Treasury Committee
Wednesday 11th November 2026
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14:15
Julie Minns
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Julie Minns
Order, order! Welcome to the Treasury Select Committee on Wednesday the 11th of November 2026. We're delighted today to welcome the Right Honourable John Healey MP, the Chancellor of the Exchequer, to explain his budget of two weeks ago. And first of all, may I say, Chancellor, congratulations on being appointed Chancellor. You know, it's an honour to hold that role and we all wish you well in it, and we'll obviously be questioning you in detail, as we are expected to do as a committee. But congratulations. He's joined by James Bowler, who's the permanent secretary at the Treasury, and by Dharmesh Nahi, who is the director of strategy, planning and budget at the Treasury.
So the man who puts the budget together in detail with under the guidance of the Chancellor. So before we go into our main session, there is a really important issue that arose on budget day itself that was outside, of course, your directly your budget statement. Chancellor and the Treasury is signed up to not giving out specific individual tax rates. But Bloomberg knew very specific information on that. It was that the change to the bank tax was going to be temporary and less than 8%. So that was a very specific tax specific leak. Mr. bowler, as Permanent Secretary, you've been there for a while.
Was the leak of information about bank taxes the worst type of breach you can think of, given it related both to the duration and the and the level of a single tax related to the listed banks.
So the man who puts the budget together in detail with under the guidance of the Chancellor. So before we go into our main session, there is a really important issue that arose on budget day itself that was outside, of course, your directly your budget statement. Chancellor and the Treasury is signed up to not giving out specific individual tax rates. But Bloomberg knew very specific information on that. It was that the change to the bank tax was going to be temporary and less than 8%. So that was a very specific tax specific leak. Mr. bowler, as Permanent Secretary, you've been there for a while.
Was the leak of information about bank taxes the worst type of breach you can think of, given it related both to the duration and the and the level of a single tax related to the listed banks.
14:16
Speaker 1
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Speaker 1
Well thank you chair. So yeah, the Bloomberg had the shape of the bank surcharge, as you say. They didn't have the exact detail that that it was less than something and temporary, not the exact measure. And that is deeply, deeply regrettable and frustrating. And I think the right thing to do is to have a proper investigation into how that came about.
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14:19
Julie Minns
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Julie Minns
And we've gone around this a few times, but this time we wrote to the FCA as well as you and the FCA waits for you to do your inquiry before they might look into it, it seems that sometimes the Treasury is rather reluctant to involve the FCA over these types of. Are you afraid of its powers and what might actually happen in the Treasury if they were to investigate?
14:19
Speaker 1
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Speaker 1
Categorically not. We work very closely with the FCA. We speak to them about that. We will share the investigation outcome we have with them in full. No we're not. We're not afraid to do that, and I'm sure we'll come on to it. I do think and this this this instance is deeply frustrating that our security around the budget improved significantly at this event.
14:20
Julie Minns
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Julie Minns
And you was very notable in your letter. You talk about not having briefings in advance of the budget, but just before the budget came out that you widened the circle within the Treasury of who had information. And the story ran at 1045, just a couple of hours before the chart, nearly before the Chancellor stood up. So from joining the dots here, the information seemed to come out at around the time that that circle would have widened.
So more people knew. Is that was that a fair summary?
So more people knew. Is that was that a fair summary?
14:21
Speaker 1
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Speaker 1
Yeah. I mean, what I said to you in my letter is that we now have market sensitive information in the budget in very tight compartments of very limited numbers, and we hold them at that by necessity. And there's a factual description of how how a budget is put together by necessity. Those compartments have to come into the budget documentation, distribution analysis and other things. And that happens in the last 48 to 24 hours. So by necessity, that that widens as we move from holding that information extremely tight to being able to deliver a budget for Parliament on time.
So that's what I was referring to there.
So that's what I was referring to there.
14:22
14:23
Speaker 1
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Speaker 1
Yeah, we do, and I don't want to give the impression that, you know, you you let go of any security. Quite the opposite. Any budget information handling remains very sensitive and on a named person basis. And we have rules right up to the right, up to the delivery of when the Chancellor stands up, obviously, including avoiding the situation we had last year where the OBR budget was pre-released, where we had to deal with that successfully, I think this year.
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14:25
Julie Minns
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Julie Minns
I'll come to you in a moment if I may. Chance. I just I just wanted to say just to for you, Secretary, before I turn to the Chancellor, do you think there's any chance that it could be coincidence that Bloomberg knew both, that the tax on the banks was temporary, which was new information, I think, to everybody at that point, and that it was less than the 8% that had been floated, you know, been mooted in the sector before that.
Do you think it could possibly be coincidence?
Do you think it could possibly be coincidence?
14:26
14:26
Julie Minns
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Julie Minns
Thank you Chancellor, you did very, very well. You were very public about making sure there was very tight security around this budget. So you must be very frustrated. And that was I have to say, I think the committee would agree a welcome move, especially after what happened last year. Are you how frustrated are you that this information leaked out?
14:27
Speaker 2
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Speaker 2
Well, first of all, I welcome coming in, Dame Meg, because this is not just a matter for the permanent secretary. You've released the exchange of letters. So you know the action that's being taken. You know, the government security group is investigating this, and I will ensure that the results of that investigation are shared with this committee, quite rightly, are taking an interest in this. But this is a this could not be more serious, and it could not be more important for me as Chancellor. It isn't just that any leak of budget information is serious, it is that there are real world impact, not just moving the markets or the gilt yields, but we saw last year with speculation, kite flying leaks, briefings.
We saw people cashing in their pension pots when they didn't need to. We saw people cancelling and changing investment plans when they didn't need to, so it could not have been more serious. And I was really determined as Chancellor, coming in to lead this budget that we introduced, not just the sort of recommendations that came from the review that James Bowler led after last budget that concluded in February. But we introduced what I would I would describe as national security style information controls. So steps that have not been taken before in relation to the budget.
So that included methods of handling information, digital digital security, personal signing, an undertaking that people understood if they were in the compartments of the requirements on them, automatic watermarking of documents, the sort of steps that I think have allowed us to conduct a tighter control quite properly of this budget process, reduce that sort of speculation, and reduce the sort of impact that we've seen not just last year, but in previous years.
We saw people cashing in their pension pots when they didn't need to. We saw people cancelling and changing investment plans when they didn't need to, so it could not have been more serious. And I was really determined as Chancellor, coming in to lead this budget that we introduced, not just the sort of recommendations that came from the review that James Bowler led after last budget that concluded in February. But we introduced what I would I would describe as national security style information controls. So steps that have not been taken before in relation to the budget.
So that included methods of handling information, digital digital security, personal signing, an undertaking that people understood if they were in the compartments of the requirements on them, automatic watermarking of documents, the sort of steps that I think have allowed us to conduct a tighter control quite properly of this budget process, reduce that sort of speculation, and reduce the sort of impact that we've seen not just last year, but in previous years.
14:31
14:31
Speaker 2
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Speaker 2
I'm dismayed that it happened at all. It's absolutely right that it's fully investigated. This committee will be briefed on the results of that investigation. Frankly, I don't want any leaks out of the budget process. I take them all seriously, particularly if they are market moving in this respect. But as the Permanent Secretary has said, this was at a late stage. It was on budget day. And you have, as members of this committee, some members that have been involved in budget processes, they understand the way that still with restrictions, nevertheless, the circle of people that must be briefed and know and the Permanent Secretary has indicated some of the ways that that was done on budget day itself.
Inevitably, it broadens the risk increases. But we want to try and get to the bottom of this.
Inevitably, it broadens the risk increases. But we want to try and get to the bottom of this.
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14:34
Speaker 2
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Speaker 2
I don't know, I would certainly hope so. It is hard. And if anybody can get to the bottom of it, it will be the government security group. It isn't. It hasn't just got the permanent Secretary of the Treasury behind this. It's got the cabinet secretary behind this. So if you like the full weight of the investigative. System that we've got, reinforced by the seriousness with which I and the Prime Minister take this.
We'll see and we'll report back to you.
We'll see and we'll report back to you.
14:35
Julie Minns
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Julie Minns
And I mean, one of the challenges, which we've discussed before with the Permanent Secretary is, on the one hand, you want to keep everything tight, and you did that with military precision this time round. That was the aim. And on the other, if you're not testing things with the sector, then things can be a surprise and can be untested. How do you intend to try and balance that?
14:36
Speaker 2
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Speaker 2
I think we did. You not . Everybody needs to know everything, and at the very heart of it was a very tight compartment. It was essentially a the core decision taking between with me and the Prime Minister and the very small number of officials that were privy to that compartment, the compartment that was part of the scorecard core of a budget process was also tight. Clearly, there are wider range of policy officials and in discussion also with externals , that develop some of the policy proposals. But that's very different to being privy to the information on which and the information about which decisions are taken in the budget process.
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14:38
Julie Minns
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Julie Minns
Job and one of the the challenges again, is when you are having to then explain to people what's in the budget, lots of more people are involved. Do you think there's a chance that someone just overstepped by trying to give some hint about what was going on, and did that inadvertently? I say inadvertently, still very serious. But I mean, have you got any assumptions.
14:39
Speaker 2
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Speaker 2
On that? To be honest, I really don't want to speculate on that and I don't feel I can. This is not a straightforward information from government into the hands of journalists publication. You know, journalists have a job to do. They dig around, they put stories together. Sometimes those are reports that aren't entirely accurate. Sometimes those are reports that are based on pieces of information. They're doing their job. And sometimes it's quite hard to pin down specifically leaks or briefings that are. Unlawful, out of order. And sometimes those that are constructed stories based on bits of information.
This this warrants the investigation that's been launched in it. It is specific. And as a committee, you're quite right to, to, to, to, if I may say so, to focus so strongly on it.
This this warrants the investigation that's been launched in it. It is specific. And as a committee, you're quite right to, to, to, to, if I may say so, to focus so strongly on it.
14:41
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14:41
Julie Minns
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Julie Minns
But if you could keep us informed on that as well. Very helpful. I should just say for the record that if any of our members are on their phones, we sometimes use this as a method of quick communication. But in meetings it's not for any other reason that we do that. So forgive us if there are moments where we pick up our phone for a quick exchange.
14:42
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14:43
John Glen
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John Glen
Could I turn to the budget measures on economic growth? We had Helen Miller from the IFS come be very clear with us. I think 98 measures in the budget, but the OBR economic fiscal outlook indicates that they found no measures that would move the dial on growth. Now, I don't want to get into speculations over all growth forecasts of different organizations IMF, OBR, etc., up or down this year or next year. Could you tell us what measures in your budget you think will move the dial on growth, given none of them were scored?
14:44
Speaker 2
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Speaker 2
I can, Mr. Glenn, and I certainly will. I think, if you permit me at this point, I just also want to set the context of the budget. I can do that very briefly, but then I can come to for measures that will help certainly drive drive growth. And with specifics in. Look, I went into this budget process less than four months ago with really deep concerns about the global economic storms that we faced, which had not been reflected in the Obr's spring forecast. And now the OBR and the Bank of England are really clear that conflict in the Middle East is driving rising energy costs.
