The Growth Plan

Lindsay Hoyle Excerpts

Friday 23rd September 2022 Commons Chamber

[The Chancellor of the Exchequer (Kwasi Kwarteng)]

Let me start directly with the issue most worrying the British people today: the cost of energy. People will have seen the horrors of Putin’s illegal invasion of Ukraine. They will have heard reports that their already expensive energy bills could reach as high as £6,500 next year. We were never going to let that happen. My right hon. Friend the Prime Minister has acted with great speed to announce one of the most significant interventions the British state has ever made. People need to know that help is coming—and help is indeed coming.

We are taking three steps to support families and businesses with the cost of energy. First, to help households, the energy price guarantee will limit the unit price that consumers pay for electricity and gas. That means that, for the next two years, the typical annual household bill will be £2,500. For a typical household, that is a saving of at least £1,000 a year based on current prices. We are continuing our existing plans to give all households £400 off bills this winter. Taken together, we are cutting everyone’s energy bills by an expected £1,400 this year, and millions of the most vulnerable households will receive additional payments, taking their total savings this year to £2,200.

Secondly, as well as helping people, we need to support the businesses that employ them. The energy bill relief scheme will reduce wholesale gas and electricity prices for all UK businesses, charities and the public sector, such as schools and hospitals. It will provide a price guarantee equivalent to the one provided for households for all businesses across the country.

Thirdly, energy prices are extremely volatile, rising and falling erratically every hour, which creates real risks to energy firms that are otherwise viable businesses. Those firms help to supply the essential energy needed by households and businesses. To support the market, we are announcing the energy markets financing scheme. Delivered with the Bank of England, this scheme will provide a 100% guarantee for commercial banks to offer emergency liquidity to energy traders.

The consensus among independent forecasters is that the Government’s energy plan will reduce peak inflation by around 5 percentage points. It will reduce the cost of servicing index-linked Government debt and lower wider cost of living pressures, and it will help millions of people and businesses right across the country with the cost of energy.

Let no one doubt that, during the worst energy crisis in generations, this Government are on the side of the British people. The Bank of England are taking further steps to control inflation, acting again only yesterday, and I can assure the House that this Government consider the Bank of England’s independence to be sacrosanct. We remain closely co-ordinated, with the Governor and myself speaking twice a week.

However, high energy costs are not the only challenge confronting this country. Growth is not as high as it should be, which has made it harder to pay for public services, requiring taxes to rise. In turn, higher taxes on capital and on labour have lowered returns on investment and work, reducing economic incentives and hampering growth still further. That cycle has led to the tax burden’s being forecast to reach the highest levels since the late 1940s—before even Her late Majesty acceded to the throne.

We are determined to break that cycle. We need a new approach for a new era, focused on growth. Our aim over the medium term is to reach a trend rate of growth of 2.5%, and our plan is to expand the supply side of the economy through tax incentives and reform. That is how we will deliver higher wages and greater opportunities and, crucially, fund public services, now and into the future; that is how we will compete successfully with dynamic economies around the world; and that is how we will turn this vicious cycle of stagnation into a virtuous cycle of growth.

As a Government, we will focus on growth, even where that means taking difficult decisions. None of this is going to happen overnight, but today we are publishing our growth plan that sets out a new approach for this new era, built around three central priorities: reforming the supply side of the economy, maintaining a responsible approach to public finance and cutting taxes to boost growth.

The UK today has the second lowest debt-to-GDP ratio of any G7 country. In due course, we will publish a medium-term fiscal plan setting out our responsible fiscal approach more fully, including how we plan to reduce debt as a percentage of GDP over the medium term. The Office for Budget Responsibility will publish a full economic and fiscal forecast before the end of the year, with a second to follow in the new year. Fiscal responsibility remains essential for economic confidence, and it is a path we are committed to.

Today, we are publishing costings of all the measures the Government have taken, and those costings will be incorporated into the OBR’s forecast in the usual way. The House should note that the estimated costs of our energy plans are particularly uncertain, given volatile energy prices, but, based on recent prices, the total cost of the energy package for the six months from October is expected to be around £60 billion. We expect the cost to come down as we negotiate new, long-term energy contracts with suppliers.

In the context of a global energy crisis, it is entirely appropriate for the Government to use our borrowing powers to fund temporary measures in order to support families and businesses. That is exactly what we did during the covid-19 pandemic; a sizeable intervention was right then and it is right now. The heavy price of inaction would have been far greater than the cost of these schemes.

