Angela Eagle
Main Page: Angela Eagle (Labour - Wallasey)Department Debates - View all Angela Eagle's debates with the HM Treasury
(1 year ago)
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Laura Trott
Let me make some progress. It has been a difficult few years for all families, up and down this country. We have had to tackle a once in a lifetime global pandemic and another period of global turmoil, caused by Putin’s invasion of Ukraine and the pressure that put on energy prices, driving inflation around the world.
When the Prime Minister took office, inflation was at 11.1%, but because of the difficult decisions taken by the Prime Minister, the Chancellor and the Bank of England, inflation is now down to 4.6%—a promise delivered. The OBR says that headline inflation will fall to 2.8% by the end of 2024 and we will therefore reach our 2% target by the middle of 2025, something I am sure that the hon. Member for Wallasey (Dame Angela Eagle) is about to welcome.
Dame Angela Eagle
I welcome the hon. Lady to her new post. I hope she has an enjoyable time at the Treasury, as I did when I was there. Will she confirm that figures show that this Parliament is the highest tax-raising Parliament since records began, in all our history, even after today’s statement?
Laura Trott
I am sure the hon. Lady will be interested to know that taxes for the average worker have gone down by £1,000. However, those on higher incomes have had to pay more, which I am sure she will agree is the right approach in a difficult period.
On growth, in 2010 we were facing the worst recession since the second world war, but this Conservative Government have turned things around. Since 2010, we have grown our economy faster than many in the G7, including France, Germany, Italy, Spain and Japan. Following the pandemic and the energy crisis, which were predicted to take us into recession, the economy has recovered more quickly than previously thought and is now 1.8% larger than its pre-pandemic size, growing faster than Germany. Looking ahead, the economy will continue to grow, boosted by 0.5% through the measures taken in the autumn statement and spring Budget.
Perhaps most critically of all, debt is down. I know the Members on the Opposition Front Bench are concerned about that, but reducing debt and borrowing is essential to controlling inflation, keeping mortgage rates down and taxes low. Let me be clear: Labour’s plans would send us all the way back to square one. Labour’s inflationary £28 billion borrowing commitment will drive up inflation, cause interest rates to spiral and hammer families up and down the country. That is a fundamental difference between this Government and the Opposition.
By contrast, look at what my right hon. Friend the Chancellor has achieved. Before he took the difficult decisions in last year’s autumn statement, headline debt was predicted to rise to 99.6% of GDP by the end of the forecast. Labour’s approach would see that number rising but, in contrast, our approach has seen debt predicted to be 5.5 percentage points lower as a proportion of GDP by the end of the forecast.
We will therefore meet our fiscal rule to have underlying debt falling as a percentage of GDP in the final year of the forecast, with double the headroom compared to the OBR’s March forecast. That headroom allows us to take the actions we are proposing in the autumn statement, because the job is not yet done. Debt and inflation are heading the right way, but we must keep pushing.
While growth is better than it could be, it is not as high as it should be. Our solution is not simply to borrow more, as the Labour party would, but to back British business and invest in areas that will create growth, driven by our values: living within our means, protecting the poorest and rewarding work. We are attracting an extra £20 billion a year from business investment, reducing taxes on working people and increasing the national living wage to give workers £1,800 year on average, and we are freezing alcohol duties until August next year.
Our announcement to make full expensing permanent means that we now have not just the lowest headline corporation tax rate in the G7, but the most generous capital allowances, too. For every £1 million that a company invests, it will get £250,000 off its tax bill at the end of the year. This will make a huge difference to investment, as more than 200 business leaders and industry bodies across the country have pointed out. We can do this only because—in case anybody is in any doubt—this Conservative Government have more than halved inflation, have met our borrowing rules three years early and are seeing our debt lower every single year.
Meanwhile, our small and medium-sized businesses, which account for more than 99% of private business in the country, remain the backbone of the economy. Our business rates support saves the average independent shop more than £20,000. We continue to back those businesses by extending the 75% business rates discount for retail, hospitality and leisure businesses for another year, and by tackling late payments.
We are reforming our welfare system, so that it supports those who cannot work and helps those who can find work. The list does not end there. With this hard-earned fiscal headroom now secured, we have a final measure: to implement a tax cut for 27 million employed people, worth an average of £450 per year; and to simplify and cut taxes for nearly 2 million self-employed people, while protecting the interests of those on the lowest pay by saving self-employed people an average of £350 a year from April.
