Budget Resolutions and Economic Situation

Noah Law Excerpts

Wednesday 28th October 2026 Commons Chamber

[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.

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[Noah Law]

Would the right hon. Member care to ask that business owner about the potential impact of the reduction in business rates for nearly 70,000 small businesses?

[John Glen]

Yes, a small measure like that will make some impact, but we need to look at the context—at what we have seen previously. As the hon. Gentleman will know, the manifesto he stood on two years ago implied a modest increase in taxes of about £7 billion, and we actually had increases of £66 billion. The scale of the burden placed on those businesses means they are disinclined to continue to invest.

I want to say a few words about defence. It is a massive part of the world in Wiltshire, including in south Wiltshire. Again, the context is changing, and it is doing so rapidly. The commitment given so far to raise defence expenditure is, of course, welcome, but in June the departing Defence Secretary was pretty explicit in insisting that a date be given by which 3% of GDP would be secured. A date has not been given today. I accept that there is a pathway to 3.5% and that a taskforce to get to 3% has been announced, but that is very different.

I think that we, in this country, are rather complacent about the nature of the risks we face. Just over two years ago, I visited the Nordics in one of my last months as a Minister. In Sweden and Norway, I was struck by the sense of anxiety and readiness over what Russia was capable of doing and how imminent the threat was. Of course I acknowledge the progress made, but the urgency and reality of the situation in which we now find ourselves necessitates a step change in the urgency of the Government’s response.

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[Graham Stuart (Beverley and Holderness) (Con)]

It is a pleasure to take part in this Budget debate and to follow the hon. Member for Warwick and Leamington (Matt Western). Like him, I tend to think that this Budget reflects the seriousness and the vision of the Chancellor, but unlike him, I do not conclude from that that the Chancellor has a deep and serious vision of the future for this country. On the contrary, he, alongside the Prime Minister, has come up with a whole series of small measures. In fact, there are more measures in this Budget than in any previous Budget, and their average value is lower than in any previous Budget. In other words, the Chancellor is fiddling. He is playing with little gifts that he can highlight and say, “We are doing this for business. Look, we are we are taking 70,000 businesses out of business rates.” Of course I welcome that, but it is inadequate in a high street that is falling and losing.

The Conservatives have a leader and a shadow Chancellor with a vision, and that is why our policy would take 250,000 high street companies out of business rates so that we can have the shops, the cafés, the pubs and all the other businesses that give chances to young people and give them that first job so that they can learn how to talk to a boss, how to engage with customers, and how to understand tills and money. That first job gives them a chance, whether it is a Saturday job or whatever. I know that Labour Members did not mean to do it, but that door has been slammed in young people’s faces by this Labour Government. That is why we have seen youth unemployment go up.

[Noah Law]

Will the right hon. Gentleman give way?

[Graham Stuart]

I will happily give way to the hon. Gentleman in a moment. I am sure that, when he meets young people in his constituency, he is exactly the same as me. I am sure he meets more and more young people who feel a sense of hopelessness. They feel that they are further than ever before from getting on the housing market, and some of them cannot even look that far because they are struggling to get that first job—that first opportunity. Today’s Budget shows that this Government still do not get it, but perhaps the hon. Gentleman does. Perhaps we can finally hear a non-partisan Labour intervention from someone who takes deeply seriously the need to get business going in this country.

[Noah Law]

I thank the right hon. Gentleman for his kind words, but does he appreciate that, in the south-west at least, 56% of retail, hospitality and leisure businesses will be lifted out of the business rates system entirely? Is that welcome news to him? I hope he has some welcome news in his own patch as well.

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[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

Let me respond to the hon. Member for Dartford (Jim Dickson) in one respect. Harwich and North Essex is a very rural constituency, and any restraints applied to gas or electricity have limited effect, because a lot of my constituents in rural areas are on kerosene and heating oil—I confess that I am on heating oil. The Government have not even removed VAT on domestic heating oil. Why are the Government doing this pre-election council band A to D manoeuvre, which will benefit mostly their voters, but completely ignoring the interests of rural voters?

Forgive me if I detain the House a little on defence. We are in exactly the same position that we were in when the previous Defence Secretary resigned under Keir Starmer. In fact, the Chancellor said that he set a target date of 2030 for 3%. That is the same target as when the then Prime Minister appeared before the Liaison Committee. The Chancellor said that

“I am getting work under way to get there in a fiscally sustainable way.”

