John Redwood
Main Page: John Redwood (Conservative - Wokingham)
John Redwood (Wokingham) (Con)
I have declared my business interests in the register, but I am not going to be talking about them.
I welcome this Budget. I particularly welcome the decision to provide some more money for crucial public services. In Wokingham and West Berkshire, we need more money for social care, and there is some in the Budget. We need more money for our local surgeries and hospitals, and a lot of money will be coming through for the health service in the years ahead. I just urge the Government to ensure that it is well spent and that there a proper prospectus before the money is finally committed in detail.
We definitely need more money for our roads and local transport. I am pleased to see funds with imaginative ideas to improve flows and safety over junctions and to ensure more roundabout junctions and improvements in strategic local route networks. I will be working with West Berkshire and Wokingham Councils, encouraging them to come forward with schemes that I hope qualify, because these are important to the productivity of my part of the world and, indeed, any part of the United Kingdom. Anyone with customers or clients in their area who goes to work daily in a van or car cannot book as many appointments as they would like and might lose one or two contracts each day because they are spending far too many minutes or even hours in traffic jams, particularly at the busy periods of the day. We therefore need to improve flows, which can also improve safety and lower fuel usage, which would be great benefits.
I also welcome the way that the Chancellor is injecting a bit more money into the economy, because there has been quite a sharp fiscal and monetary squeeze administered to the economy since March 2017. The story so far is one of dreadfully inaccurate forecasting by the OBR and the Treasury. We had the idiotic, wild forecasts about how we would have a recession, falling house prices and a big increase in unemployment if we voted to leave the European Union. They said that that would happen in the winter of 2016-17, whereas I am pleased to say that the economy continued to grow pretty well until March 2017. Jobs and employment went up and house prices did not tumble in the way that was forecast, because Brexit was not bad news. A lot of people thought that Brexit was very good news, and they went out and spent a bit more money because they liked it.
We then had a fiscal and monetary squeeze. The Bank of England has put interest rates up, and it withdrew special lines of credit from the clearing banks and issued instructions to lend less against cars and certain types of houses. That had a visible impact on the car and housing markets. We had a fiscal squeeze, because as we see in today’s figures, in this year alone £7.4 billion more has been collected in tax and £4.5 billion less has been spent on public services than was forecast in March. There has therefore been a £12 billion—I presume unplanned—fiscal squeeze on the economy since March, and there was also a squeeze in the previous year, combined with a rather sharp monetary squeeze, whereby money growth has now halved, as a result of what I think was the Bank of England’s fairly untimely and overdone interventions. I do not think there is a huge inflation problem out there, and I think the action that it has taken is too strong.
I am therefore delighted that something has been given back. What the Chancellor is giving back next year—about £11 billion—only matches the £12 billion of the squeeze that was being taken out this year. The OBR says, “This is a big giveaway,” but it is not actually a giveaway compared with what it said as recently as March this year. One needs to put that into perspective.
We now have to discuss what impact Brexit will have. All the forecasts grossly exaggerate the economic impact of Brexit. It is an extremely important political event, but I do not think we will see it on world economic graphs when we look back in two or three years’ time, and I think we would be hard pushed to see it on the graphs of the UK economy as well. The effect could be reasonably neutral. If we go for a no-deal Brexit because, unfortunately, the EU does not offer us something that is better than no deal, or if there is a continued breakdown in the negotiations—at the moment, the Chequers plan does not look very popular with the EU—then, yes, the Chancellor is right that we will need an additional Budget, but it will be a Budget full of good news because it will be the Budget to spend the £39 billion.
An awful lot of Brexit voters voted in part to take back control of our money. The OBR confirms that if we go ahead with the withdrawal agreement it has in mind, we will indeed be asked to spend £39 billion, sending that money over the exchanges to be spent in relatively rich continental Europe rather than having it available for our own priorities here. So will it not be great to have a Budget to confirm that we can spend £39 billion in a no-deal scenario?
Sir Henry Bellingham
A moment ago, as my right hon. Friend will recall, I also made the point about the £39 billion. It is incredibly important that the Government clarify the situation on that, because some Ministers are saying that part of it is owed contractually in many different ways, while other Ministers are saying that the whole lot would revert to the Treasury in the event of no deal. Surely, the Minister must clarify that when he winds up.
John Redwood
I have looked into this. I have taken advice from lawyers. I have also read the report from the House of Lords—not a known bastion of leave enthusiasm. Its legal conclusions were wholly admirable. It said, “No, there is no legal requirement to pay a penny to the EU after we have left.” If we leave on 29 March 2019, we would definitely save that money. There is no requirement to pay. We did not get a bonus when we joined the thing, because there were lots of inherited liabilities, so we do not have to go on paying for liabilities after we have left. That is quite an absurd proposition. We should be able to grasp this opportunity.
