Oral Answers to Questions
Lindsay Hoyle Excerpts(2 weeks, 3 days ago)
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Rachel Reeves
I will follow up on that issue. The smallest businesses—those that employ the equivalent of four people on the national living wage—will be paying no national insurance at all from this April. Up to 1 million of the smallest businesses will be paying less or the same national insurance as they were paying previously.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Since the spring statement the world has been rocked by the announcements by President Trump on tariffs last week. It is an event as significant as the financial crisis of 2008, or perhaps as covid, and in those instances the state unleashed everything it could to try to resolve those issues. Is the Chancellor considering changing any of her rules to ensure that everything that the state can throw at this problem is being done?
Rachel Reeves
Impressive. We will be considering all such schemes as part of the spending review, but I agree with the hon. Gentleman that we need to go further and faster to grow our economy. That is why we are spending £113 billion more on capital investment in this Parliament, compared to the plans that we inherited, which means that we can upgrade more roads, rail lines and energy infrastructure, and build the 1.5 million homes our country needs too.
Richard Fuller (North Bedfordshire) (Con)
Two weeks ago, the spring statement rushed through changes to disability benefits, or “pocket money” to the Chief Secretary to the Treasury, to help plug the £14 billion gap in public finances created by the first Labour Budget. Now we are already in the Office for Budget Responsibility’s scenario 2 on tariffs, and the Chancellor is once again forecast to be out of room on her fiscal targets. What does she plan to ask the Chief Secretary to the Treasury to do to update departmental budgets in his multi-year spending review in order to avoid punishing businesses and people once again with further taxes?
Mr Speaker
I presume Mr Lamont thinks it is north-east Scotland, rather than north-east England.
John Lamont
This Government decided to cancel the A1 upgrade, which will harm the economy not just in the north-east of England, but in the south of Scotland. What economic impact assessment did the Government make before deciding to cancel that vital road link?
Emma Reynolds
Nice try. In terms of north-east growth, I have already said that we are working very closely with the Mayor of the North East combined authority. I suggest that the hon. Gentleman asks questions about roads relevant to his part of the country at Transport questions.
Mr Speaker
I now call the Minister to answer Alistair Carmichael’s question on the potential impact of changes to agricultural property relief and business property relief on farmers, which was omitted in error from earlier versions of the Order Paper.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Darren Jones
We recognise how important this issue is for the hon. Member’s constituency, the region and, indeed, the national economy. My ministerial colleagues in the Department for Business and Trade are in discussions on this particular issue, but in our infrastructure strategy we are considering, as he would expect, the best value for aligning investments between housing, rail, energy and other types of infrastructure to deliver growth for everyone, in every region of the country.
Gareth Davies (Grantham and Bourne) (Con)
We know that the Energy Secretary is against airport expansion unless it is in Doncaster, and we know that many Labour MPs are against airport expansion unless it is in Pakistan. To be fair, at least the Chancellor wants airport expansion actually in this country, but at the same time she is jacking up air passenger duty by as much as 16%. Only this Chancellor could be pro-airport, but anti-passenger. Labour’s Climate Change Committee wants to see air passenger numbers fall by 2030, so I ask the Minister: does he?
Jim Shannon
The Minister’s response is key. He is right to highlight the issues, whether they are in Liverpool, Everton, Cardiff, Edinburgh, Belfast or Strangford. In Northern Ireland, we have made the most of over-the-shops apartment conversions as opportunities for housing. Does the Minister agree that the possibilities for the regeneration of high streets and town centres also include housing opportunities?
Darren Jones
We have a shared ambition to ensure that our high streets are thriving communities for the people who live, shop or work there. We are delivering an integrated settlement for combined authority mayors in England, and have delivered a real-terms increase in funding for the Northern Ireland Executive—the largest since devolution began—to invest in exactly those types of local projects.
Daisy Cooper (St Albans) (LD)
To follow on from what the hon. Member for Strangford (Jim Shannon) said, high streets up and down the land, be they in Liverpool Riverside, St Albans or anywhere else, have just been hit with the double whammy of the jobs tax and higher business rates bills. What steps are Ministers taking to prevent an epidemic of boarded-up shop fronts in the next 12 months, before the new rate comes in next year?
Emma Reynolds
The Chancellor delivered the biggest ever settlement for Scotland in October 2024, and I think the answer is “thank you”.
Mark Garnier (Wyre Forest) (Con)
There is a great deal of speculation about the future of the cash individual savings account. As we know, it is an important savings mechanism for many savers across the country, all of whom will be dismayed at the loss of a significant cash savings opportunity. Just as importantly, cutting cash ISAs will deprive building societies of important funds for their balance sheets, reducing the amount of capital available for the residential mortgage market. This point has been raised with me by the mutual societies. Given that the loss of the cash ISA would have a profound effect on mutuals’ ability to raise debt capital, what research have the Government undertaken to establish the extent of the damage that such a measure might inflict on the residential mortgage market, which is not just important for all our constituents, but crucial for the 1.5 million new homes that the Government propose building?
James Murray
The Government have already taken action on the fair repayment rate, lowering the cap on deductions from universal credit to 15%—it was 25% before the autumn Budget last year. That will benefit 1.2 million households by an average of £420 a year, and 700,000 of the poorest families with children will benefit.
James Wild (North West Norfolk) (Con)
Businesses have just been hit by the Chancellor’s £25 billion jobs tax, which will cost working families £3,500; also, business rates are nearly doubling for hospitality and retail businesses. How does imposing taxes that the Office for Budget Responsibility says will result in lower wages, higher prices and fewer jobs help growth and those on the lowest incomes, and will the Chancellor keep her promise not to come back with more taxes in this Parliament?
The Chief Secretary to the Treasury (Darren Jones)
Mr Speaker, you shocked me by moving to topical questions so quickly, but I have now found my page and am ready to answer them.
Darren Jones
From ferries to the National Care Service, we have seen failure after failure from the SNP in Scotland, including a track record of waste. In contrast, this Labour Government are tackling waste and investing in frontline services such as our national health service, which has seen waiting lists fall for each of the past five months in England. We hope that the people of Scotland will soon have the opportunity to experience such a transformation.
Darren Jones
As my hon. Friend knows, we have given the Scottish Government the largest increase in spending since devolution began. The people of Scotland expect that money to be spent well, which we are doing in England by transforming public services and improving the national health service. However, given that SNP Members are not present in the Chamber today, the people of Scotland need to know that they will have to elect a Labour Government in Scotland later next year for that to happen.
Mel Stride (Central Devon) (Con)
It was obvious to many before the emergency Budget that the President of the United States was going to be slapping tariffs on our exports. May I therefore ask the Chancellor why it was that she came forward at the emergency Budget with a recklessly slender slither of headroom—the same headroom that she had at the time of the autumn Budget, which proved then to be entirely inadequate. She blew that headroom and more due to her disastrous economic choices.
Darren Jones
I am sorry to disappoint the shadow Chancellor, but I am afraid that, because of the ordering of questions, he is stuck with me. To answer his question, he will have seen at the Budget that we increased the fiscal headroom back to our agreement of £9.9 billion, which was more than the headroom that we inherited from the Conservative party. The key difference is that this is a Government who take economic and political stability seriously, because when a Government lose control of the economy, they lose control of family finances and, ultimately, end up in opposition.
Mr Speaker
Just to correct the record, the Order Paper has not changed at all in topicals.
Mel Stride
You are quite right about that, Mr Speaker, as you are about everything. Indeed, the right hon. Gentleman is completely wrong when he says that he inherited less headroom than was the case at the autumn Budget. He inherited, on the current Budget, £23 billion, and he took it down to £9.9 billion to be precise. He also loosened the fiscal targets, which is why he is not underwater already on the targets that we had when we were in government.
May I ask him this: the fiscal targets are looking like they will be under a great deal of pressure come the autumn. There is a great deal of speculation and uncertainty among businesses as to whether this will lead to tax increases. Can he take away that uncertainty now, particularly given the tariffs and all the uncertainty that is vested in that, to make it clear at that Dispatch Box that there will be no further increases in taxation on businesses this Parliament?
The Chancellor of the Exchequer (Rachel Reeves)
The first duty of any Government is to keep the nation safe. That is why we are increasing defence spending as a share of GDP to 2.5%—the biggest sustained increase in defence spending since the end of the cold war. Derby has a vital role to play within the UK’s defence sector, particularly in nuclear engineering and aerospace, as demonstrated by the landmark £9 billion deal with Rolls-Royce, which will create up to 1,000 jobs in the city and protect thousands more.
Daisy Cooper (St Albans) (LD)
I welcome the fast action by the Government to convene the automotive industry in reaction to President Trump’s damaging tariffs, but the measures in and of themselves will not create new export markets or stimulate demand here in the UK. Will Ministers look at Liberal Democrat calls to reintroduce the plug-in car grant and equalise VAT for electric vehicle pavement charging? Will the Government instruct the valuation office to scrap business rates for EV charging bays until the transition is complete?
Jim Allister (North Antrim) (TUV)
Earlier, when the Chancellor was talking about the impact of tariffs, she pledged that the Government would act in our national interest. How can it be in the whole national interest, so long as the trade laws governing Northern Ireland are not the trade laws of the UK but those of a foreign jurisdiction, namely the EU?
Rachel Reeves
We inherited the settlement made by the previous Government, as the hon. and learned Member will know. There is a summit between the UK and the EU on 18 May where we will be looking to reduce the barriers to trade between the whole of the United Kingdom and the European Union. We recognise the specific issues around Northern Ireland, particularly in regard to the response to the tariffs, and we will continue to work with the Executive there to ensure that we get the best outcome for the people of Northern Ireland.
Speaker’s Statement
Lindsay Hoyle Excerpts(2 weeks, 3 days ago)
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Mr Speaker
Before we come to Treasury questions, I have agreed to a request from the Chancellor to make some brief comments about the global financial situation, following which the shadow Chancellor and the Liberal Democrat spokesperson will be allowed to respond and ask a question. I will then call other hon. Members to ask the questions on the Order Paper in the usual way. Other Members may well wish to refer to the Chancellor’s comments in their supplementary or topical questions, and I will take a more liberal view of the scope of supplementary questions than is usually the case. I call the Chancellor of the Exchequer.
The Chancellor of the Exchequer (Rachel Reeves)
Thank you, Mr Speaker. As you say, I would like to make some brief remarks on the current economic situation.
The United States decision to impose tariffs has had, and will continue to have, huge implications for the world economy. These implications have been reflected in the reaction we have seen in global markets in recent days, which the financial authorities have of course been monitoring closely. This morning, I spoke to the Governor of the Bank of England, who confirmed that markets are functioning effectively and that our banking system is resilient.
I know, too, that this is an anxious time for families, who are worried about the cost of living—we have your backs. British businesses are worried about what a changing world will mean for them—we have your backs, too. This Government are clear-eyed that our response to global change cannot be to watch and wait, but instead to act decisively, to take the right decisions that are in our national interest, protecting working people. All the decisions that we make as a Government will be underpinned by the stability of our non-negotiable fiscal rules.
A trade war is in nobody’s interests. That is why we must remain pragmatic and cool-headed, and pursue the best deal with the United States in our national interest. That remains our priority. It was part of the discussion that I had with US Treasury Secretary Scott Bessent last week. But we have been clear that nothing is off the table. That is why we will continue to back British businesses during these uncertain times, particularly in industries that are most affected, as we rebuild our industrial base here in Britain.
We showed that backing yesterday when the Prime Minister and I announced new measures to give British car makers certainty and stability, and to support them on the transition to electric vehicles. We have put forward plans to support our life sciences sector by cutting back the time it will take to set up clinical trials in the UK. It is why we are working with our international allies to reduce barriers to trade right across the world. Over recent days I have had discussions with my counterparts in Canada, Australia, Ireland, France and Spain, and with the European Commission. We will pursue those talks in earnest. Tomorrow, I will hold talks with the Indian Government as part of our two nations’ economic and financial dialogue, as we seek to secure a new trade deal with India.
Finally, we must go further and faster in our mission to kick-start economic growth. I know that the challenges facing the global economy, and their potential impact, could be profound. As a Government, we must step up to that challenge to deliver security for working people through our plan for change, which is underpinned by stability, reform and investment—prioritising the builders, not the blockers; reforming our public services, not defending the status quo; investing in our long-term infrastructure, not cutting it for the short term. Security for working people, renewal for Britain—that is our focus, and that is what this Government will deliver.
Mel Stride (Central Devon) (Con)
I thank the right hon. Lady for advance notice of her comments.
This is a time of great concern for millions of people up and down our country, for businesses, and, as an open-trading nation, for our economy at large. Free trade has been the bedrock of prosperity for our country, and for many countries around the world, for decades. It has raised billions of people out of poverty. Tariffs are the enemy of free trade, and we on the Conservative Benches will do whatever we can to assist the Government in getting those tariffs down.
Having said that, of course we will never cease to be an effective Opposition who vigorously hold the Government to account—not least on the disastrous decisions that they have already taken in respect of our economy. We will be responsible when it comes to these matters, particularly where market sensitivities are engaged.
I want to ask the right hon. Lady the following questions. First, could she provide further details of the US negotiations and specifically whether further meetings with Scott Bessent and others have been arranged that involve her? Secondly, which areas beyond tariffs are being discussed in those negotiations? Thirdly, which sectors beyond cars and life sciences are being considered for potential Government support? Finally, could she update the House on what options there are for protecting sectors of the economy that might be affected by the dumping of goods as a consequence of trade diversion?