That was the reason the now Chancellor resigned from the Government, so what was that all about? It was obviously not about defence, because nobody can make any plans until the Treasury has signed off figures for increased defence spending, and it has not done so. It is still not going to sign them off until the public spending review, which may be after the next general election.

I am sure that Labour Members know that the next general election is going to be pretty tough for them. Their very large majority was a bit of an electoral accident, so many of them will lose their seats, but they can trust the Prime Minister, because he said on 25 September, “Don’t worry, the election will be in 2029”—just as he said, “We’re not going to reopen all the arguments about rejoining the EU” and, “We’re not going to reopen the argument about free movement.” Hon. Ladies and Gentlemen in difficult seats facing a difficult election next spring can absolutely trust the Prime Minister; he is not going to do that to them. Trust is rather important in a political party. I hope it is not getting too bad within Labour.

Let me say what I really think about this Budget. It is a non-Budget, exactly as my right hon. Friend the Leader of the Opposition and others have said. It is a breathing space. Another £2.2 billion of new taxes on business is by far its biggest effect, and the impact of the two previous, absolutely catastrophic Budgets remains embedded in Government policy. They hammered sectors such as hospitality, and businesses that used to enjoy employing a lot of young people can no longer afford to do so. Take Rix, a farm business in my constituency that is the leading supplier of potatoes and onions to Tesco. It employs mostly low-paid workers—a lot of young people—and its costs have rocketed as a result of the change to national insurance contributions.

Take the Cricketers in Eight Ash Green, a pub that has been virtually driven out of business by the increase in national insurance costs and business rates. By the way, there has been no cut in business rates—this Government put them up. I am very pleased that they have responded to the Conservative campaign to increase the exemption, but as we have just heard from my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), it is a very slight change. As has also been pointed out, all of these 59 micro-measures are minute. What the OBR actually says about national insurance contributions is that

“Sharper falls in employment among lower-paid sectors are consistent with our judgement that these firms would be most affected by the”

increase in national insurance contributions. That is the truth, and the Government have not faced up to it.

On the question of the real public expenditure outlook, let us look at the section in the OBR’s outlook that deals with welfare spending—the Chancellor is announcing £100 million here, £200 million here or £10 million here, but this is the real problem. Paragraph 5.21 says:

“Welfare spending is forecast to rise…by £19 billion (5.7 per cent) to £353 billion or 11.1 per cent of GDP… It is then forecast to rise in nominal terms by an average of £16 billion (4.4 per cent) a year over the rest of the forecast period”.

That utterly dwarfs any other figures that the Government have been talking about.

“This would be 1.3 per cent of GDP higher than its pre-pandemic level of 10.1 per cent of GDP in 2019-20, with 0.5 per cent of GDP of this increase occurring between 2025-26 and 2031-32.”

The Government are still spending on welfare, and they are not committing to spend on defence. That is the reality of this Budget.

[Noah Law]

When the hon. Gentleman talks about debt to GDP ratios, does he not recognise that the significant mountain of debt built up under his Government, and that the debt to GDP ratio has remained relatively stable under this Government?

[Sir Bernard Jenkin]

I beg the hon. Gentleman to listen to himself. What he is basically saying is that the reason there will be such gargantuan increases in welfare payments between now and 2031-32 is that it is all our fault—that it is because of what we did. [Hon. Members: “Yes!”] It is not. The Government have not begun to tackle the welfare state problem. We should have done; and they must do so, or we are heading for a fiscal crisis. It is interesting what the Red Book says about the forthcoming fiscal crisis.

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[Kit Malthouse (North West Hampshire) (Con)]

It is a pleasure to follow the hon. Member for Carlisle (Ms Minns), although she will not be surprised to hear that she and I have very different views about the Budget. I draw the House’s attention to my entry in the Register of Members’ Financial Interests as a business owner and, frankly, to my interest as a father, although that is not because I think I am going to be particularly affected—I do not think anybody will be particularly affected by this rather bland bowl of muesli of a Budget from a Chancellor who was quite obviously decaffeinated this morning.

I am quite exercised about the Budget because, while a number of colleagues have said it is a missed opportunity, I think it is a lot worse than that. In many ways it is profoundly negligent of a Government to produce such a Budget in the face of three distinct emergencies—three distinct fires burning in the basement of the British economy—some of which have been made worse and are forecast to be worse because of the Budget.

