Autumn Statement Resolutions

John Redwood Excerpts

Monday 21st November 2022 Commons Chamber

[John Glen]

One of the guiding principles of taxation in that sector—of these windfalls—has been a desire to retain an incentive for capital investment. What the hon. Lady says is an enduring reality of what we have done.

[John Redwood (Wokingham) (Con)]

Will the Treasury have a look at why the Bank is being allowed to lose £11 billion between now and March, by selling at a loss bonds that they do not need to sell, rather than managing its bond account well? Would that not be a good saving to make?

[John Glen]

I am, as ever, grateful to my right hon. Friend, and he made the same point when I was previously at the Dispatch Box. As he knows, the Bank of England is independent. He asks about quantitative tightening, and I am sure such matters will feature in conversations between the Chancellor and the Governor.

The new taxes will help to pay for the £55 billion of help for households and businesses with their energy bills, in one of the largest support plans in Europe. From April, we will continue the energy price guarantee for a further 12 months at a higher level of £3,000 a year for the average household.

Our support for public services means that, despite needing to find £55 billion in savings and tax rises, we are protecting the amount going into public services in real terms over the five-year period. Overall departmental spending will grow at an average of 3.7% a year over the 2021 spending review period. Departments will be required to find efficiency savings to manage pressures from inflation. After the spending review period, day-to-day spending will continue to grow in real terms, but slower than previously planned at 1% a year in real terms until 2027-28. We are launching an efficiency and savings review, which will include reprioritising lower-value and low-priority programme spending and reviewing the effectiveness of public bodies.

I now turn to our most vital public service, the NHS. The nation stood outside their homes and clapped for NHS workers every Thursday during the pandemic, and we did so because of their sacrifice during the historic pandemic. It is now incumbent on us to help address the issues they face, the workforce shortages and the pressures on the social care sector.

To recruit and retain our dedicated NHS workforce, the Department of Health and Social Care and the NHS will publish an independently verified plan for the number of doctors, nurses and other professionals we will need in five, 10 and 15 years’ time.

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[Jonathan Ashworth]

I am afraid that the Government’s position is as clear as mud. The OBR says that the Government are raising £5.7 billion from fuel duty. If they are not raising £5.7 billion from fuel duty, they should tell us where that £5.7 billion is coming from. I thought that this lot had moved away from the reckless, irresponsible approach to the public finances, but it seems that with the Tories, nothing ever changes.

Let us be clear: people are paying not only more income tax, but more council tax, and we expect motorists to pay more for petrol and diesel. Never again can Conservative politicians stand in front of posters of double whammy boxing gloves or tax bombshells at election time, because the tax on working people combined with the wages that they are losing to the ravages of inflation mean that they are being squeezed until the pips squeak under this Conservative Government.

[John Redwood]

The right hon. Gentleman said that the Government were not proposing to spend enough by the end of the review period. They are proposing £200 billion a year more. How much more would Labour want to spend?

[Jonathan Ashworth]

I did not actually say that. I know that the right hon. Gentleman is disappointed with the Government’s plans and that the previous Budget, of which he was so much in favour, was decisively rejected by the money markets. That shows what happens when we allow the Conservatives to be irresponsible with the public finances.

I now turn to social security and pensions. In fairness, the Chancellor responded to our pressure and honoured the triple lock, which I welcome. I hope that the House will recall and accept that I always give credit where it is due and I always work on a cross-party basis when we agree on things. I always agreed with our man in the jungle, the right hon. Member for West Suffolk (Matt Hancock), when he wanted to put us into lockdowns. I never went as far as the new Chancellor on lockdowns—he wanted much more severe restrictions—but I was always prepared to work cross party with the Government, so I am pleased that they have honoured the triple lock.

The impact of freezing the personal tax allowance at £12,500 or so, however, is that half a million more pensioners will be pulled into paying tax. Over the coming years, it is predicted that, because of the freeze on the personal allowance, 2 million extra pensioners will be pulled into paying tax. So pensioners with little income beyond the state pension—those who have done the right thing and saved all their lives—will be paying more in tax under the Conservatives.

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[Mr Clarke]

It is precisely because I do not believe that the mini-Budget was disastrous and ill-thought through. I believe very firmly in the merits of a lower tax, higher-growth economy. Indeed, that is why I sit on the Conservative Benches and he sits on the Labour Benches. It was the lack of alignment with our spending plans, which would have been addressed through a spending review. That would have allowed us to set out the runway—if you like—to the landing zone that the Government were intent on delivering. It was the lack of ability to model the benefit of robust supply-side reform and lower taxation properly that was, I think, at the heart of what went wrong.

[John Redwood]

Did my right hon. Friend notice that the week before the mini-Budget was presented, the Bank of England and the Federal Reserve Board were deliberately driving down bonds on both sides of the Atlantic, wanting rates higher, and that the Bank of England hit the market more when it announced that it would start selling bonds worth £40 billion into a falling market?

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[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

This autumn statement is quite easy to characterise: it will increase spending a lot, it will increase taxation revenue a lot and it will increase borrowing. I do not recognise all the descriptions by the commentariat and Treasury when they put it rather differently. I do not see this as an austerity package that is half done by public expenditure reductions and half done by tax rises. The tax rises are certainly there, with £260 billion more in tax revenue in the last year of the period, compared with last year. However, there will be £200 billion more of annual spending by the end of the period, compared with last year. Borrowing is also definitely up, with the increases clearly weighted to the current year and next year. I think that is right, because I hope we are trying to offset some of the deflationary and recessionary forces, and a fiscal adjustment in that direction in the next two years clearly makes sense. Arguably, it is a little underdone, when taken in conjunction with the very tough monetary policy that the Bank of England is now providing.

