Budget Resolutions and Economic Situation

Baroness Laing of Elderslie Excerpts

Wednesday 15th March 2023 Commons Chamber

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—(Jeremy Hunt.)

[Madam Deputy Speaker (Dame Eleanor Laing)]

It is on this motion that the debate will take place today and on succeeding days. The Questions on this motion and on the remaining motions will be put at the end of the Budget debate on Tuesday 21 March. I call the Leader of the Opposition.

[Keir Starmer (Holborn and St Pancras) (Lab)]

Thank you, Madam Deputy Speaker. May I say that it is good to see you back in the Chair?

For all the hype, this is a Budget for growth that downgrades the growth forecast. The Chancellor’s opening boast was that things are not quite as bad now as they were in October last year after the kamikaze Budget. The more he pretends everything is fine, the more he shows just how out of touch the Government are. After 13 years of his Government, our economy needed major surgery, but this Budget leaves us, like millions across our country, stuck in the waiting room with only a sticking plaster to hand. Our country is set on a path of managed decline, falling behind our competitors—the sick man of Europe once again.

This was a day for ambition, for bringing us together with purpose and intent, for unlocking the pride that is in every community and matching their belief in the possibilities of the future, but after today we know that the Tory cupboard is as bare as the salad aisle in our supermarkets. The lettuces may be out, but the turnips are in: a hopelessly divided party, caught between a rock of decline and a hard place of its own economic recklessness, dressing up stagnation as stability as the expiry date looms ever closer.

The figures published today spell it out: a year of stagnation, with growth non-existent. According to the International Monetary Fund, we are the worst-performing country in the G7 this year—a prediction today confirmed by the Office for Budget Responsibility, with growth downgraded in the years to come. This is a failure that can be measured not just by the figures, but by the empty pockets of working people right across the country: 13 years without wage growth, 13 years no better off, 13 years stuck in a doom loop of lower growth, higher taxes and broken public services.

The OBR makes it clear today that things do not look any better in the long run. A broken labour market is holding back our prospects. There are 7 million on NHS waiting lists. Ill health and disability are on the rise, and the consequences, as we have just heard, have been deferred to the future. It is the classic short-term, sticking-plaster cycle: decisions cynically ducked today; pain for working people tomorrow.

It does not have to be like this. Britain has enormous potential. In science, innovation and technology, we should be leading, not lagging. We need an industrial strategy that removes barriers to investment, but the announcements today are nowhere near the mark. The lowest investment in the G7: that is the Government’s record. All our competitors know this. They are gearing up for an almighty race, for the opportunities of tomorrow, and we have to be on the start line, not back in the changing room tying our laces.

The Chancellor mentioned the war in Ukraine. Of course the Opposition stand with Ukraine, and we stand with the Government’s response to Putin’s brutality. We will look carefully at the details of the military spending announced, and we will support them, but what we cannot accept is the use of the war as a blanket excuse for failure.

Our economy has weak foundations. Global crises hit Britain more than other countries. Wages in this country are lower now in real terms than they were 13 years ago. The average French family are a tenth richer; the average German family a fifth richer. Those countries faced the same pandemic and those countries face the same war. The war did not ban onshore wind, the war did not scrap our home insulation scheme, the war did not run down our gas storage facilities—the Government did, with decisions that hurt working people battling the cost of living crisis right now. It has been the same story for the whole 13 years: always the sticking plaster, never the cure, and today’s Budget does nothing to change that. Again, we see a failure to grip the long-term challenges—[Interruption.]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. People should not be speaking while the Leader of the Opposition is delivering his speech. They should be listening. We will now listen to the Leader of the Opposition.

[Keir Starmer]

Today’s Budget changes nothing. Again, we see a failure to grip the long-term challenges and no determination to create growth, which unlocks the potential of the many. Working people are being made to pay for Tory choices and Tory mistakes.

These are the organising principles of Conservative economics, and we should judge them by their choices: the running down of our public services, paid for by working people; the disaster of the Tory mortgage premium, paid for by working people; the opportunities still missed for a proper windfall tax, paid for by working people. That is what makes the Chancellor’s boasts about lower inflation so ridiculous—the idea that it is a tax cut. British people can see through that. They see their tax burden at its highest level for 70 years, and they know it is not the Government who are lowering inflation. It is working people, earning less and enjoying less. It is their sacrifice that is helping to bring inflation down, and they deserve better than another cheap trick from the Government of gimmicks, making them pay while trying to claim the credit.

