“It can’t be that hard for us to say what we would cut, or at least give a few examples, for goodness’ sake.”

[Interruption.] Beneath the shouting, those are the questions that Labour Members are asking themselves, and they are absolutely right to do so.

Jesse Norman: On the question of evidence, is my right hon. Friend aware that institutions as wide ranging as the Institute for Fiscal Studies and the Bank of England have calculated independently that we would be borrowing between £7 billion and £10 billion more if interest rates had been allowed to stay at the same level, without the fiscal austerity programme that was introduced by the Chancellor?

Vince Cable: Yes, indeed. There is clearly a close link between the level of the budget deficit and interest rates, both long-term interest rates in the markets and short-term interest rates set by the Bank of England. That is why maintaining a monetary policy that is supportive of growth—which is what we are doing—requires fiscal discipline.

Let me now deal with how we can achieve sustainable, balanced growth, and what “sustainable, balanced growth” actually means.

Steve Rotheram (Liverpool, Walton) (Lab): It has taken the Secretary of State 20 minutes to reach this stage.

Vince Cable: I have been dealing with a great many interventions from members of the hon. Gentleman’s party. I am always happy to do that.

I must begin by acknowledging that the task is a massive one, although there are some encouraging signs. Manufacturing is growing at its fastest pace for 16 years, the car industry is growing by 12% a year, and we are seeing a real-terms growth of 5.5% in exports. However, when it comes to rebalancing the economy, I do not pretend that we are anywhere other than at the beginning of a very long march. It is a long march because we inherited a structure that was horribly unbalanced and unsustainable.

Let me remind Opposition Members of some of the things that we inherited, quite apart from the deficit. There was a hollowed-out manufacturing sector that, under the last decade of Labour government, declined by more than the manufacturing sector in any other western country, from 21% to 12% of GDP. Exports were growing at half the rate of growth of world trade. As we were reminded by the shadow Chancellor himself,

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household debt was running at 170% of GDP, a higher rate than in any country in the world as far as our statistics can establish. We had a property bubble that was more extreme than that in the United States, and banks were encouraged to grow until their balance sheets amounted to more than 400% of the British economy. We had grotesquely distorted pay structures and lending behaviour, and a financial vulnerability of Irish and Icelandic proportions.

Joan Walley (Stoke-on-Trent North) (Lab): The Secretary of State has talked of sustainable economic growth. How does that square with the Government’s claim to be the greenest Government ever? Given that the Office for Budget Responsibility has been set up so as not to take account of green considerations, is there not a real risk that if the green investment bank is not a proper functioning bank from day one, it will not be able to lever in investment that could otherwise have contributed to the growth recovery that we need?

Vince Cable: The claim to be the greenest Government ever has been vindicated in significant part by some of the key announcements in the Budget—of, for instance, the establishment of the carbon floor price, which is the first effective carbon tax system in the world, and the green investment bank, to which the hon. Lady referred. It has been made clear for the first time that it will be a proper bank—a borrowing bank—although, as a public sector institution, it will have to reflect the position of the public finances.

Angela Smith: The carbon floor price, which the Secretary of State has just mentioned, could threaten the international competitiveness of key intensive energy users such as the steel, glass, paper and ceramics industries. How will the right hon. Gentleman ensure that growth does not suffer as a result of the policy?

Vince Cable: The hon. Lady makes a valid point. I have already spoken to representatives of the steel industry about precisely that issue.

The Budget referred to the climate change agreements and to more extensive relief. Energy-intensive industries are an issue, but any Government who are serious about carbon reduction will have to deal with such industries in a balanced way.

Graham Jones (Hyndburn) (Lab): Does the right hon. Gentleman agree that exports are being driven by the decision to stay out of the euro and the low value of the pound?

Vince Cable: The low value of the pound has certainly been very helpful, and that is supported by low interest rates. That is indeed a supporting factor for exports. It is not just a question of exchange rates. That is why I introduced the trade White Paper a few weeks ago. We are extending export credit support for small-scale business. The current export boom must be sustained, and it definitely was not sustained under the last Labour Government.

When we consider the catalogue of ways in which the economy became unbalanced under the Labour Government, it becomes clear that there was not just a

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problem of deficit denial, but there was manufacturing denial, trade denial, debt denial and banking denial. There was denial of many of the fundamental weaknesses that emerged in the economy. We are picking up the pieces and trying to create the conditions for sustainable growth.

Ben Gummer: Would my right hon. Friend add job denial to his list because, as under every single Labour Government, when the last Administration left office unemployment was higher than when they came into office?

Vince Cable: That is right, and I am sure that if we reflected a little we could add further to the list.

Let me talk about employment.

Ian Murray rose

Vince Cable: Let me press on a little first, and then I will take an intervention.

In future, growth and jobs will come from the private sector, and in particular from small-scale business. Taken in conjunction with the trade White Paper to which I have referred, the Budget’s commitment to lower and stable corporation tax gives the strong signal that we are open for business and we warmly welcome inward investors. Growth and jobs also depend on small companies, which provided a giant proportion of the 300,000 additional jobs created in the private sector in the past six months, and they will be helped by the Budget’s extension of small company business rate relief and cuts in small company corporation tax.

Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): On inward investment, this Administration’s “ The Plan for Growth” states

“the Government will provide a bespoke service to key inward investors, giving them direct access to UK ministers and speedy resolution of bureaucratic obstacles to investment”.

Does the right hon. Gentleman not think that that could leave the Government open to rather difficult situations with foreign investors, and how does he think British businessmen will feel when they see inward investors getting priority access to Ministers that they do not enjoy?

Vince Cable: I would have thought that Opposition Members who want the economy to flourish and new jobs in their constituencies welcomed the fact that I and other Ministers spend a lot of our time talking to potential inward investors. That is good not only for them but for the British companies that then become part of their supply chain and whose confidence is reinforced.

Especially for small businesses, growth requires the Government not to put unnecessary obstacles in the way. When we searched the archives, we discovered that we had inherited a stock of 21,800 regulations and that the last Government were responsible for roughly 10,000 of them. Rather sad people like me who have spent some of the best years of our political lives in Statutory Instrument Committees will have seen all of that happening.

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We have taken action to stop the gold-plating of EU regulations, to ensure that every new regulation is matched by the value of an “out”, and to mandate sunset clauses. We have launched a reform of the expensive and time-consuming tribunal system, and we have injected common sense into Health and Safety Executive inspections. The Budget confirmed the statement I made last week that there will be a three-year moratorium on new regulation affecting micro-businesses with fewer than 10 employees.

John Mann: You should be ashamed of yourself.

Vince Cable: Not at all; we should be proud of lifting regulation from small companies that generate employment, which every Member should be concerned about.

John Mann: Will the right hon. Gentleman give way?

Vince Cable: No, I have taken a lot of interventions, and the hon. Gentleman has already made his intervention from a sedentary position.

The role of government is not only to get out of the way when they are blocking growth, but to intervene when there is a genuine market failure. Training is one such area, and we are seeking to alleviate the problem by supporting apprenticeships. When we came into office, 150,000 apprenticeships were planned for 2010-11 to be part-funded by government. We have increased that number, even in an environment of cuts, by 75,000 over the spending review period and in this Budget we have added another 50,000. The problems of training are massive. Let us remind ourselves that we inherited a system in which 14% of the adult population have poor literacy skills—we are talking about the reading age of a 12-year-old—and 19% have grossly inadequate mathematical skills. That is the base from which we start. [Interruption.] A lot of people, both in this House and outside it, would take this issue of innumeracy among the public much more seriously than the Labour Front-Bench team.

In the Budget, the Government have also invested further in science, particularly in research infrastructure. Through a combination of policies—the protection of the ring-fencing of the science budget; the legislative action to protect scientists and others from libel action; and the launching of the technology and innovation centre and advanced manufacturing—we have made a very firm declaration of support for the science community and the commercial application of science.

Joan Walley: Before the Secretary of State leaves the issue of apprenticeships, will he tell the House whether the new money for apprenticeships will be dependent on employers coming forward? In my constituency, in the city of Stoke-on-Trent, employers have not come forward in the way we need them to do, so there is a real danger that the new apprenticeships will go to other areas of the country, where they are not needed so badly.

Vince Cable: It is new money and of course this has to be employer-led; otherwise, there would be no job to follow the apprenticeship. That is why it has got to come from the private sector and why this is the best way of investing in training.

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In my concluding comments, I wish to move on to the issue of fairness. It is a legitimate challenge to any Budget to ask about its distributional impact.

Mr Don Foster (Bath) (LD): I confess that I am about to be disappointed here. In 46 minutes, we heard hardly any news from the shadow Chancellor about what a Labour Government would do. My right hon. Friend is about to disappoint me by not even mentioning some of the other fantastic things he has done for businesses, such as the research and development tax credit, the entrepreneurs’ relief, the increased bank lending, the developments in the enterprise investment scheme and so on. Why is he not referring to these many other good things?

Vince Cable: I probably was going to disappoint my right hon. Friend, because the Chancellor covered those issues very well yesterday. However, there is a lot more where that came from.

John Mann rose

Vince Cable: I am not going to take any more interventions.

I return to the issue of fairness. When we first came into office, the major attack from the Opposition was that we were going to hit the poorest hardest. When it became clear that we were producing policies to protect the state pension, increase child tax credits, give preferential treatment to low-paid workers in the public sector and lift low-paid workers out of tax, attention shifted to the so-called “squeezed middle”, which has been variously defined to encompass 90% of the population.

The truth of the situation is that as a result of the financial crash and the recession that followed, Britain is a significantly poorer country than we were several years ago, so living standards have been squeezed. As the Governor of the Bank of England said,

“the real consequences of this crisis are only now beginning to be felt.”

What we have done in the Budget is take concrete action on fuel duty and on lifting the thresholds at which low earners pay tax. I shall dwell on that point a little—

Nick Smith (Blaenau Gwent) (Lab) rose

Vince Cable: Let me finish this point. One genuine philosophical difference we have with the Opposition is on how best to help those on low and modest pay. The Opposition believe in using targeted means-tested benefits. By contrast, we believe that the best way of doing this is by lifting low earners out of tax—880,000 on 1 April and 260,000 more next year. In this way, we not only lift them out of tax but reinforce the incentive to work and to save alongside the welfare reforms. Other taxpayers received £200 in cash last year and will get £126 more next year. We believe that in tough times, we should let taxpayers—especially the low-paid—keep more of their own money, rather than taking it off them and giving some back through complex means-tested benefits.

The test of the Budget will not be the response of the political world or this debate. It will be the response of the business community, which has to invest for recovery. It is worth reviewing what the business community has

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said about the Budget as it has often been critical of Budgets in the past. The British Chamber of Commerce said:

“Despite tight fiscal conditions we are encouraged that the Chancellor has prioritised business growth and private sector expansion alongside deficit reduction”.

The Engineering Employers Federation—the manufacturers —commented:

“The Growth Review has now started to deliver tangible progress in removing the barriers to growth investment and job creation in the UK”.

And the CBI concluded:

“This budget will help businesses grow and create jobs”.

The Government recognise that the road back to balanced, sustainable recovery will be painful and difficult, but we are on the right track. As the head of the OECD put it, we must “stick with it”.

Several hon. Members rose

Madam Deputy Speaker (Dawn Primarolo): Order. I remind hon. Members that there is now an eight-minute limit on all Back-Bench speeches and 30 or more Members wish to participate, so will each Member bear in mind that they have a colleague who might also like to make a contribution? It is not compulsory to use the full eight minutes; you could always leave time for somebody else.

3.2 pm

Mr Geoffrey Robinson (Coventry North West) (Lab): I am very pleased to follow the Secretary of State for Business, Innovation and Skills, but, unfortunately, by the end of his speech he still had not told us a single practical thing from the strategy for encouraging growth. Despite all the pages in “The Plan for Growth”, the Office for Budget Responsibility stated yesterday that it found nothing that it could measure as contributing to an improvement in the UK’s growth prospects. He goes on about low interest rates, but I wonder whether he has tried to borrow, or knows of any small company that has had to borrow, in the current difficult market and has been able to do so at the low or zero interest rates to which he referred. That is absolute nonsense. It is divorced from the real world and he knows it.

