Budget Resolutions and Economic Situation
Catherine West Excerpts(10 years, 7 months ago)
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Mr Umunna
My hon. Friend makes a very good point. While I am on the subject of apprenticeships, it is worth remembering that the number of apprentices still not receiving the legal minimum wage is alarming. According to the Government’s recent apprenticeship pay survey, 15% are not receiving the appropriate minimum wage, rising to 24% for young apprentices. If we want more young people to study the science, technology, engineering and maths skills that we need them to study, taking away the maintenance grant from the poorest who want to study those subjects at university is hardly the way to encourage that. The Government are taking a huge gamble that that policy will not deter students from lower-income households from going to university.
Catherine West (Hornsey and Wood Green) (Lab)
Does my hon. Friend agree that cuts to further education of up to 24% could undermine the good idea of the employment levy? That is the glue that holds the whole thing together.
Mr Umunna
That is a good point. The cuts that the Government are making in FE are already having a hugely negative impact, not least in the college that the Secretary of State attended.
To go back to undergraduate student financing, I note that the Government are switching from student grants to loans, but that simply dumps more debt on students. In the end, that is debt that, along with the loans taken out to pay tuition fees, will end up in the hands of the taxpayer. It is estimated, according to House of Commons Library figures, that that will add £280 billion to the national debt and we have heard no solutions from the Government to address that.
In the 2011 plan for growth, the Government told us to judge them not only against their achievements on skills but on whether they helped to deliver a substantial boost in business investment. Clearly, we must address that, because, as I said, our performance lags behind that of our competitors.
Rishi Sunak (Richmond (Yorks)) (Con)
It is a privilege to be called to speak in this debate, Madam Deputy Speaker, and a pleasure to follow the hon. Member for Streatham (Mr Umunna).
There is much to commend in this excellent Budget, but to me one conclusion stands out: that by the end of this Parliament, under this Government, Britain will live within its means. No more irresponsible borrowing. No more spiralling debt at the taxpayer’s expense. No more passing the debt to the next generation. I was delighted to hear the Chancellor’s plans for this nation finally to run a budget surplus.
I have spent my career in business. Every company I have been involved in sets a budget, as indeed does every household in this nation, and when they do they operate with these basic principles: first, “How much is coming in?” and only then, “How much can I spend?” For too long, Governments have got that back to front, spending first, ignoring how much is coming in, then letting borrowing endlessly make up the difference.
Coming from a financial background, I decided to spend some time analysing our nation’s fiscal history. I wanted to know, when it comes to our Government’s revenue, how much does in fact come in. I can tell the House that, since 1955, tax receipts, with limited variation and remarkable consistency, have averaged 36% to 38% of GDP. In spite of the vast differences between Labour and Conservative Members in our approach to setting tax rates, the average tax take has been remarkably similar under Governments of both parties. There appears to be a natural ceiling to what any Government can extract from the pockets of its hard-working taxpayers.
That to me suggests a simple conclusion: in normal times, public spending should not exceed 37% of GDP. That is the best estimate of our income as a Government and therefore the best guide to what we can afford to spend. So the Government’s plans to get public spending to that level are not, as some Opposition Members have suggested, an ideological crusade or clever politics; rather, tackling excessive public spending is simply the sensible, logical and responsible course of action. That action, taken to make sure that we live within our means, is the same course of action that any business or household would take when presented with the facts. We all know what happens when those facts are ignored: more borrowing, more debt.
Catherine West
The hon. Gentleman makes a good point about debt. Does he agree that a graduate in social care from London Metropolitan University with personal debt of £54,000 not only has a personal problem on her hands, but represents a long-term national problem for us, because in the end we will have to pick up that debt?
Rishi Sunak
It is clear that university graduates’ earning power is raised. It is hardly fair to ask people working hard without the benefits of a university degree to pay for the earnings of someone in the legal profession or the City who is earning a great deal. That is why this Government created a progressive system whereby those who earn more pay more back and those who do not pay just a fair share.
Rishi Sunak
I would like to make some progress. As you said, Madam Deputy Speaker, many people wish to speak.
