Income Tax (Charge)
Motion made, and Question proposed,
That income tax is charged for the tax year 2022-23.
And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—(Rishi Sunak.)
At this point I would normally call the Leader of the Opposition to respond to the Chancellor’s statement. As Mr Speaker announced earlier, the Leader of the Opposition is sadly isolating—we all wish him a speedy recovery—and therefore, to answer on behalf of the Opposition, I call the shadow Chancellor, Rachel Reeves.
Thank you, Madam Deputy Speaker.
Families struggling with the cost of living crisis; businesses hit by a supply chain crisis; those who rely on our schools, our hospitals and our police—they will not recognise the world that the Chancellor described. They will think that he is living in a parallel universe.
The Chancellor decided in this Budget to cut taxes for banks, so at least the bankers on short-haul flights sipping champagne will be cheering it. And he had the arrogance, after taking £6 billion out of the pockets of some of the poorest people in this country, of expecting them to cheer today for £2 billion given to compensate. In the long story of this Parliament, never has a Chancellor asked the British people to pay so much for so little. Time and again today, he compared the investments that he is making to the last decade, but who was in charge in that lost decade? They were.
Let us just reflect on the choices that the Chancellor has made today. We have the highest sustained tax burden in peacetime—and who is going to pay for it? It is not international giants such as Amazon; no, the Chancellor has found a tax deduction for them. It is not property speculators; they have already pocketed a stamp duty cut. And it is clearly not the banks, even though bankers’ bonuses are set to reach a record high this year. Instead, the Chancellor is loading the burden on working people, with a national insurance tax rise on working people, a council tax hike on working people, and no support today for working people with VAT on their gas and electricity bills.
And what are working people getting in return? There is a record NHS waiting list with no plan to clear it, no way to see a GP, and people are still having to sell their home to pay for social care. We have community policing nowhere to be seen, a court backlog leaving victims without justice, and almost every rape going unprosecuted. There is a growing gap in results and opportunities between children at private and state schools, a soaring number of pupils in super-size classes, and no serious plan to catch up on learning stolen by the virus. The £2 billion announced today is a pale imitation of the £15 billion catch-up fund that the Prime Minister’s own education tsar said was needed. No wonder he resigned.
The Chancellor talks about world-class public services. Tell that to a pensioner waiting for a hip operation. Tell that to a young woman waiting to go to court to get justice. Tell that to a mum and dad waiting for their child to get the mental health support that they need. The Chancellor says today that he has realised what a difference early years spending makes. Has he ever heard of the Sure Start programme that this Tory Government cut?
Why are we in this position? Why are British businesses being stifled by debt while Amazon gets tax deductions? Why are working people being asked to pay more tax and put up with worse services? Why is billions of pounds in taxpayers’ money being funnelled to friends and donors of the Conservative party while millions of families are having £20 a week taken off them? Why can’t Britain do better than this?
The Government will always blame others: “It’s businesses’ fault”; “It’s the EU’s fault”; “It’s the public’s fault”; “They’re global problems”—the same old excuses. But the blunt reality is this. Working people are being asked to pay more for less, for three simple reasons: economic mismanagement, an unfair tax system, and wasteful spending. Each of those problems is down to 11 years of Conservative failure. Government Members shake their heads, but the cuts to our public services have cut them to the bone. While the Chancellor and the Prime Minister like to pretend that they are different, this Budget will only make things worse.
The solution starts with growth. The Government are caught in a bind of their own making, because low growth inexorably leads to less money for our public services unless taxes rise, and under the Conservatives Britain has become a low-growth economy. Let us look at the last decade. The Tories have grown the economy at just 1.8% a year. If we had grown at the same rate as other advanced economies, we could have had an additional £30 billion to invest in public services without raising the taxes that the Tories are raising on working people today.
Let us compare growth under the last 11 years of Conservative government to that under the last Labour Government. Even taking into account the global financial crisis, Labour grew the economy much faster—by 2.3% a year. If the Tories matched that record, we would have £30 billion more a year to spend on public services.
It could not be clearer: the Conservatives are now the party of high taxation, because the Conservatives are the party of low growth. The Office for Budget Responsibility confirmed that today. We will be back to anaemic growth—[Interruption.] Conservative Members might not like this, but the Office for Budget Responsibility said that by the end of this Parliament, the UK economy will be growing by just 1.3%. That is hardly the plan for growth that the Chancellor boasted about today; it is hardly a ringing endorsement of his announcements. Under the Tory decade, we have had low growth, and there is not much growth to look forward to.
The economy has been weakened by the pandemic, but also by the Government’s mishandling of it. Responding to the virus has been a huge challenge. Governments around the world have taken on more debt, but our situation is worse than in other countries. It is worse because our economy was already fragile going into the crisis, with too much inequality, too much insecure work and too little resilience in our public services. And it is worse because the Prime Minister dithered and delayed against scientific advice, egged on by the Chancellor, and we ended up facing harsher and longer restrictions than other countries. So as well as having the highest death toll in Europe, Britain suffered—[Interruption.]
So as well as having the highest death toll in Europe, Britain has suffered the worst economic hit of any major economy. The Chancellor now boasts that we are growing faster than others, but that is because we fell the furthest. While the US and others have already seen their economy bounce back to levels seen before the pandemic, the UK has not. Our economy is set to be permanently weaker.
On top of all that, the Government are now lurching from crisis to crisis: people avoiding journeys because they cannot fill up their petrol tank is not good for the economy; people spending less because the cost of the weekly shop has exploded is not good for the economy; and British exporters facing more barriers than their European competitors because of the deal the Government did is not good for our economy. If this were a plan, it would be economic sabotage. When the Prime Minister is not blagging that this chaos is part of his cunning plan, he is saying he is not worried about inflation. Well, tell that to families struggling with rising gas and electricity bills, rising petrol prices at the pump and rising food prices. He is out of touch, he is out of ideas and he has left working people out of pocket.
Conservative mismanagement has made the fiscal situation tight. When times are tight, it is even more important to ensure that taxes are fair and that taxpayers get value for money. The Government fail on both fronts. We have a grossly unfair tax system, with the burden being heaped on working people. Successive Budgets have raised council tax and income tax. Now they have raised national insurance, too. But taxes on those with the broadest shoulders, those who earn their income from stocks and shares and dividends and property portfolios, have been left nearly untouched. Businesses based on the high street are the lifeblood of our communities and are often the first venture for entrepreneurs, but despite what the Chancellor said today, businesses will still be held back by punitive and unfair business rates. The Government have failed to tax the online giants and watered down global efforts to create a level playing field.
Just when we needed every penny of public money to make a difference, we have a Government who are a byword for waste, cronyism and vanity projects. We have had £37 billion for a test and trace system that the spending watchdog says treats taxpayers like an ATM cash machine, a yacht for Ministers, a fancy paint job for the Prime Minister’s plane, a TV studio for Conservative party broadcasts that seems to have morphed into the world’s most expensive home cinema, £3.5 billion of Government contracts awarded to friends and donors of the Conservative party, a £190 million loan to a company employing the Prime Minister’s former chief of staff, and £30 million to the former Health Secretary’s pub landlord—and every single one of those cheques signed by the Chancellor. Now the Chancellor comes to ordinary working people and asks them to pay more than they have ever been asked to pay before, and, at the same time, to put up with worse public services, all because of his economic mismanagement, his unfair tax system and his wasteful spending.
Of course, there are some welcome measures in the Budget today, as there are in any Budget. Labour welcomes the increase in the national minimum wage, but the Government need to go further and faster. If they had backed Labour’s position of an immediate rise to at least £10 an hour, a full-time worker on the national minimum wage would be in line for an extra £1,000 a year. Ending the punitive public sector pay freeze is welcome, but we know how much this Chancellor likes his smoke and mirrors, so we will be checking the books to make sure that the money is there for a real-terms pay rise. Labour also welcomes the Government’s decision to reduce the universal credit taper rate, as we have consistently called for, but the system has got so out of whack that even after that reduction working people on universal credit still face a higher marginal tax rate than the Prime Minister. Those unable to work through no fault of their own still face losing more than £1,000 a year. For families who go out to work every day but do not get Government benefits, who are on an average wage, who have to fill up their car with petrol to get to work, who do that weekly shop, and who see their gas and electricity prices go up, the Budget today does absolutely nothing.
We have a cost-of-living crisis. The Government have no coherent plan to help families cope with rising energy prices. Although we welcome the action taken today on universal credit, millions will still struggle to pay the bills this winter. The Government have done nothing to help people with their gas and electricity bills through the cut in VAT receipts that Labour has called for—a cut that is possible because we are outside the European Union and could be funded by the extra VAT receipts of the last few months. Working people are left out in the cold while the Government hammer them with tax rises. National insurance is a regressive tax on working people: a tax on jobs. Under the Chancellor’s plans, a landlord renting out dozens of properties will not pay a penny more in tax, but their tenants, in work, will face tax rises of hundreds of pounds a year.
The Chancellor is failing to tackle another huge issue of the day: adapting to climate change. Adapting to climate change presents opportunities—more jobs, lower bills and cleaner air—but only if we act now and at scale. According to the Office for Budget Responsibility, failure to act will mean public sector debt explodes later to nearly 300% of GDP. The only way to be a prudent and responsible Chancellor is to be a green Chancellor: to invest in the transition to a zero-carbon economy and give British businesses a head start in the industries of the future. But with no mention of climate in his conference speech and the most passing of references today, we are burdened with a Chancellor unwilling to meet the scale of the challenges we face. Homeowners are left to face the costs of insulation on their own. Industries like steel and hydrogen are in a global race, but without the support they need. In the week before COP26, the Chancellor has promoted domestic flights over high-speed rail. It is because of this Chancellor that in the week when we are trying to persuade other countries to reduce their emissions, the Government cannot even confirm that they will meet their 2035 climate reduction target.
Everywhere working people look at the moment, they see prices going up and they see shortages on the shelves, but this Budget did nothing to address their fears. Household budgets are being stretched thinner than ever, but the Budget did nothing to deal with the spiralling cost of living. It is a shocking missed opportunity by a Government who are completely out of touch.
There is an alternative. Rather than just tweak the system, Labour would scrap business rates and replace them with something much better by ensuring online giants pay their fair share. That is what being pro-business looks like. We would not put up national insurance for working people. We would ensure that those with the broadest shoulders pay their fair share. That is what being on the side of working people looks like. We would end the £1.7 billion subsidy that the Government give to private schools and put it straight into our local state schools. That is what being on the side of working families looks like. We would deliver a climate investment pledge of £28 billion every year for the rest of this decade: gigafactories to build batteries for electric vehicles; a thriving hydrogen industry creating jobs in all parts of our country; and retrofitting so that we keep homes warm and get our energy bills down. That is what real action on climate change looks like.
This country deserves better, but it will never get it under this Chancellor, who gives with one hand but takes so much more with the other. What you get with these two is a classic con game, like one of those pickpocketing operations you see in crowded places: the Prime Minister is the front man distracting people with his wild promises, and all the while his Chancellor is dipping his hand in their pockets. It all seems like fun and games until you walk away and find that your purse has been lifted.
But people are getting wise to them. Every month, they feel the pinch. They are tired of the smoke and mirrors. They are tired of the bluster, of the false dawns and of the promises of jam tomorrow. Labour would put working people first, and would use the power of government and the skill of business to ensure that the next generation of quality jobs are created right here in Britain. We would tax fairly, spend wisely and, after a decade of faltering growth, get Britain’s economy firing on all cylinders. That is what a Labour Budget would have done today.
I broadly welcome the Budget, which is the first my right hon. Friend the Chancellor has delivered in what we might call the second phase of this crisis, the first phase having been from a sharp contraction in the economy through to the recovery, during which period my right hon. Friend, I think it is fair to say—[Interruption.]
I was saying that in the first phase of this crisis, between the huge contraction in the economy and the recovery that we are now seeing, it is fair to say that my right hon. Friend the Chancellor did a pretty remarkable job to support the jobs market and to support jobs—not without criticism, incidentally, from my Committee, but overall it was a remarkable job.
My right hon. Friend has an even tougher job as he looks to the future, now having to deliver sustainable economic growth and ensure that the public finances are on a sustainable trajectory, as well as meeting all the other objectives the Government rightly have on levelling up, net zero and so on.
My right hon. Friend mentions levelling up. Does he not agree that this is a real workers’ budget? The funds for skills and schools will transform the prospects of our young people and our adults, and let them climb the ladder of opportunity to get skills, security, prosperity and jobs for the future.
My right hon. Friend is absolutely correct about skills. He, of course, through his Committee, has done so much to promote that agenda, which I will come to momentarily, but the background is extremely tough.
While the Chancellor is right to point out that the deficit is falling, it is none the less very highly elevated compared with historical measures. The debt, in financial terms at least, is at a record level of £2.2 billion, and the economy has the headwinds of supply chain bottlenecks and the mismatch between demand and supply that we are seeing in parts of the labour force.
However, there are reasons to be cheerful, which my right hon. Friend outlined. Those are the OBR’s revised forecast showing that growth is much stronger this year—I think the Chancellor suggested 6.5%, compared with the March forecast of just 4%—and the scarring downgrade from 3% to 2%. By my calculation, that is probably worth about £10 billion or thereabouts per year; it is a significant achievement. All that has been achieved through the hard work of the last 18 months to two years. I do not think we should take that away from my right hon. Friend.
That has left my right hon. Friend with some breathing space, and he recognises that there are many challenges facing the economy and uncertainties going forward. A big test as we unpack the Budget is what he has done with that additional headroom. Not surprisingly, he has spent quite a lot of it. It appears to me that, with his fiscal rule of keeping day to day expenditure without borrowing and debt coming down as a percentage of GDP, he has headroom of about £25 billion in 2024-25 on the net debt target, which is about 0.9% of GDP, with the OBR economic and fiscal outlook suggesting he has a 55% to 60% chance of hitting that particular metric. The Committee will want to look very closely at how prudent an approach my right hon. Friend has taken to the Budget.
I see my hon. Friend the Member for Basildon and Billericay (Mr Baron) itching to intervene, so I give way to him.
I am listening intently. I do believe that the Government have done extraordinarily well in raising the national living wage as part of that headroom. That is a major step towards a high-wage, high-tech economy, and it bolsters our one nation agenda, which is to be applauded.
My hon. Friend is absolutely right. I will come to the matter of wages and wage growth momentarily, but let me dwell on the challenges facing the economy.
Another thing that the OBR points out is the increased sensitivity to interest rate rises—the Chancellor made this point—and the damage that they can do to the public finances. I think my right hon. Friend gave the example of a 1% rise leading to a £23 billion increase in debt servicing costs. To put that in perspective, it would wipe out the value of the corporation tax increases and income tax threshold freezes that my right hon. Friend announced in the last Budget. That would be gone in one enormous gulp, so we must be careful about the vulnerability we have. Though we have low interest rates, and interest rates might move up in baby steps, that applies to a very large debt indeed.
Let me touch on inflation—I am pleased that my right hon. Friend spent quite a lot of time on it during his speech—and its impact on interest rates. We have already seen the Monetary Policy Committee beginning to divide on whether rates should go up, and there is an expectation, certainly in the markets, that rates will start to increase. We have seen 10-year gilts going up in more recent times, and it is possible that quantitative easing will start to unwind —perhaps passively initially—when we reach a certain trigger level of interest rates, so it is important that this credible plan is there to deliver on those fiscal targets.
The history, however, is not good in that respect. We have had Chancellor after Chancellor failing to meet their fiscal targets; they have either abandoned them completely or delayed or modified them in some form. Depending on what happens to demand in the economy relative to supply, there may be a case for fiscal stimulus even further down the line. One thinks of the removal of the universal credit uplift, the energy price increases, the labour market demand-supply mismatches and the rise in taxes, often taking demand out of the economy. None the less, and setting that to one side, the Chancellor’s default position must be to stick to those fiscal targets and resist the huge cacophony of demands for more and more expenditure, particularly the day-to-day expenditure that he is rightly targeting in his fiscal rules.
Some of those demands might end up being necessary. If we do not get back to the pattern of demand for public transport that we had before we locked down, it is conceivable that further subsidy will need to go to the public transport sector. Other areas, such as the health service, might have additional demands, but I point out to my right hon. Friend—he knows this more than most —that the NHS public expenditure take has risen in the last 10 years from 32% to 42%. He must get very good at saying no to Ministers when it is necessary to do so, and telling them to go back to their Departments, work harder and get more out of what they are given. That is a lesson for us all, incidentally, particularly those of us on this side of the House.
If we fail in that endeavour and inflation takes off, interest rates go through the roof, the cost of servicing our debt becomes ruinous and international markets lose faith in our economy, we will be back broadly where we were in 1992 when we had Black Wednesday. Conservative Members will remember the long, hard lesson of that: it took us a generation to re-establish our ability to look the electorate in the eye and say, “We can offer a fiscally responsible Government.”
There were some announcements on tax today. May I say first that the drop in the bank surcharge is absolutely the right thing to do? We are putting corporation tax rates up to 25% from 19%, so it would be absurd to cripple our financial institutions with uncompetitive international tax rates.
I was particularly delighted by the shift in the universal credit taper rate from 63% to 55%. That will help countless low-paid families to earn more and keep more of their money, and encourage more people into work. When I was a Treasury Minister, we looked endlessly at this and I pushed really hard on it. I know how expensive it is to do that—my right hon. Friend the Chancellor suggested £2 billion a year—so I take my hat off to him for having grasped that particular nettle.
My right hon. Friend is also right to set out an aspiration to get taxes down before the end of this Parliament. The same pattern occurred under Lady Thatcher, who is much referred to when we talk about tax. In the early years of the Thatcher Government, the tax burden rose quite strongly, and it was my right hon. Friend’s hero Lord Lawson who was able to bring tax rates down. Let us hope that my right hon. Friend is in a position to emulate that in due course.
I turn briefly to inflation, which is right at the core of what is happening in the economy. The threat to the public finances from inflation cannot be overstated. The big debate now is whether price surges and increases in inflationary expectations will be transitory or more persistent. My right hon. Friend referred to the surge in demand relative to supply, which of course will lead to price increases; all else being equal, one might imagine that it will pass relatively quickly.
We have seen the commodity, transport and energy price increases that my right hon. Friend referred to, but there are other price increases that we might expect to be stickier. There are bottlenecks that are often outside our control—a south-east Asian chip manufacturer can have a bottleneck that results in our being unable to produce cars in the United Kingdom. Structurally, the labour market has changed: as a consequence of the pandemic, there is now greater demand for goods relative to services. It will take time to mop that up.
The Bank of England MPC has expressed increasing concerns, in different ways, about inflation and has been constantly deferring the moment at which it believes inflation will peak. There is a debate as to when deferred “transitory” becomes “persistent”, but the huge danger is that we will go into a wage price spiral. One way in which that might happen is if we talk up wages by inducing companies to put them up without a coincident increase in productivity. That will simply feed the inflationary tiger. We have to be very careful on that point.
Does my right hon. Friend agree that we need to be very careful about believing any of these forecasts from the OBR and the Bank of England? They said that inflation would be down at under 2% just a few months ago and have now had to change their mind. Does he also agree that when Lord Lawson cut income tax rates, we had a surge of extra revenue?
It is certainly the case that the Bank of England’s projections on inflation have been under-baked. In fact, if we go back in time, we can see that its recent revisions have been more dramatic, which really illustrates my point. I have a feeling that there will be rather more inflationary pressure than many people imagine.
Some of the drivers of inflation are outside the control of my right hon. Friend the Chancellor, but some are very much within it. One of those is immigration. I totally accept the comment from my right hon. Friend the Prime Minister that we do not want to instinctively
“reach for that…lever of uncontrolled immigration”.
He is absolutely right: this country left the EU to get control of our immigration. However, what we must not do is avoid pulling the lever where there are genuine pinch points in the labour market in the shorter term. If we do not act to bring in skills if necessary, we will simply encumber businesses in a way that may mean many going out of business, and replace them with imports, which can also be inflationary.
The other such area is skills. Further to the point that the Chair of the Select Committee on Education, my right hon. Friend the Member for Harlow (Robert Halfon), made about the importance of skills, I was really pleased by the announcements from my right hon. Friend the Chancellor about post-16 T-levels and lifelong learning. Those announcements are vital to repurposing the workforce to get the challenges of the future sorted.
In the longer term, there is a huge opportunity for us in this country. We are a world leader in life sciences, FinTech, financial services and the digital sector and we have opportunities in artificial intelligence, robotics and genetics, but if we are to grasp those opportunities, we have to get the level of business investment up. I think that my right hon. Friend referred to that level increasing over time; that may be true, but it is still quite a long way below where it ought to be, looking at it historically.
The super deduction is a very important move that the Chancellor has already made, and the extension of the annual investment allowance to 2023 is very welcome, but I think we may need to look even deeper at how, beyond the end of the super deduction, we can continue to see business investment rise.
On research and development, it seems to me that in the plethora of announcements, figures, dates, schemes and adjustments to relief that my right hon. Friend identified, we may have slipped on our target of hitting £22 billion by 2024-25—if I heard him correctly, it has slipped to 2026-27—and I am not quite sure where we are on our target of 2.4% of GDP by 2027. Those are vital targets for us to meet in the longer term.
Finally, there needs to be an overarching examination of how the recovery is balanced. Those hit hardest by the pandemic have been the poorest in our society, who are much more likely to have faced the impact of lockdown and loss of income, and young people. My Committee will look very closely at all the issues that I have raised, including that point.
Once again, I welcome the Budget. The Chancellor has been in a very difficult position and I think he has put forward a very positive set of proposals. The devil will be in the detail; my Committee will look forward to examining that detail, including with my right hon. Friend on Monday.
Thank you, Madam Deputy Speaker. I think that we are used to the Prime Minister perhaps being fast and loose with facts, making things up as he goes along, but I have to say that I think better of the Chancellor. I have to say gently to him that if he thinks he is going to cut air passenger duty for Inverness and the highlands and islands, he is wrong—because there is no air passenger duty in Inverness. One would have thought that if he were going to make announcements, he would check his facts first.
More fundamentally, COP26 kicks off this weekend. What on earth are we doing? When we are saying to the rest of the world that we are trying to engage other countries to step up to the plate with their climate obligations—the Prime Minister has spoken today about the importance of 1.5°—the Chancellor wants to cut air passenger duty on domestic flights. [Interruption.] I can see him nodding his head. He is increasing air passenger duty on long-haul flights, admittedly, but the fact is that carbon dioxide emissions per mile are much higher for domestic flights than for long-haul flights.
What on earth are we doing? How can we say that we are taking our climate obligations seriously? By the way, the Scottish Government, exactly because of our climate responsibilities, took the decision in 2019 to remove our planned reduction in air passenger duty. Chancellor, this is a disgrace. Quite frankly, it shows that this is not a Government who understand the climate challenge that we all face. The Chancellor should withdraw and remove that proposal.
The Budget that the Chancellor has just delivered is tantamount to grabbing 20 quid out of people’s pockets, handing them back a tenner and expecting them to be grateful. Today’s announcement does not even come close to compensating for the tax rises and cuts that he has imposed over the past month. Let us take our pensioners as an example: with the removal of the triple pensions lock, there will be a £6 billion saving for the Government from their raid on pension tax credit and on pensioners.
That is the harsh reality under this Tory Government. The raw reality of that fiscal trickery means that millions of families and workers will be worse off this winter. This is a Budget that brazenly cuts taxes for the banks, while it cuts universal credit for the poor. We welcome the changes to the taper relief, but they do not change the fundamental fact that everybody on universal credit has just lost £1,000.
The Chancellor who once promised to do “whatever it takes” is now a very distant memory. The true test of this Budget was whether it would act radically and tackle the cost-of-living crisis, the Brexit crisis and the climate crisis, and it has failed that test on all three fronts. Instead of doing “whatever it takes”, the Chancellor has done as little as possible. The Tories’ half-hearted rhetoric about fairness has predictably only produced half-measures when it comes to soaring household bills and the crippling cost of inflation.
Perhaps worst of all, before the Chancellor stood up today, millions in poverty knew that they were facing the choice between heating and eating this winter. The ultimate failure of this Budget is that when the Chancellor sat down, those millions of people were still left with that terrible choice. I think that once the full details of today’s announcement sink in, the Tories’ cheers for their Chancellor will quickly fall silent. We can already sense that discontent growing among Government Back Benchers in the red wall seats, because another hidden truth of this Budget is that it only promises capital spending tomorrow, but delivers austerity today.
