Luke Evans
Main Page: Luke Evans (Conservative - Hinckley and Bosworth)Department Debates - View all Luke Evans's debates with the HM Treasury
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Dr Luke Evans (Hinckley and Bosworth) (Con)
To put it in simple terms for those listening at home, the Chancellor raised taxes by £40 billion, she spent £30 billion and she borrowed £70 billion. Cumulatively, that will make people think, “How am I going to get the return on that investment if we are not growing the economy? How do I ensure that the interest will be paid?” That is why interest payments go up and we as a country end up paying more debt—because of the decisions the Chancellor has made.
Sir Mel Stride
My hon. Friend is absolutely right. If we borrow more money, we pay more for that borrowing. Of course, that has fed through to inflation. We know that inflation this year, according to the International Monetary Fund, will be the highest in the G7. The IMF also says it will be the highest in the G7 next year. The consequence of that in monetary policy is interest rates being higher for longer. Of course, if we have a mountain of debt and add to it ruinously, the cost of servicing that debt goes through the roof. It now stands at about £100 billion a year, rising to £130 billion at the end of the scorecard. That is more than twice what we spend on defence every year.
Sir Mel Stride
My right hon. Friend is entirely right. The conclusion that one must draw on the mess that this Government have made of our economy is that it has become brittle, fragile and vulnerable to the kind of external shocks that it was able to withstand when the Conservatives were stewards of it.
While per capita growth is almost on the floor, unemployment is at a five-year high; as we know, every Labour Government in history have left unemployment higher on leaving office than it was on entering office. Inflation is high and business confidence is at rock bottom. In a recent survey, the Institute of Directors found that business confidence among its members was the lowest in history. My right hon. Friend the Member for South West Wiltshire (Dr Murrison) refers to covid—according to the IoD, business confidence is even lower now than it was during covid, when the economy contracted by more than 10% overnight. That is how bad business sentiment is out there.
Sir Mel Stride
To be fair, I think the Prime Minister was referring to facial hair growth, rather than growth in the economy. They are distinctly different things.
Sir Mel Stride
Well, he may or may not be—it remains to be seen.
What all this ends up with, of course, is lost fiscal headroom. That is the story so far. We had a Budget last October with about £10 billion against the debt target; that vanishes, with 50% on top as well. It is rebuilt in the spring, and now it has all disappeared, and we are waiting to find out how deep that black hole is. We have entered something of a doom loop, with higher taxes destroying growth, leading to a loss of fiscal headroom, requiring—in the Chancellor’s terms at least—further tax increases, leading to further destruction of growth, and around and around we go.
Sir Mel Stride
Madam Deputy Speaker, that is a great shame. The hon. Gentleman has not been here for any of the debate, but that does not mean that he might not have given the best possible intervention from the Labour Benches so far. Perhaps he may like to come in a little later.
We have a Government who are engaged in serial breaches, who have no backbone to take the right decisions, and who will always fold to pressure, including from their own Back Benchers—and all at the expense of businesses and hard-working people up and down our country.
Dr Evans
The Chancellor set out in a speech only last year an absolute commitment not to raise taxes. She said, “We’ve set the spending envelope for this Parliament, we don’t need to increase taxes”. Yet here we are on the cusp of taxes going up. Is not the crux of this the fact that she cannot even stick to what she promised?
Sir Mel Stride
My hon. Friend is absolutely right. He will have heard the various quotations at the beginning of my contribution exactly to that effect.
The motion on the Order Paper asks a simple question. It is essentially this: even at this late stage, will the Government stand by their word, or will they dragoon those on the Benches behind them through the wrong Lobby tonight? If they vote with us, millions will heave a huge sigh of relief. If they vote against, the people will have their answer, and they will never forget.
James Murray
We are back to questions about what will be in the Budget. The answer, again, is very straightforward. The Chancellor set out the values that will guide her in taking the decisions at the Budget on 26 November. She set out the challenges that we face, being straight with the British people about that. The details will all be announced by the Chancellor on Budget day in the normal way.
