NHS Pensions

Robert Syms Excerpts

Wednesday 26th June 2019 Westminster Hall

[Sir Robert Syms (Poole) (Con)]

I beg to move,

That this House has considered NHS pensions, annual and lifetime allowances.

I begin by declaring an interest, because anybody who has been in the parliamentary pension scheme is affected by annual allowance and lifetime allowance. Therefore, some of the things I say may reflect on me and maybe other hon. Members, so I suggest they make a declaration as well—

[James Gray (in the Chair)]

Order. The hon. Gentleman may be right to say that all hon. Members may be affected by that matter, but for each individual to have to make that declaration would, I think, be otiose.

[Sir Robert Syms]

Thank you, Mr Gray. This is an important subject, and the more I learn about it, the more I realise its implications for the national health service. I had originally been told that the Treasury would respond to the debate, but I understand that the Department of Health and Social Care has manfully stepped up to the plate—the first example I have seen of a hospital pass to a Department.

The subject has devastating implications for the NHS, dental services and many other services in this country unless it is addressed by the Government. When the coalition Government came into office in 2010-11, they were quite right to reduce the amount of money that could be put into pension funds. At that time, someone could put £255,000 into a pension fund tax free; clearly, if they had such resources, it was unfair on the lower paid. The Government moved to reduce the tax leakage by reducing a number of the allowances.

The problem today is that the Government have drawn the allowances too tight, and in 2015-16 they also introduced a taper to the annual allowance. All that is having a pernicious effect on the NHS and creating what the British Medical Association has called a “perfect storm”. The lifetime allowance, which is just over £1,055,000, is such that most senior doctors and general practitioners get pulled into additional tax, paid at 55%. That raises the question whether they should continue working or retire early; there is a lot of evidence that members of the medical profession are deliberately retiring early because of the implications of working longer.

The annual allowance of £40,000 is creating problems of supplementary tax bills, which are falling at the doors of consultants, doctors and senior nurses. That £40,000 is made up of the increase in the fund and contributions, in a slightly convoluted formula, but the introduction of the taper and the way that it operates cause particular havoc. For higher earners, a strict regime applies to annual contributions, which is known as tapered annual allowance. It applies to people who have both adjusted income over £150,000 per year, which is total taxable income plus the real growth in value of pension rights over the year, and threshold income above £110,000 per year, which is essentially total taxable income, but net the value of any employee pension contributions.

Where an individual ticks both boxes, for every £2 of adjusted income that they receive above the £150,000 level, their annual allowance is reduced by £1. This means that those with an adjusted income of £210,000 have their annual allowance tapered down from £40,000 to £10,000, the lowest level to which tapering can reduce the annual allowance. That tapered allowance was introduced in 2016-17. The ability to carry forward unused allowances for years before the taper was enforced has so far helped to dampen down its impact, but in 2019-20, carry-forward will be from no earlier than 2016-17, when the taper came into force. That will reduce the number of people with significant amounts of underused annual allowance available, and as a result the taper will bite rather more than in earlier years.

If we look at the figures, we see the number of people who exceed annual allowance or hit the taper multiplying each year, pulling many more people into the system. Many senior doctors earn enough money from their core hours plus additional shifts to be potentially affected by the tapered annual allowance. In addition, because of the relative generosity of the NHS pension scheme, pension rights can be built up quite quickly, especially for those who have experienced a step-up in pension rights because of a promotion. Paradoxically, in most cases overtime shifts are not pensionable. That means that a doctor can find that, by working more, he or she has built up no extra pension but, because of the operation of the tapered annual allowance, has reduced the amount of pension that he or she can build up within the tax relief limits.

All that leads to more complexity within the system. It is extremely difficult for someone to work out whether they have an annual allowance issue; that is true for any high earner, but may be particularly true for those in the NHS, because they have rights under different sections of NHS pension schemes—for example, a final salary pension and a career average pension. Those rights are tested against annual allowance, but a negative accrual in one scheme cannot be set against a positive accrual in another scheme.

[Alex Chalk (Cheltenham) (Con)]

My hon. Friend is making an excellent speech on an area that is technical, but has enormous implications. I have been contacted by a consultant in emergency medicine at Gloucestershire Hospitals NHS Foundation Trust, who has indicated that because of the perverse incentives of this scheme, he will not be taking on an extra shift and out-of-hours work, which reduces that vital expertise. Does my hon. Friend agree that we must turn this around so that we have frontline medics doing what they should be doing—caring for our patients?

