Budget Resolutions and Economic Situation

Bernard Jenkin Excerpts

Wednesday 28th October 2026 Commons Chamber

[Ed Davey (Kingston and Surbiton) (LD)]

It is always a pleasure to follow the Chair of the Treasury Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier). I am glad she committed to looking at the devil in the detail of this Budget, because when one looks at the fine print there are quite a few things for her Committee to scrutinise. In particular, I hope that she will look at the very disappointing growth forecasts, because I think this Budget will be defined more by Labour’s red lines on Europe and the Conservatives’ Brexit red tape than by faster growth.

At the root of so much of what has gone wrong in our country—the cost of living crisis, higher taxes, broken public services, empty high streets, and the lack of jobs and opportunity—is the lack of economic growth. Our economy is being held back. British business is being held back. It is being held back above all by the terrible damage of the Conservatives’ Brexit deal: a deal, let us never forget, that was backed by the leader of Reform and voted for by Labour—a deal that put up pointless new barriers to trade, tied up British firms in extra costs and red tape, and pushed up prices on our supermarket shelves.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

Will the right hon. Gentleman give way?

[Madam Deputy Speaker]

Order. As I said earlier in my introductory remarks, Sir Bernard, we do not intervene on Front-Bench speeches. The odd thing is that we went through this scenario this time last year. [Interruption.] We did, we did—yet here we are again.

--- Later in debate ---

[Peter Kyle]

I agree. I realise that in seeking to make an intervention we stop listening to what is being said, but I did say before I gave way to the hon. Member that that would not be instead. I am not proposing that we look to start investing five years down the line after five years of 3% growth—of course, we must move towards those NATO targets, just as the Prime Minister and the Chancellor have promised—but if the debate is about getting cash into defence, this illustrates how there is more than one way of doing that. Immediately, yes, it is about increasing the percentage, but in the long term, on the back of economic growth of 3% and above, we could do so sustainably, and that would unleash enormous amounts of resource in addition to the reprioritisation that might need to happen.

Of course, the difference is that when the spending comes from growth, other Government Departments’ budgets can grow as well, and working people right across the country will be feeling it in their pockets. That is why growth is one of the driving social justice issues of our time.

It is my belief that government needs to become organised around growth, and that growth needs to become the organising principle of government. In the essay that I published, I give some practical suggestions based on my time in government for what I would do if I had the opportunity.

First, the Government need to adopt a taskforce mentality when it comes to growth. The Prime Minister should back a 90-day plan to unblock investment. Of course, we need Cabinet accountability, but we have these great boards in government—experts on the Board of Trade and non-executives on Departments’ boards—and all sorts of different specialist groups and outside experts coming in and sitting on boards across Government. We should pick from those boards those people who are best placed because of their understanding of Government from the work they are already doing, and jump to a taskforce-based approach to looking at different Government Departments and the opportunities we have to act fast in Departments. They should identify areas that need legislative change, and for that we can introduce a growth Bill, if that were appropriate. I believe that it is.

[Sir Bernard Jenkin]

Legislating for growth?

[Peter Kyle]

Well, we should certainly legislate to remove the barriers to growth, because some barriers require legislation. Let me illustrate that with one point.

When I was Secretary of State, I visited a fantastic company called Ocean Infinity down in Southampton, which is building and deploying globally—it is a global leader—autonomous marine vehicles. I was taken to see one of its vehicles, which was 36 metres long, being built. These are huge investments, with these vehicles doing extraordinary work autonomously for marine biology and drilling, going to remote marine places on Earth. I was taken one deck below on an autonomous vehicle and shown one room. I was asked, “What do you notice in there?” There was a washing machine and a tumble dryer—in an autonomous boat. Why? Because the law requires any boat more than 34 metres long to have a washing machine and a tumble dryer for its crew.

Conservative Members may laugh at my suggestion of a growth Bill, but there are some things that need to change in the law to unlock the stupidity out there in how we regulate certain sectors simply because of the passage of time. I say to all hon. Members who worry deeply about deregulation or the modernisation of the regulatory landscape that there are absurdities out there that are holding businesses back. If we aggregate that one example of a tumble dryer and a washing machine across our economy, we can start to see the need for real positive action.

