Economy Update

Debate between Baroness Laing of Elderslie and Mel Stride

Thursday 26th May 2022 Commons Chamber

[Madam Deputy Speaker]

Order. That is enough. Now we will hear from the Chairman of the Select Committee, Mel Stride.

[Mel Stride (Central Devon) (Con)]

I broadly commend the announcement. My right hon. Friend has made a significant intervention to channel billions of pounds in a targeted series of transfer payments to those who most need it, but, as he will know, similar approaches were taken in the pandemic and there were many who fell through the gaps and missed out on support.

I note the additional £0.5 billion increase in the household support fund, which is welcome. Will my right hon. Friend set out to the House how he arrived at that figure and why he feels it will be adequate for the demand?

On the issue of inflation that my right hon. Friend raised, these transfer payments will stimulate the economy—granted, they will come with some tax increases as well—but will he share with the House his assessment of the inflationary impact of the announcement he has just made?

Finally, will my right hon. Friend appear before the Treasury Select Committee immediately after recess so that we can look at these matters in greater detail?

[Rishi Sunak]

I thank my right hon. Friend for his questions and for his thoughtful advice on how best the Government should respond to the current situation. We put extra support into the household support fund because, very specifically, the one group of those on means-tested benefits to whom we cannot deliver money automatically is those who receive only housing benefit, because that is administered by local authorities. That is the main group that needs that specific help, but of course there may well be others, which is why the fund is there.

On the inflationary impact, I believe it will be manageable, but my right hon. Friend is right to highlight it. That impact is why it is important that the support we provide is targeted where it can make the most difference, and that it is temporary and timely, and gets help to where it is required. That is the right approach: being fiscally responsible is going to help us to combat inflation in the long run.

Budget Resolutions

Debate between Baroness Laing of Elderslie and Mel Stride

Wednesday 27th October 2021 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I broadly welcome the Budget, which is the first my right hon. Friend the Chancellor has delivered in what we might call the second phase of this crisis, the first phase having been from a sharp contraction in the economy through to the recovery, during which period my right hon. Friend, I think it is fair to say—[Interruption.]

[Madam Deputy Speaker (Dame Eleanor Laing)]

Order. One moment. It is too noisy down here. It is not fair —the right hon. Gentleman has to be heard too.

[Mel Stride]

I was saying that in the first phase of this crisis, between the huge contraction in the economy and the recovery that we are now seeing, it is fair to say that my right hon. Friend the Chancellor did a pretty remarkable job to support the jobs market and to support jobs—not without criticism, incidentally, from my Committee, but overall it was a remarkable job.

My right hon. Friend has an even tougher job as he looks to the future, now having to deliver sustainable economic growth and ensure that the public finances are on a sustainable trajectory, as well as meeting all the other objectives the Government rightly have on levelling up, net zero and so on.

Budget Resolutions and Economic Situation

Debate between Baroness Laing of Elderslie and Mel Stride

Wednesday 3rd March 2021 Commons Chamber

[Mel Stride (Central Devon) (Con) [V]]

I broadly welcome this Budget, although I say that being aware that the devil is always in the detail of Budgets. We very much look forward to welcoming my right hon. Friend the Chancellor to the Treasury Committee on Thursday next week to look at that detail in more detail.

I totally applaud the measures that the Chancellor has taken in extending the bridge of support—the bridge between the crisis and the recovery. I think the measures he has taken around furlough, support for the self-employed and the extension of the VAT reduction, business rate relief and so on are all most welcome. I also very much welcome, as I and the Treasury Select Committee have been pressing for them for some time, the targeted elements that he has introduced.

As we come through this recovery, there is no doubt that certain parts of the economy will pick up quicker than others. Some businesses will do better than others, so I welcome the 30% turnover threshold that my right hon. Friend has introduced, so that he can more accurately target the relief where it is needed. That goes also for what I understand of his announcements on grants, and of course the VAT reduction extension that will help particularly hard-pressed sectors. I also welcome the investment that he has announced in areas of the country, many of which will have suffered particularly during the crisis. I think that is also welcome targeting.

