Economic Situation

Chris Philp Excerpts

Wednesday 12th October 2022 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the current economic crisis.

[The Chief Secretary to the Treasury (Chris Philp)]

The Chancellor of the Exchequer is in Washington, having meetings with the IMF, and is—[Interruption.]—which have been—[Interruption.]—routine meetings, which have been long scheduled.

[Mr Speaker]

Order. I know it is the first Wednesday back; we are all excitable. Let us have a little calm, so that I can hear the Minister. Come on, Minister.

[Chris Philp]

Thank you, Mr Speaker. They are routine meetings that have been long scheduled, and are certainly not a cause for exuberance or over-excitement from the Opposition.

As we know, the world has faced surging energy prices since Putin’s illegal invasion of Ukraine. We have seen very high inflation across the western world, and we have seen a cycle of increasing interest rates across western economies as well—across many western economies. But let me reassure the House that the fundamentals of the United Kingdom’s economy remain resilient. Unemployment, at 3.5%, is the lowest it has been in my lifetime—and for the record, I was born in 1976. Economic growth last year, the calendar year 2021, was the highest of any G7 country—7.5%. Just yesterday the IMF forecast that economic growth—GDP growth—this current year in the UK would be at 3.6%—once again, for the second consecutive year, the highest of any G7 country. So our economy is in resilient condition.

But I know that many families are worried about the challenges we face, and that is why, just a few weeks ago—two or three weeks ago—we introduced the energy price guarantee. Families were genuinely fearful that they might face this winter energy bills of three, four, five, six or even seven thousand pounds per year, but that energy price guarantee will ensure that the average household sees energy prices no higher than £2,500 on average—not for six months, like the Labour plan, but for two years.

We also introduced a growth plan to get our economy growing, to see wages sustainably rising, to see good jobs created and to create a sustainable tax base to fund our public services. This Government have a growth plan; the Opposition have no plan.

We intend to do this in a way that is fiscally responsible, and that is why—[Interruption.]—and that is why, on 31 October, in less than three weeks’ time, the Chancellor of the Exchequer will set out the medium-term fiscal plan, explaining to the House exactly how he will do that, and how we will continue the UK’s track record of having the highest growth in the G7, not just last year but this year as well.

[Rachel Reeves]

People are facing insecurity, instability and deep anxiety and they deserve answers. Conservative economic policy has caused mayhem with financial markets, pushed up mortgage costs and put pension funds in peril, and it has wiped £300 billion off the UK’s stock and bond markets—all directly caused by the choices of this Government. The mini-Budget, just 19 days ago, was a bonfire made up of unfunded tax cuts, excessive borrowing and repeated undermining of economic institutions. It was built and then set ablaze by a Conservative party totally out of control—not “disrupters” but pyromaniacs. And that fire has now spread. Yet Government deny all responsibility.

So will the Minister tell the House, what guarantees will the Government give that the currency slide will stop, and that people’s pensions are safe? How do they expect people to pay £500 more a month, on average, on their mortgages? How many more repossessions of family homes will there be if the Government do not change course? How much more are the Government spending on debt interest because of higher borrowing costs?

While Ministers desperately try to blame global conditions, why is it that no other central bank in the world has had to step in three times in less than three weeks to protect financial stability?

The country now faces a very serious situation. Ahead of the ending of the Bank of England’s emergency operations this Friday, what action will the Government take to ensure that their Budget does not have further consequences for financial stability, or for people’s pensions?

This is a Tory crisis made in Downing Street, but it is ordinary working people who are paying the price. It can be resolved only when the Conservatives put aside their pride and reverse this catastrophic mini-Budget, and they must do so now.

[Chris Philp]

The shadow Chancellor calls for a reversal of the growth plan, yet at the first opportunity—last night—the Labour party voted for it. She asks about mortgage rates, so let me point out to her that mortgage rates around the world have been on an upward trajectory all year. In fact, if we compare base rates in the United Kingdom with those in the United States, we see that in both countries, as she will be aware, the base rate started this year at 0.25%. In the UK the base rate is currently 2.25%, and in the US it is 3.25%, a full percentage point higher.

The shadow Chancellor referenced borrowing costs. I am sure she is aware that two-year Government bond yields are about the same in the US as they are in the UK—US bond yields have been going up over the course of this year as well. She referenced the currency: the dollar has shown strength against a basket of currencies throughout this calendar year. If she looks at the dollar strengthening against the euro, she will see that it strengthened about 15% this calendar year, and strengthened about 15% against sterling—very similar figures.

The shadow Chancellor also asked about the cost of living. We are very mindful of that, which is why we have introduced a £37 billion package to help people, disproportionately targeted at those on lower incomes, so that people on the lowest third of incomes receive £1,200. It is why we introduced the energy price guarantee on our second or third day in office, ensuring that people do not pay, on average, more than £2,500, instead of facing bills of £5,000 or £6,000—and not for six months, as the Labour party offered, but for two years. It is why the national minimum wage was increased by a large amount last April. It is why the national insurance threshold was increased to £12,500 in July, so people on lower incomes now pay virtually no national insurance or income tax. That is the package of measures that this Government have introduced, because we stand on the side of working people and have taken the steps needed to support them.

[Mr Speaker]

I call the Chair of the Treasury Committee, Mel Stride.

[Mel Stride (Central Devon) (Con)]

My right hon. Friend the Chancellor was quite right to bring forward the date for the medium-term fiscal plan and the Office for Budget Responsibility forecast. He now has, of course, a huge challenge in landing those plans in order to reassure the markets. He has to get the fiscal rules right and come forward with spending restraint and revenue raisers that are politically deliverable. Given the huge challenges, there are many—myself included—who believe it is quite possible that he will simply have to come forward with a further rowing back on the tax announcements he made on 23 September. Can my right hon. Friend the Chief Secretary confirm that that possibility is still on the table?

[Chris Philp]

I thank my right hon. Friend the Chair of the Select Committee for his counsel, which the Chancellor always listens to very carefully. The Chair of the Select Committee, along with others, suggested publicly that the date for the medium-term fiscal plan should be brought forward, and the Chancellor listened to him and responded by bringing the date forward from 23 November to 31 October.

There are no plans to reverse any of the tax measures announced in the growth plan. There is, I think, a measure of consensus—indeed, the Labour party voted only last night for the reduction in national insurance. We want to ensure that the UK is a competitive jurisdiction that companies and high-potential individuals who are internationally mobile choose to come to, to locate and grow. However, as the Select Committee Chair says, we of course need to do so in a way that is fiscally responsible, to ensure that debt over GDP falls in the medium term. The plan will lay out to the House in detail exactly how that will be achieved, scored by the OBR, on 31 October.

[Mr Speaker]

I call the SNP spokesperson, Alison Thewliss.

[Mr Speaker]

Order. I have the greatest respect for the hon. Lady, but can I just say that she knows the rules give her one minute, not one minute and 45 seconds or two minutes? Please, let us stick to the rules of the House.

[Chris Philp]

The Scottish Government are of course receiving record levels of funding, and that will continue. The hon. Member asked about excess deaths. Well, I think the drug death record of the nationalist Government is, frankly, pretty terrible. She asked about the uprating to welfare. There is a statutory process that happens every year—every autumn—and that decision has not been taken. It will happen in the normal way, as it has been done for every year.

The hon. Member referenced the IMF’s growth forecast for next year. I have already pointed out that last year we had the highest growth in the G7 and this year we have the highest growth in the G7. If we take the three years together—last year, this year and next year—we will find that the UK, at 11.7% over those three years, still has the highest growth of any G7 country.

The hon. Member asked about institutions. The Chancellor and the Prime Minister have the highest regard for the OBR and the Bank of England. They are meeting both of those institutions regularly. She referenced the growth plan. Having a competitive tax system, supply-side reforms to unleash the productive potential of our economy and making our energy market function properly once again are essential prerequisites for growth, and I am proud that it is this Government who are promoting them.

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

I am disappointed at the shadow Chancellor, who is a very good economist. She is accusing the Government of causing problems for people’s mortgage rates, but my right hon. Friend will agree with me, I am sure, that one of the worst things that can hit any economy is a wage-price spiral as a result of huge inflation. Can he confirm to the House that the action the Government have taken to provide support to the economy and to provide this huge input in relation to energy prices will bring down headline inflation, and specifically make mortgage rates better than they would have been otherwise, which is totally the opposite of what the shadow Chancellor is saying?

[Chris Philp]

My right hon. Friend, who of course has a very distinguished professional track record in financial services, is absolutely right. A range of independent forecasters have confirmed that the energy price guarantee will not only protect our constituents from high prices, but lower inflation by about 5% compared with where it would otherwise have been—a vital intervention. While we are on the subject of inflation, it is worth keeping in mind that inflation in many countries in continental Europe is considerably higher than it is in the United Kingdom. For example, in Germany it is 10.9% and in Holland it is 14%.

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

The Minister has made great play of supporting people with their energy bills, but businesses only get support until March. The Government also make great play of creating growth. Many of the businesses in my constituency, particularly hospitality businesses, with a guarantee on their energy bills only until March, are making decisions in the coming weeks about whether they will be able to stay open and continue to be employers. How does that help growth, and will he give them some guarantee from March onwards?

[Chris Philp]

The hon. Lady raises questions about timeframes. Of course, the Labour proposal was only for six months for consumers and businesses, and I did not hear her criticising that. The consumer offer is for 24 months—for two years. In relation to businesses, she is quite that the business scheme is for six months, but the Government made a commitment back in September that within three months of September—so within two months of now—further plans would be brought forward to explain to businesses, charities and, indeed, the public sector how they will be handled after March next year. My right hon. Friend the Business Secretary will announce that to the House in the coming weeks.

[Andrew Selous (South West Bedfordshire) (Con)]

Growing our tax revenues in a way that is sustainable in every sense of that word is clearly massively important to pay for all the things we deeply care about, but will my right hon. Friend reassure us that he does get the significance of Government borrowing costs and that he will make sure that His Majesty’s Government do nothing that pushes those up unnecessarily high compared with the United States and Germany?

[Chris Philp]

Yes, my hon. Friend is making a very important and very reasonable point. I have said this already, but he mentions comparisons with other countries, and our two-year bond yield is about the same as that of the United States at the moment. However, we are mindful of the need to ensure reasonable borrowing costs, which of course means financial responsibility. Our debt-to-GDP ratio today is the second lowest in the G7. My right hon. Friend the Chancellor will be setting out in under three weeks’ time—on 31 October—precisely how he will be delivering fiscal stability and fiscal responsibility in the years ahead, and I am sure that my hon. Friend, when he hears that statement, will be reassured and comforted by it.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Earlier today, the Treasury Committee was given evidence that was incredibly sobering. All five of the economic specialists agreed that the UK’s Budget has contributed—

[Emma Hardy]

As I was saying, earlier today we on the Treasury Committee heard evidence in which all five economists agreed that the UK’s Budget has contributed to the current economic turmoil. With the Prime Minister earlier stating that there were going to be no budget cuts, and further to the point from the Chair of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), does the Minister agree with Mohamed El-Erian, the chief economic adviser to Allianz, who said yesterday:

“I see no alternative but the government saying we will not cut taxes now”?

[Chris Philp]

I thank the hon. Lady for her question. I have already set out how there have been global trends over the past six or nine months, with higher energy prices, higher inflation and a cycle of increasing interest rates around the globe. In particular, I set out how the monetary tightening in the United States, at 300 basis points over the past nine or 10 months, is one and a half times higher than the fiscal tightening in the United Kingdom, which has been 200 basis points over the same period.

In relation to the hon. Lady’s questions about balancing the books over the medium term, the medium-term fiscal plan will set that out. We do intend to control public spending—[Hon. Members: “Ah!”] Well, just listen to the answer—for example, to stick within the spending review 2021 spending limits. I would point out to the House that those SR21 spending limits do see real-terms increases over the three years, but we are going to be sticking with iron discipline to those spending limits, not increasing them, and we will also show spending restraint in the years ahead. However, showing spending restraint is different from real-terms cuts.

[James Cartlidge (South Suffolk) (Con)]

It is very welcome that, a few minutes ago, the Chief Secretary said that the effect of the statement on 31 October will be to show that the Chancellor is 100% committed to fiscal responsibility. That is very welcome to colleagues on all sides, I think, but can he confirm that that means all the previous unfunded tax cuts will now be funded in that statement?

[Chris Philp]

What the statement will set out in the round is how we will get debt as a proportion of GDP falling in the medium term. That is the critical metric, and that is what the medium-term fiscal plan will deliver.

[Dame Angela Eagle (Wallasey) (Lab)]

Can I just offer the Chief Secretary to the Treasury some gentle advice? If he refuses to accept that the fiscal event on 23 September has had any effect on what has happened in the markets since, that will not be reassuring for the markets. He needs to stop being in denial and admit that serious mistakes were made.

The Prime Minister said at Prime Minister’s questions that there would be no public spending cuts, yet we know that, as a result of the fiscal event and the unfunded tax cuts, there is a £60 billion gap between expenditure and the money coming in. If there are no public spending cuts, that leaves only the reversal of the tax cuts to balance the books, does it not?

[Chris Philp]

I have explained in response to an earlier question that spending restraint is not the same as real-terms cuts. We do not plan real-terms cuts, but we do plan iron discipline when it comes to spending restraint. The answers to the hon. Lady’s questions will be set out in full at the fiscal statement, which will be accompanied by a full Office for Budget Responsibility scoring and a set of OBR forecasts. That is when all those questions will be answered very clearly.

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

The intervention of the Bank of England in both the gilt market and the corporate bond market has alarmed many in recent days. I would be interested in the view of the Chief Secretary to the Treasury on the Treasury’s assessment of the cost to the Treasury and the fiscal position following the interventions by the Bank of England in those markets.

[Chris Philp]

I thank my hon. Friend for his question. It obviously depends on the prices at which the Bank and England buys and sells bonds or gilts in the market. It is worth observing that so far it has purchased considerably less by value of gilts than the limits that were set out originally. The volume of gilts that it has on its balance sheet is much less than the limits. On his question about fiscal cost, if there is any fiscal cost, that will depend entirely on market prices.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Two days before the Budget, a young constituent of mine hoped to buy her home through shared ownership. She was offered a mortgage at 4.28% interest by the Halifax. A day after the statement, the offer was withdrawn and a two-year fixed-rate deal has rocketed to 6.9%—that is £150 a month more overnight because of the Government’s unfunded giveaways to people on over 150 grand a year. What is the Minister’s advice to my constituent? Should she take the deal, or does he agree with the panel of experts at the Treasury Committee this morning that she should not go near it, because house prices are about to plummet?

[Chris Philp]

I am obviously not going to offer individual financial advice to constituents. What I would say is that there are about 2,300 mortgage products currently on the market. We are keen as a Government to help first-time buyers, particularly younger ones in their 20s and 30s, which is why stamp duty is being cut for cheaper purchases. The stamp duty threshold for first-buyers has been raised, from memory, to £425,000, which particularly helps with putting together a deposit, which cannot be mortgage-funded. In addition, we want to help people with the broader cost of living pressures, which makes it easier to find money to fund mortgages. That is what the energy price guarantee is designed to do, and it is what lower tax rates in general are designed to do, including the tax reductions that the Labour party voted for yesterday. It is what the cost of living package is designed to do—the £37 billion. By helping with the cost of living in general, we are obviously making mortgage costs a little easier to meet.

[Alun Cairns (Vale of Glamorgan) (Con)]

Yesterday, the International Monetary Fund underlined the position of the UK economy as the fastest growing in the G7. Despite the noises off, it further stated that the recent fiscal changes would add further to growth projections. That is in addition to the record low unemployment data that has been highlighted this week. Does my right hon. Friend agree that further changes need to be made in terms of supply-side reforms, which will continue the momentum of a growing economy, resulting in real jobs in my constituency and across the country?

[Chris Philp]

I am grateful to my right hon. Friend for mentioning the international comparisons again. The unemployment figure in the UK is 3.5%—inexplicably, Opposition Members have not asked about that—which is the lowest in my lifetime and compares favourably with that in France, where it is more than double, at 7.3%, and Italy, where it is 7.8%. Even in Canada, it is 5.2%, so our unemployment figures compare favourably internationally. As for the growth figures he asked about, if the three years are taken together, the figure is 11.7%, which heads the G7. That is nearly four times higher than Germany, at 3.9%, over double the figure for Japan, at 5.1%, and higher than the figures for France, Italy, Canada and the USA.

My right hon. Friend asked about supply-side reforms to help his constituents. He will hear a lot more about them in the coming weeks, both directly from Secretaries of State and from the Chancellor in the medium-term fiscal plan, to explain how we will get regulatory burdens off the back of businesses to help them to grow and create the jobs for his constituents that he rightly wants to see.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

The mini-Budget fiasco has caused a material risk to the UK’s financial stability, and the Bank of England has said that $1 trillion could have been erased from UK pension fund investments if it had not stepped in after the mini-Budget turmoil. So the Minister needs to heed the advice of the Chairman of the Treasury Committee and others across the House, and junk the tax cuts in the Budget. They are unfunded and they are creating chaos in the markets. We need to restore confidence so that our constituents do not suffer. The Minister needs to stop being arrogant and take heed, listen to the expertise and take action.

[Chris Philp]

If the hon. Lady objects so much to tax reductions, why did she vote for them yesterday?

[Henry Smith (Crawley) (Con)]

Yesterday, I spoke with business leaders in my Crawley constituency. They welcomed both the near record low unemployment levels and the International Monetary Fund outlook of 3.6% growth. Does the Chief Secretary to the Treasury agree that that is a direct consequence of the policies that the Government are enacting?

--- Later in debate ---

[Chris Philp]

Yes, I do. The leading growth in the G7 and the lowest unemployment figures in my lifetime are testament to the sagacity of the Government’s economic policies.

[Sarah Olney (Richmond Park) (LD)]

Today is another day when the Government’s mismanagement of the economy is causing market turmoil, putting thousands of pensioners and mortgage holders at risk. Yesterday, the Governor of the Bank of England told pension funds to “sort it out” after announcing that the Bank’s emergency bond-buying scheme would close in two days. The Government have 48 hours to save pension funds. Will they call the Chancellor back from Washington, hold an emergency Cabinet meeting and deal with the pension crisis?

