Charter for Budget Responsibility
Rachel Reeves Excerpts(1 day, 22 hours ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Today I have laid before Parliament the charter for budget responsibility. The charter sets out the new fiscal framework announced at autumn Budget 2024.
The new fiscal rules will put the public finances on a sustainable path and prioritise investment to support long-term growth. The charter also strengthens fiscal stability and transparency via a series of reforms including enhancing the role of the OBR in scrutinising the Government’s fiscal policy.
In accordance with the Budget Responsibility and National Audit Act 2011, the charter was first published in draft alongside the Budget on 30 October as it includes modified guidance to the Office for Budget Responsibility. No further changes have been made to the charter since it was published in draft.
A debate and votes in the House of Commons on the charter and the level of the welfare cap, will be scheduled in due course.
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Oral Answers to Questions
Rachel Reeves Excerpts(2 days, 22 hours ago)
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Sir Ashley Fox (Bridgwater) (Con)
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.
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.
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)
Alison Hume (Scarborough and Whitby) (Lab)
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.
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.
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.
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.
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)
Brian Leishman (Alloa and Grangemouth) (Lab)
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.
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)
Chris McDonald (Stockton North) (Lab)
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?
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?
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.
UK-China Economic and Financial Dialogue
Rachel Reeves Excerpts(1 week, 2 days ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Growth is the No. 1 mission of this Labour Government. To grow the economy, we need to help Great British businesses to export around the world, including to China, the second biggest economy in the world and our fourth-largest trading partner. Not engaging is simply not an option. That is why I led a delegation, including the Governor of the Bank of England, the chief executive of the Financial Conduct Authority and representatives of some of Britain’s largest financial service firms, including HSBC, Standard Chartered and Schroders, to the 2025 UK-China economic and financial dialogue—the first of its kind since 2019.
This dialogue has delivered a set of tangible benefits to ensure that British firms have greater access to the Chinese market, while safeguarding our national security—the first duty of any Government. In China, I met outstanding British companies, such as Brompton, Jaguar Land Rover and AstraZeneca, that will benefit from the steps that we have agreed. We have worked to lift market access barriers across a range of goods and services, particularly in the agrifood sector. On financial services, we have successfully secured new licences and quota allocations for UK firms to improve operating access in China. We agreed to co-operate further, including by renewing our shared commitment to the UK-China stock connect scheme, first launched in 2019, by deepening our co-operation on wealth management through a UK-China wealth connect scheme, and by progressing initiatives on pensions and sustainable finance, delivering significant benefits for UK firms and the City of London. I am pleased that China agreed to issue its first ever overseas sovereign green bond in London in 2025, underlining the UK’s position as a global capital for high-quality sustainable finance.
The UK is a global leader in financial services. There are significant opportunities to expand our presence in new markets, and the tangible outcomes we have delivered this week will help to deliver that. These steps are part of a wider programme to make substantive progress on improving arrangements for UK exporters and investors, as reflected in new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives and accountancy, which have set us on course for this dialogue to unlock £1 billion of value for the UK economy.
These outcomes, agreed with my counterpart Vice-Premier He Lifeng, represent pragmatic co-operation in action, and support secure and resilient economic growth, because security and economic growth go hand in hand. That means finding the right way to build a stable and balanced relationship with China that is in our national interest—one that recognises the importance of co-operation in addressing the global issues that we face, of competing where our interests differ, and of challenging robustly whenever that is required. In Beijing and Shanghai, I was clear that while we must co-operate on areas of mutual interest, we will confidently challenge on areas where we disagree. I expressed our country’s real economic and trade concerns to the Chinese, including about trade imbalances and economic security, and I raised concerns about Russia’s illegal war in Ukraine, human rights, and restrictions on rights and freedoms in Hong Kong, including the case of Jimmy Lai and the completely unjustified sanctions against British parliamentarians.
A key outcome of this dialogue is that we have secured China’s commitment to improving existing channels, so that we can openly discuss sensitive issues and the ways in which they impact our economy, because if we do not engage with China, we cannot raise our real concerns. This dialogue is just one part of our engagement with trading partners across the world. Since becoming Chancellor, I have been to New York, Washington, Toronto and Brussels to build our global economic relationships, while my right hon. Friend the Business Secretary has travelled to the Gulf to boost trade and investment, and my right hon. Friend the Foreign Secretary is engaging with partners all over the world to deliver growth that benefits people across the United Kingdom.
We must continue to go further, faster, in driving economic growth to make working people better off. That is why the Prime Minister launched our artificial intelligence opportunities action plan yesterday. It throws the full weight of Government behind AI in the UK to revolutionise our public services and make our economy more productive. It is why next week I will talk to business leaders, investors and entrepreneurs at the World Economic Forum meeting in Davos to make the case that the UK is one of the best places in the world in which to invest. In the coming weeks, I will set out further details of our plans to kick-start growth in the economy after 14 years of failure from the Conservative party.
Mel Stride (Central Devon) (Con)
It is good to see the Chancellor in her place, and I thank her for advance sight of her statement. I know that she has been away, so let me update her on the mess that she left behind. The pound has hit a 14-month low; Government borrowing costs are at a 27-year high; growth has been killed stone dead; inflation is rising, impacting millions; interest rates are staying higher for longer; and business confidence has fallen through the floor. The Labour party talked down the economy and crippled businesses with colossal taxes, breaking all their promises. This is a crisis made in Downing Street.
It should hardly surprise the Chancellor that international markets are uneasy. The UK’s long-term borrowing costs have risen to their highest in almost 30 years. But while the Government were losing control of the economy, where was the Chancellor? Her trip to China had not even begun when my urgent question was taken in the House last week. She was still in the country, but she sent the Chief Secretary to the Treasury, rather than facing up to her failures. May I ask her why she chose not to respond herself?
The Chancellor, of course, ducked the difficult questions by jetting off to Beijing. I believe that in Labour circles they are calling it the Peking duck, but whatever was on the menu in China, was it really worth the unedifying sight of an increasingly desperate politician scampering halfway around the world with a begging bowl? The Chancellor’s deal pales in comparison to Labour’s black hole, which opened up in the public finances while the right hon. Lady was absent from her station.
Let me give the House a sense of scale. The deal that the Chancellor has announced amounts to £120 million a year. The rise in our borrowing costs, due to her disastrous Budget, has added about £12 billion to our annual spending on debt interest alone: literally 100 times what she says she has brought back from Beijing. That is money that cannot now be spent on the public’s priorities. That £12 billion is enough to pay for 300,000 nurses or to cover Labour’s pernicious winter fuel payments cut for eight and a half years—and, of course, even before this latest market reaction, the Budget meant spending tens of billions more on servicing our debt. According to the Office for Budget Responsibility’s forecast, two thirds of the money raised from the Chancellor’s jobs tax will be swallowed up by additional debt interest. Forget those billions going towards better public services; they are going on paying the price of Labour’s mismanagement.
We on this side of the House know how this sorry story goes. We have seen it all before: socialist Governments who think that they can tax and spend their way to prosperity; Labour Governments who simply do not understand that if you tax the living daylights out of business, you will get stagnation. They do not understand because there is barely a shred of business experience on the Government Front Bench. May I ask the right hon. Lady which of her promises she will break if the OBR judges in March that she is now in breach of her own fiscal rules? Will she cancel promised spending, will she ramp up borrowing, or will she raise taxes yet again?
This whole sorry tale is nothing short of a Shakespearean tragedy being played out before our eyes. This is the Hamlet of our time. Labour promised the electorate much, while pouring the poison into their ear. And the end—you can feel the end; the Chancellor flailing, estranged, it seems, from those closest to her; those about her falling; the drums beating ever closer. To go, or not to go, that is now a question. The Prime Minister will be damned if he does, but he will surely be damned if he does not. The British people deserve better.
