very strange set of priorities. It was strange, too, that Mayor Johnson churlishly turned down the previous Labour Government’s offer to part-fund the electrification of the Barking to Gospel Oak section of the London overground, which would have assisted in creating a bypass route for freight in London and would have improved the service generally.
My constituency is in inner London, and the local situation is as follows. Unemployment is rising, and currently stands at 8% for adults and about 25% for youth. Today’s Islington Tribune picks up on a report cited in The Guardian that showed that the rate of unemployment among black young people has doubled since 2008 and is rising faster than for the rest of the community. The housing benefit cap is forcing many people in my constituency out of private rented accommodation—and there are still no controls whatever on the rents of those living in private rented accommodation.
I want a Budget that helps the poorest in this country, that creates jobs, that encourages local authorities to build council housing, and that shows that there is a sense of the reality experienced by those living in inner urban areas. If we do not provide jobs for young people, we will reap the whirlwind.
Over the years, Conservative Chancellors have stood at the Dispatch Box on Budget day and outlined great programmes of reform to transform the economy, modernise the country, improve lives and restore Britain’s standing in the world. That is exactly
what our current Chancellor of the Exchequer did in his Budget on Wednesday. He has had to reverse the socialist doctrine of an over-bloated state fuelled by the last Labour Government’s binge-spending, which resulted in an unprecedented economic crisis.
I fully support this Government’s aim to earn our way out of the economic crisis. I support the Budget principle of rewarding work, backing business, and being on the side of those who aspire to do better for themselves. I also support the introduction of the new enterprise allowance, which will help young people not just get into work, but start up enterprises. Importantly, I also support the principle of sticking to the plan to deal with Labour’s debts.
This will also be seen as a historic Budget, with the largest increase in the personal tax allowance ever, which will benefit 24 million ordinary families throughout the country. Most basic rate taxpayers will gain £220 every year. This Government will have taken 2 million low-paid people out of tax entirely.
The foundations of our economic strength were left to crumble by Labour, but this Chancellor has put forward strong and credible plans to rebuild our economy. Just as the reduction in the main rate of corporation tax to 22p sends a resounding signal to the rest of the world that would-be foreign investors are welcome in Britain, so this country needs a Government who are committed to reducing the overall tax burden and letting low, middle and high earners keep more of what they earn in their pockets. The Labour party may not, for all we know, like the idea that people should be free to spend their money as they like, but my constituents want to be able to control more of their money—the money that they earn—rather than have the state raid their pockets and waste their money on an over-bloated public sector.
In addition to the scandal of leaving the country with the biggest ever national deficit, the Labour party failed to serve the country well, and certainly failed to serve Essex well, on infrastructure investment. In Essex, our infrastructure desperately needs investment, with the A120 being a case in point. It is the 10th most dangerous road in the country, and I am sorry to report that last week a young constituent of mine was very badly injured in an accident on this dreadful road. Despite being one of the largest large net contributors to the Treasury, Essex was left behind under the previous Government. The Labour Government were prepared to profit from the labours and endeavours of hard-working Essex families and businesses, but were never prepared to put anything back. With a record like that, is it any wonder that voters there refused to return a single Labour MP to the House of Commons and have made Essex a Labour-free zone? I hope that the Government will look to fast-track and implement mechanisms to bring inward investment in our infrastructure. In particular, I would welcome the opportunity to work alongside government to examine the financing models for roads such as the A120.
Whether through supporting small and medium-sized enterprises, attracting foreign investment or helping hard-working families by providing the largest increase in the personal allowances in 30 years, this Budget is giving this country’s economy the strong foundations it needs for future growth and economic prosperity.
This has been an interesting debate, although we have not heard too much about transport, despite that being the theme for today. I suppose that that is a feature of Budget debates, but I suspect that it is also a down to the fact that the Budget did not contain that much about transport. I am therefore not going to delay the House too much by talking about transport but will talk about the broader measures and about the Chancellor in the broader context.
People say that the Chancellor is a man who already worries a lot about his legacy, despite it being very early in his Chancellorship. I suspect that explains the volume of leaks, which reported that he wanted this to be remembered very much as a watershed Budget. The word used in the press quite a bit was “Lawsonian”, which I understand is a compliment where he comes from. Well, it was a watershed Budget and it will be remembered—there is no doubt about that—but perhaps not for the reasons he wanted and not in the manner he anticipated.
