Budget Resolutions Debate
Full Debate: Read Full DebateRachel Reeves
Main Page: Rachel Reeves (Labour - Leeds West and Pudsey)Department Debates - View all Rachel Reeves's debates with the Department for Work and Pensions
(5 months, 3 weeks ago)
Commons ChamberThe stark reality of yesterday’s Budget is clear: taxes rising, living standards falling, growth stalling, and yet again the Tories making promises that they cannot deliver. They have failed on the economy, they are out of ideas and they are out of time.
Let me turn first to the most, and potentially only, remarkable bit of the Budget statement yesterday. After an hour and 10 minutes, the Chancellor of the Exchequer seemed to float an idea of getting rid of national insurance altogether. I was not quite sure what I had heard, but then Ministers started touring the TV and radio stations to say that that indeed was their intention. In what seems to have been a casual afterthought, the Chancellor has made a £46 billion unfunded commitment, leaving a gaping hole in the public finances, even bigger than the unfunded tax cuts announced in the Tory kamikaze mini-Budget just 18 months ago.
Let me ask the Secretary of State for Work and Pensions this: how does the Chancellor plan to pay for the £46 billion tax pledge made yesterday? To be more precise, what is the Chancellor’s assessment of the impact that £46 billion of tax cuts would have on borrowing, tax rises elsewhere or public spending, or has he simply managed to find the same magic money tree that his predecessor was so fond of? This is an omnishambles Budget from a desperate Tory party. Instead of recklessness, Labour will take a different approach: as Chancellor, I will never make a commitment without saying where the money will come from. That is the responsible approach.
Let us turn now to the other tax cuts that the Chancellor announced yesterday. Two years ago, when the current Prime Minister wanted to increase national insurance, we opposed it. Since then, I have consistently said that I want taxes on working people to be lower and so, just as we supported the last cut to national insurance, we support the measures announced in the Chamber yesterday to bring it down by a further 2p.
Let us be clear, however: the measures come in the context of a rising tax burden, the highest it has been in 70 years, and the tax burden is rising in each and every year of the forecast period. For every £10 that the Government are taking from families in higher tax under their plans, they are only giving £5 back. They are giving with one hand and taking twice as much with the other, and they expect people to be grateful.
Does my right hon. Friend agree that the Prime Minister’s tax plans will leave households on average £870 worse off under the Conservatives?
My hon. Friend has done the maths and is absolutely right. Taking into account the changes to the tax threshold, the announcements yesterday and in November, and council tax, by the end of the forecast period the average family will be £870 worse off.
As the Resolution Foundation highlighted just this morning, the 8 million tax-paying pensioners will see their taxes increase by an average of £1,000. That is a collective £8 billion tax grab from our nation’s pensioners. As Paul Johnson, the director of the Institute for Fiscal Studies, said yesterday:
“This remains a parliament of record tax rises.”
That is the legacy of this Conservative Government.
The Tory Government’s pickpocketing has meant higher taxes on working people, leaving them with less money at a time when their daily lives are getting more expensive. Yesterday, the Chancellor said that a person on average earnings is £900 better off, but let us take a look at that claim. He has ignored not only his own stealth tax rises, with the tax thresholds and council tax, but the rising costs of energy bills, food, mortgages and rent. In fact, rather than being better off, as he claimed, household disposable income is set to fall by £200 per person over the course of this Parliament.
I completely agree that deliberately leaving tax thresholds untouched at a time when pay and prices are increasing is a stealth tax. It is a stealth tax when this Chancellor does it, but it was also a stealth tax when Gordon Brown did it.
It is interesting to have an intervention from the SNP, which is increasing taxes on ordinary working people—I would probably just stay on the Bench.
This is the only Parliament on record in which living standards are set to be lower at its end than at its beginning. The Chancellor chose to ignore all those realities, but the truth is that ordinary families cannot ignore them. As people up and down the country know, the definition of being better off is having more money. Under the Tories, people have less. People feel worse off because they are worse off.
Let us look at economic growth. Growth is critical for our success as a nation, for our living standards and for provide sustainable funding for public services, but the Tories have failed there, too. The context of yesterday’s Budget is a Prime Minister who pledged growth but has delivered recession. This economy is now smaller than when the Prime Minister took up office. Instead of bouncing back, the UK’s GDP is bumping along the bottom this year.
In his statement, the Chancellor rightly elevated the true measure of success:
“not just higher GDP, but higher GDP per head.”—[Official Report, 6 March 2024; Vol. 746, c. 837.]
