Amendment of the Law

Meg Hillier Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr David Lammy (Tottenham) (Lab)]

This is my first opportunity to speak about a Budget following the spotlight that fell on my constituency in the summer, so I want to begin by supporting some measures in it. Business and shopkeepers on Tottenham high road recovering from the mayhem and violence, burnt shops, broken windows and the loss of business will welcome the simplification of taxes. Many of those small businesses still grumble and talk about the complexity of such regulation.

There has been a lot of concentration in the House over the past few months on the undeserving poor. There has been heated debate, and I have certainly made my views clear on issues such as housing benefit. I therefore welcome the fact that the Chancellor has concentrated his attention on those who play the system in another way, and that he has looked at unearned income and property taxation. The changes to stamp duty and capital allowances are to be welcomed.

I represent the constituency with the highest unemployment rate in London, and it is right that I ask, on behalf of my constituents, whether the Budget does enough to alleviate that tremendous problem. This is only a week after we discovered that 56% of young black men in Britain are unemployed. That is a huge concern which should be shared across the House. All unemployment, among all members of our population, is a disaster, and long-term unemployment leaves serious scars, but we should be particularly concerned about that statistic.

Much has been said about a feral underclass. I do not like the term. The word “underclass” summons up visions of the caste system in India and we ought to reserve the word “feral” for discussion of rodents. However, those in the House who either grew up on working-class housing estates or have significant housing estates in their constituencies will recognise a workless class—those on housing estates turning from being working class to members of a workless class.

I do not want to be completely partisan about that because there was structural unemployment in our system under Labour. We talked about that largely in the context of those not in education, employment or training. NEETs have remained a long-running sore in this country. However, it should be of huge concern to the House that in a constituency such as Tottenham, 6,000 people are unemployed and 21 are chasing every vacancy.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Does my right hon. Friend share my concern about the particularly high unemployment rate among young black men? It is a scourge that has existed in our society for far too long. The recent figures fill me with dread not hope, but the Government’s policies do nothing to help them.

[Mr Lammy]

My hon. Friend, like me, recognises that problem and will know, from the history of Hackney, that this is of such concern because in constituencies across the country, in areas as different as Middlesbrough, Hull, Tottenham and Hackney, we are seeing intergenerational worklessness. I hoped that the Budget would make some attempt to deal with that problem.

In my lifetime, there have been serious levels of unemployment twice before. There was huge unemployment in the 1980s, when it was higher than today, and it was even higher as recently as 1996, when more than 10,000 people in the constituency of Tottenham were unemployed. We are talking about a group of young unemployed people, aged 18 or 19, whose parents were unemployed and sometimes whose parents’ parents were unemployed. That is a disaster for our economy. When I looked at the scenes in August with tremendous and deep concern for what was happening on the streets of London, I realised that often some of the children of those who rioted last time were causing the same the problems this time. That is how scarring unemployment is and why we needed a Budget that got to the heart of growth.

It would be wrong, of course, if I did not welcome what has been said about the film and games industries, but it is right that in London I reflect on whether that will come to the constituencies that need it and matter. Although I of course welcome the decisions on capital allowances in the royal docks area of the east end of London, I want to make what may feel like a parochial point, but which is in fact a serious point. Are we committed to one London—where there are not inner cities, but just one city—or will we continue to show a preference for certain parts of London? Despite the huge problems that exist in the east end, it has Canary Wharf and the Olympics, and it now has a Mayor committed to a new airport in the Thames estuary. In north London, in a concentrated area of poverty in Tottenham and Edmonton, we have seen nothing like it.

With regeneration coming around the Spurs development, I would hope that we, too, might get those allowances. To deal with the jobs problem—I am talking not about highly skilled jobs, but about semi-skilled jobs and some jobs that do not require skills—we will need to attract private investment to give us those jobs. The danger now is that there is an incentive to go to another part of London, concentrating poverty even more deeply in north-east London in particular.

There is another issue in the Budget: not those without employment, but the working poor. We should remind the House that someone working in a constituency such as mine, here in London, might be a dinner lady at lunchtime and likely a cleaner in the evening, or a minicab driver during the day and a security guard at night. Such is the situation for those who are unable to make a living wage in our capital city. Of course, the changes to the personal allowance are desirable for those who are working. However, I might add that these are the very same families who saw their tax credits taken away in the last Budget, so this really is robbing Peter to pay Paul. As we know, those who will benefit from the changes will largely be middle-class families and those who are really well-off.