The Business Secretary knows that when we were both in different places in the Chamber he used to say that we had either to establish a national bank or its equivalent or to make the banks lend. He has come up with no solution to the problem and the fact remains that the single biggest inhibitor to growth in the vital sector of small and medium-sized enterprises still remains, and that is their inability to access credit. How can they grow in a difficult situation when markets are flat without access to credit? That is the question he has not answered and until he has answered it, he has no credibility as a Business Secretary. We need definite plans for doing that at some stage.

Rory Stewart: Will the hon. Gentleman give way?

Mr Robinson: I shall in a moment.

It is no good the Business Secretary asking us for our plans. He now has responsibility, he chose to take it and he chose, also, to go into this coalition, having been convinced by a concerted effort by the Governor of the

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Bank of England and others that the Liberal Democrats were wrong before the election—that within one week of the election campaign, everything had been turned on its head and we faced an imminent crisis, the outcome of which was that we would face interest rate rises and an inability to borrow nationally, along the lines of the situation faced by Greece and Portugal. He knows that he did not even meet the Governor for a working over, because his leader, the Deputy Prime Minister, had already been worked over. Nobody else on the Government side needed to be worked over—the Governor had worked them over before and during the election campaign. The implicit deal was, “Go along with this huge deflationary package, and I will keep monetary policy so loose that you don’t need to worry—you’ll still get growth.” I believe that that is the sort of Faustian deal to which the Business Secretary referred in his reply to the Budget debate last year.

What have we seen since? Interest rates are still low and policy has been loose. No doubt it might even continue to be loose for a period of time, but I am sure that interest rates will go up in the near future. Irrespective of that, there is still no credit for the SMEs from which, as Sir Richard Lambert pointed out, the vast majority of jobs must come if the commercial and business sector—the private sector—is to recover. However, there is still no prospect of their being able to borrow. Why does the Business Secretary say, therefore, that there is no alternative because the OECD says so? The OECD is as wrong as everyone else. We heard last night from Robert Chote that all those forecasts are a “load of rubbish”. One cannot always be right about such things; nobody ever is. One might ask what the point of them is. Certainly, to invoke the OECD, which can be as wrong as anyone else, and say, “It says that we have to go on with this strategy, so therefore we will,” in the face of all the mounting evidence that the strategy is not working is perverse and not worthy of the intellectual distinction that the Business Secretary is capable of bringing to these problems.

The only thing that could be said in favour of the Government’s policies is that they have not had enough time yet—not quite a year—to have worked, but it is obvious that they are not working.

Jacob Rees-Mogg: Will the hon. Gentleman give way?

Mr Robinson: I shall in a moment, but the hon. Member for Penrith and The Border (Rory Stewart) is first.

The figures for every crucial forecast area of activity are pointing in the wrong direction. Unemployment is up, growth is down, inflation is up, bizarrely, and Government borrowing is up—the very thing they are meant to be getting down—as measured against the OBR forecasts. Those are the only measures we can use to judge whether their policies are working. We can look at the past and it is clear that they are not, but to see whether they are working, we have to look at the forecasts. The Government’s whole policy is predicated on such forecasts, but look at the figures now—down, down, down! Every single indicator is going the wrong way, but they still say that we have to press on with their

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programme—plan A or whatever it is. I think I heard the Business Secretary say, in response to an intervention from an Opposition Member, that some flexibility is built into the Government’s plan A. I do not know whether he will elaborate on that or whether I misheard—we will see in tomorrow’s


whether I did. I did not raise the issue at the time because I was not sure whether I had heard right—I could not believe it. If there is some flexibility, the sooner it is acknowledged, built in and practised the better.

Rory Stewart: Clearly, it is very difficult to get banks lending to small and medium-sized enterprises and to balance the need for that against the problems caused by credit in the first place. What solutions does the hon. Gentleman propose?

Mr Robinson: I do think it is pathetic when the only answer that the Government, who are charged with handling the nation’s affairs, can come up with is, “What are the Opposition going to do?” If the Government want to vacate those Benches, my right hon. Friend the shadow Chancellor is not slow in coming forward and would be over there on the Government Front Bench faster than anyone. We have instead a Business Secretary who preached about these matters very eloquently when he was in opposition and said that he would be practical, but he has done nothing.

What do we have now that the current Government are in office? We have inflation going up to 4.4% or perhaps even 5% and the deficit reduction that was to come from growth being hindered because growth and the forecasts are all down. Each forecast, whether for borrowing, inflation, unemployment or growth, is heading in the wrong direction. Those are the facts. All indicators, whether for last year, this year, next year or even the year after that, are headed in the wrong direction. Perhaps the Government should fix the electoral cycle to have 10-year terms and then some latter-day outcome might eventually catch up with what they forecast at the beginning. It should be clear to anyone looking objectively at the evidence that the Government’s plan is not working, that it needs to be changed and that there are alternatives that could be pursued.

If we are talking about getting growth in the economy—the right sort of growth—I agree entirely that we need business employment and development in the private sector. Let us consider HS2—the stupid vanity project that I am sure the Business Secretary would have opposed when in opposition. It is being proceeded with despite the eventual cost of some £32 billion. I cannot believe that the Treasury is going along with it, but I am told that the Chancellor is, bizarrely, in favour of it. Why do we not switch from that to the simple plan that was set out in Atkins’ alternatives—I think it was alternative 2 —for an investment that could be proceeded with immediately, that would give us what is most needed right away and that would help Coventry: four-tracking the line between Coventry and Birmingham? That could have been given the go ahead this year, had effect next year and made a direct contribution.

Why cannot we get the schools programme back on track? Make it quicker, make it simpler—we would accept all the criticisms if that would make it easier for the Business Secretary to go ahead with it. In Coventry, we have not had a single school built—not one! One

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school in my constituency has been propped up by scaffolding for the past three years. I was on the shadow Chancellor’s back all the time about that when he was the Education Secretary, asking, “Why can’t we get it done quicker? Why can’t we do it?” I was told that procedures had to be gone through and all the rest of it. The Government should speed it up and get on with it, but they should not cut it and stop those projects as they are doing at the moment. I still believe that they should go ahead with some of the other important projects that we could do, particularly in transport, and that they should go ahead with building projects.

To take the example of building projects and the construction industry, I read a couple of days ago in the Financial Times that orders in the industry over the past six months are down 50% on the previous six months. Much of that would be good, constructive infrastructure investment of the kind we are want to see, creating employment and skills and making a real contribution to long-term growth in the private sector, and yet we have cut it by 50% in six months. That cannot make sense, and in the meantime unemployment, borrowing and inflation are going up—all the wrong indicators.

In my remaining minute I will focus on Coventry. I heard today that we have lost another 400 jobs in an insurance company there. Since the Government came in, around 2,500 jobs have gone in Coventry. If the Business Secretary is open to meeting companies inwardly investing in this country, which he says he is, will he come to Coventry to see the investment problems we have? We have nothing to take back to those people who have lost their jobs. I say to him that he should have the confidence and courage of his convictions and stand up to the Treasury and his so-called coalition partners, because things are going to get worse, and he faces returning here with his whimpering excuses to his own increasing embarrassment.

3.11 pm

Mr Sam Gyimah (East Surrey) (Con): I have sat here today with a sense of déjà vu, first because I sat here yesterday for a number of hours and did not make it into the debate—as it wore on today I felt that the same thing was going to happen—and secondly because of the arguments from the Opposition, especially those put forward by the right hon. Member for Morley and Outwood (Ed Balls). If we were to listen to him and completely ignore the fact that we had a general election in which they lost and we won and formed a coalition Government—[ Interruption. ] The British people clearly did not believe that Labour’s stewardship of the economy had been exemplary, which is why they were kicked out of office. That is why in places such as Erewash, a seat that Labour won in 1997, we had a 10% swing back to the Conservatives. Let us not allow Labour to pretend that their stewardship of the economy was somehow exemplary. Until they learn to accept, in front of the British public, that they made mistakes, they do not have the credibility to be part of the economic argument. Let us not allow the right hon. Gentleman to rewrite history.

I will take up the gauntlet laid down by the right hon. Member for Bath (Mr Foster). Rather than allowing Labour to push us into debating the fiscal plan that we set out last year and the implications for growth and interest rates now, let us talk about some of the excellent

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measures that are in “The Plan for Growth”, because Government Members owe it to the British people to explain them rather than letting the Opposition muddy the water on what happened in 2008-09, when they clearly mismanaged the economy and were kicked out of office.

Mr Mark Field: My hon. Friend is absolutely right. “The Plan for Growth”, particularly in relation to the smallest start-up businesses and the idea of exempting them from much of new regulation and legislation or putting a moratorium on it, is a very positive way forward. I hope he will explore that a little further.

Mr Gyimah: I agree with my hon. Friend entirely. One of the great things about “The Plan for Growth” is that the Chancellor did not try to say that there is a silver bullet for creating growth in the economy, or that we can pick winners. No bureaucracy or Government can really pick winners to generate economic growth. I am reminded of a story—perhaps apocryphal, but certainly instructive—about McKinsey, the strategy consultancy firm, which produced an economic outlook for the 2000s that completely omitted the internet when identifying the key drivers of economic growth. Today the internet is a massive sector worth, I think, £100 billion and employing thousands of people. It is right that we have not tried to pick winners.

Looking at what the Chancellor has done, I note that it is we, rather than Opposition Members, who recognise that growth will come from the private sector, not from a state-led programme. That is why I agree with the four objectives that he laid out: to be competitive on taxes; to be one of the best places to start, finance and grow a business; to encourage investment in exports as a route to a more balanced economy; and to create a more educated work force.

I will focus on just one of those areas—starting, financing and growing small businesses—partly because I have an interest in it because my constituency is full of small businesses. Nationally, however, there are 4.8 million small and medium-sized enterprises, and they are responsible for 50% of private sector output and 60% of jobs. If we really want to create the growth that drives jobs, we should surely look to do so from the private sector.

Research by the National Endowment for Science, Technology and the Arts points out that 6% of the fastest-growing companies create 50% of the jobs, not just in the south-east, but throughout all regions and sectors. In other words, the start-up, survival and eventual success of small companies is vital for public policy and for creating growth.

The hon. Member for Coventry North West (Mr Robinson) mentioned bank lending, but fast-growing companies’ revenues are often volatile and their cash flows can be unpredictable. Banks do not want to lend to them, so we need to be able to create an environment for equity lending. One thing we know in the UK is that, if people want to raise amounts below £2 million, they find it incredibly difficult to do so. Such risk capital, however, encourages businesses to take a risk—to take on the new plant, to hire new staff—so it is great that there are so many changes to the enterprise investment scheme in “The Plan for Growth”.

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Increasing relief to 30% means that someone who is going to invest in a business knows that they can offset 30% of their investment against tax. It will encourage people to take sensible risks and invest in those companies that will drive growth. Raising the relevant annual limit to £1 million and to £10 million per company means that companies can seek capital from high net-worth and private individuals, not just from institutions. Anybody who is involved in small businesses knows that people often rely on friends and family to support their business in its early stages, so it is good to see the Government backing those who are ready and willing to take such risks.

Raising the limit on qualifying companies to 250 employees means that the measure will apply not just to start-up companies, where the failure rate can be quite high, but to well-established companies that need capital to grow. I would like to see what more the Government can do to allow connected persons to enjoy such tax reliefs, because connected persons—directors—cannot enjoy them at the moment, and that is where businesses get much of the expertise that they need. By making investment in small businesses easier, the Budget recognises and encourages people who are willing to take risks.

Mr Andrew Love (Edmonton) (Lab/Co-op): I am listening very carefully to the hon. Gentleman. Does he agree that the real problem for small businesses is not in formation, as a number of them will inevitably die after a few years, but in taking a small business and making it into a larger business? I take his point about venture capital trusts, business angels and all the other mechanisms, but the only way in which we can achieve such growth is through bank lending. That is the real source of capital for small businesses, so how do we improve bank lending?

