Oral Answers to Questions
Debate between Baroness Laing of Elderslie and Rishi Sunak(11 months, 3 weeks ago)
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The Prime Minister
I agree with my hon. Friend that cuckooing is an abhorrent practice that often preys on the most vulnerable in society. As part of the Government’s antisocial behaviour action plan, the Home Office engaged with relevant stakeholders about whether a new criminal offence was necessary. The results of that engagement demonstrated that a range of existing powers can be used to disrupt that activity, but of course I will ensure that the relevant Minister meets with my hon. Friend and updates her on the work we are doing to share effective practice to tackle this abhorrent problem.
The Prime Minister
The treaty, as I have said, addresses all the concerns of the Supreme Court, but it is a point of pride that we are a compassionate country that does welcome people from around the world. Let me just get the right hon. and learned Gentleman up to speed on what we are doing: we have reduced the number of illegal arrivals from Albania by 90%; increased the number of illegal working raids by 50%; and because of all the action we have taken, the number of small boat arrivals is down by one third. But what is the right hon. and learned Gentleman’s plan? What it comes down to is that he simply does not have a plan to address this problem. [Interruption.] No, no, I am probably being unfair, because he does have a plan: it is to cook up a deal with the EU that would see us accept 100,000 illegal migrants.
The Prime Minister
I have slightly lost the thread of the question. The simple point is that if you believe in stopping the boats, as we on this side of the House do, you need to have effective deterrence and a returns agreement. It is as simple as that.
The right hon. and learned Gentleman is not interested in stopping the boats, which is why he is not interested in the Rwanda plan. In fact, we know they do not want to tackle this issue, because even when this Government were trying to deport foreign national offenders from this country, they opposed it. Multiple shadow Front Benchers signed a letter to me to that effect, but I do not need to tell him that, because he signed it too! [Interruption.]
The Prime Minister
My hon. Friend makes an excellent point. We have set aside £8 billion as a result of our plans on HS2, which is enough to resurface over 5,000 miles of road to improve journeys—a cornerstone of our plan—but we are also introducing a range of measures, as my hon. Friend says, to reduce congestion from roadworks. Contained in the plan for drivers is a scheme for greater fines and penalties to ensure that works finish on time. I will make sure that we look at his suggestion, and I wholeheartedly back his campaign.
Madam Deputy Speaker
Order. We really must hear the Prime Minister, and we have a lot of questions to get through. [Interruption.] It is not the Prime Minister’s opponents who are giving him trouble.
The Prime Minister
I say to the hon. Gentleman that Margaret Thatcher’s view was to cut inflation, then cut taxes and then win an election, and that is very much my plan.
The Prime Minister
In a couple of years’ time, we will have increased spending to over £8 billion every year on free hours and early education, which will help working families with childcare costs; indeed, it is the single biggest investment in childcare in England ever. But my hon. Friend makes an excellent point, and that is why we will ensure that there is a discretionary supplement in the local authorities’ local funding formula for rural communities to account for the smaller economies of scale, so that they can continue to deliver their vital work.
Israel and Gaza
Debate between Baroness Laing of Elderslie and Rishi Sunak(1 year, 1 month ago)
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The Prime Minister
I can assure the hon. Lady that we are working very hard with partners across the region to bring humanitarian aid to the people who need it as soon as practically possible.
Madam Deputy Speaker (Dame Eleanor Laing)
Order. I know that a lot of people are disappointed that they have not been able to ask their particular question, but the House is grateful to the Prime Minister for having been at the Dispatch Box for two hours. I must point out in advance to all those colleagues who will come and complain to me about not being able to speak that the House has been asking the Prime Minister to use his diplomatic skills to the best of his ability on behalf of our country, so I think we must release him from the Chamber to allow him to do so. Thank you, Prime Minister.
G20
Debate between Baroness Laing of Elderslie and Rishi Sunak(2 years ago)
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Madam Deputy Speaker (Dame Eleanor Laing)
Order. Before the Prime Minister attempts to answer the question, I should point out that there is far too much noise in the Chamber. One would think that people were anticipating something about to happen and chatting among themselves instead of giving their full attention to the important answers that the Prime Minister is giving to important questions.
The Prime Minister
Thank you, Madam Deputy Speaker. Maybe not as important as what is about to come from the Chancellor.
All trade deals involve give and take on both sides. The Australia trade deal will open up new markets for 3 million British jobs, which is fantastic, reduce prices for Australian goods and make it easier for young people to move back and forth between the two countries. Going forward, we will ensure that our trade deals work for the UK. That is what we will deliver.
Economy Update
Debate between Baroness Laing of Elderslie and Rishi Sunak(2 years, 6 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
The high inflation that we are experiencing now is causing acute distress to the people of this country. I know that they are worried. I know that people are struggling. I want to explain what is happening, why it is happening, and what we propose to do about it.
I trust the British people, and I know they understand that no Government can solve every problem, particularly the complex and global challenge of inflation, but this Government will never stop trying to help people, to fix problems where we can and to do what is right, as we did throughout the pandemic. We need to make sure that those for whom the struggle is too hard, and for whom the risks are too great, are supported. This Government will not sit idly by while there is a risk that some in our country might be set so far back that they might never recover. That is simply unacceptable, and we will never allow it to happen.
I want to reassure everybody that we will get through this. We have the tools and the determination we need to combat and reduce inflation. We will make sure that the most vulnerable and least well off get the support they need at this time of difficulty, and we will also turn this moment of difficulty into a springboard for economic renewal and growth, with more jobs, higher skills and greater investment: our plan for a stronger economy.
Before I turn to the details of our plan, let me put into context for the House the challenge we face. This country is now experiencing the highest rate of inflation we have seen for 40 years. The Bank of England expects inflation to average around 9% this year. Our exposure to global shocks continues to explain most of the inflation above the 2% target. Supply chain disruption as the world reopened from covid, combined with Russia’s invasion of Ukraine and potentially exacerbated by recent lockdowns in China, are all contributing to significant price increases for goods and energy.
However, over the course of the year, the situation has evolved and become more serious. There are areas of particular concern. Even excluding energy and food, core inflation has become broader-based and elevated. Of the basket of goods and services we use to measure inflation, a record proportion is seeing above-average price increases. Also, we are acutely exposed to the European energy price shock and, like the US, we have a tight labour market. Make no mistake, the lowest unemployment in almost 50 years, just months after averting a jobs crisis during the pandemic, is good news, but combined with the shock to European energy prices, it does contribute to the UK’s relatively high rate of inflation.
Lastly, as the Bank has noted, longer-term inflation expectations have risen above their historical averages by more than they are doing in the US and Europe. We cannot and must not allow short-term inflationary pressures to lead people to expect that high inflation will continue over the long term. We can get inflation under control. It is not some abstract force outside our grasp. It may take time, but we have the tools we need and the resolve it will take to reduce inflation. We have three specific tools available to combat and reduce inflation, and we are using them all: independent monetary policy, fiscal responsibility and supply-side activism.
First, our primary tool is a strong independent monetary policy. Since control of monetary policy was taken out of the hands of politicians 25 years ago, inflation has averaged precisely 2%. It is right that the Bank of England is independent, and I know that the Governor and his team will take decisive action to get inflation back on target and ensure that inflation expectations remain firmly anchored.
Secondly, we need responsible fiscal policy. That means providing fiscal support where required but not making the situation unnecessarily worse, causing inflation, interest and mortgage rates to go up further than they otherwise would. Excessively adding fiscal stimulus into a supply-constrained economy, especially one in which households and businesses have built up over £300 billion of excess savings, risks being counterproductive and increasing inflationary pressures. In other words, fiscal support should be timely, temporary and targeted. Timely because we need to help people when the shock is at its worst, targeted because unconstrained stimulus will make the problem worse, and temporary because if we do not meet our fiscal rules and ensure the public finances are resilient in the longer run, we create even greater risks on inflation, interest rates and the trend rate of economic growth.
Thirdly, we are taking an activist approach to supply-side reforms. This will increase our productive capacity, ease inflationary pressures and raise our long-term growth potential. The Prime Minister’s energy security strategy will reduce bills over time by increasing energy supply and improving energy efficiency. The Work and Pensions Secretary is moving half a million jobseekers off welfare and into work and doing more to support older people back into the jobs market. The Home Secretary is making our visa regime for high-skilled migrants one of the most competitive in the world, and in the autumn we will bring forward tax cuts and reforms to encourage businesses to invest more, train more and innovate more—the path to higher growth. Independent monetary policy, fiscal response ability and supply-side reform—the country should have confidence that using these three tools, we will combat inflation and reduce it over time.
But of course, we know that households are being hit hard right now, so today we will provide significant support to the British people. As I have said, a critical part of how we are dealing with inflation is responsible fiscal policy. What this means in practical terms is that as we support people more, we need to think about the fairest way to fund as much of that cost as possible. The oil and gas sector is making extraordinary profits, not as the result of recent changes to risk taking or innovation or efficiency, but as the result of surging global commodity prices, driven in part by Russia’s war. For that reason, I am sympathetic to the argument to tax those profits fairly, but—[Interruption.]
Madam Deputy Speaker (Dame Eleanor Laing)
Order. A bit of gentle banter is fine, but when it gets to the stage that nobody can hear what the Chancellor is saying, it is counterproductive. Quieter banter, please.
Rishi Sunak
But, as ever, there is a sensible middle ground. We should not be ideological about this; we should be pragmatic. It is possible to both tax extraordinary profits fairly and incentivise investment. So, like previous Governments, including Conservative ones, we will introduce a temporary targeted energy profits levy— [Interruption.] But we have built into the new levy— [Interruption.] We have built into the new levy a new investment allowance similar to the super deduction, which means that companies will have a new and significant incentive to reinvest their profits.
The new levy will be charged on the profits of oil and gas companies at a rate of 25%. It will be temporary, and when oil and gas prices return to historically more normal levels, the levy will be phased out, with a sunset clause written into the legislation. And crucially, with our new investment allowance, we are nearly doubling the overall investment relief for oil and gas companies. That means that for every pound a company invests, it will get back 90% in tax relief. So the more a company invests, the less tax it will pay.
We understand that certain parts of the electricity generation sector are also making extraordinary profits. The reason for this is the way our market works. The price our electricity generators are paid is linked not to the costs they incur in providing that electricity but rather to the price of natural gas, which is extraordinarily high right now. Other countries such as France, Italy, Spain and Greece have already taken measures to correct this. As set out in the energy security strategy, we are consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
These reforms will take time to implement, so in the meantime, we are urgently evaluating the scale of these extraordinary profits and the appropriate steps to take. So our energy profits levy will encourage investment, not deter it. It will raise around £5 billion of revenue over the next year so that we can help families with the cost of living, and it avoids having to increase our debt burden further. There is nothing noble in burdening future generations with ever more debt today because the politicians of the day were too weak to make the tough decisions.
I know the whole House will agree that we have a responsibility to help those who, through no fault of their own, are paying the highest price for the inflation we face. To help with the cost of living, we are going to provide significant targeted support to millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.
First, on people on the lowest incomes, over 8 million households already have incomes low enough for the state to be supporting their cost of living through the welfare system. They could be temporarily unemployed and looking for work; they could be unable to work because of long-term sickness or disability; or they could be on low pay and using benefits to top up their wages. Right now, they face incredibly difficult choices. I can announce today that we will send directly to around 8 million of the lowest-income households a one-off cost of living payment of £650. That support is worth over £5 billion and will give vulnerable people certainty that we are standing by them at this challenging time. The Department for Work and Pensions will make the payment in two lump sums, the first from July and the second in the autumn, with payments from Her Majesty’s Revenue and Customs for those on tax credits following shortly after. There is no need for people to fill out complicated forms or bureaucracy, as we will send the payments straight to their bank account.
Our policy will benefit over 8 million households in receipt of means-tested benefits from July. Uprating in that timeframe could only be done for those on universal credit, and our policy will provide a larger average payment this year of £650, whereas uprating the same benefits by 9% would be worth only £530 on average.
There are two further groups who will need extra targeted support. Many pensioners are disproportionately impacted by higher energy costs. They cannot always increase their income through work and, because they spend more time at home and are more vulnerable, they often need to keep the heating on for longer. We estimate that many people who are eligible for pension credit are not currently claiming it, which means many vulnerable pensioners will not be receiving means-tested benefits. I can announce today that, from the autumn, we will send over 8 million pensioner households that receive the winter fuel payment an extra one-off pensioner cost of living payment of £300.
Disabled people also face extra costs in their day-to-day lives; for example, they may have energy-intensive equipment around their home or workplace. To help the 6 million people who receive non-means-tested disability benefits, we will send them, from September, an extra one-off disability cost of living payment worth £150. Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payment to £800.
I can reassure the House that next year, subject to the review by the Secretary of State for Work and Pensions, benefits will be uprated by this September’s consumer prices index, which on the current forecast is likely to be significantly higher than the forecast inflation rate for next year. Similarly, the triple lock will apply to the state pension.
Of course we recognise the risk that, with any policy, there may be small numbers of people who fall between the cracks. For example, it is not possible right now for the DWP or HMRC to identify people on housing benefit who are not also claiming other benefits. To support them and others, we will extend the household support fund delivered by local authorities by £0.5 billion from October.
This is a significant set of interventions to support the most vulnerable in our country. We will legislate to deliver this support on the same terms in every part of the United Kingdom, including Northern Ireland. Taken together, our direct cash payments will help one third of all UK households with cost of living support worth £9 billion.
We are meeting our responsibility to provide the most help to those on the lowest incomes. I believe that is fair, and I am confident that the House will agree, but many other families who do not require state support in normal times are also facing challenging times. Is it fair to leave them unsupported? The answer must surely be no.
Although it is impossible for the Government to solve every problem, we can and will ease the burden as we help the entire country through the worst of this crisis. We will provide more support with the rising cost of energy, and that support will be universal. Earlier this year, we announced £9 billion to help with the cost of energy, including a council tax rebate of £150 for tens of millions of households.
We planned to provide all households with £200 off their energy bills from October, with the cost repaid over the following five years. Since then, the outlook for energy prices has changed. I have heard people’s concerns about the impact of these repayments on future bills, so I have decided that the repayments will be cancelled. For the avoidance of doubt, this support is now unambiguously a grant. Furthermore, we have decided that the £200 of support for household energy bills will be doubled to £400 for everyone. We are on the side of hard-working families with £6 billion of financial support.
To summarise, our strategy is to combat and reduce inflation over time through independent monetary policy, fiscal responsibility and supply-side activism. We are raising emergency funds to help millions of the most vulnerable families who are struggling right now, and all households will benefit from £400 of universal support for energy bills, with not a penny to repay.
In total, the measures I have announced today provide support worth £15 billion. Combined with the plans we have already announced, we are supporting families with the cost of living through £37 billion or 1.5% of GDP. That is more than or similar to the support in countries such as France, Germany, Japan and Italy. I am proud to say that around three quarters of that total support will go to vulnerable households.
As a result of the measures announced today and the action we have already taken this year, the vast majority of households will receive £550, pensioners will receive £850 and almost all of the 8 million most vulnerable households in the country will, in total, receive support of £1,200.
Let me put that in context. The House will have noted the news from Ofgem earlier this week that it expects the energy price cap to rise to £2,800 in October. That implies an average increase in people’s bills this year of just under £1,200, which is the same amount as our policies will provide for the most vulnerable people this year.