We know that there is much more for us to do as a Government, but we can see the tough choices we made last year showing early signs of progress. We are set to deliver the largest primary deficit reduction in both the G7 and the G20 over the next five years. Our stewardship of the economy has helped the Bank of England cut interest rates five times, meaning lower mortgage payments and cheaper borrowing for families and businesses; real wages rose more in the first 10 months since the election than in the first 10 years of the previous Government; and the average person’s disposable income is now £800 higher in real terms than just before the election, meaning living standards have begun to rise. We have increased public capital investment by £120 billion over the Parliament and supported the NHS to achieve a reduction in the total elective waiting list of more than 206,000 since July 2024.
Dr Luke Evans
We on the Conservative Benches have been struggling to get an answer on the question of the 50% reduction in integrated care boards, for which the expected redundancy bill is about £1 billion. Today, the Government have issued a press release that says that they have dealt with that. Yet in response to my written question on the subject, the Health Department said that it could not provide an answer because it does not know the numbers, so I have received a holding answer. How much will the redundancy payments cost, and will it come from the Health budget or the Treasury budget?
James Murray
It is for the Health Department to set out the details in response to any questions that the hon. Gentleman has tabled. The point about the merger between NHS England and the Department of Health and Social Care is that it is a way of cutting costs and ensuring that that money is reinvested in frontline services. Rather than having duplicative structures within our system, we want to ensure that we are merging NHS England and the Department of Health to make those savings, which we can reinvest in patient care.
As I said, there are still many challenges ahead and we are impatient to see things improve. Globally, inflation remains high and confidence is low, deterring investment and hindering growth. As geopolitical uncertainty grows, we are also faced with a critical need to invest in our defence spending. Domestically, we must continue to cut NHS waiting lists, lower the cost of living and improve our country’s productivity. We must invest in our roads, transport, housing, infrastructure, public services, towns and cities and the businesses for which the last Government failed so completely to provide.
Conservative Members will see the Budget two weeks from today. They will have plenty of opportunity to scrutinise it and participate in a serious debate about it later this month. We will, of course, oppose today’s motion, which speculates on what the Budget might contain. The effort of rebuilding a country requires the contributions of everyone in that country. Together, we can renew the UK and build an economy that is fair and thriving. That is what this Government were elected to do and that is what the Budget in two weeks’ time will play its crucial part in achieving.
Charlie Maynard
They are interested in what costs them money, and their mortgages are more expensive because of the decisions the Conservatives took three years ago—[Interruption.] Well, read the Financial Times.
Moving on, I suggest that the digital services tax is another way we should be looking at to raise revenues. We would increase it from 2% to 10%, which would raise roughly £4 billion a year and get some of the biggest and wealthiest corporations in the world to finally contribute their fair share of tax here in the UK. We would also increase gambling taxes, because gambling really beggars some of the most vulnerable in society. Of course, the biggest one of all is that we should rejoin the customs union with the EU. Nobody voted to leave the customs union, but we are now in a market that is more than seven times smaller than the one we used to be in. As somebody who founded and ran a business for 24 years, I know that that hurts. It has done huge damage to small, medium-sized and big businesses and we are living with that loss. The quickest thing we could do is to negotiate a new, bespoke customs union with the EU. This would unleash the potential of British business.
With every month and year that goes by, it becomes clearer just how economically damaging the previous Government’s Brexit deal has been. The OBR has forecast that it will harm economic growth, reducing long-term GDP by 4%. However, according to Frontier Economics, a much closer trading relationship with Europe—not even a customs union—could boost UK GDP by 2.2%. These are enormous numbers, so when we are looking around for solutions, there is one right in front of us. It stands to reason that a new customs union would probably raise more than £25 billion a year for the Exchequer. There it is. Grab it, please. With the autumn Budget just two weeks away, the Liberal Democrats’ message to the Chancellor is clear. Instead of asking hard-working households and struggling small businesses to pay even more tax, she must take growth seriously and repair our broken trading relationship with Europe.
