Economic Update

Rachel Reeves Excerpts

Monday 17th October 2022 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

As I regularly say now, I welcome the new Chancellor to his place. He is the fourth in four months of chaos and fiasco as this Conservative Government spiral down the political plughole. But the damage has been done: this is a Tory crisis made in Downing Street, but ordinary working people are paying the price. All that is left, after these humiliating U-turns, are higher mortgages for working people and higher bonuses for bankers. The Government’s climbdown on energy support begs the question yet again why they will not extend the windfall tax on energy producers to help to foot the bill.

It is good to finally see the Prime Minister in her place and not, as the Leader of the House had to assure us earlier, under a desk. But what is she left with? She has no authority, no credibility and no plan for growth. It is clear to see that the people who caused the chaos cannot be the people to fix the chaos. They are out of ideas, out of touch and out of time.

The Prime Minister should have spoken to the House today, but we know that she could not do that with a shred of credibility, given that the survival of this Government now depends on smashing to smithereens everything that she stands for. Now she is attempting to reverse everything that she campaigned on—it is not just impossible; it is absurd. The Prime Minister is barely in office and she is certainly not in power. Only five days ago, the Prime Minister said at Prime Minister’s questions that there would be “absolutely” no public spending reductions, but after what we heard from the Chancellor today, every single public service is again at risk from the Conservatives—from our NHS nurses to our schools and our servicemen and women—with the country paying the price for the Conservatives’ incompetence.

The Prime Minister said that she had an energy package for two years. Now that is being withdrawn on the very day it is supposed to be legislated for. She insisted that her Conservative mini-Budget would lead the country to the promised land. Instead it has led to the highest mortgages in 15 years and emergency interventions by the Bank of England to protect pensions. Then on Friday, there was the unedifying spectacle of the then Chancellor being dragged back from the IMF before he could do any more damage to our economy. So she has turned to a new Chancellor, who finished eighth out of eight in the Tory leadership contest, winning just 18 votes from MPs. The Tories have run out of credibility and now they are running out of Chancellors.

The latest office holder has been in the Cabinet for nine of the past 12 years, at the centre of a Government responsible for low growth and weakened public services, with him responsible for helping run the NHS into the ground. He was a big part of austerity season 1, and now he says the cure is austerity season 2. What was the Chancellor’s flagship policy in his own short-lived leadership contest? It was to reduce corporation tax in a totally unfunded manner, and not from 25% to 19%. The right hon. Gentleman called for it to be lowered to 15%, with not a single explanation of how it was to be paid for. The truth is that had he won the contest and implemented these policies, we would be in an even worse place than we are now. There is no mandate and no authority for any of this.

The Conservatives have put a lasting premium on people’s mortgages. Uncosted borrowing has sent interest rates spiralling. Millions of people’s mortgage deals will be coming to an end in the next few months, leaving many families forking out £500 more a month. People will be paying a Tory mortgage premium for years to come, so how does the Chancellor think ordinary people can possibly afford any more of this Conservative Government? We have heard no answers today. The Chancellor has said that growth requires “confidence and stability”. I agree, but where does he think the lack of confidence and stability has come from? It did not come from the sky; it came from the mini-Budget three weeks ago.

What does it say about our country that we are watching borrowing costs hour by hour? That is not the sign of a strong G7 economy; it is the exact opposite. Businesses are now saying that things are so unstable they are pausing investment here in Britain. The former deputy governor of the Bank of England Charles Bean has outlined the extraordinary damage that the Conservatives have done to our standing. In his words,

“we’ve moved from looking not too dissimilar from the US or Germany…to looking more like Italy and Greece.”

What a mess.

Where is the Office for Budget Responsibility forecast? Have this Government learnt nothing? Does the Chancellor really expect the country to take everything from him at face value? Last week, the Business Secretary was busy undermining the Office for Budget Responsibility. Today, we have received another massive fiscal statement with no forecast. What have this Government got to hide? They should publish the numbers so that we know the true state of the public finances after 40 days of this Prime Minister and after 12 years of Conservative Governments.

Today, the Chancellor has scaled back help with energy bills for families and pensioners. It prompts the question yet again: why will the Government not bring in a proper windfall tax on energy producers to help foot the bill for consumers, and when will the current Chancellor publish in full the Government’s estimates of the windfall profits of the energy giants over the next two years?

