Finance Bill 2016

The First Reading, where legislation is briefly introduced to the House, before debate begins.
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Anne Blakesley
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Finance Bill 2016

Post by Anne Blakesley »

The Chancellor takes her place at the Despatch Box to traditional cheering from the government benches. Returning to the tradition of enjoying a beverage with the Budget Speech, the Chancellor has opted for a gin and tonic with two wedges of lime.

Mr Deputy Speaker,

I rise today to present the Finance Bill and Main Estimates for the coming year.

The past year has certainly seen challenges. Flooding across Yorkshire caused significant property damage and loss of life. The Government rose to those challenges. Our boost in investment for flood defences is continued today, as we pledge an additional £900 million in spending on flood defences and a revolving loan fund to help local authorities finance improvements in drainage.

Yet it is not just the challenges of the past that shape our decisions. It is the challenges of the future. For the past five years, a resounding cry was that deficit and debt were the preeminent challenges of our time. That is outdated thinking. A lack of investment is a challenge of our time. Rising poverty rates are a challenge of our time. Regional inequality and productivity gaps are a challenge of our time. Cash-strapped public services are a problem of our time.

These are problems that have far worse outcomes than the cost of a sustainable level of debt. An unwell society cannot spur growth. An unproductive society cannot spur growth. An impoverished society cannot spur growth. And without adequate growth, there can be no resolution of the debt. It is a virtuous cycle, Mr Deputy Speaker, where meaningful, prudent investment is necessary to create the fiscal outcomes desired.

And that is where we find ourselves today.

The economy is growing. But it could be better.

Investment if growing. But it could be better.

Consumption is growing. But it could be better.

Unemployment is shrinking. But it could be better.

The challenges we face – child poverty, in-work poverty, regional inequality, weak skills development, low levels of business investment – all create a downward pressure. And that pressure prevents the economy from growing as robustly as it could. It prevents more jobs from being created. It prevents wages for rising rapidly.

It is easy to think of these challenges in the context of a spreadsheet, in the context of numbers. We must also remember that these challenges impact the lives of ordinary people. Our families, our children, our parents, our friends, our neighbours – all of them feel the burden of these challenges. Our schools, our hospitals, our environment, our communities – all of them feel the burden of these challenges. These challenges are not just numbers on a spreadsheet – they are tangible things that impact the lives of everyday people working hard to get by.

And it is those challenges that we must confront today. Those challenges, of course, must be confronted in the context of the need for some fiscal restraint. Because the financing necessary to confront these challenges is only sustainable in the context of low, long-term gilt yields. Significant changes in the structure of our debt will require a change in approach. However, in consultation with the Governor of the Bank of England, I do not foresee major changes in debt structure in the year ahead.

In making this Statement – my first as Chancellor – I will seek to lay out the broad fiscal policy that this Government will engage in. And in order to guide fiscal policy decisions, we must adhere to critical fiscal rules.

First, Mr Deputy Speaker, we must strive to fulfill the Golden Rule: that we will borrow only to invest.

Second, we must ensure that the level of debt is sustainable, in the context of current interest rates, debt maturity, and revenue growth.

Third, we must ensure that economic growth is sufficiently powered, specifically by creating incentives for both private and public sector investment. It is my belief that public sector capital investment should aim to reach 3.5% of GDP, excluding Investment Fund-financed capital expenditure.

This number will change based on increasing private sector investment and interest rates. As the British Investment Bank becomes fully capitalised, we will see a significant amount of structural investment support being issued by that institution – allowing government to rein in investment spending without causing economic harm: that is critical.

Mr Deputy Speaker, in light of these fiscal rules, I wish to lay before Parliament the projections for the deficit. As a percentage of GDP, the deficit is projected to shrink this year. However, the total amount of deficit spending remains comparable to last fiscal year. Mr Deputy Speaker, in the context of our fiscal rules, this is entirely appropriate.

Mr Deputy Speaker: I am wary of withdrawing investment support from the economy until such a time that we observe sustained increases in investment and productivity. As the British Investment Bank begins lending at scale, alongside structural reforms that we are making, I anticipate seeing significant increases in investment throughout the economy. Once this occurs, it will be a sign that we can reduce direct government investment. However, threatening the nascent economic recovery is not something I am willing to engage in.

While deficit spending remains at previous fiscal year levels, the current deficit is anticipated to be reduced by over £12.5 billion – an over 33% reduction. As such, we continue along the path towards seeing the current deficit eliminated by the end of the Parliament. This will allow us to accomplish one of our key fiscal rules by the end of this Parliament: that we not borrow to fund day-to-day or resource expenditure.

Important in the discussion about debt are two key metrics, Mr Deputy Speaker. First, there is the Bank of England rate, which was decreased last month. This will have the impact of lowering gilt yields, ultimately making it less expensive to take on debt. Second, there is the maturity of our debt – which is the most mature amongst our peer economies. Mr Deputy Speaker, we are rapidly beginning to replace more expensive debt issued many years ago with less expensive debt today, continuing to drive the cost of deficit spending downwards. It is for these key reasons that I am not overly concerned by the growth of debt at this time. Withdrawing financial support from the economy would be far riskier.

As such, we are spending in such a way as to meet the second and third of our fiscal rules. In. particular, with regard to investment and capital expenditure, public sector capital expenditure is expected to rise to 3.1% of GDP this year, up from 2.3% in the prior year.

