Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 21st January 2025 Commons Chamber

[Sir Ashley Fox (Bridgwater) (Con)]

19. What assessment she has made of the potential impact of the autumn Budget 2024 on levels of debt interest spending.

[The Chancellor of the Exchequer (Rachel Reeves)]

When we entered office, debt was at highs not seen since the 1960s. My commitment to the fiscal rules is non-negotiable, and we will drive debt down to a sustainable level. There have been movements in global financial markets, and the UK is not immune. The Office for Budget Responsibility will produce a forecast in the usual way, and I will respond with a statement to Parliament on 26 March. I will not be giving a running commentary on that forecast.

[Mr Holden]

Labour came to office promising to kick-start growth. Instead, it has kicked growth into the gutter. Over the last few months we have seen some of the slowest growth in the G7—in the actual figures rather than the projections. Where will the money for the public sector and public services come from with zero economic growth?

[Rachel Reeves]

Yesterday’s PwC report shows that the UK is the second most attractive place in the world to invest for global CEOs—it is the first time in 28 years that we have been in that position in the league table. And the International Monetary Fund forecast on Friday that the UK will be the fastest-growing major economy in Europe next year.

[Dr Evans]

Last time I raised the markets’ concerns about debt with the Chancellor, she told me to “get real.” What is real is that the cost of debt interest is over £10 billion. What is real are the three choices she has: to increase taxes on people and businesses in Earl Shilton, Burbage and across the country; to cut services for people in Hinckley, Donisthorpe and across the country; or to borrow on the country’s credit card. Will she now be real with the public and tell them which of the three it is going to be?

[Rachel Reeves]

We inherited a high amount of debt from the previous Government, and we have to pay interest costs on that debt. The forecast I set out in the Budget in October showed that debt falling to a sustainable level. As I said, the OBR forecast will be published on 26 March, and I will make a statement at that time.

[Sir Desmond Swayne]

The Chancellor’s increased demand for Government borrowing drives up its price and crowds out investment by productive private enterprises, doesn’t it? [Hon. Members: “No.”]

[Rachel Reeves]

Let me have a go. There have undoubtedly been moves in global financial markets this year, and the UK is not immune to those movements. The OBR has not yet started its forecast. It will update that in due course, and I will make a statement on 26 March.

[Sir Ashley Fox]

Since coming to office, the Chancellor has increased taxes by £40 billion and borrowing by £30 billion and her Employment Rights Bill has increased the costs of employers by a further £5 billion. Does she accept that her decisions have led to a loss of confidence in the British economy and an increase in our borrowing costs?

[Rachel Reeves]

I do not think the borrowing costs in every major country in the world can be explained by the decisions made by this Government. As I said to the hon. Member for Hinckley and Bosworth (Dr Evans) last week, the hon. Gentleman has to get real. There have been global movements in financial markets that have affected the United Kingdom, but if he looks at the PWC report from yesterday, the most recent report on market confidence, global CEOs see the UK as the second best place in the world to invest, after the US.

[Peter Swallow (Bracknell) (Lab)]

The International Monetary Fund forecasts that the UK is set to be the fastest-growing major economy in Europe, which one would have thought Conservative Members would welcome. I know my right hon. Friend the Chancellor will not be satisfied until residents in Bracknell, and across the country, feel the benefits of economic improvement in their pay packets and their day-to-day lives, so will she set out what more she can do to ensure we tackle the cost of living and fix the economic mess we have inherited from the Conservatives?

[Rachel Reeves]

After 14 years of stagnant growth and the decline in living standards during the last Parliament, my hon. Friend is absolutely right that we must turn around that performance. That is what this Government are determined to do. The planning and infrastructure Bill will come to Parliament shortly, followed by the pensions Bill, which will unlock long-term pension capital and make it easier for businesses to get things done in this country.

[Mr Speaker]

I call the shadow Minister.