Rachel Reeves
The shadow Chancellor is simply not serious. I was on the Opposition side of the House for 14 years, and I think that after a statement one usually asks some questions.
We heard a great deal from the right hon. Gentleman about what he would not do, but we heard absolutely nothing about what he would do. Now we can see what happens when the Leader of the Opposition tells the shadow Cabinet that it should not have any policies. As far as I can tell, the Conservative party’s economic strategy is to say that the UK should not engage with the second largest economy in the world, or indeed with our nearest neighbours and our biggest trading partners in the European Union. The right hon. Gentleman’s economic strategy is to support higher spending but none of the right decisions that are required to deliver sound public finances, and his economic strategy is to ignore the mistakes of the past with no apology to the British people for his part in Liz Truss’s mini-Budget that crashed the economy. I appreciate that, having said that, I may now receive a “cease and desist” letter from her later.
One question that the shadow Chancellor did ask was: why did I go to China? I went to secure tangible benefits for British businesses trading overseas. The right hon. Gentleman said that it was not worth it; let him say that to the representatives of HSBC, Standard Chartered, Prudential, Schroders and the London Stock Exchange who attended those meetings with me last week, all of whom have spoken of the difference that it will make.
I have been under no illusion about the scale of challenges that we face, after 14 years of stagnant economic growth, higher debt and economic uncertainty, and we have seen global economic uncertainty play out in the last week, but leadership is not about ducking these challenges; it is about rising to them. The economic headwinds we face are a reminder that we should—indeed, we must—go further and faster in our plan to kick-start economic growth, which plunged under the last Government, by bringing stability to the public finances after years of instability under the Conservative party, unlocking investment that plummeted under the previous Government and pushing ahead with essential reforms to our economy and public services. That is my message to the House today, because if we get it right, the prize on offer to us—to the British people—is immense: the opportunity to make working people better off by making Britain better off. That is the mandate this Government have, and that is what we will deliver.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I welcome my right hon. Friend’s commitment to growth in this country and to encouraging investment in the UK. Listening to the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride), we would think the country was going to hell in a handcart. Does my right hon. Friend agree that this is no time for panic, that it is perfectly possible to manage any pressures on the Budget through astute management of public spending, and that we are a very long way from the approach taken during the years of austerity under the Conservative party?
Rachel Reeves
I thank the Chair of the Select Committee for that question. I set out this Government’s fiscal rules at the Budget in October: we will pay for day-to-day spending through tax receipts, and we will get debt down as a share of the economy. We remain committed to those fiscal rules and will meet them at all times.
Daisy Cooper (St Albans) (LD)
I thank the Chancellor for advance sight of her statement.
Let us be blunt: the Budget has not worked. The Chancellor says that the Government’s No. 1 mission is growth, but to date there are no signs that the Government are going to deliver it. The national insurance contributions rise is self-defeating. It undermines growth—it does not unleash it—and it piles pressure on to struggling small businesses and high streets. Nor does it raise anything like the sums of money for the NHS that the Government initially suggested it would. Now we have this much-lauded visit to China, which the Government themselves say is only worth £600 million to the UK over the next five years. That is equivalent to just five and a half hours of NHS spending a year—27.5 hours over the five-year period. All growth is welcome, but this really is small beer.
What are we to make of the Chancellor’s pledge to improve existing channels with China? It is nothing short of warm words and mixed messages. The Chancellor should not have gone to China unless there was a commitment that Jimmy Lai was going to be released.
Does the Chancellor now accept that the national insurance increase will damage growth? Does she accept that there were and still are much fairer ways to raise the necessary revenue without holding back our economy and our high streets? The international market jitters we have seen in the last few days are largely caused by the threat of tariffs by the new Trump Administration, so will the Chancellor guard against the risks of a Trump presidency by rebuilding our trading relationship with our European neighbours?
After the economic vandalism of the previous Conservative Government and their mini-Budget, our NHS and care services are still on their knees. Does the Chancellor accept that wealth and health are two sides of the same coin and that scaling back any investment in the NHS will be not only devastating for local communities but damaging for economic growth?
Rachel Reeves
I am slightly confused by the hon. Lady’s response. The Liberal Democrats opposed every decision we made to get the public finances under control at the Budget, and now they say that we need to spend more on public services. Well, I am afraid they cannot have it both ways. The only way there is more money for our public services is by raising it, as we did in the Budget—decisions that the Liberal Democrats apparently oppose.
The hon. Lady says that £600 million is not worth it. That is £600 million of tangible benefits for British businesses trading overseas. I would have thought she would welcome enhanced trade and investment as a way to create more good jobs paying decent wages in St Albans and, indeed, in all our constituencies.
The hon. Lady says that we should not go to China because we need to raise difficult issues. I am not sure how she thinks we are going to raise difficult issues unless we engage with the second biggest economy in the world. Because I went to China, I was able to raise issues around human rights, forced labour, Hong Kong and Jimmy Lai and the sanctioning of parliamentarians. We cannot raise those issues unless we are in the room. I was in the room and therefore able to do just that.
Labour is the party that put £20 billion into the national health service at the Budget in October. We were able to do that because of the difficult decisions we took, including on taxation. The hon. Lady seems to want the additional money for public services but without finding any way to pay for them. That is the way the Conservative party got into its troubles. I am afraid the Liberal Democrats are going down exactly the same path.
Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
May I thank the Chancellor for raising the case of my constituent, Jimmy Lai? I know it will mean a lot to him and his family. Does she agree that it is because of the profound differences that it is vital we maintain this strategic engagement?
Rachel Reeves
I thank my hon. Friend for what she has just said. On behalf of the whole House, I want to send our best wishes to the family of Jimmy Lai at this difficult time. I had the opportunity to raise this as well as other issues during my time in China, and it is incredibly important that at every opportunity we have, we raise some of the difficult issues and challenge the Chinese authorities in a way that is appropriate and consistent with our British values.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
The economic and financial dialogue was stayed because of the brutal imposition of the national security law in Hong Kong. When the Chancellor and the Government go back to engage and reopen that dialogue, they do so on the back of things getting worse, not better. The reality I put to her is that while she was away, Shein refused point blank at a Select Committee hearing to answer the question of whether it has slave labour in its supply chain, but the Government want it to list here in London. We have solar arrays being imported by the Government into the UK that demonstrably involve slave labour. Can the Chancellor be clear with the House about the Government’s position on slave labour? Can she explain whether this Government will allow any products or services, or allow companies to align themselves here or import goods here, that contain any slave labour, no matter how important that import is?
Rachel Reeves
I thank the right hon. Gentleman for that question; I know how seriously he takes this issue, like so many other Members on both sides of the House. Listing of companies in the UK is a decision for the Financial Conduct Authority, but any company listing on the London stock exchange has to live up to the responsibilities set out by the United Nations and the OECD on forced labour.
This Government are committed to working with international partners and businesses to ensure that global supply chains are free from human and labour rights abuses. As the right hon. Gentleman knows, under section 54 of the Modern Slavery Act 2015, commercial businesses that operate in the UK and have a turnover of more than £36 million are required to report annually on the steps they have taken, and rightly so, because modern slavery is abhorrent, and this Government continue to take steps to deal with it.
Dr Jeevun Sandher (Loughborough) (Lab)
First, may I remind Conservative Members that UK bond yields are rising for the same reason that German and French bond yields are—because they are tracking the US rate? They never were very good at numbers.
The Chancellor has set out her economic philosophy that our prosperity is built upon secure foundations in a more uncertain world. Will she set out how she is building that economic security here, particularly with reference to having domestic energy, rather than being dependent on foreign fossil fuel dictators?