That said, Mr Deputy Speaker, I must reiterate that, as investment and productivity begin to grow, it is my intention to begin a course of robust deficit reduction. This course will be based on the economic realities of the time. And while the current amount of debt is not my greatest concern – it is absolutely necessary to demonstrate to markets our ability to fiscally restrain spending. It would be easy for me to announce major spending projects left and right. However, sustainability of debt prevents that pursuit.

And while the deficit and debt are certainly challenges, they are not the only challenges that we face as a country.

Mr Deputy Speaker, I have been consistent in outlining the three great challenges facing the Government: productivity, poverty, and public services. I should like to take this time to provide greater understanding to what these challenges fully entail.

The productivity challenge is perhaps the best understood. Mr Deputy Speaker, as I laid out while delivering the Mais Lecture, the United Kingdom, amongst OECD economies, lags in productivity. Even amongst out G7 peer economies, we sit, at best, in the middle of the pack. That is not acceptable in the long term.

The productivity challenge that we face can be diagnosed in multiple manners: a lack of private investment, a failure to invest in skills, a fundamentally regionally unbalanced economy. However, they all lead to a lack of productivity growth in the economy.

Of course, as I mentioned, regional imbalance is a key driver of the productivity challenge. Mr Deputy Speaker, while the South East, London, East Anglia, the Midlands, and Scotland saw productivity growth over the past six years, the North, South West, Wales, and Northern Ireland all saw productivity fall. That is a massive problem. That is what we must work to rectify with investment.

The poverty challenge we face can likewise be broken down into multiple streams. Rising rates of low pay and in-work poverty create stresses for workers. Astronomically high rates of child poverty threaten to deny the next generation the life changes that they require. Concentration of intergenerational wealth and the development of an asset class and an assetless class threatens upward mobility for millions.

The public services challenge engenders stresses to the system caused by, over the past several years, austerity measures. Austerity that was combined with increasing demand and market-driven reforms that failed to yield the desired outcomes.

And it must be noted that these challenges often intersect. Children and families in poverty often lack the time or resources to develop new skills, contributing to the productivity challenge. Likewise, poverty places unique stresses on our public services. Robust public services enable a healthy and well-educated workforce – improving productivity. There are numerous connections between these challenges. Connections that require us to confront all three at once.

And so we shall. If the House will indulge me, Mr Deputy Speaker, I should like to move on to the main event: the fiscal policy decisions taken by the Government for the coming year.

Mr Deputy Speaker, I shall begin with our plans to improve productivity in the economy.

Mr Deputy Speaker, for the duration of this Parliament, I am pleased to announce that the government will restructure capital allowances to enable full expensing by British businesses. The data on this front are absolutely clear: full expensing improves private investment in the economy. For investments made prior to this fiscal year, the legacy system of capital allowances will remain in place, allowing companies to claim their 18% writing down allowance for previous capital costs incurred.

The introduction of full expensing will coincide with a 3 pence increase in corporation tax – with the main rate rising to 22%. Mr Deputy Speaker, let me be clear, this is the result of a fundamental restructuring of corporation tax. On the balance, the British businesses will see a £3 billion reduction in corporation tax liability.

I am aware that these changes to corporation tax run the risk of causing harm to small companies, which may not have sufficient capital to take advantage of our new capital allowance structure at this time. As the British Investment Bank continues to grow and begins offering financing to small- and medium-sized enterprises, I hope to see these companies be able to make the capital investments that the introduction of full expensing is designed to promote. However, until such a determination can be made, I am reintroducing the small companies rate of corporation tax, which will remain at 19%. No small company will pay more in corporation tax as a result of this reforms.

Mr Speaker, these reforms are on top of the relief businesses will see on High Streets across the country from the freezing of business rates for the coming year. And for pubs across the United Kingdom, I have another message: we will freeze alcohol duties for the coming year.

The next piece of boosting productivity is placing innovation at the centre of our reforms. Mr Deputy Speaker, I remain unconvinced of the economic utility of the Patent Box – particularly for large corporations. As a result, Patent Box relief will be restricted to corporations paying the small companies rate of corporation tax.

The savings from this reform will instead be invested in innovation across the United Kingdom – with investments in Research Councils and Innovate UK, as well as the establishment of a new research agency to finance high risk, high reward research. These are investments that will provide targeted support for research that will advance British industry – not simply reward the licensing of intellectual property. This is, by my analysis, a deadweight benefit – representing economic activity that would occur regardless of the presence of the Patent Box.

Mr Deputy Speaker, as we improve innovation, we must also think about how innovation occurs. It begins at university, which is why the Government is ensuring that university funding is protected. But it continues with investment in critical infrastructure, such as fibre networks. To that end, the Government is providing £200 million in capital investment in rolling our high-speed fibre, whilst preparing to unleash gigabit fibre. Mr Deputy Speaker: a full plan for a digital economy and the accompanying legislation will be laid before the House this year.

The British Investment Bank will be capitalised by an investment of £10 billion this year, Mr Deputy Speaker. Part of this investment will be financed by the sale of a 5.4% stake in RBS, acquired by the Government during the financial crisis, which we expect to raise £2 billion. This will add to the £2 billion invested in the last year, as well as the £1.7 billion merged into the British Investment Bank from the British Business Bank and the Green Investment Bank. This will bring the total equity of the Bank, in its first year, to £13.7 billion – allowing it to issue over £34 billion in debt that will be used to provide venture finance, loans to small- and medium-sized enterprises, and green investment.

