Budget Resolutions

Lord Grayling Excerpts

Wednesday 6th March 2024 Commons Chamber

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

It is quite surreal to follow the hon. Member for Romford (Andrew Rosindell). Like him, I believe in small business, but small business growth will not solve the problems in the public sector, which has been squeezed during 14 years of this Tory Government until the pips squeak. However good it is, small business will not refill council coffers and ensure basic social services and special educational needs in schools. Small business will not solve the NHS waiting lists or bring schools off their knees.

This Government and the Government of the austerity years have caused all those problems, and crashed the economy in September 2022, leaving families and businesses crushed. Those who survived the pandemic have faced real hardship since. This is a Budget of a desperate Government—another slew of promises that will not be delivered on. That is what we focus on in the Public Accounts Committee: delivery. We look at optimistic, sometimes well-intentioned promises that fail because there is no plan for delivery.

In my own borough we see such poverty. Earlier today, in Prime Minister’s questions, the Prime Minister said that equality has increased and inequality has reduced under his Government. Not in my borough, as 48% of children in Hackney—nearly one in two—live in poverty after housing costs are taken into account. Even in inner London, we are the 22nd most deprived local authority in England. There is real, day-to-day poverty. I invite anyone to join me on my doorstep surgeries and see the reality.

Let me tell the House a story about that reality. I could choose many constituents, but I visited a particular lady just a few weeks ago, who lives in a two-bedroom council flat with her husband and four daughters. The flat is only marginally bigger than my office in this building, and only a bit smaller than a Committee Room. Three of her daughters share a very small bedroom with bunk beds. The toddler shares with her parents. The bathroom and kitchen are so tiny that two people at a time hardly fit. They share one living space.

Government failures over housing and Brexit mean that children are leaving London. For my constituent, that means that the local school is closing because rolls are dropping. The cost of housing means that they have no prospect of moving anywhere else, because of the shortage of properties in the social rented sector, where more than 8,000 households are on the waiting list. According to the most recent verified figures, only 671 homes became available during 2021-22, compared with more than 1,200 in 2016-17. Both of those figures are outstripped by demand.

The cost of housing means that many people are being shipped out to temporary homes, ripped from their schools, churches, mosques and communities. That means that my constituent’s local school is closing, as are others. On top of the overcrowding, her four daughters need to move schools. They are a working family who want to do well, but they have little opportunity. Down the road is the product of the Government’s free school policy: a school with 25 pupils per class. Members who know how schools funding works will know that that school will never be financially sustainable, because schools are funded on 30, 60 or 90 pupils per class. The trust that has taken it over from the one that failed is struggling with the finances. A brand-new building has been built, but it is unsustainable, while other schools are closing thanks to Government policies.

The housing costs across my borough are absolutely wretched. So many people are renting privately but unaffordably. More people rent socially than privately, but they live in overcrowded conditions. An average two-bed rent is just under £2,000 a month. There are 30% fewer privately rented properties available now on Rightmove compared with before the pandemic, and no properties available to those on low incomes at local housing allowance rates. This is the real, day-to-day impact of Government policy. So many people are housed outside the borough.

[Chris Grayling (Epsom and Ewell) (Con)]

Forgive me if I misunderstand how our system of government works, but social housing in the hon. Lady’s constituency is the responsibility of the Labour Mayor of London, is it not?

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[Chris Grayling (Epsom and Ewell) (Con)]

It is a pleasure to follow the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard), and I echo what he said about the emergency services. They did an extraordinary job removing that bomb in what could have been a horrible situation. However, I have listened to what the Opposition are saying and I have listened in vain for an actual plan. Instead, we seemed to be hearing a whole series of shopping-list items with no sense at all of the economic reality of the moment.

