Budget Resolutions Debate
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Mel Stride
Main Page: Mel Stride (Conservative - Central Devon)Department Debates - View all Mel Stride's debates with the Department for Work and Pensions
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Sir Mel Stride (Central Devon) (Con)
The film “Groundhog Day” sees Phil Connors go to a place where he wakes up every morning to the same DJ playing the same song: “I Got You Babe” by Sonny and Cher. We have a very similar situation with the Chancellor. It is groundhog day, with the Chancellor destroying the economy, putting up taxes, losing her fiscal headroom, and round and round it goes. That film was said to be a romantic comedy. Well, there has been nothing comedic about the results that this Chancellor has delivered in terms of increased unemployment, diminished living standards, higher inflation and so on. Whether the public were ever enamoured with the Chancellor, I know not, but they certainly are not now—according to the polls, she is apparently the least popular Chancellor in the history of polling on that question.
Dame Harriett Baldwin (West Worcestershire) (Con)
I liked the introduction to the shadow Chancellor’s speech. Would a better film analogy perhaps be “The Nightmare Before Christmas”?
Sir Mel Stride
That is absolutely true.
Let us look at how we ended up at this sorry pass. In opposition, Labour assured the British electorate that they would not be putting up taxes left, right and centre, and when they got into power, what did they do within a few short months? They slapped taxes—£40 billion-worth—on the British people, £25 billion of that by way of national insurance increases on business alone. It is no surprise that that destroyed employment and growth.
They talked down the economy. They came up with this confected £22 billion black hole. What an irony it was—[Interruption.] There may be chuntering from those on the Front Bench, but what an irony it was that it was at the behest of the Government themselves that the Office for Budget Responsibility was invited to look into this claim and said that it would not legitimise that figure. The damage was done. The animal spirits in the economy were extinguished.
Of course, they did something else that socialists down the ages always do: they borrowed and borrowed and borrowed and spent and spent and spent until they ran out of other people’s money—
The Parliamentary Secretary to the Treasury (Torsten Bell)
Who did the borrowing?
Sir Mel Stride
The Minister is having trouble containing himself, such is the punishment that he is receiving at the moment. They borrowed all this money, and what did that do? It stoked inflation, and with inflation higher, interest rates have been higher for longer.
Sir Mel Stride
The Minister says from a sedentary position that inflation is coming down. The International Monetary Fund says that inflation will be the highest in the G7 this year and next year.
We know that with high inflation, interest rates are higher for longer. That means businesses’ borrowing costs are higher. It means that consumer sentiment is dampened. It means that the servicing cost alone on the burgeoning debt that this Government are constantly adding to is currently £100 billion a year—twice what we spend on defence. In fact, if debt servicing were a Government Department, it would be the third largest in Whitehall—not spending money on better public services, as we are often told by the Labour party, but simply paying for the profligacy of the Labour party when it comes to borrowing.
The run-up to this Budget was a farce. We have seen weeks and weeks of uncertainty generated by the Treasury, which has leaked every possible combination of tax increases and then U-turned on some of them. It has flown so many kites that it has blotted out the sun, and a huge shadow has been cast across businesses, which have pressed pause on investment and hiring. The Parliamentary Secretary to the Treasury should speak to Andy Haldane, who concludes that what I am saying is absolutely right. It has also weighed down on consumer sentiment. All this hokey-cokey around what is in the Budget has done real damage to our economy on this Government’s watch.
Sir John Hayes (South Holland and The Deepings) (Con)
My right hon. Friend did a service to the House a week or two ago when he drew what he is describing now to the attention of this Chamber. He told the Government that these leaks were not only doing damage to the economy, in the way he has just described, but were a discourtesy to this House. Many times, Madam Deputy Speaker, you and Mr Speaker have said that announcements should be made to this House first. It is fundamental to this place that what the Government announce is brought here for scrutiny, not the public realm.
Sir Mel Stride
My right hon. and gallant Friend is entirely right, as usual, and something else has also been going on. I have written to the OBR to ask Richard Hughes exactly what happened with the information that the Treasury appears to have leaked out about the forecasts during the run-up to the Budget. I say that in the knowledge that the OBR’s own guidance says that information exchanged with the Treasury during the build-up to a Budget is provided to Ministers in confidence. Why is it then that the Chancellor herself was on the airwaves before the Budget, opining on the apparent coming downgrade to productivity? I have written to the OBR to ask whether it feels that that was appropriate.
I have also written to the permanent secretary to the Treasury to ask if he is implementing an investigation into the leaks coming from the Treasury. Interestingly, he has written back to me simply to say that in the event that there are suspected leaks, of course there is an investigation. He has not quite answered my question as to whether there is an investigation being undertaken at the moment, but I will be following up with him on that matter.
What has happened in this Budget? The OBR forecasts tell a sorry story: unemployment is higher in every single year of the forecast than it was forecast to be back in the spring. Inflation is up—we have seen the latest figures from the Office for National Statistics. Labour is the party that talks about resolving poverty; it is a disgrace that food inflation in the last set of figures went up way above the headline rate, from 4.5% to 4.9%. That rise is being borne by some of the most vulnerable and some of the poorest in our society.