Rachel Reeves
I thank the right hon. Gentleman for that response and for his offer to work constructively. I know from my time as shadow Chancellor that those moments when we can work constructively together in the national interest, whether in response to covid or in supporting Ukraine against the aggression of Russia, are when this House is at its best.
The shadow Chancellor asked for further details in a number of areas. Discussions are ongoing across a range of Government Departments, including the Treasury, with the United States, and I will be meeting US Treasury Secretary Scott Bessent shortly. Beyond tariffs, we are discussing a range of different areas, but the focus is on reducing tariff and non-tariff barriers to trade, with a particular focus on those sectors that are subject to the higher tariffs.
Although the 10% tariffs are lower than those for many other countries around the world, and we welcome that, the additional tariffs on cars, on steel and potentially on life sciences pose a real challenge to our country, because those are some of our biggest export markets. That is why we made the announcements yesterday, and in those sectors—automotives, life sciences and steel—we will continue to take the action that is necessary, working in partnership with business and trade unions, to make sure we are addressing those issues. We are also using institutions such as the British Business Bank, the National Wealth Fund and UK Export Finance to help businesses through these times.
The shadow Chancellor also mentioned concerns around dumping. We are working with colleagues around the world to understand those implications, but our first priority is not to create more trade barriers but to reduce the ones that exist today.
Daisy Cooper (St Albans) (LD)
People up and down the country will be incredibly concerned about what Trump’s trade war means for their living standards and their communities. At the same time, people want to show that Britain is not going to take Donald Trump’s trade tariffs lying down. We welcome the Chancellor’s announcement that the Government will be working further and faster with our allies abroad. Can she confirm that any new trade deals will be brought before this House for a vote before they are ratified? At the same time as working with our allies abroad to create new export markets, will the Chancellor and the Government commit to a “Buy British” campaign as part of a broader national effort to encourage people to buy British here at home?
Spring Statement
Lindsay Hoyle Excerpts(4 weeks, 2 days ago)
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The Chancellor of the Exchequer (Rachel Reeves)
This Labour Government were elected to bring change to our country, to provide security for working people and to deliver a decade of national renewal. That work began in July, and I am proud of what we have delivered in just nine months: restoring stability to our public finances, giving the Bank of England the foundation to cut interest rates three times since the general election, rebuilding our public services, with record investment in our NHS bringing waiting lists down for five months in a row, and increasing the national living wage to give 3 million people a pay rise from next week.
Now our task is to secure Britain’s future in a world that is changing before our eyes. The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly. At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies. The job of a responsible Government is not simply to watch this change. This moment demands an active Government—a Government not stepping back but stepping up, a Government on the side of working people helping Britain reach its potential. We have the strengths to do just that as one of the world’s largest economies, an ally to trading partners across the globe, and a hub for global innovation. These strengths and the progress we have made so far mean that we can act quickly and decisively in a more uncertain world to secure Britain’s future and to deliver prosperity for working people.
As I set out at the Budget last year, I am today returning to the House to provide an update on our public finances, supported by a new forecast from the independent Office for Budget Responsibility, ahead of a full spending review in June. I will then return to the House in the autumn to deliver a Budget in line with our commitment to deliver just one major fiscal event a year.
Let me now turn to the OBR’s forecasts; I want to thank Richard Hughes and his team for their dedicated work. The increased global uncertainty has had two consequences: first on our public finances and secondly on our economy. I will take each in turn.
In the autumn, I set out our new fiscal rules that would guide this Government. These fiscal rules are non-negotiable. They are the embodiment of this Government’s unwavering commitment to bring stability to our economy and to ensure security for working people, because the British people have seen what happens when a Government borrow beyond their means. The mini-Budget delivered by the Conservatives resulted in higher bills, higher rents and higher mortgages, and it was not the wealthy who suffered most when they crashed the economy; it was ordinary working people. They continue to feel the effects two and a half years later of the damage that the Conservatives did.
Let me be clear: there is nothing progressive, there is nothing Labour, about working people paying the price for economic irresponsibility. The British people put their trust in this Labour Government because they knew that we—they knew that I—would never take risks with the public finances and would never do anything to put household finances in danger. We must earn that trust every single day.
I set out two rules at the Budget. The first was our stability rule, which ensures that public spending is under control, balancing the current budget by 2029-30 so that day-to-day spending is met by tax receipts. The second was our investment rule to drive growth in the economy, ensuring that net financial debt falls by the end of the forecast period, while enabling us to invest alongside business.
Turning first to the stability rule, the OBR’s forecast shows that before the steps that I will take in this statement, the current budget would have been in deficit by £4.1 billion in 2029-30, having been projected to be in surplus by £9.9 billion in the autumn, as the UK, alongside our international peers like France and Germany, has seen the cost of borrowing rise during this period of heightened uncertainty in global markets. As a result of the steps that I am taking today, I can confirm that I have restored in full our headroom against the stability rule, moving from a deficit of £36.1 billion in 2025-26 and £13.4 billion in 2026-27 to a surplus of £6 billion in 2027-28, £7.1 billion in 2028-29 and £9.9 billion in 2029-30. That compares with the headroom left by the previous Government of just £6.5 billion. That means that we are continuing to meet the stability rule two years early, building resilience to shocks in this, a more uncertain world.
The OBR forecast that the investment rule would also be met two years early, with net financial debt of 82.9% of GDP in ’25-26 and 83.5% in ’26-27, before falling to 83.4% in ’27-28, to 83.2% in 2028-29 and then to 82.7% in 2029-30, providing headroom of £15.1 billion in the final year of the forecast, broadly unchanged from the autumn forecast.
After the last Government doubled the national debt—[Interruption.] After they doubled the national debt, debt interest payments now stand at £105.2 billion this year. That is more than we allocate to defence, the Home Office and the Ministry of Justice combined. That is the legacy of the Conservative party. The responsible choice is to reduce our levels of debt and borrowing in the years ahead, so that we can spend more on the priorities of working people, and that is exactly what this Government will do. I said that our fiscal rules were non-negotiable and I meant it. I will always deliver economic stability and I will always put working people first. I said it at the election; I said it at the Budget; and I say it again today.
Let me now set out the steps that the Government have taken. At the Budget we protected working people by keeping our promise not to raise their rates of national insurance, income tax or VAT. At the same time, we began to rebuild our public services after the Conservatives left a £22 billion black hole in our public finances. Ours were the right choices: the right choices for stability and the right choices for renewal, funded by the decisions that we took on tax.
As I promised in the autumn, this statement does not contain any further tax increases, but when working people are paying their taxes while still struggling with the cost of living, it cannot be right that others are still evading what they rightly owe in tax. In the Budget, I delivered the most ambitious package of measures we have ever seen to cut down on tax evasion, raising £6.5 billion per year by the end of the forecast. Today I go further, continuing our investment in cutting-edge technology, investing in HMRC’s capacity to crack down on tax avoidance, and setting out plans to increase the number of tax fraudsters charged every year by 20%. These changes raise a further £1 billion, taking the total revenue raised from reducing tax evasion, under this Labour Government, to £7.5 billion. These figures are verified by the Office for Budget Responsibility and I to thank my hon. Friend the Exchequer Secretary for his continued work in this area.
Last week, my right hon. Friend the Secretary of State for Work and Pensions set out this Government’s plans to reform the welfare system. The Labour party is the party of work: we believe that if you can work, you should work, but if you cannot work, you should be properly supported. This Government inherited a broken system: more than 1,000 people every day are qualifying for personal independence payments; one in eight young people are not in employment, education or training. If we do nothing, we are writing off an entire generation. That cannot be right and we will not stand for it. It is a waste of their potential and it is a waste of their futures, and we will change it.
As my right hon. Friend said in her statement last week, the final costings will be subject to the OBR’s assessment. Today, the OBR has said that it estimates that the package will save £4.8 billion in the welfare budget, reflecting its judgments on behavioural effects and wider factors. This also reflects final adjustments to the overall package, consistent with the Secretary of State’s statement last week and the Government’s “Pathways to Work” Green Paper. The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the universal credit health element will be cut for new claimants by around 50% and then frozen.
On top of that, we are investing £1 billion to provide guaranteed, personalised employment support to help people back into work, and £400 million to support the Department for Work and Pensions and our jobcentres to deliver these changes effectively and fairly, taking total savings from the package to £3.4 billion. While spending on disability and sickness benefits will continue to rise, these plans mean that welfare spending as a share of GDP will fall between 2026 and the end of the forecast period, which is very different from what we inherited from the Conservative party. We are reforming our welfare system, making it more sustainable, protecting the most vulnerable and, most importantly, supporting more people back into secure work and lifting them out of poverty.
At the Budget, I fixed the foundations of our economy to deliver on the promise of change. That work has already begun. There are some 2 million extra appointments in our NHS; waiting lists are down; new breakfast clubs are opening across England; there have been the largest settlements in real terms for Scotland, Wales and Northern Ireland in the history of devolution; and asylum costs are falling—promises made, and promises kept, and every single one of them was opposed by Opposition parties.
At the Budget, alongside providing an increase in funding for this year and next, I set the envelope for the spending review, which we will deliver in June, led by the Chief Secretary to the Treasury. That will set departmental budgets until 2028-29 for day-to-day spending, and until 2029-30 for capital spending.
Today’s statement reflects two steps that we have taken on our spending plans. First, because we are living in an uncertain world, as the Prime Minister has set out, we will increase defence spending to 2.5% of GDP and reduce overseas aid to 0.3% of gross national income. That means that we save £2.6 billion in day-to-day spending in 2029-30 to fund our more capital-intensive defence commitments. Secondly, in recent months, we have begun to fundamentally reform the British state, driving efficiency and productivity across Government to deliver tangible savings and improve services across our country.
Earlier this month, the Prime Minister set out our plans to abolish the arm’s length body NHS England, and to ensure that money goes directly to improving the service for patients. The Secretary of State for Health and Social Care is driving forward vital reforms to increase NHS productivity, and is bearing down on costly agency spend to save money so that we can improve patient care.
The Chancellor of the Duchy of Lancaster is taking forward work to reduce the cost of running Government significantly—by 15%. That will be worth £2 billion by the end of the decade. This work shows that we can make our state leaner and more agile, and deliver more resources to the frontline, while ensuring that we control day-to-day spending to meet our fiscal rules.
Today, I build on that work by bringing forward £3.25 billion of investment to deliver the reforms that our public services need through a new transformation fund. That is money brought forward now to bring down the cost of running Government by the end of the forecast period by making public services more efficient, more productive and more focused on the user. I can confirm today the first allocations from this fund, including funding for voluntary exit schemes to reduce the size of the civil service, and for pioneering artificial intelligence tools to modernise the state; investment in technology for the Ministry of Justice to deliver probation services more effectively; and up-front investment so that we can support more children in foster care, to give them the best possible start in life and reduce cost pressures in the future.
Our work to make Government leaner, more productive and more efficient will help deliver a further £3.5 billion of day-to-day savings by 2029-30. Overall, day-to-day spending will be reduced by £6.1 billion by 2029-30, and it will now grow by an average of 1.2% a year above inflation; for comparison, in the autumn, that figure was 1.3%. I can confirm to the House that day-to-day spending will increase in real terms above inflation in every single year of the forecast. In the spending review, apart from the reductions in overseas aid, day-to-day spending across Government has been fully protected.
I can also confirm our approach to capital investment. In the autumn Budget, I announced £100 billion of additional capital spending to crowd in investment from the private sector, in order to fix our crumbling infrastructure and create jobs in every corner of our country. Today, I am not cutting capital spending, as the Conservative party did time and again, because that choked off growth and left our school roofs literally crumbling. That was the wrong choice. It was the irresponsible choice. It was the Tory choice. Today, I am instead increasing capital spending by an average of £2 billion per year, compared with in the autumn, to drive growth in our economy and to deliver in full our vital commitments on defence. This Government will ensure that every pound we spend will deliver for the British people by increasing productivity, driving growth in our economy and improving our frontline public services.
Let me turn to the impact of increased uncertainty on our economy. To deliver economic stability, we must work closely with the Bank of England, supporting the independent Monetary Policy Committee to meet the 2% inflation target. There have been three interest rate cuts since the general election, and today’s data shows that inflation fell in February, having peaked at 11% under the previous Government. The Office for Budget Responsibility forecasts that consumer prices index inflation will average 3.2% this year, before falling rapidly to 2.1% in 2026 and meeting the 2% target from 2027 onwards, giving families and businesses the security that they need, and providing our economy with the stable platform that it needs to grow.
Earlier this month, the OECD downgraded this year’s growth forecast for every G7 economy, including the UK, and the OBR has today revised down our growth forecast for 2025 from 2% in the autumn to 1% today. I am not satisfied with these numbers. We Labour Members are serious about taking the action needed to grow our economy; we are backing the builders, not the blockers, with a third runway at Heathrow airport and through the Planning and Infrastructure Bill. We are increasing investment with reforms to our pension system and a new national wealth fund, and tearing down regulatory barriers in every sector of our economy. That is a serious plan for growth. That is a serious plan to improve living standards. That is a serious plan to renew our country.