It was a watershed Budget for two key reasons. First, it shattered, once and for all, the illusion that this Chancellor is a master of political tactics or economic strategy. The only masters are the masters of the universe, down the road in the City, who will be thanking him for this Budget. They might be the people who think he is still smart about economic theory. I hate to tell him, but the only vanity that is burning right now is his own, on the front pages of the Daily Mail, The Daily Telegraph and all the other newspapers in which I read this morning that one Tory Back Bencher, who remained nameless—I cannot think why he wanted to remain anonymous—said:
“Everybody was saying George is a great economic strategist and political strategist and how unique he is to have both skills: that is going to be questioned. In fact, colleagues already are.”
More important, this Budget was a watershed because it gave the lie, once and for all—[Laughter.] The laughter indicates that Government Members are not worried about this in any way, shape or form. However, the Budget gave the lie to the notion that we are all in it together in this country in a period of austerity, because after this Budget we clearly are not. Clearly after this Budget, the old Tory order is restored and some people in our society are, in their view, more equal than others.
The themes the Chancellor sought to pursue in his speech were that his Budget would be simple, predictable and fair—that was how he described it just a couple of days ago. This morning, the Institute for Fiscal Studies described it as a “hotch-potch” of reforms that
“may turn out to be less fiscally neutral than intended”.
It is hard to disagree with that conclusion from the independent IFS, because everywhere one looks in the Budget one finds measures that are mis-described, such as the tax increase on pensioners that is described as a simplification, and outcomes that are overstated. We have heard a lot today about this being a Budget for business, but according to the OBR, it is resulting in a 0.7% reduction in business investment this year, which is down 7% on the anticipated volume of business investment over the past year.
Crucially, numbers have been massaged throughout the Budget or just plain made up—guessed at—on the basis of Arthur Laffer’s famous cocktail napkin curve. I am afraid that Matthew Hancock will find that numbers in the Budget will fall apart.
In a moment.
Those numbers are absolutely crucial to the debate because they are crucial to the claims of fairness and fiscal neutrality. The key number is that relating to the 50p rate costing only £100 million, because the OBR endorses HMRC’s findings. That is what the Government estimate will be the long-run annual cost to the Treasury of cutting the 50p rate. The Chancellor swept the number aside the other day as though it were nothing, just as he swept aside with an imperious flourish of his hand the £1 billion that we actually saw going into the Exchequer in the first year of the 50p rate.
Is it any wonder that Labour left everything in such a mess given that it does not accept that higher taxes have behavioural consequences? Is the hon. Gentleman saying that Labour will never again look at the impact of tax rises on people’s behaviour?
We absolutely agree that taxes and changes in the income tax rate have an impact on “behavioural yield”, to use the Treasury’s phrase. That is why, when we calculated in March 2010 the revenues that would be realised—
It is interesting that the hon. Gentleman says that; I am going to explain why it is not wrong and why we are right. At first glance, it looks very simple. Page 51 of the HMRC report shows the cost of cutting the 50p rate—the money that will be forgone by the Exchequer—as £3 billion, not £100 million. The next line covers the behavioural impact to which the hon. Gentleman has referred—the one based on the Laffer curve and a bit of undergraduate economic text in the previous 50 pages—and says that the Exchequer will get back £2.9 billion rising to £3.9 billion over the spending period. The key point is that all that is entirely based on a taxable income elasticity measure of 0.45. If we plug that into the equation we get this £100 million gap. Of course, the previous Treasury figures were predicated on a 0.35 number—a more conservative estimate— and that would have given £2.7 billion in revenues each year.
I would be intrigued to get the Secretary of State to explain why it was wrong. If she looks at page 50 of the document she will see that it says simply that the Government decided that 0.45 was a better estimate. That was predicated on a single academic study produced in the Mirrlees report and there is no other evidence for drawing that conclusion. That is why
the Government are guessing at the £100 million. Sensible economists would think a different sort of sensitivity range would have given them a far better estimate.
The OBR is very clear that the £100 million represents a reasonable and central estimate. In fact, I would suggest that the previous Government’s assessment of elasticity in one of their final Budgets was designed entirely to manufacture tax receipts that were never going to materialise. If it was such a good idea, why did it take them 13 years to think of it?
The reason why we did not introduce it was because the economy was growing through most of our period in government, unlike the economy under her Government. That is the principal reason.
Let us return to the taxable income elasticity measure. The OBR says that it might be reasonable, but it also says on no fewer than seven occasions throughout the document that there is “huge uncertainty” around the assumptions—not small uncertainty, but huge uncertainty. The Treasury itself, in its document—albeit buried on page 68 of 69—says:
“The results of this evaluation are highly uncertain.”