The Chancellor is living in the naive hope that the public will somehow have forgotten what his Government have hit them with over the last few weeks. He came in today and bragged about his Government’s generosity, but for the last month his Government have hammered working people and ordinary families with regressive national insurance tax rises, the premature ending of furlough, and, worst of all, that disgraceful £1,000 cut in universal credit. I am sorry to break it to the Chancellor, but the public have far from forgotten. They know the political choices that this Government have made, and they know the choices that have made them poorer. They know that they have been badly hit in the pocket by this Government, and that today goes nowhere close to making up for it. They know, too, that the rise in the minimum wage is welcome, but I must say to the Chancellor that the Living Wage Foundation will update the real living wage on 15 November this year. That will reflect what is happening.
Perhaps the Chancellor and the Secretary of State for Scotland might listen, because this is important. This is about the poorest—this is about people in poverty—and I am asking the Chancellor to recognise the Living Wage Foundation’s announcement on 15 November of the real living costs for the poorest in society. While I welcome today’s announcement of the increase in the minimum wage to £9.50, I ask him to give a commitment that that figure will rise to the amount of the real living wage this year, because that, fundamentally, is what will keep people out of poverty. We know that a full-time worker on the minimum wage this year will still be hundreds of pounds worse off because of the cuts in universal credit.
The smoke and mirrors act about rising wages just doesn’t cut it. The Chancellor may want folk to think he is giving with his left hand, but in reality he is taking much more out of their pockets with his right hand. However, no one is fooled. The only people who are living in their own parallel universe are the neighbours in Nos. 10 and 11 Downing Street. In the real world, people are struggling with a Tory cost-of-living crisis that this Budget fails to fix.
Under the leadership of the Prime Minister and the Chancellor, the public are being hit with an energy crisis, a Brexit crisis, a labour crisis and an inflation crisis, and it all adds up to a Tory cost-of-living crisis that is punishing workers and punishing families. It is a deeply damaging pattern that has become all too familiar. What we are experiencing is a United Kingdom in constant crisis, and it is very little wonder that Scotland wants out. [Interruption.] They are predictable. I hear, from a sedentary position, the Secretary of State for Scotland—at least, that is what I think his job title is—
Who does not have a mask on, despite the fact that Members of this House are falling ill with covid.
I say to the Prime Minister and I say to the Secretary of State for Scotland that the simple fact of the matter is that all of us have to recognise democracy, and the Conservatives have to recognise that an election to the Scottish Parliament took place this year. There is a majority for independence in that Parliament, and that Parliament will bring forward a referendum Bill. It ill behoves those who lost the election in Scotland—and the Conservatives have lost every election there since 1955—to deny the right of the people of Scotland to their own sovereign will, their own sovereign decision, to have a referendum on our future, offering us the hope that is failing from this Tory Budget today. More and more people are coming to the view that independence now offers safety and stability—an escape from the constant crisis of Westminster control. They are coming to the view that we can simply no longer afford to pay the price of being part of this failing union.
The defining decision of this Budget is the failure to fully reverse the cuts in universal credit. Tapering the rate is only tinkering around the edges of the problem. The decision was fully wrong and it needs to be fully reversed, because not only was the cut to universal credit the wrong policy, but it came at the worst possible time. [Hon. Members: “ Callous!” ] It was a decision that was callous, and it was a decision made before the rapid rise in inflation was truly known. But instead of having the strength to admit that they were wrong, the Tories have decided to dig their heels in. Earlier this week, the Chancellor, in many of his pre-Budget announcements, said that this Budget was a chance for him and his Government to get back to
“a more normal way of doing things”.
It is therefore very telling that in the same Budget he has confirmed that disgraceful cut in universal credit. He is cutting the surcharge on banks from 8% to 3%. So “back to normal” for this Chancellor clearly means one thing. It means the mindless mantra of the Tory long-term economic plan. It means austerity for the many and tax cuts for the few.
There is a very simple way for the Tories to prove me wrong. They can do the right thing: reverse the cut in universal credit, and put £,1000 back into the pockets of those who desperately need it. And while they are at it, they can remove the benefit cap, the two-child limit, the rape clause, the sanctions regime and the five-week wait, and—finally—introduce statutory sick pay at the level of the real living wage.
As well as those permanent measures, specific and targeted measures are needed to help with energy prices for the winter ahead. That is particularly true for the 2 million pensioners in poverty who have been let down by the removal of the triple lock. We believe that the fairest way to help is to introduce an emergency energy payment to cover families who simply cannot afford the soaring cost of heating and electricity bills. That would be, at the very least, the best way to protect people this winter.
I suspect that inflation will not be the pressing issue of this Budget alone; I fear that it may well be the defining issue of many Budgets to come. The Bank of England’s new chief economist has warned that inflation could soon hit 5%. Mortgage holders are rightly fearful that that this inflationary spike will be met with a sharp rise in interest rates. The Chancellor seems to think that all this is merely transitory, but complacency on this issue is not an option. History shows how quickly an inflationary spiral can get out of control.
It is worth remembering that in 1980 the inflation rate hit 18%. None of us can afford to go back to that place.
However, the inflationary threat is just one element of what amounts to a perfect storm of economic vulnerability. The covid crisis can no longer camouflage the deep damage that Brexit has done, and the single biggest threat to our recovery remains being dragged out of the European Union, against the wishes of those who live in Scotland. The consequences of Brexit are here and they are hurting: our exports down 14% year on year, our fishermen blatantly betrayed, our farmers sold out in fire sale UK trade deals, labour shortages, food shortages, medical shortages. It cannot be said often enough that Scotland is paying the price for a policy that we never supported.
Brexit has already cost billions, but while the European Union is giving Ireland €1.05 billion to mitigate the damage of Brexit, Scotland has yet to receive a single penny of compensation from Westminster. So I would like to ask the Chancellor: where is same billion-pound package of support for struggling businesses that have been hit by Brexit? I know those on the Government Benches do not like to hear this, but what those businesses also need is a return to freedom of movement. They need the 1% hike to employer and employee national insurance halted, and our hospitality and tourism sector needs the 12.5% VAT rate to be made permanent. All those businesses badly need a break from Brexit.
As we know, this Budget comes a matter of days before COP26. Keeping the target of 1.5° alive depends on a Government commitment to embrace the green economy, but let us be honest: this Budget today does not help. The fact that this crucial conference is happening in Glasgow is a chance to show moral leadership, but it is also an opportunity to grasp the opportunities that the green economy can provide. Moving to a just transition from oil and gas is essential to capture the economic opportunities of the new energy technologies and to support people into new jobs. The depth of anger felt in the north-east of Scotland at this Government’s decision to renege on their promise to ensure that we have carbon capture and storage in Scotland obviously has not hit home on the Government Benches.
If this Chancellor was—[Interruption.] Chancellor, this is really important. This is about our ability to get to net zero, and it is about the fact that the Treasury has blocked carbon capture and storage in Scotland. I say this directly to the Chancellor: perhaps he will meet me in the coming days to ensure that the Scottish Acorn project is put back on track and that we increase the number of carbon capture and storage projects from two to three, for the simple reason that we need that to deliver on our net zero targets and to deliver 15,000 jobs in Scotland for that just transition.
I say to the Government directly: let us ensure that we give some hope to the north-east of Scotland, because £350 billion of tax revenues has been taken out of the North sea. We need a helping hand to deliver that just transition, and I need the Secretary of State for Scotland to stand up for us—to stand up for Scotland and ensure that we get that just transition.
If the Chancellor was serious about supporting Scotland, he would have stood up today and announced that the Scottish cluster would go ahead. The reality is that it was a purely political choice to deny Scotland carbon capture and storage. What on earth is the Secretary of State for Scotland doing? Sitting on his hands and failing once again to stand up for Scotland’s interests. [Interruption.] I hear “Hee haw” from the SNP Benches. Maybe he is the Secretary of State for hee haw.
It is not only on carbon capture where this Government are holding back our renewable opportunities. I am passionate about the potential of tidal stream energy, but the contracts for difference budget of this UK Government means there is currently no route to the domestic market for that industry. Despite the Prime Minister’s warm words in response to my questions last week, there is no ring-fenced £71 million budget for tidal stream energy—a small pot of money that would kick-start the opportunities in this industry and prevent it from being lost overseas.
Let us be real about this—[Interruption.] It is really important that the Chancellor listens to this debate. It is his debate. We are serious about the opportunities—[Interruption.] He can point to the clock all he likes, but we are talking about the future of the renewable energy industries in Scotland, and about paying attention to what the industries are saying.
We know about the breakthroughs in technology, and we know that the Royal Society has painted a picture of an industry that could represent 20% of our electricity needs throughout the United Kingdom, but it needs to be kick-started with financial support. However, when we were all talking about our responsibilities to net zero, it is the UK Government who are standing with their foot on the brake preventing this industry from getting off the ground and delivering for people— not just in Scotland, but right across the United Kingdom.
There is also no commitment to match the Scottish Government’s £500 million investment for a just transition in the north-east of Scotland. Now that the Chancellor has blown up the idea of a Boris bridge across the Irish sea, he should have plenty of spare money to invest. On that point, can I ask him whether the estimated £20 billion cost for that cancelled bridge will now be ring-fenced for future transport projects in Scotland and Northern Ireland? Or is that just one more promise that will be broken—just one more example of Westminster holding back Scotland’s green future?
This Budget could have been an opportunity to do things differently, to get a grip on the cost-of-living crisis and to kick-start a fair recovery. But this Budget does not signal recovery. It signals that this Chancellor is dragging us into another winter of discontent, but I can assure the House that Scotland has been discontent with Westminster control for more winters than one. Our country has not voted for a Tory economic plan since 1955. Westminster’s choices are not our choices. The last thing Scotland needs is another winter of discontent imposed by another Tory Government.
Ultimately, we know that democracy is the only cure and the only solution to that deep discontent. That is why, when the crisis of the pandemic has passed, Scotland’s people will have the right to choose their own future—an independent future. It is a manifesto promise that we made, and it is a democratic promise that we will keep. I look forward to the judgment of the people of Scotland. I look forward to a future that is fair, green and European. I look forward to an independent Scotland.
I think the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) was saying thank you for the extra £4.5 billion that will come to Scotland as a consequence of the Budget. I think he was also probably saying thank you for the eight allocations of UK-wide growth funds, with bids in Scotland between Aberdeen and Glasgow.
When the right hon. Gentleman talks about the support for his party, the SNP, in the polls, I am not sure whether his memory goes back to June 2017, when the SNP in Scotland got less than 37% of the vote, way behind the 44% that the Tories got across the country as a whole.
Madam Deputy Speaker, I would like to say, through you, to the Chancellor and the Prime Minister: thank you for the content, thank you for the delivery and thank you for the hope that things will go on getting better in the future. We need to have the resilience to face the unknown problems that will come, but we also need to face the known problems now. I think the whole House will agree—certainly given the reaction from the Labour Benches during some of the announcements, including on universal credit—that the Chancellor has found an imaginative way of giving help to people before the end of the year. I think that there will be a great deal of approval for that.
I would like to say something in tribute to Frank Field, who spent a long time working on child benefits. As and when there is extra money for children, I would give it through child benefit. I would not give it through the extra provision of services all the time, because parents would like to make their own choices. I believe in expanding holiday provision and activities, but I do not think that a child taking all their meals outside the home outside of term time is a good idea. Families should be able to look after themselves, and they need the resources to be able to do that.
I do not want to speak at length because of the time that has been taken up by the leader of the SNP, although he is often worth listening to.
I will not at the moment.
The hon. Member for Leeds West (Rachel Reeves) spoke for the Opposition, and I thank her for her speech, but it was not absolutely clear whether that speech had been drafted for the Leader of the Opposition or for herself. I felt that there should have been some spaces left in it so that she could pick up on what the Chancellor actually said. It seems to me that the Chancellor has been criticised for the opposite of some of the provisions he read out to the House.
I welcome the extra attention to the first 1,001 days. The earliest stages of life, and of parents preparing to have a child, matter, whether it is health, economic security or housing.
I thank the Chancellor for his commitment to returning to spending 0.7% of gross national income on overseas aid. I hope he will be able to announce that the spending will not suddenly go from 0.5% to 0.7% in two years’ time but will move from 0.5%—if we have got down that far, and I hope we have not—up to 0.6%, 0.65% and then 0.7%. It is ludicrous to think that we can suddenly pile an extra 40% into a programme and expect it to be used effectively, so please try to plan ahead.
My right hon. Friend spoke about the cladding money, and he and the Prime Minister must have a top-level forum with the cladding groups, the Leasehold Knowledge Partnership and the all-party parliamentary group on leasehold and commonhold reform to get an understanding that leaseholders, people at the beginning of their household life, are faced with bills of £20,000 and sometimes £100,000, which they cannot afford. Some people are having their equity wiped out when their flats are forfeited because they cannot afford to pay these charges. We need to find the problems, fix the problems and fund the problems, and then we need to get the money back.
As part of the £5 billion, I ask that potential claims on behalf of leaseholders, which might have to be made by landlords, can be made by an agency that has the power to go to the builders, developers, surveyors, architects and building control people, some of whom are the Government’s people although most are not, and their insurance companies. In time, the money has to come back from those who are responsible. The one group we know are not responsible are the leaseholders who do not own a single brick of the building.
As a life member of the Campaign for Real Ale, I thank the Chancellor for what he has done on the draught beer tax. In Worthing, which has a good reputation for hospitality, the business rates relief will be greatly welcomed by 90% of businesses. Some people think of Worthing as a place that is not only represented by a mature MP but has a lot of mature people. They are wise people.
We have had one of the youngest mayors and council leaders in the country. As Dan Humphreys prepares to stand down after six and a half years, I thank him for doing the kinds of things that the Government are trying to do. He has increased digital capability, sought regeneration funds that work, worked and shared offices with other councils to get the best value for money and provided the kind of leadership and quiet, undramatic provision of local services that gives local government a good reputation.
If my right hon. Friend the Chancellor can continue doing sensible things that get support from both sides of the House, as he has today, we will be glad that he has joined that company, too.
I hope we can manage the rest of today’s debate without a formal time limit. We have plenty of time, but a great many people wish to contribute. If everyone were to keep to around seven to eight minutes, which is much longer than we have had recently, we will manage without a time limit. That always makes for a much better-flowing debate.
It is always a pleasure to follow the Father of the House.
This Budget could be described as a pork barrel Budget. The Chancellor talked about a beer barrel Budget, and I have yet to look at the detail of the beer duty, but small breweries in my constituency will be grateful for that measure. That is my thank you to the Chancellor.
The Budget has pulled rabbits out of hats, and there has been a lot of smoke and mirrors. When we look at the detail of the funding, as we do on the Public Accounts Committee, we can see the holes in this Swiss cheese Budget. We have again had the mantra of levelling up, but there is no acknowledgement of the reality of the lives of many of my constituents who will not qualify for levelling up, by the Chancellor’s definition, because of where they live. Of course we are still waiting for the new Secretary of State for Levelling Up, Housing and Communities to define what “levelling up” means.
I have many constituents living in overcrowded housing with one family living in the living room and another family living in the bedroom. They are not street homeless and they are not living in temporary accommodation, although I have plenty of those too, yet there is nothing in the Budget for them on housing. The cost of living is hitting all our constituents very hard, and it is clear that this Budget will not tackle a lot of those problems for a lot of people, many of whom will be made poorer as a result of these decisions.
Of course, the Chancellor has announced £150 billion for Departments this year. We have to be wary of such global figures. It sounds like a lot of money, but it is dwarfed by the spending on covid. Compare that with the steady state of the NHS budget pre-covid, which was about £150 billion, and with the £37 billion allocated over two years to test and trace. I have to wonder where the Government’s priorities are.
I thank my hon. Friend for the Public Accounts Committee’s report on the spending of NHS Test and Trace. It is 20% of the NHS budget, yet the money was spent in such a way that how effective it was in meeting the main purpose could not be demonstrated. Taxpayers’ money was treated like an ATM. Does she agree that if we are to spend such money, it needs to be spent wisely and properly?
I completely agree with my hon. Friend, and I hope the Chancellor does, too. I hope the Treasury is acknowledging the lessons that have been learned. We were very tolerant on the Public Accounts Committee, as we understood that spending in those early days would be challenging and money might be spent in the wrong way. The ventilator challenge, for example, means we now have ventilators that will not be used, but it was the right thing to do at the time because that is what the Government thought they needed, and any Minister in that position would have considered making such decisions.
Test and trace is one example where money kept following money without clear outcomes, without clear challenge and without a clear approach to spending taxpayers’ money. These are eyewatering sums. When we think of the NHS backlog, there have obviously been pre-announcements on NHS funding, but there is still so much work to be done to make sure that patients get the treatment they need. The money spent on test and trace could have been much better spent on the backlog.
Once again, we have heard very little about the detail of housing policy. The Government have promised to build 1 million homes over this Parliament, a statement that the Chancellor repeated. There had been a promise of 300,000 homes a year, so the figure is shifting. One hopes it means that the homes will be built eventually, but the Red Book confirms that, of the £11.5 billion that has already been allocated, £7 billion or so is owed from the spending review onward. That is enough to deliver 180,000 affordable homes, and we can add the 160,000 homes being built through mayoral combined authority and local authority funding. We are still getting very low figures.
The affordability of affordable housing, of course, depends on a person’s income. In my constituency, people in receipt of housing benefit, including housing benefit through universal credit, cannot rent a three or four-bedroom property because the rents are above the cap. That is just the market in Hackney South and Shoreditch and across the borough. It is impossible to buy. More people rent privately than own their own home, and more people rent social housing than both of those combined. Those in generation rent and those who cannot get on the waiting list for social housing are left in limbo. They are left out in the cold. Where is the levelling-up agenda for them?
The Father of the House mentioned the terrible issue of dangerous cladding on tower blocks, and this Budget only reconfirms the existing £5 billion set aside for remediation. This is the biggest consumer and regulatory failure in a generation, and many of my constituents, like many people across the country, are living in unsaleable homes. I should declare my interest, as I live in one, too, although my developer has shouldered the entire cost. As the Father of the House said, we need more developers to take that on.
The £5 billion is about a third of what is needed to sort it out. I am the Chair of the Public Accounts Committee, so I do not want to see money given out willy-nilly, but if the remediation is not funded now, there will be no confidence in the sector to get started. Even as somebody who lives in a property surrounded by scaffolding right now, and as an early adopter because the developer paid, it will take many years before the remediation is delivered. For those who have not got to that point, we are talking about well over a decade before this problem will be solved. It is about certainty of funding from the Government. As the Father of the House said, there are ways of getting this money back from developers. We need to be more imaginative. I challenge the Chancellor to work with his Cabinet colleagues on that.
There was some mention of street homelessness in the Budget. Getting “Everybody In” was a covid success story; let us not squander that opportunity for the lack of a bit of funding now. The money to make sure that people get into the 6,000 new homes that are supposed to be provided for people who are sleeping rough on the streets needs to be delivered. If it is not and they go back on the streets, it will end up costing the taxpayer and the Exchequer considerably more. The Department for Levelling Up, Housing and Communities—I hope I have got the new title right—has been slow to confirm the figures on progress, so it is right that the Treasury should keep an eye on how the money going into that Department is spent and on whether it will actually deliver those homes, which will, as I say, save the taxpayer money in the end.
I could speak at length about the cost-of-living issue but, given the time, I shall touch only on the main issue. Universal credit has been cut by £20. I welcome the offer to revise the taper, but it will affect only those who are in work and rather plays into a negative narrative that some people are scrounging off the state. People have lost their jobs during the covid pandemic. People have struggled to get back into work, despite the situation not being as bad as some had predicted. On top of that, we see fuel prices increasing, energy bills going through the roof and inflation. That £20 a week is still a real issue for people.
According to the Red Book there will be a 3% real-terms increase in local government funding over the spending review period, but that comes on the back of cuts of up to 40% or more in some boroughs over the past decade. Since 2019, we have seen an increase year-on-year, but 2019 is only two years ago; let us not forget the deep and swingeing cuts to local government, which has proved itself an effective deliverer of vital services during covid but cannot be squeezed further. We are still nowhere near to the previous levels of funding.
On school funding, there is another smoke-and-mirrors promise. Again, increases are talked about, but after years of cuts. Per-pupil funding is still way lower than it was in 2010 and we are only inching back up to that level. A Public Accounts Committee report showed that the per-pupil increase is lower for pupils in the most-deprived areas and much higher for those in the least-deprived areas, thereby widening the gap in funding. The gap in attainment between the least-deprived and the most-deprived was narrowing, but we now see it growing as a result of covid. This is not the time to cut funding, or to reduce funding even if it is not seen as a cut. It is clever how the Government try to present it, but let us be clear that in effect we are talking about a cut to the poorest, with money going to the wealthier pupils.
The Government have also promised a £30,000-a-year salary for teachers; as far as I can see, having read the Red Book quickly, there is not enough in the settlement for schools to pay for that even if, now that the pay freeze has been lifted, the basic pay increase is taken on board—and we do not yet know what that will be.
The hon. Lady mentions having read the Red Book and says there is no new money for housing, but the Red Book announces
“an additional £1.8 billion for housing supply”
and for the regeneration of brownfield land; is that not new money?
It is not clear to me that it is new money. I have acknowledged the figures for housing on brownfield sites and other housing, but let us be clear: the Government promised 1 million new homes over the Parliament, and they had said 300,000 a year, so they are already watering down the promise on the number of homes. Crucially, there is no figure for proper affordable housing that is actually affordable, so many of my constituents who are priced out of the private rented market and home ownership have no option. There is a real gap there and, as I have said, it is not levelling up for many of my constituents.
As I was saying, even if the pay review bodies come forward with an increase to the basic pay for teachers, as we expect they might, it will be very hard for schools. In effect, it will mean cuts to the number of teachers and to other school services to pay for that promised salary, because there is not enough money in the pot to be carved up all ways. Even the catch-up money will not cover that issue.
Let us look at the detail over the coming days and weeks. The flourish with which the Chancellor finished at the Dispatch Box will wither away as we see the reality that this Budget does not exactly deliver everything that he has promised.
I refer the House to my entry in the Register of Members’ Financial Interests.
First, I commend my right hon. Friend the Chancellor for the good news in the Budget. It is indeed good news that the economy is growing faster than was predicted and it is good news that we are bouncing back from the pandemic not just faster than predicted but faster than other countries in the G7, with the OBR confirming the 6.5% growth that the International Monetary Fund and OECD predicted. It is good news that unemployment is lower than the very dire predictions that we heard at the beginning of the pandemic, largely owing to the action that the Government have taken. It is good news that, as my right hon. Friend announced, the national living wage has increased to £9.50, thereby putting, as he said, just over £1,000 into the pockets of some of the lowest paid. It is also good news for public sector workers that the pay freeze is going to be lifted.
It is good news that the Chancellor has felt able to announce, albeit over a number of days publicly rather than to the House today, increased spending on issues such as infrastructure, the NHS and science. I agree with my right hon. Friend that we must today start to build the new economy post covid and that we are on the verge of what could be an economy fit for the new age of optimism. Like my right hon. Friend, I have always been optimistic about what can be achieved by the talents, hard work and initiative of the British people and what they can do to build a brighter future for themselves, their families and the country. But the brighter future will not be built simply by telling people that it will be there: a new economy needs sure foundations and optimism needs to be backed by practical delivery.
As we know, there are headwinds that mean that however optimistic people are for the future, many are finding it difficult to manage today. As the Chairman of the Treasury Committee, my right hon. Friend the Member for Central Devon (Mel Stride) said, there is a debate to be had about what is going to happen to inflation and whether higher inflation is here to stay or just temporary. Of course, that will have an impact on interest rates.
Increased taxes will have both direct and indirect impacts on individuals, as will increased costs in other areas. We must never forget, as the Labour party so often does, that people are hit by increased taxes on business, because those increased costs often cannot be absorbed and are passed through to consumers—to members of the public.
I welcome the significant cut in the universal credit taper rate announced by my right hon. Friend the Chancellor. It is true to say that it is something that Conservative Governments have been working for, but previous cuts have been rather less dramatic than the one he announced today. What he has done is extremely good news.
Let me focus briefly on three particular issues in the Budget and spending review, the first of which is the forecast for the future growth of the economy. As I said, yes, we are bouncing back well, but our economy will be smaller for a number of reasons, some of which are specific to the UK, and the predicted rate of growth is below that which would normally be seen as an acceptable growth trend rate.