A changing world presents challenges, but also opportunities for new jobs and new contracts in our world-class defence industrial centres from Belfast to Deeside, and from Plymouth to Rosyth. In February, the Prime Minister set out our Government’s commitment to increasing spending on defence to 2.5% of GDP from April 2027—the biggest sustained increase in defence spending since the end of the cold war—and an ambition to spend 3% of GDP on defence in the next Parliament. That was the right decision in a more insecure world—we are putting an extra £6.4 billion into defence spending by 2027—but we have to move quickly in this changing world, and that starts with investment. Today, I can confirm that I will provide an additional £2.2 billion for the Ministry of Defence in the next financial year—a further down payment on our plan to deliver 2.5% of GDP by 2027. This additional investment is about increasing not just our national security, but our economic security.
As defence spending rises, I want the whole country to feel its benefits, so I will now set out the immediate steps that we are taking to boost Britain’s defence industry, and to make the UK a defence industrial superpower. We will spend a minimum of 10% of the Ministry of Defence’s equipment budget on new, novel technologies, including drones and artificial intelligence-enabled technology, driving forward advanced manufacturing production in places like Glasgow, Derby and Newport, creating demand for highly skilled engineers and scientists, and delivering new business opportunities for UK tech firms and start-ups. We will establish a protected budget of £400 million in the Ministry of Defence—a budget that will rise over time—for UK defence innovation, and a clear mandate to bring innovative technology to the frontline at speed.
We will reform our broken defence procurement system, making it quicker, more agile and more streamlined, and giving small businesses across the UK better access to Ministry of Defence contracts—something welcomed by the Federation of Small Businesses. We will take forward our plan for Barrow, a town at the heart of our nuclear security, working with my hon. Friend the Member for Barrow and Furness (Michelle Scrogham). We are providing £200 million to support the creation of thousands of jobs there. We will regenerate Portsmouth naval base, securing its future, as called for by my hon. Friend the Member for Portsmouth South (Stephen Morgan). We will secure better homes for thousands of military families—the homes that they deserve, which were denied to them by the previous Government—in the constituencies of my hon. Friends the Members for Plymouth Moor View (Fred Thomas), for Plymouth Sutton and Devonport (Luke Pollard) and for York Outer (Mr Charters) and in Aldershot. That is the difference that this Labour Government are making.
Finally, we will provide £2 billion of increased capacity for UK Export Finance to provide loans for overseas buyers of UK defence goods and services. I want to do more with our defence budget, so that we can buy, make and sell things here in Britain. I want to give our world-leading defence companies and those who work in them further opportunities to grow, and to create jobs in Britain, as military spending rightly increases all across Europe. To oversee all this vital work, my right hon. Friend the Defence Secretary and I will establish a new defence growth board to maximise the benefits from every pound of taxpayers’ money that we spend, and we will put defence at the heart of our modern industrial strategy to drive innovation, which can deliver huge benefits for the British economy. That is how we make our country a defence industrial superpower, so that the skills, jobs and opportunities of the future can be found right here in the United Kingdom.
As the previous Government learned to their detriment, there are no shortcuts to economic growth. It will take long-term decisions. It will take our putting in the hard yards. It will take time for the effect of the reforms that we are introducing to be felt in the everyday economy. It is right that the Office for Budget Responsibility should consider the evidence and look carefully at measures before recognising a growth impact in its forecast, but I can announce to the House that the OBR has considered and has scored one of the central planks of our plan for growth.
In my first week as Chancellor, I announced that we were pursuing the most ambitious set of planning reforms in decades to get Britain building again, and in December we published changes to the national planning policy framework, driven forward tirelessly by my right hon. Friend the Deputy Prime Minister. We are reintroducing mandatory housing targets, and bringing grey-belt land into scope. The OBR has today concluded that these reforms will permanently increase the level of real GDP by 0.2% in ’29-30—an additional £6.8 billion for our economy—and by 0.4% of GDP within 10 years, which is an additional £15.1 billion in the British economy. That is the biggest positive growth impact that the OBR has ever reflected in its forecast, for a policy with no fiscal cost. Taken together with our plans to increase capital spending, which we set out in the Budget last year, this Government’s policies will increase the level of real GDP by 0.6% in the next 10 years. That is the difference that this Labour Government are making. Those are policies to grow our economy promised by a Labour Government, delivered by a Labour Government and opposed by the parties opposite.
The planning system that we inherited was far too slow. The OBR has concluded that our reforms will lead to house building reaching a 40-year high, with 305,000 homes a year by the end of the forecast period. Changes to the national planning policy framework alone will help build over 1.3 million homes in the UK over the next five years, taking us within touching distance of delivering our manifesto promise to build 1.5 million homes in England in this Parliament. Those are homes promised by this Labour Government, homes built by this Labour Government and homes opposed by the parties opposite.
The impact on our economy goes further still. I said at the election that we could not simply tax and spend our way to prosperity. We need economic growth, so I can today confirm that the effect of our growth policies, including our planning reforms, means an additional £3.4 billion to support our public finances and our public services by 2029-30. Those are the proceeds of growth, promised by this Labour Government, delivered by this Labour Government and opposed by the parties opposite.
Earlier this week, we provided an additional £2 billion of investment in social and affordable homes next year, delivering up to 18,000 new homes, and allowing local areas to bid for new development across our country, including sites in Thanet, Sunderland and Swindon. That is more security for families across the country, promised by this Labour Government, delivered by this Labour Government and opposed by the parties opposite.
To build these new homes, we need people with the right skills. Earlier this week, my right hon. Friend the Education Secretary announced more than £600 million to train up 60,000 more construction workers, including through 10 new technical excellence colleges across every region of the country, giving working people the chance to fulfil their potential. Those are new opportunities for our young people, promised by this Labour Government, delivered by this Labour Government and opposed by the parties opposite.
All this is just the start. The Planning and Infrastructure Bill passed its Second Reading on Monday. That was no thanks to the parties opposite. Once that Bill completes its passage, it will help deliver the homes and infrastructure our country badly needs. I say to the parties opposite: the British people will be watching. If the parties opposite do not support these reforms, let us be clear about what that would mean: they are opposing economic growth, they are opposing more homes for families and they are opposing good jobs across our country. We on the Government Benches are clear about whose side we are on; the parties opposite must decide, too.
This Labour Government are taking the right decisions now to secure Britain’s future. Today, I can confirm to the House that the OBR has upgraded its growth forecast next year and every single year thereafter, with GDP growth of 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029. By the end of the forecast, our economy will be larger compared with the OBR’s forecast at the time of the Budget. That is the difference that this Labour Government are making.
This is not just about lines on a graph; it is about improving people’s lives. Working people are still feeling the pinch after a cost of living crisis caused by the Conservatives that caused interest rates and inflation to go through the roof, so I am pleased that the OBR confirms today that real household disposable income will now grow this year at almost twice the rate expected in the autumn. Compared with the forecast in the final Budget delivered by the Conservatives, and after taking inflation into account, the OBR says today that households will be on average more than £500 a year better off under this Labour Government. That will mean more money in the pockets of working people and higher living standards—promised by this Labour Government, delivered by this Labour Government and opposed by the parties opposite.
The world is changing. We can see that, and we can feel it. A changing world demands a Government who are on the side of working people, acting in their interest, acting in the national interest, not retreating from challenges, and not stepping back. It demands a Government with the courage to step up to secure Britain’s future and to seize the opportunities that are out there and before us. I am impatient for change. The British people are impatient for change after 14 years of failure, and we are beginning to see change happen. Our plan for change is working. Defence spending is rising. Waiting lists are falling. Wages are up and interest rates are cut. That is the difference that this Labour Government are making.
Today, the OBR confirms that our plan to get Britain building will drive growth in our economy and put more money in people’s pockets. There are no quick fixes, but we have taken the right choices: returning stability to our economy after years of mismanagement by the party opposite, and delivering security for our country and security for working people. That is what drives this Government; that is what drives me as Chancellor; and, that is what drives the choices I have set out today. I commend this statement to the House.
Mel Stride (Central Devon) (Con)
At the last Budget, the right hon. Lady said that she would bring stability to the public finances, but this statement, more appropriately referred to as an emergency Budget, has brought her to a cold—[Interruption.]
Mr Speaker
Order. Rightly, I wanted to hear the Chancellor, and I now want to hear the shadow Chancellor. [Interruption.] I do not need any help.
Mel Stride
This emergency Budget has brought the right hon. Lady to a cold hard reckoning. She has become fond recently of talking about the world having changed, and indeed it has. This country was growing at the fastest rate in the G7 only about a year ago. Just as the OECD, the Bank of England and other forecasters—including, we learn today, the OBR—have stated, growth has been halved for this year. It has been cut in two as a consequence of the decisions and the choices that the right hon. Lady has made on her watch. Inflation was down to 2%—bang on target—under a Conservative Government on the very day of the last general election. We are now told that this year we will be running at twice the level as was forecast under us in 2024. That will mean prices bearing down on households and on businesses right across the country, because of her choices.
The OBR also says that unemployment will be rising this year, next year and the year after. In fact, across the forecast period it will not decline at all. So much for the right hon. Lady’s back to work plans. We have already seen what it means when it comes to controlling borrowing under this Chancellor. She has come forward now with a plan to squeeze spending later on in the forecast period, and she has of course told the OBR that these are the elements of spending restraint to which she will stick, but what do the markets think? Given her track record, and the fact that she has failed to control spending and borrowing to date, what does the right hon. Lady think the markets will make of her latest promises?
Of course, the right hon. Lady says that none of this is her fault. It is the war in Ukraine, it is President Trump; it is tariffs; it is President Putin; it is the Conservatives; it is her legacy; it is anyone but her. What the British people know, however, is that this is a consequence of her choices. She is the architect of her own misfortune. It was the right hon. Lady who talked down the economy so that business surveys and confidence crashed through the floor. It was the right hon. Lady who confected the £22 billion black hole, a smokescreen that was only ever there to cover up for the fact that she and the Prime Minister reneged on their promises to the British people during the last general election, and a black hole that the Office for Budget Responsibility itself—ironically, at the Government’s behest—has said it will not legitimise. She chose to be reckless with a sliver of headroom against her fiddled targets. She borrowed and spent and taxed as if it were the 1970s. Little wonder that the Chancellor has tanked the economy, little wonder that we have an emergency Budget, all because of her choices.
The Chancellor likes to tour the television studios and tell everyone that they should be thankful that she will not be ramping up taxes in this emergency Budget as she did before, but that will be cold comfort to the millions up and down the country who are waiting in fear and trepidation for the start of the new tax year, buckling under the burden of tax that will rise to the highest tax burden—on her watch—in the history of our country. May I ask the right hon. Lady whether, when she replies, she will give that much-needed reassurance, particularly to businesses, that she will not be ramping up taxes still further in the autumn? Even a basic economist knows that if you tax something, you get less of it. You do not need to have worked at the Bank of England for 10 years to know that.
So what did the Chancellor tax? She taxed jobs and wealth creation. She has destroyed livelihoods. Businesses have been clobbered, big and small—small companies, the backbone of our economy—and enterprise has been crushed on the altar of her ineptitude. The Chartered Institute of Personnel and Development has told us that a third of the businesses affected will shed labour, with Morrisons losing 200 jobs, Tesco 400, and Sainsbury’s 3,000. No wonder the Federation of Small Businesses has said that outside the pandemic, business confidence has been left at its lowest level on record. However, it is not just businesses. It is charities, it is GPs, it is pharmacies, it is those who transport children with special educational needs, and it is hospices caring for the sick and the dying. In this House, the Labour party had the opportunity, yesterday and last week, to stop that, but they voted our amendments down, and we will never let their constituents forget it.
If you ramp up taxes, Mr Speaker, and if you ramp up borrowing and spending without any commensurate improvement in productivity, it leads to growing inflation, and inflation has been increasing on this Government’s watch. It means that interest rates stay higher for longer. The Chancellor has just trumpeted the fact that there have been three interest rate cuts since the Labour party came to office. She knows full well that there would have been more than that had she managed—[Interruption.] She knows full well that interest rates are higher for longer because of the choices that she made. This has led to servicing costs for our national debt running at twice the defence budget, and today we have learnt from the OBR that debt interest is to increase still further—and none of this money will be spent on public services. It will be going down the drain.
The real black hole is not the one that the Chancellor invented; it is the one that the Chancellor created. Is not the central problem that this Chancellor is a gambler? Even with her fiddled fiscal targets, she left way too little headroom. Is not the truth that while the right hon. Lady said of the last Budget that it was a
“once-in-a-parliament reset”,
she rolled the dice on a wafer-thin margin, and she lost? Reckless, with her fingers crossed, she fiddled the targets and she missed them. [Interruption.]
Mr Speaker
Order. I am not sure about the language being used. I think there are better and more constructive words that the shadow Chancellor would prefer to use in future.
Mel Stride
May I just point out that all the Chancellor’s fiscal headroom disappeared, not just some of it? In fact, she went underwater to the tune of £4.1 billion. Reeling from one fiscal event to the next is not a way to run the public finances, and breaking your fiscal rules to the extent that the right hon. Lady has in just six months is a public humiliation.
May I now focus briefly on defence spending? We on this side of the House welcome the fact that the Government will reach 2.5% of GDP by 2027, as we pressed them to do, and we note the stepping stone along the way that the right hon. Lady has just announced, but we should go further than that. The 3% target should be brought forward to this Parliament. So may I ask the right hon. Lady: given the geopolitical tensions that she has raised, what provision she has made in her headroom, in her fiscal plans, for increasing defence spending more quickly in this Parliament, if that proves necessary? May I also ask her this: would she scrap the absurd Chagos deal, and put that money behind our armed forces?