The economic reality is very straightforward. Over the past four years, we have dealt with the biggest public health crisis in a century, the biggest security crisis in Europe for 75 years and an international resurgence of inflation and rising interest rates, and still we have an economy that is doing far better than the Opposition said it would. We have an economy that still has some of the lowest levels of unemployment for decades, that is turning a corner, that is forecast to grow and that is attracting investment. We are No. 3 in the world for attracting inward investment. We have heard today about AstraZeneca’s plans in Cambridge and on Merseyside. Those are good-news stories, and they are happening because this country remains a good place to do business and a place that attracts international organisations to base themselves here.

None the less, we are a country like those in the whole of the western world. Other European countries face the same challenges, and the answers are not simple or straightforward. I have listened to the Opposition, and they seem to be suggesting that there is a magic solution and that the world would be fine if they somehow transformed themselves into the Government of the day. Well, I can assure them that, in the unlikely event of that happening, they would face all the same issues. The difference is that they would get the solutions wrong. Instead of bringing down taxes and taking steps to drive investment, as the Chancellor did in the autumn statement, they would do the opposite. They would put up taxes, put up public spending and stifle our economy, which is why they do not offer a solution for the future. It is why, actually, a Labour Government would be profoundly damaging to this country.

We need to remember that, back in 2010, we inherited 2.7 million unemployed people and rising, including 1 million unemployed young people. Here we are, 14 years later, with historically low levels of unemployment. Yes, there are challenges in the labour market—I will talk a little about those—but, of all the economic challenges that a nation can face, I have always believed that unemployment is the worst, because unemployment creates real human misery. The fact that we do not have the level of unemployment that we inherited 14 years ago is a huge plus for this country.

The reality is that we need to return to some of the principles that we put in place back in 2010, because we have too many people outside the workforce and too many people on long-term sickness benefits. At that time, we had some very proactive programmes to help those people back into work, and I think we need to recapture that in the aftermath of the pandemic.

One thing that is not a solution is a system without sanctions, as the Opposition propose. Ultimately, those who can work should not be sitting at home on benefits. Even the vast majority of those on sickness benefits have the potential to return to work, perhaps to do something different from what they did before. With the right help and support, they can get to a better place. Nobody benefits from sitting at home on benefits for the rest of their life. It destroys lives and destroys health.

If there is no stick to go with the carrot, we will achieve far less than we should. The idea that an alternative is providing support without consequences for those who do not take it is simply nonsense. We have to get back to a proactive carrot-and-stick approach. The welfare state is a ladder that people should climb; it is not a place in which they should live.

I am sorry to see that we are putting up taxes on air passengers, albeit in the higher classes. This will ultimately drive traffic out of the United Kingdom. People will interchange on the continent or in Dublin, because it is cheaper. I hope that the measures will be temporary, and I do not want to see further measures that drive down the UK sector’s competitiveness.

At the same time, I am very pleased to see the investment in helping the development of sustainable aviation fuels. The Chancellor’s announcement earlier this week is welcome and necessary because, as I said at Prime Minister’s questions, this is an essential area for the aviation sector, which can take serious steps towards net zero only if it transforms the fuels it uses. Both for long-haul flights and in the immediate future, sustainable synthetic aviation fuels are the only way in which it can take such steps towards net zero.

I do not want to see a situation in which our industry buys all of its fuel from other countries. As I said earlier, the United States is currently the source of sustainable fuels for UK airlines, which might be fine right now, but we have to take quick steps to ensure that we have an industry in this country. That requires, over the coming months, the Department for Transport and the Treasury to work together to accelerate the process of setting out plans for the SAF mandate and a price support mechanism so that, immediately after the election, whoever is in power can put the plans in place straightaway. That is essential for the future of the industry in this country—and it is not just about aviation; it is about jobs in parts of the country that need jobs.

I hope the Treasury will put its foot on the gas to make sure that sustainable fuels happen quickly. I hope the Department for Work and Pensions will be bold in stepping up its support, as well as stepping up the consequences for the long-term unemployed who refuse to accept that support. In difficult circumstances, I think those in the Treasury have produced a pretty good, balanced Budget, for which I commend them.

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[Sir David Davis]

I might return to that shortly.

