Taxes

Tuesday 15th July 2025 Commons Chamber

[Madam Deputy Speaker (Caroline Nokes)]

I must inform the House that Mr Speaker has not selected any amendment.

I call the shadow Chancellor of the Exchequer.

00:00

[Sir Mel Stride (Central Devon) (Con)]

I beg to move,

That this House notes that the Government was elected on the basis of a manifesto commitment not to increase taxes on working people and not to increase National Insurance or the basic, higher, or additional rates of Income Tax, or VAT; accordingly regrets the decision to raise employers’ National Insurance contributions in the Autumn Budget 2024; further regrets the proposed changes to Agricultural Property Relief and the burden on taxpayers from increases in Council Tax, which is forecast to increase at its highest rate in 20 years; calls on the Government to reaffirm the statement made by the Chancellor of the Exchequer in the Autumn Budget 2024 that, from 2028–29, personal tax thresholds will be uprated in line with inflation once again; regrets that the Government plans to bring those whose only income is the State Pension into paying Income Tax this Parliament; and urges the Government not to introduce new taxes on the value of assets owned such as savings, homes and pensions, which would drive wealth creators away from the UK.

This is the Government of broken promises. The Labour party said during the general election campaign that it would do nothing on taxation, and yet it came straight into government and placed £25 billion-worth of taxation on businesses up and down our country. We know the consequences of that: it killed growth nearly stone dead, and it has cost around £3,500 pounds by way of lower wages alone to the average working family. It is a clear breach of the Labour party’s manifesto. Members need not take my word for it—they can take Paul Johnson’s, when he was the head of the Institute for Fiscal Studies. He has also been on the airwaves recently describing the move as not just a breach of the Labour party manifesto, but a “blatant” breach.

We had the Secretary of State for Environment, Food and Rural Affairs—then the shadow Secretary of State—out reassuring farmers, looking Tom Bradshaw, the president of the National Farmers Union, in the eye and telling him that at least when it came to inheritance tax, farmers had nothing to fear from a future Labour Government. How wrong they were!

Then there was the winter fuel payment debacle. Labour reassured pensioners up and down the country that it would not be means-testing the winter fuel payment. Before somebody jumps up and says, “Well, it only excluded millionaires,” it did not—some 80% of pensioners living below the poverty line were denied those payments and had to go through a long and cruel winter. The U-turn, when it finally came, will come as little comfort to pensioners who are now about to be dragged into income tax for the first time as a result of the Labour party’s policies.

In opposition, the Labour party said it would freeze council tax, and yet we have seen in the latest spending review a £7 billion increase in council tax levied across this Parliament. According to the IFS, it is the largest increase in council tax in a generation—and that from the party that said it would not be putting up taxes on working people. Does it not think that working people pay council tax?

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

I am grateful to the shadow Chancellor for making that point. Does he believe that a humble toolmaker who happens to own a small business is a working person?

[Sir Mel Stride]

Indeed, my hon. Friend is absolutely right. We need to stand up for everybody—even our toolmakers.

Let us be frank: we have had to table this motion today, which seeks to do nothing other than reaffirm the commitments that the Labour party has already made, because of the litany of broken promises that I have just shared with the House.

[Sir Jeremy Hunt (Godalming and Ash) (Con)]

Does the shadow Chancellor agree that, following the welfare U-turns, public finances today are in a far worse state than they were a year ago when the Government came into office? There is a crucial difference: a year ago, the Conservative Government were taking difficult decisions to bring taxes down in order to grow the economy; because this Labour Government are failing to take those decisions, there is only one way taxes can go, and that is up.

[Sir Mel Stride]

My right hon. Friend is absolutely right, and under his stewardship, things were so much better. As he points out, the Government have resiled from any attempt to control the welfare bill—an unfunded tax commitment of £5 billion. That, plus the U-turn on the winter fuel payment, is more than £6 billion of unfunded commitments that the Government are responsible for—unfunded commitments that they said they would never see themselves making. He is absolutely right: the legacy that he left when he was Chancellor in the previous Government was the highest growth in the G7 for our economy. We had near record levels of employment, and near record low levels of unemployment. We had had 13 consecutive months of real wage growth, and inflation had been brought down from over 11% due to the Ukraine war, to bang on 2% on the day of the general election. Where is inflation now? It is almost double what the Government inherited.

[Ben Coleman (Chelsea and Fulham) (Lab)]

Given all the extraordinary and wonderful things that the right hon. Gentleman is setting out, is it not equally extraordinary that the British people thought you were a shower and needed to get rid of you—and they did? That is why you are on the Opposition Benches and we are over here.

[Madam Deputy Speaker (Caroline Nokes)]

Order. I am not sure that the British people were seeking to get rid of me.

[Sir Mel Stride]

I think what the hon. Gentleman said was a gross impertinence, Madam Deputy Speaker. He also referred to you as an absolute “shower”, which is totally unreasonable. I have always been a great admirer of yours, as you know, and always will be. [Hon. Members: “ Name him!”] Name the hon. Gentleman—quite.

We have a Government who are grossly incompetent. As soon as they came into office, what did they do? They talked down the economy. It is no surprise that the British Chambers of Commerce is now saying that the No.1 concern of its members is high taxes, or that the latest survey by the Institute of Chartered Accountants in England and Wales once again shows that business confidence is down—and that is for the fourth survey in a row.

[Graham Stuart (Beverley and Holderness) (Con)]

Amid the shadow Chancellor’s quite correct exposition on the subject of where the Government have gone wrong, does he not have a little pity for the Ministers on the Government Front Bench? After last week, it is quite clear that they are no longer responsible for the running of the Government, as that has been handed to the hard left who have no interest whatsoever in balancing the books, and do not care about rising debt, rising gilt costs and the other irresponsible outcomes of this Government, who are now absolutely out of control.

[Sir Mel Stride]

My right hon. Friend is absolutely right. When it comes to criticising this Government, it is always confusing whether to address those on the Front Bench or on the Back Benches, because they are never quite in the same place.

The big mistake that the Government made was to talk down the economy by going on about this confected black hole of £22 billion—something that the Office for Budget Responsibility has already debunked. The Government should stop using that number. They are the ones who created a black hole of some £6 billion, as I have just set out, and they should focus not on the black hole that they have invented, but on the one they have created. It is that black hole that is creating speculation across the summer about what will happen in autumn, damaging confidence and damaging businesses up and down the country.

[Noah Law (St Austell and Newquay) (Lab)]

Does the right hon. Gentleman accept that regardless of the actual size of the black hole left by the previous Government, it is a significantly larger number than the one he is talking about with respect to the welfare bill?

[Sir Mel Stride]

I am not sure that I fully understood the point, but the hon. Gentleman seems at least to accept that there is a real black hole when it comes to this Government, of at least £6 billion.

[Sir Alec Shelbrooke (Wetherby and Easingwold) (Con)]

Does my right hon. Friend find it extraordinary that when the Government came into office they made a big play of putting the OBR on a pedestal, but because they did not like the news, they now want to dismiss it and water it down?

[Sir Mel Stride]

Well yes, exactly. The Government will look to any floating branch or whatever to cling on to, to try to look a little better than they truly are.

We have seen a Government who have indulged in spending like it was the 1970s. The result of that has been to push up inflation, which has led to interest rates being higher for longer than they otherwise would have been. It is all very well for Labour Members to trumpet the fact that there have been four interest rate cuts since they came into office. The reality is that if they had not lost control of inflation, there would have been more and they would have come more quickly. The headroom that the Chancellor has against her fiscal targets is wafer-thin. This is the usual Labour way: spending and spending and spending until it runs out of other people’s money.

[Melanie Ward (Cowdenbeath and Kirkcaldy) (Lab)]

The shadow Chancellor talks about interest rate rises. Will he enlighten us as to why he thinks we should take lectures on economic competence from his party, which has a shadow Cabinet with 16 members who served in the Government of Liz Truss and Kwasi Kwarteng?

[Sir Mel Stride]

It would be sensible for the hon. Lady to look at those on her own Front Bench and ask why they take these appalling anti-business decisions. The answer is that hardly any of them have any experience of private business or of setting up a company—in fact, not one senior Front Bencher from her party has that. That is unlike the Conservatives—whether that is myself; the shadow Home Secretary, my right hon. Friend the Member for Croydon South (Chris Philp); the shadow Business Secretary, my hon. Friend the Member for Arundel and South Downs (Andrew Griffith); or others—who actually understand the real world of business.

[Dr Evans]

The shadow Chancellor makes a very good point. Is he surprised by the Federation of Small Businesses, which has come out and said that for the first time ever in its index—since records began in 2008—more small businesses will contract than will grow? Is he as worried as I am about what signal that sends to those small business owners who are trying to grow for our economy?

[Sir Mel Stride]

My hon. Friend is absolutely right. The reality is that if we tax something, we tend to get less of it. This Government have taxed business, so it is not surprising that the economy has been damaged as a consequence.

An often fair question asked of the Conservatives is: what would we do? Let me answer that question directly. First, we would have taken very different choices. We would not have loaded up taxation on businesses and stifled growth in the way that Labour has: we would have focused on productivity. We would not have come into office and given the train drivers 14% and the junior doctors 22% with no strings attached whatsoever. We were told by the now Health Secretary during the run-up to the general election that all we needed to do was get around the table with the unions and settle and the problem would go away—well, the junior doctors are back for more.

[Darren Paffey (Southampton Itchen) (Lab)]

Will the right hon. Gentleman give way?

[Sir Mel Stride]

I will momentarily.

We would of course have tackled the welfare bill, as we did when we were in office. We made £5 billion-worth of savings, as scored by the Office for Budget Responsibility, and we had 450,000 fewer people going on to long-term sickness benefits as a direct consequence of our policies. We had a clear plan to go into government and save £12 billion a year in addition.

[Darren Paffey]

While the shadow Chancellor is engaging in such fascinating whataboutery at the Dispatch Box, will he take the opportunity to say which of the 25 tax increases in the last Parliament he regrets or would undo?

[Sir Mel Stride]

I think this debate is actually about the tax policy of this Government. As I have clearly set out—[Interruption.] To be fair, there was the small matter of covid, which came along and shrank the UK economy by 10% overnight. People at the time speculated that we would see mass unemployment, the like of which our country had never, ever seen, yet through our intervention we ensured that that did not happen.

Likewise, when the Ukraine-Russia war brought inflation to our shores through energy price spikes, peaking at 11.1% at the back end of 2022, we took the tough decisions, along with the Bank of England, to bring that inflation down. In the meantime, we protected millions of low-income families up and down the country from the consequences of that inflation. That came with a £400 billion price tag, so it is not surprising that some taxes had to rise in order to pay for that.

[Mr Richard Holden (Basildon and Billericay) (Con)]

The shadow Chancellor is making an excellent speech. Does he agree that the danger is that if Governments do not have a prudent financial position, they end up in the situation that we are now seeing, with the interest on Government debt going up and up? We are now paying around £10 billion a year more than we were at the time of the general election.

[Sir Mel Stride]

My right hon. Friend is absolutely right. With the increasing Government debt to which this Government are constantly adding, and the higher interest rates for longer for which they are responsible because of their extravagant spending, we are spending about £100 billion a year on simply servicing that debt, which is twice what we spend on defence. That is not sustainable, and things will get worse under this Government.

[Joe Powell (Kensington and Bayswater) (Lab)]

Might the Chancellor elaborate on the national debt that the previous Government inherited in 2010, compared with what we inherited last year?

[Sir Mel Stride]

I would be delighted to talk the hon. Gentleman through that. The preceding Labour Government left this country with a deficit of 10.1%, or £160 billion a year, so clearly we had to get on top of that deficit. It is a simple fact of economic life that if a country is running a large deficit, its debt increases, but by the time of covid, we had largely settled that deficit. For the reasons that I gave a moment ago, of course we added to the debt and the deficit at that point, because we had to intervene to stabilise the economy. However, the inheritance that we received in 2010 was the start of that debt climbing. The hon. Gentleman should acquaint himself with the economic history.

What approach can this Government take in the autumn? They are not going to be saved by growth—that is for the birds. The OBR, the Bank of England and the International Monetary Fund have all downgraded growth, and the Office for National Statistics recently announced that for the second month in a row, we have had an economic contraction.

How else might the Chancellor make the numbers add up? Well, despite Ministers insisting that their commitment to the fiscal rules remains non-negotiable, there are reports of potential changes to the broader fiscal framework, including the early use of the flexibility of a 0.5% of GDP range for the current budget target, which would allow £12 billion to £13 billion of extra borrowing. However, that would be a breach of faith. There are similar reports that Ministers might move to just one OBR forecast a year, to avoid an embarrassing emergency Budget like the one we saw in March. However, that would completely abandon the commitment not to sideline the OBR, so when the Minister comes to the Dispatch Box will he reconfirm that the Government’s commitment to the fiscal rules also applies to the fiscal framework, and that we will continue to have two OBR forecasts per year?

The Government should be looking not for yet more borrowing, but to rein in spending. However, the welfare debacle shows that they are utterly incapable of doing that, so that leaves just taxes. The motion before us today simply asks the Minister to confirm the Chancellor’s commitment not to extend the freeze on tax thresholds. She specifically said in her Budget speech that such a move

“would hurt working people. It would take more money out of their payslips.”—[Official Report, 30 October 2025; Vol. 755, c. 821.]

When the Minister comes to the Dispatch Box, will he confirm that he, too, holds that position? Will he also rule out wealth taxes? We have already seen tens of thousands of people—high net worth individuals—leaving our country. I know that socialists may say, “Good riddance to them—they are wealthy”, but the Adam Smith Institute calculates that the tax forgone as a consequence of their departure is equal to the tax paid by around half a million people on average earnings. The Labour party has no plan to stem that exodus of talent and wealth creation.

Whatever decisions are taken in the autumn, they will be bad ones, and as nervous markets look on, they may prove disastrous. It may even be that this Government take us to a dark place; it is hoped not, but if history is any guide to the future, the lights are surely flashing red. Surely, too, the British people, those hard-working men and women up and down our country—the businesses, the entrepreneurs, the farmers who toil all hours, our charities, our hospices, our veterans, our elderly, and all those who embody the very best of all that our country can be—deserve answers about the promises made to them, and about whether their pay packets, their pensions and their savings are safe. Surely, they deserve better than this wretched, rotten and defunct Labour Government.

16:44

[The Chief Secretary to the Treasury (Darren Jones)]

I congratulate the shadow Chancellor on another theatrical performance—one that I know we all enjoyed across the House. I remember fondly his previous attempts to weave the story of “Alice in Wonderland” into his contributions. The only conclusion I can draw today is that he has not found his way out of the rabbit hole just yet.

The shadow Chancellor made a number of points where he seemed to rewrite history. It was all the fault of Russia invading Ukraine, with not one mention of Liz Truss—“Who’s that? We’ve never heard of her.” When asked why, if everything was so hunky-dory under the Conservatives, they suffered such an historic loss, the answer was, “Oh, I don’t know.” There was no answer to the question. We had hope when he said, “I will tell the House what I would do differently.” I sat and listened carefully, and the grand reveal: “I would focus on productivity.” Well, I think the Conservatives said that before, and how did that go? Not one policy, suggestion or apology for their record—not one thing.