The economy is in a perilous state, but there was a different way. There were different choices on taxing and spending and borrowing, and on productivity, and on welfare. Let me just say a few words about welfare. It was the privilege of my life to serve as the Secretary of State for Work and Pensions, and when it came to welfare reform, with that privilege came a deep responsibility: the responsibility for welfare reform to be properly thought through, with a very clear plan—[Interruption]—I know that Labour Members do not like it, because it is an alien idea to their party—so that we could be fair to the taxpayer, but equally fair to the many people up and down the country, some of whom are highly vulnerable. That was an approach, on our watch, that led to £5 million of savings across the forecast period, and 450,000 fewer people going on to long-term sickness and disability benefits as a direct consequence.
We would have gone further—much further—and we set out a clear plan in our manifesto to do exactly that, but those in the party opposite rushed their changes. They had no plan. There was not a single mention of the personal independence payment in the Labour party manifesto, and when they got into office, the Labour Government pussyfooted around and dithered. Why? Because it is deeply divisive within their rank and file. Then suddenly, when the Chancellor decided that she had run out of money, out went the word to find some savings in welfare, to scrabble around, to yank every lever possible.
Then there was the spectacle, frankly, of what the OBR has said about the simply shambolic changes that were announced only last week by the Secretary of State for Work and Pensions. We have gone from incompetence to chaos. There have been more changes to this policy than there were at the last minute to the right hon. Lady’s LinkedIn profile. The result is the worst of all worlds: a wholly inadequate level of savings on welfare, with welfare costs spiralling ever higher, and changes that are likely to harm many vulnerable people. May I ask the right hon. Lady: when the Secretary of State for Work and Pensions came to the House last week with these changes, she did not provide an impact assessment, but was this because the OBR had not signed off the numbers, was it because the Department did not have enough time to produce one, or was it only provided today, as many of us suspect, because this was thought to be a good time to bury bad news?
The forecast for growth is down, the forecasts for borrowing costs and inflation are up, and business confidence has been smashed into a million pieces. This Chancellor is constantly trying to blame forces beyond her control. The right response is not to duck responsibility, but to build a resilient economy. The right hon. Lady would have us believe that that is what she is doing, but how can we believe this Chancellor? How can we trust this Chancellor? She is the Chancellor who said she would not increase borrowing, but she did. She said she would not change her fiscal rules, but she did. She said she would not put up national insurance, but she did. She said she would not cut the winter fuel payment, but she did. She said she would not tax farmers, but she did, and she said she would not move to more than one fiscal event a year, and she just has. Now we are all paying the price of her broken promises. Today’s numbers confirm it. We are poorer and we are weaker. To govern is to choose, and this Chancellor has made all the wrong choices.
Rachel Reeves
I know that the shadow Chancellor has not been in his role for very long, but at least he is not misquoting Shakespeare today. If this was a Budget, it would be the Leader of the Opposition responding. I am glad that she is still in her place, but I know she will want to get back to her office for a lunchtime steak soon.
The right hon. Gentleman talks about Budgets. Let me remind the Conservative party that the only emergency Budget we have seen in recent years was in response to their party’s disastrous mini-Budget—a mini-Budget that crashed the economy, sent mortgage bills spiralling and left a £22 billion black hole in our nation’s finances. Conservative Members may have forgotten about the damage that they did to our country, but the British people never will.
As always, the shadow Chancellor talked a lot, but he did not offer a single alternative. He says he opposes our tax rises, but he cannot tell us whether he would cut the NHS to reverse them. He says he wants economic growth, but Conservative Members abstained on the very planning reforms that the OBR has said will kick-start growth. Mr Speaker, you do not change the country by abstaining or by sitting on the fence; you change the country by leading and by taking action, and that is what this Government are doing. The shadow Chancellor says he wants businesses to trade, but he does not want us to talk to the second largest economy in the world or, indeed, our biggest trading partners in the European Union. He simply is not serious. Four months into the job, and he has got no clue.
The right hon. Gentleman wants to talk about growth, but he does not say anything about the fact that the OBR has upgraded growth next year and every single year after. He talks about pensioners, but he forgets that it is his party’s policy to scrap the triple lock, which we are protecting and which will mean the state pension rising next month by over £400. He talks about wages, but he forgets the fact that we are boosting wages by boosting the national living wage from next month. The shadow Chancellor says nothing about living standards or this morning’s fall in inflation, because the last Parliament was the worst on record, and the OBR has today revised up its forecast for family finances. Working people are always better off with Labour.
The right hon. Gentleman is learning something, because at least this time he has asked a couple of questions, so let me respond to them. He asked what the markets should make of this. What the markets should see is that, when I have been tested with a deterioration in the headroom, we have restored that headroom in full. That is one of the choices that I made. He says that it is a sliver of a headroom. Well, it is 50% more headroom than I inherited from the Conservative party. When I was left with a sliver of headroom, I rebuilt it after the last Government eroded it. That is the difference that we have made. While they left the public finances and the public services in a mess, we wiped the slate clean, which means that we have the flexibility now to increase defence spending, as the leader of the Labour party has done. The Conservatives had 14 years to increase defence spending, and now they lately come to the party.
The shadow Chancellor mentions welfare reform and his time at the Department for Work and Pensions. What a legacy: one in eight young people not in education, employment or training, and 1,000 people a day going on to personal independence payments. The OBR says today that welfare spending as a share of GDP will now start falling—a far cry from what we had under the Conservative party. The shadow Chancellor speaks about employment. The OBR says that employment will increase, that wages will increase and that living standards will increase. What a change, after 14 years of the Conservative party.
The world is changing, and no one can be in any doubt about it, but the Conservative party is stuck in the past—divided, out of touch and carping from the sidelines. Conservative Members have no plan: no plan to kick-start growth, no plan to fix our public services and no plan to keep our country safe. The only plan for change they are working on is a plan to change their party leader, and we cannot blame them for that.
If the Opposition have no plan, let me remind them about ours. The minimum wage up, real wages up, house building up, NHS investment up, investment in our schools up, investment in our roads up, defence spending up—and every single one of those policies is opposed by the party opposite. They are opposed by the Conservatives, opposed by Reform, opposed by the SNP, opposed by the Liberal Democrats and opposed by the Greens. It is the anti-growth coalition in action. They are the blockers. We are the builders—securing Britain’s future, protecting working people and delivering change.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
My right hon. Friend inherited a very difficult challenge when she became Chancellor of the Exchequer last July, and she is absolutely right that the books need to balance. This is not other people’s money we are spending, but taxpayers’ money—our constituents’ hard-earned money—and she is right to be tough as Chancellor. We look forward to quizzing her at the Treasury Committee next week, and I am sure she is looking forward to it just as much.
The Chancellor announced an extra £2 billion a year in capital spending, and she talked about extra defence spending. Could she give some more detail about where she hopes that extra £2 billion a year will go?
Rachel Reeves
I thank my hon. Friend for that question, and I do indeed look forward to attending the Treasury Committee next week. I was pleased to serve on the Treasury Committee in the past, and it is a pleasure to give evidence to it.
We will set out in the spending review—my right hon. Friend the Chief Secretary will set out in the spending review—the allocation of the additional capital money. However, I was able to announce today the £2.2 billion for defence from next year, as well as the £2 billion as a downpayment to build the affordable and social housing that we need. Those are two examples of the priorities of this Government to get Britain building and to secure our national security.
Daisy Cooper (St Albans) (LD)
The people of this country are crying out for change, but they feel they are just getting more of the same. Of course, it was the Conservative party that wrecked the public finances, but we are eight months into the new Government and people are left wondering, “Where is the change that was promised?” The Chancellor says that the world is changing, so why will she not change course with it? The Chancellor said she wanted a dash for growth, but with her national insurance jobs tax she shot herself in the foot before she even crossed the start line.
After the Government’s disastrous Budget, the Government had the chance today to change direction, fix our finances, kick-start growth and deliver a small business Budget. The Government could have scrapped the jobs tax, which will hammer our high streets, and instead ask the big banks, social media giants and online gambling companies to pay their fair share instead. The Government could have changed their approach to trade, launching talks to boost growth through a new trading deal with our European neighbours. Instead, the Government have made the wrong decisions to cut public services, hit disabled people and inflict more pain on our small businesses and high streets. In doing so, they have delivered no change and almost no growth at all.
After years of Conservative mismanagement, people can see just how broken our public services are. They cannot see a GP, they cannot see a dentist, they are fighting for an education plan and, they are picking up the pieces of a broken social care system. Everything is broken. Nothing works. That is why people are impatient for the change they were promised.
We have to bring the welfare bill down and support more people into work. That is right for people and our economy, but cutting support for someone who needs help getting dressed and washed in the morning is not just wrong; it does absolutely nothing to support that person into work. If anything, it does the exact opposite. It will also have knock-on impacts for the entitlements of their family carers, too. Will the Chancellor come clean about this? If the Government are serious about cutting welfare spending, they must get serious about fixing health and social care. Will the Chancellor speed up the social care review and ensure that it concludes no later than the end of this year?
In the Chancellor’s quest to slim down the civil service, I wonder why she has not looked at the mountain of red tape created by the previous Government’s terrible trade deal with Europe. A whopping 2 billion extra pieces of paper have had to be completed by businesses since Brexit, enough to wrap around the world 15 times. If we manage to cut the red tape, we can give British businesses a tailwind, deliver far more growth than is currently predicted, increase the fiscal headroom to deal with global headwinds, and free up precious time and money in our civil service. That would be real change.
Business was promised change too. Today’s statement should have been a small business Budget. We Liberal Democrats have repeatedly raised the alarm about the impending damage of the national insurance jobs tax, bigger business rates bills and changes to reliefs for family farms and family businesses. Those changes will be a hammer blow to small and family businesses, leaving communities facing the prospect of an epidemic of boarded-up shopfronts. They will be a hammer blow to community health and care providers who stop our NHS from falling over. This is not the change that was promised. Instead, I say again that the Chancellor should look again at much fairer ways to raise the tax revenue our public services desperately need by reforming capital gains tax more fairly and asking the big banks, the social media giants and the online gambling companies to pay their fair share.
I know the Chancellor must contend with President Trump’s trade war, which is causing global economic turmoil, but our response to Trump’s bullying cannot be to cower in the corner and just hope that he is nice to us. We cannot sit on our hands while British steel is hit with Trump’s tariffs. We Liberal Democrats warmly welcome the Chancellor’s move to raise defence spending to 2.5% of GDP, but instead of cutting the aid budget, which abandons the world’s poor and damages our soft power, she should be covering the cost by raising the digital services tax, handing the tab to Elon Musk and Trump’s other billionaire backers. At the very least, can the Chancellor categorically rule out any reduction in the tech tax in an attempt to appease the White House, especially when disabled people in Britain face eye-watering cuts?
To conclude, I have a series of questions. Will the Chancellor recognise that cutting public services that are already stretched is a false economy? Will she accept that trying to bring down the welfare bill without fixing health and social care is a road to nowhere? Will she listen to the warnings of small and family businesses that her jobs tax will do more harm than good? Will she look at the fairer ways of raising revenue that we Liberal Democrats have put forward? And will she take the bold action we need to grow our economy by rebuilding our broken trading relationship with Europe? The public were promised change. Where on earth is it?
National Insurance Contributions (Secondary Class 1 Contributions) Bill
Lindsay Hoyle ExcerptsWednesday 19th March 2025
(1 month ago)
Commons ChamberRead Full debate National Insurance Contributions (Secondary Class 1 Contributions) Act 2024-26 View all National Insurance Contributions (Secondary Class 1 Contributions) Act 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 19 March 2025 - (19 Mar 2025)
Mr Speaker
I can confirm that Lords amendments 1 to 20 engage Commons financial privilege. Having given careful consideration to Lords amendment 20, I am satisfied that it would impose a charge on the public revenue that is not authorised by the money resolution passed by this House on 3 December 2024. In accordance with Standing Order No. 78(3), that Lords amendment will therefore be deemed to be disagreed to and is not available for debate.
Lords amendment 20 deemed to be disagreed to (Standing Order No. 78(3)).
Clause 1
Rate of secondary Class 1 contributions
The Exchequer Secretary to the Treasury (James Murray)
I beg to move, That this House disagrees with Lords amendment 1.
Mr Speaker
With this it will be convenient to consider Lords amendments 2 to 19 and 21, and Government motions to disagree.
James Murray
I welcome the opportunity to consider the Lords amendment to the Bill. I thank Members of both Houses for their careful scrutiny and consideration of the Bill, and I place on record particular thanks to the Financial Secretary to the Treasury, Lord Livermore, for his invaluable support and for so expertly leading the Bill through the other place.
During consideration of the Bill in the other place, 21 amendments were made, 20 of which we will address today, but before I do so directly, let me remind both Houses of the context for the Bill. When we entered government, we inherited a fiscal situation that was completely unsustainable. We have had to take difficult but necessary decisions to repair the public finances and rebuild our public services. The measures in the Bill represent some of the toughest decisions that we have had to take as a result. To restore fiscal responsibility and get public services back on their feet, we needed to raise revenue, including through the measures that the Bill will introduce. Many of the amendments from the other place put at risk the funding that the Bill seeks to raise, so let me be absolutely clear: to support the amendments is also to support higher borrowing, lower spending or other tax rises. With that in mind, I now turn to the first group of Lords amendments.
Oral Answers to Questions
Lindsay Hoyle Excerpts(1 month, 3 weeks ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Emma Reynolds
I could not agree with one of my predecessors more. The right hon. Gentleman is absolutely correct. It is a great scheme and now that we are expanding it, we will take that opportunity to promote it better.