It's driving debt, increased costs, and it's also weakening economic growth that's hitting nations worldwide. But it's hitting us particularly hard in this country. And so ending the conflict in the Middle East would be the single best economic policy for Britain. That's why diplomacy pressure on Iran is a whole of government drive, including for me as the Chancellor. And with this continuing conflict with Iran, with the crisis in global energy prices and with the huge upheaval in government bond markets, I took the view that what Britain needed was a a breathing space budget. And so that's what I delivered.
So it was action to help with cost of living and cost of business pressures, but also action that start to make the deeper changes necessary in this country on energy, on AI, on devolution, on housing and on defence and national security. And despite the global shocks. And this I'm coming to your point about growth, Mr. Glenn, the UK's economy has shown real resilience during this period of uncertainty and conflict and has done since the 2024 election. Government investment up, business investments up, productivity is up and real wages have are up as well. And all this has been underpinned by a strong fiscal discipline, which has led the IMF to say that Britain stands out amongst the G7 for our deficit reduction programme plans and performance, and which I continued in the budget.
So in summary, look, I'm proud Britain has beaten the growth forecasts for this year. The growth measures in the budget mean that I aim to see us beat the forecasts again next year. They are, if you like, a boost to business investment and innovation. They are a backing of business founders and fastest growth firms, and then they are the. The greater confidence to plan, if you like, for the future. And to reinforce an example of that, the announcement today from Fractile, which is a UK based UK started AI chip firm, has been a £500 million funding round with a contribution from the British Business Bank and from sovereign AI.
But this brings the valuation of this British based company. British started company to $7 billion, and this funding round is the largest ever European semiconductor funding round here in the UK.
It's driving debt, increased costs, and it's also weakening economic growth that's hitting nations worldwide. But it's hitting us particularly hard in this country. And so ending the conflict in the Middle East would be the single best economic policy for Britain. That's why diplomacy pressure on Iran is a whole of government drive, including for me as the Chancellor. And with this continuing conflict with Iran, with the crisis in global energy prices and with the huge upheaval in government bond markets, I took the view that what Britain needed was a a breathing space budget. And so that's what I delivered.
So it was action to help with cost of living and cost of business pressures, but also action that start to make the deeper changes necessary in this country on energy, on AI, on devolution, on housing and on defence and national security. And despite the global shocks. And this I'm coming to your point about growth, Mr. Glenn, the UK's economy has shown real resilience during this period of uncertainty and conflict and has done since the 2024 election. Government investment up, business investments up, productivity is up and real wages have are up as well. And all this has been underpinned by a strong fiscal discipline, which has led the IMF to say that Britain stands out amongst the G7 for our deficit reduction programme plans and performance, and which I continued in the budget.
So in summary, look, I'm proud Britain has beaten the growth forecasts for this year. The growth measures in the budget mean that I aim to see us beat the forecasts again next year. They are, if you like, a boost to business investment and innovation. They are a backing of business founders and fastest growth firms, and then they are the. The greater confidence to plan, if you like, for the future. And to reinforce an example of that, the announcement today from Fractile, which is a UK based UK started AI chip firm, has been a £500 million funding round with a contribution from the British Business Bank and from sovereign AI.
But this brings the valuation of this British based company. British started company to $7 billion, and this funding round is the largest ever European semiconductor funding round here in the UK.
14:51
John Glen
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John Glen
Mr. Glenn, of course, I acknowledge that as a wonderful success story, and we have in accepted over many years seen that the UK has led in terms of unicorns. But I still come back to my question, which was that whilst you've set out the overall sort of meta narrative, if you like, there were no measures in the budget that were scored as having a material impact on growth. And you mentioned there or you alluded to, but if I could just draw you into the issue of Founders Relief, Helen Miller from the IFS was, I mean, uncharacteristically, passionately concerned about, well, I would say yes, scathing.
Maybe one word could be used about it in terms of the distortions, cliff edges, etc.. Now, I've seen the finance bill that was published last Wednesday that it doesn't contain founders relief. Now, obviously, we know that things could come forward later. Are you concerned about the distortions that may occur, the sort of rules around a number of years to reach certain milestones, the number of shares to be held, turnover, etc.? A number of employees that actually it won't have the therapeutic effect that you think it ought to.
Maybe one word could be used about it in terms of the distortions, cliff edges, etc.. Now, I've seen the finance bill that was published last Wednesday that it doesn't contain founders relief. Now, obviously, we know that things could come forward later. Are you concerned about the distortions that may occur, the sort of rules around a number of years to reach certain milestones, the number of shares to be held, turnover, etc.? A number of employees that actually it won't have the therapeutic effect that you think it ought to.
14:54
Speaker 2
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Speaker 2
No, I'm not concerned. Otherwise I wouldn't have introduced it and made the decision. No, I'm not concerned because it comes off the back of a consultation on broader tax support that could be offered to support enterprise in this country. And third, I'm not concerned because we're doing a rapid technical piece of work now until the end of this month, in order to devise the fine details, and we'll introduce it into the finance bill. And, you know, I've got a lot of respect for Helen Miller, but to be quite honest, I look more to those who are in the field.
And I look up to, for instance, to the start up coalition. And their executive director looked at the budget as a whole and the founders relief and said, This Chancellor has delivered the boldest action on backing start ups and scale ups of any government in years.
And I look up to, for instance, to the start up coalition. And their executive director looked at the budget as a whole and the founders relief and said, This Chancellor has delivered the boldest action on backing start ups and scale ups of any government in years.
14:55
John Glen
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John Glen
No, I recall the emphasis on finding a suitable quote from a relevant agency in the run up to a budget, but on the on the CGT carve out specifically on on the 10% up to 10 million. Is there not just conceptually a risk that you will end up encouraging people to sell out and rather than grow their businesses? How would you address that concern?
14:56
Speaker 2
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Speaker 2
I think for a successful and rapidly growing business and for the sort of founders that generally are leading these firms, the the reinvestment in the success, I think, is incentive for many itself. What we're looking for with this is to recognise and reward that with the, as you say, the 10% CGT and the 10 million lifetime limit, but also encourage them then to reinvest in Britain here. So what they've done successfully with one company, we want them to go on and do again with others here.
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14:58
Speaker 2
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Speaker 2
You'll remember from the budget process yourself? Mr.. Glenn? Absolutely. Everything is in the frame in the early days combination, a combination of combination of fiscal constraints and policy, policy choices and priorities pretty rapidly narrows it down. I really wanted us to to to signal to this particular group of fast growth firms, the business founders that were responsible for them, that we recognise the huge, heavy lifting in that they're doing in the economy at the moment, and the massive potential they've got with the sort of backing that I think the combination, not just of the founders relief, but also the changes in the MI system will help do.
And there's a range of different enterprise linked measures in the budget that together, I think will, will. And to finish where you started. Yes, of course, I understand the way that people tend to look at the scorecard as the measure of any budget. And it is correct to say, look, the OBR in the budget measures I set out didn't choose to quantify and read anything in the scorecard. I'm not terribly worried about that, because I believe in the months ahead and the next year or two, the sort of measures on enterprise, I believe the measures on devolution, I believe the measures on energy and also on AI, will start to feed through, and we will see that impact on growth.
And in the end, yes, of course, the the formal figures matter, the forecasts matter, but actually it's also the business confidence and sentiment and investors in this country. And if, if, if their belief in Britain, the resilience that they've shown over the last year to beat the forecasts of the expert bodies is reinforced, as I hope it is, by the budget and not undermined by the risk of renewed or continuing conflict in the Middle East, then I think Britain is very well placed. As you quite rightly said. You know, we have a we're the most innovative country in Europe.
We've got a great deal going for us. And part of the responsibility, I think, for government in particular, but us as policy makers is to recognise that and reinforce it.
And there's a range of different enterprise linked measures in the budget that together, I think will, will. And to finish where you started. Yes, of course, I understand the way that people tend to look at the scorecard as the measure of any budget. And it is correct to say, look, the OBR in the budget measures I set out didn't choose to quantify and read anything in the scorecard. I'm not terribly worried about that, because I believe in the months ahead and the next year or two, the sort of measures on enterprise, I believe the measures on devolution, I believe the measures on energy and also on AI, will start to feed through, and we will see that impact on growth.
And in the end, yes, of course, the the formal figures matter, the forecasts matter, but actually it's also the business confidence and sentiment and investors in this country. And if, if, if their belief in Britain, the resilience that they've shown over the last year to beat the forecasts of the expert bodies is reinforced, as I hope it is, by the budget and not undermined by the risk of renewed or continuing conflict in the Middle East, then I think Britain is very well placed. As you quite rightly said. You know, we have a we're the most innovative country in Europe.
We've got a great deal going for us. And part of the responsibility, I think, for government in particular, but us as policy makers is to recognise that and reinforce it.
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15:03
Speaker 2
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Speaker 2
Well you heard me earlier on in general terms saying that the budget measures to boost investment and innovation that isn't geographic specific. So if you look at the increased capitalisation of the National Wealth Fund, the increased support for the British Business Bank, those are UK wide and indeed the. The new investments confirmed today in two big offshore wind projects off Norfolk, the East and West, Vanguard projects £12 billion of new renewable energy investment. Billion billion of it coming from the National Wealth Fund. Those are the sort of investments that will, I think, help lift, help generate growth in more places around the UK.
And that's that's the purpose behind that declaration that we want to see growth in every postcode.
And that's that's the purpose behind that declaration that we want to see growth in every postcode.
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15:05
Speaker 2
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Speaker 2
I would say that the budget measures are designed to try and boost the fast growth parts. The greatest potential that we've got in Britain, and that isn't confined to city regional areas. There's a particular role for elected mayors that's reinforced in this budget. But I, you know, if if, if , if people in rural areas are looking for very specific things that are there for them, then there are. The, you know, the £2 bus fare cap that will come in in January will be I know from having spent a lot of my early years in rural North Yorkshire, invaluable to many in rural areas, for instance.
But if you wanted a if you wanted a rural areas audit, then perhaps that's a bit of supplementary work I need to provide to you and the Committee.
But if you wanted a if you wanted a rural areas audit, then perhaps that's a bit of supplementary work I need to provide to you and the Committee.
15:07
Siobhain McDonagh
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Siobhain McDonagh
Thank you. Chancellor. You've previously backed the expansion of Heathrow as an important driver for economic growth and expansion. That could bring £33 billion of private investment. What assessment has the Treasury made of the economic benefits of a third runway, and how quickly do you expect those benefits to materialise?
15:08
Speaker 2
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Speaker 2
So the government is behind a third runway at Heathrow. I'm part of the government. Our experience in recent decades, is it not, is that successful ? Airports are very often an engine for economic growth in the wider area. That's as true in Manchester as it's true in parts of London and elsewhere. In terms of the assessment following the the consultation period, that's not led by the Treasury, that's led by the Department of Transport and the the government is working through the responses and the further update information we've got from that.