[Chris Philp]

The Chancellor is in extremely regular contact with the Governor of the Bank of England, which, with its various agencies, has responsibility for systemic financial stability. We are working closely with it, and we have complete confidence in the Bank’s management of this process.

[Robert Largan (High Peak) (Con)]

The Conservative party stands for low taxes, but also for fiscal responsibility and sound money. Given that the Prime Minister has just said that there will not be public sector spending cuts, may I ask the Chief Secretary to the Treasury whether the Government are considering deferring any of the tax measures recently announced by the Chancellor?

[Chris Philp]

We do not plan to defer the tax measures, because we think that having an internationally competitive tax system is important, as it will help to encourage businesses and successful individuals to locate here in the United Kingdom, rather than anywhere else. I used to be technology Minister, and tech businesses can choose whether they locate here, in New York, San Francisco, Singapore, South Korea or anywhere else in the world. We want them to choose the United Kingdom, which is why competitive tax rates and the right regulatory environment are important.

[Mr Tobias Ellwood (Bournemouth East) (Ind)]

Britain has embraced globalisation arguably more than other nations over the past couple of decades. About half of our GDP is subject to international headwinds, but the world is getting more dangerous, not less. The Minister mentioned Ukraine. May I suggest that any future fiscal statement is run by the National Security Council for comment and perhaps recommendations, which might include organising a United Nations safe haven around the port of Odesa, so that the grain ships can get out, helping to reduce the price of food and inflation in this country?

[Chris Philp]

I thank my right hon. Friend for his suggestion about Odesa. I know that he is an expert in military matters and matters of international diplomacy, and that he has been to Ukraine in the past 12 months. I will pass his suggestion on to my colleagues.

[Mr Ben Bradshaw (Exeter) (Lab)]

I do not think that Ministers appreciate the gravity or urgency of the situation. We have a Prime Minister who committed to no spending cuts a few minutes ago, a Government still committed to tens of billions of pounds of unfunded tax cuts and the Bank of England withdrawing its special support on Friday. What are the Government doing to avoid a market crash this Friday?

[Chris Philp]

The reason that, on the second day of the new Government’s term in office, we brought forward the energy price guarantee was to protect consumers and in effect lower inflation by 5% compared with where it would otherwise be. We legislated at pace yesterday to alleviate the burden of the national insurance increase, which Opposition Members enthusiastically voted for. In terms of markets, as I said, we are in regular contact with the Bank of England and have complete confidence in its ability to manage systemic financial stability.

[Marco Longhi (Dudley North) (Con)]

The funds made available by the Bank of England to purchase gilts were described by the shadow Chancellor as taxpayers’ money. I find that confusing. My understanding—I am not an economist—is that those funds are not taxpayers’ money and that, in fact, the Bank of England may even make a profit from the actions that it takes on the markets. Different people will have different views about whether the Bank of England’s intervention is appropriate action, but does the Chief Secretary agree that it is completely wrong for the shadow Chancellor to describe those funds as taxpayers’ money?

[Chris Philp]

It is not taxpayers’ money in the sense that the phrase suggests. There is a fiscal indemnity so that any profit or loss will end up flowing back to the Exchequer, but, as I said to my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), whether that is crystallised depends on market prices. I point out that the volume of gilts so far purchased is considerably less than the limits that were set out.

[Sammy Wilson (East Antrim) (DUP)]

Covid supply-side disruption and the war in Ukraine have obviously added to inflation, as has monetary policy in the United States and our own high levels of borrowing, added to the rate of interest here in the UK. That has put real pressure on households across the United Kingdom. Despite the fact that the Government have responded by putting more money in people’s pockets through tax cuts and help with electricity bills, there is real public concern about the stability of our economy. Does the Chief Secretary accept that that is partly due to poor political decisions such as reducing the top rate of taxation, bad communication of his own strategy, open warfare on his own Benches and some of the careless remarks that we saw yesterday from the Governor of the Bank of England?

[Chris Philp]

I think the Prime Minister said a couple of weeks ago that, with hindsight, some of the pitch rolling or preparation could have been better handled, but I think that the package of measures is in the interests of the country. In addressing the cost of living pressures that the right hon. Gentleman referred to, we are protecting our fellow citizens, our constituents, from what could have been £5,000, £6,000 or even £7,000 annual energy bills. That is important. We are alleviating the burden of taxation at what is a difficult time. We are making sure that the households most in need of assistance get additional assistance, amounting to £1,200 a year for the one third of households on lower incomes. All those are measures designed to protect our constituents and I am sure that he will join me in welcoming them.

[Robert Halfon (Harlow) (Con)]

Of course, I welcome the energy intervention and help for the lower paid. However, does my right hon. Friend agree that, just as it is important to grow the economy, it is important to grow society and that, if we believe in trickle-down theory, we should also have trickle-up economics? By that, I mean that we need to invest in education and skills. Will he confirm that education spending will increase in real terms and incorporate rises in wages—whatever they may finally be—for the teachers, support staff and many other people working in education?

[Chris Philp]

I thank my right hon. Friend for his question. As Chairman of the Education Committee, he is a tireless campaigner for education and skills. I agree that the purpose of economic growth is to grow all parts of the economy, to help people across the entire income spectrum—rich and poor alike—and to ensure that the burden of taxation on those people is as light as it can be. That is why we have increased the minimum wage by such a large amount—from £5.93 an hour when Labour left office to £9.50 an hour today—and why we have lifted so many people on lower incomes completely out of taxation through increasing the income tax and national insurance thresholds to £12,570. All that disproportionately helps people on lower incomes.

We are seized of the importance of ensuring that education is properly funded. It is an investment in our country’s future and our children’s future, and I assure my right hon. Friend that that is very much at the front of our minds as we think about the fiscal plan.

[Richard Burgon (Leeds East) (Lab)]

Like many others, I have listened with disbelief to much of what the Chief Secretary has said. While we have been in the Chamber, the Bank of England has again linked the economic turmoil to the Government’s disastrous mini-Budget. Will he explain to us all and to the public why he is right and the Bank of England is wrong?

[Chris Philp]

As I have explained before, we are in a global cycle of interest rate increases and there has been global dollar strength. We have taken action in the energy intervention and in the growth plan to protect our constituents, get our economy growing and build on our record as the fastest growing G7 economy last year, this year and over the three-year period as a whole.

[Alexander Stafford (Rother Valley) (Con)]

The whole world is facing a global inflation crisis, and the US, Germany and other countries are facing a worse situation. That is why I believe that the best way to deal with the situation is to get more people into better-quality jobs. I have already hosted two job fairs in Rother Valley and will have another one Friday week at Wales High School. I am pleased to see that 680 more people are in work this year than last year, and 40 more people are in work than were last month. Does my right hon. Friend agree that the most important thing is to get people into good-quality paying jobs and that the Government always stand by working people?

--- Later in debate ---

[Chris Philp]

Absolutely. I completely agree with my hon. Friend, whose work on jobs fairs is extremely commendable. The way out of poverty and to create prosperity is to get people into good jobs and see rising wages. That is how we will combat poverty. That is why it is so welcome that unemployment is at a 48-year low.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

With the greatest respect, the Chief Secretary to the Treasury does not seem to be inhabiting the same planet as the rest of us. It is clear to anyone that the Government’s half-baked mini-Budget, sidelining of the Office for Budget Responsibility and lack of authority have caused chaos in the markets, and households are already paying the price. Should the Government not just accept that they could do something in the national interest to change that by reversing their disastrous mini-Budget that has sent us into chaos and calling a general election now so that the country can decide how they want to get out of this crisis?

[Chris Philp]

The hon. Member calls for a reversal of the growth plan, yet she voted in favour of its largest measure just last night. She talks about sidelining the OBR, yet it will be fully scoring the medium-term fiscal plan on 31 October. The right response is to protect our constituents from rising energy prices, and we did that on our second or third day in office. The right response is to get our economy growing, and that is what the growth plan will do.

[Imran Hussain (Bradford East) (Lab)]

Today, the Chief Secretary has made much mention of spending and pay restraint. During the cost of living crisis, the Government have repeatedly told workers that they must accept pay restraint to keep inflation in check while plotting to make further swingeing cuts to public services. Why do the pay restraint and cuts not apply to bankers, too? Is this not the same old Tory ideology of austerity for the oppressed many and luxury for the privileged few?

[Chris Philp]

If I may respectfully say so, that is nonsense. The tax reductions, including those that the hon. Gentleman voted for last night, apply to everybody in work earning more than £12,570 a year. The national insurance cut and the cut to the basic rate of income tax are tax cuts for everybody, rich and poor alike. The increases in the threshold disproportionately benefit people on lower incomes, and the people on the very lowest incomes now do not pay any national insurance or tax at all. Again, the significant increases that we have seen in the national minimum wage from £5.93 an hour under Labour to £9.50 an hour now most benefit people on low incomes. The Government stand on the side of people on lower wages but doing the right thing by working.

[Janet Daby (Lewisham East) (Lab)]

I thank the Minister for his attempts to reassure the UK economy, even though they are simply not working. Does the Minister agree with the former chief adviser to the Bank of England, who said that because of this Budget we can “say goodbye to growth”?

[Chris Philp]

Respectfully, no, I do not agree.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

The Joseph Rowntree Foundation has commented on reports that the Government plan to increase benefits only in line with earnings instead of CPI September inflation, stating that this would amount to the biggest

“permanent deliberate real-terms cut to the basic rate of benefits”

ever made in a single year. Can the Chief Secretary assure my frightened constituents today that, first, these reports are not true and, secondly, that he will uprate benefits in line with CPI inflation in September?

[Chris Philp]

I have already explained, as I think I said yesterday, that there is a statutory process that happens every single year when these decisions get taken. No decision has been taken on the question yet; indeed, the September CPI figure, which is relevant, has not even been published yet. When the decisions are taken, Ministers will of course have regard to the cost of living pressures and high inflation that we and many other countries are experiencing, although of course the energy intervention will make that inflation lower than it would otherwise be. We also, of course, must pay due regard to hard-working taxpayers who ultimately have to pay the benefit bills, and we will take all of that into account when we make the decisions.

[David Linden (Glasgow East) (SNP)]

Following the Government’s pretty disastrous mini-Budget, the hedge fund manager and Tory donor Crispin Odey is said to have made millions from shorting the pound. It has also been suggested that the Chancellor met Crispin Odey for lunch in the weeks running up to the mini-Budget. Is that true and, if so, what did they discuss?

[Chris Philp]

I am afraid that I have no idea who the Chancellor met. I am sure that if the hon. Gentleman writes to the Chancellor he will set that out, but I do not know.

[Alison McGovern (Wirral South) (Lab)]

I would like to ask the Chief Secretary about unemployment. How can he possibly crow about unemployment when there are fewer people in work than before the pandemic and when rates of inactivity because of long-term sickness are through the roof?

[Chris Philp]

I think having the lowest unemployment in my lifetime and having lower unemployment than comparable countries such as France and Italy is something that we can be proud of as a country. Of course, we are committed to working with people who have long-term sickness, working through the NHS and with work coaches at the Department for Work and Pensions to find ways to enable them to return to the workforce. Of course we are going to work with them, but ultimately having the lowest unemployment rate in my lifetime is something we should be proud of.

[Mr Kevan Jones (North Durham) (Lab)]

Listening to the Minister, I wonder what colour the sky is in his world. He talks about the energy price guarantee protecting families from energy bills of up to £6,000 a year, but as a direct result of the Government’s mini-Budget families in my North Durham constituency now face a mortgage increase of £6,000 a year not just this year but in future years as well. He can blame international markets when it comes to energy, but is he actually going to admit that the mini-Budget has led to those families paying £6,000 a year extra, if not more in some cases, and what is his advice to them?

[Chris Philp]

I have explained already that there is a global upswing in interest rates—

[Mr Jones]

No!

[Chris Philp]

The right hon. Gentleman can say no and not want to hear it, but I will just tell him again. In the United States, in the last nine months, there has been a 3% increase in the federal reserve base rate. In that same period, the Bank of England base rate increase has been only 2%. It has gone up by one and half times more in the United States compared with the United Kingdom. We do understand that there are cost of living pressures and that is why we have stepped in with the energy price guarantee to protect families in his constituency and mine from the £5,000 or £6,000 bills that they would otherwise have faced. That is why we are alleviating the tax burden on their shoulders and why we will ensure that the economy grows.

[Ben Lake (Ceredigion) (PC)]

A few weeks ago, the Welsh Government warned that they face a shortfall of some £4 billion to their three-year funding settlement as a result of rising inflation. Will the Minister confirm that the Treasury will consider, in the statement at the end of the month, providing additional funding support to help mitigate the impact of inflation on the budget for public services in Wales?

[Chris Philp]

Public expenditure both in Wales and across the United Kingdom stands at record levels. It has never been higher. In relation to extra funding, we are going to have iron discipline when it comes to public spending so the spending plan set out at the comprehensive spending review 2021, covering this current financial year and the next two, contains the limits we are going to stick to with discipline because it is important that we make the numbers add up.

[John Cryer (Leyton and Wanstead) (Lab)]

A few minutes ago, in answer to the hon. Member for Hitchin and Harpenden (Bim Afolami), the Chief Secretary said that the costs to the Treasury of the Bank of England’s intervention was not known because it depends on pricing, which I would imagine is fairly blindingly obvious even to him. Does that mean that the Treasury has made no assessment of that cost? If they have, what is it?

[Chris Philp]

It depends on market prices, as I say. Lacking any clairvoyance about where prices may move in the future, it is not possible to make an assessment not knowing where prices will be in a fast-moving market. I repeat that the volume of gilt purchases by the Bank of England have so far been a great deal below the ceiling that was set out.

[Holly Lynch (Halifax) (Lab)]

The Resolution Foundation’s chief exec, Torsten Bell, told the Treasury Committee this morning, “This is what happens when you are not paying attention.” He said that the Government’s proposals would not have been a good idea at any time but, “You definitely shouldn’t be doing it in the current climate.” Our constituents need the Government to pay attention. Where is the plan to stabilise the economy now and stem the ongoing damage the mini-Budget continues to cause?

[Chris Philp]

The growth plan protected the hon. Lady’s constituents and mine from what could have been £6,000 or £7,000 energy bills this winter. Frankly, I think they will welcome that. The growth plan will lay the foundations to continue the G7-leading growth we experienced last year and this.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I would like to dare the Minister to come to Newcastle and explain to my constituents, who are worried about their mortgage payments, their pensions, their benefits payments, their public services, their businesses and the cost of their supermarket shop, that this Government are fiscally responsible. They would laugh in his face, which is what the markets are doing. Why cannot he accept that the only way to address this crisis, made in Downing Street, is to withdrawal the fiscal mini-Budget and put in place something credible, costed and competent?

[Chris Philp]

Once again, the hon. Lady calls for the withdrawal of the growth plan, yet she voted last night for the biggest measure contained in it. I would be quite happy to explain to anyone, whether in Newcastle, in her constituency, or in Croydon, south London, in mine, that we are protecting people from energy price rises, that we have plans to keep our record growth levels going, that we are cutting taxes on working people and that we have a plan to get the economy going. I would be happy to go anywhere in the country and explain that.

[Mrs Paulette Hamilton (Birmingham, Erdington) (Lab)]

Why does the Chief Secretary think that the Nobel prize winner Paul Krugman said that the mini-Budget was “stupid and cruel”? I know that that is how my constituents in Erdington, Kingstanding and Castle Vale think.

[Chris Philp]

I imagine that constituents in the hon. Lady’s constituency, as much as in mine, are pleased that they will not face energy bills of £6,000 or £7,000 this winter, which the growth plan delivered on. I do not agree with the analysis she read out from Mr Krugman, or Dr Krugman—[Interruption.] Professor Krugman; I am happy to stand corrected. This growth plan will ensure that we continue with our G7-leading levels of growth.

[Barry Gardiner (Brent North) (Lab)]

The £60 billion of borrowing for the energy guarantee is to paid back by bill payers, not the oil and gas producers who are making record profits on the back of the public’s misery. That is not fair. Will the Minister consider raising not a temporary windfall tax but the basic tax rate for oil and gas producers, which in the UK is the lowest in the entire world? If he raised it even to the global average, he would raise an addition £13.4 billion every single year.

[Chris Philp]

I will make a couple of points. Extraction companies already pay about double the rate of corporation tax that other companies pay. In addition, we have imposed the energy profits levy, through which the rate of taxation on their profits increases to 65%. That is a pretty significant rate of tax, even by Labour party standards, and it will raise about £23 billion over the relevant three-year period. The hon. Member will also have seen the announcement from my right hon. Friend the Business Secretary yesterday on ensuring that renewable companies provide energy to our constituents at reasonable prices. The suggestion that no contribution is being made by the energy sector in the circumstances is, frankly, not accurate.

[Chris Stephens (Glasgow South West) (SNP)]

The Minister quoted IMF analysis but curiously not the part where it warns that rising prices will be worse in the UK, noting that the Government’s tax cuts will “complicate the fight” against soaring prices, and where it expects higher prices to last longer in the UK than elsewhere. What is his analysis in relation to food prices and tackling food poverty in the next two years?

[Chris Philp]

The energy intervention will make sure that inflation in this country is about 5% lower than it otherwise would be. That is not a Government forecast, but the consensus of independent forecasters. Also, the inflation rate in the United Kingdom is lower than in some other countries, including Germany and Holland.

[Derek Twigg (Halton) (Lab)]

No matter what the Minister has said today, the sums do not add up—that is a fact. The Government have lost control of the situation and shown a level of incompetence that has rarely been seen in British politics. As a result, we have seen increased anxiety and even terror about the cost of living and energy bills, as well as mortgages. On pensions, can the Minister give an absolute guarantee and assurance that people do not need to worry about the future of their pensions?

[Chris Philp]

If the hon. Member is asking about the state pension, the Prime Minister has been clear that we stand by the triple lock. If he is asking about the private pension system, yes, I have complete confidence in the Bank of England’s responsibilities around financial stability. On his first comment, I think that having the lowest unemployment rate for 48 years and the highest economic growth in the G7 is something we should all be happy about.

[Tonia Antoniazzi (Gower) (Lab)]

As well as mortgage costs, the cost of lending to businesses is going up. UK Finance said that small businesses have £240 billion in outstanding debt. What assessment have the Chancellor and his Department made of the impact that the rise in borrowing costs will have on businesses’ ability to invest, and what will the Minister do about it?