[Sir Robert Syms]

Almost anybody I talk to in any hospital anywhere has an example of the impact of this additional taxation biting, and its impact on working methods. I know my hon. Friend has tried to get a debate on a similar subject, because we are ultimately talking not about consultants, but about the patients and the impact this has on delivering services.

For defined benefit pension rights, the test against annual allowance is complex. The growth in rights over the year must be adjusted to strip out any increase that simply keeps pace with inflation, and is then multiplied by 16 added to any additional lump sum accrual before being tested. Whether the tapered annual allowance applies depends not just on whether someone’s adjusted income is over £150,000, but on whether their threshold income is over £110,000. These two measures are quite different, and adjusted income in particular is calculated in a very complicated way.

That creates unpredictability. A tapered allowance works by using income from the current year to determine the size of the annual allowance for the current year. Many NHS doctors work extra NHS shifts and many do private work; they may have little idea what their income for the year will be until very late in the year. Sometimes, NHS trusts get additional money released at the end of the year, leading to more operations. Sometimes, NHS trusts pay at a rather slow rate, and they may pay in a different year from that in which an operation was undertaken. As a result, doctors who take on a lot of extra work late in the year can suddenly find they have an annual allowance issue.

There is also a cliff edge issue. Although the tapered annual allowance result is a gradual reduction in annual allowance for each £1 of adjusted income over £150,000 per year, the fact that the whole system switches on abruptly for threshold income above £110,000 can create a violent cliff edge effect. For example, those with threshold income that is 1p below £110,000 can effectively ignore the tapered annual allowance, but those with income that is 1p above it can find themselves caught with a rather large tax bill. For the latter group, not only does each extra £1 attract income tax at 40p and a loss of personal allowance equivalent to another 20p in the pound, but they can suddenly face a big drop in their annual allowance.

Some people can be worse off overall by working an extra shift. I have heard testimony to that effect from many doctors who say they have done additional work and ended up worse off.

[Paul Masterton (East Renfrewshire) (Con)]

I congratulate my hon. Friend on securing this debate. I hope he will not mind my taking the opportunity to plug the event I am hosting with the BMA next Wednesday between 4 pm and 6 pm, which will be a great opportunity for MPs to meet many consultants with stories such as this, and to find out more information about the problem. Does he agree that, because this matter is so complex, it is important for MPs to come along and speak to the BMA, and speak to their local senior consultants, to really understand the impact this is having on the ground?

[Sir Robert Syms]

I thank my hon. Friend for his contribution. This is an area that people start to get interested in only when they start thinking about retirement. Then they realise how complicated the retirement rules are. This issue is upsetting many people who work in the NHS because of the impact it is having.

A survey of GPs to which 46% replied—354—found that their average tax bill owing to the tapered allowance was £18,500, so we really are talking about considerable sums of money being levied on doctors, many of whom do not expect it and suddenly get into arrears. Dr George McInnes, radiologist at Poole Hospital, said to me that most of his radiologists are contracted for 10 sessions, with most working 11 or 12 as a matter of norm to keep the throughput going. However, as is the case in most hospitals, he now finds it terribly difficult to get them to do more than 10, and when people come to review their contracts, they ask to do less work, rather than more, because of the impact of the pension arrangements.

The real problem is that most of the people affected have done years of training and have years of experience—they are the super strikers of the NHS; the team leaders—and despite tax bills have a loyalty to their hospitals and teams and continue working. However, year on year, they find themselves penalised for working. As rational people, they decide to play golf or to spend more time with their families or with Netflix. That is logical, and the Treasury is deterring many people from doing what they have trained for their whole lives to do. The letters, emails and phone calls I get from doctors do not say that they want to work less. They actually want to work more, but they do not really feel that they should work more and be worse off as a result.

The Government have put additional resources into the NHS, and we can argue about whether it is enough or not. However, the key point from the Treasury and the Department of Health and Social Care was the importance of productivity in the NHS, which we can get only if the people within the service are actually able to deal with patients and the issues before them. If, because of the tax issue, people work less, the only way around that—apart from locums, if they can be recruited —is to recruit more people to do fewer operations. That is not increased productivity; that is reduced productivity. If we want to use these people, we have to set a tax system that is proportionate and sensible.

