Oral Answers to Questions
Lindsay Hoyle Excerpts(1 month ago)
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Emma Reynolds
I am very pleased to say that there has been a 152% increase in the number of pensioners who are applying for pension credit. That is good news, and is a result of the pension credit awareness campaign that we have been running since early September. We are putting in place all the resources we can to process claims as quickly as possible.
Nigel Huddleston (Droitwich and Evesham) (Con)
We on the Conservative Benches are deeply concerned about all those who will lose their winter fuel payments under Labour. Some pensioners will keep the winter fuel payment if they claim pension credit, but we know that some will not apply or will have difficulty applying. Can the Minister confirm how many people the Treasury assumes are eligible for pension credit but will not claim it, therefore losing their winter fuel payment, and what is the Treasury doing to close that gap?
Emma Reynolds
As the hon. Gentleman will understand, the estimates of how many people might be eligible for pension credit are an imperfect science—they are based on a survey. Means-testing what is a very complex benefit, as all means-tested benefits are, requires an assessment of not only people’s income but their savings; it is about pensioner household units, too, so it is a complex set of procedures. All I can say is that I am glad we are targeting support at those most in need, something that was outlined in the 2017 Conservative party manifesto, which stated:
“we will means-test Winter Fuel Payments, focusing assistance on the least well-off pensioners, who are most at risk of fuel poverty.”
Daisy Cooper (St Albans) (LD)
As the newly appointed Treasury spokesperson for the Liberal Democrats, this is my first opportunity to welcome the Chancellor and Ministers to their places. Notwithstanding that, on the winter fuel payment, the Government need to think again. I recently spoke with representatives of Citizens Advice in St Albans, who are deeply concerned that letters from the Department for Work and Pensions will be sent out only in December to people that it believes are eligible, meaning that many people may lose out. We have urged the Government to either reverse the cut and make it taxable or look at, for example, raising the pension credit limit. Could the Government confirm whether they are going to look again at any of the measures that we have suggested?
Daisy Cooper (St Albans) (LD)
Small businesses are the engine of our economy, but many of them are penalised for investing in their businesses because of the broken business rates system. Will the Chancellor ensure that investment is exempted from business rates, and will she ensure that the Budget tomorrow is the final Budget in which business rates are a permanent feature?
Bill Esterson (Sefton Central) (Lab)
The creation of the national wealth fund, and the record success of the £63 billion of investment announced at the investment summit, comes on top of investments that Ministers have just announced in carbon capture in the north-west. Those are examples of the success—
Mr Speaker
Order. The hon. Gentleman is a very good Member who has been here a long time. Please try to look at me occasionally; it would be helpful.
The Chancellor of the Exchequer (Rachel Reeves)
In July, a Treasury assessment of public spending showed that this Government inherited a £22 billion black hole in the public finances. I took immediate action—[Interruption.] Those on the Opposition Benches may not like it, but it is true. [Interruption.]
Rachel Reeves
There are not many Conservative Members, but they still make quite a lot of noise.
I took immediate action by identifying savings and making reforms to the spending and fiscal framework to ensure that never again can a Government be allowed to make unfunded commitments, and to leave their successors with a massive black hole, as the Leader of the Opposition and the previous Chancellor did. As my right hon. Friend the Chief Secretary to the Treasury said to the House yesterday, the Budget will confirm the detail of the robust fiscal rules—this was set out in our manifesto—and will set out tax and spending plans, alongside an updated forecast from the independent Office for Budget Responsibility.
Alan Mak (Havant) (Con)
Last Wednesday, in Washington, the Chancellor announced changes to the debt rules to allow Labour to borrow more. However, published Treasury advice says that increasing borrowing risks interest rates staying higher for longer. Does the Chancellor agree with her Treasury civil servants?
Tim Roca
When does the Chancellor think that the Conservative party lost its fiscal credibility? Was it with the Liz Truss mini-Budget? [Interruption.] Was it when national debt rose from 65% to nearly 100% of GDP? Or was it when they made the farcical promise to abolish national insurance?
Mr Speaker
Order. Who wants to go for that cup of tea? Normally this happens at Prime Minister’s questions; I do not want it starting in Treasury questions.
Rachel Reeves
All of the above. That is why my hon. Friend is in his place and Conservative Members are on the Opposition Benches.
Rachel Reeves
I know that the hon. Gentleman is a proud supporter of businesses big and small in his constituency and across Northern Ireland. I will set out more detail in tomorrow’s Budget, including on business rates, but I recognise how important it is for us to support small businesses, so that they can grow and create jobs right across the United Kingdom.
Gareth Davies (Grantham and Bourne) (Con)
Clearly, the Chancellor is desperately trying to raise old ghosts, along with debt and taxes, but her own broken promises are coming back to haunt her and are frightening investors. It does not have to be Halloween for socialists to spook British business. Why does she think that business confidence has fallen faster in the past three months than at any point since the pandemic?
Luke Taylor
We know that no impact assessment was carried out prior to the decision to cut the winter fuel payment, but was any consideration given to the burden that the daunting application form places on the elderly, and the extra burden on charities such as Age UK, which advise them on completing it? Evidence of that daunting burden is the 60% limit to uptake over the past decade. Will she work with her colleagues to simplify the application process, ease the burden on those who are losing the winter fuel payment, and help them receive the broad benefits that pension credit provides?
Mr Speaker
I think the Minister got it in the first two minutes, never mind the last three.
Emma Reynolds
The Government did an equality analysis on the change, which was published in September. I recommend that the hon. Gentleman take a look at it. It was such a long question that I have forgotten what he asked. On application forms—
Mr Speaker
Order. What is the hon. Gentleman standing for? I hope he is not. I call Blake Stephenson.
Blake Stephenson (Mid Bedfordshire) (Con)
James Murray
My hon. Friend is absolutely right that, while keeping taxes on working people as low as possible is crucial, the way to make people better off in the long run is through boosting public and private investment, and delivering sustained economic growth. That is the focus of this Labour Government, and that will guide the choices we make.
Laura Trott (Sevenoaks) (Con)
During the election campaign, I held a press conference at which I outlined the glaring funding gaps in Labour’s plans and the taxes they might raise to pay for them. One of those taxes was employer national insurance contributions. The right hon. Member for Bristol North West (Darren Jones)—now Chief Secretary to the Treasury—responded at the time by arguing that this was a list of things that “Labour isn’t doing.” Is it correct that raising employer national insurance contributions is something Labour isn’t doing?
Rachel Reeves
My hon. Friend makes a really important point, which I think is familiar to all of us in our communities, about the cost of housing outstretching people’s incomes. In our manifesto we committed to building 1.5 million new homes, including social housing, which is so important and can give security to people who would otherwise be left in insecure housing in the private rented sector.
Mr Speaker
As this is his farewell question time, let us now come to the shadow Chancellor.
Jeremy Hunt (Godalming and Ash) (Con)
This are indeed our final exchanges in the House, so before tomorrow’s fireworks I wish the Chancellor well for the future in her role. There has been a lot of common ground between us. For example, before the election she said that raising employers’ national insurance was a jobs tax that would take money out of people’s pockets. I very much agree with her on that; does she agree with herself?