I am interested by the fact that the Government appear to think that they can sustain a situation wherein public spending increases by, as I think my right hon. Friend the Chancellor said, 3.8% a year, but the economy grows at less than half that rate. I welcome the fact that my right hon. Friend has introduced new fiscal rules, but I may have misheard or misunderstood: I think he said that the new fiscal rules will be met in the third year of every forecast period, but the forecast period rolls forward every year, which suggests to me that we will never reach the fiscal rules and they will just be rolled forward every year. As the Chairman of the Treasury Committee said, it is not the case that previous Governments have not been guilty of changing the date at which the fiscal rules were going to be met, but it seems to me that, unless I have misunderstood, it is baked in that they never necessarily need to be met.
The answer to the issue of the balance of increased public spending versus growth is, of course, to increase the growth rate of the economy. I support the desire for a green industrial revolution, but that brings me to my second point: the green industrial revolution is about not just providing support to businesses, to different sectors and to initiatives such as hydrogen. Those moves are important, though, and I welcome the fact that the Minister of State, Department for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) has introduced the Nuclear Energy (Financing) Bill and is finding a way to ensure that the RAB—regulated asset base—financing model will work for new nuclear in future.
To deliver the green economy of the future, we will have to ensure that we have the green skills of the future, which means that the issue involves not just the Treasury and the Department for Business, Energy and Industrial Strategy but the Department for Education. It is about ensuring that at every stage in our education system we prepare people for the jobs of the future and ensure that they have green skills. There were a lot of references to skills in the financial statement, but I did not hear any specific reference to green skills, which are very important. Young people are hugely enthusiastic about saving the planet, as I know from when I raised the seventh green flag for St Mary’s Catholic Primary School in Maidenhead recently. We need to ensure that young people’s education provides them with what they need to be able to take up the green jobs of the future.
I am grateful to the right hon. Lady for giving way and even more grateful that she is mentioning the whole issue of the climate emergency and green skills. It felt like the Chancellor was skating over that vital issue—I do not think he got the memo on the climate emergency. Does she agree that if we had much greater investment in the net zero review, we would be able to scale up the jobs at the level she is describing? At the moment, we have a pitiful amount going into that net zero review. We have a Budget that is making more car driving more likely. It is making that cheaper. It is making short-haul aviation less cheap. So it is sending out the wrong messages at the wrong time. We need a test that would make sure that every single spending decision is measured against its climate impact.
The hon. Lady has always spoken passionately on these issues in this House, but I think she has overlooked the fact that the Chancellor announced a significant number of green jobs—several hundred thousand of them—for the future. Investment is going in from the Government, but the point I am making is that it is not just about the investment that the Government are putting directly into these areas; it is also about ensuring that our whole Government, on a cross-Government basis, understand the importance of this issue. That includes education. I had a positive meeting with the Secretary of State for Education earlier this week on that and other issues. So it is a cross-Government exercise and it needs to be understood as such.
My third and final point is on a different issue, which is about the NHS and social care spending. I recognise the increased money going to local authorities, but there are local authorities that feel they will be hit with significant costs with the new social care provisions. This is about not just the costs over the next couple of years before the levy money comes into social care, but those authorities that are in areas where the provision of care is more costly than in other parts of the country and where they have a very high proportion of self-funders. That includes both Wokingham Borough Council and the Royal Borough of Windsor and Maidenhead.
My main and final point is that in the necessary bid to deal with the backlog in the NHS—obviously more funding has been announced in relation to that—we do not lose sight of the long-term plan. Crucially, the long-term plan had commitments on areas such as mental health, prevention and workforce planning. Those commitments need to be met if we are to put the NHS on a sustainable footing for the future. For example, the young person whose mental health needs are identified and provided for at an early stage is the person who will not then turn up at A&E in a crisis situation, costing the NHS more.
Another important aspect in the long-term plan is that it was matched with measures and metrics that the Treasury was going to be able to use to ensure that money was spent effectively and wisely. As we know, the NHS does not always spend the money as well and as effectively as it could. People want to see more going into the NHS, but they want it to be spent properly with value for money, so it is important that the Government do not lose sight of that.
As a Conservative, I believe in low taxes, fiscal prudence, and sound management of the economy. I look forward to our being able to be in a position to deliver that at the same time as we are delivering that green economy for the future and that optimistic future that the Chancellor referred to in his speech.
It is a pleasure and indeed an honour to follow the right hon. Member for Maidenhead (Mrs May) in this debate. I am not sure that either of us would have thought that we would find ourselves doing this, but we do, and I have to say that I agreed with a great deal of what she had to say. I certainly agreed with far more than is probably good for me nowadays, but I did and I will say so in my speech.
I have been a Member of this place since 1983 and have heard a great deal of just about every Budget speech. The style has changed rather a lot. There was a time when we used to get a long lecture about monetarism and the money supply—the whole theory would be explained to us, with special emphasis on M4. I may have got this wrong, but the present Chancellor’s heart seems to still be with that school of thought, but to his credit he has realised the extraordinary nature of the circumstances that currently confront us and taken what for him, and I guess the Prime Minister as well, has been a philosophically broader view.
The current circumstances are quite mind-boggling. We have not done this voluntarily, and I do not blame the Government for it, but we have borrowing at a peacetime record now. It stands at some £320 billion, which is the equivalent of 14.9% of GDP. Government debt has increased now to about 96% of GDP. Spending, I acknowledge, is falling, but it is still at what for us is a high level and what for the Conservative party must be a very high and worrying level, surpassing anything that we have seen in peacetime.
As well as the national finances being under great strain, the finances of my constituents are too. I welcome some of the measures in the Chancellor’s speech, including the capital funding for the national health service to try to clear the backlog. Whether it is enough, it is certainly more than we were going to get, so I welcome it on those terms. I am very sceptical as to whether the funding for the announced changes will find its way later into the social care budgets. The cost of that—we all see this is necessary, and it is necessary now and not in a few years’ time—will end up with local government. As we work through the details of the Budget—the ones that were not leaked to the newspapers in advance—I think that we will find that local government will be forced, particularly in metropolitan areas, to pick up the burden.
I join the right hon. Lady in welcoming the long overdue—from my point of view—addressing of the taper on the universal credit interface with increased work earnings. Universal credit affects some 9,000 households in east Newcastle, and 35% are in employment so will almost certainly come up against the clawback of 63% as it was and 55% as it is now. It is not as big a deal as it sounds, but it is going in the right direction. It is welcome. The problem of the interface between benefits to people who are in work is not a new one, and my view is that more thought needs to be given to this to find a more equitable solution. The marginal tax rate is still quite high. It was 75% on the old clawback when national insurance and other taxes are added in, and it will be something of that order even with the Government’s announcement, but that does not stop me welcoming it. I do.
Discretionary incomes, particularly those of the poor, are under significant pressure and I regret the fact that the present Government have decided to break their manifesto promise and take more from those who do not really have it, with their 1.25% increase in national insurance. I can see why the Government—a Conservative Government—see the need to raise tax, but there were other ways of doing it and I would like a lot more reassurance that these were explored properly before we arrived at the solution that the Government have arrived at.
Mention has been made of the inflationary pressures that are now loose in the economy. I take this very seriously—
May I take the right hon. Gentleman back to those halcyon days when he enjoyed lectures on monetarism and remind him that inflation is always and everywhere a monetary phenomenon? There is no such thing as cost-push inflation.
If the right hon. Gentleman would let me make a little more progress, I was going to quote Mrs Thatcher with approval; I rather thought that would catch his interest. What he says is essentially correct, and when these issues were more contentious, it was recognised very vigorously indeed by the then Conservative Prime Minister, Mrs Thatcher, who once said that
“inflation is the biggest destroyer of all—of industry, of jobs, of savings, and of society”,
briefly acknowledging, untypically for her, that there was such a thing as society—perhaps her better known quote.
Although I seem to have lost my copy of the 1987 Conservative manifesto, I have a memory that it contained the memorable phrase, “Inflation is an evil and must be exterminated”. I commend that point of view to the present Government if inflationary forces are unleashed again, given all the other problems we have to face up to at the moment. The victims are my constituents: the poorest and those who are least able to find the extra money—or, indeed, to find the goods to buy, given the way in which the distribution sector is currently challenged. These higher priced products could only be purchased if people found a supermarket that was still selling them and that had not been disrupted by a lack of delivery and HGV drivers. Retailers’ stock levels are at their lowest—or reportedly at their lowest; I cannot claim personally to have done a stock check—since I entered the House in 1983.
We know that inflation will hit our constituents hard. The situation with gas prices needs a response from the state, at least temporarily. My preference would have been Labour’s proposal to remove VAT from fuel bills, at least temporarily—for, say, six months. The Government could do more, and I urge them to, to help our more vulnerable constituents through this winter. That brings me, inevitably, to covid.
The R rate is reportedly now more than 1 and is said to be as high as 1.2. I understand that the Government’s underlying assumption is that the booster vaccine will provide a countervailing policy and that that will be enough to bring the rate back down. But if it is not, the Government need seriously to focus on whatever plan B actually is, because putting the country through a lockdown or some other set of restrictive policies again in the current circumstances will have a devastating effect on our hopes for a recovery.
I will finish soon, because I know that other Members want to get in. It is a fact that, in 2014, 27% of children in my constituency lived in poverty, and the latest child poverty figure that I have for my constituency is 38%. The adjustments that have been made and announced—pre-announced, if you will—in this year’s Budget do not serve to relieve that burden on the bulk of my constituents. All 12 local authorities in the north-east of England are in the top 20 of those that have seen the highest increases in child poverty rates.
The Government used to say that the way through this situation was to increase economic activity through the northern powerhouse. The Chancellor did not mention the northern powerhouse in his address at all, unless the Government have renamed it Teesside. However, the thrust of the argument is still clear and I would like it to succeed; I would like properly paid, well-resourced jobs to be brought to the region, and for them to endure. It is not a quarrel between the parties that we want to drive up the living standards of our constituents in our region. We can make much more common cause here in Parliament on the details of the issue. I tried to tackle that when I was the Regional Minister, with some success—I am not going to say with anything else!
One of the galling announcements in the Chancellor’s statement was the reference to family hubs. What happened to Sure Start? What was wrong with that? If the incoming Conservative Government had thought it was a poor initiative that could have been configured differently, why did they not just pick it up and configure it differently, and shape it like they say they now want to shape the family hubs? The underpinning reasons for the policy are wholly justified. It did deliver results. The Government are right to have found their way to it now, but they should have got there 10 or 11 years ago.
Finally, the greatest question facing our country and the world at large is climate change, and the prospects seem absolutely terrifying. I wish the Government well with COP26 and taking the issues forward internationally. Are we going to get there? I share the concerns and worries of, frankly, every thinking Member of this House. It is essential to the community that I represent that the Government do get there and that we are able to carry international partners with us. The Government’s proposals include industrial jobs—jobs that we could do in the north-east of England and projects that our communities could bid for. We want to play our full part in taking a green industrial strategy forward.
It is a pleasure to follow the right hon. Member for Newcastle upon Tyne East (Mr Brown). He is right that many of us share common ambitions across the House—ambitions for COP26, and to bring better jobs to his constituents and constituents across much of the country in areas where such jobs have not necessarily been in the past.
I was Employment Minister back in 2010, in the wake of the last economic crisis. It is therefore with a particular sense of pride—I emphasise, pride—that I listened to today’s Budget and I congratulate the Chancellor. Back in 2010, there were 2.7 million people unemployed; the numbers were rising, the pressures were upward and the challenges were enormous. I listened to economists saying, “This is going to get worse and worse.” The achievement of the Conservative party, over a decade in government, of which I am proudest is the transformation of employment prospects for the people of this country. As we went into the pandemic, we were as close as we have been in modern times to full employment. After some tough economic and spending decisions, and some tough challenges met after 2010, we collectively—through smart management of the economy and the right employment programmes to support the long-term unemployed—delivered a transformation in job prospects, particularly of young people in the United Kingdom.
It was with huge trepidation, at the start of the pandemic, that I saw that work at risk, with forecasts of 3 or 4 million people unemployed and a whole generation’s prospects disappearing. I have to say that the Chancellor stepped up to the plate. It was not easy—he was right in saying that these have not been easy decisions for a Conservative Government, but they were the right thing to do. After a large amount of money spent on the employment support programme, the furlough scheme and the loan support for businesses, we are coming out of this pandemic with unemployment at 5.4%. Yes, that is higher than it was, but there are not many in the House who, in March 2020, contemplating the prospects for the labour market, would not have been pleased and surprised to see unemployment at that level coming out of the pandemic, and falling, with 1 million vacancies in the economy and decent prospects for people. The Chancellor, single-handedly—and we have to bear in mind that he had only been in the job for about half an hour when this all started—delivered programmes that have made a massive difference to this country. I hope he will always be proud of that.
But we do now have 1 million vacancies in this country. We have businesses with skills shortages, against all our expectations. We will not solve that through mass immigration. One reason that the haulage sector is lacking people is that there was so much cheap migration of both migrant workers and trucks from eastern Europe that drove down prices and left people thinking, “This is not an industry to be part of—I am going to retire, or go elsewhere.” The solution in that industry will be about paying more, but the solution in our country to these labour shortages will be about automation and productivity.
We have taken too much advantage of a steady flow of unskilled or semi-skilled labour over a long period of time. I remember talking a few years ago to the logistics director of a big retailer, who said to me, “If we leave the European Union, where am I going to get my warehouse staff from?”, to which my answer was, “Why do you need warehouse staff—surely you are automating your warehouse?” He said, “Actually we do not need to automate our warehouse because we have access to low-cost staff.” That has to change. I welcome the measures taken by the Chancellor last year and this year to drive business investment. Much of the solution to the skills shortage in our society—although not all; there are areas where it is a real problem—will come through a drive on productivity, innovation and automation. That is the way forward and that is the challenge that not just Government but business in this country has to grasp right now and deliver on, because that will be as big a part of transforming our economy and transforming our prospects as anything the Government do.
The Chancellor was also right to stress the benefits of leaving the European Union. We have only just started to scrape the surface of the benefits that can be obtained. I look forward to seeing a process of sensible deregulation. I am not in favour of the abolition of all regulation—it is there to protect people, and rightly so—but there are things we can do in areas like artificial intelligence, and financial services and the City, to make the UK more competitive. The job of getting that done has only just started. There is work to be done. I look forward to seeing, I hope, in the months ahead more announcements from the Treasury and from other Departments about what we will do in future to maximise the potential of Britain outside the European Union.
I have two final points, briefly, because I know we are short on time. First, I welcome the return to 0.7% because we must help countries around the world to deal with the challenges they face, particularly around energy and climate change, but also in something that I feel passionately about—the protection of the natural world and habitats. Deforestation happens for a number of reasons, but one of them is simply that people cut down trees to make charcoal to cook their food. I want to see more support provided for the creation of proper sources of renewable energy in the developing world so that that element of deforestation no longer happens. There is a huge amount that we need to do in tackling climate change, but looking after the natural world is one very important part of that.
My final point is about what the Chancellor said at the end of his speech. As Conservatives, we believe in low taxation and leaving people to make their own choices. He set a direction today. My message to the Treasury is that I—and, I am pretty sure, an awful lot of people on the Conservative Benches—will be holding the Chancellor’s feet to the fire to deliver on that, because we cannot plan a future, as Conservatives, as a big-state, high-tax party. We are a small-state, free-enterprise party. We know that that is what leads to prosperity and we all want prosperity for the people of this country, particularly those who are struggling and those on low pay. This needs to be an equal, levelled-up society, and we will not do that with a big state and high taxes.
Order. I remind everybody that Dame Eleanor suggested contributions of between seven and eight minutes in order that people lower down the list will get fairly equal time as well. Mr Grayling, you did that—congratulations—but the average is 11 minutes, so please could people be a little bit more conscious of the timing of their contributions?
We will see whether the Chancellor’s optimistic forecasts for the economy come true. I believe we have many more difficult times still to come. I particularly note that he skipped over the threat of inflation, which I will mention quickly, and the damage that will do to the economy and household income. He did not even really mention the potential of interest rate rises, which we may face in the future and would have a substantial impact on people’s standard of living. We have already seen and heard that the tax burden is rising to its highest sustained level in history. This Budget will not properly address the real concerns of my constituents over the rising cost of their weekly shop, the huge increase in the price of fuel at the pump and the eye-watering increases expected in energy bills. This Budget shows that the Government are out of touch with ordinary people.
Even the rise in the living wage, alongside the announced universal credit taper change, will not offset the £20 loss in universal credit that has hit families hard. Many people in my constituency have had no pay rise for years. There is also the Government’s culpability in the lack of planning to deal with our increasing need for energy, its supply and the rising costs, or to deal with things such as the shortage of HGV drivers, which was well known before. All those problems are down to the Government’s lack of planning and foresight to come up with solutions to help address them.
My hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) raised the issue of the Test and Trace organisation and system and the eye-watering waste of £37 billion of taxpayers’ money, which is about a fifth of the NHS budget. That shows that the Government are guilty of wastage not just here, but in various contracts they have let in the past 12 months or so.
I will spend the brief time that I have on the NHS. As we know, the NHS is in crisis. It is just about coping only because of the dedication and hard work of its staff in a perilous situation. The Government’s focus since March 2020 was on covid, and that was understandable and right, but it was at the cost of treating people with other conditions such as cancer and coronary disease. It may be that more people will lose their lives over time as a result of conditions other than covid because of that problem. Until recently, the Government had no plan in place to deal with that foreseeable problem. Even now, with the additional funding the Government have announced for the NHS, there is no guarantee as to when wating lists will be brought down to pre-pandemic levels.
It is now more difficult to see a GP face-to-face. That is partly because Tory Governments since 2010 have failed to ensure that the NHS and general practice doctors and nurses have the staff they need. The British Medical Association medical staffing report was published in July 2021. It shows that across primary and secondary care, there are currently 2.8 doctors per 1,000 people in England, while the average in comparable OECD EU countries is 3.7. If the rate of medical workforce growth remains the same, it will take until 2046 before the NHS has the number of practising doctors needed to match that average. That puts us 25 years behind where we should be today. The number of patients per GP practice is 22% higher than it was in 2015, but the GP workforce has not expanded with that rise in patient need. As a result, there are now just 0.46 fully qualified GPs per 1,000 patients in England, down from 0.52 in 2015. As we all know, there is also an urgent retention issue with GPs.
I raise that issue because, despite the significant money the Government are putting into the NHS, the significant problem is that we just do not have enough staff. The shortage of doctors, nurses and specialist staff in our hospitals has happened on this Government’s watch, and I repeat that they have been in power since 2010. The latest NHS vacancy statistics for England relate to June 2021. There were 93,806 full-time-equivalent vacancies in hospital services in England, amounting to a 7.2% vacancy rate. For nursing posts, there were 38,952 vacancies, which is a 10.3% vacancy rate. For medical posts, there were 9,691 vacancies. Constituents are finding it increasingly difficult to get an NHS dentist.
When it comes to social care, local authority budget pressures are immense. My local authority has faced a cut of almost 60% in its funding since 2010. It has to make £21 million more of savings in the coming years. It is the 23rd most socially deprived borough in England and Wales. The social care crisis is forcing councils to hike council tax, and the Government are of course trying to deflect blame for that when they are not funding councils properly for social care. We are seeing increasing problems, which will get worse this winter, with discharges from hospitals into a care setting. The Budget does not go anywhere near funding the shortage that councils are facing because of Government cuts. On education, the catch-up funding and the money that the Chancellor announced is something like a third of what Sir Kevan Collins asked for before he resigned earlier this year.
I am clear that as a result of the Budget, low and middle-income families in my constituency will struggle with the cost of living, but those on high incomes and the very rich will not. The Chancellor has failed to bring forward any real sustainable solutions to the cost of living crisis coming this winter. He has proved that he is out of touch.
What a fantastic Budget. It is fantastic for all sorts of reasons. It demonstrates how incredibly well our Chancellor and our Government did during the covid pandemic in supporting lives and livelihoods. The much more optimistic economic forecasts that have come out are testament to the effort that was put in and the result that we are starting to see.
The Budget is also fantastic for the support it gives to the leisure and hospitality sector, which will help businesses in South Northamptonshire. I thank my right hon. and learned Friend the Financial Secretary to the Treasury, who is sitting on the Front Bench, for that.
Many people wrote to me about universal credit, and the taper will help people who are in work and receive universal credit. Speaking as a former Business Secretary, the investment in R&D is superb. It will create the jobs—particularly the green jobs—and productivity that we want to see across our country.
The Budget is particularly fantastic, however, because of babies. I happen to be holding “The Best Start for Life”—it is not a prop, merely something to lean on. I thank the Prime Minister, the Chancellor, the whole Front-Bench team and many Opposition and Conservative Members for their commitment for many years to making sure that every family gets the support they need to give their baby the best start for life. The Prime Minister is totally committed to that, as is the former Prime Minister, my right hon. Friend the Member for Maidenhead (Mrs May). When she asked me to chair an inter-ministerial group to look at the early years, she was completely clear that babies are vital. On that inter-ministerial group a couple of years ago were two Ministers, one of whom was Rishi Sunak, a local government Minister, and the other was Nadhim Zahawi—
Thank you, Mr Deputy Speaker. I should know that by now.
Of course, those Ministers have gone on to fulfil a fantastic pledge for every baby. I also pay tribute to parents and carers across England for their amazing contribution and their determination to have their voices heard and to make sure that “The Best Start for Life” works for all parents and carers.
I will take a moment to explain why that period of life is vital. Essentially, human babies are unique in the animal kingdom in the extent of their underdevelopment at birth. Every other animal can fend for itself pretty well from minutes, or at least hours, after it is born. Human babies cannot do anything for themselves until they are at least one year old, and often they are two before they can really fend for themselves.
The physical and brain underdevelopment of human babies means that they adapt to the environment in which they find themselves, so the baby who is born into a secure and happy home with a loving family will grow up learning that as an instinct for life. They will be able to do well at school, make friends, learn, get a job, hold down friendships and relationships, and then be a good parent themselves. Conversely, the baby who is born into a situation where there is interparental conflict, drug or alcohol misuse, mental health problems or severe deprivation will not have the same life chances. All the research demonstrates in spades that, for those babies, life is much harder. Their instinct for life is not good and they often go on to have all sorts of problems.
I am glad that the hon. Lady, whom I consider a friend, has given me a chance to tackle that, because the standard response is “What about Sure Start?” I have paid tribute in the House to the excellent efforts of many Sure Start centres and I worked with hon. and right hon. Members across the House on that subject, but Sure Start did not provide what most families need. Unfortunately—I can vouch for this, having led a charity that had to pay rent to provide a parent-infant mental health service within the walls of a Sure Start over 20 years ago—Sure Start did not stipulate services for families. It was all about the buildings, and therein lies the problem.
With the Government’s policy of family hubs, I hope we have something that Sure Start will build into: a welcoming place where families can go to find antenatal classes, meet health visitors, meet other parents and get support, whether for smoking cessation, mental health issues or breastfeeding advice and so on. Multidisciplinary services will be available under one roof, not just physically but virtually. One thing that we learned in lockdown was the incredible value that parents placed on being able to take part in something remotely, whether breastfeeding support or perhaps dads’ mental health support. These things can very well be provided online and remotely in the 21st-century digital age, so that if someone’s baby is crying and will not sleep in the middle of the night they can look at something online rather than waiting for Sure Start to open. Unfortunately, in many cases, a Sure Start centre might be open for only a few hours a week.
I must take the hon. Lady to task, because there are 3,000 Sure Start centres in England as we speak. My hope is that local authority areas will use that as a foundation and build on them to create the family hub model proposed by the Government.
I want to move on to other action areas in “The Best Start for Life: a Vision for the 1,001 Critical Days”. I am delighted that the Chancellor has announced funding for every local authority area to publish its own Start4Life offer. One critical thing that parents and carers said to us in the early years review was that they just did not know what they needed, let alone how to access it if they did know. If someone was pregnant for the first time, why would they know that they might need smoking cessation advice, breastfeeding and weaning advice, support to avoid oral decay and help with brushing their baby’s teeth? They might need debt advice or nursery advice and so on. When someone first finds out the hopefully, but not always, fantastic news that they are expecting a baby they do not know where to go, so the news that local authority areas can publish and offer parents a range of Start4Life services will be transformational.
