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.
Last week the Chancellor presented his Budget, reiterating this Government’s commitment to a long-term economic plan. [Interruption.] I will say that again—a long-term economic plan, something that Labour does not have or is in search of, I am not sure. We are restoring the public finances and supporting businesses while providing security and stability for Britain’s families. I must say that today’s other news that inflation is down to 1.7% is very good news for hard-working families.
Following Labour’s great recession, which, I remind the House, wiped out 7.2% of our economy, worth £112 billion or £3,000 for every household in the country—it is still in denial—last week we learned that our economic recovery is now established and taking hold faster than originally forecast.
I will give way, but many Members want to speak, so first I want to make a little progress.
A year ago, the Office for Budget Responsibility predicted that growth in 2014 would be 1.8%. Now, the forecast is 2.7%, the biggest upward revision between Budgets for at least three decades. The deficit has fallen by a third in three years, and is forecast to halve by next year. By 2018-19, the OBR expects the public finances to move into surplus by some £4.8 billion for the first time in 18 years. Before that, in 2017-18, the fiscal mandate will be met a year early. Employment has been revised up and unemployment revised down in every year of the forecast.
The right hon. Gentleman was talking earlier about the process under the previous Government, and he claimed that it was Labour’s recession. When he was leader of the Conservative party was there any point at which he did not agree with the spending plans of the then Chancellor of the Exchequer?
I remind the hon. Gentleman that when one goes into government one is responsible for what happens. I know it is hard to take, but I have always believed that one wants to go into government to take responsibility for all the things that take place while one is government. He may not want to know it, but the reality is that the Labour was in government, the recession was very hard, and people have suffered.
There is still more to do—we have not done enough—if we are to secure Britain’s future. That is why the Budget set out further investment to ensure a resilient economy that delivers the promise for business that it can compete with the best in the world, and hope for families—this is important—about their prospects now, and for their children’s futures. From next week, corporation tax will be down to 21% from the 28% inherited from Labour, and will be down again to 20% next year—the joint lowest in the G20—making it competitive to invest in Britain, which is good for jobs and good for young people.
That will be matched by the best export finance, doubling direct lending to £3 billion and the investment allowance to £500,000, so that British business can take advantage of the best opportunities at home and abroad. Again, that is good for investment and good for growing jobs.
We are cutting tax not just for business but for Britain’s hard-working people, ensuring all can share in the benefits of Britain’s growth. By raising the personal allowance threshold to £10,500 next year, we are taking some 3 million of the lowest paid out of tax altogether and ensuring 25 million people pay less.
As a result of those changes since 2010, the typical taxpayer is £800 better off—something that Labour’s simple measure of real earnings fails to recognise. Similarly, through new child care support, we are helping families overcome prohibitive costs and ensuring that more parents find that it pays to get a job. Under universal credit, we have already invested £200 million to remove the 16-hour rule, so that 100,000 families in mini-jobs or part-time work receive help for the first time. Now, we are going further still, increasing child care support from 70% to 85% of costs so that work pays more for half a million families.
It pays to work, and now, finally, it pays to save, reversing the damaging trend whereby for too long Britain has borrowed too much and saved too little. The radical changes to retirement saving announced in the Budget are possible only because of the significant pensions reforms the Government have already delivered: a triple lock on the state pension; auto-enrolment to make saving the norm, helping up to 9 million save in a workplace pension—over 3 million are already saving, and I pay due credit to the Minister of State, my hon. Friend Steve Webb for that—and, vitally, the single-tier pension, for which I again pay credit to my hon. Friend, set above the level of the means test, so that those who have contributed for 35 years have a secure basic income, without having to resort to additional state support in later life.
I listened carefully to what my right hon. Friend said about incentives to work. Will he say a little about the 450,000 fewer workless households, and the 290,000 fewer children living in such households? Perhaps that has something to do with his welfare reforms.
I am going to come on to that, but one of the great success stories is the fact that the number of workless households has fallen for the first time in 30 years. My hon. Friend is absolutely right, and I shall give a few more details about that in a second.
I shall make a little more progress before giving way to Mr Love.
As a result, for the first time, we can rethink the rules and trust people to use their own money as they see fit, not as the Government tell them. After the Budget, gone will be the prescriptive limits on how and when people can turn their pension pot into annual income, which, we all agree led, for too long, to inertia among consumers and risked locking people into low-yield annuities, with rates that have fallen by 15% since 2009. In countries such as the United States, Australia and Denmark, Governments do not impose restrictions. Now, that will be the case in the UK too, freeing people to shape their finances in retirement as they choose, which is absolutely right.
We are consulting on guaranteed guidance—an important feature of the Budget—asking the Financial Conduct Authority to work with the pensions regulator, consumer groups and others, to develop a robust set of standards and monitoring arrangements, with £20 million provided to kick-start that thinking. Whether people choose to buy an annuity as now, take the cash, or grow their pension pot, the reforms will increase the attractiveness of saving for retirement. That will pave the way for new financial products, increasing competitiveness in the market, driving innovation and a better service, as well as giving people new choice over their future.
As I recall, the savings ratio under the previous Government fell to all-time lows, and under this Government it will be higher at the end of this Parliament than it ever was under Labour. When I take interventions from the Opposition they always fail to recognise that the economy crashed in 2009-10, taking 7.2% off gross domestic product, which had a staggering effect on savings and everything else. The reality is that we will have a better savings position, which will grow, given the fact that we are working to improve savings in pensions in the workplace, with a single-tier pension and giving people the right and responsibility to choose where their savings go.
I have given already way to the hon. Gentleman, and I just want to make another point about something that is typical of what has been going on.
On Wednesday, in his Budget response, the Leader of the Opposition did not mention pension reforms at all. Come to think of it, he did not mention any single measure in the Budget. On Thursday, the shadow Chancellor would say only of the measure that Labour would somehow look at the proposals. On Friday, in a panic, I think, Rachel Reeves said on “Any Questions” that she supported the reforms. On Sunday, when asked whether he supported the measure, the shadow Business Secretary began to backtrack and said:
“I’m not going to sign a blank piece of paper on your show”.
Later the same day, the hon. Member for Leeds West began to backtrack, saying that Labour supported the reforms but that they did not go far enough. Labour’s position on this policy is a complete shambles. It has struggled to reach a position and say that it may support the measure is not because it believes in it but because it realises that it is popular. The reason Labour does something is all about popularity and nothing to do with values—that is the truth of it.
Over and above the radical changes to pensions savings, the Budget announced four further important measures to make saving pay, including abolishing the 10p rate for savers altogether, for the first £5,000 of savings. As my right hon. Friend the Chancellor said, when we abolish a 10p rate, we take it to zero; when the previous Government abolished the 10p rate, they took it to 20p. Those measures also included merging cash and stocks to create a single, simple new ISA, with an increased annual limit of £15,000; launching a new pensioner bond, paying market-leading rates; and introducing something that we have worked on in the Department with the Treasury and my right hon. Friend, the excellent Chief Secretary: a class 3A national insurance contribution, so that anyone who has reached state pension age before the single tier is introduced can top up their state pension.
The Opposition’s response is becoming chaotic. I want to press the hon. Member for Leeds West: normally by this point in the Budget debate, I understand, the Opposition make it very clear what resolutions they will vote against, but we have heard nothing from them at all. It seems that there is a row and chaos, so I will give way to the hon. Lady if she would like to tell us which ones.
I particularly want to ask her about resolution 43, which, I understand, is about the treatment of salaried members within limited liability partnerships. I wonder if she can tell us whether the Opposition will vote against that, given the fact that their economic policy is now fundamentally limited, that their leadership is a liability, and, after all their rows, that they are clearly not in a partnership? I will give way to her if she would like to tell us which resolutions she is going to vote against. Will she confirm or deny that she is voting against anything? I will give way to her if she wants. Well, they clearly do not know, Mr Speaker, so we will look forward to this evening with some relish.
It now pays to save. That is what is going on—I am glad that you enjoyed that joke, Mr Speaker; you are always a good test on these things—and so under the Government it pays to work, breaking dependency and getting people back into jobs.
For the avoidance of doubt, I should just say that I was happy to see the Secretary of State looking happy.
When the hon. Lady got up to make an intervention, I wondered whether she would take the opportunity to say how much she welcomes the fact that unemployment has fallen by 20% in her constituency—a very good thing. I know she does not want to say that, but I say it for her.
I have to say to that no, we do not regret that. What we have undertaken since we came into power is going to hugely incentivise and improve pension savings and the savings marketplace. The extra vehicles announced in the Budget will rapidly improve that and I believe, all in all, that we will have a much better savings position than we inherited, so I think I have answered that question.
I need to make the point about employment and unemployment. Let me get this right: when we came into power, we inherited a situation where unemployment rose by nearly half a million. At its peak, some 5 million were on out-of-work benefits—1 million for a decade or more—and in one in five households, no one worked. The number of households where no member had ever worked doubled under Labour, from 184,000 in 1997 on an upward trend to 351,000 by 2010. I do not recall Labour Members mentioning those figures, and they avoided them when they were in power.
Correspondingly, since we came to power, unemployment is down 168,000 since the election. The claimant count has fallen by almost a quarter over the last year, which is the fastest annual fall since 1997. Workless households have fallen to the lowest rate since records began, down 450,000—two percentage points—since the end of 2010.
At the same time, we now have record employment: more people in work than ever before, more women in work than ever before and more people in work in the private sector than ever before—up over 1.7 million since the election. Ninety per cent. of the increase over the last year has come from British workers, unlike before, and more than three quarters of the increase since the election is from full-time work, up over 1 million compared with part-time work, which is up only 300,000.
Here is the point: we hear a lot from Labour Members about what they would do if they were in government, but youth unemployment increased under the previous Government by nearly half from 1997 to 2010—up almost 300,000. Now, on what the shadow Work and Pensions Secretary called
“the failure of this government to get young people into work”, youth unemployment is down 81,000 on the year and is lower than what we inherited. The International Labour Organisation long-term youth unemployment is also down 37,000 on the year. The number of young people out of work and not in full-time education is down 63,000 and the long-term youth claimant count is down 23,900 on the year, having fallen for the last 15 consecutive months.
I remind the Opposition, who are chuntering away from a sedentary position, that under them long-term unemployment nearly doubled in two years, from 400,000 in 2008 to 800,000 in 2010. While they were seeing that rise, they gerrymandered the figures on the claimant count: 80,000 were put on to training allowances so that they came off the measurement of whether they were long term unemployed or not. Even though they were back out of work or back out of training, they went back as though they had just started their claims.
The trend slowed and is now falling. ILO long-term unemployment is down 38,000 this quarter and is down 59,000 on the year. The number on the claimant count for 12 months, ungerrymandered, is down 74,000 on the year—a fall of 17%. That is down, I believe, to so many of the reforms and changes that we have made, improving the labour market and improving the process of getting people back to work. The latest labour market statistics are remarkable and nothing demonstrates more clearly the Government’s success in getting Britain working.
Again, I say to the hon. Gentleman that he really needs to address his question to those who were governing, because, as I said earlier, GDP fell by 7.5% under the previous Government during the recession. What does he think forced those economics for individuals and working households to fall? It was the fact that there was a massive recession—the biggest for 100 years —on Labour’s watch.
I want to make some progress. The latest labour market statistics are remarkable. The Work programme that we brought in is now helping long-term unemployed people dramatically: half a million people under the programme have started a job; 252,000 have now gone into sustained work; and 10 times as many people have achieved job outcomes now compared with the end of the first year.
Compared with the flexible new deal, one of Labour’s great flagship programmes, under the Work programme, twice as many people have gone into a job, and it costs £5,000 less per place according to all the estimates. So, too, with the work experience programme that we brought in, allowing young people to take a work experience placement for up to two months while still keeping their benefit. That has helped 50% of participants off benefits and into work. It has the same success rate as the future jobs fund, but at a 20th of the cost—£325 as opposed to £6,500 of wasted money. What is more, the majority of places are in the private sector, whereas the future jobs fund created jobs almost exclusively in the public sector.
This Budget has been very good for jobs but it is very good for apprenticeships as well. The Government have already committed to a quarter of a million more apprenticeships than Labour ever planned, with 1.6 million starts since 2010. The Budget announced £170 million more for another 100,000 apprenticeship grants and for developing new degree-level apprenticeships as well. It is important that the Government are not only finding and helping to find people work, but helping to shape their skills and experience.
In the Secretary of State’s list of successes, rightly attributed to the businesses in this country and the Government’s policies, will he also make reference to those that are now being supported by the enterprise allowance and the start-up schemes? As we saw at my recent jobs fair, more people are seeking self-employment as well.
I pay tribute to my neighbour and hon. Friend for his phenomenal work on the jobs fairs, on all the creation he has done and on the work he has done with local unemployed people. He is absolutely right: the new enterprise allowance has been a phenomenal success. Thousands of people have started their own businesses under it. It is one of the big success stories of this Government. It is going to grow and we are going to ensure that many more, particularly young people who are more and more keen to start their own businesses, get the kind of support they want.
Does the Secretary of State not have any concern that even now there are 2.3 million people unemployed, and as his own statement made clear, the total has gone done by only some 160,000 since the election? The figure was 2.4 million before the election and now it is 2.3 million. What has gone wrong with getting those people into jobs?
Of course I want to see more people back in work, particularly young people, but the hon. Lady must remember that we inherited from the previous Government an economy that had hit the buffers, with young people cascading out of work in the two years running up to the election. Youth unemployment rose over their whole period in office, which suggests to me that their policies were hurting young people long before the recession. What we are doing is aimed at getting more people back into work. We have been successful in improving the situation, as the figures now are better than those we inherited—more people are in work, including more young people—but of course there is more to do, and it is this coalition Government who are doing it.
We are also introducing our other programmes, including the Work programme and universal credit, with the pathfinders moving into the north-west and eventually rolling out by 2016. We know that 90% of claims for jobseeker’s allowance and other benefits are already being made online, which is a huge change—only about 10% or 12% were made online before—that is improving speed and accuracy. Some 78% of claimants are confident about their ability to budget with monthly payments, as a result of the programmes we have run. Two thirds think that the universal credit process offers a much better work incentive than jobseeker’s allowance. Even in its early stages, universal credit is having a significant impact on people’s work prospects: claimants are likely to spend twice as long looking for work; two thirds agree that it is easier to understand their obligations; and 86%—rising to 90%—are confident of gaining a job within three months, which is a much higher rate than for jobseeker’s allowance.
These are dynamic changes that we are making, improving the path back to work, the incentives and the choices that people make. We are improving their work prospects and helping them into meaningful, long-term jobs. However, I gather from the Chief Secretary that the Treasury received a submission from the Opposition in the run-up to the Budget for an alternative to our programmes, which they call a jobs guarantee. I thought that we should look at that, just to examine whether it was worth embracing. I think it only fair that we tell the House whether or not it would work. Having looked at the proposal in a completely ambivalent manner, I have to say that it is confusing. The first submission said that it was a six-month programme for young people. The second submission said that it was a year-long programme. The third submission said that it was a two-year programme for the long-term unemployed. I gather that there is now some suggestion that it might be a six-month programme for everybody.
Apparently the jobs guarantee is now a flagship policy for the Opposition, but I understood that it would be funded for only one year. Now we hear that the same funding they announced for one year is meant to last all the way through a full Parliament. We asked the Treasury to do some formal costings for that, which I hope have been made available to the Opposition. They said that their scheme would cost only £1.9 billion in its first year and £0.9 billion thereafter, but the Treasury’s formal costings—[Interruption.] I know that Opposition Members do not want to listen, because the last thing they want to hear is how they would pay for it The Treasury, which is full of decent people doing a hard day’s work, has shown that there is a massive gap of £2.6 billion per year between what the Opposition say their jobs guarantee will cost and what we calculate it will cost.
Not only have the Opposition underestimated the costs by £0.6 billion in the programme’s first year, and £1.7 billion in future years, but they have no robust means of funding it. They say that they will fund it with a bankers’ bonus tax that will raise £2.3 billion, which is questionable, but I understand that they have spent that 10 times over. Let me list a few of the things they have committed to spend it on: reversing the VAT increase, which would cost £13.5 billion; more capital spending, which would cost £5.8 billion; reversing child benefit savings, which would cost £3.1 billion; reversing tax credit savings, which would cost £5.8 billion; and more housing, which would cost £1.2 billion. They have made £30 billion of spending commitments, apparently to be paid for by a tax that would save them £2.3 billion.
Does my right hon. Friend agree that the lesson of Labour’s crash is that more spending, more borrowing, more debt and more taxes do not work? Does this not show that the Opposition have not worked that out, because they have spent their bankers’ bonus tax more times than the number of sides on the new £1 coin?
My hon. Friend is absolutely right. The reality is that the Opposition are not very good at learning lessons. Were they in power again, I suspect that they would crash the car into the buffers, just as they did the last time.
At the same time, the Opposition’s proposal for restricting pensions tax relief has been called “extraordinarily complex” by the IFS and “unworkable” by the CBI. Labour needs a little reminder that make-work schemes are enormously expensive and, worse still, a mean attack on these pension proposals. The saving they expect to make from pensions tax relief is another mean attack on people who do the right thing by saving for their future. Labour has learnt nothing. Its proposal is even possibly a rehash of its old StepUp programme, which ended up costing a massive £10,000 per place before it binned it, rather than introducing it.
There we have it: a policy—the only one I have heard from the Opposition—that is full of flaws, unfunded and simply would not work. It is small wonder that when asked they said, “Okay, this will be about the private sector.” Actually, the future jobs fund, on which this proposal is based, never got jobs in the private sector. In fact, Barnsley council reported that only 7% of those jobs were in the private sector, and Birmingham council reported only 2%. It is small wonder that when asked to confirm whether that would be for private sector jobs, the shadow Chancellor said:
“But if not, you can do it through the voluntary sector. If not… you have to have a final backstop: public work scheme.”
If not one, then the other, but if not that, then another one. It begins to sound a bit like Vicky Pollard: “Yeah but no but yeah but no.” They have no policy for employment at all. To this date the private sector’s response has been unequivocal:
“Wage subsidies for employers are not the source of sustainable jobs… Government must focus on creating the conditions for growth”.
It is the same old Labour; the same old failed policies.
A little over a year before the next general election, this Budget sets out the choice now facing the electorate. On one hand we have an Opposition who every day are mired in confusion, who have voted against every reform measure and who have learnt nothing. After making welfare spending balloon by 60% during their time in government, they now want to spend more.
I want to ask the hon. Member for Leeds West what she meant by something she said when addressing a meeting of Christian socialists—perhaps they were just socialists, but I am not sure. She said:
“It will be much better if we can say all the changes that the Government has introduced we can reverse and all benefits can be universal.”
There we have the beating heart of Labour, and the public should know this—[Interruption.] They are cheering, because that is exactly what they want. Only now will they vote for the welfare cap—although I understand that a number of them will not—but they have no intention of sticking to it. That is only because, as the hon. Lady went on to say, to do what she wants to do would at the moment appear unpopular. They do something because it appears popular, not because they believe in it.
I wonder whether my right hon. Friend can help me. Does he know whether it is now the policy of Her Majesty’s Opposition to have an individual welfare cap or a universal budget cap? It is not only hon. Members in this place who would like to know what their policy is; 27 bishops in the other place would, too.
With respect, I have found in the past few weeks that I cannot really answer for bishops. They usually think they can answer for me, which is a fair response, but I am happy to avoid that challenge.
The Opposition have been quite confused about the welfare cap. They say that they are going to support it, but within the cap they have a policy they say they are going to change by ending the spare room subsidy. [Interruption.] Opposition Members call it a bedroom tax. I noticed that when they said last week that there were 24 tax rises under this Government, they did not schedule that as one of those tax rises. The truth is that they know it is not a tax, so, as ever, they are trying to fool the public. Let me point out that reversing that policy will cost them up to £500 million a year, and they have, they say, produced only one measure within the welfare cap that they will use to pay for that—means-testing winter fuel allowances for wealthier pensioners, but that will save only £100 million. Almost as soon as they vote for the cap tomorrow, they will be planning to break it. Perhaps the hon. Member for Leeds West can tell us—I will give way to her if so—what other elements she is going to change within the capped programme to reduce spending to bring it under the cap. Will she will intervene to tell me that? Of course not; she has no idea. There we have it—it is just a game for them. The only reason they might vote for the cap is that they are worried that it would be unpopular not to do so, but they do not intend at any stage to implement it.
On the other hand, this coalition Government are reforming welfare in the firm belief that it is the right thing to do, not only saving money but breaking dependency and restoring the incentive to work. We have record highs in employment and record lows for the rate of workless households. What is more, this Government are rewarding hard work and saving, in the belief that people have a right to take their own decisions on the money that they have earned, not dictating to them through high taxation or forcing them to buy poor yielding products as the previous Government did. This Budget delivers support for those who try, help for those who need it, and security for hard-working families up and down the land. I commend this Budget to the House.
Order. I should say to the House that in the light of the very large number of Members who wish to contribute, there will be a time limit on Back-Bench speeches of seven minutes. It is conceivable that that limit could even go down, although it might rise over the course of the debate. That may not be conclusive, but it is a guide, at any rate.
Wednesday’s Budget was certainly dressed to impress, but at its very heart there was an admission of failure. Let us remember what the Chancellor told us in 2010: that the Government would clear the deficit during this Parliament. They laughed at Labour’s plan to halve the deficit by the end of the Parliament, yet last Wednesday the Chancellor had to admit that he will not meet his targets until 2018—fully four years late.
The Chancellor comes from a wealthy family of wallpaper manufacturers, and this really was the ultimate Osborne and Little wallpaper Budget: paper over the cracks, use a stunning design to mask the underlying structural faults, and repeat patterns from last year’s range. But the truth is that for all the patterns and effects, people are worse off by £1,600 per year under this Government. Energy bills are up by £300, and however he dresses it up, people will be worse off in 2015 than they were in 2010.
This Budget was an opportunity to tackle the cost of living crisis faced by hard-working people across this country, but, again, the Government have failed to do so. They failed to do anything for families struggling with the costs of child care this side of an election. They failed to do anything to address youth unemployment and long-term unemployment with a jobs guarantee. They failed to help those working two or three jobs but still struggling with not enough to live on. They failed to help older people struggling to pay their energy bills, and they failed to help the disabled people so unfairly penalised by their bedroom tax.
Before the hon. Lady gets into full flow, will she at least recognise that on elderly poverty, fuel poverty, child poverty and overall inequality, the situation under this Government is better than that left by Labour?
The Government’s own figures show that the number of pensioners in poverty is set to rise, not fall, under this Government; that is the Chancellor’s legacy.
The Chancellor called this a Budget for the makers, the doers and the savers. The reality is that for the makers, over the past three years, manufacturing is down by 1.3%, infrastructure investment is down by 11%, and exports are falling, not rising. For the doers, real wages are down by 6% in this Parliament, energy prices are up by £300, and long-term youth unemployment has doubled. As for the savers, what has he done for them? According to the Pensions Minister, Steve Webb, he is allowing them to cash in their pensions and buy a Lamborghini. How incredibly out of touch is that? The average pension pot is about £30,000. I checked on the internet this morning, never having looked at this before, and found that the Lamborghini Aventador costs £263,000. The Cabinet might be lucky enough to be able to afford to buy a Lamborghini with their savings, but ordinary people would be lucky to be able to afford the door of a Lamborghini.
For the record, it is inaccurate to describe everybody on the Government Benches as having a wealthy background; that is clearly not the case. On helping hard-working families, does the hon. Lady’s party support the overall DWP welfare cap, and the individual welfare cap, given the views not only of Members in this place, including Chris Bryant, but of 26 bishops in the other place, plus one other bishop who does not sit in the other place—Archbishop, soon to be Cardinal, Vincent Nichols?
I am sorry if the hon. Gentleman cannot afford a Lamborghini with his savings. I will come on to the welfare cap. We have been clear that we will be supporting the welfare cap in the vote in Parliament tomorrow.
If the Chancellor really wanted this to be a Budget for the makers, he would have cut business rates, supported a British investment bank to help small businesses, and committed to build more homes—the 200,000 extra homes a year that Labour has promised. If he really wanted it to be a Budget for doers, he would cut taxes for millions of working people with a 10p starting rate of tax, freeze energy bills and reform the broken energy market, and expand child care for parents with three and four-year-olds, as a Labour Government would.
On cutting taxes for ordinary working people, surely the hon. Lady must concede that putting the tax allowance up so that they are paying nothing on their first £10,000 or £10,500 is better than their paying 10p on that amount?
The hon. Gentleman will know that the Institute for Fiscal Studies has counted the costs of what this Government have done. Taking into account all the changes to taxes, including VAT, which he voted to increase from 17.5% to 20% despite what was in his party’s manifesto, changes to tax credits and benefits have cost the average family £891. It is a case of giving with one hand but taking much, much more with the other.
My hon. Friend talks about a Budget for the doers. Yesterday I met three young people in my constituency aged 22, 24 and 23 who had never had proper long-term jobs because they had worked for agencies and on zero-hours contracts. If the Chancellor cared about doers and young people, his Budget would have addressed those issues.
I thank my hon. Friend for that intervention. As he knows, Labour’s compulsory jobs guarantee would benefit people exactly like the young people he met in Corby. It would guarantee a job for every young person who has been out of work for a year, giving them real hope and opportunity and utilising their skills and talents.
If things are going as swimmingly as the Government wish us to believe, is my hon. Friend as concerned as I am about the numbers of people getting into personal debt trying to make ends meet, and about all the evidence that shows that personal debt will rise, not fall, over the years ahead? Does she think that is a sign of an economy recovering, or of people scraping to make ends meet under this Government?
My hon. Friend speaks knowledgably not only of what she sees in her constituency of Walthamstow, but of what she hears when talking to others about the impact of payday lenders and debt on many of our communities.
The hon. Lady has mentioned her jobs guarantee, which Labour has said will involve the private sector. Which companies have actually signed up to it?
The compulsory jobs guarantee, which will last for the full five years of the next Parliament, will be based on what we have seen with the jobs growth Wales programme, whereby 80% of the jobs are in the private sector. A couple of weeks ago, the shadow Minister for employment—my right hon. Friend Stephen Timms—and I visited a software company in Cardiff that had taken on 12 people through jobs growth Wales. It had made a huge difference to those young people, giving them hope and opportunity. The Government carp at our policies to get young people back to work, yet under them long-term youth unemployment has more than doubled. That is the Secretary of State’s record under this Government.
If the Chancellor really wanted this to be a Budget for savers, he would cap fees and charges on pensions and require insurance companies to provide free independent brokerage, as Labour has called for. Why did the Chancellor not do those things? It is because he is strong when it comes to standing up for the rich, but weak when it comes to standing up for the poor.
Does my hon. Friend agree that one of the biggest indictments of this Government and the Budget is the way in which they have adjusted taxation such that women will fund the bulk of the £14 billion the Government have to save? Women will have to save £11 billion—that is an indictment of this Government.
My hon. Friend makes an important point: women are disproportionately hit by the changes introduced by this Government and are struggling with the rising cost of living more than anybody in this country. Moreover, the increasing costs of child care under this Government are making it harder for working parents, particularly working mums, to go back to work and make the contribution we need to the economy.