15:09
Siobhain McDonagh
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Siobhain McDonagh
Are you as frustrated as I am at how long these things take while international airports are continuing to expand, are you concerned that further delays risk Britain losing investment, trade and international connectivity to competing European airports? And. Would you like to meet me down at the the third runway with my cement mixer to get it finally laid?
15:10
Speaker 2
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Speaker 2
Next to your cement mixer. You asked me a direct question. Yes, I am frustrated, and I'm frustrated. Not just in this job in the last four months, but I. I was in government before Miss Madonna. And you will remember Dame Siobhan. I was responsible for the. And took through Parliament the National Planning Act in 2008. And that was designed for the first time to try and deal with Britain's deep seated problem of delays in infrastructure projects. It produced a number of the important elements that are there as part of the system now. But yes, it still takes us too long.
And I think you've seen over the last couple of years a determination from this as a government to do what we can to speed those up.
And I think you've seen over the last couple of years a determination from this as a government to do what we can to speed those up.
15:12
15:12
Bobby Dean
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Bobby Dean
Thank you, chair Chancellor. The Resolution Foundation described the forecast for living standards in this budget as catastrophic. It's set to be the worst decade on record, achieving just a 10th of the growth that we did in the previous decade, which was the 20 tens. And we've also received further analysis from Resolution Foundation that says if you strip out pensioners for working age families, the story is even worse. Do you accept that this budget did nothing meaningful to address that trend?
15:13
Speaker 2
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Speaker 2
No, I don't, but you're right to you're right to point to the Resolution Foundation's view. You're also, I think, right to point to the fact that we had in the last Parliament until 2024, the first Parliament ever in which living standards fell. I did, in my opening remarks, point out that real wages have risen in the last couple of years, but there is no doubt, and this is reflected in the OBR figures in their economic forecast, that the impact of the Middle Eastern conflict, the. In particular, the impact on inflation is now putting that under pressure.
And it's one of the reasons why you saw in in the budget some of the measures I've done, some of the measures that recognise the pressure on households, in particular on energy costs. It's why I introduced a £100 direct payment into people's bank accounts for 20 million households across England, and that sits alongside the extension of the VAT cut from electricity bills. It sits alongside the extension of the £0.05 cut in fuel duty, and also the removal next year of the gas standing charges of People's Gas bill. So there are steps, there are steps in there to help relieve the pressure on inflation, but importantly, to try and give a bit of breathing space to, to households with, with, with what they're.
And it's one of the reasons why you saw in in the budget some of the measures I've done, some of the measures that recognise the pressure on households, in particular on energy costs. It's why I introduced a £100 direct payment into people's bank accounts for 20 million households across England, and that sits alongside the extension of the VAT cut from electricity bills. It sits alongside the extension of the £0.05 cut in fuel duty, and also the removal next year of the gas standing charges of People's Gas bill. So there are steps, there are steps in there to help relieve the pressure on inflation, but importantly, to try and give a bit of breathing space to, to households with, with, with what they're.
15:16
Bobby Dean
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Bobby Dean
Facing, if I may, Chancellor, all of those measures are taken into account in in this forecast, we actually asked the OBR directly about the war in Iran, which you rightly said is the conflict would be the single best economic policy. But they already assume in their forecast that that war will come to an end next year. And still we're on track for the worst fall in living standards. What else do you think is driving that, and what else could you do about it in future budgets?
15:17
Speaker 2
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Speaker 2
Well, I think this this this committee and and you, Mr. Dean, probably better understand than any in the long run, people's living standards will be lifted by a stronger economy and stronger growth. And so it is. We I hope we'll come back to this. So it's it's so if you take energy. Yes, there was action in the budget with the £100 direct payment, the household energy payment, and on other fronts. But I think more importantly for the long term, there was a confirmation that from this point, cheaper energy, not just cleaner energy, is going to be the priority for the government an end next year, not just to standing charges on gas bills, but an immediate end to the practice that we've seen for too long.
And and certainly under previous governments of government policy costs loaded as levies onto consumer bills, that's finished. And I've scrapped the next scheduled one of those, the gas shipper obligation on the basis I'm going to because you asked me about you asked me about the living standards.
And and certainly under previous governments of government policy costs loaded as levies onto consumer bills, that's finished. And I've scrapped the next scheduled one of those, the gas shipper obligation on the basis I'm going to because you asked me about you asked me about the living standards.
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15:20
Bobby Dean
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Bobby Dean
Because you asked me about. You asked me about the living standards. Yes, but you asked me about costs that people face. You asked me about the action in the budget, and I'm spelling it out to you. And the other the other thing is that we understand those. We. And we will now back renewable energy. It's part of the way that we get cheaper and cleaner energy. But we will do that only where it can be connected to the grid and only where it will also bring cheaper energy as well as cleaner energy. Okay, I accept that.
Can I, can I move to two choices that you could have made that have been put forward by the evidence we've heard so far. So Resolution Foundation, again, they noted that departmental budgets were topped up by £9 billion. And if you look at the cost of living measures, they amounted to about half of that £4.4 billion. And so can you explain why you decided to make that choice to prioritise departmental spending over easing the cost of living? It was it was a budget that, well, first of all, made sure that all policy choices I took in the budget were fully funded over the forecast period.
That was part of the fiscal discipline I promised on day one as as Chancellor. And it's part of in the end of continuing the task of bringing down borrowing costs and meeting the fiscal rules, which this budget does. And I do, and it's it's it's also a reflection of the important mix of. priorities that are captured in the budget that. nevertheless was also a budget. And I talked about it as a breathing space budget rejected any argument for across the board tax rises. So a strong emphasis on the cost of living help that we can provide now, a bit of breathing space to households, but also some of the important policy measures there that were there for the rest of the government, that that answer does actually bring them on to the second point.
So the OBR noted that the freeze on tax.
Can I, can I move to two choices that you could have made that have been put forward by the evidence we've heard so far. So Resolution Foundation, again, they noted that departmental budgets were topped up by £9 billion. And if you look at the cost of living measures, they amounted to about half of that £4.4 billion. And so can you explain why you decided to make that choice to prioritise departmental spending over easing the cost of living? It was it was a budget that, well, first of all, made sure that all policy choices I took in the budget were fully funded over the forecast period.
That was part of the fiscal discipline I promised on day one as as Chancellor. And it's part of in the end of continuing the task of bringing down borrowing costs and meeting the fiscal rules, which this budget does. And I do, and it's it's it's also a reflection of the important mix of. priorities that are captured in the budget that. nevertheless was also a budget. And I talked about it as a breathing space budget rejected any argument for across the board tax rises. So a strong emphasis on the cost of living help that we can provide now, a bit of breathing space to households, but also some of the important policy measures there that were there for the rest of the government, that that answer does actually bring them on to the second point.
So the OBR noted that the freeze on tax.
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Bobby Dean
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Bobby Dean
That's having the biggest impact on people's disposable income and therefore their living standards. And you said that you didn't want to raise taxes. But if you look over the course of this Parliament, that threshold freeze is the equivalent of putting about 2% onto income tax. Now, if you was to take that decision about raising income tax by 2%, you'd be expected to explain that at the despatch box. But freezing thresholds wasn't mentioned at all in your budget speech. Do you think that's that's fair on the public for them to see an effective tax rise without it being explained or justified?
So the decision on thresholds had already been taken. It wasn't a fresh decision for me for this budget. What I wanted to do was reject any arguments for an across the board increase in.
So the decision on thresholds had already been taken. It wasn't a fresh decision for me for this budget. What I wanted to do was reject any arguments for an across the board increase in.
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Bobby Dean
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Bobby Dean
Could respect and follow the commitments we made, that people voted for us at the election, which was that we wouldn't raise levels of, of, of income tax, national insurance and VAT. Do you accept the analysis that the freeze on thresholds is one of the primary drags on people's living standards? Look, I accept that it it's there. It's there in the numbers it contribution it makes to the finances. It it's there in the analysis that it impact that it has on, on on, on people's incomes.
I'm very conscious of that. It's also .
I'm very conscious of that. It's also .
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Jim Dickson
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Jim Dickson
Change it. Thank you very much. Mr. Jim Dixon MP thank you, Chancellor. You just said that growth was the solution to some of the issues about household incomes. We've heard about our fiscal position generally for for the country. And one of the key to trying to stimulate economic growth is productivity. Can I ask you how you. evaluated measures in the budget to boost. productivity .
and how you decided which .
and how you decided which .
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Bobby Dean
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Bobby Dean
Which ones you would decide not to include? Well, Mr. Dixon, you'll be as a member of this committee, you'll be very aware that our our measures of. productivity are imperfect. They're often lagging. . And what I hope you would see is that the focus I've made for the the fiscal and intervention measures, greater .
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Bobby Dean
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Bobby Dean
Digital AI. Those are really the third leading country in the world on. AI are the ones where the. emerging the emerging evidence of, of, of encouraging. productivity growth is greatest. And if we can reinforce that, I think we will see that come through more clearly in the numbers. And I don't know whether Dharmesh or James has anything they want to add, particularly.
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Speaker 2
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Speaker 2
In last year. It's very welcome. It's also worth saying to this committee they all have followed it that ONS has struggled with measuring it. It's an excellent box in the budget document I'd draw your attention to on how that's changed. So they they improve the long run productivity, up from 0.5 to 0.9, still below historic averages. But it means we've got much more information that we're not less lagging behind our international peers than we were.
And then the last thing I'd just emphasize is in the budget.
And then the last thing I'd just emphasize is in the budget.
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Speaker 2
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Speaker 2
Put a very significant effort on the on the non scorecard non-fiscal elements of the budget and what we could be doing, particularly on growth and and how they would impact on on productivity. So that that was just as important as the numbers going up and down in the scorecard. If I may just add, one of the areas the UK has traditionally been weakest on is both public investment and private investment. And over the last two. years we've seen quite strong growth in government investment. It's up about. 17% since the end of the last Parliament. And and business investment is up about.
7.5% since then. And obviously that's one of .
7.5% since then. And obviously that's one of .
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Bobby Dean
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Bobby Dean
When we see what other investment is going on around the world? I'd start by suggesting perhaps the comparator of quantum is not the best way to look at it. The government role is different from the the private investors and the private AI companies. Our unique role and. responsibility is to ensure that we've got a a framework and sufficient capacity in this country that allows us to deal with the risks and the fears that people have about the AI, and also ensure that we can. maximise the benefits for it. So I think a significant element of the budget was the total of about.
700 million into AI.
700 million into AI.
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Bobby Dean
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Bobby Dean
And that we can start making steps to make sure that our workers and our firms can make the most of it. But I acted in the budget because I do not want to see the US data centre debate rerun in the UK. I act in the budget because I want to ensure that we don't see a free for all in data centres, as we saw in the US, but there is a really important step in the budget that. recognises that the data centres that we need to secure the. independence in AI for this country require us to have data centres.
And so the new Data Centre. compact will ensure that we give the go ahead to data centres only when there are clear community benefits, which means that I'm ready to say no to data centres where they don't bring those benefits. But equally, if there are benefits to local areas, I will back projects because we have to have this to protect and ensure our independence. I don't want to see health data used in AI .
