Budget Resolutions

Adam Afriyie Excerpts

Wednesday 27th October 2021 Commons Chamber

[Robert Jenrick (Newark) (Con)]

It is a pleasure to follow the hon. Member for Wallasey (Dame Angela Eagle). Unlike her, having recently left the Cabinet, I am grateful to the Treasury for all the effort that it has made to keep us informed of what will be in the Budget—I have never approached a Budget knowing quite as much in advance. However, I would still like to speak about a couple of elements that I think are quite significant.

One of those elements is the change in the universal credit taper rate, which will help millions of people throughout the country. It underlines a fundamental Conservative objective, which is to make work pay, and I strongly welcome it. I also think it important that we have announced an increase in the national living wage, which, again, will help us to build that higher-wage, higher-productivity economy that is so fundamental to our economic plan.

I also want to put on the record my praise for the Chancellor, which is contrary to some of the remarks we have heard today. I think that his stewardship of the economy over an extraordinary year and a half is enormously to his credit, and I think that that is reflected in the public confidence that he has built up for himself and for the Government over that period. We are seeing the economy bouncing back better—still scarred, but in a significantly better position than many people would have imagined. We are seeing employment in an immeasurably stronger position than we would have imagined just a few months ago, along with a commensurate surge in tax revenues that contrasts with the gloomy forecasts from the Office for Budget Responsibility the last time we heard from the Chancellor. I share the view of my right hon. Friend the Member for Wokingham (John Redwood): we have to question how useful the OBR is when its forecasts are so far out, and have to hope that it can raise its game in the future.

Let me make a few brief points. First, I think the Chancellor was right to continue to highlight the cost of living as a major issue. I do not think we should assume that inflation will be fleeting and transitory; I think it could be with us for a long time, which is why it is important that we take action. The action on the universal credit taper rate will help, as will the national living wage, and the changes in fuel duty and other items will be useful as well, but we must prepare ourselves—steel ourselves—for the likelihood that this year and most of next year will be marked by a significant pressure on people on low and medium incomes.

Secondly, I am very concerned about the current level of public spending, and the size of the state. We must be honest with ourselves, and acknowledge that on top of the £400 billion of unplanned outlay that was required to get us through the covid response, we are now seeing the size of the state increase to the largest that it has been in peacetime. The amount of public expenditure today is higher than it was during the financial crisis; it is about the same as it was under Denis Healey in 1976, when he had to go cap in hand to the International Monetary Fund. The size of the state is large, and we have heard from the Chancellor today that it is going to grow even further, beyond 41% of national income. History suggests that that is not a sensible long-term level for public expenditure, because it starts to crowd out the private sector, and makes it hard to build and sustain the free-market, free-enterprise economy that we all want to see.

That leads me to two points. One is that we have to ensure that this public money is well spent. I think particularly of the NHS, which is soon to account for 40% of total current expenditure. That is a significant amount. Many of us, and our constituents, want to see the NHS properly funded, but a heavy burden of responsibility now falls on the Department of Health and Social Care to ensure that the money is well spent and is accompanied by reform. I remember previous settlements, including the one referred to by my right hon. Friend the Member for Maidenhead (Mrs May). Just a couple of years ago, money was given to the NHS without a proper plan for reform and was not well spent, so I hope that this money will be spent differently.

The second point is the difference between funding for day-to-day purposes and funding that will genuinely increase productivity in the economy. At the end of the day, as many Members have already said, it is all about productivity growth. The forecasts that the Chancellor set out earlier today were for one or two years, if we are to believe the OBR, of very significant growth in the economy, and then a return to low levels of growth— 1% or 1.3%—with perhaps a decade of low growth ahead of us.

We have to improve productivity, and in that respect there was much to commend in the Budget and the spending review: significant increases in infrastructure, particularly the sorts of infrastructure, such as roads, railways and broadband, that will genuinely improve productivity and boost the economy, and the work on skills—in particular lifelong learning, which for too long has been a weakness in our country.

[Adam Afriyie (Windsor) (Con)]

My right hon. Friend is making a powerful speech about productivity. Does he share my delight that the Chancellor announced tax relief for investment—certainly in the short term and hopefully in the longer term? Hopefully, that will enable businesses to do the heavy lifting rather than the Government trying to do it for them.

[Robert Jenrick]

I agree entirely with my hon. Friend. At the end of the day, the way we boost productivity is by backing the private sector in the economy. The way we grow the economy is to make the UK a more competitive place to do business. That will mean ensuring that we attract investment from overseas. It will also mean correcting the poor levels of trade that we have seen in recent years, as has been mentioned. That needs to change. It also means ensuring that we as a Government bring forward some of the supply-side reforms that we will have to implement if we are going to make ourselves more innovative and competitive.

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[Mike Wood (Dudley South) (Con)]

As chair of the all-party parliamentary group on beer and brewing, I welcome the measures that the Chancellor announced to support sectors that have been particularly hard hit throughout the pandemic and by many of the measures that were necessary to fight coronavirus. In the previous financial year, around £17 billion in lost trade was wiped off the value of the pub and beer sector. Trade in the wider hospitality sector was down 64% year on year; beer sales through pubs fell by 70%; and at least 1,000 pubs that closed during the restrictions have still not opened their doors since the end of those restrictions.

Beer and pubs are worth fighting for and are intrinsically linked. Pubs and brewing support around 930,000 jobs throughout the United Kingdom, roughly equally split between men and women, and around half the people employed in the sectors are aged under 25. Pubs and brewing support more than 1,000 jobs in my constituency of Dudley South. They contribute around £26 billion to the UK economy and, as the Chancellor will be aware, around £15 billion to the Exchequer in tax revenues.