Four years ago, this Government said that debt would fall and that living standards would rise, yet the reverse has happened. They have broken their promise to balance the books by 2015 and they are set to borrow £190 billion more than they had planned. National debt is rising this year and it will rise next year and the year after that. There is more borrowing, more debt and more welfare spending under this Government.
On the subject of debt and future spending—the hon. Lady will probably get to this later in her speech—will she answer the question asked by my right hon. Friend the Secretary of State about her remarks at a meeting last week? She is reported to have said that it would be better if she could reverse all of the changes and make benefits universal. That is a spending commitment of hundreds of billions of pounds. She needs to say whether she said it or not; otherwise no one will believe a word the Opposition say.
We are the party who have said that we will cut the winter fuel allowance for the richest pensioners and means-test that benefit to save money, but Government Members do not support that. The reality is that we are the party who are willing to take tough decisions to get the welfare bill down, whereas it is rising, not falling, under this Government.
The truth is that social security spending is £13 billion more than this Government had planned. In last week’s Budget, the Chancellor had to revise up spending on social security by £1 billion more this year and £1 billion more next year than the Government had planned just six months ago. Was that what the Prime Minister meant when he said that he was cutting the cost of welfare? It is going up, not down.
The problem is that without addressing the cost of living crisis, it is not possible to control the costs of social security. Long-term youth unemployment has doubled since 2010, costing taxpayers £330 million a year. The number of people working part-time who want a full-time job is up to 1.4 million, costing £4.6 billion in extra social security. One in five workers are paid less than a living wage—up from 3.9 million in 2009—costing the Treasury an estimated £3.2 billion a year. Housing benefit is increasing and has been revised up again because house building is at a record low. The Secretary of State has also played his part, with his shambolic welfare reforms. Just one in five people who have been on the Work programme for two years have secured a job; £1 billion has been paid out, yet more people are ending up back in the jobcentre than getting a job through the Secretary of State’s failed Work programme.
I think I am grateful to the hon. Lady for giving way. Given that I have been listening for 12 minutes to her critique of my right hon. Friend the Chancellor’s Budget, why is it that her party has come out saying it will support so many of its measures? Why is Labour thrashing around with such difficulty to find what to vote against tonight? Will the hon. Lady share with the House what her party plans to vote against?
The right hon. Gentleman will not have to wait too long: at 7 pm, he will find out how we will vote on the different measures. Let us be clear: what matters most of all is what was omitted from last week’s Budget, including a compulsory jobs guarantee, a cap on fees and charges and cancelling the bedroom tax. Those things would make a real difference to the lives of our constituents, but the Chancellor did not even mention them in last week’s Budget statement.
The Secretary of State has not just failed with the Work programme; he is failing with universal credit as well. It is years behind schedule and £130 million has already been wasted on IT, yet the Secretary of State continues to say that his flagship reform is on time and on budget.
He continues to do so now. If three years later and £130 million down the drain is on time and on budget, that says more about the Secretary of State’s grasp of mathematics than anything else.
The truth is that from Easterhouse—where the Secretary of State had his epiphany—to the Vatican, people are queuing up to tell the realities of this Government’s reforms. Rosemary Dixon, the chief executive of a charity on the Easterhouse estate in Glasgow—the Secretary of State might remember her—has said that the simple truth is that “things are going backwards.” A letter from 27 bishops stated that
“we must, as a society, face up to the fact that over half of people using foodbanks have been put in that situation by cut backs to and failures in the benefit system, whether it be payment delays or punitive sanctions.”
Archbishop Vincent Nichols has said that
“the role of food banks has been crucial to so many people in Britain today and for a country of our affluence, that quite frankly is a disgrace.”
The Secretary of State says that he is on a moral crusade. The people affected by his policies know what sorts of morals he has.
The hon. Lady may regret bringing the bishops and the moral case they were arguing into this. Perhaps she would like to reflect on what the position was of the bishops, and what Labour’s position was, when her Government kept people on benefits at a 95% marginal tax rate? Those people could not afford to take a job and Labour did nothing but trap them in a life on benefits.
The employment rate reached a record high under the previous Labour Government and it has not risen to that level today. I believe that work did pay under the previous Government, and a flagship reform to make work pay under this Government has failed. The national minimum wage did more than anything under the previous Labour Government to make work pay, but that policy was opposed by the hon. Gentleman and his party.
If the Secretary of State really wants to get the welfare bill down, he must tackle the low wages and zero-hours contracts that leave too many people reliant on in-work benefits. If he really wants to get the social security bill down, he needs to build 200,000 extra homes a year to control the cost of the rising housing benefit bill. If he really wants to get a grip on the social security bill, he should introduce a basic skills test to help those who are unemployed to find and stay in work. If he really wants to control the cost of social security, he should introduce a compulsory jobs guarantee to get the young and the long-term unemployed back into work. The Budget failed to do those things. If we did them, however, we would gain control of social security. For those reasons, we will support the Government when we vote on the welfare cap tomorrow.
However, Labour would make different choices. We would get a grip on the failing programmes, such as universal credit and the Work programme, and focus on the cost of living crisis. We would scrap the bedroom tax, which is cruel and costs more money than it saves. We would take tough decisions, such as scrapping winter fuel allowance for the richest pensioners. We would get more people into work on decent wages that they can afford to live on. Different parties, different values, different priorities. Our priority would be to control the cost of social security; under the Tories, it continues to rise.
On pensions, I think that we can all agree that people need more help to save for their retirement. That is why I am pleased that the Labour Government legislated for automatic enrolment and that this Government have taken forward that Labour policy, based on the Turner consensus. We support greater flexibility so that people can get a better deal from the pensions market when they retire. We will continue to support reforms in the annuities market, which we have campaigned for and which the Leader of the Opposition called for in 2012.
The Government should go further than they did last week. Their figures show that savers are losing up to £230,000 from the value of their pension pots because of excessive fees and charges when they save. The Government should bring forward a meaningful cap on fees and charges to ensure that people’s pension pots are not drained by insurance companies. They should ensure that there is full disclosure of fund manager charges alongside that cap. They should ensure that, for those who want to turn a lifetime of savings into a secure and decent stream of income with an annuity, that is not made harder, and that brokerage is not just offered, but is taken up, so that people get the support they need to make the decisions that are right for them. We must not risk another Tory mis-selling crisis like the one that followed the personal pensions revolution of the 1980s.
To ensure that the Government get the reforms right, we will hold them to account with three tests. First, is there robust advice for people who are saving for their retirement? Secondly, is the system fair to those on middle and lower incomes who want a secure retirement income? Thirdly, are the Government sure that the changes will not result in extra costs to the state, either through social care or by increasing housing benefit bills? We will continue to push for the reform of pensions, but it must be reform that works for people who have saved all their lives, who deserve security and confidence in retirement.
We must be clear that the Office for Budget Responsibility has delivered a damning verdict on the Government’s record of getting people saving. The proportion of income that people are saving has fallen from 7.2% in 2012 to 4.1% this year, and it will fall to 3.2% by the end of the forecast period. More needs to be done to ensure that people have the confidence and the ability to save.
To conclude, whether you are a young person looking for work, a couple looking to buy your first home, a mum and dad trying to pay the bills and get decent child care, a pensioner struggling with rising energy bills or a business trying to access finance, you are worse off under the Tories. They have had four years to deal with the cost of living crisis and they have failed. They have had four years to help young people and the long-term unemployed, and they have failed. They have had four years to help those who are disabled and vulnerable, and they have failed.
There is a tax cut for millionaires, and beer and bingo for the working classes. George Orwell wrote of his nightmare vision of the world in 1984 that
“beer, and above all, gambling, filled up the horizon of their minds.”
Thirty years on in 2014, it seems that the Chancellor thinks that all he needs to do is to cut taxes on beer and bingo, and they will be happy. It is them and us, Mr Speaker—how patronising, how out of touch, how very Tory. The Tories cannot deal with the cost of living crisis; only Labour will.
Order. I remind the House of the seven-minute limit on Back-Bench speeches.
I will start by drawing attention to the question that I asked the shadow Secretary of State. I notice that she did not deny saying that she wanted to reverse all the changes that the Government have made—[Interruption.] Well, according to the well-known Guido Fawkes website, with which I believe one or two Members are familiar—[Laughter.] If she did not say it, then she should deny it. At a meeting of Christians on the Left, she said:
“It will be much better if we can say that all of the changes that the Government have introduced we can reverse and all benefits can be universal.”
If she did not say that, she should just say so. I will take her intervention. She should deny that she said it. Given that she has not taken the opportunity to deny it, we will know when she leads her party into the Lobby to support our benefit cap that it is a mirage to fool the voters. If Labour ever gets its hands on the tiller, it will increase welfare spending and it will not help people into work.
Let me take the hon. Lady squarely on to the cost of living agenda and her allegation that my right hon. Friend the Chancellor said nothing about it. That is complete and utter nonsense. This morning, the rate of inflation fell according to the consumer prices index and the retail prices index. CPI inflation is at its lowest level for four years.
On jobs, unemployment is continuing to fall. When Labour was in power between 2003 and 2008, when the economy was creating jobs, 90% of those jobs were going to foreign nationals. That provoked the former Prime Minister, Mr Brown, to say that there should be
“British jobs for British workers”, but he had no idea what to do about it. I am very proud, as should be the Secretary of State and the Home Secretary, that since this Government have been in power, because of our welfare, immigration and skills reforms, more than 75% of the 1.3 million net new jobs have gone to British citizens. The British public will be very supportive of that. [Interruption.] Chris Bryant keeps chuntering, but he should listen. More than three quarters of the 1.3 million net new jobs have gone to British citizens. That is a record of which I am very proud.
I have been very clear that net migration from outside the EU is falling, but that it is going up from inside the EU. That is why we will renegotiate and put the terms to a referendum. We trust the British people with that decision—something that the hon. Gentleman’s party is not prepared to do.
One of the most important things that we have done on the cost of living is to enable interest rates to stay low. That means that one of the largest costs for any family—their mortgage—has stayed at a very low rate. That has been incredibly important and the Labour party would put it at risk.
Is it not a bit galling to take lessons from the Labour party on equity and fairness when, under this Government since 2010 there are 400,000 fewer workless households and 290,000 children who are no longer in workless households? That is a record that I will be proud to stand on at the general election next year.
My hon. Friend is absolutely right.
Also on the cost of living, I am very proud that Conservative councillors in Gloucestershire, working in partnership with the Government, have delivered a council tax freeze. Council tax is one of the most significant costs for families, after their mortgage. Gloucestershire county council has delivered a council tax freeze in every year since 2011-12; Forest of Dean district council has delivered a freeze since the 2011 local election; and Tewkesbury borough council has frozen council tax for four years running. I am looking at my council tax bill. The Conservative-controlled bits of the bill are frozen. The only bits that have gone up are those that are controlled by the independent police and crime commissioner who, for the second year running, has broken his promise and put up council tax for hard-working families across my constituency. That is an unacceptable breach of his manifesto promises. I am pleased that Conservative councils, working in partnership with the Government, have kept council tax low.
In constituencies like mine, having a car is not a luxury but a necessity, so I am pleased that we have frozen fuel duty. That means that for my constituents petrol is 20p a litre cheaper at the pumps than it would have been if the fuel escalator put in place by Labour had continued. That is not a trivial matter for my constituents. It saves them £11 or so every time they fill up and it is very much welcomed.
The hon. Lady spoke about our pension reforms. I know why there is some confusion, to which the Secretary of State drew attention. I raised in the House last week at Business questions the interesting response from one of the Opposition’s key policy advisers, a man who used to advise their Social Security Secretary, Ms Harman. He said—and I think this is what many on the Labour Benches believe—that
“you cannot trust people to spend their own money sensibly planning for their retirement”.
He was not a lone voice. He was supported by Mr Watson, who said that the Labour party must oppose our policies, and there are a number of other Labour MPs such as Austin Mitchell, and Dame Anne Begg, who is in the Chamber, who sounded a little confused. She was sort of welcoming—[Interruption.] She sounded a little confused about our policy. I have great respect for the hon. Lady, with whom I worked when I was in opposition as the shadow Minister for disabled people.
If the hon. Gentleman waits, he will hear that I will be asking the Government Front-Bench team rather a lot of questions. Perhaps at the end of today’s debate, Ministers will be able to answer them.
All I said is that the hon. Lady is not as enthusiastic about our changes as the hon. Member for Leeds West suggested. It is clear that we on the Government Benches, as the Minister of State, Department for Work and Pensions, my hon. Friend Steve Webb set out clearly, trust people to save their own money and we trust them to make sensible decisions in retirement about how to spend it. The idea that somebody who has spent their entire lifetime working hard and building up a pension pot is going to throw the money away when they reach retirement age is nonsense.
I will not give way; I will make progress. Our pension reforms are very valuable and will be well supported.
Finally, I draw the attention of the House to the use of the phrase “middle income”. I noticed that a story I was reading in The Guardian referred to 40p taxpayers as being on a middle income. For example, according to the latest figures that are available by parliamentary constituency, the median income in 2011-12—not the mean income—in my constituency is only £18,800. We on the Government Benches are right to keep our tax changes focused on the least well paid and those genuinely on a middle income.
There is not a single constituency in our country where the median taxpayer—the middle taxpayer—is paying the higher rate of tax, not even in the Cities of London and Westminster, Chelsea and Fulham or some of the wealthiest parts of London. In those constituencies, the median income earner is paying the basic rate of tax. My right hon. Friend the Chancellor’s focus on helping those middle income payers was absolutely right. It is right for our party. The Conservative party should be focused on helping the great majority of taxpayers.
It is worth bearing in mind that a higher rate taxpayer—again, I am using the 2011-12 figures—is in the top 14% of income earners. That does not mean that those people are not important, but it is right that we focused our help on those at the middle and lower end. This Budget was one for hard-working people at all levels of the income scale. It was for people who want to save and for people who want to get on in life. I am proud to support it this evening and will continue doing so.
Mr Harperwill forgive me, I hope, if I do not follow him directly in what he has just said. I want to say something about infrastructure in this country, and I want to talk about some of the slightly longer-term issues in relation to the capacity in our economy as it now is, as well as levels of public expenditure, but I start with annuities. In drawing the attention of the House to my entry in the Register of
Members’ Financial Interests, I declare a further interest. As I was 60 at the end of last year, my professional interest in pensions has become rather more personal.
Five years ago when I was Chancellor I looked at the whole question of annuities, which at that time was receiving quite a lot of publicity. There were two reasons that I did not make any changes. One was that I was concerned about any major change that would undermine the insurance principle that underpinned the idea of annuities when they were introduced some 70 or 80 years ago. Also, at that time I was concerned about some of the safeguards that we would need. Given the general economic climate at the time and because I was more focused on what was happening to our banks rather than our insurance companies, I did not pursue the matter.
However, I quite accept now that, because of the very poor annuity rates in the past few years and because the industry has not helped itself in the range of products that it offers people, it is time to look at the matter again. There are three areas about which I want to express my concern. These are issues that the whole House needs to address, and the Government need to address them during the consultation period that follows. First, I am concerned about the effect of the proposals on the annuity market. It is interesting that one does not have to get too many pages into the White Paper to see that at paragraph 2.27 the Government say that annuities are
“the only realistic option for many.”
I read last week that the IFS is concerned about the effect that taking out the higher end contributions will have on annuity rates. The Government need to have regard to that. It is not insuperable, but we need to look at it.
Secondly, the Australians have shown that it is possible to have a wide range of products that we would not necessarily recognise as annuities, but safeguards are needed, particularly in relation to the advice being offered. The Government said last week that they had made £20 million available. When I read the detail, I was surprised to find that that is a one-off payment. There is nothing after that. We in this House should all know that unfortunately the financial services industry has shown that if there is scope for mis-selling, mis-selling will happen. This is critically important.
Although the Pensions Minister may be indifferent as to whether or not somebody buys a Lamborghini, if they are buying it, they must at least understand that there might be consequences for how much money they have for the rest of their lives. It is not in the public interest that people go into something that might have to last them for the next 20 or 30 years without having received proper advice. That needs to be looked at. The offer of guidance is not enough.
Thirdly, the Government will have to consider the scope for tax avoidance. The reason that pensions are tax-privileged is that there is a societal interest in making sure that we save for our retirement. It was never designed to enable people to shelter their money from tax. Those are all aspects that need to be looked at.
I want to say a word about infrastructure. On Monday last week in the Financial Times there was the now traditional announcement of all the infrastructure projects that were on their way and on show, and an invitation to the pensions industry and others to invest. That is all very well. There were some old familiars which I recognise from my time in government, which are still not built and are still looking for money. Owing to the Budget, the pensions industry has just been relieved of quite a large sum of money. I would be interested in the Government’s assessment of where we will get the additional funds that we all know are needed from both the public and the private sector if we are to improve our housing stock, our transport stock and our ageing power fleet, which we are still struggling to replace. Successive Governments have had difficulties with that and this Government need to attend to the matter. That infrastructure will have some bearing on the capacity in our economy if we are to be able to provide for an ageing population and everything we have taken for granted over the past 30 or 40 years.
Reading the OBR report on the Government’s measures announced last week in relation to the economy, we see, rather surprisingly, that none of the measures announced by the Chancellor will, in the view of the IFS, make any difference whatever to the country’s GDP. The annual investment allowance which he doubled will, it says, have a negligible effect. That did not surprise me, because I doubled it when I was the Chancellor and it had no effect then. At least the advice from the IFS and the Treasury is entirely consistent. What is worrying is that we must increase the capacity of our economy. If we do not, we are locking ourselves on to a path where austerity will be unavoidable, because we will not have the wealth to pay down our debt, reduce the borrowing and generate the capacity needed in an economy.
This is an issue for Members on both sides of the House. We must decide how we are going to get more capacity into the economy. I hope the measures announced last week in the Budget work, but whether firms come to this country will be determined far more by big issues such as our infrastructure than by simply fiddling round the edges with tax reforms.
My right hon. Friend speaks with great authority on these matters. Does he agree that unlocking potential capacity and creating more employment in turn creates more revenue?
Absolutely, and the argument that has been with us throughout this Parliament has been about how to ensure that we generate growth to pay down the debt. Part of the problem that the Government have at the moment is that the plan that they started out with did not achieve significant results—it is not the same plan as they are operating now, by the way, because it is running some four years late and is significantly different from the one set out in 2010—because we simply did not have the economic growth that people expected.
One of the most worrying points in the OBR’s report is that it expects our economy to be at full capacity in just four years’ time. Normally, when growth recovers after a recession, as it did in the ’80s and ’90s, it peaks at 3% or perhaps 4%, because spare capacity is being used up. The OBR says that there simply is not spare capacity in the economy at the moment. That should worry us, because if our economy is operating at capacity in four years’ time and inflationary pressures start kicking in, how on earth will we meet the future bills of a mature economy with an ageing society?
I understand that some Government Members are more ideological than others about public expenditure, and understandably, many of them expressed concern about the flooding in the west country earlier this year.
Before my right hon. Friend finishes his interesting speech, will he respond to the concerns among Labour supporters about how the Conservative party keeps reminding us of what it claims was the mess that Labour left behind? Are we therefore to believe that the international recession, which had an impact on Ireland, Iceland, Japan, America and so on, did not have an impact on Britain? Was that his experience?
Having been around at the time, I rather got the impression that it was having an impact on everybody, from communist China to the republican United States and throughout Europe and the whole world. If there is a banking crash, it is not surprising that it has consequences.
To return to my point about the west country, we have to recognise that there are some things that the private sector will never do, and flood defence is one of them, so there will always be a role for the public sector in the economy. I firmly believe in a mixed economy and I am enthusiastic about anything that we can do to help the private sector innovate and invest, but it has to be complemented with investment in science, innovation and so on. The Government have a role in such things.
The Chancellor talks seriously about reducing public expenditure to levels last seen in 1948, but I say to the House and the country that the world in which we lived in 1948 was hugely different from the world that we live in today. Expectations are different and the population is getting older—many Members, not just me, may be grateful in a few years for what the state is willing to do as opposed to what we can do as individuals. That issue affects all parties that will be standing at the 2015 election, and we need to address it, because we cannot allow ourselves to drift into a situation in which it is almost inevitable that our economy will stall and hardly grow. That would lock us into unpalatable and difficult consequences. It is dead easy to sign up to cuts in a debate such as this, but living with the consequences of them—60% of them are still to come—will cause a great deal of pain to constituents of Members on both sides of the House.
Of course we have to deal with the immediate consequences and fall-out of what has happened over the past five years. Some sensible reforms have been announced in relation to savings, but we need to get pensions right, because we have got them wrong in the past. We need to get our economics right in the long-term interests of this country and of future employment and jobs, and I am not sure we are doing that yet.
It is a pleasure to follow Mr Darling.
Four years ago, I promised my constituents that if we were elected our first priority would be to repair the public finances. No longer could we go on borrowing £1 for every £4 we spent. Reducing the deficit has involved tough decisions, and I pay tribute to the Chancellor for sticking to the necessary path, which has seen the deficit come down by a third. It is forecast to fall by 50% next year.
Even after all that work, the OBR estimates that we will still be spending more than we earn by £108 billion this year, so the job is not yet done. However, people are at last starting to enjoy the fruits of progress. Earnings are projected to exceed inflation this year, and the increase in employment has been huge. In my constituency, unemployment has fallen by 25% since the election. Contrary to the Labour party’s predictions, the 1.6 million private sector jobs created since 2010 have exceeded the number of jobs lost in the public sector by a factor of three.
There was a time, 18 months ago, when the International Monetary Fund, which was broadly supportive of our policies, looked on nervously as Britain was the one country that was serious about tackling an out-of-control deficit. The proof of the pudding is in the eating, and UK unemployment stands at just over 7% and falling. That is in sharp contrast to the rest of Europe, where unemployment averages 10.9%. Likewise, the OBR has raised its forecast for economic growth from 1.8% to 2.7%, which makes the UK the fastest-growing economy in both the EU and the G7.
It is interesting to note that in today’s Treasury Committee meeting, the economists there predicted that growth would exceed that 2.7% figure, and even the Bank of England’s projection of 3.3%.
I heartily agree, and I would not be surprised if things got even better than that over the next few years. We have momentum now, as my hon. Friend’s point shows.
Our economic strategy has been about far more than reducing the deficit: how we do that matters. The Chancellor set out a strategy to rebalance the economy, and we wanted to see growth that was more balanced between London and the south-east and the other important regions, between the service sector and the manufacturing sector and between the public and private sector. We also wanted to build an economy made more secure by savings and investment, instead of one built on excessive debt.
This Budget marks another milestone—it capitalises on the hard-won and sustainable economic progress to secure radical reforms that will restore the incentive that has been so recklessly destroyed over recent years. Scottish Widows estimates that fewer than half of us are saving enough for our old age, and that one in five are saving nothing at all. The bold increase in the ISA tax-free limit to £15,000 is welcome. There are more than half a million ISA savers in the west midlands alone. Not all of them will be able to put away the maximum every year, but the fact that they will now have complete freedom to invest cash as well as equities will encourage more saving among people who just want their cash to grow in a tax-free environment.
Before 1997, Britain had one of the best-funded occupational pension systems in the world. That proud state was totally undermined by the last Government’s decision to end dividend tax relief on pensions. Incentives to save were also undermined by the growth of means-testing of the state pension. The welcome pension reforms that the current Government have already introduced were given a further boost last week by the Chancellor’s dramatic announcement that we are no longer to be forced to buy an annuity. That is welcome news for everyone who is saving into a pension scheme, regardless of their age.
Just under 20,000 people in Stourbridge are of pensionable age, and many have been badly hit by the poor annuity rates and exceptionally low interest rates of recent years. I was therefore delighted on their behalf by the new pensioner bond, which from next year will offer a much better return than anything available on the market today. Low-income savers will also benefit from the abolition of the 10p tax rate on savings from income of £5,000 or less.
I know that my hon. Friend is an expert in these matters, and I strongly agree that the change will definitely encourage more people to save into pensions. The forced way in which people have had to invest so much of their pension savings into annuities was a disincentive, certainly to my generation.
In my last couple of minutes, I want to turn to opportunities for young people. The number of people aged 18 to 24 claiming jobseeker’s allowance in my constituency has fallen since 2010 by 18%, and we can all agree that we would like such falls to accelerate. The vast majority of young people on JSA gain employment within six months, but a small group do not. They face very real social problems, but this Government’s Work programme and their reforms in very much improving jobcentres and supporting young people—and those of all ages—into work will make and are making a difference.
Unfortunately, an even smaller minority of young people have been conditioned to not want to work. For too long, they have perhaps been allowed to be too choosy about their first job: if it is not the one they really want, they would rather have none. I am talking about a very small minority. There is no doubt, however, that the changes introduced by the Government—I give the credit to my right hon. Friend the Secretary of State for Work and Pensions—have made people realise that they are entering a contract with the jobcentre and the taxpayer, and that they need to put in the effort to make a serious attempt to find work, with the state providing the necessary support.
In addition, I strongly welcome the continued support for the apprenticeship programme. My constituency has had a 90% increase in apprenticeship starts in the past couple of years. Last week’s Budget gave further support to apprenticeships by providing £85 million for the employers’ apprenticeship grant scheme and £20 million extra to support apprenticeships right up to postgraduate level, which carries on the good and vital work of creating greater parity of esteem between apprenticeships and degrees.
None of the support—for exporters, manufacturers, taxpayers, savers, pensioners—announced in the Budget last week would have been possible without the work done on restoring the public finances. There is a very long way to go to overcome our indebtedness, but the fact that we are now so clearly on the right road, with results starting to come in almost daily across every single economic indicator, means that the Government can provide support where it is most needed. That was amply demonstrated by last week’s Budget, which will make Britain truly competitive once again. I am delighted to support it in the Lobby tonight.
It is a pleasure to follow Margot James. I want to concentrate my remarks on the social economy. I draw the House’s attention to my—unpaid—entry in the Register of Members’ Financial Interests.
Since the crash of 2008, there have been a difficult few years for countries around the globe. Many companies have struggled to find investment and to grow. Ordinary people have very often been faced with redundancy and unemployment. That particularly applies to our young people, of whom nearly 1 million are struggling to find work. Public services have been cut quite dramatically, and many are facing increased demand at the same time, none more so than in the spheres of the national health service and social care.
Against that very difficult background, and as we enter what I certainly hope will be a period of better economic news of sustained growth and job opportunities, we have a real chance not to do business as usual, but to take a new path towards what many of us have talked about in this House—a more responsible capitalism. At the moment, it is still a fairly nebulous concept, but I believe that we can start to put some flesh on the bones and to invest in the social economy.
For the past 18 months, I have convened a group of local authorities, social enterprises and some large corporate firms to consider how we might come together to get the public sector, the private sector and the third sector to work in a much more integrated fashion. We have done that under the banner, “Doing good is good business”. Social enterprise has always been a passion certainly of mine, but it is now taking a much more central position in our economy. In this country, there are 70,000 social enterprises, which contribute £18.5 billion to the UK economy and employ about 1 million people. It is no longer a niche part of our economy, but is becoming absolutely mainstream. In Europe, one in four new businesses that starts up is a social business. Some 35% of people who left private sector employment last year have gone into the social economy. It is really moving on apace. There are now many brilliant social enterprises. I have Unlimited Potential and Social adVentures in Salford. In the constituency of every hon. Member, there will be social enterprises that not just provide jobs and opportunities, but bring into our economy the absolute gold dust of innovation and creativity.