And so the new Data Centre. compact will ensure that we give the go ahead to data centres only when there are clear community benefits, which means that I'm ready to say no to data centres where they don't bring those benefits. But equally, if there are benefits to local areas, I will back projects because we have to have this to protect and ensure our independence. I don't want to see health data used in AI .
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Jim Dickson
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Jim Dickson
Kept in this country, and just the same with the security of data as well. Thank you. Thank you for that answer. I just wanted to quickly say, I'm pleased to hear you say that there will be some effort to understand where data centres are really needed. I have one proposed in my constituency that I .
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Julie Minns
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Julie Minns
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Julie Minns
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Julie Minns
Work, but hopefully useful for you chairing it as chair of the liaison. No, no, I sadly I will not be a member of that committee. But but but there will be a bit of work that will be hopefully useful to the government and the country on that issue. Seema Malhotra MP thank you, Chancellor. I do get the sense from your answers that. productivity is one of .
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Julie Minns
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Julie Minns
And taking, I think, into account, it's actually been the increase in been increasing productivity in the last couple of years, which has been very positive. Sustaining that does require decisions that will see that lasting see lasting productivity gains. What measures do you expect to improve productivity .
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Bobby Dean
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Bobby Dean
Before the end of this Parliament? I think if we to to to link with Mr. Dixon's series of questions, if we as a as a nation can fashion what I believe we can and we will. A British way with AI, I think we will see enormous. We will. inevitably see profound change with AI, whether or not we like it, whether or not we make the decisions necessary to harness it, and whether or not we make the decisions to properly protect our our people and our businesses from it. So I think those those are decisions in the budget.
If we get the right, we'll have a very direct impact.
If we get the right, we'll have a very direct impact.
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Bobby Dean
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Bobby Dean
And I profoundly believe that our defence tech sector is a standout example of that. And if we support them in a way that the our, our businesses and our we've never had a we've never had a problem in this country, have we, of leading ideas, leading innovation. It's a question of making sure that we see those .
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Julie Minns
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Julie Minns
We see those companies succeed, and we see them stay here. Just to follow up on that, just very briefly, just to understand how support for smaller firms fits into that strategy of AI adoption. because some of the. measures are with 30 million for local partnerships authorities, 15 million for the challenge prize represent a smaller share of the total. How do you see that .
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Bobby Dean
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Bobby Dean
And, and thinking coming in small firms, often newly founded firms. These are the challenges. These are the ones that are the real competition in the in the wider system, those government can be a really significant first customer. For many of those. We found a way of starting to do that in defence when I was Defence Secretary and in the budget there are proposals for. identifying in other. areas some of the most promising.
potential scale up firms, and we'll do what we can. particularly using the both the. investment power we've got .
potential scale up firms, and we'll do what we can. particularly using the both the. investment power we've got .
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Bobby Dean
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Bobby Dean
Driven by the Middle Eastern conflict. The step back lesson I take from that, before I come to the specifics of, if I may, Mr. Lewin, is that it. reinforces the. The steps we took and commitment that I set out in the budget for increased defence investment. Unless. Nations . individually and particularly with allies, can deter and deal with conflicts like this and aggression like this, then we will be more. susceptible in the future. On the specific on the specific question in the Treasury, I, I think I said earlier on that the ending, the war in the Middle East would be the single biggest economic benefit to Britain.
It's the biggest single risk factor that the OBR. identified in its spread of. particular possible scenarios. And the biggest uncertainty that. underpins the context for the for the budget and the period ahead. So within the Treasury, I'm leading a. A new Treasury Middle East response group, pulling together the permanent Secretary and the most senior officials across the Treasury meeting weekly. This is within the Treasury, our way of monitoring the economic impact. It's a way of working on the. contingency options we may have if some of the worst. scenarios come to pass and the war escalates.
And it's also a way of of. preparing some of our.
It's the biggest single risk factor that the OBR. identified in its spread of. particular possible scenarios. And the biggest uncertainty that. underpins the context for the for the budget and the period ahead. So within the Treasury, I'm leading a. A new Treasury Middle East response group, pulling together the permanent Secretary and the most senior officials across the Treasury meeting weekly. This is within the Treasury, our way of monitoring the economic impact. It's a way of working on the. contingency options we may have if some of the worst. scenarios come to pass and the war escalates.
And it's also a way of of. preparing some of our.
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Speaker 4
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Speaker 4
Options to help with cost of living support, should that be necessary. A brief follow up, if I can, on. contingency planning. The energy price cap for January will be announced in a couple of weeks time, but that is set over a three month window. So we, the forecasters, already have a very good idea of where that is going to fall. Even if we see the encouraging trend in the fall in cost of oil and gas that we've seen in the last week, since the midterms in the US. So we are looking at a consensus of a price cap of probably above £2,000.
Can I ask you, when you look at.
Can I ask you, when you look at.
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Bobby Dean
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Bobby Dean
The household energy support, the designed for January for the period of maximum pressure. recognising that the price cap will likely rise from then was set out in the budget. It's £100 direct payment. It will go into people's bank accounts in 20 million households in January, and there are other cost of living measures that are designed to try and help people through the worst of those winter pressures. We can't, as a government remove those cost of living pressures altogether, but we .
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Speaker 2
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Speaker 2
Respite from them. Thank you. Sorry, I was coming in on your previous point. I mean, I just just to emphasize just how important this point is about how we set up our economy and our fiscal position for repeated crises. You ask about the work that's going on in the Treasury, and certainly a lot a conversation. I've had a lot with Helen Miller. We have to we we, the Treasury. But this committee and Parliament have to understand why we are doing fiscal.
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Speaker 2
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Speaker 2
Because it's tough. And one of the main reasons we are doing it is to allow us the space to deal with the next crisis, the next crisis after that, and the next crisis after that. And I'm not I'm not quite sure this comes across as much as it should, because there's tough decisions when you. consolidate over over many years. And, you know, it is why the Treasury is particularly pointing out in the budget. And there's an excellent chart on it that, you know, the fact that our borrowing is now less than the G7 average, we're delivering.
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Bobby Dean
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Bobby Dean
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Jim Dickson
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Jim Dickson
Was the the right judgment in the circumstances that we were in. Is there not? Thank you for that answer. Is there not one obvious risk? That is, if you decide not to uprate fuel duty in the middle of next year, that. 15 billion potentially comes down to 10 billion. And that is then looking really quite thin as a as a buffer against .
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John Glen
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John Glen
And you've elected to get to half of that. Whilst I recognise the contrast with the last year of the previous government, you are at half the average over the last 16 years. Are you not concerned that, given the economic storms, you yourself have referred to, that that is an. imprudent situation to get us into, given the .
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Bobby Dean
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Bobby Dean
Projected at the start of this conversation today? To be perfectly honest, Mr. Glenn, you know, there isn't a right or wrong answer to this. It's sort of not a maths question. It's a judgement question. And I think the broad range of. expectations was that I mean, let's let's take the counterfactual. If if if you lock in a a headroom in a particular at a particular level, you.
effectively lock that in for good. It's there for a function. I chose to, I chose to rebuild it a bit in the fiscal year and then. significantly in.
effectively lock that in for good. It's there for a function. I chose to, I chose to rebuild it a bit in the fiscal year and then. significantly in.
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Bobby Dean
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Bobby Dean
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John Glen
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John Glen
Committee, you may take a different view, but that's a matter of judgment rather than you set out your position. I think we can all hear that if we talk about the interaction, then with the headroom and the sort of pressures on public finances, and obviously one of the most significant ones is the pathway to. 3% of defence spending. If that is met, I think it's clear from the the f o and the budget document that will face in the final three years of the forecast period, a cut of minus two of. 2.6% in the.
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John Glen
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John Glen
The general overall sort of assessment of the budget is probably that as you set out at the start, that this was a low. impact budget to give stability. And you've said that yourself today, but it's also that many difficult decisions are deferred around. tax and spending. Could you confirm to us then when are you going to sort of. clarify in terms of the.
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Bobby Dean
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Bobby Dean
To be next year before the summer recess. I'll I'll make announcements on that in. I'll make announcements on that in due course. But in relation to the first of all, the the sort of fiscal. consolidation that then gives the platform for decisions for next year. 90% of the. consolidation on the current budget is completed by 2829. Two thirds of the.
consolidation of and reduction of borrowing that was set out in the.
consolidation of and reduction of borrowing that was set out in the.
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Bobby Dean
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Bobby Dean
That should have been dealt with many months before now. But we go we will go into a we will go into a spending review next time around, and we'll go from a base that is. 40 billion higher on day to day spending and an investment over this period, which is. 120 billion higher. So we're going from a position of relative strength. There will be some hard, hard.
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Bobby Dean
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Bobby Dean
To take. I think you can see that I've been willing to take those in this budget with the decisions I've taken on fully funding the Defence Investment Plan, and some one of you mentioned the the Cabinet Secretary's speech last night. That's an indication, as there are measures in the budget that. demonstrate the direction of transforming public services. The. We we will we will also do a great deal more on the devolution side to cut out the cost of double running.
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John Glen
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John Glen
We'll do more also on the on on the long term prevention investment. I mean, you also have just the week after the budget, new earned settlement policy that isn't costed. I mean, you present a obviously you're bound to a positive view. You also have. 75 billion of additional taxes that when your manifesto didn't suggest that you were going to have anything like that. So the public finances are in a very uncertain trajectory going forward. You've got to acknowledge that surely if you're going to make your self professed desire to get to 3% of GDP, come back to my question.
What about the.
What about the.
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Bobby Dean
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Bobby Dean
Country that that how are you going to deal with that? Well, you're right to stress the uncertainty of now, not just, if I may say so. You're focusing on the figures. The uncertainty is driven by the context that we've talked about already in the OBR confirms with the with the worldwide economic storms and shocks, as we as we as we prepare to do a spending review, we will have a ten year plan for Britain that the Prime Minister talked about.
Prime Minister's questions again today that will be published .
Prime Minister's questions again today that will be published .
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John Glen
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John Glen
The long ten year vision , and the same with the Melbourne Review and the same with lots of these long term. aspirations and the actual reality of public finances. A ten year vision has still got to mesh the next spending review and the next budget. And what I'm trying to get at is that there are real, unaddressed. pressures in the documents that are published as a consequence of this budget that you've offered no. reassurance about how you're going to deal with. You've talked about future events. You haven't defined when you're going to have a spending review, or how it's going to interact with a budget, which you haven't said when it will be.
And I just trying to convey the frustration and concerns that people will have about the gap .
And I just trying to convey the frustration and concerns that people will have about the gap .
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Bobby Dean
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Bobby Dean
And the reality of hard numbers. Chancellor. Well, look. with respect, I delivered my my budget 100 days to the day of the new government. We we , we will set the. priorities for the way that we frame and make decisions in the spending review in the ten year plan. So that will be driven by political decisions and choices in a way that has not been done in the past. That spending review will be based on a fiscal. consolidation in this country. That is part of rebuilding confidence in Britain that you'll recognize was so badly damaged in 2022.