The Parliamentary Secretary, His Majesty’s Treasury (Emma Reynolds)
We are not hiding the figures. If I had had the chance, I would have said that 455,000 pensioners are paying the higher rate of tax and that 39,300 are paying the additional rate. Many wealthy pensioners have said to me that they do not need the winter fuel payment—[Interruption.] The right hon. Gentleman says that, but there are a number of—
Emma Foody (Cramlington and Killingworth) (Lab/Co-op)
Neil Duncan-Jordan (Poole) (Lab)
This Government have inherited a Britain that is now the most unequal country in the G7 bar America. The UK’s 50 richest families own 50% of the country’s wealth, and our tax system exacerbates this inequality with unfair loopholes that benefit those who have wealth rather than those who go to work. What steps—
James Murray
My hon. Friend will have to wait for the Budget tomorrow, but he will know that we have committed to closing some loopholes, including VAT on private schools, the non-dom loophole and cracking down on tax avoidance.
VAT: Independent Schools
Lindsay Hoyle Excerpts(1 month, 3 weeks ago)
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Kit Malthouse (North West Hampshire) (Con)
The shadow Secretary of State makes a strong point about the sanctity of zero-rating VAT for education. I am concerned that children’s clothes, which are currently exempt from VAT, may be the next target. Notwithstanding the impact that the change to VAT will have on individual families, does he agree that private and prep schools—my constituency has five—are enormous employers of people involved in building maintenance, such as electricians and plumbers, and that the impact on the wider economy could well be profound?
Mr Speaker
Order. I remind Members to look towards the Chair when they are speaking, or what they say will not be picked up by the mics; I then struggle to hear them. I know that the Minister was struggling as well. If Members keep the chatter down, it will help us both.
Damian Hinds
My right hon. Friend is of course correct about the economic contribution that schools make locally and the large numbers of people they employ. That point was also made by NASUWT, which is worried about teachers being inadvertently pushed out of the profession if redundancies are made mid-way through the school year.
Damian Hinds
I will take one more intervention before making progress, so as not to try your patience too much, Mr Speaker.
Mr Speaker
It is not that my patience is being tested, but I do worry when shadow Secretaries of States cover a subject at length. I understand, but we need to get on, because lots of Back Benchers are desperate to get in. In fact, we have a very eager Opposition Whip coming in now.
Paul Holmes
You will find out, Mr Speaker, that I will not test your patience. I want to take my right hon. Friend back to the point he made about the Education Secretary’s tweet, which I thought was disgraceful. [Hon. Members: “Where is she?”] The divisive language behind that tweet was a disgrace, given the many independent schools that work hard and play by the rules. Does my right hon. Friend agree that the embossed notepaper that the Secretary of State focused on is sent to many children who are being sponsored through bursaries or scholarships, and whose parents work hard to give their children the best education? The Education Secretary should apologise for that disgraceful tweet.
James Murray
I am not going to give way, because I am responding to the right hon. Member for Witham (Priti Patel).
Graham Stuart
I am grateful to you, Mr Speaker. Could you give any advice to me on how we can ensure that the impact assessment that must have been conducted on this policy is shared with the House? It is a fundamental—
Mr Speaker
Order. As you know, that is not a point of order—do not waste my time. Carry on, Minister.
James Murray
As I was saying to the right hon. Member for Witham, the Government will publish a tax information and impact note on the VAT policy change at the Budget, once the independent Office for Budget Responsibility has scrutinised and certified the costing of the final policy.
James Murray
I am going to make a bit of progress.
To address some other points raised in this debate, we know that a small number of diplomatic officials and service personnel are posted abroad for extended periods. In such circumstances, the Foreign, Commonwealth and Development Office and the Ministry of Defence provide the continuity of education allowance to ensure that this does not interfere with their children’s education. I can give the reassurance today that the Government will monitor closely the impact of these policy changes on affected diplomatic and military families, with any changes to the scheme being considered as—[Interruption.]
James Murray
I am not quite sure what happened there, but I will carry on. I was making an important point, which is that the Government will monitor closely the impact of our policy changes on affected diplomatic and military families, with any changes to the scheme being considered as part of the ongoing spending review.
James Murray
I will make a bit of progress. In our consultation on the technical detail of this policy, we have been engaging widely and in depth, and the views of MPs are an important part of that. As I said earlier, it has been a tough but necessary decision to end tax breaks for private schools. We believe it is the right decision, and one we need to implement as soon as possible to help raise the funding that we need to deliver our priorities for state education in this country. We are determined to make sure that education, which is available for all, is of the highest possible quality, because that is how we ensure that we meet the aspiration of every parent to get the best possible education for their children.
Munira Wilson
The shadow Education Secretary was suggesting to the Minister that that is where he could find some money—[Interruption.]
Mr Speaker
Order. If Members wish to intervene, they should do it properly. Let us not have side banter, as the rest of the Chamber needs to get in as well.
Munira Wilson
Thank you, Mr Speaker. As we have a Treasury Minister rather than an Education Minister opening the debate for the Government, I say gently that he should look at what the Liberal Democrats proposed on reforming capital gains tax as a way to fund some of the important investment that we need in education, rather than looking at taxing parents’ choices to invest in their children’s education.
The Government’s policy would undermine two important principles. First, education should simply not be taxed. As we have heard, all education provided by an eligible body, including university education, music lessons, and tutoring are exempt from VAT, and VAT should not be imposed on any of those things because education is fundamentally a public good. Secondly, parents have the right to choose what education setting is best for their child. As Liberals we have always championed choice, and believe that nothing should get in the way of those important choices. Of course we want to get to a point where every parent can choose a local state school that meets their child’s needs and gives them the best possible start in life, and opportunities to flourish. But let us be honest with ourselves: that is not the reality facing many parents today, especially when their children have special educational needs.
Liberal Democrats have many times raised the crisis in SEND provision. Conservative cuts to school and council budgets mean that many parents and carers simply cannot get their children the support they deserve. The Minister talked a moment ago about sorting out state-school SEND provision, so that no parent with a child with SEND would need to send their child to a private school, but does he recognise that in order to sort out and fix our broken SEND system we will need not millions but billions of pounds? I am not entirely sure that the Chancellor will be giving that kind of money to the Department for Education.
Jess Brown-Fuller (Chichester) (LD)
In my constituency there are three independent schools, one of which is a choir school. In one of those independent schools there are 29 children with diagnosed SEND, and only one with an EHCP with that as the named school. Does my hon. Friend agree that given the crisis in attaining EHCPs, especially in West Sussex county council, which is ranked fifth worst in the country and where only 3.6% of EHCPs are given within the statutory framework of 20 weeks, there needs to be more support in dealing with the deluge that this policy will cause county councils—
Mr Speaker
Order. May I suggest that interventions are meant to be short and not a speech, especially if you are on the list? People are going to go down to a six-minute time limit shortly. Please, think of others.
Munira Wilson
I thank my hon. Friend for that intervention. She is absolutely right to say that because only children with EHCPs will be exempt from the VAT charge, there will be the unintended consequence of adding yet further pressure to what is already a broken system. Indeed, a parent in my constituency has written to me along those lines to say that they now feel that they will have to go through the application process. So many parents and carers are forced to navigate a postcode lottery and wait months, as my hon. Friend said, to get the support that their children are entitled to.
Jen Craft
You reflect on there being an exemption only for children who have EHCPs, and you mentioned that there should be an exemption for children who do not have an EHCP based on SEN or disability. My question is: how do you define that? There is huge scope for private schools to say that they are SEND specialists. There is not a measure of whether that is the case. How do you define those who have SEND or those with additional needs, beyond the scope of an EHCP?
Mr Speaker
Order. May I gently say to the hon. Member that when you say “you”, it is as though I have said it? I want to reassure you that I am not involved in any of this.
Munira Wilson
Mr Speaker, I would not dare to second-guess your position on this issue. The best way to deal with this issue is to drop the policy entirely, but if we are to exempt children with special educational needs, a good place to start is the SEND register. Just yesterday, I was discussing with one of the headteachers in my constituency the number of children on their SEND register and how they go about identifying them. Schools already do that in the state sector to support children. We could apply those same rules and regulations in the private sector, and those children should be exempted. However, I would rather this policy was just dropped altogether.