[Mark Garnier (Wyre Forest) (Con)]

The Chancellor makes reference to the PWC report, but half of the survey in that report was done before the Budget. The Chancellor and I spent a very happy three years sitting next to each other at the Treasury Committee, and she was incredibly good at demanding straight answers from the witnesses that came in front of the Committee. She has already been asked questions about the fact that the fiscal headroom is only £10 billion and the increase in the cost of borrowing is now going to go through the roof so, at some point, she will have to raise taxes, cut investment or increase debt. Which will it be?

[Rachel Reeves]

The headroom in our Budget was larger than the headroom that we inherited from the previous Government, so we have put aside more money for changes in economic prospects. The OBR has not yet done its forecast, which will take a whole variety of factors into account, and we will make decisions based on that. I have been really clear that our fiscal rules are non-negotiable because, unlike the Conservatives, we are determined to meet the fiscal rules, not break them time and again.

[Mr Speaker]

I call the spokesperson for the Liberal Democrat party.

[Daisy Cooper (St Albans) (LD)]

The rising cost of borrowing will bring more misery to mortgage holders, with reports suggesting that some mortgage holders could pay an extra £500 a year. Given that potential global trade tensions could further affect the UK’s financial stability, what assurances will the Government provide that UK lenders remain in a strong position to support households and small businesses?

[Rachel Reeves]

Labour and Liberal Democrat Members are mindful of the last Government’s impact on mortgage borrowing costs for many of our constituents, and we are determined to tackle the cost of living crisis. As the hon. Member knows, I have written to financial regulators, including the Financial Conduct Authority, about regulating for growth, not just for risk, so that we can help more people get on the housing ladder and help grow our economy.

[Emily Darlington (Milton Keynes Central) (Lab)]

2. What the fiscal circumstances are that would allow official development assistance to return to 0.7% of gross national income.

--- Later in debate ---

[Alison Hume (Scarborough and Whitby) (Lab)]

23. What steps she has taken to help increase economic growth in North Yorkshire.

[The Chancellor of the Exchequer (Rachel Reeves)]

The Government are better targeting these reliefs to make them fairer. The latest figures for 2021-22 show that the top 7% of claims are counted for 40% of the total value of agricultural property relief.

[Helen Morgan]

The Chancellor will know that one of the biggest factors holding back the rural economy is poor public transport. When I visited the jobcentre in Oswestry last year, I was told that one of the biggest impediments to people finding a job is that they cannot get away from where they live because of poor public transport. Can she update me on the discussions that she has had with her colleagues in the Department for Transport over reinstating projects such as the Oswestry to Gobowen railway line and step-free access at Whitchurch railway station?

[Rachel Reeves]

At the Budget, we introduced sustainable transport settlements, with £650 million of funding for local transport, and confirmed an extension of the UK shared prosperity fund, providing £900 million to local authorities to invest in local growth. We also announced money in the Budget for some trailblazer projects to help those furthest from the labour market back into work. On the specific issues around transport in her constituency, I am very happy to set up a meeting for her with the relevant Minister.

[Dr Gardner]

The A50/500 growth corridor, a significant transport corridor in my constituency of Stoke-on-Trent South, enjoys an extraordinary concentration of advanced manufacturing, including anchor companies such as JCB and Michelin. With modest targeted investment in transport, energy and digital infrastructure, this vital corridor could generate £12 billion in gross value added and create 18,000 jobs. Will the Chancellor meet me to discuss the targeted investment needed to develop a detailed growth plan for this vital industrial artery and help deliver it on this Government’s mission for growth?

[Rachel Reeves]

I thank my hon. Friend for the work that she has put into this proposal and for her commitment to delivering growth in her constituency of Stoke. On a recent visit, I had the opportunity to meet JCB in the region and see its important work, particularly on the use of hydrogen. I encourage my hon. Friend to meet the Minister for Services, Small Businesses and Exports—I am happy to set up that meeting—whose portfolio includes local growth. The Government are committed to driving growth in the midlands, which is why I confirmed funding for the west midlands investment zone at the autumn Budget and also confirmed an extension of the UK shared prosperity fund.

