Middle East: Economic Response
Debate between Judith Cummins and Rachel Reeves(3 weeks ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Thank you very much, Madam Deputy Speaker. With permission, I will make a statement on the Government’s economic response to the war in Iran and the action that we are taking to support families and businesses with rising costs.
The Government have the right economic plan. I said I would grow the economy, and last week the Office for National Statistics confirmed that Britain’s economy was the fastest-growing in the G7 for the first quarter of this year. We beat the Office for Budget Responsibility’s forecast in the spring, with economic growth at 0.6% in the three months to March. And because of the resilience of our economy, this week the International Monetary Fund upgraded Britain’s forecast for this year.
I said I would cut borrowing. Borrowing last year was £20 billion lower than the previous year, and the latest forecasts show it falling in every year of this Parliament. The IMF has backed our economic plan, saying that the Government’s fiscal framework strikes
“a good balance between deficit reduction and growth-friendly spending”.
I said I would cut the cost of living. Since the election, interest rates have been cut six times; real wages have continued to rise in every single month since I became Chancellor; and yesterday the ONS confirmed that inflation fell faster than expected in April, making the UK the only G7 economy where inflation fell last month.
We have the right economic plan, but the conflict in the middle east poses a significant challenge to the world’s economy, including our own. I have not shied away from my criticism of the war; I believe it to have been a mistake. Nor have I ignored the costs that it will bring to bear on the British people. I have been clear-eyed about my duty to do what I can to support families and businesses; to be responsive to a changing world, and responsible in the national interest.
Next week, Ofgem will confirm the level of the energy price cap that will apply from July. I know that any increase will be felt by families. Because of the decision I made in last year’s Budget to cut £150 from energy bills, we have lessened the impact of rising prices, and current external forecasts suggest that the cap from July will be at a similar level to the cap in April last year. We stand ready to act if market conditions worsen significantly later this year, and I have been leading cross-Government contingency work on the design of potential future targeted and temporary support.
For businesses, any support will also need to be carefully targeted at the firms most exposed to the crisis, but although many firms have been insulated from recent price rises through fixed-price contracts, there are sectors that face particular structural issues related to energy costs. That is why we have already increased support for our most energy-intensive industries through the British industry competitiveness scheme, which we have brought forward. It is also why we have built resilience in our critical infrastructure and industrial strategy sectors, where supply chains are critical for growth and security.
Following representations from my right hon. Friend the Member for Redcar (Anna Turley) and my hon. Friends the Members for Mid Cheshire (Andrew Cooper) and for Bathgate and Linlithgow (Kirsteen Sullivan), and building on the good work of the Minister for Industry, my hon. Friend the Member for Stockton North (Chris McDonald), I am today establishing a £350 million critical chemicals resilience fund to support strategically important producers. Having listened to hon. Friends, including my hon. Friends the Members for Stoke-on-Trent Central (Gareth Snell), for Stoke-on-Trent North (David Williams), for Stoke-on-Trent South (Dr Gardner) and for Amber Valley (Linsey Farnsworth), as well as workers represented by the GMB union, I am today announcing a new £120 million fund to help our historic ceramics sector, helping it to increase efficiency and drive down energy costs. We will always stand up for British industry and British jobs.
This week, the Government have also set out additional, targeted support for those businesses most exposed to rising fuel costs. We are granting hauliers a 12-month road tax holiday for heavy goods vehicles, saving the typical heavy lorry up to £912. To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year, and having heard from my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon) and the trade union Unison, I can today announce a 10p per mile increase in tax-free mileage rates, backdated to April 2026. This will benefit those who need to drive for work, from care workers to plumbers.
When a country faces challenges because of higher oil and gas prices, we must ensure that those who benefit from increased prices and volatility pay their fair share. In my first Budget, I extended and increased the energy profits levy. Last year, I announced a new permanent windfall tax regime on oil and gas prices. Last month, I increased the electricity generator levy, alongside further action to weaken the link between high gas prices and electricity prices. Today, I am bringing forward specific changes to the taxation of foreign branch profits, changing how companies are taxed in relation to their overseas activities. Currently, some oil and gas groups that operate overseas through foreign branches have structured their tax affairs in a way that ensures they pay little or no corporation tax on their UK energy trading profits. Today, we are putting an end to that practice. We expect these reforms to raise hundreds of millions of pounds a year and fund the package of measures set out today, with costings certified by the OBR forecast in the usual way.
