Budget Resolutions — House of Commons, 2017-03-09
Topic: Macroeconomics
Seema Malhotra-Saluja (Labour, Centre-left): Thank you for giving me the opportunity to contribute to today’s Budget debate, Madam Deputy Speaker It is fair to say that today’s headlines are not what the Chancellor might have planned: "Spite Van Man", "Tories break tax vow", "Phil Picks a Pocket or Two", "Rob the Builder! White Van Man gets battered by Budget", and that is just to name a few. It is a good example of how, when one does things in a hurry, one gets things wrong. The Chancellor got it wrong yesterday. If he takes anything away from the last 24 hours, it will be that he made the wrong choice at the wrong time and in the wrong way. That is why Labour, along with many Government Members, will oppose the increase in national insurance for the self-employed. It is a broken promise and the Chancellor is rightly in for a rocky ride The Chancellor has used his first Budget to continue with tax giveaways to those at the top, while hitting self-employed low and middle earners for £2 billion to fill his own black hole. The Association of Independent Professionals and the Self-Employed describes this tax hike as an additional burden upon individuals who are already subjected to costly excessive bureaucracy. Anyone who is self-employed and earns more than £16,250 a year will have to pay more tax. Under the proposals, a self-employed person earning £20,000 will pay almost £100 more in national insurance from next year and a self-employed person earning £30,000 will pay almost £300 more. Up to 8,000 self-employed small businesses in my constituency could be affected by the change. For a self-employed earner bringing up a family on about £25,000, that could be about £15 to £20 a month out of money used to pay for school trips, school uniforms or putting food on the table. At the same time as inflation is going up and average wage growth is being revised down, this measure, implemented in this way, will lead to yet another squeeze on household incomes. The last thing we want is for families to be borrowing more just to make ends meet. The just about managing could become the just about managing no longer The self-employed are the engine of the UK economy. I have twice had periods of self-employment and I know the challenges they face. There is not the back-up and security of an employer to fund their pension, pay for a training course, cover them with another member of staff if they are off sick, or provide statutory holiday pay. It is hard and it is stressful, alongside the rewards of being independent and entrepreneurial. Due to income fluctuations, it can be harder to get a mortgage or a rental agreement The Budget should have been a chance for the Government to show the self-employed that they are on their side. Indeed, the biggest difference in tax take between self-employment and employment lies in the 13.8% employer national insurance, not the national insurance paid by individuals. If the Government are serious about equalising tax treatment, they should focus on how to work in partnership with the self-employed to balance and share the risk for those who are doing the right thing. The small and medium enterprise community is the backbone of our economy, and the Government should bring forward such proposals only after proper dialogue and consultation with it I want to focus on a few other points. Productivity growth is set to be revised down again, even after the UK productivity gap widened last year to the worst levels since records began. After seven years of Tory Government, we still lag behind Germany and the US by more than 30%. As the Chancellor said at the time of the autumn statement, the productivity gap is well known, but it is shocking none the less. The downward revision of productivity is not just due to Brexit. It is a reflection of the Government’s strategy and investment record: their lack of achievement, rather than their recycled infrastructure plans. At some point, the Government will have to take responsibility for their poor record. They now have no one else to blame When the Government came to power, they stopped the Building Schools for the Future programme, and two schools in my constituency were affected. We can now see the outcome of the Government’s neglect in favour of a blind ideological pursuit of, and almost exclusive support for, free schools and grammar schools. The National Audit Office calculates that £6.7 billion is needed to bring existing school buildings in England and Wales to a satisfactory standard. Ministers are choosing to give billions of pounds to fund new free schools, while existing schools are crumbling into disrepair. That is not my view, but the conclusion of the Whitehall spending watchdog. The Chair of the Public Accounts Committee called for the money to be reassigned and diverted to existing buildings, arguing that taxpayers’ money could be used to fund much-needed improvements Another challenge is 4G coverage. The UK is 54th out of 80 countries surveyed for 4G coverage, with levels here lower than in Bulgaria, Albania and Romania. This is the fifth time the Government have announced this highly limited roll-out of fibre broadband. Once the roll-out is complete, only 7% of homes and businesses will have benefited This Budget and previous Budgets have cut corporation tax, which will be 19% this year, 18% next year and 17% the year after, removing £15 billion from public finances in this Parliament. This is a direct cost to the taxpayer. The irony is that not a single business, large or small, that I have talked to, and I talk to many, has put corporation tax levels at the top of their wish list. They have raised infrastructure; affordable housing, so that employees can live and work near where they work; education and skills; and public transport and its affordability. The decision to go ahead with those corporation tax cuts is a self-dug black hole that the Government need to fill. They are plugging the gap with the earnings of the self-employed and cutting the amount spent on children’s education In recent weeks and months, teachers have told me about growing parental poverty, and about kids coming to school hungry or without clean school uniforms. Parents are sometimes unable to afford school trips. Schools are having to cut teaching posts and non-teaching welfare and support staff, curriculum teaching time is being reduced and the school day is being shortened. As pupil numbers increase, teachers face increasing class sizes. Increasing numbers of children face mental health conditions but are unable to get the support they need. How can the Government be proud of that record, which is the reality of what our wonderful schools face—the worst they have known in a generation The Government should delay or abandon their corporation tax cuts and support schools, which work hard to ensure that the children of our country get the education they need. Indeed, at a minimum, they should delay the application of the apprenticeship levy to schools It is worth mentioning one other lost opportunity. In the 2015 Budget, the former Chancellor announced that he had hiked the tax take on dividend income by 7.5%. That change took effect only in April 2016, meaning that people could bring their dividends forward by a year to avoid it. The OBR estimates that, once other factors are taken into account, pre-announcing the policy cost the Treasury £800 million and handed shareholders that same amount; and that each of those individuals withdrew an average of £30 million in dividends and avoided £1.1 million in tax. That is a devastating conclusion and another example of how the Government continue to give to those who already have and take away from those who need the most We need better than this. We need a strategy that addresses the needs and challenges that businesses and families in our constituencies face. We need a proper plan for funding public services, an economic plan that suggests a clear sense of direction, an honest assessment of the risks of Brexit, and a sensible response to those risks. What was missing from the Budget was a proper vision of our future and a pathway to get there. It was an unfair Budget, it made the wrong choices and is set to leave us poorer and less prosperous as a nation.