And from then onwards, which is will be largely. complete in this scorecard period, in the way that I've said, and it will be it will be a spending review that's based on a higher baseline of, of, of, of public spending that doesn't solve the problems, doesn't avoid some really tough decisions on prioritisation. And both the Prime Minister and I have been really strong with the cabinet colleagues about this from the the first days that we came into government. And then there are some really sort of deep changes that we are also in the starting to make, which , with.
And from then onwards, which is will be largely. complete in this scorecard period, in the way that I've said, and it will be it will be a spending review that's based on a higher baseline of, of, of, of public spending that doesn't solve the problems, doesn't avoid some really tough decisions on prioritisation. And both the Prime Minister and I have been really strong with the cabinet colleagues about this from the the first days that we came into government. And then there are some really sort of deep changes that we are also in the starting to make, which , with.
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Bobby Dean
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Bobby Dean
Absolutely a fundamental to framing the spending review. But this will also be a spending review that must look beyond the traditional scorecard period. So you've seen the decision that we've already taken about the triple lock on pensions, for instance. That is that is not a decision that is. principally for the next spending review period. It is for the mid-term and the long term. And when the government responds to the Melbourne and Thames reports, you will see that sort of.
combination of mapping out the deep reforms that we have to we have to see in .
combination of mapping out the deep reforms that we have to we have to see in .
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Speaker 4
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Speaker 4
Be part of the process and the path on that. Thank you, Chancellor Andrew. Thank you. Chair. In the run up to the budget, the commentary often focuses on headroom but also gilt yields, particularly in recent years. Now the UK's debt to GDP ratio is actually lower than a number of our peers, notably notably France and Italy. Yet gilt yields here have still been higher.
What's your .
What's your .
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Bobby Dean
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Bobby Dean
Answer for that answer? Why do you think that is the case? I touched rather lightly on it. I don't really want to labour it, but quite honestly. Our our gilt yields were pretty much in step with European countries until the Liz Truss mini budget. We've been paying a premium since then. And when the permanent Secretary talks about the underlying importance of the fiscal discipline meeting the fiscal rules, that is a long term project that is about bringing our costs down, but raising the confidence of Britain again, I think we are beginning to get there. I was pleased with the way that the IMF regards us as a stand out for our.
consolidation plans, and and I've continued those and strengthened them in the in in the budget. I think if you look at the upheaval in the bond markets in recent weeks, you'll have seen that Britain can't avoid the storm. But we don't happen to be the centre of the storm in the way that we have potentially been in the past. That has been difficult for France. And you've seen those the relative rise in yields for for France, in that period of turmoil and uncertainty that have. outstripped the UK. And I don't know whether the permanent secretary, who's got far more experience than the bond markets .
consolidation plans, and and I've continued those and strengthened them in the in in the budget. I think if you look at the upheaval in the bond markets in recent weeks, you'll have seen that Britain can't avoid the storm. But we don't happen to be the centre of the storm in the way that we have potentially been in the past. That has been difficult for France. And you've seen those the relative rise in yields for for France, in that period of turmoil and uncertainty that have. outstripped the UK. And I don't know whether the permanent secretary, who's got far more experience than the bond markets .
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Speaker 2
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Speaker 2
As well as Treasury select committee appearances, might just want to add anything on that. Well, I love to start with. I don't want to comment on the day to day stuff on that. But look, the Chancellor is absolutely right that about when we diverged from the G7 average on on spreads, I think it's probably worth. Saying that throughout this Middle Eastern.
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Speaker 2
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Speaker 2
The UK has been very much in line with the G7 average and other countries which are frustratingly have seen obviously, borrowing costs rise and they're rising predominantly because that means more. inflation via energy and tougher fiscal situations. So the thing that the UK is standing out on now is that not only do we project that we're going to get our public finances under control in a set period, with the announcements made on how we're going to do it, but also that we've started to deliver that already. So you see that we've delivered the largest reduction .
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Bobby Dean
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Bobby Dean
Mr. Lewin, sir Bobby Dean MP thank you, chair, just a quick clarification. First of all, it was implied in your answer to Mr. Dixon, but can I just get on the record that you're committed to the. 14% rise in fuel duty next summer? Sorry. Your question. There's a there's a. commitment in your budget to fuel duty going up by. 14% next summer, and you're personally committed to sticking the extension of the fuel duty freeze. And the. £5.05 cut in fuel duty is extended in the budget until the end of June next year. Okay. So so by implication, you're committed to that going up next.
So it's extended through June through the winter and spring period, which is the period of greatest pressure we expect on household budgets. I appreciate that answer. Okay, so just back to the headroom figure again, we went round in circles with this with the previous chancellor about what sufficient level might look like. And some people have come up with figures for what the general variance between fiscal events is. And this is lower than that now. And it's not only to take account of shocks like the war in Iran, but also just general forecast variance. One of the products of that being too low is that you get incessant tax speculation that creates uncertainty.
Are you concerned that now that you've returned to a lower figure, that we might have incessant tax speculation until the next fiscal event? I think my predecessor will probably have explained to the committee that some of that concern about. speculation was a reason for her making the decision. She did. And I would just say to you, Mr. Dean, look, I can't control that if that's the case.
But I've made the. judgments about this year and in . 20, in 20, 30, 31, which will be the fiscal fiscal year when I come to do the next .
So it's extended through June through the winter and spring period, which is the period of greatest pressure we expect on household budgets. I appreciate that answer. Okay, so just back to the headroom figure again, we went round in circles with this with the previous chancellor about what sufficient level might look like. And some people have come up with figures for what the general variance between fiscal events is. And this is lower than that now. And it's not only to take account of shocks like the war in Iran, but also just general forecast variance. One of the products of that being too low is that you get incessant tax speculation that creates uncertainty.
Are you concerned that now that you've returned to a lower figure, that we might have incessant tax speculation until the next fiscal event? I think my predecessor will probably have explained to the committee that some of that concern about. speculation was a reason for her making the decision. She did. And I would just say to you, Mr. Dean, look, I can't control that if that's the case.
But I've made the. judgments about this year and in . 20, in 20, 30, 31, which will be the fiscal fiscal year when I come to do the next .
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Harriett Baldwin
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Harriett Baldwin
Thank you, chair. Thank you very much indeed, Dame Harriet. Thank you. Chair Chancellor, one of the things you can. control is welfare spending. And it's up. 5 billion since the last time the office for Budget Responsibility did a forecast between the two. It has gone up by five. And they say that if nothing else happens and it carries on on, its current.
trajectory will actually be. 25 billion higher than they're forecasting in their report at the moment. So what are the measures you're. anticipating taking in terms of bringing that welfare .
trajectory will actually be. 25 billion higher than they're forecasting in their report at the moment. So what are the measures you're. anticipating taking in terms of bringing that welfare .
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Bobby Dean
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Bobby Dean
Already taking. Those are baked into the numbers to try to try and deal with what has been a rapidly rising welfare bill less rapidly since. 2024 than the years before 2024. But bringing back face to face assessments has been part of that. Removing the. The strong. incentive to brand people as incapable of work has helped deal with the level of universal credit health.
payments and in putting in place local apprenticeship services. As .
payments and in putting in place local apprenticeship services. As .
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Bobby Dean
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Bobby Dean
No extra steps are taken. Chancellor. So this month we're expecting two important reports, one from Alan Milburn and one from Stephen Timms. They will provide the basis for the government, then to set out plans to deal with deep reforms, as well as control of the spending on welfare. And I said in the budget, we have a schedule for the action that we will take on, that there will be a detailed statement of government policy, a White Paper early in the new year. There will be. legislation next year to start to reform the system, which I think Dame Harriet, you would agree, is a broken system and needs fixing for the long term .
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Harriett Baldwin
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Harriett Baldwin
Then, because I sort of see this budget as being a bit of a breathing space budget for yourself, Chancellor, you know, you delivered it on the 100th day in office and you didn't start the year expecting to be delivering a budget. So I see it as a bit of a breathing space for you. And what I'm hearing you say there in terms of.
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Bobby Dean
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Bobby Dean
Or in the first quarter of next year. You should expect a an immediate government response to to to Milburn. You should expect early in the New year. More likely February than than January a a but certainly early in the new year, we'll be looking for a government White paper, the Policy Plans on welfare. And as I confirmed at the budget, we will look also to introduce legislation next year that will confirm the steps that will be taking in order to both reform and fix the system, but also deal with .
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Harriett Baldwin
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Harriett Baldwin
Rising welfare costs that you quite rightly point to. One other spending pressure, if I may, chair, is the the Prime Minister has told us that the. renegotiation with the European. Union has a benefit of. £10 billion per year. That's the number he gave the Commons. And I just wondered in terms of the fee that the European Union might. demand in terms of that.
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Bobby Dean
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Bobby Dean
The costs. Thank you Chancellor. Thank you very much. Thank you. Chair. Taking into account the protection for the Health Department, there's kind of implied real term cuts to sort of courtrooms, classrooms. councils coming down the track. Now, I know there's substantive decisions to be taken in the spending review, but are there relevant. departments preparing for that to to make efficiencies .
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Bobby Dean
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Bobby Dean
We've just emerged from the budget. The whole of government is now preparing for and contributing to work on the ten year plan. And beyond that will be the spending review , and we'll set out. I'll set out more details on how the ministers know. Departments will see what's written in black and white as well. And I guess the message from the Treasury now is you need to start.
preparing .
preparing .
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Bobby Dean
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Bobby Dean
My two colleagues here may want to comment. My, my, my experience of other government departments is they don't need to be told by the Treasury. They're pretty well prepared for a spending review coming down the track there. As they will need to be. And. So I think, Mr. Dean, you can expect that that's happening. And the the spending review is the the government spending review. But the spending review is also a fiscal event. And ultimately it's my responsibility as Chancellor. But just for for this committee, the Prime Minister and I and you will have seen this from day one, have worked in lockstep on the fiscal discipline and on the fiscal restraint across government.
We will be running next year's spending review as a review that is jointly run between number ten and number 11 and the. Opmc . will be heavily involved, acting from number ten. When you say the spending review is a fiscal event, are you are you . planning to potentially make tax changes at the same time? Those decisions will be decisions to take during the course of next year. Review didn't have any tax rises alongside it. So we're just wondering if that is your plan this time. I will set out and announce the the the timing and the more detailed method for the spending review in due course.
Thank you. On on protected departments, as I mentioned earlier, the health departmental spending has been protected. But in this budget you have talked about. reallocating capital spending towards funding defence. And it's. unclear whether or not health will be protected from capital spending cuts to will they also be on the list of departments that are having their funds reallocated towards defence? So the full funding now of the Defence Investment Plan, that was not the case until this budget involves a a a further requirement of all. departments to contribute to that capital, including health. We may see hospital programmes potentially cut as part of this process.