I want us to give a real boost to social enterprise on a cross-party basis, but we also need to do something about public procurement. The Public Services (Social Value) Act 2012, which I helped to take through the House, empowers public authorities to take into account social, economic and environmental impacts, as well as value for money. That can be absolutely transformational, provided that we get behind it, give it teeth and really make it work.
I pay tribute to the right hon. Lady, whose work in this area has been really first rate. I told her that last time we met, over dinner at Apsley House, but I am just dropping names. Will she take her point a little further, because the creation of social impact bonds is a very big and important area? I know that she is a big supporter, but how does she see that rolling out, particularly now that the Budget will bring in tax relief for it?
I am absolutely delighted that social investment tax relief has been set at 30%. Some estimates suggest that that might liberate up to £500 million of extra investment into the economy. At a time of austerity and when there is very little public money about—whichever party is in power—we must absolutely seize the possibility of mobilising private capital for public good.
I pay tribute to the Secretary of State, because he has been a pioneer. He set up his social investment fund, which has catalysed the market in Department for Work and Pensions areas. I have spoken to the Secretary of State for Education to try to get something similar in relation to social mobility and educational attainment, and he is very interested. I said to him, “The Secretary of State for Work and Pensions is a bit of a pioneer, so why don’t you get involved in this as well?” I have also spoken to the Minister of State, Department of Health, who has responsibility for social care, to look at social investment bonds for the care of the elderly, particularly in relation to dementia, which is a huge issue for all of us and, indeed, countries across the world. Mobilising private capital to enable us to transform public services is an extremely exciting agenda.
I want to say a word about the Public Services (Social Value) Act, because a whole range of local authorities are now taking up the new powers, including my own in Salford, as well as Liverpool, which has declared itself a social value city, Birmingham, Wakefield, Hackney and Lambeth. People from all political parties and local authorities of all shapes and sizes want to commission in this new way. We now need transparency, through metrics and measurements, so that the people on this playing field can get some recognition.
One of the most exciting things is that some companies in the private sector want to do exactly the same in moving from traditional corporate social responsibility into using their mainstream business model to make a social impact. Companies such as Fujitsu, Veolia, Interserve and CH2M Hill are now looking at their supply chain to see how they can get social enterprises and small businesses to bring them the agility and creativity that such big global enterprises sometimes cannot put into the system. In particular, Fujitsu has done a report called “Collaboration Nation” about building a very different supply chain. It has told me that it absolutely sees the business case for doing so, because it is able to develop new products. It is also attracting the best talent, because these days young people want to work for an organisation that has values, and to go home at the end of the day being proud of what they do. All those private sector companies want to do that and be responsible capitalists in that way, but we must encourage them and recognise that this will be a long-term agenda.
I say to the Chancellor and the Secretary of State that if we could extend the Public Services (Social Value) Act to goods and infrastructure—that is where the big spend will be in the next 10 to 15 years, not necessarily on services and revenue expenditure—why can we not have social clauses in procurement for High Speed 2, for the possible new airport, or for regeneration projects that bring apprenticeships, get a better supply chain and make a social impact?
As I said, I am delighted that social investment tax relief is being brought forward. We now lead the world in that, and at the G8 meeting that I was privileged to attend we could see how much the United Kingdom’s creativity has taken that forward. There are now a whole range of new social investment bonds. We have just signed one off in Manchester to help young people come out of care, and to provide foster care and adoption, which is an amazing ability.
When I went to Brussels last week I met Commissioner Andor, who was hugely encouraging about social procurement and social investment. We are about to launch some local investment funds. The first was launched in Liverpool two weeks ago, and we would like to have 10 to 15 across the country over the next year. We are hoping to do that in Greater Manchester, bringing together European Union structural social funds with social investment, to provide unsecured loans to social enterprises of £50,000 to £100,000—exactly the kind of loans they need.
All that brings the social economy into the mainstream. We used to think about social enterprise as a niche or an add-on to the mainstream economy, but no longer. If we take what measures we can to make social procurement mainstream, including goods and infrastructure, and to support social enterprises to make social investment and the market grow in the long term, we can genuinely harness the innovation that is often in social enterprise, together with people who want to do capitalism in a more responsible way and the engine of the public sector. In doing that we will show that “doing good” really is good business.
It is a privilege to follow Hazel Blears, of whom I am a big fan, and to support what she said in her exciting speech that extolled the virtues of the big society. I congratulate the Secretary of State who has done such a great deal to bring on the big society and social enterprise, through his work at the Centre for Social Justice and in the Department.
I am, however, somewhat disappointed to be speaking in this debate having heard the shadow Secretary of State be so disparaging about the cut in beer duty. It is not just I, the Member of Parliament for Burton—the home of British brewing—who will be disappointed that the Labour party dismissed such an important industry, but the 1 million people who are employed in that industry, the 4,000 people in my constituency who earn a living from the beer and pub industry, and the 120,000 members of the Campaign for Real Ale who campaigned hard across the country because they love British beer, they love the industry and they wanted a cut in duty.
My hon. Friend, the MP for Britain’s second foremost brewing town, has done a fantastic job on this issue. In the pub over the weekend I noticed a lot of people talking about a penny off a pint. Has he made any assessment of the scrapping of the beer duty escalator, as well as the cut in duty, and how much a pint would have cost had the Labour party had its way?
I thank my hon. Friend for that intervention, and I will not let petty rivalries interfere in this important debate. He is right, however, because this is cumulative: it is not just about the historic cut in duty by a penny this year, but last year’s 1p cut in duty and the scrapping of Labour’s hated beer duty escalator. Added together, they have taken more than 7p off the price of a pint in our local community pubs. Beer drinkers, publicans and the industry will welcome and raise a glass to that, and it is part of the measures that have shown this Government to be the most pro-pub and pro-beer Government in generations. It is historic: this is the first ever Chancellor to cut beer duty two years running, and it comes after the previous Government, when beer duty rose by an eye-watering 42% between 2008 and 2012. Is it any wonder that the industry has been in such dire straits?
This industry is important for our community pubs. We talk about supporting community pubs, but seven out of 10 drinks purchased in a pub are a beer. This is a great British product that is brewed and consumed in this country and employs people in this country. Those 1 million jobs are important—46% of those workers are under 25, and more than 50% are women. If we want to help young people into the jobs market and get more women into the workplace, supporting the hospitality industry, pubs and breweries is exactly the way to do it. CAMRA, the Society of Independent Brewers, and the British Beer and Pub Association have welcomed the support that this Government have shown for beer and pubs.
Last year the Chancellor had a beer brewed in his name. Pennies from 11 was brewed by a Tatton brewery, and Sajid’s Choice was brewed in recognition of the support that the Financial Secretary gave the brewing industry during his time in the Treasury. I have no doubt that in weeks to come, Morgan’s Magnificent Mild will be brewed in gratitude.
I absolutely agree with my hon. Friend, and I enjoyed sampling a pint of Ginger Rodent in the Strangers Bar. It was particularly enjoyable as it was a penny less as a result of this Government’s measures.
We should not underestimate the community pub. It is an important industry, and £620 million from beer exports came into our coffers as a result of the cut in beer duty last year. Beer exports outside the EU were up by 23%—this industry is incredibly important to our country and has great potential. We all know that we brew the best beer in the world in this country, and having a Government who stand up and not only listen but act in support of that industry will mean that the business will grow, employ more people, and create more revenue for the country as a result. I commend the work that has been done.
The facts speak for themselves. Last year we said to the Chancellor that if he cut beer duty, scrapped Labour’s hated beer duty escalator and gave beer and pubs a break, there would be investment and growth in the industry. That proved to be absolutely right. We have see two quarters of growth in beer sales in the past 12 months, which is the first time in 10 years that beer sales have been on the increase. Brewers all say that that is as a result of the support that the Government have given to the beer and pub industry.
This is not just about scrapping the beer duty escalator. The Government also gave a £100,000 business rates break for pubs up and down the country, and scrapped Labour’s job tax by scrapping employers’ national insurance contributions for those under 21—important people whom this industry employs. As a result, we are seeing growth and investment. Some £400 million has been invested by the industry in the past 12 months. Only yesterday, Marston’s brewery in Wolverhampton announced 3,000 new jobs as a result of the Government’s support for beer and brewing.
I thank all the right hon. and hon. Members from all parts of the House who supported our campaign to reduce the duty on beer. This was a cross-party campaign. On behalf of CAMRA, SIBA, the British Beer and Pub Association and all beer lovers across the country, we will be raising a glass, saluting the Government and saying, “Cheers, George.”
It is a pleasure to follow Andrew Griffiths and to listen to his speech on small beer.
At a time when we hear that we are turning an economic corner—I welcome this immensely—after several challenging years of recession, this year’s Budget should have been one of optimism and hope for all, and in particular for those who have suffered the most under the Government’s austerity programme. Hard-working families have suffered a cost of living crisis and seen their incomes reduced by £1,600. The disabled, the disadvantaged and those with health issues that prevent them from working have all been badly affected financially.
I welcome the reduction in unemployment, but there are still thousands upon thousands of people who desperately want to work. They have not acquired the skills to take up the posts that are available. Despite their best efforts, they cannot find a job, an apprenticeship or training. It is ludicrous that so many people are willing to work but do not have the skills and expertise to do so. In my constituency, and in many others, jobs are advertised overseas and taken up by those from overseas who have an enhanced skill profile. That is primarily because of the lack of investment in high quality training and support here. These barriers must be removed as a matter of priority, with further investment in vocational training, but yet again the Government have missed a golden opportunity to invest in their people and pump-prime a further reduction in unemployment and benefit payments.
There were token increases in the amount of income exempt from tax, but the Government’s slogan “We’re all in this together” has been further discredited by their unjust refusal to increase tax on higher earners to 50% and their failure to clamp down on the many who avoid tax, thereby robbing the Exchequer of millions of pounds. Primarily, this has been a Budget for Tory vested interests in an effort to sustain support. In other words, these are the same old Tories, some of whose policies evoke blue language on the Opposition Benches. So much for the often quoted but meaningless Tory mantra, “Those with the broadest shoulders will bear the heaviest burden.” In effect, this is the politics of mirage and fantasy. The coalition think that if something is said often enough, people will believe it. On this side of the House, we emphatically do not. Thankfully, those who live in the real world are not so gullible and do not share the same self-delusion. They are only too aware of the opportunities missed: replacing the failing Work programme with the job guarantee scheme, an energy freeze, expansion of free child care for working parents and help for millions of workers by reducing basic income tax further.
Like all mainstream political parties, hard-working people support a cap on welfare spending and want effective measures to be taken against the small minority who are fit to work, but who have abused the welfare system and want to live permanently on benefits. However, hard-working people are also only too aware of the gross injustices forced on one section of our society in particular. The hallmark of a civilised society is how we treat our poor, disadvantaged and disabled. This Government have continuously presided over massive failures in policy development and implementation.
Does my hon. Friend share my concern and horror at the escalation in the number of sanctions made by Jobcentre Plus which, on appeal, have been found to be erroneous?
My hon. Friend makes a very important point. In my office, we deal with 12 such cases every week, concerning Atos and sanctions.
The forcible and inhumane imposition of the bedroom tax is a real concern for us. The Prime Minister should have sent the Secretary of State for Work and Pensions back to do his homework properly, and to plan a course of action on welfare benefits on a fair, consistent and evidence-based manner. The fact that he did not demonstrates a weakness to stand up to a dogmatic Minister who has taken a callous, uncaring and brass-neck approach to implementing hurriedly a range of flawed practices that have impacted unfairly on so many of our citizens.
The Chancellor has been culpable of doing us a major disservice, as his Budget did absolutely nothing to address the multiple and shambolic failings of the DWP. Dogmatic intransigence and gross inefficiencies have led thousands to suffer through the application of a target-setting culture, in many cases resulting in unjust sanctions and declarations of fitness to work, despite medical evidence to the contrary. Those injustices have left many honest and upright citizens, for the first time in their lives, being forced to access food banks and payday loans and to get into debt. The numbers have grown massively. From my own constituency, I will highlight three inconsistencies and injustices, but I am sure that they are mirrored many times over in other constituencies throughout the country.
The first involved a man who had a medically certified spinal injury and was therefore unable to lift weights. That was interpreted as job avoidance, despite the fact that he had participated in the required number of job applications. He was sanctioned for 13 weeks and had to resort to the local food bank for sustenance.
The second example involved a lady who had been waiting for months for an Atos appointment. Her employment and support allowance was stopped and she was advised to claim jobseekers’ allowance. She is still waiting for an appointment. It is no wonder that she has been waiting: an informed insider told my office last month that in Scotland and north-east England there are 24,000 Atos reports waiting to be processed. When questioned by me, the director of Atos in charge of quality assurance said he did not recognise that number, but we still await a figure. So much for DWP-Atos quality assurance and standards.
The third example concerns a lady who had suffered a close family bereavement. She explained her situation, but until there was prompt intervention by my office, she was ruthlessly sanctioned. The Government have received regular exhortations to abandon the inhumane and vile imposition of the bedroom tax, and to bring fairness, compassion and dignity to DWP-Atos assessments. They have singularly failed to do so.
The ongoing injustices I have highlighted make it clear that our disadvantaged, poor and disabled are still being treated unfairly. In my main jobcentre, there are only two computer access points. Those people are often dealt with callously, but they too have the right to be treated in a respectful and dignified manner, and the DWP must recognise that. Until this happens consistently, DWP Ministers should hang their heads in shame.
I want to speak briefly about the elderly. The response to the Budget has focused on the needs of the next generation and of younger people, but I represent a constituency in Cumbria with serious issues of isolation. I will make three points.
First, we should bear in mind the enormous contribution of older people. All of us, from all parts of the House, know from experience that people aged over 55 are probably the most vigorous and active citizens in our communities. Many of the things that happen day in, day out for us as constituency MPs involve people aged over 55 challenging our decisions, holding us to account, being highly articulate and leading community projects.
Whether it is by digging in superfast broadband or working out how to support the hospice at home movement, the elderly make an enormous contribution.
The reality is, however, that the elderly in this country are suffering a real problem. We have developed a culture that is increasingly focused on the young: on the idea of youth, on the idea of productivity, and on the idea of the next generation. We are finding it more and more difficult, in the media or in the House, to talk properly about the elderly, although in my experience—and, I suspect, in the experience of many other Members—it is the elderly in particular who represent the most shocking scandal in our society. Day after day, walking into the homes of the elderly, we witness scenes of loneliness, isolation and deprivation which can be shocking. We do have ways of addressing this—the Government’s pension reforms are a very good step in the right direction, and it is good to hear, for example, Age UK praising those reforms—but there is much that we can do to become more ingenious.
One concrete example of the scandal in our society is deafness. We pride ourselves constantly on huge technological changes. We pride ourselves on being able to produce a new kind of laptop every year, and on increasing developments in miniaturisation. However, hearing aid technology is still basically stuck in the 1970s. Deafness is a terrible thing. Anyone who lives with a deaf person can see that it removes the complexity from conversation, it removes the human relationship, and it creates deep isolation. Yet we are not investing in and developing the technology in the way in which we could.
Secondly, we need to grasp the potential of telehealth and telemedicine, which, despite spending more than £1 billion on superfast broadband, the national health service has not yet done. If we want elderly people to remain at home, we need to find a way of addressing them directly. I recently had a very depressing conversation with staff in a GP’s surgery, who told me that they felt no need to use superfast broadband connections, because they were just coming to terms with the huge benefits of talking to people on the telephone.
Thirdly, we need to think about how we can use community hospitals in a much more flexible and imaginative way to support social enterprises and third sector organisations—about which we heard from Hazel Blears—when it comes to going into people’s homes. The biggest killer among elderly people in this country at the moment is, of course, loneliness. A person’s chance of dying doubles within a year of his or her partner’s death. We can all understand how that happens, in very concrete terms. Your partner dies suddenly, and perhaps you no longer receive a prescription for a new set of glasses. Your partner dies, and perhaps your medication is no longer checked. Perhaps the stair carpet is not being nailed down. Perhaps you are not being taken to the supermarket to buy food. Those are all things that the third sector can help to deal with, and they are all things that can be dealt with by community hospitals if they are imaginatively managed.
I shall not say much more, as I am aware that we are short of time, but if our nation is looking for a mission for the next 20 or 30 years, it is this: we need to come to terms with the elderly. We all understand the statistics, because they are easy. The number of people aged over 85 will double. The number of people aged over 65 will rise by 2 million between now and 2025. The number of people with Alzheimer’s disease and dementia will double. Every single one of us will experience, in our families and our homes, the terrible pressures of ageing.
As I saw when I was in Afghanistan, all young Afghan men—men in stonewashed jeans with the latest mobile telephones—show enormous respect to the elderly. Indeed, they will cross the road to show their appreciation and support. It is very worrying that in this country, where the elderly are contributing so much in terms of citizenship, wisdom, advice and support, every one of us, day by day, sees our parents, our grandparents or indeed our friends undergoing the terrible process of deafness, forgetfulness or, ultimately, dementia. We need, as a Government and as a community, to build a society that is fit not just for our children, but for our parents.
I enjoyed the speech of Rory Stewart. He focused on issues relating to older people, and I think that many of the points he made were welcome. No doubt we shall have opportunities to explore them over the coming months and years. However, I have to dispute, for reasons that I shall explain shortly, his opening remark that the Budget had focused on young people.
As we know, this year’s Budget followed a huge global financial crisis and several years of flatlining in our economy. The growth that we are now seeing is very welcome, but I think we must acknowledge that, outside the M25 collar around London, it is quite patchy. In many areas, local communities are struggling to secure balanced growth in their economies, and it is undeniable that many people are experiencing a cost of living crisis. In Telford, which has a history of low wages, a history of temporary working and a history of agency working, people are still struggling to make ends meet. There has been some growth in the banking sector—the food banking sector, that is. More people are having to resort to the food bank in Telford, for a variety of reasons. I pay tribute to the volunteers who work at the food bank. I also say “Well done” to the local authority for funding it, and for recognising its contribution.
I intend to talk about unemployment, and about youth unemployment in particular. I know that the hon. Gentleman represents a northern seat, although I do not know how much further north it is than mine, if at all. Let me add that I enjoyed his comments about the brewing industry. I welcomed the Chancellor’s policy announcements about the industry, which I think were very positive, and, as a supporter of CAMRA, I agreed with much of what the hon. Gentleman had to say.
I want to develop my argument before I give way again.
Telford has a particularly good and proactive Labour council, which is driving forward investment projects that will have a very positive effect on our local community. Hundreds of millions of pounds have been invested in the Southwater scheme in the town centre as a result of a partnership between the public and private sectors. That is what a proactive Labour council can do to deliver jobs and investment in the community.
Let me now say a little about what was in the Budget, what was not in it, and what could have been in it. I think that we can give a cautious welcome to what the Government have said about pensions reform, but I also think that the devil will be in the detail. A number of Members have referred to the mis-selling scandals that have taken place over the past few decades. There are significant problems involving fees, and we shall need to look at the regulatory regime more broadly in relation to the pensions market and the pensions sector. I assume that a Bill will be announced in the Queen’s Speech.
There are serious issues to consider in respect of how the pensions sector sits alongside social care, and how we should fund social care in the long term. I am not making a party point. If we are to reform the pensions structure and change the way in which people receive resources and assets, there are serious questions to be asked about the echoes of that when it comes to how we should pay for longer-term care for the people who will need it as our population ages.
Does my hon. Friend not think that it would have been better for the Government to explore some of those issues before announcing a policy that had clearly had not been fully thought through?
I agree. I think that the Government could have made an announcement much earlier. They could have conducted a consultation exercise across the pensions sector, and we could then have reached a consensus in the House. The Chancellor is clearly attempting to use this issue as a political tool. We need to have a long-term debate, because these matters will affect our constituents in the very long term. I do trust people with their pension pots; I do trust people to make the right decisions. The people I do not particularly trust are those in the financial sector who will be coming up with new products to sell to people as the pension environment changes. That worries me, and we must think very carefully about how we regulate that sector.
The welfare cap is another issue that came up in the Budget. I do not have a problem with the welfare cap in principle as long as it acknowledges the prevailing economic circumstances that people face in local communities. A blanket cap that does not acknowledge changes in the economy or what is happening in the wider economy just will not work.
I also welcome the development on ISAs. The raising of the threshold to £15,000 is a good thing and gives a positive message about savings, but I have to say that the Conservative party seems to be living in a different world from me. Not many people in Telford can afford to invest £15,000 a year in an ISA, and I cannot think of many couples who can invest double the amount.
No, I will not.
For many people in Telford £15,000 will be an annual income on a part-time job. People will struggle to be able to invest the kind of money the Conservative party clearly thinks they have got swilling around in their coffers, but never mind; they can go and enjoy themselves at the bingo.
Immediately after the Budget, I took part in a Federation of Small Businesses event—a phone-in debate and panel discussion at a hotel in Telford. I have to say that the small business community, and certainly the people I spoke to in the phone-in, were quite disappointed. They were concerned that there had not been more movement on business rates and that a lot of the initiatives the Chancellor was talking about were targeted at larger businesses. They felt they were getting a bit of a raw deal and they were being ignored. My view has always been that in our modern economy the strength of our future economy and of our nation will depend very much on the success of small and medium-sized enterprises. We must, therefore, think much more about support for small businesses.
There were two glaring omissions from the Budget, the first of which relates to young people. Unemployment rates among young people in Telford and Wrekin remain stubbornly high and hundreds more young people are underemployed. The Chancellor spent little time in his speech talking about young people, but it should have been his top priority. It is for us in Telford. The local authority is investing £1.3 million specifically to target youth unemployment, and the job junction initiative is helping people in towns across the borough, providing support for them to get back into work. We also have other partners, such as Telford college of arts and technology, which have programmes targeted at getting young people who have found formal education difficult back into education and into securing skills and training. I recently had the pleasure of opening a campus facility for the college in Dawley.
The other omission from the Budget was any discussion of the need for a significant increase in the provision of social sector housing units for rent. Understandably, we all want to talk about affordable housing for sale in this country, but we face a real dilemma in that we do not have enough properties for rent in the social housing sector. The next Labour Government must have an enormous drive to build more social housing, to ensure that we deal with what is one of the biggest issues for my constituents.
It is a pleasure to follow David Wright, but judging from what he said about small businesses, he does not appear to have noticed that in previous Budgets under this Chancellor there have been changes to the tax and investment regimes that have been enormously beneficial to them. It is right that in this Budget the Chancellor should turn his attention to savings and pensions.
This was a great and profound Budget. Its consequences will live with us, to the substantial overall benefit of the United Kingdom, for decades to come. I share the huge enthusiasm for treating savers like adults and creating a vastly improved environment to encourage saving. However, changes on this scale will have unforeseen difficult consequences, as well as some that are already being identified by expert commentators.
I represent four major providers of savings products in the Reigate constituency: blue-chip market leaders in Legal and General with 2,500 jobs and Fidelity with nearly 2,000 jobs; and two newer market entrants, Partnership and Just Retirement. The latter two have provided astonishing case studies of what can be achieved by well-led and innovative companies. They have become market leaders in specialist annuity products and have led the growth of the equity release market, which is such an important product in the suite of products available to give people a sustainable and comfortable retirement. Between them they have added many hundreds of jobs in my constituency in the last few years alone. I am astonished by the market reaction to the Budget, which saw their share prices halve under the assumption that the annuity business was now effectively over.
The Chancellor’s proposals are just ushering in an era where innovation in savings products and market fleet-footedness will play straight to the competitive advantages of the people employed by those two companies. The behemoths of Legal and General and Fidelity are also rightly highly bullish about the much-improved climate for savings that the Chancellor now proposes. The short-term analysis of some market-makers has left me bemused. They plainly do not know enough about the companies or their excellent people and products and their ability to innovate in this great new market.
The challenge is to ensure the spirit of the reforms develops into a well-governed and safe experience to deliver good customer outcomes. Rightly therefore, much of the attention has been on guidance. The financial services industry has held a protracted debate on the differences between advice and guidance without delivering a solution for the 500,000 people who retire each year with defined contribution pensions or the future wave of retirees who have been auto-enrolled into them. The Financial Conduct Authority reported evidence of major failure in pension provider pre-retirement processes, with eight in 10 consumers who purchased an annuity from their incumbent pension provider able to get a better deal by shopping around. This perhaps explains why a recent Which? survey found that only 42% of consumers coming up to retirement trust their pension provider to act in their best interest. Taking provider interests out of the new guidance framework is necessary to ensure savers are properly equipped to consider their options in the external open market.
The Government have just resisted amendments to the Care Bill about guidance on the cost of care, but I now think we need to nudge people in the direction of properly informed independent advice at retirement to help them make the best plan for their circumstances. I suggest that a small percentage of any tax-exempt saving should be reserved for paying for independent financial advice at retirement. If savers have a proffered pot of funds that has been ring-fenced for advice, they will be in no doubt as to what the state thinks they should do. However, consistent with treating people as adults, if they take a positive decision to opt out of independent advice at retirement, on their own head be it if they decide to put those ring-fenced funds into their wider savings pot and make their own decisions or place themselves in the hands of an existing provider without taking an informed view of the whole market.
The complexity of choice in the use of all one’s assets, pensions, savings and property at the point of retirement to insure against future care costs, provide an annuity, make cash available and decide on protection or use of the family property cries out for independent advice. We should nudge people in that direction. Expecting the provider industry to deliver that is a triumph of hope over experience. This will continue to be a key debate and, given my constituency interest, one of which I would want to be a continuing part. Yes, that is a bid to serve on the Committee of the Pensions Bill. There are, however, now a series of concerns about the consequences of the behaviour of savers faced with these welcome new freedoms and what that will mean for the financial markets.
Much reaction to the Budget has focused on the less competitive, inert parts of the annuity market, but the majority of pension value is placed in the open, transparent, competitive external annuity market, which does deliver good value for consumers. People should continue to value security, especially at a time of life when returning to work may not be an option for providing income. Annuities will remain the only means of providing a guaranteed income for life.
Just Retirement and Partnership are both specialist retirement income providers whose arrival in the past 10 years has driven innovation, value and competition, and has positively disrupted the market. The development of equity release, led by Just Retirement, has opened a vast new opportunity for meeting Europe’s gaping black hole in provision for a comfortable retirement for a growing number of retirees as a proportion of our population, so we ought to raise the warning flags over the potential unintended consequences of this welcome policy change.
In conclusion, this Budget will live in the pantheon of the great Budgets, along with Geoffrey Howe’s lifting of exchange controls and Nigel Lawson’s cutting of the higher rate of income tax. Overall, it is a great measure and I am proud to support the Chancellor.
It is a pleasure to follow Crispin Blunt, who stressed the importance of getting independent advice. That advice was well worth giving, but I simply observe that in the past people have had independent advice but it has not always turned out to be to their advantage. There are two kinds of independent advice: good advice and bad advice. How we distinguish between the two will be—
The important change is that independent advice is now definitively independent advice—the era of relationships, commission and so on between financial advisers and providers has gone, and that is an important benefit.
I agree, but my concern is that the people giving the advice need to be competent; it is not necessarily a question of whom they are connected to.
