The Exchequer Secretary to the Treasury (James Cartlidge)
It is a privilege to open the second day of debate on the autumn statement for the Government. Last Thursday, my right hon. Friend the Chancellor presented this House with a plan to tackle the cost of living crisis and rebuild our economy—a statement that was honest about the challenges we face and fair in its response. His three priorities, and the priorities of this Government, are simple: stability, growth and public services. The people of this country need us to take the difficult decisions on their behalf, and that is what we will do.
In yesterday’s debate, we heard how our plan leads, among other things, to lower energy bills, higher long-term growth and a stronger NHS and education system. The subject of today’s debate is sustainable public finances and taxation, and the House will understand if I focus my remarks on those aspects of the statement.
For the record, and as the Chancellor revealed, the Office for Budget Responsibility judges that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says that higher energy prices explain the majority of the downward revision in cumulative growth since March. It also expects a rise in unemployment from 3.6% today to 4.9% in 2024, before it falls to 4.1%.
One of the most salient points, and an issue we cannot and will not ignore, is inflation. Last week, the Chancellor called inflation “the enemy of stability”, noting its impact on mortgages, household bills, businesses and unemployment. We are experiencing very high levels of inflation, the primary cause of which, according to the OBR, is global factors. Those who question that should remember the following: yes, inflation is high in the United Kingdom, but it is higher in Germany, at 11.6%, in Italy, at 12.6%, and in the Netherlands, at 16.8%. The reality is that the pandemic is still casting an economic shadow, with the lasting impact on supply chains having made goods more expensive. As Members will understand, this has been significantly exacerbated by Putin’s illegal invasion of Ukraine.
The OBR forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, although I note that the OBR has said that actions taken as part of the autumn statement will help inflation to fall sharply from the middle of next year. Tackling high inflation needs fiscal and monetary policy to work together, with the Government and the independent Bank of England acting hand in glove. It also needs the world to believe that this country will always pay what it owes. Thanks to the decisions this Government have already taken, the OBR has said that the peak of interest rates is likely to be lower than it would otherwise have been, in turn benefiting our economy and public finances.
But we cannot be complacent. That is why we are committed to rebuilding the public finances. The decisions the Chancellor made last week will mean that over the next five years, borrowing is more than halved. This year, we are forecast to borrow 7.1% of GDP, or £177 billion. Next year, it is 5.5% of GDP, or £140 billion, then by 2027-28, it falls to 2.4% of GDP, or £69 billion.
The Chancellor also confirmed two new fiscal rules. The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. The second is that public sector borrowing over the same period must be below 3% of GDP.
Peter Dowd (Bootle) (Lab)
Given that the Government since 2012 have broken virtually every fiscal rule they have set themselves, why should we pay a blind bit of attention to this new fiscal rule? Why would we believe anything that those on the Tory Front Bench say about their fiscal rules, which are brushed aside as and when they feel like it?
James Cartlidge
I always enjoyed intervening on the hon. Gentleman when he was a shadow Minister and I was a Back Bencher, and I have great respect for him. The Opposition may want to airbrush from history the extraordinary events of recent years—the pandemic and now the invasion of Ukraine—but any Government would have to adjust to those circumstances. These were not minor events; they were once-in-a-generation events, and they have had a huge impact.
Overall, the autumn statement delivers a consolidation of £55 billion, with just under half from higher taxation and just over half from spending reductions. The consolidation ensures that excessive borrowing does not add to inflationary pressures and push interest rates up further. In the short term, we are taking difficult decisions to make sure that fiscal policy keeps inflation in check, but doing it in a compassionate way that still provides support to the most vulnerable.
Chris Stephens (Glasgow South West) (SNP)
I thank the Minister for giving way; he is being very generous. The OBR says that Her Majesty’s Revenue and Customs compliance measures and chasing social security fraud against the Department for Work and Pensions will bring in £2.8 billion, but the Green Book says that social security fraud is £2.2 billion, which suggests only £0.6 billion coming in from tackling tax avoidance and evasion. Why is that figure so low, when the estimate is £70 billion of tax avoidance and evasion?
James Cartlidge
The hon. Gentleman asks a perfectly good question. He will be aware that we have made huge progress on closing the tax gap, which effectively means that we are making huge progress on cracking down on tax avoidance. There is always further to go, but we have scored significant savings from those measures over the forecast period.
