Robert Halfon: How the patronising metropolitan elites wrinkled up their noses at more money for potholes

Plus: Unsung Conservative heroes. The Centre for Rocket Studies. And: why do we need the traditional, three-year University course?

Robert Halfon is MP for Harlow, a former Conservative Party Deputy Chairman, Chair of the Education Select Committee and President of Conservative Workers and Trade Unionists.

Workers Budget

Credit where credit is due, the Budget last week was exactly what was needed. Tax cuts for the lower paid, increases in the Living Wage, a fuel duty freeze, and more money for our NHS.  It was astonishing how the metropolitan classes sniffed at the £420 million for potholes – one journalist argued that it was wrong given the threat to our environment. Given that our town and road infrastructure is riven with potholes, and how small white van businesses and motorists depend on good roads, it was so typical of the anti-car brigade to be so aloof from day-to-day realities.

I welcomed the £200 million for vulnerable youths and the £400 million more for education capital spending – though much more is needed; ideally, a Ten Year Plan, similar to the NHS, if education is not going to become our Achilles heel.  It is vital that the Spending Round next year, sets out the a long term education plan, to ensure our schools and colleges are properly funded and fit for the 21st Century and the arrival of the Fourth Industrial Revolution. We need less initiative-itis on education, with a bit of funding tinkering here and there, and a much more strategic view on what education policy and funding should be.

Unsung Heroes

The Conservative Party is full of unsung heroes and one of those is Nonie Bouverat, who most of this site’s readers will have never heard of.  Mrs Bouverat is Chief Executive Officer of the Conservative Foundation, one of whose primary tasks is to raise funds to provide low income parliamentary candidates with bursaries.

This is something I have fought for a long time, and was delighted when Lord Feldman made an initial announcement about this at the 2015 Party Conference.  The website of the Conservative Foundation does not even mention Bouverat, yet it is she who has done so much to get this bursary scheme off the ground.

If the bursary scheme was developed to include supporting councillors and Party members, we could help ensure that low-income members could get a fair deal when they got involved in the Party, especially when standing for elections or travelling to events. Hats off to Bouverat and the Foundation. I hope it goes from strength to strength.

Centre for Rocket Studies

What has happened to the Centre for Policy Studies?  Under its remarkable new director, Robert Colvile, you rarely read a newspaper without hearing about the latest work of the CPS.  Though big under Margaret Thatcher, the CPS later had a few lean years, but now seems to be having a rocket-boosted resurgence, with policy pamphlets a plenty, alongside the great CapX online newspaper promoting Capitalism.

Their latest report, launched by the Prime Minister earlier this week, proposed a £1,000 a month ‘Universal Income’ to raise wages for the lower paid, and a Work Guarantee to ensure that everyone keeps 51p in every extra £1 they earn, partly bu cutting the Universal Credit Taper rate.  Alongside Tory Workers, the CPS are carving out a Conservative-minded, pro-Workers agenda. All power to the CPS-ers!

Universities and value for money

My Education Select Committee published a report this week in which we noted that 49 per cent of graduates are not in graduate jobs.  We need a rethink of Higher Education – more focused on graduate outcomes, more committed to skills and vocational education, and more devoted to really giving the disadvantaged a chance to climb the Higher Education Ladder of Opportunity.

Re-introducing means-tested maintenance grants would help, as well as more Degree Apprenticeships, as these students earn whilst they learn. The number of part-time students has declined by half over the past few years, so why not introduce flexible learning, by which students can hop on and off courses and build up credits? Why do we need the traditional, rigid three year structure?  Of course, excessive Vice Chancellor pay should be curtailed too. That must be a job for the new Office for Students.

1922 Drama (not)

I read every weekend in the Sunday newspapers that the end of the Tory world is nigh.  A week or so ago, we were told by the media that the 1922 meeting with Theresa May would take on the role of some show-trial court of the Prime Minister, with a ‘noose’ in the offing, and the distinguished Sir Graham Brady acting out the role of Judge Roland Freisler.