Dr Luke Evans
The hon. Gentleman talks about the trading union, but if we were to go back into the EU, one of the things we would have to take is freedom of movement. How does that tally with the Lib Dems’ position on dealing with immigration?
Charlie Maynard
I think we should have all the economic benefits of Europe while controlling our borders and controlling movement—[Interruption.] Well, look at Norway, Switzerland and Turkey. There are lots of options out there. Let’s go and negotiate something that makes sense for us.
My final point is that we need an office for value for money—an effective regulator with proper scrutiny and proper teeth that really looks into our Budget. I ask the Government to take inspiration from the Swedish model of tax scrutiny. I understand that after introducing these changes 30 years ago, and aided by strong economic growth, Sweden has reduced its national debt from nearly 80% of debt to GDP to 32%. Meanwhile, our public debt is around 95%, which means that billions that we could be spending on our public services are instead going towards servicing our debt.
A key component is significantly strengthening the scrutiny powers of this Chamber when it comes to the Government’s financial management. The Chancellor’s practice of keeping the Budget secret until the day, at which point everyone else has to scramble to assess the detail and has no time to provide a proper, meaningful critique, is far from the best way to scrutinise the Government’s economic policy. This is not how many of our international peers go about their economic policy. Proper, detailed scrutiny of the Budget, as opposed to the wave-through regime we currently have, with no proper transparency before approval, needs to be addressed—
Sam Rushworth
I have confidence in the Chancellor to produce a Budget that will do the things that my constituents need it to. What my constituents are asking for, and what they voted for at the general election, is change.
Look what the Conservatives did to our justice system: prisons are 99.9% full, and we have a court backlog that makes victims wait years for justice. We all know that our surgeries are crammed with these cases. Look at what they did to the asylum system, which has an enormous backlog. Whoever negotiated the contract on asylum hotels must have been the person who did the dodgy covid contracts, given the amount that they wasted. Millions a day were spent on hotels.
Look at what the Conservatives did to childhood. Contrary to what was said earlier, child poverty in our country has increased. The Institute for Fiscal Studies said that both relative and absolute poverty have increased. The pattern between 1997-98 and 2022-23 can be described as a U-curve; poverty fell under the 13 years of the last Labour Government, and then relative and absolute child poverty increased. Look at what that means for the communities I represent: 16 Sure Start centres closed; primary school budgets are below their 2010 levels; transport for college students is expensive, and their education maintenance allowance was cut; youth services, boxing gyms and swimming pools have closed; and social infrastructure has disappeared from our communities over the last 15 years.
These are real challenges, but the problem is not just with our public services. Because the Conservatives robbed the capital budget to pay for day-to-day spending, they left Britain in the slow lane. Cancelling Labour’s Building Schools for the Future project left our schools and public buildings infested with reinforced autoclaved aerated concrete. Cancelling nuclear projects left us reliant on expensive fossil fuels, which led to 11% inflation at one point under the Conservatives. Cancelling High Speed 2 to secure a media headline on the eve of a conference has left us without the critical transport infrastructure we need.
All these problems come with a higher social cost. When His Majesty’s Revenue and Customs staff are sacked, we get more tax avoidance and fraud. When people have to wait two years for a routine operation, businesses have a bigger sick bill. When prisons are not built and the police are cut, there is more crime. When civil servants were cut, the previous Government had to spend £3 billion on agency staff.
Dr Luke Evans
The hon. Gentleman has missed something from his list: the Government’s own assessment shows that when winter fuel payments are cut, it puts 50,000 people into absolute poverty and 100,000 people into relative poverty. A 2017 report by the hon. Member for Chipping Barnet (Dan Tomlinson), now the Exchequer Secretary to the Treasury, said that cuts to the payment would kill 4,000 people. Was that factored into the hon. Gentleman’s assessment when he went through the Lobby to vote on the measure?
Sam Rushworth
The only vote we ever had on the issue was a vote for or against an Opposition day motion. I was always clear that the original threshold that the Government set was far too low. I do not think that millionaires and asset-rich, wealthy pensioners should receive the payment. The policy, as it now stands, and as it will be for pensioners in my community this winter, is as it should be.