I know there are other pressures. I am not trying to claim that we have solved the entire problem for everyone—no Government could—but I hope that when people hear of the significant steps we are taking, and the millions we are helping, they will feel some of the burden eased and some of the pressures lifted. They will know that this Government are standing by them.
Supporting people with the cost of living is only one part of our plan for a stronger economy—a plan that is: creating more jobs; cutting taxes on working people; reducing our borrowing and debt; driving businesses to invest and innovate more; unleashing a skills revolution; seizing the benefits of Brexit; and levelling-up growth in all parts of the United Kingdom. The British people can trust this Government because we have a plan for a stronger economy, and I commend it to this House.
Madam Deputy Speaker (Dame Eleanor Laing)
I call the shadow Chancellor, Rachel Reeves.
Madam Deputy Speaker
Order. We are not going any further unless you are quiet. I call the Chairman of the Select Committee, Mel Stride. [Interruption.] I beg your pardon. It would be best if I allowed the Chancellor first to reply to the shadow Chancellor. I am not trying to change the rules; I am just trying to go a bit faster. I call the Chancellor of the Exchequer.
Rishi Sunak
I thank the hon. Member for Leeds West (Rachel Reeves) for her contribution, albeit her response was based on a fundamental misunderstanding of why now is the right time to act. Since February and March, three significant things have changed: the situation in Ukraine has altered considerably from what was first envisaged; inflation is now tacking considerably higher than was previously expected; and finally, and most importantly, we now have concrete information on the autumn and winter energy price cap. With that information, we were better able to design and to scale our policies. That is why, with time and thought, our energy profits levy has a very generous investment allowance built into it—not something proposed in the Labour party’s blunt instrument.
Because we were patient, we have been able to scale our support to the problem, which means that our proposals are in fact more generous than those offered by the Labour party. Because Labour Members rushed it, they got their sums wrong. But we all make mistakes, and being able to change course is not a weakness: it is a strength. I will not criticise the Labour party for getting it wrong, just so long as Labour can acknowledge that with this package we have got it right.
Let me address some of the specific points. I think the hon. Lady talked about energy security and, somewhat bizarrely, reflected on the lack of investment in nuclear capacity. Well, this is the Government who are correcting the mistakes of the past.
The hon. Lady asked about energy efficiency. This is the Government who are investing £6 billion to improve energy efficiency.
The hon. Lady asked about business rates. This is the Government who are delivering a 50% discount in business rates for our high streets next year.
The hon. Lady talked about growth. One of the best ways to drive growth is to drive up business investment. That is something the Labour party will never understand.
The hon. Lady also asked about VAT. This goes to the heart of the issue. VAT is worth, on average, about £140 of support; our policy, universally—to all households in this country—is worth £400. That is the reason not to do VAT. What we are doing is far more generous.
My final point—I know we are pressed for time, Madam Deputy Speaker—is about ideas. For our constituents, there are only good ideas and bad ideas, and whether we can do anything about them. This Government can, because we are always on the side of the British people. This Government have been faced with challenges unlike any other and at every step we have achieved things that the Labour party said were not possible. We averted the mass unemployment crisis that Labour predicted because of our furlough interventions. We led the country out of covid with a vaccine programme that Labour would have left us unable to deliver. Each time I am at this Dispatch Box opposite the hon. Lady, I find myself thinking the same thing: the public can see through it. They know the difference between a party playing politics and a Government trying to help. [Hon. Members: “Hear, hear!”]
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.
Rishi Sunak
I know councils are working as hard as they can to get the payments to people, and we of course remain engaged with them, to help provide the support that they need to do that as fast as possible.
Madam Deputy Speaker (Dame Eleanor Laing)
I thank the Chancellor of the Exchequer for his swift answers to the questions following his statement.
Financial Statement
Debate between Baroness Laing of Elderslie and Rishi Sunak(3 years ago)
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The Chancellor of the Exchequer (Rishi Sunak)
Madam Deputy Speaker, I have heard your words and those of Mr Speaker. I have the greatest respect for you both and want to assure you that I have listened very carefully to what you have said. May I also send my best wishes to the Leader of the Opposition? I know that the whole House will join me in doing that.
With your permission, Madam Deputy Speaker, let me turn to today’s Budget. Employment is up, investment is growing, public services are improving, the public finances are stabilising and wages are rising. Today’s Budget delivers a stronger economy for the British people: stronger growth, with the UK recovering faster than our major competitors; stronger public finances, with our debt under control; and stronger employment, with fewer people out of work and more people in work. Growth is up, jobs are up and debt is down. Let there be no doubt: our plan is working.
This Budget is about what this Government are about: investment in a more innovative, high-skilled economy, because that is the only sustainable path to individual prosperity; world-class public services, because they are the common goods from which we all benefit; backing business, because our future cannot be built by the Government alone but must come from the imagination and drive of our entrepreneurs; help for working families with the cost of living, because we will always give people the support they need and the tools to build a better life for themselves; and levelling up, because for too long—far too long—the location of your birth has determined too much of your future, and because the awesome power of opportunity should not be available only to a wealthy few but be the birthright of every child in an independent and prosperous United Kingdom.
Today’s Budget does not draw a line under covid; we have challenging months ahead, and I encourage everyone eligible to get their booster jabs as soon as possible. But today’s Budget does begin the work of preparing for a new economy post covid: the Prime Minister’s economy of higher wages, higher skills and rising productivity, and of strong public services, vibrant communities and safer streets—an economy fit for a new age of optimism, where the only limit to our potential is the effort we are prepared to put in and the sacrifices we are prepared to make. That is the stronger economy of the future, and this Budget is the foundation.
The House will recognise the challenging backdrop of rising inflation. Let me begin by carefully explaining what is happening in our economy and why. Inflation in September was 3.1% and is likely to rise further, with the Office for Budget Responsibility expecting the consumer prices index to average 4% over the next year. The majority of this rise in inflation can be explained by two global forces. First, as economies around the world reopen, demand for goods has increased more quickly than supply chains can meet. Having been shut down for almost a year, it takes time for factories to scale up production, for container ships to move goods to where demand is and for businesses to hire the people they need.
Secondly, global demand for energy has surged at a time when supplies have already been disrupted, putting a strain on prices. In the year to September, the global wholesale price of oil, coal and gas combined has more than doubled.
The pressures caused by supply chains and energy prices will take months to ease. It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with Finance Ministers around the world and it is clear that these are shared global problems, neither unique to the UK nor possible for us to address on our own. But where the Government can ease these pressures, we will act. To address the driver shortage, the Transport Secretary is introducing temporary visas, tackling testing backlogs and changing cabotage requirements, and is today announcing new funding to improve lorry park facilities. We have already suspended the HGV levy until August, and I can do more today, extending it for a further year until 2023 and freezing vehicle excise duty for heavy goods vehicles.
To help with the cost of living, we have introduced a new £500 million household support fund, and today’s Budget will support working families further.
On our fiscal policy, we will meet our commitments on public services and capital investment, but we will do so keeping in mind the need to control inflation.
Finally, I have written to the Governor of the Bank of England today to reaffirm the Bank’s remit to achieve low and stable inflation. People should be reassured: it has a strong track record in doing so.
I understand that people are concerned about global inflation, but they have a Government here at home ready and willing to act. In a period of global uncertainty, we need to work hard to maintain a strong economy and be responsible with the public finances, and that is what we are doing. I am grateful to the OBR for its work, and I am pleased to say that it now expects our recovery to be quicker. Thanks to this Government’s actions, it forecasts the economy to return to its pre-covid level at the turn of the year—earlier than it thought in March.
Growth this year is revised up from 4% to 6.5%. The OBR then expects the economy to grow by 6% in 2022, and 2.1 %, 1.3% and 1.6% over the next three years. In July last year, at the height of the pandemic, unemployment was expected to peak at 12%.
Today, the OBR expects unemployment to peak at just 5.2%. That means more than 2 million fewer people out of work than previously feared. Wages are rising: compared with those in February 2020, they have grown in real terms by almost 3.5%. I can confirm for the House that the OBR’s forecast for business investment has been revised up over the next five years.
Because of the actions that we took to support our economy, we have been more successful than previously feared in preventing the long-term economic damage of covid.
The OBR has today revised down its scarring assumption from 3% to 2%. In the depths of the worst economic crisis on record, we set out a plan for jobs. It is a plan that was backed by business groups and trade bodies; a plan that has helped millions of people and saved millions of jobs; and a plan that the OBR has today described as “remarkably successful”. Today’s forecasts confirm beyond doubt that our plan for jobs is working.
Disruption in the global economy highlights the importance of strong public finances. Coronavirus left us with borrowing higher than at any time since the second world war. As the Prime Minister reminded us in his conference speech: higher borrowing today is just higher interest rates and even higher taxes tomorrow. We need to strengthen our public finances so that when the next crisis comes, we have the fiscal space to act. Today I am publishing a new charter for budget responsibility. The charter sets out two fiscal rules that will keep this Government on the path of discipline and responsibility. First, underlying public sector net debt, excluding the impact of the Bank of England, must, as a percentage of GDP, be falling. Secondly, in normal times the state should only borrow to invest in our future growth and prosperity. Everyday spending must be paid for through taxation. Both rules must be met by the third year of every forecast period, giving us the flexibility to respond to crises while credibly keeping the public finances under control. These rules are supplemented by targets to spend up to 3% of GDP on capital investment and to keep welfare spending on a sustainable path.
The House will be asked to vote on our charter, giving Members a simple choice—to abandon our fiscal anchor and leave our economy adrift with reckless unfunded pledges, or to vote for what we on the Government side of the House know is the right course: sound public finances and a stronger economy for the British people.
Important as the charter is, our credibility comes as much from what we do as what we say, so I am pleased to tell the House that, because our plan is delivering a stronger economy and because we have taken tough but responsible decisions on the public finances, the OBR reports today that all our fiscal rules have been met. Underlying debt is forecast to be 85.2% of GDP this year, then 85.4% in 2022-23, before peaking at 85.7% in 2023-24. It then falls in the final three years of the forecast, from 85.1% to 83.3%. Borrowing as a percentage of GDP is forecast to fall in every single year, from 7.9% this year to 3.3% next year, then 2.4%, 1.7%, 1.7% and 1.5% in the following years. Borrowing down, debt down: proving once again it is the Conservatives, and only the Conservatives, who can be trusted with taxpayers’ money.
I have made four fiscal judgements in this Budget. First, we will meet our fiscal rules with a margin to protect ourselves against economic risks. That is the responsible decision at a time of increasing global economic uncertainty, when our public finances are twice as sensitive to changes in interest rates as they were before the pandemic and six times as sensitive as they were before the financial crisis. Just a one percentage point increase in inflation and interest rates would cost us around £23 billion. My second judgment today is to continue to support working families.
Thirdly, as well as helping people at home, our improving fiscal position means that we will meet our obligations to the world’s poorest. I told the House that when we met our fiscal tests, we would return to spending 0.7% of our national income on overseas aid. Some people said this was a trick or a device. I told this House that it was no such thing, and based on the tests that I set out, today’s forecasts show that we are, in fact, scheduled to return to 0.7% in 2024-25—before the end of this Parliament.
My fourth fiscal judgment is this: today’s Budget increases total departmental spending over this Parliament by £150 billion. That is the largest increase this century, with spending growing by 3.8% a year in real terms. As a result of this spending review, and contrary to speculation, there will be a real-terms rise in overall spending for every single Department, and public sector net investment as a share of GDP will be at the highest sustained level for nearly half a century. If anyone still doubts it, today’s Budget confirms it: the Conservatives are the real party of public services.
Our stronger economy lays the foundation for everything that we want to achieve in today’s Budget: world class public services and more investment in our future growth. Before I turn to the details, I would like to thank the Chief Secretary to the Treasury, my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke). Completing the spending review in such challenging circumstances was a tall order—and thankfully we had just the man for the job.
At the start of this Parliament, resource spending on healthcare was £133 billion. Today’s spending review confirms that by the end of this Parliament it will increase by £44 billion to over £177 billion; and the extra revenue we are forecast to raise from the health and social care levy is going direct to the NHS and social care as promised. The health capital budget will be the largest since 2010: record investment in health R&D, including better newborn screening, as campaigned for by my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken); 40 new hospitals; 70 hospital upgrades; more operating theatres to tackle the backlog; and 100 community diagnostic centres, all staffed by a bigger, better-trained workforce, with 50,000 more nurses and 50 million more primary care appointments. As well as funding to deliver the Prime Minister’s historic reforms to social care, we are providing local government with new grant funding over the next three years of £4.8 billion—the largest increase in core funding for over a decade.
We are investing more in housing and home ownership too, with a multi-year housing settlement totalling nearly £24 billion—£11.5 billion to build up to 180,000 new affordable homes, the largest cash investment in a decade, 20% more than the previous programme. We are investing an extra £1.8 billion—enough to bring 1,500 hectares of brownfield land into use, meet our commitment to invest £10 billion in new housing, and unlock 1 million new homes. We are also confirming £5 billion to remove unsafe cladding from the highest risk buildings, partly funded by the residential property developers tax, which I can confirm will be levied on developers with profits over £25 million at a rate of 4%. We have already reduced rough sleeping by over a third, but we will go further, with £640 million a year for rough sleeping and homelessness—an 85% increase in funding compared to 2019.
Today’s Budget funds our ambition to recruit 20,000 new police officers; provides an extra £2.2 billion for courts, prisons and probation services, including £0.5 billion to reduce the courts backlog; pays for programmes to tackle neighbourhood crime, reoffending, county lines, violence against women and girls, victims’ services and improved responses to rape cases; and, over the next three years, commits £3.8 billion to the largest prison-building programme in a generation.
All Governments should aspire to provide greater life chances for future generations, but few Governments can match our ambition. So let me now turn to what this Budget does to support children. The evidence is compelling that the first 1,001 days of a child’s life are the most important. My right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom) has recognised this with her inspirational report. We are responding today with £300 million for a start for life offer for families; high-quality parenting programmes; tailored services to help with perinatal mental health; and, I am pleased to tell my hon. Friend the Member for Congleton (Fiona Bruce), funding to create a network of family hubs around the country too. To improve the quality of childcare, we are going to pay providers more, with today’s spending review providing an extra £170 million by 2024-25. We are confirming £150 million to support training and development for the entire early years workforce. To help up to 300,000 more families facing multiple needs, we are investing an extra £200 million in the supporting families programme, and we will provide over £200 million a year to continue the holiday activities and food programme.
Today’s spending review also delivers our commitment to schools, with an extra £4.7 billion by 2024-25, which, combined with the ambitious plans we announced at spending review 2019, will restore per-pupil funding to 2010 levels in real terms, equivalent to a cash increase for every pupil of more than £1,500. For children with special educational needs and disabilities, we are more than tripling the amount we invest to create 30,000 new school places. We know that the pandemic caused significant disruption to children’s learning. We have already announced £3.1 billion to help education recovery. Today, as promised by the Prime Minister and the Education Secretary, we will go further, with just under £2 billion of new funding to help schools and colleges, bringing this Government’s total support for education recovery to almost £5 billion.
As we level up public services, we are also levelling up communities, restoring the pride people feel in the places they call home. To do that, we are providing £560 million for youth services, enough to fund up to 300 youth clubs in England; over £200 million to build or transform up to 8,000 state-of-the-art community football pitches across the UK; and funding to turn over 100 areas of derelict land into new “pocket parks”.