If we were able to spend that £39 billion over a three-year period—I know that it is spread over three years and does not come all in one year—there would be, over that period, a 2% boost to the UK economy. That could take our growth rate back up to about 2% per annum. The OBR forecasts are a bit gloomy, and it could be that our economy has grown by only 1.5%, but that is underperforming. We need to ask why that is, and it is certainly nothing to do with Brexit. The reason the growth rate fell is, as I say, deliberate policy by the Bank of England and possibly inadvertent policy by the Treasury creating a combined monetary and fiscal squeeze. This Budget does something to start to lift the fiscal part of that squeeze, and that is very welcome.
It is crucial that we do end austerity. I am absolutely with the Prime Minister on this. Indeed, I fought two elections on the proposition that we want prosperity not austerity. I strongly agree with the Chancellor that we should define austerity, as the public do, in its wider sense. Austerity does not just mean not having enough money for social care, which we need to remedy; it means that people’s real wages have not gone up enough or at all, so they are not better off. People expect us collectively, as a result of our interventions in the economy and our supervision of the general position, to help them to progress and have real income increases so that they can afford more and improve their lifestyles as they go on life’s journey. That is what we should be doing. We should be in the business of promoting more jobs, better-paid jobs and lower taxes so that people keep more of the money from those jobs and the income they are earning. I therefore welcome the bringing forward of the income tax reductions, which will be very helpful.
I also strongly support tackling the problem of low pay. There is still too much low pay, and I am glad that the Government regard this as an important issue. We need to do more on productivity measures, because the real way to eradicate low pay is by higher productivity: “work smarter and get paid more” is what we need to be thinking and doing. That requires a whole raft of the policies that were mentioned in the parts of the Budget document on education, training, transport and many other areas. That will contribute to making a more productive economy.
I am fully behind the Government’s aim of banishing austerity. I am fully behind the aim of getting real wages up and allowing people to spend a lot more of their own money. I want the £39 billion because that would be a really knock-out blow in getting a stronger and better economy.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
It is a shame that I have only eight minutes, because I could use all those eight minutes to rebut some of the views just espoused by the right hon. Member for Wokingham (John Redwood).
If this was an “austerity is over” Budget, I invite the Chancellor to come to my constituency and see the challenges there, particularly with housing and homelessness, which I want to address. However, I must pause for a moment to touch on the views of the right hon. Member for Wokingham. The idea that we do not have to pay the £39 billion if we crash out of the EU is not the case. We have certain contractual obligations; I could go through them all in detail. In particular, there is the pension liability that we have for many of our own people who worked in Europe and have those pensions, and there are many other commitments that we have entered into. It was the Prime Minister— was it not?—who said that we are a country that pays what we owe, and we do owe money.
John Redwood
I do not think the hon. Lady understands. The bulk of the money is payments for another 21 months in the EU that we would not be making if we simply left.
Meg Hillier
It is about commitments that have already been made, and we have to pay our share of that as we were members at the time.
The Chancellor talked about this Budget being for strivers, grafters and carers, and he said that austerity was not driven by ideology. His own phrases demonstrate, as austerity has demonstrated every step of the way, a disconnect with the reality of people’s lives. He talked about 3.3 million more people being in jobs and the proportion of low-paid jobs being at its lowest. I wonder what measure that was based on, because very many of my constituents have low-paid and insecure jobs working on zero-hours contracts, which may have their place for certain people but not for those who are trying to pay the family bills and trying to pay the rent on time. In my constituency, we also have huge issues with housing, on which, as I say, I will go into in more detail.
The digital services tax is very interesting to me as the Member representing Shoreditch and all the tech businesses there, including some of the big players. This is only a consultation, of course. The big question, as my hon. Friend the Member for Leeds West (Rachel Reeves) highlighted, is whether it will deliver a result. If it only levies up to £400 million, as I think the Chancellor said, it will not recover the tax that some of the big tech giants have avoided through their complex multinational tax arrangements. I will be watching this closely, not least to see whether those big players will cough up, but also to make sure that the growing start-up businesses in my constituency will be protected as the Chancellor has said. We need an ecosystem of tech businesses. We need those start-ups to start and grow in Britain so that they become the big employers and the responsible taxpayers of the future.
On local government funding, the £650 million in grant funding as a one-off is not good enough. We have had so much money taken out of local councils. Their real-terms spending on social care, for example, reduced by 5.3% between 2010 and 2017, while the number of over-85s rose by 28% between 2006 and 2016—a slightly longer period. The £20 billion for the NHS does not cover social care. It may make small contributions, but on its own it is not enough.