Mr Gyimah: I take the hon. Gentleman’s point and thank him very much for it. Anybody who has ever tried to start a business knows that banks do not lend to businesses with unpredictable revenues or cash flows. One has to raise equity to support small businesses, and the Budget includes a raft of measures to encourage individuals and institutions to invest in them. Entrepreneurs do not always mind whether it is a bank or an individual who is willing to invest in their business either in the early stages or when they need new plant; what they want is the money to grow their business and to hire new staff. That is how they look at it, and there are many appropriate measures in the Budget to address that.

The Budget also seeks, through the entrepreneurs’ relief and raising the cap on capital gains from £5 million to £10 million, to reward people who mortgage their home, take a low salary and start a business. That will not make the newspaper headlines, but in competitive terms it makes the UK a centre for investment. I have spoken to several people in the venture capital industry who say that they will now be thinking of coming to the UK to look for small business assets to invest in. It also means that an entrepreneur who lives in another country will come to the UK to set up a business such as Skype because he is more likely to attract investment—and yes, they might be from abroad, but they will employ UK residents. That is what is great about this Budget.

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Unless we understand that the engine of growth is enterprise—that it is individuals and their efforts who will drive growth—we will be barking up the wrong tree as we discuss this Budget.

In addition, we have measures such as the research and development tax credits; I cannot go through them all in the short time that I have available. It is good that small businesses that invest a lot in R and D can get some of that back in the form of a tax break. I am reminded of a husband and wife who came to my surgery. They had set up a business, having developed equipment to treat club foot, and needed R and D tax credits, but they had to move to Cornwall to do so. I hope that the tax relief that we are providing will not only be regionally based but that people will be able to access it wherever they are in the country.

Last week, Opposition Members came up with their growth plan—the right hon. Member for Morley and Outwood reiterated it today—which would levy the bank tax again and spend it on a series of Government programmes. What I like about this Budget is that it does not seek a Keynesian stimulus—we cannot have that because we have maxed out the credit card—but backs enterprise. It relies on the endeavour, the ingenuity and the efforts of the British people to get our country back on its feet again, in contrast to what the Opposition did, which was to get the country into a mess.

3.22 pm

Chris Williamson (Derby North) (Lab): In listening to the debate today, and certainly yesterday, I was interested to note that George Orwell’s Ministry of Truth is still alive and well and speaking through the Chancellor of the Exchequer. His relentless Newspeak mantra that we are all in it together just will not wash. When we consider that poverty is increasing, unemployment is going up, and the Government Benches are stuffed full of millionaires and people who are doing extremely well for themselves, it is complete and utter nonsense to suggest that we are all in it together.

It is not only wrong to suggest that for those reasons, but because the cuts are very unevenly spread, and depending on which part of the country someone happens to be from, a different level of cuts are being imposed. They are far greater in the more deprived parts than in the more affluent parts. The reality is that the poorest people in Britain will bear the biggest burden of the cuts imposed by this Administration.

According to a new report by the Institute for Fiscal Studies, the British people are suffering the biggest drop in their living standards for 30 years. It is no coincidence that 30 years ago another Tory Government presided over the last drop in living standards. The Business Secretary said today that he was happy to have the worst public services in the G7 countries by 2014-15. What an admission from a member of a party that used to claim to be a progressive party that stood up for ordinary working people! Clearly, that is a long way in the past.

Mr Mark Field: The hon. Gentleman makes great play of the idea of reduced living standards. That is not a phenomenon that has arisen only over the past nine months. Indeed, it was when the credit and debt bubble was built up for many years during the last Labour

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Administration that living standards for ordinary people began to be undermined. As for saying that we are all in this together, that is the very reason that the Chancellor has bravely decided, although it does not make a lot of economic sense, to keep the highest rate of tax at 50%. I fear, however, that he is doing grave damage in ensuring that some people who should be developing businesses here are leaving these shores, which is not in anyone’s interests, rich or poor.

Chris Williamson: There is nothing brave about what the Chancellor is doing. In fact, he is behaving like a bully; he is picking on the poorest and weakest members of our community. As I have said, the poorest in our society will bear the biggest burden of these cuts. If Labour had won the last general election, the measures that we would have put in place would have ensured that the poorest people in our country did not bear the biggest burden. That is an absolute fact, as was made clear by my right hon. Friend the Member for Morley and Outwood (Ed Balls) in his speech.

The Chancellor claims that this is a Budget for growth, he says that he wants a private sector-led recovery, and he argues that his catastrophic cuts are necessary. However, this Budget will not deliver the growth that the country needs, it will not precipitate a private sector-led recovery, and it will not create the jobs that the country desperately needs. While other countries are seeing their economies grow, the UK’s growth forecasts have once again been revised down—for the third time in 10 months. That is dreadful.

Gordon Banks (Ochil and South Perthshire) (Lab): Does my hon. Friend agree that the Government and the Government parties seem to lack an understanding of the interdependence between the public and private sectors? Without a strong public sector and a strong private sector, this country will go nowhere.

Chris Williamson: That is a point that I will come to later in my speech.

The Chancellor is presiding over the highest and longest squeeze on public spending since world war two. My fear is that the Budget and the unprecedented cuts being pursued by the Government will impede economic recovery. As my hon. Friend said, the Chancellor refuses to accept that there is an umbilical link between the public and private sectors. Taking an axe to one causes catastrophic bleeding in the other. Last year’s PricewaterhouseCoopers report highlighted that connection admirably in pointing out that the half a million job losses in the public sector will be replicated in the private sector.

Martin Horwood (Cheltenham) (LD): Will the hon. Gentleman give way?

Chris Williamson: No, I will not give way any more.

This Budget does little or nothing to ameliorate the public service cuts. The cuts to local council budgets in particular are vindictive, gratuitous and counter-productive. The Department for Communities and Local Government budget is set to experience a whopping real-terms reduction of 67.8% over the next four years.

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The Chancellor needs to create demand in the economy. My hon. Friend the Member for Coventry North West (Mr Robinson) referred to the importance of the construction industry. Every pound invested in construction generates £2.84 in total economic activity, and 92p of every pound spent on construction is retained in the UK. Every pound invested by the public sector yields a return of 56p to the Exchequer, making it a net investment of just 44p. In spite of those facts, house building is at an all-time low, Building Schools for the Future was scrapped and housing targets have been abolished. The £250 million announced in yesterday’s Budget to support first-time buyers is not enough.

The proposed changes to the planning system, which as the Chancellor said will introduce a presumption in favour of sustainable development, contradict the proposals in the Government’s Localism Bill. What is going on? On the DCLG website, the Minister of State, the right hon. Member for Tunbridge Wells (Greg Clark), who has responsibility for decentralisation, is quoted as saying that the Localism Bill

“will enact new rights allowing local people to shape and influence the places where they live, revolutionising the planning process by passing power down to those who know best about their neighbourhoods.”

A Budget briefing from the UK Contractors Group states that

“it has been much harder to obtain definite information on investment intentions from a number of key public sector clients. Indeed, there appears to be some deliberate attempts to delay decisions and to obfuscate on forward plans. A prime example of this is the future of the school building programme. The Sebastian James review was originally scheduled to report to ministers before Christmas. In March, we are still waiting for the Department for Education to signal its intentions. Equally on energy supply, the industry stands ready to support the enormous amount of investment needed but to deliver this support effectively and efficiently we need a clear understanding of the future programme.”

It goes on to say how the health reforms have caused further confusion.

I turn to the Chancellor’s modest reduction in fuel duty. As other Members have said, it is more than offset by the imposition of the VAT rise. I have been lobbied heavily by small businesses and residents in my constituency, who say that the VAT rise on petrol is hurting and needs to be reversed. It is not acceptable for the Government to argue that they are prevented from doing so by the European Union—that simply will not wash.

The Economic Secretary to the Treasury (Justine Greening): Will the hon. Gentleman give way?

Chris Williamson: I will not give way any further, I am afraid.

The Chancellor should have done more to support manufacturing. The growth fund is inadequate—nowhere near as much as the regional development agencies were spending—business confidence is falling and the enterprise zones will not generate growth either. It is simply a case of rearranging the deckchairs. Let us not forget that it was the Tories who decimated manufacturing industries when they came to power in 1979. They also put all their eggs in the financial services basket, and that is why this country was overexposed when the financial bubble burst.

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There are also problems with the Government’s ambitions on welfare reform. A Financial Times survey of businesses showed that three quarters of them said that they could not absorb lost public sector jobs, and that 57% were not interested in doing so. What hope do long-term unemployed people have of being able to get employment, given the welfare reforms and the so-called private sector-led recovery, which is not happening? They will simply not be able to get employment, given the cuts that the Government are bringing about.

Further to that, an investigation by my local paper, the Derby Telegraph, has shown that unemployed workers are being discriminated against by the insurance industry, which is saying that landlords who let their properties to unemployed workers will not be able to obtain insurance. A lot more people will be facing that situation as a result of the cuts, with more and more people losing their jobs.

We are in an economic downward spiral, and we need a virtuous circle. We need public sector investment to create jobs and demand in the economy, which in turn would create more demand and then more jobs. Yesterday, the Chancellor claimed that his decisions had brought economic stability, but the reality is that they have created a toxic cocktail of falling growth, increasing poverty and rising unemployment.

The inconvenient truth for the Chancellor is that his decisions have left this country facing the spectre of stagflation. To add insult to injury, he is borrowing an extra £44.5 billion a year, and for what? It is to pay for unemployment and lower growth. It is clear that he has lost the plot, and that we need a plan B. He said that

“society should not just be judged by the strength of its economy alone, but also by the compassion of its people”.—[Official Report, 23 March 2011; Vol. 525, c. 961.]

He certainly fails on the first point, and he is making the second very difficult. I am afraid that unless we get a plan B, this country is doomed to further decline.

3.33 pm

Mr Charles Kennedy (Ross, Skye and Lochaber) (LD): The hon. Member for Coventry North West (Mr Robinson) has had to leave the Chamber, but for reasons that I well appreciate he went to the heart of much of the economic debate since the general election, which has been about whether the pace and depth of the Government’s public expenditure cutting strategy is too far and too fast, and what implications it will have for other indicators. I suspect that that debate will go on for the remainder of this Parliament and for many years into the future.

The hon. Gentleman knows that, as something of an unreconstructed Keynesian myself, I have every sympathy with his side of the argument and have expressed my view on many occasions over the past year about the rapidity and depth of the public expenditure constraint and cutting strategy. None the less, whether or not it is too far and too fast, reading into it quite what he did is too much, too soon. The Government set sail so firmly last year that they and their economic policy are tightly lashed to the mast this year and will remain so in the years ahead. Their consistency of purpose has shown that. The Budget should be seen in that context.

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The coalition Government’s economic fate will be sealed in the third to fourth year of the Parliament, when so many of the genuine longer-term implications of the strategy that is being pursued become clear. Despite the views that I have expressed in the Chamber and elsewhere in the past year, it must be acknowledged—I genuinely do so—that, within the severe self-constraints that the Government have imposed, there is much welcome ingenuity in the Budget.

I want to draw particular attention to the continuing pressure and policy direction on income tax personal allowances. I would like to underscore that, because the Liberal Democrats have been wedded to the principle and policy for many years. As a result of the proposals that the Chancellor outlined yesterday, in the financial year 2011-12, more than 1 million people will be lifted out of income tax altogether, and 25 million people will be better off. Women and part-time workers will be the primary beneficiaries of such a policy. I welcome that. Those figures have been verified today by our most authoritative independent source in this place—the House of Commons Library—in an excellent briefing note on the Budget, which has been circulated. It is important to place that on the record and demonstrate that, thanks to the Liberal Democrat input into the coalition Government, social conscience is continuing to be emphasised at the heart of Government policy.