Emma Reynolds
We are committed to promoting savings and investment, as I said in an earlier answer. One measure we are looking at is the Financial Conduct Authority’s review of the advice guidance boundary. As I said in a previous answer, I do not want it just to be the 8% of people who can afford financial advice who reap the rewards of investing in our economy. We keep all taxes under review.
Mark Garnier (Wyre Forest) (Con)
The City of London has been a leader of innovation in the world of finance and savings for a few hundred years now, and it has been successful because it has always seized opportunities and innovation when presented. In that spirit, we are pleased that the Chancellor in her Mansion House speech embraced the concept of securities tokenisation, but we now find that the catalyst for this innovation in the UK—a pilot for the digital gilt instrument known as DIGIT—has found itself in a two-year black hole. Innovation is not something that can hang around for two years, so will the Minister give assurances that she will do everything she can to deliver DIGIT as soon as possible?
James Wild (North West Norfolk) (Con)
Even before Labour’s jobs tax comes into force, we can see the damage that it is doing. Three quarters of a million jobs in hospitality will be subject to employer national insurance for the first time, costing £1 billion. Given that major hospitality and retail businesses are warning that lower-paid and part-time workers will suffer most, will the Chancellor think again? Can the Minister at least commit that there will be no further increases during this Parliament?
James Murray
The businesses to which the hon. Gentleman refers, like businesses in all sectors of the economy, benefit from the stability that this Government have brought to the economy. He wants to talk about unemployment and the rate of jobs. We recognise that making changes to employer national insurance contributions was a tough decision that will have consequences, but the unemployment rate will fall to 4.1% next year and remain low until 2029. When taken together, the Budget measures mean that the employment level in this country will increase from 33.1 million in 2024 to 34.3 million in 2029.
Daisy Cooper (St Albans) (LD)
Health and wealth are two sides of the same coin, and we will not get economic growth without a healthy population. But as a result of the national insurance contribution changes, the Care Provider Alliance reports that 73% of social care providers will have to refuse new care packages from local authorities or the NHS, and that 57% will have to hand back existing contracts. What assurances can the Government provide to the huge number of people who are very scared that they will have to go without care and see their lives deteriorate?
The Chief Secretary to the Treasury (Darren Jones)
At autumn Budget 2024, we set out the first major steps in our approach to regional growth through devolution, investment and reform. The January growth speech regional investment package built on that. We have made clear the Government’s focus on attracting inward investment across the country and to investing in infrastructure needed to support cities and regions to grow. We have made it clear that the importance of investing in major city regions across the UK will play an important part in that endeavour. For example, if we improve the productivity gap in Manchester, Birmingham and Leeds, we estimate we can deliver an extra £33 billion in economic output.
Graham Stringer
Sorry, Mr Speaker. I was nearly as shocked when you called me as I was when listening to the Chancellor of the Exchequer on Radio 4 talking about economic growth. She said there had not been a new runway built in this country since 1945. Manchester airport would be very surprised to hear that, because its new runway has been operating for nearly 25 years. I was shocked by that but not really surprised, because I think many officials in the Treasury who advise her show a startling ignorance of the English regions, and that leads to a certain prejudice in the formula they use to calculate whether a scheme should go ahead. Can the Minister and the rest of the Treasury team provide coaches to send Treasury officials around the English regions to talk to people who know about growth? Secondly, will he look at the formulas that decide where economic growth happens, which are biased against the regions?
Darren Jones
I can commit to working with DFT colleagues on projects such as that and others around the country as we make decisions in the upcoming spending review. I would make an observation that it is not just about the decisions on spending; there have been problems in the past where decisions have been made and U-turned, and then made and U-turned again. That is difficult for the supply chain and difficult for investors and local communities. In our multi-year capital budgets and our 10-year infrastructure strategy, which are coming in the months ahead, we will give stability to the UK economy so that we can get on and deliver projects such as the one the hon. Lady mentions.
Gareth Davies (Grantham and Bourne) (Con)
The Chancellor has lauded the new National Wealth Fund as a key part of the Government’s regional growth ambitions. The trouble is, it is not actually new; it is just the UK Infrastructure Bank with a new colour scheme and £7 billion it did not need. The Prime Minister announced at a recent Labour party political conference that he will allocate £200 million from the National Wealth Fund for Grangemouth, but it is supposed to be operationally independent. Will the Minister therefore confirm that that is still the case and that the full independent investment process was followed? Will he also confirm that the unexpected resignation of the National Wealth Fund CEO just days before that announcement is not connected?
Darren Jones
I agree entirely that mental health services are in desperate need of investment and support across the country. The evidence is very clear that there are, for example, too many people out of work who would be like to be in work, but who are waiting at home unwell and unable to receive the support and services that they need and deserve. The Health Secretary is working hard on that at the moment. We are going into the spending review negotiations over the coming weeks and months, and we will set out further detail in due course. I look forward to being able to provide more information specifically as we go through that process.
Richard Fuller (North Bedfordshire) (Con)
Improving public sector productivity was the No.1 ask of Institute of Directors’ businesses trying to weather Storm Rachel, but under Labour, public sector productivity has fallen further behind pre-pandemic levels. The number of civil servants working from home has gone up and, shockingly, as The Daily Telegraph has found, thousands of civil servants are being signed off to work from abroad. Therefore, whether it is on civil servants working from their bedrooms or from Benidorm, or on other blockers of public sector productivity, what has the Chief Secretary to the Treasury actually done in his last eight months in office, or is he too comfortable with what the Prime Minister calls
“the tepid bath of managed decline”?
Darren Jones
I thank the hon. Member for his tour of the scenic A9 and for telling us the importance of that road to Scotland. I am sure that I support what would have been his question. The Scottish National party Government in Scotland ought to take infrastructure seriously, as we are doing here in the UK Government.
Dave Doogan (Angus and Perthshire Glens) (SNP)
We can listen to the braying of Labour MPs from Scotland or we can look at the fact that the Scottish economy grew 12% more than the UK economy in 2024. That is because of the SNP Scottish Government’s forensic focus on making Scotland the most attractive place in the UK for foreign direct investment year after year, having a progressive taxation system, rewarding our public sector workers properly and investing in our communities. What difference does the Minister think agricultural property relief and business property relief will have on the Scottish economy—positive or negative?
Rachel Reeves
The Government have no plans to consider zero rating indoor play facilities for VAT. All tax breaks must provide value for money and evidence suggests that such savings are only partially passed on. I would, however, welcome my hon. Friend engaging with us as we look to inform our “Transforming Business Rates” paper ahead of the Budget later this year.
Mel Stride (Central Devon) (Con)
How many jobs will the right hon. Lady destroy as a result of her jobs tax?
Rachel Reeves
The right hon. Gentleman and his party had 14 years to reform the welfare system. They failed to do so, but this Government will. We are turning the British economy round after the disaster left to us by the previous Government: three cuts in interest rates since the general election, real wages rising at their fastest rate for three years, fuel duty frozen, the payslips of working people protected, and millions getting a pay rise through an increase in the national living wage. That is the change that this Government are delivering; that is the change that the Opposition are blocking.
Jacob Collier (Burton and Uttoxeter) (Lab)
Rachel Reeves
Unlike the Conservatives, we believe that investing alongside private industry is good for jobs and good for economic growth. I visited the National Wealth Fund’s offices last month where I heard at first hand about its equity investment in Cornish Metals. This will help to finance the reopening of Cornwall’s South Crofty tin mine, creating more than 300 local jobs, and—
Mr Speaker
Order. Look, enough is enough. I have to get Members in from both sides. I am sorry that the Front Bench does not want to get these Members in, but I am determined to. These are called topical questions, which means I want quick questions and certainly short answers. I call the Father of the House, Sir Edward Leigh.
Sir Edward Leigh (Gainsborough) (Con)
Growing the UK Economy
Lindsay Hoyle Excerpts(2 months, 3 weeks ago)
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The Chief Secretary to the Treasury (Darren Jones)
With your permission, Mr Speaker, I would like to update the House on the Government’s work to unlock investment and secure economic growth. That is the No. 1 mission of this Government. Without growth, we cannot deliver on the priorities of the British people, cut NHS waiting lists, rebuild our schools or put more police on our streets. That is why the pursuit of growth is our first mission, putting our country on a new path towards a brighter future after 14 years of failure from the Conservatives. By helping businesses to invest and create wealth, we ensure they can provide jobs and opportunities that change lives, putting more pounds in people’s pockets and rejuvenating communities across the country.
We have seen progress on that already, with huge private sector investments into our country since this Government came into service, but now we must go faster and further. We must help businesses and places to achieve their potential. We do that by being an active and strategic state—one that works in true partnership with businesses, investors and local leaders to deliver for the British people in every corner of the country. That principle was at the heart of the Chancellor’s speech earlier today in Oxfordshire, where she announced the latest steps that the Government are taking to drive growth across the country. I am pleased to update the House on those announcements now.
The economic growth we are pursuing must reach into every town, city and community across the United Kingdom—inclusive growth for everyone, not just those at the top—because there is untapped talent and unrealised opportunity throughout the country and we cannot let that go to waste any longer. If we can raise the productivity of major cities like Manchester, Birmingham and Leeds just to the national average, we will deliver an extra £33 billion in economic output. So I can confirm that our plans for regional growth will be hardwired into the spending review, the infrastructure strategy, the industrial strategy and our approach to trade and investment.
We are already providing £200 million of funding to support the development of a new mass transit system in West Yorkshire, and at the autumn Budget we secured improved connections between towns and cities from Manchester through to York. We are also developing our plans to further improve connectivity in the north and across the country through our 10-year infrastructure strategy, which will set out our long-term vision for social and economic infrastructure across the country.
Today we are progressing with the Wrexham and Flintshire investment zone, focusing on the area’s incredible strength in advanced manufacturing to leverage in £1 billion of private investment and create up to 6,000 new jobs. As the Chancellor announced at Davos last week, the Office for Investment will work hand in hand with local areas to develop opportunities for international inward investment, starting with the Liverpool city region and the North East combined authority, while the national wealth fund will build on its strength and combined authority engagement to build a pipeline of investable propositions with mayors, starting with strategic partnerships in the Glasgow city region, West Yorkshire, the west midlands and Greater Manchester. Sticking with Manchester, we are giving our support to the Mayor of Greater Manchester’s plan for the redevelopment of Old Trafford, creating new housing, new commercial developments and a new stadium—but, I am advised to inform the House, not necessarily Government-wide support for the team that play there.
I am pleased to update the House on our new approach to the Oxford-Cambridge growth corridor, a hugely exciting opportunity for the UK and the British economy. For centuries these two cities have been synonymous with inspiration, invention and innovation. Economic analysis suggests that with the right support the region could bring a GDP boost of £78 billion by 2035, yet time and again Governments have failed to capitalise on this remarkable area, most recently in 2021 when the last Government dropped their commitment to what they called the Ox-Cam arc project.
Through under-investment, poor transport connections and a lack of affordable housing, the incredible growth potential of the area has been squandered as people and businesses have been forced to move and invest elsewhere. No longer: Lord Vallance will act as our champion for the growth corridor, utilising his impressive experience in life sciences, academia and Government to unlock growth opportunities across the region and promote its potential to investors across the world. We will establish a new growth commission for Oxford, to recognise and capitalise on the growth potential of this historic city.
We already know, of course, that transportation is a huge factor in the success of the country. Heathrow is the UK’s only hub airport and our largest air freight hub by volume, connecting us to emerging markets around the world, opening up new opportunities for trade and investment. But its growth has been constrained for decades. Today we are announcing that the Government support and are inviting proposals for a third runway at Heathrow airport, to be brought forward by the summer. This is an important infrastructure project expected to have positive growth impacts across the United Kingdom, and it has the backing of businesses and business groups including the CBI, the Federation of Small Businesses and British Chambers of Commerce as well as trade unions such as the GMB and Unite.
According to a recent study from Frontier Economics, a third runway could increase GDP by 0.43% over the next 25 years, with over half—60%—of that boost going to areas outside London and the south-east. It could create over 100,000 jobs in the local area and maintain Heathrow’s status both as a global passenger hub and as the UK’s largest air freight hub by volume.
Reforms this Government have introduced to speed up the planning system will ensure the delivery of the project and set it up for success. Once proposals have been received the Government will take forward a full assessment through the airport national policy statement to ensure that any scheme is delivered in line with our legal, environmental and climate obligations. We want the scheme to be value for money, and our clear expectation is that any surface transport costs associated with the project will be financed by private capital and should be sustainable and low-carbon. The Secretary of State for Transport will also set out planning decisions for further airport expansion at Gatwick and Luton shortly.
Crucially, I am pleased to announce that we are taking further steps in our transition to greener, cleaner aviation. At the start of the month, the sustainable aviation fuel mandate became law. Sustainable aviation fuel reduces carbon dioxide emissions compared with fossil jet fuel by around 70%. Today we are announcing an additional £63 million for the advanced fuels fund over the next year, and we have set out the details of how we will deliver a revenue certainty mechanism. Those measures will support investment and high-skill green jobs in plants across the United Kingdom, delivering sustainable aviation fuel here in the UK for UK consumption.
Transportation is equally important on a local level, and that is as true for the Oxford-Cambridge growth corridor as it is for anywhere else. This Government have confirmed that they will provide crucial funding for transport links, including upgrades to the A428 to reduce journey times between Milton Keynes, Bedford and Cambridge, as well as for East West Rail with new services between Oxford and Milton Keynes starting this year. We have already received submissions to the new towns taskforce to build new developments along the new railway. At Tempsford, we will accelerate delivery of a mainline station on the east coast main line so that travellers can get to London in under an hour and to Cambridge in under 30 minutes once East West Rail has been delivered.