The third measure for which the Chancellor is offering money is a digital version of the red book. Many of us have a plastic red book, with bits of paper falling out. We forget to take it to health visitor meetings and to immunisations, so the record is incomplete. Sadly, having spoken during the research phase of the project to many foster carers, including some fabulous people who had fostered 40 babies between them, I heard that only two of those babies had turned up with a red book. Those foster carers knew nothing about what had happened to that baby, what the baby’s birth experience was, what the situation was with the birth parents—there was no information at all. That must stop, so in the digital age, a digital version of the red book will be a game changer for every family. It will be important not just for families to see what happened—when did I wean my first baby? When do I need to meet the health visitor again?—but for early years professionals. Very often, parents say, “I have had to tell my story six times this week to six different people. Why don’t you ever talk to one another?” When there is a serious case review, all too often it is a case of “These people didn’t speak to those people” or “This team didn’t know what that team was doing”.
Joining up services in Start4Life for the period from conception to the age of two is the big win in today’s Budget in my opinion. That will be transformational for many millions of babies across England. The next steps will be the implementation—it is not done until it is done—and I want to thank many colleagues and professionals in the early years sectors, as well as many Ministers current and past, for the extraordinary coming-together of views that meant that today is the biggest win for families.
I might not be as gushing as the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), but nevertheless this Budget has been delivered in a very difficult economic circumstance. A plethora of figures and initiatives have been thrown at us today, and on the first day of a Budget debate we always comment on measures with some trepidation because of course once we start looking at the detail of the Budget and the implications of its measures we often feel a bit embarrassed at having embraced some of them with enthusiasm. Indeed, sometimes even Chancellors have had to retreat quickly from measures they earlier announced with great euphoria.
Nevertheless, I am encouraged by the general thrust of the Budget and the path the Chancellor has outlined. First, he believes we must get the high levels of debt down to leave us less vulnerable to interest rate changes in the future; that is good. Secondly, he believes that has to be done in the context of returning to making fewer demands on people through taxes. Again, that is good; my party believes people and businesses are far better placed to decide how to spend their money than Government. Thirdly, although we are spending vast amounts on public services, and the Chancellor will have to continue doing so in the future, he believes that must be spent wisely. He therefore must not be afraid to tackle the question of whether money is being wasted and to stop spending it and change direction if it is.
I am also pleased that the Chancellor wants to reward people who are in work. The national living wage increase is welcome, as is the reduction in the universal credit taper to encourage people to move from not working to working or from working in low-paid jobs to working in higher-paid jobs, but we must not forget that there is still a marginal rate of 55% on people in that position, so there is still that disincentive.
However, I still worry that those in low-paid or even medium-paid jobs will face a bleak period in the near future, whether through the tax rises already declared or the fact that we are already facing huge energy price increases. While Members have condemned that in this House, we must not forget that part of the reason for it is the climate hysteria that seems to have overtaken Members and the Government themselves. One reason for higher energy bills is the fact that we are turning our back on cheaper fuels and expecting people to heat their homes in more expensive ways.
The Chancellor has of course said that he has already written to the Bank of England about the current inflation rate. There is only one reason why he would write to the Bank. He cannot instruct it to increase interest rates, but if he is raising concerns about the current level of inflation the implication is that the Bank may well look at introducing higher interest rates, which of course will hit homeowners. So while I welcome some of the incentives to get people into work, we must not ignore that there are challenges ahead, especially for those in low-paid industries.
Turning to specific matters, the Chancellor made a big issue of the additional money going to the devolved Administrations. An extra £1.6 billion per year will go to Northern Ireland, which is a real increase, but there is to be a real increase in expenditure in Northern Ireland of 1.3% each year on average over the period. That is half the increase that will go to Scotland, about one and a half times less than is going to Wales and about a third of the general increase in Government spending. While spending in Northern Ireland is going up in real terms, which I welcome, relatively speaking it will go down, and that at a time when the Government are talking about levelling up and when there are additional pressures on the Northern Ireland economy because of the Northern Ireland protocol and its impact on industry. There has to be an explanation why, relatively speaking, expenditure in Northern Ireland will be lower over this spending period than it is currently.
Let us look at some of the initiatives that have been undertaken under the levelling-up agenda. I welcome the fact that £300,000 will be spent on a digital hub in Cushendall in my constituency. I already know from speaking to those involved in it how that will create jobs—good jobs—in a relatively poor rural area. The extra money for Dundonald Ice Bowl will be welcomed by my hon. Friend the Member for Belfast East (Gavin Robinson), and of course the money that is going into the city region deal will benefit massively some capital projects in my constituency. I welcome all that.
The hospitality industry has taken a hammering. The Chancellor has said that there will be a 50% discount on rates for the industry. I take it that there will be a Barnett consequential of that for Northern Ireland, and I hope that it is replicated by the Finance Minister in Northern Ireland.
There is one question that I would like a response to, and it is about the changes in excise duty on alcohol, which will be important for the likes of Diageo in my constituency and the hospitality industry. Since Northern Ireland is part of the EU excise regime due to the Northern Ireland protocol, will those changes apply to taxation on alcohol in Northern Ireland? That is a technical question that I do not know the answer to; it would be interesting if the Chancellor came back to us on that.
The Chancellor has been a steady hand on the tiller in the storms of the past. There are still economic storms for him to take the country through. We wish him all the best with that, but we will also be scrutinising the route that he takes as he seeks to guide the nation economically.
I have declared my business interests in the Register of Members’ Financial Interests.
Growth is the way that we need to proceed. Growth is the way to get us over the damage done by the pandemic policies. Growth is the way to deliver the optimism that the Prime Minister expresses so well about the economy. Growth is needed to level up. Growth is needed to help generate the more and better-paid jobs we require. And growth is needed to remove the supply constraints and shortages that are too obvious in our own economy and many others around the world trying to overcome the pandemic disaster.
We therefore need from the Treasury a more vigorous growth policy even than the one that has been envisaged today, which is largely public sector-led. We need also to engage the private sector, get innovation pulsing and make sure that people can enjoy the rewards of success. Let us look at taxation of small business and the self-employed. It still seems to me that the Government have a bit of a downer on that. We are going to be mightily dependent on the good spirits, good will and enthusiasm of all those who are setting up businesses or have small businesses, or who are taking that step to go and work for themselves. They find a tax regime that is becoming increasingly penal.
We need as well to look at our capacity in many areas where the Government are the great regulator, instigator and provider, where we need to harness more private capital. We are chronically short of energy in this country, yet we are an energy-rich part of the world. If only we would exploit it. Why do we import so much gas and electricity? Why are we making ourselves so dependent on wild and erratic world market prices and sometimes having to pay spot prices, when we could produce much more of our own electricity and gas at home, supply it under sensible average price contracts and give people proper security of supply?
The Transport Secretary is doing great work in, I hope, an early resolution of the heavy goods vehicle driver shortage. There was a Government problem there, in the number of tests, the training and the support. Indeed, the taxation of drivers is another issue, which I think has led to some leaving the profession or not joining it. Again, I ask the Government to please consider where they are engaged, where they are licensing in the wrong way or where they are not providing enough capacity, to allow the private sector to respond and to perform well.
My disagreement with the Chancellor in this Budget—I do have one—is that I think the way we get faster growth is to go for lower tax rates to promote it. Lower tax rates should not be a reward for achieving growth that is much more difficult to achieve if it is done against the background of much higher tax rates. I understand why the Chancellor was persuaded to put in the £12 billion from national insurance, but it is a tax on jobs. I was against it. It is deeply damaging and wish they would remove it. However, would the Chancellor have still put that in if he had known that, in the first six months of this year, he was going to collect £44 billion more in tax revenue than the OBR forecast as short a time ago as March?
The OBR was £44 billion out for the first six months of the financial year. That revenue came in because we were living through a period of lower tax rates—stamp duty surged because the rate had been cut, for example—and because we were recovering from covid on the back of a massive fiscal and monetary stimulus, a stimulus I always supported and for which I pay tribute, as others do, to the Chancellor and the Bank of England for organising. We needed that massive stimulus. We needed to go in behind the Federal Reserve Board, which really saved the advanced world at a time of great crisis and trouble with an even bigger monetary stimulus proportionate to the size of its economy.
Now, however, times are moving on. We have had a very sharp recovery, which the OBR and the Bank of England did not forecast correctly. We have more inflation than they said. They were forecasting inflation below 2% for this year. Now I see in the latest figures that they have upped the forecast to 4% for next year and they have had to up their forecast for this year a bit, although probably not by enough. The Bank of England was caught on the rise, not understanding the power of the economy to recover. I have never seen such big revisions to forecasts in six months. We have here today a very big increase in the growth rate, a big drop in the unemployment rate and a big rise in the inflation rate.
Those of us who were saying that the forecasts were wildly pessimistic in March were, unfortunately from the Government’s point of view, proved right, but the Government should celebrate that. They should also puzzle over how the official forecasts are now much more positive for this year and next year at the very moment the economy is actually slowing for a variety of reasons partly relating to tax policy and the threat of interest rate rises, which the Bank of England now seems to think it needs to administer. I urge the Government to pay less attention to official forecasts, because they are all over the place. I have no great confidence that this latest set will be proved right over four or five years any more than I thought the March lot would be. They point to a very disappointing growth rate in the last three years of the forecast period. That is why I am urging the Treasury to look again at its growth rate policies and to find ways to strengthen them.
My final point, to keep within time, is that of course I welcome more money if it will buy me more operations and treatments, and bring down waiting lists in my local health service. Of course I welcome more money if it finds its way to my local schools, enabling them to have more and better paid teachers, and the equipment they need. But these are very large sums of money. The health increases, which come out on a very regular basis now, are on top of a massive increase in health expenditure which was understandably needed to combat covid. The Treasury must push back on some of those sums. In the case of the health budget, we will not need the massive test and trace budget, with all its set-up costs. We are not going to repeat the experiment of building Nightingale hospitals and then closing them down once we have completed them. We are not going to repeat the need to procure in a hurry a vaccine that does not exist and set up a means of distributing it. We have done all that, so that money, which is still in the base budget, should be reallocated.
Before the Government give additional money to the health service, they should satisfy themselves that the money is being properly distributed and properly spent. Above all, we need a productivity revolution. I want to see much higher pay in this country and in the public sector, but that requires increasing productivity and there is no easy way of doing that. Ministers must galvanise the senior managers of the NHS to deliver it.
As always, it is a pleasure to follow the right hon. Member for Wokingham (John Redwood), who I agreed with for the first time ever yesterday. That is something I enjoyed, however fleetingly.
After listening to the Chancellor today, I think arrogance is up, complacency is up and delusion is up. Certainly, in my constituency of Wallasey and in the country as a whole, the cost of living is up, taxes are up, poverty is up and hardship is up. That is the background against which the Chancellor delivered his speech.
The combined Budget and spending review comes at a pivotal time for the country. That is partially a result of grim circumstance, which is beyond the control of any Government, as we have heard today—the pandemic and the challenge of the transition to net zero—but it is also the result of the Government’s serious mistakes and self-inflicted wounds. The botched Brexit deal has caused chaos at the borders, soaring prices and shortages, and the Government’s deadly complacency about the virus has resulted in one of the biggest economic hits and one of the largest per capita death tolls in the developed world—failure piled upon failure.
The most vulnerable have been hit the hardest, whether they are the young having their opportunities destroyed by school disruption, the old sacrificed in their tens of thousands in our neglected and underfunded social care system or the millions flung into poverty by the Government’s cruel universal credit cut—not compensated for by changes to the taper announced today, which will help only one in three and leave us with the circumstance whereby millionaires pay a marginal tax rate of 45p while those on poor wages who qualify for universal credit and are able to work pay 55%.
Two brief points. First, it is worth saying that the legacy benefits system that we inherited, before we implemented universal credit, had withdrawal rates for benefits sometimes close to, and sometimes exceeding, 100%. Whatever the hon. Lady says, this is a massive improvement.
Secondly, there is a qualitative moral difference between taking from people money that they have earned and withdrawing benefits that people are given, paid for by other taxpayers. Those are different things, and the hon. Lady should not pretend that they are the same.
While I agree with the right hon. Gentleman that benefit tapers have been a long-running problem for many Governments to solve, we know that the 63% fall in the Department for Work and Pensions’ costs has come about not because everybody is in work, but because benefits are some of the lowest in the developed world, causing huge hardship and poverty. The right hon. Gentleman needs to recognise that as well.
This is a Government who love power but are bored with the hard work of governing. They disdained to anticipate the problems their ideological obsession with a hard Brexit has created, choosing to believe their own propaganda instead, but the red book shows that, as a result, trade with the EU is sharply down and projected to reduce living standards by 4%, which is twice the OBR estimate of the cost of the covid pandemic. Underlying some of our difficulties are the problems of Brexit and the fact that the Government did not prepare for the trade disruption caused by their hard Brexit deal, which threw fishing, farming and peace in Northern Ireland to the wolves in pursuit of their own peculiar obsessions. They did not prepare for the supply chain problems caused by the shortage of HGV drivers, the vacancies in social care and the staff shortages in the NHS.
This is a Government who have been unwilling to offer short-term temporary relief to those who are suffering the growing cost-of-living crisis, as energy prices have rocketed and as inflation soars towards 5% this winter. Fuel and food prices are rising fast, and people are feeling the pinch. An end to the public sector pay freeze will not compensate unless it offers real increases in wages, which, taking inflation into account, have only just returned to their 2009 level. Let’s face it: whatever it says in the Chancellor’s latest propaganda press release, any pay increase below inflation is actually a pay cut on top of years of hardship, so we will have to await the detail.
A fair recovery would start with a Chancellor who had the humility to be honest about why these blunders have been made. Unfortunately, we do not have such a Chancellor; we have a Jekyll and Hyde Chancellor, with his eyes firmly on his own advancement and with a slick PR operation to match his vaunting ambition—a Chancellor whose persona depends a bit on his audience.
To the country at large, he is that nice Dr Jekyll, brandishing his public spending largesse in a blizzard of pre-Budget leaks, increasing the national living wage and announcing the end of the public sector pay freeze—he is hoping that we will not notice that it was he who froze pay last year, on top of a decade of previous Tory pay freezes that have seen real living standards fall more than at any time since the Napoleonic wars.
But when he is burnishing his leadership credentials with Tory MPs, he becomes the sadistic Mr Hyde, posing as a true low-tax, small-state Thatcherite, waxing lyrical about his
“sacred responsibility to…balance the books”,
because to do otherwise would be “immoral”—he is hoping that they will not notice that he has presided over the largest increase in the size of the state in peacetime and the biggest tax rises in 25 years. That comes the year after he borrowed an eye-watering £350 billion in a single year to pay for his covid response. The fraud, the waste and the graft to Tory donors have been an ever-present feature of the bonanza of state mis-spending that he has presided over. In fact, it has been the very definition of “immoral”.
Does this Budget meet the formidable long-term structural challenges before us? In the short term, does it tackle the cost-of-living crisis now looming for millions this winter? No, it does not. Projections of 1.3% growth by the end of this Parliament are nothing particular to be proud of.
The Treasury-inspired blizzard of media propaganda announcing £30 billion of apparent spending commitments means that the Budget is really an afterthought. Closer inspection reveals many reheated announcements of previous Government press releases with one thing in common: despite being announced over and over again, few of them have ever actually been delivered.
There are some modest funding allocations that seek credit for restoring a minority of the huge cuts that have been inflicted in the past 11 years of this Tory Government —indeed, the Chancellor has openly boasted, over and over again, about taking spending back to 2010 levels. Having destroyed 1,000 of Labour’s Sure Start centres, this Government now expect credit for creating a pale imitation of them in just 75 places, 11 years later. Having cut skills funding by 50% since 2010, this Government now expect credit for restoring 42% of it, 11 years later. Having underfunded education for years, this Government now expect credit for restoring funding to levels that they inherited from Labour in 2010.
This is a cynical Budget of smoke and mirrors, aimed more at burnishing the Chancellor’s leadership credentials than at fixing the country’s growing challenges. As the challenges pile up like leaked Government announcements, it is becoming plainer by the day that this Chancellor is not going to be the one who meets them—and Britain will be the poorer for it.
It is a pleasure to follow the hon. Member for Wallasey (Dame Angela Eagle). Unlike her, having recently left the Cabinet, I am grateful to the Treasury for all the effort that it has made to keep us informed of what will be in the Budget—I have never approached a Budget knowing quite as much in advance. However, I would still like to speak about a couple of elements that I think are quite significant.
One of those elements is the change in the universal credit taper rate, which will help millions of people throughout the country. It underlines a fundamental Conservative objective, which is to make work pay, and I strongly welcome it. I also think it important that we have announced an increase in the national living wage, which, again, will help us to build that higher-wage, higher-productivity economy that is so fundamental to our economic plan.
I also want to put on the record my praise for the Chancellor, which is contrary to some of the remarks we have heard today. I think that his stewardship of the economy over an extraordinary year and a half is enormously to his credit, and I think that that is reflected in the public confidence that he has built up for himself and for the Government over that period. We are seeing the economy bouncing back better—still scarred, but in a significantly better position than many people would have imagined. We are seeing employment in an immeasurably stronger position than we would have imagined just a few months ago, along with a commensurate surge in tax revenues that contrasts with the gloomy forecasts from the Office for Budget Responsibility the last time we heard from the Chancellor. I share the view of my right hon. Friend the Member for Wokingham (John Redwood): we have to question how useful the OBR is when its forecasts are so far out, and have to hope that it can raise its game in the future.
Let me make a few brief points. First, I think the Chancellor was right to continue to highlight the cost of living as a major issue. I do not think we should assume that inflation will be fleeting and transitory; I think it could be with us for a long time, which is why it is important that we take action. The action on the universal credit taper rate will help, as will the national living wage, and the changes in fuel duty and other items will be useful as well, but we must prepare ourselves—steel ourselves—for the likelihood that this year and most of next year will be marked by a significant pressure on people on low and medium incomes.
Secondly, I am very concerned about the current level of public spending, and the size of the state. We must be honest with ourselves, and acknowledge that on top of the £400 billion of unplanned outlay that was required to get us through the covid response, we are now seeing the size of the state increase to the largest that it has been in peacetime. The amount of public expenditure today is higher than it was during the financial crisis; it is about the same as it was under Denis Healey in 1976, when he had to go cap in hand to the International Monetary Fund. The size of the state is large, and we have heard from the Chancellor today that it is going to grow even further, beyond 41% of national income. History suggests that that is not a sensible long-term level for public expenditure, because it starts to crowd out the private sector, and makes it hard to build and sustain the free-market, free-enterprise economy that we all want to see.
That leads me to two points. One is that we have to ensure that this public money is well spent. I think particularly of the NHS, which is soon to account for 40% of total current expenditure. That is a significant amount. Many of us, and our constituents, want to see the NHS properly funded, but a heavy burden of responsibility now falls on the Department of Health and Social Care to ensure that the money is well spent and is accompanied by reform. I remember previous settlements, including the one referred to by my right hon. Friend the Member for Maidenhead (Mrs May). Just a couple of years ago, money was given to the NHS without a proper plan for reform and was not well spent, so I hope that this money will be spent differently.
The second point is the difference between funding for day-to-day purposes and funding that will genuinely increase productivity in the economy. At the end of the day, as many Members have already said, it is all about productivity growth. The forecasts that the Chancellor set out earlier today were for one or two years, if we are to believe the OBR, of very significant growth in the economy, and then a return to low levels of growth— 1% or 1.3%—with perhaps a decade of low growth ahead of us.
We have to improve productivity, and in that respect there was much to commend in the Budget and the spending review: significant increases in infrastructure, particularly the sorts of infrastructure, such as roads, railways and broadband, that will genuinely improve productivity and boost the economy, and the work on skills—in particular lifelong learning, which for too long has been a weakness in our country.
My right hon. Friend is making a powerful speech about productivity. Does he share my delight that the Chancellor announced tax relief for investment—certainly in the short term and hopefully in the longer term? Hopefully, that will enable businesses to do the heavy lifting rather than the Government trying to do it for them.
I agree entirely with my hon. Friend. At the end of the day, the way we boost productivity is by backing the private sector in the economy. The way we grow the economy is to make the UK a more competitive place to do business. That will mean ensuring that we attract investment from overseas. It will also mean correcting the poor levels of trade that we have seen in recent years, as has been mentioned. That needs to change. It also means ensuring that we as a Government bring forward some of the supply-side reforms that we will have to implement if we are going to make ourselves more innovative and competitive.
The right hon. Gentleman has had a position at a senior level of Government overseeing local government, and I wonder whether he would like to modify his comments slightly. Of course I understand that the private sector is vital for our growth and productivity, but strong public services and strong local government are also critical for helping to enable a strong local economy. Does he not feel that it is important to build that into the Government’s thinking?
Absolutely; I do not demur from that, but we have to find the right balance in our country between public expenditure and ensuring that the private sector can flourish. I worry that we have now reached the moment at which there is not much more that we can spend.
We have to ensure that we grow our way out of this challenge. That was illustrated in some of the Chancellor’s announcements today, including those on research and development relief, the continuation of the investment allowance, the support for skills and also the maths support, about which I would be interested to hear more detail. This is also about ensuring that we have sensible tax arrangements in this country that can incentivise investment and ensure that businesses can prosper. The overall tax burden is at its highest sustained level in peacetime, and I worry that we will not be able to go much further than that.
I want to make one last point briefly before closing, because I appreciate that—
I want to say a fantastic big thank you to my right hon. Friend personally, because it has just been announced this minute that Gainsborough is getting £10 million of levelling-up funds. I relentlessly lobbied him on this, and I have lobbied his successor, so a big thank you!
I am grateful to my right hon. Friend for ending on such a positive note. I know Gainsborough well—it is my neighbouring constituency—and I am delighted for him and his constituents.
I shall close where I began, which is by saying that there was a huge amount in the Chancellor’s announcements to be applauded. I commend him and the Treasury team and wish them well. The focus now needs to be on growing the economy and making the UK the most competitive place it possibly can be, rather than seeing taxes rise and expenditure increase, risking the private sector not being able to flourish and build that optimistic vision that the Chancellor laid out.
It is a pleasure to follow the right hon. Member for Newark (Robert Jenrick), although I cannot express the same pleasure about much of what the House has heard today. We face a looming cost of living crisis, with food prices and energy bills soaring. The Chancellor had a chance to lessen the pain for hard-working families who pay their tax, play by the rules and need his support. Instead, he is hammering them with tax hikes, empty words and broken promises from a Government who are completely out of touch with the people of this country. There is nothing to help families with their energy bills this winter.
The Chancellor says that this Budget is all about optimism, but it is hard to be optimistic when it is our children who will pay the price with their income, their life chances and their planet. Today he could have chosen to invest in their future; instead, he chose to anchor them to the pandemic and the past. Our children, their education already damaged and their futures undermined, are left without sufficient funding for the catch-up classes that they desperately need. Unless the Government provide that funding in full, children who are at school now will face up to £46,000 in lost earnings over their lifetimes. If the Government are serious about investing in our future, surely they should start with those children. Instead, the Chancellor has spent more today on cutting the price of prosecco than on saving our children’s future. That tells us everything we need to know about this Government’s priorities.
The £5 billion of catch-up funding is a third of what the Government’s own adviser said is needed, and it is just a fraction of the £450 billion hit our economy could see from the learning our children have lost to covid.
My hon. Friend is making a powerful speech on behalf of children, parents and teachers across our country. Is she aware that, in the fine detail of the Budget, banks are getting a tax cut that is bigger than the increase announced today for catch-up funding? Does she agree that is the wrong priority?
I thank my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) for his intervention, and I will address the Government’s strange priorities.
Under this Chancellor we have seen the highest tax burden since the second world war and the lowest school spending per pupil in a generation. Increasing funding per pupil by 2025 will come too late for millions of children whose life chances are being dashed. That is the choice the Chancellor has made, and it is the wrong choice.
Many of us in this place come from a background in which education was our passport to a better future. Our families had the support they needed to enable us to be the first in our family to go to university, and I do not want to deny that chance to this generation. The Chancellor’s announcement on universal credit is giving just a third of what he snatched away, and millions of families who are not in work will not be helped at all. What will their winter be like? Those parents will be choosing between eating and heating. For those who get the disparaging increase in the minimum wage, it has already been eaten up by the national insurance hike.