I want to make two specific points from a constituency viewpoint. First, I welcome the fuel policy measures. Some 20 years ago, when Jim Wallace, a long-standing friend, was still a Member of the House, he and I embarked on a series of meetings and visits with the European Commission in Brussels. We were astounded to discover that a derogation was available to member states—it was a much smaller European Union in those days—on fuel policy. For the best part of those two decades, I and many others have hammered away at successive Governments, Conservative and Labour, to pursue such a policy, only to meet, every time, a brick wall. The Treasury hates that sort of thing, and I have no doubt that the Treasury institutionally continues to hate it and is not rubbing its hands with glee at the commitment that was given in the Budget. However, at last, the Government are applying for the scheme, which will be introduced for the most peripheral island communities as a means of lowering fuel prices. That is great.

Having argued for such a policy for nearly 20 years, it would be churlish not to welcome it. I simply make the point that the Government have to start somewhere, and self-defined island communities make sense. Equally, many more remote mainland communities have problems that are not essentially dissimilar, but for obvious reasons of definition, they cannot be included in the scheme. In my area, there are such communities around Lochalsh and Wester Ross. I hope that when the analysis of the scheme is examined, the impact on those areas will not be overlooked and that their continuing needs will be taken into account in the years ahead.

Secondly, the acceleration of the policy on the green investment bank through the Budget is welcome. An increase of £2 billion in the start-up funds that will be available to the bank was announced, and it continues to be a big priority for the Government. I say that because the Kishorn site in Wester Ross, a remote part of the western highlands, is a prime UK site to take

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advantage of the potential in offshore renewable technology. I have raised that issue many times, and the Secretaries of State for Scotland and for Energy and Climate Change are taking a great interest, which I welcome. The impetus that the Government give to the green investment bank will be critical in that respect.

Other aspects of oil policy in the Budget are controversial, but I offer one reflection from my constituency in conclusion. A great concrete platform—a classic historical example—for the North sea was built at Kishorn. To this day it extracts oil, but it was a case of boom and bust. The opportunity from renewables would mean sustained employment in that community, and that technology harvests natural resources, which can continue, essentially, in perpetuity. It is important that the Government continue to emphasise that.

In welcoming those important developments in this week’s Budget, and their potential impact on the economy, social fairness and areas such as mine, I hope that we can look forward to continuing resolve from the Government.

3.41 pm

Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): As Chair of the Select Committee on Business, Innovation and Skills, I wish to address my remarks to the so-called plan for growth. It is fair to say that I share with many people a sense of bafflement that the plan was published in the context of a Budget that shows that this year’s projected growth rates are lower than last year’s. That makes me wonder how a plan for growth works within the Government’s overall policies. This is the first plan for growth that I have ever known to predict a drop in the growth rate.

The plan is conspicuously devoid of references to jobs. If we have a plan for growth, we should reasonably expect an element of job creation to be included. The private sector is supposed to be mopping up those cut from the public sector as a result of cuts in public spending, and we ought reasonably to be able to expect to see how the plan deals with that.

The problem is that the plan incorporates a series of micro-measures. I approve of some and would not object to others, but they are intended to deal with a macro-economic programme that fundamentally undermines their objectives. The statistics have been reeled out several times, but the most important one is that the Government, in trying to keep interest rates down, have a fiscal policy that includes VAT increases. Those push inflation up, therefore increasing the chances that interest rates will go up. That could fundamentally damage the potential for growth in our economic capacity.

I welcome some elements of the plan, not least because some, such as the export credit insurance measures, were recommended by my Committee. I have to hand it to the Government, because I pushed for those when I was a Government Member, but I did not make much progress. At least on the surface, those measures address some of the issues that the manufacturing industry raises. I do not know whether they will be successful, but they are a step in the right direction.

Similarly, the creation of a creative industry council addresses a gap in the recognition that the creative industries play in exports and employment. My churlish quibble might be that among the 32 or so industrial ambassadors who promote our industries abroad there

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is not a representative of the creative industries. Given the huge export market of our creative industries, and in the light of some of the issues involving IPT abroad in particular, I would ask the Government to consider that point in order to reinforce the measures they have already taken.

Many of the objectives and plans of other Departments cut across what the Department for Business, Innovation and Skills is trying to do. We are just recovering—I hope—from the damage that the visa issue has inflicted on our export potential and ability to attract bright research students and undergraduates into our universities. All the feedback that the Select Committee received during its recent visit to China demonstrated that in the country that will be the economic driver of the world economy over the next 30 years, that issue has given the impression that Britain is not open for business. It is too early to say whether the measures announced on Tuesday will address that problem, but the initial indications from universities are that they will go some way towards doing so. However, damage has been done that is fundamentally at odds with all the objectives incorporated in the plan.

Mr Binley: I am delighted that the hon. Gentleman has found space in his speech to make the point about visas. I had the good fortune, owing to the sad occurrence that happened to the Chairman of the Select Committee, to lead that delegation to China, and I want to impress on the House how many people in both the British and the Chinese business community made the same point. This is a really important issue, because they think that Britain is closed for business. We need to change that perception. Does he agree that the Home Secretary needs to do more to ensure that the message gets through loud and clear in China?

Mr Bailey: I thank the hon. Gentleman for that intervention. For personal reasons, I could not join the Committee’s visit to China. However, he put those proposals to me forcefully, and I have spent the morning with the appropriate Ministers pressing that very point, because a lot of damage has been done. We need to rectify it if we are to realise any of the potential in the document.

On the localism agenda, noises were made in the Budget about improving planning for local businesses. Despite the fact, however, that the Localism Bill places planning priorities in the hands of local communities and neighbour planners, the local organisations set up by the Government—the local enterprise partnerships—have no defined role in that. I do not understand how we can have a legal process for devising planning programmes locally without incorporating the representatives of the local business community. There is enormous concern among the business community about the potential damage that that could cause.

Martin Horwood: Will the hon. Gentleman give way?

Mr Bailey: I am sorry but I am not taking any more interventions, because a lot of Members want to speak.

There are a number of measures that in themselves might be good, but which I do not think address the scale of the problem created by the Government’s macro-

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economic policy. First, research and development tax credits are very welcome. Business has been pushing for them, particularly in high-quality manufacturing, but at the end of the day they will affect only a few thousand businesses. They are very welcome but will not in themselves transform the economic landscape. Entrepreneur reliefs are also welcome, but they affect only a few hundred people. National insurance holidays for start-ups were announced some time ago, but so far only some 1,500 of the 400,000 that it was thought would apply have done so. The Government need to look at that again.

I have mixed feelings about enterprise zones. There will be one in my area, which I very much hope will work—I will certainly be working with the black country business community to ensure that it does. However, the reality is that enterprise zones are a recycled policy from the 1980s, which was not even very successful then. Indeed, those fears were expressed yesterday by the hon. Member for Chichester (Mr Tyrie), the Conservative Chair of the Treasury Committee. If the policy is to succeed, we have to prevent existing businesses from relocating just to pay less tax, while not necessarily employing more people. I am concerned that we may end up trying to prevent that by incorporating a lot of regulations that will defeat the purpose of having enterprise zones in the first place.

Although there are some measures in the plan that are good, they are not sufficient to address the core problem of the macro-economic policy that undermines them. They are hot on rhetoric, but they will not deliver very much, I am afraid—although my Committee will be probing and supporting those that can.

3.51 pm

Stephen Hammond (Wimbledon) (Con): Before I start, let me refer the House to the register. I give advice on transport matters to the Confederation of Passenger Transport, and economic advice to the Professional Contractors Group.

I am delighted to follow the hon. Member for West Bromwich West (Mr Bailey), the Chairman of the Business, Innovation and Skills Committee, who welcomed a number of the measures in the Budget. Some will clearly be helpful, so it was perhaps disappointing that the shadow Chancellor did not acknowledge them. He will probably be relieved to learn that I have little in common with him, apart from the fact that we were both economics undergraduates—I suspect that he was rather more distinguished than I was. I remember one of the first tutorials given by Maurice Peston, now Lord Peston, a former Labour adviser who taught us about economic debate. I just wonder whether the shadow Chancellor needs to reflect on how his proposition that the cuts are being made too fast and too deep is equally a subject of economic debate, and whether, as could be argued, he is being just as ideological and dogmatic as he claims the Government are.

For there are some economic facts—some economic truths—even if the shadow Chancellor did not want to accept them this afternoon. Whatever he says, this Government were left with the biggest peacetime deficit—a deficit that was 11% of GDP, twice that of Germany and Italy, while France had 8.6%. Borrowing is costing

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£120 million, and let us be clear: the total stock of debt tripled over the lifetime of the Labour Government. Those are facts.

Mr Mark Field: Does my hon. Friend also accept that the brutal truth is that for many years we have collectively lived well beyond our means? Only our near-zero interest rates are disguising just how damaging that is.

Stephen Hammond: My hon. Friend makes a correct point, and those are true facts. The causes of those facts may be in dispute. There is a clamour from the Labour party about the financial crisis. No one is suggesting that it did not happen, but equally the Labour party cannot escape the fact that this country had a structural deficit before the financial crisis or that Labour contributed at least partly to that crisis, because the regulatory regime that the previous Government put in place made no estimation of systemic risk.

There are risks to the Budget strategy—although I should say from the outset that I support it wholeheartedly. Those risks concern the lack of growth in places such as Brazil, India and China—which are slowing dramatically compared with previous levels—global inflation and the eurozone crisis, which the Prime Minister is talking about today. There are risks to the Budget strategy; it is just that the risks that the Opposition are talking about are not the risks that are real. Their strategy relies on their comment about the cuts being “too fast, too deep”. This is not just about the fact that no international economic body agrees with them, or about their plan to halve the deficit over the lifetime of this Parliament—which the shadow Chancellor reiterated again this afternoon, albeit without giving any detail. That deficit might or might not halve, but the total stock of debt would still rise, as would the cost of servicing it, even at this level.

The shadow Chancellor was wrong blindly to dismiss what is happening in the gilt markets. I read the yield curve this morning, just as he did, and it is clear that 10-year gilts yields are low at the moment. If the market believed that the Government’s debt reduction plan was going to change, those yields would undoubtedly rise and the cost of borrowing would rise substantially from £120 million a day, ruling out any prospect of more of the things that we really want to spend public money on. Labour Members shouted out, “Too fast, too deep,” yesterday, but they should remember that there are risks involved, and that theirs is an equally dogmatic strategy.

It has been interesting to observe the movement in the past year from the Opposition Benches to the Government Benches. Year after year, as we sat on the Opposition Benches, we listened to Chancellors changing their forecasts and changing the length of economic cycles. I would gently say to the Opposition that we have growth in the economy, and that there is growth for the next four years. Its overall level might be tinkered with slightly, but the forecasts often change—

Chris Leslie (Nottingham East) (Lab/Co-op): Growth forecasts are going down.

Stephen Hammond: No, far from it. The hon. Gentleman was not in the last Parliament, when the Chancellor consistently got it all wrong. The Opposition say that

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the Government’s position is dogmatic, but my contention is that theirs is equally dogmatic.

Mr Mark Field: Does my hon. Friend also recognise the massive distinction, in the context of forecasts on growth and throughout the economic sphere, between what happened before the election and what has happened since May 2010? In the past the Chancellor of the Exchequer made the forecasts in his own interests. We have instituted the independent Office for Budget Responsibility, and it is a sign of the robustness of its independence that it has issued the downgrades in the forecasts to reflect changing circumstances.

Stephen Hammond: Indeed; I am grateful to my hon. Friend.

The shadow Chancellor, in contending today that the changes were too fast and too deep, once again relied on the Keynesian multiplier. He is an eminent economist, and he should know better than to rely too heavily on that mechanism. It has traditionally held out the prospect that public sector investment has an impact on the private sector, so there could be an element of crowding out and of limiting of growth potential. If the right hon. Gentleman has read the recent academic research, however, he will also know that the size of the multiplier in the growth phase of an economy is about a third of the size of the multiplier when an economy is going into recession. To rely on that thesis is therefore to rely on a very weak economic mechanism.