[Chris Philp]

We are very mindful of the impact that rising global interest rates have on businesses. That is one reason why we will keep corporation tax at 19% rather than increase it to 25%. What I do not know is whether the Labour party support that.

[Helen Hayes (Dulwich and West Norwood) (Lab)]

I would like to relay to the Chief Secretary a message that I just received from one of my constituents who was watching Prime Minister’s questions. My constituent said:

“The Prime Minister says she is unashamedly pro-growth and pro-business, but our local dry cleaner was in tears this morning at the news that their energy bill has gone up more than four-fold. They say they get it but they really don’t.”

What does the Minister have to say to my constituent and thousands more of my constituents who are simply terrified about how they will sustain their businesses or keep a roof over their heads in the context of the self-inflicted chaos and harm to our economy that his Government are causing?

[Chris Philp]

On the energy bills for the dry cleaner in the hon. Member’s constituency, she must be aware that the whole world has been experiencing the energy price crisis as a result of Putin’s illegal invasion. That is driving energy prices higher. The dry cleaner should be the recipient of the business energy guarantee scheme in relation to their bill. It should not see bills rising as high as she suggested, so if she writes to the Secretary of State for Business, Energy and Industrial Strategy or to me about that case, I will be very happy to look into it to make sure that the business—like businesses in all our constituencies—is being properly protected.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Further to the question from my hon. Friend the Member for Halton (Derek Twigg), will the Minister give us a few details of the Government’s back-up plan to protect people’s pensions, should the run on gilts continue when current Bank of England support ends, despite dire warnings from the pensions industry?

[Chris Philp]

As I said, the Chancellor of the Exchequer is in regular contact with the Governor of the Bank of England and his officials. The Bank of England has responsibility for financial system stability and I have complete confidence in its ability to manage that.

[Wendy Chamberlain (North East Fife) (LD)]

The energy price guarantee still means increases in costs for consumers. We know that disabled people already face higher costs, and the only support that thousands of unpaid carers receive from the Government is carer’s allowance. In many cases, that means that they have been excluded from cost of living support. In addition, carer’s allowance is effectively means-tested due to the earnings cap, meaning that carers cannot seek work, as the Chief Secretary seems very keen for them to. Will he commit to ensuring that we review the carer’s allowance situation and, if not, that we provide further support to carers, who do such valuable work?

[Chris Philp]

The hon. Lady is right that despite the energy price guarantee—the decisive intervention that has protected our constituents from £5,000 or £6,000 bills—bills this year are higher still than they were last year. That is why we have made the £37 billion intervention, which, for people on lower incomes, amounts to £1,200 a year. There is more money on top of that for people with disabilities for the reason that she mentions. As for reviewing various components of disability and caring benefits, those will get reviewed in the normal way along with the other benefits. The Minister with responsibility for welfare and the Chancellor of the Exchequer will lay all that out in the coming weeks.

[Nick Smith (Blaenau Gwent) (Lab)]

I, too, am really concerned about the oversight of our pensions industry. When was the last stress test to see whether these funds had sufficient liquidity to cope with market turbulence, and can the Minister explain in simple terms the regulation of pension funds right now? Our country needs pension stability, not ongoing, home-grown financial crises.

[Chris Philp]

We have excellent regulators overseeing our financial system and pensions in particular, whether we are talking about the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority or the Pensions Regulator. They are all rightly independent, but all of us in Government and Parliament can have every confidence that they are making sure that our system is operating safely and securely.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

The Minister said that the Government were being fiscally responsible. I am no expert, but fiscal responsibility does not usually result in the market and the wider UK economy being set ablaze in what can only be described as a bin fire. With the pound in freefall, pension funds on the brink, unfunded tax cuts for the rich, mortgage payments up by hundreds of pounds and the UK’s financial institutions—barring the Institute of Economic Affairs, obviously—utterly undermined, the Government are waiting another six weeks to show their working. That is not fiscally responsible; it is chaos theory-IEA style. Will the poorest pay for this or will benefits be uprated in line with inflation—yes or no?

[Chris Philp]

The hon. Member was obviously not listening to my previous answers in which I said that the decision has not been taken and the CPI figure, which is a critical input into the decision, has not even been published yet. I also explained how interest rates around the world are rising—they have risen more in the US than they have here—and how the dollar has been strong against a number of currencies. Its strengthening against the euro has been only about 3% higher so far this year than it has against sterling, so I do not accept the hon. Member’s characterisation at all. As for fiscal responsibility, we have the second lowest debt-to-GDP ratio in the G7. The Chancellor said that we will get the debt-to-GDP ratio falling over the medium term. The hon. Member for Argyll and Bute (Brendan O’Hara) has less than three weeks to wait, if he can contain himself, before the medium-term fiscal plan is set out in full.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

A local teacher and her partner wrote to me last week. Once their fixed-rate mortgage comes to an end, their mortgage will rise by £9,000 a year; that is an extra £750 a month. They are terrified and cannot sleep because they do not have that sort of money spare. I have listened to the Minister’s answers, but given that the IMF’s Tobias Adrian said yesterday that the announcements on 23 September triggered rising interest rates, will the Minister finally accept that the Conservative Government’s mini-Budget has caused this chaos for our constituents?

[Chris Philp]

We have every sympathy with people who are struggling. That is why we have the energy price guarantee. It is why we have had the £37 billion intervention. It is why we are cutting taxes, particularly for people on lower incomes. It is why the minimum wage increased by so much a few months ago. It is why we have increased the national insurance threshold to help people.

On interest rates, I have explained more than once this afternoon that there is a global cycle that has been going on for about nine months. So far in this calendar year, interest rates in the United States, a comparable economy, have increased one and a half times as much as in the UK: by 300 basis points, compared with 200 basis points. It is very important that the House keeps that context in mind.

[Rachael Maskell (York Central) (Lab/Co-op)]

Yesterday, when I asked the Chancellor, he could not tell me how private pension schemes will be protected since the Bank of England has confirmed that it is ending its refinancing scheme. The Pensions Regulator has a responsibility to ensure that pension schemes are viable. However, in the current economic situation, without making demands on employers and workers, those pension schemes will collapse. How is the Chief Secretary going to respond?

[Chris Philp]

I have to say that the speculation in which the hon. Lady is engaging is slightly reckless, if that is perhaps not too strong a word. We have extremely capable regulators: the Bank of England, the Prudential Regulation Authority, the Pensions Regulator and others. Their responsibility is to make sure that our financial system, including pensions, is safe and secure for our constituents. The Government have complete confidence in our regulators, and I think the House should as well.

[Fleur Anderson (Putney) (Lab)]

There has been growth since the mini-Budget: a growth in people stopping me on the street in Putney, Roehampton and Southfields to say how worried they are about their bills and rising mortgage costs. I met estate agents in Putney this week; they say that the stamp duty change will make absolutely no difference to the housing crisis in Putney. What does the Chief Secretary say to families who are looking at a £500 increase in the cost of their mortgage as a result of this failed strategy, or at having that cost passed on to them if they are renting?

[Chris Philp]

When the hon. Lady was stopped in the street, I presume that she explained the points about global interest rates increasing. When her constituents asked about energy prices, I presume that she explained to them that this Government took decisive action on our third day in office to protect our constituents from bills that could have gone up to £5,000 or £6,000 a year. I presume that she also explained that the Labour party’s plan was good only for six months, but the plan that we have put in place lasts for two years.

[Owen Thompson (Midlothian) (SNP)]

We have seen the crash of the pound. We have seen mortgage prices going through the roof. We are seeing the cost of living across the country getting out of control. There has been economic chaos since this new Tory Government took over from the last Tory Government. May I ask the Chief Secretary: on a scale of one to 10, how well does he think it is going?

[Chris Philp]

I do not call the lowest unemployment for 48 years, and the top growth rate in the G7, economic chaos.

[Florence Eshalomi (Vauxhall) (Lab/Co-op)]

Small businesses across my constituency are watching the news with utter dread. They have just about survived the pandemic, the Brexit uncertainty and the collapse of the tourist trade in London, which really affects my constituency—we normally have more than 3 million people going through Waterloo station alone. The spiralling costs, combined with the recession, will wipe out any existing benefits or support from the Government. These businesses simply do not have six months. The Chief Secretary has gone on and on about growth, but does he agree that growth will happen only if these businesses survive the winter?

[Chris Philp]

That is why we have offered the energy price guarantee to businesses as well as to consumers, and why we are keeping corporation tax low at 19% rather than putting it up. Of course, that helps businesses of all sizes: any business making £50,000 a year or more in profit will benefit from the freeze in corporation tax. We do not yet know, as far as I am aware, whether the Labour party supports that position. The shadow Chancellor is sitting impassively, not giving any indication whether she supports lower taxes; I think the House would love to hear at some point what her views are.

Those are the things that we are doing to help businesses. Last night, we voted—the Labour party voted for it as well—to reduce the national insurance burden on businesses. That is the plan that we have to help businesses, and I am very proud to stand behind it.

[Dame Diana Johnson (Kingston upon Hull North) (Lab)]

I am very pleased to hear that the Chief Secretary has confidence in the Bank of England. The media are now reporting, for the seventh time, that the Bank of England has clearly linked the mini-Budget or UK-specific factors to the turmoil in the bond market. That includes, in the past hour, the Governor speaking to camera and to a room full of the world’s top banking chief executive officers in the US. Can the Chief Secretary explain to me why the Governor of the Bank of England is wrong and why he himself is right?

[Chris Philp]

Obviously I am not in Washington and have not heard those comments. I am not going to speculate about what the Bank of England Governor may have said. We are working closely with the Bank of England Governor and other regulatory authorities to make sure that we navigate these globally volatile markets successfully, but in the long term what matters is continuing to grow our economy. That is what the Government’s plan will do.

[Stephen Flynn (Aberdeen South) (SNP)]

The energy price guarantee is doing some heavy lifting today, so let us look at it in more detail. Energy Action Scotland has produced analysis in the past couple of days that shows that the average bill in Scotland will be not £2,500, but £3,300, and that for someone who lives in a rural area it will be in excess of £4,200. What message does the Chief Secretary have for people living in energy-rich Scotland, where we produce six times more gas than we use and almost all our electricity comes from renewables?

[Chris Philp]

Well, if the nationalist Administration in Scotland were willing to support more natural gas and oil extraction or indeed nuclear power generation, that would help the energy situation. Renewable energy use in the United Kingdom has increased from, I think, 7% to 42% over the past 12 years, which is very welcome. The energy price guarantee has protected families and businesses across the United Kingdom from bills that could have been £6,000 or £7,000 higher, which is a huge amount. The hon. Gentleman has not mentioned the £37 billion intervention, which particularly helps people on lower incomes, giving them an extra £1,200 a year to support them with bills. The fact that we are in such an economically successful Union means that we can offer things like the energy price guarantee and the £37 billion energy intervention.

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

It does not get more serious than this Tory-led crisis made in Downing Street. Only yesterday, a mortgage adviser in my constituency contacted me about offers that he is redoing for customers with increases of £300 to £500 a month. People are desperate for stability, but rates are changing by the day.

Commentators have said that sidelining the OBR in the recent mini-Budget and not having its assessment created more uncertainty. Does the Chief Secretary agree that sidelining the OBR was not helpful and was a mistake? Can we have a guarantee that it will not be sidelined on 31 October or in any future fiscal event?

[Chris Philp]

When the new Government came into office there was a need to act urgently on the energy price guarantee, and to alleviate the extra national insurance burden, which the hon. Gentleman’s constituents and mine are paying right now, but—thanks to yesterday’s vote—will not be paying from 6 November. That is why it was done quickly: to address the situation in front of us.

The OBR will be fully scoring the medium-term fiscal plan on 31 October. There is a statutory requirement under the Budget Responsibility and National Audit Act 2011 for the OBR to produce forecasts twice in every financial year. That commitment will continue.

[Carla Lockhart (Upper Bann) (DUP)]

The Chief Secretary will be aware of the stress on mortgage holders as they have watched deals being withdrawn with the prospect of steep rises ahead. What assurances can he give them that the Government will act to undo the damage done and to ensure that mortgages remain attainable and affordable for homeowners?

[Chris Philp]

When I checked, there were about 2,300 mortgages available. Obviously the global cycle of increasing interest rates is affecting people in the United Kingdom, as it is affecting people around the world, including in the United States of America, as I set out earlier. We are trying to make sure that other cost of living pressures are mitigated as far as possible through things like the energy price guarantee, reductions in the burden of taxation and the plan to continue economic growth.

[Margaret Greenwood (Wirral West) (Lab)]

A constituent has written to me to say that she and her partner are being priced out of the private rented sector. They recently secured a mortgage for a shared ownership flat, but the mortgage offer has now been withdrawn. She is desperately worried for herself, for her partner and for their young son, who attends a local school. She says that the Government’s mini-Budget has destroyed their dream. Will the Chief Secretary apologise to my constituent? Can he tell her what she should do and how the Government will end this mayhem that they have caused?

[Chris Philp]

The Government are keen to help everyone, including the hon. Lady’s constituent, to get on to the housing ladder: that is something we strongly support. I have already explained about the global interest rate increase cycle that countries around the world are experiencing, but we are doing everything we can to help, and I believe that the Secretary of State for Levelling Up, Housing and Communities will be laying out some plans relating to house building in the coming weeks. We have already reduced stamp duty for first-time buyers—stamp duty is a particularly challenging element of buying a first home, because it cannot be funded by a mortgage—and the Government will continue to do everything they can to support people who are trying to get on to the housing ladder.

[Mohammad Yasin (Bedford) (Lab)]

This is the question that my constituents want me to ask the Government: why is the Chancellor experimenting with their lives, putting their homes and pensions at risk, to test out his fancy economics? The Chancellor and the Prime Minister have no mandate to take the gamble that they are taking, so will the Chief Secretary urge his colleagues to ditch their disastrous Budget and put their new plans to the people in a general election?

[Chris Philp]

If the hon. Gentleman thinks it was all so disastrous, perhaps he could explain why he voted for it last night. The real gamble is having taxes that are too high. The real gamble is not having a plan for growth. This Government have a plan for growth; the Labour party has no plan.

[Jim Shannon (Strangford) (DUP)]

Will the Minister outline the specific help that is available to the working poor? They face not simply energy increases but mortgage increases, and increases in the cost of diesel and petrol just to get to work to actually earn some money, and the price of groceries is 15% higher. While those people’s top-line income does not qualify them for universal credit, the present circumstances must surely call for assistance. Will the Minister tell me and the House where that help will come from?

[Chris Philp]

We certainly do stand with the working poor. That is why we have increased the thresholds to ensure that people on lower incomes pay very little income tax and national insurance. It is why we froze petrol duty, and, indeed, cut it by 5p earlier this year. It is why we have increased the national minimum wage by such a large amount, from just £5.93 an hour under the last Labour Government to £9.50 an hour today. So we do stand on the side of the working poor, and I will certainly continue to work with the hon. Gentleman to ensure that his constituents are looked after and protected in the years ahead.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Given that the UK Government, in the run-up to their fiscal statement, chose to ignore warnings from anti-poverty campaigners about the devastating impact that a lack of targeted support for lower-income households would have on those households, will the Chancellor now be making some sort of assessment of the impact that that will have on levels of poverty in the UK?

[Chris Philp]

I dispute the claim that there was no targeting. I have already pointed out that the minimum wage has risen hugely under this Conservative Government, from £5.93 an hour to £9.50 an hour. When we made the first energy intervention this year with the £37 billion package, that was targeted: it was targeted, rightly, at people on lower incomes, so that those on the lower one-third of incomes received £1,200 per annum, and people with disabilities, and some pensioners, received even more than that.

[Tahir Ali (Birmingham, Hall Green) (Lab)]

Hard-working families are paying the price for this Government’s reckless kamikaze Budget. Hundreds of families in my constituency depend on universal credit while being in full-time work. According to a recent Survacion poll, 38% of them fear being made homeless next year while 34% fear having to resort to food banks next year. Given that the Government have just committed themselves to no spending cuts, will the Minister also make a commitment to ensuring that benefits are uprated to keep up with inflation, so that those most in need in my constituency and throughout the country will not be forced from their homes and left to go hungry?

[Chris Philp]

As I have said, no decisions have yet been taken; that will happen in the normal way in the coming weeks. I have already explained how the minimum wage has gone up and how we have alleviated the burden of taxation on people on lower incomes, but ultimately what will help the hon. Gentleman’s constituents is ensuring that we have a growing economy so that everyone’s wages can go up, which is why we have a growth plan. I think the hon. Gentleman and his constituents can take comfort from, and be happy about, the fact that we have the lowest unemployment for 48 years and the highest growth in the G7. However, we would like to go further to help his constituents, and that is why we have a growth plan.

[Ruth Jones (Newport West) (Lab)]

My son currently pays £612 a month for his mortgage. Next year, when his fixed rate comes to an end, he will be paying at least £1,300 a month. My daughter, a hard-working junior doctor, cannot even look at buying a property on her salary of £23,000 a year. The stamp duty cut is no help to her.

What this Government are doing is not hypothetical; it is real, and it is affecting people like my son and daughter. The U-turns, tax cuts for the richest and a failed Budget are all signs of a Government who are out of ideas. Will the Chief Secretary tell me why any person in the UK should listen to a single thing they say?

[Chris Philp]

As I have already explained repeatedly, there is a global increase in interest rates, and as I have also pointed out, the increase in base rates in the United States this calendar year has been 1.5 times higher than the base rate increase in the United Kingdom. We know that people are facing pressures, for the reason that the hon. Lady set out, and also because of energy prices. That is why we have helped with the energy price guarantee. It is why we have put £37 billion towards helping people. It is why we are alleviating the tax burden on people on lower incomes, and it is why we have a growth plan. That is what we are doing to deal with these global pressures, and our plan is designed to help people exactly like the hon. Lady’s children.

[Madam Deputy Speaker (Dame Eleanor Laing)]

And the last word comes from Alan Brown.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I thought you were going to say “Last but not least”, Madam Deputy Speaker, but thank you.