No one was talking about spending cuts until the Tories crashed the economy with their mini-Budget, so I ask the Chancellor: why should the British people pay the economic price for the Tories’ mistakes, and what spending cuts do the Government plan to make? We believe that the Government must honour their commitments to uprate benefits and pensions in line with inflation. Will the Chancellor make it clear today that is what he intends to do? What a contrast that cuts to benefits are still on the table, but the one thing the Chancellor could not bring himself to reverse today was lifting the cap on bankers’ bonuses. Why is this the last policy standing in this disastrous mini-Budget?

Let me come to credibility. Does the Chancellor accept that once credibility and trust have been destroyed, they cannot simply be regained by a series of zig-zagging, chaotic U-turns? Will he and the Prime Minister apologise for the costs and anxieties laid on families? Can he admit once and for all that the market turmoil we are in was directly caused by the disastrous decisions of his predecessor and of the Prime Minister? Can he guarantee that the Bank of England will not have to intervene again to save the Government, and what guarantee can he give people about their pensions, their mortgages and their household bills?

The Chancellor said today that everything is now on the table, but is that really the case? We know that abolishing the non-dom tax status will raise £3 billion a year, yet there was no mention of that. How can it be right that some of the richest individuals in society are allowed to buy their way out of paying the tax that should be paid here Britain? This would not be an eye-wateringly difficult decision, so why do not the Government just do it?

There is lasting damage which these policy U-turns will not change. They have set fire to everything; now they insist it is all fine. The truth is that an arsonist is still an arsonist even if he runs back into a burning building with a bucket of water. Because they cannot be trusted; the Tories are clinging on for themselves, regardless of the cost to the country.

Trickle-down economics will always fail; what drives forward our economy are the talents and efforts of millions of working people and thousands of ordinary businesses. The Government’s economic credibility has been destroyed. They have harmed our economic institutions, people are paying higher mortgages; the same set of people doing U-turns is not going to fix it. The only way to change this is a real change of Government.

[Jeremy Hunt]

I thank the hon. Lady for her questions, and I am sorry that, given the speed with which things moved at the weekend, I have not had time to sit down with her one to one as would normally be the practice before parliamentary exchanges.

I understand the role Opposition parties play—I have stood at that Dispatch Box myself—but behind the rhetoric, and I was listening very carefully, I do not think the hon. Lady disagreed with a single one of the decisions I announced to Parliament, and that is important for the country and markets to know. I think there is also agreement on the process of policy making. I support the independence of the Bank of England, introduced by Gordon Brown, and I know the hon. Lady supports the independence of the Office for Budget Responsibility, set up by George Osborne. The whole Government support the independence of those two important institutions.

I fully accept—I do not think I could have been clearer—that we have had to change some decisions made in the last few weeks, but I reject wholeheartedly the hon. Lady’s broader narrative about Conservative economic management. Let me remind her that the UK’s unemployment rate is the lowest since 1974; it is lower than that of France, Italy, Canada, Belgium, Sweden, Spain and the Netherlands and is massively lower than in 2010. Let me remind her that since 2010 our growth rate has been the third highest in the G7 —[Interruption.] She may not want to hear this, but these are the economic facts. Our growth rate since this party came into power has been higher than that of Germany, France, Italy and Japan and has been faster than that of any G7 country this year. Looking to the future, we have the largest technology sector in Europe and more foreign direct investment than anywhere in Europe bar one country. That is a legacy to be proud of.

I was listening carefully for some questions about the measures I announced, but the hon. Lady did not ask any and I think she agrees with them. I will pick her up on one point, however. She talked about the NHS; let me tell her—[Interruption.] Maybe they do not want to listen about the NHS. She talked about the NHS: because of the global financial crisis, which happened on her party’s watch, the NHS went through one of its most difficult periods ever, yet this party protected the NHS budget, and then in 2017 we were able to give it its biggest single increase in funding, because of the difficult decisions we took and the hon. Lady’s party opposed.

In conclusion, we inherited the financial crisis, we dealt with the global pandemic, and we have led the world in support of Ukraine, all possible because of difficult decisions taken over the last 12 years, each and every one opposed by the party opposite. So if the hon. Lady is preaching today the need for fiscal credibility, which I warmly welcome, may I just tell her this: the true test will be in two weeks’ time, to see whether she supports public spending restraint? I have showed Conservatives can raise taxes; will she show Labour is willing to restrain spending?