Budget Resolutions and Economic Situation

Alan Brown Excerpts

Tuesday 21st March 2023 Commons Chamber

[Michael Gove]

I am very grateful to the right hon. Gentleman for his intervention. No one can doubt the sincerity of his concern and care for people, both in the private and the social rented sector—standing up for them has been a consistent theme of his time in this House—but I respectfully disagree with him. I think there are legislative changes that we can make in order to help those in the private rented sector, including the abolition of section 21, but if we want to ensure that there is a pipeline of affordable private rented homes for people, there are two things that we need to do. First, we need to improve supply, particularly in London, and to do so in partnership with the Mayor of London, who has not always been as energetic as his predecessor in bringing forward new homes. The other thing we need to do is make sure there is fairness in the tax treatment of landlords and others. I look forward to working with the right hon. Gentleman and others on that. A rent freeze, while often attractive, has the effect, as we have unfortunately seen in Scotland, of reducing the supply of rented homes. Although I know his heart is in the right place on this issue, the methods he proposes run counter to what we both want to see.

I was talking about supply-side reforms earlier, and I briefly mentioned pension reforms. It is important we recognise that the pension reforms unveiled earlier in the debate by my right hon. Friend the Chancellor of the Exchequer have been widely welcomed, including by the British Medical Association, the Royal College of Surgeons, the leaders of police and crime commissioners everywhere and, most conspicuously, the hon. Member for Ilford North (Wes Streeting), the shadow Secretary of State for Health and Social Care. He called some time ago for a change. He said that he recognised it may not be “progressive”, but that it was “pragmatic” to introduce a pension change that will see more doctors coming out of retirement and on to the frontline, ensuring that more patients are treated more quickly, that fewer people are in pain and that our NHS is there for those who need it.

This wholly welcome change to pensions was addressed in Treasury questions earlier. Labour Members had an opportunity to express their dissatisfaction with that change, but not a single Labour Back Bencher did so. I know that the measure is a source of synthetic and confected rage from elements of the Labour Front-Bench team, but this initiative will cut waiting lists, has been welcomed everywhere—from the shadow Health Secretary to Labour Back Benchers, and from the BMA to the Royal College of Surgeons—is progressive and is in the country’s best interests.

Other changes made in the Budget also contribute to economic growth and social justice. The full expensing of capital receipts is a way of ensuring that our companies address what is, as the right hon. Member for Islington North (Jeremy Corbyn) rightly pointed out, one of the long-term property problems in this country. We have not always had the level of business investment—this runs across Governments of all colours—that we need to ensure we have high-paying jobs and the capital required to take advantage of the technological changes of the future. The full expensing proposals, amounting to a tax cut of some £9 billion, are a pro-business tax cut, and they also mean we maintain not just one of the most competitive corporation tax regimes, but the most competitive business environment in the G7.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The right hon. Gentleman must know by now that the measures taken on the annual allowance and all the rest of it were a sledgehammer to crack a nut. It did not need to be a full £4 billion package. In terms of growing the workforce, when he was having his cross-party summit to discuss Brexit problems, did they discuss the problems that ending freedom of movement has caused in the health and social care, hospitality and agricultural sectors? If they did not, why not?

[Michael Gove]

The hon. Gentleman makes an important point about freedom of movement. If we want to have the benefits of freedom of movement within the United Kingdom, and if we want to ensure that talented people across the United Kingdom can go to the jobs where they are needed, the one thing we need to avoid is a divisive debate focused on separatism, which he and his party have been leading. There is no more expensive and harmful intervention to the economy of this country and that of Scotland than a perpetuation of an obsession with independence.

I am grateful to the Member of the Scottish Parliament for Skye, Lochaber and Badenoch for how she has made it clear that the SNP needs to address its mediocre record in government, get rid of politically correct obsessions and focus once more on partnership with the UK Government in order to generate economic growth. If the hon. Lady wins, I hope we can work together in the interests of everyone in Scotland. If it is one of the other candidates, I am afraid that the SNP will continue on the vortex of decline, which I know will be a source of sadness to the hon. Member for Kilmarnock and Loudoun (Alan Brown) but a relief to many of the rest of us.