The hon. Lady agreed with the point made by the right hon. Member for Kingston and Surbiton (Ed Davey) on bank taxation. Does she agree that 28 is higher than 27? The corporation tax rate on banks is currently 27%, and after the rise in corporation tax and the change to the bank corporation tax surcharge it will be 28%. By anyone’s reckoning that is an increase in taxation on banks, not a decrease.
I thank the hon. Gentleman for his point, but I do not want to get involved in nit-picking. [Interruption.] I did not mention either 27% or 28%. I was talking about the disparaging increase in the minimum wage, which has already been eaten up by the national insurance hike. That broken Tory promise means a nurse on an average salary will see her tax bill rise by £310 a year. After 18 months on the frontline of the pandemic, covid heroes will be clobbered by a tax hike and the cost of living crisis. How can it be that NHS staff and care workers are facing a £900 million tax hike while banks are, as my right hon. Friend the Member for Kingston and Surbiton said, being given a £900 million tax cut? No doubt bankers will be toasting their tax cut and the Chancellor’s decision to reduce the bank surcharge with cheaper bubbly tonight. It is clear that this Chancellor’s priorities are not the priorities of the British people.
It could have been so different. The Government could have addressed the labour shortage that threatens to derail our recovery before it gets going. They could have radically overhauled business rates, as they promised, instead of the sticking plaster we got. They could have provided the £10,000 that the Liberal Democrats want every adult to have to buy training in the new skills that they desperately need.
The Government could have provided the £150 billion green recovery plan we are calling for to insulate people’s homes and to protect our natural environment. They could have seized the opportunity afforded by COP26 to lead the way on protecting the planet. Instead, the Chancellor has slashed air passenger duty on domestic flights and admitted that overseas aid will not be restored to the legal target of 0.7% until at least 2024. What kind of signal does that send to our international partners ahead of next week’s crucial climate summit in Glasgow? Then again, the word “climate” did not appear anywhere in the Chancellor’s statement.
It is clear that this is the Budget of a former hedge-fund manager, but we cannot run a country like a hedge fund. There is no column in a spreadsheet for people’s dignity and no formula for investing in our children’s future. Today’s Budget promises a future bitter with the consequences of the Chancellor’s inaction—bitter with the betrayal of future generations. It is a Budget that handcuffs us to the consequences of climate change, fails to invest in our children’s education and hammers families with tax hikes instead of helping them with the cost-of-living crisis. What has it all been for? The suspicion remains that the Chancellor is using old data from the Office for Budget Responsibility so that he can save some spending for later in the Parliament. That is the reality: pain for ordinary families now, but a tax cut before the election to help Tory candidates. The Budget should have been about ordinary people’s jobs up and down this country but was instead all about one person’s next job—the Chancellor’s.
As chair of the all-party parliamentary group on beer and brewing, I welcome the measures that the Chancellor announced to support sectors that have been particularly hard hit throughout the pandemic and by many of the measures that were necessary to fight coronavirus. In the previous financial year, around £17 billion in lost trade was wiped off the value of the pub and beer sector. Trade in the wider hospitality sector was down 64% year on year; beer sales through pubs fell by 70%; and at least 1,000 pubs that closed during the restrictions have still not opened their doors since the end of those restrictions.
Beer and pubs are worth fighting for and are intrinsically linked. Pubs and brewing support around 930,000 jobs throughout the United Kingdom, roughly equally split between men and women, and around half the people employed in the sectors are aged under 25. Pubs and brewing support more than 1,000 jobs in my constituency of Dudley South. They contribute around £26 billion to the UK economy and, as the Chancellor will be aware, around £15 billion to the Exchequer in tax revenues.
If pubs are a force for good economically, they are also a force for good socially and culturally. As Professor Robin Dunbar of the University of Oxford wrote in his report “Friends on Tap”, people who have a local that they use regularly are more likely to have more friends and to be more
“satisfied with their lives and feel more embedded in their local communities”.
They are likely to be healthier and happier.
Isolation is one of the big social challenges that face so many of our communities. Pubs really were the original social network. They are at the heart of our communities. So often, when a pub in a town or village closes, it is the last facility to go. As pubs have closed throughout the pandemic, it is not just one service that has gone with them. As we have seen through so much of the work by the wonderful charity Pub is The Hub, there are, in effect, community centres operating out of pubs. There are parent and child groups, jobs clubs and almost every facility and service. The APPG even visited one pub with a barber and hairdresser operating out of the bar. I only hope that the people cutting the hair had less to drink than some of those who might have been on the receiving end of the haircut. Pubs also raise more than £100 million a year for charities and they support grassroots community sport to the value of £40 million annually, working in every one of our constituencies.
Over the past two years, pubs have never been in greater need of support, so pubs, brewers and beer drinkers were looking to the Chancellor today to see whether he would step up to that challenge. I was pleased to hear that he did with a package of measures that went beyond what I think the industry had even dared to hope for. A key measure will be around business rates. The 50% support on business rates will make a massive difference to the viability of many pubs and to the jobs and livelihoods that depend on them.
One of my first questions in this place after I was elected six and a half years ago was to ask the now Health Secretary about business rate reform. As has been alluded to during this debate, it has been promised a few times. For this finally to go ahead, we need to make sure that it recognises the realities of a 21st century economy where the value of property is not necessarily the driving force of economic activity, as it might have been 50 or 60 years ago.
Pubs pay around 2.5% of business rate revenues and that is despite having only about 0.5% of the rateable values. They are paying far more than the proportionate amount and that needs to be addressed during the reforms that were mentioned earlier.
As a sector, beer and pubs were absolutely clear that the one thing they could not afford as they started to rebuild after the pandemic was an increase in alcohol duties.
I commend my hon. Friend for his speech. He is making a wonderfully nuanced exposition of the benefits of pubs and local hospitality businesses to an area, both in terms of charities and of contributing socially to a community. The Windsor constituency is dependent on hospitality and the whole constituency breathed a sigh of relief with the measures in the Budget, because it is clear they hit home when it comes to supporting those hospitality businesses and pubs, which are at the heart of our local communities. Like him, I very much commend the Chancellor’s words today and, in particular, those measures that support those smaller businesses.
My hon. Friend is absolutely spot on. The wider hospitality sector employs around 3 million people across the country. It is a bigger employer than automotives and aerospace combined. It is one of our biggest economic sectors. An increase in alcohol duties today, even a CPI or RPI increase, would have killed off so many of those small businesses: businesses that have struggled through two years of on-off restrictions, that have just about kept their heads above water, and that have exhausted all of their savings and reserves—their borrowing facilities—but have just about managed to keep going with rebuilding their businesses. It is excellent business and job-saving news that the Chancellor has listened to them and announced that, yet again, there will be no increase in beer duty, which will mean that beer duty has not increased at all since before the 2017 general election.
The broader reforms that the Chancellor has announced for a new, simpler and fairer system of alcohol duties, and that my hon. Friend the Minister has published in the consultation alongside the Budget this afternoon, also make sense. They take away so many of the distortions that the current multiple rates represent: the disincentives to expand; and the incentives to produce stronger alcoholic drinks rather than ones that may be lower in alcoholic volume. These are all counterproductive and go against our policy in other areas.
The changes resolve many of the anomalies in a system that has grown in an ad hoc fashion over many years—for example, on cider duties. Why should far more duty be paid on a flavoured cider just because the fruit is added after the fermentation process, so that it suddenly finds itself being taxed as a wine, instead of a cider? The hon. Member for Edinburgh West (Christine Jardine) seemed to think that the changes being introduced to duty on sparkling wines were either unnecessary or illogical, but what is logical about a system of wine duties under which more duty is paid on a £6 bottle of prosecco than a £30 bottle of claret? That makes no sense economically or on any level. Resolving those anomalies in the duty system is only possible now that we have the control to restructure duty systems outside of the previous EU excise duties regulations.
Most significant of all was the announcement by the Chancellor of the new reduced rate for draft beer and cider. The Exchequer Secretary to the Treasury, the hon. Member for Faversham and Mid Kent (Helen Whately), is smiling; she may be aware that I have been arguing this case for some time. I think the issue was in the speech that I made four and a half years ago when I first became chair of the all-party parliamentary group. Of course, at that point we did not have the legal powers to address it.
Before the pandemic, it made sense to support our pubs, bars, restaurants and hospitality venues by charging a lower rate of duty on draught beer—the beers that can only really be served and sold through a hospitality venue—than on the bottles and cans that tend to be sold at very low prices in our supermarkets. Since the pandemic, that has gone from being a sensible measure to a bit of a no-brainer. It will help the parts of the sector that have been hit hardest during the pandemic and need the most support.
Beer and pubs have had a terrible two years. For many, the conditions will remain extremely difficult for some time to come, but the measures that the Chancellor has announced today provide a lifeline and a source of confidence to rebuild, reinvest and support those jobs to play their part in creating the prosperity on which our constituents rely.
I have often found myself wondering what levelling up means and how we know that we have got there. I have discovered the answer in the Budget today. It means that the Tories’ ambition is to get back to Labour’s level of public funding in 2010. Eleven wasted years—the Chancellor and the Prime Minister are trying to create the impression that this Government have only been in power for the last two years, and that they were not part of austerity and the years that followed. We cannot return to a system of austerity that kicks the stuffing out of our public services to the point that they do not have the resilience to respond to something such as the covid pandemic. Covid taught us that we need resilient public services—services that we are not only entitled to, but that we so desperately need to have in place.
The Tory austerity years from 2010 saw the lowest annual increases in NHS spending—lower even than under Margaret Thatcher, so she would be very proud of the Government. There have been cuts to police funding; central Government grants for policing fell by 30% in real terms between 2010 and 2019. There have also been cuts to education funding. According to the IFS, education funding from 2010 to 2019 was the worst since the 1970s. Government funding for local authorities has fallen by an estimated 49% in real terms from 2010 to 2018. Our public services were already stretched before covid came along.
In 2010, funding for Sure Start—we have heard a lot about that today—was £1.8 billion. It was cut by a third by 2018, with over 500 centres closing between 2011 and 2017. We now have today’s announcement of £300 million. That is nowhere near to getting us back to where we were with Sure Start. We have had all the guff about wraparound services, but these could easily have been provided through Sure Start—why was it cut? We heard from the Chancellor about youth spending, with another 300 youth clubs. Youth service spending was £1.4 billion in 2010. By 2019 it had been cut to £429 million, and 700 youth clubs went, as well as 4,500 youth workers.
Then we have the 21,000 police officers that were cut. The Conservatives came here and told us that they were going to cut 21,000 police officers but that it was going to result in more police officers being on the street. They closed nearly 600 police stations. In London, they took £1 billion away from policing; when the Prime Minister was Mayor, we lost our safer neighbourhood teams. My local Tories are now campaigning about closures of police stations—the brass neck! The Tories were warned that cutting 21,000 police officers would lead to rising crime, as it did, and now they are panicking and trying to put 20,000 officers back, as was confirmed in this Budget. Like burglars wanting to be thanked for returning stolen goods, they want to be thanked for reversing the cuts that they made in the first place.
It is the same in the NHS. Capital spending is back to 2010 levels—so we cannot not welcome that. We have 80,000 vacancies in the NHS. The Tories cut nursing bursaries. They were warned that that would lead to a lack of recruitment among nurses. We now have 38,000 nursing vacancies—nearly half the vacancies in the NHS. What was the Government’s response after covid—after everything nurses had done? The Government wanted to give them a 1% pay increase. That is not the way to deal with the recruitment crisis in the NHS. There was precious little about that in the Budget. A Nursing Times survey indicated that 80% of nurses feel that patient safety is compromised due to the severe staff shortage. Health Education England is saying that we need £900,000 per year for training to plug the gaps in nurse numbers in our NHS. In 2015, the Government promised 5,000 doctors, but we are 1,300 down on that figure.
In education, it is a similar situation. According to the IFS annual review of education funding, teachers’ pay has fallen by 9% since 2010. Total spending per pupil in England was just over £6,400 in 2020. Compare that with the high point of £7,200 in 2010, under the last Labour Government. Now we are going back to 2010 levels, the Chancellor claims in the Budget. Overall, the most deprived secondary schools have received a 14% real-terms cut per pupil between 2010 and 2020, compared with just 9% in the least deprived areas. Go tell that to the red wall seats! The IFS says that represents the largest cut in over 40 years. The increase in spending in previous years under the Labour Government was 60%. Cuts to our children’s education just highlight the reality of Tory austerity Britain. Under austerity, our children’s education was expendable. Funding had consistently been cut since 2010. Small wonder that the Tories failed to fund the catch-up that our children need following covid and refuse to feed our children during the school holidays.
Since 2010, as part of austerity, the Tories’ strategy has been intentionally to impose a cut on public sector pay. As a result, average public sector pay is £900 lower today in real terms than it was in 2010. For many, the loss in pay was more than £900 a year. For example, nurses and community nurses at NHS band 5 are more than £3,000 worse off today in real terms than they were in 2010. Residential care workers employed by local government are nearly £1,900 worse off in real terms. Ambulance drivers are £1,600 worse off in real terms. Now we are told that the Government believe that public sector workers deserve a pay rise. Will it be funded? Do they intend to restore public sector pay to 2010 levels in real terms? Will they fund those pay rises no matter what is recommended, or will the Government insist the increases are found from within existing budgets, as they did with nurses’ pay this year?
What does levelling up mean when it comes to poverty? In 2010, 49,000 people received three days’ worth of emergency food from Trussell Trust food banks; in 2019, that number was 1.9 million; and in the last financial year, it was 2.5 million. Is reducing reliance on food banks a measure of levelling-up success? Since 2010, the number of pensioners in poverty has risen from 1.6 million to 2.1 million. The TUC found that the number of children growing up in poverty in working households has risen since 2010 by 800,000 to 2.9 million. Working households comprised 37% of those below the official poverty level in 1994-95. By 2017-18, that had risen to 58%. Most people in poverty live in a family with someone in work—a dramatic change from 20 years ago according to the Joseph Rowntree Foundation. Will we see those people levelled up as a result of this Budget? I think not.
Then there is the cut to universal credit. In my constituency, 8,690 households containing 5,383 children will lose a combined £9 million. That is £9 million they will not have available to survive from day to day. That is £9 million that will not be spent in my local community. They will be facing the costs of inflation, fuel bills and food prices that they cannot avoid. The living wage increase does not touch families living on universal credit. It only affects the 2 million people on the national living wage. As we heard earlier from my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown), the taper on that was at 75%. When we take into consideration income tax—income tax relief has been frozen, so that is an increase—and the increase in national insurance, with the marginal rate of tax for people on the national living wage, the change will be minimal. They will be lucky if they end up with £7 a week—not the large figures read out by the Chancellor.
Getting funding back to the levels of 11 years ago is not progress. It is an indictment of the Tories’ record and underlines the fact that we have had 11 wasted years of Tory austerity. Sadly, following this Budget, I think that that will continue.
It is a privilege to follow the hon. Member for Eltham (Clive Efford). Although I may disagree with much of what he says, he always speaks with compassion, commitment and belief, and that is important in this place.
Unlike the Opposition, I took pleasure in the optimism and cheerfulness of the Chancellor’s presentation—something has obviously rubbed off from next door in that respect—which was because he was able to announce any number of increases in spending, from the national health service to local infrastructure and from R&D to the numeracy multiplier in education. As my right hon. Friend the Member for Wokingham (John Redwood) pointed out, the Chancellor was able to do that because of a Treasury re-forecast for the growth rate—a Treasury error.
When people have heard the number of Budgets that I have, they come to realise that finding £20 billion down the back of the sofa is not unusual. In this case it was £44 billion, but the Chancellor’s predecessor but one found £20 billion in his last Budget. That arises because the Treasury, the OBR and the Bank of England are all very bad at forecasting; they generally get it right within about £20 billion but not much closer.
The first thing I will say about the Budget strategy we are talking about today is that we have to make allowance for it being £20 billion out. The key point in that is the growth rate. As my right hon. Friend the Member for Wokingham pointed out in his brilliant speech, the key to the whole strategy must be growth—private sector growth—without which we cannot pay for anything. That is what I will briefly focus on today; given his speech I can do it more quickly that I might otherwise have.
Before I get to that, the overhang of debt that arises from the covid crisis, which is £400 billion of borrowing or thereabouts, is crucial to the broad economic strategy. We have not seen that scale of debt since after each world war, and the approach should be the same. In essence, we should create war bonds that are paid off over 50 to 75 years. Both sets of war bonds were paid off in the last decade or so, which gives us a measure of how long was taken over it.
In the 1920s, when Winston Churchill was Chancellor, he consolidated the war debt on a 4% basis when our Bank rate was 4.5%. The Bank rate today is barely above 0%—0.1%—so now is the time to do that. If we are worried about the £27 billion cost of each 1% increase in interest rates, we should lock it up as quickly as we can so that we can sterilise it from our future decisions about spending and growth. That is key.
The Chancellor says that he aims to broadly balance the books by 2023. Given the error margin in our forecast, he ought to say 2025 and base balancing the books on growth. To that end, the area where I disagree with the Government’s strategy is on the level of income tax, national insurance contributions and taxation generally which, in my view, is likely to raise significantly less money than the Treasury spreadsheet tells them. The simple truth is that the increase in NICs will undoubtedly depress growth and employment and, as a result, depress the tax take.
Similarly, the freeze in the income tax personal allowance will have a big effect on the poorer families who we care about and who matter to us—that goes to the point about levelling up that the hon. Member for Eltham made. It will have a big effect on consumption and, as a result, a big effect on growth. There is a real issue there. My view, like that of Nigel Lawson, who I think is one of the Chancellor’s heroes, is that cutting tax rates leads to more growth, more investment, more employment and, as a result, more tax take. That is, essentially, the normal Conservative strategy.
The other element of the Budget strategy is based on higher wages—not just raising the living wage, but the whole wage bill—with which we all agree, but that can be done only if we increase productivity. Again, we come back to a tax issue. Notwithstanding the arguments about the bank sector, we are talking about increasing corporation tax. Of course there are a lot of offsets for investment, but I am afraid that when investors are deciding which country to invest in, they take the headline rate of corporation tax into account.
We may be the best in the G7, but when someone is looking at whether to invest in Great Britain or the United Kingdom, they are not looking at the G7 but at Ireland or the Netherlands as comparators. Those places have significantly lower corporation tax rates than we do, which is important because, as well as trade, investment is the key to productivity. As a result, we should look hard at reducing that tax. I hold no brief for the individual capitalists involved; it is simply a question of where the money will go and whether we need it here, and the answer is yes.
It is really very simple. The route to maintaining a growth rate higher than 1.3%, which is in the Red Book, for a few years is lower taxes and more investment and, as a result, more employment. The level of 1.3% applies because of demographic factors, which we cannot change. We cannot change the demographics that we face. We can do very little—we can attract research, investment and talent—but we will not materially change them. Tax cuts, however, will increase investment and productivity rates. That is the key to a successful strategy.
It is a pleasure to speak in the debate and follow many important contributions from Members across the House. It is disappointing that we heard very little that was new, or that was not pre-announced. It is frustrating that Parliament seems to be a sideshow when it comes to the Government making important decisions.
Moving on to the content of the Budget, a test for the Budget is whether it makes life easier or harder for businesses and families across the UK, and whether it takes the steps necessary to tackle the increase in the cost of living which we all know families in our constituencies face. The Chancellor’s choices today will shape how well children can learn; who goes to bed hungry; and how our businesses, which have been on the frontline, can not just survive but can be equipped and prepared for the future.
It is a shame that the Chancellor seems to have chosen a tax cut for bankers that is bigger than the extra funding that he is providing for children to catch up. Even that as a total is a third of what was recommended by the Government tsar. That was not a random figure of £15 billion picked out from a hat; it was based on research and evidence, and on understanding what children across the country needed to get through and catch up because of what they faced and how they were held back during the pandemic. They must continue to be at the front of our minds in this House.
This winter, the country faces a cost of living crisis of historic proportions. Fuel shortages, rising energy prices, the Government’s supply chain crisis and price inflation have hit families across the UK. A recent survey by 38 Degrees in Feltham and Heston found that 90% of respondents were concerned about their current supply of critical food and goods. Sixty-four per cent. of respondents had observed insufficient stock in their supermarket. The price of fruit and vegetables is up, and half of respondents had seen a rise in their energy bills. In the past few weeks, the Office for National Statistics has reported that 8 million Britons have been unable to buy essential food items, while grocery prices are reported to be 1.7% higher than last year.
These changes cannot be denied, and they have been compounded by the Government’s cruel decision—and it was cruel—to cut universal credit for six million families this winter, taking £20 a week from the pockets of families at time when prices are rising. In Feltham and Heston, 18,000 households are worse off as a result of the cut. £18 million has been cut from our local economy. Where was the £20 for universal credit going? It was not going into offshore tax havens; it was being spent by families, on families, in our businesses, in our communities and on our high streets. Returning what appears to be £2 billion through changes to the tapering of universal credit is welcome, and is an important step, but it does not go far enough. It will support some people, but not all, and there will still be millions of families who, just by trying to get through, will end up going into debt, with all the consequent problems that that brings. The Chancellor knows that, food banks know it, and the citizens advice bureau knows it. Everyone who looks at families’ income and the impact of the universal credit cut knows it.
I am glad that the Government have at least taken the advice of the Low Pay Commission to increase the minimum wage. I welcome this, but it needs to go further, and to a minimum of £10; good employers such as Morrisons have already increased wages to a minimum of £10 for all their employees. Many families are still going to struggle, however, even before taking into account the likely rise in gas and electricity prices next year, but there are no measures today to assist householders with rising domestic gas and electricity bills.
Meanwhile, many businesses are approaching what should be their most profitable period of the year yet are in great danger of insolvency, faced with huge debts from the pandemic, soaring energy bills, rising prices, empty shelves and growing shortages. Analysis based on the Office for National Statistics business survey suggests that over 300,000 new businesses, employing some 800,000 people, are at risk of closure in the next few months, yet the Government’s response has been to hit businesses with a new jobs tax as well as weakening their industrial strategy, and to take little more than piecemeal steps to resolve a supply chain crisis made worse by inaction and the lack of forward planning.
This crisis has hit British businesses and families harder than those in other countries. Almost 50 high street shops per day closed in the first six months of this year. Without further targeted action the face of our high streets and communities will be changed beyond recognition. Although today’s changes to business rates are welcome and a step in the right direction, as the Chancellor knows these reforms are in part a response to the stand Labour has taken.
The current business rate system in England is not fit for purpose. It punishes investment and entrepreneurship and hits the high street. Some of the incremental changes announced today, adopting calls for change from the British Retail Consortium, the CBI and others, are the steps that we need to incentivise rather than disincentivise investment, but there is no proper plan for sustained reform and rebuilding our high streets and economy. UK Hospitality has previously said that the biggest cost danger in sight for the sector was the reintroduction of business rates from 2022.
Today’s moves are welcome but also highlight why Labour called on the Government to freeze the business rates multiplier and extend the threshold for small business rates relief. This can be paid for by increasing the sales tax, levelling the playing field between online and bricks and mortar businesses, but this is an area where the Government have inexplicably been dragging their feet. Why, on page 144 of the Red Book, do they say they will
“continue to explore the arguments for and against a UK-wide OST”
and “publish a consultation shortly”? This has been going on for a long time; this is not a new issue. The inequity between online and bricks and mortar businesses is impacting on the prosperity of those on the frontline in our communities, who have served our communities and who have served our country through the pandemic. They are being penalised for being in our communities rather than moving their services online. Reducing the cost burdens so many of our businesses face is essential if they are to survive and grow that necessary employment for the future.
If this Government were genuinely supporting entrepreneurship, I would have liked to see more about that in the Budget, and it would be helpful for the Government to be clear about whether they are still targeting the new enterprise allowance for cuts. Latest statistics show that since its launch in 2011, 268,000 start-ups have been initiated by 249,000 individuals. Those businesses reportedly range from plastering, gardening and removal services to website design, film making and architecture enterprises; they are businesses that are at the heart of our communities and that go on to employ others. This scheme has been supported by the Prince’s Trust and others that do amazing and important work in supporting enterprise and entrepreneurial skills for young people. This is the kind of culture and opportunity we should be looking to enhance; it should be integral, not an add-on. In the work we have been doing in Hounslow, I have consistently been surprised—positively and pleasantly surprised—by how many young people want the skills and opportunities to start their own businesses, and how many people who may lose their jobs want support to do something different and to achieve a dream or grow a passion. Yet we seem to make it harder, not easier.