I am allocating the first round of bids from the levelling up fund—£1.7 billion to invest in the infrastructure of everyday life in over 100 local areas. With £170 million in Scotland, £120 million in Wales, and £50 million in Northern Ireland—more than their Barnett shares—this will benefit the whole United Kingdom. We are backing projects in Aberdeen, Bury, Burnley, Lewes, Clwyd South, and not one, not two, but three successful projects for the great city of Stoke-on-Trent. But that is not all. We are also going to fund projects in Ashton-under-Lyne, Doncaster, South Leicester, Sunderland and West Leeds. We are so committed to levelling up, we are even levelling up the Opposition Front Bench.
Levelling up is also about protecting our unique culture and heritage. The British Museum; Tate Liverpool; the York Railway Museum: we are investing £850 million to protect museums, galleries, libraries, and local culture. Thanks to the Culture Secretary, over 100 regional museums and libraries will be renovated, restored and revived; and she has secured up to £2 million to start work on a new Beatles attraction on the Liverpool waterfront. We are also going to review our museum freedoms and make our creative tax reliefs more generous. On current plans, the tax relief for museums and galleries is due to end in March next year, just as exhibitions are starting to tour again, so I have decided to extend it for two years to March 2024. To support theatres, orchestras, museums and galleries to recover from covid, the tax reliefs for all those sectors, from today until April 2023, will be doubled, and they will not return to the normal rate until April 2024. That is a tax relief for culture worth almost a quarter of a billion pounds.
This is a Budget for the whole United Kingdom. Through the Barnett formula, today’s decisions increase Scottish Government funding, in each year, by an average of £4.6 billion, Welsh Government funding by £2.5 billion, and £1.6 billion for the Northern Ireland Executive. This delivers, in real terms, the largest block grants for the devolved Administrations since the devolution settlements of 1998. The whole of the United Kingdom will benefit from the UK shared prosperity fund, and over time we will ramp up funding so that total domestic UK-wide funding will match EU receipts, averaging around £1.5 billion a year. We will fund projects across the UK, including funding for the Extreme E race in Scotland—the 2022 Hebrides X-Prix—accelerating funding for the Cardiff city region deal in Wales, and funding in Northern Ireland for community cohesion. While today demonstrates the indisputable fiscal benefit of being part of the United Kingdom, this is and always will be secondary to the simple truth that we are bound together by more than transactional benefit. It is our collective history, our culture and our security. We are, and always will be, one family and one United Kingdom.
While today’s Budget delivers historically high levels of public spending, its success will be measured not by the billions we spend, but by the outcomes we achieve and the difference we make to people’s lives. The budgets are set; the plans are in place; the task is clear. Now we must deliver because this is not the Government’s money—it is taxpayer’s money.
Our stronger economy allows us to fund world-class public services—the people’s priority—but over the long-term, the only way to pay for higher spending is economic growth. If we want to see higher growth, we have to tackle the problem that has been holding back this country for far too long: our uneven economic geography. As we come out of the worst economic shock we have ever seen, we have a choice—to retrench, or to invest. This Government choose to invest: to invest in our economic infrastructure, to invest in innovation, to invest in skills and to invest in a plan for growth that builds a stronger economy for the future. That is what this Budget is about and that is what this Government are about.
Infrastructure connects our country, drives productivity and levels up. That is why our national infrastructure strategy invests in economic infrastructure such as roads, railways, broadband and mobile—over £130 billion. To connect our towns and cities, we are investing £21 billion on roads and £46 billion on railways. Our integrated rail plan will be published soon, dramatically improving journey times between our towns and cities. Today, we are providing £5.7 billion for London-style transport settlements in Greater Manchester, the Liverpool city region, the Tees Valley, South Yorkshire, West Yorkshire, the west midlands and the west of England. We are helping local transport everywhere with £2.6 billion for a long-term pipeline of more than 50 local roads upgrades, over £5 billion for local roads maintenance—enough to fill 1 million more potholes a year—and funding for buses, cycling and walking totalling more than £5 billion. The Prime Minister promised an infrastructure revolution. This Budget delivers an infrastructure revolution.
Investment in our infrastructure is just the first step. We need to do what the people of this country have always done: invent, discover, and create the ideas and technologies that will change the world. So we will also invest more in innovation. The UK is already a world leader. With less than 1% of the world’s population, we have four of the world’s top 20 universities, 14% of the world’s most impactful research and the second most Nobel laureates. We want to go further. I can confirm we will maintain our target to increase research and development investment to £22 billion. But in order to get there, and deliver on our other priorities, we will reach the target in 2026-27, spending, by the end of this Parliament, £20 billion a year on R&D. That is a cash increase of 50%—the fastest increase ever. I can confirm for the House that this £20 billion is in addition to the cost of our R&D tax reliefs. Combined with those tax reliefs, total public investment in R&D is increasing from 0.7% of GDP in 2018 to 1.1% of GDP by the end of the Parliament.
How does 1.1% compare internationally? Well, the latest available data shows an OECD average of just 0.7%. Germany is investing 0.9%, France 1% and the United States just 0.7%. This unprecedented funding will: increase core science funding to £5.9 billion a year by 2024-25, a cash increase of 37%; meet the full costs of associating with Horizon Europe; establish the new Advanced Research and Invention Agency with £800 million by 2025-26; and strengthen our focus on late-stage innovation, increasing Innovate UK’s annual core budget to £1 billion, double what it was at the start of the Parliament.
There is more to becoming a science superpower than just what the Government spend on R&D. Our ambitious net zero strategy is also an innovation strategy, investing £30 billion to create the new green industries of the future. We have just issued our second green bond, making us the third-largest issuer of sovereign green bonds anywhere in the world. London last week was named the best place in the world for green finance. On Monday, the new UK Infrastructure Bank announced its first ever investment: £107 million to support offshore wind in Teesside. To build on this work, one week today I will be hosting global finance ministers and businesses at COP26.
Innovation comes from the imagination, drive and risk-taking of business. That is why we have launched Help to Grow to turbocharge SME productivity and started a new co-investment venture capital fund, Future Fund: Breakthrough. It is why I am announcing today that we will consult on further changes to the regulatory charge cap for pensions schemes, unlocking institutional investment while protecting savers. It is why we are introducing a new £1.4 billion global Britain investment fund, supporting transformative economic activity in our world-leading sectors, such as life sciences. It is why today’s Budget increases the British Business Bank’s regional financing programmes to £1.6 billion, expanding their coverage and helping innovative businesses get access to the finance they need, across the whole United Kingdom.
A third of our science Nobel laureates have been immigrants. Half of our fastest growing companies have a foreign-born founder. So an economy built on innovation must be open and attractive to the best and brightest minds. Thanks to our brilliant Home Secretary, today’s Budget confirms the eligibility criteria for our new scale-up visa, making it quicker and easier for fast-growing businesses to bring in highly skilled individuals. The Trade Secretary’s new global talent network, launching initially in the Bay Area, Boston and Bangalore, will identify, attract and relocate the best global talent in science and tech sectors. It is all part of our plan to make our visa system for international talent the most competitive in the world.
If we want greater private sector innovation, we need to make our research and development tax reliefs fit for purpose. The latest figures show the UK has the second highest spending on R&D tax reliefs in the OECD. Yet it is not working as well as it should; UK business investment in R&D is less than half the OECD average. We have reviewed the reliefs and identified two issues we are solving today. First, the reliefs need to reflect how businesses conduct research in the modern world. So, as many companies have called for, I am expanding the scope of the reliefs to include cloud computing and data costs.
The second problem is this: companies claimed UK tax relief on £48 billion of R&D spending, yet UK business investment was around half of that, at just £26 billion. We are subsidising billions of pounds of R&D that is not even happening here in the United Kingdom. That is unfair on British taxpayers and it puts us out of step with places like Australia, Canada, Hong Kong, Singapore, Switzerland and the USA, which have all focused their R&D tax reliefs on domestic activity. So from April 2023, we are going to do the same, and incentivise greater investment here at home. So a £22-billion investment in R&D, the net zero strategy, the future fund, Help to Grow, more regional finance, unlocking institutional capital, a more competitive visa system and a modernised R&D tax credits regime—enough action to prove the hypothesis that we are making this country a science and technology superpower.
As well as investing in infrastructure and innovation, there is one further part of our plan for growth that is crucial: providing a world-class education to all our people. Higher skills lead to higher regional productivity and higher productivity leads to higher wages. With 80% of the UK’s 2030 workforce already in work, our future success depends on not just the schooling we give our children but the lifelong learning we offer to adults.
We have already done a lot. Our plan for jobs invested in apprenticeships, traineeships and the kickstart scheme, but we need to go further. Today’s Budget invests in the most wide-ranging skills agenda this country has seen in decades. We are increasing skills spending over the Parliament by £3.8 billion—an increase of 42%. We are expanding T-levels, building institutes of technology, rolling out the Prime Minister’s lifetime skills guarantee, upgrading our further education college estate, quadrupling the number of places on skills bootcamps and significantly increasing funding for apprenticeships.
We are also going to tackle a tragic fact: millions of adults in our country have numeracy skills lower than those expected of a nine-year-old. According to the leading charity National Numeracy, this costs individuals with poor numeracy up to £1,600 a year in lost earnings. People with poor numeracy skills are more than twice as likely to be unemployed as their peers. So today, I can announce a new UK-wide numeracy programme: Multiply. With £560 million, Multiply will improve basic maths skills and help to change people’s lives across the whole United Kingdom.
So we are building our infrastructure with new roads, railways and broadband; cementing our status as a science and technology superpower; and strengthening the skills of our people, the country’s greatest asset. That is a real plan for growth and that is how this Government are building a stronger economy for the British people.
World class public services are the people’s priority. Investment in infrastructure, innovation and skills will create the growth that we need to pay for them. But as Conservatives, we know that Government action alone will not be enough to create a stronger economy. We want this country to be the most exciting and dynamic place in the world for business. Now that we have left the EU, we have the freedom to do things differently and deliver a simpler, fairer tax system.
I want to begin with one of our smallest taxes, but a tax that plays an important role in one of our pre-eminent industries: shipping. Now that we have left the EU, today we start reforming our tonnage tax regime to make it simpler and more competitive. And we are also making it fairer for UK taxpayers.
When we were in the old EU system, ships in the tonnage tax regime were required to fly the flag of an EU state, but that does not make sense for an independent nation. So I can announce today that our tonnage tax will, for the first time ever, reward companies for adopting the UK’s merchant shipping flag, the red ensign. That is entirely fitting for a country with such a proud maritime history as ours. I am sure that the Opposition will be delighted that red flags are still flying somewhere in this country, even if they are all at sea.
Let me turn now to air passenger duty. Right now, people pay more for return flights within and between the four nations of the United Kingdom than they do when flying home from abroad. We used to have a return-leg exemption for domestic flights, but we were required to remove it in 2001. But today I can announce that flights between airports in England, Scotland, Wales and Northern Ireland will, from April 2023, be subject to a new lower rate of air passenger duty. This will help to cut the cost of living, with 9 million passengers seeing their duty cut by half; it will bring people together across the United Kingdom; and because they tend to have a greater proportion of domestic passengers, it is a boost to regional airports like Aberdeen, Belfast, Inverness and Southampton.
Airports are major regional employers, so to help them get through the winter I am also extending our support for English airports for a further six months. We are also making changes to reduce carbon emissions from aviation. Most emissions come from international rather than domestic aviation, so we are introducing, from April 2023, a new ultra-long-haul band in air passenger duty covering flights of over 5,500 miles, with an economy rate of £91. Less than 5% of passengers will pay more, but those who fly furthest will pay the most.
Our approach to corporate taxation strikes a responsible balance between funding public services and encouraging the investment we need for a stronger economy. At the March Budget, we took the difficult but necessary decision to increase the rate of corporation tax to 25% from 2023, which is still the lowest rate in the G7 and the fifth lowest rate in the G20. Alongside, I introduced the new super deduction—the biggest business tax cut in modern British history—and extended, to the end of this year, the annual investment allowance at its higher level of £1 million. Now is not the time to remove tax breaks on investment, so I can confirm today that the £1 million annual investment allowance will not end in December as planned. It will be extended all the way to March 2023.
I also said in March that I would review the bank surcharge within corporation tax to maintain the competitiveness of our financial services industry. We will retain a surcharge of 3%. The overall rate for corporation tax on banks will, in 2023, increase from 27% to 28% and will remain higher than the rate paid by other companies. Small challenger banks are improving banking competition, which is good for the sector and good for consumers, so to help them, I will also raise the annual allowance to £100 million.
Our manifesto promised to review business rates. We are publishing our conclusions today. Before I set out our plans, let me say this: we on the Conservative Benches are clear that reckless, unfunded promises to abolish a tax that raises £25 billion every year are completely irresponsible. It would be wrong to find £25 billion a year in extra borrowing, cuts to public services or tax rises elsewhere, so we will retain business rates, but with key reforms to ease the burden and create stronger high streets.
First, we will make the business rates system fairer and timelier with more frequent revaluations every three years. The new revaluation cycle will be delivered from 2023. Secondly, as called for by the Federation of Small Businesses and the British Property Federation, we are introducing a new investment relief to encourage businesses to adopt green technologies such as solar panels.
I am announcing today that we will accept the CBI and the British Retail Consortium’s recommendation to introduce a new business rates improvement relief. From 2023, every single business will be able to make property improvements and, for 12 months, pay no extra business rates. That means that a hotel adding extra rooms, a manufacturer expanding their factory, and an office adding new air conditioning, CCTV or bike shelters will all pay no extra rates.
Together with the new green investment relief, we are introducing investment incentives totalling £750 million. This will make a difference, but without action, millions of businesses would see their tax bills going up next year because of inflation. I want to help those businesses right now, so our third step is that next year’s planned increase in the multiplier will be cancelled. That is a tax cut for businesses worth, over the next five years, £4.6 billion.
I have one final measure to help those businesses hardest hit by the pandemic. I am announcing today, for one year, a new 50% business rates discount for businesses in the retail, hospitality, and leisure sectors: pubs, music venues, cinemas, restaurants, hotels, theatres and gyms. Any eligible business can claim a discount on their bills of 50%, up to a maximum of £110,000. That is a business tax cut worth almost £1.7 billion. Together with small business rates relief, this means that over 90% of all retail, hospitality and leisure businesses will see a discount of at least 50%. Apart from the covid reliefs, this is the biggest single-year cut to business rates in over 30 years. Taken together, today’s Budget cuts business rates by £7 billion.
We are unleashing the dynamism and creativity of British businesses with a simpler, fairer and more competitive tax system: the biggest business tax cut in modern British history; the biggest single-year cut to business rates for 30 years; a £1 million investment allowance; tonnage tax reformed; air passenger duty cut. That is the way to back business and build a stronger economy.
Let me turn now to alcohol duties. First introduced in 1643 to help pay for the civil war, our alcohol duty system is outdated, complex and full of historical anomalies. The Institute for Fiscal Studies has called it “a mess”; the Institute of Economic Affairs said that it “defies common sense”; and the World Health Organisation has warned that countries such as the UK which follow the EU rules are:
“unable to implement tax systems that are optimal from the perspective of public health.”
So today, we are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years. We are taking five steps today to create a system that is simpler, fairer, and healthier.