The upshot is what the Chancellor rightly called a “balanced path to stability”. We are tackling inflation to help all our constituents with the cost of living, while at the same time providing the stability that business needs to be able to invest and grow. We want low taxes and sound money, but sound money has to come first.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
What worries me about the Budget is the lack of focus on how the economy will grow in subsequent years. If we have an austerity Budget, public investment is falling; exports are falling because of Brexit; and consumer spending is going to fall because household budgets are being crushed by the cost of living crisis. That leaves business investment. Are businesses seriously going to invest when all other areas of growth are collapsing?
James Cartlidge
I am grateful to the hon. Gentleman. The key issue for growth at the moment is inflation. What on earth do we think is causing consumers to rein back spending? The answer is that this year, this country will have to find an additional £150 billion to pay for the higher cost of energy—that is the equivalent of an entire NHS. Yes, we are taking difficult decisions, but that is the best way to ensure that we get inflation down, in partnership with the independent Bank of England, and build the platform of stability that businesses need to grow and invest. On the point about Brexit, if it was causing the problems, why do the Netherlands and Germany have higher inflation? He should think about that.
On tax, the House will have heard the Chancellor say that we will be fair by asking those who have more to contribute more, and by avoiding tax rises that most damage growth. That means, for example, that while some taxes are rising, we have not raised headline rates of taxation. Tax as a percentage of GDP, meanwhile, will increase by just 1% over the next five years.
On personal taxes, we are reducing the threshold at which the 45p rate becomes payable from £150,000 to £125,140, which means that those earning £150,000 or more will pay just over £1,200 more a year. At the same time, we are maintaining at current levels the income tax personal allowance, the higher rate threshold, the main national insurance thresholds and the inheritance tax thresholds for a further two years until April 2028.
Jonathan Gullis (Stoke-on-Trent North) (Con)
In the summer leadership contest, the Prime Minister set out his plan to see a dramatic cut to the 20p tax rate at the end of this decade. Is that ambition still held by the Prime Minister and the Chancellor?
James Cartlidge
As I have said before, my hon. Friend is a champion for his constituents. In oral questions, he raised an important point about tax on fuel and he now mentions tax on income. We face an extraordinarily difficult position and I am sure that even he would agree that inflation is the ultimate tax. Inflation undermines savings, hits the poorest the hardest and hits the entire economy in every part of the country. We have had to take difficult decisions on income tax, but of course, in future fiscal events, we will announce what we will be doing with taxes.
The current tax changes include the fact that the dividend allowance will be cut from £2,000 to £1,000 next year and then to £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year and then to £3,000 from April 2024. Those are not insignificant changes, but they still leave us with more generous core personal allowances than countries such as Germany, Ireland, France and Canada.
To make our motoring system fairer, we have also decided that electric vehicles will no longer be exempt from vehicle excise duty from April 2025. We are keeping previously announced cuts to stamp duty to support the housing market, but only until 31 March 2025, following which we will end the measure.
Moving to the all-important business taxes, we have decided to freeze the employer’s national insurance contributions threshold until April 2028, but we will retain the employment allowance at its higher level of £5,000. That means that the smallest 40% of all businesses—the ones that are crucial to our growth—will still pay no NICs at all.
On VAT, we already have a registration threshold more than twice as high as the EU and OECD averages, but we will maintain it at that level until March 2026. We will implement the internationally agreed OECD pillar 2 global corporate minimum tax rate to make sure that multinational corporations pay the right tax in the right place. At the same time, we will take further steps to tackle tax avoidance and evasion. Further to the intervention of the hon. Member for Glasgow South West (Chris Stephens), that will raise an additional £2.8 billion by 2027-28.
Ahead of the autumn statement, there was much discussion on the merits or otherwise of windfall taxes applied to profits resulting from unexpected increases in energy prices. Our view is that any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses.
Chris Stephens
The Minister is being generous on these points. Of the 6,000 additional staff who are estimated to be going to HMRC and DWP, what is the split between the new posts that are going to DWP and those that are going to HMRC?
James Cartlidge
In my short time in this job, I have tried to cram a lot of facts into my head, but I do not have that split immediately to hand. I will write to the hon. Gentleman after raising the matter with my officials.
To return to windfall taxes, in that context, we will increase the energy profits levy from 25% to 35% from 1 January until March 2028. We have also decided to introduce a new temporary 45% levy on electricity generators to reflect the fact that the way our energy market is structured also creates windfall profits for low-carbon electricity generation. Together, those taxes will raise more than £14 billion for the public purse next year.
Christine Jardine (Edinburgh West) (LD)
The Minister is being generous with his time. On the specific point of the windfall tax, there have been calls in this place since October last year for a temporary windfall tax on the extra profits of oil and gas companies. Does he accept that, had the Government moved more quickly to do that, they might not have faced as much blame for not reacting quickly enough to the global events that he mentioned and that people would perhaps think that the Government were managing the crisis better? At the moment, a great deal of the criticism is about not the events themselves, but the Government’s lack of reaction and poor management of them.