[David Williams]

I warmly welcome the recent investment of an extra £20 million for our buses and an extra £11 million to fix our broken roads across Stoke-on-Trent and Staffordshire. Does the Chancellor agree that continuing to invest in our roads and public transport is an excellent way to keep our communities connected and to increase job opportunities to boost our local economy?

[Rachel Reeves]

It is great to see two strong advocates for Stoke in the Chamber today. A number of local authorities and, indeed, Labour mayors have raised with me bus procurement and the importance of buses for the local economy. I look forward to working with them, particularly David Skaith in York and North Yorkshire and Steve Rotheram in Liverpool, to boost bus services in communities, and particularly rural communities, to support jobs in the UK. At the Budget, I allocated more than £1 billion for local bus services, and that includes £712 million for local authorities to support and improve bus services in the next financial year.

[Jonathan Davies]

Museums make an important contribution to our cultural life, but also to our economy. The Arts Council and the Museums Association found that net expenditure on museums and galleries has decreased by almost 40% in real terms since 2009. I welcome the Chancellor’s recognition that the creative industries are key to delivering growth and that national museums were given support in the recent Budget, but what steps can the Government take to support regional civic museums, such as Derby museum, which did not benefit from that funding?

[Rachel Reeves]

The Culture Secretary was pleased that the creative industries were one of the sectors included in our industrial strategy. She hosted an event with members of the creative industries taskforce in Newcastle just last week to emphasise the importance of having good cultural offers and art and museums in local communities. I am happy to sort out a meeting for my hon. Friend with the relevant Minister to discuss access to the arts and culture in Mid Derbyshire.

[Mrs Lewell-Buck]

As my right hon. Friend knows, South Shields is a gorgeous coastal tourist town. We pride ourselves on our small businesses and our strong hospitality industry, but she will also know they are struggling after years of neglect by the Conservatives. To help those businesses, will she outline what consideration she has given to reducing VAT on our hospitality, leisure and tourism sectors?

[Rachel Reeves]

I thank my hon. Friend for that question. I remember a very nice dinner of fish and chips with her in her constituency just a few years ago, and she is a strong advocate for local businesses in South Shields. In the Budget, we were able to extend business rates relief to the retail, hospitality and leisure sector of 40% for the next financial year and then to move it on to a fairer footing, so that high street businesses and smaller businesses pay fairer rates of business tax compared with, for example, the online giants.

[Alison Hume]

The bus manufacturer Alexander Dennis builds innovative electric buses, employing 800 people in Scarborough. The Chancellor has spoken about the need for public procurement to take better account of employment and environmental standards. As bus services are brought back into the control of mayors and local authorities, will the Government use public procurement to back British companies such as Alexander Dennis to boost economic growth?

[Rachel Reeves]

My hon. Friend is a good advocate for businesses, including Alexander Dennis in Scarborough. The Government will soon publish a new national procurement policy statement, which will set out our priorities for public procurement in support of our mission to grow the economy. In addition to the answer I gave my hon. Friend the Member for Stoke-on-Trent North (David Williams), we recognise the importance of buses in growing our economy by getting people to work, but also the opportunities to use public procurement to buy more buses made in this country, supporting good jobs here in Britain.

[Mr Speaker]

I call the Chair of the Treasury Committee.

[Dame Harriett Baldwin (West Worcestershire) (Con)]

Former Chair, Mr Speaker, but thank you very much for calling me.

It is clear that we all want to see economic growth in rural areas and across the UK, but I am concerned that some of the measures in the Chancellor’s Budget are having the opposite effect. Which statistic worries her most: the fact that we are at a 20-year high for business closures, or the 100% increase in millionaires leaving the UK?