Rachel Reeves
My hon. Friend is absolutely right to say that economic growth has to be built on strong foundations, which is the approach of this Government. Our mission to make Britain a clean energy superpower is consistent with that. If we can ween ourselves off fossil fuels and the oil of dictators, we will be more secure in our economy, because we will not have to import so much from overseas.
Dame Harriett Baldwin (West Worcestershire) (Con)
It is good to see the Chancellor back from China and to hear her reiterate that growth is her No. 1 mission, because we have not had any growth since her Budget. Given that accepting responsibility is the first step in solving a problem, will she accept that last October’s Budget has caused business confidence and growth prospects in this country’s economy to plunge?
Rachel Reeves
I thought for a moment that the hon. Lady was going to apologise for Liz Truss’s mini-Budget. Maybe she will do so on another occasion.
Yuan Yang (Earley and Woodley) (Lab)
I thank the Chancellor for raising the case of Jimmy Lai. I hope that the Government will in future press the case of pensions owed to British national overseas constituents in Earley and Woodley, and across the UK, who have moved here from Hong Kong.
I was surprised to hear the shadow Chancellor advocate knee-jerk responses to inter-day movements in market prices. I would argue that such short-termism led to the Conservative party having five Chancellors in only four years. Will the Chancellor reassure us that she will not be misled by short-termism, and that she will instead keep her focus on our Government’s long-term ambition to raise living standards and growth?
Rachel Reeves
My hon. Friend is absolutely right. There have been movements in international markets in the past week or so, and they have been global in nature. In the UK, we must do what we can, which is why I have reiterated today my commitment to the fiscal rules that I set out in the Budget in October. I reiterate that growth is the No. 1 mission of this Government: growth built on stability, which will come through securing the public finances; through investment, including through the national wealth fund and GB Energy; and through reform—of our planning system to make it easier to build in Britain, getting people back to work, and of our pension system. This Government are cracking on after 14 years of failure from the Conservative party.
Esther McVey (Tatton) (Con)
Did the Communist party of China tell the Chancellor that she was doing a good job or a bad job of running the UK economy when she was there?
Rachel Reeves
I was not seeking assurance from any foreign Government on the performance of this Government. What I was seeking—I achieved this in China—were tangible outputs for British businesses trading overseas, helping to create more good jobs that pay decent wages here in Britain. The Conservative party absolutely failed to do that in 14 years.
Tim Roca (Macclesfield) (Lab)
I thank the Chancellor for her statement. I particularly welcome the fact that she raised the issues of Jimmy Lai and human rights in Beijing, which is really important. After 14 years of the Conservative party’s inconsistency on China, does she agree that we need a cross-Whitehall strategy and a pragmatic approach?
Rachel Reeves
What is really important is that we take decisions in Britain’s national interest. Taking decisions in the national interest means engaging with our trading partners all around the world, which is why, since being appointed as Chancellor, I have been to Brussels to reset our relations with the European Union, as well as to Washington and New York to welcome investment from overseas. I have secured £600 million-worth of benefits for UK businesses doing business in China.
Stephen Flynn (Aberdeen South) (SNP)
Will the Chancellor of the Exchequer do what the Prime Minister refused to do yesterday and rule out future spending cuts?
Rachel Reeves
I am not going to write five years’ worth of Budgets in the first six months of a Labour Government, but I am absolutely committed to meeting the fiscal rules that I set out in the Budget in October. We know what happens when Governments lose control of the public finances: they crash the economy and end up on the Opposition Benches.
John Grady (Glasgow East) (Lab)
The Chancellor may be able to learn a bit about emergency spending cuts from the Scottish Government in Holyrood, who have had three years of emergency spending cuts. Does the Chancellor agree that it is essential to engage with large economies like China so that we can export our brilliant financial services sector and whisky from Scotland? In the real world, we have to trade with large economies like China.
Rachel Reeves
Many of the benefits that we secured last week were for the financial services sector, and both Edinburgh and Glasgow are important hubs of financial services in the UK. Businesses such as Abrdn and Standard Chartered, which were on the delegation with me, have welcomed the tangible benefits, which will result in more jobs and more economic prosperity in Scotland and across the United Kingdom.
Martin Vickers (Brigg and Immingham) (Con)
It has been reported that the Chancellor was going to meet the owners of British Steel in China. Many of my constituents work at the Scunthorpe steelworks. While I appreciate that Ministers may not have reached a final decision on the steelworks, is she able to give reassurance to my constituents that she has had constructive engagement?
Rachel Reeves
My right hon. Friend the Business Secretary has met Mr Li, from Jingye, on a number of occasions. Talks are ongoing, but I am not able to provide an update on that today.
Preet Kaur Gill (Birmingham Edgbaston) (Lab/Co-op)
The Chancellor has only my admiration and support for the tough decisions that she is taking to fix the fundamentals. While Conservative Members were carping about the Chancellor’s whereabouts this week, she was having serious discussions with the world’s second largest economy and securing access for UK firms. Is it not clear that only Labour Members are serious about growth?
Rachel Reeves
I will always stand up for Britain’s national and economic interest, which is why I am helping some of our best businesses to export around the world. That is what I did in China at the weekend, and it is what I will continue to do. I will always stand up for our economic interest.
Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)
Has the Chancellor of the Exchequer spoken to the Governor of the Bank of England about what action needs to be taken to bring about stability in our bond markets?
Rachel Reeves
I regularly speak to the Governor of the Bank of England; indeed, he was with me on the delegation to China this weekend. We work closely together to ensure that the British economy remains competitive in global markets.
Katie White (Leeds North West) (Lab)
I am quite surprised at the audaciousness of those on the Opposition Benches. The Conservatives oversaw a rise in debt levels over the last 14 years, and it is a shame that they did not turn their minds to the issue earlier. Does the Chancellor agree that serious discussions, such as the one with China, can deliver not just on our economic aims, but on our wider climate and international objectives?
Rachel Reeves
Unless we engage and work with our partners around the world, we will miss out on the opportunities that other countries secure for their businesses and economies. If we miss out on those investment and trade opportunities, we can be sure that other countries will take advantage of them. That is why I was in China, and it is why I will work with counterparts around the world to secure good outcomes for British businesses and jobs here in the United Kingdom.
Dr Andrew Murrison (South West Wiltshire) (Con)
The Chancellor raised the issue of human rights abuses in China, but did she get the opportunity to raise with her interlocutors the extrajudicial work of the United Front Work Department, particularly in relation to UK institutions, especially universities?
Rachel Reeves
I raised a number of issues around human rights abuses, labour and, indeed, rights and freedoms in Hong Kong, including the case of Jimmy Lai. I raised that with all the Ministers I met in China, and I will always stand up for our values and interests.
Kanishka Narayan (Vale of Glamorgan) (Lab)
Unlike the bickering in the Conservative party, we are cutting deals in the national interest and putting Britain at the frontier—£600 million just over the weekend, and an AI opportunities plan just this week. Does the Chancellor agree that we are the party of action and the Conservatives are the party of rhetoric?
Rachel Reeves
We on the Government Benches are not going to apologise for getting a good deal for British businesses and the people working for them. I am determined to leave no stone unturned in ensuring that British businesses have the rights and freedoms to export and trade around the world, helping to create good jobs here in Britain.
Sarah Olney (Richmond Park) (LD)
UK exports to China currently represent less than 10% of the UK’s total exports, whereas our exports to the EU represent over 40%, demonstrating the greater opportunities that trading with the EU makes available to our small and medium enterprises. Will the Chancellor commit to talking four times as much to our European partners about our trading opportunities than she has to China?
Rachel Reeves
This is not either/or; we cannot write off one country and say that we are going to put all our eggs in a different basket. China is our fourth biggest trading partner and we cannot miss out on opportunities in a country that is growing quickly, with an expanding middle class, where there are huge export opportunities. As the hon. Lady knows, I was in Brussels in December to reset our relations—the first British Chancellor to go to a Eurogroup meeting since we left the European Union. I am leaving no stone unturned in exploiting export opportunities for British businesses.
