Liam Fox
Main Page: Liam Fox (Conservative - North Somerset)Department Debates - View all Liam Fox's debates with the HM Treasury
Energy (oil and gas) profits levy
Liam Fox Excerpts(2 years, 1 month ago)
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Tulip Siddiq
I will make a bit more progress, but I will come to the Members in a minute. I am happy to take interventions.
We of course welcome that, after months of kicking and screaming, the Government have decided to adopt Labour’s policy of strengthening the windfall tax on energy giants, but they are still leaving billions of pounds on the table by giving a tax break to companies drilling for new polluting fossil fuels. Labour would have raised over £10 billion more—£10 billion, at the time of a cost of living crisis, is an enormous amount—over the next three years than the Government’s proposal by closing that unfair loophole, taxing oil and gas at the same level as other countries such as Norway and backdating the tax to January of this year.
Dr Liam Fox (North Somerset) (Con)
It has been clear from this debate and the previous debate that the backdrop to our economic discussion is one of continuing post-pandemic global economic disruption and the rise of global inflation, caused not least by Putin’s invasion of Ukraine. If anyone still believes that we do not live in an interconnected and interdependent world, they are simply not looking at the evidence around us.
Part of the difficulty in assessing the data is the opacity of some of the figures on post-pandemic global trading and investment, but some patterns are now clearly beginning to emerge. According to the Office for Budget Responsibility, in the fourth quarter of 2021, UK imports from the European Union dropped by 18%, but global imports from the rest of the world were up by more than 10% and UK exports to the European Union in July this year reached an all-time high of £17.4 billion. In other words, despite the fact that there are greater barriers to trade on the European Union side than on the UK side, British exports to Europe are actually managing to be more robust than European exports to the United Kingdom. So let us be clear: we do not need a new relationship with the European Union, Swiss or otherwise. We do not require freedom of movement, integration into the European single market or integration of EU law into the UK.
Kit Malthouse
My right hon. Friend has outlined some impressive figures. Does he recall that one of the themes of the Brexit debate was that our trading patterns should change? We said that there was a big wide world out there to which we had to look, from a trade point of view, that we had become over-reliant on the EU and that there were more exciting markets elsewhere that were growing much more strongly and that we could participate in.
Dr Fox
I entirely agree. The concept of the bloc in trade terms is very second half of the 20th century. We need to look at the growing markets that give greater opportunities for the United Kingdom in goods and services. The fact that they are not immediately geographically adjacent to us should not be our primary concern. We need to move with the trends in the global economy, not focus on what is a largely ossified view of the world based on the post-second world war consensus.
When we look at the origins of the inflation that we are facing in the United Kingdom, we see that there are several of them. They have been referenced a lot during this debate. The post-pandemic supply issues are still ricocheting around the global economy and particularly harming developing countries at the present time. Also, the central banks—not just the Bank of England but the Federal Reserve in the United States and the European Central Bank—got into a group-think on what they laughingly call the modern monetarists, which means that they are not monetarists at all. They believed that they had found some sort of monetary alchemy through which they could continue to print money faster than the economies were growing without creating inflation. I believe that is why there is higher inflation in the United States, the United Kingdom and Europe than in other countries—notably Switzerland, which sits in the middle of the eurozone but did not follow the same expansionist monetary policies.
By far the greatest boost to inflation has come from Putin’s invasion of Ukraine, however. That has come about in a number of ways, which I will come to in just a moment, but we must remind ourselves that inflation is not just an economic evil; it is a moral and social evil as well. The poorest people in our society are hit the hardest by inflation because they spend more of their income on non-discretionary items. It also transfers money from the savers to the borrowers in society, which is not something that a Conservative Government should want to see. The Government have done much in this statement to protect those on low and fixed incomes, including an extra £26 billion in cost of living support, particularly on fuel, on top of what we have spent already, and an extra £11 billion on uprating benefits. The Government introduced those two items to protect those on low and fixed incomes and, taken together, they are the size of the United Kingdom’s defence budget. These are not small sums. Our increased spending on education and health is hugely welcome, especially as we catch up on the post-pandemic disruption, but to be frank, even the generous sums put forward by the Government will largely be eaten up by inflation until we get it under control.
And that is before we come to the most frightening item of all, the fact that this year we will be spending £120 billion on debt interest payments. For reference, we spend only £134 billion on NHS England each year, so we are spending almost the NHS budget on debt interest payments. We need to recognise that we cannot increase our debt further. As my right hon. Friend the Member for North West Hampshire (Kit Malthouse) said, around 20% of our debt is now index-linked and is therefore very vulnerable to rises in the retail price index. Duncan Simpson, the chief executive of the TaxPayers Alliance, said:
“The spiralling cost of servicing the national debt is deeply concerning. Taxpayers’ money that should be spent on frontline services or keeping rates down is instead going towards interest payments that outsize the costs of government departments.”
If we cannot raise debt any further, either we have to see spending come down or taxes go up, or we have to increase Britain’s wealth from the rest of the global economy. The latter is difficult in current global conditions and the Government have correctly, but rather disappointingly, from a political perspective, had to see taxes rise. That sets a clear way in which to see our future priorities. The first thing is to bear down on inflation. At the same time, we have to get control of the public finances and then we have to get our taxes back down.
I hope the Opposition will reflect on this point today. We have heard from the Opposition Front Bench on both days of this debate that we are facing a recession made in Downing Street. Currently, the greatest source of global inflation is Putin’s invasion of Ukraine and rising global commodity prices, particularly food and fuel, which is causing potential starvation in vulnerable states, with widespread social dislocation and increased international migration.