In contrast, this Government were elected with an historic landslide and on a mandate of change. [Interruption.] Conservative Members question our historic landslide, but they should look at the number of seats we have on our side of the House, and how many they have on theirs. I encourage them to remember that the aim of the game is to get Members in this House. It was an historic landslide for the Labour party at the last election, elected on the promise of change—to put pounds in the pockets of working people and to deliver for the renewal of Britain.

At the Budget last year we fixed the foundations, stabilising the public finances and putting Britain back on the road to growth, after 14 years of Conservative waste and decline. [Interruption.] I know that the Conservatives do not want to hear it, but every time one of them gets up to speak—we have heard it already—it is as if they have forgotten about the £22 billion black hole they left in the public finances. Rather than act to fix it, they called an election, ran away and left it for us to clear up their mess. This Labour Government will never repeat the mistakes of the Conservative party.

[Graham Stuart]

The Chief Secretary said the name of the game is to get the maximum number of seats. I gently suggest to him that that is not the name of the game; the name of the game is to serve the British people and honour the promises we make to them. [Interruption.] He thinks that is amusing. If he wants to know where his vast majority came from, it came with a series of promises that, one by one, he is breaking.

[Darren Jones]

I roll my eyes because, evidently, all my hon. Friends put themselves forward and stood to serve the country. As my right hon. Friend the Prime Minister has made very clear, he changed the Labour party to make sure that we put the country first. The right hon. Gentleman makes the case that the name of the game is not to get Members elected to this House; if that is the case, he obviously played the game very well, because the Conservatives failed to do that miserably.

At the Budget, we took the decisions necessary to stabilise the public finances and give our public services a vital injection of cash to start to turn around the years of decline that members of the public across the country know: NHS waiting lists growing, schools crumbling, the prisons crisis, and project after project being cancelled or delayed. That investment was underpinned by changes to the tax system to make it fairer and more sustainable, while protecting working people against higher taxes in their payslips.

[Wendy Morton (Aldridge-Brownhills) (Con)]

I wonder whether the right hon. Gentleman could help me out by explaining what a working person is.

[Darren Jones]

A working person is someone who goes to work, and in our manifesto we made a very clear commitment to protect working people through the taxes they pay on their pay slips—which is something that we experience when we go to work.

However, we did more than that. We ended tax breaks for private schools to help fund new teachers and raise education standards, supporting more than 90% of children in state schools to achieve and thrive. We removed the outdated concept of domicile status from the tax system, so that all long-term residents of the United Kingdom pay their fair share of taxes here. We ensured that the UK tax system remains internationally competitive, reforming the tax treatment of carried interest. We took further action by raising the higher rates for additional dwellings for stamp duty land tax to support first-time buyers and main home movers, giving them a competitive advantage. We made changes to the energy profits levy to ensure that oil and gas companies contribute to the clean energy transition. In the Budget last autumn the Government introduced the most ambitious package ever to close the tax gap, ensuring that more individuals and businesses pay the taxes they owe.

[Stuart Anderson (South Shropshire) (Con)]

The Chief Secretary talks about the Budget. I have spoken to small businesses across my constituency that are feeling the impact of last year’s tax rises, and they are concerned about uncertainty and a lack of clarity. Does he really understand the impact that last year’s attacks on small businesses are having, and how devastating they are for our constituents?

[Darren Jones]

Of course we engage with businesses, small and large, week in, week out, as Ministers in the Treasury, across Government, and in our constituency capacities. As Members know, the introduction of the employer national insurance contributions was weighted with changes in the threshold for payment with the aim of reducing the burden on smaller businesses. We recognised that we were honouring our promise to working people not to increase the headline rates of employee income tax or national insurance in their pay slips.

Like other benefits that replace income, the state pension is taxable, but the personal allowance will continue to exceed the basic and full new state pension, which means that pensioners whose sole income is the full new state pension or basic state pension without any increments will not pay any income tax. The state pension continues to be the foundation of the support available to pensioners, backed by this Government’s commitment to the triple lock. This year more than 12 million pensioners have benefited from a 4.1% increase in their basic or new state pension, which means that under this Government those on a full new state pension will receive an additional £470. The full new state pension is currently projected to go up by around £1,900 over the course of this Parliament, on the basis of the latest forecast from the Office for Budget Responsibility.

I note that Members of opposition parties have not opposed these spending plans. They have not said that they think the NHS should get less money this year, or that we have too many teachers, nurses or police officers. If they support our spending plans, I simply ask: how would they pay for them?

[Melanie Ward]

Like many of my constituents, I welcome the investment that was announced by the Chancellor at the time of the spending review for the long-awaited regeneration of Kirkcaldy town centre, a town centre that went only one way under 14 years of Conservative rule and 18 years of the SNP. They talk about support for small businesses, but what really happened is clear. Does my right hon. Friend agree that it has only been possible to do this because of the decisions that we have made to raise revenue?

[Darren Jones]

I wholeheartedly agree with my hon. Friend, who is an excellent champion for her constituency. She is right to point out that the investment announced for her constituency was a consequence of the decisions made by this Chancellor and this Labour Government to invest in the renewal of Britain.

[Mr Louie French (Old Bexley and Sidcup) (Con)]

I am not sure what financial qualifications the Chief Secretary has, if any, but last week’s reports suggested that, privately, Ministers are briefing their Back Benchers that they will introduce a wealth tax without calling it a wealth tax. Can he confirm whether or not that is true?

[Darren Jones]

That is a slightly odd question, but I can definitely confirm that any tax changes, one way or the other, will be announced by the Chancellor at the Dispatch Box in the normal way in the autumn.

As I say, Conservative Members are welcome to come forward with suggestions about how they might pay for the decisions that this Government have taken. Maybe they disagree with our fiscal rules, which are our assurance to the financial markets that we will live within our means and reduce Government debt.

[John Glen (Salisbury) (Con)]

The right hon. Gentleman is being generous in giving way. One area the Opposition would be looking at is a coherent reform of the welfare system so that, by changing the pathway to entitlement to benefits, we get that whole budget under control, which would make a meaningful difference to the fiscal position that the Government are in.

[Darren Jones]

As the right hon. Gentleman knows, my colleagues in the Department for Work and Pensions, with the Stephen Timms review and other work, are taking those measures forward.

[Madam Deputy Speaker (Caroline Nokes)]

Order. The Chief Secretary is the third Minister or shadow Minister to refer to a colleague by name. It seems to be a bad afternoon for it.

[Darren Jones]

Madam Deputy Speaker, it is because the review is named after the Member, which led to my naming him, but the Timms review will be taking forward that work and coming forward with proposals in due course.

If Conservative Members wish to challenge the fiscal rules, I invite them to do so. Do they instead think it would be wise to let debt balloon year on year, as they did, to pay for the day-to-day costs of Government, ultimately spending more and more on debt interest and less on the priorities of working people? In contrast, our fiscal rules are non-negotiable, and they are the foundation for stability and investment.

The first rule is for stability—that day-to-day Government spending should be paid for through tax receipts—which is the sound economic choice and also the fair choice, because it is not right to expect our children and future generations to pay for the services we rely on today. This first rule allowed my right hon. Friend the Chancellor, at the Budget last year, to allocate £190 billion more to the day-to-day running of our public services over the course of this Parliament.

The second fiscal rule has enabled this Government to invest in Britain’s economic renewal while getting public debt on a downward path. This rule has allowed the Chancellor to increase public investment by over £100 billion in the autumn and a further £13 billion this spring—investment to rebuild our transport network, our defence capabilities and our energy security. In short, it is investment to grow our economy, improve living standards and put more money into the pockets of working people in every part of the country.

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

16:57

[Sarah Olney (Richmond Park) (LD)]

Let me be clear: the legacy left behind by the last Conservative Government is one to be ashamed of. Their incompetence in governing left schools and hospitals crumbling, social care cripplingly underfunded, and record levels of sewage in our lakes and rivers. Their record is a dispiriting picture of low growth, high interest rates and record levels of inequality.

We know that this Government inherited a mess, and we know that the cause of that mess was years of reckless economic mismanagement, but that cannot be allowed to serve as cover for measures that damage business or cause suffering for the vulnerable in our society. The decisions taken by this Government at the autumn Budget have not worked. The national insurance jobs tax will damage small businesses, lower people’s living standards and undermine the Government’s own ambitions for growth. People endured years of Conservative mismanagement, which is why this new Government should be doing far more to grow our economy, create new jobs and improve living standards.

The Liberal Democrats acknowledge that the Government had tough decisions to make. However, instead of raising national insurance, cutting disability benefits and cutting departmental budgets even further, they should be taking bold and ambitious steps to grow our economy, which is the best way to raise tax revenue and boost living standards. That is why we have been calling on the Government to ignore the scaremongering from those on the Conservative Benches, and urgently negotiate a new, bespoke UK-EU customs union.

On taxation, as set out in amendment (b), tabled by my hon. Friend the Member for St Albans (Daisy Cooper), we all know that the Government are desperately looking for ways to raise revenue. I encourage Treasury Ministers to take a look at the measures set out in last year’s Liberal Democrat manifesto, which would ensure that revenue is raised in a fair way, taking into account the huge amount of economic inequality that, sadly, we see across the United Kingdom.

This huge inequality in our country threatens to rip our social fabric apart, which is why the Liberal Democrats have proposed a better way: raising revenue fairly, doing so practically and tackling inequality; increasing taxes on some of the biggest and wealthiest corporations, including the big banks, by reversing the Conservatives’ tax cuts for banks; ensuring that the wealthiest people in the world who are doing business here are taxed effectively, by raising the digital services tax from 2% to 10%; fairly reforming capital gains tax in a way that cuts tax, or keeps it the same for the vast majority, while ensuring that the wealthiest 0.1% cannot avoid paying their fair share; and doubling remote gaming duty to ensure that gambling companies pay their fair share. Those steps could happen immediately, so I hope Ministers, who are keen to fill a fiscal hole, might follow our advice.

The previous Government did so much damage to our high street businesses, but the Labour Government’s national insurance jobs tax has only made things even harder for them and their workers. High street businesses are the beating heart of our economy at the centre of our local communities, and they create the jobs that our communities rely on. The changes to employer national insurance contributions announced in the autumn Budget are an unfair jobs tax which will have highly damaging impacts across many sectors: on social care providers; on GPs; and on the hospitality sector, which has been hit by an extra £3.4 billion in annual costs through the cumulative impact of the changes announced in the autumn Budget. The Liberal Democrats voted against the changes to employers NICs at every opportunity. I once again urge the Government to scrap those measures.

As the motion looks to examine the causes of the economic challenges faced by people and businesses across the country, a perhaps surprising omission is the ongoing disastrous damage caused by the Conservatives’ pitiful Brexit deal. The appalling agreement negotiated by the last Conservative Government has been a complete disaster for our country, particularly for high street businesses, who are held back by reams of red tape and new barriers to trade, costing our economy billions in lost exports. The dismal picture of the financial impact of their terrible Brexit trade deal is becoming increasingly clear. A recent survey of 10,000 UK businesses found that 33% of currently trading enterprises experienced

“extra costs directly related to changes in export regulations due to the end of the EU transition period”.

Small businesses have been particularly badly affected, with 20,000 small firms stopping all exports to the EU. And a recent study has found that goods exports have fallen by 6.4% since the trade deal came into force in 2021.

The Liberal Democrats welcome the steps this Government are taking to rebuild our relationship with the EU, but I urge them to recognise that this should only be a first step towards negotiating a bespoke UK-EU customs union. Independent analysis has shown that a closer trading relationship with the EU could boost GDP by 2.2%. That would bring in roughly £25 billion of extra tax revenue every year, which would be crucial for fixing the public services which the Conservative party left broken.

More broadly, as we look at measures which would ease the pressure felt by so many businesses and boost the economy as a whole, we continue to call on the Government to introduce vital reform to the business rates system. In 2019, the previous Conservative Government promised a fundamental review of the business rates system, but they failed to deliver it. Meanwhile, the current Government pledged to replace the system in their manifesto, but still no action has been taken. The current system penalises manufacturers when they invest to become more productive, leaves pubs and restaurants with disproportionately high tax bills, and puts local businesses at a disadvantage to online retail giants. The Liberal Democrats have called for a complete overhaul of the unfair business rates system and its replacement with a commercial landowner levy that would shift the burden of taxation from tenants to landowners. Our proposals for fair reform would cut tax bills, breathe new life into local economies and spur growth. Equally important, it would provide long-term certainty for businesses, which is what everybody across the UK wants.

On the Liberal Democrat Benches, we know the extent of the challenges the Government faced when they came into office. We acknowledge that they inherited a dire economic landscape—challenges now exacerbated by an unreliable actor in the White House and an aggressive Russia—but that cannot be an excuse for the mistakes the Government are making. They must take bold action to boost our economy. As such, we support the calls in today’s motion to scrap the national insurance jobs tax and reverse the changes to agricultural property relief. People across the country are still struggling with the cost of living crisis, just as small businesses remain burdened with sky high energy prices, now compounded with an unfair jobs tax and an unfair business rate system.

The Liberal Democrats will continue to urge Ministers to go further and act with more urgency, investing in skills by reforming the apprenticeship levy, properly funding social care and boosting growth through negotiating a bespoke UK-EU customs union to give our economy the boost it so desperately needs.

17:04

[John Grady (Glasgow East) (Lab)]

I rise to speak against the Opposition motion. My right hon. Friend the Chancellor of the Exchequer has raised taxes. She has done so to stabilise the public finances, because the public finances that the Labour Government inherited were in a shocking state; she has done so to invest in public services, in particular the NHS and schools, because public services were left in a shocking state by the previous Government; she has done so to invest in national security; and she has done so to invest in Scotland. My right hon. Friend has raised taxes because public finances need to be managed carefully. We cannot keep pretending that we have money when we do not.

[Harriet Cross (Gordon and Buchan) (Con)]

On pretending, it seems to me that Labour likes to pretend that the covid pandemic never happened and that the £400 billion that the previous Government spent to protect the country and protect jobs, which Labour supported and asked us to go further on, never happened. Will the hon. Gentleman reflect on that and at least acknowledge what happened in the recent past?

[John Grady]

I am very happy to reflect that the covid pandemic happened, but I also reflect that Liz Truss and Kwasi Kwarteng’s mismanagement happened. The Conservatives lost the last election because they made a mess of the economy. They have lost their reputation for economic competence, which is why they have lost so many MPs and suffered an extinction event. I read in today’s Times that it was thought that the common crane had been extinct for more than 500 years in Scotland, but it is now reported that there are six or seven nesting pairs in Scotland—more than we have Conservative MPs, and there may be a reason for that.

The Opposition motion implies a reversal of more than £20 billion in taxes. The Opposition need to explain how they would fund that. What cuts would they make, and what effect would that have on the businesses they claim to support? They need to explain whether they would reverse the investment in the NHS, which is essential to businesses. Many businesses have said to me that they want to see investment in the NHS in order to get the waiting lists down and reform the service. That is exactly what my right hon. Friend the Secretary of State for Health is doing. The disruption caused to businesses by NHS waiting lists is significant, but they are now coming down—if only the same could be said for Scotland.

The Opposition must explain whether they would reverse the investment in education, because businesses say to me every week that they want to see investment in skills. They need skilled workers to grow their businesses. It is essential for economic growth.

