18:58 - The House divided: - Ayes: 318 / Noes: 43 - Question accordingly agreed to.
The Chief Secretary to the Treasury (Laura Trott)
It is a privilege to open the final day of debate on the Budget—a Budget with a plan to grow the economy, a plan for better public services and a plan to make work pay. Today’s debate is focused on a theme close to my heart: improving productivity. As some Members know, back in 2010, before I became a Member of Parliament, I worked for my noble Friend Lord Maude on an efficiency and reform agenda that saved the Government £14 billion a year by 2014. It captured everything from buying printer paper collectively to managing Government projects better and digitising services. That agenda not only cut costs but improved productivity.
Ahead of the pandemic, and under this Government, productivity in the private sector increased by an average of 0.7% a year between 2010 and 2019. [Interruption.] As I am sure Opposition Members will be interested to know, that contrasts starkly with the decline in public sector productivity by an average of 0.2% per annum between 1997 and 2009. Our success was entirely due to hard work behind the scenes and a relentless focus on output.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Rather than cherry-picking statistics, will the Minister tell us what she thinks about the fact—confirmed by the House of Commons Library—that the UK has the lowest investment in the G7 and is the second worst performer in the G7, post-pandemic, in terms of economic growth?
Laura Trott
I will say to the hon. Gentleman that since 2010 we have grown faster than France, Germany and Italy, and we are predicted to do the same in the next five years.
It is no coincidence that between 2010 and 2019 the number of violent crimes and burglaries halved. Our reading standards in schools, which were previously behind those of France, Germany and Sweden, raced ahead. The latest technologies, such as the NHS app and virtual wards, are now used by patients across the country.
However, this is not a “once and done” situation. The effect of the pandemic on productivity was significant. Moreover, as Lord Maude has put it, the focus on productivity must
“never end. This will always be a work in progress. There never can be a steady state… The public, for whom public services exist, deserve nothing less.”
That is why this Conservative Chancellor is willing to invest once again to drive change.
The head of the National Audit Office has said that if we can improve public sector productivity, the size of the prize is tens of billions of pounds, and the Office for Budget Responsibility estimates that raising public sector productivity by 5% would be the equivalent of about £20 billion extra in funding.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
While the Chief Secretary is on the subject of the OBR, may I ask her whether the OBR is correct in saying that the target public sector debt measure is forecast to increase, or whether her own personal calculations continue to suggest that debt will fall?
Laura Trott
I am sure that the hon. Gentleman will see in the OBR figures that public sector net debt overall is expected to fall, and public sector net debt excluding the Bank of England is due to fall in the fourth and fifth year of the forecast. [Interruption.] No, that is just the overall public sector net debt figure.
Steve McCabe (Birmingham, Selly Oak) (Lab)
May I pursue the Minister’s response to my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty)? Why have the Government chosen a debt measure that excludes the Bank of England?
Laura Trott
To put it simply, it is because we are more in control of that figure. The overall figure is falling, but public sector net debt excludes the impact of the Bank of England on the figures.
The rise in public sector productivity will help us to manage the size of the state in the long term, while also maintaining public service quality and delivering savings for taxpayers. That is why, 14 years on, in my role as Chief Secretary to the Treasury, I am delighted to be leading our public sector productivity programme.
Mr Clive Betts (Sheffield South East) (Lab)
I am pleased that the Minister is in charge of that programme. Perhaps she can explain a little more about it. Local government currently has a deficit of about £4 billion. In the productivity plan for local government, the Government highlighted the need to reduce waste on equality, diversity and inclusion. I have found no Government figure showing how much that will save, but the TaxPayers’ Alliance says that it will save £50 million over three years, towards the £4 billion deficit. Has the Minister a figure that suggests that the saving in that part of the productivity plan will be greater?
Laura Trott
Yes, the savings in the productivity plan will amount to billions of pounds.
Let me say a little about the economic context. The last few years have not been easy. The pandemic, Putin’s illegal occupation of Ukraine, energy price rises, and now conflict in the middle east have taken their toll on the economy, on businesses and on families. However, because of the difficult decisions that the Government have taken, the economy is turning a corner. Inflation has more than halved, from 11% to 4%; real wages have risen for seven months in a row; and unemployment is down, from a high of 8% in 2010 to 3.9% at the end of last year. Because we have stuck to our plan, we have been able to cut the double tax on work, putting £900 back into working people’s pockets. On Sunday, the independent Institute for Fiscal Studies gave its verdict on our tax cuts for workers:
“genuinely putting a lot more money into the pockets of people”.