I grew up in a small business in our community in Hounslow. I have been self-employed. I have an MBA. I have worked in the private sector and the public sector. I know what innovation and entrepreneurship is. I know what it takes; I know the sacrifices that those who are self-employed—those who start up and bear the risk —make. I know what they do.
In the last year, I have co-chaired the development of the west London innovation district, looking to use innovation and create opportunities for research and investment to enable our local aviation hub to become a worldwide Silicon Valley for aviation, working with all parts of our national and international aviation supply chains to take advantage of opportunities in technology and to drive jet zero outcomes. We are working with West London Business and our research institutions— Brunel University, Imperial College and others—because we recognise that a place-based response to innovation is what drives sustainable growth. Part of that is bringing entrepreneurship and entrepreneurs into the overall growth programme and having an integrated strategy that helps to deliver that.
I want the UK to be the best place to start and grow a business. We should be improving and upgrading measures such as the new enterprise allowance, as opposed to pulling the rug out from under the feet of new community-based entrepreneurs—not just those in the City but those in the heart of our communities, who deserve opportunities at grassroots level.
With a week to go until COP26, the Government have also failed to match their climate change rhetoric with action, as shown by the Climate Change Committee predictions that the Government are on course to miss future carbon budgets. A recent British Chambers of Commerce survey found that just 11% of small and medium-sized enterprises are aware of how to measure their carbon footprint.
How much of the increased R&D investment, which is so critical to supporting innovative businesses at the cutting edge of the new economy, is going to support small businesses on their transition to net zero, and how is that going to be enabled? How are these announcements going to be delivered and translated to outcomes on the ground that make a difference in the recovery of local communities such as Hounslow—being an aviation community, we were hit very hard by the covid slowdown—with tremendous green growth ambitions?
I cannot see in this Budget the step change in vocational and technical skills that we need, or the less bureaucratic apprenticeship system. I am sure that hon. Members across the House will have seen this in their constituencies, but in north-west London, for example, millions in apprenticeship levy money has gone unspent. It is a scandal that that has been carrying on for years. The Government have been told about it, but we need structural reform to the apprenticeship levy to make it easier to create opportunities for skills to be grown for the future. We need businesses to be able to find the skilled workers that they need, and we need our local communities to have access to those opportunities so that they are equipped for the jobs of the future.
I, too, want an optimistic Budget—we all want an optimistic view for our country—but why did today’s Budget not make a clear, unequivocal commitment, with clear messages about our direction, such as Labour’s call to invest £28 billion every year until 2030 to tackle the climate crisis so that we can protect the planet and secure jobs in the UK? Businesses want to be certain about our vision and direction. They want a clear view of where they should invest. They want to know that if they make an investment today, they will get a return on it in five years’ time, and that there will not be another sudden change of strategy. The Chancellor has been talking to businesses; he will have heard the same message that I have.
Let me mention a few other areas of concern before I close. As co-chair of the all-party parliamentary group on mortgage prisoners, I find it disappointing that there is nothing in the Budget to help the 250,000 mortgage prisoners trapped paying high interest rates. The Government sold many of them off to mortgage loan sharks, which are charging them hundreds of thousands of pounds extra a year. That is more than seven months after the Chancellor promised Martin Lewis that the Government were looking for workable solutions. Markets are now expecting rises in interest rates, which will have a devastating impact on the finances of mortgage prisoners. The Government need to make sure that all mortgage prisoners can access reasonable fixed rates, so they get a fair deal and are protected against interest rates rises.
On building safety and cladding, I want to make just a brief mention of the challenges leaseholders are facing in blocks below 18 metres. I am not the only MP who is hearing about this from their constituents and the anxiety it is causing families week after week, day after day, with the uncertainty of how the safety measures and remediations will be funded. There needed to be more on that in the Budget and the Government need to tackle the issue urgently.
On children and youth facilities, I must say that I take issue with the portrait of Sure Start centres painted by right hon. Member for South Northamptonshire (Dame Andrea Leadsom). Her experience was not the same as mine. Our Sure Start centres did exactly what she described: they were family hubs, they gave advice and they supported early education. They supported language and literacy for those who were one or two years old. They supported new parents and they brought families together. I pay tribute to Noveen Phillips and others who ran the Bedfont Sure Start centre, which was forced to close as funding ran out. Those cuts affected over 500 Sure Start centres across the country, with children paying the price. On youth services—
On youth services, No Shame in Running, Project TurnOver and other Hounslow youth services have seen cuts. They are doing an excellent job of trying to support young people.
In conclusion, the Budget should have had a longer-term and better plan for the short-term cost pressures facing businesses and families. We need a more resilient economy and public services. I will be honest: I expected more today. We needed more today. I hope that, in the interests of our country, the Chancellor will take heed of the comments from Members across the House this week.
It is a pleasure to follow the hon. Member for Feltham and Heston (Seema Malhotra), although I have to say that I did not expect more from the Budget—I came here today fearing the worst. I expected to see some pretty dire public finances, and to be fair we have seen some pretty dire numbers. The deficits for the last financial year and the current year total £500 billion, and we will still be running a deficit this year of about £130 billion.
However, we have managed to forecast to balance the books in the financial year after next. I could not possibly have expected that we could go from the economic storm that we suffered back to a balanced situation less than a couple of years after the end of the pandemic. That is a tremendous achievement and it shows how successful the Government’s measures to save the economy have been over the past 18 months that we can even forecast that position. Even if that forecast is a bit optimistic, I was expecting years and years of deficit, and was wondering how we were going to fill it with spending cuts and tax rises. It looks, thankfully, like we will not need them.
We are forecasting the end of the deficit the year after next despite the Budget increasing the deficit by £25 billion. The measures we see are tax rises of about £12.5 billion and spending increases forecast to be about £38 billion. The spending envelope is actually being relaxed while we are balancing the books—quite a tremendous achievement. It probably shows, however, how key some of the sensitivities are in the forecast that we need to deliver the economic growth to drive tax receipts, otherwise those numbers just will not work.
We need to focus on what more we can do to increase the long-term trend in the rate of growth. What we are seeing by the end of the forecast period, well under 2%, will not be sufficient to deliver the public finances that we all want to see. That is why we need to make sure that the very welcome measures to increase investment, improve skills and boost productivity are driven through and made to work.
There was much good news in the Budget. Most of it was trailed well in advance. More money for the NHS will be hugely welcomed across Amber Valley. The rise in the living wage will be welcomed by people earning low wages. The end of the public sector pay freeze is the right thing to do. We had a year of it. I understand why we needed it in the middle of the crisis, but we cannot leave people worse off in real terms given the rise in bills.
I especially welcome the reduction in the universal credit taper. If I could just gently tick the Government off, that is not a tax rise. It is not a marginal tax rate. If we really wanted to say what the marginal tax rate was and we included that, we would have to add the 55% new taper rate, the 13% national insurance rate and the 20% income tax rate for those earning over £12,000, leaving an 88% marginal tax rate. I suspect that is not what the Government are trying to tell us, and nobody really believes that people can move into work from benefits and not have any reduction in their benefits. It is quite right that there is a reduction, so I am not sure that it was helpful to present this as a tax cut. It is a welcome reduction in the taper rate, which will ensure that work pays, but we should be careful in the presentation of that.
I have been one of those arguing to keep the £20-a-week uplift. We would have had a much better system if the benefit had started in the right place and then tapered off at the right rate. It is clearly welcome that the Chancellor has found £2 billion a year to improve the taper rate and make sure that we can be certain for everyone that work will always pay and that they will be materially better off if they take work, get more hours and get higher pay. That is hugely welcome.
I also welcome the fact that the Government, in our post-Brexit world, are starting to tweak the tax system so that we can use our post-Brexit freedoms. The reduction in the draft beer duty rate is sensible. On the domestic air passenger duty rate, it is absolutely right that people should be able to fly within their own country at a lower tax rate than when they fly overseas. That is what used to be the case until 20 years ago, when we were forced to change.
I even welcome small measures such as the plan to take away the right to offset losses incurred across Europe from UK corporation tax. That is a sensible measure. There is no reason why a loss that someone incurs overseas should reduce their UK tax bill. There are other measures that we had to introduce to be compliant with EU rules, which we could now reform. We had to take away a collection of tax avoidance measures because they did not comply with EU rules; we can now reinstate them and protect our tax. I urge the Government to continue that trend.
I welcome the changes to the research and development rules, the increased investment and the tweaks to the R&D tax incentives. It is right that when we give people a tax incentive, that work is done in the UK. Actually, it is more important that the fruits of that research are owned in the UK, that the intellectual property produced is owned and exploited here, and that the research generates jobs and tax revenues here. I urge the Government to introduce the detail behind those changes and to add a rule that says, “If you are going to claim that tax credit, the IP produced needs to be owned in the UK for you to get it.” That will be more important in the long run than where the research was carried out. If the Minister wants some clues on how to draft such a measure, he should know that I moved an amendment to that effect about 10 years ago during consideration of the Finance Bill. He can check the history.
On the universal credit taper rate change, my hon. Friend says it is not a tax cut. It will cost the Exchequer £2 billion to do it, so it is a tax cut in that way. On national insurance and personal tax thresholds, for people who are below those figures, the extra taxation he mentioned—the 20% and the 13%—will not apply.
I am grateful to my hon. Friend for his intervention. I agree with his point, but actually we cannot say that every spending increase is a tax cut. That makes no sense. This is an increase in welfare spend; universal credit is not a tax. By improving the taper rate, we are not changing tax. That is not the case. It is not a factual statement, nor is it helpful for people who need to understand their own financial position to believe that description. I am sure my hon. Friend knows that many people who are entitled to universal credit earn more than £12,000 and therefore pay income tax and national insurance. That is not an unusual situation to be in.
I shall conclude so that I comply with the Chair’s strictures on time. This is a hugely powerful Budget that sets the country in the right direction. It shows a welcome improvement in the public finances and delivers on many of the priorities of my constituents. I wholeheartedly welcome it.
Owing to the extensive trailing that went on in the press beforehand, this Budget contained far fewer surprises than it properly ought to have had. At the outset, I want to take a moment to salute the bravery of the Treasury spin doctor who allowed the Chancellor to be pictured wearing a pair of flip flops in the Evening Standard the day before delivering a Budget. If we had had rather more flip flops in the Budget than we had in the Evening Standard, we might be having a different discussion and one in which I could be more favourable towards it.
The Chancellor posed the question whether we want to be a country where in every crisis people ask, “What are the Government going to do about it?” To put it bluntly, that is the wrong question entirely. The question that we should be asking, particularly of this Chancellor and this Prime Minister, is “How can we stop them making it worse?” Across a range of issues, of which I will concentrate on three—the cost of living, supply and the environment—the Budget is doing nowhere near as much as it should to tackle the crises that we face.
It is a Budget that appears to be marked by short-termism, with a conceit that it is boosting working family incomes, while still imposing levies. I am careful about treading into the friendly fire that has been exchanged, but there is certainly no arguing with the fact that, even with the reduction in the taper rate, anyone who earns an additional £1 will still lose more than if they were paying the higher rate of income tax on it. That is a marginal rate, if you like, but there is also a very high marginal rate of tax on some of the youngest and lowest earners in society, which this Budget does nothing to tackle in the face of the worst cost-of-living crisis in memory.
I know that we have all been busy gathering external reaction from our various electronic devices as best we can, but I draw hon. Members’ attention to an IFS finding:
“Over the next 5 years real household disposable income is expected to grow by 0.8% per year, well below the historical average.”
The director of the IFS, Paul Johnson, has said:
“This is actually awful. Yet more years of real incomes barely growing. High inflation, rising taxes, poor growth keeping living standards virtually stagnant for another half a decade”.
The Chancellor spoke about the importance of the first 1,000 days of a child’s life. I heartily concur, which makes it all the more extraordinary that in each year of a child’s first 1,000 days on this earth, the Government will potentially be taking £1,000 away from its family by withdrawing the universal credit uplift. In Scotland, that will mean 20,000 children drawn into poverty and thousands more drawn into hardship, undermining the impact of the Scottish Government’s Scottish child payment to families. Those who are earning at the taper will still lose out to a far greater extent for every additional £1 than any objective analysis would suggest they should.
The costs of energy are soaring, the triple lock on pensions has been removed and—lest we forget—we have seen a 1% hike in national insurance, which breaks a Conservative party manifesto commitment and will bake in geographical and generational inequalities for many years to come, but it has all been made many, many times worse by the rising inflationary pressures as Brexit shortages begin to bite. We are seeing what I believe is the most concerted attack on living standards and hard-working, hard-pressed families.
The rising growth that the Chancellor has been relying on reflects a hoped-for return to trend, rather than anything beneficial that has been happening in the Budget, but it is a return to a trend that was very sluggish before covid and is even more so as Brexit continues to bite. On covid, we clearly could not do a great deal to prevent the impact as it hit us, but Brexit is an entirely self-inflicted wound. That has not acted as an existential shock to the economy, stimulating new ways of doing things and jolting the Government into action to counteract the immediate damage. The Chancellor or the Government could have announced measures, and not necessarily even fiscal or economic measures; simply allowing more immigration to fill the shortages that we are seeing in certain sectors would have been hugely beneficial in counteracting the adverse impacts that we are seeing in our supply crisis.
The Chancellor has announced measures to increase R&D funding, which may or may not compensate—we will find out when we delve into the figures—for loss of access to European funding streams for research and innovation, but investment in research and development is a marathon rather than a sprint. The UK’s R&D spending of 1.7% of GDP is still languishing well below the OECD average of 2.5%, while Germany is way out in front with 3.2%. It remains to be seen whether or not the modest changes that the Chancellor has announced—even if they were not announced with a huge amount of modesty—will close that gap.
As I have said, we are seeing significant labour shortages, especially in the haulage and agriculture sectors. Of particular concern to me, as a Member representing a rural constituency, is the fact that an animal and potentially human welfare crisis is looming in the pig industry because there are not enough butchers and abattoir workers to deal with the capacity issues. While this Government may not class those jobs as being particularly highly skilled, they are certainly in high demand at present, and it is in no one’s interest for the demand to be as high as it is now. We are also seeing significant shortages in shops, and I do not think that anyone could reasonably be convinced by the Chancellor’s plea in mitigation that they are a result of “global inflation”. We have already seen a CO2 crisis; it seems that we have far too much CO2 where we do not want it and not enough where we do want it. As supply chains continue to be stretched to breaking point, this is a crisis that can only worsen and lead us into a winter of discontent.
The most pressing crisis of all is the environmental crisis. The Scottish Government are set to invest more than half a billion pounds in a “just transition fund” to benefit the north-east of Scotland, and have challenged the UK Government to match that, but I am sorry to say that nothing I have seen in the Budget so far suggests that the UK Government are doing so. In fact, what they have done this week is scupper the Acorn project in Peterhead for carbon capture and underground storage, which was the only scheme in the mix that was scalable and deliverable, using an existing infrastructure, and which could have benefited clusters in south Wales and around the Solent because of its ability to accept imports of carbon dioxide. The contrast is striking, and my constituents will see it very clearly: the UK Government roll out the pork barrel for the north-east of England, while sticking two fingers up to the north-east of Scotland.
What has happened with the Acorn project is doubly galling, given that Scotland’s carbon assets have already been taken and now this carbon-capture asset is not being placed in Scotland, after all that has been taken from it over the decades.
My hon. Friend makes a powerful point. There has been £350 billion from the North sea since oil began to be extracted, and when it comes to dealing with the environmental consequences of fossil fuel use, we are potentially not even going to be in the pole position that we ought to be in, and will not be able to take full advantage of our geological, geographical, sectoral and intellectual advantages in that field.
This afternoon we have heard a blizzard of spending commitments, un-baselined, some of them doubtless reheating previous announcements. Together with the new fiscal rules, it put me in mind of another Chancellor who for a long time coveted the role of the gentleman next door, and of his desire to mark his own homework. We are told that today’s announcements will be Barnettised, but experience leads me to say that I need to wait, and that the Scottish Government and people in Scotland would be also be wise to wait and see what actually does come through to the Scottish Government.
This Government have demonstrated eloquently, today and in the days leading up to it, that they have no interest in working with the Scottish Government, or working with the grain of Scottish opinion to respect the democratic choices of the Scottish people. Scotland can do better than this, and shall do better, with independence.
What I have heard from several Members, particularly Opposition Members, suggests that they do not really know what levelling up is. I think it is actually very straightforward. It is about spreading opportunity more fairly and evenly across the country, so that all children, whichever part of the country they live in—in fact, not just all children, but all adults—have the same opportunity to reach their full potential. I do not think that that is very complicated to explain, but it is of course more challenging to deliver.
Surely levelling up should be something very simple, and simply understood. It is a product of UK misgovernance over the years—of governance that has meant only policies for the south-east of England, specifically ignoring much of the rest of the UK. That is why, on our side, we want to do things ourselves in the future.
I took an intervention from the hon. Gentleman because I anticipated what he might say. I listened carefully to the Chancellor, and he set out a Budget that delivers not just for every part of England but for every part of our United Kingdom. We on this side of the House—and I think, to be fair, those on the Labour Benches—want to ensure that we keep our country together. We are spreading opportunity to every part of the United Kingdom. I listened carefully to the Chancellor, and this Budget delivers a significant increase in resources to the Scottish Government. I hope that they spend those resources wisely, although given their track record, I am pretty confident that they will not.
Let me make a little more progress, then I will of course give way to my right hon. Friend.
I thank the Chancellor for agreeing to the levelling-up bid made by my constituents. It was a partnership bid by Hartpury University and Hartpury College, Forest of Dean District Council and Cinderford Town Council, and it focuses very much on improving opportunities for my constituents. They worked collaboratively with me and my office, which put me in a strong position to make the case to Ministers, including the Chancellor, and it got us a really good result today. This was a real Forest team effort. Does my right hon. Friend still wish to intervene on me?
I see that he is allowing me to make some progress.
We have a strong track record in my constituency. We got money from the Getting Building Fund last spring for the Construction Skills Accelerator Centre, which will improve skills and productivity in the construction industry. That centre will be completed and opened this December, which demonstrates turning around Government support and money in partnership with the private sector and delivering real change on the ground very quickly indeed.
I also welcome what the Chancellor set out on alcohol duty. That will be particularly welcomed by small producers in my constituency, especially our fantastic cider makers, including Severn Cider. Also, picking up on the theme of leisure, retail and hospitality, the 50% reduction in business rates will be a tremendous benefit to that sector, which was hard hit throughout the pandemic. That extra resource will be very welcome. Also, £175,000 from the community ownership fund has enabled the Rising Sun pub in Woodcroft to be saved and to become a really strong community asset.
Turning to the Budget themes overall, I think the Chancellor’s focus on fiscal responsibility and sound money is incredibly important. This is not about ideology; it is the key to our future prosperity. It is because we took sensible, difficult decisions between 2010 and 2019 that, when the pandemic hit last year, we were able to spend what was required to protect jobs and to defend people across our country. If we had not taken those difficult decisions, we would not have been in a position to respond accordingly. It is important to focus on sound money because inflation is a real threat, and it is a threat to the poorest. That is why it is important for the Chancellor to keep control of the public finances—I am pleased that he has done so today—and of the level of investment to drive up productivity. I agree with all those speakers on our side of the House who have pointed out that we have to deliver productivity in order to ensure that we can have high wages without driving up inflation. That is absolutely critical.
Finally, I want to focus on a few themes from the Budget. The spending that we rolled out last year on the pandemic, particularly on protecting jobs, keeping unemployment low and reducing the long-term impact of covid, will turn out to be one of the wisest decisions that we took. It has been welcomed by my constituents, and I think that our decision to minimise the economic impact of the pandemic will be something that we will look back on and be thankful for. That decision does of course mean that we have grown the size of the economy. We have had to put up taxes, which I am not comfortable with and nor is the Chancellor, but it was necessary and we would have regretted doing anything differently.
I welcome the Chancellor’s significant reduction in the taper rate for universal credit. This will ensure that work pays. It will encourage everybody on universal credit to get into work—we are seeing a record number of vacancies in the economy—or, if they are in work, it will make it absolutely worth their while to take on extra hours or increase their skills to earn extra income. That is the right set of incentives.
In closing, to stick to the Chair’s informal time limit, I will focus on the Chancellor’s final remarks on the size of the state and the direction of travel. I am pleased he has set out an ambition for this Government to reduce the size of the state, enabling people to take more responsibility for themselves. It was necessary to grow the state to deal with the pandemic, but he has set out a clear direction of travel on empowering individuals. I am pleased to back that mission, and I am pleased to support the Budget.
I commend the Budget to all Conservative Members.
Thank you, Madam Deputy Speaker, for calling me on this first day of the Budget debate. I draw the House’s attention to my interests, which are declared in the register.
I do not think any Finance Minister or Chancellor has faced a more difficult year than my right hon. Friend the Chancellor has faced, and he has commanded the House and carried out his duties with exceptional skill and devotion. This extremely good Budget comes at the end of that very difficult year, so I start where my right hon. Friend the Member for Forest of Dean (Mr Harper) left off.
As the Chancellor knows, I have been extremely concerned about the cut to universal credit. I am also conscious that it was a temporary measure designed by the Government to put their arms around people who were very vulnerable as the pandemic got going, but nevertheless any such cut in benefits is a controversial matter. He has been extraordinarily skilled in reducing the taper rate of universal credit, which is an extremely good approach, on which I congratulate him.
I have three brief points. The first point is local and regional, and it concerns the west midlands and, in particular, my constituency of Sutton Coldfield. We are pleased to have £1 billion of transport funding for the west midlands, and that funding has also gone to the Mayor of Greater Manchester. It is backing for the regional mayoral structure, and it is very welcome. Money from the fund will enable Sutton Coldfield to start major work on town centre renewal. The town centre renewal plan is all set, and taxpayers’ money is needed to address some of the transport issues, so I am pleased with this week’s announcement.
Secondly, in the west midlands we also want money from the skills budget, and the Prime Minister singled out Andy Street, our Mayor, for his work on boot camps for digital retraining. That model was pioneered in the west midlands and is now being taken out nationally. This is incredibly important if we are to capture the vital growth that a number of my hon. and right hon. Friends mentioned. The skills agenda is vital. There is money for skills, and we want it in the west midlands.
Thirdly, we want money to ensure that homes for the future are built on brownfield sites and not on the green belt. We are looking for a £200 million accelerator in the west midlands so that we can get houses built and protect the green belt. In my constituency I have one of the biggest house building programmes in the country at Langley, on Sutton Coldfield’s green belt. The scheme was much loved by the Labour Birmingham City Council, and it was quite wrongly waved through by a Conservative Secretary of State. That is done now, and we will get the best we can for the town from that development. We want to see homes built, but we want to see them built in the right places, which is why the brownfield money is so important.
In the royal town of Sutton Coldfield we have four particular priorities: the town centre, the cottage hospital, our royal park and the town hall. They all require, for the development and the aspirations that we have for them, a little bit of taxpayers’ money, and we are glad that on at least one, if not the other three, we have managed to convince the Government and the regional Mayor of the importance of that support. That is my first point.
Secondly, moving from the parochial to the national and, indeed, the international, as we look toward the COP that is coming up shortly it is clear that the Government are doing extremely well on the UK’s climate strategy. The report published last week sets out the importance of our reaching net zero emissions by 2050; how the UK will be powered entirely by clean energy by 2035; the subsidies for replacing domestic boilers; the incentives to switch to electric vehicles, which is incredibly important in the west midlands in respect of Jaguar Land Rover, which will make only electric cars from 2025; the quadrupling of offshore wind; and the significant advances in carbon capture and storage. Of course, the agenda will also unlock 500,000 new jobs, as well as huge private sector investment. Those are important matters on which Britain is leading and clearly setting the right example, which is very good. By contrast, I am keeping my fingers crossed that the Prime Minister’s unique boosterism will pull a rabbit out of a hat for the COP, because as he himself has said the approach to the COP is challenging.
We learned today from the Public Accounts Committee about the waste of £37 billion on NHS Test and Trace; I merely point out to those on the Treasury Bench that the £4 billion that has been cut so damagingly from the international development budget amounts to just 10% of that amount. Of course, it would be churlish of me not to recognise that today the Chancellor asserted his conviction that we must return to the 0.7% target and that we will be able to do so by 2024-25. I am fighting the inner cynic in me when I note that that commitment has been given for a period just after the likely date of the next election. Nevertheless, if the 0.7% is restored by that date, I promise the Chancellor of the Exchequer—if he is still Chancellor and not Prime Minister by then—that if, when he progresses north to his constituency at the end of that week, he can take the time to come to the royal town of Sutton Coldfield, I will buy him the best dinner that the town can provide. It would be an extremely good dinner. I very much regret that that cut was made but I am pleased to hear that the Chancellor puts a priority on this. We in the House must never forget that the development budget not only makes some of the poorest people in the world safer and more prosperous but makes us in Britain, in our constituencies and economic centres, safer and more prosperous.