According to figures published in connection with the mini-Budget, not implementing the corporation tax increase is predicted to cost the Treasury more than £2 billion in this financial year alone, and in subsequent years £12 billion, £17 billion, £18 billion and £19 billion: £68 billion in total. We can split hairs about whether or not that is a tax cut, but is not the reality that the Treasury’s own figures show that cosying up to business has created a £68 billion black hole?

[Chris Philp]

I thought you were going to say that you had saved the best till last, Madam Deputy Speaker.

It is important to have internationally competitive rates of corporation tax. Keeping it at 19% is not just for big businesses; it is for smaller businesses too, because any business with profits of over £50,000 will benefit. Many of these businesses have a choice about where to locate. They do not have to locate in the United Kingdom, but could go to America, to Geneva, Singapore or South Korea. Many of them are internationally mobile. We want them to choose to locate in the United Kingdom and to invest in the United Kingdom—including, of course, Scotland—and that is why we are maintaining a competitive rate of corporation tax. We still do not know what those in the Labour party think about this, because they will not tell us.

[Stephen Flynn (Aberdeen South) (SNP)]

On a point of order, Madam Deputy Speaker. During Scottish Questions today the shadow Minister, the hon. Member for Blaydon (Liz Twist), stated:

“I have raised before at the Dispatch Box the fact that the UK Government chose to sideline the Acorn carbon capture and storage project in the north-east of Scotland. The Scottish Government have refused to provide financing either.”

However, on 14 January this year, despite this being a matter for the UK Government, the Scottish Cabinet Secretary Michael Matheson stated:

“That is why I am announcing today that we stand ready with up to £80 million of funding to help the Scottish Cluster continue and accelerate the deployment of carbon capture technology.”

May I seek your esteemed guidance, Madam Deputy Speaker, on how we can ensure that the record reflects the reality?

Oral Answers to Questions

Chris Philp Excerpts

Tuesday 11th October 2022 Commons Chamber

[John Stevenson (Carlisle) (Con)]

11. What fiscal steps he is taking to support investment in infrastructure projects.

[The Chief Secretary to the Treasury (Chris Philp)]

A critical part of the Government’s growth plan is road, rail and energy infrastructure. We will be introducing legislation shortly to ensure that the delivery of that critical infrastructure is massively sped up.

[Ben Everitt]

I am grateful for the investment in physical infrastructure, but those on the Treasury Front Bench will know that we need the skills for the future to deliver the jobs for the future to make that infrastructure investment sustainable. Will the Minister meet me to discuss the idea of MKU: a brand-new university in Milton Keynes? Every single Minister and Secretary of State I have spoken to about it thinks that it is a good idea. Will my right hon. Friend meet me to get it off paper and get boots on the ground?

[Chris Philp]

I thank my hon. Friend, who is a tireless champion for the great city of Milton Keynes. I would be delighted to meet him to discuss the idea along with colleagues from, perhaps, the Department for Education. I note that Milton Keynes has already received £23 million through the towns fund, but I am happy to meet him to discuss the idea.

[John Stevenson]

Growing the economy is about improving people’s lives as well as improving the success of places such as Carlisle. To achieve that, we need both public and private investment, and, in the case of public investment, it is infrastructure that will make the real difference. Given the rise in the cost of infrastructure projects, will the Minister confirm that where such projects have a shortfall in funding but are ready to go, the Government will step in and give additional funding to support them?

[Chris Philp]

It is very much our intention to speed up projects where they are ready to go. The growth plan announced a few weeks ago made clear our commitment to doing that. The last spending review provided, I think, about £100 billion of funding towards critical economic infrastructure. Where we can speed up projects, we will certainly be doing that. One project that we have in mind for exactly that is the A66 northern trans-Pennine route, which I believe goes not far from my hon. Friend’s constituency.

[Nick Smith (Blaenau Gwent) (Lab)]

In 2017, former Conservative energy Minister Charles Hendry conducted a review of the Swansea Bay tidal lagoon. He gave it the thumbs up, but since then successive Governments have not pursued it. Given the energy crisis we are in, will the Minister consider reopening the business case? It could be a fantastic source of green energy for our country.

[Chris Philp]

The Government are extremely interested in all forms of new energy generation. We are determined to make sure that the United Kingdom is electricity-independent. We are looking at all kinds of projects, including of course marine projects. I understand that when the Swansea scheme was investigated there were questions about value for money, but I am sure that we would be very happy to take a careful look at any proposition that is put forward, if the hon. Gentleman wants to do so.

[Stephen Flynn (Aberdeen South) (SNP)]

When it comes to the delivery of projects, I cannot help but admire the speed at which the Government managed to transform Downing Street from a nightclub into a casino. I have one ask that is not a gamble. When are the Government going to deliver the Acorn project in the north-east of Scotland?

[Chris Philp]

My right hon. Friend the Chancellor says that that is something we are examining carefully. The hon. Gentleman’s characterisation of the growth plan is extremely unfair. The real risk is in not having a growth plan. The real risk is in having taxes that are too high. The real risk is not investing in infrastructure. It is clear that this Government have a growth plan and the Opposition have no plan.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Of course it is always right to look for efficiencies and try to get better value for money for the taxpayer. As we look for spending cuts, could my right hon. Friend confirm that they will not come at the expense of reductions in vital infrastructure spending in our regions, not least in the north of England?

[Chris Philp]

I am pleased to say, as my right hon. Friend the Chancellor said when he introduced the growth plan, that expediting critical infrastructure was an important part of that plan. Without critical infrastructure, we are not going to see the growth in jobs or wages and the prosperity that we all want. The Government will do everything that they can to speed up the delivery of those projects.

[Mr Clive Betts (Sheffield South East) (Lab)]

We do not know much yet about the Government’s new investment zones, but in order to achieve success for the primary investment in them, will the Government have specifically targeted funds for infrastructure projects in those zones? If so, will this be a further unfunded expenditure commitment?

[Chris Philp]

I think the Chancellor set out the investment zone concept very clearly. There will be, by agreement with local authorities, planning freedoms and very significant tax cuts. Infrastructure investments are being handled separately to that, but it would be reasonable to expect a degree of co-ordination between the Department for Levelling Up, Housing and Communities and the Department for Transport, as they consider the way investment zones interact with transport projects.

[Marsha De Cordova (Battersea) (Lab)]

5. What assessment he has made of the potential effect of removing the cap on banker’s bonuses on the distribution of wealth.

--- Later in debate ---

[David Linden (Glasgow East) (SNP)]

13. What recent discussions he has had with the Secretary of State for Work and Pensions on the potential effect of inflation on that Department’s budget.

[The Chief Secretary to the Treasury (Chris Philp)]

I have regular discussions with my right hon. Friend the Secretary of State for Work and Pensions. If the hon. Member’s question relates to the operating budget of the DWP, we expect Departments to live within their existing CSR21 allocations. If his question relates to the level of benefits more generally, a statutory process is undertaken every year and no decisions have yet been made. They will be made in due course in the normal way.

[David Linden]

I thank the Minister for his answer, if not for his recent tweets. Has he had any representations from the Secretary of State for Work and Pensions to increase social security payments in line with inflation? Far too often, this Government talk about their agenda for growth, but failure to increase in line with inflation will result only in a growth in food banks in Easterhouse, in fuel poverty in Carmyle and in child poverty in Baillieston. When is the Minister going to do the right thing and commit to raising social security in line with inflation and not with earnings?

[Chris Philp]

I am obviously not going to offer any kind of running commentary on the ongoing internal discussions. I have said that the normal ordinary statutory process is ongoing, but the Government are mindful of the cost of living pressures that people are facing. I would draw the hon. Member’s attention to the large increase in the national minimum wage—I think about 7%—that took place last April or May, and there are now more vacancies in the economy than there are people on unemployment benefits.

[Julian Smith (Skipton and Ripon) (Con)]

Can the Minister confirm that the Government will not balance the forthcoming tax cuts on the backs of the poorest people in our country?

[Chris Philp]

The Government’s first objective is to ensure that the economy is growing. That will help to lift wages and to create new jobs and a sustainable tax base for our public services, but as we make the decisions that my right hon. Friend refers to, we are going to balance considerations of fairness and the cost of living pressures that people suffer with the interests of the taxpayers who are working hard to pay tax.

[Mr Speaker]

I call the Chair of the Public Accounts Committee, Dame Meg Hillier.

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

The Minister talks about vacancies in the job market. There are vacancies, of course, but many of my constituents earn under £12,000 a year. They will not benefit from the tax cut, so they rely on universal credit to make up the gap. They cannot afford to work because of the high cost of childcare. They are already on the poverty line. What is his advice to them? Will he give us some comfort that the Government will make the right decision on uprating benefits?

[Chris Philp]

I have already explained that the normal statutory process is under way. When it comes to helping people on lower incomes, I mentioned the very significant increase in the minimum wage just a few months ago. We made an unprecedented intervention this year, amounting to £37 billion, which is disproportionately directed towards people on lower incomes. The one third of households on lower incomes are receiving an extra £1,200 this year.

The hon. Lady also referred to the fact that people earning £12,570 or less pay not a penny of national insurance and not a penny of income tax, which is thanks to the action of this Conservative Government.

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

14. What fiscal steps his Department is taking to encourage business innovation.

--- Later in debate ---

[Paul Holmes (Eastleigh) (Con)]

Since the 1970s, residents in Eastleigh have long been expecting, and have been promised at times, funding for the Chickenhall Lane bypass, including being allocated funding in the 2015 Red Book. Will the Minister agree to meet me and Hampshire County Council to discuss getting this sorted for people who have simply waited far too long?

[The Chief Secretary to the Treasury (Chris Philp)]

My hon. Friend is a tireless advocate for that and other projects in his constituency. I and perhaps colleagues from the Department for Transport would be delighted to meet him and his county council colleagues to discuss that important project.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

The Chancellor was warned that unfunded tax cuts would force the Bank of England to increase rates and that is exactly what has happened. The Bank of England has said today that, in effect, the mini-Budget has caused a material risk to Britain’s financial stability. Can the Chancellor explain how people are supposed to pay their mortgages, which have gone up by £500 on average and £900 in London? What is he going to do about it, because it is not acceptable that his incompetence is risking people’s livelihoods?

Health and Social Care Levy (Repeal) Bill

Chris Philp Excerpts

2nd reading
Tuesday 11th October 2022 Commons Chamber

[The Chief Secretary to the Treasury (Chris Philp)]

I beg to move, That the Bill be now read a Second time.

Let me start by reiterating that the central and defining mission of this Government is growth. This Government are completely and unashamedly committed to achieving that objective—economic growth. However, we are not committed to it simply for its own sake or for some abstract reason; we are committed to growth because of the impact it will have in so many ways on people’s lives.

Growth brings higher wages, bringing prosperity to our constituents. Economic growth will create new and better-paid jobs and, critically, economic growth will create a sustainable tax base that will fund public services into the future. Without strong economic growth, we cannot have well-funded health services, education and police. It is quite clear that, with economic growth, everyone benefits—not in some trickle-down sense, but because it will elevate salaries for everybody, create jobs the length and breadth of the United Kingdom, and generate the tax income that will fund our public services.

Crucially, this growth agenda set out by the Chancellor two or three weeks ago will pursue growth in a way that is fiscally responsible, and on 31 October—in just under three weeks’ time—the Chancellor will set out in detail how that will take place, buttressed by a full scoring and forecast produced by the Office for Budget Responsibility.

The growth plan announced by the Chancellor just a fortnight ago is crafted to achieve 2.5% growth year on year. It aims to do so in a host of different ways. First, it will do so through lower taxation, because with lower taxation we incentivise companies to invest, we incentivise people to get into work, and we encourage companies and high-potential individuals to choose to locate in the United Kingdom as opposed to somewhere else. Many successful companies, and indeed successful people, have a choice about where they locate, where they do business and where they work, and by having internationally competitive rates of personal and corporate taxation we are encouraging them to make the choice to locate in the United Kingdom, all of which improves and increases economic growth.

There is of course more to the growth plan than just that. We are working on infrastructure—whether road, rail or energy infrastructure—and speeding up its development, as well as supporting skilled employment, removing barriers to investment, getting the housing market moving and removing obstacles, such as the recent IR35 changes that have caused difficulties for many self-employed people and contractors. Critically, the growth plan has moved at pace to help both households and businesses with the terrible crisis posed by Putin’s illegal invasion of Ukraine and its consequences for energy bills.

Just a few weeks ago, households and businesses in the United Kingdom were faced with the realistic prospect of domestic energy bills going up to £5,000, £6,000 or even £7,000 per year. The energy price guarantee takes that possibility off the table, not just for six months but for two years, ensuring that the average household will pay no more than £2,500.

[Peter Grant (Glenrothes) (SNP)]

Does the Minister accept that, regardless of what the Government have done, my constituents can expect to pay double for their energy bills this year compared with what they paid last year?

[Chris Philp]

The energy price guarantee ensures that the average household pays no more than £2,500 a year. The hon. Gentleman is correct that that is higher than average bills this time last year, and that is why the comprehensive package was put in place earlier this year. It amounts to a further £37 billion, and ensures that households on the lower one third of incomes receive £1,200 per year, which pretty much fills the gap that he described. The energy price guarantee, combined with that £37 billion intervention, is the kind of thing we can do as a Union and as a United Kingdom. It is the kind of thing we can do together that would be so much harder apart, and that is one of the benefits of our precious Union. There is a lot more in the growth plan, but I will not labour the point because we are here to talk about the health and social care levy.

[Hywel Williams (Arfon) (PC)]

Growth in Wales has for a long time—for many decades before and after devolution—been based partly on the idea of attracting high-worth individuals to invest in Wales. The mixed result of that gives me pause for thought as to that strategy. Does it do the same for the Minister?

[Chris Philp]

We will deliver growth if we encourage people across the whole income spectrum—people doing jobs on lower incomes, those on higher incomes, businesses big and small alike. We need to encourage the entire economy, which is why tax cuts in the growth plan are broadly based, like the tax cut we are debating now. We need to encourage them all, which includes companies and people who are internationally mobile. I used to be technology Minister, and most technology businesses have a choice about where they locate. They are very internationally mobile. They could go to New York, San Francisco, Singapore—they could go anywhere in the world. We need to ensure that every part of the United Kingdom is attractive to such businesses, and the growth plan intends to create those conditions that make us attractive as a nation.

[Alex Cunningham (Stockton North) (Lab)]

The Minister seems to have mentioned everything except the need for a healthy workforce. Local authorities spend £1.2 billion every year on social care needs caused by smoking, and that will get more expensive if the Government fail to address the issue of tobacco. This morning the Health and Social Care Secretary hinted that she will do less, not more, to tackle the dangers of smoking. Will the Minister join me and press her to bring forward the tobacco control plan, to help protect the health of the nation and save health and social care costs?

[Chris Philp]

I do not think I should trespass into the realm of my right hon. Friend the Secretary of State for Health and Social Care and Deputy Prime Minister. She will make her own views and policy on that issue without intervention from me. We are ensuring that the NHS is well funded so that it can provide the treatment our constituents need. Our commitment to NHS funding is undiminished.

Let me turn to the Bill, which repeals the health and social care levy. Members will recall that the health and social care levy was originally announced in September last year, and the Health and Social Care Levy Act 2021 received Royal Assent on 20 October last year. The levy had two phases: first, a temporary 1.25% increase for employers and employees in the current tax year; and then from April 2023 a formal surcharge of 1.25%, which would have affected not just those of working age but also those of state pension age. The Bill repeals that Act with elegant simplicity. Clause 1 states simply:

“The Health and Social Care Levy Act 2021 is repealed.”

[James Cartlidge (South Suffolk) (Con)]

This is my first opportunity to congratulate the Chief Secretary on his appointment. What he said on the energy support for my constituents and all our constituents is very important, and I very much welcome that. However, on repealing the levy, he is of course aware that one of the most important things that it was going to fund was the welcome cap on care costs introduced by the Government, which had been promised by successive Governments with many a White Paper and many a Green Paper. How will we now pay for that?

[Chris Philp]

I thank my hon. Friend for his kind words. We are long-standing colleagues, and I look forward to working with him for many years to come. To be clear, the funding that was to be provided via the levy for both health and social care, which in the case of social care amounted to £5.4 billion over the three-year spending review period, is completely unaltered. There is no change to that funding at all.

My hon. Friend asked about funding for social care. The funding envelope for all public services will be set out by my right hon. Friend the Chancellor on 31 October via his medium-term fiscal plan. We will ensure that we are responsible custodians of the public finances by sticking to the spending plan set out in spending review 2021. We will be disciplined about doing that. We will ensure that we generally exercise spending restraint, mindful of the fact that we cannot have public spending forever increasing at faster and faster rates. We will be disciplined about how we manage the public finances.

I also point to economic growth. If, or rather when, we are successful in delivering the growth plan’s mission to elevate trend growth from 1.5% to 2.5%, with an extra 1% per annum over a consistent period of time—for example, five years—by the fifth year that additional growth will deliver about £47 billion of extra tax revenue, as set out in the table on page 27 of the Blue Book that accompanied the growth plan. I hope that gives my hon. Friend a hint about our thinking, but really the medium-term financial plan on 31 October will provide the most complete answer.

[Hywel Williams]

The Chief Secretary is being generous with his time. I should say that the table on page 27 shows a target, rather than anything that will stand closer examination. However, in respect of the decision to increase national insurance to pay for social policy—in England, I might add—the Welsh Government had no say whatsoever, just as they had no say in the now paused policy of scrapping the additional rate of income tax. Does the Minister not think that the Welsh Government, who are, after all, responsible for social care in Wales, warrant consultation on a fundamental matter such as this?

[Chris Philp]

I do not think that the Government in Wales complained too loudly when they were provided with extra money to fund social care in Wales. On the hon. Member’s point about page 27 of the growth plan, he is right that it is a target, but it is a target accompanied by a plan to deliver it. There is a clear path to how we will achieve the increase in growth that I referred to.

Let me return to the repeal of the health and social care levy. To be clear, the Bill will repeal the legislation from last year, reversing the temporary increase in national insurance contributions from 6 November—in just a few weeks’ time. Additionally, it will ensure that no new levy comes into force in April 2023. Members will understand that it takes a little time for His Majesty’s Revenue and Customs and businesses to prepare their systems for such tax changes. That is why we chose 6 November as the date of implementation, but that will ensure that the extra money gets into people’s pockets as quickly as possible.