So I arrived at the meeting on my electronic Segway Rollerscoot (it is always a long walk otherwise to Committee Room 14) expecting great drama.  Many journalists were outside in Commons Committee Corridor with pens and pads – a bit like the old ladies with their knitting needles waiting around the French Revolution’s guillotines for the next execution.

As it happened, it was a good-natured affair, with Theresa May being quite frank about her views (whether you agreed with them or not). Sir Graham was more Rumpole of the Bailey than Roland, as MPs were called to give their views on the EU.  As I left this most august occasion, journos asked me what I thought. I could only reply, that the Prime Minister was ‘honest’.

Howard Flight: The best part of a week on, we can see that last week’s Budget was a popular one

The Chancellor has been fortunate that the public finances have improved substantially at a particularly convenient time.

Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

Philip Hammond has been fortunate that the public finances have improved substantially at a particularly convenient time. Economic growth has been revised up next year to 1.6 per cent; employment has been revised up, with 800,000 more jobs than forecast in 2023; wages will rise above inflation for the next five years.

The borrowing target has been met three years early, with the deficit now down to 1.9 per cent of GDP. The debt target has also been met three years early at a peak of 85 per cent of GDP. Borrowing is £11.6 billion lower than forecast at 1.2 per cent of GDP. This has improved significantly the scope of what the Budget can seek to address.

Overall public spending will increase by 1.2 per cent per annum, between 0.2 per cent and 0.4 per cent less than forecast growth. The improved tax yields have enabled the Prime Minister’s NHS commitment to be fully funded.

The Chancellor presented a pragmatic “micro” Budget, seeking to address virtually all of the issues which came up as needing attention. Yet perhaps its most important ingredient was a significant cut in taxation for the majority next April – increasing the personal allowance to £12,500 and the higher rate to £50,000 a year.

Local Authorities are getting an extra £1 billion of funding and business rates for retailers with rateable values below £51,000, will be cut by a third for two years. A further £1.7 billion each year will be provided to benefit working families on Universal Credit with the work allowance – the amount families can earn before losing credits – being increased by £1000 per annum.

A new two per cent digital services tax to insure that large digital firms pay a “fair share” of tax, is expected to raise £400 million per annum. Schools will get a further 400 million this year and defence will get a further £1 billion this year and next. There is also £160 million for counter-terror police. The national living wage will increase by nearly five per cent to £8.21. The national productivity investment fund will be increased to £37 billion and will be extended to 2024. Large roads will get £28.8 billion for 2020-25, and even potholes will get £420 million! PFI will be abolished, leaving a bill for £200 billion to be honoured.

There was a range of extra funding largely for small business – extending the annual investment allowance to £1 million; extending the start-up loans programme for 10,000 entrepreneurs; delivering the lowest corporation tax rate in the G20; keeping three million small businesses out of VAT; reducing the cost of taking on apprentices by halving the co-investment rate for non-levy payers; £121 million to support cutting-edge digital manufacturing; £78 million to fund electric motor innovations; £315 million in quantum technologies and £50 million for new Turing Fellowships.

Measures to help more people into home ownership include abolishing stamp duty retrospectively for first time buyers of all shared ownership properties of up to £500,000; an additional £500 million for the housing infrastructure fund; committing over £7.2 billion to a new help to buy equity loan scheme to support 110,000 new home buyers and the abolition of the housing revenue account cap controlling local authority borrowing for house building.

There are measures for those keen on the environment and more money for the Transforming Cities fund. Remarkably, the Chancellor has addressed virtually all the issues of concern to citizens and, as a result, I think, the best part of a week on, that this has proved to be a very popular Budget. The one important reform it has not addressed is the confiscatory rates of stamp duty on larger properties in London and the South East. This had led to a freezing up of the market – bad for revenues and for economic mobility.