But let us leave the world of deficit denial behind, and welcome a Budget that does not bow to pressure. It is hugely important that the Government should stick to their policy of deficit reduction, as that is the only way to achieve long-term growth in the economy. Market rates clearly indicate that there is confidence in what the Government are doing, and to be blown off course would result in a loss of confidence. The cost of borrowing and the yields on 10-year gilts, which are important for the cost of industry borrowing and UK Government borrowing, would change. Domestic inflation would rise in those circumstances, and any indication of making a special case for one would result in having to make a special case for another. The Government are therefore to be congratulated on sticking to their policy.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Will the hon. Gentleman give way?

Stephen Hammond: I am sorry; I have no more time.

Many colleagues on both sides of the House, including the Chairman of the Select Committee, the hon. Member for West Bromwich West, have made the point that the macro is always based on the micro. The devil is always in the detail. This is the first Budget for many years in which the detail has matched the rhetoric, and in which the detail on the micro side supports the detail on the macro side. Measures include the corporation tax rate, and the 21 new enterprise zones. Far from being a failed policy of the 1980s, this was a great success. Only earlier last year, when I travelled to Merseyside and Manchester to talk to business people there in my role as a shadow Transport Minister, I found that people were asking for this and were keen for it to come through.

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The measures to support small and medium-sized enterprises include research and development tax credits and the change in the enterprise investment scheme, which, alongside what is happening with the banks, will bring new capital into the country. These are micro-economic reforms that will come through to build macro-economic success through growth. The simplification of the tax code, the abolition of regulation, the acknowledgement that the 50% tax rate must be only temporary—these are all key levers of growth. They are a sign that in this Budget, the rhetoric is matched by the detail and the commitment.

Finally, growth must come in order to be fair to families, and again with this Budget, the rhetoric matches the detail. The increases in personal allowances, taking the lowest income earners out of paying tax altogether, ensuring that the 40% tax band is not extended, the freeze in council tax—those measures will all impact on real people, and it is real people and the private sector, not just the Government, who build the growth of the economy. The Budget is to be commended; it is the first for some time in which the detail has matched the rhetoric.

4.1 pm

John McDonnell (Hayes and Harlington) (Lab): I listened to the Budget debate yesterday as well as today, and I want to take up some of the points raised in it. I clearly come from a different economic school from the hon. Member for Wimbledon (Stephen Hammond)—and I probably come from a different one from his erstwhile colleague the shadow Chancellor as well!

The premise of the debate so far has been that as a result of profligate public expenditure by the last Government, we have an economic crisis on our hands. The conclusion is that we can solve the deficit largely by cutting public expenditure. My hon. Friend the Member for Bassetlaw (John Mann), who is no longer in his place, referred to various Treasury charts, and I have to say that one that was published a short while ago demonstrates that the profligate expenditure argument is simply not true.

Let us consider the recent Treasury chart about public spending under the last Government and previous Governments as a percentage of gross domestic product. It shows that public expenditure under the last Government was, in fact, less than it was at the height of Thatcherism and under John Major’s period in office. I shall circulate this chart to Members. I know this is true because for many of the years the last Labour Government were in office, I was attacking them for not spending enough and for poor expenditure. I fully agree with the criticisms made of the private finance initiative; I opposed every PFI scheme that was proposed.

If we look at the chart to find out when expenditure as a proportion of gross domestic product rose dramatically, we discover that it was, as the shadow Chancellor said, only when the economic crisis hit and we had to pump out the quantitative easing into the economy. In my view, the deficit occurred as a result of the failure to match expenditure with tax justice. We had large levels of tax evasion and avoidance and, in addition, we failed to develop a whole range of other tax bases within the economy. Genuine criticisms can be made of over-dependence on the financial sector and the failure to develop the manufacturing sector during that period.

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What do we do now? It is not all about cutting expenditure. In yesterday’s debate, reference was made to the crisis of the 1930s and the lessons that can be learned from it. It is worth Members returning to J.K. Galbraith, who I believe wrote the best book on the crisis, “The Great Crash 1929”. What Galbraith says is that although economic structures can be put in place, what will defend us most against a repeat of the crisis is memory. We seem to forget that the cause of that crisis was the cause of this crisis—speculation by the banks and other speculators and, yes, a Government who failed to regulate. I have to say, however, that when a number of Members called for bank regulation in this House, there was an element of quietude on all sides. I remember fighting for four years, in almost a solitary capacity, to secure the passage of the City of London (Ward Elections) Bill at a time when we were pressing for regulation.

One of the lessons of the 1930s is that the one thing we should not do in a recession is cut public expenditure, because that will turn a recession into a depression. However, it is exactly what the Government seem to be doing. At present 2.5 million people are unemployed, 1 million young people are unemployed, according to recent statistics 1.7 million people are in voluntary and part-time employment, and the £80 billion cuts proposed by the Government will make at least another 1.2 million people unemployed.

What I am really anxious about, however, and what we should all be anxious about, are the cuts in capital expenditure. We are told that there will be a 4% cut next year and a 6% cut in the year after that, and that local government capital expenditure is to be cut by 30%—possibly more, according to the Red Book. I believe that if that element of demand is removed from the economy, we will experience either a deflationary spiral or the worst of all worlds, stagflation: increasing inflation along with stagnation in the real economy. I do not believe that there will be a double dip. My fear is that we will become like Japan, where asset values are falling, and will scrape along the bottom of economic activity for perhaps a decade.

People ask what the alternative is. I have mentioned the lessons of the 1930s, and Keynes’s name has been bandied about many times today. It is true that Keynes concentrated on the bond market, but one of the main lessons to be learned from him is that the key issue is unemployment. I think we should be declaring, across parties, that our objective must be the return of full employment, which appears no longer to be cited as a policy objective. As has already been pointed out, the most effective way of restoring investment is through capital investment—the development of capital programmes in housing, renewable energy and transport. I ask Members to look at the green new deal and to examine the “One Million Climate Jobs” booklet produced by trade unions including the Public and Commercial Services Union, which sets out a capital investment programme that could get people back to work.

How would that be paid for? Let me list just a few short-term measures. I am very pleased that windfall taxes have come back into fashion, and I commend the Government for that, but I do not think that the windfall taxes on the banks go nearly far enough. The lending rates on personal loans in particular are exploitative

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and extortionate in the markets. I also think that if we are to consider organisations that have profiteered during the recession, we should consider the supermarkets. Commodity inflation is about 3%, but they have increased prices by 6% and above, and they have been profiteering for a number of years.

I think that a windfall tax on energy is appropriate. The current profits of British Gas average 24%, and Ofgem has reported an average profit margin of 38% per customer since last November. That is profiteering during a recession. Some economists have suggested that a windfall tax in those three areas would produce up to £10 billion to get people back to work.

Let me make clear, however, as I did under the last Government, what should happen in the longer term if we are to avoid future deficits. Yes, it is about careful expenditure and it is about having confidence in local and regional decision making, but it is also about achieving a fair and just tax system that will fund our expenditure. First, we must tackle tax evasion and avoidance. What has been done about that by past Governments and by the present Government is trivial. According to Richard Murphy and John Christensen of the Tax Justice Network, £150 billion a year is potentially available to us. Secondly, we need a financial transaction tax. We have been talking about a Robin Hood tax for too long, and we should now be implementing it. Thirdly, I think we should deal with land speculation. I believe that now is the time for land value taxation. If we tax the wealth in land, we will encourage development rather than preventing it.

On Saturday, there is to be a “march for the alternative”. I expect at least half a million people to march in the streets against the cuts, and I want them to march for a just alternative. I believe that one of the alternatives they will expect us to implement in the House is a fair taxation system allowing investment in public services so that we can all share in that wealth.

4.9 pm

Julian Smith (Skipton and Ripon) (Con): I refer Members to my entry in the Register of Members’ Financial Interests.

I am delighted that business, as well as families, took centre stage in yesterday’s Budget. Enterprise zones will be a beacon for growth. There will be two in Yorkshire: one in Leeds and one in Sheffield.

Mr Binley: My hon. Friend might also be pleased to know that West Northamptonshire Development Corporation will shortly submit an application to create an enterprise zone in Northampton, which will bring 10,000 new jobs to an area that is supposed to be building 50,000 new homes over the next 15 years. Does that not show that the Budget is particularly about promoting growth, and that this is just one way to achieve that?

Julian Smith: My hon. Friend is absolutely right, but he will be facing stiff competition from the North Yorkshire local enterprise partnership, which will be seeking to get ahead of his proposal.

The most exciting aspect of yesterday’s Budget was the direction of travel the Chancellor set in respect of the conditions for business that he wants in Britain,

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because growth will ultimately be achieved through the individual efforts of business leaders, not through Government. The 2% cut in corporation tax signals to companies that Britain is once again open for business. It is now clear to every potential investor, in the UK and overseas, that this Government are committed to putting in place the best corporation tax rates in the G20 by the end of this Parliament. Overnight, global companies such as WPP have said that that will make a difference to their decisions on where to invest. That is great news.

The Budget also encourages those who want to set up a business to go for it. It contains a big nudge from the Government for people to give entrepreneurship a go. There is a golden carrot to dangle before those thinking of taking a risk: a 10% capital gains tax rate up to £10 million. The profit motive is a motivator, and the Budget clearly says, “If you believe in your business, take the risks and are successful, you will be much better off financially.” Therefore the message is, “Unless you’re a cracking singer or can dance like the Business Secretary, forget ‘The X Factor’ and ‘Strictly’; this Budget gives you a golden ticket to join start-up Britain.”

The moratorium on new legislation for small businesses with fewer than 10 employees will be a big relief for entrepreneurs, who need to be fully focused on jobs and growth rather than the latest wheeze from Whitehall. When I was a small business owner, dealing with employment law took more time than any other management responsibility. Employment laws and regulations have been piled on British business since 1997.

Ian Lucas (Wrexham) (Lab): Will the hon. Gentleman give way?

Julian Smith: Not at the moment.

Let us be clear: employers want to get on with running their business. They want to allow their workers flexibility in their jobs and to give them training, but they also want to make decisions themselves. The changes in the Budget will provide welcome relief from administration, rules and red tape, which always come from new legislation. Opposition Members have already started putting about the myth of this being about “nasty Tories” who have no interest in equal rights. It is nothing of the sort. Labour took some good steps on employment, and we have accepted many of them, but the last Government ultimately failed to see that adding on regulation after regulation was counter-productive; they just did not know when to stop.

This Budget establishes two principles: first, that micro-business needs to be treated differently from other business, which is very important for my constituency; and, secondly, that creating jobs is more important than adding more regulations to existing ones. Everything we do should encourage business and make things easier for risk takers. Only by doing that will we get this country’s economy growing to its full potential. Jam-packed with other measures as well as the ones I have talked about, this Budget has set us firmly on the right course.

4.14 pm

Mr Pat McFadden (Wolverhampton South East) (Lab): The first thing to say about this Budget is that it has to be seen in the context of last year’s Budget, because that

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gave us a large-scale fiscal adjustment of some 6.9% of gross domestic product over the course of the Parliament and the measures announced this year were inevitably going to be smaller in scale and focus. So our discussion is not so much about the measures about to be taken, but, inevitably, largely about the measures already taken: the VAT rise; the shift from the retail prices index to the consumer prices index for so many things; the pay freezes; the child benefit freezes; and the cuts to public expenditure. All those are going to have a far larger impact on household finances and on businesses than anything announced yesterday.

The one headline the Chancellor did not want to see in today’s newspapers was anything that smacked of a U-turn or a reversion to a plan B in terms of his broader strategy. What that means for the public is set out in the forecasts published alongside the Budget by the Office for Budget Responsibility. For the third time since the election, we have seen a downgrading of growth forecasts—growth down last year, this year and next year. Inflation forecasts are up and unemployment is at a 17-year high. The forecasts for borrowing and the interest to be paid on borrowing are also up, even though dealing with that is supposed to be the central purpose of his grand economic strategy. Those forecasts underline the fact that growth is needed and although the Chancellor will continue to claim that any problems he is addressing are Labour’s fault, he will find out that, to use his own metaphor, this particular tank of political fuel runs out over time.

