Ian Blackford
Main Page: Ian Blackford (Scottish National Party - Ross, Skye and Lochaber)Department Debates - View all Ian Blackford's debates with the HM Treasury
(12 months ago)
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Harriett Baldwin (West Worcestershire) (Con)
What a difference a year has made to this country’s finances and to the economy. Last year, our inflation rate was 11.1%; it is now down to 4.6%. It is still too high, but that is enormous progress, thanks to the independent Bank of England and the decisions taken in this Chamber a year ago to manage the public finances prudently, in a way that would not increase inflation. We need to reflect on the progress that we have made in our economy. From listening to the—I am not going to use unparliamentary language—speech of the Opposition spokesperson, the hon. Member for Ealing North (James Murray), we would not think that anything had changed from a year ago. Things have changed enormously.
This time last year, our economy was reeling from the energy shock caused by Putin’s evil invasion of Ukraine. It was thanks to the help given through the energy price cap that households were able to get through last winter. I do not need to remind the House how serious inflation is for the poorest households. It is the worst tax on our economy, our businesses, and people’s budgets. It is a truly evil problem, and it is right that it has been the No. 1 focus of the Prime Minister and the Government this year.
Clearly, with inflation at 4.6% there is still more to do. Yesterday, the Treasury Committee heard from the Governor of the Bank of England. The Bank of England is forecasting that we will get to a 2% handle, probably by the end of next year. That is in line with what the Office for Budget Responsibility is saying. Clearly, there are still risks to the upside. Energy prices continue to be volatile, but the Governor told our Committee yesterday that it is the inflation-busting hikes in rates that have generated the increased payments that our constituents are facing on their mortgages. Therefore, when the hon. Member for Ealing North says that these are Tory mortgage hikes, that is just throwing mud and trying to make it stick. It will not stick, however, because I am hopeful that rates are now high enough to bring inflation back down under control. In the analogy the Bank of England uses, we have marched to the top of Table mountain and are now walking across the top of the mountain, and the markets are now forecasting that the next rate change will be a decrease.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Does the hon. Lady remember the Budget of just over a year ago, which crashed the economy, sent interest rates spiralling and sent mortgage rates up? We must not forget that there is an interest rate premium in the UK over much of the rest of the western world, and that is forecast to remain for years to come because, sadly, it is down to the long-term mismanagement of the UK economy, which the Tory Government must take responsibility for.
Harriett Baldwin
My hon. Friend is absolutely right. Central banks around the world have lessons to learn from this recent bout of inflation, but I am comforted by the evidence we got yesterday from the Governor, which, while acknowledging there are still risks to the upside, shows that the world is on a trajectory of having dealt with this.
Ian Blackford
I am grateful to the hon. Lady and the hon. Member for Torbay (Kevin Foster) because they have made key points. We have heard lots today about growth, but the US has grown at an average rate of about 1% more than us over the last decade, and forecasts for its growth for the years to come are also higher. We need to get real about what growth looks like and what sustainable economic growth is, but the fact remains that UK interest rates are above those in the European Union and have remained above those of the western world for most of the last decade, and will remain above those of the rest of the world for many years to come.
Harriett Baldwin
The right hon. Gentleman might think the UK should join the euro, but I shall fight strongly against him on that campaign.
I want to return to the theme of what a difference a year has made in terms of the public finances. It is remarkable to see how the priorities in the autumn statement are being delivered. First, that is seen in reducing debt, something all on this side of the House are keen on otherwise we are just passing on the costs to our children and grandchildren. Last year’s forecast was 94.6%, which still feels uncomfortably high to me, and that is why I welcome that in today’s autumn statement debt is falling to 92.7% in the same year. I encourage the Chancellor to keep on moving in that direction.
The challenge now is to support growth, and non-inflationary growth above all. The Chancellor announced 110 measures. I have gone through the small print of the documentation, and I do not think I have got to the bottom of all 110 of them yet, but I hope we shall do so when we take evidence from him, the OBR and independent economists next week. I welcome that the OBR is revising growth up this year, however, and that the measures announced in the statement were taken through the lens of making sure inflation continues to decline.
Cutting tax is also an important priority because it rewards hard work, and it is good that earnings are again growing faster than inflation, which means households up and down the country are seeing disposable incomes rise once again.