Christine Jardine (Edinburgh West) (LD)
The right hon. Lady is referring to the 2p cut in national insurance. That cut has been wiped out by the freeze in income tax thresholds, and the average worker on £35,000 a year will still be nearly £400 a year worse off this year than last year. How do these figures match up?
Laura Trott
I am sure the hon. Lady will be pleased to know that the average earner will be subject to the lowest effective tax rate since 1975.
Laura Trott
I am going to make a bit of progress.
Sadly, the Labour party is putting this in jeopardy. Labour Members have no plan to cut taxes, and cannot name a single one that they would cut. Instead, they are trying to pull the wool over the public’s eyes by pretending that they have refinanced their £28 billion a year plan to decarbonise. They themselves have said that their pledge costs £28 billion a year, and they are apparently not scaling their promises down. We all know what that means: more taxes for hard-working families. What the public and the House need to know is this: which tax will they raise to pay for the plan, and, if they are in government after the general election, will they stick to our spending plans as set out in the Budget? The British public deserve to know.
During this Parliament, total departmental spending has increased by 3.2% a year in real terms, and day-to-day departmental spending will grow at an average of 1% a year in real terms beyond the current spending review period. The Government are protecting the record increase in capital spending over this Parliament, which will deliver about £600 billion of public sector investment over the next five years. As announced in the Budget, we are also committing an additional £2.5 billion for the NHS in England in 2024-25, protecting day-to-day funding levels in real terms.
Tim Farron (Westmorland and Lonsdale) (LD)
Is the Minister aware that thousands of people in this country would love to work and be productive, but cannot because they are living with cancer? Cancer is not only a threat to people’s life, but it also limits their ability to earn a living. I am sure that she is aware that a third of people diagnosed with cancer wait two months for their first intervention that will help to cure them. Is there any room in the capital spending that she set out for large-scale investment in radiotherapy, as suggested by the all-party parliamentary group for radiotherapy? That would help to cure people more quickly and in a more targeted way, so that there is no collateral damage, and people can go back to work much sooner.
Laura Trott
I praise the hon. Gentleman for the work that he has done on this very important issue, and I know that the capital we are providing will help with issues such as the one he has highlighted.
We cannot just put more money into public services and hope for the best. I was delighted to read that the hon. Member for Bristol North West (Darren Jones) said recently that he was in favour of reforming public services, not splurging on them. Well, here’s hoping that the Labour party breaks the habit of a lifetime. I genuinely hope that he will agree with some of the measures on productivity that we have set out today, because outcomes are determined by how things are done. By focusing on outcomes, not funding, we can deliver real value for the taxpayer. It is a trap to think that simply spending more buys us better public services. Simply spending more is also not sustainable.
Keir Mather (Selby and Ainsty) (Lab)
On the subject of unfunded spending commitments, we on the Treasury Committee learned from the Office for Budget Responsibility this morning that the Government have not told it about the £46 billion ambition to scrap national insurance contributions altogether, and because the OBR has not been told, it cannot forecast the economic impact that that may have. How does that bake in long-term economic stability for the United Kingdom?
Laura Trott
Unlike the Labour party’s massive £28 billion unfunded tax commitment until 2030, our long-term ambition to cut national insurance and erase the double tax on work does not have a date on it. We have shown that, through careful stewardship of the economy over time, we can reduce people’s taxes without cutting spending.
Simply spending more is not sustainable. If no action is taken, public spending is forecast to grow faster than GDP from 2030; that accounts for pressures that we cannot avoid, such as demographic changes. That must be managed, using all the tools at our disposal—and not by borrowing more, or increasing taxes on the British public. Instead, we have to assess how we deliver public services, and improve them to make the UK more productive and ensure the long-term sustainability of public finances. Yes, this is about money, but it is also about delivering the best services for the public, because productivity is not a theoretical concept; it affects us all, in each area of our everyday lives.
I want better outcomes for children, and teachers being able to spend more time with pupils, rather than filling out paperwork. I want the police to spend more time on the beat, not on forms. As a Member of Parliament representing constituents in Sevenoaks and Swanley, I want nurses and doctors spending time with patients, not having to look at computer screens. Better public productivity means better value for money, better support for frontline workers to do their jobs effectively, and better results.