We have always said that, when it is responsible to do so, we will cut taxes, and, because we keep our word, we are cutting the main rate of employee national insurance from 12% to 10%. That makes somebody on the average salary of £35,000 more than £450 better off, which is something that hon. Members will welcome. As we want people to see that benefit on their payslip soon, we will immediately introduce legislation to bring in this new rate from 6 January. This is the biggest cut to employee and self-employed tax ever, and the biggest tax cut implemented since 1988. These measures, however, are not by chance. This is what happens when we take tough decisions early, when we take responsibility for those decisions and when we deliver on them in good time and on budget, as the Prime Minister said we would.
Things have been really tough, but the economy is on the right track and the future is growing brighter. We have made: tax cuts for big businesses to drive investment; tax cuts for smaller businesses to drive growth; tax cuts for self-employed people to reward hard work; and tax cuts for 27 million working people who make our country what it is.
As we debate these measures in the next few days, I leave Members with a few reflections. We have halved inflation and we have avoided recession, but growth is not achieved by burning our businesses or our people, as the Labour party would have us believe. Instead, in this autumn statement we have—and let me repeat this—delivered the biggest ever cut to employee and self-employed tax; the biggest tax cut since 1988.
Laura Trott
I will say it lots of times, believe me.
This Conservative Government are the party of business. This Conservative Government are the party of workers. This Conservative Government are the party of working people. The Government have a plan to keep delivering, and it is presented to this country and to this House in today’s autumn statement. It is a plan that permanently increases the size of the economy, that backs Britain and Britain’s businesses, that rewards work and improves pay and that will deliver growth in every part of this United Kingdom.
James Murray
The Opposition accept the independence of the Bank of England, unlike some Government Members, but frankly that was a fairly shameless attempt by the hon. Member to distance herself from what the Government did to the economy last year in their disastrous mini-Budget. The British people will not forget, as they are still paying the price.
Dame Angela Eagle
My hon. Friend is making some important points. Does he agree that, if it is the decisions of the Bank of England that have halved inflation, as the Opposition think, the Government cannot go around claiming credit for it?
James Murray
As always, my right hon. Friend makes an important point. The Government are trying to have it both ways. When inflation goes up, it is someone else’s fault. When it comes down, they claim the credit. I think that we can trust the British people to see through whatever way they try to distort the truth.
Dame Angela Eagle (Wallasey) (Lab)
It is a pleasure to follow the right hon. Member for Witham (Priti Patel), who made an interesting and thoughtful speech.
The backdrop of the autumn statement is an ongoing cost of living crisis and a flailing Government who cannot defend their appalling record in office and know that the general election is fast approaching. The fifth Tory Prime Minister in 13 years has had four relaunches in the past six weeks. He cannot decide whether he is the change candidate or continuity Cameron, he cancelled the northern leg of HS2 in Manchester, his King’s Speech was a visionless damp squib, and he has had to ditch an incompetent Home Secretary he should never have appointed in the first place.
The reality is that the Tories have delivered 13 years of chaos, incompetence and instability. They have made our country weaker, and working people are worse off. Taken together, these Tory Governments have delivered 25 tax rises since 2019. The last Prime Minister sacked the Treasury permanent secretary responsible for fiscal stability, crashed the economy and nearly melted down pension funds, and millions of people are paying higher mortgages and rents as a result.
Since the last election we have seen the highest increases in tax in any Parliament since records began and today’s announcements have not changed that reality. This Tory Government have cost each and every household in the UK a massive £4,000 in tax rises since 2010. Even after today’s tax cuts, the tax burden still reaches its highest level for 70 years. The Tories have delivered the worst economic growth since the 1920s and the worst performance for real wage growth since Napoleon crowned himself emperor.
Yet despite a tax burden running at a 70-year high and a debt which is the highest in peacetime, our public services are crumbling, our schools are riddled with reinforced autoclaved aerated concrete—RAAC—our rivers are full of sewage, and there are 7.8 million people on an NHS waiting list. The Tories in all their various iterations of Government have somehow managed to deliver the worst of both worlds: record high taxes and crumbling public services, and an ongoing cost of living crisis causing misery to millions.
To be fair, there have been some achievements. We have seen record levels of waste and fraud: a staggering £l00 billion of it in the last four years. My constituents are furious about this, and it is right and proper that my right hon. Friend the shadow Chancellor has pledged to set up a covid corruption commissioner to get some of these lost billions back.