[Rachel Reeves]

I have already outlined some of the positive numbers, including the upgrade in the IMF forecast, the PwC report and the fact that the economy had returned to growth in the most recent data and inflation is falling. Instead of talking our country down, I will be banging the drum to bring in investment and jobs to our country.

[Josh Babarinde (Eastbourne) (LD)]

A new hospital in Eastbourne would help to drive economic growth in my town and across rural Sussex, but years of Tory tumbleweed and, I am afraid, yesterday’s announcement mean that it will not be delivered and built until 2041. Will the Chancellor accelerate the release of funds to the Department of Health and Social Care to bring forward the building of our new hospital, to support patients in Eastbourne and beyond, and of course to support wider economic growth?

[Rachel Reeves]

I recognise the strength of feeling about this issue. We were left a terrible situation by the previous Government, with a £22 billion black hole in the public finances and the promise of things for which absolutely no money had been put aside. We have now done the responsible thing by reviewing the programmes that we inherited from the previous Government. That means that the timetable for some projects has had to be pushed back, but it is because the previous Government made promises knowing that the cheque would bounce.

[Saqib Bhatti (Meriden and Solihull East) (Con)]

Businesses in my constituency and across the country are still reeling from the Chancellor’s damaging Budget. She made a commitment at the Confederation of British Industry conference that she would not come back for more taxes. Does she stand by that commitment?

[Rachel Reeves]

I had to do a once-in-a-generation Budget in October to fix the mess in the public finances left by the previous Government. I will never have to do a Budget like that again because we have now fixed that terrible inheritance.

[Sammy Wilson (East Antrim) (DUP)]

Devastating changes to inheritance tax, increased environmental costs because of net zero policies, and diversion of farming support to foreign countries—with those kinds of policies, how does the Chancellor ever expect to generate economic growth in rural areas?

[Rachel Reeves]

Bringing stability back to our economy by fixing the public finances is the No. 1 thing we can do to help businesses to grow, alongside our planning reforms to make it easier to build things in Britain and our reforms to the pension system to help businesses access long-term patient capital. As for agricultural property relief, the latest figures show that the top 7% of claims—117 claims—accounted for 40% of the total value of the relief, costing the taxpayer £219 million. We cannot afford to carry on like that, which is why we made those progressive and fair reforms in the Budget.

[Mr Speaker]

I call the shadow Minister.

[James Wild (North West Norfolk) (Con)]

Farming’s vital role in growing our rural economy, growing our food and protecting the countryside is threatened by Labour’s family farm tax. The self-proclaimed “iron Chancellor” is proving herself to be the tin-eared Chancellor, ignoring evidence from the National Farmers Union and others showing that the tax is based on flawed assumptions. Ahead of Saturday’s farming day of unity, rather than threatening family farms, will she speak to farmers, think again and withdraw those damaging proposals?

[Rachel Reeves]

The problem with the Conservatives is that they support increased spending in vital areas but they have not supported any of the tax increases necessary to pay for them, which, frankly, is why we are in the situation we are in today, having inherited a £22 billion black hole in the public finances. The hon. Gentleman will know that in the Budget we announced £5 billion for the farming budget over two years— including the largest funding directed at sustainable food production and nature recovery in this country’s history—and £60 million to support farmers affected by flooding.

--- Later in debate ---

[The Chancellor of the Exchequer (Rachel Reeves)]

When I became Chancellor, there was a £22 billion black hole in the public finances. We simply could not carry on like that, which is why I have taken control of our public finances and made growth the No. 1 priority of the Government to improve living standards.

In December, I launched the second phase of our spending review, where for the first time in 17 years every single pound of taxpayer money will be investigated line by line to ensure that it is being spent well. The spending review will set resource or day-to-day departmental budgets until 2028-29 and capital departmental budgets until 2029-30. On 11 June, when we conclude the review, I will present departmental budgets to the House.