Health will manage. I'm very confident we'll manage the contribution they need to make in the way that . protects the most vital investments and services. And finally, Chancellor on on defence spending. There was a concern raised on one of our evidence sessions that. channelling defence spending via the public financial. institutions may not meet NATO's. requirements towards their percentage figure target. Are you absolutely. confident that spending in the way that you have planned will contribute towards NATO target? The simple answer is will depend on exactly what it's spent on, but a significant amount of the National Wealth Fund or British Business Bank investment, particularly where it goes into direct defence.
We will be running next year's spending review as a review that is jointly run between number ten and number 11 and the. Opmc . will be heavily involved, acting from number ten. When you say the spending review is a fiscal event, are you are you . planning to potentially make tax changes at the same time? Those decisions will be decisions to take during the course of next year. Review didn't have any tax rises alongside it. So we're just wondering if that is your plan this time. I will set out and announce the the the timing and the more detailed method for the spending review in due course.
Thank you. On on protected departments, as I mentioned earlier, the health departmental spending has been protected. But in this budget you have talked about. reallocating capital spending towards funding defence. And it's. unclear whether or not health will be protected from capital spending cuts to will they also be on the list of departments that are having their funds reallocated towards defence? So the full funding now of the Defence Investment Plan, that was not the case until this budget involves a a a further requirement of all. departments to contribute to that capital, including health. We may see hospital programmes potentially cut as part of this process.
Health will manage. I'm very confident we'll manage the contribution they need to make in the way that . protects the most vital investments and services. And finally, Chancellor on on defence spending. There was a concern raised on one of our evidence sessions that. channelling defence spending via the public financial. institutions may not meet NATO's. requirements towards their percentage figure target. Are you absolutely. confident that spending in the way that you have planned will contribute towards NATO target? The simple answer is will depend on exactly what it's spent on, but a significant amount of the National Wealth Fund or British Business Bank investment, particularly where it goes into direct defence.
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Bobby Dean
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Bobby Dean
Is likely to score and. These sort of discussions are also ones that we have the whole time with NATO in the question marks over sort of the loans or the. guarantees and so on. So will you be ensuring that any spending that is channelled through the public financial institutions will meet the NATO target? I have to tell you, my first my first priority is making sure we get the level of spend, the most effective spend to make sure we've got our defence and our security systems up to scratch.
Yes, it matters, particularly in terms of being able to account for our obligations and our commitments to NATO, that that scores in NATO terms,
Yes, it matters, particularly in terms of being able to account for our obligations and our commitments to NATO, that that scores in NATO terms,
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Speaker 1
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Speaker 1
And we'll do our best to make sure that that's also the case. Thank you very much, Mr. Chancellor. I mean, public spending is often a temptation for secretaries of state to ask for more money. You talk about being in lockstep with number number ten and number 11 being in lockstep on on spending review. Will you be holding secretaries of state to account in a very tough way for the spending on projects that are already underway? I think we're all haunted by .
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Speaker 2
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Speaker 2
Just to add, the Permanent Secretary is keen. I've had this conversation with you for over a number of years. We spent. £1.4 trillion in public spending. I think the idea that anything additional always has to be over and above that is something we've got to get past in this country. And I would say that, you know, it's perfectly reasonable, for example, that as defense rises up the agenda, as it must do, we.
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Bobby Dean
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Bobby Dean
Will the Prime Minister sign off budgets for all government departments, for example? So I think, as I said earlier. ultimately the spending review is my responsibility. But this will be a jointly run spending review in a way that I think is. Is new, is appropriate for the challenges that we face that will be framed by the ten year plan in terms of the priorities for the country and for the government and the I, there will be a very welcome role also for the First Secretary of State and the Npcc o p MC .
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Bobby Dean
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Bobby Dean
Every Secretary of State got a letter very clearly jointly from me and the Prime Minister. It talked about the. expectations of managing within the budgets that they've got in the spending review, recognising the pressures. requiring the contribution that we subsequently confirmed, and I confirmed in the budget to the Defence Investment Plan, but making also very clear that it is part of the Secretary of State's. responsibility to manage within those budgets and to be able and capable of.
reprioritising within those within the budgets. And, where .
reprioritising within those within the budgets. And, where .
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Julie Minns
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Julie Minns
That's just to be clear. That's good to know. Thank you. Seema Malhotra MP thank you. Thank you very much. Chancellor. You did announce in the in the budget that in the next spending review you'll have a new form of public spending, ring fenced. preventative del which some might see as a version also of invest to save. Would you be able to share how much public spending you might expect to fit into this.
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Bobby Dean
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Bobby Dean
Defined for. departments to adhere to. So the short answer is that it's premature to be able to give you that sort of detail. We're within two weeks of the budget when I made the confirmation that that's what I intend to do, was introduce an element in the spending review. The thinking behind this is really twofold. One is that we we. recognise in in ceadel the particular value and importance of long term investment. And this is a way of of. recognising the potential long term value of preventative spending. And potentially doing so not just within a scorecard scorecard period.
That's the first thing. The second thing is that it is a recognition that in some of the most complex and. intractable social service. delivery and. arguably economic, but not principally economic, the the. complexity of having multiple. departments with different budget lines that may or may not make a contribution. So it's a way of trying to in, in I would I would expect a limited number of. areas to try and. demonstrate in. practice a different way, not just of. accounting and, and allocating budgets, but. managing it most effectively. Our ability to tackle some deep, long seated, deep seated problems, obvious potential priorities might be rough sleeping, homelessness.
Violence against women and girls, where short term decisions often load extra costs in other parts of the system. And this is a way of trying to for government to get .
That's the first thing. The second thing is that it is a recognition that in some of the most complex and. intractable social service. delivery and. arguably economic, but not principally economic, the the. complexity of having multiple. departments with different budget lines that may or may not make a contribution. So it's a way of trying to in, in I would I would expect a limited number of. areas to try and. demonstrate in. practice a different way, not just of. accounting and, and allocating budgets, but. managing it most effectively. Our ability to tackle some deep, long seated, deep seated problems, obvious potential priorities might be rough sleeping, homelessness.
Violence against women and girls, where short term decisions often load extra costs in other parts of the system. And this is a way of trying to for government to get .
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Julie Minns
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Julie Minns
Of barriers and constraints that we've too often seen in the past. It has been, I think, as you describe. Brought forward as an idea for looking at long term thinking, long term. investment in areas where also perhaps one government department doesn't have all the answers to solving the problem. And I think youth unemployment has been one area that may potentially be suitable for for this sort of new public form of public spending.
Would you be able to share anything then, about the timetable on which you might bring forward some of those criteria? I .
Would you be able to share anything then, about the timetable on which you might bring forward some of those criteria? I .
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Speaker 2
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Speaker 2
I'm going to give James Bowler and the team in the Treasury following the session. It might just be. I think part of the reason for the ring fence is because governments in the past have been less good at like protecting this sort of spending against being reprioritized and then being able to track how much of this is continuing.
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Speaker 1
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Speaker 1
I think it would be useful to be able to get an update when when that's available. I'm sure the Treasury officials will be working hard to ensure departments don't do game playing and shove all their money into the ring fenced and protected preventative spending. Not that I would suggest they wouldn't dare to try that, but I'm sure you're alert to that just before I pass to, well, we have the vote coming to Dame Siobhan in. You talked about number ten being very involved in the spending review. You said, Chancellor, that you are ultimately responsible. But if number ten are involved in the decision making, we would expect as a committee that when we scrutinise the spending review, that there would be representation from number ten in this room when you or your colleagues are with the .
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Bobby Dean
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Bobby Dean
Social and Affordable Homes programme in the Treasury. In the debate on the budget, yes, the budget and I wasn't able to be in there for that. But. Look, that's not a solution in itself. But I hope it's a signal that there's a serious commitment and it brings over the next decade to. 40. 40 billion the investment we're willing to make in that. And I, you know, as a former housing minister and shadow secretary for housing, I'm very conscious of the.
The pressures that are there on temporary accommodation, and. particularly .
The pressures that are there on temporary accommodation, and. particularly .
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Jim Dickson
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Jim Dickson
Budget of two weeks ago. And I'm going to ask Mr. Jim Dickson to kick off Mr. Dixon. Thank you. Jim. The Prime Minister's been very clear that one of the key ways to drive growth in every postcode is through fiscal devolution. That is mentioned several times in the budget. Have you made an assessment of how much growth and .
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Speaker 2
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Speaker 2
Additional productivity there might give the UK? Not in aggregate terms. What I think, Mr. Dixon, you can start to see is the way , in particular, that mayors in the mayoral. authorities are able to plan. anticipate and already start to anticipate the private investment they're going to be able to put alongside the revenue streams that will come from the fiscal devolution. And the on the basic. principle that we put more power and resources in the hands of local leaders that know their area best, that are in the best position to bring. Investors business, some of their.
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Speaker 2
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Speaker 2
Some of their community groups together to deal with the the bottlenecks or the gaps that simply can't be seen from Whitehall. I have a confidence in the medium term that this will have a real impact. And I think in five years time, people will look back to the budget on. the 28th of October and say this. This was a very. significant move that often escapes the SW1 world, but in the S 66 area that I live in,
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Jim Dickson
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Jim Dickson
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Speaker 2
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Speaker 2
Able to do that and therefore be able to say, yes, this is working? In preparation for the I mean, I will I and the Treasury will make a very strong submission to the OBR on this and some of the other budget measures from last month in time for the next the next budget. We'll see what they make of it. And I hope, you know, within a year or so we'll be able to point to some, you know, significant developments that we can at least .
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Jim Dickson
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Jim Dickson
Link to some of the decisions that we've taken in this budget. Just the only sort of caveat is the OBR were quite clear with us when we saw them last week, that they thought it was going to be very difficult to assess cause and effect on these things. And I think the quote was, it will probably be quite. challenging to measure the growth potential, even when the final decisions have been taken. And they were saying that because some of the decisions about what to devolve hadn't yet been taken.
But even when .
But even when .
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Speaker 2
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Speaker 2
It's clear the move must be massively pro-growth. It is hard, Mr. Dixon, though, you know, I go back even longer than James Bowler does here. I was responsible in the previous Labour government for regional economic and local economic development policy and the regional development agencies in England at that time. And because most of our most of our data in this. country is sort of.
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Speaker 2
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Speaker 2
National level data and economic data is quite often imperfect. And, and post ante, we we set up at that time regional observatories, which were designed to try and develop that sort of evidence base. So this is a but make no mistake, you know, the budget signals not just a a series of radical steps, but a long term commitment. And you will see that reflected in the ten year plan.
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Jim Dickson
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Julie Minns
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Julie Minns
Authority as well. Thank you, Mr. Dixon. Julie Mintz MP thank you, chair Chancellor, you just said there that you've got confidence in the medium term about devolution delivering growth. But we heard from Professor Tony Travers, who's on record as saying that a maximum of six mayoral authorities will have the capacity to handle the significant new powers. What how will you ensure that the .
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Speaker 2
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Speaker 2
Strategic authorities will have capacity to use the powers? As part of the budget? You will see the. 150 million that I've put aside for capacity building. There's a process. Also, I in my view, of accountability building as well. But Tony, Tony Travers is a is such a , a local government and London expert that he'll also be able to be able to help point the way that we can draw lessons from .