First, to radically simplify the system, we are slashing the number of main duty rates from 15 to just six. Our new system will be designed around a common-sense principle: the stronger the drink, the higher the rate. This means that some drinks, like stronger red wines, fortified wines and high-strength white ciders will see a small increase in their rates because they are currently undertaxed, given their strength. That is the right thing to do, and it will help to end the era of cheap, high-strength drinks which can harm public health and enable problem drinking. Because this is a more rational system, the converse is also true: many lower-alcohol drinks are currently overtaxed—and have been for many decades. Rosé, fruit ciders, liqueurs, lower strength beers and wines—today’s changes mean that they will pay less.
The second step I am taking today will encourage small, innovative craft producers: I am announcing proposals for a new small producer relief. This will extend the principle of the small brewers relief to include for the first time ever small cider makers and other producers making alcoholic drinks of less strength than 8.5%.
Thirdly, I am going to modernise the system to reflect the way people drink today. Over the last decade, consumption of sparkling wines like prosecco has doubled. English sparkling wine alone has increased almost tenfold. It is clear they are no longer the preserve of wealthy elites, and they are no stronger than still wines. So I am going to end the irrational duty premium of 28% that they currently pay. Sparkling wines, wherever they are produced, will now pay the same duty as still wines of equivalent strength. Because growing conditions in the UK typically favour lower-strength and sparkling wines, this means English and Welsh wines, compared with stronger imported wines, will now pay less. Sales of fruit cider have increased from one in a thousand ciders sold in 2005 to one in four today, but they can pay two or three times as much duty as cider made with apples or pears, so we are cutting the duty on them too.
The fourth step I am taking today would directly support the home of British community life for centuries: our pubs. Even before the pandemic, pubs were struggling: between 2000 and 2019, consumption in the on-trade fell by 40%. Many public health bodies recognise that pubs are often safer drinking environments than being at home. As my hon. Friends the Members for Dudley South (Mike Wood) and for North West Durham (Mr Holden) will agree, a fairer, healthier system supports pubs, so I can announce today draught relief.
Draught relief will apply a new lower rate of duty on draught beer and cider. It will apply to drinks served from draught containers over 40 litres. It will particularly benefit community pubs that do 75% of their trade on draught. Let me tell the House the new rate: draught relief will cut duty by 5%. That is the biggest cut to cider duty since 1923; the biggest cut to fruit ciders in a generation; the biggest cut to beer duty for 50 years. This is not temporary. It is a long-term investment in British pubs of £100 million a year and a permanent cut in the cost of a pint of 3p. I cannot wait for the Opposition to accuse me tomorrow of beer-barrel politics.
These much needed reforms will come into effect in February 2023, but I want to help the hospitality industry right now, so for my final announcement on alcohol duties today, I can confirm that the planned increases in duty on spirits like Scotch whisky, wine, cider and beer will all, from midnight tonight, be cancelled. That is a tax cut worth £3 billion.
Our reforms make the alcohol duty system simpler, fairer and healthier; they help with the cost of living while tackling problem drinking; they support innovative entrepreneurs and craft producers; they back pubs and public health; and they are only possible because we have left the European Union.
World-class public services; investment in infrastructure, innovation, and skills; simpler, fairer taxes to support businesses and consumers: all built on the foundation of a stronger economy and responsible public finances. That is our vision for the future and that is what this Budget delivers.
This Budget also supports working families. With fuel prices at the highest level in eight years, I am not prepared to add to the squeeze on families and small businesses, so I can confirm today that the planned rise in fuel duty will be cancelled. That is a saving over the next five years of almost £8 billion. Compared to pre-2010 plans, today’s freeze means the average tank of fuel will cost around £15 less per car; £30 less for vans; and £130 less for HGVs. After 12 consecutive years of frozen rates, the average car driver will now save a total of £1,900.
I can also announce today that public sector workers will see fair and affordable pay rises across the whole spending review period as we return to the normal, independent pay-setting process, and I can take action to help the lowest paid as well. It was a Conservative Government who introduced the national living wage in 2016, a Conservative Government who, according to statistics published just yesterday, have overseen the proportion of people in low-paid work falling to its lowest level since 1997, and it is a Conservative Government who are increasing the wage floor again today. The independent Low Pay Commission brings together economists, business groups and trade unions. The Government are accepting its recommendation to increase the national living wage next year by 6.6%, to £9.50 an hour. For a full-time worker that is a pay rise worth over £1,000. It will benefit over 2 million of the lowest paid workers in the country, it is broadly consistent with previous increases, it keeps us on track for our target of two thirds of median earnings by 2024, and it is a major commitment to the high-wage, high-skill, high-productivity economy of the future.
As we build this stronger economy, we are doing so at the end of an extraordinary 18 months. Covid was not just a public health challenge and an economic challenge—it was a moral challenge, too. We had to show we could pull together as a country, and we did. We had to put aside questions of ideology and orthodoxy to do whatever it took to care for our people and each other, and we did.
There is a different moral dimension to the economic challenge we face now. Last year, the state grew to be over half the size of the total economy, and taxes are rising to their highest level as a percentage of GDP since the 1950s. I do not like it, but I cannot apologise for it: it is the result of the unprecedented crisis we faced and the extraordinary action we took in response. But now we have a choice: do we want to live in a country where the response to every question is “What are the Government going to do about it?”, where every time prices rise, every time a company gets in trouble, every time some new challenge emerges, the answer is always that the taxpayer must pay? Or do we choose to recognise that Government has limits?
Government should have limits. If this seems a controversial statement to make, then I am all the more glad for saying it because that means it needed saying. And it is what we believe. There is a reason we talk about the importance of family, community and personal responsibility. We do so not because these are an alternative to the market or the state, but because they are more important than the market or the state. The moments that make life worth living are not created by Government, are not announced by Government, are not granted by Government: they come from us as people—our choices, our sacrifices, our efforts—and we believe people should keep more of the rewards of those efforts. Yes, we have taken some corrective action to fund the NHS and get our debt under control, but as we look towards the future I want to say this simple thing to the House and the British people: my goal is to reduce taxes. By the end of this Parliament, I want taxes to be going down, not up. I want this to be a society that rewards energy, ingenuity and inventiveness, a society that rewards work. That is what we believe on this side of the House. That is my mission over the remainder of this Parliament.
The final announcement in today’s Budget takes a first step. For many of the lowest paid in society there is a hidden tax on work: the universal credit taper withdraws support as people work more hours. The rate is currently 63%, so for every £1 someone earns, their universal credit is reduced by 63p. Let us be in no doubt: this is a tax on work—and a high rate of tax at that. Organisations as varied as the Trades Union Congress, the Joseph Rowntree Foundation, the Resolution Foundation, the Centre for Policy Studies, and the Centre for Social Justice have all said it is too high. So, to make sure work pays and help some of the lowest-income families in our country to keep more of their hard-earned money, I have decided to cut this rate, not by 1%, not by 2%, but by 8%. This—[Hon. Members: “Hear, hear.”] This is a tax on working people and we are cutting it from 63% to 55%, the rate originally envisaged by my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith). And because I am also increasing the work allowances by £500, this is a tax cut next year worth over £2 billion. Nearly 2 million families will keep on average an extra £1,000 a year. Changes like this normally take effect at the start of the new tax year in April, but we want to help people right now, so we will introduce this within weeks and no later than 1 December.
Let me tell the House what these changes mean. A single mother of two renting and working full-time on the national living wage will be better off by around £1,200. A couple renting a home with their two children, one parent working full-time, the other working part-time, will be better off every single year by £1,800. This is a £2 billion tax cut for the lowest paid workers in our country. It supports working families, it helps with the cost of living and it rewards work.
So, fuel duty cut, air passenger duty cut, alcohol duty cut, the biggest cut to business rates in 30 years, growth up, jobs up, wages up, public finances back in a better place, more investment in infrastructure, innovation and skills, a pay rise for over 2 million people, and a £2 billion tax cut for the lowest paid. This Budget helps with the cost of living. This Budget levels up to a higher-wage, higher-skill, higher-productivity economy. This Budget builds a stronger economy for the British people. I commend it to the House.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Returns for disposals of UK land etc (motion No. 19);
(b) Diverted profits tax (closure notices etc) (motion No. 24);
(c) Rates of tobacco products duty (motion No. 39);
(d) Vehicle excise duty (exemption for cabotage operations) (motion No. 41).—(Rishi Sunak.)
Question agreed to.
Madam Deputy Speaker (Dame Eleanor Laing)
We now come to the motion entitled “Income Tax (Charge)”. It is on this motion that the debate will take place today and on succeeding days. The Questions on this motion and the remaining motions will be put at the end of the Budget debate on Tuesday 2 November. I call the Chancellor of the Exchequer to move the motion formally.
Financial Statement
Debate between Baroness Laing of Elderslie and Rishi Sunak(3 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rishi Sunak)
Madam Deputy Speaker, a year ago, in my first Budget, I announced our initial response to coronavirus. What was originally thought to be a temporary disruption to our way of life has fundamentally altered it: people are still being told to stay in their homes, businesses have been ordered to close, thousands of people are in hospital. Much has changed, but one thing has stayed the same. I said that I would do whatever it takes. I have done and I will do so. We have announced over £280 billion of support, protecting jobs, keeping businesses afloat, helping families get by.
Despite this unprecedented response, the damage that coronavirus has done to our economy has been acute. Since March, over 700,000 people have lost their jobs, our economy has shrunk by 10%—the largest fall in over 300 years—and our borrowing is the highest it has been outside of wartime. It is going to take this country, and the whole world, a long time to recover from this extraordinary economic situation. But we will recover.
This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people. First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Secondly, once we are on the way to recovery, we will need to begin fixing the public finances, and I want to be honest today about our plans to do that. Thirdly, in today’s Budget we begin the work of building our future economy.
Today’s forecasts show that our response to coronavirus is working. The Prime Minister last week set out our cautious but irreversible road map to ease restrictions while protecting the British people. The NHS, deserving of immense praise, has had extraordinary success in vaccinating more than 20 million people across the United Kingdom. Combined with our economic response, one of the most comprehensive and generous in the world, this means that the Office for Budget Responsibility is now forecasting, in its words, a
“swifter and more sustained recovery”
than it expected in November. The OBR now expects the economy to return to its pre-covid level by the middle of next year, six months earlier than previously thought. That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher.
But while our prospects are now stronger, coronavirus has done, and is still doing, profound damage. Today’s forecasts make it clear that repairing the long-term damage will take time. The OBR still expects that in five years’ time, because of coronavirus, our economy will be 3% smaller than it would have been. Before I share the detail of the OBR’s forecasts, let me thank Richard Hughes and his team for their work.
The OBR forecasts that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast. The OBR has said that our interventions to support jobs have worked. In July last year, it expected unemployment to peak at 11.9%. Today, because of our interventions, it forecast a much lower peak: 6.5%. That means 1.8 million fewer people are expected to be out of work than previously thought. But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority.
Let me turn straightaway to the first part of this Budget’s plan, to protect the jobs and livelihoods of the British people through the remaining phase of this crisis.
First, the furlough scheme will be extended until the end of September. For employees, there will be no change to the terms. They will continue to receive 80% of their salary, for hours not worked, until the scheme ends. As businesses reopen, we will ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10%, and 20% in August and September. The Government are proud of the furlough, one of the most generous schemes in the world, effectively protecting millions of people’s jobs and incomes.
Secondly, support for the self-employed will also continue until September, with a fourth grant covering the period February to April, and a fifth and final grant from May onwards. The fourth grant will provide three months of support at 80% of average trading profits. For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.
But as the economy reopens over the summer, it is fair to target our support towards those most affected by the pandemic, so people whose turnover has fallen by 30% or more will continue to receive the full 80% grant. People whose turnover has fallen by less than 30% will therefore have less need of taxpayer support and will receive a 30% grant. I can also announce a major improvement in access to the self-employed scheme. When the scheme was launched, the newly self-employed could not qualify because they had not all filed a 2019-20 tax return. But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom became self-employed last year, can now claim the fourth and fifth grants. Over the course of this crisis we will have spent £33 billion supporting the self-employed, one of the most generous programmes for self-employed people anywhere in the world.
Thirdly, we are also extending our support for the lowest paid and the most vulnerable. To support low-income households, the universal credit uplift of £20 a week will continue for a further six months, well beyond the end of this national lockdown. We will provide working tax credit claimants with equivalent support for the next six months. Because of the way that system works operationally, we will need to do so with a one-off payment of £500.
And over the course of this year, as the economy begins to recover, we are shifting our resources and focus towards getting people into decent, well-paid jobs. We reaffirm our commitment to end low pay, by increasing the national living wage to £8.91 from April—an annual pay rise of almost £350 for someone working full time on the national living wage.
My right hon. Friends the Education Secretary and the Work and Pensions Secretary are taking action to give people the skills they need to get jobs or get better jobs. The restart programme—supporting over a million long-term unemployed people. The number of work coaches —doubled. The kickstart scheme—funding high-quality jobs for over a quarter of a million young people. The Prime Minister’s lifetime skills guarantee—giving every adult the opportunity for a fully funded level 3 qualification. And we want businesses to hire new apprentices, so we are paying them more to do it.
Today, I am doubling the incentive payments we give businesses to £3,000—that is for all new apprentice hires, of any age. Alongside investing £126 million of new money to triple the number of traineeships, we are taking what works to get people into jobs and making it better.
One of the hidden tragedies of lockdown has been the increase in domestic abuse, so I am announcing today an extra £19 million, on top of the £125 million we announced at the spending review, for domestic violence programmes to reduce the risk of reoffending and to pilot a network of respite rooms to provide specialist support for vulnerable homeless women.
To recognise the sacrifices made by so many women and men in the armed forces community, I am providing an additional £10 million to support veterans with mental health needs.
On current plans, the funding to support survivors of the thalidomide scandal runs out in 2023. They deserve better than to have constant uncertainty about the future costs of their care, so not only will I extend this funding with an initial down payment of around £40 million; I am today announcing a lifetime commitment, guaranteeing funding forever. I thank the Thalidomide Trust and my hon. Friend the Member for North Dorset (Simon Hoare) for their leadership on this important issue.
As well as supporting people’s jobs, incomes, the lowest paid and most vulnerable, this Budget also protects businesses. We have been providing businesses with direct cash grants throughout the recent restrictions. These grants come to an end in March. I can announce today that we will provide a new restart grant in April to help businesses reopen and get going again. Non-essential retail businesses will open first, so they will receive grants of up to £6,000 per premises. Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we will give them grants of up to £18,000. That is £5 billion of new grants on top of the £20 billion we have already provided, taking our total direct cash support to business to £25 billion. I pay tribute to my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) for highlighting the particular needs of the personal care sector.
With my right hon. Friend the Culture Secretary, we are making available £700 million to support our incredible arts, culture and sporting institutions as they reopen: backing the UK and Ireland’s joint 2030 World cup bid; launching a new approach to apprenticeships in the creative industries; and extending our £500 million film and TV production restart scheme.
Even with the new restart grants, some businesses will also need loans to see them through. As the bounce back loan and coronavirus business interruption loan scheme programmes come to an end, we are introducing a new recovery loan scheme to take their place. Businesses of any size can apply for loans from £25,000 up to £10 million through to the end of this year, and the Government will provide a guarantee to lenders of 80%.