James Cartlidge
I am grateful to the hon. Lady. We introduced a windfall tax in May. When we consider the timeline relative to the invasion of Ukraine, that is pretty swift. By that point, it was clear that we had an extraordinary surge in energy prices. Of course, as a Government, we would not ordinarily want to take such steps, but I think there is consensus that, when profits are rising so sharply and consumers are having to pay such high prices, we should look at putting that kind of regime in place.
Alexander Stafford (Rother Valley) (Con)
Can the Minister tell us more about what he means by “temporary”? Earlier this year, we heard that the windfall tax would be temporary. We have heard about lots of taxes, such as the 45p tax, being temporary. Indeed, income tax, which was introduced in 1799 by William Pitt the Younger, was going to be a temporary measure to deal with the Napoleonic wars, yet here we are dealing with it. What does the Minister mean by temporary, and when will it end?
James Cartlidge
I am grateful to my hon. Friend; it means until March 2028.
Stephen Crabb (Preseli Pembrokeshire) (Con)
In response to the criticism of the hon. Member for Edinburgh West (Christine Jardine) about not responding fast enough to proposals to extend the windfall tax, I would say that changing the rules of the game regarding tax for some of the biggest investors and employers in different regions of the United Kingdom is a huge thing for a Government, so proceeding cautiously in response to changing events and to the precise quarterly profits that those companies posted was exactly the right thing to do.
James Cartlidge
My right hon. Friend puts it perfectly. These are significant changes for the industries concerned and one should not go about it in a wanton fashion. We have to try to carry the industry with us, which is why, for example, we have a very generous investment allowance in the North sea levy. As I said, I think the wider public support that but he is right that we have to go about it pragmatically to ensure that we balance the interests of investment with raising the revenue.
Let us not forget that that revenue is going to fund support for energy bills at an extraordinary level through the energy price guarantee, which the OBR now estimates will cut £900 from the typical energy bill this winter. Next year, with the new energy price guarantee, a further £500 will be cut. We are taking these difficult measures to be compassionate and help those at the bottom the most: earlier this year, the amount of energy support for the most vulnerable was £650; next year, it will be £900. We are taking serious steps to support the most vulnerable.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
It is extraordinary to hear that response to the question about levying a windfall tax and those comments about the pragmatic approach that the Government took when the oil industry companies themselves were saying, “We’re happy to pay more tax. Take more money from us. We’re making so much money.” So the Government were incredibly slow to act.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
It’s a stock answer.
James Cartlidge
It is not a stock answer. How could it be a stock answer when I have not taken an intervention like that before?
The hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) will I am sure forgive me but, on his substantive point, we have delivered a significant windfall tax, but with the investment allowance that balances the interests of investment in the sector against needing to raise revenue. I repeat, where is that revenue going? It is to help families throughout the United Kingdom, including in Scotland, because we are stronger together when the support of the Treasury, at the heart of the United Kingdom, helps everyone in every part of this country.
The final issue to address with regard to taxation is business rates, which I know many colleagues feel strongly about. We believe that bills for business rates should accurately reflect market values, so we will proceed with the revaluation of business properties from April 2023. However, we will soften the impact on businesses with a £13.6 billion support package over the next five years. Nearly two thirds of properties will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit. Furthermore, we are extending and increasing the retail, hospitality and leisure relief scheme from 50% to 75% in 2023-24, showing that this is a Government committed to protecting the businesses that make our high streets and town centres successful.
These are not easy times to bring in these sorts of measures, but that does not mean the Government will shy away from difficult decisions. Our priorities, expressed through the autumn statement, are stability, growth and public services. Today, we are debating specific tax measures and the importance of sustainable public finances, but what the Government are delivering is much more comprehensive than that—an integrated response to what the Chancellor last week called
“a global energy crisis, a global inflation crisis and a global economic crisis”.—[Official Report, 17 November 2022; Vol. 722, c. 855.]
The bottom line is this: because of the difficult decisions that I have outlined today—the decisions this Government are not afraid to take—the OBR confirms we will see less severe inflation and a shallower recession, but perhaps most importantly, unemployment is forecast to be 70,000 lower than would otherwise have been the case. That is 70,000 real families who will benefit. At the same time, when growth returns, we will be in a better position to pay our debts, ensuring those are not simply passed on to future generations. That is the promise of this autumn statement—a statement that is balanced, honest and fair—and I commend it to the House.
