Finance (No. 2) Bill

John Redwood Excerpts

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

[James Murray]

We in the Labour party believe that having fiscal rules that are iron-clad is essential to being trusted to manage the economy in a responsible way that puts family security and family finances first. Having strong fiscal rules and stability underpinning every other decision that we make is absolutely essential to everything that a Government might hope to do. Indeed, that stability forms the foundation for getting the economy growing, because with stability we will be able to work in partnership with businesses to remove the barriers to investment, using catalytic public investment to unlock more than £20 billion from the private sector to invest in the industries of the future. To support that investment, we will reform the systems that our economy needs to thrive, from reform of our planning system and employment rights to devolving powers to elected Mayors on transport, skills, enterprise, energy and planning. That is how Labour will begin to grow the economy if we win the next general election.

We know that a new approach and a new Government are needed, because that is what people across the country are telling us. People want a new approach whereby they can feel better off, rather than struggling to make ends meet as their taxes rise relentlessly. The Conservatives are desperate to distract from the mess they have created. They go from the simply unbelievable, like the Chancellor claiming yesterday that they had abolished low pay, to the unbelievably reckless, like their £46 billion unfunded plan to abolish national insurance. But no matter what they say, or how hard they try to pretend that their plan is working and that people in Britain have never had it so good, people know the reality of life. People know that taxes are at record levels.

Today we want the Conservatives to at least come clean and admit how many more people are paying tax as a result of their decisions in this Parliament, and how hard they are hitting pensioners in particular. Frankly, however, no matter whether they come clean, come the general election, people across Britain will ask themselves whether they and their family feel better off today than they did 14 years ago. The answer to that question is the reality from which the Conservatives cannot hide.

[Sir John Redwood (Wokingham) (Con)]

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

I rise to speak in support of tax-cutting proposals. We are not discussing the national insurance reductions in this group of clauses, but both previous speakers have spent some of their time discussing them because they are relevant, as they are the other side of the issues related to the correct levels and thresholds for income tax, which are the proper matter of our current debate. I wanted any kind of tax cut in the Budget, because we are over-taxed and the right kinds of tax cuts can speed up growth, which all the major parties in this House want, although there are some disagreements about the exact mix of policies that might create it.

The first thing we need from the Treasury is for its official forecasts and those of the OBR to have greater belief in the fact that if we promote more growth by cutting some tax rates, we may end up with more tax revenue. The best generator of more revenue to pay for our public services is a growing economy. The best generator of more growth is productivity improvements, and there is particular scope for such improvements in the public sector. The public sector was badly damaged by the covid experience. We lost a lot of productivity through the hasty and unnecessary reorganisation of public services during the pandemic, but we are finding it hard work and slow going to get the lost productivity back.

I welcome the fact that, in the latest set of Budget numbers, the Government have put in future productivity recoveries over the next few years, but it is slow progress, even to get back to the levels of productivity in 2019. I put it to the Government that they do not need to spend extra money on new technology, such as artificial intelligence, to get back to the levels of 2019. They may wish to recommend schemes for AI investment to get above 2019 levels but, by definition, we were able to get to 2019 levels of productivity without AI, because it had not been invented at that stage.

There should be more common agreement about the urgency of productivity recovery in public services. We are missing out on at least £20 billion due to the productivity problems that have developed since 2020 and the lockdown experience. However, there is also a source of extra revenue from lower taxes, because if we cut tax rates in the right way, we will generate more cash, rather than less. I think everybody now agrees that cutting certain taxes has that effect, because it is quite obvious that if we impose certain kinds of turnover or activity taxes, they will lower turnover and activity. Indeed, many taxes are imposed with a moral wish to lower activity or usage rates. For example, alcohol and tobacco attract higher taxes because the wish is that people buy them less or, in the case of tobacco, do not buy them at all. We get the same effect with things that we should be promoting.

--- Later in debate ---

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

As we scrutinise the Finance (No. 2) Bill in detail, starting with clauses 1 to 4, we see that the legislation serves as a profound symbol of a Government who have run aground. The Bill starkly exposes the UK Government’s complacency in the face of the cost of living crisis that continues to devastate homes across Scotland and, indeed, the other nations of the UK. Households are still reeling from the catastrophic decisions made by this Westminster Government.

As we have heard from the Government, clauses 1 to 4 are about household incomes, but the Bill falls dramatically short of meeting the urgent needs in our communities. I am used to this place lacking in humanity, but where is the humanity? It is never shown on these domestic issues. People in our communities need and want help. They want to know how they will pay for their soaring mortgage bills, their food bills—up by more than a quarter in the past two years—their ballooning car insurance premiums, their energy bills, which are still nearly 60% higher than in the winter of 2021-22, according to Library research, and much else. The clauses before the Committee do not really get to that issue.

The shadow Minister is right to talk about the per capita GDP issue in the UK, which is an utter disgrace, but what is Labour’s plan? More Brexit, more austerity and more being wedded to the fiscal rules that got us into this place. This is a damp and ineffective piece of navel-gazing from folk who had the wrong idea in the first place. Time and again, that idea has failed, but they have repackaged it and put it forward once more. Austerity is bust. It does not work, and it is madness for both the Conservative party and the Labour party to continue pursuing it, but that is what they do. This broken institution is not listening to people.

Clauses 1 and 2 could have invested in the economy. The Minister talks about devolution, but instead of devolution of investment, we are getting the devolution of his cuts. The spring Budget slashed Scottish capital funding by 16.1%, severely restricting Scotland’s aspiration for new hospitals and more. I note that the shadow Minister was happy to quote the Institute for Fiscal Studies, and Labour and the Tories are both maintaining what the Institute for Fiscal Studies has called a “conspiracy of silence” on the magnitude of the cuts required in the coming Parliament.

The former Labour leader in Scotland, Kezia Dugdale, makes it clear in an article published today that voting for Labour in Scotland would mean that people have to pay for tuition fees, and possibly for prescriptions and personal care. They are likely to see fewer child poverty interventions such as the Scottish child payment, an SNP initiative that is already lifting 100,000 children out of poverty. If they vote for Labour, people in Scotland are likely to see those things scaled back. That is the reality of the future under Labour: more austerity. Voting for a compliant, so-called Scottish Labour will have real-life consequences for the people of Scotland.

Although we will support Labour’s new clauses 1 and 4, which would offer some scrutiny of what is going wrong with the Government’s policy, Labour is ultimately only slavishly following this horrible, extremist, worn-out and clueless Tory Government, who are hollowed out by their right wing. It is testament to a Government devoid of ideas and vision, in this fag-end Parliament characterised by minimal legislative activity, that the Bill contains a mere 26 clauses, compared with last year’s 352.

[Sir John Redwood]

Can the hon. Gentleman tell us why Scotland grows less quickly than England, despite having more public spending per head?

[Drew Hendry]

Had the right hon. Gentleman done any real research, he would know that the figures for the UK are skewed dramatically by the overheated economy of London and the south-east, which buck the UK trend. If he looks at the figures for all the counties of England, including those in the north of England, he will see how the Government are letting down the people of England across the piece. But of course he does not want to do that. He just wants to make a lazy characterisation of what is happening, saying nothing about people’s potential, which is being ignored and run down by this place, this Government and the official Opposition, who have no idea how to change that.

Clauses 1 to 4 aim to maintain the current rates of income tax, including the savings rates, for another financial year. However, they do little to mitigate the Government’s broader fiscal missteps. In contrast, Scotland’s progressive approach to income tax under the SNP— I almost choked when we heard about progressive taxation earlier—has not only shielded public services from Westminster’s austerity but enhanced them, generating approximately £1.5 billion in additional revenue. We are protecting those on lower incomes, because most people in Scotland pay less income tax and dramatically less council tax than people in England.

All the scare stories about people leaving Scotland because of its progressive policies have proved to be rubbish. The report from His Majesty’s Revenue and Customs has shown that more higher-rate taxpayers have moved to Scotland. The revenue that the Scottish Government are attracting supports a wide array of social benefits, from free prescriptions to university tuition, which significantly reduces the cost of living for Scottish residents. Those are all things that this Parliament would attack, and Kezia Dugdale has today posted a warning about what would happen if Labour got its hands on the Scottish Parliament.

--- Later in debate ---

[Ben Lake]

I could not agree more. We were told that one of the supposed benefits of withdrawing from the European Union would be the liberty to tailor our tax powers; to devolve them to different parts of the UK in a bespoke way, so as to promote growth and better reflect the needs of the people. I agree that it is remarkable that the UK Government have thus far failed to make real the supposed benefits of Brexit. This review of tax policy could touch on those things. It would also be useful given the important link between tax decisions and public spending and, indeed, economic growth.

[Sir John Redwood]

Were a future Parliament to grant these tax powers to Wales, would the hon. Gentleman think that in order to promote faster growth in Wales he should cut taxes below English rates, or would he put them higher than English rates?

[Ben Lake]

I am not one to make up policy on the hoof, but the review could look at that, and if the evidence shows that tax decisions could be made to promote growth and to level up, which I think the right hon. Gentleman is in favour of, we should follow that evidence and do so.

Our continued reliance on the Barnett formula to allocate funds between the UK’s nations is problematic not only due to its flaws, but because of its inconsistent application in recent years, which has meant that Wales has lost out on billions of pounds of much-needed public investment. Members will be familiar with the concerns raised by communities across Wales regarding the way in which HS2 spending has been classified. Although not a single inch of track or rail was to be laid in Wales itself, it was categorised as an England and Wales project under the statement of funding policy, thus depriving Wales of significant consequential funding that the Barnett formula would otherwise have provided. The latest estimates suggest that Wales has lost £4 billion in consequential funding—money that could have transformed the country’s public transport infrastructure.

