Budget Resolutions and Economic Situation

Catherine West Excerpts

Tuesday 14th July 2015 Commons Chamber

[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.

--- Later in debate ---

[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.

[Catherine West]

Will the hon. Gentleman give way?

[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.