On growth, of course the Chancellor tells a good story. She says that the growth forecast is up compared with spring this year, but, as the Parliamentary Secretary to the Treasury will know, it is down compared with the autumn of last year, when the OBR said that growth would be 2% in this year; it is now forecast to be 1.5%. In in every subsequent year, growth is forecast to be lower than was forecast back at the time of the spring statement. That is the simple fact.
Sir Mel Stride
We will come on to why that is the case momentarily.
What has happened to borrowing? One might have thought that the Government would have learned the lesson that ever-increasing borrowing always leads to disaster, but no: there is £11 billion of additional borrowing on average in every year of the forecast. What has that done to living standards? Real household disposable income—the economists’ measure of economic wellbeing —is down in every year of the forecast compared to the forecast in the spring.
The OBR says—the Parliamentary Secretary to the Treasury will like this one—that real income growth across this forecast will be well below the average of the last decade. So this Government should not point a finger at the last one when it comes to living standards.
Rachel Taylor (North Warwickshire and Bedworth) (Lab)
Will the right hon. Gentleman give way?
Sir Mel Stride
I will in a moment. It is there in black and white in the OBR’s report. The reason for that forecast is £26 billion of additional taxation in 2029-30, and, as the Parliamentary Secretary to the Treasury will know, an additional £12 billion of tax take that will occur because of fiscal drag. Those higher inflationary numbers in the forecast are dragging ever more people into paying ever more tax.
Jim Shannon (Strangford) (DUP)
While I am not churlish about the extra money that the Labour Government have given to pensioners, the fact is that they have pushed more people beyond the threshold, meaning that pensioners will pay more tax than they have ever paid. Does the right hon. Gentleman agree that when it comes to helping people, unfortunately this Government have given with one hand and taken away with the other?
Sir Mel Stride
The hon. Gentleman is absolutely right. The income tax threshold freeze—which has been extended for three years, even though the Government briefed that it would probably just be two—means 780,000 more people paying tax for the first time, because the personal allowance will be frozen for longer, and 920,000 people going into the higher rate tax bracket. In fact, by 2029-30, around one in four workers in this country will be in the higher rate tax bracket.
The Institute for Fiscal Studies has said that the measure is a clear breach of the Labour party manifesto. The Chancellor herself accepted in the autumn Budget last year, when she said that she would not come forward with the measure, that it would hurt working people. She repeated that yesterday. It is very clear that this is a breach of the Labour party manifesto.
When it comes to young people, we hear that there will be a freeze to the student loan payment thresholds. Young people are already disproportionately impacted by the changes to national insurance, particularly the reduction in the threshold that means that lower-income earners, which include younger people, will be disproportionately impacted by those tax changes.
The Employment Rights Bill, which is coming down the line, will make it far riskier to take younger people—[Interruption.] Government Members should be careful what they wish for. The Labour party speaks a lot about those who are not in employment, education or training, of which there are about 940,000; that Bill will do nothing to improve their life chances. It will make things worse. It will make it more risky to take those people on and employ them.
Rachel Taylor
As the right hon. Gentleman seems to care so much about those who are not in education, employment or training, why did he allow 88,000 young people to become NEETs, and is he proud that when he left office, almost 1 million young people were not in any form of employment, education or training? Is this not the worst kind of hypocrisy?
Sir Mel Stride
I congratulate the hon. Lady on reading accurately from the Whips’ circular. The Opposition stand by our record—[Interruption.] Absolutely. When we were in government, we were a job-creating machine: there were 4 million more jobs under us than had been there before. When we left on the day of the general election, we had a near-record high level of employment and a near-record low level of unemployment. Unemployment is now at a five-year high—[Interruption.] The Parliamentary Secretary to the Treasury shakes his head, but it happens to be true. One of the results of the Budget for young people is that there will continue to be a lost generation of workers.
What about those who want to save, do the right thing and provide for their future in retirement? Should we not be encouraging that? What has the Budget delivered on that front? Salary sacrifice has been savaged, the savings tax has been put up, and the cash ISA has been cut. We are punishing savers. We will see the reverberating effects of those measures for many generations and many years to come.
Sir Geoffrey Clifton-Brown (North Cotswolds) (Con)
The sad fact is that youth unemployment—that is, unemployment among 16 to 24-year-olds—is at a staggering 15%. Given the national insurance hikes and the rise in the minimum wage, employers are unlikely to consider taking young people on, which could have the disastrous effect that people who graduate from university or from an apprenticeship will emerge having done a lot of work, but will not be able to get a proper job.
Sir Mel Stride
My hon. Friend is precisely right. I have set out the iniquitous impacts of the reduction of the national insurance threshold on younger people, as well as the impact that the Employment Rights Bill will have by increasing the risks of employing younger people. That is self-evident and obvious, and businesses are saying it over and over again. If an employer is put in a position where he is faced with a young person who has no career track record, and the Government’s legislation says that on day one the employee can take that employer to a tribunal for unfair dismissal—a claim that may get clogged up for two years, and for which the lawyers advising the employer will probably conclude that he should give in and pay out, even if the merits of the case do not warrant it—that is a recipe for higher youth unemployment. It is simple; it is basic economics.