In last week’s Budget, the Chancellor announced that we are allocating £4.2 billion to investment in productivity. The package is broad and comprehensive, and includes £3.4 billion for the NHS—double its current budget for tech and digital transformation. The NHS says that that will unlock over £35 billion in the coming years—10 times the amount we will put in. At the next spending review, that will be the model for all our public services. The package also includes £105 million for 15 new special free schools across England, which I know will be welcomed across the House. That will create over 2,000 high-quality places for children with special educational needs and disabilities, and prevent local authorities’ use of costly independent provision.
The Budget provides £165 million to tackle the shortage of children’s home placements and to rebuild the children’s home estate. That will reduce the need for expensive and unsuitable emergency provision that does not produce the right outcomes for the children who need our help the most. There is £334 million to cut crime by improving policing technology, and £17 million for modernisation of Department for Work and Pensions services, and replacing the paper-based system for benefits. As a former Pensions Minister, I know the impact that such modernisation has had on the state pension. However, this is just the start. I am also committed to driving forward work to embed productivity at every level across the whole public sector.
Laura Trott
No, I will not. I have been very generous with my time.
When I began thinking about this agenda in 2009, no one could have foreseen the technological changes of the last decade. Those changes are revolutionising the private sector, and we must embrace them in the public sector, too.
Our job is not yet done on the economy, but we are making progress with our plan to reward work and create growth—a plan that would be put in jeopardy under the Labour party. This Budget does what it says on the tin: it sticks to the plan—a plan that Britain needs, a plan that is putting money back in the pockets of British people, and a plan that is working. I commend this Budget to the House.
Several hon. Members rose—
The Economic Secretary to the Treasury (Bim Afolami)
It is a pleasure to close these three days of debate on the Government’s spring Budget. Before I get on to more contentious points, I will start on some common ground.
We all know that the last few years have been tough for our country. We all know that this Government have spent more than £400 billion on protecting lives and livelihoods after covid. We all know that Putin’s war in Ukraine sent energy prices to unprecedented highs, and that this has had a huge impact on our economy.
Since 2023 this Government have principally worked to three economic priorities: halving inflation, growing the economy and reducing the national debt. We have made good progress on each of those priorities. [Interruption.] Opposition Members should wait for it. Inflation has more than halved, going from 11% to 4%. Our economy is expected to grow faster than many of our major European neighbours and partners over the medium term. The IMF predicts that over the coming four years we will be the third quickest growing economy in the G7. The OBR has confirmed that national debt is on track to fall in line with our fiscal rules.
Members across the House may say, “A lot done; a lot more to do”, but this prudent and responsible Budget takes us one step closer to tackling the inflation that has harmed the economy, to dealing with the low growth and poor productivity that has hampered us, and towards a brighter future. We have already had much success. That is why we are able to afford to cut national insurance for 29 million people. We will responsibly go further than that, as long as the country can afford it.
Peter Dowd (Bootle) (Lab)
Asked last week about the Government’s commitment to abolish national insurance contributions, the Minister said
“we’d like to continue along that track”—
more of a cul-de-sac, in my humble opinion—but today the Minister has been silent on that plan for a huge £46 billion unfunded tax commitment. Will the Minister tell us if it is still the Prime Minister’s plan to resurrect the Trussonomics mini-Budget package of last year?
Bim Afolami
It is not our plan to resurrect anything from the mini-Budget. We have our plan and we set it out in our Budget.
As the son of a doctor and a pharmacist, as many of us are on the Government Benches, I am mindful that any good doctor will say that in order for the medicine to work, one has to complete the course and stick to the plan. This Budget sticks to the plan we set out in 2023 and has three key objectives: to reward work, to grow the economy and to improve productivity. Before I get on to those points, I will address some of the remarks made by hon. Members during the debate.
The hon. Member for Makerfield (Yvonne Fovargue) made a point about some of the most vulnerable in our country and their access to credit. I commend her long-standing support for her constituents, including the most vulnerable. We are extending the household support fund, as she will know, and we are making it easier to access the debt relief order. The right hon. Member for East Ham (Sir Stephen Timms) welcomed the decision to extend the household support fund. In response to his question about making the fund permanent, that is a decision for the next fiscal event, whenever that will be.
I say to Members of all parties who are concerned for the most vulnerable that this is a Budget and a Government for them. Since 2010, the real income—the take-home pay—of those working full time on the national living wage is 35% greater than it was in 2010. On rewarding work, thanks to the actions that this Government have already taken, falling inflation means that wages in real terms are on the up, even while unemployment is low. In response to the question raised by the hon. Member for Liverpool, Walton (Dan Carden), real household incomes overall have increased by 8% since 2010. But we all know that we can go further. The simplest and most effective way to do so is by reducing people’s taxes and getting rid of the double taxation on work, which means reducing national insurance.
