Charter for Budget Responsibility
Lord Redwood Excerpts(3 years, 2 months ago)
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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.
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.
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
Lord Redwood Excerpts(3 years, 4 months ago)
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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.
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.
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?
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.
UK Infrastructure Bank Bill [Lords]
Lord Redwood ExcerptsTuesday 1st November 2022
(3 years, 5 months ago)
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The Chief Secretary to the Treasury (John Glen)
I beg to move, That the Bill be now read a Second time.
The UK Infrastructure Bank Bill will finalise the bank’s set-up and ensure that it is a long-lasting, enduring institution. The Bill will set out its objectives to tackle climate change and support regional and local economic growth in legislation, as well as giving the bank a full range of spending and lending powers, so that it can benefit communities across the country and help the UK achieve its net zero goals. The bank is already having an impact. Since summer 2021, when the UK Infrastructure Bank became operational, 10 deals worth close to £1.1 billion have been done, including providing financing for a new £500 million fund that could double the amount of subsidy-free solar power in the UK.
This is a Bill for the whole UK. Thanks to £22 billion-worth of capacity, the bank will be able to support infrastructure investment and the levelling up of the whole UK. The bank represents a step change in the Government’s ability to crowd in private sector capital and to address the economic and climate challenges the country faces. The UKIB will focus on prioritising investments where there is an under-supply of private sector financing, which we expect will unlock a further £18 billion of investment.
Before I go on, I would like to thank my noble Friend Baroness Penn for her work in bringing the Bill through the other place. The Bill has already undergone thorough scrutiny, as Members would expect, and I look forward to discussing it further today and in Committee in a few weeks’ time.
It is worth remembering why we set up the UKIB. Four years ago, the National Infrastructure Commission published its national infrastructure assessment. It recommended that the UK create its own domestic bank if funding for economic infrastructure was to be lost from the European Investment Bank. As Members will recall, the UK did lose its EIB funding, worth around £5 billion a year. However, I would like to be clear that this is not intended to be and is not a direct replacement for the EIB funding, which, given its very broad remit, at times crowded out private sector funding. There was widespread consensus that we would need to bring forward plans for the UKIB, which we did, and I pay tribute to my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who played an instrumental role in bringing those plans to fruition.
When establishing the bank, we were cognisant of three specific recommendations from the NIC. First, that there would be governance to safeguard the operational independence of the bank. We will come on to it later, but one of the key purposes of the Bill is to protect exactly that. It will make it impossible for the Government to simply dissolve or sell the bank without further legislation. We will also be unable to alter its core objectives on climate change and regional and local economic growth.
Secondly, the bank should provide finance to economic infrastructure in cases of market and co-ordination failures, catalysing innovation. We all know that infra- structure projects take a long time and cost a lot of money, and I want to see more private investment in such projects. Often, however, the private sector does not provide enough finance to emerging innovative technologies that have a higher risk profile—for example, net zero technologies or those that are in areas of the UK that do not historically get financing.
John Redwood (Wokingham) (Con)
Can the Chief Secretary explain why the bank is investing in a very expensive cable electricity link between the United Kingdom and Germany, given that we are in the same time zone and have similar weather, and both countries are chronically short of electricity capacity? It does not sound like a good idea to me.
John Glen
I will not be able to comment on specific investments. As I said, a series of investments have been made in the last 12 months, and I would be happy to correspond with my right hon. Friend and put him in touch with the bank so that the logic behind that decision can be explored with him.
Out-of-Turn Supplementary Estimates 2022-23
Lord Redwood Excerpts(3 years, 5 months ago)
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Andrew Griffith
The hon. Lady is absolutely right that the package extends to not just businesses but schools, hospitals, the public sector and charities—the important third sector. She articulates well the concern of her local schools; of course, it is important to have as much time and certainty as possible to plan. I am sure that the Minister for Climate, who is next to me, and the Secretary of State for Education will have heard her points.
The House will note that both these energy schemes are expensive. Indeed, they were the largest single element of the plans to which the gilt market reacted in previous weeks. Rather than an indefinite and open-ended liability, therefore, the Government will launch a Treasury-led review on how to support households and businesses after April 2023.
John Redwood (Wokingham) (Con)
Can the Minister give the House some idea of how sensitive the putative cost of £60 billion until March is to the actual prices of gas and electricity? Is there a possibility that, with lower prices, it might be considerably less?
Andrew Griffith
I defer to my right hon. Friend on all matters economic, but he is absolutely right that the Government had to act and come forward with an estimate, and that global gas and energy prices are volatile. We are proceeding on the basis of a particular set of assumptions, but if those things change, of course we will return to the House with an update.
