Debate resumed (Order,
Question again proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
I welcome the Budget, which reiterates this Government’s commitment to restoring the damaged economy that we inherited. I remind hon. Members that the deficit—11.2% of GDP—was the largest since the second world war, higher than that of Germany, France and even the USA. The important point is that the deficit fuelled a high debt burden—which had been set to rise dramatically—of 65% of GDP and rising. In fact, if nothing had changed, it was forecast that borrowing would have risen by more than £200 billion during the course of the spending review. The deficit has cost more than £42 billion in interest payments each and every year since we entered office. [Interruption.] I am fascinated to hear that Mr Byrne, who is chuntering from a sedentary position, says that he is concerned about borrowing. The truth is that under Labour’s plans borrowing was set to rise by another £200 billion, and under its existing plans its solution for the problem of borrowing is to borrow more. Perhaps the right hon. Gentleman would like to explain how that would help the deficit.
The Secretary of State is being characteristically generous in giving way so early in his speech. The previous Chancellor’s Budget would have halved the deficit over the course of four years, but this Budget confirms that borrowing is now set to grow by £254 billion more than first forecast. How can the Secretary of State judge that to be a success?
Let us be clear about the plan left by Mr Darling. Labour Members have been banging on about capital spending over the past 48 hours, but it is worth reminding everyone that while they now claim to want more capital spending, it was set to fall by 7% under the Darling plan. The honest truth is that, notwithstanding the euro crisis and the fact that the rest of Europe is mired in recession, as shown by the situation in Cyprus, the idea that there would have been a continuum and that all would have been well is complete and utter nonsense.
We are reducing the deficit and getting borrowing down, and it is set to fall further. Instead of banging on about capital spending, the right hon. Member for Birmingham, Hodge Hill should explain why Labour’s solution, which would send shudders through the world, is to borrow more. That would make our deficit position worse and raise interest rates dramatically, leaving ordinary people unable to afford their home loans.
The truth is that the Secretary of State is in this hole because the recovery that we left this Government has been knocked out. Growth has now stalled and, as a result, tax revenues are coming in at £5 billion lower than forecast. That is why we needed a Budget that would get back growth and jobs.
On capital spending, is the Secretary of State saying that he now agrees with the Deputy Prime Minister, who said earlier this year:
“If I’m going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government”?
I do love these little exchanges with the right hon. Gentleman—I am sure we could become quite friendly—but the reality is that he is dancing around what was actually happening. I remind him that Labour’s capital spending programmes would have resulted in a real cut of 7% compared with our plans. It is all very well for Labour Members to talk about this now, but under the plan they left, capital spending was falling fast. We are spending more than their plan proposed, which would have resulted in a net 7% cut.
Borrowing today is lower than under Labour. It was £159 billion at its peak and it is now £120.9 billion, which is £38 billion lower, and forecasts approved by the Office for Budget Responsibility show that by the end of this Parliament it will be £63 billion lower and falling. [Interruption.] I say to the right hon. Gentleman that the public do not believe that Labour’s plan would have been any better. In fact, it would have been a lot worse and now Labour Members want to make it even more so, because they want to spend more, borrow more and see the deficit rise.
Does the Secretary of State not recognise that the difference between this Government’s plan and the one we left is that the economy and capital investment were growing? The Chancellor’s emergency budget in 2010 caused damage by ripping the heart out of the capital programme, and that led to a depression.
I know it is difficult in the Chamber for anyone to listen to what anybody else is saying, but I want to return to my point. Under the plan that Labour left behind, capital spending would have been 7% lower compared with what it is today. It is absolutely no good—
I am going to make some progress. The right hon. Gentleman will have plenty of time to contribute and I want to finish responding to the intervention from Mr Jones. Capital spending was set to fall. The plan that Labour left was to lower capital spending and there is no way around that. He cannot talk about capital spending rising because it was set to fall. We are bringing borrowing down. Labour has no plans at all for that and would raise borrowing.
Does my right hon. Friend agree that the bottom line is that today more men are in work than ever before, and more women are in work than ever before? That is the most important thing for our constituents.
I was going to come on to that. I agree with my hon. Friend, and our employment levels put us in a better position than almost everybody else in Europe. We have more people in work and lower levels of unemployment. To be honest, people in Spain or France would give their eye teeth for the figures that we have today. Labour would push the cost of borrowing higher and higher, the deficit would spiral and the world community would not lend to us except at the highest rates possible. We would be rather like Spain or, in some senses, Italy.
The Secretary of State knows as well as I do that annual housing starts totalled just 98,000 in 2012. That is 11% down on the previous year, and half the number of homes that it is estimated are needed in this country. That is why Labour is saying clearly that we should spend the proceeds of the 4G licence sale, and half the money from a bank bonus, on building homes. This week’s figures show a 65,000 fall in the number of people working in the construction sector. This country needs investment in building homes, not a spare homes subsidy for the very rich.
I thought the right hon. Gentleman would have avoided this issue because it is like walking into a large hole of his own making. Let me quote something from his right hon. Friend the ex-Prime Minister. This is how much he thought of house building:
“Housing is essentially a private sector activity...I don’t see the need for us to continue with such big renovation programmes”.
He cut spending, and I remind Labour Members that housing building under his Government fell to the lowest levels since the 1920s—[Interruption.] No, absolutely not. Housing construction orders are up by 32%, and our plans will outstrip the house building figures of the previous Government.
No. The numbers of people living in overcrowded accommodation rose. The housing waiting list doubled. It was a shambles and a mess, and we are doing more to put it right. The plans in the Budget, which I will come on to, will improve the situation even more.
Let me make some progress. The Office for Budget Responsibility has confirmed that we are on course to meet the fiscal mandate one year early. The deficit has already been cut by a third to a forecast 7.4% this year, and it is predicted to fall every year in this Parliament. The likelihood of meeting the supplementary debt target has decreased. Public sector net debt is forecast to be 75.9% of GDP this year, and to peak at 85.6% in 2016-17. However, we have made a £31 billion saving in the debt interest payments predicted two years ago—almost as much as the whole defence budget.
Borrowing is down to £115 billion and forecast to be £87 billion by the end of this Parliament. Even excluding Royal Mail pensions and the asset purchase facility cash transfers, it is already £39 billion lower than the £159 billion peak for borrowing under Labour, and will be £63 billion lower—a reduction of 40%. I remind the House that Labour’s prescription is to borrow more, not less. The Institute for Fiscal Studies has estimated that in the absence of measures taken by the Government, total borrowing would have been £200 billion higher between 2010-11 and 2015-16.
It is important to note that since the beginning of this Parliament, issues in the eurozone have made matters very difficult, and in the current economic climate the challenge is harder than anyone could have predicted or hoped. As the OBR, OECD and others have explained, there are real risks to our stability and to others, in particular the financial storm in the eurozone, which shrank by 0.6% last quarter—the largest fall since the height of the crisis. With Europe accounting for 40% of our exports, it is no surprise that weak net trade has impacted on our GDP. In the words of the OBR, the
“unexpectedly poor performance of exports is more than sufficient on its own to explain the shortfall”.
Although the eurozone is expected to remain in recession throughout the year, the UK is forecast for a slight increase in growth. This Budget will, I believe, stimulate growth further still, so let us look at a few of its important measures. We are further reducing the main rate of corporation tax, which we had already lowered to 21%, to 20% from April 2015, down from the very high 28% inherited from Labour. It will now be the lowest rate in the G20. We are also—this is really important for my right hon. and hon. Friends, and for me it is the most important measure in the Budget—merging small company and main rates of tax at 20p. That had been asked for, but as I think Mr Frost said, it goes way past what was actually asked for. It is a real boost to small businesses.
We are increasing capital spending by a further £3 billion more than our existing plans from 2015-16, meaning that the Government will never cut capital to the levels planned by Labour which, I remind hon. Members, would have reduced spending by 7% more than our plans. We are taking measures to dramatically reinvigorate both house buying and the construction industry in this country by extending the excellent right-to- buy scheme, building 15,000 more affordable homes and increasing fivefold the funds available for building for rent. I remind colleagues that one of our biggest problems in getting housing benefit under control is due to the failure of the previous Government to allow enough houses to be built for rent, so that measure will be a huge help. We are introducing Help to Buy—a two-part scheme set over three years, committing £3.5 billion into shared equity loans for new builds, and offering new mortgage guarantees to support £130 billion of mortgages. That is really important.
I was watching the news programmes yesterday, and it was quite amusing to watch the shadow Chancellor run around. More and more he reminds me of the film “Toy Story”, and that rather angry Mr Potato Head who wanders around shouting, screaming and being very angry to absolutely no effect at all. Disaster, chaos, crisis, U-turns—I wonder what he does in his private life when anything goes wrong. He is certainly not much help to his wife I expect.
The list of initiatives that my right hon. Friend has read out illustrates that this Government are part of the aspiration nation, wanting people to own their own homes. That is one of the greatest things to which people aspire, and it is fantastic that we are doing everything we can to help the construction industry and help people achieve that dream.
I congratulate my hon. Friend on arriving at a really good statement: the aspiration nation. She is absolutely right, and the fact that she has come across it herself is testament to her brilliance on the Back Benches. This is about an aspiration nation, and the alternative—as somebody just remarked to me—is Mr Potato Head to infinity and beyond on borrowing. That is about the end of it.
The Budget also includes further measures, which I want to go through because some are really good.
By introducing an employment allowance, we will reduce the amount that 1.25 million businesses pay in national insurance contributions each year, and take 450,000 small employers out of national insurance altogether. That is a huge measure, and really important for small businesses, which, as we know, drive most of our employment.
Through tax reliefs both for social investment and for businesses that help employees to return to work after sickness, we are incentivising interventions that prevent long-term social problems. The sickness absence review on which the Government have led is really important. That tax help will drive change on one of the big problems we have had—we have talked with Dame Carol Black and Mr Frost about this—namely, that too many companies leave people who have difficulties to slide through their sickness and fall out eventually into incapacity benefit or, currently, employment and support allowance. We are trying to get companies to work with us on that review to ensure that they do much more to intervene earlier with help and support to try to resolve problems before people crash out of work and fall on to the benefits system. I hope that the sickness absence review will be fully supported on both sides of the House, and that that tax measure starts to get us ahead of the problem, which is where we always want to be. When somebody at work is finding it difficult, we want the companies involved earlier to ensure that something is done to change the situation.
That tax relief is important, as is the tax relief on social investment bonds. Sir Ronald Cohen has said that there is potentially a huge market for investment in social projects, and huge potential for bringing investors and some of the wealthier people in society back into contact with, and helping, areas of society that have damage and difficulty. Such investment can help to get kids off drugs or help with rehabilitating people from prisons. The measure will be a huge incentive, and I am pleased that we are consulting on it.
My right hon. Friend might be aware that the Chancellor responded to representations from me and others and will consider further incentives for social investment tax relief to encourage smaller investors and crowd funding to help to drive local community finance initiatives.
I congratulate my hon. Friend on being picked out in the Budget—it is not often that people are picked out in a Budget. He should shake hands with Tristram Hunt. He was angry before the Budget, but waved his Order Paper to applaud the Chancellor during his speech. I do not blame the hon. Gentleman, because he helped to change opinion—[Interruption.] I apologise. I do not want to talk about that too much because he has a career ahead of him—I hope.
Finally, in a welcome move, we are raising personal tax allowances to £10,000 by the end of the Parliament. That measure, which is a result of a good coalition agreement, means that working families pay £700 less in tax than when the Government took office, and that almost 3 million more of the lowest earners will pay no income tax at all.
The concept that 24 million people are helped by that measure is somewhat difficult to grapple with. It is much better interpreted by individual constituency. In my constituency, for example, 38,062 people will be £700 better off, and 359 people will be lifted out of income tax altogether.
I agree with my hon. Friend and thank him for reminding me that we need to centre the measure down to constituency level, so that hon. Members know what it does. With my right hon. Friend the Chancellor, I will endeavour to ensure that every constituency is informed about how many people will be lifted out of tax and how many will benefit.
Let me finish my point. That is one coalition measure of which I, as a Conservative, am incredibly proud. I am incredibly proud that we struck that agreement, and that, a year early, before the end of the Parliament, we will raise the threshold to £10,000. That will do more for poorer people who are struggling to make ends meet than almost anything the previous Government did. I should remind the House that they did exactly the opposite. They got rid of the 10p tax rate. They tried to pretend that that was somehow a tax cut, only to find that they spent billions of pounds—borrowed billions—to try to rectify it.
During the passage of our last Bill, we were clear about who was winning and losing in those circumstances, and I am happy to engage with the hon. Gentleman on that. There are two important things to remember. The Opposition go on about this, but the reality is that in every year of this Government, the wealthiest in society—the top 1%—will pay nearly a quarter of all income tax, and the top 5% will pay nearly half of all tax. The richest will pay more in every single year of this Parliament than they would have paid under the previous Government’s plans. The 14,000 people in the UK who earn more than £1 million a year will pay £14.2 billion in tax this year. Conservatives did not say that they were pleased for people to be filthy rich; Labour did. The previous Government allowed wealthy people to boast that they paid less tax than their cleaners. We need take no lectures on upper rate tax from the Opposition.
Will the Secretary of State tell the House what representations he has made to the Chancellor on whether it is right that universal credit should be calculated on post-tax income? The Secretary of State will know that the effect of that is to claw back three quarters of the increase in the personal allowance from Britain’s poorest families.
The reality—the right hon. Gentleman needs to get his head around this—is that those who engage with universal credit, all the way up the scale, will be better off than they would have been going back to work under all the measures in place at the moment.
I seem to recall that, under the previous Government, the then Chancellor had to admit that his changes to VAT were a complete disaster and made no difference to anybody. Most companies ended up spending more money trying to make alterations. The reality is that the previous Government should have increased the personal tax allowance threshold to £10,000, but they never did. I would love to hear the Opposition welcome that measure rather than carp about it.
I suspect my right hon. Friend will wait in vain for that. Does he recall that the previous Government introduced stealth taxes by refusing to increase tax-free allowances even in line with inflation, so more people paid more?
We know about the incredible stealth taxing under the previous Government. Their tax on pension funds meant that they were worse off by £100 billion, which sounded the death knell for defined benefit pensions. The previous Prime Minister, who, as I have said, got rid of the 10p starting rate, did more to punish people than we would ever expect from a Labour Government.
I would be grateful if the Secretary of State turned his attention to the benefit cap and its effect on poor people in high-cost areas such as the one I represent. Is he aware that 1,000 children in Islington schools are affected by the benefit cap? Some of their families will be affected by as much as £200 a week. That will lead to the social cleansing of the whole of central London because of the high cost of rents. Will he look again at the benefit cap and its effect on those in private sector housing, and do something rapidly to stop the enforced movement of poor people out of central London?
I do not agree with the hon. Gentleman, although I understand fully what he says. I keep all benefit changes under review, but people have been told for more than a year that they are the families that will come under the benefit cap when it comes in on
Rather than advice, I will take that to be an instruction, gently and eloquently given. I can crawl with the best of them—I hope better than my opposite number, but he will make his own attempt. I will make progress and try to be quicker.
I will talk briefly about the single-tier changes for which we are legislating. They are not just about improving the prospects of workers today, but about securing their position as they enter retirement. I am enormously pleased that the Chancellor confirmed that the single-tier pension will start in April 2016, which is in keeping with our original timetable. That means that after 60 years of modifications and tinkering, we will deliver a vital overhaul of the pensions system as soon as possible. I pay tribute to the Minister of State, Department for Work and Pensions, my hon. Friend Steve Webb, who has been instrumental in driving that forward. If anyone is able to say at the end of this Parliament, “I made a difference,” it will be him. I will ensure that his name is remembered for that.
We are successfully rolling out auto-enrolment, which will help up to 9 million people get into a workplace pension scheme. That is important as it will make saving the norm. However, auto-enrolment will not work unless it pays to save. That is the key problem that the Minister and I have been discussing endlessly. What is the incentive to save? Too many people in Britain have been spending rather than saving.
The single-tier pension is all about solving that problem. We are replacing the complicated two-tier system of the basic state pension, additional state pension and the other outdated add-ons with a single flat-rate payment. That means that people will know what they are entitled to and will be able to project forward so that they know what they need to save. They will know that what they save will go above the line and that they will be able to use every pound; it will not be means-tested away so that they cannot use it. At £144 a week, the new state pension will be set above the level of the means test.
We are ending the unfairness whereby many people reach state pension age, having scrimped and saved all their life, only to find that others, who did not make any effort, get the same income through the pension credit. That is unfair. This change is about fairness and making saving pay. Michelle Mitchell, the charity director general of Age UK, said:
“The government’s proposals for a single tier state pension could help transform retirement for future pensioners, bringing clarity and stability to a system which is currently opaque and unfair.”
In 2020, three quarters of new pensioners will get a higher state pension following the introduction of single tier. That will benefit those who have historically had poorer state pension outcomes in particular. There will be better provision for the low-paid. Some 60% of low-income pensioners will see their income in retirement increase by 2040, compared with the current system.
Critically, there will be better provision for the self-employed, who, for the first time in about 40 years, will be treated the same as employees for the purposes of state pension retirement. There will be better provision for those with broken contributions, such as women and those with caring responsibilities. Some 700,000 women who reach state pension age in the 10 years after single tier is introduced will receive £9 per week more on average. Implementing it in 2016 will benefit an additional 85,000 women who will now retire under single tier.
The single-tier pension is one of the big reforms, alongside universal credit, that will transform the landscape. It pays to work and it will now pay to save.
With respect, I am under the eye of Mr Speaker. Although he is invariably generous, given his admonition, I will make a little more progress to ensure that I finish on time.
Universal credit makes it pay to work. Alongside universal credit sits universal jobmatch, an online job searching and matching service that is revolutionising the way in which people look for work. Two million people are already registered. It is already allowing us to segment those who are out of work so that we can deal with the people who are the most difficult to get into work earlier than we could before.
From April, we will begin to replace disability living allowance with the fairer and more objective personal independence payment. We are also improving employment opportunities for disabled people so that they can live independent lives.
Finally, we are getting to grips with the housing benefit system, which the last Government allowed to run out of control. Housing benefit doubled in 10 years. We are dealing with the problems that we inherited.
As well as being welcome to individuals, will not the simplification of benefits bring massive savings in the administration of the Department by making it much simpler not only to deal with claims at the outset, but to stop people coming to us repeatedly who have problems not with the outcome, but with the system and the bureaucracy?
Absolutely. Our dramatic changes will allow savings to be made for the right reasons, such as improving efficiency. The system will be simpler and easier, so people will understand it better. The lack of complication will help to save more.
In conclusion, the Labour Opposition vote against our reforms again and again. On welfare alone, they have voted against savings of £80 billion. That money needs to come from somewhere. They do not say where it would come from, apart from borrowing. Once again, that is backward logic: borrow more to cut borrowing; spend more to cut spending. Meanwhile, the Government are changing the culture of welfare and Government spending in the country. We are backing people who want to work hard and get on in life, and taking bold action to ensure that we succeed in the global race. It pays to work. It pays to save. The Chancellor’s Budget delivers sound public finances and a fairer deal for working families. It has all the right elements and I commend it to the House.
As if we needed it, Wednesday’s Budget was the final, definitive, categorical proof that plan A has failed. Growth has halved; it will be lower this year and next year than was forecast. The deficit is not falling; it is static. The IFS said yesterday that the only way for the Chancellor to bring the deficit down this year and ensure that it is lower than last year would be to pay this year’s bills next year. Paul Johnson of the IFS concluded:
“The truth is that borrowing is the same this year as it was last year. And it will be the same next year as this year.”
Total debt is not down; it is going through the roof because the Government’s fiscal plans are in tatters. Borrowing is set to be £245 billion higher than was forecast. We were promised that the books would be balanced by 2015. That is a promise broken. According to Wednesday’s figures, the national debt will not be falling until 2017-18.
I am glad that the Secretary of State raised the idea of the global race. The House will have seen from the OBR’s figures on Wednesday that the fabled rebalancing that we were promised is simply not happening. Our exchange rate has fallen by 20% since 2007. Exports have grown by 1%. Once upon a time, in its early days, the OBR said that the export boost to GDP was set to be 1.2%. It now admits that net trade is dragging down our economy by 0.8%. What a contrast that is to 20 years ago, when sterling depreciated by 18% and exports grew by more than a third. Contrary to what the Secretary of State says, the OBR says that our market share is deteriorating not because the growth of our trading partners is slowing, but because our exporters have become less competitive. The Chancellor was right to say on Wednesday that we are in a global race. The problem is that we are set to lose it by setting sail for a low growth, low pay, low skill economy, and there was nothing in the Budget to change that course.
The right hon. Gentleman is doing his usual trick of trying to rabbit around the figures and then arrive at an insoluble conclusion. He says that there are difficulties and complains about borrowing, but his prescription is to spend more and to borrow more. Will he please explain who agrees with him that we should spend more and borrow more when our problem is borrowing and our problem is a deficit?
The chief economist to the IMF has been clear that a different fiscal strategy is needed. Indeed, the Secretary of State for Business, Innovation and Skills hinted that what was needed at the moment was a whacking great boost in capital spending, and the Deputy Prime Minister has admitted that the Government cut capital spending far too fast. That is why we have set out clear, costed plans to increase capital spending and change course.
The Chancellor and the Prime Minister bear responsibility for that catastrophic failure and the failure of their fiscal plans, but, let us be honest, they have been aided and abetted by the Secretary of State for Work and Pensions, who has proved incapable of translating his fabled welfare revolution into practice. There could not have been a worse curtain-raiser to Budget day on Wednesday than the unemployment figures that we saw at 9.30 am. Halfway through this Parliament, unemployment is higher than it was at the general election—and it is not going down, it is going up. [Interruption.] I do not know where Government Members were on Wednesday. Unemployment rose on Wednesday. Youth unemployment went up by 50,000 on Wednesday. Unemployment among women went up, not down, on Wednesday. Government Members would do well to live in the real world for once.
Order. James Duddridge will resume his seat. [Interruption.] Order. Do not argue with the Chair, Mr Duddridge. The hon. Gentleman would not have the foggiest idea when to start or where. He will intervene when permission has been granted, and not before. If he does not like it, he can lump it and he might not speak at all.