The reality is that based on the Laffer curve, the Government have made up that £100 million number, but over the last year we got £1 billion from the 50p rate.
There is more evidence that reducing the rate ups the take. Each time there was a reduction, from 80% to 60% in the ’80s, and then to 40%, revenues went up hugely. We know that it works, from the evidence.
What we know is that last year we got £1 billion from the rate—not £100 million, but £1 billion. What we also know is that the OBR thinks the estimate of £100 million is highly dubious. That is the reality. If we had waited two or three years—a reasonable period—to make the estimate, when people would not be able to pull the money into an earlier year, which is increasingly difficult as the years go by, we should have seen a reasonable number.
The real issue is not the estimate, but what will actually happen as a result of the Government’s cooking the books in that fashion. Ordinary people will pay the price. In this country, 4.77 million pensioners will pay between £80 and £280 extra as a result of the changes to the personal allowance. That is the reality of the Budget, not what the hon. Gentleman describes.
What about the 1.3 million ordinary working people earning about £41,000 who have been sucked into the 40p rate? We have not heard a lot about them in the Budget. We have not heard about the teachers, policemen and middle managers who will be paying more, or indeed about the 1.3 million who will be affected by the big cut in their child benefit—£1,300 for most of them. That is the reality of the Budget for ordinary working people.
Many Members talked about business and growth. We heard a fascinating contribution from the hon. Member for West Suffolk about the need for an interventionist business and industrial strategy. I completely agree. There were two measures in the Budget along those lines: one was for video games and the other was
the patent box that is said to be benefiting GSK. I know a bit about the patent box, because I was one of the industry side negotiators with the Labour Government back in 2009 when we struck the deal on the patent box. It was not a Tory policy—an industrial strategy made not by the Tories, but by Labour, and we are now reaping the benefits.
What about the video games measure? The hon. Gentleman thinks of himself as a bit of a historian of economic facts, so he should look back to the first Budget of his great friend the Chancellor, when the right hon. Gentleman got rid of tax relief for video games. Two years later, with the video games industry pointing out that it was a really duff move, the Government have reinstated the relief: not a policy made on the Tory side, but on the Labour side.
What is the reality? It is 0.1% extra growth, 4.77 million pensioners paying the price, inflation still at 3.2% and wages only up 1.4%. The reality is that the Government are ill serving our economy and ill serving Britain. They do not know what they are doing. They are making a mess and the time has come for us to think again.
I am grateful for the opportunity to respond to the debate and to reinforce, at the end of the first few days of Budget discussions, the Government’s determination to restore the UK to prosperity.
I regret that you have not been here for the whole debate, Mr Deputy Speaker. During the day, we have heard from the Opposition, in general terms, vacuousness, hypocrisy and a lack of ideas. Specifically, the efforts from the Front Bench of Owen Smith show no grasp of the situation. I note he continued to put forward the view that child benefit should continue for millionaires. That is not something that the Government support.
As the House is already aware, it is because of 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. This year’s Budget builds on that strong foundation; it safeguards our economic stability; it creates a fairer, more efficient and simpler tax system; and it drives through reforms to unleash the private sector enterprise and ambition that is critical to our recovery.
Minister agree with Opposition Members, and in fact with GlaxoSmithKline, that it was the patent box legislation that Labour put forward that, as Andrew Witty said before the last election, would transform the life sciences sector? Will the Minister say thank you to us for putting that forward? We are glad that she has taken it on.
If only they had been so full of good ideas in the last 13 years. It is absolutely clear from the timing of GSK’s announcement, the day after the Budget, that it is responding to the actions that we took to put this economy back on track. We will not return to growth through unsustainable debt, irresponsible spending and over-reliance on any one sector or any one region. Nor will we jeopardise the progress that we have made in tackling our debts. That is why, as the Chancellor said, this Budget will have a neutral impact on public finances and implements fiscal consolidation as planned. I could refer here to the CBI, for example, which says that there were many calls on the Chancellor to spend money he did not have.
Opposition Members have made interesting contributions to today’s debate. Roberta Blackman-Woods suggests that the coalition is unaware of the global crisis around us. I think the IMF knows that Britain is no longer in the fantasy land of Europe, and I think householders also know that we are in the very real land of securing the future for our children—of spending what we have and of taking this country away from the turmoil in the euro area and back to a strong foundation for private sector growth.
