Budget Resolutions and Economic Situation

Nigel Mills Excerpts

Wednesday 15th March 2023 Commons Chamber

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for Harrow West (Gareth Thomas).

A few weeks ago, if I thought about the Budget, I probably thought the Chancellor should not bother: there would be no wriggle room, he had no money to spend and he might as well wait until the autumn when we have a better idea of what the public finances look like. However, we have had some quite significant announcements today. I remember being advised a few years ago that in a £2 trillion economy, any intervention of less than £1 billion probably will not touch the sides and is not worth that much excitement. I always look through the Red Book to see how many things score more than £1 billion and, out of a total of £20 billion in new policy announcements for the next financial year and the one after, the childcare changes, the full expensing, the fuel duty, the energy price guarantee and defence spending are all over £1 billion, so there are some quite significant items and some quite far-reaching changes there.

My constituents will particularly welcome the fuel duty freeze and the retention of the 5p reduction from last year, which will help them with their cost of living. I think it is right to retain the energy crisis support—I called for that on the cost of living support payments—but I am not quite sure why we did not just extend it until after next winter. If we think bills will be below £2,500 on the price cap, there is no cost to having the extension, but if we think bills will be higher than that we will need the extension, so I urge the Government to keep an eye on that and provide people with certainty for next winter that their bills will not be any higher than they have been this winter. I also agree that the long-overdue changes on prepayment meters make complete sense.

The childcare changes are hugely welcome, and I welcome the fact that they pick up many of the ideas in the Work and Pensions Committee report from a few weeks ago. At some point, though, we should stand back and think, “If we decided years ago that we would effectively give people free childcare from when their children were aged nine months until they leave school at age 18, would we structure it quite like this, with the complex number of schemes, the 30 hours, the tax-free childcare and all the other options, or is there a better way of delivering this for people that is not so quite cumbersome for them?”

As the parent of two children who will be three in three weeks’ time, I can say that 30 hours’ free childcare for some weeks of the year does not mean my wife can work full-time 46 weeks of the year; it means she can work part-time for some of those weeks. We should be careful with what we are offering. If we think we need wraparound childcare from 8 am to 6 pm for kids who are five, do we need that for kids who are two as well? I think we need to think through what we really want. If we want people back working nearly full time, do we need to have a slightly different offering?

I also welcome the support for swimming pools. I have three effectively council-owned swimming pools in my constituency, and there have been huge problems with their energy bills. The council tax rise was, in part, to pay for the heating of those swimming pools, so the support is welcome, and I hope that the council can now find a new use for all that money.

The pension tax changes are hugely welcome. I think we have all wrestled with how to stop the pension tax system, which was designed to limit how much tax relief people got, driving out of work people we desperately want to be in work. There have been a load of crazy ideas about just changing that for one sector of the economy, which would have been completely unviable. There was, I think, no alternative but to change the lifetime allowance significantly. I was a bit surprised that it was abolished completely—I actually think that it would be better to have a larger lifetime cap rather than an annual cap. I am not sure that I am that worried about restricting it year by year, but I think it is right to restrict how much tax relief people get over their whole working life.

It is worth noting that we have not changed the reduction in the allowance for people earning over £240,000 a year, so it will not be a big change for the highest earners. I also think that it is right that we have effectively frozen the tax-free lump sum at a quarter of the current lifetime allowance rather than have it increase, effectively, to anything. That has been sneaked into the detail.

Perhaps similarly to the childcare stuff, I think we need to step back and ask, “What are we trying to do with our tax regime for pensions?” We have always said that they should be tax-free on the way in and that people will then be taxed on the income that they draw down. We then have limits on how much tax relief people can have. Is the new system really a coherent, sensible way of incentivising pension saving? I think that, at some point, we should perhaps have a proper review asking, “What are we trying to do? Who are we trying to help? What are we trying to incentivise?” We could then use the £50 billion or so a year that we spend on this to achieve the outcomes that we want.

Likewise, full expensing for capital spend is probably welcome if it encourages and increases investment, but our way of giving tax effect to capital spend for businesses is somewhat haphazard. I would like to encourage people to reshore manufacturing, as the Americans have been doing over the past two decades, but what tax relief would people get for building a factory? Nothing for buildings. They would get some for the equipment embedded in those buildings, but nothing for the actual factory. Is that a sensible situation? Why would we not give tax incentives to build factories in the UK, but give a 100% allowance in year one to buy some more computers? That is a slightly counterintuitive situation. I am not sure how many businesses can really use 100% of their capital spend against profit in year one. I suspect that for those than can, it will be hugely welcome, but others will now have to defer those deductions and try to use them over a more sensible time.

I would have thought that, if we are to get to the end of the three years and make it permanent, we should just step back and ask, “What do we want to people to do, how do we incentivise that, and what is the best use of the money that we allocate to it?” This is a welcome short-term fix, but as with so many things, we need to make it work for a longer time.

Finally, I welcome the announcements on nuclear. I remember Rolls-Royce in Derby being very keen on small modular reactors about six or seven years ago. Could we please order some so that we can show the world that we can make that technology work and that we are committed to it? I hope that, by the time we get to the next Budget, we will actually have bought one. Then we can really go full steam ahead on these things.