We will ensure that the pioneering work that has long been a hallmark of the area will continue. We are today committing to a new AI growth zone in Culham. We welcome the University of Cambridge’s plan for a new flagship innovation hub in the centre of Cambridge, and a new Cambridge cancer research hospital will be delivered as part of wave one of the new hospital programme. Just yesterday, Moderna completed the build for its new vaccine production and research and development site in Harwell, while committing to invest £1 billion in the United Kingdom—proof that when we create the conditions for success, businesses can lead the way.
I am pleased to confirm for the House that the Environment Agency is lifting its objections to specific developments in Cambridge, so we will press on with plans to develop 4,500 additional homes, new schools and office, retail and lab spaces in and around Cambridge. In a further boost to the area, we have now agreed water resource management plans with water companies, unlocking £7.9 billion of investment in water resources over the next five years, including the new Fens reservoir serving Cambridge and the south-east strategic reservoir near Oxford.
This Government have come in with a purpose: to bring growth, and with it opportunity, to the country. In just six months, we have taken the tough decisions to make that possible. We are taking on the responsibility of a Government who deliver real change for people—no longer the hollow promises of the Conservative party, but change delivered under this Labour Government, working with business and local leaders to drive the growth that will lift up this country. Now we must go further and faster so that the next generation and the generation after will have the opportunities they deserve, to ensure that Britain is strong and successful once again in a fast-changing world and so that everybody in this country can have the chance to succeed. Today’s announcements will help make that a reality and show how our plan for change will build a better Britain. I commend the statement to the House.
Darren Jones
The House is indebted to the shadow Chancellor—Mr Melmentum himself—for his lecture on the need for speed from this Government. Let me tell him that we have done more in the last six or seven months than that lot did in the last 14 years.
The shadow Chancellor asked me about our plans to work with business. The comments today from business leaders and investors speak for themselves: our plans are welcomed by businesses, and we will be working in partnership with them to deliver for this country. He also asked me about work. Those of us in the Labour party make no secret of the fact that we like to support people into work—strong, secure work with workplace rights and secure incomes to help make people’s family finances add up. That is why our party was created in the first place. The real truth from the data is that under the last Government, too many people were waiting at home sick, unable to get NHS appointments or access to mental health services so that they could be helped back into work. Too many people were waiting at home, waiting for training and unable to seize the opportunities advertised in front of them. This Labour Government will not treat those things as a luxury, but will work at speed to give people the work they deserve.
At the heart of the shadow Chancellor’s statement was a truth for the country to consider. Under the last Administration, it was promises cancelled; under this Administration, it is promises being delivered.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I welcome this Government’s commitment to infrastructure investment and to telling the world that Britain is open for business, but to achieve all of this, we will need a really skilled workforce to deliver on those major construction projects. May I ask my right hon. Friend to set out how the Government will ensure that we have the skills to deliver what he has promised?
Darren Jones
I thank the Chair of the Treasury Committee for her question. This is an important test of turning policy into real-world delivery. Through our infrastructure and industrial strategies, we are engaging right now with businesses and investors across the country so that as we bring forward our plans, we have a skills and training system that creates opportunities for people to take up the jobs that we need them to do in order to help get Britain building. That will be a crucial part of our approach to infrastructure, so that every person across the country can seize the benefits of this Government’s plans.
Daisy Cooper (St Albans) (LD)
The Government are absolutely right to focus on economic growth, but their blinkered approach on Europe is holding back British businesses and stifling the very growth that we need to fund our public services. By ruling out negotiations with the EU on a bespoke customs union and a youth mobility scheme, the Chancellor’s dash for growth will be more like a slow crawl in a car with the handbrake on. In order to turbocharge economic growth, will the Government start negotiating those initiatives now?
To unleash growth through our small businesses, the Chancellor should scrap her national insurance contributions rise, and instead seek to raise the same amount of money through the measures that we Liberal Democrats have suggested: reversing the tax cuts on the big banks, increasing taxes on the big tech and gaming companies, and reforming capital gains tax in a way that would be fairer and raise more money. Will the Government look again at those alternative revenue raisers and lift the burden that the Government have placed on small business?
On airports, the Chancellor has voiced her support for Heathrow expansion and has suggested that expansion will be forthcoming for other airports. We Liberal Democrats oppose this, because it will deliver minimal growth at a huge cost to the climate. Can the Government confirm whether they intend to abide by the advice of their own climate change advisers that no airport expansion should proceed until a UK-wide capacity management framework is in place? In the midst of a climate emergency, can the Government give a cast-iron guarantee that the so-called refreshed carbon budget that the Chancellor referred to will not water down climate targets, and what do they have to say to those experts who say that sustainable aviation fuel is not realistic or scalable?
Turning to the Oxford-Cambridge growth corridor, we really welcome plans that further boost the UK’s position as a European and global science leader. Can the Government confirm that there will be enough money for the whole of the route to be constructed on the East West Rail route, and that they will work hand in glove with local authorities to minimise the environmental impacts, introduce infrastructure before or alongside housing, and maximise local community benefits?
Agricultural and Business Property Reliefs: OBR Costing
Lindsay Hoyle Excerpts(3 months ago)
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The Exchequer Secretary to the Treasury (James Murray)
At the autumn Budget, we took difficult decisions on tax, welfare and spending that were necessary to restore economic stability, fix the public finances and support public services. We had to do that to address the mess we inherited from the previous Government, which the right hon. Member for Louth and Horncastle (Victoria Atkins) will remember well, having served in that ill-fated Government. We have taken these decisions in a way that makes the tax system fairer and more sustainable.
The Government are better targeting agricultural property relief and business property relief to make them fairer. These reforms mean that despite the tough fiscal context, the Government are maintaining very significant levels of relief from inheritance tax beyond what is available to others.
Under the current system, the benefit of the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from His Majesty’s Revenue and Customs, 40% of agricultural property relief benefits the top 7% of estates making claims. That is just 117 estates claiming £219 million of relief. It is a similar picture for business property relief, with more than 50% of it being claimed by just 4% of estates making claims, which equates to 158 estates claiming £558 million in tax relief. Our reforms mean that individuals can access 100% relief for the first £1 million of combined business and agricultural assets, and 50% thereafter. Given the nil rate bands, this means that a couple can pass on up to £3 million between them to a direct descendant, inheritance tax free.
Yesterday, the Office for Budget Responsibility published further details on the data sources and modelling used to estimate costings across a number of the tax measures announced at Budget, including the reforms to agricultural property relief and business property relief. The costing is the same as published at Budget, and the approach to modelling the costing is typical and in line with other tax policies. As the Government have set out, the reforms mean that almost three quarters of estates claiming APR in 2026-27, including those that also claim BPR, will not pay more inheritance tax. This is a fair approach that protects farms while also fixing the public services we all rely on.
Mr Speaker
I call the shadow Secretary of State for Environment, Food and Rural Affairs.
Victoria Atkins
Having inherited the fastest-growing economy in the G7, the Chancellor’s Budget has led to the highest borrowing costs since the pandemic, growth flatlining, business confidence plummeting and job freezes. Who has Labour chosen to pay the price for its economic illiteracy? Pensioners, family businesses and farmers. For months, farmers, farming businesses, professional advisers and economists, and now eight major supermarkets, have warned the Chancellor that she has got her figures wrong, but Ministers cleave desperately to their soundbites. Let us hope that they listen to the OBR.
Yesterday, the independent OBR released additional information about this particular measure and reiterated the “‘high’ uncertainty” of the predicted yield. It noted that the yield of the measure is likely to be reduced by 35% because of behavioural responses, and that it is unlikely to reach a steady state for 20 years. The OBR also expressed grave concerns about the impact on older individuals and their ability to plan. In short, the reassurances provided by Ministers are falling almost as flat as the economy.
The Chief Secretary to the Treasury has lectured this House about the perils of sidelining the OBR. In light of its analysis, will the Minister now commit to a full and proper review of this dreadful policy? The public have noticed that Government Ministers are failing to answer reasonable questions about their policies, so will the Minister please give straight answers to the farmers and businesses watching our proceedings today?
In light of the new analysis, how many farms does the Treasury think will be affected by the changes to APR, APR/BPR and BPR alone? What assessment has he made of the Central Association of Agricultural Valuers’ finding that the Chancellor has underestimated the number of farms affected by the changes by a factor of five? How many tenant farmers will be evicted? As worrying reports of suicides among farmers begin to emerge, will the Minister please do what the Secretary of State for Environment, Food and Rural Affairs has failed to do and measure the number of suicides over the next 12 months, so that we can understand the human cost of this policy?
Finally, why does the Minister think that Tesco, Sainsbury’s, Asda, Morrisons, Marks & Spencer, Aldi, Lidl and the Co-op have all come out against this tax policy and believe the Treasury’s figures to be wrong? Why does he think they are wrong and he is right?
James Murray
There certainly is evidence that the current inheritance tax system has caused people to use these reliefs for tax planning and to avoid inheritance tax bills. My hon. Friend alludes to the broader question of the fairness and sustainability of this measure. As I mentioned earlier, 40% of agricultural property relief benefits the top 7% of estates, and 50% of business property relief benefits the top 4% of estates. The Leader of the Opposition has said that she thinks this is a good way to prioritise public money, but we think it is neither fair nor sustainable.
Steve Darling (Torbay) (LD)
After years of the Tories failing our rural communities, including with a dodgy and utterly shameful Australian trade deal, it is a great pity that the new Government have picked up the baton. From Orkney to the Isles of Scilly, Liberal Democrat colleagues are extremely concerned about the impact of these proposals.
The report published yesterday clearly demonstrates the uncertainty about the income from the misguided family farm tax over the next two decades. In the light of this, and given that it will hit older farmers in particular and those who put food on the tables of the United Kingdom, will the Minister do the right thing and scrap this tax?
Mr Speaker
Mr Dickson, I think you were very late. I would not want to embarrass you by allowing you to ask a question.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
One of the witnesses before the Environment, Food and Rural Affairs Committee told us that the Government’s changes hit the people the Government say they are protecting, and protect the people the Government say they are hitting. It is difficult to improve on that analysis of what is proposed. It really does not have to be like that. There is a sensible debate to be had about reforming inheritance tax to stop the super-rich from sheltering their wealth while still protecting family farms. His Majesty’s Revenue and Customs has its technical consultation coming up. Why does the Minister not agree to broaden its terms, engage with the farming communities, and look for a way to protect family farms and get at those who are sheltering their wealth in land?
Mr Speaker
Order. Surely that is not relevant to the question you are going to ask. Come on!
Dame Harriett Baldwin
The Office for Budget Responsibility forecasts that the measure will raise £500 million in revenue by 2029, which, in the context of tax revenues of over £1,150 billion, is a very small number. What value does the Minister put on food security for the United Kingdom?
Mr Carmichael
On a point of order, Mr Speaker. Before questioning the Minister, I should have reminded the House of my entry in the Register of Members’ Financial Interests. My failure to do so, for which I apologise, was inadvertent—I just got carried away with the excitement of the moment.
Oral Answers to Questions
Lindsay Hoyle Excerpts(3 months ago)
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Rachel Reeves
After 14 years of stagnant growth and the decline in living standards during the last Parliament, my hon. Friend is absolutely right that we must turn around that performance. That is what this Government are determined to do. The planning and infrastructure Bill will come to Parliament shortly, followed by the pensions Bill, which will unlock long-term pension capital and make it easier for businesses to get things done in this country.
Mark Garnier (Wyre Forest) (Con)
The Chancellor makes reference to the PWC report, but half of the survey in that report was done before the Budget. The Chancellor and I spent a very happy three years sitting next to each other at the Treasury Committee, and she was incredibly good at demanding straight answers from the witnesses that came in front of the Committee. She has already been asked questions about the fact that the fiscal headroom is only £10 billion and the increase in the cost of borrowing is now going to go through the roof so, at some point, she will have to raise taxes, cut investment or increase debt. Which will it be?
Rachel Reeves
The headroom in our Budget was larger than the headroom that we inherited from the previous Government, so we have put aside more money for changes in economic prospects. The OBR has not yet done its forecast, which will take a whole variety of factors into account, and we will make decisions based on that. I have been really clear that our fiscal rules are non-negotiable because, unlike the Conservatives, we are determined to meet the fiscal rules, not break them time and again.
Daisy Cooper (St Albans) (LD)
The rising cost of borrowing will bring more misery to mortgage holders, with reports suggesting that some mortgage holders could pay an extra £500 a year. Given that potential global trade tensions could further affect the UK’s financial stability, what assurances will the Government provide that UK lenders remain in a strong position to support households and small businesses?
Darren Jones
I thank the right hon. Gentleman, as I am sure the Chancellor does, for his kind words. A key part of the test on ODA spending in terms of fiscal circumstances requires those circumstances to improve. One of the reasons we are in this problem in the first place is because of the mess the previous Administration left this country in. We are working hard to turn that around.
Helen Maguire (Epsom and Ewell) (LD)
Recent flooding in Leatherhead left footpaths near essential services such as train stations overflooding—
Mr Speaker
Order. It is the question number I need. Minister, you can just answer the question and then we will have the second part.