It is not only the NHS. The British Dental Association says the same thing: people are retiring early and are more averse to taking on NHS patients. The consequence is the problem that we are now starting to see, which will get worse and worse. I know that the Department of Health and Social Care understands the issue; I have talked to the Secretary of State. I think the Treasury sort of understands that there is a problem, which is why I think it indicated that it might give additional resources to the NHS. However, the problem is that the only way out of this is to get rid of the taper, because its impact on the way people work is so detrimental to the NHS. Even if we take into account wider issues and other areas, I cannot see how any scheme can be brought in to ameliorate its impact.

We in this House want patients to get the best service, and sometimes we have to pay people to get the best service in the national health service. Most consultants or senior nurses have trained for years and are dedicated to their patients, and all they want to do is to turn up and work. The Government have put money into the NHS to allow operations to take place, but perversely our system of taxation on pensions, which was probably drawn up to stop city slickers avoiding tax, is impacting on a major, important public service and will lead to longer waiting lists, meaning people—who, if not in pain, will be very uncomfortable—waiting to be dealt with.

We all want people to be dealt with, doctors to be happy and the NHS to work properly. We need the Treasury to get out of the way on this one, because it is causing problems.

--- Later in debate ---

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

I declare an interest: I spent more than 30 years as a consultant in the NHS and am married to a GP, so naturally the issue affects us. However, it also affects many of our colleagues.

The first thing to hit was the lifetime tax allowance changes. In my husband’s practice, I saw GPs being driven out at the age of about 57 or 58. They had had no intention of retiring early, but they had been warned in their annual meeting with their accountant that, because of the taper, they would suddenly reach a high marginal tax rate of well over 50%, which naturally is not very attractive. The result, exactly as other hon. Members have laid out, is that we are losing the people with the most expertise—the people who train the new people.

It is important that we do not get carried away into thinking that the NHS is about machinery, buildings or gizmos and gadgets. Every one of those gizmos and gadgets is used by a person. It is people in the NHS who care for, treat and diagnose people. If we do not have the workforce, all the waiting times that we like to stand up and talk about will be completely shot. The workforce issues that all four UK nations face are being made worse by these problems.

Many people may think, “A £1 million pension pot allowance? What a great problem to have!” It is a great problem, but the difficulty is that in general practice, GPs reach a high salary quite early, unlike in a hospital where becoming a consultant takes 15 or 16 years, so people have taken out added years and bought extra service. Because we graduate late, it ends up being very difficult to work for 40 years and have a half-salary pension. We thought about buying added years—we looked at it twice, but we could never afford it.

It is the same issue that arose with the Women Against State Pension Inequality Campaign and with Hewlett Packard, Magnox and all the others: people are expected to commit to a pension in their early 20s, but when they get to the other end, the goalposts have moved. It hits them when they can do nothing about it but bail out—and that is what they are doing.

The lifetime tax allowance limit has already driven out consultants and GPs before the age of 60, but what makes the problem much more acute is the tapering annual tax allowance. As we have heard, it was introduced in 2010 at more than £250,000 to avert tax avoidance and gaming of the system. Senior medics in the NHS are probably the highest-paid people who do not run a business. They are on pay-as-you-earn, so they cannot play the game of writing off this, that and the other or paying themselves in weird ways; they just get their payslip, and the tax is taken. They are not in the tax avoidance game that was perhaps thought of when the taper was introduced. The commercial sector is defined contribution, not defined benefit; it is how the limits interact with the NHS, and probably other public service schemes, that causes the problem.

The annual allowance was reduced to £50,000 in 2011 and then to £40,000 in 2014. For those caught by the taper, the allowance can go right down to £10,000. The threshold is £110,000—not £150,000, which was the impression that the Chancellor gave at Treasury questions on 21 May. People hit a cliff edge, as hon. Members have highlighted: all of a sudden, they are caught in a system where they are taxed over and over on the same income. It particularly affects consultants, who are paid about £110,000 or more, and full-time GPs.

Those who have been caught out and hit by these bills are now talking to their colleagues. The result is that people are refusing promotion and refusing to take on the extra duties that are required in the NHS, such as becoming an education director, a manager of junior doctors or a clinical lead, because anything that could bring in extra income for extra work could suddenly push them over the threshold. Doctors cannot see in advance whether they will be hit, so they cannot manage things over the year.