For all these reasons, the Liberal Democrats do not support ending the VAT exemption for independent schools. Instead, we want to see a better partnership between independent schools and local state schools. Many already do that, and I am not just talking about a few bursaries here and free use of a pool there; I am talking about genuine partnership working and the sort of brilliant collaboration that I have seen in schools in my constituency, where Hampton school and Lady Eleanor Holles school share staff time with Reach academy in Feltham. They have also been mentoring and coaching pupils for medical school and other university places, and the results have been phenomenal in a disadvantaged part of west London, where typically students were not going on to further or higher education. That partnership has borne immense fruit for those young disadvantaged people.
Mr Adnan Hussain (Blackburn) (Ind)
Does the Member agree that the policy threatens the viability of many independent schools that have charitable status and serve deprived communities, including many independent schools in Blackburn, such as faith schools and those schools serving children with special educational needs? This policy will put those schools on their knees and vastly increase the number of spaces that will be required in public schools. In Blackburn, we do not have those spaces.
Mr Speaker
I gently say to the Liberal Democrat spokesperson that you have now been going 18 minutes. [Interruption.] No, let me finish before you make a judgment call. I do not want you to speak for longer than the Government Minister, and we are shortly in danger of doing that. I am sure you will be coming to the end of your speech.
Munira Wilson
I apologise, Mr Speaker. I was just coming on to the last paragraph of my speech, but I wanted to take some interventions from those on the Liberal Democrat Benches.
Mr Speaker
Perhaps the answer should be that you cut the speech if you want to take more interventions.
Munira Wilson
May I just finish by urging Ministers to look, instead of a damaging and counterproductive tax on education, at ways to get independent schools to do more of that great partnership work with state schools and their communities and to ensure they are investing in that local community? Let us ensure that every child, no matter their background or circumstances, is given the support and opportunities they need to thrive. Let us support investment in our education, not penalise it.
Louise Jones (North East Derbyshire) (Lab)
Thank you, Mr Speaker, for calling me to make my first contribution in the House. It is a great honour to be here. I am so proud to be part of a Government who are putting state education at the heart of our mission. I have not been an MP for long, but I have already spent a lot of my time visiting schools in my constituency, and I have seen and heard for myself the very real challenges that they are facing because of the effects of austerity on their budgets. Opportunities for young people are shrinking in front of our eyes. I am glad that we are making these decisions so that we can invest more in the state education that 93% of our children need.
I would like to talk about the service of my predecessor as MP for North East Derbyshire, Lee Rowley. A constant refrain for me when I was campaigning during the election was how well regarded he was as a constituency MP, which is not always what you want to hear when campaigning for the other side, but it is a clear sign of how well regarded he was by his constituents. I also pay tribute to his service in the House, where he served in various ministerial positions with distinction. I particularly recognise his important work campaigning on behalf of those with ovarian cancer. I am sure that everybody in the Chamber will join me in thanking him for his service.
It is a huge honour to represent my home, North East Derbyshire. I will take a few moments to talk about what that place means to me, and indeed what home means to me. For many of my colleagues, home is where they were born or where they grew up. It is very much the origin of their journey, but for me and many others like me, it is the destination. As many of my fellow military veterans will know, I lived in over 11 different places over the past 10 years as a result of my military service. Whether that was a small officer cadets’ bedroom in the Royal Military Academy Sandhurst, kept to the ruthless standards of tidiness that that place demands—standards that may have lapsed since—my first posting to Normandy barracks in the beautiful city of Paderborn in Germany, or indeed the compound in Kabul where I served on operations, my accommodation has been varied, transient, occasionally used as target practice, and rarely felt like home. So when I say that I have found my home in North East Derbyshire, that is because I have come home.
When I turn off junction 29 of the M1 and see in the distance the latticework of green fields of Holy Moor, I know that I am home. When I am walking up Market Street to have a cuppa at the café Host, or something stronger at The Three Horseshoes, I know that I am home. After a busy day’s canvassing, when I am getting a superlative chippy tea at New Tupton Fish Bar or a bacon cobb at Woodheads in Eckington, I know that I am home. When I am crossing the bridge over the River Rother into Killamarsh and I see the sign for that village, called by its original name—please forgive my Anglo-Saxon here—of Chinewoldemaresc, I know that I am home, When I crest the hill at Coal Aston and see before me across the valley the town of Dronfield, with the purple hills of the Peak district in the distance, I know that I am home.
I want to say thank you to the people of North East Derbyshire for seeing in me the service and the values that they want to represent them in this place. I repeat the pledge that I made during my campaign that I will use each and every day here to serve you and deliver the future that I know we can have: a better future based not just on promises, but on real progress.
The work of this Government has already begun, and there is so much that I know will make a huge positive transformation for people in my constituency, whether that is renationalising railways so that we can be proud of the service they provide again, huge reforms to workers’ rights and renters’ rights so that we can end no fault-evictions, or the establishment of the child poverty taskforce so that we can drive down child poverty, just as Labour Governments have done before, and I know we will do again. There is much to do, and much that I am looking forward to being a part of.
Delivery matters. I want to speak briefly about why that is and about the effect that it has on our democracy. This is a subject close to my heart. As I have mentioned, I served in the military, and nobody is so much affected by the decisions of this House as my former colleagues. The decisions that colleagues sat in the Chamber have made and will make will have a direct impact on their lives. Those decisions could send them to dangerous places to do dangerous things. Indeed, some of my former colleagues in the armed forces have not come back. I would like us all to take a moment now to remember Corporal Liam Riley, who grew up in Killamarsh in my constituency and lost his life in Afghanistan. Lest we forget. [Hon. Members: “Hear, hear!”]
It is of deep concern to me when I see that the number of people voting has diminished over the past few years; that so many people up and down the country see politics no longer as the mechanism by which we govern ourselves and bring the change that we want for our communities but as something done by some other people in some other place for the benefit of some other people. It is our duty to ensure that we leave this precious democracy that we have inherited in a better place than where we found it and that we show everybody that a vote for an MP matters, that a vote for a Government matters, and that a vote for democracy matters. That is how we can make the difference in the small towns and villages that make up places such as my constituency of North East Derbyshire.
Finally, there is a piece of advice that I would like to commend to the House. Over the summer, I had the privilege of meeting Clay Cross air cadets. As I take my place in the House, I commend their motto, “Acta non verba”—deeds, not words. We can all agree that that is a good motto to have as a Member of Parliament, and indeed for the Government.
Oral Answers to Questions
Lindsay Hoyle Excerpts(2 months, 3 weeks ago)
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Jacob Collier (Burton and Uttoxeter) (Lab)
Pubs are the lifeblood of our local communities. In my constituency, the home of British brewing, we are blessed with wonderful pubs—
Mr Speaker
Order. Unfortunately, supplementary questions must be linked to the main question.
Nigel Huddleston (Droitwich and Evesham) (Con)
I congratulate the Chancellor and the entire Treasury team on their appointments. We have always had civil, albeit occasionally robust, interactions, and I am sure that will continue, but it is now our job to hold them to account for the important decisions they make at the Treasury. During the election, Labour promised on more than 50 occasions not to increase taxes on working people. Does it now recognise that working people have pensions too, and can the Chancellor give those people, who are saving for the future, peace of mind by confirming that the Government will not increase taxes on pensions in the upcoming Budget?