Will those on the Treasury Bench clarify whether the funding for the special drawing rights that the IMF has issued and for the other measures, particularly the vaccines, will come out of the 0.5% of GNI, as it now is, or be in addition to that? Perhaps a Minister could make clear the position on that at some point.
Thirdly, on value for money, I am conscious that the taxpayer is going to provide an immense amount of money for the NHS catch-up and for social care. When the Government announced what is a very welcome measure indeed in the House, I asked what plans the Treasury had to monitor what taxpayers will get for the additional money; the response from those on the Treasury Bench was not as good as it could have been. I want to see Treasury officials all over this money. It will be hard-earned money provided by taxpayers and we need to demonstrate to them one of the mantras of the Department for International Development, before it was vapourised: that for every hard-earned pound taken off the taxpayer, 100p of value must be delivered on the ground. I hope that the Treasury will make certain that the Departments that spend the extra £12 billion a year raised through national insurance justify every penny of it, so that we can assure our constituents that it really is successful, incremental spending that works to their advantage.
It is a pleasure to follow my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). I do not know whether his offer to the Chancellor has advanced or impeded his prospects in the future, but I am sure that he will look forward to the dinner none the less.
No one can be in any doubt about the central importance of science, innovation and technology to the future wellbeing and prosperity not just of this country, but of every country around the world. Yesterday, my Committee —the Science and Technology Committee—was privileged to hear from Professor Sir Andrew Pollard who, with Dame Sarah Gilbert, was one of the scientists who developed the Oxford-AstraZeneca vaccine against covid. Their work is saving millions of lives in this country and around the world, and allowing life here and around the world to resume. The vaccine would not have been possible had it not been built on sustained research conducted by world-class scientists in Britain over many years. It is not just in vaccine development, but in almost every field of human endeavour that research and science are transforming the world, from battery technology and energy storage, as we move to net zero, to the role that satellites play in monitoring agricultural matters from space to get the best crop yields around the world.
At this most exciting and transformational time for science and technology since the first industrial revolution forged in Britain, it is obvious that our future must be even more science and innovation focused than ever.
In the industrial strategy that we launched in 2017, the then Prime Minister and I committed the UK to invest 2.4% of our GDP in research and development within a decade—the OECD average—and then to move on to 3% thereafter. We increased the public science budget from £9 billion to £12 billion a year by 2020—then the biggest ever increase. I mention this to underline the remarkable fact that this Budget will increase the national investment from public funds in research and development not from £9 billion to £12 billion, but to £20 billion a year by 2024-25.
However, the Government had previously committed in the manifesto to invest £22 billion by that year, so, clearly, it is a source of regret that the Chancellor has not been able to keep that commitment. Having said that, had the original commitment been to £20 billion by 2024-25, it would still have been regarded as a remarkable transformation in our science funding and warmly welcomed. None the less, there is a cost to commitments that are not met in terms of the confidence of investors, who are investing alongside the Government.
Having said that, the Committee and the science community were very concerned that there might be a stop-start approach to meeting this commitment because of the current fiscal difficulties, with future increases deferred until later in the Parliament and therefore more uncertain. Witnesses to my Committee talked about the importance of a sustained increase in funding rather than famine first and feast later. I welcome very strongly the fact that the increases are not just in the later years, but that there is steady progress throughout the spending review period that will give great confidence to the science community. In fact, the later increases to get to £22 billion are somewhat less than the early increases that are being made, so I hope that it might prove possible in future Budgets to find the £2 billion required to get to the target earlier than 2026-27.
Last week, in my constituency, I met representatives from the Glasgow School of Art, who raised concerns that the creative industries were part of the original industrial strategy, but that that now seems to have been lost given where the Government are going now. Does the right hon. Gentleman share my concern that much economic activity can come from the creative industry—innovation as well as other things—and that perhaps it ought to form a larger part of the strategy?
The creative industries play a crucial role right across the country. The creative industries cluster in Glasgow has given a great deal of boost to that city and that has been matched by a lot of private sector investment. I pay tribute to Sir Peter Bazalgette who led the creative industries review that resulted in that. The money is there now as a result of this settlement and I very much hope that the faith placed in successful programmes such as that will be maintained.
Let me say a brief word about the fact that the Budget and the spending review provide the necessary funding for our association with Horizon Europe, the European funding system. There are many advantages to that association, as science is inherently international, but we are facing difficulties with the Commission ratifying our application for association. I do worry that the delays are already leading to British research institutions not being included in bids that are being put together for some of the funding that will be available over the next seven years. As every month goes by, the attractiveness of association diminishes.
The Chancellor has confirmed to me personally that the Horizon subscription that is listed in the Red Book is guaranteed, available and set aside. It is £1.3 billion this year and rises to £2.3 billion in 2023-24, and more thereafter. We no longer get more out of Horizon than we put in, which was the case when we were a member of the European Union. We also have to pay an administration fee, which I understand to be about £200 million a year, which is about twice the administration cost of running our own domestic innovation programme. Given that and the delay, it seems to me that the science community will want to assure itself that it would not prefer the budget that the Chancellor has guaranteed to be in the hands of UK universities and research establishments so that they can deploy themselves in international collaborations.
Science is inherently international, so I share the welcome of my right hon. Friend the Member for Sutton Coldfield for the prospects of resuming the 0.7% target on official development assistance. I particularly welcome the increase in the Red Book for ODA funding of science, even within the spending review period. In fact, that will nearly double. The cuts to science programmes that were funded by ODA were a big blow to science, so it is good to see that funding increase.
A major theme of this Budget is levelling up. British universities and research institutions all across Britain are often the most important institution in their area for driving prosperity. I therefore hope that, with a substantially rising tide of funding, it will be possible to keep faith with the programmes of excellence that we have, while strengthening the contribution made by the regions and nations of the United Kingdom. As Professor Richard Jones of the University of Manchester said in evidence to my Committee, that is literally levelling up—advancing the prospects of the nations and regions without diminishing the investments that we already make.
The science and research community and my Committee will look in detail at what has been proposed, but we recognise this substantial commitment to science—the biggest ever increase in the science budget. Even if we regret that the £22 billion that was scheduled may be two years late in being delivered, we are relieved that there will be sustained and steady progress towards it. If the economy recovers even more strongly in future years, we hope that we will be able to get there as planned, as originally set out.
I am delighted to follow my right hon. Friend the Member for Tunbridge Wells (Greg Clark), who speaks so powerfully about science and research.
I welcome the Chancellor’s Budget and the actions that he is taking so that we can build back better from the effects of the covid-19 pandemic. It was a constructive, thoughtful, innovative and conservative Budget that was presented with style and dynamism by my right hon. Friend. We are recovering faster than our major competitors, more people are in work and growth is going up. That is brilliant news and a testament to his hard work and his and his team’s successful policies. I congratulate him on and thank him for all his work over the past 18 months. His actions have protected jobs and livelihoods with £407 billion, supporting more than 14.5 million jobs and providing more than £100 billion-worth of business grants and loans, throughout the pandemic.
I know from conversations and correspondence I have had with businesses in my constituency and across my borough of Bexley that the Government support has been much appreciated, particularly the ability to furlough staff and the coronavirus grant funding. These measures have been vital to help businesses survive during a really difficult time, particularly when many of them have not been operational due to necessary restrictions. I also meet and talk to people from small and medium-sized businesses around the country. They, too, are very pleased to have a Chancellor who listens to them, hears what their problems and challenges are, takes note of them and tries to implement policies to assist them. We must never forget that these small and medium-sized businesses are the backbone of our economy and our country.
I should like to direct my main comments to businesses and skills. Business is the key to the economic success of our country. Our ability to invest in our vital public services relies on successful businesses paying the taxes that can then be used for those public services. Our priority now therefore has to be to help people into work and to help them develop the skills they need to progress their careers, as well as to increase and spread opportunity across the whole of the UK by supporting businesses, investing in infrastructure, and encouraging growth.
The Government had already taken positive steps towards that aim, and our plan for jobs is supporting people to gain the skills our economy needs. The £2 billion kickstart scheme has already seen 85,000 young people into employment, and the £2.9 billion restart scheme has helped over 1 million long-term unemployed people to find work.
Regrettably, our country does have a skills shortage. New employees often do not have the skills that employees want, and we need retraining and reskilling of the existing workforce. In an age of great change, and to have a successful, innovative and entrepreneurial economy, we need to boost skills. I am particularly pleased with the commitment to create a new UK global talent network to work with businesses and research institutes to identify and attract the best global talent in key science and tech sectors.
The Government very much understand the importance of lifelong learning and developing skills to support our economy, increase productivity and spread opportunity. The lifetime skills guarantee offers adults in England without an A-level or equivalent the chance to retrain, realigning further education with employers’ needs. The measures announced today to tackle poor numeracy through a new UK-wide numeracy programme called Multiply will benefit some half a million adults through a £560 million investment. This is really good news to help people who do not have the skills or the education to get jobs and make something of themselves throughout their lives. I welcome that really strongly and passionately, because social mobility is so important, and without the basic education we do not get the social mobility that all of us, in all parts in this House, want to see.
I also welcome the substantial commitment to increasing overall skills spending by £3.8 billion over the course of the Parliament, equating to an increase of some 42%. That is big money. We are not talking trivia; we are talking big investment. This includes more hours’ learning for 16 to 19-year-olds, including those who are taking T-levels, which are another great innovation; more traineeships; building institutes of technology to help to close skills gaps in key STEM areas; funding the lifetime skills guarantee; upgrading our further education college estate; quadrupling the number of places in skills bootcamps; and increasing funding for apprenticeships to a record £2.7 billion by 2024-25.
I believe, and have always believed, in local colleges. I had the pleasure of working for one in the years when I was not in Parliament. They have a vital part to play in our determination to upskill and reskill individuals to maximise their potential. In my area of London, we are extremely fortunate in having a first-class college in London South East Colleges, led by Sam Parrett CBE. I regularly visit the Erith campus. The college does a fantastic job in the field of training, spread over the Bexley, Greenwich and Bromley boroughs, and—this is the key point—in working closely with businesses and local authorities to find out what businesses need and then being able to deliver it. The increase in money for schools is very welcome, as is the commitment for more money for per pupil funding and for new school places, particularly for children with special educational needs and disability. That is really good news for education.
The Budget also strikes the right balance between supporting businesses to recover from the pandemic and investment in our public services. One area I have regularly raised is the hospitality industry, which was the first to close but the last to reopen. I have had many discussions with businesses in my area dealing with hospitality on the issues they have had and the problems of lock- down measures and local restrictions. I know that the announcement today to cut business rates to help hospitality, retail and leisure will be most welcome across my borough of Bexley. The measures, alongside the small business rates relief, equate to a business tax cut worth £7 billion for more than 700,000 eligible businesses. It is the biggest business rates tax cut in 30 years. It will significantly reduce the financial burdens on businesses to support further investment.
In conclusion, I am pleased to give this Budget my full support. My right hon. Friend the Chancellor has struck the right balance between improving public services, supporting businesses, upskilling individuals and looking at the public finances. He has delivered a positive and constructive Budget that is good for our country. I think I can do no better than quote my right hon. Friend’s concluding sentence, when he said:
“This Budget builds a stronger economy for the British people.”
I believe it does.
Like my right hon. Friend the Member for Bexleyheath and Crayford (Sir David Evennett), I was pleased with the Chancellor’s optimistic Budget for our country today. We faced a major difficulty with the pandemic and have had to intervene in the economy more than any Government since the second world war, introducing schemes that were massive in their scale to protect people, jobs and businesses. The amazing thing is that that was delivered seamlessly and successfully. We used our fiscal position, whereby we had relatively low national debt, to get through this crisis. The fact that the OBR has reduced its estimate of scarring of the economy, and that the Bank of England has reduced it to only 1%—I suspect it may be reduced further—shows that the economy has got through a major crisis and emerged the other side in much better shape than one had any reason to suspect.
We have 1 million vacancies and an economy estimated by the OBR to grow by more than 6% this year, and it could be higher. We therefore have an economy that is growing and recovering extremely fast. I think that is a good thing. The fact that we have come through this with a growing economy is great. We also look like we will have rapid growth next year and growth in future years. The Government are now in quite a good position. They have a rising growth rate and rising tax income.
Two things concern me. First, I do not like raising taxes. I will only raise taxes if I feel that money is being spent well. We have increased spending in this Budget, and it is beholden on the Government to justify that it is being well spent in the NHS and through other Departments. I have to say that some of the examples—things such as Test and Trace—do not exactly fill one with enthusiasm that some of this money is being well spent. I call on the Government to look at that organisation and perhaps to start to reduce its size and the amount of money it is spending. Some £20 billion-odd a year is a lot of money—twice what we got from putting up national insurance on many people who are low paid. There are still many areas where the Government could save money.
I was pleased by the optimistic tone of what the Chancellor said today. What he has done with many taxes and charges, generally speaking, is just to let things flow on and not to put up inflation by raising things such as fuel duty and alcohol duty. The changes to business rates are welcome and will be helpful. In particular, I think the change of the taper rate in universal credit, so that people can earn more if they work more, is vital. It has always struck me that there is a barrier there. Many people working 16 hours a week, if they are asked to do overtime, say, “No, it’s not worth my while.” It must be right that those who are partly supported by the state and work for employers have flexible enough employment that they can take up more work and earn more when asked. That and many other measures should add flexibility to the British economy.
I welcome what my right hon. Friend the Member for Tunbridge Wells (Greg Clark) said about science. If any of us needed a lesson about the importance of science, the pandemic brought that home. We are a science superpower, but sometimes the proceeds of science are not turned into jobs, factories and other things.
At the beginning of the pandemic, we had world-class people to develop vaccines, but only two vaccine manufacturers for animals rather than people. Now we have factories and the capacity. Even the person who drives the van with vaccines in it from the factory to the delivery point is a job created in the United Kingdom. With any kind of science policy, we have to ensure not only that we have world-class science, but that that is turned into jobs in this country, which has always been our weak point.
One of big lessons of the past 12 months is that we have been living in a just-in-time world, so many businesses are finding higher freight rates and disruption due to the pandemic very difficult. We must have a more resilient economy, which may mean that the Government have to look at storemen and storing strategic materials. I was pleased to read in the newspapers that we are in discussions about increasing our gas capacity and bringing back some of the British Gas capacity. As an economy, the biggest challenge ahead is ensuring that we have the raw materials and the resources to get ahead. Relying on other people to build things is not as sustainable and sensible as it used to be.
Over the past 20 years, we have imported a lot from nice China, but we now find that it is more aggressive, so we have to look at where we source things from. There is nothing better than sourcing something at or near to home, which would make a big difference. Clearly, freight rates will make a big difference to the world economy. The economics change substantially if we can import a container of cheap products from the far east for £1,500 compared with £8,000 a container. That is why some British companies are busy filling a new market.
The essential lessons for the Government are to get the national debt and the deficit falling, which the Budget does; invest in the things that are worth investing in, such as decent infrastructure and science, where we can win; structure our economy so that we produce more at home; and plan for the fact that the free-flowing world-trading economy that we have known over the past 20 years may not be there in future. We have to be more resilient and more careful in how we proceed.
I do not envy the Chancellor. I do not think anyone else would have wanted to do today’s Budget, which was delivered in one of the most challenging environments of any Budget for many decades. I congratulate him, therefore, on a very skilful, comprehensive and prudent Budget, and on the priorities that he identified. That was possible only because of the prudent measures taken to support jobs and businesses during the pandemic, which proved to be essential and the right thing to do. It also emphasises how important it is that we avoid, at all costs, going back into a lockdown and taking the economy into reverse. The figure of a 6.5% increase in the economy, which is way ahead of the forecast and our competitors, is stunning and we need to safeguard that at all costs.
In the short time available, I will comment on a few specific things that the Chancellor announced and a couple that he did not. I absolutely welcome the end of the public sector pay freeze. Public servants did a sterling job during the pandemic in particular and I am sure we all want to see them rewarded more. I also welcome the increase in the national living wage to a rate above even that being advertised by the Labour party for security people at its party conference earlier this year.
I welcome the masterstroke on universal credit. I was uncomfortable with the ending of the temporary uplift, but the measure will be a practical help to 2 million families. I pay tribute to my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) who made that possible in the first place. If we go back to the first principles of how he envisaged that universal credit would work in practice, it is about making work pay and about fairness. It is a shame that that was not welcomed by the Opposition.
I welcome the focus on skills and productivity, and everything that has been said about the importance of R&D and investment in science. Again, the pandemic showed us that we have world-class academic and research facilities in this country, and we need to make more of them in future if we are to address the productivity gap from which we have suffered for so long. We must upskill our workforce and wean ourselves off the dependency on importing cheap, temporary labour from the EU and abroad without investing in training and the quality jobs that will keep people there and keep improving jobs.
I share the enthusiasm of my long-standing friend, my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom), for the emphasis on vulnerable children. Extraordinarily, that announcement was heckled by the Opposition. It is the vindication of the campaign that my right hon. Friend has undertaken for many years—many of us have banged the same drum—acknowledging the crucial importance of those first 1,001 days. We have made the case for the social benefits of investing in early years: investing in a strong attachment between a baby or toddler and his or her parents; investing in happy mums—and dads, where possible; and making sure that those children are well supported before school.
The situation has been made worse by the pandemic, with challenges for first-time single mums in particular and babies who could not meet other babies for many months. There has been a lot of focus on mental health problems in schools and school-age solutions—that is absolutely right—but we need to go back to where it begins, at conception. The stat that I have used throughout this campaign is that there is a 99% likelihood that the mothers of 15 or 16-year-olds suffering from some form of depression or low-level mental illness at school suffered themselves from some form of low-level mental illness or depression during or around the time of pregnancy. It is interconnected, so why do we not acknowledge that and invest?
Every year, we spend more than £8 billion on perinatal mental health, often for first-time mums. Every year, we spend £15 billion on child neglect, making a total of £23 billion on getting it wrong for mums and for kids at a crucial stage in their upbringing. Today’s announcement is a recognition by the Chancellor of the financial—not just the social—advantages of investing in children and their parents right at the beginning, and I absolutely praise that. I would point out that there is still a £2 billion shortfall in children’s social care for those children whose parents could not take advantage of that early support for whatever reason and who find themselves in care. That still needs to be addressed, because all the focus, I am afraid, has been on adult social care, but there are a lot of children out there who are missing out.
For those who say, “Sure Start was fine—why don’t you just stick with it?”, I should say that the Government measures are complementary; this is not an either/or. Sure Start had shortcomings, and 15% of the most deprived families in the country did not access it. This is not about bricks and mortar; it is about outcomes. Family hubs are much more flexible, offering all sorts of doorways and access points to those vulnerable families at a time when they need that sort of support, as well as the information to know what support they need, as was well articulated by my right hon. Friend the Member for South Northamptonshire. It is all about much better team-working around the family.
A couple of other things to mention: I raise a glass to the changes in duty on alcohol, particularly on sparkling wine, which helps the English wine industry in particular. I have been drinking English wine since the 1970s, but it was not very good then. Now it is a world-class, quality product of this country that beats French champagne and other competitors hands down.
The literature that is ready to go out from the Labour party makes the criticism that for the Chancellor it is all about reducing the cost of champagne. By 2040, the sparkling wine industry—the English and Welsh wine industry—is predicted to encompass more than 25,000 jobs, produce 40 million bottles and make over £1 billion in sales, a third of that in exports. It is a major industry, and it was a ridiculous anomaly when sparkling wine, with 11% alcohol, was taxed a third more than still wine, typically with 13% to 14% alcohol. I have been badgering Ministers about that anomaly for many years, and at last this Chancellor has put it right; we should celebrate that, rather than be trying to make cheap party points against a very important quality English and Welsh industry. I welcome, too, the measures on draft beer relief and on ciders.
On a different subject, I absolutely endorse the comments of my hon. Friend the Member for Worthing West (Sir Peter Bottomley): please can we taper back up to 0.7%, rather than just have a big leap back up with the problem that all of a sudden we have to spend large amounts on finding new projects, just as we have had to take away large amounts of money on end-early projects which we were previously financing under the 0.7% international development spend?
In closing, I want to mention a couple of things that were not in the Budget. The Labour party has been calling for VAT on energy bills to be scrapped. That of course could only happen now, after Brexit: the irony of that coming from people who have been banging on about the downsides of Brexit is that it is only possible as we can now dictate our own VAT and other tax rates in this country.
As the fuel poverty charity National Energy Action points out, an across-the-board scrapping of VAT is not necessarily the best way to support those most in need of help with rising fuel bills this winter. I ask the Chancellor to look at using the estimated £100 million additional revenue from the VAT receipts on rising energy prices, and perhaps some of the additional £1 billion the Treasury is gaining from the rising carbon tax revenues due to gas price hikes, to concentrate on a winter fuel payment to vulnerable working-age households, providing direct relief to help with energy bills this winter. We also need to be able to help those who are not working families and who will not benefit from the changes to universal credit.
As part of the green revolution, I want to see zero-rated VAT applied to heat pumps and energy efficient measures as well. It is incongruous for a Government who are strongly and effectively pushing the green agenda to be taxing environmental goods when no longer compelled to do so by the EU.
Finally, the hospitality sector is big in coastal constituencies such as mine. Hospitality businesses took a big hit in the lockdown but were helped by schemes such as eat out to help out—again, masterfully produced by my right hon. Friend the Chancellor last year—and helped hugely by the reduction in VAT from 20% to 5%. It has now just gone back up to 12.5% and is due to go back to 20% next April. I welcome the huge help from that 50% reduction in business rates, which is a big factor for many hospitality businesses, but they have taken a big hit already: a £100 billion reduction in income; permanent closures of over 12,000 establishments, including many pubs, as we heard from my hon. Friend the Member for Dudley South (Mike Wood); and 660,000 job losses.
It is great that we are having this business rate relief, but it is only for a year. My constituency’s hospitality businesses—restaurants, pubs and so forth—say, “We know we’re going to be paying higher wages, and we want to be able to pay those higher wages and to upskill our staff. We’re going to need to do that to keep them in the hospitality sector because the pandemic has meant it’s a buyers’ market, and people are going into higher paid jobs and other jobs that are less onerous and do not have such antisocial hours. If we can keep VAT rates low, we can pay those extra wages.”
That is the deal so, after the year when the business rate relief is no longer in place, please can we look at permanent solutions as well to help those businesses to up the pay of their staff in crucial areas of our economy, help improve the quality of those jobs and upskill the people in those jobs? This sector is a major part of our economy, particularly in coastal constituencies like mine.
I greatly welcome the Budget. It contains some very good practical measures that few would have expected after the economic nightmare we have all been through in this pandemic. I congratulate the Chancellor greatly on the Budget, therefore, and hope that just occasionally the Opposition will give credit where credit is due rather than leap on the bandwagon of saying everything this Government are doing is bad. Today’s Budget shows that actually we are getting things back on track, thank goodness.
I refer the House to my business interests in the Register of Members’ Financial Interests.
May I start by saying what a pleasure it is to follow my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton)? I think I agree with everything he said, particularly his point about the importance of early years. All I would perhaps say is that, like him, I have been drinking English wine since the 1970s, and we had to grimace at the time. It has got a lot better, and I commend it not just to the House but to the world. It is first class.
This has been said a few times, but may I say well done to the Treasury Ministers? When a colleague says that, there is usually a “but” at the end of it, but I do mean it. The Chancellor has done a phenomenal job. He has been very sure-footed during the last 18 months, and that is what we have needed. He and the Treasury team have been absolutely right in ensuring that we minimise the economic impact of the pandemic, with the furlough scheme and all the rest of it. I think the success that we are seeing with the economy now is a testament to that period when tough decisions were required, and taken, for the good of all.
I thought the Budget overall was very good. There was lots of optimism in it, quite rightly; that was quite justified. I liked the measures to help the lower paid, including the reduction in tapering on universal credit; I liked the green jobs emphasis; I liked the science and technology emphasis, and I liked the reform of how we levy duties on alcohol. I particularly liked the introduction of a £9.50-an-hour national living wage, as a result of which those working full time will be something like £1,000 better off per year. That will particularly support younger and lower-paid workers and help the UK transition to the high-wage, high-skill economy that we need.