The second departmental request relates to capital funding for the Bank of England. Since 2009, the asset purchase facility, a subsidiary entity of the Bank of England, has been a policy tool of the independent Monetary Policy Committee. The APF supported the MPC’s objective of stimulating the economy to try to keep inflation at its 2% target. By far the largest element of the APF was so-called quantitative easing, under which the Bank of England has purchased to date a total of £856 billion-worth of gilts and corporate bonds. The Treasury rightly indemnifies the APF and the Bank against any losses from those authorised operations.
In 2012, the Bank and the Treasury agreed that it would be prudent for cash management purposes that any excess cash in the APF would be transferred to HMT at the end of each quarter and that if there were a deficit, the cash would be transferred in the other direction. To date, the APF has regularly transferred cash to the Treasury. In February, however, the MPC announced that it would start unwinding QE, initially by not reinvesting redemption proceeds. Further, on 21 September, the MPC announced its decision to unwind £80 billion of its stock of gilts acquired under QE over a 12-month period, including through a programme of active gilts sales that are due to start soon.
Accompanied by the recent rise in the Bank rate, that means that the overall net position has altered from one of receiving cash over the past 10 years to having to pay out under the indemnity. The outflows requested today are therefore the counterpart of previous receipts in the life cycle of the scheme. The eventual size of the net payments to or from His Majesty’s Treasury should not be used as a measure of the success of asset purchases or of the impact of the schemes on the public purse as a whole. The schemes should instead be judged by the degree to which they meet their objectives for monetary policy and financial stability. I should point out to the House that the value of these payments is difficult to predict. Future market prices and the Bank rate will impact on the amounts required, and the Bank of England MPC decision on sales may itself change over time. Any adjustment in the payments, either up or down, will be reflected in the Treasury’s usual requests in future main or supplementary estimates in the normal way.
Given all that, this is an important motion for the continuation of Government business, and I commend it to the House.
John Redwood (Wokingham) (Con)
I am glad the Minister agreed that the £60 billion for the energy scheme will of course adjust according to market prices, and let us hope that the current downward trend in some of the gas prices is continued. We need a mild winter and other bits of good fortune, otherwise we could be back facing even bigger bills. I am sure we are all appreciative of the fact that the new Chancellor wishes to review the scheme after March, because this is a very expensive scheme and there may be better ways of doing it to contain the expenditure.
I hope, for example, that consideration will be given, where price controls are still being offered to consumers, to limiting the amount of subsidised fuel any household can buy to a reasonable amount for a normal household, so that those who are in richer households and making much bigger demands on the fuel system would pay for the additional fuel they need—if they are lucky enough to have a heated swimming pool, or whatever it is—and would pay the full price on the extra fuel that such luxuries require. That is offered as a hopeful idea of how one can start to grapple with the very high costs of this scheme without in any way undermining the crucial guarantee to all those who are struggling with their bills already and want this kind of security.
I also have some concerns about the Bank of England estimate. It is quite true that, from Chancellor Darling onwards, quantitative easing decisions have always been jointly taken by Chancellors of the Exchequer and Governors of the Bank of England. One of the main reasons why they have always been joint decisions is that the Bank of England always understandably insisted on a complete capital guarantee against losses on the bonds, because it was envisaging buying so many bonds that they became very big for the Bank of England balance sheet, and it wanted to be reassured that the Treasury and taxpayers stood behind the system in case of losses.
To the extent that this supplementary estimate is to make good losses on bonds that the Bank of England is selling, I have these questions. First, why does the Bank of England think it must sell bonds at this juncture, when the United Kingdom bond market, the American bond market and lots of other bond markets around the world are particularly depressed by the need for a counter-inflation strategy based on high interest rates? We are crystalising a loss that, as I understand it, the Treasury then has to pay for, whereas if we have an unrealised loss, no payments are of course needed until eventual redemption, and very often the redemption value of the bond is considerably higher than today’s price in the market. I cannot quite understand why the Bank needs to sell these bonds now, and as this has always been a joint policy in which Chancellors have been very heavily involved and have heard Bank of England advice—Chancellors had to sign it off because the taxpayer is at risk, not the Bank of England itself—I hope this will be carefully re-examined.