We are at the beginning of a new era, and as we contemplate—[Hon. Members: “Oh!”] That’s right: a new era. As we contemplate this new era, we recognise that there is huge potential in our country. We have unbounded entrepreneurial drive. We have highly skilled people. We have immense global presence in sectors such as finance, life sciences, technology and clean energy. But there are too many barriers for enterprise. We need a new approach to break them down, and that means reforming the supply side of our economy.

Over the coming weeks, my Cabinet colleagues will update the House on every aspect of our ambitious agenda. Those updates will cover the planning system, business regulations, childcare, immigration, agricultural productivity and digital infrastructure. But we start this work today. An essential foundation of growth is infrastructure—the roads, railways and networks that carry people, goods and information all over our country. Today, our planning system for major infrastructure is too slow and fragmented. The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead. We have to end this.

We can announce that in the coming months we will bring forward a new Bill to unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth. We will streamline a whole host of assessments, appraisals, consultations, endless duplications and regulations. We will also review the Government’s business case process to speed up decision making. Today, we are publishing a list of infrastructure projects that will be prioritised for acceleration, in sectors such as transport, energy and telecoms. To increase housing supply and enable forthcoming planning reforms, we will also increase the disposal of surplus Government land to build new homes. We are getting out of the way to get Britain building.

One of the proudest achievements of our Conservative Government is that unemployment is at its lowest level for nearly 50 years. But with more vacancies than unemployed people to fill them, we need to encourage people to join the labour market. We will make work pay by reducing people’s benefits if they do not fulfil their job search commitments. We will provide extra support for unemployed over-50s and we will ask around 120,000 more people on universal credit to take active steps to seek more and better paid work, or face having their benefits reduced.

At such a critical time for our economy, it is simply unacceptable that strike action should be disrupting so many lives. Other European countries have minimum service levels to stop militant trade unions from closing down transport networks during strikes. We will do the same, and we will go further. We will legislate to require unions to put pay offers to a member vote, to ensure that strikes can be called only once negotiations have genuinely broken down.

Of course, to drive growth, we need new sources of capital investment. To that end, I can announce that we will accelerate reforms to the pension charge cap so that it will no longer apply to well-designed performance fees. That will unlock pension fund investment into UK assets and innovative, high-growth businesses. It will benefit savers and increase growth. And we will provide up to £500 million to support new, innovative funds and attract billions of additional pounds into UK science and technology scale-ups.

This brings me to the cap on bankers’ bonuses. A strong UK economy has always depended on a strong financial services sector. We need global banks to create jobs here, invest here and pay taxes here in London—not in Paris, not in Frankfurt and not in New York. All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe. It never capped total remuneration, so let us not sit here and pretend otherwise. As a consequence, we are going to get rid of it. [Interruption.] We are going to get rid of it and, to reaffirm the UK’s status as the world’s financial services centre, I will set out an ambitious package of regulatory reforms later in the autumn.

To support growth right across the country, we need to go further, with targeted action in local areas. Today, I can announce the creation of new investment zones. We will liberalise planning rules in specified agreed sites, releasing land and accelerating development. And we will cut taxes. For businesses in designated tax sites, for 10 years, there will be accelerated tax reliefs for structures and buildings and 100% tax relief on qualifying investments in plant and machinery. On purchases of land and buildings for commercial or new residential development, there will be no stamp duty to pay whatsoever; on newly occupied business premises, there will be no business rates to pay whatsoever; and if a business hires a new employee in the tax site, on the first £50,000 they earn, the employer will pay no national insurance whatsoever. That is an unprecedented set of tax incentives for business to invest, build and create jobs right across the country.

I can confirm to the House that we are in early discussions with nearly 40 places such as Tees Valley, the west midlands, Norfolk and the west of England, to establish investment zones. We will work with the devolved Administrations and local partners to make sure that Scotland, Wales and Northern Ireland will also benefit if they are willing to. If we really want to level up, we have to unleash the power of the private sector.

Now we come to tax—central to solving the riddle of growth. The tax system is not simply about raising revenue for public services, vitally important though that is. Tax determines the incentives across our whole economy. We believe that high taxes reduce incentives to work, deter investment and hinder enterprise. As the Prime Minister has said, we will review the tax system to make it simpler, more dynamic and fairer for families. We are taking that first step today.

