Energy (oil and gas) profits levy

David Linden Excerpts

Tuesday 22nd November 2022 Commons Chamber

[Dr Fox]

I entirely agree. The concept of the bloc in trade terms is very second half of the 20th century. We need to look at the growing markets that give greater opportunities for the United Kingdom in goods and services. The fact that they are not immediately geographically adjacent to us should not be our primary concern. We need to move with the trends in the global economy, not focus on what is a largely ossified view of the world based on the post-second world war consensus.

When we look at the origins of the inflation that we are facing in the United Kingdom, we see that there are several of them. They have been referenced a lot during this debate. The post-pandemic supply issues are still ricocheting around the global economy and particularly harming developing countries at the present time. Also, the central banks—not just the Bank of England but the Federal Reserve in the United States and the European Central Bank—got into a group-think on what they laughingly call the modern monetarists, which means that they are not monetarists at all. They believed that they had found some sort of monetary alchemy through which they could continue to print money faster than the economies were growing without creating inflation. I believe that is why there is higher inflation in the United States, the United Kingdom and Europe than in other countries—notably Switzerland, which sits in the middle of the eurozone but did not follow the same expansionist monetary policies.

By far the greatest boost to inflation has come from Putin’s invasion of Ukraine, however. That has come about in a number of ways, which I will come to in just a moment, but we must remind ourselves that inflation is not just an economic evil; it is a moral and social evil as well. The poorest people in our society are hit the hardest by inflation because they spend more of their income on non-discretionary items. It also transfers money from the savers to the borrowers in society, which is not something that a Conservative Government should want to see. The Government have done much in this statement to protect those on low and fixed incomes, including an extra £26 billion in cost of living support, particularly on fuel, on top of what we have spent already, and an extra £11 billion on uprating benefits. The Government introduced those two items to protect those on low and fixed incomes and, taken together, they are the size of the United Kingdom’s defence budget. These are not small sums. Our increased spending on education and health is hugely welcome, especially as we catch up on the post-pandemic disruption, but to be frank, even the generous sums put forward by the Government will largely be eaten up by inflation until we get it under control.

And that is before we come to the most frightening item of all, the fact that this year we will be spending £120 billion on debt interest payments. For reference, we spend only £134 billion on NHS England each year, so we are spending almost the NHS budget on debt interest payments. We need to recognise that we cannot increase our debt further. As my right hon. Friend the Member for North West Hampshire (Kit Malthouse) said, around 20% of our debt is now index-linked and is therefore very vulnerable to rises in the retail price index. Duncan Simpson, the chief executive of the TaxPayers Alliance, said:

“The spiralling cost of servicing the national debt is deeply concerning. Taxpayers’ money that should be spent on frontline services or keeping rates down is instead going towards interest payments that outsize the costs of government departments.”

If we cannot raise debt any further, either we have to see spending come down or taxes go up, or we have to increase Britain’s wealth from the rest of the global economy. The latter is difficult in current global conditions and the Government have correctly, but rather disappointingly, from a political perspective, had to see taxes rise. That sets a clear way in which to see our future priorities. The first thing is to bear down on inflation. At the same time, we have to get control of the public finances and then we have to get our taxes back down.

I hope the Opposition will reflect on this point today. We have heard from the Opposition Front Bench on both days of this debate that we are facing a recession made in Downing Street. Currently, the greatest source of global inflation is Putin’s invasion of Ukraine and rising global commodity prices, particularly food and fuel, which is causing potential starvation in vulnerable states, with widespread social dislocation and increased international migration.

[David Linden (Glasgow East) (SNP)]

Will the right hon. Gentleman give way?

[Dr Fox]

I will not give way.

Those who talk about a recession made in Downing Street might want to ask themselves how much they are absolving Vladimir Putin of the global inflation we see today and whether, in fact, they are neglecting their duty to be patriotic at this time.

Conservatives do not want to see taxes rise. If we have to see temporary rises in taxation, the necessary corollary is that, as soon as inflation starts to be controlled, we will see those taxes coming down again. I would go further than my right hon. Friend the Member for North West Hampshire in one respect: this is not just a debate about growth, because any dummy can borrow tomorrow’s money to spend today and call the increased activity “growth,” which has been central to every Labour Government since the second world war.