Tom Clougherty: Make Work Pay. A new agenda from the CPS for fairer taxes – including an end to pernicious marginal rates.

If one of a couple claiming the marriage allowance becomes a higher rate taxpayer, there is a 23,800 per cent effective marginal tax rate on the penny that pushes them over the threshold.

Tom Clougherty is Head of Tax at the Centre for Policy Studies.

We often hear that the political tide has turned since the financial crisis, and that the British public are in the mood for higher taxes and bigger government. Yet a new YouGov poll for the Centre for Policy Studies (CPS) paints a rather different picture. We find that only 17 per cent think people in the UK pay too little tax. What’s more, only 21 percent think that the official top rate of tax – 45p on incomes over £150,000 – is too low.

Another striking finding came from asking people to choose between different aims for the tax system. Twenty-three per cent said the goal should be to raise as much money as possible for public services; a quarter said redistribution from rich to poor was the key. But the most popular option by a clear margin, with 35 per cent support, was “to provide people with the strongest incentives to work”.

None of this suggests much of a mandate for hard-left government. On the other hand, it does suggest that the central theme of my new report for the Centre for Policy Studies – Make Work Pay: A New Agenda for Fairer Taxes – is one that resonates with the public.

Here’s the context: we all know that Britain is experiencing a “jobs miracle”; that employment is at a record high, while unemployment is at an historic low. We’re also all aware that wage growth has been sluggish (at best) since the financial crisis, while the cost of living has rocketed up people’s list of concerns.

The goal of my research for the CPS was therefore to come up with ways of putting more money in people’s pockets – but not by going down the usual route of government handouts or heavy-handed market intervention. Instead, the focus would be on making work pay – first by ensuring that everyone could earn a basic minimum before they had to pay any tax at all; and then by ensuring that they always got to keep at least 51p of every additional £1 they earned.

Clearly, the Government has already made great strides on that first point with its policy of raising the personal allowance. But we too often forget that millions of those supposedly “taken out of tax” are still paying National Insurance – a second income tax in everything but name. I suggest it’s time to right that wrong by establishing a new “universal working income” – a combined £12,000 threshold for income tax and National Insurance, which would allow people to earn £1,000 a month completely tax free.

This would be significantly more generous than the government’s current plan – to raise the personal allowance to £12,500 next year, while only lifting the National Insurance threshold in line with inflation. Compared with the current tax system, the universal working income would give anyone earning more than £12,000 an extra £459 a year of spending power. But it would also cut taxes for the 2.4 million people who currently only pay National Insurance – helping to make work pay for those on the lowest incomes.

I realise that my second point – that people should never lose more than 49p of the next pound they earn in tax – might not sound like much. After all, even if you factor in National Insurance, the headline top rate of tax in the UK is “only” 47 percent.

Yet in reality, this principle – which I call “the work guarantee” – is violated at numerous pinch points in the tax system. The effective marginal tax rate on earnings between £100,000 and £123,700 is 62 per cent, thanks to the withdrawal of the personal allowance. Someone with three children and £50,000 of income will face an effective rate of 67 per cent on the next pound they earn, as a result of the high income child benefit charge. And a couple claiming the marriage allowance face losing hundreds of pounds if one of them becomes a higher rate taxpayer – as things stand, there’s a 23,800 per cent effective marginal tax rate on the penny that pushes them over the threshold.

Fortunately, there are simple – and relatively inexpensive – solutions to all these problems: the marriage allowance could be replaced by a more generous “family responsibility allowance” aimed at married couples with young children or other care responsibilities; the high-income child benefit charge could be levied at a much lower rate; and the withdrawal of the personal allowance could simply be abolished, with the 45p threshold lowered from £150,000 to £100,000 (and then linked to inflation) to minimise any revenue loss.