I know the pressure that family finances are under, which is why I have already taken action to provide help. I have increased the national living wage and the national minimum wage to their highest rates ever, frozen prescription charges for two years in a row, and frozen rail fares for the first time in 30 years. I have also taken £150 off energy bills, which contributed to last month’s fall in inflation. However, I want to go further, and today I am taking further action to ease the burden on family finances.
First, on fuel duty, I have already extended the 5p cut twice since the election. I can confirm today that there will be no rise in fuel duty this year, recognising the pressure that the war has put on fuel prices.
Secondly, I know that the cost of the weekly shop is often one of the biggest worries for families, so last month I met supermarkets to urge them to do all they can to keep prices low. Today I am taking action by suspending tariffs on over 100 different foods sold in supermarkets. I am clear that I expect supermarkets to pass those savings on in full to their customers.
Thirdly, I will not tolerate any company exploiting the current situation to make excess profits at consumers’ expense. As such, I am bringing forward tough new powers so that the Competition and Markets Authority and other regulators can take action when firms break the rules.
Fourthly, for many families, driving is not always an option. Buses are the most popular form of public transport in Britain, with over 4 billion journeys made last year. I have already extended the £3 bus fare cap to March 2027, and today I can confirm that bus travel across England will be free for children aged between five and 15 throughout August.
Finally, I recognise that what matters for families is not just getting by, but being able to enjoy time together without worrying about the next bill. That is why I am launching the great British summer savings scheme, to help families and to support our hospitality sector. I can today announce a temporary cut in the rate of VAT on summer attractions from 20% to 5% over the summer holidays. This will apply to ticket prices for both adults and children, covering attractions such as fairs, theme parks, zoos and museums. It will include children’s tickets for cinemas, concerts, soft play and the theatre, and it will also cut the cost of children’s meals in restaurants and cafés from 20% VAT to 5%. These changes will apply across the UK from the start of the Scottish school holidays on 25 June and will run until the end of the school holidays in England, Wales and Northern Ireland on 1 September.
This Government have the right economic plan. We promised to grow the economy, and we have. We promised to cut inflation, and we have. We promised to cut the cost of living, and we are—promises made by a Labour Government, promises delivered by a Labour Government. I commend this statement to the House.
Rachel Reeves
Let me take the issues that the shadow Chancellor has raised. On fuel duty, when I became Chancellor of the Exchequer, the freeze in fuel duty was due to expire, under the plan set out in the Conservatives’ final Budget, within a matter of months. I have frozen fuel duty twice already and I have frozen it again today; indeed, I have frozen it with more than three months to go before the increase was due to happen, giving people plenty of time.
I have always said, since the middle east conflict began, that I would keep an eye on what was happening to oil and gas prices and set out plans ahead of the change due to come into effect in September. That is exactly what I have done. I have also gone further in three specific areas, with additional support for hauliers, additional support for red diesel—particularly helping the rail freight industry and farmers—and the higher mileage rates. The shadow chancellor says he welcomes the changes on mileage rates. It is the first time they have been increased since 2011, so if he welcomes them so much, why did the Conservatives not increase them when they had 14 years in government?
On the Iran conflict, let us remember that this is a war that the UK did not start and this Government chose not to join, whereas the Conservatives and Reform were cheering on the conflict every step of the way. The impact on the UK and global economies would be much more severe if we had heeded the pleas of Reform and the Conservatives to join that conflict.
The shadow Chancellor talks about inflation and growth. Yesterday, the numbers showed that inflation had fallen; we are the only country in the G7 where inflation fell last month. The IMF has revised up our growth forecast and we had the fastest growth of the G7 in the first quarter of this year. The shadow Chancellor asks whether that will be paid for with new borrowing. No, it will not. If he had been listening, he would have heard the changes we are making around the foreign branch exemption. That will raise hundreds of millions of pounds a year, which is why we are able to afford the package that we have announced today.
The shadow Chancellor mentioned high streets. Because of the Pride in Place money that I announced at the Budget, the banking hubs and the changes that we made to business rates, which have seen those rates for retail and hospitality come down significantly compared with the plans we inherited from the Conservative Government, we can reinvigorate our high streets.
The shadow Chancellor mentioned borrowing. Borrowing has fallen below 5% for the first time since 2019 because of the actions that I have taken as Chancellor. Borrowing is expected to fall in every year of this Parliament—very different from what happened under the Conservatives. Employment and activity remain in the top half of the OECD and the G7. The biggest benefits boom came under the last Conservative Government, when the shadow Chancellor was the Work and Pensions Secretary.