Callum Anderson (Buckingham and Bletchley) (Lab)
I thank the Chancellor for her statement. Can she set out in more detail how the Government intend to help reinvigorate the UK-China stock connect, so that UK companies and investors can access Chinese capital markets and vice versa?
Rachel Reeves
The stock connect is an initiative first set up by the former Conservative Chancellor Philip Hammond to improve links between the Shanghai and London stock exchanges and to help Chinese businesses to access capital on UK financial markets. That is good for financial services firms operating in London, and the enhancement of that stock connect scheme at the weekend offers new opportunities for British businesses in financial services in the UK.
Dr Luke Evans (Hinckley and Bosworth) (Con)
As the Chancellor flew east, the pound plummeted south and Government debt rocketed north. Why? The markets do not believe her plan for growth; that is the fundamental issue. To pick up the question from my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson), what is she going to say to the markets to make them believe she really does understand how to deliver growth in the UK?
Rachel Reeves
There has been global volatility in markets. It is not reasonable to suggest that bond yields in the United States, Germany and France have risen because of decisions made by this Government. I think the hon. Member should just get real.
Brian Leishman (Alloa and Grangemouth) (Lab)
I thank the Chancellor for her statement. In regard to raising money for public services, an annual wealth tax on the multimillionaire and billionaire class would certainly achieve that. However, that is a conversation for another day—on to China. My right hon. Friend and I have had discussions regarding the closure of the Grangemouth refinery, in which PetroChina—part of the Chinese state-owned China National Petroleum Corporation—is heavily involved. If the refinery closes, thousands of jobs will be lost. This is not just a constituency issue for me. It will impact all of Scotland, as our fuel and national security will be severely weakened. Did the Chancellor speak about the issue with her Chinese counterparts, and if not, will she do so?
Rachel Reeves
We are working closely with the Scottish Government to ensure that there is a bright future for the people of Grangemouth, because deindustrialisation should not be the future for communities, including in Scotland.
Richard Tice (Boston and Skegness) (Reform)
The data in September and October shows that the economy is falling. It is going down and the currency markets and bond markets are selling off and expressing their clear concern that there is no growth and that the economy continues to fall. If the Chancellor is so confident, will she confirm to the House when the economy will start growing again?
Rachel Reeves
Growth is the No. 1 mission of this Labour Government, but the truth is that it is not possible to turn things around quickly after 14 years of lacklustre growth and declining living standards under the Conservatives. We are leaving no stone unturned, which is why last week in China we secured £600 million-worth of tangible benefits for the UK economy, helping great British businesses exporting overseas.
Nesil Caliskan (Barking) (Lab)
Does the Chancellor agree that developing our economic and trading relationships with other nations is one of many important levers; and that, alongside that approach, public investment, planning reforms and an industrial strategy—whose absence under the Conservative Government was problematic—will be returned under this Government so that we can see economic growth?
Rachel Reeves
The best way to grow an economy is to boost investment in an economy. The truth is that, under the Conservatives, we were the only G7 economy where investment stood at less than 20% of GDP. That is the inheritance that our party was bequeathed by the Conservatives, but we are beginning to turn that around through the creation of a national wealth fund to leverage in private sector investment, through planning reform to get Britain building again, and through pensions reform to unlock £80 billion of investment to help small and start-up businesses to grow. We are turning things around after 14 years of failure from the Conservative party.
Paul Holmes (Hamble Valley) (Con)
While the Chancellor was in China securing her measly £600 million, borrowing rates reached the highest they have been since 2008. In 2024 she said that her Budget would be
“a Budget with real ambition, a Budget to fix the foundations…a Budget to rebuild Britain.”
How is that going, given that her mess has caused borrowing to be the highest it has been since 2008, making real working people in this country suffer?
Rachel Reeves
I am not sure whether the hon. Gentleman follows global financial markets, but borrowing costs have increased for countries around the world. What we saw under Liz Truss’s mini-Budget was unique to the United Kingdom, because it was only UK markets that were affected by the decisions of the Conservatives.
Chris McDonald (Stockton North) (Lab)
It is great to see our Chancellor of the Exchequer working with international business and winning investment for the UK. Does she agree that while the Conservatives were happy to sell out our heavy industry to China, leading to the end of steelmaking in Teesside after 150 years, our industrial strategy is delivering investment in steel, chemicals and life sciences in Stockton North, in Teesside and across the UK?
Rachel Reeves
The national wealth fund created by this Government will get investment into industries such as carbon capture and storage, green hydrogen, ports and, indeed, steel. We were really pleased at the end of last year to be able to announce investment in carbon capture and storage in Merseyside and Teesside, securing billions of pounds of investment into those economies and securing many thousands of jobs.
Luke Murphy (Basingstoke) (Lab)
I thank the Chancellor for her statement. I think it is worth reminding the House that under the previous Government business investment fell to 28th out of 31 OECD countries, which was lower than Latvia, Slovenia and Hungary. Could the Chancellor set out how our industrial strategy will overcome that terrible legacy on business investment left by the Conservatives?
Rachel Reeves
One of the reasons for such poor investment—the lowest of all the G7 economies—is that our planning system makes it so hard to get anything done in this country. That is why the planning and infrastructure Bill, which is being brought forward by my right hon. Friend the Deputy Prime Minister, will turn that around, making it easier to invest in transport, in digital, in housing and in so much more. That is the way to get our economy growing after 14 years of failure.
Carla Lockhart (Upper Bann) (DUP)
I thank the Chancellor for her statement. She goes to China, New York, Washington, Toronto and Brussels to build economic relationships, yet she will not take the time to speak with the Ulster Farmers Union, the NFU, the Farmers Union of Wales or NFU Scotland to hear at first hand about the devastating impact that her death tax will have on family farms and small businesses. When will she realise that no matter what deals she does around the world—and I welcome them—Rome is burning around her? Agriculture is the backbone of our economy, so will she commit to meet me as a representative of the thousands of farmers whose farms are going to be decimated by her death tax?
Rachel Reeves
I have had the opportunity on a couple of occasions to meet the First Minister and Deputy First Minister of Northern Ireland, and I am sure that the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for Streatham and Croydon North (Steve Reed), would be happy to meet colleagues from Northern Ireland. The truth is that we inherited a £22 billion black hole in the public finances from the Conservatives, and in order to stabilise our public finances we had to make difficult decisions on taxes. At the moment we hear from the Opposition that they do not like the increases in taxes but they want increases in public spending. Well, they cannot have it both ways.
Ms Polly Billington (East Thanet) (Lab)
I welcome my right hon. Friend’s statement. Could she elaborate further on how this visit and the discussions she has started are not only consistent with the Government’s approach to China, but a vital part of it—co-operate where we can, compete where we need to, and challenge where we must?
Rachel Reeves
This is the first economic and financial dialogue between our two countries since 2019. Since then, other countries around the world have continued to engage with China, securing tangible benefits for their economies. I do not want UK businesses and the people working in our country to miss out, which is why this weekend we secured £600 million-worth of tangible benefits for businesses that export to China, thereby helping to create more good jobs paying decent wages in our country.
Nick Timothy (West Suffolk) (Con)
I am slightly worried that investors will be watching this statement and wondering what planet the Chancellor is on. She just said that she is investing in transport infrastructure, but she is actually cutting transport capital budgets. She has previously said that she wants only one Budget a year, and the March statement is billed only as a fiscal forecast. Can she rule out any new tax rises or departmental spending cuts in the March statement, or will the fiscal forecast become an emergency Budget?