        If I could turn briefly to the so-called excluded—those who have fallen through the gaps of support hitherto—I am a little disappointed not to have heard something by way of support for those directors working through their own limited companies, paying themselves by way of dividend, yet not having those dividends counted towards their entitlement for furlough. There have been new ideas explored by the Committee, and I would hope, even at this late stage, that the Chancellor will consider some of those ideas with the Committee next week. I was, however, extremely pleased to see that the new self-assessment tax information that has been taken on board—right up until, I think the Chancellor said, last night—will be taken into account in helping many of those who would otherwise have fallen through the gaps in support, some 600,000 in total.

I want to focus on three important areas for business and jobs, and comment on what the Chancellor had to say in that respect. The first is corporate debt. The situation is that the data shows that larger businesses have a great deal of cash in the bank, and it is perhaps not surprising that they have been cautious, that they have received quite a lot of support from Government and, of course, that a lot of them have not been investing. However, among small and medium-sized enterprises the picture is less clear. I have a concern that many of those businesses will struggle with the level of the debt that they have, that they will not be growing when we want them to be creating the jobs of the future and that they will be focusing on de-leveraging their balance sheets. I would like to see something from the Chancellor as to how that particular problem might be addressed. If it is not, the risk is that many of these SMEs will go out of business and markets will become more concentrated and less competitive as a consequence.

Secondly, on investment, I was hugely encouraged by what my right hon. Friend said about the super deduction. My own view was that there should be an increase in the annual investment allowance. It seems to me that this goes significantly beyond that. The devil will be in the detail, but certainly, if the kind of projections for investment that he has just outlined by way of the OBR’s figures are correct, as I understood them, this will be a huge shot in the arm for corporate UK and very welcome. I welcome the three-year loss carry-back arrangements—also something the Committee has pressed for.

My third point is around skills. I have been very impressed with all the announcements that have been made around encouraging apprenticeships, and there was more in the Budget statement just now. On the kickstart scheme, it is imperative that we get this right and that we maximise the efficiency of the transfer of parts of the labour force from those parts of the economy and businesses that are contracting to those that are expanding. I think the Treasury needs to play a very proactive role in making sure that those schemes are successful.

One of the big tests I set in my mind for my right hon. Friend’s Budget was to what degree he navigated successfully the requirement not to put up taxes too early and choke off growth, but at the same time making it very clear to the markets that he and the Government are serious about dealing with the deficit and debt in the more medium term. I have to say that, once again, I have been pretty impressed with what I have heard. I want to see the detail. However, it seems to me that the tax increases and the threshold freezes that my right hon. Friend has announced do not kick in straightaway but he has charted a clear road map for how those taxes and thresholds will be dealt with between now and the end of this Parliament.

If I could just say, on the issue of corporation tax, that it is quite a hike from 19% to 25%. However, we still will remain internationally competitive, and I believe that President Biden, during his campaign for the presidency, suggested US rates might rise from 21% to 28%. So I think, on balance, this is a reasonable move, given that none of the possibilities is particularly palatable, and I welcome the carve-out for small businesses through the small profit rate.

It was pleasing to hear from my right hon. Friend that the OBR’s current projections have improved, and that we are hopefully going to get back to pre-pandemic levels of economic output six months earlier than was thought in November. But of course we still, as he has identified, face a huge challenge going forward, not just around covid, but with the issue that we will have a smaller economy and less taxes that will be able to be raised. Of course, we have demographic pressures going way into the future, with an increasingly elderly population and the pressures that will put on our finances. My right hon. Friend knows that it is critical that we deal with these pressures in a timely manner, or interest rates will rise—and, as he has stated, a 1% rise would mean an eye-watering £25 billion increase in the cost of servicing our debt.

That brings me to the principles that my right hon. Friend has set out today: not borrowing to fund day-to-day expenditure at some point in the future; and having an eye to seeing the level of debt as a percentage of GDP decreasing over time. Those are welcome signals from my right hon. Friend.

I want to turn briefly to an issue that I think is an underestimated threat that has not been discussed enough in an economic context: a return of inflation. Andy Haldane, the Bank of England’s chief economist, has pointed to this risk recently. We know that if inflation increases and spikes, the Bank of England would need to tighten monetary policy to try to keep inflation under control. We would have bond markets in which the Government and the Bank of England were potentially both sellers, with increased upward pressure on interest rates and all that would follow.