Even with the price guarantee, the average energy bill has doubled in 18 months. Because of the Government’s recklessness, the average mortgage payment is up by £2,000 a year—a massive hit to living standards, however they cook the books. And yet there is still no real ambition on industrial strategy, no real ambition on the clean energy that will give us cheaper bills, no real ambition on house building. We are seeing the same old Tory choices, with sticking-plaster politics, no growth for the many, and working people paying.

Let us turn to “his” policies on the cost of living. I say “his” policies because there is a history to this—a pattern. Over the course of the whole cost of living crisis, time and again it is Labour who brings the Government not just to their senses, but to our position. Who first pushed for the energy price guarantee? Labour. Who first called for a proper windfall tax? Labour. Who first stood by people on prepayment meters? Labour. Who first said we should freeze the price guarantee this April? Labour. And we can go on, because it is also Labour that first committed to extending the fuel duty cut—a policy that, in January, the Chancellor dismissed, as part of a dossier that he published. So for one poor soul in their research team at least, this really is a back-to-work Budget. I have a word of advice for the Chancellor as he promotes this policy in the coming days: use your own car, and for heaven’s sake make sure you know how to use a debit card. I look forward to the Prime Minister promoting the swimming pools policy. He will not have to borrow one of those—unlike the car.

The cost of living crisis is not over, and once again the Government have left money on the table when it comes to oil and gas companies—money that could have been better spent on working people. Politics is about whose side you are on. There are loopholes that urgently need closing. Even the former CEO of Shell admitted that the companies should be paying more. The long-term plan just is not there. We are seeing the same old Tory choices and the same three principles—sticking-plaster politics, no growth for the many, working people pay—and we are seeing those principles at play in our broken labour market.

Much of what the Chancellor said today focused on that, as well it might. The figures announced in this Budget show how damaging the current situation is to growth—a long-term drag on our ability to create more wealth. Our inactivity levels are particularly shocking, up by half a million since the pandemic, and ours is the worst jobs recovery in the G7. More people are unable to work because of ill health than ever before.

We will look at what the Chancellor has announced today, because we on these Benches have long called for reform of the work capability assessment, and for a welfare system that supports people with disabilities and long-term health conditions and helps them to thrive at work. The universal credit system must help people into employment, and childcare is a huge barrier to that. We have made the case for reform.

When it comes to childcare, of course more money in the system is obviously a good thing—[Interruption.] They obviously were not listening when he told us when he was actually going to do it. We have seen the Tories expand so-called free hours before. As parents up and down the country know, it is no use having more free hours if you cannot access them, and it pushes up the costs for parents outside the offer. That is what we have seen before.

On pensions, the Chancellor made a big spending commitment that will benefit those with the broadest shoulders when many people are struggling to save into their pensions. We needed a fix for doctors, but the announcement today is a huge giveaway to some of the very wealthiest. The only permanent tax cut in the Budget is for the richest 1%. How can that possibly be a priority for this Government?

The truth is that our labour market is the cast-iron example of an economy with weak foundations. Our crisis in participation simply has not happened elsewhere—not to this extent. It is a feature of Tory Britain, and global excuses will not wash. We need a wider reform agenda. Instead of making working people pay, we need to make work pay. We need to move on from growth that is based on insecure, low-paid jobs to growth that comes from good work and strong employment rights and can deliver higher productivity: growth from the many, for the many, that makes people better off in all parts of our country.

I welcome the Chancellor’s announcements on devolution deals. The principle that we should push power out of Westminster is fully supported on this side of the House. In fact, we want him to go further: communities beyond Birmingham and Manchester deserve the right powers, and the same powers, to drive growth as well.

But the Chancellor is a former Health Secretary, and a published author on health, no less—he gave me a signed copy of his book. He knows that growth needs an NHS fit for the future, and no country can be fit for work when there are 7 million people on hospital waiting lists. So I was waiting for him to match Labour’s ambition—waiting for him to match our plan to train more doctors and nurses and to tackle the capacity crisis, a policy that he publicly praised just 15 days before becoming Chancellor. And yet it never came. If ever there was a symbol of the poverty of ambition, that is it, because the reality is that a country getting sicker is a country getting poorer, and a country getting poorer is a country getting sicker. Health and wealth must go together. Britain cannot afford to be the sick man of Europe. Britain cannot afford the Tories.