Some of the bills that arrive have been absolutely horrendous. The average bill is £18,500, but many are getting towards £100,000. No one has that kind of amount lying around in their bank account, however much they are paid. Even trying to pay the bill has caused terrible problems. People are paying it either from already taxed income or by taking a loan on which they will have to pay interest—or they are using scheme pays, borrowing from their pension pot to pay off their bill and then having to pay the money back at non-commercial rates. That still reduces their final pension pot, because the money has technically not been in it for the same length of time.

[Sir Robert Syms]

A BMA consultant told me that an actuary has done some modelling and found that the penalties are so severe that somebody who works 48 hours a week and has to borrow money from their pot at the end will have a lower pension than someone who works 24 hours a week.

[Dr Whitford]

I thank the hon. Gentleman for securing the debate and for making that point. I have not seen that actuarial working, but it highlights how completely bonkers the scheme is. People are trying not to do anything extra; they are doing everything to stay below the threshold, because once they are over it, they get sucked into a Kafkaesque spiral that pulls them down to ridiculous levels.

Another problem for GPs in England is that they are not getting their pension statements because of issues with the system; I think Capita runs it at the moment, and we know how well it runs some of the other services that it has been asked to manage. Non-pensionable income is counted, which seems very weird for pension tax allowances. The notional growth in someone’s pension pot is also being counted as income. I am sorry, but income is income; it is what someone earns or receives, not what might be sitting in their pension pot for them to gain in 10 years. All these problems are catching doctors out, because they cannot see them. As they have begun to suffer, all they can do is ensure that they stay below the threshold.

The former junior Health Minister—the hon. Member for Winchester (Steve Brine), with whom I have spent many hours in this Chamber—highlighted the fact that 80% of people affected will change practice. That is leading people to refuse anything that will lift up their income—not only promotion and extra duties, but extra sessions. Many of those who are in their early to mid-50s are talking about retiring, which would be cataclysmic. The survey that he mentioned shows that some 30% are already considering doing so.

Between six and seven years ago, we were suddenly hit with a doubling of our pension contributions—from about 6% to about 14%—which meant that my take-home pay went down. Here we are, six or seven years later, being punished because our pension pots are too big. It is completely bizarre.

The problem is that we cannot afford for those who are affected to retire. Every time we discuss workforce, we talk about recruitment and retention. These people are the ones who will train the new recruits, and we need to hold on to them. As has been mentioned, the measure is not devolved but its impact is devolved in health. Only this place can sort out the pensions mess.

I am really disappointed that we do not have a Treasury Minister listening to this debate, and I hope that at some point we will have a debate to which a Treasury Minister responds. The Minister for Health, who is here today, will have to gather our comments and take them to the Treasury, and we would rather communicate directly with the Treasury. This issue has to be sorted, or there will be an absolute workforce meltdown within the next two years.

--- Later in debate ---

[Sir Robert Syms]

The lifetime allowance and the annual allowance have not created the crisis. The reduction in the limits has not created the crisis. If all we had at the moment was an annual allowance of £40,000, or a lifetime allowance of just over £1 million, the NHS would be living with that. What has caused the problem is the taper, and the taper’s impact on the way in which people do their business. Initially, it is changing behaviour. If it is not fixed, it will do real damage to the NHS. I know the Department of Health understands that and I hope the Minister will make representations to the Treasury. If he gets moved and promoted soon, perhaps he will leave a note to his successor and send a note to the Treasury saying that unless they fix it soon, the cost of fixing it for taxpayers and for patients will be far higher. I thank everyone for contributing.

Question put and agreed to.

Resolved,

That this House has considered NHS pensions, annual and lifetime allowances .

Healthcare (International Arrangements) Bill

Robert Syms Excerpts

Wednesday 14th November 2018 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

I welcome the Government bringing forward the Bill. This is clearly part of a suite of legislation to prepare for the changes that Brexit will bring about. It is also pretty critical that at the end of the day, a deal is done to allow this to work in a smooth and effective fashion.

Brits like to travel; over 50 million go abroad. Most of them go with family members, and many retire abroad. Those who do not come to Poole may go to the Costa Blanca or elsewhere, and health for older residents is one of the big concerns. The European health insurance card system has worked pretty well. There is no point, just because we object to some aspects of European integration, objecting to other aspects that may be beneficial to our citizens and those of the EU, so the Government’s intent to try to replicate the system—whatever happens with Brexit—is very sensible and good. The fact that a quarter of a million people used the EHIC card last year indicates how important that is for many people.