It is good news that since March this year growth has been revised up slightly, inflation has halved—although is still high by G7 standards—and borrowing has been revised down. In other words, inflation is twice the target and growth is so modest it could be a rounding up error. The bad news is that the economy is barely growing, with ongoing risks of a recession, and despite what the Chancellor said in his autumn statement, the OBR has downgraded growth forecasts substantially for the next three years. Living standards are now due to be 3.5% lower in 2024-25 than pre-pandemic, the largest reduction in living standards since the 1950s. Taxes are at record levels and the national debt is projected scarcely to fall at all, meaning soaring levels of debt interest spending to service it.
Higher tax receipts in nominal terms and borrowing coming in slightly below the expectations set in the March Budget have increased the so-called headroom the Chancellor has if he is to meet his fiscal rules. He has decided to spend all of it. The OBR points out that half of this so-called headroom comes from a fuel duty escalator that keeps being cancelled and which the right hon. Member for Witham has just perfectly reasonably argued ought to be cancelled next time. That means the headroom the Chancellor has just splashed around is cut in half by that one decision on fuel duty.
This apparent largesse of his also signals—he did not talk about this much—that public spending plans which were already very tight indeed are going to end up even tighter. As the OBR has pointed out in its assessment published this afternoon, this headroom is
“mainly a reflection of a £19.1 billion erosion in the real value of departmental spending.”
The Chancellor did not give us any indication that he was going to increase public spending in real terms to compensate for that, which means that already very difficult public service and departmental budgets will be squeezed further. The Institute for Fiscal Studies has calculated that the extra spending pressures imply real-terms cuts of 16% for unprotected Departments such as Justice and flat budgets in real terms for many of the rest, but the Chancellor has conveniently pushed that scarcely credible fiscal consolidation into the next Parliament, where it is safe to assume he will not be in the job or have to deliver it. It is a scorched earth policy that Julius Caesar would recognise.
The outlook for both growth and productivity is currently gloomy. The OBR forecasts a modest improvement this year, coupled with significant downgrades for the next three years. That is slightly more optimistic than the Bank of England forecast last month, which put the chances of a recession next year at 50-50, with the possibility of three quarters of zero growth. As members of the Monetary Policy Committee pointed out in evidence to the Treasury Committee yesterday, productivity growth since 2016 has been a dismal 6%, while the USA has achieved a 25% increase in the same period.
Falling so far below our competitors will simply lock in the stagflation we are already experiencing. There can be no prospect of sustainable growth in living standards and real wages without a significant improvement in our economy’s performance. Labour has long argued for a move to make full expensing of business investment permanent. The Chancellor condemned that as “irrespon-sibility from Labour” in the King’s Speech debate just eight days ago, so we welcome his damascene conversion today, which ends the uncertainty of the three-year cut-off period and the problems it was creating. We need to increase economic growth, and, despite the blind faith of the Conservative party, tax cuts do not do that; investment in equipment and people does. Labour’s green prosperity plan will put shovels in the ground and cranes in the sky, propelling us to net zero and transforming our infrastructure in every region, truly preparing us for the future.
Having spent most of the last year saying that tax cuts were irresponsible, the Chancellor has now decided to cut national insurance by 2p at a cost of around £10 billion, spending that headroom created by higher nominal tax receipts because inflation is higher than expected. While inflation has halved, it is still very high in comparison with other G7 countries, and the Governor of the Bank of England told us yesterday in the Treasury Committee that he feared that the risks were on the upside, so there are considerable dangers in the Chancellor pursuing the strategy that he has decided on. The current Prime Minister’s decision to freeze tax thresholds for six years has been revealed as a stealth tax that is due to rake in £52 billion—one of the biggest tax grabs ever, as I think the right hon. Member for Witham said in her contribution.
The cut to national insurance does not unravel that tax grab. For most people, even after that modest cut to their national insurance contributions, their taxes will still go up next April. The OBR points out on page 11 of its executive summary that the tax changes
“reduce the tax burden by 0.7 per cent of GDP but it still rises in every year to a post-war high of 37.7 per cent of GDP by 2028-29. Income tax increases explain most of the increase in this forecast”,
and goes on to demonstrate that
“frozen thresholds result in nearly 4 million additional workers paying income tax, 3 million more moved to the higher rate, and 400,000 more paying the additional rate.”
Apparently, that is a tax-cutting Budget, in our Chancellor’s view—well, not in mine. Close to the end of the Parliament in which the Conservative party has raised the tax take by more than any of its predecessors, giving a tiny bit back at the end will make virtually no difference.