Stuart Anderson (South Shropshire) (Con)
It is interesting to follow the hon. Member for Bishop Auckland (Sam Rushworth), who clearly has an ideology that he believes.
As a Conservative, I believe in lower taxes, and that people have a better understanding than Governments of how to spend their own money. I want to see more South Shropshire constituents keep more of what they earn. Last year’s Halloween Budget hoicked taxes by £40 billion a year. It included a hugely damaging rise in employer national insurance contributions, which has added almost £1,000 to the cost of employing someone. We are stunting the wealth creators, and that is not acceptable. The Chancellor did that with one hand, and withdrew support from our suffering high streets with the other. Pubs will have to pay an extra £3,000 on average because of the changes to business rates, and they are feeling it.
The latest statistics have confirmed that economic growth has flatlined, despite the Chancellor’s promise to
“lead the most pro-growth, pro-business Treasury our country has ever seen, with a laser focus on delivering for the working people”.
How is that going? Since last year’s Budget, a huge number of people—the figure is approaching 180,000—are out of work. Jobs have been lost, and unemployment is up to 5%.
A year ago, the Chancellor told the country that she would not come back with any more tax hikes. The slate had been wiped clean. She clearly said on TV: “This is what I will be doing, and I will not have to come back.” No matter what reason they come up with, if the Government break that manifesto promise, I believe it will hurt them beyond what they believe possible. They have run out of road in their continual blaming of the previous Government. However, it seems almost certain that that is what will happen, so pensions, savings, cars and houses are all sadly in the frame for Labour’s Budget.
South Shropshire is a big rural constituency, so let us consider rural prosperity. The Chancellor’s policies have killed growth, fuelled inflation and reduced opportunities for South Shropshire residents. On average, productivity, earnings and ease of access to further education are all lower in rural than in urban areas. Closing those gaps could add billions to England’s economy. A stronger economy is needed to enhance public services. I agree with the hon. Member for Bishop Auckland that we need strong public services, but we cannot stifle private industry and businesses to get them.
The shadow Chancellor, my right hon. Friend the Member for Central Devon (Sir Mel Stride), has shown how huge savings can be made at the same time as cutting taxes for working people. If the shadow Chancellor and shadow Treasury team set out clear objectives, we should put party politics behind us and adopt some of them for the good of the country.
The family farms tax is crippling farmers in South Shropshire. I have a huge rural constituency—25% of my constituents work in the agriculture industry—and the tax is really hurting it. The Budget must reverse the cruel family farm tax, which needs to change. Farmer confidence has dropped to its lowest-ever level on record. More than 6,000 farms have already closed under this Government. That is concerning, and it is a threat to food security.
The Budget must also reverse some measures to release the stranglehold on the high street. Every Member would struggle to find a business in their constituency that says, “I am enjoying the measures that have been put in.” More than a thousand pubs and restaurants on our high streets have already gone—that is the equivalent to two every single day. That is an issue. I welcome the fact that a future Conservative Government would abolish business rates for thousands of retail, hospitality and leisure businesses. That would stimulate growth, and we could then invest in the areas where we need to.
Dr Luke Evans
This toxic concoction creates a cumulative cycle. The pubs that do survive have to reduce staffing and hours. In rural areas, that might increase loneliness and reduce opportunities for young people to get jobs. That cyclical nature means a spiral into decline. I am concerned about that in my area. Does my hon. Friend share that concern for his area?
Dame Caroline Dinenage (Gosport) (Con)
It is a pleasure to follow the hon. Member for Harlow (Chris Vince). I thank him for cantering us through his mother’s career at HMRC—on behalf of the whole House, I thank her for her service, and I ask him to pass on our very best wishes.