The other key changes that I want to mention in the context of improving productivity were the changes on regulation, particularly of the Medicines and Healthcare products Regulatory Agency. Those are coming about as a result of Sir Patrick Vallance’s review of how we can better regulate the science and tech sector outside the European Union. Then there is the investment in energy. I know that we are not going as far as the right hon. Member for Doncaster North wants—indeed, he is not even being allowed to go as far as he would want by the shadow Chancellor, the right hon. Member for Leeds West (Rachel Reeves)—but with our investment in Great British Nuclear and carbon capture and storage, we are ensuring that we move towards net zero in an environmentally and economically sustainable way.

One key point of distinction between those on the Government Benches and those on the Opposition Benches is that this is the Government who legislated for net zero and who introduced the 25-year environment plan. We have been the greenest Government ever. We are also the Government who believe in moving to net zero in a sustainable way. If we are to do that, it is vital that we continue to have the means, through oil and gas from the North sea, to have a just transition. Jobs in the north-east of Scotland need to be protected, as do jobs in Middlesborough, Tyneside and Humberside. It is those on this side of the House who believe that we can have sustainable and prudent new exploration and new drilling. The message from those on the Opposition Benches, whether SNP, Liberal Democrat or Labour, to the north-east of Scotland and to workers in Aberdeen, Middlesbrough, Tyneside and Humberside is, “We put our ideology ahead of your jobs and growth.” Those of us on the Government Benches will not stand for it.

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

This Budget follows on from the autumn statement, when the introduction of the energy profits levy and the electricity generator levy provided an additional £75 billion of predicted income to the Treasury. That money mostly arose from Scotland’s energy sector. In this Budget, the Government chose to increase the tax rate on whisky by 10%. What does Scotland get in the Budget? Acorn was overlooked once again, but we are expected to be grateful for £320 million of Barnett consequentials over a two-year period. Only the Scottish Tories can think that is a fair return.

One thing is for sure: this Budget is not about the Tories trying to help grow the Scottish economy. We have the highest energy bills in the UK, but we do have our fair share of the biggest cut in living standards since the 1950s and of Brexit’s 4% cut to GDP. Are we supposed to be grateful for being part of the broad shoulders of the UK when that is what being part of the sharing process looks like? There is £65 billion of additional income from oil and gas revenues, yet the UK Government will not even match the Scottish Government’s £500 million just transition fund, even though the Secretary of State was talking about the need for a just transition in the oil and gas sector.

Nothing sums up Tory pork barrel politics more than the fact that three out of the five community projects in Scotland have gone to the constituency of the leader of the Scottish Tories. That, plus £1.5 million for a bridge to be repaired that the local Tory council thought was too low a priority for them to bother with. What the Treasury does not say is that the whisky distillers in Speyside alone will be handing over more additional duty to the Treasury than the pennies that it is giving back in community projects. Where is the Scottish Tory leader on standing up for the whisky industry against the 10% duty rise? Is he pointing out the fact that 75% of the cost of a bottle of whisky is now tax to the UK Exchequer, or that draught beer, wine and cider are to be subsidised while 99% of spirits are excluded from the scheme? Let us not forget that distillers are excluded from the energy intensive industries support scheme, while other alcohol producers receive support. Instead of trying to grow the whisky industry, it is clear that the UK Government are treating it unfairly within the overall alcohol production sector.

When it comes to energy considerations, it seems that the intention is to sabotage the good work that has gone on in the renewable energy sector. While the United States has the Inflation Reduction Act, the Tories have given us the energy generator levy, but with no corresponding renewable investment allowance to encourage reinvestment. We had an announcement of £20 billion in funding for carbon capture and storage, but Acorn did not even get a mention in either the Budget book or the speech. That is shameful given the history of pulling funding from Peterhead.

Paragraph 4.99 of the Budget document mentions track 1 expansion later this year. Is that a realistic prospect for Acorn? If not, what is the timescale for announcing the track 2 processes? Not only is Acorn the most advanced cluster and the easiest to deliver, its progress is needed to address greenhouse gas emissions from Scotland’s two biggest polluters. It is the only way that Scotland can meet its 2030 commitments. The next time that Scottish Tories complain about Scotland possibly missing emission targets, they had better look in before they look out, and question the decisions made down here.