I thank the right hon. Gentleman for giving way. I thought he had already given way, which is why I started. I apologise to you, Mr Speaker, and to the right hon. Gentleman who has been kind to give way. The only point I wanted to make was that since 2010 employment has increased. Yes, in my constituency there was a short period last month when unemployment was reported to have gone up, but even on a year-on-year basis employment has gone up and unemployment has gone down for both men and women.
Does my right hon. Friend share my frustration at the constant repetition of the mantra from the Conservative Members that there are more people in work than ever before? Will he confirm that the employment rate is still lower than it was in 2008?
I can confirm that, and I will also say to the House that families are now paying an extraordinary price. They are doing anything and everything to get work. On average, people have taken a £1,250 pay cut since the election, and that is why it is such a bad idea to cut tax credits and give a tax cut to millionaires in two weeks’ time.
Let me make two things clear. Unemployment is at a lower rate than when we took over in 2010, and there are more people in work than ever before. It is no good the hon. Member for Westminster
North (Ms Buck) harking back to 2008—Labour bust the economy in 2008-09, which led to this problem, and youth unemployment was rising. The right hon. Gentleman said that he is supported by the IMF. Let me quote Christine Lagarde who said
“when I think back myself to May 2010, when the UK deficit was at 11% and I try to imagine what the situation would be like today if no such fiscal consolidation”— the one we are carrying out—
“programme had been decided... I shiver.”
She shivers at the problems caused by the previous Government and what they would have done.
The right hon. Gentleman is telling a tale of catastrophe. I do not doubt that the country is awash with suffering, but may I draw his attention to UK industrial production, which is at a 20-year low? The point is that it collapsed under his watch: UK industrial production collapsed to a 20-year low under his watch. Will he not just admit that it was his Government who dropped us into this mess?
We have unemployment rising and debt that is £245 billion higher than forecast. The hon. Gentleman should be ashamed of that record.
We needed a Budget to get unemployment down and we did not get one. I hoped to see a Budget that delivered for those who are out of work, but what did we get instead? The conclusion of the OBR was clear that the impact of the Budget on growth would be so significant that it would amount to precisely zero. That is what the Secretary of State has managed to negotiate from the Chancellor. He has been turned over, stitched up and done like a kipper yet again.
Any sensible Secretary of State, faced with a collapsing Work programme and rising unemployment, would surely ask for more help today, not tomorrow. People out of work need help today, not in the years to come. What did we see instead? The OBR has weighed up the efforts of the Secretary of State and the Chancellor and it has concluded that what is in hand is going so well that unemployment will not go down next year, but up—and that is against the projections set out in the 2010 Budget. Next year the International Labour Organisation measure of unemployment is expected to rise from 7.9% to 8%, and the claimant count is set to rise by another 50,000. What is even worse is that the OBR says that the welfare bill will not go down either—it will go up, including for housing benefit. Spending on social security benefits will now be £21 billion higher than the Chancellor first planned.
My right hon. Friend is making a strong point. There is no more striking indictment than the fact that in my constituency the number of those claiming for more than 12 months has risen against the previous year by 22.6%. That long-term unemployment—the loss of hope, talent and potential—is a striking indictment of the Government.
My hon. Friend is absolutely right to raise that point. Not only did we see youth unemployment rise on Wednesday, but the claimant count for long-term unemployment went up again. That is why I say to the Secretary of State that we needed action in the Budget to bring unemployment down.
The organisation of back to work schemes under this Secretary of State is now in a state of complete chaos. This is what he had to say about the Work programme in November 2010:
“The difference between this Government and the previous Government will be that the Work programme—the most comprehensive, integrated work programme in existence, certainly, since the war”.—[Hansard, 22 November 2010; Vol. 519, c. 18.]
What have we had instead? We have had a Work programme that has been literally worse than doing nothing: just 2.3% of people referred on to the programme have found sustained jobs. The Public Accounts Committee had this to say:
“Actual performance was even below the Department’s assessment of the non-intervention rate—the number of people that would have found sustained work had the Work Programme not been running.”
Will the Secretary of State now tell us what on earth is going wrong and what he got from the Chancellor to fix it?
I will hold the right hon. Gentleman to those words when we publish the next figures, because the Work programme will be proven to be a remarkable success. As the Work programme becomes a success, it will actually save the taxpayer money, because none of the companies are paid unless they get people into work for six months. He knows full well that his Government’s programmes were expensive and failed: unemployment rose dramatically, and youth unemployment was rising from as early as 2004, when the economy was meant to be growing.
I will take that as a no.
The only measure in the Budget that might remotely help jobs is the employment allowance—a welcome idea that we support and for which we have argued before—but it will not kick in until halfway through 2014 and will not be fully up and running until 2015-16, when the GDP growth is forecast to be 2.4%, which is three times the growth forecast this year. We need action on jobs now, not in the first year of the next Parliament.
If we require any proof of the need for a big plan for jobs, we have only to look at the story by Mr Patrick Wintour in today’s Guardian. Here we learn some of the terrible ways in which front-line jobcentre staff are now being asked to reduce the unemployment figures—targets for sanctions and league tables for jobcentres. So tough is the pressure on staff that they are threatened with disciplinary action by their superiors if they fail to deliver for Ministers. They are even given a dictionary of which phrases to spot so that they can catch out jobseekers who have turned up to jobcentres for help. The leaked e-mails tell staff to look out for phrases such as, “I pick up the kids”, “I look after my neighbour’s children” and “I didn’t come in yesterday because my husband was ill”. It beggars belief that Ministers told the House on Monday that no such targets or league tables existed, yet we see from these e-mails that it is deep within the DWP’s culture.
How on earth could Ministers not have known? How on earth could the House have been given information earlier in the week that was the opposite of the truth? I know that the Secretary of State will apologise, because he is a decent man. On Tuesday, the Minister of State, Department for Work and Pensions, Mr Hoban, said:
“There are no league tables in place. We do not set targets for sanctions”.—[Hansard, 19 March 2013; Vol. 560, c. 828.]
“There are no targets whatsoever.”—[Hansard, 19 March 2013; Vol. 560, c. 872.]
I am glad that we have secured an independent review of the sanctioning regime in the Jobseekers (Back to Work Schemes) Bill. It was clear that we were right to demand it, and it is now clear that the sanctioning regime is running out of control, so I hope that the Secretary of State will guarantee that the independent review will get to the bottom of every case in which sanctions have been used. If he does not, we will bring forward such amendments in the other place.
First, I can absolutely commit to the fact that there are no targets for any sanctions whatsoever. To emphasise that, I should point out that the head of Jobcentre Plus has issued a reminder to everybody in the estate that there are no targets and that there will be no targets, and that anybody using those targets will be disciplined. It was the last Government, not this Government, who set up a target culture; we are breaking with that culture. I see Stella Creasy in her place. The work they do in that jobcentre is remarkable at getting people back to work. They have accelerated and improved their performance. I would love to hear the shadow Secretary of State say to those working hard in jobcentres, “Well done for the work you do in getting record numbers back to work.”
My admiration for jobcentre staff working under this regime is unbounded. They are good people trapped in bad systems, with a Secretary of State who, I fear, is out of touch.
I have a copy of the e-mail that Mr Wintour reports today, and this is its concluding paragraph:
“Guys, we really need to up the game here”— on the issuing of sanctions—
“The 5% target is one thing—the fact that we are seeing over 300 people a week and only submitting six of them for possible doubts is simply not quite credible.”
The e-mail says, “So the bottom line. I have until
“Obviously if I am on a PIP…to improve my team’s Stricter Benefit Regime referral rate I will not have a choice but to consider implementing PIPs for those individuals who are clearly not delivering SBR within the team.”
That is why it is important that we have assurances that the independent review, set out in the Jobseekers (Back to Work Schemes) Bill, will get to the bottom of every sanction issued.
I was extremely disappointed to hear the Secretary of State’s response just now, because we are talking about the jobcentre that serves both our constituencies. The e-mail also states:
“Our district manager is not pleased”.
“James Corbett is not pleased and neither is John”, states the e-mail. It says that because John is
“under pressure to improve our office output and move up the league he has to apply some pressure downwards.”
The e-mail is talking about league tables. Will the Secretary of State comment on that? Who does my right hon. Friend think is putting together these league tables and applying this pressure on staff, from a regional perspective down to our jobcentres, to find reasons to sanction people in our community, not because of their behaviour, but simply to meet a target?
I will in a moment. I assure the Secretary of State that I will give him time to answer.
The e-mail in question starts by stating that Walthamstow is 95th in the league table out of only 109. This is incredibly serious, not least because in response to repeated questioning the Minister of State, the hon. Member for Fareham, and the Under-Secretary, the hon. Member for Wirral West, assured the House earlier in the week that this was not happening, yet it clearly is.
There are no targets for sanctions. There will be no targets. Anybody caught imposing a target will be dealt with. That is absolutely clear. That message has already gone out. It went out before on innumerable occasions. The target culture was under the right hon. Gentleman’s Government. I am sorry that Stella Creasy did not say one word about the good work being done by staff in her jobcentre. She owes it to them to remind everybody that they are doing a brilliant job in difficult times and have improved their performance dramatically.
I know that my hon. Friend Stella Creasy will speak later and will provide the Secretary of State with a full answer on that. I repeat, however, that if the Government do not make refinements to the Bill, we will move the necessary amendments. I am glad that the independent review has been legally sanctioned in the Bill. We will ensure that it is used to get to the bottom of what is going on, and I am sure he will co-operate.
Just as bad as the lack of action on the Work programme in the Budget were the new surprises about universal credit. The Secretary of State and others have given frequent assurances that the programme is on track, but that raises the question: what on earth is the track? Earlier in the week, we heard in the Financial Times that small businesses were so badly prepared by HMRC for the introduction of real-time information—the method by which payrolls will be updated to calculate universal credit—that the Government have had to U-turn again, only a few days before the change is being introduced. The RTI system for businesses employing fewer than 50 people—covering about 7 million—will be slipped back by six months. There are worries now, not just about the Work programme and the lack of action on bringing down unemployment, but on universal credit.
As I said earlier in the week, the ultimate test for the Secretary of State is this: when he went to Easterhouse all those years ago, he talked about the need for a jobs revolution in this country, but if we now look at the 1% most-unemployed estates in our country, we see that unemployment has not fallen over the first half of the Parliament but gone up. It has gone up in three quarters of estates, and long-term unemployment, which we are so worried about, has risen on two thirds of those estates. This welfare revolution is falling apart, and we needed a Budget for jobs this week to fix it.
The greatest tragedy is who will pay for this failure. We know that a host of cuts, not least the bedroom tax, that are arriving in a couple of weeks will hurt some of the most vulnerable people in our country. Yesterday in Great Yarmouth, together with Lara Norris, I met a woman called Sandra who had cerebral palsy. She has brought up five children, but for reasons of her disability she sleeps separately from her partner, who is her carer. She will be hit by this bedroom tax in a couple of weeks. She now has to take decisions about switching off the heating for half the week because she can no longer afford to heat her home. She has to go to bed and snuggle up in an electric blanket in order to stay warm. That is what is happening in our country, yet these cuts will start on the same day as Britain’s richest citizens are given a tax cut. It is wrong and we should have had action in the Budget to reverse it.
The housing benefit bill is going up by more than £1 billion, because policies such as the bedroom tax will cost more than they save. I cannot remember how many people will be hit by it in the hon. Lady’s constituency, but they will be interested to know that she voted for it. The truth, as she will know, is that those hit by the bedroom tax will have to move to the private rented sector or become homeless. Neither will cost the public purse less; they will cost it more. What we needed in the Budget was not a spare home subsidy; what we needed was action to reverse the hated bedroom tax.
The right hon. Gentleman has not answered the question. Given that Labour has opposed every measure this Government have introduced to reform welfare and housing benefit, what did he have in mind when that commitment went into the Labour manifesto?
What we need to bring down the housing benefit bill is to build more homes. That is why we have said that the 4G licences and half the bank bonus tax should be spent on building homes. The Deputy Prime Minister—the hon. Lady’s right hon. Friend—admits that capital spending was cut too fast. I look forward to hearing her justify to her constituents who will hit by the bedroom tax why they should pay £14 a week extra while millionaires get a £2,000 a week tax cut.
May I just remind the right hon. Gentleman—as far as I can see he lives in cloud cuckoo land most of time—that under the last Government housing benefit bills doubled and were set to rise to more than £25 billion this year? We are saving a minimum of £2 billion from that rise. Under Labour the bill would have gone up and we had the lowest house building programme since the 1920s. Really, he should stand up and apologise for the shambles and the mess they left housing in.
The Secretary of State’s level of delusion is now bettering his previous level. He knows that the policy costings—which he has clearly not read—published by his right hon. Friend the Chancellor show that the housing benefit bill is not going down over the next couple of years, but going up. The Secretary of State’s efforts have been so successful that he is bringing in a policy—the hated bedroom tax—that will cost more than it saves. We saw the proof on Wednesday—housing benefit up by more than £1 billion. That is a mark of his failure.
The Secretary of State cannot rewrite history. This Government inherited the biggest council house building programme for 20 years. One of the first things they did was scrap it. They now have the lowest building starts since the 1920s—lower even than we had, and that is saying something.
My hon. Friend is absolutely right. What we needed in the Budget was determined action to build houses, not another subsidy for Britain’s richest citizens.
Let me start to conclude by reminding the House what most families will now experience. We heard in the Secretary of State’s speech some words about the rise in the personal allowance. The truth is that, even despite the rise in the personal allowance, the cuts buried in the Budget will mean that by April 2014-15 the same family who will see the personal allowance increase to £10,000 will be worse off. They will lose £600 a year in cuts, and my fear is that worse is to come.
The Chancellor gave away a lot of things in the first year of the next Parliament. Although we saw a little of how he will pay for it—he is going to fast-track the flat-rate pension—this is one of the great mysteries of this Budget, and we have not heard much about it yet. When the Minister winds up, I hope he will confirm at what rate the flat-rate pension will be introduced. The original White Paper set the figure at £144, which I notice is lower than £145, which is the combined total of pension credit and the state pension set out in the Budget book on Wednesday. As we know, the advance of the flat-rate pension offers the Treasury a huge national insurance windfall of about £5.5 billion in 2016-17 and 2017-18. What is interesting—we heard nothing about this—is that half of that windfall comes from public sector employers. The Library was able to tell me earlier in the week that the national health service, schools and the police will face a bill for £1.6 billion in higher national insurance contributions. We heard nothing about precisely where that money will come from. I hope the Minister will be able to set our minds at rest and say why this will not be another cut to the NHS in the next Parliament.
The second mystery surrounds the unspecified cuts of £11.5 billion in the first years of the next Parliament. We know that things such as the strivers tax and other cuts to working tax credits will deliver up to £6 billion, but where will the other £5 billion come from? Can DWP Ministers tell us how they will resist another huge great cut to welfare in the June spending review?
We got more of the same from the Chancellor on Wednesday and more of the same from the Secretary of State today. Once upon a time he liked to say that he cared about poverty. No more. One million children on his watch will be pushed into poverty. Tens of thousands of disabled people will follow. Families get less, while millionaires get more, all because this Chancellor has flatlined the economy and because the Secretary of State has asked for nothing, got nothing and delivered nothing to bring down unemployment.
Thank you for calling me, Mr Deputy Speaker. [Interruption.] In my rush to speak, I almost ended up advertising an election leaflet for the Conservative party. It was not intentionally aimed at Opposition Members.
I would like to focus on two quite technical issues that have not been raised but are worth raising, and then turn to some issues affecting Rochford and Southend
East, the constituency I have the honour of representing. The first issue is the change to shares and stamp duty on shares on AIM—the alternative investment market. Although the change will not make the front page of the
Southend Echo this morning, it will help the longer-term regeneration of small and medium-sized enterprises. However, this is not just about aspiring individuals for an aspiring nation; it is also about aspiring businesses that want a step up. Floating more companies on AIM and raising equity is essential. Reducing stamp duty on AIM, which represents only 6% of shares, is a step in the right direction that will allow small and medium-sized companies in Southend and elsewhere to raise equity, rather than having to rely on banks, which we all know have their own set of problems.
The Government have taken a step in the right direction. I hope that in future Budgets they will consider extending the decision to the other 94% of shares, to allow greater participation by small and medium-sized companies. That would also improve the liquidity of the London financial markets, which, although liquid enough to support basic transactions, will benefit from greater liquidity, which would mean cheaper financing for small and medium-sized enterprises, allowing them to grow further.
The second thing I would to note—again, it will not make the front page of the Southend Echo tomorrow, although I think a number of families will appreciate it when they start to benefit from it—is the change to the child trust fund regulations. The previous Government gave away £250 that could be put in a child trust fund—either a cash fund or an equity fund. This Government did not think that was affordable and introduced junior individual savings accounts. As all those changes were unwrapped, some anomalies emerged. Most people did not put in more money, which was what the previous Government desired; rather, most people’s children had just the £250. Firms are putting up their charging rates disproportionately—for what is, in the case of equities, essentially an index tracker—and people are locked into the funds.
To be frank, I feel a degree of sympathy for the financial services companies involved, because 1.5% on £250 plus a bit of growth does not even pay for the stamp on the statement at the end of the year. However, measures in the Budget will mean that such funds can be converted into junior ISAs. I have not seen the detail—I am not sure whether it has come out of the Treasury—but I would also encourage the Treasury, as well as looking at actual transfers, to consider allowing people, if they choose, to leave the fund to one side and still open a junior ISA. At the moment, people cannot have both open at the same time.
Those are two quite detailed, technical points in the Budget. I should apologise, Mr Deputy Speaker, for being unfamiliar with the process, but I think that at the beginning of my speech I should have drawn Members’ attention to the Register of Members’ Financial Interests and some work that I do outside the House.
My constituents in Rochford and Southend East talk to me about the cost of fuel—not only individuals, but businesses. In the run-up to the Budget, staff at Churchill’s sandwich bar, where I always get my panini on a Friday—it is very good and I recommend it to all hon. Members who visit my constituency—told me about the fuel cost not just for the business but for their suppliers. The cost made a difference to individuals, even within a sandwich business. When we leverage that up to show the costs to our constituents of other goods with greater transportation costs, we can see that the Budget will not just help aspiring companies. A van driver could save up to £340 a year, a haulier more than £5,000. Those are big numbers and this will assist people.
I welcome the non-increase in beer duty—the reduction by 1p. That will not transform the economic outlook of the United Kingdom, but it is a nice hat-tip to the direction that the Government would like to take in future as we do more for hard-working families.
The £10,000 personal allowance is enormously significant, particularly for young mums looking to get back to work. It provides clarity about the lack of bureaucracy in taxation and all of the first £10,000 will go into their pockets, rather than into tax. There is a barrier to entry to work, not only because of the growth of the economy but because of confusion about the interaction between the benefits system, which has been overly complex, and the taxation system, which has dragged in far too many people too early and too low down the salary scales.
I have been disappointed by the tone of the debate. I am a great fan of Mr Byrne. It is important to be candid when writing and it is an excellent idea to tell people what one wants, although the details about the cappuccino and so on might have gone a little over the top. The infamous letter that said, “Dear chief secretary, I’m afraid there’s no money left. Kind regards and good luck, Liam,” was not the total picture—even though in humour it is good to be brief. There is no money left and they maxed out the nation’s corporate credit card. I will give way to the right hon. Gentleman if he wants to apologise.
I am grateful to the hon. Gentleman for offering me that opportunity. He will know that I also left a Budget, drafted with my right hon. Friend Mr Darling, who was Chancellor at the time, that would have halved the deficit over four years as opposed to putting the total debt burden of this country up by £245 billion, which is what his Government have secured.
I am grateful to the right hon. Gentleman for that intervention and for the extra minute of time he has given me. If that was truly the sentiment and he felt that that was the case, why did he not leave that in a note? He left a candid note that gave half the picture.
The truth is that the previous Government ran down the economy. It is as if the nation were a family, and two individuals within that family had been given responsibility for the finance and budget for 10 years each. One spends and borrows and enjoys the good times, and the other has to clear up the mess.
I want to talk about housing, particularly in London, but before I do let me refer to the millionaires’ tax cut that will come in in April. It will benefit 13,000 individuals who earn more than £1 million and have a combined income of £27.4 billion, and I am grateful to the trade union Unison for providing me with that figure. Those 13,000 people earn £27.4 billion, and the Government somehow think that in these times that cut should be a priority for public expenditure. It is outrageous. The Government are freezing child benefit for the third year running, and the money could have been used to benefit 12 million children if child benefit had been increased in line with the consumer prices index. I wonder what the cash injection to the economy would have been if that money had been given to families who would have spent it rather than on providing a bonanza to 13,000 people. Imagine the letter from the Chancellor of the Exchequer saying, “You’ve been selected as one of 13,000 people to share in a £1.2725 billion payout from Her Majesty’s Exchequer and all you have to do to qualify is confirm in writing that you earned more than £1 million this year.” What an absolute disgrace.
I look back on the criticisms of our benefit changes when we were in government, and on the fact that the Liberal Democrats were constantly carping, saying how mean we were, and attacking us about benefit changes and rules for people with disabilities—but now they sit there, and that tax cut is their priority. At a time like this, when the bedroom tax is being introduced, when wages are being frozen and when unemployment is going up, as we have heard, this Government’s priority is a tax cut for millionaires. I find that absolutely shocking.
Some elements of the Budget are welcome: any assistance for people who want to buy their homes, particularly those who might have to wait many years to save a deposit, is always welcome. However, I am concerned about the impact of the Government’s planned assistance in the absence of a significant improvement in the supply of housing. I know they will say that they are planning to supply housing and that they have a house building programme, but we have been hearing those honeyed words since they came into office in 2010. In London we have seen a slump in house building and we now have the lowest level of starts since the 1920s. The Secretary of State has attacked the Labour Government and made a great deal of saying that they built too few homes—they did, and they certainly built too few socially rented homes—but this Government are going even further.
For instance, in London most of the homes built under the current Mayor were started under Ken Livingstone. The current Mayor is claiming credit for homes although the plans were started under Ken Livingstone. According to the Evening Standard—I think we can rely on the Evening Standard because, as we all know, it was heavily briefed on the Budget on Wednesday—there have been only 3,332 starts for affordable homes in the past year, and only 1,357 have been completed. That is fuelling enormous problems in London, not just for people who need rented homes but for people who want to save to buy homes.