Dr Fox
I will not give way.
Those who talk about a recession made in Downing Street might want to ask themselves how much they are absolving Vladimir Putin of the global inflation we see today and whether, in fact, they are neglecting their duty to be patriotic at this time.
Conservatives do not want to see taxes rise. If we have to see temporary rises in taxation, the necessary corollary is that, as soon as inflation starts to be controlled, we will see those taxes coming down again. I would go further than my right hon. Friend the Member for North West Hampshire in one respect: this is not just a debate about growth, because any dummy can borrow tomorrow’s money to spend today and call the increased activity “growth,” which has been central to every Labour Government since the second world war.
The Government need to focus on wealth creation, in which we turn our unique intellectual property into goods and services that do not exist today, or into better goods and services than exist today. That means dealing with the supply-side constraints on the economy, making more private capital available to scale up companies, getting more international investment in the United Kingdom and making us more competitive globally. No one in the world owes us a living, and no Government can guarantee increasing living standards to the next generation. Only a successful free-market country in a free-market world can achieve that, and the sooner we get there, the better.
Sarah Olney (Richmond Park) (LD)
This is a cost of chaos Budget. Everyone is now paying the price for Conservative incompetence. This Conservative Government crashed our economy with their reckless, unfunded tax cuts. They have presided over years of low growth, low investment and declining productivity, and now they are eroding our public services and hiking taxes on ordinary people, all while slashing taxes on the big banks and refusing to close the windfall tax loophole that has allowed Shell to avoid paying a single penny.
The British people need a Government with a plan for a fairer economy that can secure future prosperity.
Sarah Olney
I will not give way, as the right hon. Gentleman has just spoken.
The British people need a Government who truly value public services, and who focus on removing barriers to economic growth by tackling workforce issues and rebuilding trade, yet all we have instead is Conservative chaos and incompetence. Thanks to the Conservatives’ economic mismanagement, Britain is getting poorer; we are all getting poorer.
Families across the UK are set for the largest fall in living standards since records began. The coming months will see family budgets put under extreme pressure. Mortgage payments are set to explode, doubling to their highest level on record next year. Energy bills will be almost £2,000 a year higher than they were in 2021, and the weekly shop is becoming more and more expensive. This is simply unmanageable with the tax rises announced by the Chancellor.
The Conservatives’ disastrous mini-Budget cost the public finances £30 billion, and now the Government have hiked taxes by £24 billion, forcing the public to clean up their mess. Everyone will be hit by unfair stealth tax rises, and more than 5 million people will be dragged into a higher band as a result, yet they will not see any benefit from the higher taxes they pay.
The Conservative Government are trying to pin the blame for all our economic woes on global factors, but the fact is these global challenges are hitting the UK harder than other major economies. We are set for the worst GDP decline in Europe next year, we are the only G7 country to have a smaller economy than before the pandemic and we have the third lowest growth forecast in the OECD.
Businesses are also really struggling right now. Conservative chaos and incompetence are forcing small businesses to suffer under crippling uncertainty, and many have already closed their doors. Last week, I spoke to a group of independent publicans in my constituency, and every single one had grave concerns about the future viability of their business. One publican told me that their current situation is 10 times worse than during the pandemic, because this time round they have no support from the Government. The business rates relief announced in the autumn statement is cold comfort to a sector that was promised a fundamental review of the unfair rates system. The previous reduction of VAT to 5% gave hospitality a lifeline during the pandemic, and the publicans I speak to say that a return to this rate would provide much-needed relief in the new year as the cost of living really starts to bite.
Publicans also need urgent clarity on energy bill support after April, as they will not be able to survive without continued assistance. I urge the Government to listen to the concerns of the hospitality sector, which is so integral to business, British industry and local communities. I would welcome a statement from the Minister for Enterprise, Markets and Small Business, the hon. Member for Thirsk and Malton (Kevin Hollinrake), on the steps the Government will take to support hospitality in the months ahead.
I was pleased to hear the Chancellor finally acknowledge workforce constraints in his speech last Thursday. Economic inactivity is a huge barrier to growth, and I welcome the review of the issues holding back workforce participation. In his review, I urge the Secretary of State for Work and Pensions to consider the impact of our inadequate childcare system on women’s participation in the labour market.
The Conservatives must also accept that their failure to deliver effective public services has led to a dramatic increase in the number of people who are long-term sick. The OBR forecasts that an additional 1.1 million people will need health and disability benefits in four years’ time, taking the number registered as unable to work to a record high of 3.5 million.
The UK’s labour shortages cannot be filled by a review of workforce participation alone. We must also look at our broken visa and immigration system, and acknowledge the impact that Brexit has had on our labour market. Brexit has also been disastrous for UK trade. Rather than opening up opportunities for global trade, businesses have been inundated with red tape. The OBR forecasts that the UK’s trade intensity will be 15% lower in the long term than if we had remained in the EU. Trade is vital for economic growth. It is way beyond time that the Government finally got a grip and started rebuilding our trading relationships.
The Liberal Democrats are the only party with a comprehensive plan to rebuild trust and co-operation with Europe, to rebuild ties with our largest trading partner and to grow our economy. The Conservatives have no plan for future prosperity. We need a plan for an innovation-led economy aligned to net zero; one that sustains economic growth and fuels a fairer society with high-quality public services. Instead, the Conservatives have inflicted higher taxes and weaker public services on everyone, all without a proper mandate and all to pay for the damage that they caused in the first place.