I understand that there will be reluctance within Government to move away from the Barnett formula, not least because devising a needs-based formula is far from simple. However, if we are to retain the Barnett formula, the funding floor should at the very least be updated to use census data from 2021 rather than the 2001 data it currently uses. I am sure the Minister will agree that much has changed since 2001—when I was actually still in primary school. The needs and population of Wales have changed considerably, so it is only reasonable that the funding floor element of the Barnett formula is at least brought up to date.

Such a consideration could be included in the review that I propose, as well as a review of the implications of UK tax policy in Wales. Again, all of this analysis and information could help inform debate for future tax policy decisions and ultimately ensure that we have a tax system that is fit for purpose and meets the needs of people in Wales.

National Insurance Contributions (Reduction in Rates) (No.2) Bill

John Redwood Excerpts

2nd reading
Wednesday 13th March 2024 Commons Chamber

[John Redwood (Wokingham) (Con)]

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

I welcome the reduction in the tax on jobs. The level of overall taxation in our country is too high. The reason it is so high is primarily the huge expenditure the country, by general agreement, incurred to tackle the covid lockdown. This is why I find the Opposition’s criticism of this Government’s tax record so difficult to grasp. After all, they wanted us to lock down tougher and they wanted us to lock down for longer. While a lot of money was rightly offered by this Government to individuals and companies to replace their lost incomes —colossal expenditure on a scale we have never seen before—Labour wanted to spend more on those causes, as well as wanting the lockdown to go on for so much longer.

What we demonstrated was that if we lock down a country for a year or more, stop a very large number of people earning their livings or livelihoods at all, and close down a large number of companies for the duration and maybe for longer, it is an extremely costly process. Of course, we needed to offset that to prevent a complete collapse in the economy and to sustain some lifestyles for those who otherwise would have no income. So we as a nation have this burden of extra expenditure, which we are now having to tackle by tax levels that are higher than we like.

We are at this very important point where the higher taxes are all in place—some of them are doing their job, and some of them will disappoint because higher tax rates do not always deliver the extra revenue that Treasury and OBR planners seem to think they will—and the Government are rightly saying, from the autumn statement through this Budget and on to future fiscal events, as they are now called, that we want to get back to getting the level of taxation and the burden of the rates down. It does not mean that we want to reduce the amount of taxation—indeed, the Government, understandably, want to collect a lot more taxation, as do the Opposition—but the fundamental policy debate is about how best to do that, and it is surely right that we are going to have a more prosperous economy and more public expenditure can be afforded if we have tax levels that promote growth, particularly if we reduce the taxation that is otherwise a big burden on work, on enterprise and innovation, and on small companies and the self-employed.

I am delighted that the self-employed have been included in the national insurance cuts in both the autumn statement and this Budget, but I still think the Government need to reform or push back the changes they made to IR35. We have lost 800,000 self-employed over the covid period. Some of that is because of the damage the covid lockdown has done, but some of it is deliberate tax policy in telling people that they cannot be self-employed, or so undermining the credibility of their status as self-employed in the eyes of others that they do not get the contracts they used to get from businesses that are nervous about the tax issue.

I urge my hon. Friends on the Front Bench to find time to look again at the second part of the self-employment package. I welcome the national insurance part, but I think we need to look at IR35, because we need that extra capacity. It would be good to get back some or all of those 800,000, and to add many new ones—younger ones—to that crucial army, because I am sure all Members in the House, being honest, would agree that the self-employed make such a valuable contribution in our constituencies.

[Priti Patel]

Does my right hon. Friend share my view that over the decades we have seen such a fall or drop-off in individuals starting their own business, younger people in particular, because of these concerns about the tax burden, how regulated it is and how difficult it is? By dealing with the whole long-standing issue of IR35, we could open up a new marketplace and encourage a new generation of entrepreneurs and small business leaders to come in and really help to grow the economy.

[John Redwood]

I largely agree with my right hon. Friend, but if we look at the numbers, I think the fall-off was from 2020 to 2024. Prior to that, with good Conservative policies and lower taxes, we were growing the self-employed army very noticeably, and it was making a very important contribution to general growth and the way all our local communities are serviced. It is so often self-employed people who allow us to make personal contact in a way that large companies do not seem to want any more. They are the people who turn up in the evening or at the weekend, if necessary, to get work done, and they are the people who wrestle with the increasingly impossible streets created by Labour and Liberal Democrat councils, which make it more difficult for them to get their vans around.

[Clive Lewis]

Does the right hon. Member not understand that perhaps the other reason for the decline in the self-employed and small and medium-sized enterprises is the growth of large businesses or large corporations that push them out of the marketplace and that monopolise and dominate? That is a big part of it, and it is a massive part of how our economy has developed over the last 30 or 40 years.

[John Redwood]

No, I do not think that is the main point. I think the two main points are the ones I have made—the covid lockdown and the tax regime affecting the ability to set oneself up. I will meet the hon. Member a little of the way, because I do think that the 2021 reforms in particular put companies off dealing with the self-employed, and the self-employed often need business from other companies, as well as directly from the public, and that has been a problem. If he and his party are seriously interested, they should look at the 2017 and 2021 reforms, which I think they supported, to understand how they have backfired. That is a good example of the OBR and the Treasury thinking that they can get more money out of the self-employed by forcing more of them to be employed but ending up with a far less successful economy with far fewer people working.

[Richard Fuller]

It is an absolute pleasure to listen to my right hon. Friend. I want to reinforce his point about IR35 so that our colleagues on the Government Front Bench are clear about how important this is. He talked about how Labour in the past supported those measures, but does he share my concern that perhaps Labour has now recognised that those changes to IR35 have backfired and that it would be disastrous for the Conservative party to go into the next election not having made those changes while the Labour party is offering to do so?

[John Redwood]

I will not join my hon. Friend in suggesting that it could be disastrous to go into the election—I hope that, when we get to the election, it will be looking rather better. But I do agree that it would be great to have sorted out the IR35 taxation mess before we get to the election—after all, there could still be many months of happy Conservative Government ahead if that is the Government’s wish—as that would be a much better outcome. Failing that, it would be good to put it in the manifesto, but the self-employed would be quite right to say to the Conservatives, “If you have now got to the point of putting it in the manifesto because you think it needs changing, why didn’t you just fix it?”

[Anna Firth]

My right hon. Friend is making a brilliant speech. He is talking about the self-employed, and in Southend and Leigh-on-Sea more than 98% of my businesses are small or medium-sized—in fact, the vast majority are micro. Does he, like me, welcome the raising of the VAT threshold in the Budget? Does he think that over time it would be welcome to continue moving that threshold, which is such a brake on the growth of small businesses? It is a brilliant thing that we have done, but could we take that further?

[John Redwood]

My first request of Chancellors in recent Budgets has been that there should be a sizeable increase in the VAT threshold. I opened the bidding at taking it up to £250,000, because I think we should want get on with these things, and we should want to allow the self-employed to take on their first one or two employees and get their business to a certain scale before this colossal bureaucratic burden comes down upon them. I have not yet persuaded my hon. Friends in the Treasury. I am pleased that Chancellors have moved from saying, “No, we don’t want to do that at all,” to saying, “It can now be done.” But if the Government are to do it, they should get on with it, mean it, and look as if it is going to make a real impact.

Five thousand pounds is not much. Lots of people get their business to around £75,000 to £80,000—I have met them in my constituency, as I am sure have most Members in theirs—and then they say, “I’ll have a month off,” or, “I’ll close the B&B for more of the off-season period,” or, “I won’t take on any more contracts, because I really don’t want all that hassle.” They will say, “I’m just a self-employed plumber”—or caterer or whatever—“and I’m good at what I do. I don’t want to become a VAT expert and I don’t want to have to spend a fortune on consultants to take me through this rigmarole of trying to keep the books straight on VAT.” I think we would benefit greatly from allowing that flexibility. The Bill helps, because it does reduce self-employed national insurance costs, but, as my hon. Friend the Member for Southend West (Anna Firth) said, it would be much greater if we dealt with the VAT threshold at the same time.

I would like to extend the conversation, which the Opposition clearly want to have and the Government need to respond to, about affordable and unaffordable tax cuts. First, I note that the Opposition dub all tax cuts—apart from the odd one they vote for—as unaffordable, whereas any amount of public spending is affordable. That is a strange asymmetry. The truth is that the Budget deficit is a combination of increased spending and reduced taxation, and one needs to look at both sides, which should be treated similarly.

The other thing that the Opposition must understand, from listening carefully to Ministers, is that getting rid of all national insurance employee contributions is just an idea; it is not a pledge and it is not a policy. It is clearly not baked into the next five years of figures. We have the Government’s five-year financial plan in the Budget, which sets out in general terms what the levels of tax revenue and overall spending will be—we await more detail for future years on spending from the public spending review in due course—and we know what the current feeling is on taxation, because we are just voting that through at the moment, based on the Budget. We know that future Budgets will make changes to taxes.

I am sure that Conservative Budgets will make reductions in taxes—assuming continuity of Conservative Government—but the Government are not promising to take off all this national insurance in one go, or indeed to make any particular change to national insurance next year or the year after. That is the right position to be in. However, given that there is plenty of time to think this through—it is not urgent policy—I urge my hon. Friends in the Treasury to set out more of the consideration than the arguments before coming up with a firm pledge or a timetable for implementing a tax cut that they want.

