Finance Bill

Mel Stride Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[Mel Stride (Central Devon) (Con)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give the Finance Bill a Second Reading because it derives from the 2024 Autumn Budget which will lead to jobs being lost, curtailed investment and prices being raised; because the Finance Bill constitutes an assault on business by increasing taxes on investment; because it will reduce the competitiveness of the United Kingdom’s tax regime; because it levies the first ever tax on educational choice and will increase pressure on state schools; because it will drive up rents by increasing tax on homeownership; because it will substantially increase the size of the state without a sustainable plan to fund it; and because it will reduce living standards, increase borrowing and debt, drive up inflation and interest rates, with the result that the OBR growth forecast for the Autumn Budget is lower than that accompanying the Spring Budget of the last Government.”

This Finance Bill, this Budget, are a disgrace. They are a disgrace because they are built on a deceit—a deceit that was propagated by the Labour party during the last general election. It told the British people that they need not worry about taxes being raised left, right and centre, yet what have we discovered? The figures of the Office for Budget Responsibility clearly show that this country is now heading to its highest tax burden in the history of our nation.

During the general election, we were also told by the Labour party that it had no intention of increasing national insurance. In fact, it stated exactly that in the manifesto on which the now Government stood. It broke that commitment. Do not take my word for it; Paul Johnson of the Institute for Fiscal Studies says exactly that.

[Dr Evans]

Is it not the case that the manifesto said that there would be no rise in national insurance, but when Ministers went to defend this policy, they said, “not on working people”, but then could not define working people? Now the language has slipped to “payslips”. Is the shadow Minister aware of this translation? I am pretty sure that the “payslip” was not mentioned in the manifesto.

[Mel Stride]

My hon. Friend makes an important and valid point. As he says, Labour is now claiming that there will be no incidence of this tax increase on working people, although it seems to have a problem defining exactly what a working person is. None the less, try telling that to those people who will see their wages depressed as a consequence of this measure. Try telling that to the 50,000 full-time equivalents who the OBR says will lose their jobs as a consequence of this measure. Try telling that to the young people up and down our country who, because it is not just an increase in the rate but also an approximate halving of the threshold, will be disproportionately affected.

Labour also reassured farmers. The then shadow Secretary of State for the Department for Environment, Food and Rural Affairs—the now Secretary of State—reassured farmers. He went to the National Farmers Union and said that nothing would be done on inheritance tax and the annual percentage rate. And on that basis, the NFU told its members that, at least on that measure, there was nothing to fear from a future Labour Government. How wrong it was. Only last week, we saw, tens of thousands of farmers, in their dignified way, coming up to the very gates of our democracy to ask a simple question of the Labour Government: “Why did you lie to us?” That is the nub of it. The measure will see the break-up of our farms and it will do nothing for food security.

[Dave Doogan]

Does the shadow Minister agree that the Government could not conceivably have been so ignorant about British agriculture that they did not know that inheriting the family farm is no form of enrichment whatsoever? So introducing this change to APR is just pure bad government.

[Mel Stride]

The hon. Gentleman is absolutely right. It demonstrates that this Government do not understand farming and do not understand the countryside. There are 100 Labour Members who represent rural constituencies. I will not guess how many there will be after the next general election, but some number fewer than 100, I suspect.

Perhaps the cruellest deception of all was of our pensioners, who were reassured that there would not be any means-testing of the winter fuel payment, yet what happened? 10 million pensioners are to face a cut. Before somebody on the Government Benches stands up and tells us that some of those pensioners can afford it, I say that many of them simply cannot. Of those under the poverty line, two thirds will actually lose these benefits.

[Dr Evans]

While the Prime Minister was out of the country on the 19th, something else was snuck out: a letter from the Department for Work and Pensions, explaining that, at the point of reaching its decision on this, it knew from its own internal analysis that it would impoverish 100,000 pensioners into relative poverty and 50,000 pensioners into absolute poverty. This information was asked for time and again in readiness for a debate in this House. Is it not right that information relevant to these measures should have been available in time for a debate?