And there is another way. On these Benches, we understand that institutions must be respected, that constraints must be accepted, that fiscal rules should be sound and followed rigorously, and that every pound is precious and must not be wasted. The Tories want to shout about their record, so let them shout. Wages: lower. Taxes: higher. Borrowing: higher. Debt: higher. Their chaos has a cost.

Certainty is vital for the growth that we need, essential for businesses and investors in our country. As we have spelt out, compared with a blanket cut in corporation tax, investment allowances are the right approach, but the question that many businesses will ask today is this: how long before the wind blows again, and we all go through this again? That is what the Tories do not understand about business investment. Their endless fighting on tax is bad for growth, in and of itself. Real stability means that taxes do not go up and down like yo-yos, and the R&D tax credit regime does not get overhauled twice in six months. [Interruption.]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Okay, that is enough. I now cannot hear the right hon. and learned Gentleman at all—and it is nothing to do with being old. Now, be quiet.

[Keir Starmer]

Let me give an example of that instability. It is a bit of a fraught subject at the moment, but when the Chancellor was Culture Secretary he apparently took some lessons on the rules of football. Let me provide a refresher. The number of times his Government have broken their fiscal rules: 11. That is one football team. The number of times they have changed corporation tax policy: 22. That is two teams—you have got a game. But if he wants the post-match analysis, he will have to consult the experts, who will be back on his screens and ours this weekend. I know that the whole House will want to applaud that.

But a Budget is about not just the choices made but the choices ignored. Britain needs more than certainty for growth; that is the least we should expect. We need change, stability and success. Anyone listening to this who is worried about NHS waiting lists or about crime going unpunished—[Interruption.] They do not want to hear about the waiting lists. They do not want to hear about crime going unpunished. Housebuilding rates are falling. I suppose they do not want to hear about that either. They will have heard very little that makes them feel hopeful about our future.

The Government could have used sensible taxation policies on non-doms or oil and gas companies and made the money work for working people. They could have tackled the vested interests that gum up our planning system and shown real ambition on the investment we need to turn us into a green growth superpower. That was the test today: could we move beyond the usual sticking-plaster solutions and set a new direction for growth that serves the interests of working people?

I am afraid that the verdict on this Budget is clear: they will not offer change because they cannot. And so our course is set: managed decline, Britain going backwards, the sick man of Europe once again. That is the Britain they have created and they should look it in the eye, because today’s figures on growth put their failures up in lights. After 13 years of Tory sticking-plaster politics, 13 years of no growth for the many and 13 years of being asked to pay, working people are entitled to ask, “Am I any better off than I was before?” After 13 years, with no excuses left, nobody left to blame, no ambition or answers, the resounding answer is no, and they know it.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. We will just let things settle down a bit. If people are leaving, please will they do so quickly and quietly, out of consideration for everybody else who is still taking part in the debate? Get a move on. I call the Chair of the Treasury Committee.

[Harriett Baldwin (West Worcestershire) (Con)]

Thank you very much, Madam Deputy Speaker; it is wonderful to have you back in the Chair.

After that torrent of socialist declinism from the Opposition, I want to start by saying how lucky we are to have a lucky Chancellor. He has been lucky this winter because the weather has been a lot warmer than it was when he stood here in November, and as a result the price of energy has come down. But he has also made some of his own luck. Thanks to the steps that he took, the financial markets have stabilised and he has had to pay less in interest than he was expecting to—about £4 billion.

It is hard to believe that this is the first official Budget we have had in this Chamber since October 2021. A lot of things have changed since then. Our world-leading NHS vaccination roll-out has ended the severe contagion of the pandemic, but Putin’s evil and illegal invasion of Ukraine has sparked the worst inflation for 40 years. The challenges that those events have placed on the public finances have been extraordinary, and the spending cannot all be borrowed and passed on to the next generation. That is why I welcome today’s news that the Chancellor is forecasting 3% lower debt in years to come.

The Treasury Committee welcomes the fact that the Budget is accompanied by forecasts from the Office for Budget Responsibility. We think it is important that that stands alongside a Budget. It is a key part of the independent framework for Chancellors and we will be taking evidence from the OBR next week on the underlying assumptions behind its forecasts.

