(2 days, 13 hours ago)
Commons ChamberMadam Deputy Speaker, I am grateful to catch your eye in this important King’s Speech debate. I follow other colleagues in congratulating the hon. Members for Bradford West (Naz Shah) and for Harlow (Chris Vince) on their amusing and well-informed speeches.
One of the few things that this Government have got right in the King’s Speech is the expedited Bill to nationalise Scunthorpe steelworks in order to safeguard domestic steel production. The plant is costing the taxpayer £1 million a day, and therefore modernisation and future private and public investment under a Government-owned company need to be implemented.
However, our economy is in a very fragile state. It grew by only 1.3% in real terms in 2025, and the Office for Budget Responsibility forecasts that it will grow by only 1.4% in 2026—the lowest level of any G7 country. The United Kingdom is carrying one of the highest levels of borrowing in the western world. National debt is a staggering £2.9 trillion, which is equivalent to 93.8% of our entire GDP or £102,000 per household. Even more concerning is the fact that we are expected to spend—wait for it—£111 billion on debt interest alone to service that debt. If that were a Government Department, it would be the third largest.
We are heavily reliant on international markets, and our national balance sheet is highly leveraged. That leaves our economy dangerously exposed to external shocks, such as the war in Iran and the Ukraine conflict. As a result, our borrowing premium on that debt is one of the highest in the OECD; today, we are paying more in debt interest than Greece. A 1% rise in interest rates adds £1.3 billion in costs in the first year, and £12 billion by the end of the forecast period, as new, expensive debt replaces older, cheaper debt. Indeed, yesterday, 30-year gilts hit a 28-year high at 5.81%. That gives a clue as to what the international markets think of our economic standing.
On that note, I observe that one of the Labour leadership candidates does not have a clue how the bond market funding our enormous debt actually works. With inflation expected to rise again—some forecasters expect it to reach 6.7% next year—we face the very real risk of sliding into recession or a bond strike. If those very serious consequences were to occur, this country would be forced to take much more fundamental measures to cut our expenditure. A competent Government should already be doing so, to avoid any chance of this happening and to protect our reputation in the international markets.
I note that the Government have included a Bill to reform the welfare system. The fact that 1 million people could work but do not is causing unacceptable tax increases on the rest of the hard-working population’s earnings. On top of that, higher interest rates are leading to higher food prices, higher mortgage payments and higher business costs. No one in this country—especially poorer working people—will be protected.
Some of the issues we see today are avoidable. The current political instability is a major factor. It is not my job as an Opposition MP to tell Labour how to sort out its leadership problems, but whatever it does, it is important to convince the international community and the people of this country that there is a stable, well-thought-out economic policy and to give the markets confidence, in order to reduce the current borrowing premium. It is not the job of the Government to subsidise every business, but it is the duty of the Government to create conditions in which growth, prosperity, enterprise and investment can thrive.
The Government have included a Bill to target youth unemployment, which is welcome, but the fact that it has risen by 16% or by 100,000 compared with a year ago makes it very hard for youngsters now leaving university or further education to start their careers. Meanwhile, businesses—particularly in hospitality and retail—are being taxed into oblivion and are not hiring as many people. In my North Cotswolds constituency, we employ 3,700 people in hospitality, and the sector provides £220 million to the local economy. However, higher employer national insurance contributions, rising minimum wages, hugely increasing business rates and energy price increases, exacerbated by the Employment Rights Act 2025, are all making it harder to make profits and are stalling growth. Taxes are already at a post-war high and there are threats to hike them further. None of this environment is encouraging businesses to hire and take on more people and so reduce the high unemployment figures.
Sorcha Eastwood (Lagan Valley) (Alliance)
I agree entirely with the hon. Member. To me, we have one of the most business-hostile environments. You made comments about young people not getting work. Do you agree that that is made worse by the national insurance hikes that have seen almost a generation being unable to get employment? Do you agree with me in that contention?
Order. Let us start the Session as we mean to go on, with no “you” or “your”, because the hon. Member is not talking about me.
I do not think I could design a tax increase that was a bigger tax on jobs than the hike in national insurance. I totally agree with the hon. Lady, and I think it is tragic in particular for our young people trying to get into the world of work today.