Several hon. Members rose—
Kit Malthouse (North West Hampshire) (Con)
It is obviously foolish for the Opposition to pretend that a pandemic and a continental war, with its associated energy shock, would not be felt economically in this country. At the same time, it is clearly preposterous for them to try to talk down the UK economy as some kind of basket case, when we compare very favourably to some of our peers on debt to GDP, employment is still very high and we have an economy that exhibits so many underlying strengths. At the same time, it is fair to say that the autumn statement was greeted with some dismay on the Government Benches. The Chancellor of the Exchequer has obviously had to make some very difficult and challenging decisions, given the economic headwinds we face.
First of all, however, I should point to one of the bright moments in the statement, which was the Chancellor’s pledge on education funding. The £2.3 billion extra on top of what is already in the baseline over the next two years was very welcome. I am grateful to the 27 colleagues who, along with me, signed a letter urging the Chancellor not only to protect schools funding, but to invest further. Our view was that one of the groups most hard hit by the pandemic and that awful disease was children. The case for investing further in their education to deal with the backlog, helping them to catch up and ensuring they can have productive lives in the future, felt to us morally strong and it would have been indefensible to cut that spending. We are therefore extremely pleased that he responded in such a positive way.
I have only a few minutes, so I want to outline three lessons from the recent turmoil, two warnings and a hope for the future. The first lesson is predicated on a phrase that does not go down well in either marriages or politics—the four little words, “I told you so.” For those of us who have been tracking the path of the UK money supply over the last 10 years, the underlying inflation, which was baked into our system and has emerged over the last 12 months, has not, I am afraid, come as any great surprise. The fact that the Bank of England has been slow to recognise the importance of monetarism and money policy over the last couple of years is a cause of great dismay, not least because a number of us consistently raised this issue with the previous Governor when he was in front of the Treasury Committee and since. The denial of the kind of Bank of England orthodoxy that the money supply mattered has come back to haunt us in a big way. The enormous growth in the money supply has outstripped the growth in our economy—yes, coming out of the crash in 2007-08, but in particular coming out of the pandemic—and resulted in the inflation in this country that is now taxing every family. It is hard to see that the Bank has moved with alacrity to deal with it—if anything, I think the criticism is that it has been a bit slow—but I hope the lesson we learn for the future, and on which this House should concentrate and focus, is that the money supply matters. When we look around the world we see consensus around a loose monetary policy for far too long and we need to bear that in mind.
The second lesson is that the Bank’s handling of the bond market really matters as well. We had assumed that that was a benign market that we could take for granted, but it became clear that the Bank’s hangover from its quantitative tightening—its declaration of sales forward into the market—had a significant impact. That was then exacerbated by the so-called fiscal event. We also bear huge losses on that market from the Bank’s dealings. Admittedly, there have been profits in previous years, but the fact that we are bearing about £11 billion-worth of losses from the Bank’s trading in that market matters. Also, within that market, we discovered to our horror that pension funds were effectively gambling with borrowed money, shorting inflation through the so-called LDI— liability-driven investment—strategy, which became so systemically problematic for the economy that the Bank had to intervene again. That points to lax supervision and comprehension of the weaknesses in the bond market.
The third lesson is that we as a House have perhaps not concentrated enough on the operations of the Debt Management Office. I have yet to see anywhere an obviously declared policy decision to move our debt more towards index-linked or inflation-linked bonds. We have moved from 6% of our debt being index-linked 10 or so years ago to about 22%. That is a near-quadrupling of the figure. As I think the Chair of the Treasury Committee—my hon. Friend the Member for West Worcestershire (Harriett Baldwin)—said yesterday, that effectively means that the Government were shorting inflation. At a time when we had lost track of the money supply, or in fact, had decided that the money supply did not matter, that proved to be a foolish bet.
Bim Afolami
When I was on the Public Accounts Committee a couple of years ago, we looked at index-linked debt on the whole of Government accounts. If I recall this correctly, the answer we received was that there was no long-term risk of widespread inflation because there were global forces that were becoming deflationary, rather than inflationary. The points that my right hon. Friend is making illustrate well the poor analysis in that approach.
Kit Malthouse
I completely agree. I remember well debates with Mark Carney, when he was head of the Bank of England, about the combination of a rise in the money supply and the underlying inflationary effects in our economy being masked by deflationary effects, not least of global supply chains, and the fact that we now have so much stuff made and imported from China, as well as the effect of the internet. Once the curtain was pulled back and we had problems with our supply chains—and that curve of deflation bottomed out—lo and behold, the money supply suddenly became important again. Let us hope that we learn that lesson for the future.