Tim Farron (Westmorland and Lonsdale) (LD)
Investment in our rural economy must focus heavily on rewarding our farmers for the food they produce and the environment they protect. The last Government ringfenced £2.4 billion a year for England to support our farming sector. Through indifference or incompetence, they underspent by £100 million last year and betrayed our farmers in doing so. Will the Chancellor confirm to me, my farmers and this House that she will not bake in that underspend, which was the fault of the last Conservative Government, and that she will at least commit to ringfencing what is already invested in farming? If not, hopefully she will back the Liberal Democrats’ call to back £1 billion extra into farming so that we can feed our—
Mr Speaker
Order. Mr Farron, please do not take complete advantage. I think you have slightly strayed from the original question. Chancellor, if you want to have a go at it, by all means do so, but I will understand if you do not.
Rachel Reeves
The rural economy plays an incredibly important role in our economic prosperity as a country, and boosting food security and biodiversity is obviously incredibly important to a whole range of this Government’s objectives. I will ensure that the Secretary of State for Environment, Food and Rural Affairs hears loud and clear the message from the hon. Member, and I am sure he will include it as part of his submission to the spending review on 30 October.
Rachel Reeves
The Government have committed to the triple lock not just for this year, but for the duration of this Parliament. That means that pensioners are £900 better off than they were a year ago. Based on September earnings and inflation data, we will uprate pensions next year by whichever is higher: 2.5%, inflation or average earnings. We are ensuring that pensioners get the pensions that they are entitled to and have contributed to.
Laura Trott (Sevenoaks) (Con)
Ten years ago, the now Chancellor argued in this House that winter fuel payments should be means-tested and cut for “the richest pensioners”. The Chancellor’s 10-year campaign has now come to fruition and she has proposed removing the winter fuel payment from pensioners on just £13,000 a year. Does she still think that a pensioner on £13,000 a year is rich?
Dr Chambers
Over the past few weeks, I have been inundated with questions from the people of Winchester about the cuts in the winter fuel allowance, and it seems as though people from all parts of the House are getting similar correspondence. Although I totally understand that there are many wealthy pensioners who do not rely on the winter fuel allowance to heat their homes, a large proportion of pensioners live on or near the poverty line and will be plunged into crisis this winter. Given the huge strength of feeling in all parts of the House, will the Chancellor reconsider her decision? If not, will she at least commit to a vote and a debate in the House about how we best protect our most vulnerable—
Mr Speaker
Order. Sorry, I have to get through the Order Paper. Put in for an Adjournment debate. Minister, I think you got the gist.
James Murray
I thank the hon. Member for his comment, but as my right hon. Friend the Chancellor set out, the state pension is £900 more this year than it was last year, thanks to the triple lock. We have committed to maintaining the triple lock as the foundation of state support for pensioners throughout the rest of this Parliament. Energy bills are lower this year. It is crucial that he and other Members across the House support our goal to increase the take-up of pension credit. If we make sure that all pensioners who are eligible for pension credit take it up, they will thereby receive the other benefits, including the winter fuel payment, to which they are entitled.
Gareth Davies (Grantham and Bourne) (Con)
During the general election, the Labour party committed to bring down energy bills by £300. Now that the election is over, energy bills are going up by some 10%. On behalf of the British electorate, especially the 10 million pensioners who are having their winter fuel payment taken away, I ask the Minister to confirm to the House that the £300 cut is still Labour policy. If it is, specifically how is the £300 calculated, and when will it be delivered?
James Murray
I thank the shadow Minister for his comment and welcome him to his new place. He referred to the cost of energy. As we know, the cost of energy is substantially lower than it was this time last year, but we are under no illusions about how much more we need to do to make sure that energy bills are truly affordable and that we tackle the cost of living crisis. That is why we have set to work straight away in establishing Great British Energy, alongside our national wealth fund, which will help to invest in the clean energy sources of the future and bring down energy bills for good.
Sarah Olney (Richmond Park) (LD)
We know that the Government have inherited a mess, and that at the centre of that mess is a £22 billion hole left in the public finances by the previous Government, but that cannot be allowed as cover for measures that cause suffering for the most vulnerable in society. The Chancellor will have heard Lib Dem colleagues talk about the hardship that the scrapping of the winter fuel allowance will mean for their constituents, so can she assure us that she will give her full support to measures to boost the uptake of pension credit? Most crucially, will she give the House the opportunity to have a proper debate and a vote on this cut, which will have such an impact on so many?
Rachel Reeves
That is the purpose of elections, and at the last election, this Government achieved a sizeable majority for our missions, including growing the economy, improving living standards and making working people better off. We have just got started, and that is what we are absolutely determined to do, in order to deliver on the mandate we got on 4 July.
Alan Mak (Havant) (Con)
The Institute of Directors’ latest economic confidence index shows that optimism about the economy fell back to minus 12 last month, following a three-year high of plus 7 in July. Can the Chancellor explain how Labour’s tax rises on working people, businesses and pensioners will contribute to economic growth when the economy is already going backwards under this Labour Government?
Rachel Reeves
Let me respond directly on the issue of Ukraine. In my first couple of weeks in this job, I had the pleasure of meeting Minister Marchenko from Ukraine, and made a commitment to him to go ahead with the extraordinary revenue acceleration programme. It is important that we work together across the House to support the Ukrainian people against the Russian invasion. In the previous Parliament, Labour always supported the Government when they took action to support the Ukrainian people, and I hope that that cross-party support can continue.
Mr Speaker
Can I remind everybody that this is topical questions? I have a big list to get through. Rachael Maskell will give us a good example.
Rachael Maskell (York Central) (Lab/Co-op)
Rachel Reeves
The basic state pension is worth £900 more than it was a year ago, and will go up again in April next year because of the triple lock, which we have committed to for the duration of this Parliament. We have already written to York council and are working with local authorities across the country to boost take-up of pension credit, because this Government, unlike the last Government, are determined to ensure that 800,000 people entitled to pension credit actually receive it.
Jeremy Hunt (Godalming and Ash) (Con)
When the Chancellor was sitting on the Opposition Benches she repeatedly attacked cronyism, so will she tell the House whether she told the Treasury permanent secretary that Ian Corfield had made a donation to her before she got him appointed as a director in the Treasury—yes or no?
Public Spending: Inheritance
Lindsay Hoyle Excerpts(4 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rachel Reeves)
Before I begin my statement, my thoughts and prayers are with those affected by the events in Southport, and I am sure that the whole House will join me in paying tribute to our emergency services who are dealing with this ongoing situation.
On my first day as Chancellor of the Exchequer, I asked Treasury officials to assess the state of public spending. That work is now complete and I am today presenting it to this House. In this statement, I will do three things. First, I will expose the scale—and the seriousness—of what has been uncovered; second, I will lay out the immediate action that we are taking to deal with the inheritance; and third, I will set out our longer-term plans to fix the foundations of our economy. Let me take each of these points in turn.
First, I turn to the inheritance. Before the election, I said that we would face the worst inheritance since the second world war: taxes at a 70-year high, debt through the roof, and an economy only just coming out of recession. I knew all of those things, and during the campaign, I was honest about them and about the difficult choices that they meant. The British people knew them too. That is why they voted for change. But upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know—[Interruption.]
Mr Speaker
Order. This is an important statement for all constituents, including mine. If I am struggling to hear it, they are struggling at home as well. You will all get your chance to ask questions; I think it is more important to hear, and then comment.
Rachel Reeves
There were things that the Conservative party covered up—covered up from the Opposition, from this House and from the country. That is why today we are publishing a detailed audit of the real spending situation, a copy of which will be laid in the House of Commons Library. I take this opportunity to thank the Chief Secretary to the Treasury, my right hon. Friend the Member for Bristol North West (Darren Jones), for his leadership, and Treasury officials for all their work in producing this document.