As Chairman of the Public Accounts Committee, my focus is on value for money for the taxpayer and ensuring that no expenditure goes to waste. Figures published by the National Audit Office in its “Audit insights” report in January 2026 point to a deeply worrying picture. The Government now spend around £1.1 trillion of taxpayers’ money across 17 Departments. A Department’s accounts are qualified—sorry, this is getting a little technical, but I hope the House will bear with me a little in this section of my speech—when it does not spend its budget as Parliament intends. The Department for Work and Pensions has had its accounts qualified for 36 years because its fraud and error rate is 3.3%, costing the taxpayer a staggering £9 billion. Overall—this is even more staggering—the Government have written off close to £7 billion this year across Departments, including the Ministry of Defence writing off £1.5 billion purely on cancelled projects. I repeat: £7 billion has been written off this year from cancelled and wasted projects. That is staggering.
The PAC has consistently recommended that each Department improves its digital and AI efficiencies. We believe that should be implemented from the top down, and that a chief digital and information officer should be appointed at a senior level in every Department and on arm’s length bodies. That would lead to efficiencies and savings. After all, every efficiency and every saving that can be made is more money to spend somewhere else. The public sector is constantly behind the private sector digitally, and we need to do much better to ensure that our public services actually deliver for taxpayers, using the latest and best technology to do so. AI is a tsunami that the Government are nowhere near prepared to deal with. I do not mean this as a criticism of the civil service—it is just how it is—but only 5% of the civil service have specific IT qualifications. Some experts say that needs to rise to 10%, which would be a massive transformation.
The Government announced a Bill to reform the welfare system. This year alone, the Department for Work and Pensions budget is expected to reach a projected £333 billion, or around 23.7% of UK spending. That almost outweighs the income tax payments of £330 billion that we receive from hard-working people. Imagine that: the total amount of income tax from hard-working people almost does not pay for the bill for the Department of Work and Pensions. The pension and benefit budgets are ballooning, and that expenditure is only due to increase as we mercifully live longer and healthier lives. Somebody else mentioned that we are at risk of intergenerational unfairness. There is a risk that our children will be unable to pay off this increasing debt, yet this Government have failed to take back control of this skyrocketing budget. Instead, their Back Benchers refuse to support such changes, which would cost just £5 billion.
Another issue that the PAC will be examining closely is the cost of Government compensation schemes, which over their lifetime are expected to exceed £102 billion, or just under what we pay in debt interest in any one year. The Government, of course, have a moral obligation to compensate citizens when the state makes serious mistakes, but we must do so in a fair, proportionate and non-litigious way.
Finally, and most importantly, I want to turn to defence. The first absolute duty of any Government is to ensure that our nation is properly defended. The King’s Speech made a commitment to NATO and to a sustained increase in defence spending, yet the defence investment plan, promised from that Dispatch Box in June 2025 and in every month since then—alongside the strategic defence review—has still not been published. Until we have that plan, we cannot see how the Government propose to procure all the military equipment that is needed.
I commend the hon. Gentleman for the speech that he is making. Does he agree that one of the things we need to do on defence here in the United Kingdom is adopt the drone technology that Ukraine now has? Russia is under threat: it is worried about the attacks that are reaching far into its interior. Does he agree that we may need a partnership with Ukraine to promote our drone technology in a way that can make us as effective as the Ukrainians?
If the hon. Gentleman is just a little patient, he will find that, two or three paragraphs down, I will address precisely that point.
Currently, the defence budget for 2025-26 is £62.2 billion, which is a measly 18% of the welfare budget of £333 billion. The Government have pledged to increase it by 2.6%, or £9 billion, by 2027 and by 3% in the next Parliament, which means a further increase of £14 billion. But none of that new money has yet arrived.
Iqbal Mohamed (Dewsbury and Batley) (Ind)
Does the hon. Gentleman agree that the best form of defence is peace, and that the overseas development aid budget—as was mentioned earlier by the right hon. Member for Sutton Coldfield (Sir Andrew Mitchell)—is a key component of achieving peace around the world through soft power and diplomacy? A great deal of that aid is crucial for people’s survival in many parts of the world.
