Budget Resolutions and Economic Situation

James Duddridge Excerpts

Friday 22nd March 2013 Commons Chamber

[Mr Duncan Smith]

I congratulate my hon. Friend on being picked out in the Budget—it is not often that people are picked out in a Budget. He should shake hands with the hon. Member for Stoke-on-Trent Central (Tristram Hunt). He was angry before the Budget, but waved his Order Paper to applaud the Chancellor during his speech. I do not blame the hon. Gentleman, because he helped to change opinion—[Interruption.] I apologise. I do not want to talk about that too much because he has a career ahead of him—I hope.

Finally, in a welcome move, we are raising personal tax allowances to £10,000 by the end of the Parliament. That measure, which is a result of a good coalition agreement, means that working families pay £700 less in tax than when the Government took office, and that almost 3 million more of the lowest earners will pay no income tax at all.

[James Duddridge (Rochford and Southend East) (Con)]

The concept that 24 million people are helped by that measure is somewhat difficult to grapple with. It is much better interpreted by individual constituency. In my constituency, for example, 38,062 people will be £700 better off, and 359 people will be lifted out of income tax altogether.

[Mr Duncan Smith]

I agree with my hon. Friend and thank him for reminding me that we need to centre the measure down to constituency level, so that hon. Members know what it does. With my right hon. Friend the Chancellor, I will endeavour to ensure that every constituency is informed about how many people will be lifted out of tax and how many will benefit.

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[Mr Duncan Smith]

Rather than advice, I will take that to be an instruction, gently and eloquently given. I can crawl with the best of them—I hope better than my opposite number, but he will make his own attempt. I will make progress and try to be quicker.

I will talk briefly about the single-tier changes for which we are legislating. They are not just about improving the prospects of workers today, but about securing their position as they enter retirement. I am enormously pleased that the Chancellor confirmed that the single-tier pension will start in April 2016, which is in keeping with our original timetable. That means that after 60 years of modifications and tinkering, we will deliver a vital overhaul of the pensions system as soon as possible. I pay tribute to the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), who has been instrumental in driving that forward. If anyone is able to say at the end of this Parliament, “I made a difference,” it will be him. I will ensure that his name is remembered for that.

We are successfully rolling out auto-enrolment, which will help up to 9 million people get into a workplace pension scheme. That is important as it will make saving the norm. However, auto-enrolment will not work unless it pays to save. That is the key problem that the Minister and I have been discussing endlessly. What is the incentive to save? Too many people in Britain have been spending rather than saving.

The single-tier pension is all about solving that problem. We are replacing the complicated two-tier system of the basic state pension, additional state pension and the other outdated add-ons with a single flat-rate payment. That means that people will know what they are entitled to and will be able to project forward so that they know what they need to save. They will know that what they save will go above the line and that they will be able to use every pound; it will not be means-tested away so that they cannot use it. At £144 a week, the new state pension will be set above the level of the means test.

We are ending the unfairness whereby many people reach state pension age, having scrimped and saved all their life, only to find that others, who did not make any effort, get the same income through the pension credit. That is unfair. This change is about fairness and making saving pay. Michelle Mitchell, the charity director general of Age UK, said:

“The government’s proposals for a single tier state pension could help transform retirement for future pensioners, bringing clarity and stability to a system which is currently opaque and unfair.”

In 2020, three quarters of new pensioners will get a higher state pension following the introduction of single tier. That will benefit those who have historically had poorer state pension outcomes in particular. There will be better provision for the low-paid. Some 60% of low-income pensioners will see their income in retirement increase by 2040, compared with the current system.

Critically, there will be better provision for the self-employed, who, for the first time in about 40 years, will be treated the same as employees for the purposes of state pension retirement. There will be better provision for those with broken contributions, such as women and those with caring responsibilities. Some 700,000 women who reach state pension age in the 10 years after the single tier is introduced will receive £9 per week more on average. Implementing it in 2016 will benefit an additional 85,000 women who will now retire under single tier.

The single-tier pension is one of the big reforms, alongside universal credit, that will transform the landscape. It pays to work and it will now pay to save.

[James Duddridge]

Will my right hon. Friend give way?

[Mr Duncan Smith]

With respect, I am under the eye of Mr Speaker. Although he is invariably generous, given his admonition, I will make a little more progress to ensure that I finish on time.