--- Later in debate ---

[Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)]

Well, I am going to start by commending the Chancellor for what I thought was a Budget that is going to leave our country richer, fairer, stronger and safer. It has been my privilege to know the Chancellor for many years, and over the course of those years, he has been a modest man. The truth, though, on the basis of the numbers that he set out to the House today, is that he has nothing to be modest about. He has been able to tell the House today that we have delivered the joint highest growth in the G7. We have had the second biggest uplift to growth in the G7. Whole-of-economy investment is now at the highest rate since 1990. Productivity growth has been upgraded again and is now back in line not just with the growth rate but with the growth achieved by our competitors. One million more people are forecast to be in work between now and the end of the forecast period—that is 550 people back in work every single day. Economic expansion of £200 billion has been forecast for this Parliament—that is twice the level achieved under the last Parliament. GDP growth per capita is forecast to rise by £2,500 over the course of this Parliament—that is 36 times more than was achieved under the last Government.

[Sir Bernard Jenkin]

Will the right hon. Gentleman give way?

[Liam Byrne]

I am not giving way.

Crucially, the OBR says today that GDP growth is now structural, therefore raising the potential for output growth over the course of years to come. Of course, that is helping the Chancellor to deliver the fastest fiscal consolidation in the G20.

I want to use the time I have to make three quick points about the virtue of predictability, about small businesses—a particular interest of our Committee—and about AI. The Chancellor has been able to deliver, and, despite the challenges posed by the war in the strait of Hormuz, he has managed to keep to the fiscal rules. Now, I am old enough to remember when the fiscal rules used to change every couple of years, depending on which faction was uppermost in the Conservative party. We used to zig-zag here and there, and the markets had no predictability. However, the response of the gilt markets this afternoon has been positive; they have respected the buffer that the Chancellor has been able to leave, but above all they have welcomed the fact that, where we have made changes to deliver real help now to the people we come to this House to serve, we have also stepped up and made the difficult decisions about how we are going to pay for those changes. We have not tried to borrow it on the never-never, as the Conservatives sought to do in the past, and that is exactly why we are retaining the confidence of the bond markets.

For Labour, growth in and of itself is never enough, and that is why growth in every postcode is an important political priority for this Administration. But if we want growth in every postcode, then we need enterprise in every postcode, and if we want enterprise in every postcode, then we are going to need surge finance into every postcode. We have got to step further and faster ahead of the proposals the Chancellor has laid out today to back those little engine rooms of growth in each of our constituencies: they are the people who work out of white vans—where I started my working career; they are the people on market stalls, on high streets and in every business park; they are the wealth creators in this economy—the visible economy that employs millions of our constituents.

I welcome the statement from UK Private Capital today that said that the Chancellor delivered “pro-investment” measures that should

“make the UK a more attractive place to invest in and grow a business.”

That is a really important judgment. The Startup Coalition has said that today’s Budget delivered the best news for start-ups and scale-ups that has come out of a Government in years. Those are important credentials.

Of course I would have liked to have seen the Chancellor go further. Today, I am publishing our Committee’s analysis, setting out where we would like to see the Chancellor do more, including further changing the business rate structure; changing VAT thresholds for small business; ensuring there is real accountability to drive Government procurement into the bank accounts of small business; going further to tackle the peril of late payments—not just tackling rogue traders, but tackling rogue customers who do not pay on time; and getting much tougher on high street crime by tackling bogus self-employment that undercuts good and honest traders on the high street. These are all important things that will help our small businesses to grow. Crucially, as a nation, we have got to crack the challenge of investing in ourselves.

The former Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), who is no longer in his place, made some important changes with the Mansion House accord, but the reality is that our country is not short of long-term savings—we have £3 trillion of long-term savings. Our problem is that we invest the lion’s share in other countries rather than in ourselves. Eighty per cent of the long-term savings that we channel into equity investment goes abroad rather than here, yet the Mansion House accord is proceeding so slowly that we are going to miss our target by a decade. That is not good enough.

I would like to see the Chancellor go further and faster on repatriating pension fund investment. The £25 billion that has been announced today for the National Wealth Fund and the British Business Bank is incredibly important, but that now has to be used to leverage in more of our long-term savings in order to expand enterprise in every postcode. We heard evidence at our Committee yesterday that underlines that the enterprise rate in our country is now at the highest level it has ever been. We have doubled the entrepreneurship rate since 1999, but too few of those businesses are surviving for the long term because we are not investing in ourselves. Let us rebuild regional banking, let us put business banking back on the high street and let us couple that with stronger, sharper incentives for our angel investors and venture capitalists. We are making some progress, but it needs to be much faster. We are not short of long-term savings or of genius, but what we have got to do is match the money to the ideas and the entrepreneurs at a completely different scale for the years to come.