Rachel Reeves
We have committed to having just one Budget a year to provide businesses with the certainty they need to invest, so we will have an update from the Office for Budget Responsibility in March. I also give the commitment that, as I have already said, the fiscal rules mean we will balance day-to-day spending with tax receipts, and we will get debt down as a share of GDP within the forecast period. We will continue at all times to meet those fiscal rules.
Tony Vaughan (Folkestone and Hythe) (Lab)
I congratulate the Chancellor on unlocking £1 billion of value for the UK economy that would not have been unlocked if she had not gone to China. However, does she agree that the Government’s much-needed decision to thaw UK-China relations is now reaping dividends while also allowing us to press China on difficult issues, including human rights and labour standards?
Rachel Reeves
My hon. Friend is exactly right. We managed to secure tangible benefits for the UK economy and British exporters. At the same time, we were able to raise difficult issues that we would not have been able to raise if we were not engaged. That is the benefit of engagement: we get the economic gains and we can raise those tricky issues.
Dave Doogan (Angus and Perthshire Glens) (SNP)
It is beyond parody that His Majesty’s Chancellor would throw herself at the mercy of the Chinese Government and come back with £600 million in revenue over five years. Is she aware that £600 million in revenue is less than one ninetieth of HSBC’s annual profit? This is what she is holding up as a major achievement of the Treasury’s trade mission. My right hon. Friend the Member for Aberdeen South (Stephen Flynn) very reasonably asked what the Chancellor will do when, not if, her fiscal rules are breached. Will she increase borrowing, raise taxes or cut spending, not over five years but this year?
Rachel Reeves
I am sure the hon. Gentleman is an expert in HSBC, but I would rather take the word of the chairman of HSBC, who welcomed the tangible investments and, indeed, led the financial forum that we held in China last week. I have been really clear that we will meet the fiscal rules that I set out in the Budget, and we will do that at all times. That is the commitment I made, and it is the commitment I continue to make.
Deirdre Costigan (Ealing Southall) (Lab)
Will the Chancellor confirm that, for her, growth must always go hand in hand with economic security? That is a lesson that the previous Conservative Government refused to learn when they left 85% of us dependent on expensive foreign gas to heat our homes this winter.
Rachel Reeves
This Government’s clean energy mission will mean that we are less reliant on foreign dictators for our basic energy needs. That is why we are investing in carbon capture and storage and floating offshore wind, and it is why we are getting rid of the previous Government’s absurd ban on onshore wind.
Harriet Cross (Gordon and Buchan) (Con)
The Chancellor referred in her statement to safeguarding national security, which I welcome, but this must include energy security. Yet her changes to the energy profits levy, removing investment allowances and not permitting new licences at a time when we are still reliant on oil and gas, not only undermines our energy security but dwarfs the £600 million that she has brought back from China with the £12 billion of tax revenues that will be lost from the sector. Why, rather than supporting our energy security, is the Chancellor turning her back on the sector, turning her back on these tax revenues and risking selling our energy security to China?
Rachel Reeves
If the hon. Lady has a brief look at the documents from the Office for Budget Responsibility, she will see that the changes to the energy profits levy—taking the tax rate up from 75% to 78%, the same rate as in Norway—raises money; it does not lose money.
Linsey Farnsworth (Amber Valley) (Lab)
I commend the Chancellor for her visit to advocate for our country’s best interests, but does she agree that Chinese companies must not provide any support to Putin’s illegal war in Ukraine?
Rachel Reeves
I absolutely agree with my hon. Friend, and I raised such issues with my counterparts in China at the weekend. It is really important that, whenever we engage with foreign Governments, we also raise issues consistent with our values, including Chinese companies supplying the Russian Government with materials used in Russia’s illegal invasion of Ukraine.
Jim Allister (North Antrim) (TUV)
Did the Chancellor raise any concerns, or indeed does she have any concerns, about the Confucius Institute, the Chinese Government-backed operation we see across the United Kingdom? And what answer did she get with respect to Jimmy Lai?
Rachel Reeves
When our Prime Minister met President Xi Jinping in Rio last year, they agreed that one of the points of re-engagement is that we were able to make clear our concerns on a range of issues in a private way. I am not going to go into the details of that conversation, but I raised these issues with all the Chinese officials I met at the weekend. [Interruption.] The problem is that Conservative Members, for all their chuntering, did not raise these issues because they did not even engage.
Ben Coleman (Chelsea and Fulham) (Lab)
My constituents, many of whom work in financial services, will have been amazed, just as I was, when the shadow Chancellor, in a fit of pique, demanded that the Chancellor should come home from China to talk to him in this House, rather than staying to promote growth, increase access to the world’s second largest market and win new licences and quota allocations for financial services businesses. As anybody who has taken the trouble to listen carefully to the Chancellor would recognise, there is more on the way. What does she think the City, and the banks that accompanied her, would have preferred in the long-term interests of this country: stay in China to win for this country, or come home to satisfy the shadow Chancellor’s fit of pique?
Rachel Reeves
We just have to look at what the businesses have already said about the deal we managed to secure last week. There are tangible benefits for British businesses exporting to China, helping to create more good jobs paying decent wages here in Britain. It has been welcomed by businesses. It is a shame that the Conservative party no longer stands up for British businesses.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
We have an embargo on Russian oil and gas. China continues to import it, and apparently Russia will be China’s No. 1 supplier this year. Did the Chancellor raise this with her counterparts on her trip to China, and what assessment has she made so that her deal does not inadvertently support the Russian war effort?
Rachel Reeves
As I have already said in the House today, I raised the issue of Chinese companies supplying the Russian Government. Indeed, the hon. Gentleman will know that last week, alongside the United States, we increased sanctions on Russian oil and gas to make it harder for Putin to continue to conduct his illegal war.
Chris Vince (Harlow) (Lab/Co-op)
Will the Chancellor outline how the visit is an example of ongoing dialogue with the international community, which will benefit businesses and residents in my constituency of Harlow? Also, while we are quoting Shakespeare, does she agree that there is something rotten in the state of the Conservative party—or perhaps that the Conservative party is in a rotten state?
Rachel Reeves
I am glad that my hon. Friend has used the 50 minutes of the statement to come up with such a good line. He is right that many people working in Harlow work in the financial services sector and will very much welcome the enhanced licences and quotas, which, incidentally, many other countries and their banks already have because their Governments have engaged with China. Those are opportunities that we have missed out on in Britain for far too long because of the six years during which we failed to be involved in an economic and financial dialogue, while other Governments cracked on and made sure they supported and stood up for their national interest.
Shockat Adam (Leicester South) (Ind)
Notwithstanding the importance of China as a trading partner, will the Chancellor please explain what steps the Government are taking to address the issues of forced labour links with Uyghur workers in supply chains at fast fashion companies such as Shein? Will the Minister provide data on the extent of forced labour in UK supply chains, especially in the garment sector? Will she also outline any actions to strengthen due diligence requirements for companies sourcing from areas with known human rights abuses, such as Xinjiang?
Rachel Reeves
As I have already set out, one of the issues I was able to raise with my counterparts in China was forced labour, particularly in Xinjiang. As I said in answer to the question from the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), I have also been really clear that any company seeking to list in London has to meet stringent requirements, as set out by the United Nations and the OECD, on labour supply and the treatment of workers.
Madam Deputy Speaker (Judith Cummins)
For the final question, I call Jim Shannon.
Jim Shannon (Strangford) (DUP)
While I welcome the UK-China economic and financial dialogue, as the Chancellor will know, as chair of the all-party parliamentary group for international freedom of religion or belief, I have repeatedly highlighted in this House human rights abuses in China, with regard to Uyghur Muslims, Tibetan Buddhists and Christians in Hong Kong and China. How will the Government and the Chancellor make sure that safeguards for British money and goods are put in place to ensure that economic engagements do not directly support those violations? Human rights concerns, forced labour, denial of religious freedom and ongoing suppression in Xinjiang, Tibet, Hong Kong and Taiwan must be remembered at all costs and in all deals with China.