Oil and gas will play an important role in our economy for many years to come, but we also need to invest in renewable energy, which is why we announced yesterday restrictions in the number of judicial reviews, which are holding up investment in clean energy. It is a shame that the Conservatives voted against our Planning and Infrastructure Act 2025 and it is a shame that the Liberal Democrats abstained on it. We are determined to get Britain building, including building the energy infrastructure we need to get bills down.
Just a couple of weeks ago, I announced changes around tie-backs to make it easier for oil and gas companies to exploit their reserves of oil and gas in the North sea. Jackdaw and Rosebank would have gone ahead if it had not been for the last Government messing up the way they legislated. We will shortly announce the decisions, which the Secretary of State for Energy and Net Zero will make. I am very clear that oil and gas will play an important role in the UK for many years to come, adding to our energy security alongside investment in nuclear, small modular reactors, floating offshore wind and onshore wind and solar, opposed by the Conservative party.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
It never fails to amaze me that the shadow Chancellor tries to lecture this Government on inflation when many of us were here in September 2022 when the Conservative party crashed the economy. I welcome my right hon. Friend’s interventions. I am particularly interested in the cut in VAT in the leisure sector, and I hope that she will commission a full study from the Exchequer Secretary to the Treasury about the impact, because it could be a great way to fuel, promote and keep our stretched leisure and hospitality sector going. Will she commit to that?
Rachel Reeves
I agree with my hon. Friend that we will take no lessons from the Conservatives on inflation, when it reached more than 11% when they were last in office. On VAT in the leisure sector, we are making the changes from 25 June right until 1 September to help boost the hospitality sector but also, crucially, to help families during the summer. Our expectation is that this will cost taxpayers money, but it is funded through the changes that we are making around the foreign branch exemption, so companies cannot book losses overseas to avoid paying their fair share of corporation tax here in Britain.
Spending Review 2025
Debate between Judith Cummins and Rachel Reeves(1 year ago)
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Madam Deputy Speaker (Judith Cummins)
Order. I need to be able to hear, and I am sure our constituents also want to hear.
Rachel Reeves
The shadow Chancellor said:
“The credibility of the UK’s economic framework was undermined by spending billions…with no proper plan for how this would be paid for.”
I could not put it better myself. He could have gone a lot further. For example, he could not even bring himself to mention Liz Truss by name—Stride by name, baby steps by nature—but at least he has made a start. He also spoke about
“the death of what we might call the Age of Thoughtfulness.”
Speaking of the death of thoughtfulness, let me turn to the shadow Chancellor’s response to the spending review. He welcomed our nuclear investment of £30 billion, but he said it is not enough. He welcomed our defence investment of £11 billion, but he said it was not enough. He and his party opposed the decisions that this Government have taken to make those announcements possible by voting against the Budget in October. You cannot spend the money if you will not raise the money. That is a lesson from Liz Truss that he has already forgotten.
The shadow Chancellor complained about the level of investment that I have announced, ignoring the fact that the reason this investment is so important is because his party oversaw 14 years of cratering investment, stagnating wages and public service collapse. Let me remind him of what I said: the Tories’ fiscal rules guaranteed neither stability nor investment, and that is why I changed them, so we can get stability and investment. All their fiscal rules enabled was them to crash the economy, and the working people of Britain will never forgive them for doing that.
The Conservatives set themselves against investment in the renewal of Britain. They set themselves against NHS investment, free school meals, investment in skills, investment in carbon capture and storage, investment in transport in our towns and cities—investment in everything that we have set out today—and yet the British people voted for that investment. The right hon. Gentleman says that the Home Office budget involves an increase in asylum costs. It does not. Asylum costs are coming down under this Labour Government because we are deporting more people and getting them out of hotels. He says we are cutting police spending; we are increasing it by 2.3% a year in real terms. We have had no apology for the damage the Conservatives did to our economy and our public services.
Interest rates have been cut four times in the past 11 months; GDP was the fastest growing of all G7 economies in the first quarter of the year; business confidence is rising; 500,000 more people are in work; record investment has been made in Britain; real wages have increased more in 10 months than they did in 10 years of a Conservative Government; the national living wage has increased, giving 3 million working people a pay rise; and we have done all that without increasing taxes on working people. Those are the choices we have made. That is the difference we are making.