Let me now explain what that document has uncovered. The previous Government published their plans for day-to-day spending in the spring Budget in March, but when I arrived at the Treasury, I was alerted by officials on the very first day that that was not how much the Government had expected to spend this year. It was not even close; in fact, the total pressure on those budgets across a range of areas was an additional £35 billion. Once we account for the slippage in budgets that we usually see over a year and the reserve of £9 billion designed to respond to genuinely unexpected events, that means that we have inherited a projected overspend of £22 billion. That is a £22 billion hole in the public finances now—not in the future, but now. It is £22 billion of spending this year that was covered up by the Conservative party. If left unaddressed, it would mean a 25% increase in the budget deficit this year, so today I will set out the necessary and urgent work that I have already done to reduce that pressure on the public finances by £5.5 billion this year and over £8 billion next year.
Let me be clear: I am not talking about costs for future years that the previous Government signed up to but did not include, like the compensation for infected blood, which has cross-party support. I am not talking about the state of public services in the future, like the crisis in our prisons that they have left for us to fix. I am talking about the money that the previous Government were already spending this year and had no ability to pay for, which they hid from the country. They had exhausted the reserve and they knew that, but nobody else did. They ducked the difficult decisions, put party before country, and continued to make unfunded commitment after unfunded commitment, knowing that the money was not there. That has resulted in the position that we have now inherited: the reserve was spent more than three times over only three months into the financial year, and the previous Government told no one.
The scale of this overspend is not sustainable, and to not act is simply not an option. This month, we have seen official Office for National Statistics figures showing that borrowing is higher this year than the Office for Budget Responsibility expected, and the disaster of Liz Truss’s mini-Budget shows what happens if we do not take tough decisions to maintain economic stability. Some, including the Leader of the Opposition and the shadow Chancellor, the right hon. Member for Godalming and Ash (Jeremy Hunt), have claimed that the books were open. How dare they? It is not true, and I will tell the House why: there are very clear instances of specific budgets that were overspent and unfunded promises that were made, but that—crucially—the OBR was not aware of for its March forecast. I will take each in turn.
The first is the asylum system. The forecast for the number of asylum seekers has risen dramatically since the last spending review, and costs for asylum support have risen sevenfold in the past three years, but instead of reflecting those costs in the Home Office budget for this year, the previous Government covered up the true extent of the crisis and its spending implications. The document I am publishing today reveals a projected overspend on the asylum system, including the previous Government’s failed Rwanda plan, of more than £6.4 billion for this year alone. That figure was unfunded and undisclosed.
Next, in the wake of the pandemic, demand for rail services fell. Instead of developing a proper plan to adjust to that new reality, the Government handed out cash to rail companies to make up for passenger shortfalls, but failed to budget for this adequately. Because of that, and because of industrial action, there is now an overspend of £1.6 billion in the transport budget. That was unfunded and undisclosed.
Since 2022, the Government, with the support of the whole House, have rightly provided military assistance to Ukraine in response to the Russian invasion. The spending audit found that there was not enough money set aside in the reserve to fund all these costs. We will continue to honour these commitments in full, and unlike the previous Government, we will make sure that they are always fully funded.
On top of these new pressures, since 2021 inflation was above the Bank of England’s target for 33 months in a row—hitting 11% at its peak—but the previous Government had not held a spending review since 2021, which means that they never fully reflected the impact of inflation in departmental budgets. That had a direct impact on budgets for public sector pay.
When the last spending review was conducted, it was assumed that pay awards would be 2% this year. Ordinarily, the Government are expected to give evidence to the pay review bodies on affordability, but extraordinarily, this year the previous Government provided no guidance on what could or could not be afforded to the pay review bodies. That is almost unheard of, but that is exactly what they did. Worse still, the former Education Secretary had the pay review body recommendations sitting on her desk. Instead of responding and dealing with the consequences, the Government shirked the decisions that needed to be taken.
I will not repeat the previous Government’s mistakes. Where they provided no transparency to the public, and no certainty for public services, we will be open about the decisions that are needed and the steps that we are taking. That begins with accepting in full the recommendations of the independent pay review bodies. The details of these awards are being published today. That is the right decision for the people who work in, and most importantly the people who use, our public services. It gives hard-working staff the pay rises they deserve while ensuring that we can recruit and retain the people we need.
It should not have taken this long to come to these decisions and I do not want us to be in this position again, so I will consider options to reform the timetable for responding to the pay review bodies in the future. This decision is in the best interests of our economy too: the last Government presided over the worst set of strikes in a generation, which caused chaos and misery for the British public and wreaked havoc on the public finances. Industrial action in the NHS alone cost the taxpayer £1.7 billion last year. That is why I am pleased to announce today that the Government have agreed an offer to the junior doctors that the British Medical Association is recommending to its members.
My right hon. Friend the Health Secretary will set out further details. Let me pay tribute to him: his leadership on the issue has paved the way to ending a dispute that has caused waiting lists to spiral, operations to be delayed and agony for patients to be prolonged. Today marks the start of a new relationship between the Government and staff working in our national health service, and the whole country will welcome that.
Where the previous Government ducked the difficult decisions, I am taking action. Knowing what they did about the state of the public finances, they continued to make unfunded commitment after unfunded commitment that they knew they could not afford, putting party before country and leaving us with an overspend of £22 billion this year. Where they presided over recklessness, I will bring responsibility. I will take immediate action. Let me set it out in detail.
On pay, I have today set out our decision to meet the recommendations of the pay review bodies. Because the previous Government failed to prepare for these recommendations in the departmental budgets, they come at an additional cost of £9 billion this year. The first difficult choice I am making is to ask all Departments to find savings to absorb as much of this as possible, totalling at least £3 billion. To support Departments as they do this, I will work with them to find savings ahead of the autumn Budget, including through measures to stop all non-essential spending on consultancy and Government communications. I am also taking action to ask Departments to find 2% savings in their back-office costs.
I will now deal with a series of commitments made by the previous Government that they did not fund, because if we cannot afford it, we cannot do it. First, at the Conservative party conference last year, the former Prime Minister announced the introduction of a new qualification: the advanced British standard. That is a commitment costing nearly £200 million next year, rising to billions across future years. This was supposed to be the former Prime Minister’s legacy, but it turns out that he did not put aside a single penny to pay for it. So we will not go ahead with that policy, because if we cannot afford it, we cannot do it.
Next, the Illegal Migration Act 2023, passed by the previous Government, made it impossible to process asylum applications or remove people who have no right to be here.
Instead, they relied on a doomed policy to send asylum seekers to Rwanda on planes that never took off, leaving tens of thousands of people stuck in hotels on the public purse. We need a properly controlled and managed asylum system where rules are enforced, so that those with no right to be here are swiftly removed. So we have scrapped their failed Rwanda scheme, which placed huge pressure on the Home Office budget. To bring down these costs as soon as possible, my right hon. Friend the Home Secretary has already laid legislation to remove the retrospective element of the Illegal Migration Act, which will significantly reduce the use of hotel accommodation. These measures will save nearly £800 million this year and avoid costs spiralling even further next year. This was a bad use of taxpayers’ money, and we will not do it.
The previous Government claimed they were levelling up the country. They made promise after promise to the British people, but the spending audit has uncovered that some of those commitments were not worth the paper that they were written on. At autumn statement last year, the former Chancellor announced £150 million for an investment opportunity fund, but not a single project has been supported from that fund.