Additionally, it is my duty to report that, following consultations with the Governor of the Bank of England, the Monetary Policy Committee sees fit to engage in a policy of delegated stimulus through the Investment Fund and the British investment Bank. As the Bank of England retires government debt purchased through the Asset Purchase Facility this year, the Bank will reinvest those funds in debt issued by the British Investment Bank. Mr Deputy Speaker, this will serve to allow an increase in lending by the Bank, as well as affirm the creation of a market for debt issued by the British Investment Bank.

This is, without a doubt, a historic investment in the British economy. These are investments that will work to resolve the challenges that we face at home: productivity, poverty, and public services.

Mr Deputy Speaker, a key part of the productivity challenge remains infrastructure: how we connect local communities and and how we connect our nation.

There is a universal piece of infrastructure that facilitates the efficient use of transport infrastructure: smart ticketing. Transport for London is a pioneer in this realm. I am announcing nearly £100 million in grants that will be provided to local and, soon, sub-regional transport bodies to roll out smart ticketing. Whether one is hopping on MetroWest or Birmingham’s light rail system, it is our ambition that ticketing be as straightforward as possible.

Related to ticketing is our aspiration to fundamentally reform bus services, Mr Deputy Speaker. In addition to our increase in subsidies for bus services, I am pleased to announce that the government will bring forward legislation allowing local governments – particularly combined authorities – to introduce London-style bus franchising. As local governments work to improve bus services, financing will be provided to integrate these bus services into a smart ticketing programme.

Of course, investment via local transport grants is all well and good. However, there must be direct investment in systems as well. I am pleased to announce four projects, focused on local communities, that are to be funded. First, Mr Deputy Speaker, is the construction, over the next three years, of an S-Bahn network in Leeds. Second, is £30 million in financing to accelerate the completion of MetroWest expansion in Bristol. Third, is accelerated financing for the completion of Crossrail – including an expansion of Crossrail to Ebbsfleet – over the next two years. Fourth, I am announcing a feasibility study into dramatically expanding local connectivity in the West Midlands – connectivity that will give the West Midlands a London-style mass transit network.

Mr Deputy Speaker, many of these projects are attracting investment from the British Investment Bank under the aegis of providing structural investment in our economy. Furthermore, additional investment is being held back pending the passage of devolution legislation. This is being done in order to establish clear guidelines for cost sharing between combined authorities and the government. We anticipate, for example, that the West Midlands Combined Authority, when powers are fully devolved, will finance a significant portion of the development of its rail expansion – much as London financed Crossrail.

Even as we pursue connectivity within our communities, we must also work to expand national connectivity. Mr Deputy Speaker, I am pleased to announce a series of investments designed to accomplish this.

First, Mr Deputy Speaker, I have taken a series of decisions regarding the provision of rail services in the North. I must announce that the planned electrification of the TransPennine Line will move forward at a fully-financed speed and expended to include the electrification and upgrade of links between Hull, Sheffield, and Leeds. Additionally, we will pursue construction of a high speed rail line - High Speed North – that will connect the cities of Liverpool, Manchester, Sheffield, and Leeds as the first stage of a broader Northern rail and connectivity strategy. High Speed North, as currently envisioned, will be fully integrated with a national high speed network.

Second, as the Government completes is assessments of the a national high speed network, we are announcing a financing package to complete the Midlands Main Line electrification, as part of the “electric spine” initiative that was laid out by the previous government. This electrification will improve connectivity between London, the East Midlands, and the North – promoting growth and the development of strong, national connectivity.

Third, we are increasing financing to complete the electrification of the Great Western Main Line and South Wales Main Line over the next two years. In addition to previously invested funds, £1.6 billion in investment will be provided. This project will be fully integrated with MetroWest in Bristol, as well as the South Wales Metro and Swansea Bay Metro proposals that are being completed in Wales. Simply put, Mr Deputy Speaker, this project will spur connectivity and promote productivity in the South West and in Wales.

Mr Deputy Speaker, as we increase investment in transport links, it is vital to remember that efficiency is part of sound governance. In constructing these projects, the Government will ensure contracting provisions that create incentives for timeliness and cost-control are met by contractors.

Mr Deputy Speaker, as we make transport decisions, the Government will further take significant steps towards achieving devolution in England. As we prepare to introduce a broad devolution bill, I am announcing a £600 million increase in the funds available to finance devolution deals. Details of those deals will be forthcoming. However, Mr Deputy Speaker, I must also announce a policy decision. As financing for devolution is increased, we are decreasing the financing for Local Enterprise Partnerships. It is anticipated that these structures will increasingly be folded into combined authorities to drive collaboration between local governments and businesses in that setting.

As we invest in devolution, we must recognise that local communities are uniquely poised to offer solutions to skills training and adult education. Therefore, I am introducing the Skills Fund under the Department for Education and Skills. This fund will be used to provide funding for combined authorities to pilot innovative skills development programmes. Furthermore, Mr Deputy Speaker, it will be targeted to authorities with worrying productivity growth and deprived areas.

It is vital, Mr Deputy Speaker, to recognise that, no matter where we are from, we are a single United Kingdom. We thrive, not as individual cities, regions, or nations, but as a single country. We all have a stake in our continued, shared prosperity. To that end, I am announcing the creation of a Shared Prosperity Fund.

