This is a Budget that can make a step change in the British economy. It is a Budget that can step us up a gear in terms of work, productivity and pay.
It is a pleasure to follow an excellent maiden speech from my hon. Friend the Member for Somerton and Frome (David Warburton), and a very thoughtful speech from the new Chairman of the Business, Innovation and Skills Committee, the hon. Member for Hartlepool (Mr Wright), whom I congratulate on his election.
I am delighted to be called to speak in a debate on local growth, because I believe that the first objective of the Budget is to deliver growth and prosperity throughout the United Kingdom, and particularly in places such as Worcester. If growth is to reach every part of the UK, it must be sustainable, and if it is to benefit the whole population, it must be translated into sustainably higher pay. For that, the first requirement is fiscal credibility. We need only look at Greece to see the situation countries can get into when they lose control of their finances to know that the Chancellor is right to say that if we do not control our debt, our debt controls us. As my right hon. Friend the Secretary of State pointed out in his opening remarks, that was very much the situation in the UK in 2010, but through the gargantuan efforts of the British people, British businesses and the British Government we have reduced our deficit and set out on a path to begin to pay down our debts.
The second requirement to deliver sustainable growth is security, and I am delighted that this Budget does what the coalition could never, and commits firmly to investing in our nation’s security and defence with that 2% of GDP commitment.
The third requirement is productivity, and I particularly welcome the detailed productivity plan that was published on Friday. This is not before time. The UK lags behind other leading economies in productivity, and it was not a Labour spokesman but my hon. Friend the Minister for Skills who set out the scale of the challenge in his 2012 Macmillan lecture for the Tory Reform Group, when he said:
“we in the political pack must not duck the really hard economic question— which is, why have people in the low and middle-ranking jobs not been able to secure a real increase in their pay for nearly a decade? And we must not dodge the really hard answer—which is, that the productivity of people in those jobs is falling behind that of their competitors.”
He concluded:
“If we want our economy to grow again, if we want our national income to be honestly earned and fairly shared…if we want to benefit from healthcare that is high quality and free, if we want to live comfortably in retirement, if we want all these things, we need to ensure that we are all a lot more productive than our competitors.”
He was right to put productivity at the heart of our mission, and the Chancellor has been right to put productivity at the heart of this Budget. I welcome the plan that sets out to raise investment in skills, in research and development, in infrastructure and, most of all, in people, in order to achieve this.
We need to provide the right incentives to businesses to invest and that should become a core principle of the Government’s ongoing review of the business rates system. We need to remove the disincentives that penalise manufacturing businesses from investing in value-added plant and that create an artificial shelf on business expansion for businesses of all sorts when they move from smaller to larger premises that fall just above the small business rate threshold. We need to design the system so that it supports growth and helps scale-up businesses. We should consider discounts for businesses that invest more in training their staff, and tapers to support businesses that grow through the thresholds for small business rate relief. I look forward to further updates on that important review, promised by the end of this year. This must not be seen merely as an administrative review, but rather as an important tool in the drive to provide higher productivity.
To get there, we need to improve our skills base. It has long been a truism in the post-war period that Germany does skills and apprenticeships better than us. This Government’s commitment to driving up the quality and quantity of apprenticeships has begun to change that, and it is essential that this continues. I am pleased to see the drive to achieve 3 million apprenticeships by 2020 and the use of the German funding model, where large employers pay a levy towards the cost of training.
We also need to make sure that schools deliver the best possible education across the country, which means delivering on one of the key commitments of the Conservative manifesto: fairer funding for all our schools. In a time of overall budget constraint this has never been more urgent, and I look forward to seeing the detail for delivering that in the next spending review. I was pleased to see fairer funding highlighted up-front in the executive summary of the productivity plan.
One of the most welcome changes in the Budget was the creation of the new roads fund predicating vehicle excise duty revenues to investment in our roads. I recently held a debate on the vital priority of upgrading Worcester’s southern link road, including the Carrington bridge, a key bottleneck in our area. Any Government committed to local growth will want to fund such projects.
We need to keep focusing on holding down the cost of travel. That is why I particularly welcome the extension of the fuel duty freeze that the Conservatives in government have now maintained over five years. So many of my constituents are concerned about this and so many businesses have told me what a massive issue it is for them that it has been something I have campaigned on in each year of my parliamentary career. Fuel costs contribute to the cost of living for everyone, whether or not they drive a car, and the price of food in our supermarkets is one of the things that would be higher and less affordable if Labour had had its way and fuel duty was higher. I also believe that the Treasury benefits from holding down fuel duty over the long term as economic activity increases.
Beyond transport, higher productivity will require businesses to have the confidence to keep investing, and the decisions to keep bringing down corporation tax and to maintain the UK’s world-beating research and development tax credit offer and extend capital allowances each have a vital role to play.