Budget Resolutions

Michael Shanks Excerpts

Thursday 7th March 2024 Commons Chamber

[Mel Stride]

It is an entirely disingenuous statement to say that there is any such unfunded commitment. The only unfunded commitment in recent times is the £28 billion that the Labour party came forward with; the Leader of the Opposition called it something along the lines of “absolutely critical”, only for the shadow Chancellor to U-turn on it not long afterwards.

Let me turn to the comments that the right hon. Member for Leeds West made about pensioners. She neglects to point out that we have stood by the triple lock. Since 2010, there have been 200,000 fewer pensioners in absolute poverty after housing costs. That is a result of this Government making the protection of our pensioners a key priority over many years. Among many things that have been erased from her memory, she has forgotten that on her watch, when Gordon Brown was Chancellor, there was the 75p increase in pensions.

[Michael Shanks (Rutherglen and Hamilton West) (Lab)]

This morning the Chancellor appeared to suggest that income tax and national insurance contributions will be merged as part of his commitment yesterday. As national insurance is not currently levied on some forms of income, will the Secretary of State confirm to the House how much extra tax pensioners will pay as a result of the Chancellor’s policy decisions?

[Mel Stride]

There is no immediate Government approach to merging income tax and national insurance, and I rather put that in the category of those comments about the apparent commitment of £46 billion, although I think the hon. Member for Bethnal Green and Bow nudged it up in a typical Labour way to £48 billion a moment ago.

Let me turn to the remarks that the right hon. Member for Leeds West made about growth. As she knows, we have had a technical recession of two quarters of negative growth—one of which was the princely amount of 0.1%—and most of the purchasing managers index data makes it clear that the economy is on a very different path. Indeed, to return to the comments of the hon. Member for Bethnal Green and Bow, the OBR makes it clear that over the period of the forecast, there will be reasonable and decent growth—greater than that of France, Italy and Germany. That is on the back of exactly the kind of growth record that this Government have had since 2010.

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[Peter Grant (Glenrothes) (SNP)]

I thought it was interesting when the topics for these Budget debates were set, because those topics are what the Government want us to believe the Budget is all about. There is no mention of public services, the cost of living or climate change and net zero for any of the three days. We are talking about rewarding work, and I want to talk about rewarding not only those currently in work, but those who will be and have previously been in the workforce, because all three groups have been shamefully failed in this Budget.

For me, rewarding works means paying everybody a living wage—not a minimum wage. The Minister should be listening, but he does not particularly care about this. A wage that is not enough to live on is not a living wage—it is as simple as that. There is nothing in the Budget about banning exploitative zero-hours contacts. There is nothing, obviously, about repealing the shameful anti-strike legislation that the Government are imposing on a great number of public sector workers.

I wondered whether it was just that the topics chosen were not that good, and perhaps the Chancellor said more about those subjects in his speech. I had a look at the speech on the Treasury website—all 7,260-odd words of it. The word “poverty” is mentioned once, but “low pay” and “zero-hours” not at all. Net zero gets a mention, because the Chancellor mentioned his colleague, the Secretary of State for Energy Security and Net Zero, and zero emissions is mentioned once. Climate has not a single mention and Brexit—not surprisingly, as we are not allowed to talk about it any more—has no mention.

By necessity, some of my remarks have to be about what is not in the Budget, as much as what is. This Government are heading to become the worst Government in history for falling living standards. The Institute for Fiscal Studies has told us that it is unlikely that real household incomes will be any higher at the end of this Parliament than they were at the beginning. How can we call it economic growth when people in their real lives, in real houses with real jobs, do not notice any improvement in their standard of living over an entire five years?

Tax as a percentage of GDP will soon be the highest it has ever been. We have seen a £66 billion increase in the tax burden in this Parliament alone, and far too often it is people on lower incomes who pick up the biggest share. As has been mentioned, the six-year freeze on tax thresholds will cost taxpayers an extra £30 billion in stealth tax by 2027-28, even allowing for the impact of the 2p national insurance cut. The UK’s interest payments as a percentage of national income are about to become the highest for 70 years. If someone is an international banker, the rewards from work can be rich indeed, but they are not for someone trying to scrape a living in any kind of normal job.

This Chancellor’s time in office has seen the longest unbroken run of declining living standards since records began. The Government talk about rewarding work, but it is quite the opposite. Income inequalities in the United Kingdom are higher than in any other large European economy. What has the United Kingdom done that they did not, and what has everyone else done that the United Kingdom did not do? Germany, for example, had a covid pandemic, just as we did. Germany is impacted by the war in Ukraine just as much as we are—possibly more so, because it is physically closer to it. Middle-income earners in the United Kingdom are 20% poorer than their equivalents in Germany. I wonder what it could be that affected the economy and living standards in the United Kingdom that has not had the same impact on Germany, France, Italy and other EU member states? We are not allowed to say the B-word, so I will leave the Chancellor to work it out for himself.

As the Child Poverty Action Group has pointed out, child poverty is not inevitable, but a choice. It has said:

“With the right policy changes we can substantially reduce the extent and depth of child poverty across the country.”

Members do not have to take its word for what might happen if policies were changed; they need only look to what has happened in Scotland, despite the fact that the Scottish Government have substantially fewer fiscal, monetary and legislative powers than this place. Scotland now has the “game-changing” Scottish child payment—that is not our word, but that of the Child Poverty Action Group. We have the child winter heating payment, supporting the most vulnerable young people with disabilities to cope with their fuel bills. We have free school meals for everybody in primary 1 to 5 and for eligible children throughout their time in school.

[Michael Shanks]

The hon. Member mentioned the Child Poverty Action Group. After the Scottish Government’s Budget, it said that it was “bitterly” disappointed and that, as it stands, the Budget will at best stall progress, hampering progress towards reducing child poverty. Does the hon. Member think his own Government are reducing child poverty as much as they could be?

[Peter Grant]

I will come on to that in a minute. The Scottish Government are perhaps not reducing child poverty as much as they could, because nobody is ever perfect, but they are doing a blooming sight more than any Government down here ever will. As I said, we have free school meals for everybody in the first five years of primary school and for a great many children right up until they leave school. We have followed the example of our Scandinavian friends by welcoming every newborn baby in Scotland with a baby box containing the essentials for the first six months of their life. That is not just about practical physical help; it is also about the difference it makes to a new mum. It simply says to them, “We think your new baby is somebody special. Your baby is welcome as a new citizen of our country.” We have more than 1,140 hours a year of early learning and childcare for every three-year-old and four-year-old, and all eligible two-year-olds.

--- Later in debate ---

[Michael Shanks (Rutherglen and Hamilton West) (Lab)]

It is a pleasure to follow a fellow Scot, my hon. Friend the Member for Stockton North (Alex Cunningham). A decade ago George Osborne—remember him?—stood in this place to deliver the first Tory Budget. He spoke about a Budget that recognised

“the hard work…of the British people”

and set out a plan for Britain

“to keep moving us from a low wage, high tax…economy”.—[Official Report, 8 July 2015; Vol. 598, c. 321.]

A decade later, after 14 years of Conservative Government, where are we? In a recession, whether the Chancellor calls it “technical” or otherwise, and with taxes higher than at any point in the past 70 years. We have had 20 years of lost pay growth, with the Resolution Foundation confirming that the average wage will not regain its 2008 level until 2026. Shamefully, this is the first Parliament since records began to see living standards fall—the most significant year-on-year decline in living standards since the 1950s. That is the reality of yesterday’s Budget— a record of economic incompetence and squandered opportunity.

Will the public feel any change in their circumstances after their pockets have been raided by 25 tax increases, and with mortgages soaring, food bills continuing to go up and up, and wages stagnating? Who on earth will feel any better off in those circumstances? Given the lacklustre response from those on the Government Benches during the Budget yesterday and in today’s debate—I have enjoyed it enormously, but there have been more contributions criticising the Budget than supporting it—it seems that they are not particularly impressed by it either, and no wonder. Less than 24 hours after the Chancellor stood up, the chaos has continued. We had a floated promise of a £46 billion cut to national insurance without a single thought given to how it would be funded, although I now hear that has been downgraded to the Chancellor expressing an ambition, which apparently is different. It is perhaps how Liz Truss expressed an ambition to crash the economy not that long ago.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I did say not to mention the name of current sitting Members.

[Michael Shanks]

I forgot she was a sitting Member, Mr Deputy Speaker; I apologise.

The Government are putting off any long-term spending plans to the next Government to avoid facing up to the reality that public services are crumbling. Shamefully, they are not putting aside a penny for the victims of the contaminated blood scandal or the victims of the Post Office scandal.

Minutes after the Chancellor sat down, we had the spectacle of the Under-Secretary of State for Energy Security and Net Zero, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) refusing to say whether he would back his own Government’s plan to expand the windfall tax on the oil and gas industry. I am not sure if he is still on resignation watch or whether his chat with the Chancellor has moved him back to a stronger position, but yesterday, the Tories in the Scottish Parliament had a debate denouncing expanding the windfall tax, and the leader of the Scottish Conservatives, the hon. Member for Moray (Douglas Ross) has said he will vote against it. This morning, the Chancellor said it would present a little local difficulty. This is utter chaos, less than a day after he delivered the Budget. With any other Government, at any other time, they would be the laughing stock of the country, but so low have our expectations fallen that it is not even getting the attention it should.

We should welcome the Government’s conversion to Labour’s economic plans, following where Labour has led on the non-dom tax loophole or expanding the windfall tax. Now it is only the SNP that is out on a limb, saying that it does not support increasing a tax on the £1 billion a week profits from oil and gas, while happily putting up taxes for those earning £29,000 a year. In SNP Scotland, teachers, plumbers, police officers and nurses pay more; oil and gas giants do not.

[Peter Grant]

The hon. Member mentions the specific case of nurses. His colleagues were reluctant to acknowledge the fact that nurses in Scotland start off with much higher pay than those in England. I did some checks while others were speaking. A newly qualified ward sister in Scotland on 2023-24 rates, even allowing for slightly higher income tax on part of their earnings, is taking home £31,884 a year. His or her equivalent in England is taking home £30,960. Why does the hon. Gentleman want nurses in Scotland to earn £900 less when moving to England?

[Michael Shanks]

I know I am in a different party to the hon. Member, but I am in the same country, so it concerns me how nurses in Scotland are treated, and they are paying more tax than their colleagues in England. That is the reality of the SNP’s budget.

The truth is that a lack of economic growth across the UK means less for public services, despite the Scottish Government receiving almost £300 million in consequentials, including £237 million from increased spending in the NHS. I hope that the Scottish Government use that to invest directly in public services, and especially in Scotland’s NHS, where statistics this week have shown a damning picture of the SNP’s 17 years in power. The list of in-patients waiting more than 12 weeks has gone up 125 times in a decade. Cancer treatment within 31 days is three times worse than a decade ago. All the while, taxes are going up in Scotland and wage growth is stagnating.

The House of Commons Library has carried out some research that shows that weekly real earnings are lower today than in 2007 when Labour left office in Scotland and the SNP first came to power. The analysis shows that real wages continued to rise until 2010, when the Labour Government left power in the UK, but under the Tories and the SNP, the average Scot earns less in real terms now than they did in 2007. EY this week found that average employment growth in Scotland between 2024 and 2027 is expected to be just 0.8%, lagging beyond all other parts of the UK.

There are some really tough long-term issues in Scotland’s labour market that we must wrestle with. Long-term sickness appears to be a particular factor in economic inactivity in Scotland, accounting for nearly 32% of inactivity compared with 27% across the UK. There are difficult demographic trends, too. These issues are not easily resolved, but they require a Government with a laser focus on the problem, not one from a hopelessly distracted party.

The Secretary of State spoke about levels of employment in the UK. Recent research by the Work Foundation and Lancaster University found that of those in employment, 21% are in extreme job insecurity—workers who experience involuntary part-time work, involuntary temporary forms of work and precarious work—and a further 33% suffer from low or moderate insecurity. In other words, more than half of people currently employed have a degree of insecurity in their work. The UK is becoming a less secure, precarious place for people to work, and part of the cause of low productivity and rising levels of in-work property is that problem. It is a challenge for us to wrestle with, but we must do so.

The Tories are the architects of this economic mess, ably assisted by the growing incompetence of the SNP. Neither can be the solution. Scots will rightly ask themselves after 14 years of the Tories and after 17 years of the SNP whether they feel any better off. The answer will come back: no. They will ask if public services and the NHS are better now in Scotland than they were 17 years ago, and the answer will be no.

The only way out of this doom loop of economic chaos, higher taxes and stagnant living standards is real change, with a Government focused on growing the economy, making work pay and turning the UK into a green energy superpower. That is the change that Scotland needs. That is the change that the UK needs. That is the change that Labour will deliver. We need a general election so that we can get on and do it.

[Mr Deputy Speaker (Mr Nigel Evans)]

Liz Twist will make the last Back-Bench contribution, so anyone who has taken part in the debate should make their way to the Chamber now.

--- Later in debate ---

[Nigel Huddleston]

That is quite amazing. I opened my speech by saying, “Let’s focus on the facts.” Is Labour really claiming to be the party of employment? Every single Labour Government in history have left office with unemployment higher than they began with.

The Secretary of State for Work and Pensions outlined how we will help the very people whom the hon. Member for Bristol South (Karin Smyth) mentions. Far from saying that everything is fine and that people have never had it so good, we are being honest with the public by saying, “We know that you have been through an incredibly difficult time.” That is precisely why we intervened to such an extent, providing over £450 billion of support during the pandemic and since. It was out of necessity. That support was needed. It is important that we are honest with the British public that the money clearly needs to be paid back. We have higher taxes out of necessity, but as my hon. Friend the Member for Folkestone and Hythe said, we reduce taxes out of choice when we can. We increase them out of necessity, and we reduce them out of choice. The Opposition do not have that philosophy.

From April 2024, we are further reducing national insurance contributions, and employees across the UK will see their national insurance contribution rate cut from 10% to 8%. Alongside the cuts we already made to NICs at the autumn statement, this is a total annual tax cut of £900 for the average worker on £35,400 a year. Self-employed national insurance will be cut further too, to 6%; 2 million self-employed will also get a tax cut, worth, on average, £650 a year. Those measures will incentivise, encourage and support more people into work or to work longer hours. The OBR says that, when combined with the autumn reduction, our national insurance cuts will mean the equivalent of 200,000 more people in work, filling one in five vacancies and adding 0.4% to GDP, and 0.4% to GDP per head.

This latest cut to NICs is the latest step towards our long-term ambition to end the unfairness that means that if somebody gets their income for having a job, they pay two types of taxes—NICs and income tax—but if they get it from other sources, they pay only one. When it is responsible and when it can be achieved without compromising high-quality public services, we will continue to cut NICs, making work pay. I believe that my neighbour, my hon. Friend the Member for The Cotswolds, outlined the precise wording from the Chancellor yesterday on that.

Of course, this should be seen in the context of our overall record on jobs, which is impressive. Since 2010, more than 2.5 million more people are in work. That is equivalent to 800 jobs created every day of the Conservative- led Administrations.

[Michael Shanks]

Does the Minister agree, however, that many of those jobs are part of a low-wage economy? The OBR, which he cited, said that in the 13 years of the Conservative Government pay has gone up by just £17 a week, which contrasts with the 13 years of Labour when it went up by £183 a week. Does he agree that many of these jobs are low paid and precarious?

[Nigel Huddleston]

The hon. Gentleman was clearly not listening yesterday to the Chancellor, who had a key focus on jobs. That is precisely why we are lifting so many people out of poverty and why we have had a focus on increasing the national living wage over the years. Let us not forget that the tax-free allowance was about £6,500 under Labour, whereas it is more than £12,500 now. We have lifted so many people out of paying tax altogether, and that has been a key focus and strategy of this Government.