Universal credit makes it pay to work. Alongside universal credit sits universal jobmatch, an online job searching and matching service that is revolutionising the way in which people look for work. Two million people are already registered. It is already allowing us to segment those who are out of work so that we can deal with the people who are the most difficult to get into work earlier than we could before.

From April, we will begin to replace disability living allowance with the fairer and more objective personal independence payment. We are also improving employment opportunities for disabled people so that they can live independent lives.

Finally, we are getting to grips with the housing benefit system, which the last Government allowed to run out of control. Housing benefit doubled in 10 years. We are dealing with the problems that we inherited.

[James Duddridge]

As well as being welcome to individuals, will not the simplification of benefits bring massive savings in the administration of the Department by making it much simpler not only to deal with claims at the outset, but to stop people coming to us repeatedly who have problems not with the outcome, but with the system and the bureaucracy?

[Mr Duncan Smith]

Absolutely. Our dramatic changes will allow savings to be made for the right reasons, such as improving efficiency. The system will be simpler and easier, so people will understand it better. The lack of complication will help to save more.

In conclusion, the Labour Opposition vote against our reforms again and again. On welfare alone, they have voted against savings of £80 billion. That money needs to come from somewhere. They do not say where it would come from, apart from borrowing. Once again, that is backward logic: borrow more to cut borrowing; spend more to cut spending. Meanwhile, the Government are changing the culture of welfare and Government spending in the country. We are backing people who want to work hard and get on in life, and taking bold action to ensure that we succeed in the global race. It pays to work. It pays to save. The Chancellor’s Budget delivers sound public finances and a fairer deal for working families. It has all the right elements and I commend it to the House.

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[Mr Byrne]

The chief economist to the IMF has been clear that a different fiscal strategy is needed. Indeed, the Secretary of State for Business, Innovation and Skills hinted that what was needed at the moment was a whacking great boost in capital spending, and the Deputy Prime Minister has admitted that the Government cut capital spending far too fast. That is why we have set out clear, costed plans to increase capital spending and change course.

The Chancellor and the Prime Minister bear responsibility for that catastrophic failure and the failure of their fiscal plans, but, let us be honest, they have been aided and abetted by the Secretary of State for Work and Pensions, who has proved incapable of translating his fabled welfare revolution into practice. There could not have been a worse curtain-raiser to Budget day on Wednesday than the unemployment figures that we saw at 9.30 am. Halfway through this Parliament, unemployment is higher than it was at the general election—and it is not going down, it is going up. [Interruption.] I do not know where Government Members were on Wednesday. Unemployment rose on Wednesday. Youth unemployment went up by 50,000 on Wednesday. Unemployment among women went up, not down, on Wednesday. Government Members would do well to live in the real world for once.

[James Duddridge]

Will the right hon. Gentleman give way?

[Mr Byrne]

I will happily give way to the hon. Gentleman. Will he admit that unemployment rose—

[Mr Byrne]

I am grateful to you, Mr Speaker, but I am happy to give way.

[James Duddridge]

I thank the right hon. Gentleman for giving way. I thought he had already given way, which is why I started. I apologise to you, Mr Speaker, and to the right hon. Gentleman who has been kind to give way. The only point I wanted to make was that since 2010 employment has increased. Yes, in my constituency there was a short period last month when unemployment was reported to have gone up, but even on a year-on-year basis employment has gone up and unemployment has gone down for both men and women.

[Mr Byrne]

Unemployment is 50,000 higher than it was at the general election. Those are the facts and the hon. Gentleman cannot deny them.

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[James Duddridge (Rochford and Southend East) (Con)]

Thank you for calling me, Mr Deputy Speaker. [Interruption.] In my rush to speak, I almost ended up advertising an election leaflet for the Conservative party. It was not intentionally aimed at Opposition Members.

I would like to focus on two quite technical issues that have not been raised but are worth raising, and then turn to some issues affecting Rochford and Southend East, the constituency I have the honour of representing. The first issue is the change to shares and stamp duty on shares on AIM—the alternative investment market. Although the change will not make the front page of the Southend Echo this morning, it will help the longer-term regeneration of small and medium-sized enterprises. However, this is not just about aspiring individuals for an aspiring nation; it is also about aspiring businesses that want a step up. Floating more companies on AIM and raising equity is essential. Reducing stamp duty on AIM, which represents only 6% of shares, is a step in the right direction that will allow small and medium-sized companies in Southend and elsewhere to raise equity, rather than having to rely on banks, which we all know have their own set of problems.