The purpose of this fund is simple: it shall be a vehicle of the Treasury to finance projects that are designed to boost the prosperity of the United Kingdom by investing in regions that were, historically, left behind. It is no surprise, Mr Deputy Speaker, that the number of deprived areas in the United Kingdom continues to grow. The number of areas deemed “less developed” by European standards threatens to grow. The gap between prosperity in some corners of the country and deprivation in others grows wider: a reality we must confront.

The uses of the Shared Prosperity Fund will be diverse, Mr Deputy Speaker. They could include critical repairs of hospital infrastructure or upgrading facilities required for improving skills education. They could include providing long-standing revolving loan funds to finance the construction of affordable housing in regions throughout the United Kingdom. They could include financing the deployment of superfast broadband. They could include partnering with the nations to capitalise the financing of transport links. The Shared Prosperity Fund will have versatility as a core part of its mandate as we continue to work to do right by deprived areas of the country.

With that in mind, Mr Deputy Speaker, I am announcing that the Treasury is beginning preliminary discussions for use of the Shared Prosperity Fund to finance portions of the Swansea Bay and North Wales Metros, as well as making significant infrastructure improvements in Scotland – such as Glasgow Crossrail, Edinburgh-to-Glasgow connectivity improvements, and linking Aberdeen and Inverness.

Mr Deputy Speaker, it will not escape the members of this House that many of these investments are targeted. I imagine I might be criticised for not dramatically scaling up investment in certain parts of the country. To that end, I will make two notes. First, the Government is actively evaluating proposals for projects such as East-West Rail in the South East and East Anglia, Crossrail 2 in London, and High Speed 2 nationally. Decisions on these matters will be taken in due course. In particular, with regards to HS2, the Government will actively review the proposed routes and alternatives before embarking on a major spending programme. Second, the challenge of regional inequality demands a laser focus on improving outcomes in the regions most impacted. Major transport decisions have been made with the South West, Wales, East Midlands, and the North in mind because those regions are the ones that require immediate investment.

Moving on, Mr Deputy Speaker, I should like to speak on the decisions taken this year in confronting poverty and low pay.

Mr Deputy Speaker, previously, the Government announced a landmark change in wage policy, with the ambition of the national minimum wage rising to 60% of median earnings by 2020 – a path that we are on track to meet. We must, however, create incentive to meet these goals – to pay employees a fair wage.

To accomplish this, the Government is fundamentally reshaping the employer side of National Insurance Contributions, Mr Deputy Speaker, with the addition of two new levies designed to slow the growth of excessive pay and create an incentive for employers to increase worker pay. The excessive pay levy will introduce a surcharge of 2% on pay over ten times greater than the national median income. This will impact businesses paying individual wages of over £325,000 per year. In short, Mr Deputy Speaker, this surcharge will impact very few. Second, we are introducing a low pay levy. Under this levy, for each individual in low pay – defined as earning an hourly wage below the national living wage – employers shall be assessed a 2% surcharge on pay below the exempt amount.

The levies are designed to incentivise employers to raise wages. Moreover, they are more than offset by a reduction in the main rate of employer National Insurance Contributions. On the balance, the employer share of National Insurance Contributions will decrease by over 800 million. These reforms to National Insurance are a tax cut for the majority of employers in the United Kingdom, Mr Deputy Speaker. For the majority of employers, it will now be less expansive to hire in this country. That is a good thing. That will drive employment growth.

The other side of the low pay equation, Mr Deputy Speaker, is social security and the Universal Credit. Mr Deputy Speaker, I am announcing a freeze in transitions to Universal Credit for the coming fiscal year. It is abundantly clear to me that flaws in the system must be ironed out before it can be allowed to continue onward.

That said, I will state now that I believe in the fundamental premise of Universal Credit. I believe in a benefit system that eases transition back into work without relying on a series of cliff edges and absurd marginal tax rates. However, the system will require significant reforms that the Government will announce over the coming year.

Moreover, Mr Deputy Speaker, it is readily apparent that the Department of Work and Pensions is not prepared to roll out Universal Credit. Therefore, Mr Speaker, I am announcing a £200 million capital investment in the Department of Work and Pensions to modernise computer systems and improve benefit management programmes in order for a seamless rollout of Universal Credit to occur. I know that this announcement may not be of significant interest to many in this room – but it is an essential investment that will make reforms to the social security system possible in the long term.

And as we work to encourage better pay and prepare the Department of Work and Pensions for Universal Credit, we must provide support to those on low pay today. Mr Deputy Speaker, I am uprating the Income Support, Working Tax Credit, and in-work element of Universal Credit in line with wages. It will still pay more to work, but this spending will provide a lifeline to those in need.

Mr Deputy Speaker, as we reduce low pay and lift wages, we must also confront a second challenge in our nation’s poverty crisis: child poverty.

Mr Deputy Speaker, I am proud to announce a dramatic uplift in tax credits for children and families on low incomes or near the poverty line. Both the Child Tax Credit and the child element of Universal Credit will be increased by over £200 per year – a rise of nearly 10%. This is money that will go directly to families in need, providing a critical boost. Additionally, for all children, I am announcing a nearly 5% increase in Child Benefit – significantly above the rate of inflation. This will at another 50 per year for families across the country.

When combined with our investment in in-work benefits, the increase in child benefits will dramatically increase support for British families. Moreover, Mr Deputy Speaker, these investments just make sense. Study after study demonstated that targeting fiscal policy towards those on low pay does more to boost consumption than cutting taxes for the most well off. These investment will help stimulate our economy as they reduce poverty.