Rachel Reeves
I thank the hon. Gentleman for that thoughtful question. It is important that when we engage with China, we co-operate where we can, we compete where necessary, but we challenge whenever our values do not align. Like the hon. Gentleman, I care deeply about issues of religious freedom and forced labour, but that is the whole point of engaging. We have to engage in the world as it is, not in the world as we would like it to be. It is through those engagements that we are able to raise even some of the most difficult issues and be very clear about the values of our great country.
UK-China Economic and Financial Dialogue: 2025
Rachel Reeves Excerpts(1 week, 3 days ago)
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The Chancellor of the Exchequer (Rachel Reeves)
I visited China 10-13 January to deliver the 2025 UK-China economic and financial dialogue.
Growing the economy is the No.1 mission of this Government. But that growth must be secure and resilient, built on the stable foundations that we have prioritised as we deliver on our Plan for Change and embark on a decade of national renewal.
National security and growth are not opposed. They are mutually reinforcing. We must and will continue to engage with international partners on trade and investment to grow our economy, while ensuring that our security and values are not compromised.
This means finding the right way to build a stable and balanced relationship with China. One that recognises the importance of co-operation in addressing the global issues we face, competing where our interests differ, and challenging robustly where we must.
It is for this reason that I visited Beijing and Shanghai for an economic and financial dialogue with China. I was accompanied by the Governor of the Bank of England, the chief executive of the Financial Conduct Authority, and representatives from Britain’s financial services firms. This dialogue unlocked market access for UK exporters in financial services and agri-products, providing greater certainty for business and an expected boost to the UK economy of £600 million over five years.
However, this is not a return to the “golden era” of UK-China relations. Throughout the visit, I was clear that while we must co-operate on areas of mutual interest, we will also confidently express our economic and trade concerns to the Chinese, including on market access and wider market distorting practices. A key outcome of this dialogue is that we have secured China’s commitment to improve existing channels so that we can openly discuss sensitive issues and the ways in which they impact our economy. Our engagement also advanced wider UK interests. I raised a range of UK concerns in meetings with Chinese Government counterparts, including Russia’s illegal war in Ukraine, developments in constraints on rights and freedoms in Hong Kong, and human rights. Our approach ensures we can confidently challenge China on areas where we disagree and uphold the UK’s national security—the first duty of our Government.
This visit builds a platform for a long-term relationship with China that works squarely in our national interest, ensuring our economy has the broad base and resilient foundations for the growth that makes working people in every corner of Britain better off.
[HCWS361]
Office for Budget Responsibility: Economic and Fiscal Forecast
Rachel Reeves Excerpts(1 month, 1 week ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Today I can inform the House that I have asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast for publication on 26 March 2025.
This forecast, in addition to the forecast that was published in October 2024, will fulfil the obligation required by the Budget Responsibility and National Audit Act 2011 for the OBR to produce at least two forecasts in a financial year.
I intend to respond to the March forecast with a parliamentary statement. This is in line with my commitment to deliver one major fiscal event a year, to give families and businesses the stability and certainty they need and, in turn, to support the Government’s growth mission.
[HCWS315]
Oral Answers to Questions
Rachel Reeves Excerpts(1 month, 2 weeks ago)
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David Williams (Stoke-on-Trent North) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
At the Budget, the Government announced major steps towards delivering a once-in-a-generation increase in social housing, including a £500 million boost to the affordable homes programme, increasing annual spend to £3.1 billion. The Government will set out future grant investment beyond the current affordable homes programme at phase 2 of the spending review.
David Williams
In Stoke-on-Trent and Kidsgrove there are many historic buildings that are lying dormant, and they have done so for a very long time. What steps will the Chancellor take to help to bring these beautiful buildings back into use as affordable homes for local people?
Rachel Reeves
Stoke-on-Trent has a proud industrial history and some beautiful buildings. My hon. Friend makes an important point—I will raise it with colleagues at the Ministry of Housing, Communities and Local Government. The £500 million boost to the affordable homes programme also allows up to 10% of that delivery to come from acquiring existing homes. Social landlords, including some local authorities, can bid for funding to bring empty homes back into use for social housing.
Sir Gavin Williamson (Stone, Great Wyrley and Penkridge) (Con)
Many of my constituents have benefited over many years from the right to buy their council homes and social housing, which has given them an important step on to the ladder to home ownership. The discounts in Staffordshire are going to be cut to £16,000. I do not doubt that the Chancellor, like me, wants to help as many people as possible on to the path to home ownership. Will she pledge to review that decision with regard to the impact it will have on so many people, and look at restoring that discount in future?
Rachel Reeves
As the right hon. Gentleman will know, home ownership fell under the previous Government. We are determined to turn that around and ensure that more people, particularly families, get on to the housing ladder. As he has confirmed, the right to buy discounts will continue, but in future every penny of that money will go back into building new social housing, so that more people can have a home of their own and a roof over their head.
Bob Blackman (Harrow East) (Con)
Mr Mark Sewards (Leeds South West and Morley) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
We have brought stability back to the economy, which is the foundation for attracting investment and is vital to our growth mission. We have already launched the national wealth fund, which will mobilise over £70 billion of private investment with an expanded remit for the Office for Investment overseen by the Minister for investment. In October, we welcomed global investors from around the world to London for the international investment summit, where we were able to announce a record-breaking £63 billion of private sector investment into our economy.
Darren Paffey
I have been meeting a number of maritime companies in and around the port of Southampton, and they tell me that the single biggest key to unlocking further investment would be the expansion of the national grid to our city. What steps is the Chancellor taking to secure that vital investment, and will she meet me and local industry leaders to discuss how this would boost our local and national economy?
Rachel Reeves
It was a pleasure to go to my hon. Friend’s constituency in June to see the port and the wealth creation and jobs that it is bringing to Southampton. As I set out in the autumn Budget, as well as focusing on the national wealth fund’s capital investment in ports, we are committed to accelerating grid connections and ensuring that new network infrastructure is built at pace to unlock investment and growth opportunities. We are particularly focused on driving network build, including by completing the strategic planning of the energy system needed for 2030, to ensure that projects such as those my hon. Friend has mentioned in Southampton make the progress that they need to.
Alan Gemmell
New green businesses such as XLCC in Ayrshire, a sub-sea cable manufacturer, are seeking long-term investment to create jobs. Recently, my hon. Friend the Member for North Ayrshire and Arran (Irene Campbell) and I visited its training academy in Irvine. What more will my right hon. Friend the Chancellor do to help Scottish businesses such as XLCC to secure long-term investment, and might she visit Ayrshire to see it in action?
Rachel Reeves
I thank my hon. Friend for his question and for the invitation. In October, the Government launched the national wealth fund to mobilise billions of pounds of investment into world-leading clean energy and growth industries. I am pleased that the national wealth fund already announced a £20 million investment in XLCC to support it in moving towards a construction phase. This will support 900 jobs, as well as making a contribution to the UK being a clean energy superpower by strengthening the home-grown energy suppliers that are fundamental to achieving our energy independence.
Mr Sewards
As the chair of the all-party parliamentary group for Yorkshire and Northern Lincolnshire, I am always on the lookout for opportunities to encourage investment and growth in our region. That is why I am backing the campaign to put the national infrastructure and service transformation authority in Leeds, and I was delighted that the national wealth fund was put in Leeds. Given these facts, will my right hon. Friend the Chancellor meet me to discuss the opportunities we have to maximise the benefits from the national wealth fund?