[Graham Stuart (Beverley and Holderness) (Con)]

As a Scottish MP, does the hon. Gentleman wish to differ slightly with those on his Front Bench, who have said there should be no new licences for North sea oil and gas? That policy does not mean that we will consume a drop less oil and gas; it simply means that we will import it from abroad with higher emissions and with tens of billions of pounds of tax and tens of thousands of jobs lost. Surely, as a Scottish MP, he should speak up for his constituents and say to those on the Front Bench, “Come on—let’s get those licences going again.”

[John Grady]

All I will say, Madam Deputy Speaker, is the plain fact is that North sea oil and gas will be produced for many years to come, and the Government support that. The Government are also supporting investment in the industries of the future, such as offshore renewables. Under the Conservative Government, there was a contracts for difference auction with no successful bids, setting back our access to fixed-price, cheap electricity. That is the Tory economic policy on energy: turning up their noses at cheap, fixed-price energy. It is little wonder we are in such a mess.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

Will the hon. Gentleman give way?

[John Grady]

I would like to make some progress, because there are many speakers, but I will give way.

[Dave Doogan]

I would just like to follow up on the hon. Gentleman’s talking down of Scottish skills and training—classic Labour. How does he reconcile the disparaging characteristic that he paints of Scottish skills, entrepreneurialism and training when Scotland has, for 10 years running, been the top destination for foreign direct investment outside London? What is it that foreign enterprise can see in Scotland that no Labour MP ever will?

[John Grady]

I cannot recall saying anything disparaging about Scottish education. I did criticise the Scottish NHS—[Interruption.] Well, the reality is that businesses are absolutely petrified of the way the SNP is dealing with Scottish education. We have insolvent universities and colleges in crisis, and education standards are plummeting. Those are the facts, and they are why the Scottish SNP Government will lose in 2026 and we will have a new First Minister.

The Conservatives are meant to be patriotic and pro-defence. How is the investment in defence to be paid for? Would they reverse the record settlement for the Scottish Government given that we have Scottish elections next year? I think they should explain.

[Stuart Anderson (South Shropshire) (Con)]

rose—

[John Grady]

I will make some progress if I may.

Our debt to GDP ratio is almost 100%, and we inherited that from the previous Government. Conservative Members object to tax rises while wanting tax cuts and increases in public spending and objecting to spending cuts. That is not realistic. We know from the disastrous Budget of Liz Truss and Kwasi Kwarteng that we must manage finances carefully. Some Opposition Members suggest that we should get rid of the Office for Budget Responsibility. The Conservatives shunned the OBR when Liz Truss and Kwasi Kwarteng put forward their Budget and we know what happened then. I find it quite surprising therefore that we still have Conservative Members who want to get rid of it.

The Conservative approach to the economy simply does not grapple with the serious state of the public finances; it inhabits a world of wishful thinking—a world of higher inflation, higher Government borrowing costs and higher interest rates.

[Joy Morrissey (Beaconsfield) (Con)]

Will the hon. Member give way?

[John Grady]

No, I will make some progress.

The huge inflation unleashed by the previous Government caused immense misery to my constituents. The interest rate rises made life a misery for hard-working families who had bought their homes in Glasgow East. That is why my right hon. Friend the Chancellor of the Exchequer is right to focus on appropriate management of the economy and not wishful thinking. The real question is this: what has the Conservative party come to. Will it ever return to seeing things as they are, rather than proposing policies that bear no relationship to reality? Its proposals, as I understand them, are a form of magical realism, which is why the electorate have cast them into 100 years of solitude.

17:11

[Sir Andrew Mitchell (Sutton Coldfield) (Con)]

I can make a very short speech today, Madam Deputy Speaker, because my right hon. Friend, the shadow Chancellor, in his brilliant speech at the beginning of this debate, set things out so clearly. There are common themes running through both Opposition debates today. The first is that the Government have lost control of expenditure and the second one, which I want to develop very briefly, is that the Executive have failed to listen with appropriate care to what people in this House have said.

On the first of these points, my right hon. Friend the Member for Salisbury (John Glen) said in an eloquent intervention just a few minutes ago that the Government need to work out how to fix last week’s fiasco with the welfare Bill. Far from saving money, this is virtually now another spending measure. It is important to remember that as the former Chancellor my right hon. Friend the Member for Godalming and Ash (Sir Jeremy Hunt) set out clearly, had we been successful in winning the last election, we would have reduced the number of working-age welfare recipients to pre-covid levels, thus saving £49 billion by the end of this Parliament.

The reason I focus on this welfare issue is that it is welfare expenditure with which this Government must get to grips, and they have failed to learn the lessons of the past. I was a very junior welfare Minister in what was then the Department of Social Security between 1995 and 1997. I learned two very important rules, which this Government would do well to consider. On both, it is clear that welfare reform is extremely difficult. The first is that we cannot take away from poor people benefits that they are already receiving. I think I am right in saying that no Conservative Government have ever reduced disability benefits in payment. But Labour did not absorb that vital lesson, which is why they got into so much trouble last week.

The second rule is that if a Government want to reduce the benefits bill, there are only really two ways of doing it. The first is to freeze the level of benefits; that has been done in the past, and it means not falling into the trap that the Government fell into last week. The second is to narrow the gateway into those benefits for future recipients. I urge the Government to absorb these important rules, because they will have to return to the issue of welfare expenditure if they are to make any progress at all on the economy.

I hugely praise the rebellion last week by Labour Back Benchers. They have hopefully taught the Executive a most useful lesson: listen to Back Benchers with respect and close attention. As a former Chief Whip, however, I deprecate rebellions unless I am involved in them. It usually takes years for the Executive to get into the habit of treating their Back Benchers with contempt and derision as unelected Downing Street special advisers strut up and down Whitehall, but this lot—this Government —managed to accomplish it extraordinarily quickly. They have learned the hard way not to treat their Back Benchers and elected Members with so little respect.

[Tom Hayes (Bournemouth East) (Lab)]

Since working at Oxfam and campaigning for tax justice, I have admired the right hon. Gentleman’s work. Were the Conservative party to listen to him, the right hon. Member for Salisbury (John Glen) and the right hon. Member for Wetherby and Easingwold (Sir Alec Shelbrooke), it could find its way back to a centrist position, which would be of benefit to our country. Will he acknowledge that this Government had a difficult inheritance; that since we came to power, we have faced a changed world, with tariffs, trade wars, sluggish global growth, rising authoritarianism and democratic backsliding; and that as a result, this Government have a harder job? Will he acknowledge that, so we can start to think about how we take forward shared improvements?

[Sir Andrew Mitchell]

The hon. Gentleman brings me elegantly to my final point. Having praised Labour Back Benchers and encouraged them to speak out, my one ask is that they now stand up for the election pledge, clearly set out in their manifesto, to restore development spending to 0.7%. I ask them to show the same zeal and enthusiasm as they did on welfare for bringing back the 0.7%. Inexplicably and astonishingly, their Prime Minister has cut the figure from the 0.5% they, alas, inherited from us down to 0.3%, and it is already causing massive difficulties, of which the hon. Member, with his background in Oxfam, will be fully aware.

When the House comes back in September, I urge the hon. Member, particularly given his experience, to join other Back Benchers in saying to the Executive, “We will not put up with this. We said in our election manifesto that we would restore development spending to 0.7%, and in the same way that we showed the Government Front Benchers that they could not proceed as they planned with welfare, they cannot proceed as they plan to with development spending.” I urge Labour Back Benchers to ensure that this rethink takes place in the autumn, when the folly of what has happened will be even clearer.

[Several hon. Members rose—]

[Madam Deputy Speaker (Caroline Nokes)]

Order. The right hon. Member has set the tone with his speech length. If all Members could stick to around six minutes, everyone will get in. I call Joe Powell.

17:18

[Joe Powell (Kensington and Bayswater) (Lab)]

I congratulate the shadow Chancellor on securing a debate on this motion. When this Government came into office, they found Britain’s public finances vandalised, the economy wrecked, debts soaring, sky-high mortgages, a cost of living crisis that has touched every household in this country, and a mismanaged pandemic, rife with dodgy contracts and corruption. The Conservatives today pretend that they have discovered fiscal responsibility, but we all remember that they increased taxes 25 times in the last Parliament, and gifted us the reckless Liz Truss mini-Budget, which sent mortgages spiralling and tanked the markets.

No Government in living memory have had a worse economic inheritance than this one. The Conservatives have no credible economic plan for dealing with the debt, no credible plan for growth, and no credibility whatsoever with the British public. What they did to the public finances and the national debt even before the pandemic is unforgivable.

[Mr Holden]

Labour Members pretend that 2010 was year zero. In truth, in 2010 there was an annual deficit of 10% of GDP in Government spending, which meant that the Government were borrowing £1 for every £4 they were spending. Does the hon. Member not acknowledge, or understand, that that was a far worse economic inheritance than any Government have been offered since the second world war?

[Joe Powell]

I thank the right hon. Gentleman for that intervention, because it is important to talk about debt. I was disappointed that the shadow Chancellor failed to acknowledge that the inheritance in 2024 was total national debt of close to 100% of GDP, which was up from 60% in 2010. The annual debt payments that the Government are having to make—as others have said, they are close to £100 billion, thanks to the Government’s economic inheritance—are 8.3% of total public spending. Imagine what we could do if we spent that money on the NHS, our schools, or fixing the housing crisis.

This goes much deeper than debt. The truth is that we inherited a sick economy, affecting living standards, wages and public services, and there was no plan for growth. The Conservatives left Britain with rising debt and flatlining growth, yet they oppose the very measures that the Government have taken to fix their mess.

[Joy Morrissey]

Just to correct the record, on the economy, we had the highest and fastest growth in the G7 when we lost the election. We handed the Government that highest growth. I know it is hard for Back-Bench Labour MPs to grapple with that, but it is a fact none the less.

[Joe Powell]

I thank the hon. Member for that intervention. Of course, the Conservatives tanked the economy, and when there is such a dramatic decline in growth, increasing it from a very low level to a slightly higher one is relatively straightforward. The economic growth figures for the first quarter of this year, as we know, are the highest in the G7.

The Government are trying to fix the mess, including through measures worth over £20 billion a year—measures aimed at repairing our public finances by addressing the black hole and investing in public services that were wrecked by austerity, poor management and wishful thinking. The Conservatives have a nerve to pretend that they would do things differently now. My constituents tell me the same. Indeed, a local resident, George, has been vociferous about the lack of a credible economic plan from the Conservative party, and will not stop sharing his views on the airwaves. Yes, even the former Chancellor of the Exchequer thinks that the Conservatives have no answers to the fiscal challenges that the country faces. There is plenty that George Osborne and I disagree on, but he is absolutely right on that.

At every turn, the Conservative party is backing the blockers and preventing a plan for economic growth, whether it is the Leader of the Opposition blocking new energy infrastructure in her own backyard or the shadow Business Secretary, the hon. Member for Arundel and South Downs (Andrew Griffith), signing letters to delay vital transport infrastructure. It is no wonder that our economy has been held back for so long.

The other parties, too, have nothing to offer. Reform wants Liz Truss’s reckless economics all over again—the same failed experiment of unfunded tax cuts that crashed our economy and left our constituents paying the price. Meanwhile, the Liberal Democrats promise all the benefits of tough decisions with no way to pay for them. It is pure fantasy economics. I am glad that the Government have committed to not repeating those mistakes. It will fall on the Labour party to fix this mess, rebuild our economy and deliver the secure growth that Britain needs.

Nowhere is the cost of failure clearer than in the broken housing system. London boroughs now spend £4 million every single day on temporary accommodation —a massive waste of taxpayers’ money. The Conservatives also locked us into paying billions for over-inflated asylum hotel contracts. That is another egregious waste of taxpayer money that we inherited from them. That is the direct result of not planning for investment or for the long term; it is the price of short-termism and a failure to plan for the future.

Let us look at housing—one part of our plan. We have ambitious planning reforms to deliver the greatest impact on growth at no fiscal cost. We have the biggest investment in social and genuinely affordable homes in a generation. We have leasehold reform, protection for renters and a new decent homes standard, which are all opposed by the Conservative party.

This Government are making tough choices to raise revenue. The Conservatives talk about businesses; I meet businesses all the time, and I understand the pressures that they are under. They tell me that it is vital that NHS waiting lists fall, so that their employees can access the treatment that they need; that we have modern infrastructure in Britain, including transport and energy; that their staff can afford housing options; and that we agree an EU youth mobility scheme to support our hospitality industry.

[Bradley Thomas (Bromsgrove) (Con)]

When businesses in the hon. Gentleman’s constituency make people redundant, do those employers explain to his constituents that they have to do that for the good of the NHS?

[Joe Powell]

I am glad that business confidence is at a nine-year high—that is from an independent assessment. The decisions that the hon. Gentleman refers to are already making a difference. Does he oppose the 4 million extra NHS appointments that this Government have managed to secure so far; the three trade deals with the US, India and the EU—deals that the Conservative party failed to get over the line—the four interest rate cuts; the efforts to close the tax gap; the fact that wages have grown more in our first 10 months in office than under the last 10 years of the Conservative Government; the rise in the national minimum wage to support low-paid workers; and the expansion of free school meals to half a million children, which also lifts 100,000 out of poverty?

The motion before us offers no ideas and no credible plan. If the Conservative party were serious about economic growth and tax, it would do some reflecting on its record, apologise to the British people and get behind the Labour plan to get Britain’s economy booming again.

17:26

[Sir Alec Shelbrooke (Wetherby and Easingwold) (Con)]

The motion is simply asking the Government to commit to what they put in their manifesto. It seems that we are hearing every sort of speech other than speeches that address that point.

Let us first take the national insurance rise. It is extraordinary to ask us to believe that businesses in Labour Members’ constituencies are delighted that their taxes have gone up because that will help public services. I am sure that they are all keen to see their taxes go up again to satisfy the new 30% pay rise that resident doctors want. We were told that that would not happen, and that that was why the Government had to put up taxes the last time. A bit of reality has to come to this conversation, given that local businesses are either cutting people’s hours, on a recruitment freeze, making redundancies or going into liquidation.

Let us think about companies that go into liquidation. After 30 years of trading, a company in my constituency went into liquidation last month, simply because it could no longer cope with the NI rise. That was the straw that broke the camel’s back. Twelve people were made redundant immediately, meaning there would be no more taxes—no more income tax or purchasing tax—from that business, and on top of that, benefits would have to be paid.

We are on a downward spiral of tax and spend in this country. Indeed, it is quite incredible to listen to the speeches from Labour Members. It is as if nobody has left the country, no money has been withdrawn from the City, and no person has taken their assets elsewhere. Those are literally the headlines on the economy, day after day, in the Financial Times and other newspapers, yet we get a lot of harking back to the past, rather than recognition that Labour has been in power for more than a year.

[Joy Morrissey]

My right hon. Friend makes an excellent point about growth and wealth creators being taxed out of this country. They are simply taking their money and leaving, as the Labour party continues to tax them.

