Budget Resolutions and Economic Situation

Iain Duncan Smith Excerpts

Tuesday 9th March 2021 Commons Chamber

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests.

No Chancellor has faced this kind of crisis in living memory and, by and large, I think the Chancellor has navigated through it with some skill over the last year, supporting those who need support as much as he can. The Bill, as a result, underpins all of this particular Budget: some £407 billion will be spent by the end of next year, with an eye-watering deficit of over £250 billion, as set out in the Budget he has just produced. That clouds every single judgment.

The key point I want to make, and I agree with my right hon. Friend the Member for Maidenhead (Mrs May), is that we must not lose sight of the reality of the need for growth. If we forget that, then we fall back on the idea that we will somehow get through this. The OBR’s forecasts for growth should make us sit up and look very carefully at that. I worry that the level of growth beyond the year after next is really very low in relation to where we start from now. If we cannot grow faster than that, it says a huge amount about some of our policies. I therefore remind my right hon. Friends on the Treasury Bench that growth is the No. 1 reality for us now.

That is why I was somewhat concerned about some issues, and I want to come back to them, but one thing I did like, which feeds towards the idea of growth, is the super deduction tax relief to kickstart business investment. That is the right kind of thing to do: encourage businesses to bring their money back in to invest in the UK. The news about freeports is also very good indeed. I hope the Government will have time to review the corporation tax rate and be very careful about the effect of that further down the road. I note that the Chancellor has given himself some time to look at that very carefully.

The issue here is that sometimes we compare productivity across countries. I give a warning about that. I do not know why the Treasury has not done more work on this. No two countries compile productivity rates at the same level. For example, France does not have the public sector in its productivity rates; it has only the private sector. That means that comparisons are often between apples and pears. Our problem in the UK is not productivity, because the London and the south-east have the highest productivity in the whole of Europe. Our problem is regional productivity. No other region of the UK meets the average for the UK in productivity. That single fact should tell us more than anything else why it is critical to put stuff and build things in the north, the midlands and places such as Wales. Our productivity around the country does not match that average level of productivity, as we are far too concentrated in London and the south-east.

I agree with those who have said that R&D tax credits are really important. I would stress that that is a good idea and a policy that the Government have to push forward on, because it encourages greater growth. We must remember that many of our technology advancements are made in universities these days, and we have to maximise that. On deregulation, I am going to come forward with plans shortly; there is huge scope for us to release some businesses through deregulation.

I want to draw to a close by making a couple of points. First, I want to make the case for the Government to review the universal credit money. The reason for that is that universal credit is not a flat payment; it is a dynamic process, and it is aimed at helping people back to work. So in truth, even if we invest the £6 billion in universal credit, as we get more people back to work, the cost of that falls because they are back at work and paying taxes. This is the critical bit: I do not want it to be compared with the furlough scheme, which is a very different item. Universal credit is about getting people back to work, and therefore they pay more. I recommend that the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), and his colleagues think carefully about that, because money was taken out of it some years before, and it needs that investment back in it. That was how it was intended.

My last point relates to the 0.7% on overseas aid. I understand the Government’s issue on this and I recognise their problem, but I hope they will keep this under review. As we move away from certain countries, places such as China will move in, and their money will come with serious problems. They will demand more dictatorial government. We need only to look at Burma to see what is going on when China supports countries. I just raise that as a policy point that the Government may want to think about.

Overall, I say to the Government that this has been a good Budget, but it is a Budget that needs to buy a bit of time, and we must think carefully: growth, growth, growth is the most important thing in front of us now.