We do need to begin with the contributory principle, which is still the main feature of the national insurance fund as we have it today, relating almost entirely to the state retirement pension. The old contributory benefits for unemployment and sickness have been largely removed from the national insurance fund—there are only residual, small amounts left—and now come out of general taxation and are voted on in the normal way. The contributory fund is primarily for the pension, which is reflected in the fact that everyone in receipt of a state retirement pension—or in expectation of one when they get to the relevant age—will have their pension based on their contribution record.

It is also true that Parliament over the years has amended how one qualifies for those contribution records—in some circumstances one can be at home and qualify for deemed contribution, which is all good and fair—but it is still very much a contribution-based system. If we suddenly went away from such a system, we would need to answer the question: how do we settle eligibility for state pension? Many of my constituents would not think it a good idea if we invited in migrant workers in their 60s to do two or three years’ work here, having settled here quite legally, and then said, “You can have a full state pension.” They would feel that was not quite what people had in mind, because all previous generations have had to be here and work for many years to gain that entitlement. So there would be issues of fairness.

If the Government’s proposition is only that they would quite like to get rid of all employee contributions, I suppose we could keep the contributory principle by proxy, because people would have an employer contribution record, which I guess modern computers could divulge in a form that made a proxy for the eligibility of that person for a pension. However, it would still leave a hole in the national insurance accounts, because with just employer revenue we would have less national insurance revenue coming in than pension going out, so there would need to be technical adjustments or the abolition of the fund and some other reassurance mechanism that people would get their entitlements for the state pension, however those new entitlements were calculated.

This is a complicated area. I have been around this policy area on several occasions in the past for various leaders, Chancellors and shadow Chancellors, and I have always concluded that it would not be a good idea to try to merge the whole of the national insurance taxation system with the whole of the income tax system. I still think there is some merit in keeping the contributory principle. It now mainly relates to the pension, which is probably what one settles for, given how much other benefits have gone up and how one could not put all that extra burden on additional national insurance contributions.

I therefore urge the Government to ask themselves questions about the timetable, affordability, wisdom and, above all, what they wish to do with the national insurance system as a whole, the contributory principle—which still means a lot, particularly to older users of the system—and what a more modern system might look like. That is Green Paper and policy discussion territory, and it is invited as part of this debate because the Opposition have tabled amendments to try to tease some of these matters out. We cannot settle this today, however; we need a lot of documentation and research to update some of the numbers and complexities, which I remember poring over in the past, so we can see how this might work.

So, it is good news that we are getting a tax cut, and good news that we can have some more tax cuts to come, but I ask the Government please not only to think about cutting national insurance, on which they have done a big and a good job, but to think about some of the other taxes, such as the VAT threshold and IR35, and such as taxes on energy where we are still completely uncompetitive in this country because energy taxation is so high, relative to China and the United States of America, let alone relative to our European competitors—they tend to have higher energy prices but we are still uncompetitive against them.

So we need to look at all of that, and when we are looking at future Budgets we need to work away at finding more headroom. I am very pleased that this national insurance cut is effectively allowed under Office for Budget Responsibility rules because the Government have seized the initiative on the productivity decline, which has been very sizeable over the covid period in the public services, and the Government are putting back around £20 billion of lost productivity in future years. That is a modest target given the scale of the decline, and it is another reason why the public finances have been thrown into disarray by covid: we did not merely have all the extra costs during the covid period, but we now have ongoing considerable extra cost to run our public services because we cannot even get them back up to the levels of productivity they had hit in 2019 before the covid crisis. We need to look at other ways of finding headroom. Productivity is a good mine for finding headroom so we can improve the quality and cut the cost of what we deliver in the public sector.

I still think the Bank of England should be stopped from selling its colossal bond portfolio at huge losses and sending the bill to the taxpayer. That is unsupportable and the fact that taxpayers and the Treasury have had to find £34 billion year to date to cover the whole range of Bank of England losses, which include capital losses on the bonds, is a sign of how out of control this is. We need to stop that kind of thing. It would also be very helpful in getting us out of this technical recession, because the monetary policy has shifted from being massively too expansionary and inflationary, as it was during the covid period, when some of us warned about the way the Bank carried on for too long with printing money and buying bonds. I was very happy with the first tranches because it was essential to offset, but the last tranche was over the top. The Bank has now lurched to being too tough and has therefore created a technical recession that we need not have had, and if it stopped quantitative tightening bond sales, that would start to ease the markets up a bit more and allow us to grow a bit more rapidly and therefore generate more tax revenue.

So I hope there is some food for thought here for the Government when they look at their progress so far. The national insurance cuts are good, but they should study the overall reform rather more carefully and think it through and not make it the only kind of tax cuts in the future. There are other tax cuts now that are more urgent and that would grow the economy more quickly, and they would be targeted rather more on enabling more people to work for themselves and more small businesses to grow, and on us having more capacity, particularly in high energy using areas.

UK Economy

John Redwood Excerpts

Monday 19th February 2024 Commons Chamber

[Bim Afolami]

I am coming to that.

The right hon. Lady started by talking about the Chancellor; as Economic Secretary, I am perfectly entitled to answer on behalf of the Department and I will do so today. The main thrust of her remarks was on growth; let me deal with that in detail.

The first point to recognise is the international context that we all find ourselves in. [Interruption.] It happens to be true. For example—to describe that international context—10 EU countries were in recession in 2023. In relation to forecasts, the Office for Budget Responsibility’s original forecast was that there would be a contraction of 1.5% in the economy; we have significantly outperformed that. As I have said, the Bank of England forecast the longest recession in 100 years; we have significantly outperformed that. On wages, I think this is the sixth month in a row when wages have been higher than inflation, which, as I have said, we have more than halved.

On the Chief Secretary, what she was explaining is that we were and are meeting our fiscal rule, which is that debt will be falling in the fifth year of the forecast excluding the Bank of England. That is what she explained, and that is what I am reiterating for the House. [Interruption.]

Labour Members do not like hearing this, but they have absolutely no plan on the economy. We have been clear about our plan, and it is starting to bear fruit with wages, with cutting taxes for working people starting in January, with higher business investment as a result of our full expensing in the autumn statement. The shadow Chancellor does not have to take it from me; the Office for Budget Responsibility said that the two fiscal events in 2023—the Budget and the autumn statement—would represent the largest increase to GDP that it has ever scored. What I say to her and the House is this: our plan is working; stick with the plan and do not throw it away with the Opposition.

[John Redwood (Wokingham) (Con)]

It is good news that unemployment has stayed low by European standards, and the economy is still generating plenty of job vacancies. Will the Government take more steps to help more people into those jobs, so that we can get faster growth, bring down the benefit bill and boost their incomes?

[Bim Afolami]

The whole House knows that my right hon. Friend is somewhat of an expert on matters relating to the economy. To answer his point specifically, the national insurance tax cut was scored at the last fiscal event—the autumn statement—as significantly increasing the number of people in work. Although I will not speculate on fiscal events, that point has been very much noted by me and the whole Treasury.

Finance Bill

John Redwood Excerpts

Report stage
Monday 5th February 2024 Commons Chamber

I very much hope that the Government will accept both our new clauses. They will ensure that Ministers consider the loophole in air passenger duty that has given private jet passengers a tax freeze while everyone else is paying more, and consider what else is needed to make permanent full expensing as effective as possible. We believe that the Government must do all that they can to provide a stable and predictable environment that encourages business investment and boosts economic growth. During this debate I have set out our approach to providing that stability and predictability, including our commitments to cap corporation tax at 25% for the whole of the next Parliament, if we win the general election, and to maintain permanent full expensing. In the interests of giving businesses as much certainty as possible, I urge the Minister to say whether the Conservatives will join us by going into the general election with both those commitments from his party too.

[John Redwood (Wokingham) (Con)]

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

I rise to support the Government’s new clause 5. I think it is good that they are considering what more they can do to promote investment in the United Kingdom’s generating capacity. We import far too much power already, especially when the sun does not shine and the wind does not blow, and on the basis of the Government’s ambitious forecasts and targets for much more of our energy to be delivered by electricity, I think that the position will get a lot worse quite quickly. Anything that the Government can do to encourage that additional investment in generating plant will be very welcome.

We will, of course, need a similar positive approach to grid and cable, because the more we electrify, the more we will need to convey that power from the rather remote locations where much of it comes from to the parts of the country that will need it. So my only worry about new clause 5 is that I am not sure it goes far enough. I think it is helpful in this limited number of cases, but I trust that the Chancellor, when it comes to the Budget—quite soon, on 6 March—will consider that the new clause is just a stepping stone and that we need to review again the very large tax impositions on energy of all kinds in this country. We now have double corporation tax in many cases and a range of windfall taxes that are often not really windfall taxes because they do not come off when the prices go down, although they are put on when the prices are going up.

That whole area needs considerable review, because we need to take seriously the fact that we are short of energy overall. We are short of electricity generating capacity and short of the means to route power from generation to use, and it would be an important stimulus for the British economy if we produced more of our own energy and generated more of our own electricity, and if we were thinking about having a surplus to export again instead of all too often being cruelly reliant upon imports of liquid natural gas and electricity, particularly from the continent.

I would also like briefly to refer to new clauses 4 and 6. They are wide-ranging new clauses that invite the Government to make assessments or reviews of features of this legislation, but they also wish to broaden it out to get the Government to review the impact of their general fiscal strategy on equalities, on investment, on the state of the corporate sector and on inequalities in our society. I am quite sure that the Government will be reviewing all those things as a matter of course, as this is often a continuous process. Indeed, many of the items covered in this request for special review are already reported on and form part of the normal process of policy preparation, and rightly so. If the Minister were to tell me that he would be grateful if I did not vote for these new clauses, I would have no problem with that—I am not sure that it would help to embody them in the legislation anyway; I think it would be a bit of an abuse of the legislation—but the Government need to respond to the general thirst for knowledge that these new clauses represent, and to understand that there are some serious issues here that need to be returned to. I trust that the Chancellor will return to them at the Budget.