I want to use the time available to me to talk about the Budget and poverty, but first I wish to refer to my experience of volunteering in our local food bank—the Big Help Project—last Saturday at the Tesco supermarket in Prescot, in my constituency. The first point to make is how generous the response of shoppers was to the appeal. It was so overwhelming that at one point the volunteers struggled to keep up with the number of bags of groceries that were being given to us, and that is a great tribute to everybody involved. Secondly, from talking to volunteers and supporters it became clear that they did not take a prescriptive view of people who, unfortunately, have to rely on the services of a food bank to feed their family. The statistics bear out why people are right to be sympathetic. The Big Help Project has had 6,000 referrals over the past 12 months, 73% of which are the result of benefit changes, benefit delays or low income. The project has a vital job to do, but we need to be mindful of the reasons why people find it necessary to go to a food bank.
I want to talk specifically about poverty, and not about welfare. We have sometimes managed to confuse those terms, but they sometimes go together and sometimes do not. According to the Joseph Rowntree Foundation,
“the most distinctive characteristic of poverty today is the very high number of working people who are also poor.”
Again, the food bank experience in Knowsley bears that out, as 22% of those referred are in employment but they are so poorly paid that they are forced to rely on the food bank to make ends meet. The other two main groups relying on the food bank are people who are dependent on the benefits system and who are affected either by benefit changes or by delays in payments. In some cases, these people find themselves with absolutely no income at all, and often that is as a result of sanctions, which in some cases are arbitrarily put on people who are trying to make a claim.
The trouble with the Government’s approach to welfare reform is not just that it is morally flawed, but that it is based on the subjective view that welfare dependency is, in some way, a choice that people can make. If it were as simple as that, it would be a relatively straightforward phenomenon to resolve—but it is not as simple as that. The reality is that people who want to re-enter the labour market are often confronted with a complex web of barriers that can, in some cases, be impossible to negotiate without help that is tailor-made to their particular circumstances.
Research from the Department for Work and Pensions itself has concluded that what matters for poverty reduction is not the aggregate employment rate, but the share of working age adults and children in workless households. In other words, an increase in the number of people in the labour market will not necessarily reduce poverty if it consists of people entering the labour market from households which are not already in poverty. So, even if employment rates are rising—I acknowledge that they are—below the surface there is a highly polarised employment structure, with a high number of double earners and a high level of zero-earner households. The Secretary of State referred to that in his opening speech.
What the Government’s approach fails to take into account are the barriers that those in zero-earner households have to surmount to become earners—certainly at a level that does not lead to their still living in poverty.
Time forbids me from going into too much detail, but let me offer two examples of the barriers that people experience. The first is the recruitment practices in many companies. A UK Commission for Employment and Skills report in 2010 concluded that employers increasingly use informal channels of recruitment rather than the jobcentre, which further disadvantages those who are unemployed and, as a result, they do not have the informal contacts needed to be in the know. That approach is probably even more commonplace now in my constituency than it was at that time.
The second barrier is the increasing use of zero-hours contracts by employers. There are varying estimates as to the level of their use, with between 500,000 and 1 million people thought to be affected. I do not intend to get into a discussion about which figure is correct, but that barrier, taken together with the unreliability of agency contract work, makes it difficult for families to abandon the benefit system altogether. That is because the employment available is so insecure and unreliable as to be too risky to contemplate—certainly for families. Indeed, it presents the very real possibility that by finding a job someone will be plunging their family into even greater poverty than they were experiencing already.
Although there are obvious improvements in the economy and in the levels of employment, poverty is stubbornly persistent in this country, to a wholly unacceptable degree. I am afraid that I am bound to conclude that because the Government do not understand the causes of poverty, they have not addressed it at all in this Budget.
I am pleased to follow Mr Howarth. I tried to follow his argument, but felt some confusion, because his constituency, notwithstanding the barriers there, has seen a drop in youth unemployment from a terrible high of 17% to 10%, so clearly some progress is being made. [Hon. Members: “Well, that is all right then.”] Before he attempts to misinterpret my words, he should read Hansard to see exactly how I phrased my thoughts.
In the Budget, the Chancellor demonstrated that he has the ideas to continue his drive to rebalance and rebuild the economy on a sustainable platform, rather than on the platform we inherited after 13 years of the previous Government, where our over-dependency on one sector and a bloated welfare state led to many of the problems we are dealing with today.
I talk about ideas. Opposition Members would do well to remember—those who are old enough to remember—what James Callaghan said after the election defeat of 1979. He said that he knew he had lost the election because his Government had run out of ideas. Frankly, it seems that Labour has nothing new to offer judging by the responses of its leader and the shadow Work and Pensions Secretary. It has chosen to move off the historic centre ground of British politics. Nothing illustrates that more than the contemptible speech that we heard in response to the Budget. It was full of class war rhetoric and it lacked ideas. The intellectual pulse of the Labour party is not there; the party is flatlining and, as I have said, it would do well to remember the words of its former Prime Minister.
It seems that Labour, having nothing new to offer, have returned to the past. Yesterday, Sadiq Khan talked about returning to widespread union-brokered collective bargaining and direct action. Labour is now officially wedded to the unions. It also remains married to the discredited politics of borrow and spend and has no ideas for the future.
Unsurprisingly, the Chancellor and his team present a stark contrast to the Labour team. They understand not only the scale of the challenge but how to bring forward ideas to help sustain the economy. They have recognised that there is a massive transfer of economic power from the west to the east. Conservatives understand that nobody owes us a living. We have to create the conditions and the mentality to go out and earn our way.
The Budget is about developing building blocks to rebalance the economy and to sustain the growth that we need. Above all else, the Conservatives trust individuals to spend their money far better than the Government. Individuals recognise that tax is not the Government’s money but the taxpayer’s money, and that if they do the right thing this Government will be on their side.
The platform for growth may have been laid down in this and other Budgets, but it is the aspiration of the British people that will see us exporting more and getting on in life. It is they who will deliver the competitive business environment and stable public finances. However, to achieve that we must look beyond economics to education and the welfare system. There are people in this country who are trapped in worklessness. They leave school at the age of 16 ready to compete in the world. The shame of the Opposition was that they stifled ambition and strangled aspiration for so many people and trapped them on benefits. There were 1 million households in which people had not worked for more than 10 years. This Government are reducing the numbers of workless households. Fewer children are growing up in workless households, employment is increasing, youth unemployment is reducing—in my own constituency the number is down by 32% since the election. It is our deep understanding of making work pay that drives our reforms. We want to rid this nation of the appalling high marginal tax rates. The fact that someone could pay a 95% marginal tax rate if they came off benefits into work provided no incentive to work, which is why we inherited a legacy of high long-term unemployment and youth unemployment.
The Government have proved that financial measures alone are not enough. By tapping into the natural aspirational instincts of the British public we can change behaviour and improve lives for ever. Nothing illustrates that more than the measures we have taken to trust people with their own money—albeit in savings or in reducing the tax burden. We have shown trust in companies to invest in their people and their businesses by lowering corporation tax. That has been done within the difficult, demanding financial constraints that we inherited and are having to deal with. These are the issues that will drive greater growth and more employment and will change lives for the future. The tax-free allowance has gone up to £10,500. It represents a 66% rise in the amount that a person may earn before tax, which is a good thing. The pensions policy, which allows a person to use their own money as they wish, is indicative of a Conservative Chancellor who uses Conservative values in a Conservative Budget and who trusts the people.
The tragedy of Nick de Bois is that he actually believes what he said. I think that we need to be a bit more realistic now. For the past four years, we have heard the Conservatives blaming the previous Labour Government for the economic recession—[Interruption.] If Members want to follow North Korean doctrines such as that of the “Dear Leader”, they should just carry on, but let us get a little bit real.
The recession started in America. I am sure that my colleagues remember Lehman Brothers and Fannie Mae. In this country, we had a problem with Northern Rock, which the Labour Government tried to address. All of this talk about us running up a deficit is nonsense. Basically, we had to save the banks. When the Labour Government came to power in 1997, they cleared the national debt. They inherited the policy of 50p of every pound paid in tax going to pay off the national debt; crumbling schools; patients waiting for treatment in hospitals on trolleys; and declining manufacturing, especially in Coventry and the west midlands. Coventry was losing thousands of manufacturing jobs a week, and household names such as Standard Triumph were disappearing. I am sure that my colleagues remember that.
The previous Tory Government attempted to rebalance the economy. They moved from manufacturing for export to the service industries, which led to the crisis of 2008. When we left office, we still had our triple A rating. We had introduced low interest rates to help families and pensioners and quantitative easing to help the economy and we had bailed out the banks to protect savings. Growth was returning. We had persuaded George Bush, an American Republican conservative President, to pump billions into the American economy.
When the present Government were in Opposition, they said that they would maintain our spending levels. They opposed freedom for the Bank of England and said that the economy was over-regulated and that they wanted to cut red tape. That was their solution to a worldwide crisis that started in America and spread across the world. Their plan was to pretend that it was confined to Britain so that they could blame the previous Labour Government and justify breaking their election promises to the British people.
We must remember that 13 million people are still living below the poverty line in the UK and that 350,000 people used a food bank last year. Energy prices are high, housing is inadequate, wages are low and the Government are offering nothing at a time when many people are suffering. The Government have very little to offer.
My first major problem with the Budget is that it is extremely unfair to our young people—a group who have been undervalued and forgotten by this Government. The Government should be ashamed of how they have simply abandoned a whole generation, who will suffer the most during this recession. Some 282,000 people under the age of 25 have been jobless for a year or more. That figure is at its highest since 1993 and has almost tripled since 2008. More than 900,000 young people are still out of work. That is a serious problem and the Government seem completely complacent about it.
The Government are pleased about the employment picture, but they have not considered the experience of young people in this country. What about young people who can find only part-time work? What about young people who have work, but in a different field from that in which they are trained, or for which they are overqualified? The Local Government Association has warned that a third of all young people will be out of work or trapped in underemployment by 2018 if we are not careful.
A young person’s first job is just a statistic to this Government, but someone’s early career can make a huge difference to their life. For someone who went to university, studied hard and hoped for a job in a particular field, it can be highly disheartening to work in a non-graduate job or a completely unrelated field. Nearly half of recent graduates are in non-graduate jobs. That can be a blight on their future in competitive industries.
Similarly, when people are burdened with financial pressures, being able to find only part-time work is a problem. We are talking about hard-working, driven young people who want to get on but instead spend their whole lives in jobs that are well below their capacity. Yet the Government smugly pat themselves on the back for the employment figures.
Our young people are being abandoned. If the Government do not see that as a serious problem and begin to take action, we are looking at a lost generation. That reminds me all too well of life for young people under Thatcher.
The Government’s flagship Youth Contract has been declared a failure by their own advisers and the Work programme is finding work for only one in six of the long-term unemployed. That is simply not good enough. Labour’s compulsory jobs guarantee scheme, which would be funded by a tax on bank bonuses, would ensure a paid job for every young person under 25 who was out of work for more than a year.
It looks to me as though the Government have given up on young people, perhaps because they think that they have not forgotten about tuition fees, or perhaps because they know that Labour will give the vote to 16-year-olds and they will not. Either way, they have simply decided that the youth vote is not worth chasing and they are going after pensioners instead. That is disgraceful. Young people are being forgotten. A Government should be a Government for everybody, not just for the people who might vote for them or the people who they are afraid might vote for the UK Independence party. That is no way to run an economy.
The Budget does shockingly little to address the fact that women are so unfairly hit by the cuts. Women are bearing the brunt of the cuts and the Budget is no exception.
I agree with my hon. Friend. The majority of jobs created that are part time and have limiting career prospects have gone to overqualified women. Since 2010, male unemployment has decreased by 17% whereas female unemployment has risen by 7%. Disgracefully, women still tend to have lower end-of-career salaries than men and so often have lower pensions. Women are under-represented in the Government and that shows in their policies. What in the Budget will address that?
I want also to raise my concerns about local government finance. I have raised the issue on a number of occasions, but I cannot stress enough how much it matters. It needs to be made clear that a crisis is coming in many local authorities. Coventry city council has already lost approximately £45 million in core Government grant in the past three years and has had to implement a significant savings programme to minimise the impact on front-line services. That has, of course, put a huge strain on services. Coventry will face a—
Coventry and Banbury are not that far away from each other. When Mr Cunningham and I entered the House of Commons together about 30 years ago, I think that the unemployment rates in our constituencies were not dissimilar at about 15%. Unemployment in my constituency today is 1%, so it is possible to make progress if the community works together and drives forward jobs.
But, of course, Opposition Members simply are not willing to acknowledge that there has been a persistent fall in unemployment. I am not sure that their dirge of pessimism will resonate with electors, however. This past week was a defining week. By Friday, the shadow Secretary of State for Work and Pensions was acknowledging on “Any Questions?” that the Opposition would support the Government’s pension changes. She obviously had a busy weekend, because on Sunday she acknowledged in The Observer that Labour
“will vote for a cap on welfare spending to keep the overall costs of social security under control.”
Of course, the Chancellor has attached the welfare cap to the charter for budget responsibility in such a way that tomorrow, essentially, the Opposition will be voting for the coalition’s deficit reduction programme. Having spent pretty much all of this Parliament resisting every welfare reform and every attempt to reduce the budget deficit, at the end of the Parliament with just over a year to the next general election the Opposition are suddenly trying to catch up, accepting the fundamentals of the Government’s economic policy and recognising the strength of the Government’s long-term economic plan.
The Opposition can do the big stuff, but when it comes to the detail they still cannot quite bring themselves to acknowledge what they must do. They say that they will reverse the spare room subsidy. I still do not understand why they want to treat tenants in the social housing sector differently from the way in which they treated tenants in the private rented sector, notwithstanding that they will have to find nearly £500 million to reverse that policy. Where do they say the money will come from? The shadow Secretary of State for Work and Pensions said again from the Dispatch Box today that it would come from taxing higher rate taxpayers through the winter fuel allowance, but that would bring in only £100 million. We can already see that they are about £400 million adrift on just that simple question. It is all very well talking the talk about signing up to the welfare cap, but they cannot bring themselves to acknowledge what they will have to do to enforce that. Welfare budgets were completely out of control under the previous Government. The number of households in which no one had ever worked nearly doubled under Labour. This Government have taken difficult decisions to bring the benefits bill down, saving £19 billion a year for the taxpayer. The new welfare cap will ensure that never again will the costs of welfare be allowed to spiral out of control and never again will the incentives to work be distorted. The level of the cap will be allowed to rise only in line with forecast inflation. Of course people who have worked hard all their life deserve security in their retirement, so the cost of the state pension will be excluded from the cap, as will cyclical unemployment benefits. We need to see a welfare system that returns to the safety net that Beveridge intended, instead of the entrapment that it had become.
We have seen the Government make some brave and positive moves to get the welfare budget back under control. The latest workless household figures show a dramatic fall of 450,000 since 2010. We have record employment figures. I can recall at the beginning of this Parliament Opposition Members all saying that the Government’s long-term economic plan would lead to the disappearance of a million private and public sector jobs. What has actually happened since 2010is that more than 1.7 million more people are employed in the private sector, which is more than four times the number of jobs lost in the public sector.
As we heard in an intervention from Mrs Glindon in the speech of Mr Cunningham, the Opposition’s answer to any conundrum is more public sector jobs. Their default position is still more public spending and more public sector jobs. In reality it is in the private sector that more jobs are being created. Indeed, almost 80% of the rise in private sector employment has taken place outside London, in constituencies such as mine and Coventry and in the constituency of probably every Member who has spoken in the debate. Almost 90% of the new jobs went to British nationals.
There are those, such as the Bank of England, who argue that the increase in employment has to a certain extent been as a consequence of the tightening of the eligibility requirements for some state benefits, which have caused people to see whether they cannot find their way back into the world of work. I visited one of the Work programme providers in my constituency the other day, which is doing a really good job of ensuring that the long-term unemployed get back into work. So the increase in private sector employment is now more than four times the number of jobs lost in the public sector. The rise in employment is being driven by businesses and entrepreneurs across the country who are feeling increasingly confident with the improving economy.
I have few large employers in my constituency. The continuous driving down of the unemployment rate month on month, week by week, in constituencies such as mine is being achieved by the private sector and by entrepreneurs, all of whom found measures in last week’s Budget that were supportive and which they supported.
We heard much about young people in the debate, but the number of young people in work has increased by 43,000 in the last three months alone, and the proportion of 16 to 24-year-olds not in employment, education or training is at its lowest in five years.
Employment is at a record high, up by over 1.3 million since the election. For the first time in three decades, the number of people employed in the UK is better than that in the United States. Unemployment in other European countries is going up, whereas unemployment in the UK is going down. That bodes well and will bode well for the Government come the general election next year.
The changes to pensions and annuities have caused a great deal of interest in my constituency, but many constituents are unsure what it means for them. This is dangerous, because the changes are being introduced quite quickly and many people will have to decide whether to defer taking their pensions until the changes come into play.
At one of my surgeries on Friday a constituent who had already bought an annuity asked me whether he could now take a lump sum instead. I fear that the answer to that is no as he had already entered into an annuity contract, but it shows that there may be some ill feeling about the sudden change among those who have only recently bought annuities.
It is also not clear to many constituents that the changes apply only to defined contribution schemes. Many are unsure what type of scheme they are in. Another constituent asked me how the changes affected his company scheme, but it seemed to me that that scheme was a hybrid, with elements of both defined contribution and defined benefit. Again, my understanding of the changes is that they would not apply to such schemes, at least at the moment. Have the Government given any thought to whether hybrid schemes will be affected? Will the possibility of taking a lump sum from such a scheme be limited, and if so, what impact is that likely to have on the scheme as a whole?
While I appreciate that anyone who is considering what to do would be well advised to seek professional advice, these are serious issues that require a clear answer to allow constituents in such schemes to determine what is in their best interests. They may have to do so fairly quickly. The changes could mean a huge change in how people save for their future, but I suspect that it will also mean a huge change in how such savings are viewed, both by the general public and, crucially, by future Governments.
The hon. Gentleman has rightly challenged the Government about the uncertainties caused by the changes proposed in the Budget. Can he enlighten the Scottish people as to the attitude of a Scottish National party Government on the proposals if, heaven forfend, there is a vote for independence?
I may as well ask the hon. Lady what a future Labour Government would do, given that Labour has flip-flopped on the proposals since they were announced last week. When we achieve our independence, we will inherit these proposals, and a future Chancellor will improve them.
There is evidence from other countries that when such changes are made, a substantial number of people take their savings as a lump sum, rather than buying an annuity. There are very good reasons why people might choose to do so, and I accept the argument that we should allow them more choice over how they use their own savings. On Thursday, during the statement by the Minister of State, Department for Work and Pensions, Steve Webb, I raised the question of whether these new pensions vehicles will be truly different from other forms of savings. That is important, because we have traditionally given greater tax incentives to allow savings for retirement that are not available for other savings products. If, however, someone entering a pension scheme can in future take the whole sum as a lump sum rather than as an annuity, what exactly makes that pension scheme any different from other long-term savings schemes? Will a future Government look at that and decide to end any tax reliefs, which could have a significant impact on future savings? In his response the Minister said:
“One of the differences between workplace pensions and other forms of saving is the employer contribution. Whereas someone of working age can save through any savings vehicle they like, it is only through workplace pensions that they get not only tax relief but the employer contribution.”—[Hansard, 20 March 2014; Vol. 577, c. 956.]
That is true to some extent, but it does not really address the question, as defined contribution pension schemes are not necessarily workplace schemes, so they do not all have an employer contribution. For example, many self-employed people may use such schemes. They get tax relief, but will that continue should the pension element of the scheme effectively be removed? Is it therefore the Government's intention to make a distinction between those schemes that have an employer contribution and those that do not? Do the Government intend to have a process for determining which schemes are pension savings and which are just ordinary savings? Again, some clarity on these points is much needed.
I also asked the Minister how someone, say in their late 50s, who comes to claim means-tested benefits would have their defined contribution scheme treated. I did not really get an answer to that point, so I shall put it again to the Exchequer Secretary. I put the question to the House of Commons Library, and it responded:
“Income from a defined contribution pension is treated as income for the purposes of means-tested benefits”.
So far, so good, and that is no surprise, but what is the position if someone has a defined contribution scheme and has the ability either to withdraw their money or take it as income? Up to now, that has not been an issue, as most people cannot get access to their funds until they reach retirement age, but the changes, as I understand them, will mean that anyone over 55 will have access to their fund.
A clue to what might happen is to be found in the rules for pension credit, where a person can be treated as having pension income for which they have not yet applied. The leaflet from the Pension Service “A detailed guide to Pension Credit for advisers and others”, which was issued last September, states:
“Notional income is income your customer does not actually get but is treated as getting. We may treat them as having notional income when they have: not claimed state pension but are entitled to it; not taken income available to them under a personal pension plan or a retirement annuity contract; deferred payments from an occupational pension; given up their rights to an income (from a trust fund for example) because they wanted to get Pension Credit”.
At present, such rules do not apply to means-tested benefits for people of working age. In this case, the present rules specify that income from a personal pension should not be treated as income available on application. Will that remain the case once it is possible for anyone who has reached 55 to take their funds from their pension plan?
It may well be that some Government Members will be of the view that any potential income should be treated as income for the purpose of assessing state benefits, but the implications of that are that someone who has done what we all wish people to do and has saved towards their retirement but is then made redundant at a late stage in their working life, could have their whole retirement fund wiped out because of a period of unemployment. Again, clarity is needed on that point. Similar concerns arise over those who are in care and meeting care costs, which is a point raised by Dr Lewis on Thursday and also by Age UK and the Joseph Rowntree Foundation.
Of course, the situation in Scotland is slightly different from that in England, but Jane Vass of Age UK is quoted in The Guardian as saying:
“The pension pot is protected from means testing. So when it is in a pension it can’t be touched but there is a risk when it comes out of that wrapper.”
It is possible that many of those who have been saving for retirement find that they have to use the fund to meet care costs, or perhaps a substantial part of their pot will go on meeting the costs of an insurance policy to meet future care costs.
Those are real issues concerning the whole set of changes to annuities, pensions and pension pots. People who are thinking of what to do with pension schemes that are coming to an end—do they take an annuity or do they defer until the new changes come in?—need that information now. Although the Government have said that advice will be available, it is not yet available, and it will probably be some time before it is. Clarity is needed now; otherwise, many people could make the wrong decision. It may be that they should take an annuity, or maybe they want to take the lump sum. They need proper advice now before the changes come into effect, possibly in 2015.
The Chancellor of the Exchequer is to be congratulated on an intellectually bold and intellectually coherent Budget that will do much to bolster the growing confidence in the British economy. We are already seeing a recovery that is not, contrary to ill-informed observers, a credit-fuelled recovery. The growth we are seeing is to do with higher employment levels. The amount of unsecured lending—credit card borrowing—is remarkably modest and small; it does not account for the recovery we are seeing. Furthermore, the gross household debt to income ratio was 170% in the credit-fuelled days of the previous Parliament. It has fallen to 140% this year.
What the Chancellor reminded us of is that there are no final victories when it comes to economic management, and he reminded us of five things that have to happen if this recovery is to be sustainable. First, the measures to improve exports—so that we have the most competitive export finance regime in western Europe—will help our net trade position. Our net trade position is frankly not good enough: 5% of GDP is the level of the deficit on our current account.
Secondly, the Chancellor reminded us that as a country we have in recent years not been saving enough, so I particularly welcome the boldness in abolishing the 10p savings rate and the 55% punitive rate of tax on draw-downs from pension pots. It will now only be at an individual’s marginal rate. He has also abolished the compulsory need to annuitise. All those things will improve the incentives to save.
Thirdly, the Chancellor said that we have not been investing enough as a nation. I think that the single most important change in the Budget for manufacturers and exporters—those in the real economy—will be the increase in capital allowance from £150,000 a year to £500,000 a year. I have only one gripe about that for Government Front Benchers: it is another temporary increase. Over the years, under successive Chancellors, capital allowances have been chopped and changed, abolished, taken down to very low levels and then whacked up again. What we have in this Budget is an extension of the capital allowance until the end of 2015. Many of us would like to ask, on behalf of those in the real economy, for a little more consistency when such measures are announced.
Fourthly, we all know that our productivity is 20% lower than the G7 average, as measured by total output hours, and we have seen lots of work over the past three years on apprenticeships, skills and training.
The fifth issue dwarfs all the others, and without it British families will have no security whatever in their economic lives. It is deficit reduction. The key failure of this country and its people, and especially its Government, over many years has been the failure to live within our means. The cyclically adjusted primary deficit is going to be cut by 10 percentage points of GDP, which is a colossal fiscal contraction. Half of that is happening in this Parliament, and the other half will happen in the next Parliament. Four fifths of the 5% tightening in this Parliament occurred in the first two years, so we are now in conditions of relatively less tightening. But, my word, it will really pick up. We will have to find another 5% between 2015-16 and 2018-19.
I will point to two charts in the Office for Budget Responsibility’s report that accompanied the Budget. Chart 3.39 shows that general Government consumption, excluding welfare, will fall from 21.8% of nominal GDP this year to 16.1% in 2018-19. That statistic is significant because it is the lowest figure for Government general consumption since 1948. It is a fiscal squeeze on steroids. It is serious. It will have to be delivered if we are to return to surplus at the end of the next Parliament, as the Chancellor so rightly points out.
Chart 4.4 shows us that if we keep the protected budgets, particularly that of health, we will see massive further squeezes in departmental spending, much tougher than those we have already experienced. The departmental expenditure limit figures show that health alone will account for 45% of departmental spending in the next Parliament, with massive cuts elsewhere. Only the Conservatives can guarantee that fiscal austerity.
Last week the Chancellor said that his ambition was to support the makers, the doers and the savers, but we also need to focus on the millions who want to make, who want to do and who dream of saving but cannot, either because they are not in work or because they are in low-paid employment. Let me say very clearly that I welcome the recent fall in unemployment, but long-term joblessness is still a major concern, as is the increasing level of under-employment in many of our communities.
I want to focus my remarks this afternoon on youth unemployment. In the city of Liverpool, 1,665 young people are facing long-term unemployment. This is an economic challenge, but it is also a social challenge. Recent research published by the Prince’s Trust has shown that about one in 10 young people in Liverpool have suffered mental health problems attributed in part to their unemployment. Many of them feel that they do not have a lot to live for. They may be depressed or feel that they have very little to contribute to society.
Tackling long-term unemployment is never easy. In my constituency, however, the previous Labour Government have a record of which we can be very proud. In 1997, the unemployment level of young people in West Derby was 850; by 2010, that had fallen to 335—a very significant fall though still much too big a figure. The future jobs fund played an important role in achieving that. I have seen its positive impact in my constituency in delivering opportunities, contrary to what Government Members have said, not only in the public sector but in the private and voluntary sectors, particularly through the fantastic role played by social enterprises. The future jobs fund was not perfect, but it was much better than the Government’s Work programme. In Liverpool, more people on the Work programme have received benefit sanctions than have found work. Different localities are seeing wildly different results. For example, in my constituency the ratio of job outcomes to referrals is just half what it is in Horsham. Such wide differences across the country serve to emphasise the need for solutions that are shaped locally.