Notwithstanding the difficult decisions that the Chancellor has made, another opportunity is coming for us to trim the sails: the Budget in the spring. As we move towards that moment, I hope that we can look towards some positive changes in the global economic environment. Hopefully, the war in Ukraine will start to recede. International container prices are already falling, as are energy costs. We can therefore think again in the spring and I hope that we will bear two things in mind.
First, we need to bear in mind that, in a tight labour market, tax rises can prolong inflation. If we, through tax rises, give people, in effect, a take-home pay cut at the same time as they face higher costs because of their mortgages and generally because of the cost of living, they are likely to start to demand more from their employers. I am afraid that that has a possibility of sparking a wage and price spiral, particularly as we know that the secondary effects of that inflation will take some time—possibly months, if not years—to work their way through the system. I would bear that in mind when we think about possible tax rises, particularly from fiscal drag.
My second concern—I give this warning to Ministers—is that chasing debt to GDP could become a hare that they are unable to catch. If the actions taken from a fiscal and monetary point of view damage our GDP number—if GDP falls—we have to work even harder to reduce costs, or debt, against that number. If the action taken to reduce the numerator in the equation paradoxically damages the denominator, the equation becomes harder and harder to reach. If we base our ability to reach that debt-to-GDP ratio on a lower figure—particularly with a 3% GDP debt limit—through tax rises, the only way to avoid a doom loop is to tax and tax, even if we know that we can never fill in the hole that we are digging.
Finally, let me turn to my hope for the future. When we get to the spring Budget, I hope not only that the global winds that are blowing against us will have receded somewhat, but that, frankly, we can restore our belief in capitalism. My strong view is that the only way that we will get out of this hole—a number of Members have said this in the past few days—is through growth. We will not tax our way to prosperity, nor will we tax our way out of this debt-to-GDP problem. We need to inject growth into the economy. The only way to do that is to let the wealth creators free by loosening the ties that bind them and by looking at the regulation and taxation on capital, in particular, so that people are willing to take risks. One of the most dismaying choices in the statement was the proposed increase in capital taxes, not least because that changes the risk-reward ratio, meaning that it is less likely that people will go out and start a business.
Although some of the decisions about research and development, including the vast amount of money that is being pumped into that across the whole UK, are extremely welcome, unless there is a strong, pullulating, dynamic private sector out there to pick up the ball and run with it, all the intellectual property that the money creates will just end up overseas, where plenty of venture capitalists and entrepreneurs will be willing to pick that up and run with it.
Believing again in capitalism, allowing people to keep more of their money and to invest it, and building businesses for the future will be critical to our overall success in the months, years and decades to come. As we move towards the spring Budget, I hope that Ministers will look again at the five-year OBR forecast, remembering that it is there not to be fulfilled, but to be beaten and bested. It is there to warn us of what might happen so that we can take action now to avoid it. I hope that come the spring Budget, that is exactly what the Government will do.
Dr Liam Fox (North Somerset) (Con)
It has been clear from this debate and the previous debate that the backdrop to our economic discussion is one of continuing post-pandemic global economic disruption and the rise of global inflation, caused not least by Putin’s invasion of Ukraine. If anyone still believes that we do not live in an interconnected and interdependent world, they are simply not looking at the evidence around us.
Part of the difficulty in assessing the data is the opacity of some of the figures on post-pandemic global trading and investment, but some patterns are now clearly beginning to emerge. According to the Office for Budget Responsibility, in the fourth quarter of 2021, UK imports from the European Union dropped by 18%, but global imports from the rest of the world were up by more than 10% and UK exports to the European Union in July this year reached an all-time high of £17.4 billion. In other words, despite the fact that there are greater barriers to trade on the European Union side than on the UK side, British exports to Europe are actually managing to be more robust than European exports to the United Kingdom. So let us be clear: we do not need a new relationship with the European Union, Swiss or otherwise. We do not require freedom of movement, integration into the European single market or integration of EU law into the UK.
Kit Malthouse
My right hon. Friend has outlined some impressive figures. Does he recall that one of the themes of the Brexit debate was that our trading patterns should change? We said that there was a big wide world out there to which we had to look, from a trade point of view, that we had become over-reliant on the EU and that there were more exciting markets elsewhere that were growing much more strongly and that we could participate in.
Dr Fox
I entirely agree. The concept of the bloc in trade terms is very second half of the 20th century. We need to look at the growing markets that give greater opportunities for the United Kingdom in goods and services. The fact that they are not immediately geographically adjacent to us should not be our primary concern. We need to move with the trends in the global economy, not focus on what is a largely ossified view of the world based on the post-second world war consensus.