The interests of businesses are not separate from the interests of individuals and families. In fact, it is businesses that employ most people in this country. It is businesses that invest in the products and services we rely on. Every additional tax on business is ultimately passed through to families through higher prices, lower pay or lower returns on savings.

I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. The corporation tax rate will not rise to 25%; it will remain at 19% and we will have the lowest rate of corporation tax in the G20. This will plough almost £19 billion a year back into the economy. That is £19 billion for businesses to reinvest, create jobs, raise wages or pay the dividends that support our pensions. I have already taken steps elsewhere in this statement to support financial services, so the bank surcharge will remain at 8%.

We will do more to encourage private investment. The annual investment allowance, which gives 100% tax relief on investments in plant and machinery, will not fall to £200,000 as planned. It will remain at £1 million, and it will do so permanently. Our duty is to make the UK one of the most competitive economies in the world, and we are delivering—we will deliver on this.

We want this country to be an entrepreneurial, share-owning democracy. The enterprise investment scheme and the venture capital trusts, we will extend beyond 2025. The seed enterprise investment scheme and company share option plans, we will increase the limits on to make them more generous—crucial steps on the road to making this a nation of entrepreneurs.

For the tax system to favour growth, it needs to be much simpler. I am hugely grateful to the Office of Tax Simplification for everything it has achieved since 2010. But instead of a single arm’s-length body that is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of government. That is why I have decided to wind down the Office of Tax Simplification, and mandated every one of my tax officials to focus on simplifying our tax code.

To achieve a simpler system, I will start by removing unnecessary costs for business. First, we will automatically sunset EU regulations by December 2023, requiring Departments to review, replace or repeal retained EU law. This will reduce burdens on business, improve growth, and restore the primacy of UK legislation.

We can also simplify the IR35 rules—and we will. In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses. So as promised by the Prime Minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.

Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres to feel the economic benefit. So we have decided to introduce VAT-free shopping for overseas visitors. We will replace the old paper-based system with a modern, digital one, and this will be in place as soon as possible. This is a priority for our great British retailers, so it is our priority too.

Our drive to modernise also extends to alcohol duties. I have listened to industry concerns about the ongoing reforms. I will therefore introduce an 18-month transitional measure for wine duty. I will also extend draught relief to cover smaller kegs of 20 litres and above to help smaller breweries. At this difficult time, we will not let alcohol duty rates rise in line with RPI, so I can announce that the planned increases in duty rates for beer, cider, wine and spirits will all be cancelled.

We now come to the question of personal taxation. It is an important principle that people should keep more of the money they earn, and it is good policy to boost incentives for work and enterprise. Yesterday we introduced a Bill that means that the health and social care levy will not begin next year—it will be cancelled. The increase in employer national insurance contributions and dividends tax will be cancelled, and the interim increase in the national insurance rate, brought in for this tax year, will also be cancelled. This cut will take effect from the earliest possible moment, 6 November. Reversing the levy delivers a tax cut for 28 million people and is worth, on average, £330 every year. It is a tax cut for nearly 1 million businesses. I can confirm that the additional funding for the NHS and social care services will be maintained at the same level.

Mr Speaker, I have another measure. Today’s statement is about growth. Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society. So to support growth, increase confidence and help families aspiring to own their own home, I can announce that we are cutting stamp duty. Under the current system, there is no stamp duty to pay on the first £125,000 of a property’s value. We are doubling that to £250,000. First-time buyers currently pay no stamp duty on the first £300,000, and we are increasing that threshold as well, to £425,000. We are going to increase the value of the property on which first-time buyers can claim relief from £500,000 to £625,000. The steps we have taken today mean that 200,000 more people will be taken out of paying stamp duty altogether. This is a permanent cut to stamp duty, effective from today.

I have another measure, Mr Speaker. High tax rates damage Britain’s competitiveness. They reduce the incentive to work, invest and start a business. The higher the taxes, the more ways people seek to avoid them, or they work elsewhere or simply work less, rather than putting their time and effort to more creative and productive ends. Take the additional rate of income tax. At 45%, it is currently higher than the headline top rate in G7 countries such as the US and Italy, and it is even higher than in social democracies such as Norway. But I am not going to cut the additional rate of tax today; I am going to abolish it altogether. From April 2023, we will have a single higher rate of income tax of 40%. That will simplify the tax system and make Britain more competitive. It will reward enterprise and work, incentivise growth, and it will benefit the whole economy and the whole country. After all, that only returns us to the top rate that we had for 20 years, including the entire time that the Opposition were last in power, bar one month.