Is my hon. Friend aware that “affordable”, as used by the Mayor’s office, is a complete misnomer? In many places where so-called affordable homes are being built, they are affordable only for people earning well over £50,000 a year and are of no help whatsoever to the average Londoner.
My hon. Friend is absolutely right.
I want to discuss the impact of the purchasing power of overseas money on house prices in London. That not only has an impact on house prices but has a knock-on impact on land values that makes it virtually impossible to build affordable housing, particularly in large parts of central London.
The Smith Institute published a report last year called “London for Sale”, which stated:
“Anyone doubting the scale and potential impact of overseas investment in London should note that at £5.2 billion in 2011 it was a larger sum than the whole Government investment in the Affordable Housing Programme for England for four years…Two years of overseas housing investment in London would total more than the public sector funding package (£9.3 billion) for the 2012 Olympic Games.”
That is the scale of the money coming from overseas into our housing market. Savills, one of the property market agents, says that London is a prime property market that
“will rise 22.7% during the period 2012-16.”
Its comparable forecast for the mainstream market across the UK is 6%, less than the rate of inflation. What we are seeing is the huge impact of overseas money on the price of housing in London. The Government intend to compete with that money by providing assistance with mortgages. I have no objection at all to anyone being given such assistance, but if—and this argument was made on the “Today” programme the other day—12 people go for 10 houses, that is likely to drive up prices. If the Government’s incentive to provide additional help to people to put down deposits means that 15 people go for houses, but there are still only 10 houses being supplied, prices will be driven up.
The Social Market Foundation has commented on what the Government plan to do, and it says that it helps only older home buyers:
“Overall, the scheme will entice young people to load themselves up with debt to finance overpriced houses”.
The SMF goes on to say that if prices fall those people will be in a trap, and they will pay twice: they will pay for the overpriced house, but they will also have to pay increased taxes to pay back the money that the Government have put into the scheme.
I have only a minute left, but I want to tell the Government that they must make it clear that they are going to build affordable houses. I return to the point that my hon. Friend Jeremy Corbyn made. When we talk about affordable houses, we must make them affordable for people on the median income for London. It must not be affordable rent calculated according to a percentage that takes into account land values in places such as Kensington and Chelsea. We must remove those land values and make sure that we build houses that are affordable, not just so that people can live in those parts of London and fill the essential jobs in the economy at the lower end of the pay scale but so that they can become savers for the future. Unless we create that capacity in the rental market so that people can live in houses that they can afford to rent and, at the same time, afford to save, we will not have a sustainable private housing market or houses for sale in future.
I almost choked on my cornflakes this morning when reading Jonathan Portes’s blog. We have to remember that Mr Portes, like Mr Blanchflower, is an arch-Keynsian and proponent of plan B—borrowing more money in a debt crisis. Referring to Robert Chote and the Office for Budget Responsibility, he observed that the OBR has shown
He went on to say:
“The UK’s underlying economic strengths remain, as the current health of the labour market illustrates.”
The Budget and, indeed, the performance of the Chancellor and his team at the Treasury have much to commend them. If we remember, three years ago, UK plc was on the verge of economic collapse. We were living far beyond our means, and the Chancellor’s emergency Budget in 2010 sought to address that problem. Two and a half years later, where are we and what progress has been made? First, the deficit is indeed down by a third. Annual borrowing has come down from £159 billion and is almost under £120 billion. We have more men in work than ever before, and we have more women in work than ever before. Indeed, the amount claimed in jobseeker’s allowance in Braintree, my constituency, has dropped by 11%. We have created more than 1.25 million jobs in the private sector. We have created 250,000 new businesses, so the Chancellor, the Treasury and the Government have much of which to be proud.
It is true, however, that growth has not been as robust as we would like, and neither has the pace of Government debt reduction been as fast as we would like. The reason is a combination of the crisis in the eurozone, which has become worse since the emergency Budget, and the inflationary impact of energy costs—a fact acknowledged by Mr Chote and the OBR. The bottom line for many of our constituents is a record level of employment. In other words, more people are in work than ever before. We have record low interest rates, which means that more homeowners have low mortgages and businesses have low interest payments.
This week’s Budget seeks to build on the strong foundation established by the original emergency Budget, addressing the need to help those who aspire work hard, as the Chancellor said. It is a Budget to help families. Indeed, as we have heard, the personal allowance, which has been raised to £10,000, will help, as there will be a tax cut for more than 24 million families—or, in my constituency, 38,391 families. Families, in fact, will pay roughly £700 less than they did in 2010—2.7 million families will be taken out of tax altogether, or, in my constituency, 3,905 families. Fuel duty will be frozen, saving people, particularly in rural areas in my constituency, £7 every time they fill up the tank, compared with what would have been under Labour.
We will help a typical family with two children under 12 with child tax credit to the tune of £2,400— 2.5 million families will benefit from that. There is help, too, to enable people to get on the housing ladder, with the shared equity scheme that the Government have proposed, as well as the mortgage guarantee scheme. It is a Budget to help businesses. The new £2,000 employment allowance will help the average business to hire an extra person for £22,400 or, hopefully, four young people on the minimum wage. I pay tribute to Lottie Dexter and the Million Jobs campaign, which tries to help young people to get back into work.
Some 450,000 small businesses and a third of employees will pay no jobs tax at all. Corporation tax will be driven down from 28% to 20% by 2015, which will make it the lowest such tax in any G20 country. Help to Buy will help the building industry which, we all know, has been struggling. In my constituency—the constituency of white van man and Essex man—I have many entrepreneurs such as electricians and plumbers, and the scheme will help them to secure much needed work. There is help, too, for angel investors and entrepreneurs. I have been plugging the seed enterprise investment scheme, and on capital gains tax for reinvestment in qualifying schemes there will be another holiday for another year. I commend that measure.
I recall that in the Budget, the Chancellor praised my hon. Friend in relation to that work. What advice can he give me and other hon. Members on how best to promote those schemes in our constituencies, as that seems to be a really good way to drive growth?
This is an important scheme, because it will help angel investors and people starting businesses. There is a gap in the market, and funding has been lacking. The tax scheme is highly attractive, and offers 50% off income tax. For example, for a £10,000 investment, people will get £5,000. If they hold the investment for three years, it is capital gains tax-free, so it is highly attractive.
Labour got us into this mess. Having listened to the responses from the Leader of the Opposition and the shadow Chancellor, I do not think they have a solution to the country’s problems other than plan B, to borrow more. That would cost up to £200 billion more, according to the Institute for Fiscal Studies. We have already had a debt crisis. Labour’s plan would cost an average family £2,000 more.
The Chancellor has set out a Budget for those who work hard and want to get on. This Budget backs families; this Budget backs jobseekers; this Budget backs drivers; this Budget backs home buyers; and this Budget backs businesses. The Government are clearing up Labour’s mess, they are backing those who want to work hard and want to get on, and they are moving Britain forward. I commend the Budget to the House.
I am pleased to be called to speak today and to follow Mr Newmark.
I shall concentrate my remarks on the need for infrastructure investment. As the economy continues to flatline, the roads and railways—the arteries of industry—are surely the key to a healthier tomorrow. A strong infrastructure will secure more jobs, hasten the end of austerity and underpin our future competitiveness. Let us listen to the IMF, the CBI, the British Chambers of Commerce, the Government’s own Business Secretary and even the Mayor of London. They are all onside for Labour’s policy of infrastructure investment. Yet Wednesday’s Budget confirmed that the Chancellor still does not have a growth plan that is fit for purpose.
In my constituency unemployment rose again last month and now stands at 3,640, and 1,250 people have been unemployed for more than a year.
If the hon. Gentleman thinks there is no plan for growth, can he explain why the Federation of Small Businesses
“believes this”— the employers allowance—
“will give small firms the confidence to create thousands of new jobs in the private sector”?
When the federation was arguing only for a national insurance contributions holiday, it predicted that that would provide 45,000 jobs. It has yet to imagine how many more this measure will create. That is growth in my book.
We want a plan B that will build houses. What the Budget measure favoured by the hon. Gentleman will deliver is a millionaires’ tax break.
In Blaenau Gwent we have 11 people chasing every job vacancy. There is 24% worklessness and 18.2% youth unemployment. That is in spite of the 4,000 jobs created by Jobs Growth Wales, which is part-funded by the European social fund and the Welsh Labour Government. So in Blaenau Gwent we know that life has got much tougher. Unemployment has not fallen there as it has done in southern England. Facing high energy, food and fuel prices, nearly 1,700 local families in Blaenau Gwent will be hit, and hit hard, by the bedroom tax next month. Food and fuel poverty will continue to blight young lives. Cuts to local services, from which the council cannot escape, will also hit us hard.
What these families need is an active Government pulling out all the stops to get our economy moving and create jobs. But in their first three years the Tory-led Government have spent £12.8 billion less in capital investment, compared to the plans inherited from Labour. The Government’s own “infrastructure pipeline” shows that only seven of the 576 projects—just seven—are completed or operational, and just 18% of the projects listed are said to have started or to be “in construction”. In the Budget the Chancellor did announce an extra £3 billion a year for infrastructure from 2015-16. He said this would get growth flowing to every part of Britain, but by now we are all used to the Chancellor’s hyperbole—fine words, but no follow-through.
My constituents want to know why the Government are not funding shovel-ready projects right now, which could get our people back to work. The British Chambers of Commerce asked the same question. It identified road maintenance as something we could do right away. We want homes and schools, too. As the National Audit Office said in its “Planning for Economic Infrastructure” report, investment may shape new patterns of demand. That is what I want for the south Wales valleys. It is an area of great potential, but we need the support to realise our talents. Road and rail investment would provide that support.
The re-opening of the Ebbw Vale to Cardiff line in 2008 is striking proof of that statement. It has been so successful that we now need funds to redouble the line, as the train frequency cannot meet demand. The Department for Transport told the Public Accounts Committee, of which I am a member, that it is looking to invest to support growth. Where? In areas of high demand, where more capacity can be delivered, and where there are schemes that can be implemented. Redoubling of the Ebbw Vale to Cardiff line meets all these criteria. I would also like to see electrification of the London to Swansea line and the complementary electrification of the valleys lines accelerated.
Much work has been done over the past year to secure a major private sector-led infrastructure project in Blaenau Gwent—a world-class motor sport and leisure facility. The developers estimate that it could create significant long-term sustainable employment for over 12,000 people. That would make a massive difference in the valleys in south Wales. The £200 million scheme would be one of the largest capital investment programmes in our region for more than 40 years. But what the developers are looking for now is the right tax-based incentive. I want the Treasury to be bold in its thinking and see how it can create the right framework to attract private investment.
Lord Heseltine was commissioned by the Government to recommend policies that leave no stone unturned in the pursuit of growth. Lord Heseltine understands that economies with a number of vibrant cities and city regions are more successful than those where the capital is dominant. The Chancellor endorses Lord Heseltine’s plan for a single pot of funding for local enterprise, but history will judge this promise—yet another post-election promise—on whether it helped the rich once again get richer.
So will the Chancellor continue to endorse this flatlining two-lane economy, or will he get the whole country in the fast lane to recovery? The Office for Budget Responsibility has said the Budget will
“have no impact on the level of GDP at the end of the forecast horizon”— in other words, it will not provide the short-term growth that we all desperately need. The sad truth is that my constituents’ hopes for some brave new thinking from the Chancellor have been dashed. Those without jobs want the chance to work and to help the economy grow. George Osborne’s action on infrastructure has failed to meet the scale and urgency of the need. Instead, we get another downgraded Budget from a downgraded Chancellor.
It is a pleasure to follow Nick Smith, even though I do not necessarily share every aspect of his analysis. I want to concentrate on two issues that address the concerns of families, particularly older people, in regard to the desire for greater incentives to save and to plan, and greater peace of mind when it comes to planning for pensions and for social care needs.
Before I do that, I want to pick up on the comments made by the Secretary of State at the beginning of the debate about one of the measures that the Government are introducing and of which he is particularly proud— something that is in the coalition agreement—namely, the introduction of the £10,000 tax allowance, which means that a typical working individual will not pay any income tax on the first £10,000. It is good news that that is being introduced 12 months ahead of schedule. As a Liberal Democrat member of the coalition, I welcome the fact that that idea, which was on the front page of our manifesto, has become the centrepiece of the coalition’s tax reform agenda and has been translated into action that will make a real difference to my constituents, giving them £705 tax back in their pockets to spend on the things that they want to spend it on.
The two reforms for which this Government will be most remembered for making a significant and lasting difference to certainty in old age are the introduction of the single-tier state pension and the recent announcements of the introduction of a cap on reasonable social care costs. I join the Secretary of State in his applause of the Pensions Minister for his tireless work developing and then driving through that policy change to deliver us a fairer, affordable and more readily understandable state pension system—one that is simpler and one that creates greater incentives to save by reducing the need to turn to means-testing as a way to deliver the state pension. That increase from £107 to £144 a week is incredibly good news. The announcement that it is to be brought in a year early, in 2016, is further good news. The fact that it delivers security in old age, particularly for women and for self-employed people, is to be welcomed.
That addresses future pensioners. Although the Budget did not address directly the current pension generation, it is worth remembering—as a Member of the House for nearly 15 years, I do remember—that one of the early Budgets of the previous Government resulted in a 25p increase in the basic pension, a miserly sum which certainly angered my constituents at the time. We as a coalition wanted to make sure that that could never happen again. That is why the introduction of the triple lock ensures that there is always a significant and generous increase in the basic state pension, and why we have seen the biggest ever cash rise, which is worth £650 every year to people on the basic state pension.
It is also worth saying that the Government are making real progress on social care reform, something that has long languished in the “too difficult to do” drawer and has not been tackled by successive Governments. As a former Minister, who was responsible for setting up the Dilnot commission, I was convinced by its arguments and argued inside Government for the implementation of its recommendations for a cap on reasonable care costs and a more generous means test. It is worth stressing that in our social care system today, for residential care we have one of the meanest and most pernicious of means tests anywhere in our welfare system, and it is good news that the Chancellor has accepted that we should move on this and start the new scheme from 2016. That is a long overdue reform that will give peace of mind and encourage people to plan and prepare for their future care needs. As I say, it has been a can that has been kicked down the road for far too long. Yet one in 10 of us who need care will be faced with the prospect of lifetime costs of more than £100,000, a catastrophic cost and a lottery that we cannot insure ourselves against. That again is why the introduction of the Dilnot proposals is so important.
I mentioned that the means test is amongst the meanest in our welfare state. At the moment, one’s wealth—everything we have ever worked for—must be run down to £23,250. The fact that that will rise to £118,000 is very welcome indeed. The combination of a cap at £72,000 and that means test gives individuals much more certainty, and ensures that more than half of what a person starts with will be protected, compared with losing 80%-plus under the current set of arrangements. But 450,000 people fund their own care, and they will need to come into this system. There is an essential need, which the Committee scrutinising the draft legislation has identified, to ensure that there is adequate capacity to assess those 450,000 people who will be queuing up at the town halls, wanting to be included within the cap system in the very early stages of its introduction.
Delivering Dilnot is only part of the Government’s plans for social care—some of the biggest changes to the system for more than 60 years. I hope that the Government will take note of the unanimous report of the Joint Committee on the Draft Care and Support Bill, particularly its recommendation of an awareness campaign, which is needed to ensure that people understand how those changes affect them and their families, and that they get the right financial advice at the right time. At the moment, 40% of people self-fund their care, and only 7% of them get financial advice. If they did so, we could probably avoid the taxpayer picking up a bill of more than £1 billion a year, so financial advice is well worth having.
I am proud that the Government are doing things that will give older people certainty to plan, to save and to make a difference in their lives, and that we are reforming our social care system, so long neglected, so long not dealt with. The coalition Government are dealing with it.
I am grateful for the opportunity to speak in today’s debate, and I make no apology for focusing the first half of my remarks on the north-east and on the Budget’s impact on my constituents. I had hoped for a Budget for the whole country, but I fear that the north-east is being left behind.
We have a lot to be proud of in the north-east. We are the country’s No. 1 car producing region, with one in three cars made on Wearside by Nissan. We have a strong record on exports and our world-class universities attract students from throughout Britain, and indeed from throughout the world. However, unemployment rates remain a considerable source of concern. In the last year in my constituency there has been a 96% increase in long-term unemployment, with an increase of 108% for young people. The situation for those aged 25 and over who have been claiming jobseeker’s allowance for more than two years is even more stark: there has been a 600% increase.
The unemployment rate in my constituency and throughout the north-east is higher than in May 2010, and the north-east continues to have the highest unemployment rate of any region. We witnessed in the past the devastating consequences of long-term unemployment, particularly among young people, and
Ministers cannot afford to be complacent and just hope for the best. My region needs a Government willing to take action, not repeat the mistakes of the past.
Figures from the House of Commons Library also show a significant increase in the proportion of working men in part-time work in the north-east—up 27% since 2007-08. I know from local trade union representatives that they are doing all that they can to work with employers to protect jobs, but that often comes at the cost of reduced hours and pay cuts. This proportionate increase in part-time male workers places greater strain on families who are already struggling to make ends meet, and it goes some of the way to explaining the rising tax credits and housing benefit bill. Families are being forced to turn to the state as hours and pay are cut at the same time as living costs rise, and that is before we consider the impact of under-employment in the economy. The Office for National Statistics estimates that the number of people who are under-employed has risen by 1 million since 2008. That is 1 million more people who want to work more hours, but they are simply not available.
In the remaining time that I have left, I intend to focus my remarks on one of the biggest barriers that parents, particularly mothers, face, and that is child care when returning to work. Affordable and accessible child care is vital to our economic and social success as a nation, allowing parents to work and helping to give children the best possible start in life. But parents face the triple whammy of fewer child care places, rising costs and reduced Government support. The measures set out by the Government in the Budget do not even kick in until the next Parliament and do nothing to help parents now. Even in 2015, the £750 million that the Government have identified pales in comparison with the £7 billion-worth of cuts made to families in this Parliament.
The Government’s plans to water down carer to child ratios will undermine the quality of child care, and are a real cause for concern. The Government’s own adviser, Professor Nutbrown, has today strongly criticised the proposals, saying that they make no sense at all, and that they are likely to lead to worse child care, with too few adults and too many little children. There is no guarantee that the plans will have the desired impact of reducing the cost to parents.
It is a cause of concern that parents face that squeeze and rising costs, but I am not convinced that changing the ratios is the answer. The Government need to ensure that the proposals do not have the impact of driving down quality and making parents so concerned about leaving their children in child care settings that they opt not to return to work because they are worried about the time that a carer will be able to spend with a child. I agree that this area concerns us all. I am sure that it concerns the hon. Lady’s constituents. We have to get it right, and my worry is that experts say that the Government are not getting it right and will need to look at it again.
In concluding, I want to return to what my constituents needed from the Budget. The OBR has confirmed that by 2015, people will be worse off than in 2010. My constituents will take little comfort from the Budget. They are paying the price of this Government’s economic failure. We needed a Budget to promote jobs and growth and to support families and businesses that are feeling the squeeze. In the north-east we showed considerable resilience in rebuilding and diversifying our economy following the loss of our traditional industries, but we need a Government for the whole nation, and if we are to complete this transition, we need action from the Government, not more of the same failed policies of the past.
I am grateful to follow Bridget Phillipson and I thank her for a thoughtful contribution to the debate. I will be extremely non-controversial and talk about two technical measures regarding social enterprise investment, which I hope will attract hon. Member’s interests, but it may not attract the interest of all hon. Members.
To pick up briefly on growth, we heard from the Opposition claims that this is not a Budget for growth. Whatever is said in the House, I take comfort from what those outside the House say, such as the Federation of Small Businesses, to which I referred. It said how much it welcomes the Budget and the contribution that it believes it will make to creating jobs, which is fundamentally what this is about. The CBI has welcomed many of its initiatives on a micro-economic level. The main people who are doing the business, not talking about it as we are doing, are broadly supportive of many of the measures and recognise that they will bring growth. I suspect that it is they who can give us a non-partisan, objective look at what will happen. The measures on national insurance, housing, fuel, the business bank—we await further details on that—corporation tax and anti-avoidance are significant moves towards what we all want: more jobs and people being lifted out of difficult times.
I will now turn to the specifics. Over the past few years, particularly the past two and a half years, there has emerged a thirst for social enterprise, the use of local community development finance initiative funds and housing to help drive change in local communities. At present, the tax system does not go far enough to help to encourage that. I and others have lobbied the Chancellor to encourage tax changes so that we help mobilise private capital towards local community development finance initiatives. CDFIs are vital, since the non-bank CDFIs—this is a crucial difference—are running out of money at a time when demand for their funds has never been higher, as a result of the need for alternatives to high-interest lenders for disadvantaged and financially excluded communities.
What does that actually mean in practice? Let me set the scene. Capital funding for CDFIs has more than halved in the past two years. That means that they do not have enough money to support the requests for funding from CDFI initiatives. In fact, the demand for lending from CDFIs rose by two thirds over the same period that their capital was halved. The disbursals remain unchanged, but that poses a threat, because their balance sheets are getting weaker as a result of lending more money. Members might be surprised to learn that barely 20 CDFI houses have less that £500,000 left each for lending, which means that at least half the sector is struggling and we are facing a problem.
Despite some of the tax measures, such as the aptly named “community interest tax relief”, with which I am sure all Members are familiar, private sector support for those CDFI houses is low. Money is going to the banking institutions that run community development finance initiatives—banking CDFIs—which, of course, are not focused entirely on lending to those who are slightly more disadvantaged or to more of the social enterprises. However, under the present tax regulations for CITR, those banks are claiming 70% of virtually all the relief available. The wrong people, who are not lending at community level, have most of the money and are getting most of the tax relief. The Treasury has listened, or so it indicated in the Budget, about the challenge that presents, and I am pleased to draw Members’ attention to page 74 of the Red Book, where the Treasury sets out that it will look at CITR and consider measures to help social investment tax relief from private people.
I support community investment tax relief—Foundation East is my local CDFI. However, I encourage my hon. Friend to go further than simply restricting it to CDFIs and allow direct investment in community interest companies, because CDFIs can often be middlemen. We need to expand the scheme and not keep the focus narrow.
My hon. Friend raises an interesting and technical point that I will move on to later, because it relates to a model in north London. There is a need to find a CDFI to manage the investment that goes out and its disbursal to local businesses and enterprises, and I will touch on that point briefly.