I welcome what the Government are doing. It is a necessary precaution. I do not begrudge spending a bit of time in this House dealing with the concerns of older people retired abroad or of Brits who want to travel, so it is important to get the Bill through today. This measure will only be for two or three years and then there will be further legislation. Some Opposition Members talk about the Secretary of State being given powers, but we are living in slightly extraordinary times, and I suspect that we will come back to legislation in this area in a couple of years.

The Government are doing a very sensible thing. I hope that it is part of an overall agreement, because that would be the easiest way to do it. Clearly, if we have to do this on a bilateral basis, that will take longer and there may well be cliff edges that cause problems for some pensioners. Therefore, when Members sometimes say that there must be a deal when they are already somewhat committed to voting against a deal, I wonder whether they ought to look at the detail of what will happen if we have no deal. This is one of the areas that will cause problems for Brits who live abroad and travel abroad and for some EU people who come to the UK as tourists. We should understand that this country benefits greatly from the tourist trade. We have only to walk around London—around Leicester Square and other areas not far from here—to see the many thousands of people who travel. They, too, need peace of mind.

This is a good piece of legislation, then, but I agree with my hon. Friend the Member for Crawley (Henry Smith) that the ethos of the NHS is such that it does not like taking money off people, even when it should. I once stood in A&E and watched an American take out a credit card, only to be told, “You don’t need to do that here.” Sometimes people are busy and want to get on with their jobs and deal with backlogs, but there is an issue with us getting proper recompense. The former Health Secretary made a good point: it is a national health service, not an international health service.

Some years ago, when I was serving on the Health Select Committee, we interviewed chief executives of trusts, and they said there was a problem sometimes with the disproportionate cost of pursuing fees and that some people actually come to London on holiday who happen to be pregnant and who end up in London hospitals at a cost to the British taxpayer, so the health service does sometimes attract people who try to take advantage of the system as well.

The figures from the Library are stark. We pay out 10 times more than we claim back from the EU and the other states in the scheme. Although some of that is because there are older people abroad and Poles tend to have six jobs and be younger, some of the figures are still quite remarkable.

[Dr Sarah Wollaston (Totnes) (Con)]

Does my hon. Friend accept, though, that the majority of the difference is due to the disproportionate number of British pensioners living abroad compared to the number of EEA foreign nationals living here as pensioners?

[Sir Robert Syms]

That is a factor, but I still think that a 10:1 ratio is quite high. London has the second-largest French population, behind only Paris, yet we claim back only £5.3 million from France. That is quite a stark figure, and one wonders why we are not claiming back rather more. I gently make that point. I know the Minister is aware of it. When we redo this, we have to emphasise to trusts the requirement to recoup money, because that means more money for British people using the service and for other services, but sometimes it falls down the priority list. I am not sure there is a magic bullet. It probably requires drilling lots of people in A&Es up and down the land to focus on whether people should be paying or getting free treatment.

In conclusion, I welcome the Bill. It is a good step forward. It will help to reassure those concerned about what the future will bring, and I look forward to seeing what the Government bring back on Third Reading.

Budget Resolutions

Robert Syms Excerpts

Tuesday 30th October 2018 Commons Chamber

[Kirsty Blackman]

Absolutely. The potential benefits of CCS are unquestionable and, as my hon. Friend says, we need to get ahead of the curve again. We need the UK Government to commit to putting the money in now. That is especially important because their pulling the plug means there is now a lack of trust among the companies that are developing CCS. The UK Government need to make a clear and unequivocal commitment.

On evolving technologies, Scotland is a global leader in tidal, and the UK Government must work with the Scottish Government on the contract for difference process to support the technology journey from development to commercialisation, which is particularly important for tidal.

On solar power, we have been contacted by so many individuals who are concerned about what is happening to export tariffs for homes, small businesses and community energy projects from next April. The tariff is a vital support that encourages people to invest in solar power, and it must continue.

Lastly, in order to reduce climate change and to increase the use of healthier methods of transport, this Budget was an opportunity to reduce VAT on bikes. Just as we would like to see VAT removed from digital books, reducing VAT on bikes would make them cheaper for all and would be a real statement of intent from the Government on reducing climate change.

[Sir Robert Syms (Poole) (Con)]

Is the hon. Lady not aware that reducing VAT is very difficult while we are a member of the European Union, but it is something that we might be able to do after Brexit?

[Kirsty Blackman]

Actually, reducing VAT is quite possible for a member of the EU. Zero rating things is a problem, but reducing VAT is fine.

