Budget Statement

Lord Tunnicliffe Excerpts

Thursday 16th March 2023 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, I begin by joining others in congratulating the noble Baroness, Lady Moyo, on her maiden speech. Her wide-ranging experience makes her an excellent addition to your Lordships’ House, and I very much look forward to her participation in future debates.

It is rare for your Lordships’ House to be given the opportunity to debate a Budget so soon after the Statement was made in the other place. With the Chancellor’s speech lasting for more than an hour, perhaps the hope was that colleagues would not have had sufficient time to fully digest his remarks or the Red Book. The Government’s economic plans have generally not held up to scrutiny, although the immediate reaction of many who watched yesterday’s proceedings may well have been: “Was that it?”

I am very grateful to the Minister for her introduction to this debate. Unfortunately, her speech painted a picture that many across this country simply will not recognise. Yes, the Office for Budget Responsibility’s short-term forecasts look better than in November, but growth expectations beyond 2025 have been downgraded and remain low compared to many of our neighbours and economic competitors. Yes, inflation is forecast to fall drastically by the end of this calendar year, but that does nothing to protect low and middle-income households from sharp increases in household bills—not just energy—or food inflation of around 17%.

Yes, there have also been changes to pensions to resolve specific issues faced by doctors and some other public sector workers, but the Treasury has chosen to do this in a way that also provides a handout to the richest 1%. In the words of Paul Johnson, the pension changes amount to using a

“sledgehammer to crack a … nut.”

The measure will cost taxpayers an estimated £70,000 for each person returned to the labour market, with the annual cost of maintaining the changes topping £1 billion by 2026-27. As families face rising bills, higher costs and frozen wages, this pensions bung is, as Rachel Reeves has said,

“the wrong priority, at the wrong time, for the wrong people.”

That is why a Labour Government will reverse this move, unless of course the Chancellor decides to perform yet another U-turn in the coming weeks.

As I just alluded to, life is currently a real struggle for so many across our country. Parts of this Budget may help certain people in limited ways, but the Chancellor’s Statement will have done little to instil that all-important sense of hope—I repeat, hope—for the future. The idea that 2% annual GDP growth is the pinnacle of what this great country can achieve is, frankly, laughable. That is why Labour has set the ambitious but achievable goal of securing the highest sustainable growth in the G7. We want to lead, while the Conservatives seem happy to languish at the bottom of the international league tables.

Despite various initiatives, relaunches and even ministerial reshuffles, our economy remains smaller now than it was prior to the coronavirus pandemic. I have been saying that for a year, so why does it remain true and what is the result? Not only are we the only G7 country which will see negative growth this year, but people across the UK are enduring the largest hit to their living standards, of around 6%, since comparable records begun. British families are now, on average, poorer than their French and German counterparts. Wages in real terms are lower now than 13 years ago. Real weekly wages are likely to remain below their 2008—yes, 2008—levels until 2026.

Meanwhile, the OBR says average interest rates on outstanding mortgages are now twice as high as was forecast back in 2021. A typical household remortgaging faces a Tory mortgage penalty of £1,950. Families and working people are therefore left paying the price of the Conservative Party’s failures.

As if higher mortgage bills were not enough, freezes to tax thresholds from April will mean an extra £500 on income tax for basic-rate taxpayers. The OBR believes that, by 2027-28, the threshold freeze will have brought 3.2 million people into paying basic-rate tax, with 2.1 million moving into the higher-rate bracket. People may accept that if they receive quality public services in return, but 13 years of Conservative control has seen many services sold off or run into the ground. The situation is perhaps best summed up by the Resolution Foundation, which describes Britain’s economy as being

“stuck in a deep funk”.

That respected body also says that even when people are supported into work, they are

“getting poorer, and paying more tax but seeing public services cut.”

That is not what people voted for.

Of course, there are things in this Budget that we welcome—in principle, at least. The promised expansion of childcare should be helpful for many parents. In his initial response to the Budget, Paul Johnson said that he doubted whether it would make “a big difference” to getting mothers back to work. How many people does the Treasury believe this policy will support back into employment?

We also know that childcare ratios will be relaxed, moving from 1:4 to 1:5, a move which the Early Years Alliance believes risks

“severely compromising the safety and quality of care”.

Can the Minister confirm whether this will be kept under review and, if so, how?

In addition, we welcome the decision to scrap higher tariffs for households with prepayment energy meters and to extend the £2,500 energy cap to the end of June. The Labour Party has been calling for these steps for some months, and the Government’s choice to drag this out has caused unnecessary additional anxiety for many. We do not mind the Government availing themselves of our ideas, whether on the price guarantee, the windfall tax or prepayment meters but, with billions of pounds of untaxed energy profits still left on the table, would the Chancellor also like to adopt our proposal to close the remaining holes in his energy levy?

We also endorse the decision to go through with the increase to corporation tax, given that it is accompanied by improved allowances for firms that invest in their UK operations. As outlined previously in relation to income tax, the personal tax burden is at the highest level since the Second World War. It is almost five percentage points higher than at the start of the pandemic, with no sign of the Chancellor finding the fiscal headroom needed to bring personal taxes down. Meanwhile, corporation tax rates in this country have gone up and down like a yo-yo. Not only has that shifted more of the tax burden on to working people, but it has created uncertainty that has made it harder for businesses to plan long term and to invest in this country’s future. Business taxes should not be unduly high, but firms must pay their fair share. Labour has committed to reviewing the business tax system across the board. It is only by adopting a new, fair and long-term framework that we can move past the short-term focus on share buybacks and dividends, towards a system with investment and job creation at its heart.

To conclude, this Budget was the chance for the Government to unlock the enormous promise and potential of Britain. Instead, it merely papered over the cracks of 13 years of Conservative economic failure. Despite the ministerial merry-go-round and policy U-turns of last summer, our economy remains on track to contract overall this year. We may avoid a recession, but the fact that Ministers are celebrating that shows just how low the bar has been set. People’s living standards remain on track to fall by an unprecedented 6% over two years, and the UK will remain towards the bottom of international league tables. The Budget has done nothing to change those facts or to resolve many of the major issues of the day, with many of the difficult decisions left until after the next election. Crucially, it has done nothing to give people a sense of hope for the future. Instead, it appears to be the latest step in our managed decline, as Conservative Britain once again becomes the sick man of Europe.