The Government have taken a step in the right direction. I hope that in future Budgets they will consider extending the decision to the other 94% of shares, to allow greater participation by small and medium-sized companies. That would also improve the liquidity of the London financial markets, which, although liquid enough to support basic transactions, will benefit from greater liquidity, which would mean cheaper financing for small and medium-sized enterprises, allowing them to grow further.

The second thing I would to note—again, it will not make the front page of the Southend Echo tomorrow, although I think a number of families will appreciate it when they start to benefit from it—is the change to the child trust fund regulations. The previous Government gave away £250 that could be put in a child trust fund—either a cash fund or an equity fund. This Government did not think that was affordable and introduced junior individual savings accounts. As all those changes were unwrapped, some anomalies emerged. Most people did not put in more money, which was what the previous Government desired; rather, most people’s children had just the £250. Firms are putting up their charging rates disproportionately—for what is, in the case of equities, essentially an index tracker—and people are locked into the funds.

To be frank, I feel a degree of sympathy for the financial services companies involved, because 1.5% on £250 plus a bit of growth does not even pay for the stamp on the statement at the end of the year. However, measures in the Budget will mean that such funds can be converted into junior ISAs. I have not seen the detail—I am not sure whether it has come out of the Treasury—but I would also encourage the Treasury, as well as looking at actual transfers, to consider allowing people, if they choose, to leave the fund to one side and still open a junior ISA. At the moment, people cannot have both open at the same time.

Those are two quite detailed, technical points in the Budget. I should apologise, Mr Deputy Speaker, for being unfamiliar with the process, but I think that at the beginning of my speech I should have drawn Members’ attention to the Register of Members’ Financial Interests and some work that I do outside the House.

My constituents in Rochford and Southend East talk to me about the cost of fuel—not only individuals, but businesses. In the run-up to the Budget, staff at Churchill’s sandwich bar, where I always get my panini on a Friday—it is very good and I recommend it to all hon. Members who visit my constituency—told me about the fuel cost not just for the business but for their suppliers. The cost made a difference to individuals, even within a sandwich business. When we leverage that up to show the costs to our constituents of other goods with greater transportation costs, we can see that the Budget will not just help aspiring companies. A van driver could save up to £340 a year, a haulier more than £5,000. Those are big numbers and this will assist people.

I welcome the non-increase in beer duty—the reduction by 1p. That will not transform the economic outlook of the United Kingdom, but it is a nice hat-tip to the direction that the Government would like to take in future as we do more for hard-working families.

The £10,000 personal allowance is enormously significant, particularly for young mums looking to get back to work. It provides clarity about the lack of bureaucracy in taxation and all of the first £10,000 will go into their pockets, rather than into tax. There is a barrier to entry to work, not only because of the growth of the economy but because of confusion about the interaction between the benefits system, which has been overly complex, and the taxation system, which has dragged in far too many people too early and too low down the salary scales.

I have been disappointed by the tone of the debate. I am a great fan of the right hon. Member for Birmingham, Hodge Hill (Mr Byrne). It is important to be candid when writing and it is an excellent idea to tell people what one wants, although the details about the cappuccino and so on might have gone a little over the top. The infamous letter that said, “Dear chief secretary, I’m afraid there’s no money left. Kind regards and good luck, Liam,” was not the total picture—even though in humour it is good to be brief. There is no money left and they maxed out the nation’s corporate credit card. I will give way to the right hon. Gentleman if he wants to apologise.

[Mr Byrne]

I am grateful to the hon. Gentleman for offering me that opportunity. He will know that I also left a Budget, drafted with my right hon. Friend the Member for Edinburgh South West (Mr Darling), who was Chancellor at the time, that would have halved the deficit over four years as opposed to putting the total debt burden of this country up by £245 billion, which is what his Government have secured.

[James Duddridge]

I am grateful to the right hon. Gentleman for that intervention and for the extra minute of time he has given me. If that was truly the sentiment and he felt that that was the case, why did he not leave that in a note? He left a candid note that gave half the picture.

The truth is that the previous Government ran down the economy. It is as if the nation were a family, and two individuals within that family had been given responsibility for the finance and budget for 10 years each. One spends and borrows and enjoys the good times, and the other has to clear up the mess.