The Scottish fire and rescue service and Police Scotland are still owed £175 million of VAT. The UK Government have recognised that the system they had in place was unfair, yet they have refused to pay back the £175 million they owe our two vital life-saving industries. It would be incredibly useful if they could see their way to giving us back that £175 million.

On the subject of the UK Government reallocating funds that should rightly have gone to Scotland, the convergence uplift of £160 million should have been paid to Scottish farmers. The Secretary of State for Environment, Food and Rural Affairs has admitted that the money has been spent elsewhere. We need a commitment that this money will come to Scotland in future years, and we need the previous years’ money to come to Scotland now, so that our farmers can have the cash they have been allocated.

I am pleased that the Budget includes measures to ensure that companies pay their fair share of tax in the digital sphere, but the reality is that this is a consultation and the measures are not going to be in place yet. We also do not have a solid idea of what those measures will be. The Scottish National party would therefore like to propose two measures on digital taxation, and we hope that the Government will take them into account. First, we believe that online retailers should be held liable for tax fraud committed by their suppliers. Sometimes when people order a product from a well-known online retailer it is delivered from China with a customs declaration and a stamp that says “gift”. Large online retailers should be held responsible for ensuring that those who use their platform pay the correct customs duties. We also believe that in order to combat tech firms that avoid corporation tax by registering implausibly low UK profits, the Chancellor should levy corporation tax on an assumed UK share of worldwide profits that is equal to their UK share of worldwide revenue. That could be subject to a dispute tribunal process to ensure fairness. The SNP will submit these suggestions in the consultation process, and we hope that they will be considered seriously.

Scotland’s cities have received city deal funding from both the UK and Scottish Governments. That is welcome, but what is not welcome is the fact that the UK Government have contributed far less to those deals than the Scottish Government. In total, the Tories have failed to match more than £350 million of Scottish Government funding for city deals and growth deals in Glasgow, Aberdeen, Inverness, Stirling and Clackmannanshire, Tay Cities and Edinburgh. We believe that they should match our contribution, and we call on the Chancellor to make that commitment, as well as to fulfill the Chief Secretary to the Treasury’s commitment to provide each part of Scotland with a regional deal.

I come to an ask, for the NHS, that would require only a small financial contribution but would have significant positive benefits. The UK Government could have used this Budget to follow Scotland’s lead on PrEP—pre-exposure prophylaxis. In Scotland, PrEP is available on the NHS, but England has been dragging its heels on making it available. The benefits in terms of the reduction in new cases of HIV are unchallengeable, and it is not fair that those in England cannot currently access the drug on the NHS. That change would not cost a huge amount of money, but it would make a massive difference to people’s lives.

If the UK Government are serious about taking their place on the global stage, they need to reform the immigration system. Countries will be looking for a more flexible immigration policy before signing trade deals with us, and we should start by getting rid of the fees that EU citizens will be expected to pay to acquire settled status. The OBR mentions the ageing population at many points throughout the Blue Book. The UK Government must recognise this challenge, and recognise that we need and want people to come to live and work in our communities. Last year’s Red Book said that a reduction in net migration of 20,000 would reduce GDP by about 0.2% by 2022. The Government need to be honest about the benefits of immigration and be clear that it is good for our country. They need to be clear that, with an ageing population, it is incredibly important that we get people to come to work here, particularly in the care sector and in the NHS. We also need a more flexible working visa policy that gives those who are seeking asylum the right to work, as the current system is dehumanising and unsustainable. Lastly, we should scrap the fees paid that families have to pay to get their children citizenship, which are ridiculously high and are yet another tax on families.

On health spending, the UK Government gave commitment after commitment that they would pass the full Barnett consequentials of the increased health spending on to Scotland, but they have chosen not to do so. They have chosen to short-change Scotland by £50 million. This comes on top of the fact that the Scottish Government’s fiscal resource block grant allocation will be almost £2 billion—or 6.9%—lower in real terms than it was in 2010-11. Despite the addition of consequentials and other non-Barnett allocations in 2019-20 that the Chancellor announced, Scotland’s fiscal resource block grant is still lower in real terms than it was in 2010-11 and at the start of the current spending review in 2015-16.

The Chancellor had the chance to make a real difference. He had political choices to make and at almost every turn he chose the wrong path. Is it any wonder that people do not trust the Tories? This Government need to follow the lead of the Scottish Government, who have put dignity and respect at the heart of decision making, rather than punishing those who are not born rich. The reality is that people in Scotland are faced with a choice of two futures: they can choose to continue to have a Westminster Government, who make political choices that disadvantage those who can least afford it; or they can fight for a fairer Scotland, where our Parliament has the powers and the responsibility to make choices on behalf of our citizens—choices that will make our country fairer, not create further inequality.

--- Later in debate ---

[Sir Robert Syms (Poole) (Con)]

I have been in the House long enough to remember lots of Labour Budgets, and I remember the claim that boom and bust had been abolished—only to be followed by the biggest bust that we have had in our history. It must have been a big bust, because only that would have made the Conservative party and the Liberal Democrats work together. We normally fight like ferrets in a sack, but in the context of 2010, a real crisis had to be dealt with.

If we look at what has occurred over the long term, we can see that we have made a great success of it. First, we have reduced the deficit from 10% to about 1%. That is a good thing, because if we borrow lots of money, we pay interest, which means that taxpayers’ money goes to pay bondholders and shareholders, not on the things that people want. I think that a compassionate Government is one who balance the books, because that means they can devote resources to the priorities that people have.

We have managed to do that without crashing the economy. Despite the calls that were often made about the economy going into recession, we have had eight years of a growing economy, which is actually pretty good. On top of that, we have created 3 million jobs. We all know that the best way to deal with poverty, to give people life chances and an opportunity to train, and the best thing for families is employment. If there is a challenge now it is to get wage levels and take-home pay up. When we compare our performance on employment with the EU and most of our neighbours, we can see that we have done a pretty good job. I am pleased there are signs that pay is picking up and that British workers will be paid more.

There is a lot of good to be said about the Budget yesterday. I do not think that Budgets in themselves make much of a difference. What makes a difference is long-term economic success and planning. If we look at Germany and other countries, we can see that they have pretty sane policies year after year—over seven, 10 or 15 years—which grow the economy gradually. Certainly since 2010, we have made pretty good progress, and there is more progress to be made as we exit from the European Union.

I welcome what the Chancellor has done on public spending. We all know that there are pressures with an ageing population and with mental health, and the Government have started to address some of those pressures. They have been able to do so because of careful management of the public finances. I also welcome the additional spending on defence. I am one of those who have always felt we have cut defence too much, perhaps because of the economic crisis. I think that Britain, as a world power and as a member of the United Nations Security Council, does need to spend sufficient resources on defence, so the £2 billion announced in the Budget is to be welcomed.

I think we have made good progress, and all that the Government need to do now is to keep that progress up year on year. We have a decent balance in this Budget because not only have we been able to spend more on public services—with the proviso that we need reform, and the proviso that we need productivity to rise because spending money will not necessarily in itself produce better outcomes—but we have managed to reduce taxation. Since 2010, we have doubled the allowance to £12,500 for those who pay tax, which is pretty good, and it massively increases the incentive for people to get into work. It is no accident that we have record employment, because we have made raising the tax allowances to help people get a job a very critical part of our employment strategy. It is also quite right for the upper rate of tax to go up as well, because that lifts all the tax bands for many middle earners. The fact of the matter is that, as a country, we tax people too much too early, and we need to increase incentives. There has to be a balance between incentives and extra spending, and on this occasion we have got that right.

We have a key task over the next few months in getting a good deal on Brexit. I note that the shadow Chancellor criticised the Government for contemplating leaving without a deal, yet as far as I know the Labour party are going to vote against the deal, so there seems to be a slight double standard.

[John McDonnell]

What deal?

[Sir Robert Syms]

Well, we shall see what comes back in the next few months.

The reality is that the Government have actually managed the economy well, and because of that, despite the level of uncertainty, we are still creating jobs and we are still growing. The interesting point is that, despite the soft patch earlier this year, the third quarter growth figures show that we are now growing more than the EU, so we are starting to pick up again.

I am confident that we have a good team at the Treasury and that they are listening to what colleagues are saying about their constituency concerns. I think we have had a really decent Budget, which has balanced sensible spending with reform and a sensible reduction of taxation. We are also maintaining a sensible management of the economy, certainly in the plans to have a 1% deficit, which is a massive reduction. I hope that we over-perform, and that if we do, we can reduce that further. The reality is that this Government have done well, and the country is doing well. We need not run down the country; the country’s best years are still ahead of us.