I was listening carefully to the shadow Chief Secretary to the Treasury, who is a man I rather like. [Hon. Members: “Ah!”] I rather admire him. We came to the House at the same time. We are practically the same age—he is about five months younger than me, but let us not go into that. But I was very surprised to hear him say—he can intervene on me if this is not correct—that it was “morally abhorrent” to cut national insurance.
Darren Jones
I always welcome the chance to return to the Dispatch Box. Just to answer the hon. Gentleman’s question, I said that it was morally abhorrent to abolish national insurance contributions at a cut of £46 billion a year with no plan to pay for it. The Minister has the opportunity once again to tell us how he is going to fund the £46 billion.
Bim Afolami
This is great fun, Mr Deputy Speaker. I say to the shadow Chief Secretary that we have been very clear about this. We have cut national insurance by a third in the last two fiscal events. It is our long-term ambition to do so and to eliminate this double taxation on work. If Labour Members do not believe that we should eliminate this double taxation, they should say so.
Bim Afolami
No, I will not give way. I wish to make some progress.
My hon. Friends the Members for St Ives (Derek Thomas), for Broxtowe (Darren Henry), and for North West Norfolk (James Wild) saw the wisdom and the importance of cutting national insurance by a third and what that means for ordinary people. From April this year, we will have taken a third off, which means £900 a year for the average worker. Some Opposition Members sniffed at that. They do not think that that is very much money. We know that, for millions of people across the country, that will make a huge difference to their lives, and we are very proud to support it.
Over and above the national insurance cuts, this Budget sets out a plan that rewards hard-working families. A lifetime of work should support the job of a lifetime: being a parent. For too long, hard-working parents have been unfairly penalised by our tax system—I am very glad that the hon. Member for Richmond Park (Sarah Olney) from the Liberal Democrats recognised that and supported our plans. That is why we are raising the child benefit threshold to £60,000 and increasing the level at which the support is completely withdrawn to £80,000. This is not done out of some ideological fancy. We are doing it because it will encourage growth in the labour market and generate an increase in work hours equivalent to around 10,000 people entering the workforce full time. So this one act on childcare that the Chancellor has put forward will save nearly half a million families an average of around £1,300 per annum in addition to the national insurance cuts.
We also want to support those who make a career out of childcare, which is why, building on our announcement at the last Budget to extend 30 hours of free childcare a week to all children aged nine months and older of working parents, my right hon. Friend the Chancellor said that the Government will guarantee the hourly rate to ensure that private childcare providers can step up to deliver this offer.
Secondly, as many Members across the House have noted, this is a Budget for long-term growth. Growth means more opportunity. Growth means greater prosperity for families and firms. And, yes, growth means higher funding for our public services.
Alan Brown
The Minister knows full well that the autumn statement had £20 billion of future cuts to public services and this Budget bakes it in. The Institute for Fiscal Studies has called it a conspiracy of silence from both Labour and the Conservatives. He talks about long-term growth and an increase in public services, but will he come clean about that £20 billion cut and what the Government will do about it?
Bim Afolami
I thank the hon. Gentleman for that point. If he looks in the Red Book, he will see that the forecast for the next spending review period is that real-terms spending on public services—the whole House should hear this, because I have heard lots of discussion from Opposition Members about cuts and slashing—will go up every year by 1% in addition to inflation. We are building on a stable foundation for that growth. Against the backdrop of economic uncertainty, business investment—one of the chronic difficulties for our economy for generations—grew last year, and will be about 11% of our GDP this year.
At the Budget, we outlined next steps on the autumn statement’s £4.5 billion funding package for strategic manufacturing, which many Members mentioned, particularly the hon. Member for Birmingham, Edgbaston (Preet Kaur Gill). That delivers the next stage of expansion for our high-growth industries.
To complement that, we are committed to ensuring the UK has the most attractive investment tax regime of any G7 or large European country. We have the lowest corporation tax rate in the G7. At the autumn statement, to complement that support for business and for growth, we announced that we would introduce permanent full expensing, which allows companies to claim, in the first year, 100% capital allowances on qualifying investments. At this Budget, the Chancellor confirmed that draft legislation on extending full expensing further to assets for leasing will be published shortly. I am very glad that my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) and the hon. Member for Gordon (Richard Thomson) supported that investment.