My right hon. Friend the shadow Chancellor fairly pointed out that growth was increasing at the time of the general election, before falling back sharply at the end of the year. I am not sure that even the Chancellor believes that that was about snow. It was about confidence, as the country realised what a tough time lay ahead for family budgets over the next couple of years. The central antidote to all this bad news about cuts was supposed to be the growth plan published yesterday. The Chancellor announced a stream of measures on innovation, tax, planning, training and so on. It was tempting to close one’s eyes, just as the Justice Secretary did, imagine a different accent and be reminded of some of the Budgets that the Chancellor used to attack so strongly for their blizzard of initiatives. We can imagine a range of groups being invited to the Treasury and the Department for Business, Innovation and Skills to be asked what was on their shopping lists. The question for us is whether the sum of these various parts adds up to a plan for growth or whether they are a list of things to insulate the Government against the accusation of having no plan for growth—the two are certainly not the same thing.

I wish to discuss a few of the individual measures, because I believe that my party should adopt a level-headed approach to them. Some of them may work, some of them may not and some of them are, in fact, Labour party policy. The technology and innovation centres announced by the Government are welcome. They were recommended by Dr Hermann Hauser in a report to the Labour Government last year and are based on the successful Fraunhofer institutes in Germany. Their essential task is to bridge the gap between concept and production—between the great idea and the manufactured product. We have long heard commentators say that Britain is less successful at doing that than other countries, so I am glad that the Government have carried on this idea begun under the Labour Government.

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The Chancellor also made much yesterday of his new regime for short-life assets in manufacturing, which is designed to encourage investment in new machinery. That has been welcomed by manufacturers over the past 24 hours, but before the Government get too carried away we have also to remember what the Chancellor announced last year: a hit of almost £3 billion on manufacturing to pay for his corporation tax cut by cutting capital and investment allowances. In other words, he made manufacturing—the part of the economy that needs to invest in new plant and machinery—pay for a tax cut for the parts of the economy less reliant on such investment. This is not, as he claimed yesterday, a conversion to support for making things; this is the Chancellor applying a dressing to a wound that he created last year. What he has given back in the measures on short-term assets is a lot less than he took last year—[ Interruption. ] If there is any doubt about that, I refer the Economic Secretary to pages 42 and 44 of the Red Book, which clearly set it out.

The Chancellor also announced 21 new enterprise zones, with the relaxation of planning control, business rates and so on. If they can create jobs in areas such as the black country, which I represent, they should be welcomed. I sense in the proposals, however, the spirit of Lord Heseltine, who was also involved in the regional growth fund. We had enterprise zones back in the 1980s, when unemployment was 3 million and industry was collapsing all around us. I hope that in reaching for them now the Government are not privately expecting a repeat of the circumstances that gave birth to them in the first place. I also hope that they are not a consolation prize for local enterprise partnerships that are disappointed when the results of the first round bids for the regional growth fund are announced in a week or two’s time.

Some of the measures are worthy of consideration and support, but do they add up to the plan for growth that the Government have claimed they are? Surely to answer that we need to return to the broader context. There is no denying that, had the outcome of the election been different, there would have been difficult decisions to take. It is important for all of us to say that to the electorate. The deficit cannot just be wished away, but there is a legitimate debate to be had about the speed and scale of deficit reduction and its impact on families up and down the country.

The deficit is not there because the Labour Government lost control of the public finances; it is there because of the hit that our public finances took as a result of having a large financial sector and because of the measures we took to stop recession turning into depression. That is not a loss of control, but a Government acting to stop recession having a more painful impact on the public and on business than would otherwise have been the case.

The Budget claims to be a Budget for growth, but there is no escaping the fact that the growth forecasts have been reduced. That is what will matter to businesses and families throughout the country.

4.22 pm

Jesse Norman (Hereford and South Herefordshire) (Con): I speak not merely as a member of the Treasury Committee but on behalf of tens of thousands of

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working people in my county of Herefordshire. It is a county where the average income is £21,000, where residents face the very high costs of living in a rural area—especially for fuel and transport—and where there is a very high relative number of small businesses. These are real people putting in the hours to support themselves and their families at a difficult economic time.

I welcome the Budget and especially several measures that will have a direct impact on the well-being of my constituents. The first is the cut in fuel duty, which we have pushed for very hard with the Treasury. The second is the rise in the income tax threshold, which will take many Herefordians out of income tax all together. The third is the support for small businesses and entrepreneurship; for apprenticeships; for local housing; for the university technical colleges; for the green investment bank; and, finally—a measure that is perhaps as important as any of those—for filling in potholes, an area in which Herefordshire rather specialises.

The Budget marks a further decisive step in dealing with the disastrous legacy of the previous Government. We know the brute economic facts, but it is important to remind ourselves of the wider picture: that this country now faces paying nearly five times more in debt interest every day than it does on care for the elderly; and that we have, in addition to the disclosed public debt numbers, £200 billion-plus of off-balance sheet debt for the private finance initiative. The wider story, however, concerns the atmosphere of unreality on the Labour Benches, and particularly on the Front Bench, which one might describe as a fog enshrouding planet Balls.

The intention seems to be to rewrite history and to deny, as the shadow Chancellor did today, the fact that in 2007-08 the previous Government created a 3% budget deficit at a time of 3% economic growth—a structural deficit that had existed at that point for seven years. It is unrealistic to pretend that America and Germany are parallel cases to ours in terms of economic recovery. America has the global reserve currency in the dollar and therefore has a far greater intrinsic ability to inflate its way out of trouble, and Germany has benefited massively over the past year or two from the expansion in the American purchasing of industrial goods. Their situations are not parallel to ours. The truth is that our economy is grossly unbalanced and that that is what exposed us to the situation we find ourselves in.

Also unrealistic is the Opposition’s refusal to acknowledge the weight of expert opinion supporting the present policy, including from the G20, the IMF, the OECD, the US Treasury Secretary and even Tony Blair. The Bank of England testified only a couple of weeks ago that without the current austerity measures, our borrowing costs would be 3% higher. Given the amount of refinancing we have to do over the next two or three years, that implies additional borrowing of some £10 billion. If one has any doubts about this issue, one need only look at Portugal, which is close to economic meltdown.

Finally, we have the shadow Chancellor’s denial, which we heard again today, that any deficit ever existed. As they say, “De Nile is not just a river in Egypt.” [ Interruption. ] I am in town all week! Labour’s strategy has been pretty clear: ignore economic reality, disavow the previous Chancellor’s own plans to make cuts and increase taxes, attack the coalition wherever possible and hope the voters do not notice. The result has been a

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refusal to articulate any constructive, concrete proposals at all. I note the contrast with the Republicans in the US, who have opposed the Democrats with great vigour. Whatever their personal merits, the fact is that the Republicans in Congress have created positive alternative plans that have to be debated. That is in sharp contrast to the actions of the Opposition in this House.

The truth is simple: this country has suffered the biggest economic shock since the great depression. It will take years to recover fully from that shock and the world’s economic system remains very fragile. The USA took slightly longer than a decade to rebuild after the great crash of 1929. Japan started to recover from the asset-based deflation of the early 1990s only a few years ago and it will be a doubly cruel blow if the earthquake sets back its recovery any further. The idea being pushed by the Opposition that this Government are in any way responsible for the current economic mess is laughable.

Martin Horwood: The hon. Gentleman makes a powerful case about the Opposition’s economic strategy, or lack of one. Does he agree that what they might also have done is risk an increase in interest rates that would have hit everyone with a mortgage, everyone with an overdraft and every new business seeking to borrow?

Jesse Norman: I thank the hon. Gentleman for that intervention. It is certainly true that if we had higher borrowing costs and a tighter monetary policy, interest rates would be higher, mortgage rates would be higher and the average mortgage holder and household would be suffering considerably.

I welcome the fact that the Budget is a reforming Budget that has not shied away from taking difficult long-term decisions, such as the proposals to merge income tax and national insurance. A properly functioning system of social insurance could have been a very fine thing—indeed, that was what Beveridge originally anticipated—but the system has been allowed to slip away from the contributory principle into a disguised income stealth tax. The new reform will bring home to people just how heavily they are taxed and will encourage them to demand better public services for their money.

In short, the country is emerging from a time of fake capitalism that was matched by fake government—a time when Fred Goodwin could destroy an august 200-year old financial institution, squander billions in shareholder value and then walk away with a fortune and have a Minister sign off on his pension. The economy became grossly unbalanced in that time and executive compensation soared both inside and outside the financial sector with little or no relation to performance. It was a time of increased complexity, short-termism, bureaucracy and regulation. As every Herefordian knows, what we need now is real capitalism, with real people taking real risks, investing real time in real work and reaping real rewards for their efforts, and this Budget is a very important step in that direction.

4.29 pm

Mrs Sharon Hodgson (Washington and Sunderland West) (Lab): The Budget was billed as a Budget for growth, which my constituents wanted and the Sunderland economy needed, but it is not a Budget for growth. In fact, it is a Budget in which the Chancellor has had to admit that he is failing to create growth. What is growing

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after this Budget and the tax and spending announcements of the past 10 months? I will tell you, Madam Deputy Speaker, what is growing: the Chancellor’s nose. It is the dole queues that will be growing, with all the projected job losses. The cost of living will be growing, with the Government’s regressive VAT hike, which hits the poorest families hardest. The number of young people not in education, employment or training will be growing, due to the scrapping of the future jobs fund and the education maintenance allowance.

Martin Horwood: Will the hon. Lady give way?

Mrs Hodgson: Not at the moment.

John Campbell from Washington e-mailed me yesterday. He currently receives £30 a week in EMA to support his studies. He asked me what support he would now get. I cannot answer, because Ministers have not told us yet, despite repeated hints from the right hon. Member for Bermondsey and Old Southwark (Simon Hughes). I share the disappointment that he will no doubt have felt yesterday. Students are making choices about their future now. How can they do so while this silence persists?

We heard that the Chancellor will lift the tax-free allowance by £630 in 2012. I am sure that those of my constituents who will be lucky enough still to have a job this time next year will be very grateful for the extra 92p a week they will get. Perhaps they could use it towards the increased prices of their weekly shopping and energy bills, or to offset their loss in tax credits or frozen child benefit. What this Chancellor gives with one hand, he takes away many more times over with the other.

I remember, as I am sure do my hon. Friends, the furore in 1999 when the Government of the day announced an increase in the state pension of 75p a week, which was widely decried as an insult, despite being part of a wider package of measures that included the introduction of the winter fuel allowance and free TV licences. I checked with the Library this morning and found that 75p in 1999 is equivalent to around £1.05 today, which is 14% higher than 92p. Using that reasoning, the Budget’s increase is an even bigger insult. The right hon. Member for Havant (Mr Willetts), who was shadow Minister for social security, asked my right hon. Friend the Member for Edinburgh South West (Mr Darling) at the time whether he felt guilty about cutting taxes for business at the same time as making such a derisory offer. I wonder whether the right hon. Member for Havant feels guilty today.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I am grateful to my hon. Friend for giving way and for highlighting the effect of the proposals on her constituents, but she is perhaps being a little unfair to the Government on pensions. After all, they are solving some of the problems by bringing forward proposals that will eventually mean that some people might not be able to retire until they are 80. Is that not the kind of measure they should have highlighted more yesterday, rather than the ones they chose to highlight?

Mrs Hodgson: Although we all acknowledge that we will have to work longer because we are living longer, I do not think that anyone in this Chamber would want still to be working when they are 80.

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At the Liberal Democrats’ spring conference last week the Deputy Prime Minister referred to the 75p increase in 1999 as an indignity, so I wonder how he views the 92p increase announced yesterday. Family income is vital to our growth prospects, as squeezing household budgets means less consumer spending, which in turn means lost profits and jobs in the sectors that depend on it.

How will growth be encouraged in Sunderland and the north-east? We heard yesterday that 21 local enterprise zones will be created and that one of them will be in the north-east local enterprise partnership on Tyneside. Seeing as we have an LEP for the whole north-east, leaving aside Tees valley, which is being given its own LEP and enterprise zone, why can we not have an enterprise zone that covered a wider area or more areas within the north-east enterprise zone, such as Wearside, in which Sunderland sits, which has both the need and potential, which are two criteria?