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Speaker 2
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Speaker 2
Reckoned without the sort of singular force of one of their local members of Parliament campaigning prowess. The serious point about London for me is that, you know, the Mayor of London offered the observation after ten years as London mayor, that this was the best budget for London. A really significant. Shoulder behind the wheel of devolution from central government, with the irony for .
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Julie Minns
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Julie Minns
Was a northern Prime Minister and Northern Chancellor that delivered it. And I think that's that's undoubtedly been the case for London. We do, however, only have one. non city region area that currently has a mayor and that's in Yorkshire. Now we're going to get one in Cumbria. So just thinking about the local accountability functions, are they strong enough to .
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Speaker 2
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Speaker 2
Take on the functions of central government. I think they need to be developed further. There are some steps towards that in the in the budget in particular. You'll see more of this mapped out in the the Rewiring Britain. devolution plan that government will produce shortly, but. specifically as an.
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Speaker 6
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Speaker 6
We've seen something on that. I think we see most of that. I think we see the primary accountability mechanism to be local. So we will be creating local accounting officers. That's quite a big change compared to now. Those will be held to account through local scrutiny committees. The English Devolution Act strengthened the accountability around those quite significantly and will set out further details. As the Chancellor said in the rewiring the State White Paper, there'll also, of course, be national minimum.
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Speaker 2
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Speaker 2
Less exposed, less exposed the variabilities in international pricing? Well. As we as we make deeper changes, not just the headline support message measures in the budget, it will help to deal with what are energy costs for business and for households in this country that are out of line with Europe. That's a ten year that's a ten year ambition that both the Prime Minister and I set out in , in conference.
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Speaker 2
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Speaker 2
To support for off grid households? I take issue with the. economists that might be advising you on that. You know, there were a range of options, but in the end, first of all, being able to make direct. payments clean, timely in January, when the pressures are greatest, was one of the reasons that we went down the route of council tax band, say, A to D. But that. But that also picks up.
9 in 10 of the poorest households. It picks up over.
9 in 10 of the poorest households. It picks up over.
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Speaker 6
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Speaker 6
That if you've come across something I've not yet. Dharmesh, did you want to add anything to that? No. Just to say because there was the money earlier in the year for households, particularly on heating oil or as Jonathan said, though, in this budget, there was as part of the Household Energy Support scheme, a further. £100 million for councils across England, and then Barnett consequentials for .
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Speaker 7
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Speaker 7
That and get back to you in writing if necessary. Thank you very much. Andrew Gwynne MP thank you, chair. I just wanted to build on the question about the targeting of the energy support. You've given a comprehensive answer there, but specifically on the choice to target it to council tax bands, A to D, of course, we all know that council tax was last re-evaluated in 1991. So. So given that, was this the best mechanism available,
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Speaker 2
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Speaker 2
It was the best because it was direct, because it could be a clear cut payment. It could be done at a time. That was when people were likely to feel the pressure of the bills most. And it could be something that would reach. 2020 million households in England and had a degree of inbuilt. For me, the sort of targeting we needed to those either under fuel stress or in the relatively poorer households with with with some.
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Speaker 7
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Speaker 7
Provision for a the locally administered Fund as a fallback and is the. Is the Treasury looking at how we might improve targeting still further because there will always be anomalies. So, for example, there might be a family who happen to live in a band E. large older home who are energy intensive because there's somebody with a. disability in the family. There are a whole host of scenarios out there.
And we all know in the design of policy, it's imperfect, but people can fall through the gaps. Are you actively looking at a different.
And we all know in the design of policy, it's imperfect, but people can fall through the gaps. Are you actively looking at a different.
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Speaker 3
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Speaker 3
Targeted payments and support in this way? Yeah. And the Chancellor set out the judgments at the budget. And I think the the issue coming out of Covid support and and energy and wider is continues to be a desire to link the ability that the, that DWP and the welfare system has to work with. households and the tax system, which does things by individuals. And there is a there is a big prize in being able to marry those two together and, and then have a lot more options on how much more targeted. And there's a lot of work going on to try and deliver on that.
There's very. complicated sets of issues underneath on that. But that I think is the, the goal .
There's very. complicated sets of issues underneath on that. But that I think is the, the goal .
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Bobby Dean
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Bobby Dean
Thank you very much. Mr.. It's a follow up to this question. I mean. 2022 is four years ago, and the best scheme that we've come up with since means that hundreds of thousands of. households that are on low incomes are going to miss out. And I appreciate what you're saying about there being an alternative route via them having to claim through their local authority, but that really doesn't feel good enough.
Are you determined to fix this? Because there's going to be more energy shocks in the future? And Mr. Bolt, whatever powers you need to make sure that you can come up with a more targeted scheme,
Are you determined to fix this? Because there's going to be more energy shocks in the future? And Mr. Bolt, whatever powers you need to make sure that you can come up with a more targeted scheme,
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Speaker 2
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Speaker 2
For Chancellor. I don't you have the intention to fix it. I recognise that the the range of routes and options are relatively restricted, but I don't accept the. characterization of the of the decisions I've taken in the scheme for the household energy payments as being somehow flawed. I think it's I think it's the right judgment. I think there is a. It hits a large majority of those who are likely to need it most. And I think it's important that we recognise that the. It isn't just those that are in in the most need or the most.
impoverished that are going to be are , are under pressure with energy costs and.
impoverished that are going to be are , are under pressure with energy costs and.
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Speaker 1
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Speaker 1
To make these household energy payments. Okay. Thank you chair. Thank you. Thank you very much, Mr. Dean. Defence spending has obviously been a big topic of discussion, both in both your roles. How perhaps you could just explain how you and the Ministry of Defence decided that 3% of GDP is the right amount to spend on defence by.
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Speaker 2
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Speaker 2
Where did the 3% figure come from? Comes as a an important head mark or date on the path to the fundamental commitment this country has made to raise defence spending to 3.5 by. 2035 as part of our NATO commitment and the nature of the escalating and changing threats we face, mean that that can't be something that we simply look to rapidly escalate closer to 2035. And it comes also from a. recognition that many other NATO nations are moving rapidly, and that the NATO secretary general has confirmed that NATO should be ready by. 2030 for a potential Russian.
incursion into a NATO nation. So, in other words, there are there are way, way points in the big structural .
incursion into a NATO nation. So, in other words, there are there are way, way points in the big structural .
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Speaker 1
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Speaker 1
Commitment that we need to make to spend more in this country. Throughout the Cold War, the UK spent around 4% of GDP on defence, and it's gone down over the years. And, you know, across party there's been concerns raised about how low it got. So you're increasing it and you've got a plan to increase it to 3.5%. Where are the where's the limit of your ambition. And do you think do .
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Speaker 2
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Speaker 2
You know why is 3% going to be enough? Is it is it going to be enough? Well, there's been cross-party concern for some time, but there's only been action to deal with this since 2024. You know , and, you know, I've been part of a government that has already got in place now the biggest sustained rise since the end of the Cold War. We have to do more. We will do more. And I've consistently said that starts with fully funding the defence investment plan that wasn't done before. It is now at the budget and it and it requires government now to plan on the basis and set out the path.
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Speaker 2
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Speaker 2
Along that way, because the the ultimate commitment is 3.5. And if . If one looks at both the the sort of waypoint for the threats that we are told via NATO that we face. And they're a an important sort of staging post, if you like, on to reach that 3.5 commitment, in my judgment, that requires us to .
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Speaker 1
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Speaker 1
That this country had not made and the government had not made before. And how I mean, how fast could you ramp it up? Because one of the challenges is ramping it up faster. If you were to go, say, 4% is how fast you could spend that money, have you done any projections? Well, I suppose in both your previous role in this one, about how much money could be injected and how quickly could spend it? Because we saw I mean, we've seen the, the change of profile of our spending because of the war in Ukraine, which has given some.
Well, I don't we don't need to teach you how to suck eggs on that point. So how quickly .
Well, I don't we don't need to teach you how to suck eggs on that point. So how quickly .
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Speaker 2
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Speaker 2
Could you ramp it up? Have you have you done an analysis of that? There is certainly question marks in the pack has done more work on this than probably anyone else. It isn't just how much you spend, but it's how well you spend it. And increasingly it is how we spend it. And so part of what the government has undertaken over the last two years and needs to accelerate is some quite deep reform of procurement within the Mod that's happening. And certainly, if we are able to command the sort of public confidence and acceptance and support for what is a shift in the structural spending of the British state to reflect that NATO.
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Speaker 2
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Speaker 2
We have to be able to convince the British public that it is money well spent, and it is money that is also, if you like, working twice, not just for our national security, but also for the economy, for new British jobs and British business support, which is why you've seen under the last couple of years, reinforced now by me and the Treasury, the premium on spending, British taxpayers .
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Speaker 1
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Speaker 1
Money and defence first and foremost with British firms and British jobs, we could get into a whole debate about defence inflation, but I won't get into that. But when you were sent Defence Secretary, I floated the idea of having a joint Treasury defence Minister to do the very thing about watching money and. procurement very directly tying the departments together on that. You weren't in favour of that when you were Defence Secretary. I think it's fair. Well, it's true to say. Have you is that something that you would consider, or are you looking at different ways for the Treasury to .
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Speaker 2
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Speaker 2
Work with the Ministry of Defence? Now you've got this role. I think there are I think there are different accelerated ways. So what I set out in the budget was that I'm setting up a task force from this point through to prepare for the spending review that is. Joint Mod and Treasury with some external. leadership and expertise as well. That is designed first to.
Accelerate the.
Accelerate the.
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Speaker 2
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Speaker 2
And I expect then the acceptance of innovative forms of funding that can contribute to this heavy lifting and the increase in defence spending, including some very significant amounts of private capital that is ready to invest, and recognising the case for investing in national security as well as our defence. It is also a way of reinforcing the sort of procurement reform to meet the modern needs that you're interested in, Dame Meg and thirdly, it is designed to try and reinforce what I believe is a really. important dimension that we've not given significant enough attention to, which is the.
potential of other like minded nations to jointly procure, hold. design and. interoperate for the future. And that is what the. multinational Defence Mechanism or defence Bank will do. And I confirmed it at the budget,
potential of other like minded nations to jointly procure, hold. design and. interoperate for the future. And that is what the. multinational Defence Mechanism or defence Bank will do. And I confirmed it at the budget,
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Speaker 1
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Speaker 1
That out for this Committee and for the pack at the Spending Review. And you. You're obviously in this role now, when you were Defence Secretary were, you know, quite rightly, as Defence secretary, arguing the case very hard. You resigned over the fact that the money wasn't coming. Have you got a change of perspective on the balance of challenges now that you're in this hot seat? So you've got demands from defence, but you've got demands from many other departments too.
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Speaker 2
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Speaker 2
Across government. And has it changed my perspective? No. I hope it's given me a a broader insight into how we deal with this. And I'm I'm determined. And, you know, as I know, the Prime Minister is and has made very clear, we know and we recognise the first duty of any government, and it certainly is for .