If pubs are a force for good economically, they are also a force for good socially and culturally. As Professor Robin Dunbar of the University of Oxford wrote in his report “Friends on Tap”, people who have a local that they use regularly are more likely to have more friends and to be more

“satisfied with their lives and feel more embedded in their local communities”.

They are likely to be healthier and happier.

Isolation is one of the big social challenges that face so many of our communities. Pubs really were the original social network. They are at the heart of our communities. So often, when a pub in a town or village closes, it is the last facility to go. As pubs have closed throughout the pandemic, it is not just one service that has gone with them. As we have seen through so much of the work by the wonderful charity Pub is The Hub, there are, in effect, community centres operating out of pubs. There are parent and child groups, jobs clubs and almost every facility and service. The APPG even visited one pub with a barber and hairdresser operating out of the bar. I only hope that the people cutting the hair had less to drink than some of those who might have been on the receiving end of the haircut. Pubs also raise more than £100 million a year for charities and they support grassroots community sport to the value of £40 million annually, working in every one of our constituencies.

Over the past two years, pubs have never been in greater need of support, so pubs, brewers and beer drinkers were looking to the Chancellor today to see whether he would step up to that challenge. I was pleased to hear that he did with a package of measures that went beyond what I think the industry had even dared to hope for. A key measure will be around business rates. The 50% support on business rates will make a massive difference to the viability of many pubs and to the jobs and livelihoods that depend on them.

One of my first questions in this place after I was elected six and a half years ago was to ask the now Health Secretary about business rate reform. As has been alluded to during this debate, it has been promised a few times. For this finally to go ahead, we need to make sure that it recognises the realities of a 21st century economy where the value of property is not necessarily the driving force of economic activity, as it might have been 50 or 60 years ago.

Pubs pay around 2.5% of business rate revenues and that is despite having only about 0.5% of the rateable values. They are paying far more than the proportionate amount and that needs to be addressed during the reforms that were mentioned earlier.

As a sector, beer and pubs were absolutely clear that the one thing they could not afford as they started to rebuild after the pandemic was an increase in alcohol duties.

[Adam Afriyie (Windsor) (Con)]

I commend my hon. Friend for his speech. He is making a wonderfully nuanced exposition of the benefits of pubs and local hospitality businesses to an area, both in terms of charities and of contributing socially to a community. The Windsor constituency is dependent on hospitality and the whole constituency breathed a sigh of relief with the measures in the Budget, because it is clear they hit home when it comes to supporting those hospitality businesses and pubs, which are at the heart of our local communities. Like him, I very much commend the Chancellor’s words today and, in particular, those measures that support those smaller businesses.

[Mike Wood]

My hon. Friend is absolutely spot on. The wider hospitality sector employs around 3 million people across the country. It is a bigger employer than automotives and aerospace combined. It is one of our biggest economic sectors. An increase in alcohol duties today, even a CPI or RPI increase, would have killed off so many of those small businesses: businesses that have struggled through two years of on-off restrictions, that have just about kept their heads above water, and that have exhausted all of their savings and reserves—their borrowing facilities—but have just about managed to keep going with rebuilding their businesses. It is excellent business and job-saving news that the Chancellor has listened to them and announced that, yet again, there will be no increase in beer duty, which will mean that beer duty has not increased at all since before the 2017 general election.

The broader reforms that the Chancellor has announced for a new, simpler and fairer system of alcohol duties, and that my hon. Friend the Minister has published in the consultation alongside the Budget this afternoon, also make sense. They take away so many of the distortions that the current multiple rates represent: the disincentives to expand; and the incentives to produce stronger alcoholic drinks rather than ones that may be lower in alcoholic volume. These are all counterproductive and go against our policy in other areas.

The changes resolve many of the anomalies in a system that has grown in an ad hoc fashion over many years—for example, on cider duties. Why should far more duty be paid on a flavoured cider just because the fruit is added after the fermentation process, so that it suddenly finds itself being taxed as a wine, instead of a cider? The hon. Member for Edinburgh West (Christine Jardine) seemed to think that the changes being introduced to duty on sparkling wines were either unnecessary or illogical, but what is logical about a system of wine duties under which more duty is paid on a £6 bottle of prosecco than a £30 bottle of claret? That makes no sense economically or on any level. Resolving those anomalies in the duty system is only possible now that we have the control to restructure duty systems outside of the previous EU excise duties regulations.

Most significant of all was the announcement by the Chancellor of the new reduced rate for draft beer and cider. The Exchequer Secretary to the Treasury, the hon. Member for Faversham and Mid Kent (Helen Whately), is smiling; she may be aware that I have been arguing this case for some time. I think the issue was in the speech that I made four and a half years ago when I first became chair of the all-party parliamentary group. Of course, at that point we did not have the legal powers to address it.

Before the pandemic, it made sense to support our pubs, bars, restaurants and hospitality venues by charging a lower rate of duty on draught beer—the beers that can only really be served and sold through a hospitality venue—than on the bottles and cans that tend to be sold at very low prices in our supermarkets. Since the pandemic, that has gone from being a sensible measure to a bit of a no-brainer. It will help the parts of the sector that have been hit hardest during the pandemic and need the most support.

Beer and pubs have had a terrible two years. For many, the conditions will remain extremely difficult for some time to come, but the measures that the Chancellor has announced today provide a lifeline and a source of confidence to rebuild, reinvest and support those jobs to play their part in creating the prosperity on which our constituents rely.