To those who say that we do need to be selling bonds as well as putting up interest rates to curb inflation, I would say they should be careful not to overdo it. If the Bank really does feel it has to tighten even more, it can do so by a further rise in interest rates; it does not have to do so by selling bonds. Very directly, as we see tonight, the sale of these bonds can realise a loss and then can trigger a cash requirement on taxpayers and the Treasury at an extremely bad time for such a cash requirement. I think all of us have much better priorities than paying for bonds that are underwater, when we see the current state of the economy and the need to route more money to individuals and companies in the right ways, to see off a longer and deeper downturn and provide some balance in the public accounts. I ask the Minister and Chancellor to think again, and to talk again to the Governor of the Bank of England about their joint responsibility. They must ask whether this is really the right time to be crystalising losses, resulting in unspecified amounts of money that will have to be paid.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the SNP spokesperson, Alison Thewliss.
Economic Update
Lord Redwood Excerpts(3 years, 5 months ago)
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Jeremy Hunt
It is a pleasure to exchange comments with the hon. Lady and I look forward to working with her closely in the months ahead. I remind her that this Conservative Government are spending £37 billion this year to support people across the United Kingdom with cost of living concerns. That is possible because of difficult economic decisions that the SNP has opposed at nearly every stage, and that includes large support for businesses up and down the country. The main thing I would say to her very gently is that she cannot claim to be concerned about the economic turmoil of the last few weeks when the central policy of the SNP—independence—would leave turmoil for Scotland not for a few weeks but for many, many years to come: a new currency; somehow finding a way to trade with the UK internal market but also the European single market; border checks between England and Scotland, as announced today by the First Minister; and a massive gap in public finances that would have to be breached. That is a recipe for precisely the austerity she says she is worried about. Let me say this: if we want economic stability and if Scotland wants economic stability, to coin a phrase we are stronger together.
John Redwood (Wokingham) (Con)
What will the impact of these measures be on the growth rate, and will we still avoid recession?
Jeremy Hunt
I will publish the economic forecasts from the OBR when I make my statement in a fortnight’s time. I think it is better for me to wait until I hear that. The proper answer to my right hon. Friend’s question is that what we are seeking is a long-term sustainable increase in the economic growth rate. That is a central policy of the Prime Minister, which has my wholehearted support.
The Growth Plan
Lord Redwood Excerpts(3 years, 6 months ago)
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Kwasi Kwarteng
All I remember is the financial crash of 2008, which the right hon. Gentleman’s party presided over and managed to engineer. I would also mention that the 40p rate was the rate for 20 years, and it was the one adopted by his party when it was successful and used to win elections.
John Redwood (Wokingham) (Con)
I strongly welcome the growth plan and the tax cuts that will help deliver it. Does the Chancellor agree that there are more obstacles to be swept aside so that we can grow more of our own food, produce more of our own energy and supply more of our goods, in order to raise living standards and generate the better jobs we all want for our constituents?
Delivery of Public Services
Lord Redwood Excerpts(3 years, 9 months ago)
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Mr Pat McFadden (Wolverhampton South East) (Lab)
I beg to move,
That this House notes that UK economic growth is forecast to grind to a halt next year, with only Russia worse in the OECD; further notes that GDP has fallen in recent months while inflation has risen to 9.1 per cent and that food prices, petrol costs and bills in general are soaring for millions across the country; believes that the Government is leaving Britain with backlogs such as long waits for passports, driving licences, GP and hospital appointments, court dates, and at airports; and calls on the Government to set out a new approach to the economy that will end 12 years of slow growth and high taxation under successive Conservative governments.
It is my pleasure to speak to the motion in the name of the Leader of the Opposition, and those of me and my right hon. and hon. Friends. The Prime Minister told us at the weekend, speaking from the Commonwealth Heads of Government meeting in Rwanda, that he was “actively considering” his third term in office. The shadow Secretary of State for Transport, my hon. Friend the Member for Sheffield, Heeley (Louise Haigh), replied that she was actively considering marrying Ryan Reynolds.
While the Prime Minister considers his future, here at home concerns are more prosaic and more real. In area after area of life, standards of service that used to be taken for granted have crumbled, leaving people facing delays and backlogs for basic services, and all this is coming on top of the cost of living crisis, which is biting deeper with each passing week. As each new backlog and delay builds up, the Government look more and more powerless to address them. Even the Government’s supporters do not seem to believe that the announcements made by No. 10 will be followed through with any proper delivery. The Government were supposed to take us forward to the future, but as we read the news each day, it feels more and more like a step back in time towards the 1970s.
In another, more candid remark, also on Saturday, the Prime Minister admitted that since the Conservatives took office the UK economy had
“not grown as it should”.
John Redwood (Wokingham) (Con)
Does the right hon. Member agree with me that if you wish to improve service you do not go on strike and if you wish to pay for higher wages you do not go on strike? Will he give that advice to the rail unions?