We all know that work is the best route out of poverty. I cannot stress how important the announcement on the national living wage is, because it means that those working full time on the national living wage now have an income of over £22,000, taking them over the poverty line. With so many vacancies in our economy, that will give more people the opportunity to work their way out of poverty. So I thank the Chancellor for that reform, and for the fact that now the income of the lowest paid comes predominantly from work, whereas in 2010 the income of those on the lowest pay was primarily from welfare. We can be proud of that real shift.
I was pleased to hear measures about the grid in the autumn statement. Building sustainable domestic energy will require improving our grid, and building more renewables and new nuclear and domestic oil and gas.
I was very pleased to see the measures backing British businesses as well, because ultimately it is British businesses that will help our country grow and tackle the important productivity challenge and deliver more jobs and prosperity for the British people.
I look forward to encouraging the Chancellor to think about simplifying even more. There were some simplifications that I welcome in today’s autumn statement, particularly in terms of national insurance for the self-employed. I look forward to seeing the detail of the measures that will help our constituents invest their savings and get better rewarded for their pensions by being able to access advice more easily. Measures the Chancellor can take in terms of the advice guidance boundary will help enormously.
I welcome, too, the funding for a world class education. Schools in my constituency will welcome that record level of per pupil funding in real terms.
In conclusion, I am delighted to see many of these measures and look forward to scrutinising more of them in detail, and I am particularly pleased that the Chancellor did not heed the Opposition’s advice to borrow £28 billion more every year.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
It is a pleasure to follow the hon. Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, which I have recently joined.
I shall concentrate on the choices the Chancellor and his Government have made. Government is about choices; it is about choosing priorities and who to help, and choosing the future we want to create. Today the Chancellor chose his priorities, and he chose to ignore the millions struggling with the cost of living crisis. The OBR has confirmed this afternoon that the UK is still on course for the largest reduction in living standards since the 1950s. Of all those struggling or who cannot pay their bills or are worried about heating their homes, the decision today was pretty much to ignore them. The Chancellor is either offering no comfort or cold comfort. The BMJ warned last month that the cost of living crisis “will cut lives short”. The Chancellor’s choices mean the Government are saying to millions of people, “We don’t care.”
The Chancellor could have looked at VAT cuts, especially in tourism and hospitality, to boost spending and lower inflation. He could have taken action to reduce the level of the energy price cap or introduced an energy social tariff; he has not done so. The national insurance measures announced today will not make up for the inflationary price increases in mortgages, rents and food and energy bills, which will still be higher than last year. I misspoke earlier when I said that the UK is still paying the highest tax for seven years; it is paying the highest tax for 70 years. No action today on people’s housing costs, no action on food prices, no action on energy costs, but never mind—at least bankers’ bonuses are now unlimited.
Let us start with food costs. Food prices in the UK are still climbing at an alarming rate and the trend of increasing costs remains. The UK’s food price inflation is double that of Ireland and Estonia, for example. The Centre for Inclusive Trade Policy notes Brexit’s role in increasing UK import prices by 11% and analysis by the London School of Economics earlier this year showed that the UK had the highest food price inflation in the industrialised world. It remains sky-high.
The Chancellor’s inaction on food prices is glaring. As people worry at the checkout, companies such as Marks & Spencer are reporting record profits on food sales. Consumer rights organisation Which? has expressed concerns over dodgy pricing and loyalty card practices, yet the Government remain silent on discussing food bills with supermarkets. There is nothing from Labour either; when Labour goes shopping at Sainsbury’s, it is for millions in donations. The SNP is left to fight for families over food costs.
The Joseph Rowntree Foundation paints a grim picture of the impact of those inflated costs, with many struggling to afford basic food items. The foundation’s chief economist emphasises the severity of the situation for lower-income households, with essential goods unaffordable for millions. That unaffordability is creeping upwards, with those who previously saw themselves as relatively comfortable now also feeling the squeeze.
The Chancellor had a choice. The Government could have heeded the Bank of England’s warnings about skyrocketing food inflation and they did not do so. France got companies to commit to freezing or cutting prices on 5,000 everyday products. In Canada, the five largest grocery chains made an initial commitment to help to stabilise food prices and say that that is just the beginning of their work. For six months, the Greek Government covered 10% of food expenses for households, funded by a windfall tax on two oil refineries.