Helen Maguire (Epsom and Ewell) (LD)
The Parliamentary Secretary to the Treasury (Torsten Bell)
Too many parts of the country and too many families have felt the devastating effects of flooding in recent months, not least in South Wales and in the hon. Member’s constituency. The Government have committed £2.4 billion over the next two years to increase community flood resilience. Everyone in this House recognises that flooding is a challenge that will be with us for years to come, and we will set out further plans at the spending review.
Bill Esterson (Sefton Central) (Lab)
The vote of confidence by PwC, the upgrading of the growth forecast by the International Monetary Fund and the £63 billion announced at the growth summit are all indications of this Government’s successful plans. Does the Minister agree that they are added to by the clear direction on green investment in energy projects and that that will deliver success for our economy, as well as contributing to our climate targets?
Torsten Bell
We take very seriously the need to protect communities from flooding and to deliver on our commitments on climate in the years ahead. It is important that we consider both principles and that is what the Department for Environment, Food and Rural Affairs and the Department for Energy Security and Net Zero are doing.
Helen Maguire
Thank you, Mr Speaker. Recent flooding in Leatherhead left footpaths near essential services such as train stations overflooding with sewage. In Leatherhead, there are no alternative options to divert water. Given the importance of long-term flood preparations, will the Chancellor commit to securing funding for flood defences beyond 2025-26?
Torsten Bell
The hon. Member will know that specific flood defence schemes will be considered in the normal way. When it comes to funding beyond 2025-26, those will be decisions on overall levels of funding that are taken in the spending review later this year.
Mr Speaker
No, we have Gareth Davies up next. We are in complete chaos—[Laughter.] We have the wrong names coming in. What has confused everybody is the fact that Question 3 was withdrawn. Everybody is a question behind. Right, I call the shadow Minister next.
Gareth Davies (Grantham and Bourne) (Con)
Never in doubt, Mr Speaker.
May I welcome the Parliamentary Secretary to the Treasury, the hon. Member for Swansea West (Torsten Bell), to his place? The removal of investment allowances from our domestic oil and gas industry is strangling domestic supplies at a time when our storage levels are depleted. Labour’s ideologically driven, unachievable obsession with decarbonising the grid by 2030 might be good news for Chinese renewables manufacturers, but it is bad news for British households. Is it not the case that the only growth that we will see from Labour’s energy policy is in the amount that people pay for their energy bills, or can the Minister stand up now and commit—just as Labour did during the general election campaign—to cutting energy bills by £300?
Rachel Reeves
My hon. Friend is a good advocate for businesses, including Alexander Dennis in Scarborough. The Government will soon publish a new national procurement policy statement, which will set out our priorities for public procurement in support of our mission to grow the economy. In addition to the answer I gave my hon. Friend the Member for Stoke-on-Trent North (David Williams), we recognise the importance of buses in growing our economy by getting people to work, but also the opportunities to use public procurement to buy more buses made in this country, supporting good jobs here in Britain.
Dame Harriett Baldwin (West Worcestershire) (Con)
Former Chair, Mr Speaker, but thank you very much for calling me.
It is clear that we all want to see economic growth in rural areas and across the UK, but I am concerned that some of the measures in the Chancellor’s Budget are having the opposite effect. Which statistic worries her most: the fact that we are at a 20-year high for business closures, or the 100% increase in millionaires leaving the UK?
Rachel Reeves
Bringing stability back to our economy by fixing the public finances is the No. 1 thing we can do to help businesses to grow, alongside our planning reforms to make it easier to build things in Britain and our reforms to the pension system to help businesses access long-term patient capital. As for agricultural property relief, the latest figures show that the top 7% of claims—117 claims—accounted for 40% of the total value of the relief, costing the taxpayer £219 million. We cannot afford to carry on like that, which is why we made those progressive and fair reforms in the Budget.
James Wild (North West Norfolk) (Con)
Farming’s vital role in growing our rural economy, growing our food and protecting the countryside is threatened by Labour’s family farm tax. The self-proclaimed “iron Chancellor” is proving herself to be the tin-eared Chancellor, ignoring evidence from the National Farmers Union and others showing that the tax is based on flawed assumptions. Ahead of Saturday’s farming day of unity, rather than threatening family farms, will she speak to farmers, think again and withdraw those damaging proposals?
Darren Jones
I thank the right hon. Member for his question, and I think “fairness” is the right word. That is why we worked in opposition to try to persuade the last Government to act on the mineworkers’ pension scheme, but we failed because the last Government did not think this was an urgent issue for them to consider. The Labour Government have implemented this change at our first Budget, and that is fairness in action. We will continue to work with trustees of the BCSSS, and we will come back with further options in due course.
Jim Shannon (Strangford) (DUP)
Mr Speaker, I spoke to the Minister beforehand, so he knows where I am coming from with my question.
I understand that some families of those affected who have passed away have retired to Northern Ireland, and they deserve their pensions. That being the case, has the right hon. Gentleman had an opportunity to ascertain the numbers of those in Northern Ireland who will qualify for such pensions, and will he chase up those people to ensure they get the moneys they deserve?
James Murray
We set out the details of our decision to increase the rate of national insurance contributions from employers and to reduce the threshold, and we have added the different benefit we will give, particularly to small businesses and charities, by more than doubling the employment allowance. The employer national insurance contribution changes were among the toughest we took in the Budget, but they were necessary to repair the public finances and deliver the economic stability that is so crucial for investment and growth.
Mr Speaker
We have had the former Chair of the Treasury Committee, so let’s now have the current Chair.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
My hon. Friend the Exchequer Secretary rightly said that small and medium-sized enterprises are a vital part of our high streets and our economy, and one of the biggest changes is, of course, the change to business rates. He was not tempted at the Select Committee last week to give more detail on the timeframe for that, but many businesses want certainty about business rates as they go forward. May I tempt him to give an indication of the Government’s thinking about how quickly this change might be introduced and whether the small business rate relief is likely to survive or to be subsumed into a new regime?
James Murray
I thank the Chair of the Select Committee for her questions. If she did not succeed in tempting me at the Select Committee, I doubt she will succeed today, but I can reassure her that the decisions we have set out about introducing the permanently lower business rate for RHL—retail, hospitality and leisure—properties below a £500,000 rateable value will be coming in from April 2026. Specifically in relation to small business rate relief, I can confirm that the Government are committed to retaining that. One of the options we are looking at in our “Transforming business rates” discussion paper is how to support businesses that want to expand into a second premises, thereby growing the business, because at the moment there is the cliff edge where they lose small business rate relief.
Richard Fuller (North Bedfordshire) (Con)
Confidence on Britain’s high streets is sliding faster than the Chancellor will be down the ski slopes of Davos later today. With retail sales down—rather than up, as expected in the run-up to Christmas—and with the British Retail Consortium saying that two thirds of stores will raise prices to cover her national insurance increases, when will the Minister accept that the Chancellor’s economic strategy of raising taxes and increasing regulations is not working?
James Murray
I am glad to know that the shadow Minister’s morning was well spent cooking up that line about the Davos ski slopes. What he will know, and what sectors across the economy will know, is that having a stable economy is a prerequisite for the investment we need to get the economy growing. That is why we had to take difficult decisions at the autumn Budget, including those to increase the rate of employer national insurance contributions. Alongside that increase, however, we more than doubled the employment allowance and set out our plans to have permanently lower tax rates for high street RHL properties from April 2026.
Daisy Cooper (St Albans) (LD)
A number of small high street businesses will be hit hard by the Government’s jobs tax and the dramatic reduction in business rates relief, and House of Commons Library research that I commissioned shows that from April 2026 the Government’s reforms to business rates could leave small and independent businesses in effect subsidising the big chains. Will the Chancellor meet me and a delegation of small and independent businesses from St Albans so that we can make the case for fairer reforms and for wholesale reform of the broken business rates system?
Rachel Reeves
I thank my hon. Friend for that question. I know that the cost of living has a deep impact on all our constituents, including in Coatbridge and Bellshill. Like my hon. Friend, I was pleased to see the reduction in inflation last week. The Bank of England’s independence is sacrosanct to carry on those efforts. In addition, we increased the minimum wage in the Budget, we have reformed universal credit to reduce deductions and we have extended the household support fund, all to help ensure that working families have more money in their pockets.
Mel Stride (Central Devon) (Con)
A moment ago, the right hon. Lady spoke about the importance of spending money wisely, so in the light of the Treasury Committee’s conclusion that her new Office for Value for Money is a waste of money, does she agree that one of its early actions should be to abolish itself in order to save money?
Rupert Lowe (Great Yarmouth) (Reform)
Mr Speaker
Order. Mr Lowe, topical questions are meant to be short and punchy. I am sure that you are very good at that normally.
James Murray
One of my key priorities as Exchequer Secretary and the Minister with responsibility for HMRC is to oversee a programme of transformation at HMRC to improve its customer service, to digitise the service, to close the tax gap and to ensure that we have the modern, reformed service that we need for the future.
Josh Simons (Makerfield) (Lab)
The Parliamentary Secretary to the Treasury (Torsten Bell)
My hon. Friend is a powerful advocate for his constituents, and particularly for those who have suffered in recent weeks, including others across Greater Manchester. As I set out earlier, the Government have put in £2.4 billion to ensure flood resilience over the next two years; as he will be aware, future decisions on flood defence funding will be taken in the spending review in the normal way. I know that he will continue to be a powerful advocate for his constituents.
UK-China Economic and Financial Dialogue
Lindsay Hoyle Excerpts(3 months, 1 week ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Growth is the No. 1 mission of this Labour Government. To grow the economy, we need to help Great British businesses to export around the world, including to China, the second biggest economy in the world and our fourth-largest trading partner. Not engaging is simply not an option. That is why I led a delegation, including the Governor of the Bank of England, the chief executive of the Financial Conduct Authority and representatives of some of Britain’s largest financial service firms, including HSBC, Standard Chartered and Schroders, to the 2025 UK-China economic and financial dialogue—the first of its kind since 2019.
This dialogue has delivered a set of tangible benefits to ensure that British firms have greater access to the Chinese market, while safeguarding our national security—the first duty of any Government. In China, I met outstanding British companies, such as Brompton, Jaguar Land Rover and AstraZeneca, that will benefit from the steps that we have agreed. We have worked to lift market access barriers across a range of goods and services, particularly in the agrifood sector. On financial services, we have successfully secured new licences and quota allocations for UK firms to improve operating access in China. We agreed to co-operate further, including by renewing our shared commitment to the UK-China stock connect scheme, first launched in 2019, by deepening our co-operation on wealth management through a UK-China wealth connect scheme, and by progressing initiatives on pensions and sustainable finance, delivering significant benefits for UK firms and the City of London. I am pleased that China agreed to issue its first ever overseas sovereign green bond in London in 2025, underlining the UK’s position as a global capital for high-quality sustainable finance.
The UK is a global leader in financial services. There are significant opportunities to expand our presence in new markets, and the tangible outcomes we have delivered this week will help to deliver that. These steps are part of a wider programme to make substantive progress on improving arrangements for UK exporters and investors, as reflected in new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives and accountancy, which have set us on course for this dialogue to unlock £1 billion of value for the UK economy.
These outcomes, agreed with my counterpart Vice-Premier He Lifeng, represent pragmatic co-operation in action, and support secure and resilient economic growth, because security and economic growth go hand in hand. That means finding the right way to build a stable and balanced relationship with China that is in our national interest—one that recognises the importance of co-operation in addressing the global issues that we face, of competing where our interests differ, and of challenging robustly whenever that is required. In Beijing and Shanghai, I was clear that while we must co-operate on areas of mutual interest, we will confidently challenge on areas where we disagree. I expressed our country’s real economic and trade concerns to the Chinese, including about trade imbalances and economic security, and I raised concerns about Russia’s illegal war in Ukraine, human rights, and restrictions on rights and freedoms in Hong Kong, including the case of Jimmy Lai and the completely unjustified sanctions against British parliamentarians.
A key outcome of this dialogue is that we have secured China’s commitment to improving existing channels, so that we can openly discuss sensitive issues and the ways in which they impact our economy, because if we do not engage with China, we cannot raise our real concerns. This dialogue is just one part of our engagement with trading partners across the world. Since becoming Chancellor, I have been to New York, Washington, Toronto and Brussels to build our global economic relationships, while my right hon. Friend the Business Secretary has travelled to the Gulf to boost trade and investment, and my right hon. Friend the Foreign Secretary is engaging with partners all over the world to deliver growth that benefits people across the United Kingdom.
We must continue to go further, faster, in driving economic growth to make working people better off. That is why the Prime Minister launched our artificial intelligence opportunities action plan yesterday. It throws the full weight of Government behind AI in the UK to revolutionise our public services and make our economy more productive. It is why next week I will talk to business leaders, investors and entrepreneurs at the World Economic Forum meeting in Davos to make the case that the UK is one of the best places in the world in which to invest. In the coming weeks, I will set out further details of our plans to kick-start growth in the economy after 14 years of failure from the Conservative party.
Rachel Reeves
The shadow Chancellor is simply not serious. I was on the Opposition side of the House for 14 years, and I think that after a statement one usually asks some questions.
We heard a great deal from the right hon. Gentleman about what he would not do, but we heard absolutely nothing about what he would do. Now we can see what happens when the Leader of the Opposition tells the shadow Cabinet that it should not have any policies. As far as I can tell, the Conservative party’s economic strategy is to say that the UK should not engage with the second largest economy in the world, or indeed with our nearest neighbours and our biggest trading partners in the European Union. The right hon. Gentleman’s economic strategy is to support higher spending but none of the right decisions that are required to deliver sound public finances, and his economic strategy is to ignore the mistakes of the past with no apology to the British people for his part in Liz Truss’s mini-Budget that crashed the economy. I appreciate that, having said that, I may now receive a “cease and desist” letter from her later.