[Mel Stride]

My hon. Friend is absolutely right. It is disgraceful that Labour waited until the farmers were at the gates of Westminster to sneak out that impact assessment, which showed that, by 2027, 100,000 more pensioners would be in relative poverty, after housing costs, than is the case today. Indeed, the analysis by the Labour party back in 2017, when it was against this proposal, was that up to 4,000 pensioners would prematurely die in the cold as a consequence of this measure. Now, Madam Deputy Speaker, when you deal in deceit, you need a pretext for so doing. And a further deceit has been brought forward, and it was raised again at the Dispatch Box this afternoon, which is the £22 billion black hole. Where is it?

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[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Before the shadow Minister responds, may I caution him against using the word “deceit” in the Chamber? No doubt he will now want to respond to the intervention.

[Mel Stride]

Madam Deputy Speaker, I will of course be guided by you on that matter. On the hon. Gentleman’s point, there is no doubt that, as we went into the last general election, the analysis of the manifestos of the three major parties showed that Labour’s manifesto would have by far the greatest increase on the tax burden. What Labour has done is to break its manifesto and go still further to take us, as the OBR has said, to what will be the highest tax burden in the history of our country. It is as simple as that.

[Phil Brickell (Bolton West) (Lab)]

I thank the right hon. Member for giving way. I did want to indulge him, but as he has now mentioned the OBR three times during the course of his speech, I wonder whether he would share with the House what conversations he had with former Prime Minister Liz Truss about respecting the OBR before she crashed the economy and sent inflation to 11%?

[Mel Stride]

As Chair of the Treasury Committee at the time, I had quite a lot to say about it, and I would point the hon. Gentleman to the public record in that regard.

Let me return to Labour’s claims of a vast £22 billion black hole, which one senses can even be seen from the moon. When the OBR looked at this matter, it concluded that the fiscal pressure was less than half that figure. It also made the point that, had it been known at that time, there would have been discussions between Treasury officials and the OBR, and that number might well have been smaller still. And it is equally the case that Governments manage down in-year fiscal pressures as a matter of course. To use another astronomer’s analogy, this is not so much a black hole as a red dwarf. [Interruption.] Or a red herring—even better. This is about not just misleading the British people, but economic incompetence.

The Government have set great store by growth. They say that they will generate the fastest consistently, sustainably growing economy in the G7—I see Labour Members nodding their heads. How is that going? Our friends at the OBR clearly forecast a lower level of growth following the Budget than they had forecast based on our Budget the preceding spring. That is a direct consequence of the kind of growth-destroying policies in which the Government are engaged. What happened when the Office for National Statistics came out with its figures recently for the third quarter of this year? [Interruption.]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. The hon. Member for Swansea West (Torsten Bell) has twice used the word “you” when heckling. I will not let him off in the future.

[Mel Stride]

I take it as a familiar mark of respect from the hon. Gentleman.

The fact of the matter is that the ONS’s figures for the third quarter of this year show growth of 0.1%. That is one seventh of what has been achieved in the United States. In September, the third month of the quarter, there was negative growth. The reason for that is very clear. When this Government came to office, the first thing that they did was talk down the economy, and talk about black holes and what a terrible mess everything was in, as cover for what they intended to do all along. That had an impact on purchasing managers’ index surveys. We can see the slump in business confidence in the data, and the Government are now reaping the whirlwind. We have now had a Budget that will do even more damage to growth.

What will happen to inflation? Let us go back to our friends at the OBR. In every single year of its forecast, inflation is higher than in every single year of the forecast based on our last Budget back in the spring—a fiscal splurge up front that will translate into higher prices and higher interest rates for longer, meaning higher mortgage rates. Before Labour Members start jumping up and down at the M-word, the Government now own mortgage interest rates, and they are being affected in the wrong direction as a result of their policies. What about living standards? They are down and flatlining. The Joseph Rowntree Foundation says that by October 2029 the average family will be £770 worse off in real terms than they are today.

[Wendy Morton (Aldridge-Brownhills) (Con)]

On the Government’s watch.

[Mel Stride]

On the Government’s watch. A number of measures in the Bill will further weigh on growth. Capital gains tax will go up, destroying wealth creation. The energy profits levy will destroy jobs, making us less secure when it comes to energy. Stamp duty will go up, and that is one of the worst taxes. The hon. Member for Swansea West (Torsten Bell) will accept that, as he shares that view—I think he makes the point in his recent book. The level of activity in the housing market will be dampened, people will be discouraged from downsizing, which will put pressure on the housing supply, and labour mobility—an important component of growth—will be impacted.