Madam Deputy Speaker, as a near neighbour to my constituency, I am sure that you will know that the history of Gosport has always been umbilically linked to the fortunes of our armed forces. The town was effectively nationalised by the Royal Navy two or three centuries ago. As the size and structure of our defence base changed, with that, over many decades, went many of the jobs and livelihoods that depended on it. Job density on the Gosport peninsula is almost 50% lower than in the wider south-east region, which is an issue that I have spent 15 years as an MP trying to help drive solutions for. There is nothing more important to an area like mine than maintaining the conditions that give businesses the confidence to invest, employ and grow, but the overwhelming foundation stone for growth, and for the innovation and investment that will solve the productivity puzzle that the UK is facing, is that businesses need to be able to make long-term decisions and plan for the future.
Employers in my constituency, both large ones like StandardAero, QinetiQ and STS Defence and the numerous small and growing businesses, need to be able to rely on stable borrowing costs and to know that the cost of materials will not rise unsustainably in order to have the confidence to take on new staff and start apprenticeship programmes. Investors like those who took the plunge and moved to the Solent enterprise zone at Daedalus airfield, creating hundreds of local jobs in the process, need to know that if they put their capital at risk by investing, the Government will not reach in on a whim to take a large slice of any reward. The fact is that employer tax rises put all of that at risk. That is what we have seen since last year’s Budget and why local people are nervous about this year’s Budget too.
Tax fulfils two purposes: one, which the Chancellor knows well, is to raise revenue for the Government, but I am not convinced that she has given much thought to the other, which is influencing changes in behaviour. The pessimism and growth downgrades in our economy over the past year have provided hard and fast evidence that changes to the tax regime are at least as powerful at achieving the second goal as the first. Some £40 billion of tax rises very effectively mowed down those green shoots of post-pandemic recovery, but worse than that, they incentivised businesses in my Gosport constituency to make decisions that run in direct contrast to what our area needs. There are fewer employment opportunities and fewer chances for young people to build good-quality careers.
I have heard worrying stories about the impact that the employer national insurance rises announced in last year’s Budget of unintended consequences have had in my constituency. The common thread is that the national insurance change hit the businesses for which labour is the highest cost hardest, putting services that my constituents rely on every day at risk. A fifth of everyone who works in Gosport works in caring, leisure and other service occupations. Those are by far the biggest employment sectors, and account for almost three times the average for England, so my constituents felt the Chancellor’s national insurance rises the hardest.
Dr Luke Evans
My hon. Friend is making an excellent speech about what happened a year ago. Another problem is that all the kite flying in the Treasury at the moment means that people are now making decisions to withdraw their pensions schemes, not employ people and not invest. Is my hon. Friend seeing that in her constituency, as I am in mine? All that kite flying has real-world consequences, even before we get to the Budget in three weeks’ time.
Dame Caroline Dinenage
My hon. Friend is 100% right to point out that people are making knee-jerk decisions because of fear about what the Chancellor will do, and they are delaying business decisions that they might otherwise have made that would have brought growth to my constituency.
My constituency lies on the south coast. The stunning Solent coastline may mean that Lee-on-the-Solent, Stubbington and the wider Gosport area is a wonderful place to retire. As I often repeat, we have the largest proportion by percentage of veterans of any place in the United Kingdom, but that requires adequate health and care provision. However, care providers, whose main cost is personnel, are struggling.
The Nuffield Trust has calculated that the national insurance rise costs England’s 18,000 independent adult social care providers £940 million, which has severe consequences for the elderly and vulnerable people who need the service. One local provider, who operates a 44-bed care home offering residential care for the frail elderly and those living with dementia, suggested that they had no choice but to pass those national insurance rises directly on to their customers. As a result, one constituent told me that he was seeing an increase of nearly 8% in his brother’s care home fees.
At the other end of the spectrum, Hopscotch nursery, which looks after 1,900 children across our local region and provides fantastic care and support, told me that the jobs tax added £1 million to its overheads—that is a 10% increase, which means a 10% fee increase is being passed on to many of my constituents. Working parents need childcare, so working parents have to pay. What is the impact? Reduced household spending and a slower economy or, even worse, a parent dropping out of work to look after the children. Perhaps that is why we have seen growth flatline, borrowing costs rise and, this week, unemployment reach its highest level since lockdown.