That brings me to the rationale for why we are repealing the levy. First, it is so that people can keep more of their own money, particularly at this time when that is so critical with the cost of living. In Treasury questions earlier today, many Members on both sides of the House referred to the cost of living challenges, most of which follow from Putin’s illegal invasion of Ukraine. By reducing this tax and urgently alleviating the tax burden on our constituents, that will immediately assist with cost of living pressures. I am not saying that it will solve them, but it will certainly assist with them.

[John Glen (Salisbury) (Con)]

I, too, congratulate my right hon. Friend on his new role.

I acknowledge the narrative of growth and the therapeutic effect of the combination of supply-side reforms and tax cuts to generate growth. My concern is the interval between his assertions today and the medium-term fiscal strategy that will be announced on 31 October, and the markets’ confidence in that interval. Today we see a welcome announcement by the International Monetary Fund on the enhancement to growth, but we also see reference to the enduring effect of inflation. We have also seen in recent weeks the effect of interest rate changes on the cost of living challenges for families up and down this country. Will my right hon. Friend please take account of the interaction of those two conflicting realities?

[Chris Philp]

I thank my hon. Friend for his question. I pay tribute to him for his extraordinary service as City Minister. I think I am right in saying that he is the longest-serving City Minister ever—I think it was four years—and, I should say, he is the best to date. I pay tribute to him for his long and distinguished service.

My hon. Friend raised a couple of points. One was the interaction between the announcements and the OBR’s scoring. There was a desire to get the growth plan done quickly and with a sense of urgency, and the energy price guarantee was something we wanted to do straight away. Families were genuinely worried. They had huge anxiety about the prospect of facing £6,000 or £7,000 bills this winter. We wanted to take that off the table immediately. We also wanted to alleviate the tax burden that we are discussing today as quickly as we could. By doing this so quickly, assuming the Bill passes, on 6 November—in just a few weeks’ time—our constituents will be alleviated of this burden at this time of cost of living challenges.

As companies make decisions about where to invest—in the UK or elsewhere—they can do so in the knowledge that corporation tax in the UK will remain low. That is why we acted so quickly. I do, however, recognise my hon. Friend’s point about the need for market confidence, and that is why my right hon. Friend the Chancellor announced just yesterday that the medium-term fiscal plan would be brought forward from 23 November to 31 October. He recognised exactly the point that my hon. Friend made and similar points made by my right hon. Friend the Member for Central Devon (Mel Stride), the Chair of the Treasury Committee.

The point about inflation came up repeatedly in Treasury questions earlier. We should be clear that we are in a global interest rate up cycle. In, for example, the United States of America, base rates set by the Federal Reserve have increased by three percentage points this year—from 0.25% in January to 3.25% now. The equivalent interest rate set by the Bank of England, the base rate, has also increased, but only by two percentage points from 0.25% to 2.25%. So we have seen higher base rate increases in the USA in the year to date than we have here. As a consequence, the base rate in the USA is a full percentage point higher than in the United Kingdom, and we should keep that international context firmly in mind.

As I explained, we are repealing the levy so that people can keep more of their own money and so that we can help with the cost of living challenges at this time as a matter of urgency on 6 November and not delay any longer. I and the Chancellor think it is also important to boost incentives to work. We want to make sure that working is as attractive as possible and, by lowering the taxes on work, I believe that we will do that.

[Steve Brine (Winchester) (Con)]

I add my voice to those who have welcomed my right hon. Friend to his role. I think he will do a good job.

Here is what is worrying me. Yes, we want work to pay, but we also want work to be available. There are lots of vacancies in the labour market, but there are also labour shortages. Lots of people, as we have heard today, are economically inactive, many of them because they are on the NHS waiting list. As my right hon. Friend the Chief Secretary will know, the first part of the levy was to fund the catch-up programme. I was in my local hospital on Friday to see how we are getting on with the catch-up programme. We are still waiting for news of our elective hub at the Royal Hampshire County Hospital in Winchester, which would help with the catch-up and get people back into the workforce. Is that affected by my voting for this repeal today?

[Chris Philp]

I can categorically assure my hon. Friend that that is not affected. The £8 billion that was allocated over the spending review period to catch up on the elective backlog is completely unchanged by this measure, and the funding for social care—£5.4 billion over three years—is also unaffected. The rest of the money, because that is not all of it, will continue to be available to the Department of Health and Social Care to spend on the NHS and social care precisely as was intended. As a result of repealing the Health and Social Care Levy Act 2021, not a single penny less will go to social care or the NHS, or in particular the elective programme that he refers to. I cannot answer on Winchester hospital, but I am sure that the Health Secretary would be delighted to discuss that with him.

My hon. Friend also made a good point about vacancies. We have a lot of vacancies in the economy. Earlier this year, I believe for the first time in history, there were more vacancies than there were people in unemployment. If we are keen to tackle poverty and help people into a more prosperous future, getting them off benefits and into work is clearly the answer.

[Karin Smyth (Bristol South) (Lab)]

To follow on from the former Health Minister, the hon. Member for Winchester (Steve Brine), if it is true that the levy was essentially not needed for the social care reforms and the catch-up, and that everything is still staying, will the Minister tell us what advice he has had from the DHSC about what it will not do now that, presumably, there is less money for the other things that it was going to do?

[Chris Philp]

The funding provided by the Treasury to the DHSC is completely unchanged as a result of the reversal of the NIC increase. That applies both to the money that was essentially hypothecated to the DHSC and its other budget. It is completely unaffected, so we are not moving money from one part of the health service budget to backfill something else. The complete health service budget is unchanged. There is not a penny less for the health service in any way as a result of the changes, but we are changing the way we fund the expenditure. Instead of funding it from the health and social care levy, it will be funded differently, partly by general taxation and other means, which will be set out in the medium-term fiscal plan. However, not a single penny less will go to the health service as a result of this change.

[Several hon. Members rose—]

[Chris Philp]

I am spoilt for choice; I will start with my hon. Friend the Member for South Suffolk (James Cartlidge).

[James Cartlidge]

I am lucky to have a second intervention already. I know that as a former businessman, the Minister cares passionately about growth, and I respect that. However, as a businessman, he must also know that the single most important factor for business is confidence and stability. When we speak to businesses at the moment, we hear that they are worried about the lack of stability. They want certainty and confidence. He needs to explain the basic question about the £17 billion of revenue from the levy to fund social care and the NHS. If the levy is going, surely that implies that borrowing fills the gap or some other change fiscally. Is it the case that that will be confirmed on the 31st?

[Chris Philp]

Yes, it is. My hon. Friend is asking entirely reasonable questions, but we have to look at this issue in the round across the entirety of public expenditure. The Chancellor will set that out in detail on 31 October to the House, accompanied by the OBR scoring.

[Alex Cunningham]

The hon. Member for South Suffolk (James Cartlidge) has made this point: if £17 billion is being removed from the Exchequer, how can we have all that extra spending on the NHS and on social care if there is no additional taxation?

[Chris Philp]

As I pointed out, we will set that out on the 31st. The Chancellor has a number of measures in mind to make sure, over the medium term, that this is fully funded, and critically, so that we can do this and the other things in the growth plan—this is obviously only one measure among many—to make sure that we get debt falling as a proportion of GDP. Hon. Members are asking entirely reasonable questions, but the point of the medium-term fiscal plan, and the details that will accompany it on 31 October, is to answer precisely those questions.

Let me set out the benefits that the move will confer on employees earning more than £12,570 and self-employed people earning more than £11,909. The average saving for people in work who are earning more than those thresholds will be approximately £330 next year. Combined with the increase in the threshold that took effect last July, the saving for the average worker earning above those thresholds will be £500 next year. That will clearly be welcome at a time of economic challenge. Moreover, almost a million businesses—920,000—will get an average tax cut of just a shade under £10,000 next year: £9,600, to be precise. That will be very welcome indeed.

It is worth being clear that the increase in the threshold that was put through a few months ago means that people on lower incomes pay very little in national insurance or income tax these days. I am sure that Members of this House who want to see the burden of taxation made as light as possible, particularly for those with lower incomes, will strongly welcome the increase in the threshold. It follows the very substantial increases in the income tax threshold over the past 12 years, from about £6,500 back in 2010 to £12,500 today, which have lifted people on the lowest incomes out of national insurance and out of income tax entirely.

I have already made the point that the reversal of the levy is part of a much wider plan. Over the coming days and weeks, my colleagues the Secretaries of State for various Departments will announce further supply-side measures to stimulate growth in our economy, including by making the planning system faster, making sure that business regulations are not unduly onerous, improving childcare, addressing questions concerned with immigration and agricultural productivity, and improving digital infrastructure. As I have said, we will do so in a way that makes sure that debt over GDP falls over the medium term.

[Alex Cunningham]

Will the Chief Secretary give way?

[Chris Philp]

I was about to finish, but as the hon. Member is an old friend, I will give way one last time.

[Alex Cunningham]

I am grateful; I enjoyed my time dealing with justice issues opposite the right hon. Member. Twelve years ago, one of his predecessors—a Lib Dem, in fact—cancelled the new hospital for Stockton. The need for one is far greater than ever and the Chief Secretary seems very capable of splashing the cash, so will he finally approve funding for a new hospital in Stockton?

--- Later in debate ---

[Chris Philp]

The Government have a commitment, which we stand by, to build I think 40 new hospitals in the coming years. Of course, the details of that programme are in the hands of my right hon. Friend the Secretary of State for Health and Social Care. I am sure she would be happy to discuss a hospital for Stockton with the hon. Member, who is an eloquent advocate for his home town, as ever.

Making sure that we act in a fiscally responsible way is a responsibility that falls partly on me as Chief Secretary. I have already said that we intend to stick to the limits set out a year ago in the comprehensive spending review—a three-year spending review, of which we are in the first year. We will exercise restraint in public expenditure, because we simply cannot have a state that continues to consume ever larger proportions of national income. Of course we need to make sure that public services are properly funded, but we need to do so in a way that does not impose excessively onerous burdens on taxpayers—our constituents who work hard day in, day out to earn a living and pay their taxes.

Growing our economy is our central and defining mission. The United Kingdom needs a Government who are wholeheartedly and unequivocally committed to economic growth. We stand committed to growth in a way that the anti-growth coalition arrayed against us does not. This Government have a very clear growth plan. The reversal of the levy and of the temporary national insurance increase is an important part of that growth plan, which is at the heart of this Government’s mission. I commend the Bill to the House.

--- Later in debate ---

[James Murray]

My hon. Friend is right to point out that the Conservatives’ sums simply do not add up. However, you do not have to take our word for it, Mr Deputy Speaker. Just look at the markets: they have issued their own judgment on the Conservatives’ so-called economic plan, and they are not convinced.

As we consider the repeal of the Health and Social Care Levy Act, it is important to remember how the Government’s decision to bring in this national insurance hike came to pass in the first place. Over the last 12 years under the Conservatives, we have been stuck in what the Chancellor himself rightly described last month as a “vicious cycle of stagnation”. With tax revenues stagnating under low growth, the Government made it clear that they felt the only way to raise more funds was to raise taxes on working people.

On Second Reading of the legislation that is being repealed today, the then Chief Secretary to the Treasury tried to defend the Government’s approach, saying that this new charge would

“enable the Government to provide additional funding to the NHS so that it can recover from the pandemic.”—[Official Report, 14 September 2021; Vol. 700, c. 843.]

We argued at the time that if the Government felt that they had to raise taxes, those with the broadest shoulders should contribute more, but the Government refused. They pushed ahead with this tax rise on working people and their jobs, and they refused throughout the debate on the original legislation to ask those with the broadest shoulders to take more of the burden. Now, as they repeal the legislation for the national insurance increase, they have abandoned any attempt at fiscal responsibility altogether, with an economic approach that has borrowing at its heart.

In a letter sent to the shadow Chancellor and the shadow Secretary of State for Health and Social Care on 22 September, the Economic Secretary to the Treasury wrote:

“The additional funding used to replace the expected revenue from the Levy will come from general taxation and may require further borrowing in the short-term.”

Labour takes a different approach. Our pledges are fully and fairly funded. As the shadow Chancellor has set out, we would boost NHS investment by ending the outrageous non-dom tax loophole exploited by the super-rich. We will use money from what is saved by scrapping that arcane practice to double the number of district nurses qualifying every year, to train more than 5,000 health visitors, to create an additional 10,000 nursing and midwife placements every year and to double the number of medical students so that our NHS has the doctors it needs.

[Chris Philp]

I think I heard the shadow Chancellor on television a week or so ago saying that her proposals on non-doms would raise about £2 billion. The cost of this measure is about £15 billion, so where is the other £13 billion going to come from?

[James Murray]

The Minister must not have been listening carefully enough to the shadow Chancellor setting out Labour’s plans, because we have set out how we would scrap the non-dom status, which it is completely irresponsible to keep in the current context, and to use some of that money to set out our plans for investment in the NHS. The difference between the Government and the Opposition is that the Government make promises and use throwaway comments about how they might fund this with general taxation or through extra borrowing, whereas when we set out our pledges, we set out exactly what we will pay for. They are fully costed, fully funded and paid for through fairer taxation.

Oral Answers to Questions

Chris Philp Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Mr Hammond]

As I have consistently said in this House, I do not believe that a no-deal exit would be in the interests of this country, and I will do everything I can to ensure that we avoid it, but an exit based on a negotiated deal that allows us to continue a close trading relationship with the European Union can work for Britain, and that is what I will be arguing for.

[Chris Philp (Croydon South) (Con)]

Is the Chancellor aware that only 18% of Scottish exports go to the rest of the European Union but 61% go to the rest of the United Kingdom? Is not the Union that really matters to Scotland the Union of the United Kingdom?

[Mr Hammond]

Yes, my hon. Friend is exactly right. The Scottish economy would be far more adversely affected by a breach of trading relationships with the rest of the United Kingdom than it will by a breach in trading relationships with the European Union.

--- Later in debate ---

[Jesse Norman]

I am grateful to the hon. Lady for the question, and I am happy to refer her to the welfare Secretary on the matter.

[Chris Philp (Croydon South) (Con)]

Does the Chancellor share my concern about the way some local councils are misusing Public Works Loan Board loans to speculate on commercial property, including many in Surrey?

Oral Answers to Questions

Chris Philp Excerpts

Tuesday 5th March 2019 Commons Chamber

[Elizabeth Truss]

As I pointed out, social care funding and access to it is increasing beyond inflation. In fact, we have seen improvements in many figures. For example, since March 2017, the number of patients who have been delayed leaving hospital due to social care has halved.

[Chris Philp (Croydon South) (Con)]

11. What fiscal steps he is taking to increase (a) the number of jobs and (b) economic growth.

[The Economic Secretary to the Treasury (John Glen)]

The Government have worked hard to build a stronger, fairer economy. The economy has grown continuously for the past nine years, employment is currently at a record high, unemployment is currently at its lowest rate since 1975 and real wages are rising.

[Chris Philp]

It is welcome that 75% of those new jobs are full-time and only 3% are zero-hours contracts. It is also welcome that the minimum wage has gone up by 38% since 2010, but what assurance can the Minister give that the policy of dramatically increasing the minimum wage to help the poorest in our society will continue?

[John Glen]

I can confirm that the national living wage will rise again this year, to £8.21. I can also tell my hon. Friend that later this year the Low Pay Commission will be set a new remit for beyond 2020. We want to be ambitious, with the ultimate objective of ending low pay in the UK while protecting employment for lower-paid workers.

Finance (No. 3) Bill

Chris Philp Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Jonathan Reynolds]

We simply do not know the answer to that question. I always listen to what the right hon. Gentleman has to say in Treasury and Finance Bill debates, but he is one of the archetypal Members who come to the House and pursues what I call the BMW argument: “Everything will be fine because we buy BMWs and everyone will give us what we want.” That argument is still being pursued in these debates, but it has been proved completely untrue by the stage of the negotiations that we are at. It is simply not good enough to say, “It will all be alright on the night. Everyone will transfer over the benefits we currently have. It will be as straightforward as that.” If that were case, the Government would not be in this morass and the country would be in a far better position.

[Chris Philp (Croydon South) (Con)]

First, is it not the case that the UK and, indeed, the entire EU currently trade with major economies, such as the USA and China, under WTO terms? Therefore, while not desirable, they can be made to work. Secondly, if we adopt the shadow Minister’s approach and rule out no deal, we have no choice but to remain in the EU or to accept whatever the EU sees fit to give us, which is not a great negotiating position.

[Jonathan Reynolds]

I thoroughly agree that what the Government have got us into is not a great negotiating position, but that is because the negotiations have been driven by the best interests of the internal politics of the Conservative party. If the national interest had been considered, we would be in a completely different place.

Trade can exist on WTO terms. It is not that the UK would somehow no longer be a trading nation, but that is not the test of good Government policy. The test is to consider the ramifications of that decision and to decide whether it is in the UK’s best interests, but I cannot believe that anyone would look rationally at what a no-deal outcome means and say, “I would find that acceptable for this country.”

Oral Answers to Questions

Chris Philp Excerpts

Tuesday 11th December 2018 Commons Chamber

[Mel Stride]

These are estimates, of course, not forecasts. I can tell the hon. Gentleman that there would be no impact on output in Scotland in the long term—15 years from the end of the implementation period—if we compare the White Paper deal with the situation as it stands today.

[Chris Philp (Croydon South) (Con)]

According to the Scottish Government’s own website, 61% of Scottish exports come to the rest of the UK and only 17% go to the European Union. Does the Minister therefore agree that Scotland’s economic interests are best served by remaining part of the United Kingdom?

[Mel Stride]

My hon. Friend is entirely right. The Scottish National party would like the country to stay in the EU, which would, for example, severely disadvantage the Scottish fishing industry. We have negotiated a very advantageous situation in terms of having control of our fishing as an independent coastal state. The point my hon. Friend makes is also entirely right: if Scotland were to be independent there would be frictions at the border between ourselves and Scotland, which would not assist with trade.

Finance (No. 3) Bill

Chris Philp Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Anneliese Dodds]

The hon. Gentleman has made the point for himself. It is precisely because we do not have the ability to table meaningful amendments that we are in this position. I am sure that he is aware that, when it was possible for Labour Members, often with other Members, to table meaningful amendments to Finance Bills, there was a huge amount of participation, such as when amendments were tabled on country-by-country reporting. Sadly, despite those amendments, we have not yet seen the change in Government policy that we would have liked. When the House is given the power, we exercise it; when we are not given the power, we are unable to exercise it.

