Budget Resolutions and Economic Situation

David Morris Excerpts

Wednesday 16th March 2016 Commons Chamber

[Tommy Sheppard (Edinburgh East) (SNP)]

I would like to start on a positive note by welcoming the Chancellor’s statement on the sugar tax. He may well want to consider whether he needs to wait a full two years to bring it in, but none the less it is a welcome start, and I commend him for it.

I am afraid that is where my generosity towards the Chancellor, his Treasury team and this Budget must end, because I see the rest of it in exceptionally negative terms. This is a Chancellor, after all, who is making a career out of failure. He has failed every one of the macroeconomic targets that he has set for himself. If we were to score him on a report card, we would have no option but to give him an F-minus. I think that when he began to prepare this Budget he was looking at failing in his final objective, which was to create a budget surplus by 2019. I would like to pause to ask what that is actually about, because a surplus in Government finances is quite a strange thing. It means that the Government are spending less on this country’s public services than they is taking in taxes from the people who depend on them. That is a strange thing to aim for.

I wonder why the Chancellor is so concerned to have a £10 billion nest egg in 2019-20. It would not have anything to do, would it, with the proximity of the 2020 general election and a Chancellor who is determined to see a longer career for himself in this House, perhaps in a different position? In fact, I wonder whether the Chancellor has less of a long-term economic plan for the country and more of a long-term political plan for himself. In order to get the £10 billion surplus, he has decided that he has to have another range of cuts, with £3.5 billion being taken out of non-protected Departments. I dread to think what that will mean when we work through the detail.

We have to ask ourselves: is there no alternative to this austerity being piled on top of austerity? There is an alternative. We said during discussions on last year’s Budget—and we will say it again this year—that rather than cut back on public spending, a prudent Government should have a slow, sustained increase over the lifetime of this Parliament in order to use the public sector as an engine for economic growth to raise revenues, eradicate the deficit and drill down on the debt. That is received economic wisdom in most of the world, including most of our competitor countries, most of the members of the European Union and the United States of America. It is only the City of London and the United Kingdom Treasury that are blinkered to that very obvious approach.

This is also a Budget for inequality. If we look at the middle income range, we will see that someone who earns £35,000 will benefit by about £180 a year from the increase in the threshold for the basic rate of income tax. However, someone who earns £45,000 will benefit by £580 a year—more than three times as much. In what parallel universe could that approach be described as removing inequality in our country?

And that is only if people are lucky enough to be earning enough wages to be taxed in the first place. Even with the Chancellor’s pretendy national minimum wage, if someone is earning £7.20 an hour over 30 hours a week, they will not meet that basic income tax threshold. This Budget does nothing for the millions of people who are in that position. It does nothing for the people who are on fixed or low incomes, or for those who, because of their situation, have to rely on state benefits.

Is not the cruellest thing of all that, while tax breaks will be given to people who can afford to pay their taxes, there will be miserly and parsimonious cuts to the benefits of the most vulnerable in our community? The Department for Work and Pensions is preparing for a £1.2 billion cut in the personal independence payment programme. That will involve assessing 640,000 claimants, 200,000 of whom will be removed from the benefit altogether, while the rest will have their benefits reduced from £85 to £55 a week. What a miserly, mean-spirited, mean-minded approach to providing a welfare system.

The Chancellor has made much of this being a Budget for business. Before I came to this House, I started and ran a successful small business. I welcomed the day that it did well enough to pay corporation tax, because it took a few years to get there. The Chancellor talks about this being a nation of shopkeepers, but there are plenty of shopkeepers in my constituency who are less worried about the rate of corporation tax than they are about whether enough people are coming through the shop door with enough money to buy their products and to keep them and their employees afloat. Rather than tinkering, it would be better to consider a programme for economic growth and regeneration.

Let us not kid ourselves that it is small businesses that will benefit from the one-size-fits-all business tax approach. A business that makes a £20,000 profit pays the same rate of tax as a business that makes a £20 million profit. That means that most of the £15 billion that is being given back in the business tax cuts is being given back to large multinational corporations that are the friends of the Conservative party and of the Chancellor.

[David Morris (Morecambe and Lunesdale) (Con)]

Will the hon. Gentleman give way?