[Frank McNally]

The recent drop in the rate of inflation is welcome news for those facing financial pressures across Coatbridge and Bellshill, as is the expectation that the UK will become the fastest growing economy in Europe. What further action is my right hon. Friend taking, working in partnership with Cabinet colleagues, to ensure that working families continue to see prices fall and living standards rise?

[Rachel Reeves]

I thank my hon. Friend for that question. I know that the cost of living has a deep impact on all our constituents, including in Coatbridge and Bellshill. Like my hon. Friend, I was pleased to see the reduction in inflation last week. The Bank of England’s independence is sacrosanct to carry on those efforts. In addition, we increased the minimum wage in the Budget, we have reformed universal credit to reduce deductions and we have extended the household support fund, all to help ensure that working families have more money in their pockets.

[Mr Speaker]

I call the shadow Chancellor.

[Mel Stride (Central Devon) (Con)]

A moment ago, the right hon. Lady spoke about the importance of spending money wisely, so in the light of the Treasury Committee’s conclusion that her new Office for Value for Money is a waste of money, does she agree that one of its early actions should be to abolish itself in order to save money?

[Rachel Reeves]

I was pleased to appoint Tom Hayhoe to run the Office for Value for Money—somebody who has a track record of delivering value for money for taxpayers. What the Government want to scrap is giving contracts to friends and donors, because that was a colossal waste of money instigated by the Conservative party.

[Mel Stride]

The Chancellor’s answer was an answer, but I do not think that it connected in any way with my question. Could I perhaps ask her about national insurance hikes? A full two thirds of the revenues raised through Labour’s job tax is simply going on servicing the additional debt being run up by this profligate Government. Given that, does she really believe that the catastrophic effects of that tax on businesses right up and down the country are a price worth paying?

[Rachel Reeves]

We inherited a £22 billion black hole in the public finances, and we set out the detail of that at the time of the Budget. It was essential to close that gap to bring stability back to the public finances. That required difficult decisions, but they were the right decisions to ensure that our country has the stability that it lacked for so many years and under so many different Prime Ministers and Chancellors under the Conservative party.

[Steve Yemm (Mansfield) (Lab)]

T3.   My constituency of Mansfield has more members of the British Coal staff superannuation scheme than any other constituency in the country. Will the Chief Secretary outline the process and questions that need to be satisfied to release the investment reserve fund to the surviving beneficiaries of the scheme?

--- Later in debate ---

[Brian Leishman (Alloa and Grangemouth) (Lab)]

T4. The previous Conservative Government decided to back an INEOS project in Antwerp, with a £600 million loan guarantee. I have spoken with the current the Secretary of State for Energy Security and Net Zero and the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for Rutherglen (Michael Shanks) about that, and I have been told that the Government have no plans to stop that money, even though INEOS plans to close the Grangemouth refinery, with the loss of thousands of jobs. Why is there £600 million for Antwerp and not Grangemouth, and why would the Government allow that to happen and not use the £600 million as leverage with INEOS, to avoid Scottish job losses?

[Rachel Reeves]

This Government cannot account for the decisions made by the Conservative party, but we have created the Office for Value for Money, to ensure value for money when we use taxpayer’s money.

--- Later in debate ---

[Sir Edward Leigh (Gainsborough) (Con)]

When I visited St Barnabas hospice in Lincoln recently, the chief executive told me that it was having to pay £350,000 extra every year to cover the national insurance increase. I do not expect an answer now, but as we all agree that palliative care is so important and we want to encourage it, and the Terminally Ill Adults (End of Life) Bill started its Committee stage today, will the Government keep that increase for hospices under review?

[Rachel Reeves]

The Health Secretary set out the settlement for hospices just before Christmas to ensure that they have the money they need, including to compensate for the national insurance increase, but I am happy to arrange a meeting for the right hon. Gentleman with the relevant Health Minister.