I welcome the hon. Gentleman’s intervention. As someone who worked under my right hon. Friend for Sutton Coldfield (Sir Andrew Mitchell) as a junior Opposition defence spokesman, I understand the value of overseas aid, and I particularly understand the elements of it that he describes as soft power. The other day the PAC conducted an inquiry about the BBC World Service, and I do wish that the Government would fund that service properly. It is an extremely well-respected element of Britain’s ability to project our values around the world, and it is very sad when the Chinese and the Russians come in as soon as we make cuts in it.
At a time when the world is increasingly uncertain and bellicose, our MOD budget is in crisis, and as a result a significant number of procurement projects have been put on hold. These delays will have significant cost implications, so when, or if, the extra money does arrive, it will buy less and less equipment. I went to Ukraine earlier this year, and it is clear to me that we need more and more rockets, drones, interceptors, unmanned vehicles and investment in space. However, some of the proposed equipment is designed for yesterday’s wars, and it remains to be seen whether the MOD will be agile enough to make those substitutions in future procurement.
It may be pretty obvious to some, but it is not so obvious to others.
To govern is to make difficult choices. In short, the Government are spending more than the country can afford, funded by ever-increasing amounts of debt. If we are serious about protecting our nation in an increasingly uncertain world, we must also be serious about the strength of our economy. That means bringing our unaffordable welfare bill under control, creating a stronger environment for growth, eliminating billions of pounds in waste—some of which I have identified in my speech, although if time had allowed I could have identified billions more—and reforming how government works through the rapid roll-out of digital reform. The civil service must be reoriented around productivity and efficiency. Only with a stronger, leaner and more resilient economy can we fund our defences, secure our future and meet the challenges ahead.
(3 weeks, 2 days ago)
Commons ChamberI certainly echo what my right hon. Friend says about it being imperative that taxpayers do not foot the bill for what has gone wrong. On the different contracts, each obviously has to be considered on its own merits, but the House can be assured that on each of the contracts for which the Cabinet Office is responsible, I keep all contractual options open. With regard to his point about optionality and going in-house in future, I will certainly ensure that the PCS trade union gets the appropriate ministerial meeting.
I thank the Minister for his statement, and for meeting me to discuss this issue. As he is aware, the Public Accounts Committee has held multiple sessions with Capita on the broader civil service pension scheme and the problems that scheme members are having accessing their pensions. As numerous colleagues from across the House will have experienced, some of these cases are tragic and deeply distressing. People have not been able to get statements, or even payments, at the most important points of their life. Does the Minister have confidence that his team will be able to manage Capita and rapidly provide civil service pensioners with the scheme that they deserve? Secondly, what reassurance can he give Royal Mail pensioners that their pension scheme will be managed properly during the transition and afterwards, either in-house or by an external provider?
I can certainly give an assurance to Royal Mail pensioners, who may be worried about the uncertainty, that we will do all we can to ensure continuity of service. I certainly have confidence in my team, and the surge of about 140 officials into Capita has made a significant difference. Equally, I will clearly have to consider very carefully what the position is at the end of June 2026, and how important that team’s remaining in place, for whatever length of time, is to the level of service.
(1 year, 2 months ago)
Commons ChamberThe Conservative party left a broken welfare system that locks millions out of work, and that, in my view, is indefensible, economically and morally. Of course we must support people who need support; we must help those who want to work to get back into work, and I think there is a moral imperative in that. My hon. Friend talked about a wealth tax. We have raised money through the energy profits levy, taxing non-doms and air passenger duty on private jets, but this is not a bottomless pit, and we must kick-start growth to secure the economic stability that we need.
The hon. Gentleman is right: we have to get the houses that we need built in his constituency and elsewhere—something that the Conservative party failed to do. That is why we have introduced the infrastructure Bill, which I think he welcomes. That Bill will get Britain building, so that we can deliver on those 1.5 million new homes through our plan for change. On the issue he raises, he and my hon. Friend the Member for Stroud (Dr Opher) have been working together to try to resolve this issue, as I understand it, and I am happy to ensure that he gets a meeting with the relevant Minister, if that would help in taking it further.