Last year, we provided an unprecedented 100% business rates holiday in England for all eligible businesses in the retail, hospitality and leisure sectors—a tax cut worth £10 billion. This year, we will continue with the 100% business rates holiday for the first three months of the year—in other words, through to the end of June. For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open—a £6 billion tax cut for business.
One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4 million people need our support. To protect those jobs, I can confirm that the 5% reduced rate of VAT will be extended for six months to 30 September. Even then, we will not go straight back to the 20% rate; we will have an interim rate of 12.5% for another six months, not returning to the standard rate until April of next year. In total, we are cutting VAT next year by almost £5 billion.
The housing sector supports more than half a million jobs. The cut in stamp duty that I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time, but due to the sheer volume of transactions that we are seeing, many new purchases will not complete in time for the end of March. I can announce today that the £500,000 nil rate band will not end on 31 March; it will end on 30 June. Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September, and we will return to the usual level of £125,000 only from 1 October.
Even with the stamp duty cut, there is still a significant barrier to people getting on the housing ladder—the cost of a deposit. I am announcing today a new policy to stand behind homebuyers: a mortgage guarantee. Lenders who provide mortgages to home buyers who can afford only a 5% deposit will benefit from a Government guarantee on those mortgages. I am pleased to say that several of the country’s largest lenders, including Lloyds, NatWest, Santander, Barclays and HSBC, will be offering these 95% mortgages from next month. I know that more, including Virgin Money, will follow shortly after. This is a policy that gives people who cannot afford a big deposit the chance to buy their own home. As the Prime Minister has said, we want to turn “generation rent” into “generation buy”.
So, the furlough—extended to September; self-employed grants—extended to September; universal credit uplift—extended to September; more money to tackle domestic violence; bigger incentives to hire apprentices; higher grants for struggling businesses; extra funds for culture, arts and sport; new loan schemes to finance businesses; kickstart, restart and a lifetime skills guarantee; business rates cut; VAT cut; stamp duty cut; and a new mortgage guarantee. This is the first part of a Budget that protects the jobs and livelihoods of the British people.
And, Madam Deputy Speaker, as you can see, we are going long, extending our support well beyond the end of the road map to accommodate even the most cautious view about the time that it might take to exit the restrictions. Let me summarise for the House the scale of our total fiscal response to coronavirus. At this Budget, we are announcing an additional £65 billion of measures over this year and next to support the economy in response to coronavirus. Taking into account the significant support announced at the spending review, this means that our total covid support package this year and next is £352 billion. Once you include the measures announced at the spring Budget last year, including the step change in capital investment, total fiscal support from this Government over this year and next amounts to £407 billion.
Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks that this country has ever faced, and by any objective analysis, this Government have delivered one of the largest, most comprehensive and sustained responses this country has ever seen.
We are using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people, but the damage done by coronavirus, combined with a level of support unimaginable only 12 months ago, has created huge challenges for our public finances. The OBR’s fiscal forecasts show that this year, we have borrowed a record amount: £355 billion. That is 17% of our national income—the highest level of borrowing since world war two. Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be £234 billion, 10.3% of GDP—an amount so large it has only one rival in recent history: this year.
Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely. Instead, because of the steps I am taking today, borrowing falls to 4.5% of GDP in 2022-23, 3.5% in 2023-24 and then 2.9% and 2.8% in the following two years. While underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023-24 before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.
Let me explain why this matters. The amount we have borrowed is comparable only with the amount we borrowed during the two world wars. It is going to be the work of many Governments, over many decades, to pay it back. Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked. When crises come, we need to be able to act, and we need the fiscal freedom to act—a freedom that you only have if you start with public finances in a good and strong place. The only reason we have been able to respond as boldly as we have to covid is because 10 years of Conservative Governments painstakingly rebuilt our fiscal resilience.
When the next crisis comes, we need to be able to act again. While our borrowing costs are affordable right now, interest rates and inflation may not stay low forever, and just a one percentage point increase in both would now cost us over £25 billion. As we have seen in the markets over the last few weeks, sovereign bond yields can rise sharply. This Budget is not the time to set detailed fiscal rules with precise targets and dates to achieve them by. I do not believe that would be sensible, but I do want to be honest about what I mean by sustainable public finances and how I plan to achieve them.
Our fiscal decisions are guided by three principles. First, while it is right to help people and businesses through an acute crisis like this one, in normal times the state should not be borrowing to pay for everyday public spending. Secondly, over the medium term, we cannot allow our debt to keep rising, and given how high our debt now is, we need to pay close attention to its affordability. Thirdly, it is sensible to take advantage of lower interest rates to invest in capital projects that can drive our future growth.
The question is how we achieve that—how we balance the extraordinary support we are providing to the economy right now with the need to begin the work of fixing our public finances. I have been and always will be honest with the country about the challenges we face, so I am announcing today two measures to begin that work. Let me take each in turn.
Our response to coronavirus has been fair, with the poorest households benefiting the most from our interventions, and our approach to fixing the public finances will be fair too, asking more of those people and businesses who can afford to contribute and protecting those who cannot. So this Government are not going to raise the rates of income tax, national insurance or VAT; instead, our first step is to freeze personal tax thresholds. We have nearly doubled the income tax personal allowance over the last decade, making it the most generous of any G20 country. We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026. The higher rate threshold will similarly be increased next year to £50,270 and will then also remain at that level for the same period. Nobody’s take-home pay will be less than it is now as a result of this policy, but I want to be clear with all Members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation. We are not hiding it; I am here explaining it to the House, and it is in the Budget document in black and white. It is a tax policy that is progressive and fair.
I will also maintain at their current levels until April 2026 the inheritance tax thresholds, the pensions lifetime allowance, the annual exempt amount in capital gains tax, and for two years from April 2022 the VAT registration threshold, which, at £85,000, will remain more than twice as generous as the EU and OECD averages. We will also tackle fraud in our covid schemes, with £100 million to set up a new HMRC taskforce of around 1,000 investigators as well as new measures and new investment in HMRC to clamp down on tax avoidance and evasion. The full details are set out in the Red Book.
The Government are providing businesses with over £100 billion of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery. So the second step I am taking today is that in 2023 the rate of corporation tax paid on company profits will increase to 25%. Even after this change the United Kingdom will still have the lowest corporation tax rate in the G7, lower than that of the United States, Canada, Italy, Japan, Germany and France.
We are also introducing some crucial protections. First, this new higher rate will not take effect until April 2023, well after the point when the Office for Budget Responsibility expects the economy to have recovered, and even then, because corporation tax is only charged on company profits, any struggling business will, by definition, be unaffected. Secondly, I am protecting small businesses with profits of £50,000 or less by creating a small profits rate maintained at the current rate of 19%. This means that around 70% of companies—1.4 million businesses—will be completely unaffected. And thirdly, we will introduce a taper above £50,000 so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate. That means only 10% of companies will pay the full higher rate. So, yes, it is a tax rise on company profits, but only on the larger, more profitable companies and only in two years’ time. I wanted to announce this now, because I think that, for business, certainty matters. For the next two years, I am also making the tax treatment of losses significantly more generous by allowing businesses to carry back losses of up to £2 million for three years, providing a significant cash flow benefit. This means companies can now claim additional tax refunds of up to £760,000. And because of the current 8% bank surcharge, the implied overall tax rate for banks would be too high. So we will review the surcharge to make sure the combined rate of tax on the UK banking sector does not increase significantly from its current level, and to make sure this important industry remains internationally competitive.
These are significant decisions to have taken: decisions no Chancellor wants to make. I recognise that they might not be popular, but they are honest. And let us consider the alternatives. The first is to do nothing: to leave our deficit problem untreated, our debt problem for someone else in the future to deal with. That has never been the way of a Conservative Government, and nor do I believe it can be the way of a responsible Chancellor. Another alternative would be to try and find all the savings we need from public spending. But when we said at the last election that we were the party of public services, people believed us—and they were right to believe us. And when we said we would be the party that invests in new infrastructure, they were right to believe that too. The only other alternative would be to increase the rates of tax on working people—but I do not believe that would be right either. So I believe that our approach, while bold, is compatible with our duty as a fiscally responsible and business-friendly Government. This is the right choice and I am confident it will command public assent.
I have one final announcement on business tax. With the lowest corporation tax rate in the G7, and a new, small profits rate, the UK will have a pro-business tax regime. But we need to do even more to encourage businesses to invest right now. Business investment creates jobs, lifts growth, spurs innovation and drives productivity. For decades we have lagged behind our international peers. Right now, while many businesses are struggling, others have been able to build up significant cash reserves. We need to unlock that investment; we need an investment-led recovery. So today I can announce the super deduction. For the next two years, when companies invest, they can reduce their tax bill not just by a proportion of the cost of that investment, as they do now, or even by 100% of the cost, the so-called full expensing some have called for; with the super deduction they can now reduce their tax bill by 130% of the cost. Let me give the House an example. Under the existing rules, a construction firm buying £10 million of new equipment could reduce their taxable income, in the year they invest, by just £2.6 million. With the super deduction, they can now reduce it by £13 million. We have never tried this before in our country. The OBR has said it will boost business investment by 10%—around £20 billion more per year. It makes our tax regime for business investment truly world leading, lifting us from 30th in the OECD to first. And, worth £25 billion during the two years it is in place, this will be the biggest business tax cut in modern British history: bold, unprecedented action to get companies investing, creating jobs, and driving our economic recovery.
Let me now turn to duties. This is a tough time for hospitality, so I can confirm that the planned increases in duties for spirits such as Scotch whisky, wine, cider and beer will all be cancelled. All alcohol duties frozen for the second year in a row—only the third time in two decades. And right now, to keep the cost of living low, I am not prepared to increase the cost of a tank of fuel, so the planned increase in fuel duty is also cancelled.
This Budget protects the jobs and livelihoods of the British people. This Budget is honest about the challenges facing our public finances and how we will begin to fix them. And this Budget does one other thing: it lays the foundations of our future economy—the third part of our plan. If we want a better future economy, we have to make it happen. We have to do things that have never been done before.
The world is not going to be any less competitive after coronavirus, so it is not enough to have some general desire to grow the economy; we need a real commitment to green growth. It is not enough to have some general desire to increase productivity; we need a real commitment to give every business, large or small, the opportunity to grow, innovate and succeed. It is not enough to have a general desire to create jobs; we need a real commitment to create jobs where people are and to change the economic geography of this country. And we cannot strengthen our domestic economy without remaining a global, outward-looking nation. This future economy will not be created in any one Budget, but today we lay the foundations.
Our future economy needs investment in green industries across the United Kingdom, so I can announce today the first ever UK infrastructure bank. Located in Leeds, the bank will invest across the UK in public and private projects to finance the green industrial revolution. Beginning this spring, it will have an initial capitalisation of £12 billion and we expect it to support at least £40 billion of total investment in infrastructure. I know that my right hon. Friend the Member for Pudsey (Stuart Andrew) will particularly welcome the location of this new institution.
Offshore wind is an innovative industry where the UK already has a global competitive advantage, so we are funding new port infrastructure to build the next generation of offshore wind projects in Teesside and Humberside. In November, I announced that we would launch a world-leading sovereign green bond. Today, we are going further, announcing a new retail savings product to give all UK savers the chance to support green projects, as my hon. Friend the Member for North East Bedfordshire (Richard Fuller) has campaigned for.
We have also asked Dame Clara Furse to establish a new group to position the City as the global leader for voluntary, high-quality carbon offset markets. Underpinning all this will be an updated monetary policy remit for the Bank of England. It reaffirms its 2% target, but now it will also reflect the importance of environmental sustainability and the transition to net zero.
Our future economy will also address our productivity problem and support small business. Too often, smaller firms do not have the time or resources to acquire the extra skills and training they need to be more efficient, more digital and more productive. Thanks to Be the Business, we have made a good start at supporting these firms. Today, the Business Secretary and I are going further, with a new set of UK-wide schemes, Help to Grow.
First, Help to Grow: Management will help tens of thousands of small and medium-sized businesses get world-class management training. Dozens of business schools across the UK will offer a new executive development programme with mentoring and peer learning, and Government will contribute 90% of the cost—a real commitment to learn more, make more and earn more.
Secondly, Help to Grow: Digital. With the pandemic, many businesses have moved online. This has been a challenge, but we want to turn it into an opportunity. We are going to help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software worth up to £5,000 each. Both programmes will commence by the autumn, and I would urge interested businesses to register today on Gov.UK/HelpToGrow. That is a real commitment to help over a hundred thousand businesses become more innovative, more competitive and more profitable.
A future economy requires us to be at the forefront of the next scientific and technological revolutions. Becoming a scientific superpower is something we can be; I do not think that is hubristic or unrealistic. Our incredible vaccination programme has shown the world what this country is capable of, so I am providing an extra £1.6 billion today to continue the roll-out and improve our future preparedness.
I want to make the UK the best place in the world for high growth, innovative companies, so I am launching two wide-ranging consultations today to make sure our research and development tax reliefs—and our enterprise management incentives—are internationally competitive.
My right hon. Friend the Home Secretary knows that a scientific superpower needs scientific superstars, so together we are announcing ambitious visa reforms aimed at highly skilled migrants, including a new, unsponsored points-based visa to attract the best and most promising international talent in science, research and tech; new, improved visa processes for scale-ups and entrepreneurs, and radically simplified bureaucracy for high skilled visa applications.
As well as support for innovation and access to talent, high-growth firms need access to capital. To do that, we are taking steps to give the pensions industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures; launching a new Future Fund Breakthrough to help fill the scale-up funding gap; and changing the rules to encourage more companies to list here. Let me thank Lord Hill for leading this landmark review. The Foreign, Commonwealth and Development Office will shortly be consulting on his proposals.
Our future economy depends on remaining a United Kingdom. Millions of families and businesses in Scotland, Wales and Northern Ireland have contributed to and benefited from our coronavirus response. Central to that has been a Treasury that acts for the whole United Kingdom. That is not a political point; it is an undeniable truth. The majority of today’s Budget measures will apply directly to people in all four nations of the UK. I am taking further specific steps with three accelerated Scottish city and growth deals in Ayrshire, Argyll and Bute, and Falkirk; three more in north Wales, mid-Wales, and Swansea bay; funding for the Holyhead hydrogen hub, the Global Centre of Rail Excellence in Neath Port Talbot and the Aberdeen energy transition zone, as well as the global underwater hub and the North sea transition deal, along with the first allocations of the £400 million new deal for Northern Ireland.
Through the Barnett formula, the decisions I am taking in this Budget also increase the funding for the devolved Administrations by £1.2 billion in Scotland, £740 million in Wales, and £410 million for the Northern Ireland Executive.
Our future economy demands a different economic geography. If we are serious about wanting to level up, that starts with the institutions of economic power. Few institutions are more powerful than the one I am enormously privileged to lead—the Treasury. Along with the other critical economic Departments, including the Department for Business, Energy and Industrial Strategy, the Department for International Trade and the Ministry of Housing, Communities and Local Government, we will establish a new economic campus in Darlington. I know my hon. Friend the Member for Darlington (Peter Gibson) will particularly welcome this announcement.
Redrawing our economic map means rebalancing our economic investment. I have already revised the Treasury’s Green Book, and set out the highest sustained levels of public investment across the UK since the 1970s. But we can go further. I am announcing today over £1 billion for 45 new towns deals, from Castleford to Clay Cross, Rochdale to Rowley Regis, and Whitby to Wolverhampton. I pay tribute to local leaders—like the brilliant Mayor for the West Midlands, Andy Street—who are making the case for investment in their area.