On storage, we have well-established pumped storage hydro technology, which is suited to complementing renewable energy. It uses spare energy to pump fill reservoirs and can generate electricity when there is peak demand. Coire Glas has been consented since 2020. SSE has £1.5 billion of capital available to invest in it. Just today, it has announced a £100-million commitment for site investigation and advance design works. It would be the first pumped hydro storage scheme to be constructed in the UK in 40 years, and would double the capacity of pumped storage in the UK while creating 500 construction jobs in the highlands. It will be able to power 3 million homes continuously for 24 hours. No subsidy is required; it is not looking for a regulated asset base model or even for taxpayers to share the risk. All that industry is asking for is a cap and floor mechanism to stabilise the price received for electricity generation.

I have raised this issue countless times over the years. The previous Secretary of State for Business, Energy and Industrial Strategy let his guard down by calling it a Scottish technology. That really does show the motives for the UK Government not to move forward with it, but they really need to revisit it. On the possibilities for pumped storage hydro, Drax has submitted a planning application to more than double the capacity at Cruachan dam, to take it up to 1 GW of generation capacity. Those are exactly the type of schemes that should complement intermittent renewables and take us towards the construction of a stable, low-carbon, truly renewable system. In contrast, National Grid ESO spent £4 billion to turn off wind turbines due to grid constraints. We need a better way of managing the grid system though a whole system approach, otherwise we are throwing money away.

If we are looking at a truly green system, the Budget document is notable for not using the phrase “green hydrogen” once. Are the UK Government now content to fall behind other countries? What is the real scale of their ambition? The day after the Budget, we had the updated allocations for the next renewable energy auction for assessment report 5. So despite rampant inflation and despite some projects struggling against the strike rates agreed for allocation round 4, the Government have decided to cut the overall budget by 30%. It is madness, and that needs to be revisited urgently.

Then we have tidal stream. Scotland is genuinely leading the world. MeyGen in the Pentland Firth is the largest consented tidal stream site in the world. It has generated 75% of the world’s tidal stream energy to date, but has seen a 50% cost increase since securing its allocation round 4 contracts for difference because of external inflation factors. The project can still go on and deliver against that, but only if it secures enough money going forward to be able to scale up. Instead of increasing the ringfenced budget for the tidal scheme, the UK Government have halved it, which puts the project and that technology at risk. Again, I ask the Government to revisit how they are doing this, because the project is an opportunity to grow our technology with a UK-based supply chain and then export that knowledge and technology around the world.

We have come to one of my hobby-horses: the UK Government have absolutely no problem with throwing money and promises at nuclear energy, with a £700 million stake in Sizewell C and the creation of Great British Nuclear, which is an oxymoron if there ever was one. The simple facts are that there is not yet a successful EPR nuclear project anywhere in the world. The only EPR station generating electricity to the grid is Taishan in China, but even that had one reactor offline for a year with damaged fuel rods, which is a possible inherent design flaw in EPR design. Olkiluoto 3 in Finland is 14 years late. It connected to the grid last March, but a year on it is still only in trial operation mode. The EPR in Flamanville, France, is four times over its original budget and a mere 10 years behind schedule.

“Now but,” they tell us, “all the lessons have been learned from these projects in time for Hinkley Point C.” However, Hinkley Point C was estimated to cost £18 billion in 2016, but it is now estimated to cost £33 billion, and guess what? It is running years late. Yet the collective madness from the Tory Front Bench, encouraged by the Labour Front Bench, says, “Let’s not worry. We will sort out the problems and we will learn the lessons for Sizewell C. What could go wrong?”

Even if they believe Sizewell C will cost less in relative terms than Hinkley Point C, given that Hinkley Point C is already estimated to cost £33 billion and that construction inflation and material costs are increasing all the time, Sizewell C will cost upwards of £35 billion, without any shadow of doubt. How can they talk about reducing debt when they want to put a further £35 billion of debt on our energy bills? It makes no sense.

And then we have the insult of passing that as a green technology. If we look at the costs of the existing nuclear waste legacy we see that the Nuclear Decommissioning Authority estimates it is going to cost us £235 billion to clean up. There is no solution yet for dealing with radioactive waste other than burying it for thousands of years, so why do we want to pass that as a green renewable energy system?