What has changed most perniciously since the last Budget in October 2021 is inflation. It was only just beginning to rear its ugly head back then, and as a member of the Treasury Committee throughout this entire period, I have been like Cassandra in highlighting some of the inflationary risks that we faced. Far from being transitory, as the independent Bank of England hoped, inflation has become quite deeply embedded in the UK economy in wage inflation and in expectations. That is why I welcome the news today that the OBR is expecting inflation to go back down to 2.9% by the end of this year.

Inflation is the worst tax that we have on our economy. It is a tax paid particularly by the very poorest, who spend the highest proportion of their income on food and energy, so the Chancellor must not listen to the siren voices urging him to increase or abandon the inflation target that he gives to the independent Bank of England. The top priority for our economy this year must be to at least halve inflation.

It is to be welcomed that in his Budget today, the Chancellor has tried to focus on measures that help to achieve that inflation target. The extension of the fuel duty freeze and the cap on household energy costs will all help to keep inflation almost 1% lower than it would otherwise have been. These might not feel like giveaways but they do cost money against the do-nothing counterfactual option. It is good to see that they are being implemented because of better public finances, and that these tax cuts can be seen as consistent with the Government’s second priority of reducing debt.

In our recent Treasury Committee report, we called on the Chancellor to think again about the fiction that lies behind fuel duty forecasts. Every year, they get embedded in the fiscal outlook, and every year Chancellors realise that it is not an ideal time to raise fuel duty. I welcome the fact that the fuel duty cut has been extended for another year and that, once again, the fiction has not been followed through into reality, but we need to think long and hard about why a tax that is inflationary, that harms growth and that is heading the way of the dodo, as we all move to electric cars, is still in the forecast numbers.

The third economic policy of growing the economy in a non-inflationary way will involve all of us working more productively. The Stride review, named after my illustrious predecessor, has rightly focused on this key question. Many helpful measures have been announced in today’s Budget. With over 1 million job vacancies in our economy, we are still, as a country, working fewer hours than we were before the pandemic. Unlocking that human and economic potential is key to strong, productive, non-inflationary growth.

The steps that have been announced today on childcare and on pensions will help to ease the labour shortages that are pushing up wage demands and help to counter those inflationary pressures. The Treasury Committee looks forward to exploring all these issues in detail with our expert witnesses and with the Chancellor in our next evidence sessions, because the details really matter.

The Treasury Committee has highlighted the new benefit cliff edges that my right hon. Friend introduced last November, when he announced that, next winter, only low-paid households will receive the £900 help with their cost of living. We asked for it to be spread over six instalments to reduce the risk of cliff edges. We are sorry to hear that a somewhat clunky computer system means there will be three instalments instead. We worry that, if a person loses their job just after the qualifying date, they will miss out on a lot of help.

There are still cliff edges, taper rates and disincentives to work galore in our benefit and tax systems, whether they are around free school meals, childcare limits, child benefit tapers, tax-free childcare cliff edges and the withdrawal of the tax-free allowance. The very welcome measures announced today on all those fronts, and the pension cap abolition, will all be studied in detail by the Committee. We plan to work closely with our colleagues on the Work and Pensions Committee to find recommendations to smooth some of those cliff edges and distortions.

The Chancellor can see how these cliff edges are disincentives to working more hours, and every hour of work should pay. We have made huge progress towards that today. At any stage in life, and at any age, people should be rewarded more the more they work.

Speaking briefly as a constituency MP, I welcome the help for swimming pools, for pubs, for levelling up, for Malvern theatres and for childcare providers and nurseries. There is a lot of very good news for them today.

The Chancellor has had some luck since November and he has shared that luck with UK households today. He has a clear intention to bring down inflation, to grow the economy and to reduce debt. May good luck continue to follow him, and may the extra billions of pounds he has secured for the defence budget help our Ukrainian friends have good luck and to beat back the Russian invaders. Slava Ukraini.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I call the SNP spokesman.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. Before I call the next hon. Member, let me say that it will be obvious that a great many people wish to speak this afternoon. I would prefer not to have to put a time limit on, and we will manage without one if everybody sticks to about seven minutes. You can say a lot in seven minutes. If we cannot manage to have a self-imposed rule, we will put on a time limit. I call Priti Patel.