(1 year, 6 months ago)
Commons ChamberI thank my hon. Friend—I say “my hon. Friend” because he is a great friend to us—for what he has said and I could not agree with him more. When we talk about stability, anybody who has run a business knows that the most stable businesses in the country are family businesses that are passed from generation to generation. This is not just about farms, but about any small businesses that are passed down through the generations. This is a hammer blow to their plans to invest for the future.
I wish to move on, because the main argument that the Government make—I am sure that we will hear this from the Chancellor of the Duchy of Lancaster—is that all this is necessary to improve public services. We on the Conservative Benches want to say, right up front, that it is absolutely right to prioritise public services. As Health Secretary, I negotiated an increase in the NHS budget of £20 billion a year, and, in this year’s Budget, I increased it by a further £6 billion. Many times I said as Chancellor that I wanted to avoid austerity cuts to public services. We would have done so this time, not by using tax rises that harm working families and businesses, but by taking difficult decisions on welfare reform and productivity—decisions that were ducked yesterday.
May I suggest that the difference between my right hon. Friend’s Budget and this one is that, although he gave considerable extra increases to the national health service, he coupled them with a need to increase productivity? There was no word in yesterday’s Budget about increasing productivity in the health service.
I thank my hon. Friend for his intervention, but there was an even more basic difference between our Budget earlier this year and this one: as a result of measures in our Budget, the growth rate went up, whereas as a result of measures in Labour’s Budget, the growth rate went down.
Reducing the number of working-age people claiming health-related benefits back to pre-pandemic levels would save £34 billion a year. It would bring more people into the workforce and improve the wellbeing of the individuals concerned, but welfare reform was dropped from the King’s Speech, and yesterday’s Budget saw the welfare bill rise by an average of £13 billion a year. According to the OBR, increasing public sector productivity—another area that we did not hear much about—to pre-pandemic levels would raise £20 billion a year. We heard some warm words about that, but delivering it requires difficult negotiations with the unions.
That was too difficult for the Government, who cancelled plans to reduce the civil service to pre-pandemic levels, increased the salaries of train drivers by £10,000, and gave junior doctors a 22% pay rise—all without asking for a single productivity improvement in return. It was no strings for the unions, but no help for 2.5 million pensioners in poverty. The Government should be ashamed. Picking the pockets of businesses, which do not vote, is the easy path, but when it damages economic growth, the result is less money for the NHS, less money for schools and less money for the armed forces, which is why, in the end, Labour Governments always run out of money.
May I start by paying a huge tribute to the hon. Member for Worcester (Tom Collins) for his maiden speech? It was clear, and he paid a sincere tribute to his predecessor, for whom we all have a great deal of affection. I am sure that the hon. Gentleman will have a great future in this place, and I look forward to hearing more speeches from him.
I agree with the final remark made by the Chancellor of the Duchy of Lancaster: this Budget marks a new chapter in the economic performance of this country, it is true, but I suspect that his predictions and mine, which I will make clear in my speech, are rather different. Starting on the plus side, there are measures in the Budget that we should welcome. My constituents who live in rural areas will be particularly pleased that fuel duty is to be frozen for another year, because often they have very little choice in how to get to work; they must do so by car. As I said in an intervention yesterday, I welcome certain Government contingencies, such as on the infected blood and Horizon scandals, that have now been funded. The onus is very much on the new Government to ensure that the people affected are paid as quickly as possible, even if only with an interim payment, so that they can start, at long last, to rebuild their life. Spending on special educational needs in Gloucestershire is a particular problem, so increased funding will be welcomed by parents whose children need help in that area.
The Public Accounts Committee held several sessions in the last Parliament on rebuilding schools and hospitals, particularly those affected by asbestos and reinforced autoclaved aerated concrete, commonly known as RAAC. We also looked at the huge project of restoration and renewal in this House. If the Government gets those investment projects under way, I will welcome it, but the PAC will scrutinise them to see how we can get value for money.
Contrary to what was said in leaks to the press before the Budget, the pensions industry appears to have been largely untouched in the Budget—perhaps Ministers will confirm that when they wind up the debate—and the trick now is to encourage large pension funds to invest in UK infrastructure. We did not hear anything about that in the Budget yesterday, but I know that the Government are thinking about it.