[Graham Stuart]

My right hon. Friend is painting an accurate but bleak picture, as reflected by the IFS, the OBR and all the independent analysts of what the impact of the Budget will be. However, I put it to him that he is understating the weakness that the Budget will create for this country. Look back at the last 14 years. We were recovering from the financial crash. We had the pandemic, Brexit and the energy crisis. We are unlikely to make it to the end of this decade without some form of further shock. Is it not central to the weakness of the Budget that it makes this country so much more vulnerable to what we do not yet know is coming?

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[Mel Stride]

My right hon. Friend makes a perceptive point, to which I will come momentarily, but first let me deal with VAT on private schools. We have already heard about the displacement effect—the behavioural effect—and the thousands of pupils who will have their education disrupted and the impact on their families, but does not this measure tell us all we need to know about socialism? Those who stretch to try to make ends meet to send their children to those schools are to be denied. Their aspiration is to be sacrificed on the altar of envy. Is it not as simple as that?

My right hon. Friend the Member for Beverley and Holderness (Graham Stuart) is right: the Budget will not create strong foundations for the future; it will create a vulnerable and brittle economy. The Chancellor has very little headroom against her fiscal targets. Against the stability target, because the Government have talked down the economy and gilt rates have responded in turn, it is conceivable that almost all that headroom has already disappeared. I will prophesy that, without doubt, perhaps if the forecasts turn in the wrong direction, or the pressure on departmental spending over the next two years becomes difficult for a profligate Labour Government, or because of some external factor, as my right hon. Friend suggested—maybe tariffs from Donald Trump’s America, or if his deficit-funded tax cuts lead to higher bond yields and higher interest rates here—I almost guarantee the House that, however it occurs, this Government will come back for more in due course.

[Sir Desmond Swayne (New Forest West) (Con)]

May I prophesy too?

[Mel Stride]

I will let my right hon. and gallant Friend prophesy.

[Sir Desmond Swayne]

To be fair to the Prime Minister, he made it absolutely clear that things would have to get worse. The difficulty is—this is my prophecy, if you like—that there is no prospect of them getting better thereafter.

[Mel Stride]

That is an extremely astute observation. The prophecy is that things will get tougher further down the line. It will then be the case that this Government took decisions that left us in a weak and vulnerable position to withstand them. Why has this happened? The Labour party has very little business experience. Very few Members on the Government Front Bench have started up a business or grown a company in any significant manner.

[Jim Dickson (Dartford) (Lab)]

Will the right hon. Gentleman give way?

[Mel Stride]

I will give way to the hon. Gentleman. Perhaps he is an example of somebody who has done just that.

[Jim Dickson]

If the right hon. Gentleman and his colleagues are against all the revenue-raising measures in the Budget, perhaps he could explain which of the many investments in the health service, roads, the justice system and schools he and his colleagues would cut?

[Mel Stride]

It is not a binary decision like that. The hon. Gentleman is clever enough—[Interruption.] I am sorry, but I will not disrespect him by claiming that he truly believes that. Had the Government brought forward a Budget that would have grown the economy, as the Conservatives would have done, the Government would have more money. Had Labour grasped the nettle of welfare reform, as we did when we were in office, and we had very clear plans in our manifesto for a saving of £12 billion a year, the Government would not have to go around caning companies, beating up on pensioners and so on as an alternative. There are better ways of doing things, and we had a much better way.

[Dr Murrison]

Earlier this week, the Chancellor of the Exchequer said in her conversation with the Confederation of British Industry, which did not go terribly well, that her tax-raising days are over. Yet significantly, the Exchequer Secretary to the Treasury failed to reiterate that assertion. Does he believe her?

[Mel Stride]

My right hon. Friend raises an interesting point because the Chancellor did say at the CBI conference, when asked, that she would not raise taxes in the future, but this very afternoon, at the Dispatch Box, the Prime Minister appeared to resile from that. We now do not even have clarity on that vital point.