The decision to give a further tax break to those earning more than £150,000 a year will seem bizarre to my constituents, who have seen their incomes fall. Anyone travelling into central London on the tube from Seven Sisters station, either to look for a job or go to a job, is looking at spending £6.20 a day, whereas someone who decides to come down into central London on the 341 bus will have to pay £4.20 a day. Fares are up by 12% on the bus and 16% on the tube, under the reign of Boris Johnson. Those costs are huge for families with babies, who have already seen their monthly costs go up by £8.20 in just the last 18 months.

The cost of living is going up for the working poor, and there are huge concerns about worklessness, yet we heard nothing about how we are going to deal with that. We still have to wait for the introduction of the youth contract. We have also seen two thirds of apprenticeships in London go to those who are over 25, and it is not at all clear that we have got apprenticeships in the right areas of the economy in our country. What is the growth story? My constituents are still waiting to see what it is. There are huge concerns about equity and fairness in this Budget. I predict there will be further disturbances and concerns until we get a grip and deal with this emerging problem.

--- Later in debate ---

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I congratulate my right hon. Friend the Member for Tottenham (Mr Lammy) on the comments he made. For all the Budget figures that we talk about, real people are at the heart. I echo his comments, but I want to talk about the small businesses in my constituency, which I hope, and we all hope, will help to create some of the jobs that my constituents, like my right hon. Friend’s, so desperately need and want.

Hackney is very much a picture of small businesses, with more than 90% of them across the borough as a whole employing fewer than six people—and many of them even fewer than that. The vast bulk of small businesses are located in Shoreditch, in the southern part of my constituency. It is very much the heart of the creative industries and the tech city hub, with nearly 39,000 people employed there. In the Shoreditch town centre area as a whole, there are more than 4,000 in the tech area and more than 5,000 in the creative industries, with about 15,000 people overall. Shoreditch has 77% of the total town centre employment and 93% of all the technical employment.

The growth and dynamism of that area have been going on for some time—before, I have to say, the Prime Minister got interested in it. Of course I welcome any interest shown by the Government in my constituency, but I have to say that some local businesses worry that the increase in rents is partly a result of the talking up in government of the area. Many of the businesses have been there for a long time, as I shall touch on shortly.

[Ms Margaret Ritchie (South Down) (SDLP)]

Does my hon. Friend agree that today’s Budget simply imperils working families and particularly small businesses because it has no measures to mitigate the effects of fuel prices, which are already high in urban and rural areas?

[Meg Hillier]

My hon. Friend makes an important point. The fuel issue is not such a big one in my constituency because of our public transport links, but it is different in areas such as Northern Ireland. I recall having a conversation with a man in Carlisle. He said, “Tell them back in London”—I thought that was illustrative in itself—“that I spend more on fuel in a month than I do on food.” He was just an ordinary working man. It is important for the Government to understand the pressures on household incomes; there are important issues there.

The economy in Hackney South and Shoreditch is dominated by small businesses. It is very creative; we have a big fashion industry, and a digital industry at silicon roundabout. We are seeking to improve and increase that economy all the time. A lot of the small and micro-businesses are struggling. They are not getting the lending that they need from banks, because banks refuse to understand their business models, which are often innovative. They are not even able to get the working capital through overdrafts. That is a real issue. Overdrafts are treated in the same way as loans on the balance sheet. Many of the businesses that I deal with, especially those that are growing and have got to a certain stable point, simply need that facility; they are not seeking a loan. The interest rate cut makes no difference to them. They are seeking an overdraft facility, not a loan.

The interest rate cut announced yesterday makes no difference to those seeking a loan, either, if they have a business model that makes banks nervous about lending to them. One person said to me, “We lend only to vanilla companies”—that is, safe bets with well worn business models. We are talking about an area of bursting creativity, an area that is growing enormously and will and does create jobs, so we need a solution. Merlin was a damp squib; the magic wand did not work. I am not hopeful that the Chancellor’s announcement will make any difference to the small local businesses to which I speak.

There is another key issue for small start-ups. We need 600 desk spaces. For those who do not know the area, if they wander around it, they will see, in cafés, hotels and specially designed work hubs, people sitting with their laptop or iPad; they will be doing business in that fashion. Across the area, a few thousand desk spaces are rented out for about £350 a month. That is how a lot of people do business; they grow that way. In the Trampery, a shared desk space area in my constituency, one business has grown to the point of renting 13 desk spaces. It has decided to stay there because of the creative input, but also because it is a big risk to move from that fluid way of working to permanent premises. That is a type of business that Government and this Budget do not really understand.