[Sir Alec Shelbrooke]

My hon. Friend sums things up perfectly. What terrifies me is that the Government do not seem to be taking any notice of that. When they talk about bringing in more taxes, such as a wealth tax, Labour Members all cheer. When my right hon. Friend the shadow Chancellor—I think it was him—said that Labour Members do not care, and would like to see more people who have wealth go, someone on the Government Benches shouted “Good!” It is absolutely incredible to say that the people who generate the wealth in this country are the enemy.

Let us just think about my constituency of Wetherby and Easingwold, which does exactly what it says on the tin: Wetherby and Easingwold are the two main market towns in the constituency. Market towns are part of the big ecosystem of the economy that is linked around farming, and the farming tax has created a huge problem in the farming community. People are scared to invest in capital equipment. That is the first thing. “How are we going to pay these bills? Is it even worth passing the farms on? So let’s pause our investment.”

That ecosystem in my constituency is not just about the farmers and what gets sold at the farmers’ market. It is about the businesses that service farm equipment. It is about the businesses that supply mechanical support. It is about the businesses that are involved in every aspect of the supply chain around farming in my constituency, and the worry and concern that is being felt throughout the communities means that they do not spend any money. That means that the Government are now losing out on VAT and on other taxes. So, what is their answer? Let us bring in a wealth tax; let us tax more—it is quite frankly frightening. In terms of taxation, I am terrified of where this country is heading.

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

The right hon. Member is making an important speech. Some 80% of millionaires in our country want to pay more tax. They want to contribute to our society and to our public services, so does he agree that when people want to pay more tax, they should be given the opportunity to do so?

[Sir Alec Shelbrooke]

I am sure it has just slipped the hon. Gentleman’s mind that people have the ability to do that. Famously, when Stanley Baldwin was the Financial Secretary to the Treasury, he gave a third of his wealth to the country to try to help with the national deficit. He did it behind the scenes and just signed it “FST”. He did not actually declare that it was from him. People can pay more tax if they wish. What they cannot do is sit in an unfair position where they can see that we do not have the most competitive taxes in the world; otherwise, they would stay here. It is blatantly obvious what is happening. If I were to throw a party at my house and I locked everybody in and halfway through the party they were trying to tunnel under the fence or get out in a hot air balloon, I would not say, “Well, that’s going really well. Let’s lock some more doors.” This is an overall assault on the lifeblood of the economy of this country. All this motion does today is ask whether the Government will be sticking to their manifesto promises.

When the Chancellor came to the Dispatch Box last July, about a year ago, she kept talking about the OBR. She talked up the OBR, saying we could never again have a situation like under the Tories where they ignored the OBR. She announced £22 billion-worth of taxes for the alleged black hole. The OBR immediately came out and said, “That’s not true, it doesn’t exist.” At best, it was £9 billion, and most of that had been caused by giving pay rises to the public sector because, allegedly, that would solve the problem. We on these Benches warned that, without reform, the public sector would come back. And boy, have they come back!

If the Government wanted to be believed that there was a £22 billion hole, one, why did they raise taxes by £44 billion; two, why did they then do another £30 billion-worth of borrowing; and three, how come we now have a £30 billion hole? That is a £100 billion hole in the economy that has been created since 12 months ago. How can anybody say that the Government have taken responsibility for the economy and are building it up? Somebody on the Labour Benches said that we were trying to rewrite history, but they are trying to rewrite the last two weeks! Labour is the only party I have known to come to the House trying to cut welfare and increased the bill! Where is the money coming from?

What do we hear? We hear that we must get rid of the triple lock, because it is now going to cost £15 billion instead of £5 billion. How about we stop people self-declaring just to have time off work and get on universal credit, which is costing £40 billion, and we do not hit people who are on fixed incomes who do not have the ability to do other things? A great number of the retired people in this country are carrying the burden of supporting their families in work, looking after their grandchildren, and doing those things unpaid. We should be grateful to pensioners in this country and not be saying, “You’re the ones whose income we’ve got to cut” because the Government are letting welfare run out of control.

This does not stop at what the Government have done to businesses in my constituency or to the ecosystem that relies on a rural economy, and it does not stop at them wanting to put solar panels all over credible farming land, pushing those businesses out even further, because they have brought in VAT on schools, and they have done it through pure ideology and envy. My constituents are not rich people. They have cars that are 15 or 20 years old. They do not go on holidays. They have been putting money in to give their children the best education, and they are now having to withdraw their children from those schools.

[Joy Morrissey]

The Labour party has decided to tax hard-working families on their choice of education. It means that people can no longer send their child to a SEND special school. It means they no longer have the choice to use their money, because the Labour party wanted to take a little more tax from them. Does my right hon. Friend agree that it is not a fair process and it is actually excluding people who want to protect their children for the future?

[Sir Alec Shelbrooke]

My hon. Friend makes a very powerful point. I am just wrapping up, but I will tell you this, Mr Deputy Speaker: I am a comprehensive schoolboy, and I am not going to take any lessons off the private schoolboy on the Front Bench who tells me that it is unfair that we are not taxing people who are trying to do the best for their children—talk about pull up the ladder, I’m all right, Jack.

Overall, the economy is being destroyed under this Government. We will have a political kickabout this afternoon, but I am terrified of where we are going. The 1970s is back good and proper—public sector strikes, ridiculous pay demands constantly bringing the Government down, 240% debt to GDP ratio predicted on this path, more and more taxes to come, and more and more wealthy people leaving. We saw what happened by 1977 when we went off to the IMF. The situation was so bad that the IMF said no! We are on that path, and it terrifies me.

[Several hon. Members rose—]

[Mr Deputy Speaker (Sir Roger Gale)]

Order. It has become apparent already that if we are to get everybody in, we will have to set a formal time limit. After the next speaker, I will put in place a six-minute time limit. If there are a lot of interventions, which will of course add time, it will be reduced smartly to five minutes and possibly even to four minutes.

17:37

[Phil Brickell (Bolton West) (Lab)]

It is a pleasure to speak in the debate, and I do so on behalf of my constituents, who dutifully pay their taxes in the expectation that they will receive a fair deal in return. Today’s motion from the official Opposition implies that the efforts that this Government have undertaken to deliver that fair deal are not in the interests of those constituents. I reject that premise entirely. Instead, Labour in government has constantly and rightly stuck to ensuring that those with the broadest shoulders carry the greatest burden. That approach has secured over £20 billion a year of revenue to pay for schools, the NHS and our national security. The Chancellor has restored responsibility and credibility—

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

Will the hon. Member give way?

[Phil Brickell]

I will make some progress given the time limits that will be put in place on other Members.

That finally put us on a strong footing to move on from the irresponsible and reckless chaos of Liz Truss’s mini-Budget and the litany of unfunded spending commitments left behind by the previous Administration, who had no intention of implementing them.

I must remind the House of what Labour inherited from the last Government when the Chancellor walked through the doors of No. 11 just over a year ago: a national debt at nearly 100% of GDP—the highest since the 1960s; living standards falling for the first time since the 1950s; anaemic growth that left us second to last in the G7; and the UK as the only G7 country where the employment rate had still not recovered to pre-covid levels by the first quarter of 2024. That was the Conservative legacy—a legacy of economic mismanagement and a tax system weighed down by loopholes, complexity and underenforcement, so I will take no lectures on fiscal responsibility from the architects of that wreckage.

We on the Labour Benches will not indulge the fantasy that the path to prosperity lies in slashing public services, making unfunded promises and claiming that we can borrow endlessly without consequences. Our constituents deserve better. This Government, led by the Prime Minister and the Chancellor, are getting on with what Labour always provides: a Government of service.

First, let me address the abolition of the outdated non-dom regime. For too long, our tax code allowed the very wealthiest to live in this country and enjoy our services, infrastructure and rule of law but contribute only a token amount to the national purse. That ended, quite rightly, with this Government. The new residency-based regime is a matter of principle: “If you live here, you pay here.”

Secondly, we have increased the rate of capital gains tax on share sales—not to punish wealth but to deliver fairness. Many of my constituents contact me to say that they see no reason why wealth—assets, and stocks and shares—should be taxed less than work. There is more to be done on that, but I welcome the measures that the Government have taken so far.

[Joy Morrissey]

What the Labour party is saying very clearly—it is useful to have it clarified—is that those who scrimp and save, who decide to give money or homes to their children, who save their farm for their children, do not matter. They will be the ones who are punished under Labour—not those who scrounge on benefits, but those who have saved their money and made choices. Labour is saying that those are the people it will punish. I thank the hon. Gentleman for clarifying that.

[Phil Brickell]

The hon. Member would do well to listen to what I have to say, and I will come to wealth taxation shortly, but I would appreciate it if she did not take that very condescending tone with me—I spent more than a decade working in the financial services industry myself.

These measures have been taken because it is simply the right thing to do. When a nurse in Bolton hospital is paying a higher effective tax rate than someone making millions on property or shares, the system is not just broken; it is unfair.

Thirdly, the Government have cracked down on tax-dodging, with more funding for HMRC to go after tax evaders and bring down the stubbornly high tax gap. That gap—the difference between what the Government are owed and what they actually collect—currently stands at almost £50 billion. That figure—50,000 times £1 million—is almost the size of the entire defence budget in 2023-24. Unlike the dearth of policy proposals from the Conservative party, I constructively implore the Government to continue tackling the enablers of dodgy tax schemes. Firms that promote aggressive tax avoidance schemes will now be held to account with fines of up to £1 million. I welcome that measure in particular.

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

On that point, does my hon. Friend agree that it is important for HMRC to work with local authorities to take action on tax evasion by high street stores that do not act fairly, like the awful Harry Potter stores in my constituency? I am worried about the impact that they have on the high street and on our tax revenues.

[Phil Brickell]

My hon. Friend, who has been a fantastic champion on tackling that issue, makes a valid point.

The Opposition would have us believe that taxes writ large are a drag on growth, but the truth is more nuanced. What stifles growth is instability. What repels investment is unpredictability. What corrodes trust is a tax system that rewards avoidance while underfunding our schools, hospitals and police. Labour is putting more money in people’s pockets by boosting the minimum wage for 3 million workers. Wages are growing more in our first 10 months than in an entire 10 years under the Tories.

I would urge the Chief Secretary to the Treasury not to rest on his laurels, however, because there is more to do. I propose three policy priorities that I hope the Treasury will give serious consideration. First, we should review and reform current tax reliefs. Some £204 billion—a quarter of all tax revenue—was spent on tax reliefs in 2022-23, yet many of those reliefs are uncosted, unscrutinised and susceptible to abuse. The Treasury Committee was right to call for a rationalisation of those reliefs. We must audit them for efficacy, eliminate those that serve no public interest and crack down on those that have become vehicles for avoidance.

Secondly, I draw the Minister’s attention to the issue of tax-dodging in our own backyard. At the end of last month, a number of British overseas territories, including the tax haven of the British Virgin Islands, missed yet another deadline to introduce public registers of beneficial ownership. The Minister will know that this is a long-running issue. The BVI in particular has missed deadlines in 2020, 2023 and 2025, as the right hon. Member for Sutton Coldfield (Sir Andrew Mitchell) knows well, he having campaigned strongly on this issue over many years.

In January this year, the Bureau of Investigative Journalism, working alongside the BBC and The Guardian, revealed that Roman Abramovich, the former owner of Chelsea football club, may owe the Treasury up to £1 billion in unpaid corporation tax, penalties and interest. That is from corporate structures with a value of $6 billion, set up through an offshore web of hedge fund vehicles primarily registered in the British Virgin Islands and Cyprus, in what looks like an ultimately botched attempt to reduce tax liabilities.

When a Russian oligarch allegedly manipulates British secrecy jurisdictions in order to obscure profits made from UK-based centres of control, it undermines the credibility and fairness of our tax system. We need every British overseas territory to adopt full public beneficial ownership registers, so that sham structures such as Abramovich’s can be traced, challenged and taxed. Dirty money—the kind that flows beneath the waves of secrecy—corrodes the entire tax system, so I call on the Minister never to shy away from the globe-spanning challenge of tax abuse hidden in the nooks and crannies of our own backyard.

Let me turn to my third and final recommendation for the Government, which relates to the often overlooked distortion in our system of pension tax relief. This long-standing relief disproportionately benefits higher earners, and it has been my settled view for a number of years that we must look again at how it operates. Currently, higher rate taxpayers enjoy 40% relief on pension contributions, while the highest earners enjoy 45% relief. Basic rate taxpayers nevertheless enjoy a rate of just 20%. Total pension tax reliefs cost circa £40 billion per year to the Treasury, according to HMRC. Of that total, two thirds is relief for those on incomes in the 40% and 45% income tax bracket, which represented 12% of the adult population in 2023-24, according to the IFS.

That highlights the inequity here: a system of relief that is tilted to those who need it least, not to incentivise moderate earners putting into pensions but to support those on the highest incomes. I urge the Minister to consider moving to a flat rate model of, say, 30%, independent of income bracket, so that every saver gets equal recognition for securing their own retirement.

Finally, with my industry expertise in addressing tax evasion before I came to this place, I would like to address the siren calls of a broader wealth tax being made by a number of colleagues on the Government Benches and elsewhere in the House. Increases in capital gains tax to align them closer to income tax are welcome. Wealth and work should be taxed at similar rates—it is as simple as that—but I have a few words of caution for proponents of wealth taxes.

The Wealth Tax Commission itself acknowledges that wealth taxes could incentivise the wealthy to hide assets behind legal vehicles using expensive lawyers and secrecy jurisdictions. HMRC is already chronically short-staffed, under-resourced and hamstrung by complexity. Without dismantling the complex web of ultimate beneficial owners, offshore trusts, nominee directors and secrecy jurisdictions, we are at grave risk of opening up a game of whack-a-mole that we would likely see the Government lose to deep-pocketed and well-lawyered high net worth individuals who can run circles around HMRC and law enforcement and secrete their assets elsewhere.

My firm view is that the Government should instead crack down on tax evasion, simplify the tax code, streamline existing reliefs and bring capital gains tax levels closer to income tax. The Centre for the Analysis of Taxation estimates that closer alignment of capital gains and income taxes alone could raise some £14 billion for the Exchequer.

As a country, we face enormous challenges: an ageing population, creaking infrastructure, rising global instability and the urgency of the net zero transition. We know that public services are under strain. We need to raise funds in a way that is both fair and that promotes the growth we need to get our country back on its feet after 14 years of Tory decline. Let us be clear: taxation is not merely a tool for revenue but the lifeblood of our social contract, which is why we desperately need a responsible and workable tax system, to ensure that education is a right, not a privilege, that healthcare is free at the point of use and that the most vulnerable in our society are protected.

17:49

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

The first line of the Tories’ motion gets to the word “manifesto”, and I accept their premise that that is what this is about—it is about the commitment

“not to increase taxes on working people, and not to increase National Insurance or the basic, higher or additional rates of Income Tax”.

I do not think that is a tall order. The next item on the list, however, is VAT. Never mind the headline rate, the concern now, from comments inside the Government, is about what will be dragged into VAT or have its reduced rate increased. There is no clarity on that from the Government, much less any reference to it in their manifesto from which Parliament, and taxpayers across these islands, can take any comfort or otherwise.

The motion

“calls on the Government to reaffirm the statement made by the Chancellor of the Exchequer…that…personal tax thresholds will be uprated”

in the manner that they said. That is a fair point. Fiscal drag is an iniquitous thing to inflict on people. It eats into pay rises and erodes people’s incentives to get on and progress, and there is a real concern, given the fiscal misadventure—it seems to be one farce after another with this Government, and one U-turn after another. They talk about introducing stability into the fiscal dynamic. Well I am holding my breath waiting for that to happen, but I think I am making a mistake in that pursuit.