When we look at the origins of the inflation that we are facing in the United Kingdom, we see that there are several of them. They have been referenced a lot during this debate. The post-pandemic supply issues are still ricocheting around the global economy and particularly harming developing countries at the present time. Also, the central banks—not just the Bank of England but the Federal Reserve in the United States and the European Central Bank—got into a group-think on what they laughingly call the modern monetarists, which means that they are not monetarists at all. They believed that they had found some sort of monetary alchemy through which they could continue to print money faster than the economies were growing without creating inflation. I believe that is why there is higher inflation in the United States, the United Kingdom and Europe than in other countries—notably Switzerland, which sits in the middle of the eurozone but did not follow the same expansionist monetary policies.
By far the greatest boost to inflation has come from Putin’s invasion of Ukraine, however. That has come about in a number of ways, which I will come to in just a moment, but we must remind ourselves that inflation is not just an economic evil; it is a moral and social evil as well. The poorest people in our society are hit the hardest by inflation because they spend more of their income on non-discretionary items. It also transfers money from the savers to the borrowers in society, which is not something that a Conservative Government should want to see. The Government have done much in this statement to protect those on low and fixed incomes, including an extra £26 billion in cost of living support, particularly on fuel, on top of what we have spent already, and an extra £11 billion on uprating benefits. The Government introduced those two items to protect those on low and fixed incomes and, taken together, they are the size of the United Kingdom’s defence budget. These are not small sums. Our increased spending on education and health is hugely welcome, especially as we catch up on the post-pandemic disruption, but to be frank, even the generous sums put forward by the Government will largely be eaten up by inflation until we get it under control.
And that is before we come to the most frightening item of all, the fact that this year we will be spending £120 billion on debt interest payments. For reference, we spend only £134 billion on NHS England each year, so we are spending almost the NHS budget on debt interest payments. We need to recognise that we cannot increase our debt further. As my right hon. Friend the Member for North West Hampshire (Kit Malthouse) said, around 20% of our debt is now index-linked and is therefore very vulnerable to rises in the retail price index. Duncan Simpson, the chief executive of the TaxPayers Alliance, said:
“The spiralling cost of servicing the national debt is deeply concerning. Taxpayers’ money that should be spent on frontline services or keeping rates down is instead going towards interest payments that outsize the costs of government departments.”
If we cannot raise debt any further, either we have to see spending come down or taxes go up, or we have to increase Britain’s wealth from the rest of the global economy. The latter is difficult in current global conditions and the Government have correctly, but rather disappointingly, from a political perspective, had to see taxes rise. That sets a clear way in which to see our future priorities. The first thing is to bear down on inflation. At the same time, we have to get control of the public finances and then we have to get our taxes back down.
I hope the Opposition will reflect on this point today. We have heard from the Opposition Front Bench on both days of this debate that we are facing a recession made in Downing Street. Currently, the greatest source of global inflation is Putin’s invasion of Ukraine and rising global commodity prices, particularly food and fuel, which is causing potential starvation in vulnerable states, with widespread social dislocation and increased international migration.
The Financial Secretary to the Treasury (Victoria Atkins)
It is a pleasure to be at the Dispatch Box to respond to the many powerful and passionate contributions made by my right hon. and hon. Friends and the sometimes incorrect contributions made by other hon. Members, and it is a genuine privilege to wind up on behalf of the Government in support of the autumn statement. We have discussed and debated many aspects of the autumn statement. We have heard some passionate and clear analyses of the situation in our constituencies as well as nationally and internationally, and of the state of the economy at home and around the world.
The autumn statement sets out our ambitions for stability, growth and public services. We say that it is a balanced plan: on the one hand, it will strengthen our public finances, bring down inflation and protect jobs, and on the other hand, it will protect standards in schools, cut NHS waiting times, fund social care, cap energy bills and support those on benefits. We have been frank, however, that that has been difficult. We as a Government are prepared to take those decisions in the country’s best interests. There is no question but that these are challenging times, but neither the origins nor the impacts are unique to this country.
To correct some Opposition Members, the independent Office for Budget Responsibility has said that the fall in living standards is almost entirely driven by rising world prices. We can see the evidence in the international figures. Inflation is high here, but it is higher in Germany, the Netherlands and Italy. My hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) explained the terrible impacts that inflation can have and my hon. Friend the Member for Wantage (David Johnston) made the critical point that inflation hurts the poorest the most. That is precisely why the Government’s No. 1 priority is to tackle inflation.