As “Erskine May” sets out very clearly, in these circumstances, the only permissible amendments are

“strictly limited to what is authorized by the specific resolutions on which the bill is founded.”

Because of those restrictions, the Opposition cannot expand the scope of measures against tax avoidance and evasion beyond the very limited scope presented in the Bill.

There is a whole host of areas in which the Government should be taking action but where the Bill is completely silent. There has been no new approach from the Conservative Government on the verification of information supplied by companies when they register, despite widespread evidence of tax avoidance and money laundering being facilitated through the registration of fake companies via Companies House.

On shell companies, the Government have provided only a consultation on partnerships rather than action, and they have failed to use to any great extent their legal ability to impose fines on partnerships that fail to provide beneficial ownership information. Despite their consultation on a new offence of failure to prevent economic crime finishing more than a year ago, we still appear to have no more progress on that. Although our Government now have, as I mentioned, the legal means to require country-by-country reporting wholesale, following that amendment to a Finance Bill two years ago, when we were able properly to amend the Bill, they have refused to take up that option.

Despite this catalogue of failure, the Government continue to talk up their record. We saw this elevated to the level of farce last night, when Conservative central office—I assume—released a graphic on Facebook with the laughable claim that Labour had just voted against cracking down on tax avoidance. Labour has consistently advocated much stronger measures on tax avoidance than this Government have done. Indeed, the weakness of measures in the Bill is one of many reasons why we oppose it. The graphic included a background of palm trees, presumably a bizarre reference to our overseas territories. It is bizarre, given the woeful lack of action by our Government in this regard.

[Chris Philp (Croydon South) (Con)]

Would the shadow Minister like to join me in congratulating the Government on having reduced the tax gap from 8% under the last Labour Government to 6% today, which is the lowest level in the developed world?

[Anneliese Dodds]

I will go on to talk about the assumptions that the Government currently use to calculate that tax gap, and the hon. Gentleman will learn that their claims to have massively reduced the amount of tax avoidance through that measure are potentially questionable, to say the least. Perhaps after we have had that discussion, we will see whether he still holds to that assessment.

[Anneliese Dodds]

Of course we need a business-friendly tax environment, but we should also recognise, just as I find when I talk to many international businesses, as I do in my shadow ministerial position, that the vast majority of businesses want to be compliant. Sadly, a small number of firms are not necessarily complying with the letter of the law and some are also not complying with the spirit of the law. That is leading to a situation where our public services are starved of the funding we need, which has a huge impact on business, as I am sure the hon. Gentleman is aware through his discussions with businesses in his constituency.

Let me return to the matter of overseas territories, which strangely appear to be referred to in pictorial form in material released by Conservative central office. This Government were forced kicking and screaming by this House to require our overseas territories to produce public registers of beneficial ownership, but I understand that all that has happened since the vote that forced that change in policy is one conference call, leading to a vague commitment to convene a technical working group—but it is not going to meet until 2019. So we have had many months since that vote in this House but almost no action. In addition, rather than fulfil the commitments the Opposition were given that our Government would work with Crown dependencies towards transparency, tax treaties were presented to this House last week that included no such provisions whatsoever.

The Minister has, as ever, opined that his Government have reduced the tax gap, and indeed other Members have just referred to that. I am sure, however, that he will not illuminate us with the fact that his Government’s tax gap measure excludes the costs of profit shifting and that it starts from the assumption that companies are declaring the correct amount of tax, which surely begs the question. The tax gap for this Government is assessed on the basis of whether Her Majesty’s Revenue and Customs has found errors or evidence of avoidance on tax returns, an approach that has rightly been criticised by the Public Accounts Committee, given that it leads to a situation where much of the tax lost through avoidance simply does not count as part of the tax gap. The Government’s tax gap does not appear to include cases of avoidance or evasion that do not fall under existing legislation, so it fails to capture numerous loopholes that continue to be exploited simply because they are exactly that: loopholes.

[Chris Philp]

Did I detect a sigh when the hon. Lady gave way? She is questioning the basis of the tax gap as a sign of progress, so let me try a different statistic that she might feel better about. The amount of corporation tax collected has gone up from £35 billion a year to £55 billion a year; is that not evidence that these tax-raising measures are effective?

[Anneliese Dodds]

I am always delighted to hear from the hon. Gentleman, but when he talks about the tax-gap measurement, he is talking about his Government’s tax-gap measurement, not one that is universally accepted. In fact, it is quite the opposite, and many alternative measures suggest that much larger amounts of tax are being avoided and, indeed, that larger sums could be rectified if tax evasion was dealt with. Yet again, we hear this comment about the cut to the corporation tax rate. I am sorry to sound like a stuck record, but I have to remind the hon. Gentleman that every expert commentator on this matter has intimated that the rise in the corporation tax take is not because of the cut to the rate and that, in fact, had the rate not been cut, more revenue would have accrued to the Treasury. As I will go on to discuss, that revenue could have been used to support public services and social security for our constituents.

--- Later in debate ---

[Anneliese Dodds]

I know that the hon. Gentleman has worked on the issue of cuts to HMRC’s capacity, as have many Members across the House. I will return to that important issue soon, because sadly the reality does not reflect the rather rosy picture that we were provided with by the Minister on that subject.

I return to the distributional impact of this Government’s tax measures. We had an interesting discussion about fairness following some comments by the hon. Member for Beckenham (Bob Stewart), who is no longer in his place. The Minister intimated that he was in favour of a fair tax system and said that the wealthiest people pay a large proportion of all tax. He is absolutely right: the wealthiest people do pay a large proportion of income tax. That is because of how wealthy they are. However, if we look at the impact of the tax system on different income groups, we find—I should not say “we” because it is the Office for National Statistics that has discovered this—that the best-off 10% of people pay less of their income in tax than the worst-off 10%. I note that the Conservatives did not contest this statistic when it was mentioned in the House yesterday. Surely that is a ringing indictment of their approach to taxation.

[Chris Philp]

I am delighted that the shadow Minister has given way once again, without sighing this time. The poorest in society are not in tax at all thanks to the increase in the threshold. The richest 1% do indeed pay 28% of tax, but they only earn about 12% of all income, so she will see that the amount of tax they pay is a great deal higher than their share of income.

[Anneliese Dodds]

It is always a pleasure to hear from the hon. Gentleman, who is always a very friendly face. Sadly, however—I feel bad doing this—I do have to correct him on two of the points that he mentioned. He stated that the poorest people will not pay any tax at all. That is simply not the case. Of course, they will pay—[Interruption.] No, no—he said “any tax”. Let us be clear: of course, large numbers of very badly off people pay a lot of value added tax, which is a regressive tax, even with the exemptions that apply to it.

In addition to that, increasing numbers of low-income people across this country are now paying council tax, many of them for the first time, because of the swingeing cuts that the hon. Gentleman’s Government have delivered to local authorities’ budgets for council tax relief. So we now have very large numbers of very-low-income people being taken to court because they are unable to pay their council tax. That situation is novel in our country but some might say it approximates things that happened back in the 1980s, which I am sure that the hon. Gentleman is too young to remember but which the history books have certainly not forgotten.

We also need a thorough understanding of how the failure to tackle tax avoidance affects our different regions, given that austerity’s impact on incomes has been strongest in areas that were already struggling economically. We need a thorough impact assessment of the impact that the failure to deal with tax avoidance is having on child poverty. Yesterday Ministers tried to deflect attention from their record on poverty by using only figures on absolute poverty. They never speak about the measure that is instead used by most academics and experts—relative poverty—because they know that more children are now living in relative poverty under their watch: almost a third of children, in fact. The problem is such that the chief executive of the Child Poverty Action Group has described the Conservative Government as being “in denial” on child poverty.

I will explain why we need to look at relative poverty. We should not look simply at whether people are destitute, as measured by absolute poverty, even though, sadly, many are having to resort to food banks for bare necessities; we also need to look at what people’s incomes are in relation to the living standards that everyone else enjoys. That is why the concept of relative poverty measures whether people are poor in relation to median-income people. Relative poverty matters because it shows whether people can afford to live a decent life.

--- Later in debate ---

[Chris Philp]

Will the hon. Lady give way?

[Anneliese Dodds]

I will not give way, because I fear that the Committee is losing patience with the length of my comments. [Hon. Members: “More!] It is wonderful to see so much interest in the topic of taxation; I only wish that were always the case.

The Conservatives’ mood music on this issue has been worrying, as I have said. As I have referred to previously, the Conservatives’ MEPs have consistently either voted against or abstained on EU-level measures to promote tax transparency, and the Conservative Government were, sadly, unwilling to meet representatives from the European Parliament’s Panama papers investigative committee when they came to the UK.

Our amendment 23 would force these issues into the open and require a proper consideration by Government of how they could act to ensure proper data sharing, in order to combat tax avoidance and evasion. It is paralleled by our amendment 19, which would require the Government to undertake a review of our controlled foreign companies regime, with particular consideration of how it would be affected in the event of a no-deal Brexit.

The Conservative Government appear to treat countering tax avoidance as a game of whack-a-mole, rather than the long-term strategic approach that is surely required. As a result, we wish to press new clause 5 and amendment 23 to a Division.

In conclusion, the Government have no long-term plan for protecting the revenue on which our public services rely and appear to have no clear idea of how they will co-ordinate, or otherwise, our measures on tax avoidance with the EU27. A different approach is needed and my party stands ready to implement it as soon as we get the chance.

--- Later in debate ---

[Luke Graham]

I thank my hon. Friend for his intervention and I could not agree more. Intangible assets are becoming an increasing part of the global economy. Just a few years ago, I did a study in relation to the Prince’s Accounting for Sustainability project. When we looked at some of the figures, they clearly showed that up to 80% of the value of the Standard & Poor’s 500 index in the United States was being held in intangibles. In considering some of the accounting standards and taxation measures that we are introducing, we could be missing up to 80% of that value, which would not then be reflected in the share price or indeed in the tax revenues that could be captured. I agree with my hon. Friend that we should look at those measures.

Without giving the Prince’s Accounting for Sustainability project too much of a push here in the Chamber, I will say that a number of the reports that it has put forward, in partnership with businesses in the United Kingdom and internationally have been really positive. They look at how we can capture some of the value of intangibles, but they also consider human and social capital. The organisation has published a number of reports, and I encourage Members to read them, because they could help to inform our policy making not only on the digital services tax, but when it comes to evaluating the impact and true value of some of the companies and enterprises across our country. It does not matter whether it is the small enterprise on our high street or, indeed, the new multinational that is capturing funds from around the world. It is about our identifying value and then being able to show to shareholders, Government and the local community the social, human and physical capital contributions that are being made to our economy.

Some people find Budget debates dry, but I find them incredibly exciting. The hon. Member for Aberdeen North (Kirsty Blackman) said last night that she enjoyed a good read of the Budget documents at home—I could not agree more. This Budget gives us plenty to read and plenty of food for thought, which is why I will support the Bill today.

[Chris Philp]

It is a huge pleasure to follow my hon. Friend the Member for Ochil and South Perthshire (Luke Graham), who is always an incredibly eloquent and articulate commentator on matters financial.

I am delighted to see that news of my speech has spread to the office of the shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), and that he has come to the Front Bench especially to hear it. I am delighted that he has chosen to come to the Chamber for this purpose; I eagerly await the imminent arrival of the Chancellor as well.

I want to speak to new clauses 5 and 6, which were tabled by the shadow Minister, the hon. Member for Oxford East (Anneliese Dodds). Their substance would require more analysis and reports on various aspects of the Government’s programme in the areas of avoidance and evasion. However, as so often in life, action and results speak much louder than reports and words. The Government’s actions and the results they have achieved are far more powerful than any call for evidence or any call for a report can demonstrate.

The hon. Lady posed some questions about whether the tax gap is the best measure. It is an internationally accepted measure and it provides for consistent comparison over time, so it is a good way of consistently comparing the record of one Government with that of another. There may be other measures, but it is at least a consistent measure and it is also a good way to compare different countries, as well as to make comparisons within a country over time.

The current tax gap in the United Kingdom is 5.7%, which is extraordinarily low by comparison with other major countries and significantly lower than it was when Labour was in office, when it was between 8% and 10%. Whatever quibbles the hon. Lady may have about the things that are included or excluded, what is clear is that the tax gap is low compared with what it was under Labour and low by comparison with other countries. That is not surprising.

[James Cartlidge]

rose—

[Chris Philp]

But before I lay out the reasons why it is not surprising, I will give way to my hon. Friend.

[James Cartlidge]

My hon. Friend is making an excellent speech on what action is happening, but does he agree that one thing not captured in the statistics is what I would call positive inducement as opposed to avoidance? If there are competitive rates of tax, people are encouraged to avoid avoidance and conduct legitimate activity by paying a standard tax.

--- Later in debate ---

[Chris Philp]

My hon. Friend is quite right. Having low and competitive rates of tax does attract people to this country, who then pay corporation tax they otherwise would not pay. I will come on to precisely that point in a few moments.

The reason I was explaining why it was not surprising that our tax gap has reduced is that the Government have taken quite a large number of measures to combat tax avoidance and tax evasion since 2010. In this Budget alone, there are 21 such measures. I was rather disappointed that by voting against the Budget on Second Reading, Opposition Front Benchers were expressing their disagreement with those 21 anti-avoidance and anti-evasion measures.

[Anneliese Dodds]

I fear, very sadly, that the hon. Member did not hear what I said on that point earlier. It is because those measures are far too weak and do not go far enough that we are voting against them. I set that out very clearly in my previous remarks.

[Chris Philp]

I am not sure that that is a very good basis for voting against something. A move forward is a move forward. I have yet to hear a detailed and coherent set of proposals that would take these measures further forward. I am sure that those on the Treasury Bench are always eager to receive ideas on measures that would raise revenue. If the hon. Lady wanted to propose ideas on the Floor of the House, I am pretty sure she would find a ready audience. One such measure, the diverted profit tax, has directly raised £700 million since 2015. In addition, it is interesting that businesses talk about not just the direct effect of the diverted profit tax. Some companies, realising that they might be caught by the diverted profit tax, choose to change their behaviour and effectively choose to pay ordinary corporation tax in a more compliant way. That does not appear in the diverted profit tax figures, but it is none the less successful in changing behaviour.

[Anneliese Dodds]

I am very grateful to the hon. Member for giving way; he is being very generous. I would like to mention, however, that I did refer in my speech to Labour’s tax transparency and enforcement plan. In fact, I referred to three cases where the Government have rightly learned from that plan, which is fabulous, and are either completely or partially adopting some of our suggestions. There are, however, many other areas where they need to take action. They should look at our plan and learn.

[Chris Philp]

The fact that the Government have adopted three measures shows that they are not only a Government who listen and adapt, but a Government who have taken more than 100 anti-avoidance and anti-evasion measures since 2010. That is a record the Government can be proud of, although there is always more that can be done. I will come on to one idea later.

The hon. Lady suggested in her very long and at times entertaining speech—perhaps inadvertently entertaining, but it was entertaining—that the Government had not shown leadership in the area of organising international co-operation to combat tax evasion. She also said it was a concern that we are leaving the European Union as we might lose that as a forum in which to combat tax evasion and tax avoidance. The most effective forum is the OECD’s BEPS initiative—the base erosion and profit shifting initiative. The UK Government have been a leader in this area—for example, on action five, which limited the deductibility of interest payments against corporation tax. That is another area where the UK Government have shown genuine global leadership.

[Kevin Foster]

Listening to my hon. Friend’s speech, I can see exactly why the shadow Chancellor rushed to the Chamber to enjoy it. On global co-operation, what does he make of the many treaties we have signed with other jurisdictions, such as Liechtenstein, which have allowed us to get hold of tax information and ensure there cannot be places where British taxpayers hide?

[Chris Philp]

That is an example of one of the many areas where we have taken action. Getting information from that jurisdiction and, I think, Switzerland has helped us to combat people who are not paying the tax they should. The proof of the pudding is ultimately—I can see the flood of hon. Members on to the Opposition Front Bench continuing—in the eating. The fact is that the amount of money collected in corporation tax has gone up from £35 billion to £55 billion.

The hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who was in his place earlier, shook his head when that point was made and referred to an IFS report, which he said made the point that if corporation tax rates were higher, they would raise more money. I have had the opportunity to look up that report since then. The article was in The Guardian, which is hardly a Conservative or right-wing newspaper—it may be too right wing for the shadow Chancellor, but it is not too right wing for me—and although any amount of money that might be raised in the short term is one thing, it goes on to say the IFS stated that “substantially less” will be raised in the medium term as companies respond by investing less.

The hon. Member for Oxford East asked what the intellectual backing was for suggesting that lowering tax rates increases revenue. That backing comes, of course, in the form of the Laffer curve, named after Professor Arthur Laffer, who made the case very coherently that lowering rates can increase the take—my hon. Friend the Member for Solihull (Julian Knight) made this point earlier—by encouraging investment and encouraging companies to relocate to a jurisdiction where there are lower rates of tax. That is no theoretical thing—[Interruption.] It is not only a theoretical thing, but a practical thing.

Since the Government introduced lower rates of corporation tax, a number of companies have chosen to take advantage of them by locating into the UK. Most recently, in August this year, Panasonic moved its European headquarters from Amsterdam into the United Kingdom, and clearly, competitive rates of tax were part of that. Back in 2012, when the former Chancellor, George Osborne, set this course, a whole number of companies announced that they were locating back into the UK, including Aon, which located here from the United States, Starbucks, which located its corporate HQ here from the Netherlands, and WPP, which located its corporate HQ here from the USA. More recently, Unilever considered moving its corporate HQ out of the UK to the Netherlands, but there was a huge shareholder revolt and it chose to stay here. Those are practical examples of a competitive tax system in action. That is part of the reason why the tax yield has gone up so considerably.

[Alex Chalk (Cheltenham) (Con)]

Not just companies but entire sectors and industries might be attracted to come here. The UK film industry is so buoyant and world-leading in very large part because of the benign tax environment that it can enjoy.