So following discussions with my right hon. Friend the Deputy Prime Minister, I am cancelling it today, because if we cannot afford it, we cannot do it.
The previous Government also made a series of commitments on transport, promises that people expected to be delivered and promises that many Members across this House campaigned on in good faith, but the Conservative party has failed them. We have seen from the National Audit Office the chaos that the previous Government presided over, with projects over budget and delayed again and again. The spending audit has revealed £1 billion of unfunded transport projects that have been committed to next year, so my right hon. Friend the Transport Secretary will undertake a thorough review of these commitments. As part of that work, she has agreed not to move forwards with projects that the previous Government refused to publicly cancel, despite knowing full well that they were unaffordable. That includes proposed work on the A303 and the A27, and my right hon. Friend will also cancel the restoring your railway programme, saving £85 million next year, with individual projects to be assessed through her review. If we cannot afford it, we cannot do it.
The previous Government had plans for a retail sale of NatWest shares. We intend to fully exit our shareholding in NatWest by 2025-26. But having considered advice, I have concluded that a retail share sale offer would involve significant discounts that could cost taxpayers hundreds of millions of pounds. It would therefore not represent value for money, and it will not go ahead. It is a bad use of taxpayers’ money, and we will not do it.
Next, let me address the unfunded pressures in our NHS and our social care sector.
In October 2020, the Government announced that 40 new hospitals would be built by 2030. Since then, only one new project has opened to patients, and only six have started their main construction activity. The National Audit Office was clear that delivery was wildly off track, but since coming into office, it has become clear that the previous Government continued to maintain their commitment to 40 hospitals without anywhere close to the funding required to deliver them. That gave our constituents false hope. We need to be straight with the British people about what is deliverable and what is affordable, so we will conduct a complete review of the new hospital programme, with a thorough, realistic and costed timetable for delivery.
Adult social care was also neglected by the previous Government. The sector needs reform to improve care and to support staff. In the previous Parliament, the Government made costly commitments to introduce adult social care charging reforms, but they delayed them two years ago because they knew that local authorities were not ready and that their promises were not funded, so it will not be possible to take forward those charging reforms. This will save over £1 billion by the end of next year.
Mr Speaker
Order. I want Government Members to be quiet as well—I want to hear the Chancellor of the Exchequer.
Rachel Reeves
I can understand why people, and Members, are angry. I am angry too. The previous Government let people down. The previous Government made commitment after commitment without knowing where the money was going to come from. They did this repeatedly, knowingly and deliberately.
Today, I am calling out the Conservatives’ cover-up and I am taking the first steps to clean up what they have left behind, but the scale of the inheritance we have been left means that the decisions we have so far announced will not be enough. This level of overspend is not sustainable. Left unchecked, it is a risk to economic stability—and unlike the Conservative party, I will never take risks with our country’s economic stability. It therefore falls to us to take the difficult decisions now to make further in-year savings.
The scale of the situation we are dealing with means incredibly tough choices. I repeat today the commitment that we made in our manifesto to protect the triple lock, but today I am making the difficult decision that those not in receipt of pension credit or certain other means-tested benefits will no longer receive the winter fuel payment, from this year onwards. The Government will continue to provide winter fuel payments worth £200 to households receiving pension credit or £300 to households in receipt of pension credit with someone over the age of 80. Let me be clear: this is not a decision I wanted to make, nor is it the one that I expected to make, but these are the necessary and urgent decisions that I must make. It is the responsible thing to do to fix the foundations of our economy and bring back economic stability.
Alongside this change, I will work with my right hon. Friend the Work and Pensions Secretary to maximise the take-up of pension credit by bringing forward the administration of housing benefit and pension credit, repeatedly pushed back by the previous Government, and by working with older people’s charities and local authorities to raise awareness of pension credit and help identify households not claiming it.
This is the beginning of a process, not the end. I am announcing today that I will hold a Budget on 30 October, alongside a full economic and fiscal forecast from the Office for Budget Responsibility. I have to tell the House that the Budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax. [Hon. Members: “Ah!”] Mr Speaker, they still don’t get it, do they? Parties in Downing Street, crashing the economy, gambling on the election—party before country, every single time.
It will be a Budget to fix the foundations of our economy, and it will be a Budget built on the principles that this new Government were elected on. First, we will treat taxpayers’ money with respect by ensuring that every pound is well spent, and we will interrogate every line of public spending to ensure that it represents value for money. Secondly, I can repeat from the Dispatch Box our manifesto commitment that we will not increase taxes on working people. That means that we will not increase national insurance, the basic, higher or additional rates of income tax, or VAT. Today, my hon. Friend the Exchequer Secretary is publishing further detail on our manifesto commitments to close tax loopholes and clamp down on tax avoidance to ensure that we bring in that money as quickly as possible. My third principle is that we will meet our fiscal rules: we will move the current budget into balance and we will get debt falling as a share of the economy by the end of the forecast.
These are the principles that will guide me at the Budget, but let me be honest: challenging trade-offs will remain, so today I am launching a multi-year spending review. This review will set departmental budgets for at least three years, providing the long-term certainty that has been lacking for too long. As part of that process, final budgets for this year and budgets for next year, 2025-26, will be set alongside the Budget on 30 October.
I will look closely at our welfare system, because if someone can work, they should work. That is a principle of this Government, yet under the previous Government, welfare spending ballooned, while inactivity has risen sharply in recent years. We will ensure that the welfare system is focused on supporting people into employment, and we will assess the unacceptable levels of fraud and error in our welfare system and take forward action to bring that down.
To fix the foundations of our economy, we must ensure that never again can a Government keep from the public the true state of our public finances. The fiscal framework I have inherited had several flaws. It allowed the Government to run down the clock on departmental budgets to avoid difficult decisions and to push them back beyond the election, so I am announcing the most significant set of changes to our framework since the inception of the Office for Budget Responsibility. These changes will come into effect in the autumn.
First, we have introduced legislation to ensure that we can never again see a repeat of the mini-Budget. Secondly, we will require the Treasury to share with the Office for Budget Responsibility its assessment of immediate public spending pressures, and we will enshrine that rule in the charter for budget responsibility, so that no Government can ever again cover up the true state of our public finances. Finally, we will ensure that never again do public service budgets get set at only a few months’ notice. Instead, spending reviews will take place every two years, with a minimum planning horizon of three years, to avoid uncertainty for Departments and to boost stability for our public finances. I have already spoken to the chair of the Office for Budget Responsibility to brief him on the findings of our audit and our reforms.
By launching the spending review, I am also today starting the firing gun on a new approach to public service reform to drive greater productivity in the public sector. We will embed an approach to government that is mission-led, that is reform-driven, with a greater focus on prevention and the integration of services at a national and local level, and that is enabled by new technology, including through the work of my right hon. Friend the Secretary of State for Science, Innovation and Technology on the opportunities of artificial intelligence to improve our public services. We will establish a new office of value for money, with an immediate focus on identifying areas where we can reduce or stop spending, or improve its value.
We will appoint a covid corruption commissioner to bring back money that is owed to taxpayers after contracts worth billions of pounds were handed out by the previous Government during the pandemic. Ahead of the spending review, I will also review the cost of our political system, including restricting eligibility for ministerial severance payments based on time in office. I expect all levels of government to be run effectively and efficiently, and I will work with leaders across our country to deliver just that. That means effective local government, a civil service delivering good value for the British taxpayer and reform of our political institutions, including the House of Lords, to keep costs as low as possible.