Moving back to our child poverty initiatives.

The Government will also begin restoring the cuts made to Sure Start over the past five years, with a focus on prioritizing Sure Start reopenings and expansion in communities with the highese levels of child poverty. The data is clear that Sure Start improves life outcomes for children and families involved – potentially more than other schemes that were trialed, such as the Troubled Families Programme. We will invest in what works, Mr Deputy Speaker. And that means Sure Start.

On the topic of improving life chances for children from low-income families, I am pleased to announce that the Government is increasing the cash value of the Pupil Premium this year and will be expanding free school meals for all children from families in receipt of Child Tax Credit, Working Tax Credit, or Universal Credit. It is no secret that education is critical to a child’s success, particularly a primary education. It is also no secret that a child who goes to school hungry often faces difficulties in learning. We shall provide the resources necessary to lift these children up in our schools.

An additional barrier that exists to the parents of children returning to work is, certainly, the cost of childcare. I am pleased to announce that the government will be providing, universally, an additional eight hours of free childcare for 4-5 year olds and an additional five hours for 2-3 year olds. This is an investment that will help parents, particularly those that would otherwise be unable to afford childcare, to get back to work, to earn more as they seek to create opportunities for their families.

Let me be clear: child poverty is something I take extremely seriously. We must be the government that wipes out child poverty over the next decade. With the investments made today, we will be.

Mr Speaker, our child poverty initiatives are financed by two significant tax changes. First, I am withdrawing the zero-rating of VAT for private education fees. Second, I am reforming the Inheritance Tax to be a Lifetime Receipts Tax.

Mr Deputy Speaker, this second reform was first presented in the Mirrlees Review and expanded upon several times since. It is a reform that is designed to effectively target the transfer of wealth – a phenomenon which, in recent years, has seen the accumulation of wealth by a limited segment of the population. The problem with wealth accumulation is that it does not aid us in confronting the challenges we face as a nation. It does not provide productive investment. It does not increase skills training. It accumulates. The introduction of a lifetime receipts tax, with a £125,000 lifetime exemption and an additional exemption for gifts under £3,000, will help ensure that investments can be made in increasing wealth across the economy.

And as we speak of wealth, we cannot avoid a discussion of the rising cost of housing additionally poses a challenge for families across the United Kingdom. These challenges range from a lack of affordable social housing from lack of investment to skyrocketing house prices as the result of rampant property speculation.

Mr Deputy Speaker, I am announcing that the Government will implement a tax on property speculation, currently set to be valued at 28% of the gains made on the sale of a house purchased within three years of sale, with a phase out over the next several years. This tax shall exclude primary residences for those resident and liable for tax in the United Kingdom. We anticipate that this will raise £1 billion in revenue. More importantly, Mr Deputy Speaker, it will discourage property speculation that drives up housing prices, particularly in London.

Additionally, Mr Deputy Speaker, we will increase direct government investment in social housing, rent subsidies, and housing upkeep. Mr Speaker, part of this investment will be financed by the British Investment Bank and repaid using rents obtained from the lease of housing units. Further reforms to the housing market will be announced in due course, Mr Deputy Speaker.

I anticipate that the Opposition will demand more for Help-to-Buy. Or perhaps a Stamp Duty holiday for first time homebuyers. I will admit that I considered those. However, the reality we face is that Help-to-Buy isn’t helping and a Stamp Duty holiday will not either. There is a critical supply issue that the Government will seek to solve. That is my first priority. That is where fiscal policy can best be targeted.

Moreover, I am aware of the cost of energy and water and the burden that it places on families. Mr Deputy Speaker, today I am imposing a windfall tax on the utilities for this year. This tax, should these companies continue dramatically increasing their rates and boosting profit margins, will become a permanent surcharge on the profits of these companies.

The proceeds from this tax will be invested in a new renewable energy investment programme and the initial financing of the British Investment Bank. Mr Deputy Speaker, with a mandate to support challenger firms and improve competition, the British Investment Bank will play a crucial role in diversifying the energy market and bringing down costs of ratepayers across this country. This is something that will be successful.

As much as housing is vital for quality of life, so is the National Health Service. I am pleased to announce that the Government approved a 5% increase in the budget of the Department for Health this year. This represents a £4 billion increase in inflation-adjusted day-to-day spending on health and social care and a £7 billion increase in funding over the past two years.

Mr Deputy Speaker, the Government is making major investments in primary care and public health – with the goal of integrating the two services to the greatest degree possible. Public health and primary care are two arms to improve health outcomes and are vital, absolutely vital, towards improving general population health.

Moreover, we are engaging in significant hiring of GPs, nurses, and medical assistants across the primary care service. This, coinciding with the construction of over one hundred new clinics and a 4% increase in commissioning grants, will see significant progress made towards the prospect increased access to the NHS for everyday people – particularly as it relates to access to preventative care.

Additional to this investment, Mr Deputy Speaker, I am announcing the launch of the Primary Care Accessibility Fund. This fund will reward innovation in primary care networks – including the facilitation of telehealth visits and increasing the ability of GP clinics to offer basic tests and screening without referral to a specialist. This spending will ensure that patients needing routine cancer screening will be able to access it at their GPs clinic and will not have to travel to a hospital or other outpatient specialist. This is but one step being taken to transform access to health care and my colleague, the Public Services Secretary, will make a future announcement about the use of the Fund.