The first of those, which a number of hon. Members have raised, is our debt. It is worth remarking, as some have, that the OBR has said that we will borrow even more in every year of the forecast—particularly next year. Combined with the massive downgrade of growth for next year, that is alarming. It is worth colleagues remembering that the OBR has quite a poor record in medium-term forecasting—it is generally optimistic. We can broadly agree that it gets the year 1 forecast right, plus or minus, but after that it is wildly optimistic, and every year it get the forecast completely wrong, particularly on debt. That matters, because the country is effectively running a structural deficit at the moment, and because of some of the measures in this Budget and the previous two, the public sector is basically eating the private sector every year we proceed. The private sector’s ability to support the public sector is reduced as a result, and we find ourselves caught in a weird kind of vice, exacerbated by the second emergency, which I will come to.

Even in some of the measures today, there seems to be no contemplation of that problem. Who does the Chancellor think will pay the bank levy—this 3% extra on corporation tax? Certainly not the international banks—they will manage to retain their return on capital. It will be the businesses, and the consumers who bank with them, who will see higher mortgage rates and higher interest rates on their loans. That money will be extracted from the private sector and sent directly to the public sector to be spent. If we continue on this path, I am afraid that the IMF has forecast that by 2050, well over half our GDP will be spent by the Government. That is a disaster, because once in that vortex it is hard to come out of it.

The second emergency, which is exacerbating the first—there was no talk of it today and, in fact, there were no measures to try to help with it—is our demographic problem. I am afraid we are not having enough children in this country. We are now down to 1.39 children born to every mother, which is below replacement rate, so we have a shrinking body of workers who are having more and more difficulty supporting an expanding body of retirees. The pyramid is inverting, as we have seen in other countries, such as Japan, to disastrous effect. If the public sector and the retired sector suck more and more money out of the private sector, we will find ourselves in a downward spiral, which will be much to our detriment.

The third emergency is one of capital. The Chancellor raised the issue of capital and spoke of trying to set entrepreneurs free. I have been a moderately successful entrepreneur during my life, and I can tell hon. Members that nothing in the Budget has done anything to reverse the assault on the return on risk that, sadly, has taken place over the last 20 years under Governments of all stripes.

[Noah Law]

The right hon. Member says that nothing has been done to reverse the so-called assault on the return on risk. How about incentivising the risk takers—the founders—who will now benefit from very targeted, fiscally responsible benefits on capital gains?

[Kit Malthouse]

I am glad that the hon. Gentleman has raised that point. If he looks at the founders’ relief in the scorecard and puts it against the reduction in business asset disposal relief, he will see that effectively there has been a straight transfer of value from family businesses, high street shops and smaller businesses to the tech bros who are going to benefit from founders’ relief. We have yet to see the detail on that relief, but the scorecard shows a net cost to the Government of about £200 million. That is negligible in the face of an economy the size of ours.

That is a real problem, because we are standing at the bottom of the ellipse of human achievement, the like of which we have not seen since the industrial revolution. This country has got its capitalism wrong in the past. We missed the IT revolution of the ’80s and ’90s because we were too busy worrying about house prices. British capital has kind of stultified and failed to take advantage of these massive advances in technology, much to our detriment in terms of national wealth.

We still live off, to a certain extent, the wealth that was created during the Victorian era. Many of our largest companies came about because of British capitalism—naked capitalism—during that era. The palaces we live in, the Cavendish Laboratory at Cambridge, King’s College, Cambridge, and the NHS—all of that built from the profits of British capitalism. We have neglected it over the last 20 years or so, particularly by attacking the return on risk. The rise in taxation on dividends, the rises in capital gains tax, the reduction in any kind of relief for entrepreneurs, and the complexity of the enterprise investment scheme and the seed enterprise investment scheme—all that is a massive deterrent to anybody who wants to start a business and take a risk. Until we realise that we will not get growth until we set capital free, we will continue to be trapped in this vortex of a demographic pyramid inversion and ever-mounting debts as the public sector consumes the private sector.

The last thing I want to raise is the new powers that are being granted to the Revenue. All Members should beware of what is hidden in the detail of those new powers. We are getting to a situation where our economy is existing to support the Revenue rather than the other way around.