As I say, rents have gone up enormously, which is a real challenge. As businesses improve and seek to stay in the area—crucially, they may employ local people if they are in the area for a long time—that causes problems. I do not want my constituency to be the nursery of businesses that move elsewhere simply because they cannot afford to stay. If they move elsewhere for good reasons, that is a different matter, but some of them are being forced out.

I want to give examples of what the Budget really means on the ground. Somethin’ Else is a media production company employing about 70 members of staff in Shoreditch. It has an annual turnover of approximately £8 million. Under Project Merlin, it was not able to get the borrowing facility that it wanted. It simply wanted an overdraft, but that was withdrawn from it overnight during the economic crisis. The company is quite interesting, because it produced a film called “somewhere to”, an Olympic-funded project run by Livity. It featured young people performing in No. 10 Downing street. The Prime Minister was so impressed by the work of the company that, as some Government Members will know, the film was played at the Conservative party conference before his speech in October last year. The very company that was paraded by the Conservative party as a success is struggling precisely because of Government policies.

Not Just a Label is an international business, an online fashion promotion platform. It is the only online fashion design platform in the world. It is present in 93 countries and represents 8,000 fashion businesses, including 1,000 in east London alone. It currently employs 15 people in very small offices tucked away in the back streets of Shoreditch. It is looking to expand and develop: it wants a design showroom to complement its virtual presence. That would involve the company doubling in size within six to 12 months, but traditional banks are not willing to fund that expansion, because they simply do not understand that business model. The “vanilla financing” line was used to that group.

Another business, Image Line, is owned by Sue Terpilowski, who is involved with the Federation of Small Businesses, so she knows a lot about what other businesses are putting up with. She told me that her business rates, for 2,200 square feet, went up by £8,000 this year. Rate increases have a big impact on businesses, and on the face of it, we can see nothing in the Budget on that issue.

There are other pressures on London businesses across the board—I am not talking just about Shoreditch now. London members of the Federation of Small Businesses are taking out loans or overdrafts at interest rates that are very high compared to those available nationally. Some 21% of London members of the FSB have loans or overdrafts at interest rates above 15%, compared with 9% of its members nationally. The 1% in question is merely a drop in the ocean in the context of interest rates that are that high. That issue must be tackled.

Has the Chancellor had any conversations with businesses about more innovative ways of providing working capital, such as the next generation funding models, including funding circles and crowd-funding? Such models might work for the new tech businesses in my constituency, but they need to be regulated. There is a lot of talk of one in and one out, but if we are to have innovative funding models, we need Government support to ensure that they are legitimate forms of funding and that scams do not happen.

The Chancellor has announced his seven short-listed funds. I have my doubts as to whether they will lend to the businesses I am talking about, especially when we consider the much vaunted Green investment bank. We hoped it would support new businesses, but we feel sure that it will be controlled by the Treasury and the available capital will go into some of the bigger known providers.

My constituents want to find work in the job-creating new tech businesses in Hackney, so skills is a key area. We have good support from Hackney community college, which has set up an apprenticeship scheme, working with the tech city hub. Thanks to Government funding, we in Hackney will have a university technical college, under principal Annie Blackmore, opening in September at the HCC. She and Ian Ashman, principal of the HCC, have been working closely to try to ensure that we develop the necessary skills through our schools and colleges so that young people in Hackney can secure these jobs. We must make a link with the people who live just north of Hoxton square and in the rest of my constituency, many of whom do not have access to these jobs because they do not have the necessary skills.

I cautiously support the Sunday trading proposals for the Olympic period, as I recognise that that is a welcome global event coming to my constituency. However, I am also concerned that the move could be a trial run for a permanent change in the law. The leaks about today’s Budget announcements were broadly accurate, and I worry that the leaks about the Sunday trading proposals, suggesting that the Chancellor has a secret mission to take on the low paid and families and to ensure that people will have to work long hours, might also be accurate. My local smaller businesses are also nervous about the proposal. The benefit of longer trading hours is very small for them, but it gives more succour to the big retailers, who are already putting a lot of pressure on such small businesses.