I suggest that the Government should not be pushed off course by big business. For too long—perhaps 20 years —because of unlimited immigration while we were a member of the EU, it has relied perhaps too frequently on lower wages as a substitute for investment in R&D, the skilling up of the labour force and increased automation, all things that will now lead to the emergence of new and better-paid jobs. That in turn will serve to increase productivity. That is excellent news, and higher wages and controlled immigration will also bolster our one nation agenda, the aim of which is to encourage economic prosperity in order to better help the less fortunate in society.
Having said all that, in the few minutes I have left, I would like to share a few concerns with Treasury Ministers. I do not think that I am alone in being concerned that the level of spending increases forecast over the next four or five years is nearly double the growth rate of the economy. If we think it through, that is unsustainable. It can only result in financial pinch points—perhaps the raising of taxes and the taking on of more debt. It cannot be sustained indefinitely.
I am not someone who attaches much credence to forecasts, but even the Treasury forecast suggests that, as this five-year spending review period unfolds, the growth rate, if anything, will fall off. We have to look at this very seriously. We have to try to reboot growth, in many respects, and at the same time keep an eye on inflation. We are at a tipping point as to whether inflation is indeed transitory or whether it will become embedded. We have to be very careful about that, because it will have serious consequences for living standards generally if we let inflation out of the bag. We have to look at rebooting growth and do everything we can, because at the end of the day, growth is where it’s at. It is growth that is the engine room when it comes to a prosperous economy, a prosperous society and helping to raise living standards.
I make no apologies in opposing the increase in national insurance. We used to believe in the Conservative party that it was a tax on jobs. We seem to have drifted away from that. I urge Treasury Ministers to think about that, because in the end an increase in national insurance is reflected in lower pay and higher prices, which are bad for workers, businesses, customers and the economy as a whole.
We need to take another look at corporation tax. We need to reduce corporation tax over time. All the evidence suggests that if we reduce corporation tax or taxes generally, in the medium to long term, we increase revenues. It is not a zero-sum game. Low taxes equals greater prosperity. I also encourage the Government to consider bringing back a lower rate of corporation tax for small and medium-sized enterprises, which we all know employ a disproportionate number of people.
It is not just about lower taxes, however. We need to deregulate more if we are to reboot growth. There is too much regulation out there, including in financial services and in industry generally. I specialise in something called investment trusts, a hangover from our EU membership. Key information documents—KIDs—are still far too complex. They should be pushed to one side, with better and simpler regulation brought in.
We should also, now that we are out of the EU, consider scrapping more tariffs. Why do we still have tariffs on imported goods? I do wonder. The trade deal with New Zealand, announced last week, is a step in the right direction. A lot of tariffs were reduced or removed altogether. I did not know, for example, that we charged an 8% tariff on New Zealand onions, but that has now been scrapped and rightly so. We need to look again at reducing taxes, deregulating and scrapping tariffs.
In the minute or so I have left, let me touch briefly on one or two other items that perhaps were not touched on enough in the Budget. The cladding issue was mentioned. The Government have to look at that again. The problem is not the fault of leaseholders. It has been an extraordinary consumer regulation failure. I made my opposition known. The Government have moved a long way on this, but I still think it is wrong that we should ask leaseholders to pay anything when it has not been their fault. So I ask Treasury Ministers to look at that again.
On soft power, as chair of the British Council all-party parliamentary group, we recently fought a campaign to get the Government to think again. For the sake of an extra £10 million, the Government opted to compel the British Council to close 20 of its overseas offices, as defined by removing a country director and staff. That will damage our soft power. It has been the largest set of closures in the proud history of the British Council. Some people forget that it was established in the 1930s to help to counter the rise of Nazism. It is too much to ask. If we want to give meaning to our concept of global Britain and engaging with the world, we cannot be closing 20 offices. The British Council does an inordinate amount of work when it comes to our soft power.
I would suggest this, if money needs to be raised. I opposed HS2. I think it is the biggest white elephant this Government or any Government have spent money on for a long time. Yes, some forecasts suggest we would lose £10 billion, but we would save £90 billion. A fair bit of money could be saved if we scrapped it even at this stage. I would also take a close look at quangos. We have far too many quangos. The TaxPayers’ Alliance reckons that billions of pounds would be saved if we consolidated them or brought them under more control.
I reiterate what a good number of other hon. Members mentioned, which is getting value for money for the expenditure we are asking the taxpayer to incur. I was chair of the all-party parliamentary group on cancer for 10 years, so I can testify to the fact that Governments of all parties have, for good reasons, bombarded the NHS with process targets, such as two-week and four-week waiting times, but not focused enough on outcome measures—in other words, one-year cancer survival rates. That is why, despite all the money that has gone into the NHS, we are still not catching up with international averages when it comes to cancer survival rates.
Half those who work in the NHS are not medically trained, but just a tweaking of that figure—say, 60:40—would make a phenomenal difference on the frontline. We must re-examine how money is spent. Overall, however, this is an excellent Budget and I commend it to the House.
It is a pleasure to speak after my hon. Friend the Member for Basildon and Billericay (Mr Baron). I agree with many of his comments, particularly those on the cladding scandal, which I have been involved in considering as a Select Committee member since 14 June 2017. I definitely agree that we need to go further on the issue.
I very much welcome the Budget, as my hon. Friend did, although not just what is in it. I welcome the optimism with which the Budget was presented, and I welcome the way it was contrasted with the pessimism of the Opposition parties. We are a party that believes in the future of this country and the individuals within it, and we believe that we can make a genuine difference to their lives.
We must bear it in mind that the Budget is set against a backdrop of the reduction in the size of the economy that began 18 months ago, which was the sharpest contraction in any of our lifetimes. As a consequence of the Government’s interventions, that contraction has been followed by the fastest growth in the economy we have seen in our lifetimes. That has certainly put us back on a par with countries that people said were doing better than us through the crisis, such as Germany. The effects on GDP and on unemployment have produced far better outcomes for us than many people predicted.
We must put that in context. The huge economic fallout from covid was totally unexpected, although we were ready to deal with the economic fallout caused by leaving the EU. I voted to remain, but never argued that our economy could not succeed outside the EU. There were going to be short-term challenges, as we have seen to some extent, but, rightly, the Government have seen that in moments of crisis there are moments of opportunity. That is exactly the way we should approach this, and the move to a higher wage, higher skilled economy is absolutely right. The key to that is having control over immigration, which we never could have had within the EU.
Owing to that and owing to the covid crisis—principally because of the covid crisis—we have some real pinch points in our economy right now. There are labour shortages across the economy; this is not just about HGV drivers. Almost every sector I speak to is having labour difficulties, not least in Thirsk and Malton. There are difficulties in some of our pig supply chains and our pig farmers are having real problems in getting the pigs off the farms and into the meat processing plants because there are shortages of some workers, who farmers would normally get from further afield. That is due to Brexit to a certain extent but is mainly down to covid.
The other big issue that we must confront and which we will be dealing with for some time yet is inflation. Predictions of inflation topping at 4% seem likely, so that will cause some pressure for people, particularly those on low incomes. Nevertheless, both issues—labour shortages and inflation—are short term and they will be resolved in time.
The longer-term issues we must deal with involve demographics and the ageing population. That is good news as it means we are living longer, but the ageing population will put huge pressure on the taxpayer. The OBR is not always accurate, but its central prediction is that, owing to the cost of healthcare, social care and pensions, our debt to GDP ratio, which is 100% of GDP, will be 400% by 2060 if we do not change our system of taxation. That is a frightening thought for the Treasury, but it is something the Treasury will have to confront and deal with.
Rather than throwing lots of money at everything without expecting to raise taxes, or criticising tax increases to pay for our spending, as the Opposition do, the Treasury has taken a sensible, balanced view. It is balancing day-to-day payments and shifting the burden away from taxpayers’ earnings, so that it is subsidised not through the tax system, but through employers paying more to employ people, while people keep more of the money—hence the universal credit taper, which I absolutely welcome. As co-chair of the all-party parliamentary group on poverty, I think it is a far better use of taxpayers’ money to provide a greater incentive to work, rather than simply paying people through other taxpayers’ contributions to their income. That is absolutely the right way forward.
If we are to head off the prospect of our debt being 400% of our GDP, it is critical that as well as making work pay, we get the economy growing. To do that, we have to make business pay. That has been my life—I started up a business—but there are so many benefits: not just the opportunities for businesspeople, but the fantastic effect on the consumer. The best way to drive down prices and drive up services for consumers is to have more competition. In my experience, having started a small business that we grew into a larger business, the one thing that makes us more competitive is competition. That is the key: a competitive economic environment. That is what we have to try to engender.
Hon. Members have talked about cutting regulation and making it simpler to establish a business. I support all those things, as long as we put sensible protections in place, but the No. 1 thing that we can do to engender a positive business environment is to have a fair and level playing field. It encourages more entrants; it encourages people with all kinds of business model to start up and scale up. Businesses want a fair and level playing field and simple and stable taxation.
I welcome what the Chancellor has done on alcohol duties: a simpler, more stable alcohol taxation system is absolutely right. There has been a massive simplification, and I would like to see the same principle applied to one of the biggest barriers to a competitive environment and to a fair and level playing field in our business world today: business rates. Business rates create a massive distortion between physical and online retailers, which is deeply unhelpful.
The Government have done a lot—I think that they have put about £11.6 billion into easing the burden on lots of business sectors—but that still creates winners and losers. Whenever reliefs, much as I welcome them, are put in place, people will fall on either side. I know that the measures are only short-term, so we need longer-term reform, as many hon. Members have said.
There seems to be a debate about online sales tax, and the Government seem potentially to be heading down that road. The Opposition say that the digital services tax should be increased sixfold, which I have to say I think is a bonkers idea. It will hit very few retailers, or even hit marketplaces only. When the levy was put in place, Amazon added it straight to the cost of goods; the Opposition’s proposed increase would be added straight to the cost to consumers. It is absolutely wrong to do things in that way, but I welcome at least the efforts to solve the problem.
I believe that we should scrap business rates completely. The system is completely archaic; I absolutely believe what the Labour party says about that. In my view, we already have an online sales tax: it is called VAT. A simple solution—not easy, but simple—would be to add the £25 billion cost to VAT while lowering the threshold for VAT registration.
Well, I am happy to have a debate. Perhaps the hon. Gentleman should think about what I am saying, rather than simply ruling it out. It would create a fair and level playing field, it would raise the same amount, and it would mean online retailers trading in exactly the same way as physical retailers. It would be a simple solution to a very thorny problem.
I sympathise with the Treasury, because this is not easy. To my mind, the Opposition solution is totally unworkable.
I join my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) in appreciating the enthusiasm and constructive effort that have been put into this Budget. It is thanks to the wisdom of the stewardship during covid that the Chancellor has been able to provide such a positive Budget today. The Red Book is just out, as is the OBR publication, and the Chancellor sat down only a couple of hours ago, so there is much to digest.
From the perspective of Bournemouth, which very much values tourism and hospitality, the cuts to air passenger duty, alcohol duty and fuel duty are not just welcome, but appreciated. The cuts to business rates are particularly appreciated by the hospitality industry; they will make such a difference to the impact on the sector, which has been hit so hard by covid.
I was also pleased to see that effort had been put into the net zero strategy. I wish COP26 well, but we can only expect other nations to agree to reductions in CO2 emissions if we lead by example. We have done well to cut our emissions to date, and I welcome other initiatives such as investment in electric vehicle technology, efforts to insulate homes better, and the carbon capture and storage programmes, but in my view this is not enough if we really want to move the scale. I strongly urge the Government—and I am pleased to see the Chief Secretary in his place—to advance the modular nuclear reactor programme, which is something in which we excel across the world: this is what Rolls-Royce does. The reactors cost about £2 billion per unit, and one can be made in a factory every six months. We can not only reduce the CO2 emissions in this country but help other countries around the world, including our Commonwealth friends, who may find it very difficult to reduce their CO2 emissions.
Let me turn to the wider picture. I welcome the increase in aid spending to 0.7% of gross national income, and I am pleased to have been part of the noise that was made to try to encourage the return to 0.7%. The Chancellor’s domestic focus on energising the post-covid economy is understandable and has of course been welcomed, but while we have been distracted by covid, the world has become increasingly dangerous, and the difficulties that we have been facing in the wider security context of today are due to a global security issue. It is because of covid that the Budget has been affected, but nowhere does the Budget, the Red Book or indeed the OBR deal with security and its impact on the Budget itself.
As I have said in the past, there is a 1930s feel to the world, with rising authoritarianism, western institutions unable to cope with errant nations, the absence of western leadership, and—as Afghanistan illustrated—a lack of strategic patience and ambition to hold the international peace. I remind the House of the 10-year rule, adopted in 1919: the assumption that there would be a decade in which to identify and prepare for future threats. Today, demands on our armed forces are increasing and the storm clouds are beginning to gather overseas, yet we currently remain on a peacetime defence budget. I hope that, if global security continues to deteriorate, the Chancellor will return to the House to announce an increase in defence spending. It falls to me to report to the House that the defence budget is the only budget that I can identify that is being cut today, in comparison with those of all other Departments.
A key part of the Chancellor’s speech was his comment that we want to live in a country where the response to every question is not, “What are your Government going to do about it?” I entirely agree with his premise. There are limits on what the Government can and should do, but I strongly believe that security is the Government’s responsibility, and I am sad to see that, in real terms, the defence budget has been cut—ever so slightly, but it has definitely been diminished.
Defence spending is overstretched. It includes space and cyber-security, which is having an impact on the three conventional services. The Army is being forced to cut the number of tanks, armoured fighting vehicles and troops. The Royal Air Force is cutting the number of heavy lift aircraft and the number of F-35s—our new fighter aircraft; we were supposed to buy 138, and we are buying only 48—and the Navy is cutting the number of frigates. Cutting the defence budget at this point is a grave mistake, which our competitors will note, and it sends the wrong message, post Afghanistan, about our commitment and appetite to play a more influential role on the international stage.
Page 7 of the Red Book states:
“The Budget…builds on the government’s vision of Global Britain as a problem-solving and burden-sharing nation, globally competitive and firmly committed to an open and resilient international order.”
It goes on to say:
“In the coming years, the UK will continue to catalyse action from the international community to address the most pressing global issues”.
Perhaps it was just a printing error, but it seems that the Government are not interested in doing that now.
We need to address this. We face continued unparalleled economic uncertainty, but we also face growing global instability. From where I sit, I see the world becoming more siloed and countries becoming more protectionist. As nations retreat from global exposure, our world is absolutely getting more dangerous, not less. I ask that as we grow in economic confidence, we address the real security concerns that are in front of us. For me, that is what global Britain needs to be about.
I warmly welcome this positive, optimistic Budget, which puts post-pandemic economic recovery at the heart of what we do. We currently have the fastest-growing economy in the G7. The OBR has predicted 6.5% growth, although looking at recent statistics, I think it could be higher. Next year, we are looking at 6% growth. That is very strong. We are also looking at employment getting back to pre-pandemic levels, and at wages going up.
But more important than my welcoming the Budget is the fact that the markets have welcomed it. Gilts have rallied substantially this afternoon. Ten-year gilt yields have gone down 10 basis points, or 0.1%. This is relevant to all of us because, as the Chancellor said in his Budget, 100 basis points, or 1%, means either a cost of £23 billion or a reduction of £23 billion, depending on which way yields go. That is a real endorsement by the gilt markets of what we have done today. It is telling that the Debt Management Office has said today that our anticipated sale of gilts will be down £57.8 billion, relative to what we thought we had to do at the beginning of the year. That is huge—we have almost £60 billion less debt that we have to go into the markets to sell.
I also welcome the Chancellor’s statement at the end of his speech that the direction of travel was to lower taxes. I feel very strongly that, while we have had to do some things because of the exceptional circumstances of coronavirus, in the long term we need to be a low-tax economy. It is with lower taxes that we encourage growth and get more investment, which leads to greater productivity, which is key.
As many colleagues have said, we are clearly investing an awful lot in public services at the moment, and it is good that we are providing that investment. However, I say to my colleagues on the Front Bench that we must ensure that we get value for money from that expenditure. Let us account for every pound of it, because the numbers are substantial. Many people have alluded to inflation, and inflation is forecast to go up, peaking at 4.4% according to the OBR forecasts. As far as that concerns wages, of course we want people to be well paid. We want a well-paid economy and well-paid workers, but let us ensure that we also get the skills and the productivity improvements in place.
This is a great Budget. I am conscious of the time, but I would like to talk briefly about a few issues in my constituency. First, I warmly welcome the tapering for universal credit, a strong development which goes to the Conservative ethos of ensuring that work pays. I am also glad to see that we have made progress on the residential property development tax. Grenfell Tower is in my constituency, so I am glad to see there has been progress, but I am conscious that we are still awaiting further details on 11 to 18 metres.
Although bank corporation tax rates will go up, we have reduced the surcharge, which I am glad to see. I object to the attitude of some Opposition Members who are so negative to financial services. I remind everyone that financial services are critical to our economy.
They are worth £76 billion.
I believe that is 11% of our total tax take. This is an issue not just for London but for Edinburgh, Glasgow, Newcastle, Leeds, Bristol and Chelmsford. Financial services are critical, so let us not talk them down, as that would be equivalent to California talking down the film industry. Financial services are a huge source of our exports.
Finally, I welcome the £7 billion-worth of measures on business rates. These are short-term measures. I welcome them but, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) has just said, we need a longer-term solution. I would like to work with my Front-Bench colleagues on finding that solution.
One small technicality: the 50% discount for hospitality will be capped at £110,000. I represent a central London constituency with a lot of retail and hospitality. Central London has suffered about the most in the country, but many of my businesses will get very little help on a percentage basis. I would appreciate a conversation on that point.
This is a very strong Budget. The economy is faring well. We have alluded to some risks, but we can all get behind this Budget, which is good for the country and good for Kensington.
Having sat here for six hours, I am running out of unique points to make. Rather than following in the footsteps of illustrious colleagues who made fine, analytical arguments on the Budget in its widest sense, I have been asking myself what it will mean for the ordinary person I represent in Bury.
Three or four days ago it was announced that Greater Manchester will receive more than £1 billion of funding to transform our transport infrastructure. Today the metropolitan borough of Bury, which is made up of two parliamentary constituencies, was successful with two levelling-up fund applications. Both were for £20 million, one to transform Radcliffe, a fine town in the constituency of my hon. Friend the Member for Bury South (Christian Wakeford), and one to transform the world’s best market, Bury market, which as you know, Madam Deputy Speaker, has the finest purveyors of black pudding. I have been working with my local Labour council and national Government to put forward a vision of how such an iconic part of our history and heritage in Bury can be used to transform and regenerate the town centre, to create employment and to provide a hub for mental health and health services.
In the last week people in the metropolitan borough of Bury, on those three announcements alone, have received more than £100 million of funding, from which we are getting a new interchange, better bus services and better tram services, as well as more employment and the regeneration of our town centres. Anyone looking at the Budget will therefore say it is a fantastic Budget that will transform opportunities and do something that politics has not done for a long time. It not only provides the fiscal policies that allow the general economy to prosper but is changing landscapes in front of us and reinforcing our pride in our areas. I thoroughly support every announcement that the Chancellor made today.
I fully support the cut to beer duty, in respect of which I want to make one point. The big four pub companies in this country account for 25% of the total number of pubs. Pubs are disappearing at an alarming rate throughout the country. All Conservative Members, and I suspect even Labour Members, support the reductions in duty, which are clearly welcomed and will benefit the industry. I gently encourage my friends on the Front Bench to think about this problem, though: the profit will go to the pub companies, in the main. Often, the contractual and leasehold arrangements that they have with their tenants in the pubs in all our constituencies make it financially unviable for the pubs to succeed, no matter what steps are taken in respect of tax. I hope that is taken into consideration.
Let me go back to Bury and how the Budget will improve lives. I am the chair of the all-party parliamentary group on youth employment, and I welcome the announcements on skills and further funding. I do not have time to go over them all, but I do know how the investments that have been previously announced are affecting my constituents. Last week, planning permission was given for a £6 million health, innovation and STEM centre, which will teach new skills and provide new facilities and training opportunities for young people in Bury. It is not simply about the numbers; when I sit in the Chamber, I sometimes think how important it is that we personalise things. We have to demand and think about outcomes, not just amounts of money, and the Government are putting in place policies in that regard.
I wish to speak in support of a lot of my hon. Friends who have talked about the positive and optimistic nature of the Budget. Last week, I talked to the headteacher of Derby High School, a fine high school in my constituency. She was full of ambition and ways to improve the delivery of education for students at the school, but the building is completely unacceptable for that and needs investment. The Budget offers a way for investment to be put in. We will have more new schools and more educational support, so that schools like the Derby know that the Government are going to back them with not only increased funding in the schools budget but the facilities that pupils in my Bury constituency will hopefully enjoy.
Whenever I look at Budgets, I cannot escape my 10 years as a councillor. Whenever I see the word “pothole” in anything, I get very excited, and there is £8 billion in pothole funding. My hon. Friend the Member for Aylesbury (Rob Butler) probably thinks the same thing. At its basic level, politics is about the things people see when they walk out the front door. If there is a pothole, people want it to be fixed. People want roads to be in such a condition that they can drive down them safely and appropriately. People want transport infrastructure in Bury. They want good schools that can be improved. They want better hospitals. That is what the Budget will deliver in areas such as mine and throughout the country. It is a fantastic Budget.
The Budget also opens up opportunities for technological advances. Last week, I visited the East Lancashire Railway in my constituency. Bury is known for many things and is a unique place, but one fine example is the steam railway. We have the longest continually used locomotive shed in existence—we have been fixing steam-railway locomotives in Bury since 1860—and although the House cannot see it, it is the most amazing place to go into. When we consider the skills agenda, there are obviously the high-tech jobs, the green jobs and all the other things that the Chancellor talked about, but there are also other innovative sectors. There is too much work for the East Lancashire Railway: we have to invest in that site so that we can carry out the renovations that are needed and preserve part of our national heritage. The railway is looking for £10 million of investment to transform that site so that it can provide more apprenticeships and opportunities and create the sense of pride in place that is at the heart of a lot of the Government’s policies.
The Budget invests in Bury people and in the infra- structure necessary for our economy to prosper, and it will put more money into the frontline services that we all need. I was delighted about the investment in special educational needs services—I know that the hon. Member for Sheffield, Hallam (Olivia Blake) is very passionate about this. Whether we as a Parliament succeed in levelling up this country will depend on our creating equality of opportunity for those with special educational needs to have the best chance to thrive and succeed. It is a credit to the Chief Secretary to the Treasury and to this Government that money is going into that area. Again, it is about how that money is delivered on the ground—£100 million, £200 million or £300 million are just numbers on a piece of paper. We have to think about the delivery model at a local level.
I have been speaking with the fantastic headteacher at Elms Bank School in my constituency, and we believe that the best model for delivering SEN provision in our area is through an SEN hub—a lifelong hub where we have the integrated commissioning of services in one place to support people not only on their educational journey, but with mental health support and employment support. One comment that was made was that the pandemic has shown that the delivery of services at a local level can be done in an innovative way to ensure that we are delivering these important levelling-up provisions in the best way. Certainly in Bury, the creation of hubs has been excellent.
I am tempted to speak about Bury for a lot longer. There is much to be said about the place, but I prefer to say this: as the last person to speak in this debate, I can say that I have listened to all the contributions from those on the Opposition Benches and that what they say is not logical. We are investing billions of pounds in frontline services and billions of pounds in the most vulnerable people. By cutting taxes, we are providing the conditions for businesses to thrive. I refer to my entry in the Register of Members’ Financial Interests—I am a practising solicitor and have my own business. What has been announced today supports employers like me. It is supporting people to deliver more jobs on the ground, supporting skills, and providing the opportunities for the future. I know that there is political knockabout and that perhaps people say things because they have to do so, but I am so proud of our Government. We are delivering on our central mantra of levelling up for every single person no matter their background, no matter their circumstances, and no matter where they are from. People have an equal chance to have a happy, fulfilling life, and that is what this Budget is about. It is a fantastic Budget, and I congratulate my right hon. Friend the Chief Secretary to the Treasury.
Ordered, That the debate be now adjourned.—(Scott Mann.)
Debate to be resumed tomorrow.