Mr McFadden
I had anticipated one or two interventions on strikes, so let me say to the right hon. Gentleman that whoever’s responsibility the strikes are, it is certainly not that of a party that has been in opposition for 12 years. He and the Ministers he supports will have to take responsibility for the industrial strife they are presiding over. I say that to him in the anticipation of other interventions in the same vein.
Mr Clarke
I agree with my hon. Friend. It is crucial that the NHS continues to reform and, frankly, become more fit for a technological age, as well as for one in which we can anticipate these problems ahead of time. We should act to improve the use of all the technologies, which will mean that we get more value for taxpayers’ money. With an ageing society that is plagued by so many avoidable and preventable conditions, we need to be able to catch them in time, and that planning and foresight will be crucial for the future.
John Redwood
When I asked representatives of the Health Department how many chief executives there were in NHS England, they said that they did not know. Has my right hon. Friend had any more success than I have in finding out how much senior management there is, how it is aligned with the interests of patients and how wisely it is going to spend the extra money he is giving it?
Mr Clarke
My right hon. Friend is right to say that with this budget for the NHS comes a responsibility for that organisation to be absolutely open and candid—in a way that, frankly, it has too often not been—about where its resources are deployed, and certainly to avoid funding a culture of managerialism at the expense of the patients. We have had recent success in securing some of the data that we have been looking for, but this is a subject where ongoing pressure from across the House for greater transparency is welcome. Certainly if there is any data that we hold that my right hon. Friend would like to see, I will do my best to facilitate that.
UK Gross Domestic Product
Lord Redwood Excerpts(3 years, 10 months ago)
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John Glen
As ever, I am grateful to the right hon. Gentleman for his remarks. I do not accept his characterisation of the situation. What I said in my response to him was that today’s data point can be explained by the specific impact of the rapid fall-off in the testing programme. Mass testing ended on 1 April, and that constituted 0.5% of headline growth. We have also seen the impact of the Russian invasion and the impact on the supply chain across the economy. Many economies across the G7 are experiencing a significant impact on their economies and their level of growth.
The Chancellor has been clear in his long-term plan for growth and in his Mais lecture that the Government are committed to investing in research and development, investing in infrastructure and looking at how we can adjust the fiscal burden for business, in particular, to enable that growth to happen. Of course, in subsequent fiscal events, those options remain open to him.
John Redwood (Wokingham) (Con)
Why are the UK Government the only Government of an advanced country making a big increase in the tax burden this year and next, at exactly the same time as we are seeing very necessary monetary tightening to control inflation and a huge hit to net incomes from that inflation itself? Is that big tax rise not bound to make things worse and slow the economy too much?
John Glen
We always listen carefully to my right hon. Friend. As he will know, we cut taxes earlier this year for hundreds of thousands of businesses though an increase in the employment allowance. We have also slashed fuel duty and halved business rates for eligible high street firms. We will continue to support growth through tax incentives, including the annual investment allowance and the super deduction—the biggest two-year business cuts in modern British history.
As I said in my response to the right hon. Member for Wolverhampton South East (Mr McFadden) a few moments ago, we look forward to working closely with him and Back Benchers to construct the right agenda going into the future.
Economy Update
Lord Redwood Excerpts(3 years, 10 months ago)
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Rishi Sunak
I know that, for some people, it will never be enough. That is why the SNP’s plans would leave Scotland with, I think, a 20% budget deficit and bankrupt the country. That is not something that we will ever do to the people of Scotland or the United Kingdom.
The hon Member’s point on food prices was surprising and slightly puzzling, given I have just returned from a meeting of Finance Ministers from around the world where everyone was talking about increasing food prices. As far as I know, they did not all leave the European Union, but I will leave that to her.
The hon. Member talked about benefits uprating. Perhaps she did not understand exactly what we were announcing. What we are doing for those on means-tested benefits is more generous than uprating. On average, uprating would be worth just over £500, whereas the one-off payment is worth £650.
The hon. Member also talked about timing. She mentioned many things that have happened this week. The other thing that happened this week is that we heard from Ofgem, and we got more certainty on what the price cap will be in autumn. That is the single most important factor in trying to size the support that we are providing to people, because it is energy costs that are the biggest driver of the inflation that we seeing now.
John Redwood (Wokingham) (Con)
When the Chancellor approved £150 billion of extra cash to be printed in November 2020 and gave a full guarantee against losses on the bonds, did he think that there could be any inflationary and public spending risk from that? I fully support giving back the huge windfall taxes that he is already collecting on energy, the VAT on fuel, the rip-off at the pumps and the much-enhanced profits tax coming from North sea oil and gas. That should be given back because people need some relief. On inflation, though, what did he think when he printed the money?