I am sure others will touch on this, but we have one other great hope for nuclear: small modular reactors. The reality is that there is not even a regulator-approved design in the UK for an SMR yet, but somehow Rolls-Royce says it could have them operational by 2029. It is the same rhetoric and the same mistakes, over and over again. In reality, each SMR will cost roughly £2 billion, so they are hardly a cheap alternative source of energy generation. If SMRs are so attractive, why is the taxpayer being asked to pay half the cost of a prototype and then sign up to a 35-year extortionate deal in terms of strike rates? It makes no sense, if it was so commercially viable.

In reality, nuclear means billions of pounds of increased debt added to our energy bills and future generations paying for decommissioning and handling of waste, no matter the pretence that that is somehow included in upfront estimates. It means years of further delays, when that money could and should be invested in renewable energy, storage, green hydrogen and, of course, in energy efficiency upgrades.

When people talk about the job creation that comes from nuclear, well of course spending £35 billion will create some jobs. The important thing is the cost-benefit ratio in terms of job creation, which can be done much better through alternatives.

It is clear that within the UK, Scotland has a drag on its economy and energy policy. We might be expected to doff our caps because of the £320 million of Barnett consequentials we are getting over two years, but I would argue that that, in the words of the Chancellor, is the very epitome of dependence, rather than independence, and I look forward to working with the Chancellor to secure the latter.

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[Mr McFadden]

My hon. Friend is absolutely right. After 13 years, there really is nowhere left to hide.

Despite the Budget being billed as a Budget for growth, the UK is still experiencing the slowest recovery from covid in the G7. All the countries that make up this group had to cope with the pandemic. All of them have suffered the consequences of Russia’s invasion of Ukraine, yet Britain’s recovery is the slowest.

What is it about Conservative stewardship of the United Kingdom that makes us stand out in this way? Is it the political chaos inflicted on the country by the Conservative party, which makes a Chancellor who gets to deliver a Budget such a rarity? Is it the fact that, since 2010, our productivity growth has been the second lowest in the G7? Is it the disastrous Tory mini-Budget last year, which they would like to bury under 10 feet of concrete, but which people will not forget? It caused borrowing costs to soar, put our pension system on life support and rocked international confidence in the UK economy. Is it the former Prime Minister’s Brexit deal, which was supposed to give us global Britain but instead gave us the problem of how to send a sandwich to Belfast?

It could be all those things, but whatever the reasons, the overriding fact for our constituents is that they are still living through the biggest fall in living standards in living memory. Their money goes less far, their incomes have been squeezed and they are living in a country that is poorer than it was four years ago.

[Alan Brown]

Will the right hon. Member give way?

[Mr McFadden]

I will give way one more time.

[Alan Brown]

The right hon. Member mentioned Brexit. Are not some of the issues related to Brexit associated with leaving the single market, leaving the customs union and not being part of freedom of movement? That has a big detrimental impact on the economy and Labour will not change any of that.

[Mr McFadden]

I understand why people regret the result. What I do not understand is why the response to that should be to erect even more trading barriers inside the United Kingdom, as the hon. Member wants to do.

Even if the fall in living standards is at its most severe this year and next, it is not just a short-term dip, because since the Government took office, real-terms wages have not risen and are not expected to get to their pre-2010 levels until 2026. That is what people feel in their lives—that year after year, it gets harder to make ends meet and harder to pay the bills. The question that people are asking themselves is the one that has been posed by the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves). Are my family and I better off? The answer is no. Are our public services in better shape now than when the Tories took office in 2010? Time after time, once again, the answer is no.

When he made his statement last week, I thought there was one significant thing about the way the Chancellor spoke: he was happy to own the whole 13 years that his party have been in office.

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[John Glen]

No, I will not.

Inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023. If debt is left unchecked, it acts as a ceiling on our economic potential. That is why we are bringing it down. Under this Government, we will pay our own way.

On growth—the focus of the Budget—there were those who said that we would fall into recession in 2023, but last week the OBR said that we will not enter a recession this year. Instead, after this year, the UK economy will grow in every single year of the forecast period, including by 2.5% in 2025. As we look to the future, we are now rolling out the biggest employment package ever, we are overhauling incentives to get businesses growing, and we are unleashing our green energy sector while supporting families and businesses with bills in the short term. But, contrary to the characterisation in many Opposition speeches today, there is no complacency from this Government. There will be no let-up in our relentless focus on enabling growth.