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[Mr Brooks Newmark (Braintree) (Con)]

I almost choked on my cornflakes this morning when reading Jonathan Portes’s blog. We have to remember that Mr Portes, like Mr Blanchflower, is an arch-Keynsian and proponent of plan B—borrowing more money in a debt crisis. Referring to Robert Chote and the Office for Budget Responsibility, he observed that the OBR has shown

“that, as a percentage of GDP, the deficit has indeed fallen by a third. The Chancellor is correct.”

He went on to say:

“The UK’s underlying economic strengths remain, as the current health of the labour market illustrates.”

The Budget and, indeed, the performance of the Chancellor and his team at the Treasury have much to commend them. If we remember, three years ago, UK plc was on the verge of economic collapse. We were living far beyond our means, and the Chancellor’s emergency Budget in 2010 sought to address that problem. Two and a half years later, where are we and what progress has been made? First, the deficit is indeed down by a third. Annual borrowing has come down from £159 billion and is almost under £120 billion. We have more men in work than ever before, and we have more women in work than ever before. Indeed, the amount claimed in jobseeker’s allowance in Braintree, my constituency, has dropped by 11%. We have created more than 1.25 million jobs in the private sector. We have created 250,000 new businesses, so the Chancellor, the Treasury and the Government have much of which to be proud.

It is true, however, that growth has not been as robust as we would like, and neither has the pace of Government debt reduction been as fast as we would like. The reason is a combination of the crisis in the eurozone, which has become worse since the emergency Budget, and the inflationary impact of energy costs—a fact acknowledged by Mr Chote and the OBR. The bottom line for many of our constituents is a record level of employment. In other words, more people are in work than ever before. We have record low interest rates, which means that more homeowners have low mortgages and businesses have low interest payments.

This week’s Budget seeks to build on the strong foundation established by the original emergency Budget, addressing the need to help those who aspire to work hard, as the Chancellor said. It is a Budget to help families. Indeed, as we have heard, the personal allowance, which has been raised to £10,000, will help, as there will be a tax cut for more than 24 million families—or, in my constituency, 38,391 families. Families, in fact, will pay roughly £700 less than they did in 2010—2.7 million families will be taken out of tax altogether, or, in my constituency, 3,905 families. Fuel duty will be frozen, saving people, particularly in rural areas in my constituency, £7 every time they fill up the tank, compared with what would have been under Labour.

We will help a typical family with two children under 12 with child tax credit to the tune of £2,400— 2.5 million families will benefit from that. There is help, too, to enable people to get on the housing ladder, with the shared equity scheme that the Government have proposed, as well as the mortgage guarantee scheme. It is a Budget to help businesses. The new £2,000 employment allowance will help the average business to hire an extra person for £22,400 or, hopefully, four young people on the minimum wage. I pay tribute to Lottie Dexter and the Million Jobs campaign, which tries to help young people to get back into work.

Some 450,000 small businesses and a third of employees will pay no jobs tax at all. Corporation tax will be driven down from 28% to 20% by 2015, which will make it the lowest such tax in any G20 country. Help to Buy will help the building industry which, we all know, has been struggling. In my constituency—the constituency of white van man and Essex man—I have many entrepreneurs such as electricians and plumbers, and the scheme will help them to secure much-needed work. There is help, too, for angel investors and entrepreneurs. I have been plugging the seed enterprise investment scheme, and on capital gains tax for reinvestment in qualifying schemes there will be another holiday for another year. I commend that measure.

[James Duddridge]

I recall that in the Budget, the Chancellor praised my hon. Friend in relation to that work. What advice can he give me and other hon. Members on how best to promote those schemes in our constituencies, as that seems to be a really good way to drive growth?

[Mr Newmark]

This is an important scheme, because it will help angel investors and people starting businesses. There is a gap in the market, and funding has been lacking. The tax scheme is highly attractive, and offers 50% off income tax. For example, for a £10,000 investment, people will get £5,000. If they hold the investment for three years, it is capital gains tax-free, so it is highly attractive.

Labour got us into this mess. Having listened to the responses from the Leader of the Opposition and the shadow Chancellor, I do not think they have a solution to the country’s problems other than plan B, to borrow more. That would cost up to £200 billion more, according to the Institute for Fiscal Studies. We have already had a debt crisis. Labour’s plan would cost an average family £2,000 more.

The Chancellor has set out a Budget for those who work hard and want to get on. This Budget backs families; this Budget backs jobseekers; this Budget backs drivers; this Budget backs home buyers; and this Budget backs businesses. The Government are clearing up Labour’s mess, they are backing those who want to work hard and want to get on, and they are moving Britain forward. I commend the Budget to the House.