My right hon. Friend Mr Darling, the former Chancellor, spoke about the Government’s plans to cut public expenditure back to 1948 levels. Liverpool city council is facing drastic cuts. Over each of the past three years it has had to make savings of £176 million, and it has to make almost the same amount over the next three years—£156 million. In that context, I pay tribute to the remarkable record of Liverpool’s Labour council and Labour mayor, Joe Anderson, in prioritising jobs and apprenticeships, especially for young people. The mayoral youth contract involves working with businesses to take on apprentices to support young people back into work. In its first year, more than 100 young people who were otherwise facing long-term unemployment got into work. I welcome the progress that we have seen on a combined authority for the Liverpool city region. The city region has identified local growth sectors of advanced manufacturing, the Liverpool super-port, and the visitor economy, setting out in detail the skills needed by the sectors involved and what businesses and educational establishments need to do to deliver this change.
When Building Schools for the Future was cancelled in 2010, the mayor of Liverpool picked up the programme, and we are now delivering the rebuilding or refurbishment of 12 local secondary schools as part of Liverpool’s city deal. As my right hon. Friend Hazel Blears said, Liverpool has just become a social value city. Even in tough times, Liverpool has sought to give priority to getting people into work—in particular, ensuring that young people do not fall into the trap of long-term unemployment. As a result, youth long-term unemployment in my constituency has fallen to 290, which is hugely welcome.
The Budget inevitably focuses on the role of central Government, which provides a valuable framework, but solutions to long-term unemployment and the poverty that other Labour Members have talked about are best shaped locally by institutions rooted in our local communities—elected local councils, local businesses, and the local voluntary sector. That is why I very much welcome the fact that my hon. Friend Rachel Reeves has said that Labour’s compulsory jobs guarantee will be commissioned by a partnership of local and central Government, taking the place of the traditional approach, under Governments of both parties, of a top-down, bigger-is-better model.
To deliver sustainable, properly paid jobs and apprenticeships for the future, the best approach must be central and local government working together. Only when we succeed in aligning schemes and programmes with the realities of local labour markets and local community priorities will we be able to tackle the scourge of long-term unemployment—in other words, by putting local communities in the driving seat. If we do that, we will have a real prospect of delivering help and support to the millions—I referred to them at the beginning of my speech—who want to make, who want to do and who dream of saving.
I apologise for being absent from the Chamber for a while, Madam Deputy Speaker, but I had to attend a Statutory Instrument Committee.
I want to start by congratulating the Chancellor. We inherited the most monstrous debt in 2010 as a result of Labour’s overspending and over-borrowing and of living beyond our means with no thought for tomorrow, but after the 2010 election, tomorrow came. Drastic action was needed to stop the country spiralling down further into irrecoverable debt, so the Chancellor drew up our long-term economic plan. He has shown courage and determination in sticking to his guns in the face of relentless criticism and opposition to every proposal to control public spending. The reward is an economy that is growing faster than that of any other European Union or G8—or perhaps it is now G7—country. In this Budget, the Chancellor has been able to ease the squeeze to help hard-working people who have been feeling the pinch.
I am particularly pleased with the range of measures to help retired people. When interest rates were higher, pensioners were able to rely on the interest on their savings to help boost their retirement income. Although low interest rates are undoubtedly a boon to all mortgage holders, pensioners’ incomes have suffered. Now, people who have saved for a pension in a defined contribution scheme during their working lives will have the freedom to manage their own retirement income as they choose. I welcome the fact that annuities will no longer be compulsory. Insurance companies and annuity providers, such as those in the constituency of my hon. Friend Crispin Blunt, who is no longer in his place, will have to make their products more competitive, innovative and attractive to those who still choose to buy one. That, plus the removal of all remaining tax restrictions on access to defined contribution pension pots, is excellent news.
New pensioner bonds, effective from next January, will offer a better interest rate than any equivalent product on the market today, including individual savings accounts. They are predicted to be 2.8% on a one-year bond and 4% on a three-year bond, which is another boost to pensioner income. For 1.5 million low-income savers of all ages—not just pensioners—the abolition of tax on savings up to £5,000 is a great incentive for everyone to start putting away something for a rainy day. In Hornchurch and Upminster, the increase in the personal allowance to £10,500 will raise 410 more people out of income tax altogether and reduce income tax bills for 44,055 workers.
The Secretary of State’s welfare reforms are founded on the knowledge that every person returning to or starting work gains security and self-esteem. Every new job is better not just for the employee, but for the taxpayer and for the country. Unemployment fell by 63,000 in the three months to January, and the number of people signing on for jobseeker’s allowance last month fell by 34,600. The number of people in work rose by 105,000 in the last quarter to a new record of 30.19 million—nearly half a million more than a year ago. Moreover, 1.7 million new private sector jobs have been created by businesses up and down the country, showing confidence in the economy.
I want to pay tribute to the schools and colleges in Hornchurch and Upminster, not only for their academic, practical and creative education, but for preparing pupils for the future by developing in them social awareness and an ability to question, think laterally and understand one another and the adult world they are about to enter. The pupils at the schools and colleges in Hornchurch and Upminster know that having an interest in sports and hobbies makes their CV more interesting to a university or prospective employer, and increases their chances of getting that all-important interview. They know that good timekeeping and good manners, looking and sounding interested, and having a pleasant demeanour, as well as their exam results, will help them to compete successfully for apprenticeships, jobs or university places.
Fiscal education now plays an important role in personal financial management and debt avoidance, and helps people to resist the constant temptation of credit card offers that come through the letterbox. That is particularly helpful for students who will be living away from home for the first time and will be faced with paying for food and heating.
I am pleased to report that the number of young people in Hornchurch and Upminster who are claiming jobseeker’s allowance is down from 7.2% in 2010 to 4.5% in 2014. The role of schools and colleges in engendering ambition and aspiration in their pupils is an important contributory factor in that reduction.
An important part of the Secretary of State’s welfare reforms is the Work programme, which is designed to help long-term unemployed people to break the cycle of benefit dependence. To ensure effective jobseeking, the programme is tailored to the individual’s needs. It is a partnership between the DWP and all sectors, and is based on payment by results to ensure value for the taxpayer. So far, almost 500,000 jobs have been started by Work programme participants, including 208,000 people who were very long-term unemployed.
This is a Budget for business, workers, pensioners and savers of all ages. There are forecast to be 1.5 million more jobs over the next five years, and 1.6 million apprenticeships have started since 2010. Every new job means that a family have independence and a more secure future, and are able to contribute to the growth in the economy. All that vindicates the difficult decisions that have been taken since 2010. The fiscal policies are working, the number of new private sector jobs means that more people are working, the Work programme is working, and the long-term economic plan is working. I congratulate the Chancellor.
This is the third day of the Budget debate that I have sat through, and I surely cannot be the only one who is finding it incredibly depressing. Too often in this House, we pretend that the reality is either black or white, but people outside this place know full well that real life is much more complex than we pretend. I want to say from the outset that of course the last Government made mistakes. It is right that my party should and does acknowledge those mistakes. It is also right that Government Members should acknowledge that when my party was making some of those mistakes, they did not just agree with us, but were urging us to go further.
The Secretary of State expressed dismay that we were not talking about the fall in unemployment. He is no longer here, but I wanted to say to him that of course I welcome the fall in the unemployment figures. Unemployment is a tragedy that affects not just individuals, but entire families and communities. I know that only too well from my constituency of Wigan.
Although I welcome any fall in the unemployment figures, we should not pretend for one moment that that is where the picture ends and that, as a consequence, life for people outside this place is rosy and is getting much better. The fall in the headline unemployment figures masks a much more complicated picture for many people, including many of those whom I represent. It masks a sharp rise in under-employment, which has been a feature of the economic recovery. It masks particular problems for women and young people, especially in relation to long-term unemployment.
Many people in the workplace not only have low wages, but face extreme job insecurity. When we talk about the strivers and the shirkers or, to use the Chancellor’s new language, the doers, we need to remember that the people we are labelling doers or strivers today might be labelled something much more offensive tomorrow, because many people are moving in and out of insecure, low-paid jobs at an alarming rate. To label people strivers or shirkers depending on which day we happen to catch them is not just offensive, but utterly stupid. In parts of the country such as mine, a combination of those factors —low pay, job insecurity and long-term unemployment among particular groups—contributes to the entrenched problems that we face. I am concerned that the Budget has very little to say to those people, and the Chancellor has had little to say about the problems.
In the brief time available to me, I shall outline a few of the major problems that we have and some of the things we could do about them. First, we have seen over recent years that, as has been the case in every major recession in history, Government intervention increases growth. For four years I have sat in the Chamber and listened to the Chancellor delivering Budgets. Over that time his language has not changed, but slowly, gradually I have heard the policies change slightly. The changes have been too small and too late, but in recent years I have heard him talking about the need to build houses, Government investment in mending roads, and underwriting exports. If only we had been talking about that four years ago, what would we have seen?
The public and the private sectors are not separate; they are heavily interdependent. In my constituency, which is a good case in point, many people are employed in the public sector, and every time they go out and spend in local shops, those small businesses get a boost and they are able to keep the staff they have and employ more people. We have to understand the role of Government if we are to get out of the present mess. I am concerned that small businesses are not getting the support they need and deserve. When I talked to small business people in my constituency after the Budget, they said that they are still struggling to get lending—net lending to small and medium-sized enterprises continues to fall—and that business rates are crippling. Although there were measures in the Budget to help larger businesses, SMEs need help now as they are some of the biggest employers in this country.
The Government need to take seriously the issue of underemployment. If the people on low and middle incomes do not have enough money to make ends meet at the end of the week, they cannot go out and spend in local shops and businesses, and areas such as mine will continue to sink under the weight of unemployment and all the other challenges we face.
I pay tribute to people at this time. One Government Member said that doom and gloom does not chime with the public mood. I believe that. People are experiencing horrendous problems, yet they are still optimistic, they are volunteering and they are trying everything they can to make their communities work.
One thing we need to understand is that subsidies do work. I have heard too many Government Members, including the Secretary of State, saying that they do not. Youth unemployment is our biggest and most urgent national challenge. I see young people losing confidence by the day because they are unable to get a job. Many of them are the first in their families to go to university and they are now competing with 16-year-olds for jobs that they could have done years earlier. If young people get a job and remain in it for long enough, they get the skills and the confidence and they are worth it to their employers, and those jobs persist. That is why the Conservatives should not rubbish Labour’s youth jobs guarantee. That is the way to get young people on to the ladder and out of the revolving door of apprenticeships and unpaid work.
Over the past four years the richest 10% have indeed paid a price as a result of Budgets, but the poorest 10% have come off second worst. When we look at where the economic burden has fallen, it makes no economic sense. Every pound that goes into the pocket of one of my constituents who does not earn very much money at all goes straight back out into the local economy, boosting jobs and boosting the economy.
Finally, the benefits cap does nothing to deal with the real structural challenges that we face. We need to have an urgent debate about how to deal with entrenched problems such as child poverty—
It is a pleasure to follow Lisa Nandy, who spoke passionately and eloquently on behalf of her constituents. It should be stated, however, that the figures imply that the success of Wigan’s economy is much greater than she indicated. Figures from the Library show that the number of jobseeker’s allowance claimants in Wigan is down by 35%, and the most fantastic thing is that youth unemployment has gone down by 55% in a year. We would kill for such a reduction in Wales, but we have the dead hand of a Labour Welsh Government in Cardiff who have no intention whatever of working with the national Government to deal with youth unemployment.
In my constituency, we have seen a drop in unemployment, including youth unemployment and long-term unemployment, which the people of the constituency have welcomed. However, young people on the Work programme are not allowed access to educational programmes, because the Welsh Government refuse any Work programme client access to any programme using funding from the European social fund. They do that to try to ensure that the Work programme fails, and it is left to me and other Conservative Members from Wales to put on job fairs.
The hon. Gentleman has returned from Patagonia as partisan as ever. Why does he not commend the fact that 80% of traineeships under Jobs Growth Wales are in the private sector? Surely, as a former small business man, he welcomes that.
The hon. Lady makes an interesting point about Jobs Growth Wales. When I wrote to local businesses in my constituency, I mentioned the possibility of young people getting on to the Work programme, but I also mentioned the possibility of using Jobs Growth Wales. I find it odd, however, that because somebody who is about to leave a youth detention centre in England, for example, is automatically enrolled on to the Work programme, they cannot access Jobs Growth Wales owing to the policies of the hon. Lady’s party. It would be well worth her while to read the criticisms that the Welsh Affairs Committee made, with cross-party consensus, of the Welsh Government’s actions on programmes that are there to support and train young people and to give them skills to take up opportunities that exist in their communities. She should raise that issue with members of her own party.
We have a success story on jobs. We are seeing a fall in unemployment in my constituency, with positive measures to support small businesses. We depend entirely on the small business community for the growth and development of jobs, and one key thing that we are doing is reducing the burden of employers’ national insurance contributions on small businesses. The reduction of £2,000 in the next financial year will be a great boost to small businesses that are looking to employ members of staff, and that is crucial.
The hon. Member for Wigan mentioned the need to ensure that we deal fairly with small businesses. Again, we can compare and contrast the efforts of the UK Government under difficult financial circumstances with what is being done in Cardiff. For example, there have been calls, demands and cries for help from small businesses in the retail sector, which have stated clearly that they need help with business rates. The Chancellor has responded so that, for example, any small business in England that has a rateable value of less than £50,000 will not only have a cap on their business rates this year but get a £1,000 rebate. That might not sound like a lot of money to some Members, but for a small retail business in my constituency that is struggling to survive, £1,000 could make the difference between success and failure. Again, though, what is happening to that £1,000 rebate in
Wales? It is not getting through to small businesses. The Welsh Government are retaining it in Cardiff to support another of their pet projects.
We hear from Opposition Front Benchers—we heard it from the shadow Secretary of State for Work and Pensions today—that people in this country face a cost of living crisis. I invite them to look at the situation in Wales. In my constituency, a Labour-Plaid Cymru council has increased council tax not by 5% or 10% but by 23% since 2010. That increase could have been avoided if the money made available by the UK Government had been passed down to local authorities in Wales, so that they could try to support hard-working families at this difficult time by freezing council tax. It is a fact that only one council in Wales has managed to freeze council tax for two years. Conservative-controlled Monmouthshire has done so for two successive years, despite the lack of financial support from the Welsh Labour Government.
In my own authority of Conwy, we have had increases of 5% and 4.8%, with a total increase of more than 25% since I was elected, simply because the Labour party in Cardiff and in my constituency is happy to place further burdens on hard-working families at a time when they need support. The situation is unacceptable, because money has been made available under difficult circumstances by the Chancellor but the Welsh Government have decided that they would rather keep it than to support hard-working families in north Wales. That is clearly a disgrace.
This is a solid Budget that will allow us to look to the future with confidence. I would be delighted if some of the changes in England were also to be implemented in Wales. Unfortunately, that is not the case, but I hope that the people of Wales will be wise enough to identify the failures of the Welsh Government in that respect.
The other key thing that has been welcomed with open arms by my constituents is the change to pensions. We have heard some reservations from Opposition Members, but not perhaps from Front Benchers, who seem to be aware of the popularity of the change. The change is popular, because it is right to tell people that they need to take more responsibility for their own lives. We have seen that in relation to the changes in personal taxation, on which the coalition have said, “Let’s increase the personal tax allowance and allow people to keep more of the money they earn.” The Labour version is to say, “Give us the tax, and we’ll put it through a bureaucratic system and then we’ll give you something back, which you must be grateful for.” I must say that when it comes to a general election, it was very handy for people to be able to phone up and say that the Conservatives are getting rid of tax credits.
The key point is that we believe in increasing the personal allowance because we trust the people. In the same way, we are making the change to pensions simply because we trust people to make the right decision about their own money. What is key is that if people are willing to save and invest for their own pensions, surely they have the right to make their own decision about how they best make use of their pension pot on retirement. The change will be welcome in my constituency, in which the average age is among the highest of all constituencies in Wales; indeed, my postbag tells me that it is being welcomed now. The key thing is that we are making the change not because we have a party political agenda, but for the simple reason that we trust the people to make the right decision about their own money.
No other issue is more likely to define this parliamentary term and this coalition Government than welfare and the cost of living. The past four years have been very tough for a great number of people, as I am sure all hon. Members are aware. The living standards of the majority of our constituents have fallen and the value of real wages has dropped, while the cost of living has gone through the roof. Many have lost their jobs or their businesses, but as a result of the Government’s welfare changes—I will not dignify them by calling them reforms—it is toughest of all for those who rely on others and for those who struggle to support themselves even in the best of times.
Once again, the Budget was a missed opportunity to address that and other issues. Instead of taking a step back and examining what could be done to make a tangible difference to the lives of some of the most vulnerable people in our communities, the Chancellor and the Government have decided to draw electoral dividing lines. They could have announced measures to mitigate the worst excesses of their welfare changes, or to help young casualties of the financial crisis back to work, funded by a tax on bank bonuses that would be paid by the very people who nearly gambled away their future. The Chancellor could even have made good on his promise to raise the minimum wage to £7 an hour. Instead, he chose to court the UK Independence party vote with tougher platitudes on welfare and to pave the way for more cuts, while those on his Christmas card list enjoy a tax cut larger in value than the average worker’s wage.
The Chancellor boasted of new private sector jobs, but ignored the fact that many of those are low-paid, part-time, agency or zero-hours contracts, and that some people are living not month to month or even week to week, but literally day to day. The Government must take action now to end the scandal of employment abuse, by restricting zero-hours contracts and promoting the living wage.
Government Members brag of an increase in the personal allowance, but that will be completely swallowed up by inflation, stagnant wages, rising energy and food bills, and previous changes to VAT and in-work benefits. According to the Institute for Fiscal Studies, the actual worth of the increase to those on low incomes will be as little as £2 per week, with one in six workers earning too little to benefit at all. The Government are for ever lecturing that austerity measures are unavoidable and that the rich are paying more than anyone else—as if progressive taxation were created only in 2010.
While my constituents are saddled with the bedroom tax, the shambles of universal credit, and months of delays waiting for personal independence payments, millionaires get massive tax cuts and bankers continue to pocket their grotesque bonuses, now totalling £1.6 billion. If the Government were really on the side of working people they could have raised additional income to help my constituents, by cutting back pension tax relief for people earning more than £150,000 a year to 20%—the same as for basic rate taxpayers. House of Commons Library estimates state that that would raise between £900 million and £1.3 billion—half the amount that will be lost to the economy through the Government’s welfare changes, snatched from the poorest in society. Even the lower estimates of that revenue would cover the cost of Labour’s compulsory jobs guarantee for young people after its first year of implementation.
The Chancellor could have taken meaningful action to help working people, but the figures behind the Budget neatly illustrate the real legacy of this Government: 350,000 people going to food banks; 400,000 disabled people paying the bedroom tax; and millions of working people worse off by, on average, £1,600 a year. The Government believe that the rich will work harder only if they are made richer, and that the poor will only work at all if they are made poorer. The truth is that, sadly, there is precious little in this Budget for ordinary working people. Once again that shows that the nation is worse off under the Tories, with a Government who are out of touch and do not really care.
It is a great pleasure to follow Graeme Morrice although I disagreed with many aspects of what he said, in particular his comments about bankers’ bonuses. Under the previous Labour Government, £12 billion was spent on bonuses but that has dropped to £1.6 billion. That is still too much, but it is less than what Labour intends to spend on its various projects, which it spent many times over.
I welcome this Budget, and I congratulate the Chancellor and the Conservative-led Government on getting to a situation where, by the end of the year, we will have virtually halved the deficit that we inherited from the Labour Government. Let us not beat about the bush: we as a country were borrowing £120 billion, not to build infrastructure projects such as HS2 or anything like that, but just to cover the running costs of day-to-day government in this country such as local government spending and housing benefit. Those things have to be paid for, and we were borrowing the money for it.
Who will pay that money back? Not necessarily my generation, but that of my children and grandchildren, will be the ones who pay back the money borrowed by the last Labour Government. There is no great morality in borrowing more and more money, yet that is all we saw from the last Labour Government, and that is all we will see if—God help us!—there is a future Labour Government. I applaud the Government for taking the right decisions. We have control over spending and that needed to be done.
I want to comment on the help for savers in the Budget. For five years we have had a 0.5% base rate of interest. When I was in business, I lived through interest rates of 7%, 8%, 10%, 12% and even 15%. They were crippling for those who were borrowing money, but for those who were saving and had money in the bank the high interest rates gave them a very good income. In this five-year period with a 0.5% base rate, our retired people and other people with savings have had a very low income from their savings. People will now be able to put up to £15,000 a year per person into an ISA, and that is to be welcomed.
I also welcome abolishing the 10p rate on savings income. If hard-working people on the base rate of tax have paid tax on their savings, why should they then have to pay tax on the income from those savings? This is, therefore, a very helpful measure. From 2015, pensioners will have access to a bond with a 2.8% return for a year’s savings and 4% on a three-year bond. In these very difficult times with very low interest rates for savers, that is very much to be welcomed.
It is a good idea that people will not automatically have to buy an annuity. For too long, pensioners have been held to ransom by those who sell annuities. There will now be competition. I have been on the Lamborghini website, but I have not seen a huge increase in the price of Lamborghinis as a result of what the Chancellor put in his Budget. I trust people to spend their money, which they have worked hard to earn and put into their savings all their life, in a way that they want. If they want to buy property and use it to provide somebody with a rented home, that is also good news for the economy.
Personal allowances are going up to £10,500 in 2015-16. They are always good for my constituents and good for the people of this country. The Government cannot create jobs or increase the buying power in people’s incomes by waving a magic wand, but they can reduce the amount of money they take away from people. That is what the Government are doing. Let us not forget that this is a Conservative-led Government. We are prepared to give hard-working people on low wages as much money as they can in their pockets, so that they are able to buy as much as they can.
I am very interested in the hon. Gentleman’s comments on the Conservative-led Government, but this is a coalition Government. The policy on hard-working people keeping more of their money actually comes from the front page of the Liberal Democrat manifesto. He is most welcome to praise it and it is an excellent policy.
I thank the hon. Lady for her intervention. It is indeed a Liberal Democrat policy, but it is also a Conservative policy. If we look at the make-up of the Government Benches, there are some 307 Conservative MPs compared with 50-whatever it is of Liberal Democrats, so I think the Conservatives can take a fair share of the credit for bringing the policy forward. As I said, the rise in personal allowances to £10,500 in 2015-16 is very good news, because it will take more and more people out of tax.
Taking a penny off the price of a pint of beer is great. The Otter brewery and the Branscombe Vale brewery are in my constituency. Of course, we also have Aston Manor brewery, which creates wonderful cider. While I am very happy that the Chancellor has taken a penny off beer and has frozen cider duty, I hope—being a good west country man—that cider will get its fair share in the form of a duty reduction at some point in the future.
There is no doubt that the council tax freeze that the Government have delivered, through both Conservative-led Devon county council and Mid Devon district council, has helped people greatly with their living costs, and I think that we, as a Government, should be commended for it. We in Devon welcome the help for social enterprise, because Devon has one of the highest densities of social enterprise in the country, and we welcome the help with fuel duty for the air ambulance service, because Devon has a very successful air ambulance.
The doubling of the business investment allowance to £500,000 is great news for the economy, because businesses do not get any relief unless they invest the money. If we want to see investment in the private sector, it is absolutely right for the allowance to be raised. The help for energy-intensive companies is also absolutely right, because of the rise in energy prices.
For all those reasons, I very much welcome the Budget.
It is a pleasure to follow Neil Parish, although I wish he had said more about youth unemployment. A golden thread ran through the speeches of many Opposition Members, most notably my hon. Friends the Members for Coventry South (Mr Cunningham), for Liverpool, West Derby (Stephen Twigg), for Telford (David Wright), for Wigan (Lisa Nandy), and for Livingston (Graeme Morrice). Their speeches focused on youth unemployment, which is clearly an issue that matters greatly to Opposition Members. It certainly matters greatly to me, because in my area, the north-east, it has never been dealt with properly since the election. Although we are seeing some very slight decreases, youth unemployment in my constituency is still double the national average, and Darlington actually does quite well in comparison with the rest of the north-east.
Youth unemployment and low pay are the two biggest challenges that face us, and they are two issues about which the Budget said very little. The average wage in Darlington is £440, and youth unemployment is now at 9.6%. That is not acceptable to us, and, to its credit, private sector companies in Darlington were not prepared to accept it either. They were concerned about the end of the future jobs fund, and decided to take matters into their own hands. I pay tribute to Sherwoods, my local Vauxhall car dealer, to The Northern Echo, to my local council and to the local voluntary sector. They got together and decided to do something, because they knew that they would not get much joy if they waited for the Government to take a lead. They then formed the Foundation for Jobs, a local initiative. Let me say at this point that I agree wholeheartedly with my hon. Friend the Member for Liverpool, West Derby that successful initiatives to address youth unemployment are best delivered through local government.
We launched the Foundation for Jobs in April 2012, so it has been going for nearly two years. We have worked with more than 2,700 young people, and have secured 250 new apprenticeships through the foundation. More than 2,000 school-age kids are building closer links with industry, 230 young people are taking part in internships or eight-week work experience placements, and 66 young people have developed their entrepreneurial skills. The foundation is based locally, and has received no funding; it depends entirely on good will. Government Members challenged the shadow Secretary of State for Work and Pensions, my hon. Friend Rachel Reeves, on Labour’s jobs guarantee, suggesting that private sector firms would not be interested in taking part. I can tell them that they were completely wrong. More than 150 businesses in my constituency alone have grabbed the opportunity presented by the Foundation for Jobs with both hands, and they would welcome the opportunity to do more. To suggest that small businesses are not interested, do not have the time or are under too much pressure makes them sound a lot less far-sighted than they are.
All that businesses get in return for participating in the initiative, apart from the satisfaction of knowing they are giving a young person a chance, is a little promotion in my local paper, The Northern Echo, which has taken an extraordinary lead. In the absence of a sensible Government scheme, Members across the House will have to take matters into their own hands, and I think local businesses are up for the challenge.
The foundation makes the link between young people and growing industries, which know they need a trained work force. They are looking at the provision available and the skills young people have, and they are looking at the challenges facing young people—who in my constituency are increasingly unwilling to take on the debt they would have if they went into further education—and they are trying to dispel myths about careers such as engineering.
This has been a lot of fun. We have done events with over 100 secondary school youngsters at a time, trying to get them to see the real face of modern engineering. We have performed computer-aided design tasks and we have made basic electric car batteries, wired wind turbines and designed a wind farm. We have built suspension bridges with over 200 young people. It has been quite an education for everybody, and one thing that stands out for me is the absence of advice and guidance for young people now that, thanks to a decision made by the Government a couple of years ago, they are no longer entitled to any face-to-face information, advice and guidance before they leave school, which is disgraceful. If we are to have any hope whatsoever of improving social mobility, particularly in the north-east, we have to improve the offer to young people in terms of advice and guidance.
Labour has made a sensible suggestion in the form of the jobs guarantee, and I am convinced the private and voluntary sectors and the larger public sector employers in the north-east would be very keen to get involved in it. The jobs guarantee would last for the whole of the Parliament for 18 to 24-year-olds who have been out of work for over a year, and twice as many of those young people are out of work now than there were in 2010. If that was my track record, I would be ashamed, and I really do not understand why the Government are not.
Young people will be able to work for 25 hours a week on the minimum wage, the employer must provide training—I think they will be only too willing to do so—and this would rightly be funded by a tax on bankers’ bonuses and on the pensions of people earning over £150,000 a year. I know my constituents support this and local businesses are crying out to be involved, and if the Government had any humility they would be taking on this idea and getting on with it now, rather than our having to wait for a Labour Government.