Surely the point is that the Chancellor is no economist, no matter how much puff one applies to try to disguise the fact. I thought I would take a leaf out of her book, even though that page was apparently written by somebody else. I can inform the House that I am an economist. Speaking as a former Governor of the Bank of England and president of the International Monetary Fund, and having run the World Bank and the World Trade Organisation at the same time—yes, for 10 years—I have as much experience as our Chancellor. That flight of fancy is, of course, all mine, but the inspiration came from the Government Benches.

This is a Finance Bill of broken promises and breathtaking incompetence—a Finance Bill that represents a present danger to the future of our economy. Was there ever a Bill more injurious to what we Conservatives love—to our pensioners, our farmers, our businesses, the poor, the vulnerable and, yes, working men and women right up and down our country? They say that astrologers are there to make economists look good. Well, they cannot make this lot look good. It is written in the stars—it is a story foretold—that unchecked, this Budget and this Finance Bill would take Britain down. That is why we will never tire of the trials of opposition, and why we will be the party that stands up for working men and women across our country, and fights this Government.

[Madam Deputy Speaker (Caroline Nokes)]

To make her maiden speech, I call Samantha Niblett.

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[Mel Stride]

You’re special.

[James Wild]

Thank you. We all appreciated the kind words from the hon. Member for South Derbyshire about Heather Wheeler’s work. I am sure that the hon. Lady will continue that manufacturing event with Rolls-Royce and the other world-class businesses in her constituency. I know from personal experience that she will enjoy taking part in the armed forces parliamentary scheme with the RAF.

There was a familiar theme in the speeches of other Government Members, which the Whips will have been pleased to hear, with lots about fixing the foundations and black holes, although the hon. Member for Macclesfield (Tim Roca)—I cannot see him at the moment—did concede that it was not a perfect Budget. Perhaps he has been taken away by the Whips to reflect.

I turn to Opposition Members’ speeches. I congratulate my hon. Friend the Member for Bognor Regis and Littlehampton (Alison Griffiths), who spoke powerfully about the impact of the Bill and the damaging impact of the Budget on high streets, hospitality and family firms in her constituency. My right hon. Friend the Member for Beverley and Holderness (Graham Stuart), in a masterly contribution, took us back in his time machine to the time when cast-iron promises were made. He focused on what is happening in reality and the importance of enterprise. He also highlighted that economic shocks may come, as they have done in the last few years, for example through covid and energy prices, and that the Chancellor may have already boxed herself in.

My right hon. Friend the Member for East Hampshire (Damian Hinds) displayed his considerable knowledge as a former Education Secretary. He talked about caring for 100% of pupils, and about the damaging impact that the education tax will have. There will be serious consequences for smaller schools, religious schools and parents and pupils involved with them. That theme was also drawn on by my hon. Friend the Member for Solihull West and Shirley (Dr Shastri-Hurst), who talked about his constituents and put us in the footsteps of the pupils who will be affected, as well as their parents.

My hon. Friend the Member for Gordon and Buchan (Harriet Cross) returned to her consistent theme of the real-world consequences for energy firms of the energy profits tax, the lost revenue, and the self-defeating nature of that measure. Finally, my hon. Friend and neighbour the Member for Broadland and Fakenham (Jerome Mayhew) focused on young people’s employment prospects, which will take a hit as a result of the Bill.

There were two very different takes in the debate. Unlike some, I would not claim to be an economist, but the OBR is full of them, and its verdict on the Budget and the Finance Bill is clear: they mean lower growth, higher inflation and higher borrowing. As the Shadow Chancellor, my right hon. Friend the Member for Central Devon (Mel Stride), put it, the British people put their trust in Labour to stay true to its promises. What did they get in response? A Finance Bill that is stuffed full of tax increases and breaks trust with the British people. It has £40 billion of annual tax rises. It is the biggest tax-raising Budget in modern history, and it is working families and businesses who will pay the price.