I was interested to read today in my local paper, the Sunderland Echo, that the Chancellor may have made an error in announcing that the local enterprise zone was going to be in Tyneside, because the location of the zone has not yet been decided. The Energy Secretary spoke to the Echo on that point and said that there was going to be a zone in the north-east local enterprise partnership area, and that the north-east LEP would help to choose where it was. He may need to go back to school and re-take his English baccalaureate—perhaps he does not have one—in geography, however, because Tyneside and the north-east are two very different areas.

That aside, we all know that if the Government were serious about stimulating the private sector they would never have abolished One North East or slashed funding for regional development. The Chancellor said that he wanted his Government to be the greenest ever, and he told us that funding for the green investment bank would be increased, in turn increasing the amount that it could leverage from private sources. I will not complain about any measures to increase investment in the low-carbon sector, particularly when that investment is going to help companies to innovate and create jobs in the north-east, but the Government could and should be doing so much more. Germany and China are taking action right now to stimulate green growth, so surely it is in this country’s economic interests to do the same and attract businesses before they locate to the countries that are taking action.

I also have concerns about the much heralded renewable heat incentive. A business man with a small to medium-sized enterprise in my constituency wrote to me to make the point that, had the scheme started next month, it had the potential to provide a big boost to the solar thermal sector. As it is, it will not start until October next year, and at a much reduced level to that which was expected. So, in effect, and even with the premium payment, the whole industry is on hold for 18 months, because who would invest now when they could get an incentive to do so in the next 18 months? That does not help the renewable energy sector; it puts the industry in limbo, and it puts jobs and innovation at risk.

My constituents may be pleased that the Chancellor has taken some action on fuel duty, however—an issue that many of them have contacted me about in the past few weeks. Cutting the duty on fuel by a penny will have

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made for some good headlines, and we all know that he needs those, but he failed to tell my constituents watching yesterday that a 1p cut in duty will not make up for the 3p VAT increase that he introduced at the beginning of the year. Again, he gives with one hand and takes much more away with the other.

There is so much more that I wanted to raise, but I will do so another time. Like so many of this Tory-led Government’s policies, this Budget is for the few, not the many. The bottom line is that this so-called Budget for growth has caused the Office for Budget Responsibility to revise down growth predictions; it had failed before it was even printed. The Chancellor spoke for an hour yesterday, but he provided almost nothing from which my constituents could draw any comfort. So, on behalf of those constituents, in particular the young and the struggling families, I urge him and his ministerial colleagues to listen seriously to the concerns that hon. Members have raised today.

4.38 pm

Jessica Lee (Erewash) (Con): Thank you, Madam Deputy Speaker, for calling me to speak in this important debate. I, for one, welcome the Chancellor’s Budget statement, and I look forward to voting on all its details and recommendations. In particular, I am relieved to be able to say that Britain is once again open for, and backing, business.

Before I was elected last year and since, in my meetings with and speeches to the business community in Erewash, I have always reflected on how important it is that we in this country make things again. I was pleased to hear Sir James Dyson speak a few years ago, and I think my right hon. Friend the Chancellor referred to him in his speech yesterday. To hear somebody of such experience, gravitas and talent speak is really encouraging, and from that I saw the real need to support budding scientists and entrepreneurs. In particular, there is a genuine need to support young women who are thinking about a science career. We all know that, for whatever reason, engineering and science, as a profession, has had a lower uptake of young women wanting to pursue it. That is a shame. Some of the measures set out in the Budget statement and by the Business Secretary do all they can to encourage young women by saying, “Now is the time. You can have a career in science and engineering—it is for you, and there are the opportunities to do well.”

In Erewash, we have a proud history of manufacturing, including traditional lace-making, furniture-making and engineering. Sad to say, the traditional lace-making, in particular, has declined over the past 10 years or so; indeed, we have just one such factory left. The people there have used their entrepreneurship and ingenuity to keep it going. I am sure that everyone in the House can imagine that that brings with it daily challenges, such as finding appropriately qualified mechanics to repair the machines and finding new business, but they are trying their best and doing well. However, we also see, unfortunately, a number of empty lace factories where once they were busy and flourishing. Under the last Labour Government, manufacturing halved as a share of gross domestic product, and jobs in that sector declined by 40%.

Moving on to the many positives about business and entrepreneurship in my constituency, we have several successful small and medium-sized enterprises, particularly

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in high-tech engineering and aerospace manufacturing, and there is a great need to support them at this time. Geographically, there are many advantages to my constituency, which is based right in the heart of the country. We have nearby large employers such as Rolls-Royce and Toyota, as well as the universities of Derby, Nottingham and Loughborough, all with very successful business departments.

We all know—the figure is startling every time it is said—that £120 million per day is paid in debt interest. That is more than the schools budget and the defence budget. There is always moaning and groaning from the Labour Benches whenever that is mentioned, but we have to deal with the facts as they are. When my constituents come to my weekly surgery, they always start by saying, “We know that the country has a lot of debt, and we know that we have to sort it out.” There is a realism and a level of acceptance about it, and that is how we have to move the debate forward.

For me, the Budget statement marked a line in the sand. What I heard is that Britain is back, and that Britain is backing business. This morning, we saw the headlines saying that in the light of the measures announced yesterday, the WPP agency may well return to the UK with its business. I suspect that it will be the first of many important businesses that are going to come back and invest. That is a great start.

The Budget contains several steps that will help business. First and foremost, there is the cutting of corporation tax by 1%, which will take it down to 23% by 2014. There will be 50,000 more apprenticeships, taking their number to more than 250,000. Locally, we have a strong history of supporting apprenticeships, and that will further encourage new jobs, investment and training for young people. The doubling in the number of university technical colleges is a positive, as is extending the small business rate relief holiday to October 2012.

I was particularly delighted to hear the announcement about the establishment of an enterprise zone for Derbyshire and Nottinghamshire. My constituency is right in the heart of that area, and I will do my best to ensure that we are its beating heart; I will fight for an appropriate level of investment. We also have some of the centres of innovative manufacturing that were announced yesterday, at Loughborough university and the university of Nottingham. Again, many young people in my constituency could benefit from that training and help, and I will do all I can to make those facilities available to them.

The enterprise zones will follow the structure set out in the local enterprise partnerships. We were lucky to have a strong LEP application for Derbyshire and Nottinghamshire from the outset, and it was one of the first to be accepted. That group is already taking great steps towards being up and running, so that it can take in bids and bring in investment and jobs. I think that the enterprise zone will assist in that even further.

Finally, the freezing of council tax will benefit hard-working families in my constituency. We are lucky in Erewash because this is the second year running in which the borough council has frozen council tax. That will really help people.

I welcome the Budget speech. I will fight for investment for my constituency, and I certainly back the move to help manufacturing.

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4.46 pm

Ian Murray (Edinburgh South) (Lab): There was so much and yet so little in yesterday’s Budget that could be talked about this afternoon, but I will concentrate on the growth section.

The first line of the foreword to the Government’s document, “The Plan for Growth”, states:

“This Plan for Growth is an urgent call for action.”

At last, after almost a year of the coalition Government, they have finally realised that hard-pressed businesses and families up and down this country need an urgent call to action for growth. However, I do not see a call to action for growth in cutting public spending too deep and too fast; the highest unemployment since 1994; the highest youth unemployment since records began, with no plan to get it down; inflation on the march, with the retail prices index at its highest level in 20 years; the largest squeeze on living standards in modern times; increasing VAT to 20%, which puts more pressure on consumer confidence and further compounds business insecurity; a continued lack of liquidity in lending markets through our banks; fuel prices that are out of control; consumer confidence at its lowest level in more than 20 years; and an overwhelming, ideologically driven attack on public services. That is certainly hurting people in my constituency, but it definitely is not working. We have all that, and the real effects of the VAT increase and the public sector job losses are still to feed through to the real economy. This does not seem to me to be a call to action for growth; it is no plan for growth, or perhaps a panic plan for growth.

That point is made clearly by the Office for Budget Responsibility, the independent body set up by the Chancellor, which we debated a few days ago in this Chamber. Even after the Chancellor’s “Budget for growth”, which, to use his words, should add fuel to the economy, the OBR has reduced its growth forecast for this year and next year, as it did last year. It is surely a huge embarrassment for the Chancellor that his Budget for growth actually downgrades growth. It is extraordinary that it does, given the urgent call for growth in the Government’s own document and the Chancellor’s own words that it would be a Budget for growth. This must be a historical first.

The Chancellor has failed to realise that cutting too deep and too fast is damaging our economy. The public and private sectors are inextricably linked. Slow growth and rising unemployment will make it harder to get the deficit down. The move from 2.1% to 1.7% is a reduction. Unemployment has been revised up to 8.2%. As someone said to me at my surgery a few weeks ago, “How can you possibly pay back debt from the dole queue?” They were absolutely right.

Martin Horwood: In its submission to the comprehensive spending review, the hon. Gentleman’s party suggested that the cuts in unprotected Departments should be no more than 20%. What the Government actually delivered was only 19%. Does he think Labour’s proposed cuts were going too far and too fast?

Ian Murray: I find it surprising that the Liberal Democrats always jump to their feet during these debates and throw out statistical analysis of stuff that is, quite frankly, not true. The Liberal Democrats’ leaflets from

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the general election, which I still leaf through, tell me time and time again that they supported what we were doing on the economy, that the banks were all to blame, that VAT would not have to go up and that employment was the key to growth. The Secretary of State for Business, Innovation and Skills said that to Jeremy Paxman after the general election.

Jessica Lee: Will the hon. Gentleman give way?

Ian Murray: I will carry on, if the hon. Lady does not mind, because our colleagues want to contribute to the debate and our time is restricted.

What we heard yesterday was a big Budget con. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who is not in his place at the moment, said that this Budget could not be seen in isolation from the last one. It is a continued attack on the cost of living. As has been said, the Institute for Fiscal Studies said yesterday that the Chancellor is giving with one hand but taking it back not just with the other hand, but with

“lots and lots of other hands”.

Does that not show how out of touch he is? Did he not realise that people would see the Budget con?

The Government trumpeted the increase in the tax threshold, but changed the threshold increase mechanism to the consumer prices index, which will totally offset the increase. Page 42 of the Red Book shows that the Government will hand out £1.2 billion in a tax cut but take £1 billion back over time through the change to the threshold indexation. Of course, the biggest con of all is that indirect taxes will continue to rise by the retail prices index, which of course is the highest measure of inflation.

I have not even touched on the millions of families who will lose their child benefit, or the fact that every family earning less than £26,000 a year will lose their tax credits. It is a Budget con for families. The Budget confirms that although ordinary people will be thrown a little bit of corn, there is little doubt that they will be hit the hardest by this uncaring and out-of-touch Government.

The second con that I wish to examine is the fuel con. We all welcome the 1p cut on fuel. I am not a car driver, but I appreciate how much it costs to drive. My constituents constantly tell me about the pressure on small businesses that have to fill up vans and cars. However, at 7 pm on Monday, the petrol station next to my constituency office was charging £1.28 a litre. On Tuesday night it was charging £1.30 a litre, and on Wednesday night, after the 1p decrease, it was charging £1.29 a litre. The 2.5% VAT increase makes up 3.25p of that price. That is the fuel cut con—the price is 1p down due the Chancellor’s decision, but 3.25p up to due to another decision of the same Chancellor.

As has already been asked, who is to say that oil companies will not just pass the additional tax costs back to the consumer? Oil and Gas UK has said in the past 24 hours that there will be job losses and a reduction in production in the North sea as a direct result of the Government’s policies. We are left in a quandary. Do we have more job losses and less production in the North sea, which could be catastrophic for the Scottish economy,

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for what might be absolutely no benefit to consumers at the pumps? The IFS said yesterday of the fair fuel stabiliser:

“If oil prices stay high but volatile, this policy will do little to stabilise pump prices.”

It is a policy that does not help hard-working families fill their cars, and may cost jobs.

According to the Government’s own figures, this Budget does nothing for growth. The Chancellor needs to think again before it is too late and he sends this country into a spiral from which it may never recover.