I agree with him that that is the most important yardstick, so how are the Tories doing against that measure? The reality is that GDP per capita is set to shrink, not grow, this year, having shrunk and not grown last year, too. GDP per capita is now expected to be lower at the end of this year than it was at the start of this Parliament. Yesterday, we learned that forecast GDP-per-capita growth has been revised down for four of the next five years—hardly the success that the Chancellor was looking for.
The Chancellor said that it was important not to follow a path that relied on net migration to provide growth and GDP, and I agree. Has the Secretary of State for Work and Pensions seen the chart on page 29 of the Office for Budget Responsibility economic and fiscal outlook, which shows that net migration has been revised up by 350,000 over the next five years? That is the exact opposite of what the Chancellor spoke about.
Our country has gone through a difficult time over these past few years. The origins of many of the crises we have faced are global: pandemic, war, and the energy crisis. Other countries have also experienced those shocks, but each time crisis has hit, Britain has found itself acutely exposed because of the choices of successive Conservative Governments: austerity that choked off investment, then Brexit without a plan, and then the Tories crashed the economy with their kamikaze Budget.
This Tory record of economic failure has held our country back for far too long. If the UK economy had grown at the average of the OECD rate since 2010, when the Conservatives came to office, it would now be £140 billion bigger than it is today. That is equivalent to £5,000 per household every year, and would mean an additional £50 billion in tax revenues to invest in our public services. Growth matters, but the Tories are incapable of delivering it. [Interruption.] The hon. Member for Newcastle-under-Lyme (Aaron Bell) says from a sedentary position that we are doing better than the G7. There are only two G7 countries in recession today: us and Japan. That is the Conservatives’ record, and they should be ashamed of it.
This is the 12th Tory plan for growth in 14 years, and we are still in recession. Twelve plans from five Prime Ministers and seven Chancellors, with none of them succeeding. We are trapped in a Tory doom loop of low growth and high taxes, and it is working people who are paying the price.
I am struggling a bit with the right hon. Lady’s figures. My own calculations suggest that this year, pensioners will see an increase of £900 from an 8.2% increase in the state pension as a result of the triple lock. In all, I think, pensioners will be getting £3,700 more than they were in 2010. That is a huge increase in their income, alongside all the help with the cost of living and winter fuel, yet the right hon. Lady was saying earlier that pensioners are going to be worse off. I do not follow her maths; can she help?
Those numbers about pensioners who pay tax are from the Resolution Foundation. They were published this morning, so the hon. Gentleman can also look at them, but it is a fact that because the tax thresholds have been frozen, pensioners who pay tax are paying more tax than they were before. That is the legacy of this Government. This is not just about lines on a graph. It is about our high streets, it is about whether businesses grow, and it is about whether we can create secure, well-paid jobs in all parts of the country, with more money in the pockets of working people, because if an economy does not work for working people, it does not work at all.
When the Tories are not pickpocketing the taxpayer, they are pickpocketing Labour policies. Having spent years defending the indefensible, the Tories have belatedly listened to Labour and recognised the importance of closing the non-dom tax loophole. I believe that if people make Britain their home, they should pay their taxes here too. The Office for Budget Responsibility says that the steady state amount of revenue raised by the non-dom policy is £3 billion per year. I first called for that loophole to be closed when it entered the public consciousness two years ago that some people were not paying their fair share of taxes, meaning that we have missed out of £6 billion in tax revenue—money that could have been invested in our public services.
If any further proof were needed that Labour is winning the battle of ideas, it is our time-limited windfall tax on the oil and gas producers. Having originally opposed the creation of such a tax, the Tories were dragged kicking and screaming by Labour to create an energy profits levy. Even after yesterday’s announcement of a one-year extension, the Tories are still leaving gaping loopholes, meaning that many energy giants will still pay less in tax. Meanwhile, the SNP opposes our proper windfall tax while, just three weeks ago, it put up taxes on working people in Scotland—on teachers, nurses, and plumbers.
I will happily take another intervention, if the hon. Gentleman wants to defend higher taxes on working people. Bring it on!
Does the shadow Chancellor not understand that the SNP’s position is that there should not be a single windfall tax that punishes only north-east Scotland? A windfall tax should be applied to every sector that has profiteered from war, covid and price increases. Does she not understand that the SNP’s income tax policy means that low-paid workers—the people the Labour party is supposed to protect—pay less income tax in Scotland than they would in England, and that nurses and care workers are paid more in Scotland than in England? That is true, is it not?