The Budget and spending review will also set out further progress on our No. 1 mission: to grow our economy. Economic growth is the only way to sustainably improve our public services and our public finances, so we will use the spending review to prioritise specific areas of capital investment that leverage in billions more in private investment. It will not happen overnight—it will take time and it will take focus—but we have already made significant progress, including: planning reforms to get Britain building; a national wealth fund to catalyse private investment; a pensions investment review to unlock capital for our businesses; Skills England to create a shared national ambition to boost skills across our country; and work across government on a new industrial strategy, driven forward by a growth mission board, to ensure that we deliver on our commitments.
Our country has fundamental strengths on which we can build, and I look forward to welcoming business leaders to the international investment summit in Britain later this year. I know that if we can create the stable conditions that investors need to thrive, we will return confidence to our economy so that entrepreneurs and businesses big and small know that this is the best place in the world to start and grow a business. That is the bedrock on which economic growth must be built.
The inheritance from the previous Government is unforgiveable. After the chaos of partygate, when they knew that trust in politics was at an all-time low, they gave false hope to Britain. When people were already being hurt by their cost of living crisis, they promised solutions that they knew could never be paid for, roads that would never be built, public transport that would never arrive and hospitals that would never treat a single patient. They spent like there was no tomorrow because they knew that someone else would pick up the bill. Then, in the election—perhaps this is the most shocking part—they campaigned on a platform to do it all over again, with more unfunded tax cuts and more spending pledges, all the time knowing that they had no ability to pay for them. No regard for the taxpayer. No respect for ordinary, hard-working people.
I will never do that. I will restore our country’s economic stability. I will make the tough choices. I will fix the foundations of our economy so that we can rebuild Britain and make every part of our country better off. I commend this statement to the House.
Jeremy Hunt (Godalming and Ash) (Con)
I thank the Chancellor for advance sight of her statement, and I echo her thoughts for the people and emergency services of Southport.
Today, she will fool absolutely no one with a shameless attempt to lay the grounds for tax rises that she did not have the courage to tell us about—[Interruption.]
Mr Speaker
Order. I want the Cabinet to act like a Cabinet, not like a rabble that is trying to shout at the shadow Chancellor.
Jeremy Hunt
The Chancellor says that the information is new, but she told the Financial Times:
“You don’t need to win an election to find”
out the state of public finances, as
“We’ve got the OBR now.”
Paul Johnson of the Institute for Fiscal Studies has said:
“The state of public finances were apparent pre-election to anyone who cared to look”
which is why he and other independent figures say that her argument is not credible and will not wash.
Those public finances were audited by the OBR just 10 weeks before the election was called. We are now expected to believe that, in that short period, a £20 billion black hole has magically emerged, but for every single day in that period—in fact, since January, in line with constitutional convention—the right hon. Lady had privileged access to the Treasury permanent secretary. She could have found out absolutely anything she needed. Will she confirm to the House that she did have meetings with the permanent secretary of the Treasury before the election? Will she tell the House whether they discussed public finances? Will she tell the House whether they discussed any of the pressures that she is talking about today? If so, why are we only hearing today what she wants to do about them? That is why today’s exercise is not economic—it is political.
The Chancellor wants to blame the last Conservative Government for tax rises and project cancellations that she has been planning all along. The trouble is, even her own published numbers expose the fiction behind today’s announcement. Just four days ago, she presented to the House the Government’s estimates of spending plans for the year. Those estimates are a legal requirement. The official guidance manual is clear that Departments are responsible for ensuring that estimates are consistent with their “best forecast of requirements”. They are signed off by the most senior civil servants—the accounting officers—in every Department. Yet, four days on, she is saying that those estimates are wrong. Who is right: politically neutral civil servants or a political Chancellor? If she is right, will she ask the cabinet secretary to investigate those civil servants and apologise to the House for laying misleading estimates? Of course not, because she knows that those civil servants are right and today’s black hole is spurious, just like when she says that she inherited the
“worst set of economic circumstances”
since the second world war. When BBC Verify asked a professor at the London School of Economics about that claim, he responded:
“I struggle to find a metric that would make that statement correct.”
The metrics speak for themselves. Inflation is 2% today —nearly half what it was in 2010 when we had to clear up the mess inherited from a Labour Government. Unemployment is nearly half what it was then, with more new jobs than nearly anywhere else in Europe. So far this year, we are the fastest growing G7 economy. Over the next six years, the IMF says that we will grow faster than France, Italy, Germany and Japan.
Just two days before the election was called, the managing director of the IMF praised the previous Government’s handling of the economy, and said it was in a good place. This week, the Institute for Fiscal Studies said that it was
“not a bad situation to take charge of”
and certainly not comparable to the 1940s or 1970s. If the right hon. Lady is in charge of the economy, it is time to stop trash talking it. What is the point of going to New York or Brazil to bang the drum for more investment if she comes home with a cock and bull story about how bad everything is? She should stop playing politics with Britain’s reputation and get on with running the economy.
When it comes to public finances, will the Chancellor confirm to the House that, far from being broke and broken, as Downing Street briefed the media, the forecast deficit today is 4.4%, compared with 10.3% when Labour left office in 2010? In other words, when Labour was last in office, we were borrowing double the current levels. Will she confirm another difference between today and 2010? The Conservatives came to office then, honest about our plans and saying straightforwardly that we needed to cut the deficit. She has just won an election telling us repeatedly that taxes will not go up. How many seats were won on the back of commitments not to raise tax, while she is quietly planning to do the exact opposite?
On the details that the Chancellor has announced today, will she confirm that around half of today’s fictitious black hole comes from discretionary public sector pay awards—in other words, not something that she has to do, but something where she has a choice? Will she confirm to the House that, apart from the teachers recommendation, none of the other pay review body recommendations was seen by the last Government, as they arrived after the election was called? Today she has chosen to accept those recommendations, but before doing so, was she advised by officials to ask unions for productivity enhancements before accepting above-inflation pay awards, to help to pay for those awards, as the last Government did? If she was advised to do that, why did she reject that advice and simply tell the unions, “Here’s your money, thanks for your support”? Will she confirm—[Interruption.] I know Labour Members do not like the truth, but here it is. Will she confirm that one of the reasons for her funding gap is that she has chosen to backdate a 22% pay award to junior doctors, to cover the time when they were striking?
We are just three months into the financial year, so why did the Chancellor not mention today that, at the start of the year, the Treasury had a reserve of £14 billion for unexpected revenue costs, and £4 billion for unexpected capital costs? Additionally, why has she not accounted for the Treasury’s ability to manage down in-year pressures on the reserve—last year alone by £9 billion? Why has she apparently not accounted for underspends—typically £12 billion a year? Has she totally abandoned the £12 billion of welfare savings planned by the last Government? If so, will she confirm that to the House? Has she also abandoned £20 billion of annual productivity savings planned by the last Government? If not, why are they not in her numbers? Finally, for someone who claims continuously the mantle of fiscal rectitude, will she confirm that in order to pay for her public spending plans, she will not change her fiscal rules to target a different debt measure, so she can increase borrowing and debt by the back door?
Every Chancellor faces pressures on public finances. After a pandemic and an energy crisis, those pressures are particularly challenging, which is why in autumn 2022, the previous Government took painful but necessary decisions on tax and spend. But we knew that, if we continued to take difficult decisions on pay, productivity and welfare reform, we could live within our means and start to bring taxes down. She, on the other hand, knew perfectly well that a Labour Government would duck those difficult decisions. She has caved in to the unions on pay, left welfare reform out of the King’s Speech and soft-pedalled on our productivity programme. That is a choice, not a necessity.