Essentially, I am arguing that we should tailor tax changes to the non-banking CDFIs that would allow private capital to come in, in very small amounts if necessary, as well as from small businesses that might want to take their corporate social responsibilities to a level at which they just want to fund local activities and be assured that those funds can go into just those activities and that they do not necessarily have to manage the whole programme. If the Treasury, as part of its review, looks at measures that are more flexible and allow multiple different types of vehicles to attract the tax relief, there will be advantages for the investor and it will increase the capital of the CDFIs, some of which are in danger of being unable to function for much longer. A more realistic tax scheme would mobilise private capital towards those institutions, and we could even start mobilising capital from very successful crowd funding exercises.
That brings me to an example that we are putting together in north London, which alerted me to this problem in the first place. I have been ably assisted by the local Member of the European Parliament, Syed Kamall, and by my hon. Friend Zac Goldsmith. Essentially, we have been working on a scheme for north London crowd funding so that we can back start-ups, particularly for young entrepreneurs who are looking at it as an alternative to full employment. It is based on the Kiva model— I recommend that
Members look at it—which derives capital from small loans from individuals, and even an option for small and medium-sized enterprises and corporations to meet their corporate responsibility ambitions. Kiva is aimed at the third world. An individual can give as little as £25 to the scheme and choose someone to support. They do not make a profit, but they are lending at a reasonably attractive rate to people starting small businesses, such as shops. I want to change that and bring the model to north London so that people can have a stake in investing in their community and roll it out worldwide. All that I am asking the Treasury to do, in its review, is try to introduce attractive tax investment incentives, perhaps as simple as ticking a box, so that the £25 can become £30 or the £10,000 can become £12,000. I think that it is a win-win situation.
In a previous era of austerity presided over by a Tory-dominated Government, the slogans on Conservative party posters in its failed 1929 general election campaign included “Safety First” and “Trust Baldwin he will steer you to safety”. Having presided over the worst recovery in over 140 years, with an economy that is increasingly plagued by low investment, falling real wages, low productivity, dismal demand, stalled deficit reduction and surging public debt, the one guarantee is that the Conservative party will not be using either of those slogans in the name of the current Chancellor or Prime Minister come 2015.
I will give way in a moment.
With the OBR having confirmed on Wednesday that people will be worse off in 2015 than they were in 2010, the Conservative party will also be unable to revive the 1959 election slogan: “Life’s Better Under the Conservatives”.
I have spoken in pervious Budget debates about the absurd economic theories that have underpinned the Government’s fiscal policies since 2010. As Mark Blyth writes in his recently published work on austerity:
“Austerity is a zombie economic idea because it has been disproven time and again, but it just keeps on coming.”
The central idea behind the Government’s economic policy is that a short-term sacrifice by the British people would produce long-term benefits in growth and a massive reduction in national debt.
There have been plenty of sacrifices demanded by the Chancellor: the average £10.47 a week in reduced support for child care for ordinary families since 2011; the higher VAT, which is costing ordinary families four times more in this Parliament than they will get back through the rise in the personal allowance to £10,000 from next year; the 1% cap on most benefits and tax credits being introduced in weeks, hurting 5.l million working-age households by as much as £5 a week on average; and, most cruelly of all, the vicious bedroom tax. The cumulative loss to ordinary families’ living standards in Scotland resulting from the tax, benefits and wages policies pursued by the Government has been quantified by Landman Economics for the TUC as £28.63 a week, or £1,488 a year, by 2015. What has it all been for? Where is the growth? When will our debts begin to fall during this Parliament? When will living standards begin to rise again for ordinary people?
Since the spending review in 2010, we have seen the third lowest growth in the G20, the fifth worst industrial production in the European Union and the fourth biggest slump in real wages in the EU. The judgment of the Office for Budget Responsibility on the Budget has been brutal—growth downgraded this year and next, by 0.8% of GDP, even since last December’s autumn statement; this Budget adding nothing to growth all the way through to 2018; borrowing £245 billion more than promised in 2010; and the national debt doubled by 2018 if we continue with the Chancellor’s failing plan.
Four years into a recovery, unemployment is stuck at 2.5 million—and is predicted by the OBR to peak at 2.63 million next year—and there are 3.2 million people underemployed in this country, desperate for more hours at work to pay the bills but unable to get them under a flatlining economy.
The Budget should have attempted to secure two aims: first, to boost economic demand to stimulate higher growth in the short term; and, secondly, to begin the process of rebalancing the economy by ending the culture of short-termism and making the fundamental reforms we need in our banking system.
In Scotland, retail sales are falling in a sector that comprises more than three quarters of economic output. Real wages have slumped by 3.2% since autumn 2010. Median wages are more than £3,000 a year lower in real terms since 2009. This week’s OBR projections mean a further loss of £200 a year in wages—four times more than any benefit from the increase in the personal tax allowance next year. The Chancellor should have eased that burden by cutting VAT to 17.5% in the Budget and putting back some of the £480 a year on average that he removed from average families in the June 2010 Budget. He should have done far more on child care costs.
This is a simple question. The hon. Gentleman has outlined what he would like to have seen in the Budget. Assuming fiscal neutrality, how would he have paid for it?
The shadow Chancellor has said that we would follow a different path. Continuing with the fiscal policy that the Government are pursuing will lead to a doubling of the national debt and a downgrading in growth this year and next. We need to do something different, as I hope the hon. Lady will accept when she makes her contribution.
As I was saying, HMRC has shown that in the year to last December, the amount of additional support, through the tax and benefit system provided to ordinary Scottish families with their child care costs, amounted to a miserly 1p a day extra. For this year, next year and the year after, the message from the Chancellor in the Budget was, “Not a penny more.”
Under the plans unveiled on Tuesday, households require all earners to be working and paying income tax to benefit either from the child care tax relief or the additional resource through universal credit, which will have to be found from elsewhere in the welfare budget. We see the gross unfairness of a two-earner couple with children, working part time on a combined income of £19,000 a year, receiving nothing under the plans, whereas a household with two earners on a combined income of £299,000 a year receives a tax break of £2,400 a year if they have two children. How on earth can that be fair?
The Chancellor should have brought forward more capital investment in the Budget. He should have announced a major social and affordable house building plan to begin this year. All he announced was a plan to reallocate capital spending from 2015, which will be of no help to the struggling construction sector now. He should have taken the opportunity to scrap the bedroom tax affecting nearly 90,000 households in Scotland.
The Chancellor has spent the past few months searching for escape velocity for the UK economy. Wednesday was the day when he finally crashed to earth. He will not change course because he puts his pride before this nation’s economic fall. He would rather that the living standards of millions were diminished than admit the scale of his mistake or take action to put it right. Only with a new policy to promote growth and boost investment will we generate the tax revenues to cut our debt. After this Budget, that can come only with the election of a new Government to replace this disastrous coalition.
I am glad to follow Mr Bain, who talked about bad economics, which will be the central theme of my speech. He also asked why there has not been growth. I refer him to the report “Thinking the Unthinkable”, which has the unfortunate subtitle “Project Armageddon—the final report” by Tullett Prebon. It explains that three of the UK’s eight largest industries—real estate, financial services and construction—accounting for 39% of the economy, are incapable of growth now that net private borrowing has evaporated.
The report goes on to say that another three of the top sectors—health, education and public administration, plus defence—account for a further 19% and cannot expand now that growth in public spending is a thing of the past. That means that 58% of the economy is ex growth, a figure that could rise to 70% if, as seems probable, growth in retailing is precluded by falling real consumer incomes. That is why there is no growth, and it is important to understand properly why we are in this mess.
The Budget was one of two halves. I certainly welcome all the tax cuts—the £10,000 personal allowance and so on. I am sure that my constituents will be glad to know that fuel duty will be 13p lower per litre than it would have been under Labour’s plans. However, I want to talk mostly about credit market interventions and monetary activism. I am particularly reminded of the curious fact that the general disinclination to explain the past boom by monetary factors has been quickly replaced by an even greater readiness to hold the current working of our monetary organisation exclusively responsible for our current plight.
The same stabilisers who believed that nothing was wrong with the boom, and that it might last indefinitely because prices did not rise, now believe that everything could be set right again if only we would use the weapons of monetary policy to prevent prices from falling. The same superficial view sees no other harmful effect of a credit expansion but the rise of a price level now has it that our only difficulty is a fall in the price level caused by credit contraction. I thoroughly recommend the preface to “Monetary Theory and the Trade Cycle”, published in 1932, since which little has changed when it comes to the error of the monetary stabilisers.
We need to ask ourselves what is holding the economy back. I refer particularly to feedback from Stewart Linford chair makers in my constituency. Stewart Linford is a great man, and chair making is what made High Wycombe a great town. As costs rose in Britain, Stewart remained competitive by increasing the quality of his product and exporting. Yesterday, he said to me:
“What’s holding me back isn’t red tape. It’s not taxation. It’s not even foreign competition. It’s HSBC bank holding our money against an interest rate swap we didn’t need.”
That swap was originally sold to him by RBS. I fully support the Government’s efforts to change the culture of banking. Previously, they have talked about the need for a responsibility revolution and it is firms such as Stewart Linford’s in my constituency that demonstrate the great David and Goliath battle that is going on.
Why is that battle going on? If we look at debt in the past 10 or 13 years, we find that the big story of banking and money is a great transformation in borrowing. In about 2002-03, under the previous Government, mortgage lending rose substantially. Eventually, the banking system blew itself up and mortgage lending collapsed and deficit spending by the Government took over.
If we look at the money supply back to 1997, we find that under the previous Government it tripled. In 1997, M4 was £693 billion; by 2010, it had risen to £2.2 trillion before stagnating. That chart, if well understood, is remarkable. It tells us that there was an accelerating rush to destruction in debt. Shortly, we will realise that while we were originally told that this was a banking crisis and then that it was a debt crisis, we will have to face up to the reality that what we use as money is debt—debt that was loaned into existence in response to incentives created by central bankers lowering interest rates.
Is it not a fact that when the Labour Government came into office in 1997, debt stood at 42% of GDP? When the banking crisis hit in 2008, it was down to 35%. The reason for its increasing was the fact that we had to bail out the banks and carry out the economic stimulus, which made the economy grow—all that, including the spending targets, was supported by the hon. Gentleman’s party when in opposition.
I am grateful to the hon. Gentleman. I came here to speak today because I expected to have 20 to 30 minutes, and if I had, I would have given him a full explanation. In many ways, I am trying to help him. If he looked at price inflation going back to 1750, he would discover that for the whole of my lifetime, since 1971, we have been living in an inflationary era unprecedented in industrial times. That is why the banking system was broken. If money is pumped into the economy at that rate, that is bound to create asset price bubbles. An independent Bank of England therefore found itself controlling the money supply by looking at price inflation without looking at house prices, which were rushing away. That was bound to end in catastrophe.
Let me explain the problem with the Chancellor’s policy on credit market intervention. When we look across the range of things that were intended, we can see that there is a clear objective, which is to restart the process of credit expansion—credit creation—into the economy. In the short term, that is indeed bound to create an increase in trade and housing and to create a small housing boom. The problem is the damage it does to the rest of the economy. If I had more time, I would talk at some length about the problem being that for far too long people have persisted in believing that there is a simple mechanical linkage between aggregate demand and total employment, but unfortunately that is not true. What matters is the distribution of employment and the use of capital across the structure of the economy and through time.
I am enjoying my hon. Friend’s argument and would like to hear him expand it further to talk about the effect of the limit on the amount of time that this measure is being given.
I am grateful to my hon. Friend. Time is crucial not only in this debate but in the economy.
When one looks at Mark Carney’s speech of February last year and at what the Government are doing, it is pretty clear what is going to be done. Inflationary expectations will be anchored to the 2% target, and the Bank will be given a more relaxed reporting regime. It is clear from Mark Carney’s remarks that he intends to use monetary instruments. Let us face it: this is about money creation. He is going to increase the supply of money in order to pump up the GDP figure and so manipulate people’s expectations. It is hoped that by manipulating people’s expectations the economy will come back just in time to deal with the money creation process and get inflation back on target. The whole thing is predicated on the Bank of England’s ability to manipulate the expectations of the 65 million people in the United Kingdom.
Somebody such as Stewart Linford, who has to live in the moment as an entrepreneur, keep employing people, and keep creating and exporting wonderful furniture, deserves better than to be deliberately and systematically misled by a big player such as the Bank of England knowingly manipulating expectations through monetary policy in order to produce particular outcomes—if it is lucky and expectations of inflation do not get out of control. Last time I spoke in the Budget debate, I explained that if the Bank loses control of inflationary expectations, the bond market bubble could burst and that could then lead to a very fast rise in interest rates, which it might then have to combat by further printing money.
Government Members know me well for always carrying on my person 1 ounce of fine silver and a $100 trillion dollar note from Zimbabwe. In the end, our society is based on money. One side of every transaction is money. If there is something wrong with money, there is something wrong with the entire economy. Right now, the reason we are in this mess is that we do not have good money—we have bad money. One can hold bad money—bad politics—in one’s hand. If we get into a position where we just borrow, borrow and borrow, with no ability to repay, creating credit out of thin air, as was done in 13 years—
Mr Jones is smiling; I really do not know why, because 65 million people in this country are having a miserable time.
I was not in Parliament at that time. If he had listened to what I have said and read what I have written throughout all my time, he would find that I have consistently advocated this point: that the problem with the Keynesians and the monetarists is that they neglect the importance of time and the structure of capital. That is what is going on again, and it will end badly.
I want to concentrate my comments on local government and, in particular, housing, although I appreciate that Monday is the allocated day for that.
This Government’s housing stimulus fails to recognise that the economy in the regions is not just stalling but in recession, and that rebalancing the economy is about boosting the construction industry in places like east Lancashire. This Budget fails to achieve that. It does nothing to tackle the shocking state of much of the housing stock in constituencies such as mine. It is worth putting it on the record again that there are wards in my constituency with over 70% non-decent homes in the private sector. Cutting VAT on property refurbishments would have been a much better move in these areas, because it would have boosted the construction industry where there is already an over-supply of housing.
The Government’s record on housing so far is a confetti of failed announcements. I think it was said of the previous Housing Minister that if a house had been built for every announcement he made or press statement he released, we would not have a housing crisis. As a result of all these Government announcements, house building has fallen, rents are rising, home ownership is becoming a harder, not an easier, goal for young families to achieve, and homelessness has risen. The new homes bonus announced by the Government in 2010 was supposed to unleash growth and build at least 400,000 additional homes, but it has failed to deliver. Housing starts fell by 11% last year to below 100,000—less than half the number required to meet housing need, which stands at about 230,000.
Next up was the Prime Minister, who claimed that the latest scheme, NewBuy, would assist 100,000 people to buy their own home. To date, however, this Government scheme has helped just 1,500 people to realise their dreams—1.5% of the target. Then we had the Government’s £10 billion guarantee scheme, which has yet to deliver a single penny of support for house building. The Government’s record on house building so far is abysmal.
On Wednesday, we got the latest wheeze—the announcement of the Help to Buy scheme, which is in fact the NewBuy scheme dressed up because that has not been particularly successful. The new scheme has already been met with caution. The Chartered Institute of Housing is concerned about any success simply fuelling another housing bubble: a supply side failure and an over-leveraged mortgage market. The Financial Times described the rebranded scheme, Help to Buy, as the right to default under a headline “Housing plan parallels US home loans system”, and commented that the Chancellor
“has not learnt the lessons of the credit crunch”.
This scheme will encourage people to overstretch their finances and max out their mortgages to take advantage of the offer. In short, read Fanny Mae and Freddie Mac, whose lending precipitated the 2007 financial crash. We have the irony of a Government who have forced banks to tighten their lending criteria now enabling a relaxation of mortgage lending terms, with taxpayers on the hook.
The criticisms come not only from Labour Members and from the industry: I note that in this morning’s press it has come from the Chancellor’s own Benches, with Kwasi Kwarteng stating:
“Having a system where you are giving mortgages without increasing supply will lead to price inflation. We”— the Government—
“could have announced something bolder that increased supply”.
Alas, that is not the case. Worse, in the equity loan element of the scheme, the Government have only a second charge against the property. I am deeply concerned about that, because it will leave the taxpayer with all the risk and the mortgage lenders with all the profits. Fathom Consulting says that the plans amount to “sub-prime lending” and:
“Suffice to say that had we been asked to design a policy that would guarantee maximum damage to the UK’s long-term growth prospects and its fragile credit rating, this would be it.”
The overwhelming barrier to the housing market is the spending review’s 60% cut to the budget for affordable housing, which is affecting the state of the economy. The Chancellor has failed to deliver a real plan for growth; all he can offer is more of the same.
Criticism of the Help to Buy scheme has continued in this morning’s press. Nick Pearce of the Institute for Public Policy Research has said that the Government
“continues a strategy based on propping up—indeed inflating—prices rather than getting additional homes built. This suggests that the lessons from the housing bubble that contributed to the financial crisis have not been learnt and that orthodox thinking on housing policy remains entrenched in Whitehall.”
“the danger is that if we don’t tackle the fact we’re still not building enough homes, we’ll just create another housing bubble that will continue to push house prices up and out of reach of the majority.
Our housing market has long been weakened by the lack of new houses being built, which are forcing up rental and house prices—leaving millions of people struggling to get on the property ladder or pay their rent.”
Duncan Stott of Priced Out said:
“The only thing that will genuinely help first-time buyers is for house prices to fall back to an affordable level. Pumping government debt into the housing market will just push house prices further out of reach.”
He also said:
“Help to Buy is bad enough on its own, but to also open it up to second homebuyers would really rub salt in the wounds of Generation Rent.”
The criticism does not end there. CentreForum says that
“it is difficult to see how today’s demand side measures under the ‘Help to Buy’ scheme will help. These measures could actually increase the cost of housing and may also mean that any significant fall in house prices results in big losses for the taxpayer.”
It has called for more supply-side answers, but the Chancellor’s Budget has failed to come up with any such solutions. CentreForum also states:
“Far better would have been a rejuvenated effort to introduce community land auctions…or a scheme to give housing associations the ability to issue government backed bonds for the construction of new homes”.
Shelter has also called for limits on council borrowing to be lifted in order for more social and council housing to be built.
In a constituency where house building is flat for many reasons—
The Budget shows that this Government’s policies are beginning to work in the context of what Governments can realistically do to help an economy. Mr Byrne suggested a fantasy world in which Governments can send a Chancellor to the Chamber on a Wednesday morning to press a growth button and introduce a new policy that will suddenly do this, that and the next thing. That is what some rather poor economists thought in the 1960s, but they have been proved comprehensively wrong. What Governments can do is set the framework within which businesses and individuals can lead economic growth. Governments cannot of themselves—they even failed to do this in the Soviet Union—create real growth just by the fiat of the Government.
How can we see that the Government’s policy is beginning to work? Two crucial statistics are now available. The first is the reduction in Government spending—the cut from 47.4% of GDP to 43.6%. That is a substantial reduction in the Government’s share of the nation’s income. It has taken some years to achieve and it needs to be reduced further, because, on average, it is very hard for Governments to get more than 38% of GDP in taxation—if it remains at 43%, there will still be a big deficit—but it is a huge move in the right direction to create stability in the economy, which will then allow businesses and individuals to lead economic growth.
Opposition Members are talking about their new path. There was a Shining Path in one country at one point, but that was not very successful, although the Opposition are probably looking for the Via Dolorosa. We are definitely making progress.
I want to pick Mr Bain up on his wonderful reference to the 1930s. I was pleased that he reminded us of our splendid slogans, which I will certainly use in my election campaign.
I think that this was a “Safety First” Budget, and quite right too. What the country needs is genuine prudence, rather than the prudence of the late ’90s and early 2000s.
I was referring to the 1920s rather than the 1930s, but I think the point applies. The hon. Gentleman refers to growth, but given that the private and public sectors are retrenching, where will demand in the economy come from for there to be growth?
There is a union of people whose seats have “North East” in their names and who make helpful interventions. I am extremely grateful to the hon. Gentleman because he leads me right to my next point, which is about the absolute essence of where growth will come from. I refer right hon. and hon. Members to page 56 of the “Economic and fiscal outlook” produced by the Office for Budget Responsibility, which contains charts on household leverage indicators. That is crucial because about three-quarters of the economy is dependent on private consumption. What we needed, and what has taken time, is for household budgets and balance sheets to rebalance at the same point as the Government balance sheet and budget.
In these charts we see that income leverage—interest payments as a percentage of income—is now at an historic low. That is important because it means that households can now afford to spend. Even more important, asset leverage is back alongside historic averages, so households are no longer over-geared in the way they were in 2007 and 2008. I actually think that the figure on household leverage is overstated because there is still a lot of bad debt in the system that the banks have been reluctant to write off because of concerns over their balance sheets. That is what has happened over the past few years. By following stable and sensible policies, the Government have allowed households to shore up their balance sheets, which means that they will now be in a position to begin to spend again should they wish.
Having looked at the big macro picture of two crucial things—Government expenditure under control, and household balance sheets restored—it is worth considering some of the positive detail within the Budget. The £2,000 cut in national insurance for businesses is fantastic. We know that small businesses are the ones that create new jobs—a series of data from the United States show that, on average, large companies shed 1 million jobs a year, while small companies create just over 1 million jobs a year. The reason for that is straightforward: large companies are always looking to cut costs, but small companies are where new ideas are built up. Anything that helps small businesses is welcome and national insurance is a very bad tax on jobs. I hope that ultimately the Government will look at national insurance in the round, but that will need to be in a time of boom, rather than a time of austerity.
The other policy that is relevant to today’s debate, which was opened by my right hon. Friend the Secretary of State for Work and Pensions, is the £10,000 tax threshold. That is a joy to behold because it gets us away from the taxation and benefits merry-go-round where people on low incomes are taxed and then given back some of their own money, once the Government have taken a cut for administration. We want to get that threshold as high as possible so that we do not tax people and then give them benefits. We want to get people out of that altogether, and out of the dependency culture that exists when we tax people on low incomes.
