Budget Resolutions and Economic Situation

Kit Malthouse Excerpts

Wednesday 28th October 2026 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

It is a pleasure to follow the hon. Member for Carlisle (Ms Minns), although she will not be surprised to hear that she and I have very different views about the Budget. I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a business owner and, frankly, to my interest as a father, although that is not because I think I am going to be particularly affected—I do not think anybody will be particularly affected by this rather bland bowl of muesli of a Budget from a Chancellor who was quite obviously decaffeinated this morning.

I am quite exercised about the Budget because, while a number of colleagues have said it is a missed opportunity, I think it is a lot worse than that. In many ways it is profoundly negligent of a Government to produce such a Budget in the face of three distinct emergencies—three distinct fires burning in the basement of the British economy—some of which have been made worse and are forecast to be worse because of the Budget.

The first of those, which a number of hon. Members have raised, is our debt. It is worth remarking, as some have, that the OBR has said that we will borrow even more in every year of the forecast—particularly next year. Combined with the massive downgrade of growth for next year, that is alarming. It is worth colleagues remembering that the OBR has quite a poor record in medium-term forecasting—it is generally optimistic. We can broadly agree that it gets the year 1 forecast right, plus or minus, but after that it is wildly optimistic, and every year it get the forecast completely wrong, particularly on debt. That matters, because the country is effectively running a structural deficit at the moment, and because of some of the measures in this Budget and the previous two, the public sector is basically eating the private sector every year we proceed. The private sector’s ability to support the public sector is reduced as a result, and we find ourselves caught in a weird kind of vice, exacerbated by the second emergency, which I will come to.

Even in some of the measures today, there seems to be no contemplation of that problem. Who does the Chancellor think will pay the bank levy—this 3% extra on corporation tax? Certainly not the international banks—they will manage to retain their return on capital. It will be the businesses, and the consumers who bank with them, who will see higher mortgage rates and higher interest rates on their loans. That money will be extracted from the private sector and sent directly to the public sector to be spent. If we continue on this path, I am afraid that the IMF has forecast that by 2050, well over half our GDP will be spent by the Government. That is a disaster, because once in that vortex it is hard to come out of it.

The second emergency, which is exacerbating the first—there was no talk of it today and, in fact, there were no measures to try to help with it—is our demographic problem. I am afraid we are not having enough children in this country. We are now down to 1.39 children born to every mother, which is below replacement rate, so we have a shrinking body of workers who are having more and more difficulty supporting an expanding body of retirees. The pyramid is inverting, as we have seen in other countries, such as Japan, to disastrous effect. If the public sector and the retired sector suck more and more money out of the private sector, we will find ourselves in a downward spiral, which will be much to our detriment.

The third emergency is one of capital. The Chancellor raised the issue of capital and spoke of trying to set entrepreneurs free. I have been a moderately successful entrepreneur during my life, and I can tell hon. Members that nothing in the Budget has done anything to reverse the assault on the return on risk that, sadly, has taken place over the last 20 years under Governments of all stripes.

[Noah Law]

The right hon. Member says that nothing has been done to reverse the so-called assault on the return on risk. How about incentivising the risk takers—the founders—who will now benefit from very targeted, fiscally responsible benefits on capital gains?

[Kit Malthouse]

I am glad that the hon. Gentleman has raised that point. If he looks at the founders’ relief in the scorecard and puts it against the reduction in business asset disposal relief, he will see that effectively there has been a straight transfer of value from family businesses, high street shops and smaller businesses to the tech bros who are going to benefit from founders’ relief. We have yet to see the detail on that relief, but the scorecard shows a net cost to the Government of about £200 million. That is negligible in the face of an economy the size of ours.

That is a real problem, because we are standing at the bottom of the ellipse of human achievement, the like of which we have not seen since the industrial revolution. This country has got its capitalism wrong in the past. We missed the IT revolution of the ’80s and ’90s because we were too busy worrying about house prices. British capital has kind of stultified and failed to take advantage of these massive advances in technology, much to our detriment in terms of national wealth.

We still live off, to a certain extent, the wealth that was created during the Victorian era. Many of our largest companies came about because of British capitalism—naked capitalism—during that era. The palaces we live in, the Cavendish Laboratory at Cambridge, King’s College, Cambridge, and the NHS—all of that built from the profits of British capitalism. We have neglected it over the last 20 years or so, particularly by attacking the return on risk. The rise in taxation on dividends, the rises in capital gains tax, the reduction in any kind of relief for entrepreneurs, and the complexity of the enterprise investment scheme and the seed enterprise investment scheme—all that is a massive deterrent to anybody who wants to start a business and take a risk. Until we realise that we will not get growth until we set capital free, we will continue to be trapped in this vortex of a demographic pyramid inversion and ever-mounting debts as the public sector consumes the private sector.

The last thing I want to raise is the new powers that are being granted to the Revenue. All Members should beware of what is hidden in the detail of those new powers. We are getting to a situation where our economy is existing to support the Revenue rather than the other way around.

[Mr Speaker]

I call Chris Evans.