Interest rates have risen here, but they have risen more quickly in the United States, Canada and New Zealand. My hon. Friend the Member for Newbury (Laura Farris) reminded the House that the Governor of the Bank of the England gave evidence to the Treasury Committee this week and said that the disruption in the mortgage market caused by the mini-Budget had subsided—indeed, that it subsided in mid to late October. I am grateful to her for that reminder.
Growth forecasts have fallen here, but they have also fallen elsewhere in the world, including falling further in Germany. The OBR says that higher energy prices explain the majority of the downward revision in cumulative growth since March. Governments do not have the luxury of choosing the context in which they must operate. Indeed, the IMF expects one third of the world’s economy to be in recession this year and next. The job is to understand what we face, address those issues deliberately and responsibly on behalf of the communities we serve and then deliver that action, and that is exactly what we are doing.
Simon Hoare (North Dorset) (Con)
Does the Minister agree with me that the measures set out in the statement and under discussion over these last few days will mean that, when the international economy and our own start to improve, we will be in a far better place to reap the benefits of that global economic improvement than if we were just to sit here, twiddle our thumbs and pretend that everything was okay?
Victoria Atkins
My hon. Friend is absolutely right. Indeed, the OBR—the independent OBR—again confirms that because of our plans the recession is shallower, and inflation is reduced because of these very difficult decisions we have taken. Unemployment is also lower, with about 70,000 jobs protected as a result of our decisions.
Drew Hendry
The Minister is very keen to lay inflationary pressures globally, but how does she explain the OECD figures showing that, for market interest rates, the UK is at the very top of the tree?
Victoria Atkins
As the Governor of the Bank of England has explained, disruption in the markets has subsided, and the impact of that has flushed through the system. I would emphasise to the hon. Member the evidence we are seeing in other countries. I do not shy away from that; I offer it as an example of the pressures we are all facing internationally. It is precisely that international picture that the Government are addressing.
The hon. Member for Bradford East (Imran Hussain) laid down in, if I may say so, a rather loud speech that there was no help for his constituents with the cost of living. It was passionate, I am told. It is fair to say that my hon. Friend the Member for Southend West (Anna Firth) expressed astonishment at his passion, and my hon. Friend the Member for Bolsover (Mark Fletcher) said that some Opposition Members were living in a different galaxy.
On a serious note, I do want to help colleagues across the House understand the help that is available, because I know that hon. Members will be responding to their constituents’ worries. Any constituent who is on benefits or paid pensions will have them increased by 10.1%. Any constituent on means-tested benefits will have a one-off payment of £900. Any constituent on pension credit will have a one-off payment of £300 on top of their winter payment, and those who are living with disabilities will have a one-off payment of £150. Any constituent on the national living wage will see an increase to their salary, with the hourly rate going up to £10.42. Every single one of our constituents will see help through the energy price guarantee, which is worth on average £900 this year and will be worth £500 next year, and it helps to lower inflation by 2%.
Victoria Atkins
I will give way, but there is even more to come.
What is more—and his is an important point in relation to the very moving cases we have heard in the House today—the most vulnerable households will be able to secure help through the household support scheme, to which we have added a further £1 billion precisely to help those who are in trouble. I know that hon. Members from Northern Ireland are most concerned about people living off-grid. We have doubled the one-off payment that will be given to people living off the grid, and that payment will be given in the winter. Finally, if anyone is in any doubt as to the help they can give their constituents, they should please look at the “Help for Households” website, which sets this all out very clearly.
I am now going to race through some of the changes that we have had to make to taxes. We have tried to be fair and compassionate in these difficult times, meaning that those with the broadest shoulders bear the heaviest weights, and we have wanted to avoid tax rises that most damage growth. On personal taxes, we have reduced the threshold at which the 45p rate becomes payable from £150,000 to £125,140, which means that those earning £150,000 will pay just over £1,200 more in tax each year. We are maintaining the income tax personal allowance and thresholds, which is a difficult but necessary decision, but even after these freezes, we will still have the most generous set of tax-free allowances of any G7 country.
On business taxes, we are raising corporation tax to 25p precisely because, as has been said, we want the largest companies to bear their responsibility. Even at the increased rate of 25%, it will still be the lowest rate of corporation tax in the G7. We have frozen the employer national insurance contribution threshold until April 2028, but 40% of businesses will still pay no NICs at all. The VAT registration threshold will stay which, incidentally, is almost twice as high as EU and OECD averages.
