Budget Resolutions and Economic Situation

Debate between Chris Evans and Richard Graham

Wednesday 15th March 2023 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

It is always a pleasure to follow the hon. Member for Clacton (Giles Watling), who is frozen in time for those of us of a certain vintage as a vicar who married into an extended Liverpudlian family. I think it was around the time, Mr Deputy Speaker, that we first met, when I was a little boy and you were the candidate in the Pontypridd by-election. We are all showing our age here.

When Ministers are asked what the Government are going to do about the cost of living crisis, they often reply, “We are taking tough decisions.” We already know that the tax burden is at its highest level ever, while inflation runs at 10.1% and interest rates stand at 4%. This raises the question of who is really bearing the brunt of these tough decisions. Is it the homeowners exiting fixed-rate deals only to be faced with new ones with higher rates, and with little money left over for spending on other essentials? Is it prospective first-time buyers who feel that ownership is just a pipe dream and, even if they cannot afford a mortgage, worry that rents could rise as landlords pass on higher mortgage rates? Is it the carer who finds that higher fuel prices are eating into their pay, as they rely on private transport to deliver vital services to vulnerable people? Or is it those who get paid on a weekly basis and struggle to budget for their monthly direct debits? For many people the cost of living crisis is not a political slogan; it is the reality of their daily lives. It is they who really are taking the tough decisions, not the Ministers who are sent out to defend the Government week in, week out.

The UK economy has been hit by a series of significant economic shocks, including the change in our trading relationship with the European Union, the covid pandemic and the sharp rise in global energy prices related to Russia’s brutal war on Ukraine and its people. For the United Kingdom, these shocks have eroded the terms on which we trade with the outside world. The prices we can get for the goods we sell have not kept up with the prices we have to pay for the goods we buy. The Government position has made us poorer as a country. The fall in our national real income has manifested itself in a rise in the prices we have to pay for the things we buy as consumers.

This position was not helped by the infamous “fiscal event” last September which saw the biggest programme of tax cuts in half a century, one that benefited the very wealthiest while adding tens of billions of pounds to the national debt; and I see from today’s announcement that the Conservative party has not learned from that.

The result of that fiscal event was the pound dropping to its lowest level against the dollar since 1985, and the UK is now the only country in the G7 to be forecast negative growth this year. The new Prime Minister has peddled the myth that he will halve inflation in a year, and we heard that from the Chancellor earlier—he said it will be less than half. This is in the hope that people somehow believe prices will be halved as well. That goes against economic orthodoxy: when prices stay high, they very rarely come down, and they certainly will not be halved if inflation is halved.

[Richard Graham]

Page 9 of the “Impact on households” distributional analysis has a chart that clearly shows that the major beneficiaries of this Budget are those in the bottom decile of earnings, and then the values in the graph slope downwards so that they are negative for those in the deciles above 7, to 8, 9 and 10—the most well-off in the country. Therefore, this Budget very much helps all our constituents who are the least well off. Does the hon. Gentleman agree that the whole point of public spending and taxation is to help our least well-off constituents?

[Chris Evans]

I have always admired the hon. Gentleman. When I first came into the House, the first intervention that I took was from him. We talked about high unemployment and I think he said something along the same lines. I urge him to look at that graph again, however, because those are frozen thresholds. There is real danger when we look at the fine print of the Budget. What always happens is that the euphoria of the Chancellor’s Budget speech is unpicked by the media on Saturday and Sunday, so I hope that we can have a discussion on Monday about the same issue.

It is families who pay the price in the Budget, which appears to be a theme across the Government’s economic plans. The developments on energy prices, about which we are all concerned, have been particularly stark. In October, as the energy price guarantee was put in place to moderate what would have been an even higher increase in Ofgem’s price cap, the typical energy price bill was still nearly twice as high as a year earlier. Who knows what the Government will do after June? Household energy prices will not come down to previous levels any time soon, and from a cost of living perspective, it is the level of what people must pay that matters. Energy bills will remain a challenge for many people, particularly those on lower incomes. Again, I am afraid that the evidence suggests that the Government are not siding with working people and have not made the oil and gas giants pay their fair share.

The story is similar for another essential in life: food. Before the war, Russia and Ukraine supplied a significant share of the global consumption of agricultural products such as sunflower oil, wheat and barley. With disruption to those supplies, prices increased sharply over 2022, which drove up food prices in UK shops and supermarkets, including for the basics that everyone has in their cupboard or fridge. In some supermarkets, a pint of milk increased from 80p to 95p, pasta went up from 45p to 70p and some brands of butter are up to nearly £5. They may seem like small increases, but when added up, even the smallest changes can make a huge difference at the end of the weekly shop. Every day, people see that for themselves and do not know how they will pay for it.

Before the crisis, food bank usage was on the rise. Between April 2021 and March 2022, the Trussell Trust distributed more than 2.1 million emergency food parcels to people in crisis, which is an increase of 14% compared with the same period in 2019-20. Food is one of life’s essentials—we cannot get away from that; we need it to live—and the fact that many people across the country can no longer afford to pay for it is a disgrace in the 21st century.

The issue is deeply affecting my constituents in Islwyn. The Trades Union Congress found that one in five people in Islwyn have missed a meal or gone without food during the present crisis. According to Action for Children, 4,578 children were living in poverty in my constituency in 2020. We can no longer leave the hard-working people and children of this country to go hungry.

I cannot talk about the Budget without talking about housing, or the lack thereof. New mortgage rates are higher than they were a year ago, which means that about one in 10 households will see their mortgage rates go up this year. If new mortgage rates rise by 3%, as market rates currently suggest, the typical monthly interest payment will go up by just under £250 for everyone. In the Budget, however, there is no mortgage emergency plan or the plan for affordable housing that we were promised.

The people who are affected are simply playing by the rules and working hard for little reward. The UK economy is suffering because of the global energy price shock and a decade of poor productivity growth, which has been made worse by erecting huge barriers to trade with the EU. Those circumstances are making everyone poorer, with consequences for low-income households with children, people with disabilities and poor pensioners.

We desperately need urgent support to be targeted at the hardest-hit households, plus an investment in skills, infrastructure and business finance to rebalance the economy away from growth based on consumer spending fuelled by rising house prices towards business investment and exports. After 13 long years, the Government can be characterised by low growth, low wages, higher prices and Government waste. Frankly, it is time for a change. This country deserves better.