On 26 November, will the Chancellor demonstrate that she has learned the lesson that tax rises that hit employers’ bottom lines have serious implications for our businesses, communities and economy? I would be shocked if she has not, but we are still hearing reports that hiring costs are going to increase yet again. None of the hospitality and retail businesses in my constituency will welcome that. After all, the sector has already seen 80,000 job losses.
I am particularly concerned for young people. A recent Telegraph article said that young people were giving up on Gosport because of the lack of employment opportunities. For many, a job in hospitality or retail is the first step on the route into work. Businesses in the sectors that take on so many young people across my constituency, from adult social care and childcare to hair and beauty, are telling me that they are not taking on more staff as a result of the Chancellor’s changes to national insurance contributions. In fact, the National Hair and Beauty Federation told me that, at the current rate of decline, there would be no new apprenticeships in that sector at all within the next few years. It is not a coincidence that this year my constituency saw the number of young people between 18 and 24 years old claiming unemployment-related benefits rise by 31%. So when the Government conduct their new independent review into why this is happening, they might want to start by looking in their own backyard.
When the Chancellor is considering the vast array of tax measures at her disposal to fill the £30 billion black hole, will she consider the impact on the employment of young people of any proposals to further penalise retail and hospitality businesses? She might even consider taking a Conservative growth policy, and announce that business rates will be scrapped for high street businesses such as pubs.
It is not only businesses that support growth. Across Gosport, Lee-on-the-Solent, Stubbington and Hill Head, many people dedicate their own time to volunteering, towards supporting sports clubs, charities, health forums and community organisations. Those groups are the backbones of our communities, but like any organisation they cost money to run. The Culture, Media, and Sport Committee, which I chair, has heard how increasing costs have impacted the ability of charities and voluntary organisations to deliver the services that local people rely on and love.
We often forget that charities face employment costs too. Despite 83% of charities recording an increase in demand for their services over the past 12 months, last year’s tax hike added a combined £1.4 billion to the wage bills of more than 44,000 charities. A huge amount of pessimism is growing in the sector. A third of charities are reducing their workforce as a result of the tax rises, and a similar number think that the sector is in an unhealthy space.
The increase might be easier to shoulder were it not for the parallel drop-off in funding streams. Tax rises mean less money for charitable giving, especially if the Chancellor is going to go after pensioners with her increase in income tax. I cannot stress enough how much tax rises have hurt and will continue to hurt the charitable sector, and the unintended consequences are huge. We have less charitable giving and fewer hours volunteered, as people work longer and salary sacrifice schemes are raided, while increased costs threaten jobs at national charities such as Oxfam, Scope and the National Trust, which face the loss of £50 million through restrictions on their ability to claim gift aid.
Sports clubs do a fantastic job of alleviating pressure on charities and the NHS, but they can also reduce the burden on the Chancellor to pay out-of-work benefits. On current estimates, spending on working-age disability and incapacity benefits is expected to increase by £25 billion to more than £70 billion by the end of this Parliament, and an estimated 148.9 million working days were lost due to sickness or injury in 2024. Physical activity can play such a vital role in the prevention of so many conditions, and so many of our sports clubs lean in, but the tax rises in last year’s Budget mean that the sector is in a precarious position and unable to meet its potential. The facilities that teams use to practise, play and socialise need staff as well as revenue streams. Tax undermines the work being done by our sports clubs to increase the take-up of physical exercise, reduce the burden on the NHS and keep our communities together.
We do not yet know what the Chancellor plans to announce at the Budget in a couple of weeks’ time. Last year we saw £40 billion-worth of tax rises. It was the highest tax-raising Budget in a generation, and I know that many people in my constituency were shocked. That was not what the Government promised when they were in opposition or at the general election. We now fear that the Chancellor will go big on tax rises, despite categorically saying last year that she had wiped the slate clean and would not be coming back for more. My concern for my constituents is that they have seen no tangible benefit from last year’s Budget, just pain, and they will undoubtedly shoulder the burden whenever new measures are announced.