My final point is about artificial intelligence. The Chancellor made some very important announcements about investing in artificial intelligence, and in artificial intelligence safety and security for the future. That builds on a number of initiatives started under the last Government, in particular by the former Prime Minister. Again, we have to grasp the fact that the way that we are going to reindustrialise our country is by marrying AI to HI—human ingenuity, the British genius that we have in such abundance on these isles of wonder.

This is the home of the scientific revolution. This is the home of the industrial revolution. We have been inventing the future and making history for 300 to 400 years in this country, but if we are to reindustrialise in the way that the Prime Minister has set out, we have to marry artificial intelligence, traditional engineering and cyber-engineering on a completely new level for the years to come. The IS-8—industrial strategy 8—needs to become the AI-8.

Crucially, we have to recognise that we are not going to spread artificial intelligence through our economy unless people trust it. That means that we will need new regulation to keep it safe and secure for the future, and we will have to ensure that there is a just transition for workers as they go through this new industrial revolution. The Committee will announce important recommendations on statutory safety legislation, which we think is needed in the here and now, and we will have a report out before Christmas about how we think workers should be supported and reskilled for the future. We have a tremendous future ahead of us if we get this right, but if we pretend that we can somehow leave it to the market to decide, rather than building a strategic partnership between the public and private sectors for the future, I am afraid that we will miss the opportunity that lies before us.

This is a Budget that, by and large, will be welcomed by business. More and further reform is needed, which I hope our Committee will influence in the 10-year plan and the CSR next year. The Chancellor should take some pride in having delivered a Budget statement today that leaves our country stronger and fitter for the future.

--- Later in debate ---

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

Let me respond to the hon. Member for Dartford (Jim Dickson) in one respect. Harwich and North Essex is a very rural constituency, and any restraints applied to gas or electricity have limited effect, because a lot of my constituents in rural areas are on kerosene and heating oil—I confess that I am on heating oil. The Government have not even removed VAT on domestic heating oil. Why are the Government doing this pre-election council band A to D manoeuvre, which will benefit mostly their voters, but completely ignoring the interests of rural voters?

Forgive me if I detain the House a little on defence. We are in exactly the same position that we were in when the previous Defence Secretary resigned under Keir Starmer. In fact, the Chancellor said that he set a target date of 2030 for 3%. That is the same target as when the then Prime Minister appeared before the Liaison Committee. The Chancellor said that

“I am getting work under way to get there in a fiscally sustainable way.”

That was the reason the now Chancellor resigned from the Government, so what was that all about? It was obviously not about defence, because nobody can make any plans until the Treasury has signed off figures for increased defence spending, and it has not done so. It is still not going to sign them off until the public spending review, which may be after the next general election.

I am sure that Labour Members know that the next general election is going to be pretty tough for them. Their very large majority was a bit of an electoral accident, so many of them will lose their seats, but they can trust the Prime Minister, because he said on 25 September, “Don’t worry, the election will be in 2029”—just as he said, “We’re not going to reopen all the arguments about rejoining the EU” and, “We’re not going to reopen the argument about free movement.” Hon. Ladies and Gentlemen in difficult seats facing a difficult election next spring can absolutely trust the Prime Minister; he is not going to do that to them. Trust is rather important in a political party. I hope it is not getting too bad within Labour.

Let me say what I really think about this Budget. It is a non-Budget, exactly as my right hon. Friend the Leader of the Opposition and others have said. It is a breathing space. Another £2.2 billion of new taxes on business is by far its biggest effect, and the impact of the two previous, absolutely catastrophic Budgets remains embedded in Government policy. They hammered sectors such as hospitality, and businesses that used to enjoy employing a lot of young people can no longer afford to do so. Take Rix, a farm business in my constituency that is the leading supplier of potatoes and onions to Tesco. It employs mostly low-paid workers—a lot of young people—and its costs have rocketed as a result of the change to national insurance contributions.

Take the Cricketers in Eight Ash Green, a pub that has been virtually driven out of business by the increase in national insurance costs and business rates. By the way, there has been no cut in business rates—this Government put them up. I am very pleased that they have responded to the Conservative campaign to increase the exemption, but as we have just heard from my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), it is a very slight change. As has also been pointed out, all of these 59 micro-measures are minute. What the OBR actually says about national insurance contributions is that

“Sharper falls in employment among lower-paid sectors are consistent with our judgement that these firms would be most affected by the”

increase in national insurance contributions. That is the truth, and the Government have not faced up to it.