Here in the UK, we have the Joseph Rowntree Foundation’s stark warning that millions cannot afford basic food items. Food bank use has grown a further 10%, according to the Trussell Trust, and donations to food banks, usually collected at supermarkets, are also dramatically down. We have a situation where not only do more people need food, but fewer people have the spare money to donate food. Unlike the Chancellor, people using food banks do not have choices.
The Chancellor could have made some choices on energy costs this winter. Before his speech today, one in four social housing households had already reduced their heating to save costs. He decided not to reinstate the energy bill rebate. It is not enough. Before his speech today, energy bills still remained double what they were in 2021, and Cornwall Insight predicts that energy prices will remain high until the 2030s. Where does the Chancellor think folk are getting the money from? It is not coming from any long-term measures today—there is no social tariff, he has not decoupled gas prices from renewables, and the SNP’s call for the reinstatement of the £400 energy bill rebate, which would have gone a long way to help in the short term, has been ignored.
The Chancellor could have chosen to act on that and he chose not to. He chose not to help the two thirds of people who live in a household where someone is suffering from a pre-existing health condition or is disabled and worried about being cold this winter. He should have committed to increasing working-age benefits in line with inflation next year as well and legislated for an essentials guarantee, giving basic necessities to those who need them most. Instead, as we heard, he intends to punish the sick. People who are sick and unable to work are already regularly being referred to work coaches. I have had constituents of mine, who were listed as having cancer or indeed as being terminally ill, being told to report to a work coach. This is just another step further to the right for the nasty party.
The Chancellor chose not to help the more than one third of households with children under five, the pregnant, or people over 65 with pre-existing health conditions who think they will not or may not be able to afford to put the heating on at all this winter. He chose not to help the millions of people already struggling with mounting energy debts. Citizens Advice expects that the number of people unable to top up their prepayment meters will be nearly half as high again as it was in 2022. Meanwhile, National Energy Action found that more than one third of adults are expected to struggle to afford to pay their heating bills this winter.
The Chancellor did not even listen to the pleas of charities. Ofgem has reported that energy debt has reached £2.6 billion—its highest level ever. A quarter of people are now behind on at least one bill, and we are not even in the heart of winter. Does anybody think that that figure is going to be lower come January? Energy bills and council tax arrears are the most commonly encountered debts for households.
What does that mean for the Scottish people? According to Ofgem, northern and southern Scotland, which are colder, rural areas, pay two of the four highest standing rates of all the regions of the UK.
Ian Blackford
One of the inequities we suffer from is the regional distribution market, which means that people in the highlands—the coldest, wettest and windiest part of the United Kingdom—pay the highest prices. The real scandal is the fact that the highlands is a net exporter of energy, and we get charged to export the energy from the highlands. That is the reality of Westminster control over Scotland’s energy. We have the energy, they have the power and we pay the price.
Drew Hendry
I could not agree more with my right hon. Friend. According to the House of Commons Library, in energy-rich, energy-exporting Scotland, energy costs make up 5.3% of total spending, while in England they make up only 4.4%. We have an energy-rich country, a centre of excellence for renewables where many people can literally look out of their windows and see the energy being generated, yet some of them cannot even afford to put on the heating. It is unacceptable. Reinstating the energy bill rebate was a necessary short-term policy that the Chancellor chose to ignore. He should go back and reconsider that decision. In independent Ireland, the Government will introduce €450 in energy bills support to all households to help them through the winter.
Now let us look at housing. More than 300,000 Scottish homeowners have seen their mortgage payments skyrocket, soaring by an average of £2,500 per year. That is a direct result of the choices of this Chancellor’s predecessor—choices that drove interest rates to punishing heights. Nor does the pain stop with homeowners; despite what has been announced today to help renters, they are equally trapped, as rents will continue to surge despite those measures. Today’s measures are a drop in the ocean compared with the pressure they face.
The majority of buy-to-let landlords, grappling with those interest hikes, have no choice but to pass the costs on. The result is rent increases that outpace inflation, squeezing every last penny from tenants. Of course, the Chancellor is no stranger to hiking rents for his own tenants well above inflation rates, as has been reported this week. If he had delivered the extra funding across the UK to fund public services and fair public sector pay awards, we could all do a bit more to help—but, of course, he chose not to. That will not change the fact that UK households now spend a fifth of their disposable income on housing, surpassing the EU average of 17.4%. For renters, the figure is even more alarming: it is almost a quarter of their income. Yet while other European countries similar in size or smaller than Scotland implement welfare policies to reduce poverty, the UK Government’s response, as we have heard today, is to punish the most vulnerable.