That choice means that taxes will have to go up and the right hon. Lady chose not to tell us before the election. Instead, in 24 days—just 24 days—she has announced £7.3 billion for GB Energy, £8.3 billion for the national wealth fund and around £10 billion for public sector pay awards. That is £24 billion in 24 days: around £1 billion for every day she has been in office, leaving taxpayers to pick up the tab for her profligacy.
Doing it this way, she makes the first major misstep of her time as Chancellor, because that great office of state depends more than any on trust—[Interruption.] In her first big moment, she breaks that trust with an utterly bogus attempt to hoodwink the public about the choices she has. Over 50 times in the election, Labour told us it had no plans to raise taxes. Now, in a U-turn that will forever shame this Labour Government, she is laying the ground to break her word. When she does, her first Budget will become the biggest betrayal in history by a new Chancellor. Working families will never forgive her.
Rachel Reeves
The shadow Chancellor had an opportunity this afternoon to admit what he had done, the legacy he had left. Instead, he takes no responsibility. The word the country was looking for today was sorry. He could not find those words; no wonder the Conservative party so definitively lost the trust of the British people at the election three and a half weeks ago. We say never again. [Interruption.] Never again should a party that plays fast and loose with the public finances be in charge of the public finances—[Interruption.]
Mr Speaker
Order. Can I just say to the Whips, who hold responsible jobs and I expect them to keep them that way, that just because they might not be at the end of the Bench does not mean they have to chunter all the way through and pass comment? I don’t need it and I won’t put up with it.
Rachel Reeves
First, specifically on the black hole, we could not have known these numbers because the Conservative party did not tell the OBR these numbers. That is why we are in the position we are in today. That is the biggest scandal of them all.
The shadow Chancellor asks about the estimates. He should recognise the estimates we laid yesterday because he produced them. We had to lay those estimates to allow public spending to continue, but since those estimates were produced, information was given to us by Treasury officials about the true scale of the overspending by the Conservative party.
The shadow Chancellor mentions the IFS. Paul Johnson from the IFS has just said that it appears that these overspends are genuinely unfunded—words not from me, but from the independent IFS, which the shadow Chancellor referenced.
The shadow Chancellor mentions what happened to the reserve. Well, the reserve has been spent, shadow Chancellor. It was spent by you three times over. That is why we are in a position of a £22 billion in-year gap between spending that was happening and the funding to produce it.
If the shadow Chancellor could do all the things he spoke about today, why were they not in the forecasts? If he was able, as he says, to make those in-year changes on welfare and productivity, they would have been in the forecasts. They were not.
On the issue of the pay review bodies, the previous Government set the remit for those but they refused to give them any indication of affordability. That is almost unprecedented. The teachers reported before the election and that recommendation sat on the former Education Secretary’s desk. Today, we are drawing a line on the industrial action: the £1.7 billion cost to the NHS alone last year and 1.4 million cancelled appointments. We are incorporating a third of those pay increases into efficiencies in our public services, as the shadow Chancellor suggested we should.
When it comes to tax, I am not going to take any lessons from the Conservative party. The Conservative party took the tax burden to the highest level in 70 years.
The response of the shadow Chancellor just confirms what we already knew: the previous Government were deluded, out of touch and grossly irresponsible. Today, we begin to fix the mess that they have created.
Rachel Reeves
I can confirm that we will be arranging multi-year settlements with local authorities, as well as with Departments. It is extremely important that both Departments and authorities can plan for the future knowing what money is available, rather than running down the clock towards the end of the year.
I thank my hon. Friend for welcoming the announcement that I made today about working with local government to improve the take-up of pension credit. It is woeful that it is so low. It is vital that everyone receives the money to which they are entitled, especially pensioners, which is why we have taken on those recommendations from elderly people’s charities today to ensure that we work with local government to boost take-up of that benefit.
Sarah Olney (Richmond Park) (LD)
I thank the Chancellor for advance sight of her statement. Let me associate myself with the expressions of gratitude to our emergency services; the thoughts of all Liberal Democrats are with those affected by the incident in Southport.
Years of Conservative chaos and mismanagement have left our economy on life support and in desperate need of emergency care. Things cannot go on like this any longer. We must now revive growth by getting people off NHS waiting lists and back into work, so we urge the Government to invest wisely in GPs, dentists and hospitals, not only to support patients but to improve efficiency in the NHS and deliver the growth that is so desperately needed after years of Conservative failure.
The outgoing Conservative Government will go down in the history books as one of the most damaging Administrations that our country has seen, and today’s statement has thrown that picture into even starker relief. It was not just their catastrophic mini-Budget; we saw a vicious cycle of stagnation and recession, driven by years of chaos and uncertainty. For the first time, living standards declined over the course of a Parliament as people experienced the harshest cost of living crisis in generations. Our public services were abandoned: waiting lists soared, schools crumbled, and our social care was in crisis. The dire state in which the Conservatives left our public finances is indicative of their irresponsibility.
People are painfully aware that Conservative chaos has real-life consequences. Interest rates were sent soaring, and millions of people saw their mortgage payments increase by hundreds of pounds a month. That is why, more than ever, we need to foster economic stability to draw a line under the uncertainty of the last few years. An important step in rebuilding confidence in our economy is the setting up of a long-term industrial strategy. That will help to unlock vital investment, create good jobs, and help us to tackle the climate emergency. Will the Chancellor reassure the House that the Government will start work on such a strategy as soon as practically possible?
We cannot talk about rebuilding our economy without talking about the crisis in health and social care. Millions have long-term health conditions that make them too ill to work, and millions more are stuck on NHS waiting lists. Many others cannot leave hospital because there is no care provision. The Liberal Democrats have always understood that we cannot have a thriving economy and strong public finances until we fix the crisis in health and social care, which is why we put forward detailed proposals to deliver more GPs, invest in dental services, and cut ambulance waiting times. Equally, we must give people the good-quality care that they deserve, so we urge the Government to work across party lines to implement a system of free personal care and give our unpaid carers the proper support that they need. The last Conservative Administration left people with crippling care costs. That is why it is urgent for us to have cross-party talks on social care, and I urge the Government to begin those as soon as they possibly can.
Investing in health and care is not just about giving people the fair deal that they deserve; it is also about sound management of our public finances. Will the Chancellor guarantee that the NHS and social care will be at the heart of her plans to address the Conservative party’s legacy of mismanagement? Part of that legacy is the previous Government’s promise to deliver 40 new hospitals, which was postponed, redefined and never properly funded. It turned out to be yet another empty Conservative promise, but having listened to many colleagues on these Benches over the last few years, some hospitals are clearly in dire need of investment, with crumbling roofs and buckets to catch the leaks. Will the Chancellor meet Members whose constituents will be affected by today’s announcement, to hear directly about the situation in their hospitals?
Lastly, let me turn to the other side of the equation: securing the funding that our public services so desperately need. Over the last Parliament, we saw the Conservative party raise taxes on hard-working households again and again, just to pay for its own mistakes. Does the Chancellor agree that it would be unfair to ask working people to pick up the tab a second time, after they have already suffered through years of painful tax rises? My party has set out detailed proposals to raise funding for our public services in a fair way—for example, by reversing the Conservatives’ tax cuts for big banks, putting in place a proper windfall tax on oil and gas producers, and raising the digital services tax on social media giants. I urge the Chancellor to draw from these ideas, which could raise billions of pounds by asking some of the largest companies in the world to pay their fair share.
There is no doubt that our economy, our public services and our public finances have been left in a precarious position. Now the hard work must be done to repair the damage and return stability, growth and prosperity to our country. That is what the Liberal Democrats will always champion, and we sincerely hope that the Government will look closely at our proposals to end the crisis in health and social care, grow our economy and give people a fair deal.