On the question of the real public expenditure outlook, let us look at the section in the OBR’s outlook that deals with welfare spending—the Chancellor is announcing £100 million here, £200 million here or £10 million here, but this is the real problem. Paragraph 5.21 says:

“Welfare spending is forecast to rise…by £19 billion (5.7 per cent) to £353 billion or 11.1 per cent of GDP… It is then forecast to rise in nominal terms by an average of £16 billion (4.4 per cent) a year over the rest of the forecast period”.

That utterly dwarfs any other figures that the Government have been talking about.

“This would be 1.3 per cent of GDP higher than its pre-pandemic level of 10.1 per cent of GDP in 2019-20, with 0.5 per cent of GDP of this increase occurring between 2025-26 and 2031-32.”

The Government are still spending on welfare, and they are not committing to spend on defence. That is the reality of this Budget.

[Noah Law]

When the hon. Gentleman talks about debt to GDP ratios, does he not recognise that the significant mountain of debt built up under his Government, and that the debt to GDP ratio has remained relatively stable under this Government?

[Sir Bernard Jenkin]

I beg the hon. Gentleman to listen to himself. What he is basically saying is that the reason there will be such gargantuan increases in welfare payments between now and 2031-32 is that it is all our fault—that it is because of what we did. [Hon. Members: “Yes!”] It is not. The Government have not begun to tackle the welfare state problem. We should have done; and they must do so, or we are heading for a fiscal crisis. It is interesting what the Red Book says about the forthcoming fiscal crisis.

[Iqbal Mohamed]

Will the hon. Gentleman share his assessment of the impact of increasing the retirement age to 66 and 67, with a target of 70, on the availability of junior jobs for young people to get into work?

--- Later in debate ---

[Sir Bernard Jenkin]

If the hon. Gentleman is saying, “If only we were not doing this later retirement thing, there would be more jobs for young people,” I have to say that managing the economy in that way is not very successful. It does not work.

On the forecast, the Government set great store by what the IMF says about the UK’s deficit reduction programme. The Red Book states:

“The IMF forecasts that the UK’s deficit reduction this year will be bigger than any other G20 country.”

I am afraid that there are a lot of lemmings rushing over cliffs in that G20 bloc. It is not a good benchmark for success. In any case, the forecast is based on the forecast that the Government have given to the IMF, and the reduction has not been delivered yet. The Government have not started to deliver the debt reduction programme. The OBR says that debt rises from 95.5% of GDP this year to 97.3% in 2028-29. The headroom is just £15 billion in 2029-30, which is £7 billion less than at the last Budget. The OBR says there is only a 56% chance of meeting the rule. As the bond markets digest this Budget, I am not sure they will be quite as sanguine as they have been.

I will end by responding to a point that we heard from the hon. Member for Hornsey and Friern Barnet (Catherine West). She talked about us getting back into the European Union and said that 60% of the economy is dependent upon trade with Europe. That is rubbish. What proportion of GDP do we export to the EU in goods? The single market is about goods. Incidentally, our record on services exports outside the EU is that there has been a dramatic, massive increase.

[Max Wilkinson]

Will the hon. Member give way?

[Sir Bernard Jenkin]

No, I will not give away. Only 5.9% of the UK economy is goods exports to the EU. A much larger proportion goes outside the EU. Incidentally, during our period of membership, the proportion of GDP that we exported to the EU was in steady decline from 1992 to 2021. Other factors have led to the decline in our exports with the EU.

Overall—this is the astonishing thing, and I will end on this point—our economy has outgrown France and Germany since 1992. Leaving the EU has not reversed that trend. I wonder whether Government Members do not understand the irony when they say, “We are the fastest-growing economy in the G7.” That has often been the case, because the EU is not a very efficient market and does not add much value to our economy. In fact, we have grown our exports to the rest of the world.

[Max Wilkinson]

Will the hon. Member give way?

[Sir Bernard Jenkin]

No, I am not giving way; I have given way twice. [Interruption.] Members may shout me down, but they do not want to hear the facts. The fact is that our economy is now growing faster outside the EU than it would have done, because of two sectors: financial services, and tech and AI. They are not regulated by the EU. Employment in the City of London has doubled since 2016. All the doom-mongers who told us that the City was finished were wrong.