The statement should have been about helping people to survive and helping our economy towards proper growth. Instead, growth is barely above zero and is not expected to climb by more than fractions—if indeed it does not decline. The Chancellor could have increased the Scottish Government’s capital budget in line with inflation, which would have helped us to build even more social housing and vital infrastructure. He chose not to.
Costs for insurance, mobile phone bills and other household basic requirements are also ballooning at the moment. A House of Commons Library report found that since January 2022, UK car insurance inflation grew exponentially, peaking at 43.1% in May this year. Before the Conservatives tell us that that is not down to their Brexit fixation, let me add that our European neighbours saw either no rise, or limited rises of only up to 6%, while car insurance inflation in both Belgium and Ireland has actually reduced. Here, households face cost rise after cost rise after cost rise, and people are begging for it to stop.
The Chancellor still wants us to believe that we are on the path to sound fiscal management. How many times will the Conservatives tell us that there is no money to support people with the cost of living—that there is no money tree—while they find room for what they want to do? Let us have a look at some of the priorities they have managed to fund while they have been in office. The infamous mini-Budget managed to overshadow some staggering stories of fiscal mismanagement. It is a showcase for how not to spend taxpayer money.
First, there was High Speed 2, which started as a £32 billion rail project, exploded into an eye-watering £100 billion project, and then, in a twist, was cancelled—from a dream to a debt nightmare for taxpayers. Despite cutting the project, the Government somehow lost £2.3 billion on a Manchester to Birmingham line that leads nowhere. There was the £5.6 billion on tanks that are 12 years late and not in service; the £2 billion supposedly for aircraft carriers, but which turned out to be £6 billion when one of them had to be stripped for parts for the others; and let us not overlook the £105.6 million splurged on now redundant architectural plans for Euston station—those plans are now as useful as a chocolate teapot. The Elizabeth line is a classic case of too little, too late—five years delayed and £4 billion over budget. And who can forget the covid supplies fiasco? A staggering £15 billion was spent on unusable personal protective equipment, tests and the rest—a fast-track to profits for a few, including an infamous inhabitant of the House of Lords, and a financial burden for our people to share.
The Ministry of Justice was not far behind with its £98 million electronic tagging misadventure. There was the £900,000 paint job for the Prime Minister’s aeroplane, because fiscal responsibility means flying in style, obviously; the £5 million spent to confirm what we already knew, that MPs must vacate the Palace of Westminster for renovations—paying double for the privilege of checking; and the £120 million spent on the Brexit festival. I have no words to add to that. Finally, let us not forget the £100,000 spent on a fake bell-bonging mechanism for Big Ben—try saying that, let alone paying £100,000 for it. Those are choices that those in Westminster make time and again—choices that speak volumes about their priorities—while our constituents struggle with the cost of living. They are disconnected from the harsh realities faced by the public. They do not just misspend money; they throw it out of the plane they have just repainted.
What of choices for a better future? Where is the ambition on net zero? The Conservatives have chucked it. It is utterly bizarre that, as other advanced economies invest in net zero and jobs, the UK goes backwards. Instead of grasping the gold rush of renewables, they dither and delay, just as they did for carbon capture at Peterhead. UK business investment has grown by just under 1% a year since 2016, and 6% overall; by comparison, it has grown 25% in the US. Right now in the US, the Inflation Reduction Act is helping businesses and communities to grow through radical plans to invest in renewables and hydrogen. Are the UK Government looking to maximise the supply chain benefits for Scotland and elsewhere? No. They are focused on their climate change culture war, costing Scotland millions, if not billions, in potential investment.
The SNP Scottish Government choose differently. We value investing in our future—in green energy, in a fairer society. That is another reason why the UK Government should have focused on funding net zero, at the very least matched the Scottish Government’s £500 million fund for a just transition in the north-east of Scotland, and included funding for offshore wind projects in Scotland. Our values lead us to want to alleviate poverty. We seek measures now and in the future to help people with that: a council tax freeze, investment in childcare, no tuition fees, and using our limited powers to mitigate the cruel policies from this place, such as the rape clause and the bedroom tax. We choose to put people first; those are our values—values that build a fairer, more prosperous Scotland.