And that is not all. I can announce today that we will cut the basic rate of income tax to 19p in April 2023—one year early. That means a tax cut for over 31 million people in just a few months’ time. This means that we will have one of the most competitive and pro-growth income tax systems in the world.

For too long in this country we have indulged in a fight over redistribution. Now we need to focus on growth, not just how we tax and spend. We will not apologise for managing the economy in a way that increases prosperity and living standards. Our entire focus is on making Britain more globally competitive, not losing out to our competitors abroad.

The Prime Minister promised that we would be a tax-cutting Government. Today, we have cut stamp duty; we have allowed businesses to keep more of their own money to invest, to innovate and to grow; we have cut income tax and national insurance for millions of workers. We are securing our place in a fiercely competitive global economy, with lower rates of corporation tax and lower rates of personal tax. We have promised to prioritise growth. We have promised a new approach for a new era. We have promised to release the enormous potential of this country. Our growth plan has delivered all those promises and more, and I commend it to the House.

[Mr Speaker]

Before I call the shadow Chancellor, I inform right hon. and hon. Members that at the end of questions on the statement I will call the Chancellor of the Exchequer to move a provisional collection of taxes motion. Copies of the motion are being made available in the Vote Office. I call the shadow Chancellor of the Exchequer, Rachel Reeves.

--- Later in debate ---

[Kwasi Kwarteng]

I was very interested to hear the hon. Lady’s defence and I was very curiously affected when she said that Labour believes in wealth creation. That was the biggest fantasy I have ever heard. You cannot grow the economy if you keep taxing families. You cannot grow the economy if you see business as the enemy. We have to reiterate very clearly to our friends on the Opposition Benches that you cannot tax your way to prosperity. You cannot help workers by increasing their taxes. Far from denigrating British workers, our measures are relieving burdens on our workers and our people by intervening on energy prices and relieving the burden of taxation. We have to unshackle the creative energies of this country and that is what we are 100% focused on.

[Mr Speaker]

I call the Chair of the Treasury Committee, Mel Stride.

[Mel Stride (Central Devon) (Con)]

I welcome much in this statement. There is a great deal that will help millions of families and businesses up and down the country. There is, however, a vast void at the centre of the announcements that have been made this morning: the lack of an independent OBR forecast. At a time when the markets are getting twitchy about Government bonds and the currency is under pressure, now is the time for transparency and making it very clear that whatever tax cuts or otherwise there may be, they are done in a fiscally responsible manner.

I have to say to my right hon. Friend that he should have come forward with an OBR forecast. The Treasury Committee knows, because of our correspondence with Richard Hughes, the head of the OBR, that it was standing ready to come forward with such a forecast. We further know, because of that correspondence, that there is a baseline forecast that the Chancellor has at the moment and that would have been on his desk when he first arrived in office. May I gently and respectfully ask him to release that forecast to provide transparency to the House and calmness to the markets, and to do that without further delay?

[Kwasi Kwarteng]

I thank my right hon. Friend and gently and respectfully remind him that, in the statement, I committed in a very categorical way to the OBR coming up with a forecast before the end of the calendar year. It will be a full forecast, not a baseline forecast, and it will fully score the measures outlined in this growth plan. I would be very happy to meet him at his Committee at a convenient time.

[Mr Speaker]

I call the Scottish National party spokes- person, Alison Thewliss.

[Alison Thewliss (Glasgow Central) (SNP)]

The Chancellor comes here today—the sixth Chancellor in seven years—asking us to believe that the things that he voted for and supported just a few months ago were all fine at the time, but need to be completely reversed now. This is a new era, but the Conservatives have been in government for 12 years. He stretches credibility beyond breaking point in saying that tax cuts for the rich, whopping bonuses for the bankers and low corporation tax for companies will somehow refloat magically Britain’s sinking economy. He has no evidence and this is no plan for growth. These are Budget measures with no OBR assessment. They are ducking scrutiny time and again. It is a plan for recession, for debt on an unsustainable trajectory and, almost inevitably, for public sector cuts to come.

Actively choosing to cut taxes permanently and spend eye-watering sums to patch up a failed energy market while inflation soars, interest rates are hiked and recession looms will not create growth; it will create economic chaos. Nothing the Chancellor has said today will provide any reassurance or give hope to ordinary people—folks who are struggling to get by in broke, broken Britain.