High broadband speeds are much needed, and Hackney council is already seeking to increase speeds, first in Shoreditch and then in Dalston. I do not know the timetable for that scheme. However, although the Chancellor says he is funding it, I want to know whether it is new funding and how quickly it can be drawn down. We certainly need these developments in Hackney.

The Chancellor has, through sleight of hand, suggested that the Government greatly support business. The small and medium-sized businesses in my constituency have yet to benefit, however, so there is a great deal of scepticism about the Budget. I want the businesses in my constituency to grow and the jobs to be created, but I am very worried that this Budget will not deliver.

--- Later in debate ---

[Chris Heaton-Harris]

I would not necessarily condemn them, but I would very much like them to answer the case on why they are doing that. I understand their business case, and people find it interesting when they start to talk to them. I like to think that the measures we have taken in the Budget, whereby we are trying to allow the flow of low interest rate money through our business sector in bigger and better ways—I think, for example, of the seven partners that the Chancellor is now looking at to do that in the future—are a valid way of proceeding.

I also welcome the broadband investment. My constituency is in the heart of England and could not be more different from that of the hon. Member for Hackney South and Shoreditch. My constituency is largely rural with lots of dynamic businesses, including lots of small businesses, based in it. However, we have awful broadband connection. When hon. Members talk about trying to get regular download speeds of 2 megabits, I look at them in awe, because my area is at the end of a copper exchange and we barely get speeds of 1 megabit. Where I live, I still watch my e-mails download, and plenty of hon. Members from across the country find themselves in exactly the same position. If we want proper inclusion across the whole country, we have to have fast broadband. I would settle for fast broadband, although superfast broadband would be a delight, and I very much welcome the measures we are taking on that.

I welcome—not because I am a Tory, but because I was in business—the fact that corporation tax is being lowered. We want to encourage businesses to invest. One way of doing that is by lowering corporation tax and I welcome the trajectory in which we are travelling.

I welcomed the waving of Order Papers when it was announced that this Government are lifting 2 million people out of paying tax, but—

[Meg Hillier]

Before the hon. Gentleman moves from the issue of small businesses, may I ask whether he has spoken to business people in his area about the possibility of a cross-Government body looking at small business administration to make sure that different Government policies do not have perverse outcomes, which Governments of all parties ought to consider?

[Chris Heaton-Harris]

As the hon. Lady knows from the Public Accounts Committee, where we have often talked about such matters, it would be lovely if Government Departments had a holistic approach to any area of policy. If we could start with small business, that would be fantastic, but I do not think we are quite there yet. That is something we would all support across the political spectrum and without political point-scoring.

I was speaking about the waving of Order Papers and the 2 million people being lifted out of paying tax altogether—a thoroughly good thing, which I would like to think is welcomed in all parts of the House. It benefits everyone who is working—people who are trying hard for themselves, have got on the job ladder and are moving forward. I benefit. From what I see on Twitter and other media sources, if people are earning around £60,000, have children and drive a car, they are not in a great place after the Budget. That includes most Members here. We have managed to produce a Budget that penalises MPs, which I am sure our constituents will be relatively happy with. Most people want to see the lowest paid in society not paying tax, and long may that continue.

I have one or two concerns and plenty of suggestions. The Treasury Minister will know of my long-running love affair with onshore wind turbines and what they do to my constituency. Although there was not much about renewables or the subsidy levels, I welcome the words spoken by the Chancellor in his speech. An investment in gas and in nuclear is proposed. If we chose that method to hit our 2020 carbon target, we would save more than £35 billion, compared with the route that we are currently choosing to go down, which involves other types of renewables that cost an awful lot more. The subsidy that is given to landowners and energy companies makes energy cost more, increasing fuel poverty at the other end of the cycle. I suggest wholeheartedly that we look carefully at the policy choices we are making when we talk about energy, green taxes and fuel poverty in the future.

Personally, I do not mind consumption taxes. I know that Labour Members take issue with that, so let me give an example. I would love to see the end of vehicle excise duty. Fuel prices are too high, as we all know because we all regularly fill up our fuel tanks. Getting rid of vehicle excise duty would add, I believe, roughly 1.5p to the cost of a litre of unleaded petrol and diesel. But we would not have to pay vehicle excise duty and we would pay as we drove, so if we drove a gas-guzzler we would pay a lot more. The old lady who drives hardly at all would pay a lot less. There would be a huge simplification of the tax system. That might not work, but I would like us to think outside the box and consider areas where we could simplify taxes.