[Josh Simons (Makerfield) (Lab)]

T7. On new year’s day, hundreds of my constituents woke up not to hangovers and warm homes, but to floodwater rushing into their houses. I watched as families with young children were pulled from their homes in Platt Bridge, and there was flooding in Ashton and Bickershaw. I welcome the £2.4 billion that the Government have committed to flood defence schemes, but will the Minister commit to protecting funding for flood victims and flood defence schemes?

--- Later in debate ---

[Chris McDonald (Stockton North) (Lab)]

T9. Will my right hon. Friend join me in congratulating Intasite, a technology business in Stockton that is celebrating its 10th anniversary with 40% growth? Does she agree that our industrial strategy will help businesses to invest and grow in Teesside?

[Rachel Reeves]

I join my hon. Friend in congratulating Intasite on its 10th anniversary as a business, and on the rapid growth it is enjoying. The announcement we were able to make last year on the carbon capture and storage work in Teesside will be a big driver of jobs and growth there, and I look forward to working with him and local businesses in Stockton to make that a reality.

[Sir Oliver Dowden (Hertsmere) (Con)]

Does the Chancellor of the Exchequer propose funding the reported £9 billion bill to the Mauritians for the continued use of Diego Garcia through higher taxes, more borrowing or spending cuts?

[Rachel Reeves]

We are in discussions with the new Administration in the United States around the future of Diego Garcia. We will set out details in the spending review, as the right hon. Gentleman would expect.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

It is estimated that 148,000 people had their lives cut short between 2010 and 2020 as a result of austerity measures; on top of that, poor health led to more than £13 billion in lost productivity under the previous Government. What are my right hon. Friend’s estimates of the different choices, and the impact that they will have on the health of the nation and economic growth?

[Rachel Reeves]

I thank my hon. Friend for that question. I know she studies closely the work of Professor Michael Marmot on life expectancy and the impact of health inequalities on our country. At the Budget, we increased the minimum wage. In addition, we extended the household support fund and reduced the amount that could be taken in deductions from universal credit, all to try to put more money in the pockets of ordinary working people, to reduce some of those inequalities and tackle the cost of living crisis.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

One of my GP surgeries called me this morning to highlight the impact of the rise in national insurance contributions, which will cost it £40,000. It can only respond by freezing cost of living pay increases for all its support staff. Does the Chancellor finally accept that working people up and down the country are paying the price for her tax rises?

--- Later in debate ---

[Sonia Kumar (Dudley) (Lab)]

My constituency has a proud industrial heritage, with manufacturing still worth £1 billion a year to the local economy from sectors that account for nearly 10% of the UK’s total economic output. What steps have the Government taken to promote the growth of the manufacturing sector and ensure that towns like Dudley continue to build on their industrial traditions?

[Rachel Reeves]

I thank my hon. Friend for that question, and for the work she does to support and promote businesses in Dudley. Through our modern industrial strategy, and the targeting of eight sectors in which there is huge potential for growth, we will work with businesses right across the country on, for example, reform of the planning system to make it easier for them to build, and reform of the pension system to get funding for businesses, including those in Dudley, that are looking to grow and expand.

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

Neither the US Federal Reserve nor the EU Central Bank are engaged in active quantitative tightening, but the Bank of England is. The Bank of England is costing the public finances in the region of £13 billion a year as a result of a fire sale of UK Government bonds. Last time I spoke to the Chancellor about that, she said that that was because of the Bank of England’s operational independence, which we all value, but that is not a licence for impunity. What discussions will she have with the Bank of England about releasing UK Government debt in a way that benefits everybody in the UK?

--- Later in debate ---

[Sarah Olney (Richmond Park) (LD)]

Residents in my constituency will have been extremely concerned to read the news this morning that the Chancellor plans to announce next week the expansion of Heathrow. I invite her to tell us, on the Floor of the House this morning, yes or no: will the Government back expansion at Heathrow?

[Rachel Reeves]

I am not going to comment on leaks. I will say that the Government are absolutely committed to growing our economy, and making this a great place for businesses to invest in and trade.