Budget Resolutions and Economic Situation

Nigel Evans Excerpts

Monday 20th March 2023 Commons Chamber

[Miriam Cates (Penistone and Stocksbridge) (Con)]

I am delighted that the Chancellor has set aside £4 billion to help families with young children. I am less delighted with how he is choosing to spend it. I am referring to the massive expansion of the 30-hour childcare scheme to include babies from the age of nine months. The stated aim of this policy is to get parents back into work and to grow the economy, but unfortunately it will probably fail on both counts. It will not get parents back into work, and the evidence of that comes from the current 30-hour offer for three and four-year-olds, which has had limited success, with only 40% of eligible families using their full entitlement. That is not surprising, because it is not free and it is inflexible, being restricted to only 38 weeks a year and between 9 am and 3 pm—not many jobs fit those requirements.

Polling shows that a great many parents would understandably prefer to look after their children themselves. A recent IFS study showed that free childcare does not have a significant impact on parents’ childcare and work decisions. If these are the problems with the three to four-year-old offer, they will be even more acute with the nine months to two years offer. We are also forgetting that families in this country keep so little of what they earn that it is often not worth going back to work even if the childcare is cheaper.

The Treasury and others keep repeating the mantra that British parents face the highest childcare costs in the western world. That is not actually true. The absolute costs of childcare in the UK are similar to those in other countries. The problem is that British families’ childcare costs are a higher proportion of families’ net income than in comparable countries. So the problem is not the childcare costs; it is the low net income. That is the result of taking so much money off parents in tax, in comparison with other countries, combined with meagre child benefits, also in comparison with other countries.

The root of this problem is our unique individual taxation system, which does not recognise households with children and results in British families paying three, four, five, or even 10 times the amount of tax as families in other countries. It particularly penalises single-earner households or households with a large difference in earnings between the two partners. Under this policy, for example, a mother might return to work because the childcare costs are now reduced. She might earn a £20,000 gross salary, out of which she has to pay taxation, national insurance, pension contributions, student loan repayments and travel costs, while her universal credit and childcare top-ups could be withdrawn. Out of her gross salary of a little under £1,700 a month, she will be lucky to keep £290. That is an effective tax rate of nearly 80%. Some people will return to work for that, but many will not because of what they are losing in time with their children, so I do not expect take-up to be high.

Will this policy grow the economy? It might increase GDP if more people return to the employment market, but what does it mean in real terms for real people’s lives? Will GDP per capita grow? I think that is highly unlikely, because when mothers return to work it creates more low-paying jobs in childcare and elderly care—important but low-paying jobs—which increases the gender pay gap. This has happened in Denmark, for example, which has three times the gender pay gap that we have here in the UK.

I do not believe the policy will see mums flooding back to work and I do not think it will grow the economy in meaningful terms, but even if I am wrong, I still believe it is the wrong policy because it is the wrong policy for children. What is best for baby in the early years? The bond between mother and child is probably the strongest human relationship there is. This is not just a soppy feeling; it is a highly evolved survival mechanism, and strong attachment in the early years pays dividends in later life. There are many great people in the childcare sector, but no one replaces mummy.

It is heartbreaking when mothers feel they have no choice but to leave their babies in childcare from a very young age because of the financial imperative. Yes, there is a cost of living problem, and many women want to work for all sorts of reasons and should absolutely be supported to do so, but the issue for many families is not the cost of childcare per se, any more than it is the cost of food or energy; it is the inability to live on one income when children are young. This is what separates many women from their children: not choice, but tragic necessity.

The Treasury thinks the answer to our financial challenges is to send more mothers to work. I think the answer is to support all families in the early years to give parents a choice. We have £4 billion for this new policy and £4 billion for existing policies, so why not use this to fund a move to household taxation and to increase child benefits? Why not spend that £6,500 a year per child in a different way, to give parents the choice of how they spend it, perhaps on formal childcare, on informal childcare or on spending fewer hours in the workplace?

Elite feminism might say that motherhood is drudgery and inferior to paid work outside the home, but that is only true if we believe that status and meaning derive principally from our salary and status in the workplace. “I wish I’d spent more time in the office instead of with my small children”, said no one on their deathbed ever. Those making these policies think of women with high-flying, highly paid careers, and of course those women should be supported to stay in work and maintain their careers, but that is not most women. Most women have jobs, not careers. As Dan Hitchens wrote in UnHerd last week, those advocating for these policies

“assume that taking your little one to Wriggle and Rhyme at the public library is an unutterable burden, whereas stacking shelves or updating spreadsheets is a liberation of the human spirit.”