Worst of all—well, it is not worst of all, but it is really bad—are the changes to agricultural property relief, which were also not in the Government’s manifesto, and I sincerely urge the Minister to pause and review those changes. As others have articulated, that measure was clearly something that Treasury officials put in front of every new Chancellor, and every new Chancellor to date has had the wit to say, “Well, I’m not doing that,”—expect for this Chancellor, who is lacking in wit and much else to recommend her. She said, “Ooh, I’ll just go ahead and do that,” completely failing to understand the agricultural economy as it exists in these islands.

My constituency of Angus and Perthshire Glens is the garden of Scotland and the highest productive agricultural land in Scotland. An ecosystem exists around that farm enterprise, of recruitment, training, plant sales, feed stock, markets, fuel sales—it all exists, and it revolves like satellites around the farm business. Those farmers are now saying, “Why would I invest? What on earth would I invest for? Why am I investing my hard-earned capital into increasing technology and lowering the cost of production, so that I can get more competitive food on to the shelves of supermarkets and help with the cost of living, which this Government are incapable of doing anything about, meaning that my asset values go up, and so that when I die and my assets transfer, my tax bill goes up?”

[Graham Stuart]

The hon. Gentleman is giving a powerful speech on this subject. I was at the Great Yorkshire Show last week, and there we had not only livestock and farmers, but the whole supply chain around that. The only conversation there was exactly as the hon. Gentleman describes, of a whole industry brought low because of this misconceived measure. He talked about Chancellors being presented with things. The caravan tax was presented to the Chancellor in 2012, and it took Government Back Benchers to persuade those on the Front Bench to change path. I hope Labour Members might do the same with the farm tax.

[Dave Doogan]

That is a welcome and comprehensive round-up of some of the broader issues on this, but it speaks to the fiscal innumeracy that says, “There is no cost to any of this; we can just help ourselves to that and it won’t have any impact.” As the right hon. Member for Wetherby and Easingwold (Sir Alec Shelbrooke) pointed out, if we speak to any rural plant sales or dealership, and they will say that sales have gone off a cliff, along with the VAT, employment, income tax, and national insurance that went with them. That speaks to a Treasury and a Chancellor who have a passing understanding of the price of everything but could not identify value in a line-up.

The motion goes on to talk about pensions. This is difficult, because I do not believe for one minute that we should pull pensioners whose income is only the state pension into tax. Neither do I believe that by dint of being a pensioner someone should get tax relief on the same income that somebody who earns that income will not get tax relief on. The Government are in a difficult position on this, and that is of their own making. Unless and until they guarantee to uprate the rates and protect pensioners from fiscal drag, there is little point in making a great big song and dance about the triple lock, if what that does is pull pensioners into taxation.

Where I diverge from the movers of the motion—

[Graham Stuart]

Shame! It was going so well.

[Dave Doogan]

Yes, it had to come, and I am relieved that there is a cleavage. Where I diverge with them is on a wealth tax. I see that we are in a state—the UK is not a country—where poverty levels among our children are rising in every country in the UK except Scotland. In Scotland, it costs us £150 million a year—it will be £200 million by the end of the decade—to mitigate Westminster’s mismanagement of child poverty.

We cannot say that it is somehow punitive for people with assets of more than £10 million to attract an annual, modest rate on those assets. That is reflective of the highest tax burden that ordinary people have paid since the second world war—incidentally, I say to Conservative colleagues that that was the case before the election. The Labour party has just knocked that into the stratosphere with its misadventure.

There has been no talk anywhere in this Chamber today about Brexit. I remember the Prime Minister—what was she called? Theresa May. She was asked repeatedly, “What does Brexit mean?” She said, “Brexit means Brexit,” which is as nebulous as it sounds. In 2025, we now know what Brexit means. It means enduring child poverty and flatlining growth, no matter who is in charge of the Treasury in the United Kingdom. It means a common purpose between Labour and the Conservatives to have a neurotic policy on immigration. It means pale imitations to substitute for EU programmes, such as substituting Erasmus with the pointless Turing scheme, or EU structural funding and other funding with “levelling up.” It means a permanent drag on business.

The further we get from covid, the more we see that the fundamentals that are wrong with this economy are due to Brexit. The Minister, in his summing up, will doubtless say—

[Mr Deputy Speaker (Sir Roger Gale)]

Order. I call John Slinger.

17:54

[John Slinger (Rugby) (Lab)]

This is all rather desperate from the Conservative party. I had thought that pantomime season was in the winter, but clearly it is not. I will defend the decisions taken by this Government to help working people, grow the economy and fix the mess we inherited from the previous Government, and we are doing so with fairer tax at the core.

I use the term “Government” regarding the last Administration loosely, because they did not believe in government. They ran the tank dry. They were running the factory without maintaining the equipment; they just made last-minute repairs, knowing that things would break down again, and they did. An astonishing 234 schools were found to contain RAAC—reinforced autoclaved aerated concrete—and were almost disintegrating before our eyes; our Army reached its smallest size since the Napoleonic wars; prisons reached capacity; and the Government did very little or nothing. The police saw 20,000 officers cut, and that was reversed only at the last point.

That is what the last Government were: crumbling and shambolic. They presided over a country whose public services were on their knees and whose people had not seen their prospects get better for many years. So woeful was their record that they vacated even the territory that they used to occupy—they became the weak-on-defence Tories, the soft-on-crime Tories and the high-tax Tories.

That brings me to my second point. The Conservatives increased the tax burden to its highest level since the second world war. It was stable at 33% from 2010 to 2019. The 2019 Parliament saw the biggest rise in the tax take in recent history, reaching 36% by 2024. They then engaged in a reckless, unfunded cut to NI, at a time when the economy was still stagnant. They did that deliberately—in my view, it was a poisoned chalice bequeathed to this Government. The Conservatives knew that Labour’s commitment not to raise tax on ordinary working people would mean that we could not and would not reverse that reckless tax cut. They knew full well that they were leaving behind a black hole—Conservative Members may not like to hear it, but they knew that. They knew that the public services were on their knees, but they did not care; they only cared about their electoral fortunes, which did not work out so well.

This Labour Government are not afraid of difficult challenges, nor of addressing those challenges. We actually believe in the concept of government and the responsibility of government—the responsibility to take the difficult decisions necessary to fill the unforeseen £22 billion black hole that we inherited. We therefore believe that we must raise revenue through taxation, as the Chancellor outlined in her Budget last autumn. Despite the accusations of the Conservative party, this has not been to the detriment of working people, nor is it the case that we are not asking the wealthiest in society to pay more. The opposite is true: we have raised taxes on wealth. Private jet passengers now face a 50% tax increase, VAT has been added to private school fees, and we are raising £2 billion more from inheritance tax by closing reliefs used by the wealthiest.

[Harriet Cross]

In his speech, the Chief Secretary to the Treasury said that working people are people who go out to work. Do farmers go out to work?

[John Slinger]

Of course they go out to work. I believe that my right hon. Friend the Chief Secretary to the Treasury answered that point earlier in the debate, but I thank the hon. Lady for her intervention.

To add to my list, non-dom status is being largely scrapped, capital gains taxes have increased, and stamp duty on second homes now starts at 5%. These measures help raise the revenue that is required for massive public investment, benefiting working people, not making them worse off. The clue is in the name of our party—Labour. We are the party of work. We are also the party of getting our country, our economy and our public services working.

As such, I ask Opposition Members to look forward to the summer recess with optimism in their hearts. Do not let the doom-mongers and gloom-mongers fill their hearts, for change has already begun. That change is made possible by my right hon. Friend the Chancellor’s Budget and by the spending review. We are fixing the NHS —we promised 2 million additional NHS appointments in our first year, and have delivered 4 million. Waiting lists are down by 260,000, and 1,900 more GPs have been recruited. We are putting more money into people’s pockets; we have boosted the minimum wage for 3 million workers, and wages grew more in our first 10 months than over a whole 10 years under the previous Administration, testifying to the Conservatives’ incompetence and weakness when they were in government. We are fixing the foundations of our economy, with four interest rate cuts, three trade deals and business confidence at a nine-year high. In the first quarter of this year, UK growth was the highest in the G7. We are tackling childhood poverty, opening the first 750 free breakfast clubs, and expanding free school meals. In one day, this Government took action to take 100,000 children out of poverty.

I now turn to the motion in front of us, which implies a reversal of revenue-raising policies worth over £20 billion a year. If Opposition Members oppose the measures we have taken, which of the investments I have just mentioned would they reverse? Is it the free breakfast clubs? Is it the investment in the NHS, with shorter waiting lists, or is it the extra police? Perhaps more pertinently, given the title of today’s debate, how would they pay for it? The Chancellor is not ducking difficult decisions, and I am confident that if people observe her actions, they will see that she and this Labour Government were correct. I call it a “zoom out and dial down” approach. If people zoom out and look down, they will see that the challenges we face as a country—on tax, and on reform of many kinds—require us to take action. If they dial down the endless noise of discontent, whipped up by social media and sometimes in the media and by our political opponents, they will observe a country whose people have—

[Mr Deputy Speaker (Sir Roger Gale)]

Order. I call Bradley Thomas.

18:04

[Bradley Thomas (Bromsgrove) (Con)]

Earlier this month, the House witnessed the Government lose control of swathes of their own party. They have had just more than a year in office, and yet the cracks could not be clearer. In the last year, the country has had to endure U-turns, tax increases and a stagnant economy, and yet the Chancellor and the Prime Minister have been pushed by their disapproving Back Benchers into the inevitable: they will have to break their fiscal rules and manifesto commitments.

The OBR has warned of an up to £12 billion cost from the watered-down welfare reforms. Labour promised to stop the chaos and support business through a stable policy environment. That was in its manifesto, yet employer national insurance contributions increased in April—another pledge disregarded. We have seen the national insurance exemption for Indian workers transferring to the UK, which the Indian Government said was a competitive advantage for them. The Leader of the Opposition opposed such a deal as Business and Trade Secretary, yet the Government continue to sell out British workers. Whose side are this Government on? Deals and decisions like that explain why 73% of voters believe that the Government do not have things under control.

[David Pinto-Duschinsky (Hendon) (Lab)]

This is the Government who got trade deals that the Conservative party failed to do, and saved hundreds of thousands of jobs. Are you saying that you would not have signed those deals? Are you saying—

[Mr Deputy Speaker (Sir Roger Gale)]

Order. I am not saying anything. Please address the Chair.

[Bradley Thomas]

The Government have not seen a success. Where we have seen tariffs imposed on the economy, the Government have not reduced them. There is a competitive disadvantage as a result of what we are seeing in the global economic climate. When Labour governs, Britain suffers.

[Graham Stuart]

On the trade deals, it turned out that the deal with the US entirely excluded the British bioethanol industry, until the President of the United States phoned up the Prime Minister and he unilaterally gave away the entirety of the market, putting at risk hundreds of jobs at Vivergo and thousands of jobs in the supply chain and at Ensus.

[Bradley Thomas]

I thank my right hon. Friend—that is another failure by Labour.

[Sir John Hayes (South Holland and The Deepings) (Con)]

There are two fundamental macroeconomic problems facing this country. One is productivity, and the second is mass immigration, which has displaced investment in domestic skills. The Budget did nothing about those, and yet the tax system could be used to address both.

[Mr Deputy Speaker]

Order. The right hon. Gentleman is very experienced. He should have been here at the start of the debate if he wanted to intervene.

[Bradley Thomas]

My right hon. Friend the Member for South Holland and The Deepings (Sir John Hayes) is absolutely spot on. The message to the Government is clear: they cannot tax their way to prosperity.

[Tom Hayes (Bournemouth East) (Lab)]

Will the hon. Gentleman give way?

[Bradley Thomas]

I will not; I have been generous with interventions.

More than half of business owners nationally are planning to, or have made, further cuts to staff numbers in response to increased employer national insurance contributions. In May, 109,000 jobs were lost in a single month. When we tax jobs out of existence, the fiscal rules are not merely stretched; they are shattered. The Chancellor will have either to break her campaign promises and raise taxes, or admit that her rules are broken. Either way, it means that working families and working people across the country will pay the price.

A fortnight ago, the Government rejected calls to protect those whose only income is the state pension from paying income tax. This retirement tax will hit 1 million of our lowest-income pensioners. This is not wealth; they are modest, often meagre incomes relied upon to heat homes, buy food and see a doctor. One in five single pensioners has no other income beyond the state pension and basic benefits, yet to fill a fiscal hole that they have created, the Government resist the plea of their most vulnerable citizens.

[Joe Powell]

Will the hon. Gentleman give way?

[Bradley Thomas]

I will not give way; I have been generous in taking interventions.

As the Chancellor grows increasingly desperate to save the sinking ship of her fiscal rules, there is now rumour of a wealth tax to compound the Government’s contempt for not only working people, but industry leaders and innovators. That is not conjecture. Only last week, Lord Kinnock said that Labour should be “willing to explore” such disastrous measures. Let us be honest: a wealth tax really means a tax on hard-working people. It means an attack on pensions and on people who have done the right thing and want a sense of fairness, and anyone who has accrued anything will pay the price.

[Tom Hayes]

Will the hon. Gentleman give way?

[Bradley Thomas]

I have explained that I will not give way any further.

The nation deserves better. It deserves a Government who trust enterprise, rein in the bloated state and live within their means. I urge the House to support the motion and send a clear message: scrap the jobs tax, fix the welfare overburden, protect pensioners and give working Britain the honest, sensible Conservative growth plan it deserves.

18:10

[Brian Leishman (Alloa and Grangemouth) (Lab)]

We live in a country where wealth is hoarded by the few while poverty is the fate of the many. Yes, the Government have taken some welcome steps, addressing non-dom status and imposing VAT on private school fees, and I make no apology for being ideological about that. Those are steps in the right direction, but, as has been shown by reforms to welfare, they are far from enough to stop cuts. The truth is that these policies do not come close to tackling the grotesque level of inequality in our country, nor will they generate the revenue that is needed to repair the failed ideology of austerity, privatisation and no small amount of political cowardice in the face of corporate greed.

The 2010s were the decade in which the super-rich won. They were handed tax breaks, were shielded by loopholes, and watched their wealth explode while wages stagnated and services crumbled. Millionaires and billionaires flourished. As I said in the earlier debate this afternoon, the fact that in one of the richest economies in the world millions of people in full-time work are relying on food banks to survive is a national disgrace. They go to work, they do their shifts, and still they are left to rely on the charity of strangers to get by.

This did not happen by accident. It is the result of deliberate political choices: austerity, privatisation, suppressed wages and a tax system rigged in favour of the ultra-wealthy. Even now, with Labour in power, we are being told to temper our ambition. How can we do that when there is a 13-year difference in life expectancy between the richest and the poorest in Scotland, and when thousands of children are growing up cold, hungry and facing an uncertain future?