Mr Deputy Speaker, we are also making significant investment in hospitals, which will see the number of hospital beds increase significantly, as well as a number of consultants and nurses hired to improve access to care at our hospitals. This investment will also see significant staffing of A&Es around the country – working to reduce critical wait times in these facilities.

I have already touched on the investment that we are making in our children as I addressed child poverty. However, I should like to note the investment that we are making in constructing new schools and investing in new equipment for schools. These are investments that will improve outcomes and reduce class sizes for students across the country.

Mr Deputy Speaker, I have three further provisions to announce before the House today.

The first is that we will be making a significant investment in the capabilities of Her Majesty’s Revenue and Customs. These investments, both capital expenditure, increases in personnel, and overall budget, will help HMRC develop the infrastructure necessary to effectively enforce our tax laws. We anticipate that this will close the tax gap by £2.5 billion this year.

Second, Mr Deputy Speaker, I have agreed to a public sector pay raise of 2.2%. This is in line with the increase in earnings for British workers over the past year. Mr Deputy Speaker, if we want to hire the best - the best doctors, teachers, soldiers, police officers, and civil servants - we must pay them like they are the best. That means ensuring that they are appropriately compensated for providing their services to the public sector. This pay raise accomplishes that.

Third, Mr Speaker, I believe in the importance of British soft power in foreign affairs. To that end, I am announcing increases in funding for the British Council and BBC World Service, which represent British excellence abroad. Likewise, we will meet our 0.7% spending goal for international aid. Finally, we have achieved our goal of spending 2% of GDP on defence.

Mr Deputy Speaker, I am proud to present this budget to that House today.

This is a budget that sets the United Kingdom on a path to tackle the great challenges that we face: productivity, poverty, and public services.

This is a budget that provides meaningful investment to get the economy growing again.

This is a budget that puts families first, with real policies to end the twin scourges of in-work poverty and child poverty.

This is a budget that revitalises our public services, such that we may see quality of life improve for people across the United Kingdom.

And we accomplish this while remaining within the fiscal rules that we previously laid out.

Mr Deputy Speaker: this is a budget for Britain. A budget for a productive, prosperous United Kingdom.

I commend the Finance Bill, the Main Estimates, and the additional contents of the Budget Statement to the House.

Takes a sip of her gin and tonic.

Copies of the Main Estimates and the Budget Statement can be found in the Votes Office.
Dr Anne Blakesley PhD DCB MP
Chancellor of the Exchequer | Energy and Environment Secretary
Labour Party | Hackney South and Shoreditch
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Re: Finance Bill 2016

Post by Anne Blakesley »

Mr Speaker, I am informed that there was a misprint in the original draft of the Main Estimates and Budget Statement made available in the Votes Office. In the Main Estimates, the Standard Allowance, Housing Element, and Limited Capability to Work Element of Universal Credit should be increased in line with inflation. This results in a change in Universal Credit spending of £8 million. An updated version of the Main Estimates and Budget Statement has been made available.

Takes a very long sip of the gin.
Dr Anne Blakesley PhD DCB MP
Chancellor of the Exchequer | Energy and Environment Secretary
Labour Party | Hackney South and Shoreditch
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Re: Finance Bill 2016

Post by Dylan Macmillan »

Mr Deputy Speaker,

I would like to begin my remarks today by formally welcoming the Chancellor to her post, the second female Chancellor in this country’s history, a historic achievement in and of itself, and based on her predecessor’s record the only way is up.

The challenges facing our nation’s economy are complex in nature and have persisted throughout the tenure of both Conservative and Labour Governments however the constraints of this year in particular are the legacy of a budget last year which can best be described as an abject failure. The economy is growing 33% slower than it was last year, as a result of this Government's botched budget. Every year between 2013 and 2015 the economy grew by more than 2% a year, reaching a high more than double the growth rate today, reckless tax and undisciplined spending has lost us tens of billions of pounds as a nation today. Inflation has risen by 50% in a single year, putting pressure on households ill-equipped to face that pressure because wages are growing more slowly today than they were when this party left office in 2015, a cut in half last year and a recovery this year which still puts wage growth around 0.5% lower than it was in 2015. But whilst wage growth falls under this Government house prices continue to spiral out of control rising by nearly double wage growth for the last two years. Mr Deputy Speaker this is the legacy of the Rt Hon Member for Finchley and Golders Green, this is the legacy of the Prime Minister who was in Cabinet whilst these discussions were ongoing, this is the legacy of the first year of this Labour Government. Lower growth, lower wages, higher inflation, and the makings of another house price bubble.