All I would say to the hon. Gentleman is: put that on your leaflet! The fact is that nurses, teachers and plumbers are paying more tax in Scotland. At the same time, the energy giants that are making huge profits from the windfalls of war will pay less tax under the SNP. That is its record, and it should be ashamed of it.
Labour is committed to investing more in our schools and hospitals. That was a priority before the Budget, and it remains a priority, because public services are on their knees after 14 years of Conservative failure. Labour believes in aspiration for all our children, and we will not stand by while the roof falls in on state education under the Tories. History is repeating itself: children are again being taught in portacabins, as they were when I was at school under a Tory Government. When the Tories undervalue our young people, they are squandering their potential and undermining our whole country’s future. That is why the next Labour Government will close the tax loopholes enjoyed by private schools. The money raised from ending their exemption from business rates and VAT will instead go where it is needed—to help the 93% of children in our state schools.
I will always be clear that all the policies in our manifesto will be fully costed and fully funded. Now that the Tories have U-turned on their policy on non-doms, which we welcome, we will do the necessary work to show how our plans will be paid for. We will set that out in an orderly and responsible way. Our public services are in a mess under the Conservatives, but a Labour Government will begin to turn them around, give an immediate injection of cash to our schools and our hospitals, and tackle Tory waste, through a serious plan to grow our economy and provide the sustainable finance that our public services need.
It takes some nerve for the Chancellor to wag his finger at local councils this week, when the Tories and the Prime Minister have squandered billions of pounds of taxpayers’ hard-earned money. Who has used excessive numbers of management consultants in central Government? The Tories. Who signed the cheques and lost an additional £10 billion through dodgy personal protective equipment contracts? The Tories. Who left the vaults open, so that organised criminal gangs could help themselves to £7 billion of public money through covid fraud? The Tories. Who made a costly mess of HS2? The Tories. Who handed £500 million to the Rwanda Government, and has nothing to show for it? The Tories.
Will my right hon. Friend give way?
My right hon. Friend is absolutely right, because every area of Conservative spending has a dimension of waste or profligacy. Does she agree that the £15,000 of taxpayers’ money spent on settling the attack made by the Secretary of State for Science, Innovation and Technology on a British scientist—an entirely unfounded and defamatory attack—would have been so much better spent supporting British scientists to drive British economic growth?
I think taxpayers will find it pretty grating to see their tax bill go up, when that money was spent so callously and casually. Meanwhile, the Chancellor failed to do the right thing yesterday, when he did not set out in the Budget compensation for those affected by the infected blood scandal or for wrongly accused sub-postmasters. That is an abdication of responsibility, and a betrayal of all those who have fought for justice for so many years, and it will not be forgiven.
I am under no illusion about the scale of the challenge that we may inherit, or the scale of the task of rebuilding our economy and country. Labour’s economic plan will take Britain from instability and short-termism to a mission-based Government, prioritising economic growth and security for families and our country—a Government built on the pillars of stability, investment and reform. Stability is brought about by iron discipline, guided by strong fiscal rules and robust economic institutions. Investment is brought about by working with the private sector, so that we can lead the industries of the future through a modern industrial strategy. A new national wealth fund will invest, alongside business, in our automotive sector, renewables-ready ports and the future of our steel industry. Reform starts with our planning system; we will take on vested interests to get Britain building again, support working people in developing the skills that they need to thrive in the changing world of work, and make work pay with a genuine living wage and a new deal for working people. Our economy needs change. Britain needs change.
The verdict on the Budget is in. There is no long-term plan for growth, and leading business organisations agree. The Institute of Directors said that the Budget
“fell short of delivering a comprehensive plan for sustainable growth.”
The British Retail Consortium said:
“the Chancellor has done little to promote growth and investment”.
The Trades Union Congress has highlighted that real pay is still below where it was in 2008. Whichever way we look at it, the Tories have failed on the economy. The damage is done. Nothing this week will compensate for the fact that people are worse off under the Tories. Taking £10 and handing back £5 is a swindle, not a giveaway. Working people pay more, pensioners pay more and homeowners continue to pay more. Reckless and desperate promises are repeated.
The lesson from the Budget is simple: the Conservatives cannot be trusted with the economy. The questions that people ask ahead of the next election are simple: are my family and I better off after 14 years of Conservative Government? Do our schools, hospitals, police and transport work better than when the Conservatives came to office 14 years ago? Frankly, does anything in our country work better than when the Conservatives came to power? The answer is a resounding no. If the Tories had any confidence in their plans and their record, they would name the date of the general election. It is time for the British people to give their verdict on 14 years of Tory failure. Only Labour can provide the change that our country so desperately needs.