Looking at the fiscal impact that these new clauses cover, I trust that in the preparation of the Budget we will have analysis in the Treasury of these particular measures, which are still going through from the last time, but I also hope that the Government will review the extraordinary losses of the Bank of England—I think that they have already run up to £34 billion in the current financial year. These are losses that the Treasury, and therefore the taxpayer, have to pay as they are incurred, and that is completely unacceptable. It imposes strains on the public accounts and on the Treasury at a time when we really do not need them and when we need that money for other purposes.

There are two simple measures that the Bank could take to stem the magnitude of those losses. First, it should not be selling bonds at a big loss in the market. The European Central Bank is not doing this, although it has a similar problem with a portfolio of very expensively acquired bonds. There is also the issue of the running losses on these holdings where the Bank of England is paying the full, much enhanced, short-term interest rate following its increases in it. This now greatly exceeds the revenue on the bonds because the Bank paid far too much for the bonds and there is a very low rate of interest on them. Those running losses are a problem. I think the Bank should look at what the European Central Bank is doing, in paying different interest rates on reserves held under this system so that it does not have such a large running loss.

[Richard Fuller]

Can my right hon. Friend tell me if I have got this right? In the commentary ahead of the Budget, we talk about wiggle room and the Office for Budget Responsibility forecast and about £5 billion or £10 billion here and there, but I think I heard him say that this matter was completely out of the control of the those on the Treasury Bench and this Parliament; that the Governor of the Bank of England could unilaterally decide to crystallise losses on whichever extent of bonds he wished to, and then put that loss into the calculations of the Chancellor of the day; and that the Chancellor would then have to work around that in order to work out what the fiscal expenditure, public expenditure and taxation would be. Is that actually the case? It sounds mightily undemocratic to me.

[John Redwood]

That is an interesting point of debate, but my understanding of the constitutional position is that it is not as bad as my hon. Friend is suggesting because all the bonds were acquired with the express permission of the then Chancellor of the Exchequer. The Bank of England’s website says that the bond portfolio is held on behalf of the Treasury. Successive Chancellors of the Exchequer—beginning with the Labour Chancellor who first undertook quantitative easing and carried on by successive Conservative Chancellors—all signed an agreement with the Bank to say that they would indemnify against loss. So, given that the Government and this Parliament empowered the purchase of the bonds and now take responsibility for any losses on them, it seems perfectly reasonable for there to be a proper conversation about whether we want to take the losses.

I see nothing wrong with us here challenging the idea that, uniquely among the big quantitative easing programmes, it is the Bank of England that not only insists on selling the bonds at big losses but gets reimbursed. The ECB does not sell them in the market at big losses. The Federal Reserve Board sells them in the market at big losses but gets no money back; it simply puts on its balance sheet that it has lost a lot of money and takes the view that, as it is a central bank, it does not really matter if it loses a lot of money, because central banks create money and it is therefore not like a normal commercial business. So I hope that Ministers will look at this as part of the general assessment that is being invited by these new clauses.

I hope also that Ministers will look at the expenditure items in the overall accounts covered by new clause 4 on the public finances, because there has been a marked decline in public sector productivity in the years 2020 to 2023. It was quite without precedent in my experience of following public finances over the years, and this very sharp decline represents at least a £30 billion loss to our system, in that it now costs at least £30 billion a year more to run the group of public services covered by these figures than it did before the collapse in productivity. On top of that, there has also been the need for much bigger sums to cover inflation. This is not the inflation figure; this is the real loss figure from the productivity.

We are all sympathetic to the difficulties that lockdown and the transition out of lockdown caused, and there was bound to be disruption. Our public services were badly affected by that, as children could not go to school and hospitals were disrupted by covid, but that is now some time behind us and it seems perplexing that we cannot get those public services back to 2019 levels of productivity. I hear comment that maybe artificial intelligence will do it and that there needs to be a big investment in computers. Well, that should be on top. All that I am saying to the Government is that we can surely get back to 2019 productivity levels using techniques from 2019, which was very much pre-artificial intelligence and before the latest round of computerisation. Again, this is a big area that needs to be looked at as part of any review of the public finances.

The third area, which is also very large and very much in the news today, is that even more people in our country do not feel they can go back to work and that they need help at home because they are no longer able to work. The Government are working on some important programmes, through the Department for Work and Pensions, to show people that through a combination of part-time flexible working and working at home with proper support and training, and maybe with additional financial support to help them, they could go back to work for part of the time and make a contribution. We desperately need them, and I think their lives would be more rewarding. They would also be better off because we now have a benefits system that means it is always better to work. This should be a cross-party matter, because it is a problem that our nation as a whole faces. We can enrich those people’s lives, help to reduce the burden on the taxpayer and improve the net income of those concerned. Again, this involves many billions.

My point in making these three simple points apparent to the House is that there are very large sums of money indeed involved in bond losses and productivity, which we need to review because that would help in the formation of the next Budget. It would create more headroom, both for the tax cuts that we need if we are to promote growth, and for improved public service provision in the areas where the shoe is still pinching. I trust that will be part of any review that might emerge from these new clauses, or from the spirit of these new clauses. I hope that my right hon. Friend the Chancellor is thinking about this, as we will have a Budget hard on the heels of this Finance Bill, which came out of the autumn statement. In these conditions of recovery, and given the need for faster growth, I welcome having more than one Budget a year, and the fact that we may have three fiscal events quite close to each other, if all goes well. They must promote growth and reduce taxes, and this is a good start.

I welcome new clause 5, but can we please have more? Can we please look at the headroom that I think I have helped to identify?

[Mr Deputy Speaker (Sir Roger Gale)]

I call the SNP spokesperson.

Autumn Statement

John Redwood Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Jeremy Hunt]

I have never hidden the fact that we took difficult decisions a year ago, such as freezing the thresholds, in order to get borrowing under control and in order to tackle inflation. However, because the economy since then has outperformed the expectations of nearly every independent body, we are able this time to reduce the tax burden, and I choose to reduce the things that will boost growth.

[John Redwood (Wokingham) (Con)]

Let me first declare my business interests.

I welcome the measures to promote more investment and more growth, which is vital. We have lost about 800,000 self-employed people since February 2020. The national insurance measure will help a bit, but will my right hon. Friend look again at the way in which IR35 prevents them from expanding their businesses and getting contracts? The measures to promote the growth of small businesses are also welcome, but the VAT threshold acts as a strong disincentive to expand a business when it reaches a certain point.

[Jeremy Hunt]

I thank my right hon. Friend. I had extensive discussions with him in the run-up to the statement, including many discussions about the self-employed. Indeed, it was partly his advocacy of the role of the self-employed that made me so enthusiastic about making the national insurance changes that I was able to make.

I hear what my right hon. Friend says about IR35. We took our decision partly because of concerns about avoidance, but I am happy to look at that again. As for the VAT threshold, many other colleagues have made the same point. We do have the highest threshold in any major European country, and, indeed, any G7 country, but there is always this issue of the cliff edge, and my right hon. Friend is right to draw my attention to it.

Draft Postal Packets (Miscellaneous Amendments) Regulations 2023

John Redwood Excerpts

Monday 17th July 2023 General Committees

[The Chair]

I am grateful for that point of order. I remind the hon. Gentleman of my comments earlier about Mr Speaker’s ruling. It is not a one-off. Colleagues may not like it, but Mr Speaker has made his ruling.

As I set out just before the hon. Gentleman joined the Committee again, Standing Order No. 118(5) requires that the Committee debate the motion

“That the committee has considered”

the draft regulations. The Clerk read out the title earlier; I have already called the Minister, and the motion is already in progress. As I said earlier, colleagues, who have clearly been moved to make points of order with such strength, will have other opportunities to raise their concerns with the Government on the Floor of the House about the procedural events, shall we say, of the past few hours.

[John Redwood (Wokingham) (Con)]

On a point of order, Mr Pritchard. You were quite entitled not to take the points of order that I tried to make earlier or when we got back, although I would have liked to hear your consideration of them. It is a great pity that the Committee started in such a hurry when people were not back from the Division, including the representatives from Northern Ireland. Surely they, above all, should be here, given that this is such a fundamental measure for them.

I would like, in this point of order, to seek your guidance on how much time, according to your planning of this Committee, we now have left, because presumably the clock has been ticking for a little while during the Divisions. How could you regard that as at all adequate, given the intensity and range of views on what is a fundamental constitutional measure, as well as a very big economic measure, of great interest on both sides of the Irish sea?

--- Later in debate ---

[John Redwood]

Will the Minister give way?

[Victoria Atkins]

If I may, I just want to set out the circumstances, because I very much hope that that will help with some of the concerns that have been raised. I know that there is a great deal of interest in these arrangements, so I am going to be absolutely clear with the Committee what these measures entail and, importantly, what impact they will have not just for our constituents, but for the United Kingdom family.

In short, someone in Great Britain sending a parcel to their friends or family in Northern Ireland will not need to engage with any customs processes. Nothing will change for those movements compared with today. Similarly, Northern Ireland recipients of parcels sent by their friends or family in Great Britain will not need to engage with any customs processes. Nothing changes compared with today. A grandchild in Blackpool—I pick Blackpool because that was where I went to school, and there is a wonderfully rich Irish community in and around Blackpool and Preston—sending a package to his grandparents in Belfast will not need to do anything new to send it and, importantly, the grandparents will not need to do anything new to receive it.