The first point I wish to make to the Government, therefore, is that money policy, which was far too lax last year, as some of us warned, has lurched to being extremely tight. I believe the forecasts that say that inflation will tumble over the next two years, although perhaps not quite as fast and as far as they say—if it was completely abolished by 2025, that would be a remarkably good outcome. However, I do think that inflation will come down, because money has been greatly tightened.

Whenever I make a point about bond buying and selling, quantitative easing and money policy, I am told by all the Opposition parties and by Ministers that the issue is not for us mere mortals, because it is something that the Bank of England does as part of its independence. I therefore need to remind the House of the constitutional position and of the deeds of this and former Governments. When quantitative easing was first introduced under Alistair Darling and the Labour Government, it was decided that it had to be a dual-control policy, where ultimate control rested with the Chancellor and the House of Commons. Every amount of bond buying has been authorised by successive Chancellors and, therefore, endorsed by Parliament.

More importantly, every Chancellor and every parliamentary motion has said that it is down to the Treasury and taxpayers to pay any losses—that includes those that will now be made—on this bond portfolio. That is why the issue should be of great interest to this House and why I find it odd that nobody ever seems to want to debate it. These are colossal sums. We see that in our immediate budget this year, because it has been decided between the Chancellor and the Governor of the Bank of England—indeed the Opposition agreed—that this House will vote for a special subsidy to the Bank of England for just a five-month period to deal with the losses on the bond portfolio. We do not have a breakdown of all those losses, but clearly quite a lot of them will come from selling the bonds in the market at very depressed prices, compared with the purchase price.

I say again, there is no need to do that. Indeed, it is undesirable, because money policy has already been tightened a lot and that will be a further tightening. On the item where the Bank of England is properly independent and where Ministers would obviously not comment, I must add that I think it is dreadful that the Bank kept interest rates as low as it did last year and has not raised them sufficiently even this year at the short end. It keeps telling us it will get round to raising the rates to the level needed to kill the inflation, so I say, “Get on with it.”

In the figures given today, it is suggested that the short rates will peak at 4.77%—a very precise and unlikely number. I do not think they need to go that high. They are currently at 3%, for those who can remember, and somewhere short of 4% or maybe 4% is quite high enough to do the job, given the tightening we have already seen. Will the Bank please get there as quickly as possible and then announce that that is the worst of the damage, so the markets can adjust to the appropriate rates?

That leads me on to spending. I think the spending plans go too far. I welcome the sensible spending on trying to ease the squeeze, on upgrading pensions and all the other necessary measures, and I am glad the Government got round to taking them. But it would be a good start to stop the big subsidies and interventions to the Bank of England; we need to look at the total interest rate costs, because one of the biggest increases in spending is on interest rates, which is why I have made more comments on them.

I do not know whether enough has been put into the figures to reflect the very odd way the Bank of England and the Treasury express the interest rate charges, including the valorisation of the index-linked bonds, which is not a cash item and is not paid month by month or year by year, but is rolled up to maturity. That was the biggest element of the big increase in interest costs when last reported, but presumably that disappears to nothing when we get to the point in the forecast in 2024-25 when they tell us there will be no inflation. I hope enough credit is given in those figures, because quite a lot of the extra increase is coming through that interest rate programme.

Along with many other colleagues on both sides of the House, I am impatient for the Government to get on with encouraging, helping and mentoring more people, who are currently on benefits and may need that extra bit of help, into all those jobs we still have, before the recession really hits. Will the Government please get on with it? Billions could be saved and people could be better off if several hundred thousand of them could be persuaded into some of those 1.2 million jobs that are still available. It would be a win-win all around: for the people concerned, for the taxpayer and for the state.

I echo the comments of my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) on HS2. While I fully accept that the Government are completely committed and do not want to cancel the whole scheme, they could certainly have another look at controlling the costs and the phasing on such projects, because in the next two or three years we are pretty short of cash and the borrowing levels are very high. I think something could be done along those lines.

There is also plenty of work to be done on migration. Others will agree that by cutting out the business model of those who traffic people across the channel, and having more appropriate accommodation for those who come here legally, we will save hotel costs. The cost to the state of the legal migration for low pay model is not to be recommended. If we invite a lot of people in for relatively low-paid jobs, they will need a lot of financial support from the state for social housing, extra school places, extra medical facilities and so forth. Indeed, when the EU had an inward migration crisis in 2016, under Mrs Merkel, it reckoned that the capital cost to set up a migrant family with social housing, along with the extra public facilities and extra capacity required in respect of transport, energy and so forth, was €250,000. We are talking about very large sums. If we invite in hundreds of thousands of people a year, we need to build a new city every year to accommodate them in decent conditions, and I do not think we are making that kind of provision in our budgets. The Chief Secretary to the Treasury should have a good look at all that.

Finally, we can do a lot more on growing revenues, particularly in energy, where we are still not getting on with the licences, permits and encouragements and incentives to invest. If we produced a lot more of our own energy, it would cut the carbon dioxide—it is particularly intensive to import liquefied natural gas—and generate a lot of extra tax for the British Treasury instead of our giving all the money to the Qatari and American Treasuries, as we do under the import model.