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Speaker 1
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Speaker 1
Us to keep the country and citizens safe. And that's what we're doing. Thank you for that clarity. Just moving on to the state pension, your. predecessor was very clear that if the state pension increased above the personal allowance, those pensions would be protected. And that's been confirmed. So but the question is really if that's fair on other. pensioners and on working people on incomes .
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Speaker 2
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Speaker 2
Above. So the extra bit above the personal allowance. Yes. I mean there's a there's a principle case isn't there, for, for anyone who's a working age and and, and earning there's a, there's a, there's a principle case that there's always more scope for people to be able to raise their earnings and their income in a way that those who are retired, particularly those who are dependent only on the full basic state.
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Speaker 1
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Speaker 1
They will be paying they will be paying tax on some of that income. But the pension tax allowance is obviously the relief will go up as the state pension goes up. And with the triple lock still in place until at least the next general election to the next general election, as the Prime Minister has pledged, that will rise further. Do you think it's going to be possible to remove it at the end of a parliament, when people have got used to having .
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Julie Minns
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Julie Minns
Seema Malhotra MP thank you very much, Chancellor. I want to. focus on the strategy behind the tax changes for individuals and businesses. Helen Miller has said that she didn't see a strategy behind the individual measures. My guess is that you might. disagree with that. Would you be able to tell us about the. overarching strategy, as you would describe it, behind the tax changes that you have announced to deal with big strategic.
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Speaker 2
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Speaker 2
Is to simplify tax administration. There's about five different questions in that. Let me try and answer it in three with three headline points. First of all, a breathing space budget, a judgment that at this point concerned about the cost of living and cost of business, big across the board tax rises were not an option I wanted to pursue and did not.
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Speaker 2
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Speaker 2
Where we have brought in and implementing new policy, I wanted them to be fully funded. I had to raise funds in order to cover the costs of the household energy payment or the taking. 70,000 high street businesses out of business rates altogether for the next two years. And so I have looked to the banks to help pay for the household energy costs. I've looked to big online sellers, I've looked to gambling, I've looked to vape shops to help fund the cost of the business, rates for support for high street, high street businesses. And third, the specific tax changes I brought in are designed to reinforce the growth resilience that we've seen in the British economy this year, and to try and raise still further the encouraging signs of higher levels of business.
investment and. innovation and.
investment and. innovation and.
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Speaker 6
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Speaker 6
Enterprise and Founders Relief. Oh, the founder. Well, as Charles said, the founders relief obviously is, in our view, a policy that addresses the direct or two direct gaps. One is that in this country, we're good at encouraging startups, but less good at those those, those, those, those companies scaling up. And then also, we've got a good offer on access to finance, including through Recapitalizing, the business bank, and also for venture capital firms that are investing in these companies and also for the employees of some of these companies. But we don't have a strong and compelling offer until now to the founders of those companies, including to reinvest here.
So our view is that that is a big an economic problem in terms of the scale ups. And there was a clear gap in the landscape in terms of what would support those companies to do that? You know, in making that, we obviously had choices between a sort of broad based scheme that, you know, that, you know, maybe has an uncapped cost versus something that's targeted. And .
So our view is that that is a big an economic problem in terms of the scale ups. And there was a clear gap in the landscape in terms of what would support those companies to do that? You know, in making that, we obviously had choices between a sort of broad based scheme that, you know, that, you know, maybe has an uncapped cost versus something that's targeted. And .
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Julie Minns
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Julie Minns
That has been. Alex Fletcher was a former adviser to the Treasury on entrepreneurship. That's been published with with with. arguments in favor. I do just want to pick up on this, and it may be helpful, Mr. Lee, if you could respond to to this, you've lowered the budget, has lowered the annual rate at which businesses can claim tax.
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Speaker 6
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Speaker 6
Businesses or both? So the capital allowances regime the UK has is like OECD leading, I think, and obviously the big things, as the Chancellor said, that we didn't do were changing either. The main changing any of the rates of corporation tax, changing full expensing, which is a world leading capital allowances scheme for plant and machinery investment. It's also worth saying that for things outside of the scope of full expensing or for most businesses for for, I think about. 99% of businesses in this country, the investment they do is captured by the annual investment allowance in full.
So this is a very small share of businesses that aren't either affected by either supported by full expensing or by the annual investment allowance. The change to the writing down allowance means that, yes, for for those for those companies using it, which is to say is sort of, you know, not 99% of businesses in this country, they will be able to write off slightly slower. But the measure also includes a much more generous upfront allowance for new investment. So rather than being able to write off 40% of the investment in year one, you'll write off 50% of the investment in year one.
So for new investment in particular, we think it sort of gives more generous support up front. And then, as I say,
So this is a very small share of businesses that aren't either affected by either supported by full expensing or by the annual investment allowance. The change to the writing down allowance means that, yes, for for those for those companies using it, which is to say is sort of, you know, not 99% of businesses in this country, they will be able to write off slightly slower. But the measure also includes a much more generous upfront allowance for new investment. So rather than being able to write off 40% of the investment in year one, you'll write off 50% of the investment in year one.
So for new investment in particular, we think it sort of gives more generous support up front. And then, as I say,
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Speaker 1
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Speaker 1
Successful businesses who would benefit from the founder's tax? Yeah, we can we can be helpful to know that because, I mean, my point is really, were you asking the right people? Were you asking the people who , who will benefit from a tax, whether they wanted a tax break brutally or the people who are thinking about starting a business? So, you know, and that make a difference to the decision .
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Speaker 2
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Speaker 2
Who engaged. Well, exactly. May, may. I just wonder if that determined that can I can I say, however, you know, one of the strongest advocates was Alex Depledge. And one of the early decisions I took as Chancellor was to extend her. contract as a, an. appointment until the day after the budget. And because I wanted to help to prepare the sort of enterprise package that I set out in the budget.
And it has many of the measures that she had been .
And it has many of the measures that she had been .
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Julie Minns
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Julie Minns
Be pleased to be talked about anyway, very briefly please. And then just one final question, Chancellor. The measures implicit in that is an encouragement for entrepreneurship. Do you want to see that there is a greater culture of entrepreneurship? Do you feel that that is something that would would support Britain in its in in your strategy for growth as well? And do you see these measures as helping .
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Catherine West
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Catherine West
Want to and to build further on it. Thank you Catherine. Thank you. Meg, I think what you've laid out, Chancellor, is to govern is to choose. And I just wanted to ask us quite specific question about VAT for Microbusinesses. So they're the ones that don't qualify for, you know, business relief, etc., because they're so small. And some very small businesses have said to me that they feel as a proportion of their.
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Catherine West
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Catherine West
Is weighing very heavily on them. And in fact, there is a debate in Parliament tomorrow. afternoon where people across the country who have those very small businesses have been in touch just to say that. And I wonder if any of that crossed the minds when the choices were being made about who to help in terms of tax relief. I know VAT is a very tricky and very .
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Speaker 2
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Speaker 2
Complicated one, but could you could you say what your thinking is? Yeah, it is if for the very small. Yes. And those starting out testing and trying out their sort of idea, their their business idea or testing the market, I hope what they haven't overlooked is that I've increased the trading allowance. In other words, the tax free allowance from. 1000 to 3000 that people are able to. generate in order to test that out. So it's that's an encouragement really, if you like, for those who've got an idea and want to just test it out in terms of the de minimis VAT threshold.
Yeah, a, a, a complex question. We still have a relatively high. threshold on VAT compared to other nations. And it . But inevitably you have a you have a point at which registration is required. And for most.
Yeah, a, a, a complex question. We still have a relatively high. threshold on VAT compared to other nations. And it . But inevitably you have a you have a point at which registration is required. And for most.
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Speaker 2
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Speaker 2
Will make. provision for the tax they may have to pay, but asking them to pay smaller amounts more. regularly rather than a larger amount at a later date is likely to lead to on a business's point of view, perhaps more manageable cash flows. For a public. accounting point of view, it's likely to lead to .
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Harriett Baldwin
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Harriett Baldwin
In the out years when more and more people are drawn into paying higher rates of tax because of the freezing of the. thresholds for quite a bit longer, there will be people over the age of 80, people over the age of 90, people over the age of. 100 being sent. self-assessment forms for the very first time in their lives. Now, HMRC have said that they're going to try and put in place safeguards. What would you want them to do, Chancellor, in terms of safeguards? You can't think that it's right for someone in a care home .
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Speaker 2
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Speaker 2
With. dementia to be suddenly sent a self-assessment form. Can you know? Of course, there are some de minimis elements of this as well, but I might ask Dharmesh to come in. But look, the principle. cases here for HMRC, I think it's not. unreasonable for them to have powers to be able to deal with people or businesses that .
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Speaker 2
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Speaker 2
But DWP do do home visits for people who have got certain needs. Is that what you're suggesting the system can and should deal with really specific cases like this, Dame Harriet but but also part of part of the rationale for the pension tax credit tax allowance is to ensure that, you know, that a swathe of, of, of pensioners are not then brought into the. self-assessment and tax system. We can we can we can ring fence them for the rest of this Parliament. But in terms of the operation of this type of specific case, you know, I think I think we should credit HMRC of having some experience for dealing with this, just like with.
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Siobhain McDonagh
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Siobhain McDonagh
That he will no longer have to pay business rates and the impact that will have on his small business, and I am sure there will be a latte in it for you if you were ever to apply, but I just wanted to ask whether you saw the. hospitality sector, particularly the small business like Kevin's, as a major. contributor to the. reinvigoration of our high streets, and whether you would envisage further support for those businesses that fall just.
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Speaker 2
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Speaker 2
These are these are the these are the sort of businesses that make give character to the communities, the places. They're the things that make the places we live in or work in the places we also love. So I've given a particular priority to those in the retail. hospitality leisure category, the small businesses that we can take out of business rates altogether . For those that are above that threshold. I brought in a freeze for business rates, so there'll be no real increase in business rates for the next two years as well. And it is it isn't it isn't the it isn't the automatic solution.
But I hope it's the basis to create a greater degree of confidence, because in the end, we want these businesses to flourish, we want them to recruit. And we want the communities in which they, they, they operate to feel like things are on the up. And that's the rationale for the business measures, the support, the breathing space for those particular .
But I hope it's the basis to create a greater degree of confidence, because in the end, we want these businesses to flourish, we want them to recruit. And we want the communities in which they, they, they operate to feel like things are on the up. And that's the rationale for the business measures, the support, the breathing space for those particular .
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Speaker 1
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Speaker 1
You for a pint of beer in one of my great craft breweries. And coffee and pastries. Pastries. Pastries in in Kent. But can I thank the Chancellor of the Exchequer? The right hon . John Healey MP very much for his time. That's two hours. 15 minutes with with, of course, the votes taking out in excluding the vote. So thank you for that time. And thank you to James Bowler, the Permanent Secretary, and from the Treasury. The transcript of this website of this session will be up on the website uncorrected in the next couple of days. Thank you to our colleagues at Hansard.
Thank you to our .
Thank you to our .
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