But we can’t talk about making work pay without also thinking about those trying to make the transition from welfare into work. After all, those at the bottom of the income distribution – who may pay tax on their earnings while also having their benefits withdrawn – often see less reward for their labour than anyone else. And while Universal Credit certainly represents a big improvement on the legacy benefits system, it doesn’t fully solve this problem: someone subject to income tax, National Insurance, and the Universal Credit taper will still face an effective marginal tax rate of 75 percent. That can hardly be described as making work pay.

To ensure that the benefits system does not take away what the tax system gives, my report therefore also advocates bold action on Universal Credit, suggesting that the taper – the rate at which benefits are withdrawn against each pound of post-tax earnings over any work allowance – should be cut from 63p to 50p. This would give a huge boost to the lowest earners, while also giving them a strong incentive to increase their hours and make progress in the workplace.

This may, I suppose, sound a bit like a policy wish list – and an expensive one at that. All told, the reforms outlined in my report would cost up to £13.5 billion, with the lion’s share going to raise the National Insurance threshold and cut the Universal Credit taper rate. (The cost could be covered by a move to ISA-style pension tax relief, reforms to National Insurance, and a range of other savings that will be detailed in full in a forthcoming CPS report.)

But while it’s true that each of the proposals I’ve outlined here would be a good thing in its own right, taken together they add up to something much bigger – to a new approach to tax and welfare reform organised around a single, universal principle: that government should do everything in its power to ensure that work always pays.

The polling we carried out as part of my research makes clear that this agenda would be popular: 76 per cent of those polled supported the idea of the universal working income (against 9 percent opposed), while 61 percent backed the work guarantee (against 18 percent who disagreed).

Ultimately, though, making work pay is about much more than political popularity: it’s about a fairer deal for middle-class families; it’s about people being able to work harder and longer without the taxman punishing them for it; and it’s about letting the poorest workers keep more of their hard-earned cash. It is – as Lord Saatchi wrote in the foreword to my report – about giving people more control over their finances and over their lives. And that is surely an appropriate goal for any Conservative Government to pursue.

George Freeman: There was much to cheer in the Budget. But now we need an inspiring programme for growth.

At the moment, we are treading water and appear to be relying on popular support for Brexit, and the threat of Corbyn, to keep us in office.

George Freeman MP is Chair of the Conservative Policy Forum and The Big Tent Ideas Festival, and is MP for Mid-Norfolk.

On Monday, the Chancellor announced that “austerity is coming to an end”. Politically, there was a lot to cheer in this Budget – some good news and headlines for struggling high streets, our crucial Universal Credit reform, NHS workers and the vast majority of constituents who rely on public services. Furthermore, there were many helpful retail pledges for colleagues in marginal seats. Given the Brexit divisions and infighting, we badly needed some good news.

But if we are going to end the biggest squeeze on disposable incomes since the war, the central question for our future is this: how can we get back to the 2.5-3 per cent growth that we enjoyed pre-Brexit? Before the EU Referendum, we were one of the fastest-growing economies in Europe and the G7. Now we’re one of the slowest-growing.

The Budget invites the public to judge us on different metrics – no longer on our commitment to balance the books (abandoned) or reduce the debt (still growing), but on our ability to “end austerity”. People will now need to feel tangible improvements and see how Brexit can be a catalyst for much higher growth and prosperity.

Because this Budget won’t be decided on the comment pages of broadsheets. It will be decided on the ground.  By parents chatting at the school gates. Families looking after their ageing relatives in care homes. Commuters stuck in traffic jams because the housing has come, but the infrastructure hasn’t. Or the millions standing on trains every morning who’ve shelled out £2,000 for a season ticket and feel ripped off.

I no longer advise the Prime Minister, but here’s what I’d say if I still did. We need to remind people that every public sector pound has to be earned before it is spent, and that we need a more inspiring programme of business-led growth to drive prosperity and opportunity.  This means some big changes.