Rachel Reeves
I welcome the work that my hon. Friend does on the all-party parliamentary group for Yorkshire and Northern Lincolnshire. As I announced in October, the UK Infrastructure Bank has now become the national wealth fund and it will expand its team and be headquartered in the brilliant city of Leeds, to realise our ambition on the national wealth fund. The national wealth fund will also have a strong regional focus, working with the mayors, including Tracy Brabin in West Yorkshire, so that we can realise the potential of all our regions, including Yorkshire. Further details on the national infrastructure and service transformation authority’s governance and location will be confirmed in due course.
Dave Doogan (Angus and Perthshire Glens) (SNP)
One of the economic investments that we do not want to see in Angus and Perthshire Glens, or anywhere else in Scotland, is foreign multinationals buying up farms because farmers have given up under the weight of the taxes introduced by this Government. This would destroy local supply chains and make larger farms that are less responsive to consumer demand. What has the Chancellor seen in her impact assessment of the agricultural property relief changes to allay those fears?
Rachel Reeves
One of the current challenges, as the hon. Gentleman will know, is that agricultural property relief is often used for tax avoidance. People are buying farmland not because they are family farmers but because they do not want to pay any inheritance tax. That is why we are reforming the system to bring in much-needed money to fund our public services, and to have a fair system with a 50% discount to inheritance tax paid on agricultural property and a 10-year period to pay that inheritance tax, interest free.
Pippa Heylings (South Cambridgeshire) (LD)
Last week, I joined a biotech boot camp in South Cambridgeshire. Although the investors and entrepreneurs recognise and welcome the research and development budget announced in the Budget, they said it is a reduction from 2021. Does the Chancellor recognise that we need to increase investment in R&D to encourage long-term investment in our leading services?
Rachel Reeves
We were really pleased to announce an R&D budget of more than £20 billion at the autumn Budget. This is important to funding and accelerating R&D not just in the hon. Lady’s constituency but across the country. Combined with the corporate tax road map, as well as the commitment to continuing funding for Horizon, our universities and great innovators can look to the future with confidence.
Josh Babarinde (Eastbourne) (LD)
Local leisure and sports facilities, such as the Sovereign centre where I learned to swim, deserve more long-term investment. I want Eastbourne to be able to invest its £20 million from the towns fund in such facilities, but it will not be unlocked by the Treasury until 2026. Will the Chancellor commit to accelerating the unlocking of that funding, so that we can invest in facilities for local families and people in Eastbourne much sooner?
Rachel Reeves
I agree it is important that all children learn to swim, especially in our coastal communities. We had to make difficult decisions at the Budget, but I am happy to try to arrange a meeting between the hon. Gentleman and the relevant Minister to make sure the investment can go ahead at pace.
Jonathan Hinder (Pendle and Clitheroe) (Lab)
Jen Craft (Thurrock) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
Sound management of the public finances means spending wisely and not sending money to fraudsters. Today, I have appointed the health expert Tom Hayhoe as our new covid counter-fraud commissioner. As chair of an NHS trust during the pandemic, he saw the urgency of getting personal protective equipment to NHS staff when they needed it. Now he is at his desk in my Department starting the work to investigate the billions of pounds lost to fraud and underperforming contracts, and instead ensuring that that money is where it belongs—in our public services.
Jen Craft
My constituents expect the Government to treat taxpayer money with the utmost respect. However, during the pandemic the Conservatives handed out contracts to their friends and donors and failed to prevent fraud, using the crisis as a cover for their greed. Does the Chancellor agree with me that that money belongs to the taxpayer?
Rachel Reeves
My hon. Friend’s constituents in Thurrock are right to be angry about the waste and corruption that happened under the previous Government. That money belongs to the British people and in our public services, not in the pockets of fraudsters taking advantage of a national emergency. Tom Hayhoe will leave no stone unturned in investigating the carnival of fraud that the previous Government presided over, including in PPE contracts, where they recommended any attempts to reclaim that money be abandoned. Letting huge sums of taxpayers’ money be wasted would be egregious and I will not tolerate that.
Harriet Cross (Gordon and Buchan) (Con)
The Treasury consistently insists that only 500 farms a year will be impacted by the family farm tax. However, the Central Association for Agricultural Valuers calculates that the real number will be five times higher and will include many farms in my Gordon and Buchan constituency. Who is right: the Treasury or the experts?
Rachel Reeves
We have published the detail of how that money is raised, but the numbers from His Majesty’s Revenue and Customs are very clear: only a quarter of estates will pay any additional tax. At the moment, the vast majority of agricultural property relief is enjoyed by a very small number of very large and very expensive estates. That is not affordable, and it will not continue.
Brian Leishman (Alloa and Grangemouth) (Lab)
I declare an interest: I am a member of Unite the Union. The Grangemouth refinery costs £100 million a year to run, and its economic contribution to Scotland exceeds £400 million per annum. Unite has a credible plan to save the refinery and prevent thousands of job losses. Will the Treasury consider the plan, and meet me, Unite and the refinery owners to discuss its viability and Government intervention for the public good?
Rachel Reeves
I am happy to arrange a meeting between my hon. Friend and the relevant Minister.
Nick Timothy (West Suffolk) (Con)
Last week, the Chancellor told the CBI conference that she would not come back
“with more borrowing or more taxes”.
Last Wednesday, the Prime Minister hung her out to dry and refused to repeat those words. Will she repeat them today and rule out any more borrowing or any more taxes—yes or no?
Rachel Reeves
At the Budget in October, we had to fill a £22 billion black hole left by the previous Government. We will never have to repeat a Budget like this one, because we will not have to clear up the mess of the previous Government ever again.
Rachel Reeves
The hon. Gentleman talks about uncertainty, but he was a Minister in the Treasury under Liz Truss, when huge damage was done to families’ and businesses’ finances. Frankly, I will take no lessons from Conservative Members on how to run the economy. We have already done phase 1 of the spending review; phase 2 will begin shortly and be concluded next year, when we will make multi-year settlements on resource departmental expenditure limits and capital budgets for the next few years.
Richard Fuller
The Chancellor may find that in her job, she needs to listen and learn lessons. One of the many criticisms of the last Budget was that the Government fiddled the figures to borrow more money, and still left little headroom for if their forecast went wrong. Since the Budget, business confidence has collapsed, putting further pressure on that headroom. Does the Chancellor have a problem with balancing her books, and will she, like Oliver Twist, be coming back for more?
Rachel Reeves
The hon. Gentleman will know that there is more headroom in our Budget in October than was left by the previous Government. The lesson I have learned is that I will never play fast and loose with the public finances, as the Conservative party did, because when it did, interest rates went through the roof and inflation topped 11%, and families and businesses in our country are still paying the price for its disastrous economic management.
Clive Efford (Eltham and Chislehurst) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
At the Budget, I wiped the slate clean after 14 years of chaos and mismanagement of our public finances, and I have brought stability back to our economy, so that we can get on with fulfilling our promise of delivering change. That means investing to fix the NHS and rebuild Britain, while ensuring that working people do not face higher taxes in their payslips.
Only through economic growth can we deliver on the promise of change. That is why we have wasted no time in delivering on the Government’s No. 1 mission. We have established the national wealth fund, have kick-started planning reforms to boost long-term growth, are developing an industrial strategy, and are announcing reforms for our world-leading financial services sector, including in pensions. I am under no illusion about the size and scale of the challenge that we face, and the struggles of working people. That is why we choose stability and investment. The Conservatives, however, choose chaos, austerity and decline.
Clive Efford
According to the Local Government Association, local government spending on public services is down 42% on what it would have been had it kept pace with demand and costs since 2010. My local authority, Greenwich, faces a £3 million to £5 million gap in commissioned social care costs, and after 14 years of Tory austerity, there is very little headroom to bridge that gap. Does my right hon. Friend agree that local authorities need more assistance to bridge such gaps in the December local government finance statement?