The Government need to focus on wealth creation, in which we turn our unique intellectual property into goods and services that do not exist today, or into better goods and services than exist today. That means dealing with the supply-side constraints on the economy, making more private capital available to scale up companies, getting more international investment in the United Kingdom and making us more competitive globally. No one in the world owes us a living, and no Government can guarantee increasing living standards to the next generation. Only a successful free-market country in a free-market world can achieve that, and the sooner we get there, the better.

--- Later in debate ---

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

It is a pleasure to follow the hon. Member for Richmond Park (Sarah Olney). I want to take a few minutes to make a few brief points, which I hope go with the flow of some of the excellent speeches we have heard. Before I do, I want to say something about the nature of last week’s autumn statement. One Opposition Member said that it was full of smoke and mirrors, but it was nothing of the sort. It was a straightforward, honest, blunt assessment of our economic situation and fiscal circumstances. Before the autumn statement, I made the point that if anybody in this House could be trusted to come up with the most “untricky”, straightforward, honest fiscal event, it is the Chancellor of the Exchequer, my right hon. Friend the Member for South West Surrey (Jeremy Hunt), and that is exactly what he did.

Opposition Members have been suggesting, yet again, that we are not spending enough and we need to spend more. I say to them that all the way through the pandemic and the lockdowns, theirs were the voices calling for further lockdowns and more restrictions. Even though we were spending hundreds of billions of pounds supporting families and businesses, Opposition Members were calling for yet more spending. Who did they think was going to pay for that? These moments of reckoning we are facing were always going to come, and the statement presented by the Chancellor last week reflected the honesty of that.

As other Members have said, the backdrop to the statement is the global energy crisis, which is fuelling the cost of living pressures that so many families in our constituencies are facing. An extraordinary number of households in this country lack basic financial resilience; they do not have the savings and reserves to enable them to withstand the shocks we have seen in the past two to three years. So I welcome the cost of living measures that my right hon. Friend has brought forward in the autumn statement.

We have heard the idea that this package lacks either compassion or financial firepower behind it, but next year alone the cost of living measures will cost £26 billion, and that does not include the extra £11 billion cost of the full uprating of working-age benefits. As one voice who had consistently been calling for the full social security uprating at this event, I welcome the clarification that the Chancellor brought, but this is a very expensive policy. We are talking about implementing the triple lock on the state pension and the full uprating of social security for working-age people by 10.1%.

[David Linden]

I pay tribute to the right hon. Gentleman for being one of the few voices on the Government Benches who have spoken about the need to uprate benefits. However, does he not agree that part of the problem with the cost of living crisis, which is not necessarily a new thing, is that it highlights the inadequacy of the current social security system and why we must have a root-and-branch review of what had gone wrong long before the war in Ukraine and long before covid?

[Stephen Crabb]

I am grateful to the hon. Gentleman for that intervention, and I will go on to say something about that, but I agree with the point he is making.

Over the past 10 to 11 years, what the Government have done, in essence, is hold back increases in working-age benefits while boosting the state pension for older people. That is very much part of the picture. When wages did not increase in the way we wanted them to, following the last financial crisis, we saw an increase in in-work poverty as a direct result. I wish to flag up three areas that should be longer-term concerns for this Government.

I welcome the additional spending on health and education announced in the autumn statement, but let us not forget that our spending on education, as a percentage of GDP, has been squeezed over the past 10 or 20 years; this is a long-term trajectory. As a country, we are not spending anything like as much as we should be on our skills and vocational education if we are to see increases in productivity. We are also not spending as much as we should on our armed forces and on defence. We are not spending what we should be on these other areas because three large areas are not sustainable in the long run and they are constraining Chancellors of the Exchequer in their decisions.

The first area I wish to flag up is the triple lock. I called for it to honoured during this cost of living crisis, but there are long-term question marks as to its sustainability. I asked the House of Commons Library to do some calculations for me. It found that over the past 10 years if we had increased the state pension by CPI—the consumer prices index—inflation rather than by the triple lock measures, we would have saved almost £13 billion. If we had applied the same uprating measures to the state pension as we did to working-age benefits, that figure would have become about £23 billion. The triple lock is a very expensive long-term policy. It has played a hugely important role in lifting many pensioners out of poverty—no one will forget the derisory 75p increase in the state pension that the last Labour Government made—but I want those on the Treasury Bench to bear in mind that we need a more honest discussion about that area.

The second area to mention, which has already been flagged up this afternoon, is working-age benefits and economic inactivity. Some 9 million people in this country are economically inactive. Many of them have good reasons for this, such as older people and students, but there are millions of people in this country who could work—many of them want to work—but are finding themselves increasingly distant from the labour market.