This measure has a further benefit if it can be extended and if the national insurance threshold can be raised, because that will reduce the administration of employment. If the national insurance threshold can be raised towards the £10,000 tax threshold, employers will be able to pay their employees without having a big administrative burden on top. I hope the Government will look at that as it would be a fantastic boost to employment. I think it could possibly be paid for simply by shifting the band for employees national insurance into line with the increase that would be made from the current level to £10,000. I accept there would be a gap on employers, but that might be minimised by doing it in the way I suggest.
The hon. Gentleman is making a far more eloquent case than the Chancellor managed for this set of policies. He seems to be saying, however, that we should not have a contributory system towards the welfare state. Is that where his argument is heading?
No, that is not where I am heading. I am saying that the contributions of people at the lowest end of the pay scales should be minimised.
Graham Jones spoke of the Government’s housing scheme. It is potentially a very exciting scheme, and the most important part of the Budget. There has been some talk of the risk, but I believe there is very little risk. I have had a look at the house prices figures produced by the Land Registry from 2008 to date, and at inflation over the same period. If we combine the two, we see that house prices on the Land Registry index have fallen in real terms by nearly 25% since 2008, which means that the scheme is being introduced at a point when house prices are sustainable, and when the risk to the Government’s balance sheet is limited. The scheme has the great potential not only to allow people to buy properties for the first time or to move into better properties, but all that goes with that, such as refurbishment, extra spending on DIY and so on. The measure could be a boost to consumer expenditure as well as free up the housing market.
I have one caveat to make before I conclude. I am concerned about the general anti-avoidance provision, which may threaten the rule of law. I will speak more about that later.
We have heard a great deal in the Budget debate—not unreasonably—about public debt, but less about the private sector crisis that generated the public sector debt crisis. We have also heard about the impact of private debt and deleveraging, including from Jacob Rees-Mogg. In that context, it might be worth mentioning that private debt and deleveraging are connected with the substantial decline in the number of people who can afford their own homes because of house price inflation in the past decade. That feeds into the core of my argument on the extent to which housing and housing costs have led us to a crisis in the welfare state.
We have heard less in the debate about flatling growth, the crisis in unemployment and under-employment, and the crisis in real wages and living standards. It is worth noting that real wages fell by 0.7% last year, and that average earnings will have fallen by 2.4% over the course of this Parliament. That fall in purchasing power is contributing to the continued stalling of growth.
Unfortunately, housing costs are at the heart of the living standards crisis, particularly in respect of first-time buyers, younger people, and those in what we call generation rent. Home owners have benefited for a decade or so from low interest rates. The tragedy is that many people are not aware of the fact that low interest rates are sustaining lower mortgages. A third of home owners have interest-only mortgages, and are extremely vulnerable to a future rise in interest rates.
Shelter has demonstrated consistently the crisis in home affordability. Some 7.8 million people struggle to pay their rents and mortgages, and 2.8 million people rely on unauthorised overdrafts and payday loans on a regular basis to cover the cost of their mortgage or rent. With underemployment and the continuing flatlining of real wages, that situation will only get worse.
In turn, that has contributed to a dramatic rise in the number of people who are caught in generation rent—they cannot save for a deposit and cannot get a mortgage because of the high house prices we have seen for generations. Two million more people now rent in the private sector than 10 years ago—26% of all Londoners now rent privately. That driver into the private rented sector has led to an escalation in rents, particularly in London. London rents now average £2,200 a month. Naturally enough, people are unable to afford such bills. That explains why the housing benefit bill has risen. It is due not to Government policy, but to the increased case load in the private rented sector, together with unemployment and flatlining wages. The Government, despite their rhetoric, will spend £12 billion more in real terms on housing benefit in this comprehensive spending review period than the last Government spent under the previous comprehensive spending review. That was the figure before the Office for Budget Responsibility upgraded that expenditure this week.
If I were the Secretary of State for Work and Pensions, I would be furious that the Department for Communities and Local Government had driven up the bills of my Department through its housing policy, with the failure to build and the halving of the affordable housing investment programme, and its rents policy. However, if I were the Secretary of State for Communities and Local Government, I would be equally furious at the extent to which the Department for Work and Pensions policy of capping housing benefit had increased the pressure on my budget, particularly through homelessness. Today, we have heard about a further rise of 10% in homelessness, with an increase of 22% in London. That is not only a human tragedy; it costs money.
Will the Budget proposals address the crisis in housing and housing affordability? No, they will not. David Orr, the chief executive of the National Housing Federation, has said that if the investment had gone into affordable housing supply instead of the mortgage guarantee schemes, it would have delivered 175,000 new homes and a £30 billion boost to the economy. We know that the money is available because the Chancellor has secured £13 billion to underpin the mortgage schemes. Those schemes are effectively the rebranding of existing schemes that have not worked over the last two or three years. As other Members have said, the schemes risk inflating a housing bubble.
A consistent theme is emerging not only from the Opposition but from commentators on the right. Even the Daily Mail has said today, “Could the great state mortgage scheme be hijacked by the rich?” The answer is probably yes. It will be a boost to older buyers and second home owners, rather than the young. Mervyn King, of the Bank of England, has warned that the mortgage guarantee is not the answer to the housing crisis. It will stoke up house prices and continue to freeze younger homebuyers out of the housing market, which will keep them locked in generation rent. That will in turn lead to an increased housing benefit bill, which Ministers will scurry to try to cap.
The housing crisis is being exacerbated, not relieved, by Government measures. That has a fundamental impact on private debt, the banking crisis, in-work and out-of-work poverty, work incentives and welfare. The Government inherited an imperfect position on housing supply, but they are making it considerably worse. Beveridge and Keynes, those giants of post-war economics, knew that affordable housing was the key to—
It is an honour to follow my hon. Friend Ms Buck, whose expertise on these issues is unparalleled. My remarks will focus on two matters: debt and welfare.
Given the landscape that the Budget has put this country into, the Labour party will never again take lessons from Government Members about the management of the public finances and public debt. We will not listen to them seeing that they are borrowing £245 billion more than they planned and will not meet the promises that they have made year after year. We have the embarrassing spectacle of the British Government being a bad partner by delaying the payment of bills and putting people at risk with their contracts, as the OBR makes clear.
While the Government are trying to avoid the debts that they have incurred, the British public cannot avoid the debts that will be incurred as a result of the Budget and the Government’s actions. I tell the House plainly that any financial director of a company who came to the board three years in a row asking for more money, having got their sums wrong, would be sacked, and rightly so. That is the situation in which we are leaving the British public. The British public are struggling.
Steve Baker is not in his place, unfortunately. He suggested, in a rather cavalier manner, that the country is awash with suffering. We see that every single day in our local communities. We see people for whom any increase in the personal allowance will be wiped out by cuts to tax credits and child benefit. We see people suffering from pay freeze after pay freeze, when prices have risen five times as fast wages. We see people who are feeling the squeeze—those are not my words, but the words of Which?. It talks about a “squeezometer”, with 40% of people feeling the squeeze, and an increase in people who are using credit or overdrafts to make sense of it. In particular, it reports that 9% of people are defaulting on their bills and loans, and that 49% are now worried about their level of debt—that is up by 5% on last month alone.
That is the context in which the Budget needed to make sense. It is in my own community, where 60% to 70% of income is spent on housing costs alone, that we see the struggles we face. The problems raised by my hon. Friend the Member for Westminster North have not been addressed and so will not go away, whether they are problems with the cost of energy, food or transport.
Most people would say that people in my community need to get a job. Many people in my community want to work. Unfortunately, we have a stubbornly high level of unemployment in Walthamstow. We have a much higher level of unemployment than other areas of London, and one of the highest levels of youth unemployment in London. Our rate is 10%, compared to just 6% in London and 7% nationally. That is why our welfare system is so important to the people of Walthamstow—important to ensure that it is fair, supportive and helps people get back into the work they want to do.
That is why I am horrified by the comments of the Secretary of State. We have seen today the revelations that there are targets for sanctions in my local jobcentre. Those targets mean that people, whose behaviour may well be understandable or rational, are still being sanctioned and having their benefits taken away as part of the Work programme, which we know is a terrible failure from the figures we have already seen. It is clear that the sanctions, and how they are being applied, are damaging people’s lives. For the first time we have conclusive proof that that is not by accident, but by design.
The e-mail contains the shocking allegation that staff in my jobcentre are so worried about losing their jobs if they do not sanction people that they are making up reasons to sanction people. What does that mean? That means sanctioning people with family commitments, sanctioning parents who have informal shared custody arrangements, sanctioning people caring for their family members, sanctioning people who may struggle with the English language, and sanctioning people who cannot find an interpreter to go with them.
The e-mail is not the work of one over-enthusiastic member of staff. When it mentions league tables and the role of divisional managers, it is clear that this is not happening by accident. I do not blame the person who sent me this whistleblower e-mail and I do not blame the scared jobcentre staff who are desperate to meet the target for sanctions that they have been told to reach— 25 sanctions per week, when they are only finding six. They are clearly frightened for their own jobs. I blame the Government who are asking everyone but themselves to take the blame for their failed economic policies. They are now setting up my community to fail, just so they can meet their own targets.
That is why the independent review into the use of sanctions in the Work programme is critical. I trusted Ministers when, on Tuesday, they claimed that there are no targets whatsoever. I now see that that means that they are either simply admitting that they do not know what goes on in their own Department, or that they were not giving us the full truth on Tuesday in this House. We need an independent review to get to the bottom of this problem, and to understand just how out of control this toxic Work programme is.
On Tuesday, my right hon. Friend Stephen Timms set out 10 questions for the inquiry. I would add another: are sanctions being made to reach a target to help ensure that the Department for Work and Pensions reaches its own budgetary requirement? The clock is ticking for Ministers to come clean about what is going on, and to stop saying that there are no targets for sanctions in the Department. They admitted to newspapers last night that the whistleblower e-mail that I brought forward was true, yet today the Secretary of State has tried to claim that it is not. The clock is ticking. I urge others not to be frightened and to use the whistleblower legislation to come forward and tell the truth, so that the independent review can hear what is really going on.
This issue is too important. We must get welfare right. We have a system that, yes, offers something for something, and, yes, uses sanctions where appropriate, but this is not appropriate. This is not about behaviour; this is about budgetary targets. This is about telling people, “However hard you are working does not matter to us, we will penalise you.” That is not fair. That is not right. That is not appropriate in the 21st century. It will do nothing to help this country get back on its feet, and the Government should be ashamed that this is happening.
It is a pleasure to follow two excellent speeches from fellow female Labour London MPs. Jacob Rees-Mogg said that households should now be able to afford to spend. That might be the case for his constituents, but it is not the case for mine. It certainly does not feel that way to them, as they struggle hard to make ends meet on a daily basis.
I want to focus on the importance of jobs and of getting people back to work, and I will pick up on the proposed child care scheme. Two things in particular struck me about Wednesday’s Budget, the first being the level of complacency among the Government about the economic challenges facing the country and the second, no less concerning, being the lack of imagination, leadership and vision in coming up with solutions to get our economy moving and get to people into work.
While thinking about what to say, I read the transcript of the last two days’ Budget debate. The speeches fell into two categories. Government Members welcomed initiatives such as the 1p cut in beer tax and the cancelled rise in fuel duty—all fine, as far as it goes—and Opposition Members talked about the tough reality of their constituents’ lives, about people struggling to make ends meet and to find or stay in work. Government Members would then attack us, claiming that we were talking our country down. I ask myself, “What underlies this difference between the speeches?” There might be an element of political points scoring or a desire to get a headline, but in truth—perhaps I am being too generous—we all see our country through different eyes.
Our stagnating, flatlining economy affects different parts of the country dramatically differently. When the Chancellor and the Prime Minister slap each other on the back about private sector job creation, I realise that they do not see the queues outside their local jobcentres that I see every week. When the Chancellor argues against capping bankers’ bonuses, I realise that he does not immediately think, as I do, “Hang on a minute. There are hundreds of bankers in this country who will earn more in one year than my father will earn in his lifetime.” When he proposes a scheme to help people buy second homes, I realise he will not be sat in an advice surgery this afternoon, listening to people so far from being able to afford to buy a home, that all they say to me is that they just want to be able to rent a decent property at a price they can afford.
I see little in the Budget that will bring genuine hope to my constituents, particularly those already paying the heaviest price for the mistakes of others. Last month, in Lewisham East, 3,517 people were claiming jobseeker’s allowance, which compares with about 900 in the Prime Minister’s constituency. There are 500 more people on the dole in my constituency than there were in 2010, and youth unemployment and long-term unemployment are up. So where was the good news for those people on Wednesday? The Government have at least listened to the Opposition’s calls for national insurance reductions for small and medium-sized businesses—and about time too—but where is the vision for the jobs of the future?
The Government pay lip service to creating a low-carbon economy, but then fundamentally undermine investment in renewables with other decisions, whether on feed-in tariffs or planning policy. When they talk about removing barriers to work, such as the sky-high costs of child care, they say, “Sorry, you have to wait two and a half years until we introduce it.”
Anything to help people with child care costs is welcome, but it has to be seen in the context of real-terms cuts to tax credits and maternity pay. It is a case of giving with one hand and taking away with the other. According to a Daycare Trust survey, child care costs—whether for nursery care, childminders or after-school clubs—have risen by over 5% in the last year. In London, nursery costs for children under two are 25% higher than elsewhere in the country. In fact, the average cost for nursery care of this sort is £5 an hour, so a full-time working mum buying 50 hours of nursery care a week has to find £14,000 a year. No wonder people say it is like having a second mortgage. Will the Minister say how far the new child care scheme will make inroads into the costs that parents have to pay? How do we know that it will not just drive up prices further? How much of this money is actually new? Child care is one of the biggest barriers to accessing the limited jobs that exist. When I speak to my constituents—by and large, people who are desperate to get back into work—it is clear that what they need is real help with meeting these costs.
The Government’s policies are hurting people. They are not working. Unfortunately, this year’s Budget is too little, too late. The sooner we have a general election and those of us on this side of the House can be in government, the better it will be for my constituents and the country.
It would be nothing less than churlish not to begin with the keynote policy of this week’s Budget: the climate change levy exemption for the ceramics industry in my constituency and also the steel industry. There is satisfaction at the highest level in the city and among our industrialists for this welcome tax break. Only last night, at the opening of Hanley’s wonderful new bus station, designed by Grimshaw Associates, which is like the inside of a whale—[Interruption]—from Victorian prints—grizzled Labour councillors and old potters were full of admiration for this welcome policy. It will make a genuine difference to the bottom line of companies. They will now be able to hire more people, invest in kit, innovate and design.
My hon. Friend is being modest by not paying credit to his campaign for this move. Does he think the people of Stoke-on-Trent should perhaps think of erecting a statute or making a memorial mug to mark his valiant efforts?
I hope the kilns are firing up as we speak.
I hope this change is part of a broader shift on energy-intensive industries. I think we have realised that we can no longer tax such businesses out of production in the UK. It does no good for our economy or our manufacturing base if we export these jobs. The production then goes abroad, where environmental controls are less rigorous and pollution is often greater, so we increase global carbon emissions and also lose worthwhile jobs. We have already lost the aluminium industry in this country thanks to cumulative taxation and we do not want to see the glass, paper, steel or ceramics industries go the same way.
I also welcomed the new tax regime for shale gas in the Budget. I regard shale as a potentially important new energy source that we need to see exploited in an environmentally sound manner. We are seeing it exploited right around the world. The technology behind it is improving at every stage. People have rightly expressed fears about contamination of water supplies, which are beginning to be addressed, but shale has a potentially paradigm-shifting capacity. What we have seen in America will not necessarily occur in the UK. It is absolutely right that we begin to explore shale—just as the Chinese and other European countries are—both onshore and, potentially, offshore. We need the technology and innovation to do that and we need a suitable taxation system.
Those involved in shale gas production need to take the communities with them and to have a social licence to produce it, but I urge Ministers to think more creatively. The great loss from North sea oil was that unlike Norway we did not create a sovereign wealth fund out of our oil riches. If we gain riches from shale, should we not consider a sovereign wealth fund? I will leave Ministers to mull on that idea.
While I am focused on industry and energy, let me highlight a contemporary crisis affecting industry here and now. As we speak, gas storage in this country is under 10% and this morning the Bacton gas connection to Belgium broke down. The price of gas hit £1.25 per therm when it is usually about 60p per therm. There is a real danger that kilns will have to close in north Staffordshire and that brickworks will close down, and I do not think that there is the necessary urgency from Ministers in Department of Energy and Climate Change or the Department for Business, Innovation and Skills about what is happening with the gas supply. That points towards a broader issue about gas storage: if we want rebalancing and want our industries to improve, we must ensure that we have a much greater system of gas storage in this country.
I am proud to represent an industrial constituency and I welcome some of the pre-Budget announcements on an industrial strategy, particularly that about the aerospace technology institute. I also welcome the adoption of 81 out of 89 of Lord Heseltine’s recommendations, particularly those on a single local growth fund. That is exactly the devolution of funding we want to see and a rightful acknowledgement that those in town halls often know a great deal more than those in Whitehall. As the Financial Secretary is on the Front Bench, let me say that we look forward to the upcoming announcements on city deals. I know that Stoke-on-Trent and Staffordshire have been working very hard to ensure that the Treasury is happy with what they are doing. It is quite right that the Government have allocated an extra £3 billion for infrastructure.
Behind all that must lie the acknowledgement that it is all too little, too late. The spending on infrastructure should have happened at the beginning of the Parliament, not more than halfway through it. As the Deputy Prime Minister has said, the Government should have not come to power and unleashed such capital spending cuts. The local growth fund could have been managed by regional development agencies, but the Government came in and abolished them. They are now realising that local enterprise partnerships often do not have the capacity and co-ordination to deliver the resources we are asking of them.
We should not have had to wait until the second half of a Parliament for an industrial strategy. In 2007-08, when we were in government, we were beginning to develop a credible industrial strategy that the Government should have continued rather than ripping it up in that terrible June Budget and beginning again. Over the past few years, we have seen a textbook example of how not to manage a recession, which will be taught in universities across the world. This is a catch-up Budget that is trying to undo the mistakes embedded in our economy three years ago.
The austerity agenda has spectacularly failed. Growth has collapsed, debt has mushroomed and the deficit at the end of the Parliament is expected to be £96 billion, five times more than the £20 billion the Chancellor expected at the beginning. As my hon. Friend Stella Creasy suggested, any board member who came to a board with such figures would be sent packing. As the shadow Chancellor warned in his celebrated Bloomberg lecture, that is the product of slashing spending, sucking demand out of the economy, the rhetoric of doom and gloom and the undermining of confidence. That is being borne witness to by the remarkable collapse in sterling, which is a sign of weakness, not strength, and by the collapse and loss of our credit rating. The austerity is not working, and, as my hon. Friend Heidi Alexander said, it is just hurting.
As the IMF chief economist suggests, we need a plan B. We need a VAT cut, a house building strategy and concentration on vocational skills and infrastructure. We need a different model, because this one simply is not working. Although I am happy to welcome the micro-element of this Budget in the context of the climate change levy, the macro-element fails spectacularly.
This is truly a triple D-rated Budget that leaves us in more debt than ever before, at risk of a triple dip, and with our credit rating downgraded. It is a Budget once again characterised by unfairness, incompetence and political game playing instead of the national interest. It is unfair, because millions of people face declining living standards while millionaires get a tax cut; it is incompetent, because the Chancellor and the Secretary of State for Business, Innovation and Skills cannot even clarify the details of the spare homes subsidy; and political game playing has seen the Chancellor play fast and loose with departmental spending to even greater political exposure in the short term, regardless of the consequences for front-line services, our international commitments or, indeed, the growth of our economy.
It is not just Opposition Members who say that—it is the Office for Budget Responsibility, which has confirmed that by 2015, people will be worse off than they were in 2010, with real wages set to fall by 2.4% over this Parliament; it is the Institute for Fiscal Studies, which only yesterday accused the Chancellor of “wasting the time” of Whitehall officials and creating “real economic costs” for the country; and, indeed, the Home Secretary, who hit the nail on the head only a couple of weeks ago, when she said:
“It’s not enough to cut budgets and hope for the best.”
I shall focus on page 70 of the Red Book, which details those £7.6 billion-worth of revenue underspends, and £2.1 billion of capital underspends in Government Departments—a staggering £9.8 billion in total. All of that was apparently done so that the Chancellor could present the illusion of a tiny drop in public sector net borrowing and make up for other accounting errors such as the 4G auction, which raised £1 billion less than he promised in the autumn statement. The consequences are serious. Opposition Members have rightly demanded to know which services, which spending, which projects and which promises have been delayed or cancelled by Departments ranging from the Department of Health to the Home Office. We need answers, and we need them now.
To take a Department in which I was proud to work, in 2010, the Prime Minister and the Chancellor categorically promised us that they would
“not balance the budget on the back of the world’s poor”.
It appears, however, that that is precisely what they have done this year, with the Department for International Development underspending by a staggering £0.5 billion, which amounts to 8% of its total revenue budget settlement for this year. That might represent a failure to pay our dues to the UN, or make our contribution to the World Bank. Indeed, the Chief Secretary seemed to suggest in TV interviews that some of the world’s poorest countries might not be ready to receive our funding. I very much hope that that proves to be untrue, because I am pretty sure that children who need vital vaccines, education or food are ready to receive our help.
Is it not rather churlish of the hon. Gentleman to make such references, as the Government have been considerably more generous than the Labour Government were in 13 years in office in affirming a 0.7% rate of gross domestic product for international development, which is more generous than almost any other country, yet the hon. Gentleman stands up and—
Order. I am sure that the hon. Gentleman is hoping to speak later. He must save something to tell the House.
The hon. Gentleman has clearly not looked at the record, because in fact we tripled the aid budget, made a commitment to the 0.7% target and, indeed, made a commitment to a law on 0.7%, which this Government have done, too, but have not put into practice.
The Government will get full credit from me if they meet the 0.7% aid target, but given the revelations on the underspend and the fantasy figures elsewhere in the Budget, why should we accept their assurances? There is another serious consequence of the underspend. We already know the stark facts that the OBR has halved its growth forecast for this year, and downgraded its forecast for next year. Since the comprehensive spending review in 2010, the UK economy has grown by just 0.7%, compared with 5.3% predicted at the time. The economy shrank 0.3% in the last quarter, and we now face the stark prospect—although I seriously hope not— of a triple-dip recession, which is why this forced underspending is deeply irresponsible, as by itself it could further hasten a slip into a triple dip, particularly in the absence of serious measures in the Budget to promote growth.
