Budget Resolutions and Economic Situation — House of Commons, 2015-07-08
Topic: Macroeconomics
Robert Andrew Raymond Syms (Conservative, Centre-right): I welcome today’s Budget. The coalition Government inherited an awful economic legacy in 2010—the largest recession, a banking system still in a pretty bad state, a general fear that unemployment was going to shoot through the roof—and at about the time they started to get on with the job of tackling it, the eurozone started to blow up and get into difficulty, and clearly that is still a problem today The Government took the right decisions in 2010. First, they nursed back the real economy, so jobs could be created, people could keep their homes, and businesses could invest. Their second priority was to reduce the deficit, which they did at a slower rate than originally intended mainly to help the real economy recover, but they still managed to halve the deficit over that period. They used as the crutch a rise in the national debt, which was a sensible policy decision, as we could then borrow money at very low rates and we started off historically, as we normally do in the UK, with a very low debt. As a result, 2 million jobs were created, investment started to increase and the British economy started to recover The public finances have moved in the right direction, but we still have a very large national debt; it is not large by continental standards, but it is by British standards. It is right that in this Budget we start to close the gap still further, from just under 5% down to a balanced budget and we top off the national debt and start to reduce it. I am pleased that the Chancellor has set out a plan to both balance the budget and start reducing the national debt, from about 80% of GDP back down to 70% and all points lower. That is good news We have been through a difficult period, but our hard work over the past five years as part of the coalition has clearly paid off, because we now have rising tax revenues and an economy that is starting to perform Tax credits are probably one reason why unemployment did not rise as much as might have been expected, because to some extent the subsidy of employment helped employers keep people on and meant people stayed in work, but the fact that we are spending so much on welfare shows there is clearly a welfare issue. At a time when we have falling unemployment and rising pay levels—they are now starting to pick up—it is perfectly sensible that we should try and float people off tax credits. I take on board the points Members have made and we will have to look at the detail carefully, but if we can reduce tax credits at a time when people’s pay is going up, the national debt and the national deficit can be reduced and people will become less state-dependent. It is right and proper that, if profits go up and corporation tax is cut, employers take the strain now and the taxpayer does not have to, because there is a limit to what we can do in terms of national borrowing. I think that the outlook is pretty good. Chancellors always do too much and always mess about with too many taxes and, like his predecessors, my right hon. Friend the Member for Tatton (Mr Osborne) has a habit of doing that. Our tax code is far too large and there is a very good argument for tax simplification, but nevertheless the priorities that the Chancellor has set in his Budget are right: increase incentives to work; increase incentives to invest; and increase incentives to save There has been some criticism of the northern powerhouse proposal, but, as somebody from the soft south, I think that it is vital that we balance our economy. The parts of our nation that generated the industrial revolution have some first-class universities and a great resource of people, and we should use that to balance against London, because London’s economic impact on the UK is too great. If we can do that, it will lead to much more sustainable growth rates. We do not want to get into a situation where just at the point when parts of the north start to feel things are improving a little bit, London starts overheating and suddenly economic policy goes into reverse. For a one nation Chancellor with a policy of trying to get growth in all the regions, that has got to be right. I therefore welcome what the Chancellor is doing to try to have a more balanced approach to our economic growth in the UK I also welcome what the Chancellor has said about inheritance tax. It always seems to most of my constituents, who have paid an array of taxes over their lifetime, that when they die the state will jump in and take their house, which may be an expensive one, rather than letting it go to their children. These days, it is not difficult, particularly in London, to have a house worth £1 million—it does not have to be very big. As we have often seen, someone’s castle in Scotland can be worth less than an ordinary terraced house in London. The issue has to be addressed, and I am glad the Chancellor has done that It is good that we have addressed corporation tax and are continuing to bring it down. Southern Ireland has clearly benefited from very low tax rates, and making ourselves tax competitive is the most effective way to stop major corporations landing profits in other low-tax areas, because the incentives for doing so are much reduced I understand the concerns about productivity. Education, training, apprenticeships and investments in science will all make a difference. Ultimately, as wages go up and as the cost of employment goes up, employers will start to invest in many areas which will start to put productivity up. One reason why our productivity is lower is that the two sectors where we were the most productive—North sea oil and gas, and the financial sector—have taken a knock over the past few years. I am a sceptic about some of these things. There are things we can count, such as unemployment, but other things are formulae made up by statisticians, and I do not think they always get it right. An economy such as the British economy, growing at this rate and with relatively full employment, is a good place to be. I do not think that we need to worry too much about some of these things, which I am sure economics will put right as the economy goes forward In 2010, the right choices were made and today’s Budget has continued to do the job we started then. As a consequence, we will end up with a stronger, more employed, more flexible and more successful economy. Of course, some challenges remain—we see the challenge of Greece. Although I do not think that Greece will affect us, we must remember that French banks have loaned heavily to the Greeks and that very big figures are involved that could have an impact on the European banking system There are problems now in China, as its economic model is not as fit for purpose as it was. The BRIC countries—Brazil, Russia, India and China—have gone into reverse. If we look around the world, we see that the countries that are often written off are those that are still doing pretty well: the United States, Canada and Britain. In Europe, the Germans and the Dutch still have formidable economies. We have to stick with the policy we have, as it is the right policy. Not only is it a good long-term economic policy, but its resilience has meant that, despite all the storms and the difficulties of the world economy, Britain has managed to make progress Clearly, we have a trade deficit—that was one of our biggest difficulties to worry about—but it is not surprising, given that 50% of our exports go to an area that has had recurring financial problems, that it is difficult for us to export. We should not get too upset about that, as it will sort itself out. If the Greeks’ problems blow up, things may well sort themselves out in the right ways, because people will actually have to take actions to make a more sustainable European Union and euro I therefore fully support what the Chancellor is trying to do. We have made progress. There is more progress to be made, but I am proud of what the Government have done. Clearly, we have to look at a lot of detailed things, but over the next five years, Britain should continue to make progress and show the world that it has a lot of good things going for it. The British economy is growing in size and influence, and its people will benefit from that