Businesses in Great Britain selling to consumers in Northern Ireland will not need to complete customs declarations, international or otherwise. Nothing changes. Northern Irish consumers buying from British sellers, including—hon. Members have raised this point with me—the likes of Amazon and other online shops, will not need to engage with any customs processes. Nothing changes. They will buy from the British seller and receive their goods without doing anything new; I say that very clearly for the sake of colleagues here today and for others outside this Committee Room who may be listening. Those facts are now recorded in Hansard and can be scrutinised. I say that very deliberately, so that those who have concerns understand exactly what we have set out in the framework.

The Windsor framework explicitly removes those requirements on goods being sold to Northern Ireland consumers and, of course, on goods being sent to friends and family. There will be no routine checks or controls applied to parcels. There will be interventions only on the basis of a risk-based, intelligence-led approach. That means that the overwhelming majority of parcels will not be subject to checks.

Parcels sent from a business in Great Britain to a business in Northern Ireland will be treated the same as equivalent freight movements. They can be moved through the new green lane when eligible, when it is introduced from October 2024.

--- Later in debate ---

[Victoria Atkins]

I must give way to my right hon. Friend the Member for Wokingham, and then I will give way to the hon. Member for North Antrim.

[John Redwood]

The form of this statutory instrument is to amend regulations relating to foreign postal packets. It includes GB-NI postal packets alongside foreign postal packets in important matters in the regulations specified. How can the Government defend that? They are effectively treating Northern Ireland and GB as foreign countries to each other, accepting a form of regulation designed for a true international border and clearly violating the terms of the internal market legislation governing the United Kingdom? [Interruption.]

[Victoria Atkins]

If I may, I will address that point, and then I promise I will come to the hon. Member for North Antrim in due course. I am pleased that my right hon. Friend the Member for Wokingham used that language, so that I can make it clear for the purposes of Hansard that this is not about trying to differentiate or draw lines around our precious Union.

--- Later in debate ---

[Victoria Atkins]

Again, I will try to answer the hon. Gentleman’s intervention as fully as I can. The Windsor framework does not introduce any discrimination against anyone. Businesses do not have human rights in the same way that individuals do. Articles 6, 2 and 8 do not apply to businesses. On his point about the business treatment, the Windsor framework is a positive step forward from what would have happened under the Northern Irish protocol. We have to operate under what would have been because I cannot pretend that the protocol did not exist or that those strictures would not come in in due course. As I say, that is not a commentary on what was negotiated at the time under those extremely difficult circumstances, but the United Kingdom and the EU have got around the table, acknowledged the significant difficulties that have been identified and come up with the Windsor framework, which answers all those concerns and does so, I would say, in a way that really moves our relationship with the EU forward.

[John Redwood]

Will the Minister give way?

[Victoria Atkins]

If I may, I will make a little progress, but I hope that colleagues feel that I have been generous with interventions.

The Government need to ensure that the powers of HMRC and Border Force are sufficient to allow them to monitor the rules for movements of parcels and that, where certain requirements are in place—the point my hon. Friend the Member for Rochford and Southend East made—for movements intended ultimately for the EU, they can be enforced. We need to be able to determine that parcels destined for the EU can be detected and to ensure that they follow the requirements of the red lane.

I know from conversations outside the Committee Room that some colleagues have read the Secondary Legislation Scrutiny Committee’s report into the rationale for bringing the instrument into force on 31 August. As I have said, some existing rules apply to prevent illicit movements of certain categories of goods, such as invasive species or ozone-depleting chemicals, which is why we are bringing these powers forward to HMRC and Border Force at this time, rather than waiting over a year.

The Committee’s report also noted the arguments submitted to it that the regulations would contravene the principle of unfettered access within the UK by introducing a customs border. Indeed, I have carefully noted the submission by the Democratic Unionist party about its concerns relating to the Good Friday agreement. We acknowledge, as I have said throughout, that there are a range of views on the Windsor framework itself, but these regulations are discrete and relate solely to the powers available to HMRC and Border Force. That said, I hope that I have been able to clarify for hon. Members and hon. Friends what the framework does and does not do, and therefore what the powers granted by the regulations will monitor and enforce.

[Victoria Atkins]

I genuinely thank my hon. Friend and acknowledge the spirit in which he asked those questions.

Historically, the role of postal parcels has not necessarily been defined in freight. As I said before, with that precise wording we are trying to ensure mirroring for this small cohort—so not between individuals or between businesses to Northern Irish individuals; that does not change. However, we do want to ensure that the mirroring in relation to green lanes and red lanes of freight is clear when it comes to those parcels.

We have been dreaming up interesting examples today in preparation for this, but I have used the example of lace. A business in Great Britain may produce lace and send it to a business in Belfast that makes dresses. If that business sells the dresses within Northern Ireland or back to GB, it will not be affected; it will not see any changes. This kicks in only if some of the dresses are sold to Dublin or further afield. We have tried to ensure that the regulations mirror each other, whether one sends a parcel by post or in a great big container.

I reiterate that the vast majority of parcels will move without any additional requirements on parcel recipients in Northern Ireland. We have pushed genuinely very hard to ensure that the interests of Northern Irish consumers, and of GB businesses selling to Northern Ireland, are protected. There are huge improvements compared with the previous protocol, but we need to manage the risk in relation to movements across the Irish border in order to avoid EU tariffs and regulatory controls. We fully accept that this is a trade-off, but we have put protecting people and businesses in Northern Ireland at the very forefront of our efforts, to try to ensure that we get to a proportioned approach in this mechanism. I hope that answers my hon Friend’s question.

[John Redwood]

I thought that, in law, and certainly politically, the Good Friday agreement took precedence over other agreements, given its importance. How is this measure in any way compatible with the Good Friday agreement when it does not have the consent of the Unionist community—an important underlying principle of the whole agreement? I would also like to assure the Minister that I do not use the phrase “hard compromise”, and I have not been recommending these kinds of proposals.

[Victoria Atkins]

I am sorry; I did not catch my right hon. Friend’s last point. Would he repeat it?

[John Redwood]

I thought the Minister implied earlier that I thought that this was a hard compromise. I do not; I think it is bad policy.

[Victoria Atkins]

I think my right hon. Friend misheard me. I was referring to the Northern Ireland Minister, the hon. Member for Wycombe (Mr Baker). I would not dream of putting words in the mouth of my right hon. Friend the Member for Wokingham.

A point was made about the Road Haulage Association. The answer to that intervention is that the powers were available to Border Force in respect of international movements. We understand the sensitivities and the concerns raised about making powers available for GB to NI movements, but we would say that that is not the same as making these international movements.

My right hon. Friend the Member for Wokingham asked a very important question about the Good Friday agreement. We do not accept that this is contrary to the Good Friday agreement. These regulations are in fact an enabler to the agreement that we have negotiated. As I said, we have ensured that consumer interests in Northern Ireland and the interests of British businesses selling to Northern Ireland are protected, but that means that an incentive now exists to move goods into Northern Ireland and take them across the Irish border to avoid EU tariffs. If we are to manage that risk—[Interruption.]

--- Later in debate ---

[Sammy Wilson]

That is one of the reasons why I say this is dynamite, because it exposes the lie being peddled at present that the Windsor framework actually cements us into the United Kingdom. It does not; it pushes us further out.

The second point I want to make is that businesses have been kept in the dark. In fact, the scrutiny Committee pointed out that many businesses do not know what the arrangements are, and the Government have not even been able to give an answer on what the new arrangements are going to be. What will they entail? What provision will there be? The Minister argues that there will be no effect and that, if anything, be better for person-to-person parcels. She says that there will be no effect on business to consumers and that there will be some effect on business to business. The truth of the matter, though, is that once this legislation is passed, the EU will have total control over what movements need to be checked, and our Government will have no say about what happens in Northern Ireland.

[John Redwood]

Will the right hon. Gentleman confirm that there has already been diversion of trade away from GB into Northern Ireland, and is he worried that the draft regulations will create a lot more diversion of trade away from GB?

[Sammy Wilson]

The right hon. Gentleman is quite right: that is the problem. In the absence of detailed knowledge about what the new arrangements will be, businesses will simply turn their back on Northern Ireland. I spoke to a constituent today who wanted to buy a mattress from Argos. Although Argos clearly brings goods into Northern Ireland, that was obviously inconvenient for it and it simply said, “We don’t sell mattresses to Northern Ireland any longer.” That is exactly what is happening. Even if the Minister is correct, the threat that there will be different arrangements for taking goods and postal packages into Northern Ireland will discourage businesses from entering into those kinds of arrangements. We are already seeing the diversion of trade.

The Government’s argument is that the draft regulations improve the situation, but actually, they do not. If we had stopped even with the provisions of the protocol, the grace periods would have prevented this from happening. It does not happen at present. If the Government really want there to be no interference, why not stick with the grace periods? Why not make it clear that the regulations are not needed? There has been no leakage during the grace periods, and there is no evidence that hazardous goods and so on are moving into the EU. Why did the Government not take that stance? Why are the Government still not taking that stance? There would then be no need for the regulations.