As we heard, the Government have said that their priority is growth. We will not let them forget that they inherited an economy growing at the fastest rate in the G7. Following the Budget, the OBR has downgraded its growth forecasts for the period by 0.7%. Inflation, which went up to 2.3% last week, is now expected to be higher in every year of the forecast period. The tax burden will increase to the highest level since records began. Borrowing will increase by an additional £140 billion over the Parliament. It is little wonder that business confidence is plummeting. The Labour party has consistently talked our economy down. The consequences are clear. The latest purchasing manager’s index output data shows that private sector activity has shrunk for the first time in more than a year. Businesses are rightly blaming the Chancellor and this anti-aspiration, anti-enterprise Government.

Let me turn to some of the parts of this broken promises Budget that were covered in the debate. First, the Bill deliberately undermines incentives for investors, entrepreneurs and people willing to take a risk and back enterprise. It hikes the main and lower rates of capital gains tax. The Treasury states that this measure alone will hit over a quarter of a million people, who will pay more tax as a result. It puts up tax rates on investor relief. It is little wonder that experts have warned that this Government risk stymieing the very investment that they seek to stimulate.

Secondly, the Bill continues the fundamentalism of the Government’s energy policy, which fails to put our energy security first. It will increase the energy profits levy to 38%, bringing the headline rate on oil and gas activities to 78%. The Exchequer Secretary could not name a country that had a higher rate. I am sure that Denis Healey would approve. It extends the rate by a year and removes investment allowances. On the real-world consequences, Offshore Energies UK has said that the hike will choke off investment and put 35,000 jobs at risk. We should be maximising our home-grown energy, not undermining domestic production and relying on imports that have a higher carbon footprint.

Having highlighted the Government’s broken promises, I turn to a single promise that they are actually keeping, unfortunately—the education tax. For some who do not seem to understand, the Labour party is not ending a relief, but bringing in a new tax. It is a vindictive tax, being imposed partway through the academic year, deliberately designed to disrupt the education of thousands of children. Putting VAT on independent schools will particularly hurt parents on modest incomes who choose to save and send their children to a school that they think is best for them. More than 100,000 children with special needs who are without an education, health and care plan, and are in independent schools, will be hit by this charge—something that Government Members who are not in their place at the moment did not seem to understand, but really should. This is an attack on aspiration, pure and simple, and we oppose it.

Other hon. Members have referred to the family farm tax. Next week, every Member will have the opportunity to vote and show whether they stand with their farmers or with Labour’s family farm tax, which will do so much damage to our countryside and food security.

As I mentioned, the consistent theme in this debate from Government Members has been blaming a fantasy black hole for this tax-increasing Bill. Those claims were thoroughly debunked by the OBR, and by the shadow Chancellor in his opening remarks. Before the election, the Chancellor said that she would not pretend to have not known the state of public finances in order to justify tax rises. Then she did just that. Let us hope that she meant what she said to the Treasury Committee on 6 November:

“We have now set the envelope for spending for this Parliament, and we are not going to be coming back with more tax increases or, indeed, with more borrowing.”

There we have it. Read her lips: no more tax increases. That was the commitment, not to the Confederation of British Industry, but to this House; but at Prime Minister’s questions today, the Prime Minister failed to repeat that pledge. He hung the Chancellor out to dry. If the Chancellor breaks that promise, how can she credibly continue in post?

Labour inherited the fastest growing economy in the G7, inflation at target, unemployment halved and the deficit halved. Labour Members may not like it, but it is true. [Interruption.] It is absolutely true. The measures in the Bill do not boost growth but target working people, pupils and parents, small businesses, and the wealth creators we need to grow the economy. Many Government Members have loyally clung to the idea that the Government are fixing the foundations of the economy. Not many would agree—not Tesco, Lidl or the other retailers who have warned that the £25-billion-a-year jobs tax will mean job losses and people’s weekly food shop going up; not the two thirds of firms who say that they will scale back on taking on new people; not the pubs, bars, restaurants and hospitality sector, which is hit by an extra £1 billion of costs.

The Prime Minister has found someone who agrees with him, although he did have to go to Rio to do so. However, while President Xi is so well practised in parroting meaningless slogans that he could be a Labour MP, the British public and British businesses are not buying it. They know that this Government do not back enterprise and do not keep their promises. The difference could not be clearer: we stand with working people, people taking a risk to start businesses and take people on, and people investing in companies. Unlike the Labour party, we are on their side. I urge Members to support our amendment tonight.