Each year I do a blog on the Budget summarising the latest data about how our economy is doing and the Chancellor’s key announcements.
How is our economy performing?
In the last year our economy has grown faster than any other major advanced economy in the world - seven times faster than France under President Hollande, the leader whose policies Ed Miliband wants to adopt.
And although the international outlook remains fragile - the independent Office for Budget Responsibility (OBR) has revised down its forecasts for global economic growth - it has revised up its forecasts for the UK.
Equally importantly, the growth is broadly based. Under Labour between 1997 and 2010, investment accounted for less than one fifth of our growth - most of it came from debt-fuelled household spending. Manufacturing halved as a share of our national economy and the gap between the North and the South grew ever larger.
Since 2010, business investment has grown four times faster than household consumption, manufacturing output has grown four and a half times faster than it did in the entire decade before the crisis and over the last year the North grew faster than the South.
And because we are making things again, the trade deficit - the gap between what we export and what we import - is the lowest it has been for 15 years.
The news on jobs is even better. There are more people in work than at any time in our history and the number of people claiming JobSeekers Allowance is at its lowest level since 1975. When we set out our plans back in 2010, Ed Miliband said a million jobs would be lost. In fact, 1.9 million jobs have been created. Now he tries to say all these jobs are insecure and low-paid. It’s not true:
• 80 per cent are full-time; and
• 80 per cent are in skilled occupations.
Inflation is lower than it has ever been, which is great news for hard-pressed families. The OBR has revised down its forecasts for future years.
Because wages are now rising and inflation is low, living standards are now rising. If you look at how much money the average person has to spend after tax and taking account of inflation, living standards are now higher than when we came to power in 2010. They fell in the first few years of the Parliament as we recovered from the recession, but they are now recovering strongly. And the OBR predicts that they will continue to grow strongly for the rest of the decade.
It is vital that everyone shares in this recovery. That’s why the Government has just agreed an above inflation increase in the minimum wage. If we continue to increase it at the current rate, it will be over £8 an hour by the end of the decade - higher than Ed Miliband is promising.
Lower unemployment means less spending on out-of-work benefits. Lower inflation means lower interest charges on government debt. As a result, the deficit (the amount of money the Government is still having to borrow each year) has fallen and the OBR has reduced its forecasts for future years. It is now less than half the level we inherited from Labour in 2010.
And the Government is also getting some of our money back from the banks, selling off some of the assets we acquired when we had to bail them out. The Chancellor could have used this money to try to bribe you into re-electing us in a few weeks’ time with extra spending or big tax cuts. But he is rightly using it to pay off some of our debt. As a result, although our debt is still increasing in cash terms, as a percentage of national income it will fall in 2015/16 having increased every single year since 2001.
This isn’t just good news for our children who will end up having to pay off these debts, it’s good news for our public services because it means that the squeeze on public spending will end a year earlier than planned.
But we will only start reducing our debts if we stick to the plans the Chancellor set out. If Ed Miliband has his way and we increase borrowing to pay for extra spending now, debt will continue to increase and we’ll soon be back in the mess we’ve painfully got ourselves out of over the last five years.
Once again, the Chancellor announced a big package of measures to tackle tax evasion and aggressive tax avoidance that will raise over £3 billion over the next few years. As Conservatives, we believe in low taxes but we are equally passionate about making sure that everyone - individuals and businesses - pay their fair share.
He also increased the levy on the banks and stopped them deducting from Corporation Tax the compensation payments they make to customers if they have been mis-sold a product. Together these measures will raise £5.3 billion over the next few years. The banks were partially responsible for getting us into this mess. As they recover, it is right to ask them to make a bigger contribution to sorting it out.
He reduced the tax relief that the wealthiest get when saving for retirement by reducing lifetime allowance from £1.25 million to £1 million (most of us can only dream of putting that much in our pension funds!)