Mortgage Charter

John Redwood Excerpts

Monday 26th June 2023 Commons Chamber

[Jeremy Hunt]

I will deal with the right hon. Lady’s specific points first. She says these measures should be mandatory, so why did Labour oppose the intervention power in the Financial Services and Markets Bill that would have made that possible? She said she wants action for savers, and I have indeed been talking to banks about action for savers and will keep the House updated. What she carefully did not mention is that we secured on Friday more than Labour committed to, because our measures provide protection for people who miss payments not for six months, but for 12 months.

The main point is that the right hon. Lady wants people to think she is fiscally responsible and will not take risks with inflation, so why on earth is she committed to borrowing £28 billion more a year when, as a former Bank of England economist, she should know that that will be inflationary and push up the cost of mortgages? Members need not listen to me; they should listen to people such as Paul Johnson of the Institute for Fiscal Studies, who said about Labour’s plans that

“additional borrowing both pumps more money into the economy, potentially”—[Interruption.]

The right hon. Lady might not want to hear this but this is what Paul Johnson says about Labour’s plans:

“additional borrowing both pumps more money into the economy, potentially increasing inflation, and also drives up interest rates.”

It is Labour’s mortgage bombshell, hidden in plain sight.

The right hon. Lady does not want people to notice the real comparison here, which is that her party faced an economic crisis in 2008, just as this Government did last year, but we are taking the difficult decisions to restore sound money and the public finances while they ducked each and every one of those decisions, ran out of money and left it to others to clear up the mess.

[John Redwood (Wokingham) (Con)]

Given that we do not want too much pressure on mortgage holders, who will be struggling, will the Government launch a series of supply-side measures to increase the supply of things that are short, to promote more home-grown food and home-produced energy, and above all to work with public sector employees and managers to have a productivity revolution in the public services where there has been a collapse in output?

[Jeremy Hunt]

As so often, my right hon. Friend is absolutely right and it is in supply-side measures that we see the long-term solution to the inflation problem that we and many other countries face. That is why the Budget was focused on labour supply measures such as a massive reduction in the cost of childcare—a reduction of up to 60% for families with young children—and it is why my right hon. Friend the Chief Secretary to the Treasury is launching the very productivity review my right hon. Friend the Member for Wokingham (John Redwood) has called for many times, to make sure we are getting better value for public money spent.

Cost of Living Increases

John Redwood Excerpts

Tuesday 25th April 2023 Commons Chamber

[John Glen]

My hon. Friend is absolutely right. In a moment I will set out exactly what interventions we have made and how we are continuing to intervene to support the most vulnerable in our communities across the United Kingdom.

The best thing we can do to help people’s money go further is to deliver on our plan to halve inflation and grow the economy. In doing so, we will meet the Prime Minister’s five pledges to the British people. Three of those are economic—two of which I have mentioned—and reflect people’s priorities. Inflation makes us all poorer. It has to be tackled head-on, which is why, working closely with the Bank of England, we are bearing down on it. We are also growing the economy.

[John Redwood (Wokingham) (Con)]

Will the Minister confirm the IMF figures that in 2020 to 2022—that important three-year period after we left the EU—the UK was the fastest growing economy of the G7? The Opposition’s forecast that the UK might be a poorer performer this year is just a forecast, and most forecasts are usually wrong.

[John Glen]

As always, my right hon. Friend is on the money. The point is that forecasts predict many different things. I have been in the Treasury for nearly five years; forecasts for every fiscal event rarely prove to be true at the next fiscal event.

We must continue to focus on taking the right decisions, decision by decision, and prove those forecasters wrong. That means long-term, sustainable and healthy growth that pays for our NHS and schools, finds jobs for young people and provides a safety net for older people, all while making our country one of the most prosperous in the world. It also means reducing debt, which we are on track to do. In fact, because of the decisions we have taken and the improved outlook for the public finances, underlying debt in five years’ time is now forecast to be nearly three percentage points lower than back in the autumn. That means more money for our public services and a lower burden on future generations—deeply held Conservative values, which we put into practice today. It is these steps that will make our country and our people better off. We are also taking action to shelter the most vulnerable while we achieve these longer-term ambitions for the economy.

In the Budget, we announced that the energy price guarantee would remain at £2,500 per year until July 2023. That was funded in part by the energy profits levy that this Government introduced last year, recognising that profit levels in the sector had increased significantly due to very high oil and gas prices caused by global circumstances, including of course Russia’s invasion of Ukraine. The levy is expected to raise just under £26 billion between 2022-23 and 2027-28, on top of around £25 billion in tax receipts from the sector in the same period through the permanent tax regime. The energy price guarantee measure will save the average family a further £160 on top of the energy support measures already announced, bringing total Government support for energy bills to £1,500 for the typical household since October 2022.

It is worth recapping those measures. This Government have helped all domestic electricity customers with £400 off their energy bills through the energy bills support scheme. The energy bills support scheme alternative funding provides £400 to around 900,000 households that are not supplied by domestic electricity contracts and are unable to receive support automatically through the energy bills support scheme.

Our support has not stopped there. Alongside holding down energy bills, freezing fuel duty and increasing universal credit, we are giving up to £900 in cost of living payments to households on means-tested benefits. Starting from today, over 8 million families across the UK will receive the first £301 cost of living payment from the Government. That is the first of up to three payments for those on means-tested benefits, totalling £900 through 2023-24. Those entitled do not need to apply for the payment or do anything to receive it. The payments will be accompanied by a payment of £150 for people on eligible disability benefits this summer and a payment of £300 on top of winter fuel payments for pensioners at the end of 2023.

These are carefully designed interventions, targeted at the most vulnerable across communities in the United Kingdom. The latest payment follows on from the £650 cost of living payment delivered to households on means-tested benefits by the Government in 2022, with an additional £150 for individuals on disability benefits and £300 for pensioner households.

The Government of course need to recognise that some people will fall into difficulties. They have enabled local authorities to provide additional support with the cost of household essentials through a 12-month extension to the household support fund in England worth £1 billion, including Barnett funding. We are also ensuring that more than 10 million working-age families will see an increase in their benefit payments from April 2023, based on the September inflation figure of 10.1%.

While we shelter the most vulnerable, the public also rightly expect us to look further to the future, making sure we are taking steps to grow sustainably and securely in the long term. This Government are unashamedly pro-growth, because expanding the productive capacity of the economy is the only way to solve the productivity puzzle, which has dogged us for decades, and improve living standards for all.

One reason we are held back is because a great number of people have left the labour market altogether. As a Conservative, I believe there is virtue in work and getting people into work is the best way to avoid the ills and perils of poverty. There has been an increase of more than 1.5 million working households since 2010, which shows that we are on the side of working families. That includes our new game-changing childcare offer that will entitle working parents in England to 30 hours of free childcare per week, once their child is nine months old, and close the gap between parental leave ending and the current childcare offer.

In addition to making provision on free childcare, the Budget set out to remove barriers for the long-term sick and disabled, for jobseekers and for older people with our pension tax reforms. Part of the plan is welfare reform to support those who have been disengaged from the labour market. My right hon. Friend the Secretary of State for Work and Pensions has introduced a White Paper setting out reforms that will support more people who are long-term sick or disabled to try work without any fear of losing their benefits. Other policies that we announced at the Budget will then ensure that those individuals are better supported to stay and succeed in work. Overall, the Office for Budget Responsibility expects the spring Budget package to result in 110,000 more individuals in the labour market by the end of the forecast period.

The UK saw the fastest growth in the G7 over 2021 and 2022. Cumulative growth over the 2022 to 2024 period is predicted to be higher than that of Germany or Japan, and at a similar rate to that of France or the US. We have halved unemployment, cut inequality and reduced the number of workless households by 1 million. We have protected pensioners, those on low incomes and those with disabilities. We are continuing to lay the groundwork for a vibrant, innovative and growing economy that benefits communities and families up and down the country.

Having sat and listened to the shadow Minister—I was not smiling, but reflecting on what I heard—I think it is very unfortunate that the Labour party continues to play politics and snipe from the sidelines without a clear and coherent plan.

Charter for Budget Responsibility

John Redwood Excerpts

Monday 6th February 2023 Commons Chamber

[The Chief Secretary to the Treasury (John Glen)]

I beg to move,

That the Charter for Budget Responsibility: Autumn 2022 update, which was laid before this House on 26 January, be approved.

Before I start my remarks, I pay tribute to my predecessor, Mr Robert Key, the former Member for Salisbury, who sadly died on Friday. Robert was a Member of Parliament for 27 years, a distinguished parliamentarian and former Minister, and a dedicated Anglican. I put on record my affection for him; my thoughts and prayers are with his wife Sue and the rest of his family.

The charter for budget responsibility is, at its heart, about how we chart a course for growth. It is a blueprint for managing the public purse responsibly. It is a path to cement stability in our economy and invest in public services. It is, in the current economic climate, about acknowledging that public finances remain vulnerable and knowing the risks that arise from debt being close to historic highs. This Government take these risks extremely seriously and believe that stable public finances are a key ingredient in the success of our economy, both today and in the future, in the south and the north, for the elderly and our youngest. This charter sets out this Government’s approach to managing the nation’s money so that everyone can see we are being prudent with the nation’s finances.

We debate this charter today in the face of difficult economic times. Like many countries, the UK faces the twin challenges of a recession and high inflation, as global energy prices have been exacerbated by Putin’s war in Ukraine. We have turned the corner in the fight against inflation that has plagued nations across Europe. Inflation has now started to fall, with inflation in the UK lower than many EU countries. A warmer winter has helped keep a lid on energy prices that jolted upwards following Putin’s illegal war in Ukraine. There is, however, a challenging road ahead. The International Monetary Fund says that 90% of advanced economies are predicted to see a decline in growth this year, and that is why we are taking action to support the economy through these extremely challenging times.