The Scottish Government have taken the steps that they can to help alleviate the worst impacts of poverty, offering people a degree of stability through the council tax freeze and a cap on rent increases. We would do more, but the fiscal powers needed are here. If we had the power to help people today, we would. The Chancellor has the power to help people, but he refused to lift a finger to right some of the wrongs that his Government have inflicted on people. People are not this Government’s priority—we see who goes through their priority lanes.
The UK Government have little to offer Scotland. Our route out of the chaos that Westminster has created—perma-austerity and the cost of living nightmare that people are having to endure—is through independence and re-joining the European Union.
Priti Patel
The right hon. Lady is correct and makes an important point. I do not want to be boxing the ears of my hon. Friends on the Treasury Bench today, which is their day, but I sound like a broken record on this subject. I would go for complete streamlining and simplification of the tax system, even on NI, where I would like to see measures such as the merger of income tax and NI. I would love to see a simple system where we do not have the burdens of bureaucracy. Even when we spoke about full expensing in the Budget, the business and regulatory implications are pretty vast. The childcare measures are very good and encouraging, but from, a personal perspective, even more complexities are being introduced to the system and we, as Conservatives, could do much more to streamline that.
Ian Blackford
I encourage the right hon. Lady on what she said about the integration of tax and national insurance. Although such measures are not without their complications, they can be overcome, so perhaps there should be some work across the House to examine that issue. Let us make things simpler and more straightforward for all our taxpayers.
Priti Patel
We could have a separate debate on a single income tax and all sorts of other measures. I would like to see tax transparency as well. I am so old-fashioned that I think we should be able to follow every pound of Government expenditure, and that there should be far greater transparency for the public in that regard. I am sure that the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier) would support that, too, from her perspective as Chair of the Public Accounts Committee. I do not say these things lightly. In this modern day, when we have much greater digitalisation and access to information, our constituents naturally also want to see more transparency in that area, especially while the Government are investing in artificial intelligence and all sorts of other things, including bots. His Majesty’s Revenue and Customs could be run by bots before we know it, although on that basis alone we might get more efficient telephone conversations and call handling. None the less, more needs to be done, and we should welcome that.
I will move on to a couple of other measures, but just while we are on the subject of taxation and revenues, I wish to make a point about the savings that can be made from Government efficiencies. This matter has not been addressed today, but the Chancellor did touch on it. There is much more work that needs to be done in this area, although I appreciate that this is an autumn statement and not a full-fat Budget. For the spring in particular, this is one area where we can do much more in boosting state productivity. The Chancellor always mentions the P word—productivity—but in 2021-22, just as an illustration, the Government delivered £4.4 billion-worth of efficiency savings. In monetary terms, that was significant, but it represented just 0.4% of public expenditure —a drop in the ocean. For the benefit of our constituents, let me say that that is £1 for every £250 spent. Again, much more needs to be done in that area.
Let me continue on the theme of hard-pressed taxpayers. This was not mentioned today, but at previous fiscal events I have voiced support for the fuel price escalator. I believe that we should do much more to back our motorists and make sure that the 5p cut in fuel duty, which was introduced in 2022, is maintained. There is some important signalling that we can do as a Government to ensure that the UK’s 37 million drivers are not seen as a cash cow. We must back them and continue to remain on their side.
That brings me to business taxes. Our economy relies on private enterprise. I am an Essex MP, and Essex is the county of entrepreneurs. Some 80% of my constituents work for small and medium-sized enterprises, which is 20% higher than the national average. We are proud of those SMEs, but we really need them to keep their head above water. That is why we must always support businesses —small businesses as well as big businesses. It is the small businesses that are the engines of economic growth.
I am proud to represent a county where we have businesses that are hungry to innovate and invest, and I want the Government to free them from the shackles that hold them back. A lot of that is regulation and red tape; and there is far too much of that. I have previously called for a freeze of the small business rate multiplier, and I am pleased that the Chancellor has agreed. That in its own right will have some benefits. I know that it has been reinstated for another year, along with other retail and hospitality measures. Retail and hospitality are burgeoning and important sectors that can help to boost our struggling high streets.
I welcome the continuation of business support with full expensing, which I have touched on, but there should be greater clarity over how that will operate, what it will mean for businesses, and the burdens that it will place on the sector. Will firms have to employ an army of accountants who will eat into their business expenses? Reducing overall taxes on businesses is, of course, welcome. It will help firms to invest, to create jobs and to boost supply, which is incredibly important.