We are creating a £150-million fund to help communities across the UK take ownership of pubs, theatres, shops or local sports clubs at risk of loss, putting more power in the hands of local people. I am also launching the first round of the levelling up fund today, inviting applications from local areas across the United Kingdom. I am grateful to my right hon. Friends the Transport Secretary and the Housing, Communities and Local Government Secretary for their support on this crucial initiative.
I have one final announcement that exemplifies the future economy. It is a policy on a scale that we have never done before—a policy to bring investment, trade, and, most importantly, jobs, right across the country, to replace the industries of the past with green, innovative, fast-growing new businesses, to encourage free trade and reinforce our position as an outward-looking, trading nation that is open to the world, and a policy that we can only pursue now that we are out of the European Union: freeports. Freeports are special economic zones with different rules to make it easier and cheaper to do business. They are well established internationally, but we are taking a unique approach.
Our freeports will have simpler planning to allow businesses to build; infrastructure funding to improve transport links; cheaper customs with favourable tariffs, VAT or duties; and lower taxes, with tax breaks to encourage construction, private investment and job creation. It will be an unprecedented economic boost across the United Kingdom. Freeports will be a truly UK-wide policy, and we will work constructively with the Scottish, Welsh and Northern Irish Administrations.
Today, I can announce the eight freeport locations in England: East Midlands airport; Felixstowe and Harwich; Humber; Liverpool city region; Plymouth; Solent; Thames; and Teesside. That is eight new freeports in eight English regions, unlocking billions of pounds of private sector investment, generating trade and jobs up and down the country. I commend Members across the House for their campaigning, but in particular my hon. Friends the Members for Redcar (Jacob Young), for Cleethorpes (Martin Vickers) and for Great Grimsby (Lia Nici), as well as inspiring local leaders like Ben Houchen, the Mayor of Tees Valley.
Let us take just one of those places—Teesside. In the past, it was known for its success in industries like steel. Now, when I look to the future of Teesside, I see old industrial sites being used to capture and store carbon, vaccines being manufactured, offshore wind turbines creating clean energy for the rest of the country—all located within a freeport with a Treasury just down the road and a UK Infrastructure Bank only an hour away. I see innovative, fast-growing businesses hiring local people into decent, well-paid, green jobs. I see people designing, manufacturing and exporting incredible new products and services. I see people putting down roots in places that they are proud to call home. I see a people optimistic and ambitious for their future. That is the future economy of this country.
And so, while this last year has been a test unlike any other, that which we are, we are. The fundamentals of our character as a people have not changed: still determined, still generous, still fair. That is what got us through the last year; it is what will guide us through the next decade and beyond. This time last year, we set out to deliver on the promises we made to the British people. But the most important promise was implicit and, in truth, is made by every Government, irrespective of their politics—and that is to do what must be done when the danger is imminent and when no one else can.
Today, we set out a plan to protect the jobs and livelihoods of the British people, but the promises that underpin that plan remain unchanged from those we pledged ourselves to 12 long months ago: to unite and lead; to level up; to create a world-class education system; to keep our streets safe; to keep our NHS strong; to support the most vulnerable; to reform and improve public services; to grow the economy; to spread prosperity; to extend the awesome power of opportunity to all corners of the United Kingdom; and, yes, to be honest and fair in all that we do.
An important moment is upon us, a moment of challenge and of change: of difficulties, yes, but of possibilities too. This is a Budget that meets that moment and I commend it to the House.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions: —
(a) Repeal of provisions relating to the Interest and Royalties Directive (motion no. 31);
(b) Stamp duty land tax (housing co-operatives etc) (motion no. 44);
(c) Annual tax on enveloped dwellings (housing co-operatives) (motion no. 45);
(d) Customs duty (removal of steel to Northern Ireland) (motion no. 52).—(Rishi Sunak.)
Question agreed to.
Madam Deputy Speaker (Dame Eleanor Laing)
We now come to the motion entitled “Income Tax (Charge)”. It is on this motion that the debate will take place today and on the succeeding days. The questions on this motion and on the remaining motions will be put at the end of the Budget debate on Tuesday 9 March. I call the Chancellor of the Exchequer to move the motion formally.
Economic Update
Debate between Baroness Laing of Elderslie and Rishi Sunak(3 years, 10 months ago)
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Rishi Sunak
My hon. Friend makes an excellent and insightful point. This is about resilience in the public finances—he used the word well. We have faced two supposedly once-in-a-generation shocks in the space of 10 years and we do not know what the future holds. What we do know is that we want to encounter the next shock that comes along in as strong a position as possible, because ultimately that will enable us to respond in as comprehensive and generous a way as we have here. That is why, over time, we must rebuild our public finances to that position of, as he said, resilience and strength.
Madam Deputy Speaker (Dame Eleanor Laing)
I wonder if hon. Members really do believe in being fair to everyone. If they do, I implore them to ask short questions—do not make statements and do not make speeches. This is a statement by the Chancellor. It is an occasion for a quick question. I have 36 people to get in and 25 minutes in which to do it. Shall we see whether Members really do want to be fair to everybody else?
Rishi Sunak
My hon. Friend is right about the supply chain. He will know that much of the supply chain also supplies the on-premises trade as well as the off-premises, so those businesses will have some trade during this period, but he is right that we must ensure that it is there for the recovery. The supply chain will, of course, benefit from our furlough scheme, which is very comprehensive in its eligibility and very generous. I thank him for his points and will of course bear them in mind.
Madam Deputy Speaker (Dame Eleanor Laing)
Let us see if we can go a bit faster to try to get everybody in.
Rishi Sunak
The hon. Lady, for whom I have a lot of respect, mentioned two things: unemployment and child poverty. We know that the best way to ensure that children do not grow up in poverty is for them not to grow up in a workless household; indeed, the rate of poverty among children who are not in workless households is five times lower. Work—removing unemployment—is the best, surest and most sustainable way out of poverty, which is why this Government have backed with billions of pounds our various initiatives to support people into work, which I know she will support, whether that is the restart scheme, the kickstart scheme, doubling the amount of work coaches or increasing the incentive for people to take on new apprentices. Those are all the surest ways to help people out of poverty, and that is why we are committing billions of pounds to that end.
Madam Deputy Speaker (Dame Eleanor Laing)
We are officially out of time, but I will keep this running for a few minutes longer if Members will be decent and be quick. There are two more items of business, and it is simply not fair on other Members later in the day if this item of business takes too long.
Rishi Sunak
The Welsh Government have received over £5 billion of up-front funding guarantees to support their local economy. I hope they will use it to do exactly that, but also, Welsh businesses will benefit from UK-wide interventions—for example, our furlough scheme, our loan programme or, indeed, some of the VAT reductions—and I have said that all our support now extends through to the spring. We will have a Budget on 3 March, where we will set out the next stage of that economic response to coronavirus.
Madam Deputy Speaker (Dame Eleanor Laing)
Between this item of business and the next statement, I will briefly suspend the House for three minutes.
Financial Statement
Debate between Baroness Laing of Elderslie and Rishi Sunak(4 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rishi Sunak)
Madam Deputy Speaker, I want to get straight to the issue most on everyone’s mind: coronavirus covid-19. I know how worried people are—worried about their health, the health of their loved ones, their jobs, their income, their businesses, their financial security. And I know they get even more worried when they turn on their TVs and hear talk of markets collapsing and difficult times coming. People want to know what is happening and what can be done to fix it.
What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure. We are clear that this is an issue above party. We will do right by you and your family, and I know I will have the support of the whole House as I say that. This House has always stood ready to come together, put aside party politics and act in the national interest. We have done so before, and I know we will do so again. My right hon. Friend the Prime Minister, alongside officials and scientists, is leading the work on the public health response. Today, I want to set out our economic response so we bring stability and security.
Let me say this: we will get through this—together. The British people may be worried, but they are not daunted. We will protect our country and our people. We will rise to this challenge. But let me also say, yes, this virus is the key challenge facing our country today, but it is not the only challenge. We have just had an election where people voted for change—change in our economy, change in our public services, change in the cost of living, change in our economic geography. This Budget delivers on that change. Yes, as we deal with coronavirus, it is a Budget that provides for security today, but it is also a plan for prosperity tomorrow. It is a Budget that delivers on our promises to the British people. It is the Budget of a Government that gets things done.
Madam Deputy Speaker, before I set out the details of our plan, let me first thank Members who have contributed to the discussions on how to respond to coronavirus—Members from both sides of this House. Our economy is robust, our public finances are sound, our public services are well prepared. My right hon. Friend the Health Secretary is working around the clock to protect the public’s health, and I will do whatever it takes to support the economy.
First, let me explain the nature of the economic challenge and my overall strategy. The challenge is this: there is likely to be a temporary disruption to our economy. On the supply side, up to a fifth of the working-age population could need to be off work at any one time, and business supply chains are being disrupted around the globe. This combination of people being unable to work and businesses being unable to access goods will mean that, for a period, our productive capacity will shrink. There will also be an impact on the demand side of the economy, through a reduction in consumer spending. The combination of those effects will have a significant impact on the UK economy, but it will be temporary. People will return to work. Supply chains will return to normal. Life will return to normal. For a period, it is going to be tough, but I am confident that our economic performance will recover.
So given this analysis of the situation, let me set out our strategy to deal with it. We cannot avoid a fall in demand, because the primary driver of that reduction in consumption—the primary reason people are not spending as normal—is that they are following doctors’ orders to stay at home. The right immediate policy response is to provide security and support for those who get sick or cannot work by funding our public services and a strengthened safety net.
On the supply side, the right response is to provide a bridge for businesses to ensure that what is a temporary impact on our productive capacity does not become permanent. In other words, our response will be temporary, timely and targeted. This is the right response, and at the right time.
That response is clearly and closely co-ordinated with the Bank of England. The Governor and I have been in constant communication about the evolving situation, and our responses have been carefully designed to be complementary and to have maximum impact, consistent with our independent responsibilities.
The Governor set out this morning the actions that the Bank will take to help UK businesses and households bridge across the likely economic disruption: a 50 basis point reduction to interest rates to support business and consumer confidence and cash flows; the introduction of an SME term funding scheme to help reinforce the transmission of the reduction in Bank rate to the real economy; and releasing the counter-cyclical buffer to further support the ability of banks to supply credit.
The Government’s response will use fiscal action to support public services, households and businesses. Together, we are taking action that is co-ordinated, coherent and comprehensive.
Let me now set out our three-point plan. First, whatever extra resources our NHS needs to cope with coronavirus, it will get. Whether it is research for a vaccine, recruiting thousands of returning staff or supporting our brilliant doctors and nurses—whether it is millions of pounds or billions of pounds—whatever it needs, whatever it costs, we stand behind our NHS.
Secondly, during this immediate crisis, if people fall ill or cannot work, we must support their finances. We will make sure our safety net remains strong enough to fall back on. My right hon. Friend the Prime Minister has already announced that statutory sick pay will be paid from day 1, rather than day 4.
Today, with the assistance of my right hon. Friend the Work and Pensions Secretary, we can go further. Statutory sick pay will also be available for all those who are advised to self-isolate, even if they have not yet presented with symptoms. And rather than having to go to the doctor, people will soon be able to obtain a sick note by contacting 111.
But of course not everyone is eligible for statutory sick pay. There are millions of people working hard who are self-employed or in the gig economy. They will need our help too. So to support them during this period, we will make it quicker and easier to access benefits. Those on contributory employment and support allowance will be able to claim from day 1, instead of day 8. To make sure that time spent off work due to sickness is reflected in people’s benefits, I am also temporarily removing the minimum income floor in universal credit. And I am relaxing the requirement for anyone to physically attend a jobcentre—everything can be done by phone or online. Taken together, these measures on ESA and universal credit provide a boost of almost £0.5 billion to our welfare system.
To further support our people, I am also creating a £500 million hardship fund, distributed to local authorities, which will be able to use that fund to directly support vulnerable people in their local area. In total, that is a £1 billion commitment to support the financial security of our people.
But the best way to support people is to protect their jobs, and we do that by supporting our businesses—the third part of our plan. The measures I have announced today on statutory sick pay are crucial to support those who need to take time off work, but that cost would be borne by business. If we expect 20% of the workforce to be unable to work at any one time, the cumulative cost would hit our small and medium-sized businesses hard. So, in recognition of these exceptional circumstances, today I am taking a significant step. For businesses with fewer than 250 employees, I have decided that the cost of providing statutory sick pay to any employee off work due to coronavirus will, for up to 14 days, be refunded by the Government in full. That could provide over £2 billion for up to 2 million businesses. This will significantly ease the burden on businesses, but we can do more. I have asked Her Majesty’s Revenue and Customs to scale up the time to pay service, allowing businesses and the self-employed to defer tax payments over an agreed period of time. Starting today, there will be a dedicated helpline, with 2,000 staff standing ready to help.
Although time to pay is important, it will still be the case that some good, well-run businesses will face problems with their cash flow. They may struggle to pay people’s salaries, pay their bills or buy new stock. They will need loans to get through this period. So, today, I am announcing a new, temporary coronavirus business interruption loan scheme. Banks will offer loans of up to £1.2 million to support small and medium-sized businesses. The Government will offer a generous guarantee on those loans, covering up to 80% of losses, with no fees, so that banks can lend with confidence. This will unlock up to £1 billion of attractive working capital loans to support small businesses, with more as needed.
Taken together, I expect the combination of those measures to protect the vast majority of businesses through the worst of the crisis, but I have two other measures that will use the tax system to support businesses through this. Our manifesto promised that for shops, cinemas, restaurants, and music venues with a rateable value of less than £51,000, we would increase the business rates retail discount to 50%. Today I can go further, and take the exceptional step, for this coming year, of abolishing their business rates altogether. But there are tens of thousands of other businesses in the leisure and hospitality sectors currently not covered by this policy: museums, art galleries and theatres; caravan parks and gyms; small hotels and B&Bs; and sports clubs, night clubs, club houses and guest houses. They would not benefit from today’s measure, but they could be some of the hardest hit. So for this year I have decided to extend the 100% retail discount to them as well. That means that any eligible retail, leisure or hospitality business with a rateable value below £51,000 will, over the next financial year, pay no business rates whatsoever. That is a tax cut worth £1 billion, saving each business up to £25,000, and it means that, over the next 12 months, nearly half of all business properties in England will not pay a penny of business rates. I am also launching today a fundamental review, to be concluded at the autumn Budget, of the long-term future of business rates. But even with the temporary extension of the retail discount to the leisure and hospitality sectors, many of our smallest businesses already pay no business rates, so would not benefit from this policy. So to support them to manage their fixed costs, I am going to go a step further. I am providing, to any business currently eligible for the small business rates relief, a £3,000 cash grant per business. This is a £2 billion cash injection direct to 700,000 of our smallest businesses.
Let me summarise for the House the fiscal impact of our immediate response to coronavirus. Taken together, the extraordinary measures I have set out today represent £7 billion to support the self-employed, businesses and vulnerable people. To support the NHS and other public services, I am also setting aside today a £5 billion emergency response fund, and I will go further if necessary. Those measures are on top of plans that I will set out later in this Budget, which provide an additional fiscal loosening of £18 billion to support the economy this year. That means that I am announcing today, in total, a £30 billon fiscal stimulus to support British people, British jobs and British businesses through this moment. And of course, if further action is needed as the situation evolves, I hope the whole House knows that I will not hesitate to act.