Inflation might come through increased friction in global trade, and we have seen increased friction in trade with the EU27 as a consequence of Brexit. It could come through the exchange rate, although recent movements have been in a positive direction, as the virus is being clamped down on and our prospects have improved relative to other economies. Inflation could also come through increases in energy costs and the price of oil, or indeed the unwinding of some of the tax cuts, for example those relating to VAT.

But inflation could also come through the interplay between the supply and demand sides of the economy as we recover. On the supply side, it remains uncertain how quickly companies will bounce back. We know that many of them have been severely damaged. On the demand side, it is also the case that we will not know at this stage the extent to which consumers will re-engage with the economy in the way they did before the pandemic, even though the virus is diminishing. We also do not know what will happen to the huge amount of effectively enforced savings as people have been unable to engage in the economy in the usual fashion—perhaps up to £200 billion or £300 billion by the summer, the Bank of England has suggested. If a lot of that goes back into the economy quickly, it will have a huge stimulus effect. If very little does, clearly the opposite will be the case.

It is therefore absolutely right that my right hon. Friend is ready and prepared to use the fiscal levers as appropriate over the coming months. If he comes back to the House of Commons many times to do so, I think that should be seen as a position of strength, rather than weakness. I wish him well. The Treasury Committee will continue to be critical of him where appropriate, but also supportive in our common endeavour of putting the economy back on track.

In conclusion, I broadly welcome this Budget. It comes against the backdrop of one of the worst economic crises outside of wartime. Yet there is hope that springs from the past, and the strength that we held going into this crisis, of strong and stable financial institutions, record levels of employment, and hard-won improvements in our public finances. But now hope springs also, it seems to me, from the future: from the thousands of men and women—our scientists, health workers and volunteers—who appear to be on the brink of little short of a miracle, the wholesale turnaround in our country’s fortunes due to vaccination. Therefore, in broad terms I welcome my right hon. Friend’s Budget today, but I conclude by supporting each and every one of them.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Before I call the leader of the Scottish National party, I should give a slight warning that there will be an initial time limit on Back-Bench speeches of seven minutes, but that will quite soon be reduced to five minutes, and quite soon after that to three minutes, if we are to have a chance of allowing everyone to speak. For the moment, it will be seven minutes.

Covid-19

Debate between Baroness Laing of Elderslie and Mel Stride

Monday 11th May 2020 Commons Chamber

[Mel Stride (Central Devon) (Con) [V]]

Thank you Madam Deputy Speaker. May I begin by associating myself with the very poignant and moving remarks made by those on both Front Benches about those who have sadly lost their lives to this devastating virus, and with the appreciation that they showed to those who have helped so much and are on the frontline? 

          I will address my remarks specifically to some of the economic issues around covid-19, not least the inevitable withdrawal of some of the Government’s support for businesses as we come out of lockdown. I do not say “inevitable” because the Government were not right to introduce the scheme in the first place—the Chancellor did entirely the right thing, and came in with the scale and pace to support business—but in the longer term, the amount of spend involved in such measures is simply unsustainable.

For example, the furlough scheme is costing as much on an ongoing basis as the funding of the national health service. Before coronavirus, Governments agonised over whether we could spend another 1%, 2% or 3% on the national health service, but here we are spending the equivalent of 100% on furloughing 25% of all workers in the United Kingdom.

I want to focus for a moment on how we might unwind the furlough scheme most productively and effectively. First, we should seek to taper it away, from 80% down to 60% and then to 40% and so on, to smooth our exit. Secondly, it is particularly important that employers should contribute to the cost of furlough beyond the end of June, because many of those with staff currently on furlough are not having to pay them and have no intention, in the medium term at least, of bringing them back in to their business. Thirdly, we need to encourage part-time working within the furlough scheme, where possible.

Finally, the Chancellor should look very closely at targeting support, not just in respect of the furlough but in respect of the other support that the Government are providing. There are at least three categories of businesses in our economy at the moment. There are those that will survive without any additional support through this crisis. Indeed, there is a small minority of businesses whose business model has actually thrived under our current circumstances. They clearly do not warrant support. Secondly, there are companies that, in the medium term, can be bridged out of the current crisis, through the provision of support. That is where a particular focus must lie. Thirdly, there are those businesses whose business model is such that, under the new economy of social distancing and before a vaccine arrives, they are, sadly, going to struggle to survive even if they are given support. I urge the Chancellor to take the courageous and difficult decisions on targeting at business and sector level, to make sure that the Treasury’s finite resources are used productively to support jobs and the economy as we emerge on the other side.