Budgets aren’t what they used to be. It used to be that there were no surprises in Budgets because the measures were trailed in the media; that is what we got used to under the last Government. Yet one of the most far-reaching and long-term changes came as a surprise in the Budget statement, and I commend the Chancellor for that.
Budgets aren’t what they used to be because they used to be met by a vociferous and articulate Opposition pulling the Budget to pieces and expressing their hostility to measure after measure after measure. That has been replaced by a deathly silence on the Opposition Benches, and here we are with two hours to go still wondering whether the Opposition will decide to oppose anything in the Budget whatsoever. I do not know whether the shadow Chief Secretary to the Treasury has yet worked out with his colleagues whether they are going to be more ambitious and more left wing in their response, or whether they are going to go along with what the Government have provided.
That is a fair comment, but we would hope for critical thought—a thoughtful Opposition going through the Budget and finding good reasons to oppose what is in it. Again, however, we heard nothing from the Opposition. It is all very well trotting the shadow Chief Secretary into the media studios to claim—despite the fact that growth is up, unemployment is down and inflation is down—that everything is going badly, like a latter-day Chemical Ali, but the truth is the Opposition have no coherent response to what will prove to be one of the strongest foundations for long-term stability in our economy.
That foundation is based on the sensible principle that people know best how to spend the money they have earned. This Government recognise that and, more importantly, in this Budget we recognise that people understand that when they have spent a lifetime saving money from their earnings, they are in the best position to decide how best to spend it. They do not want to be artificially constrained by someone else telling them how best way enjoy their retirement. This Budget delivers that freedom to them and should be applauded. It comes after years of socialist trickle-down, taking money from working people to put into Labour’s big bureaucratic plans—out of touch with the realities of people—to find out whether their Highgate polices are somehow going to deliver from the socialist graveyards in Highgate to the people of Bedford and Kempston. We have dismissed all that top-down, trickle-down, socialist rhetoric, in order to give people back the money they earned. This is a Budget for working people, and I am proud to support it.
The Budget also shows that the Government recognise that as we were so highly leveraged—with so much debt—in 2010, it will take a long time to recover. A few years ago, I would have urged the Chancellor to go further and cut expenditure more, but he chose a middle path on reducing public expenditure. We have made progress in bringing the deficit down, and sometimes we are now joined by people who said a few years ago that we were going too far, too fast. The Chancellor has found a middle way with that.
The Opposition’s level of coherence on this Budget is most starkly demonstrated by their position on the benefit cap. May I say to the shadow Chief Secretary—if he has the time—that I understand from the speech of Rachel Reeves that the Opposition are going to support the benefit cap? Page 88 of the Red Book contains a helpful listing of the benefits that will be included in the benefit cap, which include housing benefit, other than housing benefit passported from jobseeker’s allowance. I presume that that includes the spare room subsidy. So my question to the shadow Chief Secretary, who, let us face it, ought to have some economic competence, is: if the spare room subsidy is included as a benefit, how can he keep referring to it as a tax? Does he understand the difference between a tax and a benefit? If he does not, and if he is going to vote on this, will he stop—[Interruption.] He is saying from a sedentary position that it is not just him, but he is charged with coming up with economic policies. One core feature of economic policy is understanding the difference between a benefit and a tax.
I just want to make sure that the hon. Gentleman is clear about this. The reference is to housing benefit but not JSA, but most working people who get housing benefit do so as a result of their being on JSA, which does not fall under the cap. Most people on housing benefit in their old age might fall under the cap, but they are not subject to the spare room subsidy—the bedroom tax.
I am grateful for that clarification. I hope the hon. Lady also understands that when people turn an important issue such as the spare room subsidy into political slogans it makes it much harder to engage on where the policy perhaps is being applied too aggressively or not aggressively enough. I have found that a tremendous barrier to engaging with people about how we can make sure the Government are getting that policy right. I hope we can use language in a way that people can understand.
Youth unemployment has been mentioned by many Opposition Members, including Jenny Chapman. I agree that youth unemployment should be a priority not just for Government but for each of us as Members of Parliament. That is why I am so proud of Members on the Government Benches, and some on the Opposition Benches, who have proactively gone out and encouraged local employers to give young people a start in their careers—whether it is in an apprenticeship, part-time work or work experience. We should not always look to Government to achieve changes in youth unemployment, particularly now with the national insurance changes that are coming in. There has never been a better time than today to get a young person into work.
It is important that we thank the Government for sticking with their long-term economic plan, for finding a course in the division of pain so that all people, regardless of their background, contribute and that those who have the broadest shoulders make the largest contribution of all. Most importantly, I encourage Ministers to recognise that the task is only half done and that many difficult decisions remain ahead. Will they maintain the same steadfastness of approach in the future as they have shown in the past?
I thank you, Madam Deputy Speaker, for calling me to speak in the Budget debate. This Budget was announced at a significant time in this Parliament, coming as it did in a year when, under the usual political time scale, we would all be facing an imminent general election. Indeed it is hard to imagine that originally it was the Government’s intent to use the new five-year Parliament to eradicate the deficit in just four years, leaving scope to offer significant tax cuts in the year ahead. Cleary, that is not where we are today.
Looking at the principal economic objectives the Chancellor set for this Parliament, it is unfortunate that he has not met any of them. Not only is the deficit still extremely large, but we are also still well below the pre-crisis peak, which is not acknowledged by those on the Government Benches. We have not seen a significant rebalancing of the economy, either sectorally or geographically, or a significant boost to exports as we become a more productive, goods-based economy.
To be fair to the Chancellor, I wonder how many of us who make speeches from the Back Benches re-read our own contributions from previous Budget debates before speaking. Certainly, there are a few Government Members who are welcoming levels of debt and deficit today that are much worse than those they opposed four years ago when the Darling plan was before us, but perhaps that is the nature of politics.
One thing that has stayed constant for me in every year that we have had a Budget debate is the sense of permanent inadequacy from the Government that they really have a plan to ensure the UK’s future prosperity in the post-financial crisis era. The 2008 financial crisis was the most profound economic crisis we have had in this country for decades. It was also the biggest political and moral crisis that we have faced, and I do not get any sense from the Government that they aspire to build anything different from what went so badly wrong last time around.
We remain an economy too dependent on the south-east and the housing market and too complacent about where our growth comes from and the quality, not just the quantity, of the work that that creates. In many families, wages no longer keep pace with inflation, and living standards are declining as a result. Very few people in my constituency are genuinely feeling any sort of economic recovery at all. It does not have to be that way. The UK has a serious chance of becoming the largest economy in Europe during the life time of most of us in the Chamber today, which is largely as a result of some of the quite contentious decisions—particularly those on immigration— made by the previous Government. That chance to ensure that we secure and expand our future prosperity is what I wish to talk about today. I have four key points.
First, we must be enthusiastic about Britain being a country that is open and outward facing to the world. That means recognising the benefits that immigration can bring. I strongly support what has been said on the Opposition Benches about preventing abuses and exploitation in immigration because that is how we will win back public support. We should not shoot ourselves in the foot, as the Government have done by including foreign students in the net migration target. Foreign students bring in £8 billion a year to the UK, and that is just in the benefits we can count, and it is madness to dissuade them from coming here. It also means something far more difficult for this Government, which is ensuring that we stay as full and active members of the European Union. There are many specific reasons to stay in the EU. I visited Nissan in Sunderland a few weeks ago, and found it to be an incredible place. I grew up in Sunderland in the 1980s, at a time of large-scale industrial upheaval, with the shipyards and the mines going, and it was fantastic to see such brilliant industrial success back in Sunderland. Amazingly, workers make almost as many cars in that one factory in Sunderland as French workers do in six Renault factories and the factory offers thousands of well-paid skilled jobs.
There are no ifs and no buts about it: those jobs are dependent on our membership of the European Union and we would be crazy to throw that away. More profoundly, if we were ever to leave the EU it would undoubtedly be read by the rest of the world as a sign that we were withdrawing into isolation, regardless of any protestations that might be made. We could simply never afford to do that. Of course, there is much we need to do to reform Europe, but we must be clear that we are in the EU for good and reap the investment and prosperity that will go with that.
Secondly, we must unleash more of the talent we have in this country. One of the figures the Government cite most regularly is the number of apprenticeships that have been created since 2010. That has largely been done by rebadging workplace training schemes such as Train to Gain as apprenticeships, which I do not think is too bad as a policy, but there is a question of quality versus quantity in what is being offered. Any workplace training is a good thing, but we need to protect the brand of apprenticeships as a route into a career and not just as in-job training if we are to succeed. As one of the co-chairs of the all-party group on manufacturing, I am repeatedly told how outdated perceptions of manufacturing and engineering are still big barriers to getting young people involved and we need to acknowledge that. An apprenticeship should give someone a career and a status that is widely understood. That is why I favour the idea of a national baccalaureate for everyone leaving secondary education, with core subjects in maths and English but the possibility of specialisation in technical skills if people want that.
In addition, we need to get serious about devolving economic power to cities and regions. For the first few years of this Parliament, in a large part of the north we had rising unemployment and a rising skills shortage. Local enterprise partnerships, outside my own in Greater Manchester, leave me a little unconvinced but there must be something now that the regional development agencies have gone. The first Chancellor to understand the benefits of devolving resources and decision making will reap huge benefits.
In Greater Manchester we currently spend £21 billion a year and raise £17 billion in taxes. If we had more of a say over spending that £21 billion, we could easily turn the deficit into a surplus, but the Government’s rhetoric on localism has so far proved hollow. “More Heseltine, less Pickles,” should be their motto.
It would be wrong to think that the national Government do not have a role, but they should just do what they do best. To get our economy right, we need many institutions and real industrial strategies, not just side projects for BIS that do not have wider Government support. Renewable energy, for instance, particularly wind power, is a crucial part of the UK’s future and we have all welcomed the decision made by Siemens today. However, although DECC and BIS champion it, DCLG holds up every onshore wind power application it can get in the way of. It is pathetic.
We need consensus on and a step change in investment and the Armitt review and independent infrastructure commission seem to me to be the best way to achieve that.
Finally, we need to orientate our economy to the challenges of the future. I have very little interest in who the Prime Minister picks for his Cabinet, but I would simply say that we will not win the global race with people who have not yet got round to accepting that climate change exists.
The Government, by their own admission, have not met any of their aspirations for this Parliament. They have created a weaker, more insecure and more divided nation than the one they inherited. In some areas, such as through their flirtation with the Eurosceptic right’s desire to leave the EU, they have threatened to undermine some of the building blocks of British prosperity. Throughout this Parliament, the Government have failed to deliver and the chance to do that will, I hope, now fall to a different Government.
It is a pleasure to follow Jonathan Reynolds. He will not be surprised to hear that I disagree with almost every point he made, but he did at least try to present his argument in a reasoned way, which is more than some of his colleagues did.
I welcome three things above all in the Budget. First, there are the measures to strengthen British competitiveness, creating more jobs and boosting exports, and particularly cutting national insurance for under-21s and increasing the business investment allowance and financial support for exporters. These are things that are important for jobs, a sustainable recovery and dealing with the productivity puzzle that still afflicts the British economy. Let us not forget that growth is what produces the revenue to pay for our precious public services.
The second thing that I welcome is the great honesty from the Chancellor about the need to go further in tightening our grip on our debts. Further cuts in Whitehall spending will be necessary, as has been said, as will a long-term limit on welfare spending. These are critical. The idea that the spending restraint we have been under is now at an end is not credible or financially sustainable. We will have to keep on making difficult decisions, and I welcome the Chancellor’s honesty.
We talk a lot about Government debt but not so much about household debt. Household debt has in fact come down by £187 billion since 2009 when it was at its peak under the previous Government, and that is important because if interest rates go up, which they will at some point, small businesses with tight loans and mortgages will need to be vigilant to make sure that they can cope. It is important that we get household debt down. The further measures in the Budget on savings were welcome as well.
Thirdly, we have provided support for working families with the cost of living, in particular the tax break for child care up to £2,000 per child. We know that for low or middle-income families across the country the cost of child care is incredibly important. We inherited the second highest child care cost in the OECD from the previous Government, and it is right that the Government take measures to ease that burden.
For those three reasons, the Budget has been widely endorsed by small businesses through the Federation of Small Businesses and the British Chamber of Commerce as well as by bigger businesses through the Institute of Directors, but also by consumer groups such as Which? and Saga. The Budget helped build on the economic record of the coalition, bearing in mind the horrendous deficit and debt that we inherited from the previous Government. We have the fastest growth in the G7, and 1.7 million private jobs have been created under the coalition. Let us remember that in less than four years that is double the rate of private sector jobs growth that Labour achieved in a decade, so it is a huge comparative achievement.
We have done all this fairly. How many times have we heard from Opposition Members that this was a Budget for millionaires and the lowest paid have suffered? Let us be clear about the facts from HMRC. This financial year, someone earning £10,000 to £15,000 is paying 47% less income tax than in the last tax year under Labour. A millionaire is paying 14% more tax. Opposition Members have gone on and on about tax fairness; in fact, it is this Government who are delivering.
Equally, on the current statistics, child poverty, elderly poverty and fuel poverty are all lower than under Labour. Those are the facts, independently verified by all government and other providers of those statistics. Tough decisions have had to be made, but they have been made in a fair way.
We have heard a lot about the cost of living, but the best way to help anyone out of the rut that we know exists is to create more jobs, and unemployment is down from 8% to 7.2%. Youth unemployment is down by 17,000 from the level that was left by the previous Government. I agree with impatient Members on both sides of the House that we have to do more for young people, but it is about job creation, and that will happen only with the dynamism of the private sector.
We have taken 2.4 million of the lowest paid out of tax. We are supporting working families, not just with child care tax breaks but with measures on fuel duty, the council tax and affordable homes. No one would like to see more done to build affordable homes than I would, but we have to look at the facts. The average rate of affordable home building over the 13 years of the previous Government was 31,000 per year, compared with 48,000 per year under this Government. We are doing 50% better than the previous Government. Those are the facts. For all the talk about the spare room subsidy and the problems of supply, we have built more homes on average in the tough times than the Labour Government did when the money was flowing easily and without restraint.
This has been a transformational Budget for savers, and that is absolutely critical. Auto-enrolment into pensions, the abolition of the 10p rate for low-income savers, the pensioner bond, the flexible pension limits and the increase in the ISA limit to £15,000 are incredibly important. Private saving is important so that people can cater for themselves into old age but also for our long-term competitiveness. Our low rate of private saving is one of the things that the World Economic Forum rankings have picked up. The measures introduced in this Budget are critical to correcting that. Opposition Members have ridiculed the increase in the ISA limit to £15,000 as if no one could afford it. I have to tell them that basic rate tax payers are a majority of those currently investing in ISAs, and it shows the contempt that the Labour party has for aspirational Britain that it mocks the increase in the ISA limit. Many people on low and middle incomes will want to take advantage of it.
This is a good Budget for business, for working families and for savers, and I commend the Treasury team.
It was a great Conservative Prime Minister, Harold Macmillan, who once said that it would be “quite intolerable” for a modern economy and a compassionate society not to have at their heart social security and a welfare state. Quintessentially a one-nation Conservative, he was right. Sadly, the modern Conservative party is very different. We have a Chancellor who seeks to divide our nation between shirkers and strivers—now doers—and is often engaged in a grotesque demonisation of anyone on benefits in a system that can be cruel in its application and is not fit for purpose.
It is cruel in application on the one hand, as can be seen in the case of Bobby Busby in my constituency. His legs and pelvis were crushed in his youth, and he was on sticks, but he was passed fit for work, and his benefits were cut off. He fell into despair and could not stop crying. He went looking for his father, even though his father had died many years earlier. He retreated to his home and died of a heart attack. The benefits system is not fit for purpose on the other hand, as in the case of one Erdington family. Fiona was diagnosed with cancer of the spine last October, and applied for personal independence payment in November. Only now, four months later and as a consequence of my intervention, will she get a home assessment carried out by Capita. That is one of many cases that demonstrate a shambolic system.
I come from an upstanding working-class background where people believe that if you can work, you should work. It is also absolutely right that we should seek to reduce the benefits bill, but it is how we do it and what kind of society we want to live in that matters. Ours is therefore a very different approach. It involves building homes, because it is crazy that we spend 95p in every £1 that goes into homes as subsidy as opposed to bricks and mortar. The housing benefit bill is rising to £25 billion because of the biggest housing crisis in a generation and soaring rents. That is why Labour would build 200,000 badly needed homes a year to buy and rent.
Labour would get young people into work, paid for by the bankers’ bonus tax. One in four in my constituency is out of work. We must connect the two things, because I want to see many more young apprentices, such as those I saw at Carillion and Willmott Dixon: young men and women building the homes needed for the future. We would introduce free child care for three and four-year-olds so that families can balance work and home; and we would tackle in-work poverty, as we are seeking to do in Birmingham, by driving the agenda for the living wage. We want to see dignity at work, and more time for people to spend with their family, because they do not have to spend every hour of the day and night at work. That is better for employers and, crucially, it brings down the benefits bill.
Ours is a progressive approach that builds a stronger economy in a better society, tackling the price of failure. Ours is an approach that builds a sustainable recovery and one that works for working people. The Government boast of recovery—any progress is welcome, but this is the slowest recovery in 100 years. The Government are borrowing £190 billion more than they planned; there have been 24 tax increases; and working people are £1,600 a year worse off. A building worker I recently met in Kingstanding has had his wages cut by £80 over the past three years. It is little wonder therefore that when I was at the school gates at St Barnabas last Friday, a working mum came up to me and said, “I heard all week about recovery. Jack, what planet do they live on?”
It is not just falling wages; it is also growing insecurity in the world of work. The Bannions in my constituency are an excellent family with a disabled son. The dad has been made redundant three times in the past three years—each new job was on lower pay and was more insecure—and sadly, there are millions like him who live in a twilight world of zero-hours contracts and agency work.
In conclusion, this is a Government who are simply out of touch, and the Tory chairman’s patronising poster said it all. I used to play bingo when I was a young man. I drank too much beer and my waistline suffered as a consequence. We have excellent bingo halls and pubs throughout Erdington, but beer and bingo are not the summit of working people’s ambitions.
Erdington has the 14th highest unemployment level of any constituency in the United Kingdom. It is a constituency of high need, with pockets of severe deprivation, but it is rich in talent. There is Angela Maher, the mother of two disabled kids, who sings in a local choir; Linda Hines, who has built 200 homes in Witton Lodge; and Maurice Weston, a former industrial worker, now a volunteer at Slade school who has written an excellent history of Slade school. There are working-class scientists and working-class engineers from Erdington working in Jaguar Land Rover. There is an airline pilot and outstanding artists such as Jim Allmark and a collective of artists with whom he works. There is our very own Billy Elliot, Amanda Cutler, the chair of the Castle Vale pool user group. She is a mum of two, living on the Vale, who danced with the Royal Ballet in “Swan Lake”.
This is a Government who are out of touch, oblivious to the consequences of their actions, divorced from the reality of ordinary people’s lives and who simply do not get it. We want to see a stronger, fairer, better economy that works for all, but that will not happen under this Government. That great task will fall to the next Labour Government.
It is a pleasure to follow Jack Dromey. I thank him for his valiant attempt to explain his party’s economic policy using real-life examples, but he has to admit that it is a very confused policy. A bit like a chameleon that has fallen into a bag of Smarties, it is changing almost by the day, by the hour. On the Government side of the House, we are waiting to find out what his party will vote for or against in this Budget, with about two hours to go before the vote.
However, the hon. Gentleman identified a really important point, which I would like to come back to. He spoke about the diverse nature of our individual constituencies—Birmingham, Erdington and mine of Daventry. Maybe, just maybe—this follows points made in speeches from Opposition Members—we are all missing a trick in trying to tackle some of the long-term unemployment problems our country faces.
However, I start by saying that this is a very good Budget. A record number of people are now in work. The pace of net job creation under this Government has been three times faster than in any other recovery on record. Unemployment figures for March show a 20% fall in the claimant count in just one year and the fastest fall in the youth claimant count since 1997. That is something we should all be able to welcome. The Office for Budget Responsibility forecast 1.5 million more jobs over the next five years. Again, that is something we can all welcome. There are a record number of women are in work, and for the first time in 35 years we have a higher employment rate than the United States of America.
There are good measures in the Budget for our exporters and good financial support to put them on an even keel with their international competitors. We are lifting people out of paying tax—3 million by 2015. So many of them will be better off by £800 each year because of the changes in the tax system. There are 450,000 fewer workless households, which is surely something to celebrate. It might not be enough, but it is something to be pleased about.
We have a fantastic new policy for pensions. We have introduced the workplace pension, the single-tier pension and now the change in policy for annuities will allow people to help shape their futures as they choose, with their own money. Three quarters of a million more people are in full-time work—that is something to celebrate—and 300,000 more people are in part-time work.
I hope that Opposition Members will stop their attack on part-time work, because it is important for all sorts of sectors in the economy, and indeed all types of people, whether students in the summer or mothers returning to work after having children. Part-time work is fundamentally important in helping to drive our economy.
Like the hon. Member for Birmingham, Erdington, I am unsure about zero-hours contracts, having heard good and bad stories about them. However, I remind him that he was the head of a trade union that pushed for a European measure that led to less flexibility in our work force here in the United Kingdom. Indeed, a Labour Secretary of State went to the European Parliament to plead for the United Kingdom to be allowed more flexibility. I suggest that the lack of flexibility in our employment market might have led businesses to look around for something that would allow greater flexibility, and that seems to be zero-hours contracts.
Then I plead guilty. I was one of those involved in those discussions, and absolutely rightly so. If there are two people doing the same job alongside each another, one who is an agency worker and one who is directly employed, it is absolutely right that they should be paid at the same rate. To fail to do that divides work forces and, as we have seen in some areas of economy, damages social cohesion.
I thank the hon. Gentleman for that point. He and I have a difference of opinion on the matter, which I would happily talk to him about over one of those beers he used to have too many of. The point I was trying to make is that the lack of flexibility in our employment market might have led employers to try various tactics to reintroduce flexibility by a different route.
Like the hon. Gentleman, I have been talking to my constituents about the Budget over the past few days. Unlike him—I might be wrong about this—I go to a gym, which is a privilege. My doctor told me I should go. In fact, he says that I have the lower limbs of a runner—“athlete’s foot”, as he puts it colloquially. I was talking to a personal trainer at the gym who recognised the importance of lifting the tax threshold and how much it would mean to him. I also met a man there who has three jobs: he is a pest control expert, he sells logs and he is a gritter for my local authority. He recognised the importance of the change in the tax threshold and welcomes any changes that bring about a healthy welfare cap. I also met a neighbour of mine there who is very pleased with the pension changes because they will allow him to plan for his retirement flexibly, and hopefully spend his own money which he has already earned and paid tax on.
The Government have delivered some good thing for my constituency, such as the university technical college and massive investment in the further education sector, which will help with long-term youth unemployment in future. There has been massive investment in the town of Daventry, helped by the council, and massive investment coming into the Daventry international rail freight terminal, where new businesses and logistics are settling. That means that my constituency is remarkably different from Birmingham, Erdington. There are only 1,000 JSA claimants in my constituency—it is still too many—which is down by 30% from last year. That is a claimant rate of 2.1%. For 18 to 24-year-olds, the rate has fallen by almost 30%. The number of people claiming for more than 12 months has also fallen by over 30%.
As the hon. Members for Birmingham, Erdington and for Liverpool, West Derby (Stephen Twigg) and, to a certain extent, Lisa Nandy said, we all have completely different constituencies. Perhaps the one-size-fits-all nature of Government delivery in trying to get people out of long-term unemployment simply will not work. We need a much more flexible solution.
Unlike some Opposition Members, I am quite pleased with the developments in the Work programme. It is a very big programme that has had more than its fair share of teething troubles, but up to December 2013 A4e, one of the two providers in my constituency, has achieved over 100 positive job outcomes in Daventry, which in the majority of cases means someone being supported into a job lasting over six months. On Friday, I went to A4e’s offices and met some of the people who work there helping to get people in my constituency back to work. I met Jodie, Hollie and lots of A4e staff giving their all to try to remedy this problem that we have in all our constituencies. I say to Labour Members that the one-size-fits-all approach does not work all the time. We need flexible solutions, and sometimes private providers are just as good as the public sector in achieving that.
Listening to the Chancellor, I could not help but conclude that my constituents simply do not inhabit his world. Indeed, very few people share his world, and therein lies the problem. For example, unemployment in my constituency has risen dramatically. Ten years ago, the figure was 1,500 in total, and that included youth unemployment. Under this Government, it peaked at 3,341, so it more than doubled under the coalition. It is now almost 2,600, but that is well above any acceptable level, especially when it includes over 700 young people without a job.
This is a Chancellor for the wealthy, and, apart from a few gimmicks, this was a Budget for the wealthy. That is what brings me into conflict with him. I acknowledge that the economy of Britain as a nation is far more complex than that of each household. Furthermore, I accept that there will be a disparity in household budgets depending on income and expenditure. However, each household has basic needs that must be fulfilled. My assertion is that the Chancellor is out of touch with hard-working people. He does not get what is obvious to everyone: that families are struggling, especially in my constituency.
We have what I can best describe as a cost of living crisis. Wages are down by £1,600 a year. To many households throughout Britain, that amount of money could be the difference between living in poverty and living reasonably comfortably. I know that the Chancellor does not get it—after all, how could he, when we know that the Bullingdon club uniform costs about £3,500? What is even more a matter for despair is the confirmation by the Office for Budget Responsibility that people will be worse off in 2015 than they were in 2010. We have had the slowest recovery for 100 years, with the Government forecast to borrow over £190 billion more than planned. Ordinary, decent hard-working people are doing all the heavy lifting as regards who is actually bearing the brunt of the austerity measures introduced by this Government.
Businesses in my constituency constantly complain to me that banks have withdrawn their overdraft facility, making it even tougher for them to survive. Bank bonuses are rising again, even though businesses cannot get the financing they need. Just before Christmas, I was most grateful to secure a meeting, with representatives of such a business in my constituency, with the Business Secretary. Although I thank him sincerely, I am puzzled that the Department for Business, Innovation and Skills and the Department for International Development are taking so long to respond.
Another business in my constituency, and in several other Members’ constituencies, Verve car showrooms, went bust. The problem was that many consumers who had paid money for cars or signed up with finance agreements still had not received their cars at the point of administration. With the Sunday Mail, we jointly did our best to expose the poor consumer protection in those unique circumstances. I also wrote to the consumer affairs Minister. The owner of the company, for whom I have no brief, claimed that his company had been stitched up by the banks. Had he been a constituent of mine, I would most certainly have called for an inquiry into the behaviour of the banks.
The Government know full well that energy bills have risen by almost £300 since their election. The most powerful and effective speech on the subject of energy bills was delivered not during the Budget statement, but by my right hon. Friend the Leader of the Opposition during the party conference season. Central to his theme was a freeze on energy bills until 2017 and reform of a broken energy market, which would give consumers a welcome break from huge increases. I have always argued that, in effect, a cartel is operating in the energy market. The energy companies were terrified by the resonance of and public support for that policy. By contrast, the Government appeared incapable and unwilling to stand up for consumers.