However, there is an alternative to relentless cuts. There is an alternative to balancing the books on the backs of the poorest. There is an alternative to managed decline as we watch the state become bankrupt both financially and morally. That alternative is genuinely progressive taxation alongside investment in people and communities. I find common ground with my hon. Friend the Member for Bolton West (Phil Brickell), in that I also support equalising capital gains tax with income tax. Currently, many who earn their living through work are taxed more than those who profit by sitting on their wealth. Equalising those rates could raise an additional £12 billion a year. My hon. Friend and I do, however, disagree about the introduction of an annual wealth tax.

Since coming to this place, I have campaigned for the introduction of a 2% annual wealth tax on those with net assets over £10 million. This single policy could raise £24 billion a year, and the notion that the wealthy will flee en masse if we ask them to contribute fairly is a tired and dishonest argument. Even among the ultra-wealthy, there is a recognition that inequality has spiralled out of control. Many are willing to contribute more, as is confirmed by the work of Tax Justice UK and Patriotic Millionaires, but the Government must have the courage to do it.

When we invest in public services, when we lift people up, we build a fairer country and a stronger economy. Children do better at school when they are fed, housed and supported. Workers are more productive when they are not spending every hour worried about how they will make ends meet. Families are stronger when the welfare state works for them, not against them. We have to find new and just ways to fund welfare, to fund the green transition, to fund public services and to rebuild the country. The labour movement was not built to tinker around the edges; it was built to transform, and if this Government are serious about real change—the change that we promised—we must be bolder than we have been so far. Redistribution of wealth and power for the benefit of workers and communities, and wider society, should always be the driving mission of any real Labour Government.

18:13

[Mr Richard Holden (Basildon and Billericay) (Con)]

The damage that this Labour Government have dealt to our economy is a real kick in the teeth for all those who voted for them last year—and for those who did not vote for them, but who wished them well and believed their words at the general election. Time and again, my right hon. Friend the Member for Richmond and Northallerton (Rishi Sunak), and many others on this side of the House, warned that the new Labour Government’s priorities and promises on tax were not to be trusted, and that members of the public should take their words with a bucket of salt. The Labour party cried foul, diving to the ground like a premiership footballer screaming blue murder, but what has come to pass is far worse than many on this side of the House imagined it would be. For all the Government’s talk of fixing the foundations, I have been pained to watch the suffering, distress and anxiety that they have wilfully chosen to inflict on the British people. They have hammered the small businesses on which people rely for their jobs, through changes to business property relief, agricultural property relief, VAT and dual cab taxes, and through the business rate rises and the national insurance tax rise.

I cannot think of a policy as woefully constructed and as disastrously executed as the national insurance tax rise. This Government claim to have been elected on a platform of promoting growth, but they are choosing to boost growth by blowing up businesses. That is so inexplicable that it calls into question the Government’s ability to govern. The people hit hardest by the tax rises are those starting out in their first job, who will be hit by the thresholds, and part-time workers—often women—trying to get back into the labour market. It is among those groups that we see the highest rises in unemployment since the Budget.

It is because of the Government’s choice to raise taxes that businesses are cutting back on hiring staff. They are also making staff redundant, shelving expansion plans and closing their doors. I see that in my constituency, where unemployment is up by about a sixth in the 12 months since the general election. It is also because of that choice that inflation is up and growth is down, and because of choices made by the Labour party that this country will continue to miss out on investment opportunities and economic security.

That brings me to the people who will feel the impact most acutely. During the pandemic, we celebrated key workers—the care home workers, teachers and hospice workers who went out every day in horrendous conditions to do their job in a spirit of service. What kind of Labour Government would willingly choose to punish those who represent the heartbeat of the nation? Only recently, I heard from a woman in my constituency who runs a small childcare business, which she kept going during the pandemic. She wrote to tell me that because of the tax rise, she has had to cut back her assistants’ hours and turn away parents. On the one side, the Government pretend that wages are increasing, but on the other, employers are being forced to cut hours, so people are no better off. It is happening in every constituency up and down the country, and that is the real cost of this Government’s choice.

The national insurance tax rise means less money for schools and teachers, for hospices and their staff, and for the healthcare workers who were applauded during covid—those operating in the most difficult circumstances. It is a fundamental disgrace that the Labour Government, who are always so keen to paint themselves as the kinder, more cuddly, and more friendly party, have made the catastrophic choice to balance the books and fix their failures on the back of essential workers and volunteers. The Government are raising taxes on hospices, which they are supposed to stand up for.

[Joe Powell]

Will the right hon. Gentleman give way?

[Mr Holden]

I give way to the hon. Gentleman on raising taxes on hospices.

[Joe Powell]

I thank the right hon. Gentleman for his defence of teachers. I am sure that he welcomes the pay rise for teachers of 5% last year and 4.4% this year, funded by the Budget.

[Mr Holden]

As the hon. Gentleman will know, that rise is not fully funded by the Budget, because the national insurance costs for schools have not been fully covered by the Budget.

[Joe Powell]

indicated dissent.

[Mr Holden]

The hon. Gentleman may shake his head, but he should look at the statistics. Schools in my constituency and his will cut support staff and teaching assistants as a result of the black hole that his Government have created for their workers.

It is particularly pernicious that the Government are raising taxes on hospices. I visited St Luke’s hospice in my constituency at the weekend. It is having to raise hundreds of thousands of pounds a year more—money that would be going towards care for the most vulnerable at the end of their life—to pay for a tax rise that Labour Members will today vote to maintain, while Conservative Members say that it should be removed.

My hon. Friends and I will always raise these issues, as we have the issues for farmers and our food security, or the mind-boggling plans to drive away wealth creators to fill up the Treasury’s coffers, and we will continue to do that in opposition. We are asking the Government to listen to us, because we want the Government to change course and do the right thing. Bizarrely, we do not actually want the Government to drive the country off the edge of a cliff.

[John Slinger]

In the spirit of listening, I would be very grateful to know which of our investments in the public sector the right hon. Gentleman would cut.

[Mr Holden]

The Chagos deal comes to mind, which the Government seem so keen on: handing over British taxpayers’ money for something we already own. We would not have made the same decisions that this Government have made. We made it very clear in government that we would not have handed out pay rises to train drivers without the need for reform, or to the junior doctors, who have come back yet again with another double-digit pay demand. The hon. Gentleman needs to think about those things. He can say, “What would you have done?” but we actually said that we would not do those things before they happened, so actually we are the ones who have been financially responsible. He is the one handing money away to Mauritius, so that it can cut its income tax, while the Government Front Benchers seem a bit wary of answering the question of whether they will have to raise taxes later this year. We Opposition Members can guarantee that they will.

I call on the Government to do what is right and look again to their manifesto. The Government should choose to back enterprise, reward work, not punish those who help out in hospices, create growth and opportunity in every corner of our country, and back others who do so, instead of taxing everyone and everything they possibly can. Otherwise, I fear that this Labour Government will face the same fate as all other majority Labour Governments that have ever existed, and leave unemployment higher than when they entered office. That is not exactly the Labour party that people voted for in my constituency or across the country.

18:21

[Dr Jeevun Sandher (Loughborough) (Lab)]

The motion before us shows the difference in values between the two sides of this House. The Conservatives’ motion speaks of wealth creators, but specifically says that only a few of us create wealth. On the Labour Benches, we believe that every single worker creates wealth in this country. We have seen the consequences of 14 years of their values in action: falling living standards, higher waiting lists, higher energy bills and a weaker nation. Our values, as we saw under the previous Labour Government, left us with a stronger, wealthier and prosperous nation, in which we taxed the wealthiest to invest in the services that we all rely on. We left a more prosperous and stronger nation last time, and that is what we are building this time.

We have seen the damage of the past 14 years, as expressed in the motion. We have seen what the Conservatives’ values mean in practice. They believed that if a few did well, and there were a few tax cuts for those at the top, our country would be wealthier. That started in 2013, and continued with Truss. In reality, at the end of that 14 years, no one did well. We had the longest squeeze on wages since Napoleon threatened our shores. We were the only high-income nation to see sickness rise after the pandemic, had the highest energy bills in Europe, and were the worst-connected country in western Europe. That is the Conservatives’ record. I believe the right hon. Gentleman wanted to make an intervention.

[Mr Holden]

The hon. Gentleman says that the last Labour Government left the country in a fantastic state. As I have mentioned before, they left behind a massive deficit and unemployment higher than when they took office. Does he not understand that a deficit of over 10% of GDP was an horrific legacy to leave in peacetime? Also, unemployment being higher was a betrayal of the people the Labour party is meant to stand up for.

[Dr Sandher]

The global financial crisis affected every single nation across the world. I do not deny, by the way, how difficult things were in 2010, but we also left the Conservatives an economy that was growing, record low waiting lists, and investment in our nation and a plan to insulate our homes. Because they did not follow through on our plans, we had the worst insulated homes in western Europe, and some of the highest energy bills to go with that. Yes, we left in a difficult moment, but we left the Conservatives with a strong foundation for going forward.

The Conservatives left us poorer, sicker and slower, thanks to their their record on tax. In the worst cost of living crisis in a century, they attempted to cut taxes for the wealthiest. Everybody on the Labour Benches thought Truss was mad; I really do not know what Opposition Members believe anymore.

[Graham Stuart]

I am sure the hon. Gentleman would not want to mislead the House, so he will recognise that in 2010, fewer than 12% of homes in this country were properly insulated with an energy performance certificate rated C or above; when we handed over power last year, that figure was over 60%. He can look up those numbers, and I ask him to never misrepresent that record in this House, because that is the reality.

[Dr Sandher]

We saw it in the insulation build-out; David Cameron, as he put it, cut the green crap. Insulation rates were rising when we left office, but they were cut throughout the 2010s; as a nation, we have not had that insulation. That is why we brought in the warm homes plan and are funding it with £13 billion. Millions more homes will be insulated under this Government, bringing down energy bills by hundreds of pounds. Those plans for insulation are funded by the tax rises that the Conservatives oppose. Time and again, we ask them what they would like less investment in, and time and again, no answer is given.

We on the Government Benches are trying to build a country according to our values—a country where each of us is doing well, is doing better, is better educated, is healthier and finds it easier to get around. Those are the building blocks of our nation’s wealth. To build that wealth takes investment, which must be funded, and those who benefit most from our nation’s productivity should be asked to contribute more. That is exactly what this Government are ensuring.

[Alison Griffiths]

Does the hon. Gentleman recognise that if people are to contribute, the fundamental bedrock is having a job, and that the jobs tax is causing mass unemployment and business closures?

[Dr Sandher]

Employment is rising, and has risen since the general election. [Interruption.] The reason why unemployment is rising is that more people are seeking to enter the labour force; people are less inactive than before, because we are getting waiting lists down. I would rather people were looking for a job than stayed out of the labour force entirely, as the Opposition would have it. We want to build the kind of country where people are able to work.

We increased employers’ national insurance contributions in the Budget while protecting the smallest businesses. We ended the non-dom tax break, to make sure that the ultra-rich could not escape taxes by using a loophole, and increased taxes on private jets. We are getting more of the energy giants’ unearned profits into the public purse to invest in the things that we all need.

We know the Conservatives will complain constantly about the things we are raising money for, but they will never say what they would cut. We saw what happened over the past 14 years; we saw the weaker nation they left in their wake. The Government are investing to change that for good. After the past 14 years, we were left a weaker and more divided nation—a nation in which each of us produces less, and looks inward as we have found it harder to pay the bills. That is exactly what the Government are fixing, and what we are investing in.

I am proud of this Government. I am proud of this country. Most of all, I am proud of the country we will build, in which each of us does well, and we recognise that our common strength is found in our common prosperity.

18:28

[John Glen (Salisbury) (Con)]

A few months ago, I met a former civil servant. He told me that when he was working in government in the run-up to the ’97 election, Ed Balls would come into the Department and say, “Look, this is what our manifesto says, but here is the three-page memo on what we are actually going to do in government.” In fairness to that Government, they achieved quite a lot. In their first two years, of course, they stuck rigidly to the Conservative spending plans, and Tony Blair’s economic adviser, Derek Scott, said that they had a golden economic legacy.

I have listened very carefully this afternoon to the speeches made by Government Members. Of course, I can acknowledge where we were, in terms of the economy, and the fact that the country wanted change; I recognise that. Government Members, however, have failed completely to acknowledge the scale of the once-in-100-years covid experience, what that did to our public finances, and the challenges it gave us in the Treasury—the tough decisions we had to make, and the inevitable scarring to the economy.

[Dr Sandher]

Will the hon. Member give way?

[John Glen]

I shall just finish my point and then I will give way to the hon. Gentleman.

The typical refrain is then to say, “What about Liz Truss?” I was not a member of Liz Truss’s Government, but I am sure that my colleagues who were did the very best that they could. She was in office for seven weeks. I acknowledge that, politically, it was catastrophic for my party, and there are lots of lessons on which we will have time to reflect, but the failure to acknowledge properly the dominant reason for losing that last election, which was related to the scarring of what happened with covid and the fundamental challenges, does not do credit to this House. I shall give way to the hon. Gentleman if he still wants to intervene, presumably on Liz Truss.

[Dr Sandher]

I thank the right hon. Member for giving way. We sit on the Treasury Committee together and I find him to be an incredibly kind and brilliant Member of Parliament. He has been very kind to me personally as well.

On the experience of coming out of covid, our contention is not just about Liz Truss, but about the fact that we had the highest inflation and the highest energy bills. Natural gas, which we depend on, sets the price 98% of the time. It is also 50% to 75% more expensive than wind and solar, so the lack of investment in clean energy left us with higher inflation and made us poorer.

[John Glen]

I will come on to address the fundamental dynamics of spending and that area in particular, but first I want to draw the hon. Gentleman’s attention back to the subject.

[Tom Hayes]

Will the right hon. Member give way?

[John Glen]

No, I will a bit of progress now. I will give way to the hon. Gentleman later, even though he did not give way to me earlier.

The Chancellor came to the Treasury Committee in November. She said, “We have now set the envelope for spending for this Parliament, and we will not be coming back for more tax increases or, indeed, more borrowing. We now need to live within the means that we have set ourselves in the Budget and in the allocations of those spending totals.” What has happened in a year? Of course, I recognise that events occur, and I have referred to those under the previous Government. They do present challenges, but the Labour party’s fundamental problem is understanding the effect of high burdens of tax on wealth creators and their motivation to employ people and to invest in the productive capacity of the economy—more jobs and more tax revenues from lower rates. This Government are saying that we can do a little bit more on national insurance; that we can just put a few more burdens of regulation; that the long-term capital investment of £190 billion will transform our economy.

However, what I hear from businesses in Salisbury—small or large—is that the motivation to grow a business, to employ more people, and to say that they are determined to do so because there are some rewards from that is rapidly diminishing. What we hear is speculation about which additional taxes will be imposed after the next three months. Today, Government Members have suggested equalisation of capital gains tax, a flat rate of pension relief, a wealth tax, or higher bands of council tax—although they may have been ruled out. The overall effect on top of what we have already had is for businesses to say, “I’m not going to do this anymore.” We have now had two consecutive months of negative growth. That may well continue, which is bad for everyone. It is bad for the capacity that we have as a country to invest in the transformation that we all seek to deliver on—some things we will agree on—and it is not sustainable if the Government do not recognise that businesses will not grow and expand if that tax level rises beyond a certain amount.