It is our constituents who will face the consequences, the unfairness and the hardship over the coming months, such as the nearly one in 10 young people locally in Cardiff South and Penarth who now have to claim jobseeker’s allowance and to do so, as I mentioned earlier, for longer. The number of those claiming for 12 months or more is up by 22.6%. Each month of that is another month of frustration, anger, hardship, wasted talent and wasted value. Others affected are the constituents whom I met in the east of Cardiff, who have lost their jobs in the construction industry because of this Government’s failure to deliver infrastructure or housing, the disabled couple in Grangetown who fear the bedroom tax, while they see millionaires offered a spare home subsidy and a tax cut worth £100,000, and the hundreds of people fighting for every job vacancy—other hon. Members have described the situation—such as those fighting for a job vacancy in Penarth and in other local businesses.
There could not be a starker representation of the Chancellor’s and the Prime Minister’s Britain than the staggering rise of food banks, which have seen an eye-watering 198% increase in use in Wales in just the past year. No wonder the Prime Minister wants to keep the cameras away on his visit. The reasons for people in Wales having to use food banks say it all: 43% of people going to a food bank say they are doing it because of benefit delays or changes, 25% are doing it because they are on low income, and 10% are doing it because they are in debt. So we see debt rising at the top and debt rising at the bottom. That is life in Tory and Lib Dem Britain.
This Government could have driven forward decisions on infrastructure instead of leaving only seven out of 576 projects completed. They could have used the funds from the 4G auction to pay for new housing. They could have delivered a VAT cut that would have done far more for hard-pressed consumers than small duty cuts, however welcome. They could have invested in jobs and training for our young people, as the Labour Welsh Government have done with Jobs Growth Wales and investment in new apprentices.
As we look outside at the snow today—which, I regret, may mean that I am unable to stay for the closing speeches—and we wonder where the spring is, many of my constituents will be asking the same question on hearing this Budget: when are the sun and the warmth coming back to the economy, faced as they are with the cold wind of this no-change Budget and this no-change Chancellor?
I begin by congratulating the Chancellor on getting something right. For months Nottingham beer drinkers, local pubs and our excellent local breweries have been pressing for a review of the tax on beer, and I have raised it with Treasury Ministers on numerous occasions. I am delighted that the Chancellor has taken the decision to cut the price of a pint. I know that the Prime Minister has promised to take action to tackle multi-buy offers on alcoholic drinks. It is not at all clear how he intends to do that, now that his Home Secretary has turned him over on minimum unit pricing, but he has allowed the Chancellor to offer this buy-300-pints-get-one-free deal.
Unfortunately there was not much else to cheer in the Chancellor’s drown-your-sorrows Budget, because he did nothing to address the real challenges facing our economy. He seems oblivious to the need for bold action to kick-start the economy and so create the jobs that we badly need in Nottingham. Yesterday on Radio 4 the Chancellor blamed his dismal economic failure on the difficult conditions he has faced as has tried to plot a course towards the peak of growth. But, as any mountaineer knows, there is no such thing as the wrong weather, only the wrong clothes. The Chancellor should have looked at the forecasts and planned for what was coming, rather than adopting a disastrous austerity programme which left the UK to slow down, turn around and start heading back downhill—not once, but twice, with the threat of a triple dip looming.
As Steve Baker, who is no longer in his place, said earlier, the country is awash with misery. Forecast growth has been halved for 2013 and downgraded for next year too. Borrowing is £245 billion higher than planned. The deficit has barely shifted from last year and will not shift in the 12 months ahead. It has stayed where it is thanks only to some last-minute manipulations which the IFS said “wasted Whitehall time and created real economic costs”.
Unemployment is heading back up, with an extra 99 people in my constituency back on the dole in the past month. Inflation is running well above wage rises, and even those in Nottingham South who do have a job are struggling to make ends meet. For those unable to find work or who are sick or disabled, things are even worse, as they face cuts to services, cuts to council tax support, and the unfair and unworkable bedroom tax, which will leave more than 1,500 of my constituents with nowhere to go. Families are turning to food banks as they struggle to cope with the impact of higher VAT, cuts to tax credits and the freeze on child benefit. The Chancellor promises help with child care, not now when it is needed, but in two and a half years’ time. Families in Nottingham cannot wait for a Labour Government to sort out the economic mess that he has created; they need real help now, not more of the same failing policies.
My constituents are particularly worried by the Chancellor’s shocking complacency when it comes to tackling unemployment. They understand that when young people are out of work, without opportunities, it leaves scars that can last the whole of their working lives. That is why we are calling on the Government to act. We support measures to help small businesses take on extra workers. The employment allowance is welcome, but it will not even begin for another 12 months. Young people in my constituency should not have to spend another year on the dole waiting for the Chancellor to act. They need jobs and opportunities now. It cannot possibly be right to cut taxes for the highest earners in the country, but do nothing for young people trapped on benefits. That is why Labour is calling for a tax on bankers’ bonuses, to fund more than 100,000 jobs for young people—jobs on proper wages with proper training opportunities.
My constituents expect someone to take a job when they are offered one, but they know that under this Government there just are not the jobs that we need, and that is why the benefits bill is going up. Now we have shocking evidence of what we suspected previously: the Government plan to cut that benefit spending and massage the unemployment figures by applying a disgraceful sanctions regime. That is exactly why we need an independent review.
Nottingham needed a plan for jobs and growth on Wednesday. What we got was a “more of the same” Budget from a downgraded Chancellor. We needed real help for families on middle and low incomes: we got more of the same failing policies and a huge tax cut for millionaires. The plan has failed completely. Families, pensioners and businesses are paying the price. Nottingham and the country deserve better.
At times of economic crisis, historically and all over the world, we have seen people moving towards blaming scapegoats, attacking weaker and poorer communities and trying to damage the interests of those who are not in their own environment. Today the potential for this global economic crisis can be seen in Europe with the rise of neo-Nazi groups in countries such as Hungary and Greece in the EU, and potentially in some other countries. We have to remember that it started in 2008 in the United States with the Lehman Brothers collapse, not with a policy determined and decided by the Labour Government in this country, as some Government Members would have us believe. It was a global, western European, north American economic crisis, with terrible consequences that we are still dealing with today.
In the 1930s, at the time of a similar global economic crisis, bold measures were eventually taken by some countries in an attempt to solve the problems. Unfortunately, it was the rearmament and the second world war that led to more people being in work in some other countries. We face real dangers today, and unless the Government and the politicians—not just in this country, but in the rest of Europe—adopt a different approach, we will see some very nasty developments over the coming years. The Government still claim, I think, that we are all in it together, but from references made by other hon. Members here today, we know how the poorest people in this country are being damaged and scapegoated while millionaires get tax cuts.
I do not have time to talk about all the issues I would like to, but I will say one positive thing about the Chancellor’s Budget. I support the Enough Food for Everyone If campaign and am pleased that we still have, at least on paper—it will be interesting to see if it happens in practice, as my hon. Friend Stephen Doughty mentioned, quite pertinently—the commitment to spend 0.7% of GDP on international development and aid projects. Over the past couple of years we have seen some fudging at the edges, as items previously funded from the Foreign and Commonwealth Office budget have been redefined and rebadged so that they now come out of the aid and development budget. Nevertheless, I take the Government’s commitment at face value and hope that over the next two or three years they will resist the pressures from the far right of their party, and from some newspapers, to cut the budget for helping the poorest people in the world’s poorest countries.
I want to touch on some of the points made by my hon. Friend Stella Creasy in what I thought was an absolutely fantastic contribution. She highlighted the problems that are coming out of the Department for Work and Pensions employment service in her constituency. I, too, am a north-east London MP. Some of my constituents have come to me with interesting information in recent weeks. I understand that the DWP staff in north-east London who deal with my constituents have now been told to refer to them no longer as “clients” but as “claimants.” There is apparently an instruction to that effect. That clearly changes people’s attitude. The approach is no longer about customer service; it is about dealing with supplicants who are asking for help.
My hon. Friend might be interested to know that one of the people mentioned in the leaked e-mail about the conduct in my jobcentre is a regional manager who also covers his part of the borough of Redbridge, which might explain why the issue of sanctions and targets is emerging. I would also like to take this opportunity to apologise to you, Mr Deputy Speaker, for not explaining in my earlier contribution that, owing to a previous commitment, I will unfortunately be unable to stay for the wind-ups, but the Minister can be assured that, even if Members are not here in person, we will all be listening very closely to what he has to say.
I am grateful to my hon. Friend for her intervention, which also gives me the opportunity to speak for another minute.
I have been pursuing a number of cases on behalf of my constituents in recent months, and for several weeks now we have received no written responses to any representations we have made to the DWP. The reason was not clear. We received telephone calls, but nothing in writing. We have begun to receive some responses by e-mail, but they are late and do not contain much detail. I do not know whether that is a policy position, because under the previous management of the Department’s services in my area I used to receive detailed written responses to the representations I made in respect of individual cases. The responses are no longer so detailed and they are delayed. I wonder whether that is because of the pressure on staff because of the cuts within the Department, or whether it is because of an attitude that says, “We don’t want MPs to have the information because then they can make effective representations about the inadequacies and failures of the Department.”
I also want to highlight what is happening with levels of unemployment. At a superficial level, because more people are in work the Government are claiming that everything seems to be fine. We have the paradoxical situation in which real living standards and real wages are falling, yet despite the double-dip recession and the flatlining economy more people are in work. However, if we dig into the statistics for the Ilford South constituency this week, we see that between February 2012 and February 2013, although the number of young people unemployed and registered for the claimant count is down, the number over 12 months of people out of work has gone up by 44%. The number of over-25s who have been claiming for more than two years in my constituency has gone up from 140 to 420—a 200% increase in one year. It seems to me that the organisations being used by the Department are concentrating on getting people into low paid jobs quickly but not on those who might have mental health or alcohol problems, poor work records or a lack of confidence. The difficult cases are there, and they will add up in the future. That is really worrying.
It is clear that plan A is not working—growth is down and borrowing is up by £245 billion. The Chancellor can meet the target set by the Office for Budget Responsibility only by doing the equivalent of hiding behind the curtains when the debt man comes, or saying when answering the door, “No, I can’t pay this week; I’ll pay next week.”
As has been mentioned, the OBR also said that people will be worse off in 2015 than they were in 2010. My hon. Friend Mike Gapes has just said that the blame game in the early days was “This is all because of the mess Labour left the economy in.” I am sorry, but the Chancellor cannot get away with that after three years in power. Let us also look at the facts. In 1997, the debt inherited by the Labour Government was 42% of GDP, and the figure was 35% in 2008—the last Labour Government actually paid down debt. Debt then went up because of the economic downturn and the massive effect of the world banking crisis in 2008, as my hon. Friend mentioned.
It is also said that there was profligate spending. In 1997, we inherited a 3.9% deficit of GDP, which was down to 2.1% by 2008. I was in the House at the time, but never heard the then Opposition argue that our spending targets were reckless or that we should reduce spending at all. In fact, in some areas—including defence, which I know about—they were asking for more expenditure.
Does the hon. Gentleman acknowledge that the Labour Government who came to power in 1997 followed the Conservatives’ spending plans for their first two years? Those plans were laid by my right hon. and learned Friend Mr Clarke; he achieved the reduction in the deficit that the hon. Gentleman mentions.
Following that logic, the hon. Gentleman cannot argue, as his party has continually done since the last election, that a mess was left by the last Labour Government. The situation was due to the economic downturn.
We are now three years into plan A, and who is to blame now? We have slightly moved away from the Labour party—now it is all Europe’s fault.
“The result of adopting these spending totals is that under a Conservative government there will be real increases in spending on public services, year after year”?
He and his party agreed with our plans.
I totally agree. In defence, for example, the Conservatives called for a larger Navy and larger Army and more expenditure. What have we seen? Cuts, cuts and more cuts.
This morning we again had the nonsense from the Secretary of State for Work and Pensions that somehow if the austerity plan does not continue we will end up like Cyprus—it used to be Greece. The right hon. Gentleman conveniently ignores the fact that the wonderful triple A rating, so coveted as the great prize, has now been lost. We need to lay the blame for the country’s problems with this Government.
We used to hear the nonsense about Labour being irresponsible, and not having mended the roof while the sun was shining, but the house has no roof now. All we have seen in the Budget is tinkering at the edges. It is a little like suggesting to someone who has lost the roof that new double glazing should be put in. The important point, which has been made by several colleagues, is about demand in the economy. The way to get the economy going is to stimulate demand, and capital expenditure is one way of doing so. I welcome the announcement of £3 billion of additional capital expenditure, but it is only from 2015, and we need it now.
My hon. Friend Graham Jones rightly referred to the effects of the downturn for housing on other sectors. The emergency Budget slashed housing spending and capital expenditure on schools and so on, and that meant that demand went out of the economy. We are now spending £7.7 billion less than the Labour Government would have spent in the same period. There is an idea that this is somebody else’s fault, but it is not. Deflating the economy and taking demand out of it, while telling everybody that it is in dire straits, will depress demand not only for housing but in other sectors.
The housing proposals in this Budget are very ideological. Am I opposed to encouraging people to buy their own homes? No, I am not. However, it is nonsense to think that someone living in my constituency who has a low-paid job in local government, and is having their pay cut in real terms because of the cap, is going to save up the deposit for a mortgage. It would have been better if the Budget had provided a massive injection of resources into affordable housing and housing for rent. If my local housing provider, Derwentside Homes, was given the ability to borrow money to build new houses, it could do it now. That would provide the housing that we need.
My fear about these proposals is that if we do not get right the balance between demand and supply, we will end up with a housing bubble and the sub-prime situation that landed us in this mess in the first place.
The other thing that could make a big difference, as it did in my constituency when we were in power, is investing in improvements to local authority housing and social housing. Cestria Housing spent £67 million on improving local housing. That not only made a real difference to those houses but regenerated the local economy. I agree with one thing that Steve Baker said; frankly, most of it was complete nonsense. If this Government really want to get the economy moving, they have the instruments to do it through banks such as RBS. However, RBS is crucifying small businesses in my constituency, including Ambic, which is run by David Potter. He has a very successful business, but he is being absolutely hammered in trying, in effect, to get RBS’s balance sheets down because this Government want to get it off the asset books as quickly as possible.
Much has been trumpeted about the new cap on the level at which people pay income tax. In my constituency, many low-paid workers will benefit from this, but they will also lose through the bedroom tax, VAT increases, and the loss of child credit. Earlier I challenged the Secretary of State to publish information, constituency by constituency, on how many people were going to gain from this measure. I challenge him again to say how much these individuals are losing through the Government’s welfare cuts.
The welfare cuts that will begin in April will hit some of the poorest parts of the United Kingdom, including my own. The thing about poor people that many Conservatives might not realise is that they do not save money: they spend it. That is not because they are profligate or irresponsible but because they have no choice. These cuts will take money out of poorer communities in North Durham, and in the constituency of my hon. Friend Grahame M. Morris, who can ill afford to lose it. Unemployment is rising. As my hon. Friend Stella Creasy said, these people do not want to be unemployed, but there are no jobs. The jobs that are being created are part time, low paid—[Interruption.] Michael Ellis says “Rubbish.” He should look at the figures, which show that people are holding down two or three jobs to make ends meet. He will also see that productivity is coming down.
This involves a bigger debate about what type of society we want to live in. I congratulate those who work hard in food banks up and down the country; they are very good and worthwhile citizens. However, I feel very uncomfortable in 2013 living in a society where I have constituents relying on charity and food banks. That is not the type of society that I want to live in. We also all need to be conscious of the fact that, while things might be easy for all of us here, including millionaires such as the Chancellor and other Treasury Ministers, each unemployed person faces individual consequences, and suicides are on the increase because of the economic downturn.
I am pleased to be able to take part in this debate. My speech will relate largely to my constituency and my city, but overall the Budget will increase inequality in this country, rather than reduce it. It also contains many inconsistencies, such as spending on a carbon capture scheme while at the same time reducing restrictions on emissions and environmental costs in other industries. We need to be careful about that. If we are serious about protecting the environment, it needs to be an international initiative rather than what I suspect the Chancellor is trying to do, which is to reduce restrictions and conditions in this country, as he is doing with corporation tax. That will lead to a race to the bottom with very damaging consequences for our social infrastructure.
According to the latest unemployment count, 3,700 people in my constituency are on jobseeker’s allowance, 1,000 of whom have been on it for more than a year. Nearly 1,000 young people are also looking for work. At the same time there are enormous problems of inequality throughout London and, indeed, society. If Members look at the tax tables helpfully produced by a number of newspapers, they will see that there is no benefit whatsoever in this Budget or the planned tax changes over the next three years for most people on below average, average or even above average incomes, and that those who earn more than £500,000 a year will gain at least £2,000 a month in most cases, while some will gain considerably more depending on their own personal circumstances.
There is no question but that this Budget will lead to greater inequality in our society, not less. At the bottom end, a lot of people are trying to survive on frozen or reduced wages in part-time work or on zero-hours contracts. At the other end of the scale, those on very high salaries or with large levels of unearned income will do extremely well out of the Budget and they are able to place their money somewhere where they pay much less tax on the savings that they manage to muster. We have to do better than that. I look to a future Labour Government to commit themselves to the principle of reducing inequality in our society, partly through taxation and partly through investment and expenditure that will help the poorest people through social spending.
My main concern—I think this is true of all other London Members—is the housing problems and the housing crisis in London. My borough of Islington is one of the smaller London boroughs, but it has at least 13,000 families on the priority needs list. The council, to its absolute credit, is doing a great deal to build new council housing, which is of high quality, innovative, energy efficient and imaginatively designed, often in restricted and small spaces. However, it is nowhere near meeting the demands and needs of large numbers of people in priority need. Therefore, my borough, like every other borough, puts people into the private sector, where rents are not restricted. The benefit cap will make it impossible for tenants to pay those rents and they will be asked to make a contribution themselves.
A local authority report notes that a large number of our schoolchildren—1,000 of them—are affected by the benefit cap and that, in the worst-case scenarios, some families are being asked to find £200 a week to contribute to their private sector rent. If they are on benefits, it is obviously impossible for them to find that money—it is £10,000 a year. The only way they can be accommodated is to move them out of the borough. Those in my borough are always offered a place in Greater London. Nevertheless, that means disruption for children in schools, and the break-up of family and community networks, which is damaging and corrosive to the whole of our society.
Other boroughs far less concerned about human needs than Islington dump people outside London. A good friend of mine who lives in north Kent tells me of the misery and poverty of large numbers of people who have been dumped in seaside towns such as Margate, in very poor quality, private rented accommodation, far away from their communities, and with obvious damaging effects to children and families as a whole.
How do we deal with the housing crisis in London? One way not to deal with it is what the Chancellor suggested this week: a charter for those with great money and resources to be subsidised into yet more purchasing of private sector homes. It is yet another escalator on the house price index, using housing as a form of investment and return on capital, rather than meeting the social needs of people in constituencies such as mine. I ask the Government to think seriously about how the housing benefit cap is being introduced and operated, and about how it acts as an agent for the social cleansing of poor and vulnerable people throughout central London to the London suburbs and further afield. It will not be long before the same process starts to happen in every other constituency in the country. This will not start and end in London; the whole process will go elsewhere.
The Government say, quite rightly, that the housing benefit bill is too big: I agree. The previous Government said it was too big: I agree. Why is it too big? Is it because council rents are so high? No, it is because of the high level of private rents in this country, and the lack of any control or real conditions on the private rented sector. We need legislation to control rents and ensure a fair rent strategy, security of tenure and decent housing for people who desperately need it.
I agree with everything my hon. Friend is saying, but does he agree that a significant proportion of the private rented sector should be municipalised so that it can be improved and proper rents charged?
My hon. Friend is right. We need controls on the private rented sector and on the levels of rent charged, but to deal with this housing crisis—and it is a crisis—we must empower local authorities to take over private rented accommodation that is badly run or ludicrously expensive, and also give them enhanced powers to take over the large numbers of empty properties that are part of land banking throughout London. We have the insulting aspect of people in desperate need living in overcrowded accommodation while nearby properties are often deliberately kept vacant by wealthy, often foreign, investors, who see it as land banking for some speculative gain in the future. What is going on is simply wrong. Housing must be a priority and a right for everyone. If every child had somewhere decent, safe and secure to live, that would be a real legacy, not this gift to those who wish to make a great deal of money out of housing speculation, which is what the Budget offers.
Oh yes, the old note that was left: “There is no money left.” That is the legacy Labour left this country. After 13 years of a Labour Government that brought this country to its economic knees and a position worse than that of Greece, the Chancellor of the Exchequer and the Treasury team have picked the country up from where it was left, and will continue to do so.
I feel that my hon. Friend is being slightly unfair to the shadow Secretary of State for Work and Pensions. He may have left that note, but in a confidential briefing in 2006, the shadow Chancellor and the former Prime Minister were warned that the efficiency of the public sector needed to improve rapidly, and that unless it did, spending growth would slow. The former Prime Minister disregarded that advice, and embarked on a £90 billion spending programme once he became Prime Minister.
Exactly. The Labour habit of spending money that the country cannot afford almost brought this country to ruin. The lack of an apology grates, but it is difficult for Labour Front Benchers to offer one, because the team that wrecked the country’s economy and trebled the national debt are still on the Opposition Front Bench.
The Budget has been welcomed by the International Monetary Fund, the OECD, the Bank of England, the CBI, the Institute of Directors and the British Chambers of Commerce—it has been rightly welcomed by everyone who knows what they are talking about as far as the economy of this country is concerned. I say to the Chancellor that he should stick with it. We cannot have a situation in which Labour is allowed to borrow more, or we will end up with a Mili-shambles.
“Deficit reduction is not an option…it is an absolute necessity”.
The Government started in 2010 with the worst debt to GDP ratio of any country—it was worse than that of Greece. Other countries with better figures than ours in 2010 had been put into special measures by the IMF.
In common with most Labour Members, the hon. Gentleman’s understanding of the economy is limited. The reality is that the country’s debt is the responsibility of the Labour Government. However hard Labour Members try to transfer the blame on to the Conservatives, we did not spend that money.