Rishi Sunak
I am grateful to my right hon. Friend for his question. He and I have talked about inflation for quite a while. He will know that I have long been concerned about the potential of rising inflation and interest rates. It is something that he and I discussed very early in my time in this job. That is why, from the beginning, I have been careful to protect our public finances against the costs of rising inflation and interest rates. I am glad that we took those decisions. Now, because of that, we are in a position to act and to support people.
Cost of Living Increases
Lord Redwood Excerpts(4 years ago)
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Stephen Flynn
Absolutely—I could not agree more wholeheartedly with my hon. Friend on that. He makes an extremely important point, which he has been making for many months, and it is time the Government listened and took action in that regard.
John Redwood (Wokingham) (Con)
Would the spokesman and his party now agree that we need to get a lot more gas and oil out of the North sea, which would generate tax revenue that the Treasury could use to ease the squeeze, instead of paying huge sums of money to Qatar and Russia for liquefied natural gas?
Stephen Flynn
The right hon. Gentleman makes an interesting point. Of course, he will be cognisant of the fact that when the oil and gas comes out of the ground it goes into the hands of multinational countries. Do we want to be in a situation in which that gas benefits us here, rather than those abroad? Absolutely. Should we be importing from Russia? Absolutely not, and the Government have been right to take action on that. Nevertheless, what I want to see from his Government, which he should want too, is a turbocharging of investment in renewables. When are they going to come forward with their energy security strategy? I have heard talk about it in the paper, but there has been no clarity whatsoever. I shall come back to that later in my speech.
John Redwood
Most of my constituents still have gas boilers. Renewables will work one day, but the immediate crisis is that we are short of gas. Do we have our own or do we have foreign gas? If we have our own, we get tax revenue.
Stephen Flynn
It is interesting to hear that we are short of gas when I regularly hear the opposite from the Minister for Energy, Clean Growth and Climate Change. That is the important point: Government Members can try to disagree with their own Government on these matters, but in real terms we are self-sufficient. Scotland is self-sufficient when it comes to oil and gas, but we can and must go so much further on renewables. If the right hon. Gentleman wants to hang around, he will hear me speak about that in due course.
Helen Whately
We have the price cap in this country, which means that customers have been protected from the volatility in global energy prices over recent months. At the moment there is further volatility following the impact on those prices of Russia invading Ukraine, but that is not going to hit the vast majority of households’ energy bills over the coming months. We will have to get to October to see the implications of that. What we have done—as I have just mentioned; I am sorry if the right hon. Gentleman was not listening—is put in place a support package worth £9.1 billion particularly to help those who will find it more challenging to pay their bills.
John Redwood
Over the last year, the economy has grown a lot faster because the Treasury did not hike tax rates but instead went for growth. That was a great policy, so why reverse it? Is there not a danger that these tax rises and massive increases in energy prices will slow the economy down too much? If that happens, the Government will have a revenue problem.
Helen Whately
If my right hon. Friend will give me a little time, I will come on to the importance of growth to our economy, which is the right answer for the longer term in ensuring that we improve people’s standard of living.
Pressures on household finances are not generally the consequence of one single price rise; they are typically affected by an amalgam of different factors. Remedying the pressure on households therefore requires taking action on a range of fronts, not just on energy bills. Again and again, that is what this Government have done and are doing. We are acting in dozens of ways to support working families. For instance, over the winter, the £500 million household support fund has helped vulnerable households with the cost of essentials such as food, clothing and utilities. Local authorities in England have allocated the lion’s share of that funding to ensuring that it reached those who needed it most, with 50% ring-fenced for households with children. Additional funding was allocated to the devolved Administrations, including the Scottish Government, in the usual way.
We have also reduced the universal credit taper rate and increased universal credit work allowances by £500 to ensure that work pays. This is essentially a £2 billion tax cut for the lowest paid in society. It is helping around 2 million households to keep an average of an extra £1,000 per annum in their pocket. Next month, the national living wage is increasing by 6.6% to £9.50 an hour, again benefiting more than 2 million workers and meaning an increase of over £1,000 in the annual earnings of a full-time worker on the national living wage. And we are committed to going further, so the national living wage will reach two thirds of median earnings for those over 21 by 2024, provided that economic conditions allow. We have supported working families in other ways too: doubling free childcare for eligible parents, which is worth around £5,000 per child every year, and introducing tax-free childcare, which will provide working parents with 20% support on childcare costs up to £10,000.