Budget Resolutions

Debate between Chi Onwurah and George Freeman

Wednesday 30th October 2024 Commons Chamber

[George Freeman (Mid Norfolk) (Con)]

It is a great pleasure to follow the hon. Member for Birmingham Edgbaston (Preet Kaur Gill). It is also an honour and a pleasure, after 14 years, to be able to rise as a free man—free to speak on the Opposition Benches liberated from the tyranny of the Whips’ handouts that are being so beautifully read from the Labour Benches, and from the tyranny of desperate ambition to get on to the Front Bench. I want to speak today, after 14 years on and off the Front Bench, about the state of the public finances. I shall speak much more in sorrow than in anger, not to score party political points but to share reflections on the real depth of the crisis this country faces in our structural deficits and the challenge that this Chancellor, this country and this Parliament face in tackling it.

As a former Minister for life science, for fusion, for quantum and for space, I am delighted to have been elected by, I think, the House to the Science, Innovation and Technology Committee. I am also chair of the parliamentary and scientific committee—the oldest all-party group—and chair of the APPG on science and technology in agriculture. I am also proudly and gladly pleased to declare my entry in the Register of Members’ Financial Interests. I am trying to repair my finances—I carry too much debt, like this country—by working with some great British companies to help them to raise money in the international markets and to grow. That is what this country has to do to get itself out of debt as well.

I want to say three things this afternoon: something about the real nature of the crisis in our public finances; something about why I so deeply believe the innovation economy is the only way to get us out of this doom loop spiral of structural deficit and debt; and something about my poor constituents in Mid Norfolk and the effect of this Budget on them. Tempting though it is to stand up and accuse the Labour Government of causing all the ills of the world, and to take no responsibility for them, I want to do the opposite and suggest that this Parliament and this country have for the last 25 years been failing to grapple seriously enough with the deep nature of structural deficit in our broken public finances.

I remember, when I was newly elected in 2010, having a brilliant briefing from Robert Chote and Paul Johnson of the Institute for Fiscal Studies, and having the structural deficit properly explained to me. That has stayed with me, and it is worth sharing for the benefit of those listening to this debate. Traditionally, all Governments in this country tax and spend. They earn money every year from tax revenues and then spend it. In some years, the economic cycle turns down, so we do not cut spending; we borrow a bit to maintain our spending and then repay it when the economic cycle turns. Occasionally in the cycle, we run deficits. The structural deficit is that bit of the public finances that means that, even when the economy is growing—even when it is growing at 2% or 3%—we are running a deficit, because there are bits of the economy that are constantly swallowing more money than we are capable of earning.

When we took office in 2010, debt interest was effectively the fourth biggest Department of state. We had a serious crisis on our hands. Looking back, if we are honest, new Labour did not pay enough attention to deep reform of our public finances during the “Cool Britannia” years of Gordon Brown and Tony Blair. In the 2007-08 crash, that Government unleashed £700 billion of borrowing and quantitative easing. We can argue about whether that was the right thing to do, but it drove huge asset price inflation and left us with huge debts.

The coalition tried to get us out of that debt with austerity, on which I think the country was with us for the first two or three years before feeling that we had overdone it. Yes, we had that crash, the disruption of Brexit, a terrible once-in-a-century pandemic and a war in Ukraine—we had £700 billion of QE, £400 billion of pandemic relief and £40 billion of cost of living relief—but we have effectively come back to where we were in 2010, facing a structural deficit and flashing red lights in the public finances. I call it the bonfire in the basement of the British economy. Even when the economy is growing, even when we see Canary Wharf on the drive from Norfolk, the unseen bonfire in the basement eats away at the economy’s resilience and sustainability. That should worry all of us involved in public policy, and I have a sneaking feeling that the public understand this.

The people I spoke to on the doorstep during the election were not economists or seasoned political observers but, after observing successive Governments fail, their common sense told them that there is a deep problem in the state. I suggest that much of the political volatility in recent years comes from an inability, including in my own party, to be honest about the scale of the problem. I think the Brexit revolution was driven by deep anger and resentment not just at Brussels, but at the failure of this country’s political economy. People outside the golden triangle felt left behind by their own Government, their own country and their own model of growth.

The lecture I received in 2010 from Robert Chote and Paul Johnson is just as relevant today. Four things drive the structural deficit. The first is debt interest. There was an inflation surge because of the war in Ukraine, but we have been lucky that the markets have generally not punished us for borrowing too much. Second is welfare bills. The coalition implemented very painful reforms to stop the rise of the welfare bill. We did not cut the welfare budget; we just stopped its rise. Third is public sector pensions. Again, there were some very painful reforms, not to cut the costs but to prevent them from booming and bankrupting the public finances.

Those are all significant issues, but the biggest one, by far, is healthcare. The structural cost of healthcare in our ageing economy, with increasingly expensive medicines and an NHS designed for the 1940s rather than the 21st century, is in danger of bankrupting itself and the public finances. I am on record as saying, and I will repeat it, that the Health Secretary’s honesty is a breath of fresh air. The NHS has not been broken by a lack of Tory funding—we have all poured money into the NHS—but the problem is that the model is not fit for the 21st century.

Much more in sorrow than in anger, I suggest that we need to start this debate by being profoundly honest about the real nature of the problem. The truth is that we cannot cut, borrow, tax or spend our way out of a debt crisis, and successive Governments have tried and failed.

I speak as a card-carrying supporter of industrial strategy, of increased R&D spending and of getting the country out of its current spiral and into a higher-growth model. I want to cheer much of this Budget, and perhaps there will be more to cheer when we read the Red Book tomorrow, but I am worried.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

I thank the hon. Gentleman, my fellow member of the Science, Innovation and Technology Committee, for giving way. He knows that R&D funding is vital to driving innovation, productivity and future growth and prosperity. Does he agree that we should welcome the commitment to protecting core R&D funding, as well as the specific investment in high-tech areas such as automotive, aerospace and clean energy? Does he agree that the Committee looks forward to examining the detail of the Budget to see its impact on science and technology in every Department and across the country?