Budget Resolutions

Bim Afolami Excerpts

Tuesday 2nd November 2021 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is a pleasure to speak in this debate and to commend the Budget to the House. I think it is a good Budget for my constituency—indeed, for all the constituencies of this country. In particular, I know that my pubs, restaurants and retailers will be very happy with the business rates cut, although I echo the remarks on both sides of the House that we need a longer-lasting solution to business rates. I think everybody recognises that they are not an optimal tax and that we can do things a bit better.

In the brief time allotted to me, I want to talk about financial services and about growth more generally. First, on financial services, the right hon. Member for Hayes and Harlington (John McDonnell), for whom I have deep respect, made the point that the City should pull its weight, or something to that effect. I would argue that the financial services sector is pulling its weight. It employs over a million people and generates over 7% of UK economic output and almost 13% of tax revenue. I would argue that that is pulling its weight.

I welcome the Chancellor’s decision to reduce the bank surcharge. It was introduced in the aftermath of the financial crisis, over 10 years ago. The planned increase in corporation tax to 25% would result in this country’s bank taxation becoming completely uncompetitive compared with other leading financial services sectors, and that would have a detrimental effect on those million people the sector employs and that 7% of economic output and almost 13% of tax revenue that it produces. I therefore really support what the Chancellor has done; indeed, I even wish he had gone slightly further. It is also worth making the point that, in his measure on the bank surcharge, the Chancellor increased the annual allowance to £100 million, thereby ensuring that small challenger banks benefit the most.

The Chancellor and the Treasury have also recognised the need for reform in the financial services sector. We have had the Hill review and the Kalifa review; indeed, we have had the wholesale markets review, looking at the whole way in which regulate the financial services sector. I urge the Treasury to continue the dialogue that it has with me, in my role as chair of the all-party parliamentary group on financial markets and services, and with many other Members to ensure not only that we get the best regulatory environment as a result of those reviews, but that we really look ahead at the next five or 10 years and think, “What is the optimal regulation for this critical sector?”

The second thing that I want to say, which is perhaps even more important, is about growth. Without growth in the economy, none of the things that we talk about in this House is possible. The OBR estimates that after we come out of the coronavirus pandemic fully—we hope—our growth rate will settle at about 1.7%. Before the financial crisis, our medium-term growth rate, if we take out the three years of recession from 1980, was about 2.8%. In effect, since the financial crisis, we have lost a significant amount of growth. We are somewhere between 30% and 40% poorer than we otherwise would have been each year. That matters because it means we are not as prosperous as we should be. Not only is increased prosperity important for the livelihoods of every single person in this country, but it helps to pay for the public services that everybody in this House talks about and rightly champions.

The Chancellor has done a remarkable analysis, as have many think-tanks and other outside bodies, of the problems of our economy. We know what they are: low private investment, which is why the Chancellor has brought in measures such as super-deduction; poor skills, which is why in the Budget we increased the skills budget hugely; poor management in both small and medium-sized enterprises and middle management in large companies, which is why the Help to Grow and Help to Grow Digital schemes have been put in place; poor transport systems, which is why we are investing in local regions; and the regional imbalance in our economy, which is the essence of why we are levelling up and why it is such important mission for the Government.

Something is missing, though. It is not just about measures or policies; we need to rediscover the importance of values and purpose in economic policy making. We cannot treat the economy like a machine, where we press a button and something comes out, and pull a lever and something else comes out. The essence of why economies grow is not just what policies come from the Government. The economic historian Deirdre McCloskey, who is a genius, has done a huge amount of work on why the industrial revolution started in this country and why it was so successful. Her analysis, backed up by that of many others, shows that it was about a change in mindset, a change in culture, and a change in the way we viewed economic innovation and dynamism in this country—and we did that here before anyone else.

I argue to those on the Treasury Bench that we need to rediscover that spirit and thinking. We could link it to the green agenda, giving purpose to the many people who want to see what they can do to help. They should not just think, “We need to give to charity here or give money to this or that group.” We do need to do that, which is what the Prime Minister and various other people are doing at COP26, but we should also champion the nobility and virtue of wealth creators, and actively argue that more economic innovation is a social good, because that is what enriches our society. I do not believe that those values are inherent to this country alone, but our growth rate over the last 30 to 40 years has not been as strong as it could be, and it has not been for want of trying by either the Conservatives or Labour in government.

We need to be thinking about those sorts of ideas underpinning all our policies in the Budget. We need to think about how we deal with Government policy as a whole and to say that the primary goal of Government policy is to push forward growth. Let us push for green growth. Let us think about the honours system and champion people who create wealth and sustainability for their local communities. Let us think about the national curriculum and how we talk about creating sustainable and ethical businesses. If we do that not only will people be better off but our society as a whole will be enriched in lots of different ways.