The truth is, as my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) said, the Chancellor has done a skilful job in dealing with an extraordinarily difficult backdrop. I think there are more things he could do—I will talk about that in a second—although much of that is down to the structure of Government decision making, rather than his fault. For example, as the Leader of the Opposition said, we are dealing with a world in which Putin has weaponised supply chains and destroyed the economic basis of our anti-inflation policy that has worked for the previous 10 years.

I understand the Chancellor’s caution and his desire to retain the confidence of the markets. Against that, it is remarkable that he has taken £20 billion out of national insurance, at about £900 a head for 27 million people and for another 2 million self-employed people. Frankly, people are underestimating the success the Government have had with inflation reduction and employment. For most of my time in this House, the idea of 800 new jobs a day, every day, for an entire Government’s tenure, would be extraordinary—that certainly did not happen under the previous Labour Government—so we have quite a lot to be happy about.

That said, if I had my way, I would not have gone for national insurance; I would have reduced income tax. Why? A lot of assertions have been made in the public domain, probably in relation to the Treasury, that national insurance is less inflationary than income tax. That is bogus nonsense. The only argument to support that is that cutting national insurance will pull tens of thousands more people into the employment pool, but so will cutting income tax. Because income tax applies to people above the age of 65, cutting it would also keep highly skilled and capable people, who we do not want to retire, in the workforce. I would have preferred an income tax cut rather than a national insurance cut, but that is what we have got and it is probably much better than we would have got from the Opposition.

While I am talking about income tax, I want to make one point en passant. At every Budget, I have raised the question of IR35, which is oppressive on small businesses and the self-employed. It drives people out of the country; the Public Accounts Committee is looking into that issue and I hope it will come up with a conclusion some time soon. I will keep at the Government to deal with IR35 and the related issue of the loan charge. Frankly, His Majesty’s Revenue and Customs is behaving in a barbaric manner, reminiscent of the Post Office, so I will continue to raise that issue.

I want to raise a number of structural matters. My right hon. Friend the Member for Wokingham (John Redwood) made the point I was going to make about the Bank of England. The current structure of the Bank of England, its guidelines and its rules, are flawed in a big way. They handicap the way Government can operate on fiscal policy and on inflation. We need to address that and my right hon. Friend made a good point about that.

There is also the issue of the OBR. George Osborne created the circumstance under which the OBR almost sets the guidelines and the fiscal rules for the Government. The Government are then terrified of what the markets will do if they do not follow the OBR’s attitude. I understand the Prime Minister has a picture of Nigel Lawson in his study. He ought to read Lawson, because Lawson’s view on economic forecasts of any sort was that they are pseudo-technical nonsense. He did not believe in forecasts and we would do well to learn from him. The whole British establishment is suffering from a collective delusion about the amount of authority that rests with OBR forecasts—in fact, with all Government forecasts.

Let me give the House an example. The Bank of England’s forecasts failed to predict the worst inflation crisis in modern times. In 2022, the OBR’s UK borrowing forecast was more than £100 billion—I repeat £100 billion—off the mark. Last year, the Office for National Statistics—not in forecasting, but just in measuring—announced revisions that added £50 billion to the size of the British economy. Panmure Gordon turned round and said that it had completely rewritten the story of post-covid Britain, which it had. A new report on the OBR has suggested that, since 2010, the combined total of the OBR’s errors in growth forecasts aggregates to over £500 billion, and its errors in forecasting public sector debt accumulate to more than £600 billion: this is the mechanism that Chancellors are using to decide how much tax they can afford to cut. To remind people, the fiscal rule is that there should be a reduction in the percentage in 2029—that is the difference between two guesses. It is not a rational way to run an economy.

[Chris Grayling]

I was particularly struck by the change to capital gains tax and the reference to the Laffer curve. Does my right hon. Friend agree that it is disappointing that the OBR in particular still does not appear to look at dynamic impacts of tax changes in a way that is essential for the future?

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Interventions are absolutely marvellous, but can those who have already spoken be conscious that we are trying to get everybody in with equal time? My advice remains six minutes per speaker. Sir David Davis will notice that he is already slightly over that.