He’s cutting Corporation Tax to 20%, one of the lowest rates of any major economy, to encourage businesses to locate here and grow and create more jobs. In contrast, Ed Miliband wants to put up corporation tax, putting jobs at risk.
He’s abolishing the National Insurance contributions (NICs) employers have to pay if they employ someone under the age of 21 to try to help young people get into the labour market. And from next April he’s abolishing NICs when employers take on a young apprentice.
He’s extending small business rate relief and the special help he’s put in place for business on our high streets. He also announced a review of the whole system of business rates.
He’s increased the personal allowance, the amount of money you can earn before you have to start paying income tax - to £10,800 and next year to £11,000. When we came to office, it was just over £6,500. This is a tax cut of up to £900 a year for 27 million people. 4 million of the lowest paid people in our country no longer have to pay any income tax.
He’s also increased the threshold at which you start paying the 40 pence in the pound rate by more than the rate of inflation.
In 2010, the top one per cent paid 25% of income tax. That’s increased to 27% this year, higher than in any year under the last Labour Government. And the lowest paid 50% are paying a smaller proportion than at any time under the last Labour Government.
He’s increased the transferable tax allowance for married couples to £1,100.
To help the self-employed, he’s abolishing Class 2 National Insurance Contributions entirely.
And he’s helping 12 million people and small businesses by abolishing the annual tax return altogether.
He’s cancelled the fuel duty increase planned by last Government for this September. Petrol duty has been frozen for the longest period for over 20 years, saving families around £10 every time they fill up.
He took a penny off a pint of beer for the third year in a row to help our pubs.
There was a big package of measures to encourage saving. He’s giving five million pensioners access to their annuity, making ISAs more flexible so you can take out your money and put it back in without losing your tax free entitlement, introducing a Help to Buy ISA where for every £200 you save for the deposit on your first home the Government will give you £50 and introducing a personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate payers, making banking tax free for all but the richest five per cent of the population.
Finally, there were two smaller measures which are close to my heart.
He announced funding for a major expansion of mental health services for children. I see the need for this in my surgeries virtually every week.
And along with the Mayor of London, he announced funding to help Croydon Council provide the infrastructure we need to transform Croydon town centre:
“London is the global capital of the world and we want it to grow stronger still. That is why we are investing in the Croydon Growth Zone, proposed and championed by Gavin Barwell. This will support delivery of over 4,000 homes and 10,000 jobs, securing Croydon’s position as an economic hub in Greater London”.
I’m grateful for his support and I hope that working with the Labour administration at the Town Hall we can go further in the next Parliament.
The long term
Today George Osborne set out two long-term goals that define what the Conservative Party is all about.
First, within a generation to make Britain the most prosperous major economy in the world. If we want to build a fairer society with great public services, we must have a strong economy.
And second and just as importantly, to ensure that prosperity is widely shared, not concentrated in the hands of a privileged view. Labour want you to believe that Conservatives only care for a privileged elite. That’s nonsense - Britain cannot succeed as a low wage, low skill economy. But nor can we succeed by demonising those who are successful and the businesses that create the wealth and jobs on which we depend. To do well, we need to strike the right balance - a government neither smaller than we need, nor bigger than we can afford; help for those who need it, but strong incentives for people to work hard and do well.
Five years ago, our economy was emerging from the worst recession in living memory. Today, it is growing more quickly than any other major advanced economy.
Five years ago, millions of people couldn’t find work. Today, there are more people in work than at any time in our history.
Five years ago, living standards were falling. Today, they are rising.
Five years ago, the deficit was out of control. Today, it is down by more than a half.
Five years ago, we were bailing out the banks. Today, we’re getting some of that money back.
Is everything perfect? Of course not, but things are heading in the right direction. Is this is the moment to change the people in charge - particularly when the alternative on offer are the people who crashed the economy the last time they were given the keys and have opposed the tough decisions that got us out of the mess? That’s the question you have to answer on 7th May.