When I call on businesses to invest, that also means that we must do much more to get them to invest in skills. Skills and productivity are the biggest challenges that we face. I would, at some stage, like to press those on the Treasury Front Bench on why we are still not committing ourselves to a labour market strategy around some of the key sectors where we know we have shortages in skills growth. When it comes to specialist sectors, we want to be the hub for technology, innovation and science, so we need to consider what more we can do. We also need to consider the work that is required around the green economy. As a former Home Secretary, I can say that we rely far too heavily on migration to fulfil our labour market needs. For the past five years, even when in Government, I have consistently and continuously called for that to be addressed. It sits with the Treasury, not just the DWP, and I urge the Chancellor to make good on those calls. I have discussed it with him several times.
I want to speak about the importance of the energy sector. The Chancellor touched on connectivity to the national grid in today’s autumn statement. I am an Essex MP. Off the coast of the east of England, we have enormous potential when it comes to increasing our energy security, because we have been successful in producing renewable energy offshore. We are effectively a hub in the east of England, where we have had investment. Efforts to develop the sector and increase renewable energy are welcome, and we are proud of the work that has taken place, but we are now suffering from the lack of strategic planning.
Windfarms have received consent and been developed without serious thought being given to interoperability and connection to the network and to the grid. That has resulted in one of the most deeply unpopular policies from central Government, which is now affecting the whole of the east of England: the National Grid’s plan to cover the east of England countryside with over 100 miles of pylons and overhead power lines. Our constituents do not support that. I am fully aware of what the Winser review says, and of the prospect of support—financial bribes, as my constituents call it—for local residences, but we need to ensure that there is proper engagement.
We are putting forward alternatives to pylons, and offshore options that we want to work with the Government to develop. That would support our renewables sector, bringing further skills to our region and our country. Ultimately, we have to address the issue of local constituents feeling frustrated. They resent that this is being done to them, rather than it being their suggestions and some of the local investment being taken into consideration. There is a sense that decisions are being made in an opaque way and that their views are being ignored. I would welcome better dialogue and consultation from the Government on this.
The Chancellor touched on the fact that devolution deals are under way. This is a work in progress for us in Essex. I would very much like to engage with the Treasury and the Government on what a greater devolution deal would mean for our fantastic county, particularly when it comes to investment in skills and infrastructure. Devolution deals can promise the earth, but central Government have to deliver the goods, and it has to translate into a return on the investment locally. In Essex, we are net contributors to the Treasury, so we can apply the multiplier effect and work out where we are getting the benefits, and where we are not getting our return on the investment. We should have further discussions on that.
I welcome the direction of travel in the autumn statement. The Chancellor has opened the door to sound economic principles of lower taxes. I welcome the support for business, which is fundamental. I urge everyone on the Government Front Bench to continue to look at ways to lower taxes, including personal taxes. Times have been tough for the British public. We want to ensure that all our constituents are able to keep more of the money that they earn, and ultimately have a secure economic future.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to follow the hon. Member for North East Bedfordshire (Richard Fuller). I understand the points he made about taxation. There have to be limits on how we tax people, families, businesses and so on, but the position we are in today underscores the need to deliver sustainable economic growth, because that will deliver the tax receipts that allow us to invest in our public services.
The autumn statement is clearly framed with the next UK election in mind. While some of the measures are welcome—I particularly welcome the announcement of the reallocation of the Inverness and Highland city region deal, allowing £20 million in funding for the Corran ferry in my constituency, which will be well received by the community in the Ardnamurchan peninsula and others—overall the autumn statement is a missed opportunity to deal with the structural weaknesses in the UK economy, while recognising the pressures felt from the cost of living crisis.
Let us reflect on the headroom referred to by the hon. Member for North East Bedfordshire. In large measure, that has been caused by the inflationary aspects on taxation receipts. Much of the gloss of the headline tax cuts will wash away when people realise the harsh reality: inflation will erode the fantasy that the Chancellor is making folk better off, and, as have heard, fiscal drag is real issue. While much of the focus is on the short term, where is the vision to sustainably grow the economy for the long term? Interestingly, when we look at the OBR book, we find that business investment is forecast to fall from 10.9% of GDP this year to 9.7% by 2029. The illusion that we will see an explosion of investment growth is not borne out by the analysis of the Office for Budget Responsibility.