When the current Government took over, £1 for every £4 spent from the public purse went on interest. Borrowing is now £3 billion lower, and the deficit is down by one third. What is Labour’s plan? Labour wants to borrow £200 billion more. I wish we had that money, but we do not have it. That is Labour’s plan.
Meanwhile, the OBR forecasts, post-Budget, 600,000 more jobs in 2013. What is the Labour party doing about jobs? Labour Members pretend that the 1.2 million jobs that have been created are fictional, not real, low-quality and part-time jobs. That is a complete fiction, and they should be embarrassed about it. They should talk the economy up and promote industry, trade, manufacturing and jobs. Are they holding jobs fairs in their constituencies? I have a jobs fair in Northampton North on
I can to improve the jobs market, but all we hear from Labour Members is that they will spend and borrow more, and yet they complain.
Corporation tax will be 20%, which is one of the lowest rates in the world. If we had stuck with Labour’s figures, we would have 3p a pint more in beer duty. Not only has that escalator been cancelled, but 1p has been taken off beer duty, but I have sat in Chamber and heard Labour Members criticise even that. They cannot bring themselves to acknowledge positives.
What is more grating is the self-righteousness of Labour Members. They believe that only they can have any compassion or think in any way of the most disadvantaged in society. Well, I have news for them. My colleagues on the Government Benches are equally if not more compassionate. We do not need to be lectured by those who put this country into such debt.
That is very kind. The hon. Gentleman has given a list of organisations that support the Chancellor’s Budget. I wonder whether he recognises this quotation from the North East chamber of commerce. Although it was pleased to see certain measures that coincided with its priorities, it said that the Chancellor had
“fallen short of providing the raft of measures that businesses and investors need in order to kick-start growth.”
The chambers of commerce have accepted that this is an excellent Budget. Of course there are issues that need to be addressed, but we are dealing with a dramatic deficit. Not everything can be done overnight.
The measures that we have taken on fuel duty mean that it will be £7 per tank cheaper to fill an average car, such as a Vauxhall Astra, than it would have been under Labour’s fuel duty plans. Under Labour, fuel duty went up dramatically. It was costing more and more. The Chancellor’s fuel duty cuts will have a dramatic effect on the cost of filling up the average car.
Measures are being taken across the board in very difficult times to improve the economic position that we inherited. All that Labour can do is whinge, whine, moan and be judgmental.
I am quite happy to answer that question. I will not be getting a tax cut and I have been driving the same car—a Toyota Prius with several dents and scratches—since well before I was elected to this House. However, I would not want to spoil the situation for the millionaires on the Labour Front Bench. There are a fair few of them, driving around in their Mercedes.
Not only does Toyota build cars in the UK, but thanks to the measures taken by the Government, this country is exporting more motor vehicles than it is importing for the first time since 1976. That is a measure of the manufacturing improvements made by this Government. It is just one of this Government’s excellent measures, which is why I support the Chancellor of the Exchequer and the Budget.
I watched the Chancellor carefully during his speech and he looked to be a very worried man, as if his whole political life was flashing before him because it was not going to last much longer. He was particularly worried when he had to say that the Budget was “fiscally neutral”, when what we need is an expansion for growth and employment.
Labour Front Benchers kindly describe our current situation as the economy “flatlining”. Actually, we are in an ongoing recession. Some 2.5 million people are unemployed. I am considerably older than everybody else in the Chamber and remember the days of full employment. In my youth, unemployment of 2.5 million would have been seen as a catastrophe. At times, unemployment fell to a tenth of its present level. Let us not be too kind to the Government. The economy is not flatlining; we are in an ongoing recession.
We must focus on the continuing economic illiteracy of the Treasury. Its consistent mistakes over decades have put us in this situation. Two years ago, I made a speech in this Chamber in which I referred to the view of Paul Krugman, among others, that the Government were going in precisely the wrong direction. I agreed with him then and I keep repeating that because in politics, one has to repeat things to ensure that they register. It is instructive to look at the history.
There was a similar situation in the 1920s. After the first world war there was big government debt, and the Government introduced what became known as the Geddes axe—pubic expenditure cuts—which drove up unemployment and poverty, and resulted in low growth. At the end of the 1920s—surprise, surprise—deficits were bigger, not smaller. In the 1930s, we had a period, similar to now, when the Conservatives and their friends were in charge. In Prime Minister’s questions, I asked the Prime Minister whether he wanted to be remembered as the President Hoover of our times, whose draconian cuts drove the world, not just America, into the great depression. He made a sarcastic reply—I suppose that was understandable; I was being slightly humorous with him—that I understood later to be a reference to Benny Hill. I would rather refer to John Maynard Keynes and to Paul Krugman, but obviously the Prime Minister is more inspired by the wisdom of Benny Hill.
By contrast, in 1945, government debt was three times what we have now, but we had a sensible Labour Government that ran a full-employment economy. The debt at that time fell dramatically because we had full employment. I have to give credit to the Conservatives, because in the 1950s they carried on with the same sorts of policies. In the 1940s, 1950s and 1960s, we saw full employment most of the time. We had the occasional hiccup, but essentially it was a full-employment era. We saw living standards rise and poverty fall, and a much better world than we had ever had before. Indeed, the world was being run so well, I thought we should carry on like that. Instead, somebody reinvented the 19th century, and went back to the kind of neo-liberal policies that were pursued at that time.
Extraordinarily, at that time of full employment, Labour and Conservative Governments competed to build hundreds of thousands, if not millions, of council houses. That all seems to have disappeared now, but it was a very fine and productive competition.
A house building programme is exactly what we need. We do not want to increase demand for houses, but supply. If we increase demand without supply, we get house price inflation.
Throughout that time I was a member of a group called Defend Council Housing, and time and again I urged my hon. Friends on the Front Bench, as indeed did a number of my hon. Friends, to build more council houses, so in a sense I accept that point.
We have seen the policy on the deficit not working—indeed, it will get worse—but we have seen only about a quarter of the promised cuts so far. What will happen in the next three, four or five years—let us say two years, because the Conservatives will only last that long—will make matters worse. The forecasts for the deficit have been out by many billions. The deficit will be £120 billion in each of the next three years, give or take the odd billion. That compares almost exactly with the tax gap, calculated by Richard Murphy, of £120 billion a year. I am not suggesting that we could overcome the tax gap in one year, but we should start to make the billionaires and fat cats pay their taxes properly. We could make a real dent in the deficit and have money to spend to generate the economy.
Would my hon. Friend care to comment on the question of tax avoidance and places, such as the Channel Islands and other British overseas territories? Is he convinced that what the Chancellor has said will mean that those places will be properly taxed, or will they continue to be places where the wealthy can get away with not paying tax?
I remain to be convinced that the Government are serious about dealing with tax avoidance and evasion. We have a revenue problem, not an expenditure problem. We are failing to collect taxes, and what are the Government doing? Successive Governments have cut the number of staff at HMRC. We should be increasing their number, because every additional tax collector collects many times their own salary. We should increase staffing levels at HMRC and start to collect those taxes. That would make a real difference.
The superficial analogy with personal household incomes has been drawn time and again—“You can’t spend what you don’t earn” and all that. If a person’s or family’s expenditure is greater than their income, we get the Micawber effect, because people finish up in penury, but Governments and economies are not like that. One person’s spending becomes another person’s income, and so on, and we get this circular flow of income, which generates jobs, wealth and tax revenues. Economies do not work like family incomes, as Keynes explained many times in very simple terms. I used to try and explain it to my students as well. Economies are not like households, so I hope that we can dismiss this simplistic analogy with personal incomes.
We have to invest, to start building again and to reflate the economy. We will do that by driving up employment in labour intensive areas, and the most labour intensive sectors are those such as construction and public services. We get much more bang for our buck from investing in those areas than from cutting taxes. The money saved by doing the latter leaks away to the better-off and frequently into tax havens, which brings no benefit to the economy, whereas direct spending on building more houses, for example, has beneficial and rapid effects on the economy. The other great advantage of construction and public services is that they have a low import content, which means that we do not get leakages into imports—not in the first round at least. It is a very sensible way of trying to regenerate the economy.
We also need the right parity for our currency. Successive Governments have been obsessed with keeping the pound “strong”, as they call it—in other words, overvalued—which means that we become uncompetitive. The strongest evidence that we are uncompetitive is our a £1 billion-a-week deficit with the rest of the EU. We should use our advantage in having our own currency to find an appropriate—in other words, lower—parity for sterling, so that we can regain our competitive advantage.
There is much more I wish to say, Mr Deputy Speaker, but I fear I have had my time. Thank you.
The people of Croydon North were looking to the Chancellor to kick-start the economy with the Budget. With long-term unemployment up again, they need more jobs. With homelessness and overcrowding on the rise, they need more affordable homes. With more children living in poverty, they need action to cut the cost of living. But we saw almost none of this. We will not get more jobs in Croydon North until the Chancellor abandons his failed economic policy, which has prevented the economy from growing.
The OBR has halved this year’s growth forecast, and when the UK’s triple A rating was humiliatingly downgraded, the ratings agency Moody’s cited subdued prospects for growth as a key reason. Growth will come when people start spending again, and we are more likely to get people spending if we put money back in the pockets of people on average and lower incomes. Labour’s proposed temporary VAT cut, which would help to do precisely that, is far more sensible than the Government’s tax cut for millionaires in just over two weeks. The wealthy are more likely to save that money or, if they do spend it, to spend it on expensive imports, but as my hon. Friend Mr Jones said, people who earn less are more likely to spend it in local shops, on everyday goods that sustain local businesses and help the local economy to grow. They do not have enough of a surplus to save, so they end up re-circulating the money in the economy.
Growth will come when the Chancellor starts to invest in decent affordable and social housing. First, however, he cut the affordable house building budget by 60%, and then he refused to intervene early enough as the housing market froze. Housing starts last year fell by 11%, and more than 500,000 people are on the council housing waiting lists in London alone.
As well as boosting new build supply—which he also needs to do—why does the Chancellor not support projects such as the one run by London Youth, which puts unemployed people back to work by training them to bring empty and derelict homes back into use? It creates jobs and homes, as well as saving money in the longer term, but it needs funding to get going on a wider scale.
Growth will come when the Chancellor starts to invest in public infrastructure—the kind of schemes that generate jobs and boost business confidence, so that the private sector starts to invest as well. I saw that effect time and time again when I led a council in south London. In Brixton, we showed how a partnership between public sector landowners and small businesses can regenerate a once declining market in spectacular style, creating jobs, bringing in investment and helping to make the town centre what it is now—one of the fastest growth areas anywhere in London. As co-chair of the Vauxhall-Nine Elms regeneration partnership—which extends all the way from Vauxhall Cross to Battersea power station—we showed how the public sector can lever in private sector investment, in a project that has become the biggest generator of new jobs and new homes anywhere in the country. The Government need to support local government to forge more partnerships like that and offer funding for public sector infrastructure that can get schemes going in areas where land values as not as high as they are on the south bank of the Thames, and I hope very much that they will carry out the Heseltine proposals, including providing adequate funding, so that this can work.
The reason so many people are living on benefits is not because they are skivers or shirkers, as the Chancellor likes to tell us, but because they do not have the opportunities that people such as him took for granted when they were growing up. I meet people in Croydon North week in and week out who are desperate for a job so that they can make more of their lives. I met a young mum on the steps of a supermarket in South Norwood who burst into tears when she told me that she and her husband, both in low-paid work, could no longer make ends meet because of the rising cost of housing, heating and child care, all of which have been made worse by the Government’s decision to clobber them with the strivers tax and a hike in VAT. She told me that they had done everything the Government had asked them to—worked hard for qualifications, got themselves jobs and bought a modest home—but now they felt desperate and abandoned by a Government who do not seem to care. This Government do not offer them aspiration, only desperation.
Such people are victims of the Chancellor’s failed economic policies. It is not just growth that is down and borrowing that is up; hope is down and despair is up. Year after year, the Chancellor fails to meet his own targets. That is because what he is doing is hurting, but it is not working; yet instead of recognising his failings, he tried to distract attention by demonising and blaming the very people who are the victims of his failure. It is time to change course, because people in Croydon North, like everywhere else, deserve better than this.
The average price of a house in Hammersmith and Fulham is £653,000. The average price of a flat is £493,000. If costs £770 a week to rent a three-bedroom house, and a one-bedroom flat costs £335 a week. At the same time, according to the most recently published census data, 45% of my constituents live in some form of overcrowding, while 62% live in some form of deprivation. Market rents are four or five times what social rents are, so one can imagine how my constituents greeted the Chancellor’s most recent, desperate attempt to do something with the economy—fuel a house price boom. This is what the Financial Times said about it today:
“The government is encouraging people to leverage themselves up to the hilt in order to buy what is already likely to be overpriced property and, as a result of this policy, is likely to become still more so. This is irresponsible enough. But worse, the government will probably…find itself permanently using its balance sheet to support risky housing finance, as the US has done.”
There is indeed a revolution in housing, welfare and planning in this country, but it has very little to do with the Chancellor’s tinkering earlier this week. It is the actions of the Secretary of State for Work and Pensions, who opened today’s debate, and the Department for Communities and Local Government, along with many Conservative councils, that have made rents unaffordable for 540 households in my constituency on the local housing allowance. Some 2,700 households will be affected by the bedroom tax from next week, and as soon as the benefit changes come in another 800 households will be affected.
We have probably heard enough from the hon. Gentleman today. His temporary attendance in the debate and his whipped speech did not do him any credit; I do not think we want any more of that drivel, frankly—[Interruption.] If I need another minute, I might give way later.
The 1% cap and the restriction on crisis loans will make my constituents more dependent on payday loans or pawnbrokers. That is no way to solve the economic crisis that the Government have got themselves into.
House building is at an all-time low. According to figures from the TUC, only 10% of the money from the increase in right to buy has gone back into house building. Only 384 council homes were built in the last three quarters of last year. At the current rates—given the so-called investment in social house building in the Budget, which meets about 1% of demand—it would take more than a century to address demand. At the same time, changes through the Localism Act 2011 mean that we no longer have secure tenancies and that affordable rents in housing associations are now up to 80% of market rents—completely unaffordable. On
On planning policy, we have plans that allow for the conversion of much-needed employment land to luxury residential use. We have a policy that says that no additional social housing must be built in my constituency and existing social housing can be demolished for development as luxury affordable housing. As the shadow Secretary of State said earlier, there will be costs through the bedroom tax and through evictions, which are going on daily and weekly. There is an opportunity cost in that people are being forced to move from west London to places where there are fewer jobs and there is a huge social cost to the poorest people, who are being dislocated from their communities.
That is who is losing through the Government’s economic and other policies, but who is benefiting? We heard at the beginning of the debate from my hon. Friend Clive Efford, who said that the majority of new properties are being built by foreign investors. About 70% of such properties in the richer parts of London are going to foreign investors and are being used as second properties, rather than first properties.
The people who are benefiting are developers. I note from today’s edition of The Daily Telegraph that
“speech on Wednesday” and:
“Property developers have been privately promised that planning laws will be liberalised again”.
Developers are making money out of this—the same people who are the friends of those on the Government Front Bench and the donors to the Conservative party.
The same is happening in health. Hospitals in my constituency are being shut so that private providers can come in and clean up with inferior services, as shown today by the 80% of people who do not support the out-of-hours care they are being offered in exchange for the closure of accident and emergency departments. In my area of justice, cuts in legal aid and restrictions on access to justice have been made to benefit the insurance industry, another major funder of the Tory party. It is in those interests that the Government act. It would be polite to call it a class interest, as it is actually a mate’s interest. It is an act of cronyism.
The Budget does nothing to support poorer people or people on middle incomes and it does nothing to help people in crisis in my constituency. The only people it supports are those who fund the Conservative party and those who already are or soon will be millionaires.
I am sure it will.
I am pleased to follow my hon. Friends, and the closing statement by my hon. Friend Stephen Doughty, who linked the snow and the inclement weather to the Budget outlook. He asked where the spring was. Perhaps I should add that this
“is the winter of our discontent”.
This is the coalition Government’s fourth Budget since 2010, including the emergency Budget. We were told that we were out of the danger zone, and the Prime Minister promised that the good news would keep on coming. In reality, growth is down, borrowing is up, and families are paying the bills and picking up the pieces and consequences of the Government’s economic mess.
I want to concentrate on welfare issues, given the subject of today’s debate. At every opportunity, the Government appear to be undermining the economic foundations that are the route to recovery in the most deprived communities in our country. Constraints on family budgets, wage cuts, and decimated social security budgets have led to a loss of confidence, which in turn has pushed demand out of the local economy. The latest figures detailing the impact of Government cuts and benefit changes on those on the lowest incomes show that a single parent working full time on the minimum wage will lose £415 this year; taken with the previous two years, the total loss is nearly £1,000. Over the same period, a single person working full time on the minimum wage will lose £706, and a family with two children, and two parents working, one full time, one part time, will lose £1,197. Those examples do not take into account other cuts that have affected working families. Child tax credit for babies under one was cut from April 2011; and the child trust fund has been cut, as has the health in pregnancy grant and the education maintenance allowance. Housing benefit has been capped, and the bedroom tax will affect more than 1,600 households in my constituency, with an average loss of £728.
Cuts to social security have undermined economic recovery by driving demand out of the local economy in areas such as mine. It is estimated that the changes to social security will take £150 million a year out of the local economy in County Durham. It is my constituents in east Durham who are living with the consequences of the dark shadow cast by the age of austerity that grows longer and longer after every Budget. We need to restore demand, which has been sucked out of the economy by the past three years of austerity. That has had a monumental impact on unemployment in my constituency. Government Members have proclaimed that unemployment has fallen, but in my constituency the claimant count has risen by 900—yes, 900—since the Government came to power in May 2010, and it currently stands at 3,501. As things stand, there is little prospect of reducing the unemployment figures to the pre-recession levels of 2008, when 2,000 fewer people were looking for work in my constituency.
I have absolutely no doubt that austerity is failing, and that the cuts have made it increasingly difficult for people to meet everyday expenditure on life’s basics such as food, energy and housing. With less money in the local economy, it is no wonder that jobs and growth have stalled as a result of the Government strangling demand. The Budget seems to promise a further assault on the welfare state. The prospect of capping annually managed expenditure, a large part of which is spent on social security, is frightening for low-income families. A “super cap” limiting social security provision would mean that in times of greatest need benefits could be spread more thinly or restricted, breaking the link between social security provision and need.
I understand that Ministers are considering which areas will be subject to spending caps, but I was interested to read in The Daily Telegraph that housing benefit is a strong contender. As my hon. Friends the Members for Eltham (Clive Efford) and for Westminster North (Ms Buck) have said, the solution is to build more affordable homes for rent and to cap rents in the private sector.
It is a cruel irony that at a time when they are pressing ahead with the unfair and unjust bedroom tax, hitting 1,600 households in my constituency and taking away between £14 and £22 a week from the income of some of the poorest families, the Government propose to underwrite mortgages for properties worth up to £600,000. Ministers should realise the monumental consequences of taking away what they may consider to be relatively small sums, such as £14 a week with the bedroom tax, and the impact that that can have on families and individuals living off low and increasingly limited fixed incomes. The Secretary of State for Work and Pensions demands that the unemployed “get on the bus” to look for work. But what do they do when the Government cut their income to such an extent that they can no longer afford the bus fare, or food to eat, or to heat their home?
It is strange that the Government will penalise my constituents when they are deemed to have a spare bedroom, but seem to be willing to introduce a second home subsidy. We need more social and affordable housing, not a scheme that will drive up house prices, forcing people to take on higher mortgage debt. A £600,000 property is out of reach of the vast majority of people in my constituency and the wider area. It seems a strange priority to underwrite huge mortgages when the Government are telling us that we must withhold welfare payments from those whom the courts found to have been illegally sanctioned.
We all know that the Work programme is not fit for purpose—the Public Accounts Committee told us so. It is clear that welfare under this Government is unfair and in chaos, and I do not think things will change until we have a general election in 2015.
Last year the Chancellor told us that his Budget was one that supported working families and those looking for work, unashamedly backed business and was on the side of aspiration. However, a year later it proved to be a Budget that led to the stalling of the economy, the downgrading of the country’s credit rating and more U-turns than can be counted on one hand or perhaps even two hands.
This year, as borrowing is set to be £245 billion more than planned and the OBR has stated that people will be worse off in 2015 than they were in 2010, when the
Government took office, the Chancellor has trotted out the same lines about aspiration and setting free the aspirations of the nation. I find myself repeating the same lines about how this Budget will adversely affect my most vulnerable constituents, who through no fault of their own have to depend on welfare benefits in one way or another. Last year the Chancellor said that he expected to make further spending cuts of £10 billion by 2016. This year he has raised the amount to £11.5 billion, and as spending on schools and health is to be protected, the welfare budget is bound to be hit.
For the first time, the Chancellor has decided to limit annually managed expenditure, which includes the welfare budget, as well as debt interest and payments to the EU. His main claim for limiting AME is that in order to spend more on the services that we value, including the health service and our armed services, he must cut the growth in spending on the welfare budget. Of course, this stands in stark contrast to the increased tax cuts of £3 billion for the most wealthy in our society.
What will these cuts to welfare involve? We know that all will be revealed in June, but what more can be taken away from the poorest in the country, both the working poor and those who have to rely entirely on benefits? There is speculation that these cuts could realise suggestions flaunted by the Prime Minister in his welfare speech made last summer—things such as paying benefit in kind instead of cash, reducing benefits for the long-term unemployed, and the abolition of housing benefit for the under-25s. But I ask: what do the Government care for the unemployed? Only this week, they pushed the contemptible Jobseekers (Back to Work Schemes) Bill through the Commons. My constituents from all walks of life are firmly against it, and have contacted me with their serous concerns about the Government’s actions. However, a Government who will stoop so low as to take rightful benefits from claimants and force jobseekers into workfare are unlikely to have any conscience when it comes to making deeper cuts and causing further hardship to the worst-off in society.
Moreover, as millions of the poorest workers look forward to being taken out of income tax, they also have to look forward to increased rents because of the bedroom tax, and they will find that they now have to pay more council tax because of changes to local government finance. In reality, they will feel that the Government have robbed Peter to pay Paul. Many low-paid workers are in the public sector, and after a two-year pay freeze will see their pay rise by only 1%. No doubt many of those hard-working people will have aspirations to own their own homes, but poverty pay and loss of tax credits and child benefits will mean that, despite the Chancellor’s Help to Buy scheme, a home of their own remains out of reach.