Families are unable to put food on the table and heat their homes, punished by the Tory benefit cap and the two-child limit. Those policies are driving up child poverty and the Chancellor should be scrapping them, not the bankers’ bonus cap. For indebted households already struggling to pay their mortgages and debt, a stamp duty cut will not help; it will overheat the housing market even more.

Disabled people and carers are terrified that the electricity will run out. Pensioners are scared to turn on the heating. The energy price cap should not go up; it is already too high and people must get more help now. Asylum seekers and people stuck on no recourse to public funds are forced to get by on a pittance, and there is nothing whatsoever for them from this Chancellor.

Community organisations such as Glasgow Central Mosque face additional energy bills of hundreds of thousands of pounds, which, as a charity, the mosque just cannot afford. People depend on community organisations like the mosque and they are being asked to be on the frontline this winter. Even with a six-month reprieve on energy prices, the bills will not go away. Would the Chancellor have the mosque close its elderly daycare service, the counselling provision, the mother and toddler group, the poverty reduction work or the vaccination centre that has been running in the community hall? These are very real choices that communities are already having to make.

The businesses that I have been listening to over the past months are incredibly worried for the future. They were already facing severe pressure through supply chain costs, input costs, labour costs, covid debts and Brexit woes before energy prices soared. Now they do not know how they will survive. Six months will go by in a flash and the question remains: what then? What then from the Chancellor? Companies cannot wish away these bills or the eye-wateringly unaffordable contracts they are being forced to sign right now. What happens to those businesses that just miss the arbitrary cut-off, and what of the increase in standing charges, which we know are disproportionately high in Scotland?

Scotland is an energy-rich country, but we do not have the power. Scotland’s renewable sector is booming, but in off-gas grid rural Scotland, surround by the wind turbines generating clean, green energy, people have to spend an absolute fortune on heating oil. In Argyll and Bute, Angus, the highlands and islands, and across our rural communities, households have faced increases of more than 230% in the past two years alone. The UK Government’s offer of £100 is nothing short of an insult as people turn to credit cards to fill up their fuel tanks.

The Scottish Government are doing all in their power to support people through this crisis: strengthening the safety net by increasing the Scottish child payment to £25 a week, doubling the fuel insecurity fund to £20 million and freezing rents, because renters are also facing pressures. We have the highest rate of the real living wage in Scotland, and we have invested in tackling fuel poverty and energy efficiency, but we could do so much more with more budget and more powers. At the back of the Blue Book today, there is still no carbon capture and storage for the north-east of Scotland. It is a game changer for renewables in Scotland. Where is it in the Chancellor’s plans? Nowhere, again. We could have growth by investing in skills, in net zero and in productivity, but the Chancellor’s plans will not achieve that.

People do not freeze to death in our Nordic neighbour countries, and people there are not living in one of the most unequal countries in the world. And it is only getting worse: this right-wing, Thatcher-cosplaying shambles of a Government are making choices of which they will never feel the consequences. I beg of this Chancellor that he listen to those on the edge—to those who are desperately looking to him right now for a lifeline. No one should have to beg for a decent standard of living.

The people of Scotland see a Scottish Government doing their best to mitigate the worst, but stymied by the broken politics of this Union and the economic madness that we heard from the Chancellor today. Scotland is looking for a different path. Scotland needs independence.

[Kwasi Kwarteng]

What Scotland does not need is reheated socialism from the SNP. The hon. Lady mentions energy; I am always staggered when people in her party mention energy but do not countenance nuclear power, which is a great, clean form of energy.

While we are speaking about energy, the hon. Lady will know that we have, indeed, listened. We have implemented a limit on energy prices: my right hon. Friend the Prime Minister, who is no longer in her place, made the announcement within two days of taking office. It is something that I am very proud of, and we have extended it to supporting businesses—[Interruption.]

[Mr Speaker]

Order. In fairness, the spokesperson for the SNP was heard in silence by Government Members. I certainly expect the answer to be heard in silence, especially as it affects the constituencies concerned.

[Kwasi Kwarteng]

I was very surprised to hear the hon. Lady mention energy, given the SNP’s appalling record in that regard. I am very open to her ideas, but I very much recommend that she pursue nuclear power, of which there is a great tradition in Scotland.