Budget Resolutions and Economic Situation

Jacob Rees-Mogg Excerpts

Wednesday 8th July 2015 Commons Chamber

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

It is interesting to follow the hon. Member for Birmingham, Perry Barr (Mr Mahmood). I enjoyed most of his speech, other than the peroration, with which I disagreed fundamentally.

Madam Deputy Speaker, it is a real pleasure to welcome you to the Chair. This is the first time I have spoken while you are in the Chair since your election to the deputy speakership. I know that the whole House is thrilled to see somebody who chaired the Backbench Business Committee with such distinction taking over as one of the Deputy Speakers.

I congratulate my hon. Friend the Member for Louth and Horncastle (Victoria Atkins) on her maiden speech. I hope that she will encourage the Queen’s Champion to return for a coronation banquet in Westminster Hall, which we had until the reign of George IV, but which were abandoned because they became too raucous. It is lucky that proceedings in this House are not abandoned when behaviour becomes too raucous.

I congratulate the Chancellor on his Budget. Turning to the Red Book, I want to start with something that will be particularly welcome in Somerset: the small cider exemption. That will allow producers to continue to provide 1,500 gallons of cider a year without coming under the auspices of the tax authorities. Our friends in Europe are having a go at the good people of Somerset and trying to tax that small quantity of cider, so I am reassured and relieved that the Chancellor has the best interests of my fellow county-men at heart.

The key to this Budget, I think, are the changes in corporation tax and the approach to make companies more competitive, which will give them the opportunity to pay people more and help get them out of the trap of welfare. That moral imperative underlies the whole tone of the Budget, making it not only economically prudent but morally right. That is quite a strong claim to be able to make for a Budget, because economics and morality do not invariably mix.

If we look at what is happening on the corporate side, we see that the Chancellor made the very important decision two or three years ago that examining corporation tax changes would be done on a dynamic basis. That meant that the increase in revenue, and in employment, that would result from reducing rates could be taken into account, in contrast to the historically flat approach taken by the Treasury, which assumed that other things would remain broadly equal—the ceteris paribus of economists, which always tends to be neither ceteris nor paribus. That approach has allowed him to reduce corporation tax, which has led to a much stronger underlying economic performance.

However, the quid pro quo that the Budget is asking for is that some of that extra profit should be devoted to increasing the wages of some of the poorest people in society. That is the moral underpinning of what the Chancellor is doing. Even better, people who then work will keep the fruits of their labour. Therefore, raising thresholds is a fundamentally good thing to do.

My noble Friend Lord Saatchi, along with another friend of mine, Peter Warburton, produced a book for the Centre for Policy Studies 10 or 15 years ago, in which they argued, “Stop poor people paying taxes.” It is idiotic to make people pay high levels of tax and then feed them back their own money through the benefits system. The more we can stop that, the more efficient the economic system will be. These corporate changes are crucial. They will help to grow the economy, boost employment and take poor people out of poverty and into solid earning work, where they will not pay tax until they are prosperous.

I think that there is more to do. I hope that the Treasury will examine national insurance further. Raising the threshold from £2,000 to £3,000 is certainly welcome, but national insurance still clicks in at much too low a level. In order to continue the process of ensuring that work pays and that people can keep the fruits of their labour, national insurance is the next challenge. Income tax will be done by the end of this Parliament, but the question of national insurance is still there.

In that context, what the Chancellor is doing about banks is very much to be welcomed. It was quite right that banks were punished, post-2008, for their manifold sins. That had to be done; the revenue was needed and society wanted to show its disapproval of the way in which some banks had behaved. But that has to come to an end eventually. We need a banking industry that is there to help businesses and individuals to prosper. Bringing down the bank levy and focusing it on UK assets will begin to do that, although whether the extra bit of corporation tax will ultimately prove necessary is another matter. Removing from the banks their pariah status is something we need to do eventually, but without forgiving them for all the flaws that they put upon themselves in the past.

Then there is the issue of welfare, which ties in with all this. The proposals will allow people on welfare to have a better chance of getting employment and being paid more, but with some benefits being reduced. Again, I think that is the right thing to do and the fair thing to do. The reason it is fair is that people who are in work ought to be better off than those who are dependent on out-of-work benefits. It is absolutely proper to defend the elderly and the disabled, because in a civilised society they deserve support, but those who can work ought to be given every financial incentive to do so. That is fair on those paying the taxes that pay for the benefits. The move to ensure that work always pays, and pays more, and that the lifestyle of those in work will be better than those who are not in work, is a good and moral imperative. With those underpinnings, and with economic sense and proper justification for fairness and good, I commend the Budget to the House.