As predicted, we have a higher fiscal burden in this country under this Labour Government than ever in our history. The Office for Budget Responsibility could not find the fabled £22 billion black hole; instead, it found £9.5 billion associated with deteriorating circumstances, and that will happen to any Government in any fiscal year; £9.5 billion is equivalent to some of the public sector pay increases that we have seen, particular to highly paid train drivers.
The Chancellor has increased taxes and borrowing by a staggering £40 billion each—the largest increase in any Budget for 30 years. The Conservatives left office with low inflation, high employment, particularly for younger people, and the fastest growing economy in the G7. In stark contrast, in this Budget the Chancellor has put up national insurance, and we have inheritance tax up, capital gains tax up, mortgages up, stamp duty up, employment costs up, and business confidence down. The OBR has downgraded our GDP growth, based on the Budget, in every year of the next five-year forecast. That will affect everybody in this country; they will continue to see their living standards fall as a result.
There are lots of topics that I would like to cover, but I have chosen to cover those that will affect my constituents most adversely. First is national debt. UK national debt is £2.5 trillion, which is not far off 100% of GDP, and it is growing at a staggering rate of almost £16 million an hour, or £400 million a day. The interest for servicing the debt has now reached more than £100 billion, which is equivalent to the budget of the fifth largest Department, and it is completely dead money. As a result of the Budget, the debt will rise even further, by £50 billion, involving even higher servicing costs, which will result in higher taxes to pay for it in future years.
On a really important point, the OBR has forecast that national debt will triple over the next 50 years. That is completely unsustainable and should be a real wake-up call to the fact that we have to correct that dire structural problem. But the Budget has made the problem far worse. We cannot just change the rules to make the results sound better. Interest rates, including mortgages, will be higher for longer, and our children and grandchildren will now be saddled with the debt, which they will have to repay, for longer.
Alex Ballinger (Halesowen) (Lab)
I congratulate the hon. Gentleman on his recent appointment as Chair of the Public Accounts Committee. Would he like to apologise for the £22 billion black hole that the previous Government left behind, and the contribution that made to the awful debt situation that the Government inherited?
I thank the hon. Gentleman for his comments about my election, and the PAC looks forward to scrutinising all Government expenditure carefully. He has fallen into the same trap as everybody else. Unfortunately, the OBR said yesterday that it could not find the £22 billion black hole. I do not have the exact quote, but the Government were advised, “When in a black hole, stop digging.” I suggest gently to Labour Members that they stop digging, because it could not be found.
The Chancellor announced that she expects national insurance contributions to rise by a staggering £25 billion, although she promised in the election that they would not. During the election, she said that the measures would not be a tax on working people; clearly she believes that entrepreneurs, who spend their time, energy and talent forming new business, are different. They will be heavily taxed, and changing the employment rules will make it more difficult to employ extra people. A 15% national insurance tax and a savage cut to the threshold, down from £9,100 to £5,000, will harm any business in my constituency employing more than four people. It could be the difference between a business growing and providing more jobs and a business not surviving.
We must all remember that the private sector, and individuals who work hard and put their livelihoods on the line, take financial risks to boost productivity and provide the growth the country needs, and they must be nurtured if they are to succeed. Small businesses account for more than 90% of all businesses.
Graeme Downie (Dunfermline and Dollar) (Lab)
Will the hon. Gentleman give way?
Graeme Downie
I ran a small business for at least 10 years. Does the hon. Gentleman welcome the increase in the Budget to the allowance on national insurance from £5,000 to £10,500, which will protect small businesses and help them grow?
I have run a business for a much longer time than that. There are many measures in the Budget that will be very deleterious, especially for the smallest businesses, and we will have to wait and see how they turn out.
The Budget will have serious implications for farmers and rural communities in my constituency. I refer to my entry in the Register of Members’ Financial Interests, as a farmer. I am incredibly disappointed that from 2026, agricultural property relief and business property relief will apply only to the first £1 million of assets. That will worry many in my farming community and those in many other constituencies. It will result in fewer farms to rent.
Equally damaging will be the cap on the amount that can be transferred to spouses for inheritance tax purposes. The purpose of that tax relief was to ensure that working farms that provide our food will not have to be split up after the death of a family member. Very few farms are valued under £1 million—basically only those of less than 100 acres are—and the rest will face a 20% tax. That will lead to the loss of jobs and livelihoods in the North Cotswolds and elsewhere. It will change the fabric of our countryside permanently. The structure and productivity of agriculture will change as more and more farms are split up and sold off as a result of this measure.