All debts need to be repaid, with interest. For the next generation, that means higher taxes or less money to spend on public services. As the hon. Member for Streatham said, we already spend more money on debt interest than we do on the police, transport or housing. That simply cannot go on.
Whether one is a Thatcherite or a Trotskyite, the rules of budgeting are the same: one cannot sustainably spend more than one earns. I commend the Chancellor for acting on that principle and ensuring that Britain’s finances will once again be back in the black.
Budget Resolutions and Economic Situation
Catherine West Excerpts(10 years, 7 months ago)
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Catherine West (Hornsey and Wood Green) (Lab)
I am very pleased to be speaking in the Budget debate. The Chancellor’s announcement on the increase in the minimum wage, mistakenly called a living wage, raised the issue of low pay. That is a debate we all welcome. Sadly, when it is combined with high housing costs and cuts to working tax credits, families in my constituency will be worse off. I will not vote in favour of this Tory Budget. Not only will many families be worse off following the Chancellor’s Budget; it has failed to address the deeper issue of social mobility.
This was not a good Budget for young people. For younger people, it is becoming more expensive to attend further education or to secure well-paid employment, and it is much more difficult for them to get on to the housing ladder. The employment training levy, to be levied against workplaces, could provide much needed workplace training opportunities. However, coupled with the proposed cuts to further education due in the autumn, training programmes could be at risk—one step forward, two steps back. Converting student maintenance grants into student personal debt will increase the debt of our young students further. In one case I know of, a student will leave a local university with £56,000 of personal debt—hardly a good start to a career for a young professional.
Preventing under-24-year-olds from gaining access to housing benefit could lead to long-term homelessness problems among a small but needy group of youngsters— many of the rough sleeping population are in this critical age group—creating not just personal misery, but further cost to the NHS in later years.
The cost and availability of childcare is a major block to productivity, and in high value areas such as London it is becoming prohibitively expensive. Childcare cuts to Sure Start and children’s centres undermine the Government’s excellent 30-hour childcare commitment, slowing down parents’ return to work and preventing the return to work of much needed skilled workers. Assessments show that returning women to work in London would be a real spur to the economy. Unfortunately, owing to the prohibitive cost of childcare and lack of childcare places following cuts to Sure Start and children’s centres, we have a false economy.
Renting in the private rented sector is now prohibitively expensive. A family would need a household income of £75,000 per annum to rent a modest three-bedroom property in Finsbury Park in my constituency. This is unaffordable and represents a failure of the housing market to support local families. By spending such a high proportion of income on housing costs, people are unable to save eventually to get on to the housing ladder. The average age of first-time buyers is going up every year in London. We are becoming not just a city of renters, but a nation of renters. Many of our children are in low-quality, high-cost housing with no hope of remaining in the local area to look after us in our older age.
While some elements of the Budget, such as applying the brakes on buy-to-let property, might have benefits, they are undermined by a failure to announce more new affordable housing and by the regressive right-to-buy housing association discounts, which set us back decades on housing supply. We must address the supply issue; it is critical.
Furthermore, pay freezes in public sector employment will be bad for young people. We know we have a crisis in retaining teachers, particularly in English and maths. We know we have a problem retaining nursing staff in our A&Es and our local hospitals. This pay freeze for the public sector is detrimental. Unless young people have access to unlimited family funds for their education, housing and training, they face a bleak future under this Tory Chancellor.
Richard Fuller
The hon. Lady has listed a number of steps that would lead to an increase in expenditure to cover some of the important topics she mentioned. Does she accept, however, the overall need, while we are borrowing over £70 billion a year, to reduce expenditure more each year so we can get back into balance? Does she accept that general trend in principle?