[John Redwood (Wokingham) (Con)]

Does the Minister not think there is some difficulty in trying to steer the economy on the basis of a five-year forward debt forecast when the official forecasters have been more than £100 billion out in two of the last three years, and £75 billion out this year with a one-year forecast?

[John Glen]

I will address the provisions of the charter and my right hon. Friend’s point directly in a few moments. As the Chancellor set out last week, we have a credible plan to generate economic growth by getting people back into employment, reinvigorating a culture of enterprise and continuing to drive up standards in education, and ensuring that that happens everywhere. The Chancellor’s plans to generate growth need to be underpinned by sustainable public finances, but the global economic shocks we have faced mean that borrowing remains high. We are expected to borrow £177 billion this year—double pre-pandemic levels. That is contributing to ever larger public debt.

Along with high debt in a time of rising inflation and interest rates comes the £120.4 billion we are projected to spend this year on debt interest alone. Let me remind the House why that is. For almost two years, in the face of a historic pandemic, we took unprecedented, bold, decisive action to support people, jobs and the economy. We rolled out vaccines at a world-leading pace, we paid 80% of people’s wages, and we gave grants to businesses to help cover their bills. The costs of inaction in the face of covid-19 do not bear thinking about. I am proud to represent a Government who took the big decisions to keep the public and the economy healthy.

As inflation rose to figures we have not seen in more than 40 years, led primarily by increasing energy prices, we again took action to safeguard the nation by contributing to people’s bills. Nobody in this Government would argue that that is not money well spent, but we are also cognisant of the facts. At nearly 100% of GDP, public debt is at its highest level since the early 1960s. It would not be sustainable to continue to borrow at current levels indefinitely. If debt interest spending were a Department, its departmental budget would be second only to the Department of Health and Social Care. Not only does that direct our resources away from vital public services, but for those of us who have paid attention to the economy, it is clearly unsustainable in the long run. It is unsustainable because increasing debt leaves us more vulnerable to changing interest rates and inflation. For every percentage point increase in interest rates, the annual spending on debt will increase by £18.2 billion. That is money we could be using to invest in schools or hospitals and in the transition to net zero.

Aside from investing in the services that we need and that so many rely upon, there is another important moral point to debt. Letting our debt increase is simply racking up debt on the nation’s credit card and handing the bill to our children and grandchildren. We are not alone in our ambition to reduce debt as a share of GDP over the medium term—Germany, Canada and Australia have made similar commitments. It is not just numbers on a spreadsheet; it will have a material impact on the lives and living standards of those who have not yet been born.

Instead, we choose a responsible, fair approach. We are demonstrating fiscal discipline, which will support the Bank of England in bringing inflation down. That is carefully balanced against the need to support the most vulnerable and to protect vital public services. At the autumn statement we announced a series of difficult decisions worth around £55 billion to get debt down, while ensuring that the greatest burden falls on those with the broadest shoulders.

All Members will hope that, having faced the pandemic, war in Europe and a bout of rising prices, we will have seen the worst of this economic storm. The truth, however, is that we do not know exactly what lies ahead, and we need to create the room to respond comprehensively in the future, should another shock occur. Last year my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) came to this place to approve rules to guide us on a path to strengthen the public finances after the worst of the pandemic had passed. By the third year of the forecast, in 2025-26, those rules require underlying debt—that is, public sector net debt excluding the impact of the Bank of England—as a percentage of GDP to be falling and everyday spending to be paid for through taxation by the same year.

Since then the context has changed yet again. To continue protecting the most vulnerable and investing in public services, the Chancellor updated the fiscal rules at the autumn statement, and we are updating the charter for budget responsibility. It will give everyone the confidence and certainty that we are going to repair our public finances. It will provide the foundation for long-term growth. In following them, we will be able to get debt down while protecting the public services upon which we all rely. The rules require that we reduce the deficit so that debt falls as a share of the economy in five years’ time. Expenditure on welfare will continue to be contained within a predetermined cap and margin set by the Treasury unchanged from the level set in 2021. I am pleased to say that the Office for Budget Responsibility confirmed in November that we are on track to meet all our rules, with debt falling and the deficit below 3% GDP in the target year of 2027-28.

Aside from the fiscal rules, the charter remains unchanged. We continue to be at the forefront of financial management through our monitoring and management of the broader public sector balance sheet. The independent Office for Budget Responsibility provides transparency and credibility via its economic and fiscal forecasts. Many colleagues have remarked on the important principle that our fiscal plans are transparent, fully costed and accompanied by an independent assessment of the economic and fiscal implications. The Government agree with this principle. There may of course be extraordinary circumstances where that cannot be the case, as we saw during the pandemic, and it was right not to delay announcing critical help for households and businesses, but in normal times major fiscal announcements should be made with one of the OBR’s two forecasts. As is usual, the spring Budget on 15 March will be accompanied by a full OBR forecast.

This updated charter puts stability first. It sets a credible plan to deliver on the Prime Minister’s key promises to get debt falling and to halve inflation, and it fosters the conditions for growth. It continues our historic support for households, as it allows us to increase the national living and minimum wage and pensions. It maintains gross investment at record levels in innovation, infrastructure and education. We have protected the most vulnerable and vital public services, and we are protecting the economy. After making the difficult decisions at the autumn statement, today we have a choice: we can sit idly by and let our economy slip into disrepair, or we can secure the foundations of our future by protecting the foundations of our economy. For those reasons, I commend this motion to the House.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

May I begin by echoing the Chief Secretary’s condolences to the family of Robert Key, his predecessor as MP for Salisbury?

It does feel like this is the time of the year when we have the annual George Osborne tribute debate. This exercise began in his period as Chancellor, but little did we know—and, I suspect, little did he know—that when he started this exercise more than a decade ago, he would end up being denounced as part of the left-wing economic establishment. The purpose of the exercise has always been more political than economic. It was to show that no matter how much the Government had set everything on fire, they could turn up here and portray themselves as paragons of fiscal rectitude—a little bit like angelic choirboys smelling strongly of petrol. The trouble for Ministers is that since this exercise was first conceived over a decade ago, there is now a long economic record for everyone to see and, perhaps even more seriously, a bitter economic reality and present that people are living through.

The UK is the only G7 country not to recover its pre-covid economic position, under the stewardship of the Conservative party. Controlling debt was supposed to be a big part of this exercise. Debt used to be numbered in the billions. It now stands at £2.4 trillion. So successful has this exercise in controlling debt been that we need a whole new word to describe it; it is now counted in trillions. Of course covid added to this, as it did in all countries, but lest Government Members claim this is all about covid, let us remember that most of the increase was built up before the pandemic.

There really is a gulf—one the size of the Grand Canyon—between the statements of fiscal probity and sound financial management, and the reality of the economic performance. When we look to the future, we see that this Government have earned the very dubious distinction of the UK being downgraded by the International Monetary Fund in its growth forecast, while the rest of the world has been upgraded. It is one thing to move in line with others, but to move in the opposite, downward direction is an achievement we should not want.

[John Redwood]

Will the right hon. Gentleman give way?

[Mr McFadden]

I am happy to—I thought mention of the IMF might bring the right hon. Gentleman to his feet.

[John Redwood]

I would like to know the Labour position. The European Central Bank is not selling debt at a loss into the market because it does not want the losses. The Americans are selling debt into the market at big losses, but they do not send the bill to the taxpayer. Only the Bank of England insists on both making huge losses and sending the bill to the taxpayer for immediate payment. Who is right?

[Mr McFadden]

I suspect that the Bank of England will not be the only institution attacked by the right hon. Gentleman tonight, but I remind him that part of the purpose of the charter is to restore our faith in the economic institutions, after what happened less than six months ago.

The IMF has forecast that the UK will have the lowest growth among developed countries for the next two years: bottom of the league on the record and bottom of the league on the forecast. And yet still the Government come along tonight and table a debate supposedly designed to enhance their economic credentials.

Well, what will the effect on those credentials be of the re-emergence of the former Prime Minister at the weekend? I have to give her 10 out of 10 for timing. What better time to write an article saying that her mini-Budget was right all along than the day before the Chief Secretary has to come here and stand up for the Government’s fiscal stability record? What better moment for her to say to members of pension schemes that had to be put on life support as a result of her mini-Budget that it was not her fault? No contrition for trying to borrow from my constituents in Wolverhampton South East in order to pay for a tax cut for people earning over £150,000 a year; not a word of apology to the millions of mortgage holders left paying a Tory mortgage penalty because of the reckless irresponsibility of the Conservative party. Just when the Government were trying to bury the memory of that mini-Budget under 10 feet of concrete, up she pops—like one of those hands coming out of the swamp at the end of the film—to tell us it was all someone else’s fault.

For me, the best bit in the article was when, in a long list of culprits, other than the Government that actually introduced the mini-Budget, the former Prime Minister blamed the Treasury civil servants for not warning her about the impact on pension schemes. I had to ask myself, were these the same Treasury civil servants that she had spent the whole summer scorning and disparaging? Were they the same Treasury civil servants whose boss was shown the door on the first day of her premiership? In what world are we expected to believe that the former Prime Minister, her Chancellor and the Government would have listened to a word those civil servants said, when all along she defined them as being part of the problem and not part of the solution?