I accept that the hon. Gentleman has great experience in farming, but did he read the analysis by Professor Andy Summers of the London School of Economics, which shows that the £1 million relief is on top of the £1 million couples allowance? The benchmark is really £200 million farms, and the average estate value is lower, so only about 200 estates will be affected a year. In this case, only a small number of UK farmers will be affected, and it is not the armageddon for farms that the Conservatives are claiming.
I suggest gently to the hon. Gentleman that, whatever the number, if the change causes damage to the farming sector and the productivity of food production, it is not helpful, and nor does it raise much money. What we surely want is measures in the Budget and elsewhere to boost the productivity of our agricultural sector so that we can produce more of the food we eat ourselves, rather than importing it from the rest of the world. I encourage the Chancellor to release any impact assessment she has done on this measure. I hope that she will reconsider this proposal, although I doubt she will.
I now turn to a topic that I have mentioned many times, and one that I will continue to raise with the Treasury. The Chancellor has talked about the difficult decisions that she has had to make on tax and spending to promote growth. May I suggest one specific policy area, tax-free shopping, which has the potential to increase growth considerably? Since we left the EU, British people have been able to shop tax-free in European states. However, we have not given the same advantage to wealthy visitors visiting the UK to spend their money here and benefit our economy. That disincentive to visit the UK will be worse if visa costs are increased. I have talked to some of the bigger businesses involved in this area, and they are seeing that instead of visiting the UK people are going to Paris, Madrid or Milan to do their duty-free shopping. We are losing out as a result.
That whole new market, unique to the UK, is worth an estimated £10 billion annually in foreign spending and would generate more than £3 billion for the Exchequer, based on an Oxford economist’s report that said that for every £1 spent by visitors, 37p was generated for the Exchequer. The only thing stopping Ministers in the last Government looking again at this issue was the Treasury’s 2020 forecasts, which unjustifiably—in my opinion—predicted little or no impact on EU visitor numbers or spending levels. That led to the wrong conclusion that there would be costs to the Exchequer, even without all the other added benefits I have mentioned for hospitality, airports and luxury goods manufacturers, which would help the economy. All the data on actual spending supplied by real businesses proves the opposite.
My only ask of the Chancellor today is that she takes the cost-free decision to review the 2020 impact forecasts in the light of overwhelming real data and this time, unlike the last, ask the OBR to scrutinise the Treasury’s forecast impact of extending the scheme to EU visitors. I would welcome the opportunity to discuss this with Ministers, and I could bring experts with me to help the discussion.
As the new Chairman of the Public Accounts Committee, I remind Treasury Ministers of the report produced in the last Parliament called “Lessons learned: a planning and spending framework that enables long-term value for money”, about how the Treasury should focus on getting the best value for every £1 of taxpayers’ money spent. The PAC will scrutinise the whole of the Government’s expenditure and help them to get better value for money.
We have another maiden speech, from Margaret Mullane.
(1 year, 9 months ago)
Commons ChamberBusinesses across the country that deal with Europe feel that the deal that the last Government negotiated is not good enough for them and has made trading much harder. That is why they are encouraging us to reset that relationship and get a better deal—better for our country, our businesses and our economy. Our No. 1 mission in government is to grow our economy, so it is very important to see this in that context.
I too congratulate the Prime Minister on what was obviously a successful series of meetings last week. He has set out some of his new policies to deal with illegal migration across the channel, and to return illegal migrants from this country. In what sort of timescale could the British people reasonably expect his new policies to start having a real effect?
We have taken early measures, because the British people want to see an impact and a difference. They feel very much that in recent years there has been a loss of control of the borders. That is a matter of border security and, actually, national security. That is why we have acted quickly to begin the steps to set up the border security command. It is why we have already begun to put more staff in the returns unit, and taken a decision on the upstream work needed to reduce the likelihood of migration in the first place. They are early steps, and I am not going to put an arbitrary date on that, but I do understand the thrust of the question; this is an area of great importance, where British people want to see a material change in the situation.