First, accelerating our transition from a service economy to an innovation nation.  Innovation is key to our driving up productivity, prosperity, inward investment and exports. We won’t escape debt with growth at 1.5 per cent and low productivity.  We need a renaissance of enterprise and innovation.  Such buccaneers as James Dyson and Richard Branson have done more to transform this country’s prospects than any government department ever will.  We need to stop the business-bashing and promote entrepreneurship and innovation. While the UK is still a crucible of start-up entrepreneurship, the engine is not yet humming: we have too many start-ups that are never scaled up, too little of our innovation funded by the City and too little that is taken global by British companies. We need a new national mission. We must be the innovation nation.

Second, tangible access to new markets for our innovation.We can’t just do research.  We need to innovate, manufacture and trade.  If Brexit means anything, it surely means an opportunity to go global. But that can’t mean importing cheap food and cheap clothes from sweatshops. We need to be exporting our innovation. The UK should be using every tool possible to unlock access to the fastest emerging markets in Africa and Asia.

For 40 years our whole economy has been geared to our being a European services economy. Why don’t we make Brexit the moment to embrace a new global strategy for higher growth through exporting technology and innovation into emerging markets? If the opportunity is properly seized, we could use our Industrial Strategy and public sector innovation to make Britain a crucible of new technology scale up and financing through the City.

We could then use our aid budget and global soft power in emerging markets to grow our exports and trade links with the fastest growing economies. Why don’t we offer some of the fastest emerging countries where we have a strong historic links a deeper Aid, Trade and Security Development Partnership?

Third, harnessing the public sector as a test bed of innovation. We’ll never export our innovation if we’re not using it ourselves. Innovation can’t be just about making a lucky few in the City rich beyond their wildest dreams. In order for us to be a test bed for new technology, we need to put enterprise and innovation at the heart of the public sector.  If we want to lead the world in digital health, we won’t do it unless the NHS is already a pioneer. You can have as many digital health clusters in Shoreditch as you like. But if the NHS isn’t testing and buying it, we will never become the innovation nation we need to be. Building, financing and growing these little start-ups into serious businesses of scale. The problem of the austerity era was thinking that our problems could be solved by cutting things. Actually, the only way our problems can be solved is by growing things.

Fourth, empowering local leaders to innovate more. Innovation can’t be ordered from on high. It comes from people having the power to make decisions themselves. That’s why we need to embrace bolder economic localism. Let’s remember that our national economic performance is made up of hundreds of local economies, all of which need to be growing faster. Another five years of ever-tighter spending controls from the Treasury risks undermining local growth and innovation.  Instead of delaying essential local infrastructure holding our growth hubs back, why not let them raise infrastructure bonds in the international capital markets and embrace bold ideas like integrated track and train mutuals which invests users money into better services?

Fifth, a new model of Treasury incentives. Too often, Whitehall’s funding orthodoxy rewards failure.  If you deliver more for less in the public sector we give you…less!   And give more to those failing.  If you ran a business like that it would be bust.  And depressing to work in. It’s no wonder that public sector leaders are so dispirited.  Many are leaving.  We need them to stay.  So why don’t we send a signal to encourage them, be bold and embrace a new model of incentives-based funding which rewards successful local service leaders for delivering efficiency and productivity? We need a new approach based on a radical idea: if an area reduces the deficit quicker than Whitehall’s average we should let them keep 50 per cent of the savings to re-invest.  Why not the same on growth? If councils grow their tax base, why not let them keep 50 per cent for local services?

Our choice as a nation is clear. Do we timidly manage our decline? Or do we set out a bold plan a brighter future? At the moment we are treading water and appear to be relying on popular support for Brexit, and the threat of Jeremy Corbyn, to keep us in office.

For a majority of voters, keeping Corbyn out and delivering Brexit are not good enough answers.  We need to show voters that this is the path to something more inspiring.  We need to start setting out a bold vision for Conservatism in the twenty-first century.