I am pleased that the Chancellor has decided to uprate benefits as normal despite the speculation that he would not do so, but benefits have already been cut a lot and have not kept pace with inflation. With that and other cuts since 2010, the poorest fifth of the income distribution have lost £2,700, as the Resolution Foundation has shown. The social security system is not generous: 73% of universal credit recipients are in food poverty—and by the way, food inflation is still at a punishing 10.1%. In my Wallasey constituency, there has been a 54% increase in the number of people needing to use food banks in the past year. The autumn statement has done nothing to address those concerns.
We need a change of Government away from the chaos, the in-fighting, the clown show. We need a serious Labour Government with a plan to grow our economy and prepare properly for the future. We need planning reforms to be delivered, not talked about; we need Labour’s green prosperity plan to get us to net zero and create good jobs; and we need a new deal for working people to ensure that work pays. And by the way, we also need a general election—the sooner, the better.
Bim Afolami
The measures here are designed to grow the economy, to make us more prosperous, to make businesses invest more and to cut taxes for working people, so I am confident that that prediction will not be borne out in the way that the right hon. Gentleman suggests. This autumn statement provides the foundation for the next decade of growth—not just for next year or the year after that. Next year, just as a start, the economy will be 2% higher—that is worth around £40 billion—than was forecast only in March this year. That is a result of the actions we have taken today.
I have been hearing about what the shadow Chancellor said to the parliamentary Labour party earlier this week. I am told that this is what she said, but I am happy to be intervened on if it is incorrect. She said that the next election would be a fight on the economy, a fight on fiscal responsibility, a fight on making working people better off and a fight on who would be the party to show that it backed British business. This autumn statement firmly shows that this Government and this party are the only choice for the British people and the British economy on these measures—[Interruption.] I see chuntering among Opposition Front Benchers. If they and the shadow Chancellor wish to fight an election on those matters, I say bring it on.
Let us talk about fiscal responsibility—[Interruption.] The Opposition do not want to hear about that. This Government have brought inflation down by half. Debt is falling by the end of this forecast period. We have the second lowest debt in the G7. We are only able to have this sort of growth Budget because of the prudence and careful measures that we have so far undertaken. Indeed, if I may use language that the Opposition might understand, this is prudence with a purpose. Let us contrast that with the record of the Labour party and Opposition Members. They are still saying that, on top of everything we have heard today, they are going to borrow an extra £28 billion. That will lead to higher debt, because they are borrowing, and higher inflation, which will lead to high interest rates for longer.
Dame Angela Eagle
I also welcome the Minister to his position. Does he not distinguish between borrowing for capital investment and borrowing for current expenditure? If he does not, he has a very peculiar view of the national accounts.
Bim Afolami
Of course I understand that distinction, but that does not take away from the fact that if we are borrowing, it has to be paid for. Unless the Labour party can show how it is going to raise that money—[Interruption.] Look, the non-dom tax has been used about 15 times to pay for 15 different things; that is not going to cut it. Unless the Labour party can say how it is going to pay for that extra £28 billion, it is not fiscally responsible. So on that measure, I say bring it on.
Let us look at whether working people will be better off as a result of this autumn statement. My right hon. Friend the Member for North Somerset (Dr Fox) talked about the need to responsibly bring down taxes for working people, and that is what we have done. The cut in the national insurance rate, worth £450 to the average worker, will benefit 29 million people. That matters to my constituents and to all the constituents we represent in this House. That is what this autumn statement delivers. The national living wage is up 30% in real terms—30% after inflation—in this Parliament. Again, that is what this autumn statement delivers. As a result of the measures on the local housing allowance, 1.6 million of the most vulnerable households in this country are all going to get an extra £800.
Contrast that with the record of the Labour party. Do not let them fool you, Madam Deputy Speaker; Labour Members do not believe in tax cuts. They do not believe in low tax. They are trying to pretend that they do, but we all know that they do not. They believe—and it is a reasonable, principled position—in ever greater, ever expanding Government control, debt and tax. That is their position.
Those of us on this side of the House and this Government have a different philosophy and a different policy. We believe in backing British business. We believe in backing the British people. We believe in cutting taxes for working people. We faced a once-in-a-lifetime pandemic earlier in the Parliament, and we spent over £450 billion supporting the lives, jobs and health of our constituents. That has led to an increase in our tax burden. But that is why this autumn statement is so important—because we are turning the corner.