Catherine West
Let me deal with aspects of the question of expenditure in turn. First, the employment training levy is being levied on small businesses by your Government. It is not a Labour proposal, but I support it because it is about investing in the workplace. Secondly, the position on student maintenance grants amounts to cost shunting—taking the costs from the university and putting them on to the individual. I referred to a case of a student owing £56,000, so instead of it sitting on the balance books of the Chancellor, it is sitting on those of the individual, which is a bad thing. Thirdly, we spent £60 billion on housing benefit over the last Parliament. We should have invested more of that in new build housing. We should not forget that council housing is not a cost. It is a net contributor to the economy because the rent is so low that housing benefit is not payable on many council properties. Housing benefit is mainly payable in the private rented sector. By investing in social homes, we will be saving the housing benefit bill in the longer term. Finally, on childcare, your own pledge by your own Government is 30 hours per week—
Madam Deputy Speaker (Natascha Engel)
Order. The hon. Lady must speak through the Chair, so she should be referring to the hon. Gentleman in the third person.
Catherine West
How did I forget that? Through you, Madam Deputy Speaker, I am saying that the Government have pledged to provide 30 hours a week childcare, which is an excellent pledge, but it is not a Labour proposal. In fact, Labour proposed something more modest and more affordable. I am thus a little worried that the hon. Member for Bedford (Richard Fuller) thinks that we are over-spending, when this is a pledge of his own Government. I wonder whether it will happen, though; I worry about the feasibility. If we go through all those elements, we find that they are not really about cost; they are about feasibility and getting the job done.
Tax Credits (Working Families)
Catherine West Excerpts(10 years, 7 months ago)
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Shabana Mahmood
I am afraid that the boy-band operation on the Government Back Benches is a little unimpressive. Rather than give way for a further Whip’s question, I shall make a little more progress.
Another argument advanced by Government Members in recent weeks is that tax credits have been subsidising poverty pay. There is academic and expert evidence that they have not depressed wages at the lower end, and that there has been no general slippage in the part of the earnings distribution where they bite. For the sake of argument, however, let us agree that in an ideal world we would not even take the risk that tax credits might depress wages, or subsidise low or poverty pay. Indeed, let us agree that we would ideally want a system in which they were not needed at all, because everyone could earn a high enough wage to manage perfectly well without them. If the Government were serious about that, they would come forward first with proper and realistic proposals for increasing wages and tackling low pay, and then start thinking about reform of tax credits. Instead, they are putting the cart before the horse and doing things the wrong way round, salami-slicing the tax credits budget but without any credible plan to get wages up before the cuts bite. The Government have no plans to ensure working families do not lose out from their tax credit cuts.
Instead of tackling low pay, the Conservatives are attacking the low paid, and they have form: they cut tax credits 14 times in the last Parliament, including cutting the childcare element of working tax credits from 80% to 70% of a child’s childcare costs, costing some working families up to £1,560 a year—an average loss of £570 per year—and increasing the working hours threshold for couples to qualify for WTC from 16 to 24 hours per week, with an average loss of £2,600 for families unable to increase their working hours, according to research commissioned by us from the House of Commons Library. We also know that a number of indicators suggest that the recovery is not feeding through to job security and pay growth for those who have to rely on tax credits.
Catherine West (Hornsey and Wood Green) (Lab)
Has there been an equalities impact assessment of this measure, which will be introduced tomorrow?
Shabana Mahmood
My hon. Friend raises an important point, and we will have to see whether we get any additional information on the impact on equalities ahead of the Budget, but we already know from what we saw over the last Parliament that women are disproportionately affected when the Government start to cut tax credits, as are black and minority ethnic communities.
Mr Gauke
My hon. Friend makes a reasonable point. There was a certain correlation between the previous Government’s generosity and election years.
The Government are bringing in a raft of measures to help working people. We are giving this nation’s children the best start in life. We have increased our spending on childcare and early-years education by £1 billion. We have given 15 hours of free childcare entitlement to all three and four-year-olds, as well as to the poorest 40% of two-year-olds, and we are doubling that for families in which both parents work. We are extending the right to request flexible working to all. Through tax-free childcare we are giving 20% support on childcare costs, up to £10,000 per child. Universal credit will increase the childcare support for low-income families to 85%. Our pupil premium and early-years pupil premium are giving schools, nurseries and childminders additional money to ensure that children from the most disadvantaged backgrounds do not fall behind. Through our childcare business grant scheme we have 4,500 new childminders and over 30,000 new childcare places.