[Chris Philp]

My hon. Friend is right to draw attention to the way in which very favourable tax systems can indeed attract companies to this country. We should be proud of the fact that we are attracting the world’s leading companies to the United Kingdom.

I am sorry to refer to the speech by the hon. Member for Oxford East so often, but it was a very full speech and there was a great deal to reply to. She suggested that the Chancellor of the Exchequer said that our plan was to become a tax haven. He never used the words “tax haven”, but he did say that we could be a tax competitive economy. There is nothing to apologise for in saying that we will be a tax competitive economy and attract companies to locate here. If there is a tax haven in Europe, it is Luxembourg, so the hon. Lady should reserve her ire for that jurisdiction.

[Anneliese Dodds]

I am very grateful to the hon. Gentleman for giving way; he is being very generous. I have not been reserved in showing my ire for Luxembourg; in fact, I have campaigned for a long time in relation to its tax practices. I am very glad that he has given me the opportunity to respond on this point, because I looked up exactly what the Chancellor did say. He was asked by the newspaper Die Welt in January 2017 whether the UK would become a “tax haven” for Europe, and he responded that the UK could be “forced” to abandon its European economy with European-style taxation. When the Prime Minister’s spokesperson was asked if she agreed with this assessment, she confirmed that the Prime Minister was in agreement and would stand by him.

[Chris Philp]

The words “tax haven” were not his, and what he clearly confirmed in response was the he intended to create a tax competitive economy, which we can all be proud of, and I will certainly support him in creating it.

I feel that I should move on—although I will happily take more interventions—to new clauses 14 and 15, which were spoken to by the hon. Member for Glasgow Central (Alison Thewliss), the SNP’s Front-Bench spokesman. In her speech, she drew attention to the importance of transparency, and she was right to do so. We have already made significant moves on limited companies and limited liability partnerships. Persons of significant control now have to be disclosed on the Companies House register, and I fully agree with her that that should be comprehensively enforced.

[Alison Thewliss]

The problem is that it is not being comprehensively enforced. About £2 billion is due in fines from SLPs. If the Government are not going to collect £2 billion, why on earth are they putting forward austerity cuts? They could have that money easily.

[Chris Philp]

It will not have escaped the hon. Lady’s notice that by the fifth year of the five-year period there is a fiscal loosening of £30 billion—that is hardly austerity—and that the NHS will receive a huge amount of extra money, including the NHS in Scotland via Barnett consequentials. I think that we can say very clearly that this was not an austerity Budget. I agree, however, with her more serious point. As my hon. Friend the Member for Ochil and South Perthshire said, where a law is passed, it should be properly enforced, and if there is more scope to enforce this law, it should certainly be done.

A further legislative measure was announced over the summer in relation to transparency. By 2021, we will start recording the ultimate beneficial ownership of property owned by companies, which is an important measure, because some properties, particularly very expensive, high-end properties, are often owned in offshore companies, but there is currently no transparency in respect of who owns those companies. As of 2021, we will know who the ultimate beneficial owners are, and that will also create an interesting taxation opportunity that I strongly commend to the Financial Secretary.

At the moment, when an ordinary property is bought or sold by an individual, it triggers residential stamp duty, but when a transaction takes place whereby the company owning the property is sold, no residential stamp duty is paid, because, as far as the Land Registry is concerned, no change of ownership has taken place. At the moment, we have no visibility over any change of ultimate beneficial ownership, because it is not registered, but from 2021 we will, because that change will have to be registered. I suggest, for a future Budget, that a change of ultimate beneficial ownership should trigger a stamp duty charge as though for a direct change of ownership, as would happen if any of us bought a property. That would yield significant extra residential stamp duty.

I will give an example. I am aware of a transaction in Belgravia, not far from here, that took place two or three years ago. It was a collection of luxury houses developed by an offshore company—based in the Cayman Islands or British Virgin Islands—and sold to a Chinese gentleman for £110 million, but he did not buy the property and therefore no stamp duty was payable. He bought the offshore company and no stamp duty was paid. Had that change of ultimate beneficial ownership been registered and had stamp duty been payable, a stamp duty charge of about £16 million would have been crystalised for the Exchequer’s benefit.

I suggest we collect that sort of money in the future. Of course, that property is liable for annual taxation on envelope dwellings, because it is held in a company, but that only levies at a rate of £226,000 a year, so the payback period is 73 years, and most of these properties are traded more frequently than that. I challenged the hon. Member for Oxford East earlier to come up with some ideas for raising revenue and combating non-compliance. There is my idea. I hope that a future Budget adopts it and takes it forward.

I will conclude—I know the shadow Chancellor wants to hear more, but I have to disappoint him—by briefly addressing Government clauses 15 and 16 on intellectual property charges and charges in relation to fragmented profits. This is an extremely important area, because a number of large corporates are using intellectual property charges to spirit away profits attributable to UK operating activities.

Most notoriously, Starbucks used this about five or six years ago. It managed to extract almost all its UK profits by levying an intellectual property charge in relation to its beans. It said the beans were special beans and had a very high charge on them, and it managed to register pretty much zero UK profit. That is precisely the kind of intellectual property charge that these measures are designed to combat. An arm’s-length, third-party intellectual property charge cannot possibly result in zero profit for the company paying that charge, and it is right that the Government are taking further action.

Multinationals take their profits out of the UK and into, typically, the Luxembourg, Swiss or Caribbean jurisdictions, and intellectual property charges are more often than not the means by which they do so. I strongly commend clauses 15 and 16 for taking direct action to prevent avoidance measures that have undoubtedly cost the Exchequer. I think that I have spoken long enough about these clauses, which I shall be extremely happy to support if there are Divisions in 10 minutes’ time.

[Paul Masterton]

It is a pleasure to follow my hon. Friend the Member for Croydon South (Chris Philp), although, as ever, the problem with following him is that he has done such a thorough and detailed job of going through the minutiae of pretty much every single piece of the Bill that there is not a huge amount left for me to say. However, I will do my best and raise a few points that I know are particularly important to people and businesses—particularly small businesses—in East Renfrewshire.

One reason why these measures are so important comes back to the perception of fairness. Action to deal with tax avoidance and evasion is important because people often perceive that they are playing by the rules and doing everything right, while other guys—often the big guys with lots of money, who can afford to pay the “big four” huge sums—are able to find clever ways of reducing their tax liability.

There have been many examples of companies diverting profits, in a way that is not fair and is not right, to other jurisdictions with much lower tax levels to save themselves money. They are taking money that was produced when taxpayers in this country went into their shops and bought their goods, supporting them and their products, but that money is not being kept in our economy or reinvested in our economy. It is being shunted offshore to other jurisdictions, where it is swept up and often manoeuvred around other areas, particularly when a global business is moving it around to prop up less competitive and less successful parts of that business offshore.

Since 2010, an extra £180 billion or so has been brought in as a result of some of the measures that we have introduced. That is a huge amount, which is being reinvested in the country in which it was produced. It means more money for our schools, hospitals and small businesses—the sort of money that can give people a bit of a break.

I want to touch briefly on the new clause tabled by the hon. Member for Glasgow Central (Alison Thewliss). She talks frequently, and with a great deal of knowledge, about Scottish limited partnerships—rightly, I think, because they are being increasingly scrutinised and are coming under the spotlight. They have been around for a long time, and previously no one paid much attention to them—no one really understood what they were being used for. They fall within a slightly odd grey area in terms of the Companies Act 2006. In my former job as a pensions lawyer, they were used as a vehicle to allow companies to put an extra step between them and an investment. They helped companies to reduce their tax in relation to employer contributions that they had made through the sweeping round of funds.

That was a legitimate funding mechanism, but there is no doubt that because of where Scottish limited partnerships sit in relation to the wider tax system, they are being used pretty unscrupulously. A lot more stuff has been coming out about them, and I think that the hon. Lady is right to go on probing and testing to establish whether their proper use is being properly enforced and checked.

Finance (No. 3) Bill

Chris Philp Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Mel Stride]

My hon. Friend characteristically makes an important and insightful point. The national living wage, which this Government brought into being, was raised by 4.4% last year and will be raised by a full 4.9% in the coming year. That is well ahead of inflation, which is why in respect of net income those in the lower deciles of the income distribution have benefited disproportionately compared with those at the top end. I remind the House that the wealthiest 1% pay some 28% of all income tax that the Exchequer receives.

[Chris Philp (Croydon South) (Con)]

Perhaps I can amplify the Financial Secretary’s point about the minimum wage. Since 2010, the national minimum wage, or living wage, has gone up by 38%. When that is combined with the increase in the personal allowance, somebody who works full time on the minimum wage is 44% better off post tax, and inflation over that period was around 25%. Is that not delivering for those on the lowest incomes?

[Mel Stride]

My hon. Friend is absolutely right. The Labour party will tax and tax, borrow and borrow and spend and spend. The Conservative party is reducing the tax burden. Collectively, we have now taken more than 4 million people out of tax altogether, which has disproportionately helped those on lower incomes.

--- Later in debate ---

[Kirsty Blackman]

Not just now. In terms of the economic growth forecasts that the OBR has apparently made—

[Chris Philp]

Will the hon. Lady give way?

[Kirsty Blackman]

I am not taking any more interventions.

The OBR has made economic growth forecasts on the basis of a smooth and orderly Brexit. It has not made economic growth forecasts on the basis of us crashing out in a no-deal scenario, so its forecasts are only worth anything if the Government can strike a deal, as the Chancellor knows, which is why he has spoken about another fiscal event coming.

Frictionless trade is not frictionless just because the Government call it frictionless. If a good has to be stopped at the border, if somebody has to fill in an additional form or if there is any delay, that is not frictionless trade. Just because the Government say, “This is frictionless trade,” it does not mean that it is actually frictionless trade.

The Government need to improve their processes around the Finance Bill. This year has been the worst in terms of those processes, and they have to improve. The Government could do that by ensuring that we take evidence at the Public Bill Committee.

The Government have to actually do the things they say they are doing. If they say they are going to give Scotland the Barnett consequentials for health, they should give it the Barnett consequentials for health. If they say they are ending austerity, they should end austerity. If they say they are putting in place a living wage, they should put in place a living wage.

Lastly, if the Government are talking about tax cuts, they need to look at the situation in Scotland. The figures I have from the Library say that around half of taxpayers in England pay more than they would if they lived in Scotland, and that half of taxpayers are the people who earn the least, not the most. The UK Government should look at what the Scottish Government are doing and learn some lessons.

--- Later in debate ---

[Chris Philp (Croydon South) (Con)]

It is a great pleasure to speak in this debate. The Financial Secretary to the Treasury got it right in his introduction—I can see he agrees with that—when he set the financial scene and reminded us of the history of the past eight or so years. When this Government came into office in 2010, we faced an economic crisis of almost unprecedented scale. At around 10% of GDP, the deficit was running out of control and unemployment was at a record high. Over the past eight years, the coalition and then the Conservative Government have worked hard and tirelessly to get our public finances back under control. It has not been an easy task. Had we listened to Labour Members, who frequently challenge our agenda, the deficit would still be extremely high and the debt would be a great deal higher than it is now—[Interruption.] The shadow Minister says from a sedentary position, “You’re joking”, but I have lost count of the number of measures of fiscal responsibility that the Opposition have voted against over the past eight years. Had Labour’s programme been adopted, the deficit and the debt would both be far higher than they are today.

Next year, borrowing is going to be down to about 1.4% of GDP, and it will be down to 0.8% by 2023. Critically, the debt as a proportion of GDP has been falling since 2016. The consequence of not getting our deficit and debt under control is that we pay far more in interest payments. Even today, we are paying around £45 billion a year in interest payments, but if the debt were any higher, as it would have been under Labour’s programme, those debt payments would be higher and the interest rates on that Government debt would be a great deal higher as well. That would mean having much less money to fund vital public services.

Hand in hand with the deficit reduction programme goes the Government’s track record on jobs. The unemployment rate has decreased from around 8% in 2010 to around 4% today, and it is now at a 43-year record low. It has never been lower in my lifetime. To those who say that the jobs that are being created are not high-quality jobs, I would say that 80% of them are full time, and I would remind those who say that they are all zero-hours jobs that only 3% of the jobs in the UK economy involve zero-hours contracts.

This track record of financial responsibility over the past eight years has now enabled a certain amount of fiscal loosening, providing extra money to be spent on public services. Both Opposition Front-Bench spokesmen said that austerity was continuing, but let us look at the Red Book. The cumulative effect of all the Budget measures being announced will result, in 2023 alone—the final year of the forecast period—in a £27 billion fiscal loosening relative to the measures that were in place before. There is no way that anyone can describe a £27 billion a year fiscal loosening as a continuation of austerity. In any case, it is not austerity. Austerity implies that it was a choice. It was not a choice; it was a necessity—

[Chris Stephens]

It was a choice.

[Chris Philp]

The hon. Gentleman says that it was a choice, but it was not. We simply cannot go on spending way more every year than we raise in tax revenue, because we would eventually lose the confidence of the bond market, as this country did in 1976. At best, we would end up saddling the next generation with a gigantic bill that they would have to pay off. There is nothing noble, ethical or moral about spending more than we can afford and sending the bill to the next generation.

If we look at the fiscal loosening in the Budget, we can see that the NHS is the principal beneficiary, to the tune of £20 billion a year by the end of the forecast period. More immediately, the Ministry of Defence gets an extra £1 billion and the universal credit system gets an extra £1.7 billion. The shadow Chief Secretary to the Treasury specifically mentioned universal credit in his characteristically lively speech earlier. I remind him that the universal credit system massively strengthens work incentives. Before, we had a system in which effective marginal tax rates were often running at 90% and in which there were cliff edges at 16 and 32 hours, after which people would actually get less money for working more hours.

The Resolution Foundation has carried out research on this. I understand that its chief executive is the former economic adviser to the right hon. Member for Doncaster North (Edward Miliband), and even he says that the total fiscal cost of the universal credit system, with these changes, will be higher than the cost of the old benefits system that it is replacing. So it is going to cost more public money than was being spent before. Universal credit’s track record of getting people off benefits and into work is better than the track record of the benefits system it is replacing. I think that universal credit has been properly funded. It might need a bit of fine tuning in some areas to do with the way in which some of the dates work, and I have spoken to Ministers about some technical changes that could be made. As a whole, however, I believe that the system is fully funded and that it will work.

[Chris Stephens]

The hon. Gentleman believes that universal credit is fully funded, but has he seen the evidence from DWP staff who are saying that they are spending so much time answering telephone calls that they cannot go through and answer the online journals from claimants? Does he not think that there is a problem there?

[Chris Philp]

When we introduce any new system that involves 5 million recipients, there will inevitably be some level of operational teething problems. These teething problems are on nothing like the scale of those we saw in the early 2000s when Gordon Brown rolled out tax credits and there was unmitigated chaos for some years.

I have had direct experience of universal credit in my own constituency. Croydon South is the joint highest constituency in the country—with Great Yarmouth, I think—for universal credit roll-out, with 43% of claimants now on universal credit. I estimate that around 4,000 Croydon South constituents are now in receipt of universal credit, and in the past six months I have had 21 complaints or problems raised by constituents. That is obviously 21 too many, but viewed in the context of about 4,000 recipients, it would appear that the teething problems are limited in their extent.

[Karen Lee]

Does the hon. Gentleman agree that the people on universal credit in my constituency who are having to use food banks really cannot be described as having teething problems?

[Chris Philp]

The growth in the use of food banks is of course a phenomenon that we have seen across western Europe. After the Budget, people on universal credit will be £630 a year better off than they were before—[Interruption.] The hon. Lady shakes her head, but that is a simple fact: the allowance has been increased. As I was saying a moment ago, the Resolution Foundation has found that the Government will be spending more money on universal credit following the Budget changes than would have been the case under the old benefits system. I would further point out that the track record of getting people off benefits and into work is better under universal credit than it was under the old benefits system. The way to combat poverty and create prosperity is to get people into work.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I am listening carefully to the hon. Gentleman, but he does not seem to be aware that many of the people on universal credit are working.

[Chris Philp]

I realise that many people on universal credit are working. It is, by definition, an in-work benefit. The point I am making is that it is encouraging more people to take more hours, and it is encouraging people who are not working at all—[Interruption.] I would be happy to take another intervention from the hon. Lady, but perhaps she would like to listen to the answer to her first one. Universal credit is encouraging people who are not working at all to get into work, which is why unemployment is at a 43-year low. A legitimate question that she might ask is whether work is paying enough. This Government have successively increased the level of the minimum wage. This Budget increases it to £8.21 as of next April. That is up from £5.93 in 2010, which is a 38% increase. As I said in my intervention on the Financial Secretary, when we combine that with the increase in the personal allowance, from some £6,500 to £12,500 from next April, the post-tax income of someone on the minimum wage working full time—40 hours a week—has gone up by 44% over that eight-year period. Over the same time, inflation was 25%. So the personal allowance changes and the minimum wage increase have helped people on low incomes more than any other group. That is why income inequality is at a significantly lower level today than it was in 2010.

I turn for a moment to Labour’s plans. Inevitably, they involve spending a great deal of money—more money than contemplated even in the Budget. There is no great merit in spending more than we can afford today if we send the bill to our children and our grandchildren, saddling them with debt and burdening the Exchequer with very high interest charges, which are already high, at some £45 billion a year. As for Labour’s mass nationalisation programme, which it says is fiscally neutral, I point out that the last time we had mass nationalised industries—up to the 1980s—they tended to be grossly loss-making and required taxpayer subsidy, rather than generating revenue for the Exchequer. To assume that a mass nationalisation programme would be fiscally neutral is a dangerous assumption.

It seems to be assumed that the only measure of a Government’s effectiveness—or compassion—is the total amount that they spend. Of course it is important to fund public services properly, but it is the outcomes that matter, rather than the amount of money spent. Gordon Brown’s mistake was always to confuse spending money with success, when what actually matters is outcomes.

In education, for example, 86% of pupils are now in schools rated good or outstanding, compared with 68% in 2010. Notwithstanding any points that may be made about the funding levels in schools—and finding room to spend more is always welcome—the fact is that children are getting a better education today than they were eight years ago, according to Ofsted, which we can agree is an impartial observer. To the extent that the opportunity to loosen fiscally allows us to spend a little more, especially on services such as the police, it will of course be extremely welcome.