The Chancellor said that the Budget does not duck our nation’s problems, but I think it compounds them. It is not a Budget for an aspiration nation; it is a Budget that will bring mixed fortunes for people across the United Kingdom. It will not bring the growth needed to see everyone prosper, to see everyone get jobs. The low-paid worker strives hard every day, but their aspirations are often crushed by the need simply to make ends meet, and this Budget will not change that. At the Conservative party conference, the Chancellor said:
“We are still all in this together.”
His Budget plan does not reflect his words, and it leaves me worried about the economic future of many of my constituents.
I welcome the Budget, which I recognise has been produced in difficult economic times. I should like the Government to make further tax cuts, but I realise that that may not be acceptable to some of our constituents who are feeling the increases in their cost of living. As a consequence, I am pleased that the Chancellor has decided to abolish the 3p rise in a pint of beer. I am also pleased that he has decided to cut the price of a pint by a further 1p. Only last week the Adam and Eve pub in Mill Hill and the Bodhran bar in Hendon thanked me for lobbying the Chancellor to do just that. Perhaps on Sunday night we will all say “Cheers” to the Chancellor.
Those proposals, alongside the abolition of the fuel duty escalator, are welcome. I certainly feel the pressure every time I put petrol in my car, and I know that many of my constituents feel the same as they have e-mailed me to say so. That measure, in conjunction with the freeze in council tax in the London borough of Barnet, is helping my constituents. Most significantly, raising the amount of money that people can earn before paying tax—the personal allowance—to £10,000 is welcome. In my constituency, 49,360 will benefit from paying £700 less in income tax than they did in 2010, and 4,967 will be taken out of tax altogether, which is a very good thing.
It is interesting that in many contributions from Opposition Members, I have heard repeated mentions of the so-called bedroom tax. The use of the word “tax” just goes to show how out of touch Labour Members are. As many people who work in this country will know, tax is levied on income earned. Housing benefit is paid to those who either do not have an income high enough to pay their appropriate accommodation costs, or do not have an income at all. In both those scenarios, if someone finds that they do not have enough income, they need to change their accommodation circumstances. I must make special mention of an hon. Member who spoke about her 17-year-old constituent who will receive a reduced income for his two-bedroom flat. The most shocking aspect of that to Government Members is that the Government are paying a 17-year-old to live in a two-bedroom flat. I wonder how many of my 17-year-old constituents would like a two-bedroom flat paid for for them.
Yes, of course it would, but I think we need to focus on ensuring that families do not break down, rather than putting someone into care. I know that the circumstances the hon. Gentleman is talking about—[Interruption.] Members are chuntering from a sedentary position, but unless they wish to intervene—
We talk about family breakdown, which of course none of us wants to happen, and I do not know the young man’s particular circumstances, but we are dealing with his case now, not what we might like to be the case. Surely it is wrong that vulnerable young men like him will be punished by the bedroom tax—call it what you like.
The young man is 17 years old, and obviously for the past 17 years we have not had a Government who have addressed social issues in our country.
There is no dispute, at least among the serious political parties, that the country has to make difficult financial decisions in order to reduce the deficit. My disappointment is that there are no such proposals coming from Labour Front Benchers. The Labour party’s 2010 election manifesto stated:
“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”
However, the shadow Work and Pensions Secretary, who is no longer in his place, was recently forced to concede that the cost of housing benefit, at £20 billion a year, is too high. He has also admitted that the Labour party does not have a solution for that. How can they be a credible Opposition if they cannot tell people where they would make cuts?
The most appealing part of the Budget for my constituents is the proposed help to assist people to get on the housing ladder. My constituency is the victim of its own success. Good schools, green spaces and a comparatively low crime rate for London ensure that many people want to move there. Although I certainly welcome them, they put pressure on the availability of the housing stock. My constituents’ children find it hard to buy a property, or indeed to rent one, when they return from university or go to work. We should not forget that not everyone is given a deed of variation by mummy and daddy that allows them to stay in part of the family’s house in places such as Primrose Hill, ensuring that they never have to go to a job interview or get a proper job in order to put a roof over their heads.
Many of my constituents are forced to move away from their family and friends and the places they grew up in. The Help to Buy scheme will help them, because in my constituency there are huge regeneration schemes in progress. The Beaufort Park and Grahame Park regeneration schemes are transforming the landscape of the social rented sector in Colindale, and the Mill Hill barracks site is also providing homes for people in the area. Only this morning—this explains my absence at the beginning of the debate—I met John Morris and the resident representatives of the West Hendon regeneration scheme. It has been a hugely difficult social sector regeneration scheme that was not progressed by the previous Government. Indeed, I suspect the motives of local Labour politicians who want to keep people in substandard accommodation instead of getting homes built. [Interruption.] From a sedentary position, Mr Morris says that that is disgraceful—
Order. The hon. Gentleman refer to hon. Members by constituency.
I did not want to intervene, but I really cannot let that pass. As someone who served on a local housing authority for almost 20 years and came into contact with many elected Labour councillors, I can tell the hon. Gentleman that it was a top priority for us to try to ensure decent housing, and I am sure that that philosophy has also applied in Hendon.
I can assure that hon. Gentleman that in my experience it certainly has not. I certainly would never wish to impugn his reputation, or indeed the work he has done over the past 20 years on the housing authority. I only wish that some of my Labour councillors had the credibility that he has.
I can only extend to the hon. Gentleman the same courtesy he extended to my hon. Friend Michael Ellis and say, “I think we’ve heard enough from you today, thank you.”
All those schemes in my constituency will allow my constituents to get a home near their family and friends, which can only be a good thing. I urge the Government to agree on those proposals as quickly as possible so that my constituents can start buying their first homes. That is a good thing that we can agree will emerge from the Budget.
The Budget rewards those who aspire to work hard and get on. It is for those who want to own their own home in Hendon, or indeed in Easington. It is for those who want to get their first job, to start a business or to save for their retirement. It is a Budget for people who realise that there are no easy answers to our financial problems but that we are on the right track, so let us get on with it.
We have had an interesting debate. There have been 27 Back-Bench speeches, of which 19 have come from Labour Members. There have been passionate speeches. A lot of information has been given about constituencies and constituents’ experience in the real world rather than the world that some on the Government Benches would like to believe exists.
We started off with a typically bullish performance from the Secretary of State for Work and Pensions, who seemed reluctant to accept that, notwithstanding what he tried to claim the Chancellor is doing, in fact the Government will borrow £245 billion more than planned. That borrowing is to deal with failure rather than to invest for future success.
The Government seem to fail to recognise that the situation has happened on their watch. It is not good enough, halfway through a Parliament, for the Government continually to come to the Chamber and harp back to what went on in the past without taking any responsibility whatever for what they are doing and their own actions.
It is interesting that Government Front Benchers seem to have an obsession with the shadow Chancellor. Perhaps it is because he has been proven to be correct. The economy is flatlining, there is no growth, the deficit targets have been missed, the triple A rating is lost and the Office for Budget Responsibility has confirmed that people will be worse off in 2015 than in 2010. There is no plan—it is more of the same from the downgraded Chancellor, and from the downgraded Government Front Benchers here this afternoon.
We have heard consistently from the Labour Benches about how unfair it is that, while millionaires will be laughing all the way to the bank at the beginning of April, very real cuts are coming for ordinary working people and those who are desperately seeking work.
A number of themes have come through the debate and I want briefly to touch on them before coming to some of the points made by my right hon. Friend Mr Byrne. We heard powerful speeches about living standards, not least from my hon. Friend Mrs Glindon, who spoke towards the end of the debate, and from my hon. Friend Grahame M. Morris. Both talked about the impact of welfare cuts on their constituents’ and general living standards.
Early in the debate, we heard from my hon. Friends the Members for Houghton and Sunderland South (Bridget Phillipson) and for Lewisham East (Heidi Alexander) about the impact of child care costs on families and how what the Government propose is too little, too late. They mentioned the dangers of changing the carer-to-child ratios, downgrading again the service provided as well as giving with one hand and taking away with the other—promising something that will happen in 2015 while cutting tax credits.
Government—[Interruption.] Government Front Benchers may think that the situation is funny, but I assure them that it is not funny for the families who my hon. Friend Mr Bain mentioned from his constituency. He knows well the impact of the bedroom tax and the problems there.
Does my hon. Friend share the anger of my constituent with cerebral palsy, who I visited last Friday? She has a house that has been adapted and she gets physiotherapy in it. She has been asked to pay a bedroom tax of £9.63 a week, while the Secretary of State was unable today to guarantee that millionaires will not benefit from a spare home subsidy as a result of the Budget.
I hear yet again Government Members saying, “It is not a tax!” The issue is that the charge will have an impact on disabled people, as my hon. Friend just mentioned.
We have yet to be given an explanation about why it is fair that people in those circumstances in constituencies throughout the UK—more than 2,000 in my constituency of Kilmarnock and Loudoun—will be impacted, while millionaires get a tax cut; it also looks as if millionaires may also get a subsidy to buy another home.
Will the hon. Lady answer this question? If she is so against this, why is she in favour of people having spare rooms subsidised by the taxpayer? Why did her party’s Government refuse to allow the same thing in relation to private sector social tenancies?
Once again, the Secretary of State’s question shows just how out of touch this Government are. These are people’s homes, in which many of them have lived—[Interruption.] The Secretary of State can shout from the Front Bench, but he had his opportunity to speak earlier. It is important to reflect back to him the points made by hon. Members when he was not in his place, and that is what I am seeking to do. It is unfair that people who have lived in their homes for many years are now finding that there are no other homes for them to move to. Some people had been given homes under the homeless persons legislation, and some because the homes are suitably adapted for their needs. It is simply not fair to suggest that these people should not be able to continue to live in these homes.
Several hon. Members talked about unemployment and the need for more to be done. My hon. Friends the Members for Lewisham East, Walthamstow (Stella Creasy), for Nottingham South (Lilian Greenwood), for Luton North (Kelvin Hopkins) and for Blaenau Gwent (Nick Smith) highlighted the problems of many more people chasing vacancies in their areas than there are jobs available. The Government consistently say that there have been increasing numbers of people in employment. However, the harsh reality for many people in the constituencies represented by Labour Members who have spoken is that they are not seeing the benefit of that job creation and are finding that jobs are not available, that only part-time jobs are available, or that they are unable to work the number of hours they need to work.
On housing, various circumstances were relayed during the course of the debate. I note that we still have not had an answer from Ministers about the second home subsidy. Will the legislation be constructed in such a way that it will not be possible for people who already own homes to buy another home under this process? Yet again, no answer is forthcoming. Housing was discussed by my hon. Friends the Members for Hammersmith (Mr Slaughter), for Croydon North (Steve Reed), for Islington North (Jeremy Corbyn), for Westminster North (Ms Buck), for North Durham (Mr Jones), for Eltham (Clive Efford) and for Hyndburn (Graham Jones). I list them all because that shows the great strength of feeling about how this Government have got it wrong on housing and have not done enough to bring forward, at an early stage, plans not only to get houses built but to give the construction sector the boost that it needs.
My hon. Friends the Members for Cardiff South and Penarth (Stephen Doughty) and for Ilford South (Mike Gapes) referred to the Department for International Development’s welcome commitment to spend 0.7% of
GDP, but made the important point that that money has to be spent on aid and should not be diverted anywhere else.
It was suggested that my hon. Friend Tristram Hunt should have a statue erected in his honour because of the amount of work that he has done in his area on energy and climate change issues. As a former sculptor, I would certainly be very keen to see a suitable monument erected somewhere in his constituency.
I want to return to the points raised by my right hon. Friend the Member for Birmingham, Hodge Hill. He made a number of very important points about how this Government have not taken any responsibility for what they are doing under their own watch. He noted how the numbers have been manipulated or massaged—we can use whatever word we like—and how they want to pay this year’s bills next year to ensure that their sums add up. At the same time, borrowing is the same as last year and will be the same next year, too. They also broke their promise to get the deficit down by 2015.
My right hon. Friend highlighted a number of issues with regard to the jobcentre targets, which was also picked up by my hon. Friend the Member for Walthamstow. Will the Exchequer Secretary address some of those issues when he winds up? As my right hon. Friend has pointed out, it has been said that staff were threatened if they did not get the figures down and that they were given a dictionary of certain phrases that they had to look out for whereby people were put on special measures or investigated further if they used those phrases in their job diaries or on their forms.
This is very serious and I have asked Ministers questions about it during previous debates. I received an assurance that there were no targets in the jobcentres, but we have heard evidence today that there seem to be not only targets, but league tables. I cannot imagine why jobcentre staff would say such things if pressure was not being put on them to work in that way. Ministers seem to be saying one thing in public while something else is going on in private behind the scenes. That suggests either that Ministers do not know what is going on, or that they do know but have not been able, for whatever reason, to get the information into the public domain. The Minister needs to answer those questions. For the same reason, it is important that we get the independent review on sanctions, which Ministers were clearly asked to consider in every case in which sanctions were used. We have heard about the many good people working in jobcentres. It has been suggested that they are good people trapped in bad systems, and it is the responsibility of Ministers to address that.
I want to end on a slightly more positive note. We welcome the employment allowance. We want to see the detail and ensure that it moves ahead as quickly as possible. It is something that we have advocated to give more help to small businesses.
Although we welcome some measures, I want to sound a cautionary note on the sickness and absence review in particular. Of course, we support the idea of people getting the help, assistance and medical treatment they need to deal with conditions and to enable them to get back to work if they have been off sick or have been injured. That access to treatment must not, however, be put at risk by further cuts to the NHS and it must not take a similar approach to the one we have already shown to be unfair whereby the Department for Work and Pensions, through organisations such as Atos, appears to be treating people in a way that disadvantages rather than assists them.
We have yet to see all the implications of the plan to introduce the single-tier pension. I have been contacted by many women who have already been hit by the change in retirement age and who are now very worried and confused about how the change to the state pension will affect them. They are now even more worried about the new proposals.
We have had a good debate, but the shadow Secretary of State raised a number of issues for which answers are still required and I hope that the Minister will provide them. I would particularly appreciate answers to the points about sanctions and jobcentres that were raised during the debate.
We have had a well-attended and at times lively debate on the Budget, and I will begin by thanking my hon. Friends for their contributions. My hon. Friend James Duddridge spoke about the steps taken in the Budget to help businesses and ensure growth, and he rightly highlighted measures relating to stamp duty for shares on the alternative investment market. My hon. Friend Mr Newmark highlighted the extension of capital gains tax policy for seed enterprise investment schemes, and I thank him for his excellent work in promoting those schemes. They are an excellent opportunity to enable start-up businesses to expand, and for investors to find good investment opportunities to help grow jobs in this country.
I thank my right hon. Friend Paul Burstow, who I know had to depart early. He highlighted the further substantial progress that the Government have made on the personal allowance, benefiting millions of taxpayers and taking many others out of income tax altogether—a contrast to the record that we inherited. He also highlighted the work on social care reform that the Government have progressed, again in contrast with our predecessors. I know that my right hon. Friend was heavily involved in that process.
My hon. Friend Nick de Bois highlighted specific matters relating to community investment tax relief. I know that he has had discussions with the Treasury about his ideas, and we welcome his engagement. My hon. Friend Steve Baker dealt with monetary policy—an issue in which he takes a close interest—and we are grateful for his views. My hon. Friend Jacob Rees-Mogg highlighted the progress that the Government have already made in dealing with the mess that we inherited, and particularly the fact that we have reduced borrowing by a third since we have been in office.
My hon. Friend Michael Ellis highlighted to the House the expression, “There is no money left”, although I have forgotten for the moment who coined that phrase—[Interruption.] I am told that it was Winston Churchill. I was thinking of someone else, although there are certain physical similarities. I also thank my hon. Friend Dr Offord for highlighting some of the long-standing housing issues in Hendon that he is seeking to address.
The Minister mentioned housing. Is he as shocked as I am by figures that the Government have released today that show a 12% increase in the number of households with children accepted as homeless in the last year; an 11% increase in those living in temporary accommodation; and a 29% increase in the number of families living in bed and breakfasts? Is that not a disgraceful indictment of this Government?
If the hon. Lady is concerned about people on waiting lists or living in overcrowded conditions, she might want to think about what we could do about too many people who have got spare rooms.
We heard a number of speeches from the Labour party, and two points about the fiscal situation were consistently raised. First was the concern that borrowing is higher than we had wanted and expected it to be—borrowing is too high and debt is increasing too fast. We then had a number of speeches that called for more spending and said that we should not worry quite so much about borrowing and should be prepared to borrow more. Remarkably, a number of speeches made both points at the same time, but the reality is that the Labour party believes that the right approach to our current difficulties in the economy is to borrow more. The proposals from the shadow Chancellor involved £33 billion more spending.
The most interesting point in the entire debate was when Mr Bain called for more spending in a particular area, and my hon. Friend Jane Ellison intervened to ask how he would do that in a fiscally neutral way. At that point the hon. Gentleman paused and said, “Well, we are on a different path.” He is an articulate and eloquent speaker, but rather than say what that path was, he refused to answer. Labour Members are on the path that dare not speak its name. Their path is simply more borrowing.
If the Budget is such a great success, why has the National Institute of Economic and Social Research said this afternoon that the Budget will make no impact whatever on increasing growth for the next two years?
I will come to the measures on growth in a moment, but let us not ignore the fact that the Labour party’s approach is to spend more and borrow more. How do Labour Members believe that will enable us to get the debt down? It simply is not feasible.
My hon. Friend is absolutely right to point that out. That would be the consequence of pursuing the policies advocated by Labour. That does not take into account the concerns about what going down that route would do for international confidence and the price we pay for our borrowing—interest rates. Such borrowing would jeopardise the economy.
We have made progress on, for example, unemployment. Since the first quarter of 2010, the private sector has increased by 1.25 million jobs and total employment is up by 890,000 in the period. A number of hon. Members, including Bridget Phillipson, described the conditions in their constituencies. It is worth pointing out that, in the north-east of England, employment has risen by 1.4% and unemployment has fallen by 1.5% in the past year.
We are therefore making progress, but I will not deny that we, like most major economies in western Europe, do not have the level of growth we would like. Two big challenges face all of us. First, how do we get growth when there is no money left, and secondly, how do we live within our means—what do we do to get the deficit down? To deal with that question, we must first acknowledge that the problem essentially is that spending is too high, and not that taxes are too low.
We must take steps to address that, which means taking difficult decisions, as the Government have done, on departmental spending. Our decisions have, by and large, been opposed by Labour. We have had support on one element of departmental spending—the public sector pay freeze. We have announced that we have had to extend that for a further year into 2015-16, but I am not sure whether Labour supports that policy. I believe that freeze is essential if we are to meet our targets.
We have also had to take steps to reform welfare. I congratulate my right hon. Friend the Secretary of State for Work and Pensions on the leadership he has shown and on his bold vision for reforming welfare. We must address welfare. In the decade before the financial crisis, and despite a growing economy, welfare spending increased by 40% and has continued to rise—it went from 11% of GDP in 2008 to 13% of GDP in 2012. Put simply, welfare spending still costs the UK taxpayer more than £200 billion a year, which is almost £1 in every £3 raised in taxes, and more than the budgets for health, education and defence combined. We need to find savings across the government. Inevitably, savings on welfare need to be part of that. If we are to spend more money on other services, we need to tackle our growing welfare budgets.
As my right hon. Friend the Chancellor explained on Wednesday, the previous public spending framework divided Government spending into two halves: fixed department budgets and annually managed expenditure. We decided in the Budget to introduce a new limit on a significant proportion of the latter. That will be set in a way that allows the automatic stabilisers to operate, but brings control to areas of public spending that have been beyond our control. My right hon. Friend the Chief Secretary to the Treasury will provide an update on that at the spending round.
We must recognise that we are in a global race. There will be economies that succeed and those that fail. We must ensure that we are competitive. That is why we have cut the corporation tax rate again to 20%—the lowest rate in the G20. It is striking how the UK is now recognised as having a very competitive tax system. That is also why we are making it easier for start-ups. I have touched on the seed enterprise investment schemes and the measures on stamp duty on AIM shares.
From April 2014, every business and charity in the UK will be entitled to a £2,000 employment allowance each year to reduce their employer’s national insurance contributions. I can tell the House that we have set up a website to help businesses understand how that will work, with an online calculator to illustrate the effect of the allowance on the employer’s national insurance bill in 2014-15. It can be found at www.employmentallowance.com. The employment allowance will benefit up to 1.25 million employers, with 98% of the benefit going to small and medium-sized businesses with fewer than 250 employees.
Cathy Jamieson said that the Labour party has proposals in this area, but the employment allowance is much simpler and is permanent, not temporary. It applies to all businesses and charities, not just the smallest, so there will not be a cliff-edge problem whereby people face disincentives in taking on a 10th employee. It will benefit all businesses and charities, not just those that are taking on new staff. It will be very simple to operate through the real-time information system. It could not be simpler. It is also worth pointing out that the Labour party fought the last election with the intention of increasing employer’s NICs. They wanted to put the jobs tax up, not cut it.
The previous Government’s plan for reducing the deficit was inadequate and had no credibility. The Labour Opposition have not stood by any element of that plan. They wanted to raise employer’s NICs; now they want to cut them. They proposed huge cuts in capital spending, which we have partially reversed. They now complain to us that capital spending should be higher. They put in place a fuel duty escalator, but have subsequently called for it to be scrapped. This Government have managed to freeze fuel duty and it is falling in real terms. The previous Government put in place a beer escalator. I think that the Opposition are supporting us in cancelling that as well.
The Labour party has one solution to our economic problems: borrowing and spending more. It spent and borrowed too much during the boom and it never accepted that there was a structural deficit before the crash. It has resisted all our attempts to control public spending and is not willing to accept that there is a need to constrain public spending in the years ahead. The truth is that the Labour party always wants to spend and borrow more. To be fair, when it is in government, it does spend and borrow more. However, the country cannot afford it.
We need to prepare ourselves for growth. We need to put in place incentives for companies to invest and expand. In government, the Labour party failed to do that and failed to control spending. That is why it cannot be taken seriously. That is why it is not the Labour party, but this Government who can achieve for the United Kingdom.
Ordered, That the debate be now adjourned.—(Joseph Johnson.)
Debate to be resumed on