This Budget is
“one of the best ever for UK GDP growth”,
says the Centre for Economics and Business Research, but perhaps the hon. Lady disagrees.
I wonder whether the Minister will answer my question about why, given the need for economic growth in the north-east, there is no mention whatsoever of County Durham in the Red Book.
Mr Deputy Speaker, it may take more time than I have to list all the counties of the UK, although I would be happy to try if you were to be charitable with me. I think the point about the Budget is that it lays out what the Government are doing across the country, and it lays out what the reality is. I will explain the reality, and that is that 226,000 new jobs were created in the private sector last year. That makes over 600,000 since we came into government. The Office for Budget Responsibility forecasts that from the start of 2011 to 2017, a total of 1.7 million jobs will created in the market sector. That is private sector growth built on a foundation of economic stability.
I will explain how we have gone even further to encourage greater growth—unless Gavin Shuker would like to do that job for me.
I am delighted to raise a very important point, and I hope a non-combative one. What is the Government’s position on the child poverty targets, enshrined in law, by 2020?
This Government take child poverty extremely seriously, and this Government of course— [Interruption.] I beg your pardon. Is the hon. Gentleman still chuntering? Would he like to clarify his question?
I certainly join the hon. Gentleman in seeking to combat and take out child poverty, but it is this Government who will do that on the basis of our work through the Budget to put private sector growth at the heart of the recovery. The Government will consider all the matters that feed into poverty and not simply transfer income from one side of a line to another.
Let me outline the other key things that we are doing in the Budget. We are overhauling the planning rules, cutting corporation tax, restoring our international competitiveness and creating an invitation for investment in the UK’s economic future. As the House knows, the Government have already set out plans for some £250 billion of infrastructure investment in the next decade and beyond. That is critical to renewing our infrastructure network, which enables Britain to compete with emerging giants in the global market.
The Chancellor provided further details on those ambitions. They include taking forward a feasibility study into ownership and financing models for the road network; supporting Network Rail to invest a further £130 million in the northern hub rail scheme, and providing up to £150 million to projects in core cities, as well as growing places funding to empower communities and businesses to lead development in their areas.
Various hon. Members asked questions. I single out those of Mrs Ellman, the Chairman of the Select Committee on Transport, to whom my right hon. Friends will be happy to write to answer her specific questions. I thank other colleagues for their contributions. They will appreciate that I am now rather short of time due to the pressing matters that Opposition Members raised.
As we invest in our physical infrastructure, it is also important that we invest in our digital infrastructure. That covers matters such as mobile coverage and broadband. It also means pushing such investment into cities; some cities will come forward for the super-connected cities initiative.
We want to help build on our long and very rich history of scientific and technological leadership. It is essential to sustain that and capitalise on our strength. It is also essential that we make the UK manufacturing supply chain more competitive. That sort of investment provides a springboard for entrepreneurs and manufacturers to lead a private sector recovery across all sectors and all parts of the country.
Just as we encourage businesses to expand at home, we must also focus on helping British businesses to expand overseas in ways in which my right hon. Friend the Chancellor set out last week. We can go further on exports—we aim to double our nation’s exports to £1 trillion by the end of the decade. We will not sit idly by while China, India and Brazil forge ahead.
Of course, if we want our businesses to take those risks to invest and hire new workers, we must ensure that they have access to finance. That is why the Budget contains the national loan guarantee scheme, on top of our deficit reduction strategy, which has earned market credibility and low interest rates. We are ensuring that the full benefits of those low interest rates are passed on to businesses throughout the UK.
It is this Government who are taking the decisive action needed to make Britain the best place to start, grow and finance a business; who are putting ingenuity, innovation and the enterprise of people in businesses at the heart of our recovery, and who are restoring our competitiveness and putting the UK at the heart of the global market. We are unashamedly backing business in the Budget by creating the most competitive tax system in the world, removing the bureaucratic burdens on businesses and investing in infrastructure.
My hon. Friends have already mentioned GlaxoSmithKline. I could add Nissan, Jaguar Land Rover and Tesco, which have announced that they are creating thousands of new jobs in the UK.
The Government are building a sustainable and prosperous economy in a recovery that builds on our strengths across all regions of the country and all the creativity and productivity of our private sector. We are also putting money in the pockets of low-paid workers. As the Chancellor said in his Budget speech, the Opposition borrowed us into trouble, we will earn our way out.
Ordered, That the debate be now adjourned.— (Mr Dunne .)
Debate to be resumed on