Since 2010-11, in my own borough, Hackney Council has had £130 million cut from its core grant funding from the Government. Dividing the £650 million by the number of local authorities in the country, Hackney will get a tiny amount, possibly for only one year, I think the Chancellor said—obviously, I have not had time to go through the Red Book. The cuts to Hackney so far are the equivalent of £471 per head—one of the largest cuts in England. In terms of spending power, Hackney will lose £1,425 per household between 2010 and 2020—the highest amount in the country—and we have £30 million more of cuts to find.
We are having big discussions about some budget cuts with Government, particularly for special educational needs, which Hackney Council has been cross-subsidising since 2011 from other parts of the budget. There is only so far that we can squeeze before the pips squeak, and the pips have been squeaking for some time now in Hackney.
I will not repeat what my right hon. Friend the Member for Birkenhead (Frank Field) and my hon. Friend the Member for Leeds West said, but suffice it to say that the problems with universal credit were predicted, foreseeable and exacerbated by the £2 billion of cuts under the former Chancellor. The Public Accounts Committee has been looking at universal credit since 2012, and our voice was added to a chorus of concern. The Government just have to listen, but they are detached from the reality of people’s lives.
In the past, there has been broad cross-party consensus on universal credit. It is still not Labour policy to completely get rid of it; there would be a pause, a review and an assessment of what could be done to make it work, because it would be very difficult to unpick it now. If we want universal credit to work, we need a Government who are listening and understanding people’s needs. My hon. Friends have outlined the problems.
For my borough, housing and homelessness is the really big issue. In London as a whole, almost nine in 10 households believe that there is a housing crisis in the capital. In Hackney, a borough-wide survey in 2015 showed that housing affordability was the top concern for residents, and things have got worse since then. The average house price in Hackney South and Shoreditch is £530,000 as of March this year. Hackney now has 34,000 privately rented homes, which is around 30% of all homes in the borough—a proportion that has more than doubled in the past decade. Rents in the private sector are astronomically high and out of many people’s reach. Rising rents have meant that the average two-bedroom property now costs £1,820 a month in the private market, which is over £300 a month more than in 2011—and that is if people are lucky; many are more expensive than that.
The brutal reality is that, given the cap, housing benefit does not pay the rent on any three or four-bedroom property in my borough or in many boroughs. In London and the south-east in general, people will find it hard to pay their rent if they are relying on housing benefit. Let us be clear: the majority of people claiming housing benefit are in work, which puts the lie to what the Chancellor said about employment solving everything. Of course employment is important, but the jobs have to be decent enough to pay the wages.
A 2017 report by Shelter ranked Hackney 10th in a list of the 50 areas in the country with the highest levels of homelessness—something the Chancellor did not mention. According to that survey, one in 44 Hackney residents were either sleeping rough or in temporary accommodation. This is a real issue. My surgeries are full of people who are desperate: women sent home from hospital with a baby and toddler to a hostel where they have been living for 18 months or two years. Four or five years ago, they were waiting only six months. Six months in a hostel was bad, but 18 months has a destroying effect on family life, the ability to work and the ability of children to study.
There has been a 300% rise in homelessness in Hackney since 2010, with 3,000 households now living in temporary accommodation. Hackney’s bill for temporary accommodation has gone up from £26 million in 2013-14 to £54.8 million—an increase of over 100%. That is money down the drain—money that is not helping people, but just keeping a vague, bare roof over their heads and nothing more.
My hon. Friend the Member for Leeds West touched on education. It is important to highlight that we in Hackney have some of the best schools in the country. We heard that there will be a £400 million in-year bonus for some little extras—what a patronising way to provide money for our children’s education. That means £10,000 for a primary school and £50,000 for a secondary school on average, which is not even enough to pay for the teachers they are having to shed, not enough to make up the short weeks they are having to introduce and not enough to reintroduce the full curriculum that they have had to cut.
I have not even had a chance to get into the details of Brexit or the fact that policing is under such siege in our city and in my borough. Extraordinarily, for the first time in my 13 years as an MP and 25 years in elected office, I have had a stream of people coming to my surgeries saying that the police did not investigate something—not something they would normally come to an MP about. It is becoming a pattern, because we have lost a fifth of our officers in Hackney.
To finish on a positive point, I welcome the business rates relief, if the revaluation delivers what the Chancellor says it will. I have lobbied for that in the past. But on the rest, austerity is not over for my constituents—it is still biting hard—and the Government have got to get in tune with the lives of real people.