We can debate the source of the pressure on public finances, but absence of growth fundamentally caps the growth in tax receipts that would allow us to invest in infrastructure and our public services, and ultimately pay down our accumulated debt through the delivery of growth. The harsh reality is that the United Kingdom is falling down the league tables for investment and growth, which affects all of us here and is all too apparent to all our constituents and communities.
Let us look at the OBR forecasts: GDP growth of 0.6% for this year, 0.7% for next year and 1.4% for the year after. That is an average of 1.4% over the six-year period forecast. I do not know how the Chancellor classifies a high-growth economy—but, my goodness, this is not it. It is a fantasy if those on the Tory Benches believe that this autumn statement delivers high and sustainable growth; quite simply, it does not.
By comparison, let us look at the International Monetary Fund forecast for the US: growth of 1.6% this year, 1.1% next year and 1.8% the year after, and an economy that has outpaced the UK on average by 1% a year over the last decade. That is the reality of how the UK has fallen behind over the period of Tory Governments since 2010. The UK has failed on growth since the financial crisis and, on today’s forecasts, the UK will continue to fail on growth. To quote the phrase to the Chancellor: “It’s the economy, stupid”.
Let us look at the reality of policy failure in broken Britain. The Resolution Foundation suggests that the current parliamentary term is on track to be the worst for living standards since at least the 1950s. The OBR suggests that real wages will only get back to the 1998 level in 2028: two decades of no growth in real wages—yet you wouldn’t believe any of that when you hear the bùrach coming from the Tory Benches. Why do they not just admit that over the course of their Administration—and thank goodness it is coming to an end—people have got poorer?
We can talk about the tax burden and we can talk about the investments they have trumpeted, but the harsh reality is that what we have seen is a massive, massive mismanagement of the economy. I ask colleagues across the House to dwell on that, and the Chancellor and his Treasury team to accept the failure of financial management that has resulted in such poor outcomes. My goodness, what a disgrace. With our debt and taxation burdens, people have got poorer. Those on the Government Benches should look at themselves in the mirror and at what they have presided over.
It is not just a failure of leadership and management in this parliamentary term; the problems run much deeper. In particular, we have been stuck with a low-growth economy since the financial crisis of 2008. Low growth, low investment and low productivity growth led to that lost decade and that squeeze on living standards.
When we think back to the period post the financial crisis, the only game in town was quantitative easing; much of it was required, but there were two failures. The complete misalignment between monetary and fiscal policy for much of the period meant that the circumstances to create sustainable economic growth could not be delivered. The failure of that lies at the door of this Tory Government. Then the continued printing of money through the QE scheme was one, but not the only, cause of the increase in inflation that we have seen. The Government say that they are not responsible for the increase in inflation to 11.1%—of course recognising the independence of the Bank of England, but let us not kid ourselves about the alignment that takes place—but much of that increase in inflation was a failure of policy, in particular a failure of policy at the time of covid. Let us accept some responsibility where it is necessary to do so.
The Government had some cheek congratulating themselves on the decline in inflation when the increase in the first place was driven by policy failure. Although the growth in inflation is falling, let us please not forget that it is hurting ordinary folk. We know about the continued increase in food prices, the cost of energy, and the painful choices that people are having to make. The lack of direct support to counteract all that is hitting home for millions of folk who are struggling to make ends meet.
Tomorrow the energy cap will be announced, and it is expected to increase from £1,800 to £1,900. That is the reality of what is happening to people—that increase in cost and the impact on consumers. Of course, there is also the fact that the Bank of England is warning that interest rates will remain high, and millions will face the impact of rising mortgage costs yet to come. And let us remember that the international markets attach a risk premium to the UK; our interest rates will remain higher for longer than our international counterparts, and that has been the case for a while now.
What we see with the tax cuts that are being trumpeted today is that our UK economy is very much based on a trade and current account deficit. What happens in the end is that the currency takes the hit and investors say they want a premium to hold UK assets. Again, that is the failure of long-term planning for the UK economy—not just the disastrous Budget last year, but the penalty of being in the UK, and for us in Scotland of being in broken Britain.
Let me return to the future and to the questions about vision and the sort of economy that the UK is. Fundamentally, the UK is a trading economy, not a manufacturing economy. When we are discussing this autumn statement and the prospects for growth, we cannot ignore the self-harm of Brexit or the lost growth opportunity that impacts the UK to the tune of 4% of our GDP—when we are struggling for growth, we actually inflict that self-harm on ourselves. Just look at the OBR forecast for growth. Where is the plan to change this? Where is the green industrial strategy?