Catherine West
Will the Treasury be doing a proper equalities impact assessment for tomorrow’s statement?
Mr Gauke
We will perform the required assessments, as we always do.
The best way to prosperity is still employment. The past five years have seen a jobs miracle—1,000 jobs a day; 2 million in total. For every job lost in the public sector, the private sector has created over five and a half more. I simply do not accept Opposition claims that they have somehow been second-class jobs on part-time or zero-hours contracts. Over the past year 85% of jobs created have been full time and 92% have been high or medium skilled. Unemployment has fallen by 349,000 people over the past year alone. That is 349,000 more people standing on their own two feet, and 349,000 households with greater financial security.
We want to continue our fantastic record on jobs so that we achieve full employment in the UK. We are providing our young adults with a route to employment through a record number of apprenticeships, and we have committed to supporting 3 million new apprenticeships. We will work with our Jobcentre Plus network to provide routes into work experience and apprenticeships for young people leaving education.
When people are in work, we will cut their taxes. We have increased the tax-free personal allowance for 27 million people, from £6,475 to £10,600 this year. That will rise to £12,500 by the end of this Parliament. We will enshrine the concept of a tax-free minimum wage in law. We will also raise the 40p income tax threshold to £50,000, because that should be for high earners, not middle earners. Already, a typical basic-rate taxpayer is paying £905 less income tax than in 2010, and by 2017-18 we will have lifted over 3.7 million people out of income tax altogether.
We have frozen fuel duty since 2011 and council tax since 2010. We have said that over the next five years we will not raise income tax, VAT or national insurance contributions. Our record low inflation is keeping down the cost of household goods. We have increased the national minimum wage by 3.1%—3.3% for 18 to 21-year-olds—thus benefiting over 1 million people. At the same time, wages have increased by 2.7% on the year for the three months to April. That all means more money in people’s pockets, more incentives to work, and a fundamental shift from dependency and towards productivity.
Back in 2010 we were a country living beyond our means and with worrying signs of being addicted to that lifestyle. Whenever that is proved to be unsustainable—something that global markets have a habit of proving—the poorest and the most vulnerable are hit the hardest. That is what we wanted to avoid, and that is why we have strived so hard to turn around Britain’s economy. Despite the best efforts of the Labour party, which opposed every difficult decision we took on the path towards recovery, we have achieved a lot. We have shielded the most vulnerable and those on the lowest incomes and have asked those with the broadest shoulders to bear a heavier burden. We have given greater economic security and a higher standard of living to millions of people in this country. At every opportunity, we have stood up for those who want to work and do the right thing. We have promoted work and helped create the opportunities to work. We have helped people to achieve their goals and secure themselves a brighter future. We have done all this while cutting the deficit and creating the highest growth in any of the major advanced economies. It is a record we are proud of, and one we will continue.
Greece
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Mr Osborne
I can give that reassurance to the residents of Sutton and Cheam, and indeed of the rest of the UK. This country’s budget deficit remains too large. We have taken important steps to strengthen our banking system, and now we must ensure that it remains competitive and healthy, which is why we are taking steps to exit from Government shareholdings. Of course, in the Budget and in the spending review this autumn we will take further steps to deal with our budget deficit and run a surplus in normal times so that we are better prepared for whatever shocks the world throws at us.
Catherine West (Hornsey and Wood Green) (Lab)
Will the Chancellor confirm that a solution to the Greek financial crisis depends on a long-term political negotiation to keep Greece in the EU, that our Government have an active role to play in that, and that failure to agree a political settlement will undermine any future argument we might wish to pursue for the integrity of the European Union as a whole?
Mr Osborne
It is fair to say that Greece’s membership of the European Union, as opposed to membership of the eurozone, was an important step in that country’s transition from fascist dictatorship to democracy and in entrenching that democracy, and I think that view is broadly held by the Greek people, whatever their views about the current financial situation or their membership of the euro. I repeat that whatever happens we stand alongside Greece as an important member of the family of European nations.