Budget Resolutions

Chris Coghlan Excerpts

Monday 1st December 2025 Commons Chamber

[Chris Coghlan (Dorking and Horley) (LD)]

In February, Louise Holmes took me to her restaurant HolmeStores in Dorking, which was especially popular for brunch. It had fantastic food and a beautiful wood-panelled interior. Louise had 12 employees and was thinking about a second site, but she could not afford the employers’ national insurance increase, so today it is closed. Putting my constituents out of business through tax rises is no way to grow our economy.

Americans are twice as rich as they were in 2008; why are we 10% poorer? This is called the productivity puzzle, but actually it is no puzzle at all. Decades of research, including by recent Nobel prize winner Philippe Aghion, show that productivity can be raised by policies that support innovation, such as public research and development. UK Government support for nuclear submarine technology has led to the development of Rolls-Royce’s small modular nuclear reactors for civilian use. The roadblock is that economic policymaking in this country is too often driven towards meeting the OBR’s fiscal rules, while the OBR uses flawed assumptions for growth, such as the assumption that public R&D has no impact on economic growth after five years.

The Budget has been surrounded by controversy about the £16 billion productivity downgrade, but the more serious question is: why did the OBR downgrade productivity in the first place? In the 15 years since the OBR’s inception, it has consistently overestimated productivity, and has had to downgrade it when it has been wrong, which has created enormous volatility in economic policymaking. That is no way to run a G7 economy.

The good news is that the Government have started to adopt some policies that raise productivity. London Business School’s Paolo Sirico—I introduced the Chancellor to his work last year—has quantified the stunning impact that public R&D can have on economic growth. Paolo has shown that from 1950 to 2015, US patents that had a publicly funded component generated 12 times the productivity of patents purely funded by the private sector. The most famous example of that is, of course, John F. Kennedy’s Apollo programme.

Public funding of basic research in universities and laboratories is so powerful for economic growth because it de-risks the cost of developing new technology and generates the discoveries that attract private investment into start-ups and venture capital. In the spring statement, using Paolo’s model, the Chancellor was able to use £2.2 billion of extra defence R&D to upgrade long-term UK GDP growth by £11 billion a year. I therefore urge the Government to adopt a broad public R&D investment strategy for economic growth, like the US, Israel and South Korea. The investment needed is not actually that large—an extra £5 billion a year on public R&D would take us to US levels, as a share of GDP—and, if we borrowed to do that, debt-to-GDP would actually fall because GDP would rise faster than debt over the long run.

I urge the Government to invest £5 billion in public R&D in our leading industries, such as finance, film, defence, healthcare and renewable energy. Then it might be possible to turn our country into one of the fastest-growing advanced economies in the world.

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[John Glen (Salisbury) (Con)]

It is a pleasure to follow the hon. Member for Brent West (Barry Gardiner), who I know holds his views with great sincerity, although I do not agree with many of them.

Before I get into the substance of the Budget measures, I want to address the process leading up to the Budget. People might say that this is a subject of fascination just for those in the Westminster bubble, but in the run-up to this Budget, it went way beyond that. In the weeks—and, indeed, months—before the Budget, virtually every conceivable tax rise was floated as a possibility. Last week, we heard from the Office for Budget Responsibility, and what it said was summed up very well by Ben Zaranko from the Institute for Fiscal Studies:

“At no point in the process did the OBR have the government missing its fiscal rules by a large margin. Leaves me baffled by the months of speculation and briefing. Was the plan to lead everyone to expect a big income tax rise, then surprise them on the day by not doing it?”

Next Wednesday, the Chancellor will come before the Treasury Committee, of which I am privileged to be a member, and we will no doubt ask her about what was happening in those weeks. I do not want to pre-empt the scrutiny of that Committee, but I think everyone across the House must acknowledge what was happening. We all read the papers. We could all see how decisions about where to invest, whether to invest in the UK, whether to employ any more people and whether to have confidence in the future of the country’s economy rested on the way the Budget was prepared for.

I regret very much the error that was made by the OBR. It was clearly a profound error, and Richard Hughes has taken responsibility for it this afternoon. He has done the right thing—the honourable thing—but this will be conflated with the much more serious breach of protocol over several months leading up to the Budget, and we in this House need to come to terms with the implications that this has for our reputation.

There are some things in the Budget that I welcome, but there are some that I do not, including the enormous tax increase. We all fought an election where Labour plainly said that only £7 billion of tax rises were implied. We had £40 billion last year and a further £26 billion this year. This will mean 780,000 of the lowest-paid people coming into tax by the extension of the threshold freeze, as well as a tax on electric vehicles, more tax on property rents, a tourism tax and increases in tax on dividends, savings and unearned income. Employee ownership trusts relief will be halved and salary sacrifice contributions will be limited.

It is obviously the prerogative of every Government to raise tax as they see fit, but what concerns me is the lack of understanding of what it takes to drive growth in an economy. When I look at the implications for the hospitality sector, which is a significant one in Salisbury, I see people who are already bemused by the unexpected increase in employer national insurance, the increase in the national living wage and the implications of changes in employment legislation—and that is before we even heard the measures in last week’s Budget. People are worried about the risks and costs associated with investing in plant, machinery and people.

[Chris Coghlan]

I thank the right hon. Member, a colleague on the Treasury Committee, for giving way. I agree with many of the things he is saying, but does he not agree that the Conservative party also has considerable responsibility for this situation, through Brexit?

[John Glen]

I did not support Brexit. Brexit happened. We made a decision as a country, and I do not want to relitigate that. I commend the hon. Member for what he does to promote the discussion about measures to drive forward productivity. I think the Government could learn from some of his observations this afternoon, because until we get to a point where those who create wealth and jobs feel that it is in their interest to do so, we will be dancing on the head of the pin in terms of feeling secure about that trajectory of sustained growth. The burdens that come from this Budget will be significant, and will change the way that people think about investing in this economy. A dynamic economy does not come from ever-higher tax and higher spending on welfare.

The OBR has downgraded growth in every year. I recognise that, since the global financial crisis, many economies face similar challenges—let us be honest about that—but we cannot go on spending money on welfare unless we address the drivers of sustainable growth in our economy. I fear that the measures in the Budget last week, many of which purported to give long-term benefit, will not provide what those who create wealth need in the short term.