Victoria Atkins
Let me move on to business rates, and then I will come to my hon. Friend and the hon. Lady. We know how important business rates are for our high streets, pubs, shops, and local hospitality businesses. That is why with the revaluation that is needed, we have none the less got a package of nearly £14 billion-worth of help, so that nearly two thirds of properties will not pay a penny next year, and thousands of pubs, restaurants and small high-street shops will benefit.
Jonathan Gullis
The Minister is talking about taxation. I am seriously concerned that the Government have enabled council tax to go up by 5%. In Stoke-on-Trent a 1% rise brings in merely £900,000, which is the second lowest of any local authority in England, and it simply will not cover the black hole that inflation has brought. Will the Government look at areas such as Stoke-on-Trent and give additional help? If they do not, we will end up in the situation that Croydon Council has just announced: the third time it has gone bankrupt.
Victoria Atkins
I thank my hon. Friend. For anyone who missed it, I think he just said that Croydon Council has gone bankrupt for a third time, which is worrying, given that it is, I think, a Labour council. He mentioned the council tax referendums, and we chose that course precisely because we want to address the very real issue of social care. We have ensured that we are balancing those pressures with grants from central Government, and I will come to that in a little more detail in a moment.
Labour’s answer to these difficult sets of international and domestic problems seems, as has been pointed out, to be non-doms. Labour says that scrapping non-doms will apparently earn £3 billion in savings. Well, here are some facts. Non-domiciled taxpayers were liable to pay £7.9 billion in UK income tax, capital gains tax, and national insurance contributions in the tax year ending 2021. Non-doms have invested more than £6 billion in the UK since 2012, using the business investment relief scheme. In other words, non-doms are paying rates of tax that far outstrip the savings that Labour would make, and it is a very one-dimensional answer to a difficult problem.
Carla Lockhart
Persistence has worked. I am sure the Minister will welcome the increase from £100 to £200 for the heating oil payment in Northern Ireland, and that it will go to all households. However, for weeks now £400 has been dangled in front of the people of Northern Ireland for the energy support payment. Can she assure my hard-pressed constituents that they will get their £400, and can she say when they will get it?
Victoria Atkins
I have been nudged by the Whips, so would the hon. Lady allow me to write to her? I know how complicated it is in Northern Ireland.
I could talk about growth. Interestingly, Conservative Members were talking about growth and about how we can ensure the future of our economy for our children and grandchildren. I am extremely grateful to my right hon. Friends the Members for Aldridge-Brownhills (Wendy Morton), for North West Hampshire (Kit Malthouse), for Epsom and Ewell (Chris Grayling), and for North Somerset (Dr Fox), and to my hon. Friends the Members for Bolsover (Mark Fletcher), for Newcastle-under-Lyme (Aaron Bell), for Stoke-on-Trent North (Jonathan Gullis), and for Stoke-on-Trent South (Jack Brereton). They all emphasised how vital growth is if we are to get through these difficult issues and build a good and rich economy for us all.
We announced in the autumn statement some interesting and important measures, including safeguarding capital investment over the next five years, so that we have the largest investment in public works for more than four decades. Of course, innovation and education will be critical, which is why, next year and the year after, we will invest an extra £2.3 billion a year in schools.
On health, because we know how important it is to each and every one of our constituents, despite the very difficult times that we are in, we are providing £6.6 billion to the NHS over the next two years. We will be providing an estimated 200,000 more social care packages for the elderly and most vulnerable in our society, because we are increasing funding in these very difficult times.
We have had to take tough decisions now to lay the foundations for our economy for the next generation. We will not pass on our debts to our children and grandchildren, but we will provide education, skills and prosperity in the industries of the future. We are facing tough times, but we will rise again with a thriving economy, high employment and a bright, responsible economic future for us all. I commend the statement, but it also commends itself to the House.
Mr Deputy Speaker (Mr Nigel Evans)
The amazing influence of the Whips—sometimes.
Question put and agreed to.
Resolved,
That—
(a) provision may be made increasing the rate at which energy (oil and gas) profits levy is charged to 35%,
(b) provision may be made reducing the percentage in section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022 (amount of additional investment expenditure) to 29%, and
(c) (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made for and in connection with extending the period for which the levy has effect until 31 March 2028.
The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).
2. Amount of corporation tax relief for expenditure on research and development
Resolved,
That (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made—
(a) increasing the percentage in section 104M(3) of the Corporation Tax Act 2009 to 20%, Friday 18 November 2022 OP No.73: Part 2 A. Calendar of Business 11
(b) reducing the percentage in section 1044(8) of that Act to 86%,
(c) reducing the percentages in sections 1045(7) and 1055(2)(b) of that Act to 186%, and
(d) reducing the percentage in section 1058(1)(a) of that Act to 10%.