Mr Deputy Speaker this Budget does some things very well, but in many other instances it is responsible for a wholly catastrophic assault on the British people, particularly the middle class. This Budget contains not a single tax cut for working or Middle Class Brits, indeed thanks to some smoke and mirrors voodoo with National Insurance the Middle Classes will pay more tax this year than last as a proportion of their income. But the most egregious taxation assault on working and middle class Brits has got to be the Lifetime Receipts Tax which throws away the entirety of the Inheritance Tax system in favour of a lifetime allowance of £125,000 and no tax on gifts worth less than £3000. Quite ignoring the lessons learned from Stamp Duty, that such a clear cut off will lead to major market distortions around the threshold ensuring that a gift worth £2999.99 will pay 0 tax and a gift worth £3000.01 will pay £600 tax in addition, the impact this will have on families is appalling. Mr Deputy Speaker I am sure that the Chancellor will sit there laughing, expecting me to talk about trust funds and the like, but the reality of the situation is that the family home is decimated by this Budget. Take for example a grandparent wishing to give the family home to their grandchild as they go into care. For the sake of this argument the family home shall be worth the average house price, approximately £228,000. For the privilege of giving their most valuable asset to their grandchild, a gift which could legitimately change someone’s life, the grandparent will be charged over £45,000 in tax which falls to over £20,000 in tax if they have any of their allowance left. Mr Deputy Speaker, how is anyone from a working or middle class background supposed to afford between £20,000 and £50,000 in taxes to save their family home and keep it in the family? The rich won’t care, they have trust funds which can lock up property for an indefinite amount of time keeping it in the family, making it livable, and keeping it away from the taxman. This measure alone is an unforgivable assault on the working and middle class family home which I urge the Chancellor to rectify immediately but with the cutting of funding for Help to Buy and private development we are transitioning from a property owning democracy to Generation Council House. I have nothing against social homes, they are an important safety net against destitution and homelessness but they should not be an aspiration for the majority of this country. Why is the Government making it harder to build and buy homes? Why is the Government going to war with the family home?

Mr Deputy Speaker I would at this moment like to speak to the extremely concerning Government cut to the Troubled Families Scheme. £1mn may not sound like a lot, it’s roughly one percent of the funding to this programme, but the programme is essential. The first scheme ran from 2010 to 2015, it turned around the lives of 120,000 families suffering from incidences of crime, anti-social behaviour, truancy, unemployment, mental health problems and domestic abuse. For the Government to cut funding to this vital scheme is a disgrace. A second scheme, running from 2015 to 2021 was scheduled to help up to 400,000 families “achieve significant and sustained progress against all their multiple problems and make work an ambition for all families” by 2020. Mr Deputy Speaker I urge the Government to u-turn on this provision. This scheme has helped over 100,000 families and could help up to 400,000 more, that’s half a million families suffering from domestic abuse, anti-social behaviour, mental health concerns, crime, and truancy being helped by both national and local governments. This could change lives and the Government is sacrificing that.

The assault on the aspiring young, families, and our nation’s burgeoning Middle Class continues in earnest Mr Deputy Speaker as the Chancellor today announced plans to make private school unaffordable to any but the richest few. It sounds good I’m sure to many on the Treasury benches to sock it to the public schools and make their fees 20% more expensive, but again the rich won’t suffer for this because they can afford it. The people who will suffer for this ideological strike will be the middle class parents who can just about afford private school if they cancel the family holiday and cut household spending to meet the fees, but a 20% increase again will simply make this unaffordable to swathes of the population. This will put greater strain on our school system, a school system starved of investment last year by this Government (but more on that later), and ensure that public schools become the sole preserve of the richest and the most powerful. But Mr Deputy Speaker the assault on education does not end there, university students from working and middle class families will be devastated to know that their support has been cut, inflated away by a Government concerned only with buying their votes, not supporting their education. No money for maintenance loans, no money for maintenance grants, broken tuition fees promises, Mr Deputy Speaker I hope the Chancellor’s voice holds up under autotune because Nick Clegg’s going to have some company very soon in the broken promises YouTube arena.

Mr Deputy Speaker when Mr Blair came to power his three priorities were education, education, and education. This Government have locked the middle class out of public school, they’ve cut them out of university funding, now they’re playing bait and switch with school budgets. Last year, as a result of the catastrophic mismanagement of this Government, schools were cheated out of £2bn in funding compared to Conservative Party proposals. They froze the pupil premium, they froze per-pupil funding, they left our children out to dry. Mr Deputy Speaker what is good for the goose is clearly good for the gander because they are trying the same tricks again whatever the Chancellor says. £750mn for primary schools through per-pupil and pupil premium funding may sound like a lot, but it is not enough to even make up the shortfall from last year where primary schools lost more than £1bn relative to Tory Party proposals. Then in secondary school, despite giving sixteen year olds the vote, the Labour Party have decided to simply ignore them. Per-pupil funding is once again frozen, pupil premium funding is once again frozen, Mr Deputy Speaker why do the Government believe that 11-18yr olds aren’t worth a penny extra? Why do students receive less funding as they get older? In primary school you get a pitiful funding raise, in secondary school you get a funding freeze, in university your funding is cut. Mr Deputy Speaker the Chancellor can talk about child benefit all she wants but the single best route out of poverty is education, and on education the Government have failed for the second year in a row.

Mr Deputy Speaker it is this stubborn belief that governments know best which lies at the heart of everything that is wrong with this Budget. The Chancellor’s desire to pick winners and losers across the economy threatens to undermine many areas. Government investment in Scotland is welcome, excessive Government taxation of one of Scotland’s strongest industries is not. A 75% tax on revenue, not profit but revenue, for the oil industry is the Chancellor’s latest bait and switch to avoid increasing fuel duty. The net result Mr Deputy Speaker is a Fuel Duty hike by the back door as prices at the pump will have no choice but to increase thanks to this Government’s negligence, or malice. What message does this send to the Scottish economy? An economy which in 2014 was shown to be reliant on oil revenues, this Government is taxing those revenues to try and appear to keep Fuel Duty low. Mr Deputy Speaker this is an appalling attempt at misdirection and must be stepped back from immediately to protect Scottish jobs. I of course want to see the UK transition away from fossil fuels towards a greener society, I have presented plans to do so with a 25yr Environment Bill, but taxing the Scottish economy into oblivion, hiking the carbon price another 33%, and cutting the funding of the Environment Agency is an absolutely disgraceful way to go about it.

The electoral picking of winners and losers, using the supposedly neutral British Investment Bank, is another example of the short-sighted destructiveness of this Budget Mr Deputy Speaker. High Speed North, Crossrail, and the Electric Spine are all very strong projects that we on this side of the House have supported for years. But High Speed North only works to its fullest potential when High Speed 2 is operational. If the Government is serious about investment it needs to ensure that its investments achieve the highest returns as quickly as possible so I will ask the Chancellor why HS2 is not in line for expedited funding, linking the Midlands to an impressive infrastructure network as quickly as possible and ensuring maximum linkage throughout the economy, north to south, east to west. Equally the Government's ignorance of the East and the Midlands astounds me again. The East West Rail Line has the potential to be worth tens of billions of pounds to the UK economy over the course of a ten year period, but it doesn’t get a penny under this Budget. Linking Oxford and Cambridge, through historic towns like Bedford and Bletchley, to the great freight lines of the Midlands and the east coast could cut journey times and costs substantially, spurring investment and re-energising entire towns, yet this Government gives it nothing. Mr Deputy Speaker I appreciate that an election is four years away and that the Government have other electoral rabbits to pull out of their hat for the devolved elections but do these people not matter?

Continuing along this path of headlines over results we move to domestic policy. This Budget hires nearly 2,000 new police officers, and freezes the procurement budget. Mr Deputy Speaker how will a new officer arrest a criminal if his department can’t afford handcuffs? It’s the same story with border staff. 100 new border staff are being hired by this budget but the enforcement budget has been frozen, as has UKVI’s budget. How do we catch illegal immigrants with 100 new staff who can’t even afford a computer? How are we going to keep our borders and our streets safe if we aren’t investing in the equipment to equip our new hires? This headlines over results policy continues into energy and the environment. Villages and rural towns are hung out to dry Mr Deputy Speaker with frozen budgets for rural development alongside budget cuts for agriculture and food safety. Mr Deputy Speaker this year is 15yrs from the foot and mouth outbreak that devastated British agriculture, but this Government has taken the decision to mark the anniversary by cutting back on food safety and animal welfare? This is unacceptable Mr Deputy Speaker.

Finally Mr Deputy Speaker I wish to speak about health and social care, especially in the context of pensions and our NHS. I welcome today the Government’s reaffirmation of the triple lock, a tremendous success of the last Conservative Government, but I ask why it is not being extended to the Pension Credit as advocated by the Tory Party. Many think of pensioners as the richest generation but whether or not that claim has any merit there are 2.5mn pensioners who have an income of less than £173.75 per week, the threshold for the credit. Mr Deputy Speaker it is a shame that the supplemental pension credit is not triple locked like the state pension and I ask that the Government reviews that oversight. In our precious NHS we see more headline chasing and more incomplete policy. Relative to Tory Party proposals last year Mental Health was starved of nearly £300mn, Social Care was starved of over £450mn, and Care Commissioning was starved of nearly £1.5bn. This year’s u-turn is a welcome one as it nearly corrects for the lost funding in each of these departments, nearly. Mental Health is still underfunded compared to last year’s Tory plans, Social Care is still underfunded compared to last year’s Tory plans, only Care Commissioning has managed to close the gap in funding to the Tory Party’s proposals, but it is a full year late. We also welcome the Prescription Charge cut that the Government have proposed, a u-turn from last year’s budget but a mistake which has cost the sickest in our society money at a time in their life when they are strapped for cash.

Mr Deputy Speaker this is a Budget which promises a lot but delivers little where it matters. It is a budget which has the potential to decimate Middle Class home ownership and particularly the family home, it is a budget which forgets about education entirely and leaves our nation’s students stranded, and it is a budget full of smoke and mirrors. The damaging decisions taken by this Government in the last budget have left growth falling, inflation rising, house prices spiralling, and wage growth below the levels left by the Coalition in 2015. The Government’s response has been to pick winners and losers, it has been to stealthily raise taxes on workers and increase taxes on Scottish industry, and it has been to u-turn on multiple promises and provisions previously announced. The freezing of school funding for secondary schools will cost them a billion pounds this year after a £2bn school funding loss last year, cuts to the Environment Agency less than two months after devastating flooding is reckless at best, and the investment policies announced by this Government and the supposedly independent British Investment Bank are lacking in key areas. Mr Deputy Speaker this is a better budget than the last one, in much the same way that it is preferable to cut off an arm to save the body. The Conservative Party will not settle for the lesser of two evils as we shall set out in our own Shadow Budget shortly. I urge this House to reject this Budget, the misdirection and the sleight of hand, I urge this House to stand up for families, stand up for the family home, and stand up for Britain in the face of this Government.
Dylan Macmillan
MP for Chelsea and Fulham: 2010 - Present
Leader of the Opposition


MP for Kensington and Chelsea: 2005-2010
Shadow Secretary of State for Foreign Affairs May - Dec 2015
Shadow Secretary of State for Defence May - Dec 2015
MoS for Justice 2005-2010
Chair of the Justice Select Committee 2010 - 2015
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