The theme of today’s debate—improving productivity—was barely mentioned by Opposition Members. I echo what the Chief Secretary to the Treasury, my right hon. Friend the Member for Sevenoaks (Laura Trott), said in her opening speech: when it comes to our public services, what the public care about is whether their services improve. That means focusing on outcomes, not just inputs. Opposition Members are very, very fond of talking about inputs and how there are apparently there are all these cuts—this slashing and burning of public services—but they are not very fond of talking about our productivity plan and how we are investing to improve outcomes. I will tell you a secret, Mr Deputy Speaker: the reason they are not fond of it is that they know it would upset their union paymasters. That is why they do not want to talk about it. They do not believe in better public services, which would mean better value for money for the taxpayer, because they do not believe in better value for money. They do not believe in better support for frontline workers to actually do their jobs properly because they just want more money for their union paymasters. They do not believe in better results. They talk the talk but refuse to walk the walk, because they do not understand what it is to take any tough decisions.
I agree with something that the hon. Member for Ilford South (Sam Tarry) said. He said that we cannot cut our way to prosperity, and I agree. That is why we are investing in our productivity plan and investing comprehensively in the NHS, as my hon. Friend the Member for Watford (Dean Russell) set out compassionately and powerfully.
Bim Afolami
I will make some progress, and then I will give way.
From upgrading computer systems to using artificial intelligence to automate tasks, we will upgrade the NHS’s technology for the 21st century. That is only part of our programme of reform to bring the whole of Government into the digital era and generate productivity improvements, including through structural investment—and what a win it would be. The National Audit Office and the Office for Budget Responsibility, bodies that Opposition Members are always terribly keen to quote—[Interruption.] They should listen to what they have said about productivity and outcomes. The OBR says:
“Raising public sector productivity by 5 per cent”,
which will bring us back to where we were before the pandemic,
“would be the equivalent of around £20 billion extra in funding”.
That is why we are doing it. That is why the work that my right hon. Friend the Chief Secretary is doing is so important.
Before I conclude, I think we can all agree, including Opposition Back Benchers, that it is impossible to know where the Labour party stands on anything these days. We used to know where it stood. The sad thing about the one concrete plan that it did have is that there was a document listing all the projects under the £28 billion and going through every constituency. That was the only plan they had, but they have dropped it. They should talk to the right hon. Member for Doncaster North (Edward Miliband) as to whether he is happy about that.
Labour Members are confused and I feel sorry for them. [Interruption.] The hon. Member for Hampstead and Kilburn (Tulip Siddiq) is chuntering from a sedentary position, but I am coming to her next, don’t worry. Labour is so confused that, by the way she was going on, one would think that she was a disciple of Peter Thorneycroft and Nigel Lawson. She was so keen on low taxes and sound money that I almost wanted to invite her to join us on the Government Benches. But then I remembered something: in one of her first acts as a Labour MP, she decided to mount the barricades and nominate the right hon. Member for Islington North (Jeremy Corbyn) for leadership of the Labour party. I wonder whether she has told the Leader of the Opposition that that is where her heart lies.
Look, I do not want to be mean spirited—it does not suit me very well. It might surprise you, Mr Deputy Speaker, to learn that I actually rather admire the right hon. Member for Islington North. He believes in things and has ideas, unlike the shadow Treasury team, who do not even have the semblance of a coherent plan or any beliefs at all, as it turns out.
We know that this will not bother the shadow Chancellor. Where is she, by the way? She is probably too busy on her smoked salmon offensive in the City of London, pretending to love bankers, to have time to think of any new ideas.
The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)
She is on Wikipedia, cutting and pasting.
Bim Afolami
She is cutting and pasting. I cannot see her, but if she needs ideas and is happy to come in, there is always the option—and she has done it before—to cut and paste from someone else. I do not want to mislead the House, Mr Deputy Speaker, but the shadow Chancellor does have one aspect to her economic plan—forgive me for forgetting about it—and, as the deputy leader of the Labour party knows, it is called the workers’ plan. True to form, the shadow Chancellor has cut and pasted this plan from the trade unions to such a degree that it might as well be called the unions’ plan. It gives sweeping licence to unions over our whole economy, which will kill jobs, hurt our productivity and undo the good work of this Budget and this Chancellor.
This Budget is a plan for the future, a plan for jobs, a plan for growth, a plan for productivity, a plan on the side of working people, and I commend it to the House.
Question put.