This is one subject that unites the entire country. Everyone knows that the energy companies are ripping off households. If I may say so, I was making that point under the previous Government—my assertion is not new, but the Budget is a missed opportunity. My right hon. Friend the Leader of the Opposition set out a coherent strategic plan to introduce transparency and fairness for consumers. Cabinet Ministers sought to undermine that excellent solution to the problem.
That proved conclusively to me, yet again, that this is a Cabinet of millionaires running the Government in favour of the wealthy. [Interruption.] I speak for my constituents. Such selfishness and unfairness will ultimately lead to this Government’s downfall. Until then, I shall continue to expose the less than even-handed treatment dished out to the vast bulk of households—those on medium and modest incomes—while this Government favour the wealthy. This is a Government for the few and what we need is a Government for the many.
Thank you, Madam Deputy Speaker, for calling me to speak in this debate. I am delighted to be able to contribute to a debate on what I consider to be a historic and era-defining Budget. In my view, this is a first-in-a-generation Budget that empowers the people. It is about putting people first and back in control of their savings, spending and pensions. That has been made possible not only because of the hard and tough decisions this Government have had to make—we all recognise and acknowledge that—but because, importantly, there is a long-term economic plan that will safeguard and secure the future of Britain’s hard-working families.
Judging by what I have heard from Opposition Members this afternoon, they spend a lot of time talking down Britain, our economy and British industries and companies. To be frank, why would a business want to invest in some of their constituencies, let alone think about long-term investment in this country, given some of their negative and hostile remarks about business?
As the economy grows, employment is reaching record levels, for which Opposition Members should be grateful. The country now has record numbers in terms of employment growth and, importantly, new business growth. It is businesses that pay the taxes in this country—they employ people, and the money, jobs and prosperity that are created contribute to taxes, which pay for the welfare budgets that Opposition Members have been speaking about.
This is a Budget that rewards hard work, cuts taxes for those on lower incomes, empowers people to go out to work and gives families greater choice over how they spend their money—their savings and their pensions. What is so wrong about that? I find the hostility of Labour Members overwhelming; I really do.
My constituents will benefit from the increase in the personal allowance, which I assume the Labour party does not support, and fuel duty will be 20p lower under this Government than it would have been had Labour’s plans been implemented. We are helping people to keep more of what they earn, in contrast to Labour.
The Leader of the Opposition talks about a temporary and unworkable freeze in energy prices, but it is this Government and Conservatives who are cutting energy bills for families and businesses by removing and reforming the costly green levies that Edward Miliband advocated when he was Energy Secretary—he championed them. The investment that the Government are supporting to develop new technologies, such as carbon capture and storage and the exploration of shale gas, is very important. Opposition Members have overlooked that. Those technologies will bring energy security to this country and create jobs. It should not be lost on the Chamber that they will help to reduce our dependence on energy imports from regimes such as Russia. That point is particularly salient right now.
It is the Conservatives that are giving people genuine help with their living costs by cutting taxes, including council tax, and using tax incentives to encourage investment, rather than by following the policies of the Labour party, which would tax with one hand and give less back with the other.
We have heard about the importance of work in this debate. Developing an economy that supports business and business investment is one of the most important ways in which we can get more people into meaningful employment. Under Labour, businesses were penalised by a legacy of high taxes. Labour went into the last general election wanting to increase corporation tax on small firms and national insurance contributions. We have slashed those rates. We are bringing corporation tax down to 20%, making the UK one of the most competitive places in the world for enterprise. That is another point that is lost on Opposition Members.
The Conservatives and the coalition Government know that it is the genius, entrepreneurial spirit and wealth-creating acumen of businesses that create jobs. This afternoon, I met a prominent Essex business, Claridon Group, which is based in south Essex. It made that exact point to me. Such businesses are the wealth creators. They are the ones that have created the jobs and the prosperity in Essex. Claridon Group is exporting to a range of emerging markets, which are difficult to do business with. It praised the Budget, the Government’s approach to exports, and the incentives for companies to go overseas and expand their businesses.
The best way for the Government to help such businesses is to remove the barriers to growth, cut corporation tax and cut red tape so that they can invest in creating new jobs. They want to keep more money in this country. Taxes need to be low so that they can continue to invest and create jobs. I commend not just businesses in the entrepreneurial county of Essex, but businesses across the country that are doing the same things. It is small and medium-sized enterprises in the private sector that are creating the record number of jobs, and they should be supported and commended.
There are plenty of other policies in the Budget that will help businesses to grow and to support employment. The cut in beer duty should not be overlooked, despite the disparaging remarks of Opposition Members, and neither should the abolition of the alcohol duty escalator, which will help to create thousands of new jobs in the sector. There is high demand for British wines and spirits, and the market for them overseas is growing hugely. My constituency contains the West Street vineyard, which is producing award-winning wines that will start to go overseas, and Hayman Distillers.
I want to touch briefly on air passenger duty. The abolition of bands C and D will make Britain more attractive to travellers from east Asia, India and Latin America, which are important markets for communities in this country. That is to be commended.
In conclusion, this is a very sound Budget. It is also a refreshing Budget. It is the first Budget in a generation to send out a powerful message to savers, investors and British businesses. It is a Budget that will help to secure the economic foundations of our country.
There was a lot in the Budget that I would like to talk about this afternoon, including on the issue of welfare, but in the short time that I have, I will concentrate on the pensions announcements. The only thing that leaked out about the Budget was that a rabbit would come out of the hat. I suspect that the rabbit was the announcement about the annuities market.
Everybody has said that annuities need to be reformed. I have said that annuities need to be reformed, my Select Committee has said that annuities need to be reformed, Opposition Front Benchers have said that annuities need to be reformed, the shadow pensions Minister has said constantly that annuities need to be reformed and even the Government have said that annuities need to be reformed. Indeed, the industry itself has said that annuities need to be reformed. The rabbit that came out of the hat was the reform of that important market. However, what the Chancellor said in his Budget went far further than anyone had been calling for or expected—particularly the industry, and also the stock market if its reaction to the announcement is anything to go by.
Why do annuities need reforming? They lack flexibility, and people are often tied in to an inappropriate amount and an inappropriate time and do not shop around. We want a system that is much more flexible, perhaps with an open-market option so that people have different choices available to them when they reach their pension age and the time comes for them to buy an annuity. We must also consider the high costs and charges that have existed, and the fact that people have needed a lot of advice.
As Government Members have emphasised again and again today, we need consumer choice so that people can make the right decision about how they will spend their own money. For some people who still have a high mortgage when they draw down their pension, paying it off might be the most sensible thing to do. Paying off another debt might be the most sensible thing to do. However, the best thing for many people to do is to buy an annuity. Annuities are an excellent principle—someone saves into a pot and then buys something that lasts them to the end of their life. We do not know how long we will live after reaching pension age, so an annuity provides insurance: we know it will not run out before we reach the end of our life. It insures against old age.
All of that is right. However—this is the big but—what if there is no annuity market? What will the many people for whom an annuity is the right choice do then? That is the question that I have for the Government. Did they intend to undermine and destroy the annuity market, or did they hope that a new form of annuity would rise phoenix-like out of the flames of their announcements last week? If the annuity market were to collapse, the choice that they say they want to give consumers will not be there for those for whom an annuity is absolutely the right choice. Do the Government anticipate that the annuity market will be undermined or strengthened?
The Minister of State, Department for Work and Pensions, Steve Webb, has talked a lot recently about his “defined-ambition” pensions—his collective defined contribution schemes. Where does the Budget leave his great defined-ambition scheme? Collective schemes for investing money during the investment period might be possible, but I cannot see how the defined-ambition system can pay out on a collective DC scheme given the proposals in the Budget.
I wonder whether the Government have done any cost-benefit analysis of the increased benefits bill for older pensioners. If people go down a different route from annuities and then run out of money before they reach the end of their life, they will become dependent on more than just the basic state pension. I know that the Government have made great play of the fact that the basic state pension will be high enough to lift people out of means-tested benefit, but that is not true of housing benefit or council tax rebates, so there will be a cost. How much work has been done on that?
Annuities have got a bad name because there have been low interest rates and low returns, but other products have the same problem. Some of them might actually give a worse return than annuities. What guarantee can the Government give that people who buy another product will not get a worse return than if they had chosen an annuity? We know that high charges and costs need to be dealt with.
I wonder whether the Government thought about just rebranding annuities because they have such a bad name. Perhaps they could have called an annuity a pension for life, which might have changed people’s attitude. I wonder whether the Government intend to turn the UK private pension system into a saving system, and if they do, will tax reliefs remain? Was that the Government’s intention, or is it an accidental consequence of last week’s proposals?
I was going to say a great deal about the need for independent advice, because I am not sure that the guidance guarantee comes anywhere near what is required. There are a number of such questions, and I hope that the Government can answer them, because if they cannot, people will not perhaps be as keen about the Government changes as they may at first have appeared.
It is a huge privilege and pleasure to follow my hon. Friend Dame Anne Begg, who speaks with such knowledge, expertise and passion in this most important area.
At a time when there seem to be days for celebrating pretty much everything in this country, I do not think that there will ever be a national Department for Work and Pensions day. That is a bit of a pity, because the areas it covers represent some of the major challenges that any Department faces. For instance, how do we deal with the issue—I prefer to see it as a good thing—of people living longer lives? How do we incentivise work? Critically, how do we empower and enable people whose lives often seem to be blighted from the very start, if not from before they were even born?
I want to start on a note of consensus. Several years ago, the centre-right Centre for Social Justice had a point in relation to some of its arguments in the debate about broken Britain. Some of the arguments went over the top, but it pointed out that bits of our social fabric were not working as well as they could or should have done, and some of the questions it asked then are just as valid today.
How are we helping and enabling people who are battling to make a decent livelihood for themselves and who are often hampered by the system? How is family stability supposed to be enhanced by the burgeoning practice of zero-hours contracts? Most of us would contend that it will not be, and there is also the whole issue of the pension provision or the lack of it for people on those contracts. Can it be right that a family with a severely disabled child—so disabled that they require large medical equipment—should be penalised for essential space in their home? What about the taxes of ordinary people the length and breadth of our country subsidising ever-growing housing benefit payments to buy-to-let landlords? Why have we turned food banks from charitable outlets for emergency use, primarily for rough sleepers and certain immigrant groups who have fallen on hard times, into what they have now become—monuments of a failure to tackle systemic poverty? This Government will still not listen to the Trussell Trust and call an in-depth public inquiry on food poverty in Britain. That is broken Britain Cameron-style.
There can be no serious debate about welfare that does not speak the language of jobs and job opportunities. That is the one issue of greatest concern in my constituency. I welcome the fact that youth unemployment fell in January, although not that it rose again in February. This Government all too often have the approach of a bad post-Christmas dieter: gaining half a stone in weight at Christmas, but back on the scales at the end of January thinking it has been a great triumph in losing 3 lb.
It is a disgrace that the number of young people stuck on jobseeker’s allowance has almost doubled under the current Government. More than 900,000 young people are out of work, at a time when bank bonuses are rising and the wealthiest are given tax cuts. That is why I am proud of my party’s proposal for a jobs guarantee that will give young people real job opportunities. It is right that we as the Labour party—that is what it means by Labour—want to invest in a high-quality scheme such as that, and it is important that we put the emphasis on Labour and make clear that we will not put up with abuses from the minority, because that is not fair on everyone else.
What does that type of programme mean? In Wales we have seen it with the Labour-led Welsh Assembly, and we are seeing the benefits. We have delivered the sharpest reduction anywhere in the UK among NEETs—those not in education, employment or training—with figures falling faster in Wales than anywhere else in the UK. Let it be known that under Jobs Growth Wales, a programme for 16 to 24-year-olds, 80% of those traineeships are in the private sector, and 78% of participants secure work. That compares, I think, with 15% under the UK Government’s Work programme which, as one Government Member said earlier, had teething problems.
Job opportunities for young people matter. I recently saw that very clearly in Chirk in my constituency at what we will always think of as Cadbury’s, although now it goes under the name of Mondelez International. One thing that struck me as I spoke to the apprentices in Chirk is that they were a pretty diverse group of young people. Some had got on well in traditional school settings and some had not, but they were all enthused by their new programme of work and the prospects their new skills offered. That is why tailored apprenticeships in different fields matter, and we need to be passionate about working with different types and sizes of employers in providing them. Absolutely nothing matters more than providing job opportunities for young people, because how can we hope to develop a work ethic where there is no serious work?
I apologise for being absent for part of this debate to attend a delegated legislation Committee, but I have heard the majority of the speeches. It is an honour to follow my hon. Friend Susan Elan Jones, and to hear her witty but correct analysis of the Budget and the things she thinks need to be done.
This Budget holds mixed fortunes for my constituents, but I will first thank the Chancellor for extending the period in which enhanced capital allowances are available in enterprise zones by a further three years. Why? The former world-famous Swan Hunter shipyard, which the previous Tory Government closed 20 years ago, was purchased by our Labour council in 2009. It is now being developed by our Labour mayor, Norma Redfearn, under the name of Swans, as a site for companies in the offshore and renewable supply industries. The new Swans site sits alongside successful companies such as oil and gas fabricators OGN, and award-winning subsea fabricators SMD. It borders Shepherd Offshore, which lies in the neighbouring constituency of Newcastle upon Tyne East. Most importantly, it forms the bulk of our enterprise zone on the north bank of the Tyne. The news announced by the Chancellor gives more commercial leverage to North Tyneside council’s excellent regeneration team, to support businesses that already want to come to the Swans site, and that will create thousands of jobs for local people over the next few years.
But mixed fortunes it is. My researcher in North Tyneside, Eddie Darke, goes to the Innisfree social club in Longbenton every week. He told me about two of his pensioner friends who remarked to him, “There is nowt in the Budget for us, Eddie”. Those gentlemen, I am sure they will not mind me saying, are hardened drinkers, yet they know that with just a penny off a pint, it would involve an awful lot of drinking before they feel any economic benefit, even at club prices.
It has been said many times in this debate that the Budget will benefit the most well off. This is certainly true, as the Chancellor extends his austerity measures well into the future. What comfort is there for thousands of public sector workers who will, in effect, see their living standards cut further, in a mere 1% pay increase, if they get even that? The real cost of living crisis is hurting single people, families, those who are employed, those who are unemployed, and young and old alike. The crisis has not been addressed to any degree, and that will not help people to feel confident about their future fortunes.
I recently carried out a survey across a community in my constituency where households live in a range of accommodation from lovely riverside apartments to local authority sheltered homes. The community is made up of mixed age groups and those in different economic circumstances. I found that since the coalition Government came to power, 67% of those constituents said that they are worse off, with only 6% saying that they are no worse off. Some 54% thought they would be worse off over the next two years, while only 30% thought they would be better off in future. Sadly, 71% are worried about their energy bills and 42% are very concerned about the rising cost of food.
I do not see anything in the Budget that will change those statistics significantly, or help any of my constituents improve their lot in relation to the high cost of living. Why did the Chancellor not freeze energy bills and take up some of the sound proposals from Labour that would see the books balanced in a much fairer way? I am optimistic about jobs being created on the north bank of the River Tyne. We are desperate for those jobs. I am, however, equally pessimistic for my constituents, whether they are working or, through no fault of their own, on benefits. They will not benefit from the Chancellor’s Budget and they will continue to struggle to make ends meet. This is in no way a Budget for them.
Listening to the Chancellor and then turning to the Office for Budget Responsibility’s analysis of the Budget is like being seduced by “Fifty Shades of Grey” only to be brought down to earth by a harsh and unrelenting textbook on morality and sexual ethics. Leaving aside all the election giveaways, the truth is that the underlying economics of the Budget are truly awful.
The economy is still, after four years of austerity, 1.5% smaller than it was in 2008, while the US economy is 5% larger. To put it another way, the UK economy is today 14% smaller than it would have been if growth had continued in the way already being achieved in 2010, when the then Labour Chancellor’s economic stimulus produced 2.4% growth over 12 months up to the third quarter of 2010. As a result of this Chancellor’s about-turn, in favour of fiscal consolidation and austerity, the UK has lost output totalling £210 billion. That is completely gone for ever, down the drain and irrecoverable, and it is equal to one-seventh of Britain’s entire GDP.
Even the deficit reduction, which was supposed to be the aim of the exercise, has worked disastrously. The Chancellor inherited a deficit of £149 billion and pledged to reduce it by £60 billion now and £20 billion next year. In fact, the deficit is projected to be £108 billion this year—nearly double what he promised.
Even more serious is that the Chancellor predicts a strong and lasting recovery, but the OBR believes that this so-called recovery is built on sand. Unemployment and spare capacity have fallen so quickly that the OBR thinks there is very little scope for rapid growth beyond this current year. Hence, it has cut its growth forecast for next year from 2.7% to 2.3%. That is a very ominous forecast. If the economy is still below the output level of 2008 and unemployment is still 2.4 million, the premature petering out of growth will speak volumes. The OBR also says that, given the current policies, Britain will continue to lose export share steadily over the next five years, although it already has the biggest deficit in traded manufactured goods in its history, at £110 billion 7% of GDP—and rising.
The whole honest OBR scenario is grim. The public finances are still terrible, none of the components for sustainable growth is present, the upswing is largely dependent on excessive consumer borrowing and yet another asset-price bubble boom and bust, and the recovery—such as it is—is expected to fade when it has hardly begun. One has to ask, almost unbelievingly, how the Chancellor could have got it so unutterably wrong.
Part of the answer, I think, is that the Chancellor seems to have genuinely believed, at least for the first two years, the dogma of expansionary fiscal contraction. That is the idea that the less a Government spend, the faster the economy will grow, because the public sector will no longer crowd out the private sector, which will then have the space in which to grow. Well, it is all right to believe that if you are a first-year economic student, but to believe it when you have the power to trash the British economy for three years—as the Chancellor has, in fact, done—is quite another thing. The theory is economic illiteracy, and we have suffered that for two to three years.
What prompts the private sector to invest is obviously the prospect of future demand, and hence the prospect of future profits. When the economy is stagnant or contracting, what incentive have private companies to invest at all? That, of course, is precisely why business investment today is completely flat—20% below the pre-crash level—and what does that tell us? What it tells us is that business itself does not actually believe in this recovery either.
But there is another explanation for all this folly, namely that the Chancellor and the Prime Minister are first and foremost ideologues, obsessed with the idea of shrinking the state to the smallest size they can get away with via the privatisation and outsourcing of everything that moves. For them—as opposed to all the people about whom Opposition Members have been talking—austerity was not a painful instrument of reform so much as a heaven-sent gift enabling them to realise their deepest prejudices. That is why, although the policy clearly is not working, the Chancellor is committed to continuing it, and indeed intensifying it, into the next Parliament.
So what should be done? I think it is obvious that what Britain urgently needs is a big and sustained increase in investment, which can only come—at least in the first instance—from the public sector, as the private sector, like the OBR, regards the recovery as far too fragile and risky. At today’s interest rates, the Chancellor could launch, at a cost of only £150 million a year, a major £30 billion drive of investment in manufacturing, public services and job creation which would bring the deficit down much faster, would shrink the dole queues—which are currently costing £19 billion a year—and would be sustainable. He could even finance it at no cost in public borrowing at all—by targeting a tranche of quantitative easing directly at manufacturing rather than the banks, by instructing the publicly owned banks, Royal Bank of Scotland and Lloyds, to prioritise their lending on British industry and not on overseas speculation, or by taxing the super-rich, who have monopolised more than 70% of the income gained since 2008, and, over the same period, increased their wealth by some—
The Budget was trailed as being
“for the makers, the doers and the savers.”
I say “trailed” because this Budget was simply a campaign tour for the Tories, telling us about what their core voters want and what they think ordinary working people want. It hid the truth about those whom it really helped. It certainly did not help the makers or the doers and it failed to get to grips with the serious cost-of-living crisis affecting many people and households across the country.
It was disappointing that the Chancellor came to the House last Wednesday gloating about growth. After three years of flatlining, it is about time, even if it is much slower than predicted and slower than that in the United States of America or Germany. Working people are still getting worse off month by month. Real wages will have fallen by 5.6% by the end of this Parliament, and most people are not feeling this modest growth, but this out-of-touch Government certainly do not get that.
The proposals in the Budget to tackle tax avoidance are welcome, although I doubt whether this Tory-led Government have the political will or courage to stand up to the big businesses. After all, they are funded by these tax-avoiding enterprises and any measures they suggest may not be as big or bold as we would like.
Last year I was involved in highlighting the tax avoidance conducted by what I would have thought was an upstanding British company: Alliance Boots. We need to do something to stop these companies taking our country for granted, and I hope the Chancellor’s proposals will go some way towards doing that.
An excellent briefing paper has been produced by Change to Win and War on Want. They say that Alliance Boots allocated the bulk of its debt to UK entities and that otherwise the UK would have been one of its most profitable jurisdictions. The company’s actions would have been suspect under two proposed models in action four of the briefing. A meaningful earnings-stripping rule would have limited the amount of debt interest the company could deduct, and the attribution of interest across the group on a more equitable basis would have resulted in the company deducting less from its UK taxable income. That is how some of these measures could stop companies such as Alliance Boots, and I hope to see this happening.
These methods could work, but are the Government willing to take on the large private equity-backed companies using sophisticated financial engineering? As I said earlier, I think this Government are either weak or in the pockets of these companies. I would like to be proved wrong and see these measures making a difference. We will have to wait and see.
Action three looks to strengthen controlled foreign company rules and encourage more countries to adopt these rules. This is key when it comes to Alliance Boots. The company is based in Switzerland, which has no CFC rules. It has a subsidiary in the Cayman Islands and if Switzerland had a meaningful CFC regime the Cayman profits could be subject to some taxation in Switzerland, but do we have the credibility to push other countries to implement strong rules, given the limitations of our own regime? We have seen company after company revealed as tax avoiders over the last year or so. They have been getting away with it, and we really do not have a leg to stand on. With such a pro-big business party in power, I am sure other countries will doubt our efforts and it will be difficult to find a genuine solution to this issue. We need to build our own credibility and then work tirelessly to encourage others to do the same.
My party is, I think, planning to vote with the Government on the welfare cap. I want to put on the record now that I will not be joining it. Capping benefits is not the solution to unemployment; it will only serve to bring more people into poverty. Out-of-work benefits account for less than a quarter of welfare spending, meaning that a large group of people are in work and on low pay. As transport and child care costs go up, cuts and freezes will have a bigger impact on those in work. The Government have offered no solution to low pay or zero-hours contracts. They will not accept a living wage and they will not make companies treat their employees fairly, yet they will make it even more difficult for these people through capping spending. I did not come into politics to demonise welfare claimants. I do not want to give welfare to those who do not need it, but only 0.7% of the benefits bill was overpaid due to fraud in 2011-12—that is 70 times less than the amount lost through illegal tax evasion.
I wish to make two final points. First, on the continuous freeze of the council tax, I heard the patronising comments about bingo and a penny off beer, but people want decent public services that are properly funded to make sure that they are warm in their house and their kids are looked after. That is what the ordinary working people want. Secondly, on a more positive note, as chair of the all-party group on scotch whisky and spirits, I am delighted that the coalition Government have decided to freeze the tax on whisky, which is a major driver of the economy, not just in Scotland, but throughout the UK. I thank the coalition Government for that measure.
We have heard from this Government for some time that we are all in this together, but with Budgets such as this one we are not getting out of it all together, as it would seem that the coalition Government are determined to fast-track the wealthiest. I say that because this Budget did nothing to tackle the cost of living crisis, and the Government just do not understand the difficulties ordinary people are facing. Yet in this Budget the Chancellor did create a structural welfare cap—it is the only thing this Budget does on welfare.
Worse still, the Budget does nothing to address the multiple failings of the Department for Work and Pensions. The DWP appears to be a in a total shambolic mess, so it is depressing to note that DWP inefficiency throws large amounts of taxpayers’ money away on failed IT projects. In autumn 2013, it was announced that the DWP had written off £34 million of IT work on the universal credit programme. In addition, a further £140 million of money already spent was under review to determine whether the IT developed had any lasting value. Despite the write-off, the projected IT budget for the universal credit programme was increased by 60%, from £396 million to some £635 million. Early this year, we were given more bad news; the DWP had completed an internal audit of its IT strategy which revealed serious deficiencies in the Department’s technology plans. This Government seem to be focused more on waste than welfare.
Where better to witness the waste of time, effort and money than the Government’s Work programme? It was devised to incentivise prime contract holders to focus extra efforts and resources on those who are hardest to get into the labour market. It would seem that instead of doing that, the prime contract holders have been creaming and parking: focusing on the easiest to place and reducing attention on the hardest to place. The Government’s own assessment of how the Work programme is going, conducted for the DWP by independent experts, suggests that it is still badly under-performing. The Work programme evaluation interim report was signed off ready for publication in September, but has been sat on ever since—I wonder why that is. Could it be that the whole payment-by-results contract structure does not seem to be doing what it was meant to do? So we have no work for the long-term unemployed, and delays to benefits and benefits assessments resulting in people using food banks. Some 73% of the people using food banks are doing so because of benefit delays. The Department for Environment, Food and Rural Affairs report on food poverty has not been made public. I suspect that is because it links food poverty with this Government’s welfare reform.
What can we say about the performance of these reforms? Incapacity benefit is being replaced with the employment and support allowance, with those already claiming IB being reassessed to decide whether they are capable of work or eligible for ESA, and with the assessments being carried out by Atos Healthcare. Like many MPs, I regularly meet sick or disabled people who are not able to work but who have been described as fit to work by Atos or by the DWP. The Minister with responsibility for disabled people, Mike Penning, has described the contract with Atos as a “mess”. Some 600,000 people across the country have appealed against decisions made by the Government to cut their benefits. Of that number, 60% have been successful. Such figures clearly prove that something is wrong with the process.
Atos is now saying that it wants to pull out of the contract early because of the threats being made against its staff. The chaos is costing taxpayers millions of pounds in assessments and tribunals, and it is causing distress and anxiety for thousands of disabled people.
Let us look at how the personal independence payment is shaping up. Atos will continue to carry out assessments on more than 3 million people receiving disability living allowance, soon to become PIP. Some constituents have been waiting months to be dealt with. However, even when Atos proves it is decent in its assessments, the Department for Work and Pensions overrules it, which is scandalous.
Let us look at another reform, the work capability assessment, because there is clearly a pattern forming here. In my constituency of Inverclyde, I have seen first hand the way in which people can be treated. One constituent was diagnosed with brain cancer. His surgeon, GP and even Atos said that he would never work again, but the DWP said that he should work and sanctioned him. It has taken many months to get back his payments. On top of all the worry, his family were faced with financial worry.
Another constituent suffering from cerebral palsy who could not travel for assessment was refused a home visit. Similarly, a constituent who was seriously injured in an accident at work was advised to travel to Glasgow for assessment, but, again, they were unable to travel because they were in so much pain. It gets worse. This constituent then had their benefit stopped because Atos sent the assessment forms to the wrong address. If it cannot get the address right, what chance do my constituents have? Those are just a couple of examples of people I have been dealing with. Clearly, my constituents have not been treated with the fairness and decency that they deserve, and the Budget does nothing to address that.
Last but not least is the bedroom tax. The best I can say is that in Scotland, thanks to a Labour Bill in the Scottish Parliament which was at last supported by the Scottish Nationalist party Government, the bedroom tax will not apply there next year. The bedroom tax is inhuman and should be abolished and Labour will abolish it across the UK.