It is fundamentally un-Conservative to spend £4 billion separating parents from their babies in the pursuit of marginal gains to GDP. We offer tax breaks and incentives to reduce costs for companies investing in the economy. Why not offer the same to families nurturing the source of our future economic success? I commend the amount of money being spent on the early years, but please can it be used to offer parents a choice and babies the best start in life?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I remind the House that the wind-ups will start no later than 9.40 pm, and that everybody who has taken part in the debate will be expected to be present for them.

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

This is a terrible Budget from a busted-flush Government. We have heard from the other side, “Give them another chance—the new Tory dynamic duo of Rishi and Jezza.” They certainly talk the talk on growth, debt, inflation and the NHS, but do they walk the walk? The answer is no.

We have seen stagnant growth for 13 years, with no real prospect of it being any better than the worst in the G7 in the year to come. Let us compare that with what happened under a Labour Government. In 10 years we saw the economy grow by 40%, and we used the money to double investment in health and education and lift a million children and a million pensioners out of poverty. With that level of growth—that trend growth—we would have been £11,000 better off in terms of average wages. The Prime Minister says “That’s not my fault”, but during much of the time during which we have seen this decay and mismanagement, he was the Chancellor.

What about debt? Since the last Labour Government, debt as a share of the economy has doubled from 45% of the economy to 90%. That is an appalling record, and an indictment of this Government’s failed austerity platform. As for inflation, the Government’s ambition is to halve it from 10% to 5%. According to the forecasts it will be 3%, so it should not be that difficult. People seem to think this will reduce prices. Obviously, if inflation is 10% and then becomes 5%, prices will have gone up by 15%; and if the Government are offering workers at the Driver and Vehicle Licensing Agency in Swansea 2%—in fact, a 13% pay cut—it is no wonder that they are on strike. This Government are busy causing strikes left, right and centre. If the RMT’s original bid of 7%, from before it went on strike, had been accepted, we would not be in the position where now the workers are—deservedly, in fact—getting 14%. We have had this disruption and chaos because of Tory mismanagement, because the Government will not negotiate. They just create strikes.

We are told that we have to live within our means. That is all very well for the Chancellor, who is a millionaire, or indeed for the Prime Minister, who is a billionaire. He has his hedge fund Theleme, which appreciated from £7 billion to £39 billion after the Government decided to buy the Moderna vaccine as recommended by the then Health Secretary, who has since made his money in the jungle.

What about waiting lists? We have waiting lists of 7 million people—are we going to get those down under this Government? We know that the cost of treating someone with low nourishment is something like £7,000 compared with £2,000 for someone who is properly fed, yet in Britain today one in four people are in food poverty. The inequality created by this Government is making the health service worse, not better, and the billion pound that they have put into pension fund tax relief will not make it better. The workers are being blamed, of course, for inciting pay demands, but wage growth is in fact down now, year on year, from 6% to 5.7%, at a time when inflation is well over that.

Who else is going to pay? Of course, homeowners have to pay. They have to help bring down inflation. How? By bringing down the price of houses by 8%. So new homeowners will see mortgage rates double or triple from 2% to 6% at a time when the value of their houses is going down—and they are supposed to be the growth creators of the future. The Bank of England’s base rate has gone from 0.1% in November 2021 to 4% now. The economy has gone out of control under Tory mismanagement.

And what about businesses? The Government talk about businesses, but we now have record insolvencies. They are up 30% since 2020. Material prices and energy prices are going up, borrowing costs are going up and demand is weak, so businesses are struggling.

We have heard about R&D in this debate, and as I have mentioned, in Wales 1,000 university staff at the cutting edge of developing green growth initiatives are being sacked because the promise of us getting “not a penny less” after the withdrawal of the EU structural funding has been broken by this Government. We are talking about losing innovative projects to turn waste plastic into nanocarbon tubes for electric vehicles. We are talking about converting steel slag heaps back into raw materials such as iron ore. We are talking about work with Tata Steel on cladding for homes that stores solar energy as well as absorbing it. On infrastructure, Wales has had just a 1.5% share of rail enhancement for decades for 5% of the population—we are not even getting our 5% for HS2.

There has been profiteering—we have seen the oil companies and the retail companies making profits out of the Ukraine war and the pandemic respectively, and we have seen natural monopolies such as the water companies profiteering. It is not good enough. The Tories are saying, “Trust us again”, even after the inflation, after the debt, after the lack of growth, after one in four have been living in poverty and after a 15% cut in trade. No, no, no! We want a stronger, fairer, greener future, and that will only come with a Labour Government. Let us have an election, put the country out of its misery and build a better future with the Labour party.

[Mr Deputy Speaker (Mr Nigel Evans)]

Could Members who have taken part in today’s debate please make their way to the Chamber, as this will be the 43rd and final contribution from the Back Benches?