[Tom Hayes]

I thank the right hon. Member for giving way, particularly as I apparently did not give way to him. I did not realise that it was he who was trying to intervene on me, otherwise I would have given way.

I recognise what the right hon. Member is saying about covid. I think that as a country we have not yet come to the terms with the true impact of covid and we will not do so for a long time, because it still feels very near to us. As a new Member of this House, I take the point that we ought to understand the true impacts. The concern for me and perhaps for other colleagues is that by trying to focus only on covid, and not on the economic and fiscal impact of Liz Truss—I know that he was talking about the political impact—we will never learn the lessons of the Liz Truss moment, and we just do not want to lose sight of the lessons that can be learned.

[John Glen]

Absolutely. [Interruption.] I am told that I ought not to take any more interventions, but I will say that Liz Truss’s insight about the imperative for growth was right; we do need to look for growth. What she did not do was examine the conditions to do that in a way that the market could understand, and it had catastrophic effects.

We now have a Labour Government, and we now have working people being massively affected by tax changes. We have Andrew Bailey, Governor of the Bank of England, saying that as a reaction to the national insurance changes, businesses have made changes to employment—that means firing people—and we have Paul Johnson downgrading growth prospects, alongside virtually every other independent analyst.

The winter fuel payments were an absolute disgrace. The changes to agricultural property relief and business property relief were put on my desk at every fiscal event, but one just has to say no, because they are the wrong thing to do. The political capital that has been lost by the Government and the damage to their reputation for their stewardship of the economy is catastrophic. I say to those on the Labour Benches that we are facing some really tough challenges as we approach the next Budget. The choices that this Government need to make on taxes will define their future. What happened last week was the worst possible situation.

Several times today we have been asked, “What would you do?” What we would have done and what we would do now is take a root-and-branch look at the welfare system to see what the Government should do. We would focus on the most vulnerable and look after them well. We would recognise that one of the legacies of covid is that the pathway into benefits has gone fundamentally wrong and the country cannot afford it. Unless we grip that major driver of costs for this country, we shall see taxes rise and rise to meet those iron-clad fiscal rules, and we will be in a spiral of decline.

18:37

[Joy Morrissey (Beaconsfield) (Con)]

On 3 December 2024, the Chancellor made a commitment. She told a conference of business leaders that she would not need to raise taxes. It was a foolish claim from a Chancellor out of her depth. She then taxed the engines of growth in her Budget—the businesses and entrepreneurs who create jobs. She sent high-earning taxpayers fleeing from our country in record numbers. She taxed jobs with her betrayal after saying she would not raise national insurance contributions, and that rise has brought charities, small businesses and entrepreneurs to their knees. She has destroyed the family farm with her family farm tax. She has taxed hard-working families with the VAT attack on independent schools.

Having broken her promises and made false claims to businesses, the Chancellor is now coming for pensioners. She is coming for the people who have worked and saved, paid their tax and contributed to this country. She is the only Chancellor who claims to be an economist but does not understand the Laffer curve. It is time for the Prime Minister to realise what he has and to act. He has a weak, out-of-her-depth Chancellor who is sending our country down a one-way street to a 1970s-level economic failure.

18:39

[Jim Allister (North Antrim) (TUV)]

A substantial level of political knockabout is inevitable in a debate such as this, but when it degenerates to the Punch and Judy of “It’s your fault—yes it is!” and “No, it’s not!” it is not really doing anything for my constituents who live in the moment of this Government. Therefore, the debate should properly have a focus on what the Government are doing in respect of our economy.

In Northern Ireland, we have felt, and continue to feel, the brunt of many of those measures, some of which, such as the inheritance tax on family farms, are cited in the motion. I agree entirely with the analysis of the right hon. Member for Wetherby and Easingwold (Sir Alec Shelbrooke) as to the depth and long-term consequences that that is having on family farms.

However, I want to focus for a moment on the other side of the inheritance tax imposition: namely, business property relief, because that has not had the same attention but is having an equally detrimental effect on many businesses. That is particularly so in Northern Ireland, where we have the staggering statistic that 89% of our businesses are micro-businesses—in the UK, the figure is 23%—which translates into the reality that most of those businesses are small family businesses. Those small family businesses, by virtue of what is happening to them with business property relief, instead of planning for growth are now having to plan for death—for inheritance—which is having a suppressive effect on our economy.

We must add to that the fact that we in Northern Ireland live subject to the pernicious Irish sea border, with all the costs that that brings. I heard some hon. Members lamenting that we got Brexit. Well, I lament the fact that in Northern Ireland we did not get Brexit—we were left under the EU’s clutches and controls. Let me illustrate that with a practical example that has just come to light. As a result in Northern Ireland of our living under EU rules, we live under the general safety regulation, and that means that a purchaser in Northern Ireland who wants to buy a new car from a car salesroom in Northern Ireland will be charged £4,000 more than his counterpart in Great Britain. Why? It is because the GSR has to be met. That is but another illustration of how individuals and businesses in Northern Ireland are being oppressed by the lack of Brexit and the continuance of EU rules.

I have heard talk today about wonderful trade deals. Those wonderful trade deals mean that goods coming from those countries into Northern Ireland are treated as coming into the EU. Therefore, if there is a differential in tariff, they pay the EU tariff. Those tariffs would not be paid in GB if those goods had 0% tariffs, or they might have a 10% tariff, but if they are being brought from the US or India into Northern Ireland, the EU tariff will be paid.

Some say, “You can claim it back.” Well, if someone is willing to go through the hideous paperwork of a reclaim and they can prove that the goods they brought in will never end up across the border in the EU, they can eventually—maybe after a year—get a refund. What does that do for cash flow in any business? Those are the realities from Northern Ireland that the Government are refusing to face up to. They are causing trade diversion, yet the Government lamentably refuse to deal with that.

This motion carries considerable merit for me, in that it draws this Government’s attention to what they promised, and the contrast with what they are delivering is very substantial indeed. The Government might have a huge majority, but it is about governing well and not governing in whatever way takes their fancy or the fancy of their Back Benchers. They should do the job, do it right and do it right as far as Northern Ireland is concerned.

18:45

[Graham Stuart (Beverley and Holderness) (Con)]

It is a pleasure to take part in this debate. It is worth reminding the House of the situation in July last year: we had the fastest growth in the G7; employment was 4 million higher than in 2010, with up to 33 million people in employment; inflation was on target, at around 2%; and the UK, between 2010 and 2024, had grown faster than Germany, France, Japan and Italy. That was the legacy of Conservative stewardship.

I have asked Labour Members to give a more rounded picture, but sadly they almost always refuse to do so. Debt to GDP had gone up significantly, partly because of the massive deficit that we inherited in 2010, at more than 10% of GDP—that was phenomenal and had to be brought down over time—and partly because of covid and Ukraine, when we intervened to pay half of everyone’s energy bills. That is a more rounded picture. Overall, we managed to come out with people helped through covid and through the energy crisis, and with remarkably high levels of employment. Yet just a year later, under this Chancellor’s watch, that strong foundation has crumbled.

The Labour party needed to recognise that the economy was recovering and to let it grow. Instead, by coming in and being held by the manifesto commitments not to put up the main taxes on the one hand, and on the other, thinking that they were being clever and somehow keeping to their pledges by imposing national insurance rises on business but not individuals, that had the most bizarre and perverse effect.

The £25 billion hit on the economy created by the jobs tax comes down to about £16 billion after behaviour change, according to the OBR. Then, after compensation for the public sector, it comes down to about £11 million. Then, people have had to scrabble around for hospices, GPs and so on, which means the net is probably about £10 million, and that is before the depressing impact on the overall economy, meaning it almost certainly comes to single-figure billions. But guess what the OBR also says: from next year, 76% of the impact of the £25 billion hit comes out of ordinary people’s wages. That is the situation.

The Government have imposed a tax of £19 billion on ordinary people’s earnings in order to generate less than £10 billion of tax revenue. That is utterly insane, and I ask Members on the Government Back Benches to have a look at that, follow it and come back. I would love to hear that those numbers are wrong, because I would love to hear that we are not doing something as suicidal, crazy and damaging as it appears to be.

I wish I could drink the Kool-Aid, like the hon. Member for Rugby (John Slinger). The funniest thing about him—a man for whom I have a great deal of respect and affection—is that, unlike some of his colleagues who spout this stuff, he gives every impression, which I believe, that he believes it himself. That is what is truly extraordinary.

[John Slinger]

I thank the right hon. Gentleman for allowing me to intervene. I am certainly not drinking Kool-Aid. I do believe what I say, and I believe it firmly. I respect the right hon. Gentleman as a colleague, even though he is from a different party, but there is no Kool-Aid for me.

[Graham Stuart]

I thank the hon. Gentleman for that.

The economy has contracted for two consecutive months, shrinking by 0.3% in April and 0.1% in May, in a textbook sign that we are in, or could be headed into, recession. Employment is down too, with Office for National Statistics data showing that payroll jobs have fallen by more than 100,000 in a single month, with around 274,000 fewer jobs compared with last year and unemployment climbing to 4.6%.

Following the excellent speech from my right hon. Friend the Member for Salisbury (John Glen), I would just say that we should look at the big picture. Again, I appeal to colleagues on the Labour Benches. There was a magnificent victory for Labour last year in the election, with 400-plus MPs elected, and it really is up to Labour Members to recognise just how scary a position we are in. We have debt to GDP at about 100% and we have a world in which the fastest growth is to be found in developing states, some of which are quite hostile to us and to our values.

The truth is that no rich, powerful country has a divine right to stay that way. Wealth does not just come down from the heavens. Even in the 14 years when we were in government, too often in this place we seemed to obsess only on how we would spend money. From the moment we got up in the morning to the time we went to bed at night, we would talk about how we would spend the money, but we have to generate it first. It does not matter whether our No. 1 concern is the alleviation of poverty, the defence of the nation, education or the health service—we have to have a strong economy.

That is why the Government were right. One of the reasons they got that majority may be because they said that their No. 1 mission was economic growth. Remember that? It does not come through in the speeches from Labour Members now. Their No. 1 mission was economic growth. We should be sweating in Select Committees, in all-party groups, on the Floor of this House and in Westminster Hall over how we deliver that economic growth, so that we are not going backwards but are actually growing the economy.

We also have to accept something that is going to be tough for Labour Members, most of whom have not had any private sector experience and who tend to believe that the rich are just there to take money off and wealth creators can be endlessly offered haircuts and will just put up with it and if they do not, it shows some moral flaw on their part. We have to accept that the art of government is to recognise the realities, to align the incentives of actors—in this case in the economy—with the public goods we want to see. After a year, there are so many flashing red lights and warning signs that the Government are not getting that right, so they need to be prepared to think again.

I was involved after that omnishambles Budget of 2012, when I was part of helping the then Chancellor see his route to a better path forward, and my experience tells me that Labour Members must recognise that the country is potentially in a really serious, parlous position. We have no divine right to be a wealthy, powerful nation. The next four years are important. I hope and expect that there will be a Conservative Government after that, but whatever happens, the next four years are important and I hope that Labour Members will start to give rather more nuanced and thoughtful speeches in order to influence the Front Bench.

18:52

[Llinos Medi (Ynys Môn) (PC)]

Despite promises of economic competence and a brighter future at the election, the tax choices that this Government have made have undermined economic growth in Wales. Over 99% of all businesses in Wales are small and medium sized, and the increase in employer national insurance contributions has hit them incredibly hard. It has raised operating costs, meaning that businesses are less able to weather times of hardship, and it limits their ability to invest and expand. The impact has also been felt in our hospices. Yesterday, we received the devastating news of the temporary closure of the hospice on Ynys Môn due to financial pressures. This one decision is having a direct impact on our communities.

One policy that the Government could stop before it is implemented is the proposed changes to agricultural and business property relief, which are set to take effect in April 2026. Having listened to the voices of family farmers and local businesses, it is clear to me that this policy will cause huge damage. As the Farmers Union of Wales says, if the reforms to agricultural property relief remain unchanged, the consequences for farmers, rural communities and food production in Wales could be devastating and irreversible. Plaid Cymru has been clear that there should be a Wales-specific impact assessment before this policy is pursued further, given the importance of agricultural and small businesses to our economy and communities.

Instead of damaging policies such as raising national insurance and cutting agricultural and business property relief, we should be making the tax system fairer. We must follow the principle that those with the broadest shoulders should carry the largest burden. Instead of taxing small businesses and trying to plunder benefits, the Government should look at a wealth tax on assets over £10 million to raise the billions in revenue that are needed to support the public finances. Taxes are a political choice. Plaid Cymru would make choices that are on the side of communities in Wales.

11:30

[Gregory Stafford (Farnham and Bordon) (Con)]

This Labour Government have begun a full-scale assault on the British economy. In just one year they have presided over a shambles that has punished workers, hammered businesses and betrayed every promise they made on tax to my constituents in Farnham, Bordon, Haslemere, Liphook and the surrounding villages.

Let us look at the facts. National insurance is up, with a 1.2% rise that the IFS confirms will fall largely on working people. Agricultural property relief has been slashed, which the National Farmers Union warns threatens family farms and food security. In my constituency, farming is not just a way of life; it underpins our local economy and communities. When I visited Bob Milton of Kilnside farm, he told me that his business now faces laying off staff and selling land just to meet Labour’s new tax burden. That is not policy; it is economic sabotage. On the changes to business property relief, a small business owner now faces a tax penalty simply for owning their own premises and hoping to pass their business on. These changes punish success and threaten continuity for family firms across the country.

And what is the result of all this? Inflation is stuck at 3.4%, well above the Bank of England’s target of 2%; unemployment is up to 4.6%, the highest in four years; borrowing was at £17.7 billion in May; and public debt is forecast to hit 96.1% of GDP, with annual debt interests soaring to £130 billion, by 2029-30. The tax burden is heading to an historic high—the highest on record, in fact—yet Labour still refuses to rule out new taxes on homes, pensions or savings. Their Chancellor will not even say whether small business owners are working people, and the Prime Minister dodged the question altogether. In Farnham, shop vacancies have risen from 9% to 10.5% in just one quarter—that is, 16 more shuttered high street shops. In Haslemere and Bordon, employers tell me they are freezing and cutting hours. The Shooting Star children’s hospice that serves my constituency will have to spend £90,000 in new NIC costs—enough to hire three nurses. That is now going straight to the Treasury.

[John Slinger]

Will the hon. Member give way?

[Gregory Stafford]

I will not give way.

That is not just wrong; it is unconscionable. Meanwhile, Labour’s VAT raid on education has pushed more than 13,000 pupils out of the independent sector—10,000 more than the Government predicted. That means more pressure on already overstretched state schools, more crowded classrooms, more exhausted teachers and more children falling behind.

Labour promised competence. Instead, they have delivered confusion, contradictions and chaos. They have broken their promises on national insurance, council tax, farms and education, and now they are breaking Britain’s economic future. This is not stewardship; it is self-harm. This is not change; it is collapse. This is not what the British people voted for, and they deserve better.

18:57

[Robbie Moore (Keighley and Ilkley) (Con)]

In my constituency there are dozens of hard-working family businesses, which are the backbone of our local economy and key to our local identity. These business owners get up early, go to bed late, work weekends, employ hundreds of local people and contribute hugely to our local high streets, local communities and local economy. But this Government seem desperate to squeeze every single penny out of those family businesses and into the hands of the Chancellor. The rise in employer national insurance puts a huge strain on the wage bill, especially when coupled with the rise in the minimum wage.