I believe that this represents one of the most comprehensive economic responses of any Government anywhere in the world to date. The Governor of the Bank of England and I are in close contact with our counterparts around the world in the G7 and the G20, and to support the global response I am also making new funding of £150 million available for the International Monetary Fund’s relief efforts.
Madam Deputy Speaker, coronavirus will have a significant impact on our economy, but it will be temporary. I will do whatever it takes to get our nation through it. I am acting today with a multi-billion-pound commitment: more money for our NHS; more generous sick pay; faster access to benefits if you are self-employed; extra local support for the most vulnerable; tax cuts, loans and grants for businesses to protect people’s jobs—comprehensive action, and if more is needed I will take it. I know that all Members of this House will want to give this plan their full support.
Before I turn to the economic forecasts, I hope the House will join me in thanking the Office for Budget Responsibility, and Robert Chote in particular. After 10 years, this is his last Budget in charge. He has led the OBR with dedication and integrity, and established that institution as one that is respected around the world.
Madam Deputy Speaker, let me now turn to the growth forecasts. Since the OBR closed its forecast, it has become clear that the spread of coronavirus will have a significant impact on our economy in the coming quarters. But given that the nature of the shock is temporary, I still want to set out for the House the OBR’s judgment on the economy over the medium term. Even before coronavirus hit, we were facing a slowing world economy. There has been, across developed economies, including here in the UK, a decade-long slowdown in productivity. This, combined with the political uncertainty of the last three years, which affected business investment in particular, has led the OBR to downgrade our productivity over the forecast period and to slightly reduce GDP growth, compared with the March 2019 forecast.
But while the world may slow down, we will act here with a response that is brave and bold, taking decisions now for our future prosperity. We are investing in world-class infrastructure and to lead the world in the industries and technologies of the future. The central judgment that I am making today is to fund an additional £175 billion over the next five years for our future prosperity. The OBR has said that as a direct result of the plans that I am announcing, growth over the next two years will be half a percentage point higher than it otherwise would have been. For the benefit of the House, the GDP forecast, without fully accounting for the impact of coronavirus, would have led to growth of 1.1% in 2020, 1.8% in 2021, then 1.5%, 1.3% and 1.4% in the following years. And today the OBR has made an estimate it has never made before. It has said, in its words, that today’s
“large planned increase in public investment should boost potential output too”.
If future Governments have the same determination to continue our approach, the UK’s long-term productivity will increase by 2.5%.
The OBR has confidence in the long-term future of our economy, and so do I. More investment and higher growth mean more jobs and higher wages. We already have more people working in our economy than ever before, women’s employment is at a record high, and since 2010 full-time weekly wages have grown faster in every region and nation of the UK than they have in London. The OBR expects that half a million people more will be in work by 2025. Wages are expected to grow in real terms in every year of the forecast period. The story of this Government has been the story of a national jobs miracle—and given the last few weeks that I’ve had, I am all in favour of jobs miracles.
On inflation, the OBR forecasts 1.4% this year, increasing to 1.8% next year and then, for the rest of the forecast period, remaining on or around target. I am sure that the whole House will join me in taking the opportunity to thank Mark Carney, the Governor of the Bank of England, for his seven years of dedicated public service. We congratulate him on his new role as finance adviser for COP26 and welcome his successor Andrew Bailey, who takes up his post on Monday.
Let me turn now to the fiscal forecasts. The economic impacts of coronavirus remind us of the importance of fiscal responsibility. Our public finances are strong, with the deficit down from 10% in 2010 to less than 2% last year. Our economy is well-prepared for the future—and it is well-prepared because of 10 years of Conservative-led Governments and Conservative Chancellors.
I too will always act responsibly with the nation’s finances. But it is important that we update our fiscal framework to remain at the leading edge of international best practice. Our economic security depends on maintaining the following principles: low and stable inflation, delivering price stability; fiscal sustainability; and independent, effective institutions like the Bank of England and the OBR. These features of our framework will always be protected. But there is a live global debate about what our low interest rate environment means for fiscal strategy, about the case for fiscal policy to play a more active role in stabilising the economy, and about the best ways to measure productivity-enhancing investment in the economy, such as human capital or measuring value on the public balance sheet. So I want to take time to consider these questions over the coming months so that our fiscal framework allows us to make the right long-term decisions for our economic security and prosperity. I will review the fiscal framework, consulting widely with a range of experts, and will report back in the autumn if I conclude that any changes are necessary.
But at the same time, credibility comes as much from what we do as what we say. We were elected on a manifesto that promised to meet a specific set of fiscal rules. Today’s Budget is about delivering our promises. That is why, despite the speculation, today’s Budget is delivered not just within the fiscal rules in our manifesto, but with room to spare. I am setting the amount that the Government will spend for the rest of this Parliament within those rules as well. Today the OBR reports a current budget surplus in every one of the next five years, and in the target year of 2022-23 we have fiscal space of nearly £12 billion. The OBR forecasts that borrowing will increase slightly from 2.1% of GDP in 2019-20 to 2.4% in 2020-21 and 2.8% in 2021-22. It then falls to 2.5%, 2.4% and 2.2% in the following years. The OBR forecasts that headline debt will be lower at the end of the Parliament than it is today, falling from 79.5% this year to 75.2% in 2024-25.
I am sure the House will understand that, given how urgently we have developed our economic response to the coronavirus, that package of measures has not yet been captured in the fiscal forecasts, and nor have the fiscal impacts of the Bank’s actions. But the House will also note that the target year for our current budget fiscal rule is not until 2022-23. So even within our current framework, I have the flexibility to act as required over the next two years.
Madam Deputy Speaker, as we enter a period of challenge, we start from a position of strength: the economy growing, more jobs, higher wages, stable inflation and sound public finances. We promised to manage our economy responsibly, and we are getting it done. This Budget responds, at scale, to the immediate threat of coronavirus and it reports on an economy whose foundations are strong. It is a Budget that provides for security today, but let me now outline our plan for prosperity tomorrow. This is the first Budget of a new decade; the first in almost 50 years outside the European Union; and the first of this new Government. At the election, we said that we needed to be one nation. While talent is evenly spread, opportunity is not, and we need to fix that. This is a Budget that will deliver on our promises to the British people, and it is the Budget of a Government who get things done.
We promised to get Brexit done, and we got it done. We promised to let hard-working families keep more of what they earn. This Budget gets it done. We promised to back businesses, to innovate, to invest and to trade. This Budget gets it done. We promised to invest in science and research. This Budget gets it done. We promised to deliver green growth and protect our environment. This Budget gets it done. We promised to level up, with new roads, railways, broadband and homes. This Budget gets it done. And, yes, we promised record funding for our NHS and public services. This Budget gets it done. This Government deliver on their promises and get things done.
Our plan for prosperity starts immediately by putting more money in people’s pockets. It was a Conservative Government who in 2016 introduced the national living wage, giving Britain’s lowest-paid workers the biggest pay rise in 20 years. And in just three weeks’ time, around 2 million workers will see their wage rise again by 6.2%. For a full-time worker, that is a pay rise of almost £1,000. That is the biggest cash increase ever, but we have promised to go further.
Today we are publishing a new remit for the independent Low Pay Commission. It now has a formal target that means that as long as economic conditions allow, by 2024 the national living wage will reach two thirds of median earnings. On current forecasts, that means a living wage of over £10.50 an hour. We promised to end low pay. We are getting it done. As people earn more, we will also cut taxes on their wages. I am increasing, in just four weeks’ time, the national insurance threshold from £8,632 to £9,500. That is a tax cut for 31 million people, saving a typical employee over £100. Taken together, our changes to the national living wage, income tax, and now national insurance mean that someone working full time on the minimum wage will be more than £5,200 better off than in 2010. The Conservatives are the real workers’ party.
I can also confirm that now we have left the EU, I will abolish the tampon tax. From January next year, there will be no VAT whatsoever on women’s sanitary products. I congratulate all hon. and right hon. Members who campaigned for this, including the former Member for Dewsbury who led the charge.
Let me turn now to duties. Scotch whisky is a crucial industry and our largest food and drink export. My Scottish Conservative colleagues, including my hon. Friend the Member for Moray (Douglas Ross), have highlighted to me the impact that the recent US tariffs are having. We will continue to lobby the US Government to remove these harmful tariffs, but in the meantime I am announcing today £1 million of support to promote Scottish food and drink overseas and £10 million of new R&D funding to help distilleries go green. To further support the industry, I can also announce that this year the planned increase in spirits duty will be cancelled.
Pubs are at the centre of community life, but too many have closed over the past decade. We have already promised to introduce a business rates “pub discount” of £1,000 for small pubs, but I have heard calls from many hon. and right hon. Members, including my hon. Friend the Member for Dudley South (Mike Wood), that we need to do more, especially given the possible impact of coronavirus on our pubs. Today I can announce that, exceptionally for this year, the business rates discount for pubs will not be £1,000; it will be £5,000. I am also pleased to announce that the planned rise in beer duty will be cancelled, and because of decisions that I have taken elsewhere in this Budget I am also freezing duties for cider and wine drinkers as well. For only the second time in almost 20 years, that is every single one of our alcohol duties frozen.
I have heard representations that after nine years of being frozen, at a cost of £110 billion to the taxpayer, we can no longer afford to freeze fuel duty. I am certainly mindful of the fiscal cost and the environmental impacts, but I am taking considerable steps in this Budget to incentivise cleaner forms of transportation. Many people still rely on their cars, so I am pleased to announce today that for another year fuel duty will remain frozen. Compared with 2010 plans, that is a saving of £1,200.
Wages up; national insurance cut; the tampon tax abolished; spirits duty frozen; beer duty frozen; wine and cider duty frozen; fuel duty frozen. We promised to cut taxes and the cost of living and we got it done.
As Conservatives, we know that to put more money in people’s pockets we need a thriving private sector. That is what drives growth; that is what creates jobs; that is what lifts living standards. The second part of our plan for prosperity is to unleash the power of business. Businesses need support to start up, grow and export. Today I provide: £130 million of new funding to extend start-up loans; £200 million for the British Business Bank to invest in scale-ups; another £200 million for life sciences; more money for growth hubs; 21 cities with British Library business support; £5 billion of new export loans for businesses; and dedicated trade envoys representing the north, the midlands, Wales and the west of England in our embassies around the world.
Businesses also need a fair tax system. We were elected on a manifesto that promised to review and reform entrepreneurs’ relief. I have now completed that review, and here is what we are going to do. Entrepreneurs’ relief is: expensive, at a cost of over £2 billion a year; ineffective, with fewer than one in 10 claimants saying that the relief was an incentive to set up a business; and unfair, with nearly three quarters of the cost going to just 5,000 individuals. Just because it is called entrepreneurs’ relief does not mean that it is entrepreneurs who mainly benefit. For all these reasons, I have heard representations that I should completely abolish it. The Institute for Fiscal Studies has criticised it. The Resolution Foundation called it
“the UK’s worst tax break”.
I am sympathetic to that argument, but, at the same time, we should not discourage those genuine entrepreneurs who do rely on the relief. We need more risk-taking and creativity in this country, not less. So I have decided not to fully abolish entrepreneurs’ relief today. Instead, I will do what the Federation of Small Businesses called “a sensible reform” and reduce the lifetime limit from £10 million to £1 million. A total of 80% of small business owners are unaffected by today’s changes. Those reforms save £6 billion over the next five years, and I am giving almost all of that money straight back to business through three additional measures.
The research and development expenditure credit will be increased from 12% to 13%—a tax cut worth £2,400 on a typical R&D claim. The structures and buildings allowance will be increased from 2% to 3%, giving an extra £100,000 of relief if someone is investing in a building worth £10 million. And, to cut taxes on employment, I will deliver our promise to increase the employment allowance by a third to £4,000. That is a tax cut this April for nearly half a million small businesses. That is another step towards the dynamic, low-tax economy that we want to see. We promised to cut taxes on business. We are getting it done.
To help our businesses lead the next generation of high-productivity industries, we also need to invest now in the technologies of the future. We are the country of Newton, Hodgkin and Turing. Ours is a history filled with ideas, invention and discovery, and it is truly a national history. The first steam railway ran between Stockton and Darlington. The first television was invented by a Scot. A Welshman invented the first hydrogen fuel cell. Jocelyn Bell Burnell, born in Northern Ireland, discovered the first radio pulsars.
To compete and succeed, over the next decade and beyond, we need to recapture that spirit, so the third part of our plan for prosperity is to invest in ideas.
In our manifesto we made a promise to double investment in research and development to £18 billion. I will not be doing this today. Instead, I will increase investment in R&D to £22 billion a year. That is the fastest and largest increase in R&D spend ever. As a percentage of GDP, it will be the highest in nearly 40 years—higher than the US, China, France and Japan—and a major step towards our target of increasing public and private investment in R&D to 2.4% of GDP. And we won’t wait to get started. Next year, funding will increase by 15%, the fastest year-on-year growth on record. Detailed allocations of our new investment in ideas will be set out at the spending review, but I can make some announcements today.
I am investing £1.4 billion in our world-leading science institute at Weybridge, where, as we speak, they are working to analyse samples of coronavirus. To secure our leadership in the technologies of the future, I am investing over £900 million in nuclear fusion, space and electric vehicles. As we invest in ideas, we are also changing the way we fund science in this country. I can confirm that we will invest at least £800 million in a new blues-skies funding agency here in the UK, modelled on the extraordinary Advanced Research Projects Agency in the US.
As we invest in ideas, we are also changing where we fund science in this country. Today, half of R&D funding goes to London, the east and the south-east of England, so we are investing £400 million of new funding in high-quality research, with much of that incremental funding going to our brilliant universities around the country. We promised to make this country one of the scientific research centres of the world—we’re getting it done.
There can be no lasting prosperity for our people if we do not protect our planet, so the fourth part of our plan for prosperity is to create the high-skill, high-wage, low-carbon jobs of the future; to level up, with completely new industries in our regions and nations; and to raise our productivity and lift our quality of life even as we cut our emissions. The Treasury’s net zero review will set out the Government’s strategic choices ahead of COP26 later this year. Today’s Budget takes the first steps.
First, we will increase taxes on pollution. Electricity is now a cleaner energy form than gas, but our climate change levy, paid by companies, taxes electricity at a higher rate. As another step towards equalising the rates and encouraging energy efficiency, from April 2022 I am freezing the levy on electricity and raising it on gas. I will support the most energy-intensive industries to transition to net zero by extending the climate change agreements scheme for a further two years. To tackle the scourge of plastic waste, we will deliver our manifesto promise to introduce a new plastics packaging tax. From April 2022, we will charge manufacturers and importers £200 per tonne on packaging made of less than 30% recycled plastic. That will increase the use of recycled plastic in packaging by 40%—equal to carbon savings of nearly 200,000 tonnes.