4.54 pm

Michael Fallon (Sevenoaks) (Con): I remind the House of the interests recorded in the Register of Members’ Financial Interests.

I am sorry that the shadow Chancellor is no longer with us, because a couple of elements were missing from his speech. First, any sense of humility was lacking in one of the architects of banking supervision, who started with 10 well-funded banks and ended with only five. Secondly, there was no apology for the appalling deficit that we inherited. Let us be clear: it is 10 years to the month since the Labour Government balanced a Budget. That is nothing to do with something that happened in 2007 or 2008. They made the mistake of letting the deficit grow in the good years as well as the bad.

The Budget’s most important feature is that it does not change the fiscal consolidation plan. We remain on track to balance the budget again by removing the structural deficit by 2015. The Office for Budget Responsibility’s forecast is that we maintain our position on track to being able to do that.

Most of the meat of the Budget is also extremely welcome, and I am glad that Opposition Members have picked out pieces that they, too, can welcome as helping their constituencies. Simpler taxation and less regulation are the drivers of a successful economy. Businesses have enough to worry about at the moment; the Government should not be one of their worries. Reducing the weight of tax and red tape on our businesses is essential. I urge Ministers to stick to their task, regulation by regulation, tax by tax, until we can genuinely say that we have one of the most competitive economies in the west.

I also welcome the Budget’s emphasis on the longer term, backing the newer technologies, especially in energy and the environment, and taking the measures necessary to improve the employability of that huge pool that we inherited of people under 25 who are simply outside the labour market.

I am struck in my constituency by how many companies succeeded in growing even under the previous Government, without direct subsidy or specific grants. I visited three recently. The Sevenoaks energy academy, which I had the honour of opening last year, trains hundreds of engineers in renewable energies, providing courses in fitting solar panels, rainwater harvesting and so on. One of Sevenoaks’s most dynamic business women, Julie Walker, made a £1.5 million investment in that academy, and I welcome that.

Ian Lucas: Will the hon. Gentleman give way?

Michael Fallon: I will not, if the hon. Gentleman will excuse me.

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Secondly, Vine Publishing is a new media company in my constituency that is heavily involved in all kinds of print and digital work. Its turnover now approaches more than £3.25 million and it employs 12 people. It was founded by three entrepreneurs, who dropped out of university because they preferred to go into business.

Thirdly, I attended the opening of the Ideal Waste Paper Company this month. It has built a major new recycling facility at Swanley—a £14 million investment, creating 60 new jobs and recycling more than 250,000 tonnes a year.

Those are examples of companies of the future, in the new technologies, the new energies and the new media. We should all ask ourselves how we get more of them. Of course, getting the long-term climate is right, but we must also address how to make it easier for people to set up such companies.

First, we must consider how we make it easier for them to start up. Like my hon. Friend and neighbour the Member for East Surrey (Mr Gyimah), who made an excellent speech, I support the Government’s enterprise incentive scheme, the entrepreneurs’ relief and the relaxation of planning. I would also like us to return to share ownership and consider how we can spread it more widely among those who work for start-up companies, particularly in the payment of dividends.

Secondly, we should consider how we make it easier for such companies to employ those who have been shut out of the labour market, and who might be viewed as too expensive or too risky to hire.

I welcome the Government’s initiative to reduce the number of cases going before employment tribunals. That is still a very serious barrier to employing more staff for small businesses. Finally, we need to make it easier for such companies to access the capital that they need; a number of hon. Members on both sides of the House have spoken about that.

I welcome the agreement on lending targets in the Merlin negotiations. Those need to be met, especially for smaller and medium-sized enterprises. Of course the banks are right to want more certainty on the capital and liquidity requirements, which are now being emphasised on all sides, from the Financial Services Authority to the G20 and so on, but I hope that there will be more focus on simpler business models with stronger regional networks, which can make lending to small businesses more worth while. We need such businesses to flourish, because they will create the jobs of the future.

The Chancellor was right in the Budget to help people to cope with the unexpected increases in the cost of living over the last few months, but I hope the Budget will also be welcomed for its long-term effects: keeping the public finances on track so that we eliminate the structural deficit that we inherited, putting Britain back into the black without huge changes in the tax and spending measures already announced, and helping to pump the oxygen of enterprise around the economy. It is nice, after 13 years under the previous Government, to welcome a Budget from a Government who believe in enterprise and are prepared to back it.

5.1 pm

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I was most impressed by the list of businesses that the hon. Member for Sevenoaks (Michael Fallon)

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has recently opened or visited in his constituency. Things could not have been too bad under the Labour Government if there is such vibrant activity, could they?

That aside, given the limited time available I want to concentrate on just one of the issues that I would otherwise have covered: the Budget announcements on the green investment bank. I am pleased that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), is in the Chamber alongside Treasury Ministers.

I welcome the fact that the initial capitalisation of the green investment bank will be increased to £3 billion. However, I note that the increase in funding is to come from asset sales, and I would be interested to know how certain we can be that those proceeds will materialise as funding for the bank. As all hon. Members know, such funds can be diverted elsewhere if there are other urgent public finance needs, so I hope for a reassurance that that sum will materialise.

Although £3 billion is clearly better than £1 billion, it is still short of the sums that many say should make up the initial capitalisation of the bank. An Ernst and Young accountant said this morning that the bank should have been granted £4 billion to £6 billion, and I have heard that figure from other sources.

I and others are also concerned that the bank will not be allowed to borrow until 2015, and that it might not be able to borrow at all if the Government are unable to meet their debt reduction targets. The chief executive of the UK Sustainable Investment and Finance Association today said that linking funding of the bank

“to progress on the deficit does not give investors the certainty they need”,

which is worrying.

However, it is not just that the bank will be unable to borrow until 2015. Today’s comments suggest that that reflects a decision on what kind of bank the GIB will be. One commentator said:

“The decision was a victory for the Treasury, which for months had been embroiled in a tussle with green enthusiasts within the government, including climate change secretary Chris Huhne, over the powers the bank should have. It was originally intended much like a private sector institution, funding investments by taking on loans and issuing financial products such as green ISAs and bonds. One by one, these powers were whittled away.”

I hope that that is just press speculation, and I would welcome any ministerial refutation of it. There is a view within the Government that it is not a problem if the green investment bank cannot borrow until 2015, because the projects that will be devolved will be large projects that will take time to get going. I am concerned, however, that if the bank cannot borrow until 2015, it will send the message that it is too closely linked to the Treasury and could have its funding turned on, turned off or even taken back by the Treasury, depending on the wider financial priorities of the Government. Again, I would welcome reassurance from the Government that that is not the case.

Hon. Members will not be surprised to hear my second point: I want to emphasise the case for the green investment bank headquarters to be established in Edinburgh. I say that not just because it serves the interests of my city—although obviously it does—but because I genuinely believe it is the best location in the UK for it to be based. I would argue strongly that its headquarters should not be in London—too much of

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the financial services industry is concentrated there anyway—and it would certainly be a mistake for it to be run out of the Treasury, as some have suggested. It needs to be outside and independent of the Government.

If the green investment bank is to add to what can be provided by existing financial institutions, and not just be a brass plaque that reads “Green Investment Bank” without doing much that is different from what happens now, it needs to be proactive and to work with the energy and renewables sector, in particular; to work with industry and academics; and to have a good close relationship with financial experts. In my view, Edinburgh has the best combination in the UK of these sectors and skills, and I believe that basing the green investment bank headquarters in Edinburgh would be good not just for Edinburgh and Scotland, but for the north of England and Northern Ireland, and would be a good sign for the renewables and low-carbon sector throughout the UK.

I hope that the Minister can give a decision on Edinburgh in her winding-up speech. However, if she feels that she cannot, as I suspect she might, I hope that the Government will still give serious consideration to the matter. I think the view is shared across political parties that locating the bank’s headquarters in Edinburgh would allow us to make the best of the skills and expertise in many areas.

5.7 pm

Lorely Burt (Solihull) (LD): On behalf of the Liberal Democrat part of the coalition, I would like to make a few remarks on the business, innovation and skills measures in the Budget. Last year, we delivered a very tough Budget—one that members of neither coalition party would have wished to bring in as our first Budget—but it had to be done. Labour Members have conveniently forgotten just what a mess they left: they increased public spending by 5% year on year for 10 years so that the state accounted for more than half of all income; overheated the economy based on borrowing that this country could not sustain when the global banking problems struck; and left behind a deficit bigger than anywhere in the G20. And now they appear to be living in a parallel reality. They said that there would need to be cuts, but they never had the decency to tell the public where the axe was going to fall, and despite all the speeches we have heard this afternoon, they still have not.

We have an Opposition party that continues to oppose everything while proposing nothing. The simple truth is that if we had not taken strong measures, the country would today be in the same situation as Portugal: a whisker away from needing a bail-out and with all the draconian measures of higher taxes and bigger spending cuts that Greece and Ireland have had to endure. Our measures were tough, but they are doing the trick. They were endorsed by the International Monetary Fund, the OECD, the European Commission and, most important of all, the credit rating agencies, which confirmed our triple A credit rating. Today, therefore, families are not paying 12.9% interest rates like those in Greece, or 10% like those in Portugal, but 3.6%.

With this Budget, we need to support the growth that will pull us out of the situation we are in. The first thing we have to do is to start rebalancing the economy. We

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have arguably the best financial sector in the world—and we need it. We need it for jobs and we need it for tax revenues. Labour supported the financial sector. The then City Minister—now the shadow Chancellor—feted it with soothing words about light-touch regulation, and we all know what happened after that.

While Labour was in thrall to the financial sector, it neglected the manufacturing sector. Shockingly, the previous Government oversaw a decline in manufacturing that was greater than that seen in the days of Margaret Thatcher. My region in the west midlands has the invidious distinction of being the only region to lose private sector jobs when they were on the increase everywhere else, in the so-called good times. What do we have in the Budget to help to redress that imbalance? Not 10, but 21 enterprise zones have been announced. Each zone has a metaphorical “Open for business” sign outside, to attract the inward investment that each area desperately needs. The predicted 1% lowering of corporation tax this April has been doubled to 2%. By 2014, we will have the lowest corporation tax in the G7, which will attract more businesses and jobs to the UK.

For a long time we have been lobbied by small businesses about the burden of regulation. They are drowning under red tape. We have already made a start in that regard, with the one in, one out rule, the introduction of sunset clauses and the establishment of the Cabinet’s reducing regulation committee. I welcome the announcements that will assist local business: no more domestic regulatory burden for micro-businesses—that is, businesses with fewer than 10 employees—for the next three years; 200% R and D tax credits for small and medium-sized enterprises; increased entrepreneurship relief; and the extension of the small business rate relief. I could go on, but I shall not, in view of how many Members still wish to speak. I think the House gets the point, although I would like also to mention that more than £350 million of regulation for the smallest businesses has been done away with. However, we will need to look at equality legislation, which embodies rights that should be available to every working person, regardless of the size of the company for which they work.

Much mention has been made of young people. We need to encourage and develop our skills agenda. We have announced a further 50,000 traineeships and 80,000 work experience placements. We have also had the welcome doubling of the number of university technical colleges.

Fuel and transport costs—a tough area for the Treasury—are clearly things that business has lobbied about. However, business is suffering very badly, and although Opposition Members may mock the 1p reduction, let us not forget that their plans were for a 5p rise in the cost of fuel. At today’s prices, that would have increased the cost of filling up an average-sized car by more than £200 a year. I am glad that we have scrapped it.

However, it is important that we do not lose sight of our desire to be the greenest Government ever. That is an agenda that the Liberal Democrats are particularly keen to promote. The green investment bank will receive treble the capitalisation and be able to facilitate investment of £18 billion by 2014-15. It will also act like a real bank, able to borrow and invest from 2015. We have also set a carbon floor price, which will drive investment in low-carbon industry.

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There is a lot more in the Budget that I would like to talk about, but I am conscious that other colleagues wish to speak. Together with all the other measures already announced, I am sure that the Budget will not only give business a helping hand, but put the “Open for business” sign up clearly outside the door of Great Britain plc.