That is squeezing every single family business, as well as schools and hospices. Indeed, last weekend I took part in a local fundraising event—the Oxenhope straw race—which raises money for our local hospice, the Sue Ryder Manorlands hospice in the Worth Valley. Every year they do fundraising, but they tell me that instead of the money going to provide end-of-life care, it now goes straight to the Treasury through employer national insurance. The sad fact is that the large sums of money going to charities is not providing the support that is needed because it is going directly to the Treasury.

The business rate relief reduction is impacting many hard-working businesses across Keighley and Ilkley. The inheritance tax challenges are impacting many of our farming businesses and family farming businesses through slashing the 100% relief on agricultural property relief and business property relief to the £1 million threshold.

That is where the naivety kicks in. When we consider the size of the average farm in England—about 200 acres—and value the farmland, the house, the cottage, the growing crops, the machinery and the livestock, we reach well above the £1 million threshold, therefore exposing nearly every farming business to an inheritance tax liability. Those hard-working businesses make a return of less than 1%, if any at all, yet Labour Members say that they must have the weight of responsibility on their shoulders. That is a disgrace.

[Phil Brickell]

rose—

[Robbie Moore]

I will take a quick intervention from the hon. Member, but I hope that he will justify why those hard-working family farms and businesses in Keighley and Ilkley, who get up day in, day out, have to shoulder the burden for the mistakes that this Labour Government are making. Will he answer that point?

[Phil Brickell]

I thank the hon. Member for giving way. He is the third consecutive Conservative Member to stand up and speak, but I have yet to hear what proposals his party wants to bring in to raise revenue or what services it wants to cut. In my contribution, I made a conscious effort to set out three constructive proposals for the Treasury to consider, and I challenged Conservative Members because there was a dearth of—

[Mr Deputy Speaker (Sir Roger Gale)]

Order.

[Robbie Moore]

I am sure that the Government Whips were watching the hon. Gentleman and making a note that he will be in line for a job, and I saw the Minister quaking in his boots at the thought of those bizarre recommendations. The point is that the Labour Government do not realise that all these tax increases are hitting the many hard-working businesses across every constituency represented in this House. Shame on the Government for bringing them forward.

No matter how elaborate the rain dance or how impressive the Government press releases, growth will not come, precisely because of the decisions that the Chancellor has taken. We need a reset; we need a new direction; we need to limit spending so that we can cut tax, not consistently raise it. Until the Government realise that, I am afraid for all the family businesses up and down the country, which are being penalised time and again by this Labour Government.

19:02

[Sarah Bool (South Northamptonshire) (Con)]

Members across the House will be familiar with the winter of discontent. In 1979—the year our Chancellor was born—the Labour Government were at the behest of their union paymasters, and refuse piled up across the country. Fast-forward 46 years: we are a year into the Chancellor’s term of office, and we have before us a summer of anxiety. We have a long and seemingly hot summer ahead of us, with the spectre of impending taxes looming. In a desperate and flawed attempt to paper over the financial chasm of Labour’s own making, the Government are targeting the hard-working people they vowed to stand for.

What has happened in Labour’s first year in office? Well, my farmers are reeling from the raid on their cash-poor industry through changes to APR and BPR, national insurance and the withdrawal of the SFI, to name but a few. The Government ask them to diversify and invest in growing their business, while simultaneously taxing them for the privilege.

The Carrdus school in South Northamptonshire is closing as a direct result of the VAT raids and the national insurance rises. Families who work hard and invest in their children’s education have been punished. Students have been displaced, teachers have lost their jobs, and standards have been hit.

Hospitality owners have said they cannot risk expansion; they are just about surviving as it stands. This year alone, over 1,000 pubs across the UK have closed—220 since April. Beauty salons and hair industry businesses in my constituency have been calling me in because they cannot take on any more apprenticeships. If things continue as they are, there will, the British Hair Consortium says, be no apprentice starts in 2027. What a legacy for this Labour Government.

Pensioners in my constituency were hit first by the removal of the winter fuel allowance, and they now face the prospect of being taxed on their pension for the first time, which is also a terrible disgrace. We have learnt a crucial lesson after a year of this Government: they are the embodiment of the phrase, “Fail to prepare, prepare to fail.” They have had years in opposition to come up with a plan, and they have failed miserably. They keep asking us what we might do. Is that because they are seeking advice from the more fiscally prudent and wise side of the House?

[Tom Hayes]

More!

[Sarah Bool]

I can certainly give you more.

The Minister and Government Members rarely want to listen, but I raise these points on behalf of my constituents, who have asked me to do this. I implore the Government: if they want growth, they must take this summer to think again about how to achieve it, or it will be an autumn of anguish.

18:24

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

Hard-working families and business owners in Bognor Regis, Littlehampton and our villages are feeling the squeeze as never before. Labour stood on a manifesto promise not to raise taxes for hard-working people, yet at the very first opportunity, in the autumn Budget, they raised employers’ national insurance. This is a tax on job security and job creation. It is a tax on growth and a tax on ambition.

The jobs tax—one of the Chancellor’s flagship failures—has wrecked business confidence. It has made it more expensive to hire workers, stagnated the jobs market and threatens countless job losses and business closures. It falls on top of the Employment Rights Bill, which signals the return of 1970s-style employment laws that will further stifle growth, as well as the family business tax, higher business rates and higher wage bills. In small coastal towns like Bognor Regis and Littlehampton, where over 90% of local businesses have fewer than 10 employees, every cost increase and every job loss is keenly felt. Across our constituency, families, small businesses, hospices such as St Wilfrid’s and charities at the heart of our communities face an impossible position.

In their short time in government, Labour has become the party of taxation. The Chancellor has backed herself into a corner, and more tax hikes are undoubtedly on the horizon. That is why I thank the Leader of the Opposition for tabling this important motion. Working people in Bognor Regis and Littlehampton and the businesses, charities and hospices that employ them need to be defended from this Government’s tax raids, and that is what I intend to do—to stand up for the people of Bognor Regis and Littlehampton today, tomorrow and throughout this Parliament.

[Mr Deputy Speaker (Sir Roger Gale)]

I call the shadow Minister.

18:24

[Richard Fuller (North Bedfordshire) (Con)]

We have had an exciting and heartfelt debate. I commend for their speeches my right hon. Friends the Members for Sutton Coldfield (Sir Andrew Mitchell), for Wetherby and Easingwold (Sir Alec Shelbrooke), for Basildon and Billericay (Mr Holden), for Salisbury (John Glen) and for Beverley and Holderness (Graham Stuart), my hon. Friends the Members for Bromsgrove (Bradley Thomas), for Beaconsfield (Joy Morrissey), for Farnham and Bordon (Gregory Stafford), for Keighley and Ilkley (Robbie Moore), for South Northamptonshire (Sarah Bool) and for Bognor Regis and Littlehampton (Alison Griffiths), the hon. Members for Angus and Perthshire Glens (Dave Doogan) and for Ynys Môn (Llinos Medi), and the hon. and learned Member for North Antrim (Jim Allister).

We have heard some excellent speeches from Members speaking with passion on behalf of the small businesses, farmers, workers and pensioners who have been hit by Labour changing its mind on taxes and doing things differently from what it said it would do at the election. We have also heard two new phrases today. Thanks to my hon. Friend the Member for Bognor Regis and Littlehampton, we now realise we have to challenge the Chancellor based on her “flagship failures”, not her flagship policies. With great passion, the hon. and learned Member for North Antrim told us how Labour’s tax on family businesses means that small businesses are no longer planning for growth; they are planning for death.

The public feel they were misled by Labour at the general election. They think those on the Labour Front Bench are incompetent. They think the Prime Minister is woefully out of touch and the Chancellor is out of her depth—and why shouldn’t they? A Prime Minister who needs multiple attempts to define a woman, and multiple attempts to define a working person, does not exactly inspire confidence; a Chancellor who says that she will not raise taxes on working people, and then hikes national insurance, costing working people their jobs and earnings, does not inspire trust.

Our motion provides the Government with an opportunity to draw a line, recognise the overreach and errors in their taxation policies, and give some hope to the makers in our society and those who work hard in our warehouses, offices, factories, shops, restaurants, and public services. They could recognise the errors in the Treasury’s assessment of the impact of the family farm tax on those who grow our food, and the trauma caused by the jobs tax for those who build our businesses. Those are the people who know how to grow our economy, not the numpties on the Front Bench, so why are the Government intent on holding them back?

Alas, the Chancellor thinks that she knows best, and despite taxes being at their highest rate on record, she is on the hunt for new taxes: wealth tax, capital gains tax, pensions tax, council tax, savings tax, tax, tax, tax, tax—it is always the same with a Labour Government. The Government’s strategy is to tax their way to growth, but I have to tell the Chancellor that that strategy will not work. No economy can tax its businesses out of existence and create growth.

Tonight the Chancellor starts her new tax campaign with a visit to the City. For the first time it will not be so much a Mansion House speech as a mansion tax assessment. The Chancellor will claim that the Government’s actions have brought about financial stability—well perhaps, but not in this country. The Government’s Chagos deal has eliminated income tax in Mauritius but given British taxpayers a new £30 billion tax bill, and the Government’s abolition of non-dom status is boosting the tax revenues of Portugal and Italy but will mean taxpayers here having to cough up billions a year more to plug the gap as people leave the UK, taking their tax payments with them.

The truth is that the Chancellor has done the complete opposite of her claims of stability. She is the eye of an instability storm of her own making, where nobody knows when her next tax raid will come, and who will get hit the hardest—a second summer of doubt and uncertainty caused by this Chancellor, and tolerated by this Prime Minister. Labour Back Benchers know it. They know all the times that the Chancellor has led them up the hill, only to lead them down again: the “once in a Parliament” tax hike, the removal of winter fuel payments, the blundered attempts at welfare cuts, and it has only been one year! Labour Members are limping towards recess—look at them, Mr Deputy Speaker. Napoleon’s troops were in better humour on their march back from Moscow than some Labour MPs are as they make their way back to their constituencies, and back to the people to whom they promised so much just one year ago, only to deliver oh so little. No wonder people feel so let down.

But let us be fair: some Labour Back Benchers are going back with a warm feeling. A reshuffle is coming soon, to clear away all the dead wood on the Front Bench —oh, so much dead wood—and some Labour Back Benchers have already had the tap on the shoulder. They already know who they are, and they are going home with great expectations of high office— [Hon. Members: “Ah!”] No, no, spare a thought, please, for the many other Labour MPs who have missed out. They felt that they were given a promise that if they did the right thing they would be looked after. Now they know that the Government have reneged on their promise, and that the change they hoped for will not come. For them, I am truly sorry. But there is one consolation: at least now they know how the rest of the country feels.

19:14

[The Exchequer Secretary to the Treasury (James Murray)]

I listened very carefully to the shadow Minister. He has clearly been taking theatrical lessons from his colleague the shadow Chancellor, the right hon. Member for Central Devon (Sir Mel Stride). Indeed, I have listened to all his colleagues during this debate, and frankly they have quite some cheek. They speak from the Opposition Benches, yet they failed to reflect honestly, even once, on why they are on that side of the House.

The reason why the Conservatives are in opposition is that they not only ran our public services into the ground, but had given up on fiscal responsibility, which is critical for stability, investment and growth. When we won the election last year, it was our task to restore that responsibility and fix the £22 billion black hole in the public finances, which was a legacy of the previous Government’s waste and delay. [Interruption.] I know they hate to be reminded of it, but that is the truth. That is what we inherited. As my right hon. Friend the Chief Secretary to the Treasury said in opening the debate, we acted on that without delay on taking office. At last year’s Budget, the Chancellor acted decisively to stabilise the public finances and lay the foundations for investment in growth after 14 years of Tory decline. Rather than shirking responsibility, we took the necessary decisions to raise taxes and made the necessary choices to ensure that our NHS, schools and other vital public services received the funding they needed to get back on their feet.

I thank all the hon. Members whom the shadow Minister mentioned in his summing-up speech, as well as my hon. Friends the Members for Glasgow East (John Grady), for Kensington and Bayswater (Joe Powell), for Bolton West (Phil Brickell), for Rugby (John Slinger), for Alloa and Grangemouth (Brian Leishman), and for Loughborough (Dr Sandher).

Many hon. Members spoke about the choices that we have had to make as a Government. Let me be clear that while many of the decisions on tax have been difficult—we recognise that they have had consequences—we took every opportunity to make them as fair as possible. That is why, at last year’s Budget, we decided to end non-dom tax status and tax breaks for private school fees. It is also why we increased air passenger duty on private jets, raised stamp duty for those buying second homes, extended the oil and gas levy, and chose to raise capital gains and inheritance tax. It is why His Majesty’s Revenue and Customs implemented the biggest package of measures to close the tax gap that this country has ever seen. Those measures will ensure that everyone, including the wealthiest, pay the tax that they owe.

Those choices have been the right ones to restore the public finances and get public services back on their feet, yet the Conservatives, the Lib Dems and Reform—who surprisingly are not here—all voted against our Finance Act 2025, which started to put our choices into action. They have refused time and again to support the decisions we have taken on tax, while refusing to say what funding for public services they would oppose as a result. The choices I have mentioned and other difficult choices we have made, such as the decision around employers’ national insurance, have been necessary to meet our fiscal rules.

Let me be clear why those fiscal rules are so important, and why, under this Government, they will always be non-negotiable. The fiscal rules introduced by the Chancellor last year are this Government’s assurance to the markets that we will live within our means and pay our Government debt. They are not only crucial to keeping debt payments under control, but enable us to invest in the future of our country. Thanks to the Chancellor’s fiscal rules—the stability rule and the investment rule—we have been able to boost capital investment by £120 billion, compared with the previous Government’s plans. That investment will improve transport infrastructure, deliver more social and affordable housing, bring down bills through energy security, unlock further private sector investment and, most importantly, improve the lives of working people across Britain by making people better off.

Without our plans to balance the books and get debt falling, our £120 billion of extra investment would not be possible, and taxpayers would see ever more of their money being spent on debt interest payments. We have taken the tough but fair and necessary choices to repair our public finances, so that we can rebuild our schools, our hospitals and our frontline services across the country.

As many right hon. and hon. Members have said today, if Conservative Members disagree with our approach, maybe they can tell us whether they would cut spending on schools, hospitals or defence, or perhaps they can tell us which taxes they would raise instead. Rather than do that, the Conservatives and Reform are competing with each other to inherit the mantle of Liz Truss. They both blindly make unfunded promises on tax—promises that we all know would force up interest payments for families across Britain and cause economic chaos, which would hit working people hardest. The British people want security, stability, public services that work again, and more money in their pocket, and only Labour Members and this Labour Government are prepared to take the decisions that are necessary to make that happen.

Question put.

19:20

Division 269

Ayes: 165

---

Conservative: 94
Liberal Democrat: 61
Democratic Unionist Party: 5
Independent: 2
Traditional Unionist Voice: 1
Ulster Unionist Party: 1

Noes: 342

---

Labour: 334
Independent: 4
Green Party: 2
Liberal Democrat: 1
Social Democratic & Labour Party: 1