The real problem for the Prime Minister, the Chancellor and the Treasury is that this is not going away. The last Prime Minister is not a lone voice, and the more that Conservative Members realise the Government have nothing left in their tank and are resigned to managing decline, the louder the drumbeat will become; and it will be cheered on by the same newspapers that gave such a warm welcome to that mini-Budget in the first place. The Prime Minister, demonstrating the sureness of touch with which we have come to associate him by now, has labelled those on the Government Benches calling for tax cuts “idiots”. That is his phrase, not mine—about those on his own side. And yet today, fearful of them, the Prime Minister now says he will listen. Which is it? Are they idiots or is he listening? This weekend’s intervention, and those who cheer its argument, will have the Prime Minister and the Chancellor looking over their right shoulders every day between now and the election, when they should be focused on the needs of the country.

This debate is supposed to be about all of us swearing fealty to fiscal rules, but there is another problem: since this Government came to office, they have broken their fiscal rules 11 times. They have had even more sets of fiscal rules than they have had Chancellors and Prime Ministers over the past year. If you don’t like one set, don’t worry—there will be another one along in a while! The Chief Secretary himself outlined how these rules were different from the ones we debated this time last year in the George Osborne tribute debate of 2022, and each time we are expected to treat the new rules as though they were the ten commandments.

The second part of this is about respecting the role of the Office for Budget Responsibility. The document before us is very clear about that. It talks in great detail about the importance of that role. Indeed, when it was first launched, the Economic Secretary to the Treasury of the time set out the benefits of the OBR, making clear the value of its

“strong, credible, independently conducted official forecasts”—[Official Report, 14 February 2011; Vol. 523, c. 747.]

She said that the establishment of the OBR and its independence from the Treasury meant that

“Governments will be reticent about introducing policies that seem to take them off course”—[Official Report, 14 February 2011; Vol. 523, c. 749.]

Well, there was not much sign of that reticence last year as the Government crashed the economy, caused a run on the pound, caused mortgage rates to rise and put pensions on life support. Indeed, we had a real-time lesson in the cost of disparaging our institutions—institutions that the Conservative party used to care about. But tonight, even after that experience with chapter 4 of the charter, we are back to a hymn of praise for the OBR.

The real problem here is not just inconsistency, but credibility. I am afraid that the many-year record since the idea of this charter was first conceived a decade or more ago has meant that the Conservative party has now forfeited the right to call itself the party of sound management; it has forfeited the right to call itself the party of growth, because the record on growth has been abysmal; it has forfeited the right to call itself the party of low debt, because debt has rocketed; it has forfeited the claim to careful stewardship of the public finances, with billions lost in bounce back loan fraud, personal protective equipment waste and tawdry stories of one dodgy contract after another; and it has forfeited the right to call itself the party of low tax, because the tax burden is at its highest for decades.

What, after all that, has this been for? We have record waiting lists, trains that people cannot rely on, and delays and backlogs everywhere. In fact, there is not a single public service that runs better now than it did 13 years ago, when the Tories took office. Low growth and high tax for a worse outcome—that is the record. When people are faced with the question, “Are you and your family better off?”, the answer is no.

Two weeks ago, we had the Chancellor’s speech on the way forward. He had four Es, and more than one person said that the biggest E was for empty, because the real problem for the Conservatives is that, when it comes to growth, the only policy they reach for is unfunded and untargeted tax cuts, and when they tried that in September, it blew up in their faces. Growth is the right question for the country, but it does not come from the discredited idea of trickle-down economics. It comes from the efforts of all of us—from every businessperson with a new idea and the drive to make it happen, and from making sure we use the UK’s strengths to make the most of the green transition that is coming, rather than standing back and allowing those investments to go elsewhere. It comes from every teacher equipping a pupil with new skills and knowledge, and from not having 7 million people on NHS waiting lists, keeping many of them out of the labour market. Talking of former Prime Ministers, it does not come from saying “F*** business”, but from a modern partnership with business that brings in the long-term investment the country needs. Most of all, in a knowledge economy like today’s, growth has to come from everyone, not just from a tiny proportion of people at the top.

Fiscal stability is an essential foundation for what we have to do—I agree with the Chief Secretary on that—but it is not an end in itself. It has to be the foundation for meeting the challenges the country faces and for giving people a more prosperous future. After many years of this debate, we look less at the latest version of the rules and more at the gap between claim and reality, because after crashing the economy and leaving the British public to pay the bill, the Government have no credibility to come forward and claim to be the champions of fiscal stability.

The idea for this charter was born in another political time, as I said at the start, and if it did have a purpose, events since have rendered it an unconvincing exercise to say the least. It certainly has not kept the Government to their fiscal rules, which have been broken many times, and it is unlikely, particularly after recent months, to convince anyone outside this Chamber that the Government have got the economy back on track.

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[John Redwood (Wokingham) (Con)]

My right hon. Friend the Member for North West Hampshire (Kit Malthouse) makes some powerful points. He is right that if we cut certain tax rates, we collect more revenue, not less. The historical evidence is very clear on that, but OBR and Treasury models do not capture that. He is right that if we try to guide our economy by a debt-to-GDP ratio and we go into recession, the ratio gets worse. We are then advised to take exactly the wrong action, and intensify the downturn by trying to chase the radio with tax rises that will push the economy lower; it is an extremely foolish thing to do.

My right hon. Friend is right that the Treasury needs its own independent forecasting, and needs to be able to say sometimes that the independent OBR forecast may be wrong. If it is genuinely independent, why should the Chancellor have to defend it? When it is as wrong as it has been at points in the last three years—for example, as wrong as it was on the deficit—it would be extremely helpful if the Chancellor was encouraged to disagree with it, because it is sending him exactly the wrong signals. For two years running, it grossly exaggerated the deficit and debt at a time when we could have done more to promote growth. This year, predictably—indeed, I did again predict it—it got it wrong; it understated what would happen, because it did not understand that its other policies would slow the economy so much. My right hon. Friend is right about the longer-term issues, but time does not permit me to go into that, as people apparently want to go home this evening.

On the control framework, I will be the one person who says that I do not think that this control framework is good. It clearly has not worked in the past, and it is fairly unlikely to work in the future. We have one extremely important control, which is not mentioned in this document: the 2% inflation target. That should be even stronger and better enforced. It is very worrying that the Bank of England, which seems to have the main responsibility for it, allowed inflation to reach over 10% when it had a clear target of 2%. It would not listen to those of us who said that if it carries on printing too much money and buying too many bonds at ever higher prices, it is very likely to have inflation. I hope that it does not cause the reverse problem, and put everything into reverse, giving us a bigger recession than we need. We do not want any recession at all, but clearly a slowdown was needed to correct the extra inflation as the Bank tried to correct its past mistakes.

It would be good to complement the 2% inflation target, which should apply to the Government as well as to the Bank of England, with a 2% growth target. We would then have the balanced model that the Federal Reserve is wisely given by our American friends and colleagues. The Fed is told both that it must keep inflation to around 2% as a priority, and that it must maximise employment in doing so. A balanced mandate of 2% inflation—it would be nice if we could do 2% growth, but the current official forecasts are way below that—would provide the right kind of signals, and give us more chance of a sensible economic policy.

This is our one chance to remind ourselves of the big issue of how we manage this enormous debt, bearing in mind that about a third of state debt is owned in accounts by the Bank of England, which means that it is owned by the taxpayers and by the Government. When I last looked, the Bank of England was 100% owned by taxpayers and the Government. Every pound of that debt that was bought up, was bought up on the signature of Labour, coalition and Conservative Chancellors, with this House agreeing that we would indemnify the Bank against all losses. Indeed, the Bank of England understandably put on its website that the whole of the bond portfolio is held with it acting as an agent for the state. These are joint control decisions, and the Government are clearly the senior partner, because they have to pay the bills.

It is quite wrong that we should have this uniquely difficult treatment when it comes to handling the rundown and the losses, when the European Central Bank and the Fed made exactly the same mistake of buying too many expensive bonds . There is a lot to be said for the ECB idea that the rundown should take place as the bonds naturally repay. One does not go charging into the market to undermine one’s own bond prices by selling even more of them at a loss. If we want to be ultra-tough on money, like the Fed—it probably has more of an inflation problem than we did—then if we sell the bonds into the market, why send the bill to the taxpayer? Why does the bill not rest with the central bank, which can actually stand that kind of thing? As the Fed constantly points out, the fact that it is sitting on a lot of losses does not matter, because it can always print dollars to pay its bills—it is not like a normal company. We should look again that this particularly hairshirt treatment, whereby the Bank of England expects taxpayers to send it money every time it sells a bond at a loss—and it wants to sell a lot of bonds at a loss, when there is probably no need to do so for the sake of the conduct of monetary policy.

I hope that the Government look again at those issues, because we have a very difficult nexus between decisions taken jointly, decisions taken by the Government, and decisions taken by the Bank of England. The treatment of this debt is having a big impact on the Budget judgments that the Chancellor comes to.

My final point is on the strange treatment of debt interest. As the Minister pointed out, the debt interest programme has shot through the roof to extremely high levels, but the bulk of that is, of course, the indexation provisions on the index debt, which in the UK is a rather high proportion of the total debt. None of that requires cash payments, so it is not a bill that we have to pay today. In practice, it will wash through by our simply rolling over the debt when the bonds fall due. We will re-borrow the real amount rather than the nominal amount, so we will not actually feel it. It is very odd that we put that as a cost against the accounts. The great news, however, is that as a result of that strange accounting treatment, we will have a great bonanza, apparently, because I think the forecasts are right, and that inflation will come down quite sharply over the next two years—indeed, the Bank of England thinks it will go well below 2%. The debt interest programme will absolutely disappear through the floor, given all this so-called debt interest throwing out the figures. I hope some of the proceeds will be used for a sensible policy to promote growth.

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.

--- Later in debate ---

[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.