In the spending review today, we set out the spending that we announced in the Budget last year and in the spring statement—not a penny more, not a penny less. I said in the Budget and in the spring statement that public services must now live within the means that we have set, and we have achieved that. There will be a Budget later this year, and in that Budget we will set out all the fiscal plans in the round. But we have already drawn a line under the Tory mismanagement, with tax rises last year, and we will never have to repeat a Budget like that again because we will never have to clean up after the mess that the Conservatives made again.
The reason that this Labour Government have spent their first year fixing the foundations of our economy and stabilising our public finances is because it is what we had to do. The Government of which the shadow Chancellor was a part of left an unenviable legacy, which is why his party is, in his own words, “in a difficult place.”
We have made our choices. We are removing barriers to growth, which were untouched by the Conservatives in their 14 years in office; strengthening Britain’s security with the biggest real-terms increase in defence spending since the end of the cold war, which the Conservatives did not do in their 14 years in office; bringing our health service into the 21st century after 14 years of Conservative neglect; investing in Britain’s renewal to repair the damage done by the Conservatives in their 14 years in office; and, in stark contrast to the Conservatives’ 14 years of chaos, waste and decline, we are delivering on the priorities of the British people.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I congratulate my right hon. Friend on delivering this spending review—the first zero-based review in a very long time. It is vital that as taxpayers—the citizens—are looking carefully at their spending in this cost of living crisis, that Government do that too. We look forward to having the Chief Secretary to the Treasury before the Committee in two weeks’ time to consider the review in more detail.
I note from the figures that the Chancellor has made a good fist of ensuring that Departments have more than they did under the Conservatives in many cases, and I welcome her work to deliver on tackling child poverty, a scourge on our society. I note from my brief glimpse, however, that there is a smaller increase for the Ministry of Housing, Communities and Local Government than there would have been—there is the £39 billion over a decade for affordable social housing. Children living in poverty also face poverty of situation in many cases. Will she expand on how she and the Deputy Prime Minister will deliver that money to provide the social housing that so many children in poverty desperately need?
Rachel Reeves
I appreciate my hon. Friend’s welcoming of the breakfast clubs, free school meals and the capping of school uniform costs, which will help families living in poverty. The free school meals will, as she knows, lift 100,000 children out of poverty. She mentions the affordable homes grant, which will have its biggest ever increase. We have set that budget for 10 years to give certainty to the sector, so that it understands what is available. In addition, we have set out some social rent changes to give certainty to the sector to invest for the future.
Rachel Reeves
We as a Government were proud to be able to step in and save British Steel at Scunthorpe, and again I thank my hon. Friend the Member for Scunthorpe, but it is not just Scunthorpe. There are also opportunities in Sheffield and Port Talbot, because as we build this infrastructure—whether it is trams and trains, nuclear power or submarines—we want to use steel made in Britain. That is a really exciting opportunity, and the investments we are making in small modular reactors and fusion in Nottinghamshire and Derby create great opportunities for jobs. That is why we are also making a record investment in skills through the spending review, so that young people in North East Derbyshire and beyond can get access to the jobs that are being created.
Rachel Reeves
I thank my hon. Friend for making those representations to me and to the Secretary of State for Transport on the importance of better rail connections so that people in Bangor Aberconwy and across north Wales can better access good jobs and public services. That is why we have put in £445 million at the spending review.
Spring Statement
Debate between Judith Cummins and Rachel Reeves(1 year, 2 months ago)
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Rachel Reeves
I was pleased to mention my hon. Friend’s constituency in my statement. As the home of the British Army, on behalf of this Government, we thank the people of Aldershot and Farnborough for the service that they give our country every single day.
My hon. Friend is right to mention the importance of companies in the defence sector, whether big or small, being able to access finance. That has never been more important than it is today, when the threats posed by Putin continue to grow. I therefore urge everyone in financial services to do their part to make sure that our fantastic defence start-ups have the money that they need to grow and help defend our country and our values.
UK-China Economic and Financial Dialogue
Debate between Judith Cummins and Rachel Reeves(1 year, 4 months ago)
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Rachel Reeves
As I have already set out, one of the issues I was able to raise with my counterparts in China was forced labour, particularly in Xinjiang. As I said in answer to the question from the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), I have also been really clear that any company seeking to list in London has to meet stringent requirements, as set out by the United Nations and the OECD, on labour supply and the treatment of workers.