We also need to start talking about the plan beyond coronavirus, even though that may seem some way away. We need to talk about growth and how we are going to support consumer expenditure in particular, given that consumers do not feel like spending and may have increased their savings during this crisis. Temporary tax incentives, such as a time-limited VAT break, may be good in that regard. Finally, as I stick within my four minutes, business indebtedness will have increased. We need the Government to look at how some of that debt can be turned into equity, so that businesses can focus on investing and creating jobs.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Thank you. I now call, to speak on behalf of the Scottish National party, Dr Philippa Whitford, whom I ask to speak for no more than 10 minutes.

Finance Bill

Debate between Baroness Laing of Elderslie and Mel Stride

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution
Monday 27th April 2020 Commons Chamber

[Mel Stride (Central Devon) (Con) [V]]

The economic backdrop to this Finance Bill is among the most challenging that this country has ever faced. The Office for Budget Responsibility, for example, in the scenario that it put forward, suggested a 35% contraction in the economy followed by a rapid bounce back—the so-called V-shaped recovery. Whether that is realistic or not remains to be seen, but it is the case that the Government have some significant control over two areas of policy that will determine whether we come back with a V-shaped recovery or not: the timing and nature of our exit from the lockdown.

On timing, as the House will be aware, the Government have put forward five tests, one of the most important of which is the fifth test, which is that we should extract ourselves from lockdown but in a manner that does not cause a second flare-up of the virus, which happened with the flu pandemic of 1918. This is critical; if the Government get it wrong and we do have that second surge in the virus, it will be a catastrophe for our economy and we will have not a V-shaped recovery, but at best a double-dip recession of some magnitude. It is therefore very important that the Government be allowed the time and space to take those decisions, and that we are patient with them.

Secondly, on the nature of our withdrawal, it is important that we have transparency. As the Chair of the Treasury Committee, I urge the Government to engage with businesses on the broader elements of the plan, so that they can both input and adjust accordingly. The element of which the Government have control, of course, is the support they are providing to the economy, at considerable scale and pace. The Chancellor is to be congratulated on that, but with scale and pace come hard edges to policy and challenges in delivery. Examples of both that the Government should focus on are, first, making sure that, for the self-employed who work through their own companies, dividends that result from self-employment can count when it comes to assessing the furlough amount that they can qualify for. Secondly, on delivery, we heard from the Chancellor earlier about bounce-back loans. I welcome those a great deal, but we also need to ensure that the banks are on notice that we expect them to deliver on the coronavirus business interruption loans and the other loans concerned. Through the Treasury Committee, I have had conversations with the British Business Bank and also written to the banks on its lending panel to urge them to come forward transparently and provide us with data on how much money is going out the door relative to the number of applications on a daily basis. I call on the Financial Secretary to the Treasury and the Government to row in behind us and ensure that transparency, because what gets measured tends to get done.

Let me turn to two specific points in the Finance Bill. The first is the changes that the Financial Secretary to the Treasury has just outlined in respect of entrepreneurs relief. He is right to make those changes; it is a relief that is not fit for purpose. However, there are £24 billion-worth of reliefs every year relating to businesses, and at a time when we need economic growth encouraged at every single turn, it is imperative that the Treasury examines all £24 billion-worth of those reliefs and makes sure that they are all fit for purpose.

Secondly, I was particularly pleased to see such a large number of clauses relating to the digital services tax. It is not right that search engines, online marketplaces and social media platforms should not be paying a fair level of tax in our country. It is not a case of evading tax; it is a case of the taxation system not being adequate for the 21st century. We cannot assess national taxation rights on property, on where people are, on where the management are or on where the intellectual property resides; we must do it on where value is created. These measures are a big step in the right direction. I urge the Financial Secretary to stick to his guns. He will face great pressure from the United States in particular, but in the absence of an international approach to this matter, it is vital that we take action.

I think my five minutes are now up, and I am very aware of your exhortation, Madam Deputy Speaker, so I will conclude, except to say that I will be supporting the Second Reading of this Bill.

[Madam Deputy Speaker (Dame Eleanor Laing)]

Exactly five minutes; I commend the right hon. Gentleman. I call Alison Thewliss, who, as her party spokesperson, is asked to speak for no more than 10 minutes.