Look at the taxes in the Budget placed on rental income. Do Labour Members not realise that that will lead to higher rents and fewer properties on the market? Do they not understand that if the family home is taxed, we will catch a lot of people who may be asset rich but are income poor? I suppose the solution will be to allow that liability to roll up and be paid on death—yet another death tax at the hands of this Government.
What is all this pain and taxation paying for? In large part, it is paying for more welfare—it is as simple as that. Scrapping the two-child cap is a mistake and it is unfair, because those who are paying taxes, working hard and doing the right thing have to take tough choices as to whether they can afford a larger family or not. It is quite right and proper that those who are on benefits should face similar choices.
Josh Fenton-Glynn (Calder Valley) (Lab)
I am sure the right hon. Gentleman is aware that the majority of people impacted by this uplift, and two-thirds of children in poverty, have a parent in work. The false dichotomy of those in work and out of work is simply incorrect, and as a former Minister in the Department for Work and Pensions, he should know that.
Sir Mel Stride
I have already set out the fact that this Government’s ruinous taxation policy, including in the Budget yesterday, is to load up taxes on people who are in work, many of them not high earners. The impact of that tax is the reason why the OBR has concluded that for every year of this forecast, real household disposable income—in other words, the cost of living issues people are facing—will deteriorate compared with the forecast back in spring. The Labour party is making poverty worse by making sure that work does not pay to the degree that it should.
The other point to make is about inflation. If the Government run a policy of borrowing vast amounts of money and spending half a trillion pounds over and above the plans that they inherited across this Parliament— that was added to by more than £100 billion just yesterday—we should not be surprised if inflation is the highest in the G7, or if the International Monetary Fund says that it will be the highest in the G7 next year. What does high inflation, particularly on food, do to poverty? It drives poverty up, and therein lie the answers that the Government need to think about.
There is an alternative, which is to get on top of and control Government spending and to do the responsible thing. Our golden rules is that at least half of those savings should go towards driving down the deficit and the debt, but we would then have capacity to drive down taxes as well. That is exactly what we set out at our conference: £49 billion of savings, and £23 billion of savings on welfare. Thanks to the solid commendable work of my hon. Friend the shadow Work and Pensions Secretary, we have found those savings, and it is a tragedy that the Government—[Interruption.] The Parliamentary Secretary to the Treasury says, “What are the savings?” The savings are £23 billion on welfare—[Interruption.] It is a number. As a member of the Treasury team, he should be familiar with numbers, but clearly he is not.
We will be bringing down the welfare bill, and the savings are clear. I direct the Parliamentary Secretary to the Treasury to the paper from the Centre for Social Justice, which makes it clear—[Interruption.] Well, it is rather better than the Resolution Foundation stuff that he produced, I have to say. The paper from the Centre for Social Justice makes it clear that by changing the gateways into longer-term sickness and health benefits, which we did when we were in office—[Interruption.] If the hon. Gentleman stops jabbering and starts listening, he might actually learn something, and that might be for the good of his party and this country.
When we were in office, we made reforms to the work capability assessment that, according to the OBR’s own scoring, would have seen 450,000 fewer people going on to those benefits. We were making a real difference in arresting the rise of the welfare bill. What did the Government do on coming to office? They scrapped those measures on day one. They then came forward with their own proposals—[Interruption.] I hope that when the Parliamentary Secretary to the Treasury gets to his feet later he will address this, and talk us through what happened to his Government’s attempt to control the welfare bill. It got smashed into a million pieces on the rocks of his own Back Benchers—that is what happened. That is the tragedy of much of this Budget: the economics are being driven by the internal politics of the Labour party. We have a Prime Minister and a Chancellor whose position is now so precarious that they have to bob up and down like a cork on the tide when it comes to making policy at the whims of Labour Back Benchers.
There is a certain melancholy about this Budget. It is like groundhog day; an old song, with the words seared into the collective mind. A socialist anthem for all time:
“That for he who has, then that must be taken away.
For he who has not, then to him must be given.”
That is not on the basis of any measure of fairness, as suggested in the topic for debate today, but rather on a fundamental misunderstanding of basic economics. Economics is about resources, of course, but it is also about incentives. To he who has, I say this: if you work hard we applaud you, and we will incentivise you to work harder still, recognising your contribution to the common good. To the vulnerable we say this: we are there for you. But to others who have not we say this: here is not a hand out, but the means for improvement.
For the socialist, Madam Deputy Speaker, distribution is all, and the means are never sufficiently willed. The eternal lesson—also the lesson of this Budget—is that that path leads all to be diminished. An economy laden with debt, with Government spending spiralling still and taxation touching skyward, will never burn bright. The whole will never grow. It is not enough—it will languish. That is how the dreams of millions perish. Yesterday, the lingering flickers of hope died.