One question that the shadow Chancellor did ask was: why did I go to China? I went to secure tangible benefits for British businesses trading overseas. The right hon. Gentleman said that it was not worth it; let him say that to the representatives of HSBC, Standard Chartered, Prudential, Schroders and the London Stock Exchange who attended those meetings with me last week, all of whom have spoken of the difference that it will make.
I have been under no illusion about the scale of challenges that we face, after 14 years of stagnant economic growth, higher debt and economic uncertainty, and we have seen global economic uncertainty play out in the last week, but leadership is not about ducking these challenges; it is about rising to them. The economic headwinds we face are a reminder that we should—indeed, we must—go further and faster in our plan to kick-start economic growth, which plunged under the last Government, by bringing stability to the public finances after years of instability under the Conservative party, unlocking investment that plummeted under the previous Government and pushing ahead with essential reforms to our economy and public services. That is my message to the House today, because if we get it right, the prize on offer to us—to the British people—is immense: the opportunity to make working people better off by making Britain better off. That is the mandate this Government have, and that is what we will deliver.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I welcome my right hon. Friend’s commitment to growth in this country and to encouraging investment in the UK. Listening to the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), we would think the country was going to hell in a handcart. Does my right hon. Friend agree that this is no time for panic, that it is perfectly possible to manage any pressures on the Budget through astute management of public spending, and that we are a very long way from the approach taken during the years of austerity under the Conservative party?
Rachel Reeves
I thank the Chair of the Select Committee for that question. I set out this Government’s fiscal rules at the Budget in October: we will pay for day-to-day spending through tax receipts, and we will get debt down as a share of the economy. We remain committed to those fiscal rules and will meet them at all times.
Daisy Cooper (St Albans) (LD)
I thank the Chancellor for advance sight of her statement.
Let us be blunt: the Budget has not worked. The Chancellor says that the Government’s No. 1 mission is growth, but to date there are no signs that the Government are going to deliver it. The national insurance contributions rise is self-defeating. It undermines growth—it does not unleash it—and it piles pressure on to struggling small businesses and high streets. Nor does it raise anything like the sums of money for the NHS that the Government initially suggested it would. Now we have this much-lauded visit to China, which the Government themselves say is only worth £600 million to the UK over the next five years. That is equivalent to just five and a half hours of NHS spending a year—27.5 hours over the five-year period. All growth is welcome, but this really is small beer.
What are we to make of the Chancellor’s pledge to improve existing channels with China? It is nothing short of warm words and mixed messages. The Chancellor should not have gone to China unless there was a commitment that Jimmy Lai was going to be released.
Does the Chancellor now accept that the national insurance increase will damage growth? Does she accept that there were and still are much fairer ways to raise the necessary revenue without holding back our economy and our high streets? The international market jitters we have seen in the last few days are largely caused by the threat of tariffs by the new Trump Administration, so will the Chancellor guard against the risks of a Trump presidency by rebuilding our trading relationship with our European neighbours?
After the economic vandalism of the previous Conservative Government and their mini-Budget, our NHS and care services are still on their knees. Does the Chancellor accept that wealth and health are two sides of the same coin and that scaling back any investment in the NHS will be not only devastating for local communities but damaging for economic growth?
Public Finances: Borrowing Costs
Lindsay Hoyle Excerpts(3 months, 2 weeks ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Chief Secretary to the Treasury (Darren Jones)
I am always grateful to see Conservative Members welcome me to the House.
Financial markets are always evolving, as the shadow Chancellor knows, so there is a long-standing convention that the Government do not comment on specific financial market movements, and I will not break that convention today. Financial market movements, including changes in Government bond or gilt yields, which represent the Government’s borrowing costs, are determined by a wide range of international and domestic factors. It is normal for the price and yields of gilts to vary when there are wider movements in global financial markets, including in response to economic data.
In recent months, moves in financial markets have been largely driven by data and global geopolitical events, which is to be expected as markets adjust to new information. UK gilt markets continue to function in an orderly way. Underlying demand for the UK’s debt remains strong, with a generally well-diversified investor base. The Debt Management Office’s gilt sales operations continue to see strong demand. The latest auction, held yesterday, received three times as many bids as the amount on offer.
The Chancellor has commissioned from the Office for Budget Responsibility an updated economic and fiscal forecast for 26 March incorporating the latest data. Only the OBR’s forecast can accurately predict the effect on the public finances of any changes in financial markets or the economy, and I will not pre-empt that forecast. There should be no doubt of the Government’s commitment to economic stability and sound public finances. That is why meeting the fiscal rules is non-negotiable.
May I end by saying that I am pleased that the shadow Chancellor is holding this Government to account on our stewardship of the economy? It is important that he does so. He will remember when his party crashed the economy with unfunded tax cuts, unrealistic public spending plans and a clear disregard for the consequences on family finances. Families across the country are still paying the price for the Conservatives’ disastrous performance on the economy through higher mortgages and bills. If there was one clear reason why the Conservative party suffered such an historic defeat at the last general election, it was their performance on the economy. That is presumably why the shadow Chancellor himself admitted in December that the lack of trust in the Conservative party’s management of the economy has left a “deep and painful scar” in the pockets of every person across Britain.
Let me tell the House what has changed. In our first six months, this Labour Government have exposed the £22 billion black hole in the public finances. Not only have we exposed it, but we have dealt with it: the Chancellor’s autumn Budget protects working people, wipes the slate clean of the mess the Conservative party left the country in, and invests in our NHS and schools. We have given the independent Office for Budget Responsibility enhanced powers of oversight, in law, so that we never again get into the situation where that lot left the country: a £22 billion black hole in the public finances. We have set tough new fiscal rules that are non-negotiable, with a budget settlement for public services that they must all live within. We have kick-started growth in this country—this Government’s No. 1 mission —by unlocking investment and bringing forward reforms, such as those to planning and in the Mansion House speech.
May I say to the shadow Chancellor that that work stands in stark contrast to the negligent and shameful horror of a circus performance that the Conservative party in government unleashed on this country only a few years ago? Until he can come to the House with an apology for the British people, I will not take any lectures from the Conservative party about how to run the economy.
Mel Stride
The performance we have just seen was a slightly anxious and breathless one, which leads me to the question: where is the Chancellor? It is a bitter regret that at this difficult time and given these serious issues, she herself is nowhere to be seen.
In the last 48 hours, borrowing costs have reached a 27-year high, and it is the Chancellor’s decisions that have led us here. Before the election, the right hon. Lady promised that Labour would get debt falling, would not fiddle the figures, would not raise taxes and would grow the economy, but the economy is now flatlining. Survey after survey is showing that business confidence has simply evaporated, and at the Budget, the Chancellor hiked up taxes, increased borrowing by an average of £32 billion a year across the forecast, and conveniently adjusted her fiscal rules to allow her to do so.
Higher debt and lower growth are understandably now causing real concerns among the public, among businesses and in the markets, and despite what the Chief Secretary has said about international factors, the premium on our borrowing costs compared with German bonds recently hit its highest level since 1990. With those rising costs, regrettably, the Government may now be on course to breach their fiscal rules. The Chancellor has committed to no further tax rises, so does the right hon. Gentleman stand by her commitment not to increase taxes even further? If so, does that mean that the public should expect cuts to public service spending if the OBR judges that her fiscal headroom has evaporated?
There are media reports that the Chancellor will make an emergency intervention to soothe markets, but with no confirmation that such a statement will occur in this House. Will the right hon. Gentleman confirm that any such statement will be made first to Members in this House? Rates on Government bonds ultimately feed through to the broader credit market, so what estimates has the Treasury made of how recent market movements will impact mortgage costs and lending across the economy?
I will make one final point, Mr Speaker. Every pound that we spend on debt interest is money that we cannot spend on the public’s priorities. The Government’s decision to let rip on borrowing means that their own tax rises will end up being swallowed up by higher borrowing costs, at no benefit to the British people. Far from this Government laying the foundations for a stronger economy, the Chancellor is squandering the endeavours of millions of hard-working people up and down our country, who are now having to pay the price for yet another socialist Government taxing and spending their way into trouble. Does the right hon. Gentleman not now accept that it is time to change course?
Darren Jones
I am pleased that the right hon. Gentleman enjoyed my performance—I have not even had my first cup of coffee yet this morning. Let me answer some of his questions. [Interruption.] Conservative Members might like to listen, if the questions are so important to them.
The right hon. Gentleman asked me about the fiscal rules. As I said in my statement, those rules are non-negotiable. As the Chancellor set out at the Budget, we have two fiscal rules: first, that day-to-day spending should be met by tax receipts, and secondly, that debt should be falling as a share of the economy.
The right hon. Gentleman talked about the debt burden that this country has. Maybe we should reflect a little on why we have so much debt—[Interruption.] From pre-pandemic, Mr Speaker. Let us look at the burden of debt inherited by this Government from the Conservatives. From 2010 onwards, why did the last Government have to borrow so much money every single month, not just to invest but to pay the day-to-day bills? Because of an absolute failure to get growth into the economy. They could not make the numbers add up. They stacked up the country’s credit card and left it to the Labour party to deal with, and we are going to deal with it. That is why those fiscal rules are non-negotiable, and it is why public spending will be within the numbers set out at the Budget.
We are starting the spending review now, and it will conclude in June. Public services will have to live within their means—the Chancellor has been very clear about that. That is why with this Government, you get economic stability and absolute clarity on public spending. That is why the British people trust this party and booted that lot out of office.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
We all know that fiscal rules and certainty are vital for the markets and the good stewardship of the public finances, so will the Chief Secretary to the Treasury explain what process he will be going through as he conducts the spending review, and what notice he will give to Departments about extra cuts that they may have to make in order to meet the fiscal rules? In addition, when the Chancellor comes in front of the House for the OBR forecast in March, will she be making a fiscal statement at that point?
Darren Jones
I thank the Chair of the Select Committee for her question. As the House knows, we have started the second phase of the spending review, to set public sector budgets from 2026-27 onwards. The Chancellor confirmed in a written ministerial statement before the House rose for Christmas that there will be a forecast from the OBR and a statement on 26 March. As I said in my response, that will be the next time the OBR will give a view about the UK economy and the levels of funding for public services. Between the OBR forecast in March and the conclusion of the spending review in June, the House will be updated in the normal way.
Clive Jones (Wokingham) (LD)
I recognise that the Chancellor has a very difficult job. She inherited an economy on its knees, following the Conservatives’ mismanagement of the economy, from their terrible trade deal—[Interruption.] That extends from their terrible trade deal with Europe, which is holding back businesses in Wokingham, to soaring inflation, stagnant growth and the Liz Truss mini-Budget, which hit so many mortgage holders across the country.
However, the Government seem to be repeating some of the same mistakes. Last night, the Treasury issued a statement saying that
“meeting the fiscal rules is non-negotiable”.
Will the Chief Secretary reassure this House that protecting the NHS and care is also non-negotiable, and will he rule out any cuts to those services as the Government try to balance the books? Will he work to repair our ties with Europe and cut trade-related red tape, especially in the face of Donald Trump and his oligarch allies such as Elon Musk?
Darren Jones
My hon. Friend knows very well that this Government’s approach has been about stability, investment and reform: the stability we have brought following the chaos of the years under the Conservative party, as has been recognised by the British people and by the markets; the investment we have been unlocking, from our global investment summit all the way through to the work we have been doing in the Budget and since; and the reforms we are bringing forward—for example, planning reform—to make sure we can deliver infrastructure better in this country and unlock the investment that private capital has wanted to put forward in the UK for many years, but could not because of the chaos from the Conservatives when they were last in government.
Sir Edward Leigh (Gainsborough) (Con)
On 6 November, the Chancellor said:
“We have now set the envelope for spending for this Parliament, and we are not going to be coming back with more tax increases or, indeed, with more borrowing.”
I am sure, because the Chancellor is an honourable lady, that she will not be opening that envelope, putting her sticky fingers inside and coming out with more borrowing or tax increases. Will the Minister give an absolute assurance of no more tax increases or borrowing?
Luke Murphy (Basingstoke) (Lab)
I thank the Chief Secretary for his statement—
Luke Murphy
I am sorry, Mr Speaker. During these exchanges on the urgent question alone, we have heard chuntering from Opposition Members about the cut in the winter fuel payment. We have heard them oppose the tax increases that have been introduced to pay for public spending, and we have heard them urge the Government to call off talks with economic partners including China. Is it any wonder that the GDP-to- debt ratio rose by a full 30 percentage points under the Conservative Government?
Mr Speaker
Order. Mr Stuart, I need no advice from you. I think you are on the Panel of Chairs, and I need to see some better behaviour if you are going to stay on it.
Darren Jones
Thank you, Mr Speaker. It is important, when you are paid by the House, to act responsibly; I agree with you.
My hon. Friend the Member for Rugby (John Slinger) makes a really important point, and Conservative Members who have their head in their hands may wish to listen to him. It will be important for the Conservatives to apologise for their behaviour before the British people start listening to them again, but for as long as they wish to grunt and groan and claim that everything was wonderful, the better for us, so long may it continue.
Several hon. Members rose—
Katie Lam (Weald of Kent) (Con)
Within the last week, has the Chancellor spoken to the Governor of the Bank of England about the impact of soaring borrowing costs?