Budget Resolutions and Economic Situation

Mel Stride Excerpts

Wednesday 28th October 2026 Commons Chamber

[Sir Mel Stride (Central Devon) (Con)]

The Budget was a whirl of little things. I picked up a road map, a taskforce, a few bob scattered around various organisations, and even a few pence off a jar of gherkins. But it is a missed opportunity. It smacks of managerial incrementalism, rather than the bold and radical reforms that our economy needs if it is to meet the challenges of the future. Those challenges include intergenerational unfairness, an ageing population and—heavens above—the menace presented by Vladimir Putin.

The Budget is based on the somewhat smug false premise that somehow the economy is going broadly in the right direction. It is not. The Chancellor prayed in aid the comments of the IMF on near-term growth and fiscal consolidation. However, the reality is that that should not be the benchmark. We should not be looking at France, which has had so much civil, economic and political unrest that it is heading towards a potential bond crisis. We should be asking a fundamental question: what level of growth does the economy need to address the challenges that I have just set out? The answer is that we need to at least get back to the growth trends that we had before the global financial crisis—at least 2% to 3% per year. We are a very long way from that.

The Chancellor lauded the fact that growth has been revised up for this year; he neglected to mention that from next year the position is very different indeed. He made no attempt to acknowledge the mistakes that this Government have made since they came to office. Huge mistakes by his predecessor, such as massive tax increases predominantly on businesses, have had the effect of lowering investment, raising unemployment, reducing output, and—because taxes are often passed on in higher prices—pushing up the rate of inflation.

We are now in a position where, if my reading of the OBR document is correct, due to the inflationary effect that this Government have in part induced, fiscal drag alone will result in more than 200,000 average days’ work being destroyed. We are left with almost the highest level of unemployment in five years, high and sticky inflation, high interest rates, massive servicing costs on our national debt and huge levels of borrowing.

In its document, the OBR sets out what is happening to real household disposable income across the forecast. If my reading is correct, it is lower now across every year within this set of forecasts than in the forecasts back in March. In other words, hard-working people up and down the country are getting poorer as a direct result of the actions taken by this Government.

[Graham Stuart]

I received a card from the Joseph Rowntree Foundation yesterday—I do not know whether my right hon. Friend also received one—suggesting that every family in Beverley and Holderness will be at least £440 a year worse off at the end of this Parliament. But today, on top of the points that he has already made, we are going to see not only disposable income being constrained, but debt going up in each of the next five years by more than was previously suggested.

[Sir Mel Stride]

My right hon. Friend is absolutely right.

That brings me to another point, which is that the Chancellor has taken a conscious decision to reduce the headroom, in the primary target, from around £24 billion to £15 billion. That is a mistake. If he had taken the radical measures necessary to get on top of public spending, particularly the welfare bill, he could have increased the headroom. He talks about the risks ahead—that is the very reason why we have the buffer of that headroom. If we have low headroom, we end up paying a premium on the debt servicing costs to which my right hon. Friend just referred.

The average headroom that Chancellors have come forward with since the instigation of the OBR runs at about 1.4% of GDP. In today’s terms, that would be about £40 billion of headroom. We are now down to £15 billion. Members across the House should therefore not be surprised if the Chancellor comes back at a future date and tells us, just as was the case with his predecessor, that the headroom has entirely evaporated, once again, because of reasons beyond his control. This is a mañana Budget. This is a Budget kicks the can down the road.

When the Chancellor resigned as Secretary of State for Defence, he made it very clear that his resignation from Government was nothing to do with the defenestration of the previous Prime Minister, and was instead a matter of principle: he did not believe that our country was going to be adequately protected as a result of not coming up with the money to fund the 3% of GDP on defence by 2030. He now has his hands on the levers, and he has failed to do even that on this occasion.

[Alex Ballinger (Halesowen) (Lab)]

The right hon. Gentleman will remember that, in his statement, the Chancellor he did commit to reaching 3% of GDP by 2030. Can the right hon. Gentleman say when the Conservatives reached 2.7% of GDP on defence?

[Sir Mel Stride]

We will have to look very closely at the wording that the Chancellor used, because my recollection is that he said that the Government would be committed to the NATO target of 3.5% by 2035, with a target to reach 3% by the end of 2030. The word “target” is not the same as the word “commitment” when it comes to reaching that particular figure. I recommend that the hon. Gentleman looks closely at that.

When it comes to this Chancellor and his principles, I am reminded of the late Groucho Marx, who said,

“Those are my principles, and if you don’t like them…well, I have others.”

It seems to me that that is where we are on this particular matter.

The Leader of the Opposition was perfectly correct in identifying the unrealistic expectations and assumptions contained within the numbers the OBR has had to work with. While the OBR sets out its assessment of what various interventions will mean for growth, inflation and so on, it has to take at face value the spending envelope that the Government come forward with, which was inherited from the Chancellor’s predecessor. As we know, that spending envelope sees a very strong squeeze in spending right at the end of the forecast period. In fact, if health spending increases in the spending review next year by 2.7% in real terms, as it did in the last review, and the 3% defence target is met, there will be a black hole of £20 billion in the figures that the Chancellor has just presented.

We have seen the march of the PuFins—public financial institutions—in the Budget measures that have just been announced. We have seen £20.4 billion placed in the National Wealth Fund. Make no mistake: it should be clearly understood that this is additional borrowing. It does not matter whether it falls within the current definition of debt—the public sector net financial liabilities definition—and would have fallen outside the old definition of public sector net debt; the reality is that it is more money that this Government are borrowing.

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

On the subject of a sovereign wealth fund, would the right hon. Gentleman comment on the fact that under the Tories we sold off our national treasures in North sea oil and gas? We should compare that with Norway, which put those assets into a sovereign wealth fund and now has £1.7 trillion available for public services, while we do not have anything. That was an absolutely catastrophic mistake for our country.

[Sir Mel Stride]

The hon. Gentleman should join us on the Conservative Benches, because we are the party that is standing four-square behind North sea oil and gas extraction. We do that for a very important economic reason.

It is right that the national minimum wage not going up by as much as it might otherwise have done will help business. The Leader of the Opposition welcomed that. We have also seen a lowering of business rates for some businesses. The mileage changes with HMRC will no doubt be slightly helpful, particularly for the self-employed.

However, the Chancellor also came forward with a reduction in the business asset disposal relief—he has halved it, making it less of an incentive for people to set up businesses. I looked at the figures in the Red Book, and it seems that there are £5 billion-worth of additional taxes on businesses across this forecast—an increase of £2 billion in additional taxes across inward investment into our economy.

In conclusion, the lights are flashing on the UK economy. We have huge challenges ahead, and it is not good enough simply to rely on saying that we can be steady as we go.

[George Freeman (Mid Norfolk) (Con)]

Like me, my right hon. Friend represents a very rural constituency. Was he shocked to hear the lack of any relief for rural areas, which are being hammered by disproportionately high energy costs? The Treasury’s own figures show that the risk of fuel poverty in rural areas is 150% higher than in cities. We heard about money for cities, but nothing for our rural areas and rural businesses, which are being hammered, and where we are seeing stagflation and inflation and taxes and interest rates going up. There was nothing for rural areas.

[Sir Mel Stride]

Absolutely. My hon. Friend is absolutely right. The absence of anything about farmers in the statement was palpable. One might think that the Chancellor might at least have said something about the farm tax, which is still hanging around the necks of our farmers up and down the country.

[Noah Law (St Austell and Newquay) (Lab)]

Will the right hon. Gentleman give way?

[Sir Mel Stride]

I am just concluding now.

When Members hear the Chancellor talking about being steady as we go, they should read into that complacency. When we hear him say that we need time to get things right, we should read into that kicking the can down the road. We face huge challenges as a country, and this Budget has been grossly complacent. It is a lost opportunity. It has failed our economy, and it has failed the British people.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Peter Kyle.