When the SNP leader replied to the Budget, he made some points about Brexit and the risks it poses. Some 61% of Scotland’s exports go to the rest of the UK, and only 17% go to the European Union. The single market that is of the most importance to Scotland, by a factor of about 4, is the United Kingdom single market—[Hon. Members: “Hear, hear.”] I see that view has support from my colleagues. That is the single market that the SNP should focus on most, because it is the one on which their prosperity most depends.

As many hon. Members wish to speak, I shall conclude shortly—[Interruption.] However, I would not want to disappoint Opposition Front Benchers by concluding too soon, so before doing so I wish to thank the Chancellor for the business rate change that he announced in the Budget. Cutting business rates for 90% of the high street—any business with a rateable value of less than £52,000—is a welcome move, and will do something to level the tax playing field. High street stores, which use real estate intensively, suffer a tax disadvantage relative to online companies. Online multinational companies also use lawful, but creative mechanisms so that they do not pay as much corporation tax as our high street shops. The business rate cut for smaller shops will really help them and I strongly welcome it.

One measure on entrepreneurship that I commend to the Chancellor for future Budgets is something that is close to my heart. Before being elected, I set up and ran businesses for 15 years. I set up the first one when I was 24 and floated it on AIM four years later—[Interruption.] I thank Opposition Front Benchers for promoting my career, but I am happy where I am. In setting up and growing that business and others, we benefited from all kinds of relief, including the enterprise investment scheme and entrepreneurs relief. I particularly commend the seed enterprise investment scheme, which is very effective in getting money into complete start-ups—companies being started from scratch. It is a very effective tax break for getting individuals to invest in greenfield start-up companies. I should declare an interest as my wife recently set up a company that used SEIS to raise capital. The limit is low—£150,000 per company—but it is very effective in getting individuals to make investments. The fiscal cost is quite low: according to Treasury figures it is about £110 million a year. I suggest that future Budgets may have scope to increase the £150,000 per company limit to encourage further significant investment in start-ups at relatively low fiscal costs—I can see the shadow Chief Secretary getting his pen out to write this down. I commend that idea to the Chancellor for future budgets.

I thank the Chancellor for the welcome business rate cut. I commend him and the Financial Secretary for delivering record high employment, record low unemployment and getting our public finances firmly back under control. Had we listened to the Opposition Front-Bench team, we would still be facing financially ruinous debt bills. It will be my pleasure to vote for the Second Reading later tonight.

[Sir Vince Cable (Twickenham) (LD)]

I wish to say a few words in support of the amendment in my name, about the economic context and specifically on some of the tax measures. Everything we are talking about, whether on the tax side or the spending side, depends on the overall performance of the economy and economic growth. This year, we have had fluctuations from one quarter to another, but the assumption is that growth is about 1.5%. According to the independent OBR, it will continue at about that rate for the next five years. As the hon. Member for Aberdeen North (Kirsty Blackman) reminded us, that not terribly optimistic picture is based on optimistic assumptions about the outturn of the Brexit negotiations that may of course not be realised.

There are two underlying reasons why the British economy is growing at just over what it was for the whole of the post-war period up to the financial crisis. One is the serious problem of productivity—a problem that has existed since the financial crisis. A paper was published this morning by analysts from Stanford and Nottingham who looked at why productivity performance is so poor at the moment. After an exhaustive survey, they found that the problem was that high-performing companies in the UK, in productivity terms, had fallen back very badly. The main reason is that those high-performing companies do a lot of a trade, in particular with the single market, and uncertainty has caused their performance to deteriorate. That is reinforced by the second element in the slowing of growth, which is poor business investment—less than half of 1% in terms of fixed business investment last year, and that is clearly a function of the uncertainty that is hanging over the economy because of the Brexit exercise.

I suspect that quite a lot of Members thought that the Finance Bill would be some light relief from the Brexit debate, but unfortunately it hangs over everything. It is the elephant in the room and it explains the economic problems that we face. There was an interesting debate between Conservative Members that, because of the adversarial way we discuss things, was rather glossed over. The hon. Member for Gainsborough (Sir Edward Leigh) and, in the Budget debate, the right hon. and learned Member for Rushcliffe (Mr Clarke) expressed the strong view that the Chancellor was taking too many risks and the Budget should have been a good deal tighter than it was. Today we heard the exact opposite argument from the right hon. Member for Wokingham (John Redwood)—that it was far too tight and should have been more relaxed. It was an important debate, and it would be interesting to know how Ministers will combat the arguments from those formidable people.

I will highlight one particular aspect of that debate. This is not a party political point—it happened in the coalition—but the Government continue to refer to the deficit as if it is the same as Government borrowing. Well, of course it is not. The Government borrow for different reasons. They borrow to cover the current deficit and they borrow for investment. Just as companies borrow to invest, the Government sensibly do so. The problem with the current trajectory, as I understand from the Red Book, is that we are potentially heading for yet another squeeze in capital spending. Perhaps the Paymaster General can correct this, but my understanding is that CDEL, which is awful Treasury speak for capital spending, is due to fall next year, 2019-20, as a consequence of the attempt to maintain borrowing at moderate levels while at the same time expanding the current Budget. Perhaps he will enlighten us, because if it is true we are doing potentially serious damage to infrastructure that has been starved of capital for many years, as well as to public sector housing and much else.

I would also like clarification on the overall tax burden of the economy. There is a sleight of hand in this Budget. On the one hand, the Government have given tax cuts, but on the other hand—as a consequence of the squeeze on local government spending, which continues unabated and is having a severe impact on local services—council tax will almost certainly have to rise because councils are severely stretched and are providing inadequate services. In some cases, they are approaching bankruptcy and cannot meet their legal obligations. It is not restricted to any one party but, by and large, Conservative county councils are in this position.

Council tax will have to rise, and, in some cases, it probably should have risen earlier. There is nothing in the Red Book that tells us how much revenue local authorities actually get from council tax. That is rather an important figure, and it is important that we see a future projection, which would give us a much clearer picture of what is happening to taxation. On the one hand, the Government are offering direct tax cuts, and on the other they are offering increases in council tax, which at least in income terms is one of the most regressive taxes of all.

The Government have provided substantial additional funding for the national health service for several years ahead, and rightly so, but there is no such guarantee for personal care beyond next year. That matters, because the shortfall in care will fall on the NHS.

Several Conservative Members have been bobbing up and down to ask why we do not take a cross-party approach to this problem. Of course we should—this is a long-term problem—but memories are short, or maybe they are recent Conservative Members, because there have been repeated attempts at cross-party agreement on personal care financing. There was an attempt before 2010, which the then Conservative spokesman, Andrew Lansley, pulled out of on the grounds that it constituted a death tax. We then had another attempt in the coalition, when Andrew Dilnot did an authoritative piece of work for us. We reached a consensus and both sides of the coalition agreed to it, and then, come 2015, the key implementation measures were not introduced, so we are back where we were before. Ten years later, and after several attempts at cross-party consultation, there has been no progress, which is why care funding is in such terrible difficulty.

[Chris Philp]

I have been looking at the Red Book while the right hon. Gentleman has been speaking. He asked two questions. First, he asked about council tax receipts, which will be £34 billion this year and are forecast to rise to £40 billion in 2023-24. Secondly, he asked about CDEL, which is £50.2 billion in the current financial year and is forecast to rise to £65.5 billion by 2020-21.

[Sir Vince Cable]

I think there are separate sets of figures, but I thank the hon. Gentleman for his clarification. His first point is particularly interesting, and I thank him for his rapid desktop research. His figures suggest there is potentially a very big tax increase in the pipeline, which is one of the assumptions in the Budget that was not spelled out on Budget day.

--- Later in debate ---

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Mr Speaker, thank you for letting me close today’s debate on the Finance Bill. The Bill represents a significant moment for this country. We have been told that austerity is over. It should be a time to rejoice. As Labour Members who have warned for eight years that austerity was the wrong choice, we should surely welcome the Bill. But the problem is, on examining the Government’s plans, you can claim that austerity is over only if you are willing to ignore the Prison Service, local government, schools, social care for vulnerable young people, social care for vulnerable older people, the police, the armed forces, those on low incomes, young people and women. I could go on, but I will not. It is enough to say that any economic policy that continues cuts to Government Departments and the squeezing of those on low incomes is not offering something new; it is simply offering more of the same.

The tragedy—the real, genuine tragedy—for those of us who were here in 2010 to listen to the emergency Budget that began austerity is that it simply has not worked. The British public have had all the pain, only to find out that there is no gain. I urge anyone who has participated in this debate to reread George Osborne’s speech in that 2010 Budget, because we know that the deficit was not eradicated by 2015 and that the retention of the triple A rating, said in that debate to be sacrosanct, does not even get a mention in a ministerial speech these days. Instead, economic growth is now the lowest in the post-war era and UK business investment the lowest in the G7. We have had eight years not even of stagnant wages, but of falling wages.

With respect, are these not the fundamentals? When we discuss a Finance Bill, should these factors—the ones that impact directly on our constituents—not be the ones we focus on? Eight years of austerity have left too many people in this country poorer, unsafe and too uncertain of their futures. It was a reckless policy that in my view directly contributed to the result of the Brexit referendum and the further chaos the Government now find themselves in. I want a Finance Bill that properly addresses these things and puts them right, but instead we have a Finance Bill that does none of these things, a Bill that offers the country nothing new—and in some areas nothing at all.

I second the concerns raised by my hon. Friend the Member for Bootle (Peter Dowd) about the way the Government have gone about the whole process of presenting the Bill. It might sound like parliamentary chicanery, but it is important. In an unprecedented move the Government did not allow us to table real amendments to the Finance Bill. By failing to move an amendment to the law resolution, they have limited the scope of amendments and new clauses only to the subject matter of the resolutions already tabled by the Government. The hon. Member for Aberdeen North (Kirsty Blackman) referenced this in her speech. In doing so, they have restricted the rights of every Member, Conservative Back-Bench Members included.

This procedure has only been used by Chancellors six times in the last century and only when a Finance Bill was tabled close to an election: Churchill in 1929, Healey in 1974, Brown in 1997, Osborne in 2010 and the current Chancellor last year in 2017—probably the only time the Chancellor has been mentioned in the same breath as Churchill. We know why these restrictions have been applied. The Government are running scared of the House of Commons and, most of all, their own Back Benchers and perhaps their allies in the Democratic Unionist party.

Time and again, the Government have used the Brexit process as a pretext for a power grab, transferring powers to the Executive without any thought for constitutional checks and balances. I ask hon. Members to have a look at clause 89, rather innocently named, “Minor amendments in consequence of EU withdrawal”. In that clause, Ministers are giving themselves the power to amend tax law outside any normal due process. That will go on the statute book with no sunset clause or limitation of any kind. It is reckless, unprecedented and unnecessary, but it is indicative of the Government’s whole approach to Brexit: grab powers first, make decisions later.

That said, I have, as ever, enjoyed listening to today’s debate. We have had some good speeches and the usual mix of slightly spurious claims and downright incorrect statements from the Government Benches. It seems we will never get Government Members to listen to the IFS on the cost of their corporation tax cuts, but it also seems that the Financial Secretary, whom we are all tremendously fond of, has chosen today to repeat his claim that unemployment rose under every Labour Government. I am afraid that, unfortunately for him, that is just not true.

While listening to the debate, I have taken the liberty of doing some research for the Financial Secretary. I can tell him that he need look no further than the very first Labour Government, who took office in January 1924. There was a general election in December of that year, something we are not in favour of. The very first Labour Government reduced unemployment from 11.9% to 10.9%: those figures are widely available. It is true that the Labour Government of 1945 had to deal with demobilisation following the end of the second world war, but they did found the national health service, build a million homes and still satisfy the legal definition of full employment, so I think we can say that they were the greatest Government in British history.

I must also place on record that the claim made by the hon. Member for Aldershot (Leo Docherty)—I am not sure whether he is still in the Chamber—about the book edited by the shadow Chancellor, my right hon. Friend the Member for Hayes and Harlington (John McDonnell), is simply not correct. I think that the hon. Gentleman was trying to quote the economist Simon Wren-Lewis, who accused the Prime Minister of lying when she gave a similar quote in the House of Commons. I ask for that to be recognised and I ask Members to reflect on its incorrect use.

Several Conservative Members referred to the increase in NHS spending. I felt that there was a slight lack of recognition of the fact that it is predicated purely on an improved forecast for the tax revenues. It is not money in the bank and, remarkably, the Chancellor chose to blow most of it in one go. That may not have been prudent.

I listened intently to the right hon. Member for Wokingham (John Redwood). He said many things that I thought were fundamentally wrong about Brexit and tax policy, but he did make some interesting comments about monetary policy. There has, I feel, been insufficient recognition that austerity has been accompanied by an unprecedented period of ultra-loose monetary policy. The Bank of England cut interest rates to record lows, and then introduced quantitative easing as a form of “life support” when they could not go any lower. We have not discussed that enough, and we have certainly not discussed enough the distributional impact that it implies.

The Bank has essentially compensated for Government austerity by pumping money into the economy to increase consumption and investment, while the Government have done the opposite. We would say that the lack of sustained growth under the Government’s stewardship has meant that we have not yet been able to unwind that policy, so that, at present, if we need it again it is not available to us. That is why, today, we are even more badly placed to deal with the next recession, when it comes.

As ever, I was slightly frustrated by the speeches of the hon. Member for Croydon South (Chris Philp) and others who made no distinction between Government borrowing for investment and Government borrowing to pay for day-to-day spending. As the International Monetary Fund itself has pointed out, if debt is accrued to finance investment, and if that investment will generate stronger tax revenues than the cost of borrowing, it is entirely sustainable. Debt as a percentage of GDP does not tell us much without reference to when that debt needs to be serviced, and at what cost, relative to the growth of taxes that have to pay for it. The public finances are not like a household’s finances, and every Member needs to remember that. The worst legacy for the next generation is a failure to grow the economy as we could. It is nonsense to talk about burdening future generations with debt when they are exactly the ones who would benefit from that long-term investment.

Some excellent speeches were made by Labour Members. My hon. Friend the Member for Kensington (Emma Dent Coad) made an important speech about housing and homelessness. She emphasised that, apart from increasing first-time buyers relief, the Bill does little to encourage house building or to tackle the UK’s housing crisis. As she said, many of the Government’s initiatives, such as Help to Buy, cause substantial problems in themselves. She also updated the House on the Grenfell situation, and I pay tribute to her for all her work on behalf of her constituents and the nation in that regard.

My hon. Friend the Member for Lincoln (Karen Lee) spoke with passion about what austerity has done to living standards in this country. There is no better example of that than the impact of universal credit. Let us not forget that the £1.7 billion promised for universal credit is only a third of the £7 billion cuts in the social security system that were already scheduled. The hon. Member for Glasgow South West (Chris Stephens) made that point well. Let me tell Conservative Members, with complete sincerity, that I am kept awake at night by the casework that I receive on universal credit, and I do not believe that I am the only one.

[Chris Philp]

Does the shadow Minister accept the Resolution Foundation’s analysis, published after the Budget, that said that the total fiscal cost of the amended universal credit will exceed that of the preceding benefits? That is, more money is going into universal credit now than even was the case before.

[Jonathan Reynolds]

I have seen that analysis. The Resolution Foundation said that the cost is greater, so the question for the hon. Gentleman is this: if more money is going in and so many people are still losing out, what terrible choices have the Government made to produce a situation as bad as that?

My hon. Friends the Members for Swansea East (Carolyn Harris) and for Mitcham and Morden (Siobhain McDonagh) mentioned the Government’s shameful delay in limiting the maximum stake for fixed odds betting terminals. Many Members, including me, see the damage done in our constituencies by these machines every week. They both gave forceful and persuasive speeches, but I am hopeful that the will of the House on this matter is clear and that the Government will be forced to do the right thing, especially given several speeches by Conservative Members. My hon. Friend the Member for Enfield, Southgate (Bambos Charalambous) gave a powerful testimony about what austerity has meant in his borough. I only hope that his school governors’ meeting was quorate without him.

There was a lively exchange on the environment. I do not think it is unreasonable to say that, given the potential catastrophe we face—as outlined in the Intergovernmental Panel on Climate Change report published in October—this Finance Bill is unsatisfactory. I sat in Mansion House in June, listening to the Chancellor promise that the UK would be leading the way on green finance, but we have yet to see any tangible evidence of the Government’s intentions on the statute book. We are lagging behind our European counterparts, which already have mandatory climate disclosure laws, and those that have issued their own sovereign green bonds. This just does not seem to be a priority for the Government.

The good news for all my colleagues is that they can join me tonight in voting for Labour’s reasoned amendment, which declines to give this Bill its Second Reading on the basis that it continues the austerity policies that have caused so much damage, and instead proposes a progressive taxation system, real funding for public services, greater public investment and a halt to the roll-out of universal credit.

I say to colleagues across the whole House, is it really unreasonable in Britain today for people to want to take their children into a city centre without having to explain to them why so many people are now sleeping on the streets? Is it really unreasonable to believe that, if we really had a strong economy, thousands of our fellow citizens would not be dependent on food banks to get by? And is it really unreasonable to believe that, when a Government present a Finance Bill, their priorities should be those most in need, not those who are already better off? We do not think that any of those things are unreasonable, so we will vote against the Finance Bill tonight. We know that this country does not just need new ideas; it needs new hope for the future. The Bill sadly offers neither and it does not deserve the endorsement of the House tonight.

Oral Answers to Questions

Chris Philp Excerpts

Tuesday 11th September 2018 Commons Chamber

[John Glen]

What is sustainable is that real household disposable income is up by 4.6% since 2010. I acknowledge that there are those who are experiencing challenges, and that is why I have set out the measures the Government are taking and are determined to take to assist those in a vulnerable position.[Official Report, 9 October 2018, Vol. 647, c. 1MC.]

[Chris Philp (Croydon South) (Con)]

The way to combat poverty and generate prosperity is to create jobs and raise wages. In that context, is it not welcome that a combination of the massive increase in the minimum wage and the rise in the personal allowance since 2010 have increased the net wages of someone working on the minimum wage by 39% when CPI during that period has been only 19%?

[John Glen]

My hon. Friend is on top of the figures, as always, and sets out the positive story that this Government have to tell, but there is no room for complacency. This Government are committed to getting as many people back into work as possible, and we welcome the current record figures.