[Tommy Sheppard]

I will not give way, because I have a minute left and others want to come in. I say to the small businesspeople of this country: “Be very wary about what is being done in your name. This is not the way to make your business successful; it is a tiny little bribe.”

I am out of time, but I want to finish on the Chancellor’s suggestion that this is a Budget for the next generation. God help us if he really believes that. The next generation have just had the remaining grants for education removed from them. They are faced with living with their parents well into their 30s and 40s because their housing options have gone, and they are now being told that they may have to work until they are 80 years old. I do not think that those people will thank the Chancellor for this Budget. They will expect the Government to do an awful lot more to provide them with the future that they require.

--- Later in debate ---

[Helen Goodman]

I do not mind whether I get the answers today, next week or even in a letter from the Treasury. One of my questions is about infrastructure in the north. The increase in spending on that infrastructure is only £300 million. We see in the Budget:

“£75m to fast-track development of major new road schemes including…the…A66”.

When is the A66 going to be widened? I am not talking about getting some little feasibility study done. When will we actually get a change to the infrastructure, which is so essential for people who make things in the north-east and sell them to the rest of the country?

[David Morris]

Will the hon. Lady give way?

[Helen Goodman]

I would rather not take another intervention, because I am running out of time.

On the skills gap, there is no evidence that changing the governance status of our schools will make any difference to their effectiveness. In four academies in my constituency, GCSE scores have fallen in the past three years. At one point they achieved a figure of 66% of children getting five A to C grades, but last year they were down to 50%. There has been no analysis of such falls.

It is regrettable that the Chancellor has not produced any distributional analysis along the lines of what we on the Treasury Committee have repeatedly asked for—in other words, an analysis of the impact by decile of tax and benefit changes in this Budget. It is absurd that we have to wait for the IFS because the Treasury is trying to hide the impact of the measures in the Budget.

Many hon. Members have pointed to the unfairness of the measures that will give people £700 million through cuts to capital gains tax and give higher rate taxpayers £400 million, but take £1.2 billion from disabled people. This is not only about fairness, but about economic efficiency. The OECD has looked at all economies and has found that more equal societies grow faster. Giving money to the bottom half of the income distribution raises the growth rate by 0.4% for every 1% redistributed, whereas giving money to the rich hinders growth and slows it down.

There are a number of hidden things in what the Chancellor is trying to do. Table 2.1 in the Red Book sets out the £3.5 billion of cuts that he needs to make to hit his fiscal target in 2019, but it does not specify which Departments those cuts will come from. We would like Ministers to explain that.

The Chancellor flunked the tax reforms on pensions, because he is concerned to maintain support in the run-up to the referendum.

[David Morris]

I am waiting to hear what the hon. Lady will say about pensions, but does she not agree that setting up a young people’s ISA so that they can put in £4,000 every year if they are under 40 years of age, with the Government putting in £1,000, will put them in a better position in their old age?

[Helen Goodman]

If I may say so, what the hon. Gentleman says is somewhat unrealistic and optimistic. Even the Treasury’s own figures on Help to Save, which were published this week, suggest that only one person in six will use the new scheme. People’s incomes have been cut, so they do not have the money to set aside large amounts for savings.

On tax reforms, my hon. Friend the Member for West Bromwich West (Mr Bailey) gave a thorough critique of the changes to business rates. We need to change business rates, and I was feeling quite optimistic about that until he spoke. There are questions for the Treasury to which everybody would like answers: what will be the impact on local authorities? What will the distributional impact be—where in this country will the changes to business rates have the most significant effect? Will such changes tip some local authorities into having even more serious financial problems than they have already?

It would be churlish not to welcome the new sugar tax on fizzy drinks and the measures on tax avoidance. The Treasury Committee is doing an inquiry on tax avoidance, and we will look at those measures in more detail.

As hon. Members may know, people who have been advised to have music therapy can go to or listen to operas that deal with their particular problems. At the moment, the Royal Opera House has an opera on about a regent who is trying to become the tsar, but he has to do some rather unpleasant things to achieve his ultimate ambition. I thought it would be ideal for the Chancellor to go to until I discovered that it was called “Boris Godunov”.