It is a pleasure to follow my hon. Friend Mr McKenzie.
Much of the post-Budget media coverage has focused on what the Chancellor’s measures mean to the average member of the public, but debates about the average do not translate very well in my constituency. In South Shields, people are more likely than the average to be unemployed, or to be in part-time work or on a zero-hours contract. They are more likely to have a disability or long-term condition and to be living in fuel or food poverty. The reality is that the Chancellor offered next to nothing for those households, and they are the very people his Government’s policies have hit worst of all.
Under the coalition’s cost of living crisis, families in my constituency have seen their incomes fall relative to prices month after month. They are twice as likely to be unemployed as they were five years ago, and those out of work, nearly four in 10, have been unemployed for 12 months or more. If they are lucky enough to have a job, there is a one in four chance it will be part time, and for those on part-time contracts, hours have fallen since 2010. The situation is even worse for the young. The number of 16 to 24-year-olds out of work for 12 months or more has increased more than 10 times under the coalition.
Now that we are finally seeing a return to growth, this Budget should have been an opportunity to help the people who have suffered hugely during the recession. Instead the Chancellor all but ignored them. He said this was a Budget for savers, but that will mean nothing to those whose incomes are so squeezed that they have nothing left at the end of the month to put aside. What little savings some people have are being spent right now to cover the gap between their income and their living costs. That is a growing problem.
The Office for Budget Responsibility reports that the savings ratio will fall by a fifth this year, and the Bank of England’s figures show that families are drawing on their savings at record levels, at a sum of about £900 for each household in the country. The Chancellor tells us that he wants to reward savers, but many people do not have that option. Raising ISA limits to £15,000 does not make my constituents more likely to save; in fact, that is more than most of them would ever earn in a year.
People who can take advantage of that policy will do well out of it, but they are already quite comfortable if they have that kind of money to put aside. The Chancellor will reward those people, who might put off buying a new car or taking a holiday to save a little more, for their responsibility, but I want to know how he will reward the responsibility of my constituents who sacrifice hot meals to give them to their children.
Government Members have pointed out some of the patronising gimmicks the Chancellor threw into the Budget to convince people that he is on their side: a cut in beer duty and lower duty for bingo halls. Once again, he proved how out of touch he and the Government parties are. People in my constituency do not have beer and bingo at the forefront of their concerns. They care about the dignity that decent, well-paid work gives them. They care about providing for their families. They care about being able to pay their bills and to afford to eat. To put it simply, bingo and beer are far from the minds of those queuing at food banks.
The Government argue that raising the personal allowance has the effect of helping those who are worst off, but again the reality is far from the rhetoric. The Resolution Foundation has pointed out that the 5 million lowest earners will not get a penny because they already earn less than the personal allowance. One in four workers in my constituency is in part-time work and many earn the minimum wage. Those people are not earning enough to feel any effect from the threshold being raised. They are the people who are suffering the most, yet the Government’s flagship policy for helping the poorest brings them no benefits whatsoever.
Single-earner households, which are more common among low-income groups, benefit half as much as dual earners even though they clearly have greater need. As if that was not enough, the vast majority of gains from raising the personal allowance are expected to be wiped out when universal credit is introduced, as that system calculates people’s benefit entitlement on post-tax rather than pre-tax income. People who receive benefits or tax credits might see their incomes rise because they are paying less tax, but for every extra pound they keep they will lose 65p in universal credit. It is therefore poorly targeted as a policy for helping the worst off.
The Prime Minister and the Chancellor have claimed that we are all in this together, yet this was not a Budget for the whole country, just as this is not a recovery for the whole country. Yes, it is true that families on all incomes have found things harder in recent years, but the effect has been felt most strongly in constituencies such as mine. As far as my constituents are concerned, there is no recovery. They face yet another miserable year ahead under this miserable Government.
As the last Back Bencher to be called to speak in the debate, I am reminded of that biblical verse, “The first shall be last, the last shall be first”. I am more than pleased to make a contribution.
There are many things in the Budget that we should be applauding. Some of the good things include the reduction in air passenger duty, the changes to pensions and to corporation tax, the fact that unemployment is down and the £21 million for potholes in Northern Ireland.
I thank my hon. Friend and colleague for that intervention. He outlines the fact that although we have seen a lot of movement, we need to see more. It is always good to see such movement happening.
I also applaud the introduction of the married couples transferable tax allowance, which was in the Conservative manifesto and which the Democratic Unionist party has supported. I suspect that we may be the only party on the Opposition Benches that has done so, but we have, and we put that on record. The perplexing thing about it is that there is to be no child care element for those in the middle band, while a child care element is in place for the lower and higher bands. My party will continue to push for that, and I hope that we get some concessions. Having liaised with various bodies about the Budget, I would like to highlight a few issues, most of which are important health issues. On tobacco and alcohol duty, Professor Sheila Hollins, chair of the British Medical Association board of science, has said:
“The Government is giving with one hand and taking with another, with a step forward on measures to reduce smoking but backward on tackling alcohol related harm.”
I understand her viewpoint. The extension of the tobacco tax escalator is certainly welcome from a health perspective, as it will reduce the affordability of cigarettes, which is an essential component in deterring children from taking up smoking. That is the greatest concern. However, while Cancer Research UK welcomes the extension of the 2% above inflation annual tobacco tax rise for the whole of the next Parliament, it has been suggested to me that a one-off increase of 5% above inflation in this Budget would lead to a fall in the number of smokers by 334,000, or 0.7 percentage points. How can we go against those figures supplied by Cancer Research? That is a measure that should have been introduced.
Furthermore, Cancer Research suggests that considerable benefits would accrue to the public finances from a reduction in smoking—a total of £199 million in the first year and more than £1 billion over the next five years —never mind the direct health and disease reduction benefits. Perhaps a way of achieving that would have been to narrow the price gap between manufactured cigarettes and hand-rolling tobacco. I am aware that a submission to the Treasury in advance of the Budget by Action on Smoking and Health and the UK Centre for Tobacco Control Studies, endorsed by 80 health organisations including Cancer Research UK, urged the Chancellor to increase the tobacco tax escalator to 5% above inflation in order to reduce smoking, while at the same time raising much-needed revenue, and I again press the Government to consider that for the future. Perhaps the Minister can tell us when that might happen or what the Government’s intentions are.
I use this opportunity to ask the Government to continue to prioritise tackling tobacco and urge that we press ahead with standardised packaging once the independent review of the public health evidence has concluded.
It has been advocated for some time that we should consider a minimum price for alcohol, which in the long term will have an effect on liver disease or whatever. Surely a lot of money could be saved if that was introduced.
My hon. Friend must have read my notes. I slipped out for a while so I suspect that he had a look at them.
Will the hon. Gentleman consider the alternative perspective from a personal liberty viewpoint?
People can decide for themselves how much they wish to drink. Mrs Lewell-Buck identified households’ problems with affording their budgets. Is it a good idea to penalise poorer people by making alcohol more expensive for them to buy?
As I said, there is a health issue to be addressed and whether we like it not, we have to do that. I am an advocate of using whatever we can within the health process to do so. The scrapping of the alcohol duty escalator and the reduction in beer duty, coupled with the Government’s U-turn on plans to introduce a minimum unit price, show that the Government have abandoned any serious efforts to tackle alcohol-related harm, which cost £20 billion in England alone last year, £2 billion of which was on health care. We cannot ignore those figures because people are involved and they are clearly affected. We will continue to call on the Government to introduce a minimum unit price because we know that minimum pricing reduces alcohol-related harm among the heaviest drinkers while leaving responsible drinkers largely unaffected.
In debates on the Care Bill, I, along with many others, raised the issue of free social care at the end of life. It would be inappropriate to go into everything that was outlined during those debates, but the key statistic is that the quality, innovation, productivity and prevention —QIPP—data suggest that net savings of £958 could be made for every person who dies in the community rather than in hospital. Health Ministers support such a move, but I would appreciate it if the Treasury, which has not yet made its stance clear in the Budget, indicated its intentions on the matter for future reference.
Finally, I wish to highlight issues in relation to the welfare spending cap. For many people, the financial impact of cancer is a major issue, as they face a loss of income as well as having to cope with additional costs. Research commissioned by Macmillan Cancer Support has found that 83% lose an average of £570 a month, which is comparable to the average monthly mortgage payment in the United Kingdom of Great Britain and Northern Ireland. It is, therefore, no surprise that people calling the Macmillan helpline are 25 times more likely to seek help with financial issues than with end-of-life issues. Although in many cases they are dying, they are more concerned about their finances and the position for their families. That is what Macmillan Cancer Support says, and it is important that that matter is dealt with. Will the Chief Secretary to the Treasury clarify and explain how the Government intend to ensure that the cap on welfare spending does not impact negatively on people with cancer? The welfare system provides thousands of cancer patients with a financial lifeline at a time when they most need it, and spending should be determined in no other way.
There are many other issues that I should like to raise, but I shall express great disappointment at not seeing a drop in fuel tax for Northern Ireland, which has the highest fuel costs in the United Kingdom. I represent a rural area, and there are many Members in the Chamber who are not from Northern Ireland but are from rural areas, who would make the point that the impact of fuel costs is greater in rural communities than anywhere else. My colleagues who represent constituencies in Northern Ireland would all adhere to that statement. We would like a reduction in fuel tax and a pilot scheme for Northern Ireland. I understand that there is such a scheme for Mid and South Down, and it should be extended to the whole of Northern Ireland, because we deserve that opportunity. Perhaps we will see that in future.
We must have a Budget that helps to reduce our outgoings, but that should not be done at the expense of our health service and vulnerable people. Macmillan Cancer Support, Cancer Research UK and the British Medical Association have all outlined suggestions for saving money that can benefit those most in need, and again I suggest that the Chief Secretary and Chancellor give that serious consideration.
In conclusion, I give this Budget the grade that I often saw in my school reports, “C-plus, Chancellor: easily distracted; could do much better.”
I shall be brief. I want to welcome the pension reforms outlined in the Budget, especially as I am the co-chair of the all-party group on older people and ageing.
As part of my campaign to secure a Minister for older people, I have often spoken in the House about the freedoms that we wish to see for older people. Policies and financial products are often skewed towards a “Werther’s Original” image of older people that does not reflect the diverse reality. I remember going to the physiotherapy department at my local hospital and seeing an elderly gentleman exercising. He was recovering from a major operation on his knee and hips. I asked him his name and how old he was. He was 84, and I asked him how his recovery was going. He described the incredible number of breaks he had had in his pelvis and legs. I had a vision of him shuffling down an icy driveway in his slippers, and I said, “That must have been one hell of a fall, Don.” He said, “No, actually, it was a hang-gliding accident.”
That just goes to show that older people are a diverse bunch. They have incredibly diverse plans and ambitions. They wish to be entrepreneurs, they wish to travel, and they have diverse responsibilities. We need to give them as much freedom as possible. We would not tolerate the restrictions on our freedoms that we have expected them to accept in the pension system and other policies, so I am pleased that that has changed. How that dovetails with our care reforms is a vital question. The new financial products that we want in the marketplace will probably not be fit for purpose for another couple of generations. That is also the case for the type of product that Dilnot wished to see and measures allowed under the Care Bill reforms. While we are waiting for those things to come on-line, it is vital that we make sure that people have as much freedom and as much choice as possible as to how they spend their money.
Finally, and briefly, I put it on record that I am very pleased to see help for high energy-use businesses. That is a major issue in the constituency I represent. The president of the Aluminium Federation, who has his factory in Portsmouth, is absolutely delighted and he is not alone in that. In Portsmouth, we are at a very exciting juncture. The maritime task force that was set up at the tail end of last year is just about to report, setting out a blueprint of what we need to do in marine and manufacturing to turn the Solent and Portsmouth at its heart into the maritime heart of the UK. There is a clear blueprint for that and investment earmarked for precisely those things.
We are able to compete really well and I think that is because of the business environment that is being created not only from this Budget, but from successive Budgets. We have managed, in just a few months, without a formal marketing process in place, to gain interest for an order book for the shipyard at Portsmouth of over £1 billion. That shows that we are able to compete not only with northern Europe, but with Dubai and shipyards around the world, and that Britain is an attractive place to do business and Portsmouth is a stellar yard to build ships in.
I particularly welcome the announcements on energy and on pensions in the Budget and commend the Chancellor and the Front-Bench team for their excellent work.
First, I thank so many of my right hon. and hon. Friends for making important contributions to the debate, highlighting constituency concerns, offering a critique of the Chancellor’s strategy and questioning the wisdom of his short-sighted short-termism. To name only a few, that includes my hon. Friends the Members for South Shields (Mrs Lewell-Buck), for Wigan (Lisa Nandy), for Coventry South (Mr Cunningham), for Livingston (Graeme Morrice), for Darlington (Jenny Chapman), for Stalybridge and Hyde (Jonathan Reynolds), for North Tyneside (Mrs Glindon), my right hon. Friend Mr Darling, and my hon. Friends the Members for Inverclyde (Mr McKenzie) and for Liverpool, West Derby (Stephen Twigg). They all made the case very strongly.
The country needed a Budget to deliver a recovery built to last and a recovery that is felt by all. We needed a Budget to ensure that growth is sustained; to support a balanced approach across industrial sectors; to spur on business investment and productivity; to drive exports; and to lift growth in all the regions and nations. We needed a Budget to make sure that a recovery is shared by the whole country, not just the wealthy already at the top.
Yet what we had last Wednesday was a Budget more notable for the reforms it did not contain. There was nothing to tackle long-term youth unemployment, which has doubled since the Government came to power. There was nothing to reform the big six gas and electricity companies, who are hitting families and pensioners with ever-higher energy bills. There was nothing to bring forward real help now with child care costs that are spiralling upwards year after year. There was nothing to drive forward the infrastructure investment that we so urgently need and nothing to address the wages crisis leaving the typical working person £1,600 worse off than they were in 2010. There was not even a mention by the Chancellor of the cost of living crisis, or even a passing reference to it in the 120 pages of the Budget Red Book. Instead, it fell to the Office for Budget Responsibility to spell out the realities to the British people: you will be worse off at the coming election than you were back in 2010—and that is official.
What sort of Budget was it? It was a Budget attempting to get the Government from here to election day, rather than to entrench, extend and enhance a recovery for all.
That is why we had a few small give-aways and that patronising little pat on the head for hard-working people to do more of the things they enjoy—and was it not interesting to see the Chancellor looking so authentic playing bingo earlier today? What a great offer from the Chancellor: buy 300 pints of beer and get one free. They give a little with one hand, but take away so much more with the other.
Amazingly, the Chancellor did not mention VAT at 20%, the granny tax, the cuts to child benefit and to tax credits, or the 2 million working people who have been drawn into the 40p tax band since the Government came to office. He also did not mention the very generous tax cut for millionaires, or the deal he struck with the big banks to water down the bank levy even further—a secret tax cut for the banks that we will be voting against tonight.
There is a crisis out there in the country. The Prime Minister once said:
“Helping with the cost of living. That is what matters most of all.”
Whatever happened to that promise? Britain needed a Budget for big changes, but the Chancellor was busy dealing with the small change, the new £1 coin modelled on the threepenny bit. Of course, as the right hon. Gentleman is the heir to the Osborne baronetcy, perhaps it is no surprise that he has such an emotional attachment to old money.
Back in the real world, changing GDP statistics are not yet felt by those on lower or middle incomes, who do not share the Chancellor’s rosy view. They are concerned about job insecurity, zero-hours contracts, escalating rents and bills and frozen incomes, while food banks are increasingly the last resort for those with nowhere left to turn. That is the real Britain that his short-termism is creating.
As my hon. Friend Susan Elan Jones said, young people who want to get ahead are sensing that the odds are stacked against them. They belong to “Generation rent”, ripped off by letting agencies, with the housing market out of reach because Help to Buy has not been matched with the help to build that we need. But because the Chancellor is so focused on showing off his new £1 coin, so focused on his short-term ambitions—[Interruption.] It does not matter if he changes its shape; its value is still shrinking day by day under him. He is failing to take the long-term steps we need to improve this country.
The flexibilities on annuities are welcome in principle, and we look forward to scrutinising the detail in due course. Annuities have failed too many pensioners. We also hope, however, that the Chancellor will address the need for comprehensive advice for those nearing retirement and for reform to go further by capping pension fund charges to stop rip-off fees and improve consumer trust.
Did the Chancellor make that change on annuities for a long-term reason or a short-term one? Is it pure coincidence that the reform will grab hundreds of millions in tax from pensioners years earlier than it would otherwise have come into the Exchequer? Did he really have the long term in mind, or was it a “manoeuvre”, as the IFS calls his tricks, from a Chancellor who will borrow £190 billion more than he said he would?
Although the annuity changes are welcome, it is difficult to escape the feeling that they are being used to distract from the inadequacy of the rest of the Budget. They provide a veneer of long-term reform to an otherwise short-term Budget. The Chancellor dangles the annuities issue as a device to divert attention from his inaction on the cost of living and the reforms we need to build a lasting recovery that is felt by all.
The Chancellor is absolutely desperate for people not to notice the broken promise to balance the books by next year. It turns out that the past three years of economic stagnation will leave the next Government inheriting a budget deficit of £75 billion. It is staggering that the Chancellor had the nerve to claim in his Budget statement that
“as a nation we are getting on top of our debts”.—[Hansard, 19 March 2014; Vol. 577, c. 781.]
The Chancellor’s neglect of economic growth has added a third to the national debt, which is now over £1.2 trillion. He promised to stop adding to the debt, but he has borrowed more in four years than the previous Government did in 13 years.
That is why my right hon. Friend the Leader of the Opposition called for a cap on structural welfare reform in June last year. Yes, we need to be tough on welfare inflation, but we also have to be tough on the causes of welfare inflation, tackling low wages and rising rents and helping to get the long-term unemployed off benefits and back into work. That is the way to ensure that we get the current budget back into surplus as soon as possible.
The Chancellor should be confronting the causes of falling revenues and rising costs for taxpayers, but he has form when it comes to bending the rules to make it appear that progress is being made. In this Budget, again, there are some extremely dodgy accounting tricks used by this master of prestidigitation: treating a forecast of worsening public sector pension costs as an opportunity to spend more money; banking future tax revenues on the basis of what the OBR called “particularly uncertain” behavioural assumptions; committing to spending billions extra on the basis of cuts to services while refusing to say where the axe will fall; and inventing revenues from tackling avoidance even though the Swiss tax deal has delivered only a quarter of what he originally promised. The IFS calls these the Chancellor’s “manoeuvres” which he will keep on repeating—a few give-aways inadequately funded by unspecified funding cuts.
We are beginning to hear that the Chancellor and his outriders are on manoeuvres in other ways too. He and the Chief Secretary to the Treasury have an eye on their personal advance to the top of their parties—believe it or not. In fact, the Chief Secretary is on odds of 14:1 to take over the Liberal Democrats after the next general election. There they sit, right there: one a zealous champion of right-wing Conservatism and the other the Chancellor of the Exchequer. No wonder the public are not getting a look-in. We needed a Budget to lock in the recovery, but all we got was a Budget designed to lock out the Chancellor’s rivals for the leadership of the Conservative party.
The Government are not ensuring that we have a sustainable recovery. The reason the Chancellor is being forced to address a growing savings crisis is that, as the
OBR says, growth might slow down again when consumer savings run dry—and it predicts that savings will be depleted even more quickly after the Budget measures are factored in. Exports will not contribute a thing to growth for the next five years, according to the OBR. A Conservative Government will certainly not invest in a pro-growth approach; they do not even acknowledge that productivity is a problem that has been emerging in recent years. Why are they not helping small and medium-sized businesses with a cut in business rates rather than making yet another cut in corporation tax that benefits only 2% of British businesses? Their short-term chopping and changing on renewables, on investment allowances and on the carbon price floor are all symptoms of a fickle and inconsistent Treasury governed by political impulse. We finally have some growth not because of this Chancellor, but despite this Chancellor.
Britain needed a Budget for the long term—long-term recovery, long-term stability, and long-term growth—but Britain got a Budget for the short term from a part-time Chancellor more preoccupied with his party’s recovery than with building Britain’s recovery. Britain deserves better.
It is a pleasure to close this excellent Budget debate. We have heard some very good speeches today. I particularly commend my hon. Friend Mr Harper, who gave strong support to the Budget. I pay tribute to his work as a Minister, not least as Minister responsible for constitutional reform when he worked so closely with the Deputy Prime Minister on those matters.
I particularly note the speech by Mr Darling, who rightly highlighted the importance of securing this country’s long-term competitiveness. I would also highlight the work we are doing on infrastructure, on skills, and on making this country more attractive for investment. In that context, I find his party’s decision to vote against the corporation tax cut utterly extraordinary. If we want this country to become more welcoming to investment, that is precisely the sort of measure we should be supporting.
Hazel Blears spoke particularly about social investment. I welcome her support for the tax relief on social investment that we confirmed in the Budget. Dame Anne Begg gave an important speech about her concerns about pensions and annuities. I am sure that those issues can be addressed as the Finance Bill goes through the House. My hon. Friends the Members for Bedford (Richard Fuller) and for Daventry (Chris Heaton-Harris) made particularly strong speeches. I commend Jim Sheridan for his speech, particularly the attention he paid to the warm welcome in the Scotch whisky industry for the measures we have taken on spirits duties—just one of a number of ways in which this was a Budget for Scotland. He is right to have welcomed that.
However, we heard at the end the most extraordinary speech by the shadow Chief Secretary to the Treasury. I gather that his party is intending to vote against the whole Budget tonight. That is surprising—or perhaps not that surprising in the context of Labour’s changing position on annuities and pension reform. Last week’s announcements on annuities complete the most progressive and important reforms to our pension system since Lloyd George was the Liberal Minister in the Treasury. The reforms are founded on the decisions we have made and are being ably led by the Minister of State, Department for Work and Pensions, my hon. Friend Steve Webb, who has responsibility for pensions. They include the creation of a single-tier pension—a firm foundation on which everyone can save—and the triple lock, which ensures finally that we will not have the kinds of derisory pension increases that we saw when Labour was in office.
People often wonder whether there will be a rabbit-out-of-the-hat moment in a Budget and I am sure the whole House will agree that our annuities announcement has been successful in rabbit production—a whole Labour Front Bench of them. They are rabbits caught in headlights. It has gone on for days. As my hon. Friend the Member for Daventry memorably said in his speech, Labour’s economic policy is like a chameleon that has fallen into a bag of Smarties. You can ponder for yourself what that means, Mr Deputy Speaker, but I think he was drawing attention to the fact that we have not had a sensible reaction from the Opposition. [Interruption.] I am not sure: I think ginger rodents play a very important role in our democracy, to answer the shadow Chancellor’s remarks.
On Wednesday the Leader of the Opposition said absolutely nothing. On Thursday Mr Watson, presumably frustrated by the continued silence of his Front Benchers, took it on himself to tell his party that it should oppose our plans on annuities and pensions. Friday saw Rachel Reeves getting around almost at least to welcoming the move. To think that Labour Members used to say that we in my party wore sandals; they are surely now the flip-flop party. They now say—this is a serious point—that they will vote against the Budget as a whole and, therefore, against all of the reforms contained in it. They did not know what to say about the reforms, then they were against them, then in favour of them, then sort of in favour of them and now in just a few minutes’ time they are going to vote against them. The truth is that our great liberalisation of the pensions market has hit Labour Members like a missile. It has cracked open one of the great dividing lines between their values and our values. We on this side of the House know that the best people to trust with money are the people who earn that money in the first place. Labour Members do not seem to agree with that.
I draw the House’s attention to the following quote:
“You cannot trust people to spend their own money sensibly”.
Who said that? It was a former Labour adviser in No. 10 under the previous Government. That says it all. Having been in opposition to that Government for so long, I understand John McTernan’s concerns. After all, when the Labour party was given access to the public purse, it went on a giant spending spree. It splurged on all sorts of unsuccessful projects. It is a party that wastes money and expects someone else to clean up after it. We are the party—the Government, the coalition—that it has left with the cleaning up. [Interruption.] Yes, the Liberal Democrats are clearing up the mess that the Labour party made of this country’s economy. I think that the people of this country know not only about the mess the Labour party made of our economy, but that people who have spent their lives saving for their retirement can be trusted to make sensible, long-term choices. It is just the Labour party that cannot be trusted to do that.
This was, in the end, a Budget for freedom. It was a Budget for the freedom of pensioners to choose to use their own savings in the way that best suits them; a Budget for working people to be free to keep more of the money they earn for themselves; and a Budget to support businesses that want to invest. The only way we can deliver the rise in living standards that has been discussed by some Labour Members is by making sure that our policies are as fair as possible.
Now that the Chief Secretary has finally come to the question of living standards, will he do what he failed to do four times when asked on the “PM” programme on the day of the Budget and admit that living standards will be lower at the time of the next election than they were at the last election—yes or no?
I rather agree with the analysis that my right hon. Friend the Secretary of State for Work and Pensions set out on that question. In his opening remarks—[Interruption.] The Opposition might not like it, but no matter how much the shadow chunterer makes his noises from the Front Bench, I will make the point that the recession that they helped to cause when they were in office cost every household in this country £3,000. That is the mess that they made. It is no wonder that we are having to work so hard to repair the British economy and to ensure that there are jobs for people.
No, I will not give way any more—sit down. I will give the hon. Gentleman the treatment that he deserves.
In the Budget, we have sought to help those at the bottom of the earnings scale by taking them out of tax altogether. I am incredibly proud, as a Liberal Democrat, to stand at this Dispatch Box and say that, come next April, the rise in the personal allowance will mean that typical basic rate taxpayers will be £800 a year better off than they would have been under the previous Government’s plans.
I have quite a few more things to say, Mr Deputy Speaker, and I have less than three minutes in which to say them.
The rise in the personal allowance is not just a reward for hard work, but an incentive for hard work, as are the substantial changes that we have made on child care in the Budget. Those changes mean that we are getting more people into work and that people are keeping more of what they earn.
We have taken measures to incentivise businesses to invest, such as enhancing capital allowances. I pay tribute to my hon. Friend Gordon Birtwistle, who pushed hard for those changes. They will make a serious difference to business investment in this country.
To conclude, this is a Government with a long-term economic plan, and they are an Opposition without any plan at all. For businesses, we have doubled the tax relief on new plant and equipment, while they are frightening off the investors whom we need to invest in the energy to power those machines. They will vote against the cut in corporation tax and confirm that the Labour party is the anti-business party in this House. For working people, we have lifted the personal tax allowance even further than we promised in our election manifesto. While they talk about a 10p rate, we have lifted the personal allowance to £10,500. For pensioners, we have delivered a triple lock, the largest cash rise in the basic state pension in a generation and the greatest pensions liberation in a century. In their time in office, they delivered a paltry 75p rise in the basic state pension.
Some people have referred to this as the Lamborghini Budget. That may well be so, because there is one person in this Chamber who has shown that he can out-accelerate a Lamborghini. That is the shadow Chancellor in retreating from his predictions on the economy, such as the 1 million jobs that were never lost and the triple dip that never came.
This Budget is another landmark on our long road to repairing the economy that the Opposition wrecked. It gives more people more control over their own money. It cuts income tax for working people. It helps businesses to invest for growth. It is a Budget that helps put Britain and business back on their feet, and I commend it to the House.
Division number 236
Question accordingly agreed to.
(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.
The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (