As the hon. Gentleman knows, certain programmes, such as the Government’s rebuilding schools programme—which has been delayed for a year in one school in Guisborough in my constituency—are dependent on PFI arrangements, which raise capital from the bond market. We had a slightly different arrangement for the
Building Schools for the Future project. We now have the sudden realisation that the cancellation of such capital projects, in the first two years of this Government, has sent the economy into a spiral.
The real issue for me, especially in the north-east, is connectivity. We want to develop our economic base, but rail electrification will go only as far as York. What we want is access to capital funds to get electrification done as soon as possible. I hope that that will yield some results, but it is already too late. We have already had nigh on three years with little investment, and now the situation is desperate. Capital is still very slow in coming from Whitehall, exacerbated by the lack of agencies in the region to assist businesses, even given the regional growth fund. How we solve that, given that those agencies have been dismantled, I do not know, but we need to do more.
Added to the Chancellor’s mood music and the deleveraging frenzy, we have a Government delaying the payment of bills to hide borrowing. The delaying of these payments—largely to big businesses—leads to deleveraging big businesses, with vast sums under the corporate mattress, using smaller businesses as an extra line of credit. Current unpaid bills to small and medium-sized enterprises total £36.4 billion, with some small businesses writing off bills to the tune of £10,000. An illustration of this is the 7% year-on-year contraction in construction, which has its lowest growth rate since 1987.
The Chancellor is aware of this issue. In the north-east, according to the regional Federation of Small Businesses, banks cannot apparently give a regional figure for the take-up of the funding for lending scheme for business. We need to hold banks to account for that. The north-east has 134,000 businesses—I mentioned two of the larger ones earlier. A thousand employ more than 50 people, while 96,000 are sole traders, who by and large do not pay corporation tax. This April, real-time information will be introduced, but apparently only 25% of FSB members know what RTI is. I suggest to Ministers that small businesses should be given a proper period of slack on the introduction of RTI. The Government have allowed six months, but extending this to 12 months might be necessary so that businesses can adapt properly. However, the closure of local HMRC tax inquiry offices in the north-east—a region with a large sole trader community—means that we will be far more exposed to transitional difficulties.
The sole traders, market town traders and small businesses on our high streets will not only have RTI to contend with. The national minimum wage is lower now, in real terms, than it was in 2004. It was raised by 1.9% today, but the consumer prices index is at 2.8%, so it is a real-terms cut. Small businesses and their customers in the north-east will see working tax credit freezes from this April, meaning those working under 30 hours will lose between £303 and £428. That is £303 to £428 less to spend. Benefits being capped at 1% rather than CPI will mean that small businesses’ customers lose up to £150. That is £150 less to spend. The bedroom tax—a housing benefit cut of between 14% and 24%—will mean they lose between £624 and £1,144. That is £624 to £1,144 less to spend. The benefit cap, to be rolled out nationally from September, will mean small businesses’ customers will lose on average £4,836, which is an average of £93 a
week. That is £93 less per week for their customers to spend. The council tax benefit cut—the Tories’ new poll tax—will mean that 700,000 people in employment will lose between £250 to £600 each, meaning small businesses’ regular customers will have between £250 and £600 less to spend. This will no doubt compound an already obvious demand crisis.
After the mummy tax and the granny tax, the end of the pregnancy grant, and VAT being increased again by a Tory Government, there will be obvious consequences for sole traders and small business in general. How do the Government think these reductions in the disposable income of small businesses’ most frequent and dependable customers will resolve this country’s economic growth problems? In the autumn statement, private consumption was expected to be a crucial driver of Britain’s growth in the years ahead. The OBR expected growth in 2012 to come from private consumption. Indeed, it revised it up to 37.5% of all growth after last year’s omnishambles Budget. Of course, it did not happen. The promised—albeit simultaneously derided—consumer growth was not delivered. Page 100 of the Red Book assumes a jump of 0.7%, from 0.5% this year to 1.2% next year, in household consumption, even though it simultaneously predicts unemployment increasing in 2013-14 and the claimant count increasing from 1.58 million to 1.63 million in the same period. The Chancellor also failed to inform the nation that 400,000 disabled people on severe or enhanced disabled benefits will now have to pay council tax for the first time ever.
In conjunction with what I illustrated earlier, these are demand-sapping policies on a monumental scale. Are they being taken because the Government fear that their other policies will bring about inflation? Are they attacking demand deliberately in order to control inflation? We know that Mark Carney, the new Governor of the Bank of England, will be constrained by a 2% inflation target. However, we also know that inflation crept up to between 2.5% and 3%—around the 2.8% mark between January and February—this year. That inflation rise, at the same time as pay freezes, local real-terms pay cuts and benefits reductions, has seen families subject to an unprecedented cost of living crisis. According to uSwitch, Britons collectively owe £637 million to energy firms— £159 million more than last year’s projections. Some 20% of all energy customers surveyed are in debt, a figure that has risen by 14% since last year.
In conclusion, with falling disposal income levels and increasing household outgoings, the temporary retail or consumer growth we are currently seeing is very small. As well as being derided in the first place by Government Members as the wrong type of growth, given the Government’s other policies, it is unsustainable in the medium and long term. The Budget is fundamentally unfair: it does not address growth, it doubles the debt and it does not deal with the deficit—it actually makes it worse. It fails on all the original criteria set out by the Chancellor in June 2010.
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