The subject of today’s debate is halving inflation, reducing debt and growing the economy. During the course of the debate, we have heard some excellent speeches from right hon. and hon. Members on both sides of the House, and I would like to respond to some of them now. I will respond first to my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), one of my predecessors. Although he welcomed many measures in the Budget, he drew attention to the question of corporation tax. Let me draw his attention to the remarks of the Chancellor, who expressed his determination that the full expensing measure will be a permanent intervention of this Government.

I thank my right hon. Friend the Member for North West Hampshire (Kit Malthouse), my parliamentary neighbour, for his constructive suggestions about the simplification of childcare. I also draw his attention to the fact that this Government have committed £492 million over this year and next to ease the supply for those who will provide our child support.

I also want to refer to the speech from my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who gave us a helpful contextualisation of the world economy and pointed out the fact that, contrary to what we heard in many Opposition speeches, since the Conservatives came to power in 2010 we have grown more than major countries such as France, Italy or Japan, and about the same as Europe’s largest economy, Germany. We have halved unemployment, cut inequality and reduced the number of workless households by 1 million. I also want to refer to my hon. Friend’s remarks on the pensions intervention. That was called for by many in the medical profession over many months, but our pension reforms benefit other experienced key workers as well as doctors, including headteachers, police chiefs, armed forces clinicians, senior armed forces personnel, air traffic controllers, prison governors, senior Government scientists, Government-employed vets and, yes, even senior people in the private sector who create jobs, sustaining growth across the economy.

I also thank my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), who had a characteristically clear understanding of how economic challenges will be met. He also mentioned the support of his local brain surgeon. Many more people working in the NHS are realising that within two weeks they will be able to continue working, knowing that their pensions are safe.

I thank my hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti) for his remarks on defence expenditure. I suspect that there will never be enough money for him on defence, but he shows a clear understanding of the extra commitment the Chancellor has made in the Budget to invest in continuing to support our efforts in Ukraine.

There were many other worthwhile contributions from Members on both sides of the House, and I think it is important that we recognise that one of the major themes of this Budget was levelling up across the whole United Kingdom. I welcome the contribution from my hon. Friend the Member for Barrow and Furness (Simon Fell), who drew attention to the value of the announcements on nuclear, particularly Great British Nuclear, and the transformation that will bring to his economy and to the country as a whole.

[Alan Brown]

On nuclear, and the fact that the Minister is talking about reducing debt, why does he think it is a good thing to sign bill payers up to £35 billion of debt for Sizewell C through the regulated asset model? Surely that is just a burden on all future generations.

[John Glen]

What is important is that this country knows that we have a Government who will take long-term decisions about energy security for this country.

I would like to address a number of significant themes of this afternoon’s discussions on the cost of living. Support for households with higher bills has been worth £94 billion—on average, £3,300 per household—across 2022-23 and 2023-24. That means that in this coming year more than 8 million households on means-tested benefits will receive three cost of living payments totalling £900; more than 8 million pensioner households will receive a cost of living payment of £300; and more than 6 million people on disability benefits will receive a cost of living payment of £150. Since this Conservative Government came to power in 2010, we have grown more than major countries such as France, Italy or Japan, and we are now on track.

I want to address public sector pay, which was also raised by a number of Opposition Members. Through the efficiency and savings review, Departments have reprioritised and identified further efficiencies, building on the 5% efficiency challenge set at the 2021 spending review.

We have faced a global energy crisis. We have had high global inflation. There has been a global economic downturn. We needed to bring about stability—we did. We needed sound money—we have it. We now need long-term, sustainable, healthy growth—this Budget delivers it. Many Opposition Members have asked who this Budget was for. It was for the families struggling with energy bills, the left-behind communities that will receive record investment, and the entrepreneurs who drive growth. The OBR’s forecasts show that this Budget will deliver improvements in growth and inflation, but this Government will continue to do everything we can to beat those forecasts. It is with humility, focus and determination that we tackle the challenges facing this country. We will deliver a stronger, cleaner economy for the whole of the United Kingdom, and I commend this Budget to the House.

Question put and agreed to.

Resolved,

That income tax is charged for the tax year 2023-24.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

The Deputy Speaker put forthwith the Questions necessary to dispose of the motions made in the name of the Chancellor of the Exchequer (Standing Order No. 51(3)).