I am delighted that the Scottish Government have been presented with an industrial strategy—it is sitting with the Government now—because we recognise the enormous opportunity that there is to increase our green energy output fivefold and to create, between now and 2050, 325,000 jobs. What a contrast it is to have a Government who will make sure that we have that just transition, who will prioritise investment in net zero, and who will make sure that we tackle fuel insecurity. The Scottish Government estimate that there are 830,000 fuel-poor households in Scotland—a third of all our households. It is a scandal that energy-rich Scotland is paying the price for the failure of UK energy policy. It clearly demonstrates that, while we have the power in Scotland, Westminster has control—and in Scotland, we pay the price.
Let me wrap up. The UK Government should have reinstated the £400 energy bill support scheme. Protecting people from the cost of living crisis should have been a priority in the autumn statement. My colleagues in the Scottish Government, through initiatives such as the Scottish child payment, are helping to drive young people and families out of poverty. We understand the importance of using our capital funding to strengthen the conditions for economic growth, but we are having to do that while our capital budget is being constrained and cut by the UK. That is the real-terms cost to Scotland of being held back by broken Britain—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I do have to pull people up if they go over. I call Maggie Throup.
Bim Afolami
Don’t miss him; he’s still here.
Make no mistake, Madam Deputy Speaker: this is an autumn statement for growth—one that supports entrepreneurs, cuts business tax, rewards work and brings prosperity to every corner of our wonderful country, and one that the OBR says will permanently increase the size of our economy. [Interruption.] That is what the OBR says. As my right hon. Friend the Chancellor said this afternoon, the Government understand that a successful economy depends less on the decisions and diktats of Ministers than on the “energy and enterprise” of its people, and that is the thrust of this autumn statement. It is about a Government taking action that reduces the burdens on businesses, while also empowering people and getting Great Britain growing and moving again.
But the context really matters. We are only able to pursue these policies now because of what the Government, under our Prime Minister, have achieved up to this point. We have brought inflation down from 11.1% to 4.6%, meeting the Prime Minister’s pledge, and we are on track to meet the 2% target by the middle of 2025. The OBR has confirmed that the measures announced today will make inflation next year lower than it would otherwise have been. We have achieved this while growing our economy, which is already bigger than it was pre-pandemic, contrary to what was often said on the Opposition Benches in debates in recent weeks and months. Our economy has grown faster than many of our competitors since 2010, which is when this Government first came into office.
Ian Blackford
I welcome the Minister to his position. Will he not acknowledge that, under the current plans, it will take until 2028 for wages to get back to their 1998 levels in real terms—a 20-year absence? That is the reality.
Bim Afolami
The measures here are designed to grow the economy, to make us more prosperous, to make businesses invest more and to cut taxes for working people, so I am confident that that prediction will not be borne out in the way that the right hon. Gentleman suggests. This autumn statement provides the foundation for the next decade of growth—not just for next year or the year after that. Next year, just as a start, the economy will be 2% higher—that is worth around £40 billion—than was forecast only in March this year. That is a result of the actions we have taken today.
I have been hearing about what the shadow Chancellor said to the parliamentary Labour party earlier this week. I am told that this is what she said, but I am happy to be intervened on if it is incorrect. She said that the next election would be a fight on the economy, a fight on fiscal responsibility, a fight on making working people better off and a fight on who would be the party to show that it backed British business. This autumn statement firmly shows that this Government and this party are the only choice for the British people and the British economy on these measures—[Interruption.] I see chuntering among Opposition Front Benchers. If they and the shadow Chancellor wish to fight an election on those matters, I say bring it on.
Let us talk about fiscal responsibility—[Interruption.] The Opposition do not want to hear about that. This Government have brought inflation down by half. Debt is falling by the end of this forecast period. We have the second lowest debt in the G7. We are only able to have this sort of growth Budget because of the prudence and careful measures that we have so far undertaken. Indeed, if I may use language that the Opposition might understand, this is prudence with a purpose. Let us contrast that with the record of the Labour party and Opposition Members. They are still saying that, on top of everything we have heard today, they are going to borrow an extra £28 billion. That will lead to higher debt, because they are borrowing, and higher inflation, which will lead to high interest rates for longer.