Let me now turn to red diesel. The red diesel scheme allows selected users to pay duty of just over 11p per litre for diesel, compared to almost 58p per litre for everyone else. But the sectors using red diesel are some of the biggest contributors to our air quality problem, emitting nearly 10% of the noxious gases polluting the air of cities like London. This is a tax relief on nearly 14 million tonnes of carbon dioxide every year—the same as the entire population of London and Greater Manchester taking a return flight to New York. It has been a £2.4 billion tax break for pollution that has also hindered the development of cleaner alternatives, so I will abolish the tax relief for most sectors. That is the right thing to do, but I recognise that it will be a big change for some industries, so, firstly, this change will not take effect for two years, giving businesses time to prepare. Secondly, I have heard the concerns about agriculture, particularly from the National Farmers Union and rural colleagues—including, indeed, the Parliamentary Secretary to the Treasury, my right hon. Friend the Member for Sherwood (Mark Spencer)—so I have decided that agriculture will retain the relief. I will also keep the relief for rail and for domestic heating, and there will be no impact on fishing. We will consult over the summer with other sectors. Thirdly, to help develop cleaner alternatives to red diesel and other fossil fuels, we will more than double R&D investment in the energy innovation programme to £1 billion.
As well as taxing pollution, we will invest in and cut taxes on clean transport. We are introducing a comprehensive package of tax and spend reforms to make it cheaper to buy zero or low emission cars, vans, motorbikes and taxis; we are investing £300 million in tackling nitrogen dioxide emissions in towns and cities across England; and we are investing £500 million to support the roll-out of new rapid charging hubs, so that drivers are never more than 30 miles away from being able to charge up their car. Taken together, this Budget invests £1 billion in green transport solutions.
Many Members around this House will have seen the devastating impact of the recent floods on homes and businesses in their own constituencies, particularly the hon. Member for Barnsley East (Stephanie Peacock), my hon. Friends the Members for Calder Valley (Craig Whittaker) and for Telford (Lucy Allan), and my right hon. Friend the Member for Ludlow (Philip Dunne). I can announce today that I am making £120 million available immediately to repair all defences damaged in the winter floods. To support those areas that have been repeatedly flooded, I am also providing £200 million of funding directly to local communities to build their flood resilience. To protect people and over 300,000 properties, I am doubling our investment in flood defences over the next six years to £5.2 billion.
We are also supporting natural habitats such as woodlands and peat bogs. I can confirm today that to protect, restore and expand these wonderful habitats, and capture carbon, we will provide £640 million for a new nature for climate fund. Over the next five years, we will plant around 30,000 hectares of trees—that is a forest larger than Birmingham—and restore 35,000 hectares of peatland. This Government intend to be the first in history to leave our natural environment in a better state than we found it.
I can make one further announcement on green growth. Carbon capture and storage is precisely the kind of exciting technology where Britain can lead the world over the next decade. I can announce today that we will invest at least £800 million to establish two or more new carbon capture and storage clusters by 2030. Once up and running, these clusters will store millions of tonnes of carbon dioxide that would otherwise be released into the atmosphere. The new clusters will create up to 6,000 high-skill, high-wage, low-carbon jobs in areas like Teesside, Humberside, Merseyside or St Fergus in Scotland. It is levelling up in action.
Green jobs; better flood defences; cheaper electric vehicles; innovative new technologies. We promised to protect our environment—we’re getting it done.
As a party, we know that talent is evenly spread in our country, but that opportunity is not. We have to put that right. We need to build the infrastructure that will lay the foundations for a new century of prosperity. We need to grab the opportunity to upgrade, to improve, to enhance and to level up. That starts today with the next part of our plan, as we get Britain building.
Over the next five years, we will invest more than £600 billion in our future prosperity. Public net investment will, in real terms, be the highest it has been since 1955. Take the average amount we have invested over the last 40 years in real terms—we are tripling it. Capital budgets in 2024-25 alone will reach over £110 billion. I will set out the detailed capital allocations at the spending review, but I am taking three major steps today. First, we are going to change the whole mindset of Government. To make sure that economic decision making reflects the economic geography of the country, we are reviewing the Treasury’s Green Book. We will have Treasury offices in Scotland, Wales and Northern Ireland. I can announce today that we are also opening a new economic campus in the north, with over 750 staff from the Treasury and the Departments for Business, Local Government and Trade. And we will not stop there: our ultimate ambition is to move 22,000 civil servants outside central London.
Secondly, because of this changed mindset, we will invest more in our nations, cities and towns. Today’s Budget provides an extra £640 million for the Scottish Government, £360 million for the Welsh Government, and £210 million for the Northern Ireland Executive. I am announcing £242 million of funding for new city and growth deals, taking our investment in these deals to more than £2.7 billion. We have agreed today a new devolution deal in West Yorkshire, with a directly elected Mayor for the region. And to make sure that it is not just Londoners who benefit from the kind of long-term transport deal that helped Transport for London, I am announcing today that the new West Yorkshire Mayor will, along with the seven other metro Mayors, get new, London-style funding settlements worth £4.2 billion. These settlements are in addition to the transforming cities fund, which will invest over £1 billion in local transport in 12 further cities, including Stoke, Preston, Derby and Nottingham, and Southampton.
Thirdly, we are going to build broadband, railway, roads: if the country needs it, we will build it. Today’s Budget provides £5 billion to get gigabit-capable broadband into the hardest-to-reach places, and £510 million of new investment into the shared rural mobile phone network, which means that in the next five years 4G coverage will reach 95% of the country. Let me thank my right hon. Friend the Culture Secretary, who will get this done.
We are also going to build better railways, with spades going in the ground on HS2, our commitment to fund the Manchester-Leeds leg of Northern Powerhouse Rail, funding today for a new station at Cambridge South and the midlands rail hub, Darlington station moving to the next stage of development and approval, and funding to make a dozen train stations more accessible.
And there is more money for our roads too. Today I am announcing the biggest ever investment in strategic roads and motorway—over £27 billion of tarmac. That will pay for work on over 20 connections to ports and airports, over 100 junctions, and over 4,000 miles of road. I am also announcing new investment in local roads, alongside a new £2.5 billion pothole fund—that is £500 million every single year: enough to fill, by the end of the Parliament, 50 million potholes. The details of all the road schemes that I am funding will be published later today, and I thank my right hon. Friend the Transport Secretary for all his efforts.
Our ambition is truly national: the A417 in the south-west; the A428 in the east; the A46 in the midlands; unclogging Manchester’s arteries; freeing the traffic north of Newcastle; and—something my north and mid-Wales colleagues will be particularly pleased to hear—we are protecting beautiful villages in the Welsh borders as we finally build the Pant-Llanymynech bypass. We promised to get Britain moving, and we are getting it done.
There is one more road I would like to mention. It is one of our most important regional arteries. It is one of those totemic projects symbolising delay and obstruction. Governments have been trying to fix it since the 1980s. Every year, millions of cars crawl along it in traffic, ruining the backdrop to one of our most important historic landmarks. So to the many hon. and right hon. Members who have campaigned for this moment, I say this—the A303: this Government are going to get it done.
Today we have announced the biggest programme of public investment ever: £27 billion for strategic roads this Parliament, funding to fill 50 million potholes, new railways, new stations, £5 billion for broadband, a new Mayor for West Yorkshire— investment in every region and nation of our United Kingdom. We promised to get Britain building: this Budget is getting it done.
Only by having a plan for prosperity will we grow the economy. Only by having a growing economy can we invest in our public services. And only by investing in our public services, the people’s priority, can we send a clear message to those who rely on them: you are our priority. Our public services are one of the most important tools by which we, the Government, can level up and spread opportunity, so that no matter who you are or where you were born, you will have every chance to succeed in our modern, dynamic economy.
And that starts with education. We have already provided schools with a three-year settlement worth over £7 billion by 2022. My right hon. Friend the Education Secretary is taking forward our plans to increase per-pupil funding next year by an average of over 4%. Today I am providing every region in the country with funding for specialist 16-to-19 maths schools; £25,000 per year, on average, for each secondary school to invest in arts activities; £30 million a year to improve PE teaching; and £8 million for the Football Foundation’s scheme to build new pitches for around 300,000 people to play on. And to support families, I am providing £2.5 million to fund research into how best to integrate family services, including family hubs, championed by my hon. Friend the Member for Congleton (Fiona Bruce).
Next, I would like to take the opportunity to pay tribute to my predecessor and friend, my right hon. Friend the Member for Bromsgrove (Sajid Javid). One of the issues he is most passionate about is levelling up further education. At the spending round, he increased funding for 16-to-19 education by £400 million. Today I can secure his legacy, with £1.5 billion of new capital over five years to dramatically improve the condition of our entire FE college estate. My predecessor wanted to level up further education—Saj, we’re getting it done.
I have one final education announcement. I have talked today about Britain being the country of scientists, inventors and engineers, but we are also the country of Shakespeare, Austen and Dahl. Our greatest export to the world is our language, our greatest asset is the free exchange of ideas and debate, and our greatest responsibility is the education of our young people. A world-class education will help the next generation thrive, and nothing could be more fundamental to that than reading. And yet digital publications are subject to VAT. That cannot be right. So today I am abolishing the reading tax. From 1 December, just in time for Christmas, books, newspapers, magazines or academic journals, however they are read, will have no VAT charge whatsoever. There will be no VAT on historical fiction by Hilary Mantel, manuals and textbooks like “Gray’s Anatomy”, or, indeed, works of fantasy like John McDonnell’s “Economics for the Many”. The irony is, it sold so few, it is literally his own little-read book.
Our second priority is to make sure people have affordable and safe housing. Today I can make good our promise to extend the affordable homes programme, with a new multi-year settlement of £12 billion. This will be the largest cash investment in affordable housing in a decade. To support local authorities to invest in their communities, I am cutting interest rates on lending for social housing by 1 percentage point, making available more than £1 billion of discounted loans for local infrastructure, and consulting on the future of the Public Works Loan Board. I am confirming nearly £1.1 billion of allocations from the housing infrastructure fund to build nearly 70,000 new homes in areas of high demand across the country, and a new £400 million fund for ambitious Mayors, like Andy Street in the west midlands, to build on brownfield sites. And tomorrow my right hon. Friend the Housing Secretary will set out for the House comprehensive reforms to bring our planning system into the 21st century.
But the housing challenge is most acutely felt by those with no home at all. So today, I am confirming £650 million of funding to help rough sleepers into permanent accommodation. That will buy up to 6,000 new places for people to live, enable a step change in support services and help us meet our promise to end rough sleeping in this Parliament. To fund those rough sleeping measures, I am confirming today that our manifesto promise to introduce a new stamp duty surcharge for non-UK residents will be introduced at a rate of 2% from April 2021.
I have one further measure to announce on housing. Two and a half years on, we are still grappling with the tragic legacy of Grenfell. Last year, we allocated £600 million to remove unsafe aluminium composite material, or ACM, from high-rise residential buildings. Today, I go further. Expert advice is clear that new public funding must concentrate on removing unsafe materials from high-rise residential buildings. So today, I am creating a new building safety fund worth £1 billion. That is what the experts have called for. That is what the Select Committee has called for. That is even what the Opposition have called for. That new fund will go beyond dealing with ACM to make sure that all unsafe combustible cladding will be removed from every private and social residential building above 18 metres high. My right hon. Friend the Housing Secretary will spearhead our efforts to make sure that developers and building owners do their fair share as well.
There is no more cherished public service than our NHS. Whatever resources the NHS needs to deal with coronavirus, it will get. We all benefit from a thriving health service, so it is right that we ask everyone to contribute. Business benefits from our NHS. So, as promised in our manifesto, the corporation tax rate will not be cut this year but will remain at 19%—still the lowest rate in the G20. Migrants benefit from our NHS, and we all want them to do so, but it is right that what people get out, they also put in. There is a surcharge already, but it does not properly reflect the benefits that people receive. So, as we promised in our manifesto, we are increasing the immigration health surcharge to £624, with a discounted rate for children. To raise further funds for the NHS, I am announcing a package of measures today to clamp down on aggressive tax avoidance, evasion and non-compliance, including extra funding for HMRC to secure £4.4 billion of additional revenue.
Those extra contributions allow me to take three further steps to support our health services. First, mental health support can be critical for many people, and particularly for our veterans. Thanks to the campaigning of my hon. Friends the Members for Wolverhampton South West (Stuart Anderson) and for Harwich and North Essex (Sir Bernard Jenkin), I will be supporting veterans with mental health needs with a £10 million donation to the Armed Forces Covenant Fund Trust. I am also confirming today that, to encourage employers to provide veterans with job opportunities, we will introduce a new national insurance relief.
Secondly, I have listened to concerns from all sides of the House that the pensions tax system is preventing doctors from taking on more hours. To significantly reduce the number of people who the tapered annual allowance affects, I am increasing both taper thresholds by £90,000, removing anyone with income below £200,000. Based on their vital work for the NHS, that will take around 98% of consultants and 96% of GPs out of the taper altogether. At the same time, I am reducing the minimum annual allowance to £4,000, which will only impact those with incomes above £300,000. This is a £2 billion commitment that supports our hard-working doctors.
Let me turn now to the overall funding settlement for the NHS. We have already provided the NHS with a record funding increase of £34 billion over five years—the biggest cash increase in public services since the second world war. Today, I can go further. I can announce over £6 billion of new funding in this Parliament to support the NHS. That new money will deliver 50,000 more nurses, 50 million more GP surgery appointments and work starting on 40 new hospitals—you heard that right: 40 new hospitals. We promised to back the NHS, and this Budget gets it done.
I have one last point to make about public services. We have now left the EU. We promised to get Brexit done, and we got it done. We promised to regain control of the money we send to Brussels, and for the first time ever, today’s OBR forecast shows that the billions of pounds we would have sent to the EU can now be spent on our priorities. Today, I am launching the next spending review, to conclude in July, setting out detailed spending plans for the Parliament.
Let me set out for the House our new totals for spending on public services. The OBR has said that today’s Budget will be the largest sustained fiscal boost for nearly 30 years. Next year, day-to-day departmental spending will grow at the fastest rate in 15 years. Over the spending review period, it is set to grow at the fastest rate since 2004, with an average growth rate in real terms of 2.8%—twice as fast as the economy. That means that by the end of this Parliament, day-to-day spending on public services will be £100 billion higher in cash terms than it is today. More police—safer streets. More nurses—better healthcare. More teachers—better education. The House now knows what the electorate already know: the Conservatives are the party of public services.
We are at the beginning of a new era in this country. We have the freedom and the resources to decide our own future—a future where we unleash the energy, inventiveness and creativity of all the British people, and a future where we look outwards and are confident on the world stage. That starts right now with our world-leading response to the coronavirus. This is a Budget delivered in challenging times. We will rise to this moment. We will get through this together. This Budget delivers security today, but it also lays the foundations for prosperity tomorrow.
This is just the start. Over the next few months, we will tackle the big issues head-on. From our national infrastructure strategy to social care and further devolution, this is the Budget of a Government that get things done—creating jobs, cutting taxes, keeping the cost of living low, investing in our NHS, investing in our public services, investing in ideas, backing business, protecting our environment, building roads, building railways, building colleges, building houses and building our Union. This is a Budget that delivers on our promises—a people’s Budget from a people’s Government—and I commend it to the House.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Rates of tobacco products duty (Motion No. 40);
(b) Vehicle excise duty (motor caravans) (Motion No. 44).—(Rishi Sunak.)
Question agreed to.
The Chairman of Ways and Means (Dame Eleanor Laing)
We now come to the motion entitled “Income Tax (Charge)”. It is on this motion that the debate will take place today and on the succeeding days. The Questions on this motion and the remaining motions will be put at the end of the Budget debate next Tuesday 17 March.