Rachel Reeves
As my hon. Friend will know, in the autumn Budget and phase 1 of the spending review, more than £1 billion was made available to local government, including £600 million for social care. The allocation of that money will be set out in the normal way over the next few weeks, so that local government is funded properly and can deliver the services that it needs to deliver.
Mel Stride (Central Devon) (Con)
What a pleasure it is to appear opposite the right hon. Lady for the first time. I was tempted to ask her how things were going, but I did not want to start out by being unkind. I will instead ask this: when she recently pledged to the CBI that she would not raise taxes again, did she mean it?
Rachel Reeves
I welcome the right hon. Member to his place, and look forward to many exchanges with him across the Dispatch Box. At the Budget in October, as he knows, we had to fix a £22 billion black hole in the public finances. Some of that black hole comes from the fact that we are the only G7 economy in which employment is lower than it was before the pandemic, when he was Secretary of State for Work and Pensions, so we had to raise taxes to fund our public services; but never again will we have to repeat a Budget like that one, because we have now wiped the slate clean and drawn a line under the mess created by the previous Government.
Mel Stride
I did not actually discern any answer to my question, so may I put it this way? No. 10 has stated that it is not prepared to stand by the Chancellor’s commitment on tax. Is that because No. 10 changed its mind, or because the right hon. Lady spoke without thinking?
Rachel Reeves
No Chancellor of the Exchequer would write five years’ worth of Budget in their first five months in post, but I can say that we will never have to deliver a Budget like that again. We took decisions in this Budget in order to wipe the slate clean after the mismanagement, decline and chaos of the previous Government. That required us to make difficult decisions, but we were right to make them, so that we can get going with our plans to achieve growth and reform public services, and deliver the NHS and schools that our country desperately needs.
Jacob Collier (Burton and Uttoxeter) (Lab)
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
Rachel Reeves
The tax rises in the Budget were used to provide a £22.6 billion uplift in the Department of Health and Social Care budget to ensure that our NHS is properly funded. The NHS will ensure that important services are properly funded, and those allocations will be set out in the normal way.
Lee Pitcher (Doncaster East and the Isle of Axholme) (Lab)
Rachel Reeves
I will head to the Great Northern conference in Hull later this afternoon to speak about the impact of this Government’s policies on Yorkshire and the wider north of England. We are supporting local leaders and communities through integrated settlements, are investing in the trans-Pennine route upgrade, East West Rail and High Speed 2, and are reshaping public services.
Helen Maguire (Epsom and Ewell) (LD)
Peter Lamb (Crawley) (Lab)
Rachel Reeves
In the past four weeks since the Leader of the Opposition was elected, the Conservatives have made £7 billion of commitments to cut taxes, but with no idea of how they would cut public services to afford them. I do not know how they will vote on national insurance, but we can see pretty quickly how they ended up leaving us a £22 billion black hole.
Damian Hinds (East Hampshire) (Con)
The single most important factor in raising living standards, driving income equality and improving children’s life chances is having a job. Why is the Chancellor disregarding that fundamental truth, with tax policies that will actively harm employment, particularly youth employment?
Steve Yemm (Mansfield) (Lab)
Rachel Reeves
I happily join my hon. Friend in welcoming Mansfield’s success. We have launched a revamped fair payment code, under which signatories commit to paying their suppliers on time, and the disability finance code for entrepreneurship. That comes on top of reforms announced at the Budget to protect small businesses, such as doubling the employment allowance to £10,500, and our commitment to maintaining the small profits rate and marginal relief at their current rates and thresholds, as well as to freezing the small business multiplier for 2025-26—
Rachel Reeves
And like my hon. Friend, I look forward to small business Saturday this week—
Mr Speaker
Order. [Interruption.] No, we are going to have a little talk now, because this is not fair; I have to get all these other Members in. I understand that these are set questions, but questions and answers should be short—it works both ways—otherwise I cannot get Members in and it makes my job impossible. Please work with me.
Rupert Lowe (Great Yarmouth) (Reform)
I cannot help but think that this morning has made for rather depressing listening. We hear this repetition about a £22 billion black hole, but we are dealing with very serious matters such as people’s employment. Ultimately I hear the Chancellor talking about a central planning agenda, but it is public services that are the problem; they are wasting money, and we must seriously consider that. Will the Chancellor accept, if the economy turns down next year, which it surely will, that she has made a mess of it?
Rachel Reeves
We mention the £22 billion because that is the inheritance that the Government now have to address. We have published a line-by-line account of the £22 billion black hole that the previous Government left. We are now growing the economy through our national wealth fund, our planning reform and our pensions reform, and we are reforming our public services, so that we can deliver for the people we came here to represent.
Clive Lewis (Norwich South) (Lab)
As the Treasury team may be aware, there is a growing body of evidence that the growth of the financial sector beyond a certain size has an impact on the economy, particularly the productive economy. Over a 10-year period, it has cost the rest of the economy £4.5 trillion, so how will the Chancellor ensure that a growing financial sector will not harm the Government’s wider missions and the productive economy?
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Today is International Day of Persons with Disabilities. With a disability employment gap of nearly 30% and a disability pay gap of nearly 14%, how is the Chancellor helping to address those inequalities?
Rachel Reeves
Just today, the Government launched the disability finance code for entrepreneurship—something championed by my right hon. Friend the Secretary of State for Business and Trade—to ensure that people from all types of backgrounds, including those with disabilities, can start and grow their own businesses.
Jim Allister (North Antrim) (TUV)
When the Windsor framework was introduced, it was accompanied by the boast that access to the EU single market would result in a huge increase in investment in Northern Ireland. Is the Chancellor aware that Invest NI has reported that there has been no upturn, and is that not because of the barrier presented by the Irish sea border to the bringing of raw materials into Northern Ireland from Great Britain?
Notification of Contingent Liability
Rachel Reeves Excerpts(2 months, 1 week ago)
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The Chancellor of the Exchequer (Rachel Reeves)
The independent Monetary Policy Committee of the Bank of England decided at its meeting ending on 3 February 2022 to reduce the stocks of UK Government bonds and sterling non-financial investment-grade corporate bonds held in the asset purchase facility by ceasing to reinvest maturing securities. The Bank ceased reinvestment of assets in this portfolio in February 2022 and commenced sales of corporate bonds on 28 September 2022, and sales of gilts acquired for monetary policy purposes on 1 November 2022. The sales of corporate bonds ceased on 6 June 2023, with a small number of outstanding corporate bonds reaching maturity on 5 April 2024. Therefore, the APF is now comprised solely of gilts.
The Chancellor at the time agreed a joint approach with the Governor of the Bank of England in an exchange of letters on 3 February 2022 to reduce the maximum authorised size of the APF for asset purchases every six months, as the size of APF holdings reduces.
Since 30 April 2024 when the maximum authorised size of the APF was last reduced, the total stock of assets held by the APF for monetary policy purposes has fallen further from £704.2 billion to £654.5 billion. In line with the approach agreed with the Governor, the authorised maximum total size of the APF has therefore been reduced to £654.5 billion, comprising entirely of gilts.
The risk control framework previously agreed with the Bank will remain in place, and HM Treasury will continue to monitor risks to public funds from the APF through regular risk oversight meetings and enhanced information sharing with the Bank.
There will continue to be an opportunity for HM Treasury to provide views to the MPC on the design of the schemes within the APF, as they affect the Government’s broader economic objectives and may pose risks to the Exchequer.
The Government will continue to indemnify the Bank, the APF and its directors from any losses arising out of, or in connection with, the facility. Provision for any payment due under the liability will continue to be sought through the normal supply procedure.
A full departmental minute has been laid in Parliament providing more detail on this contingent liability.
[HCWS208]
Financial Statement and Budget Report
Rachel Reeves Excerpts(2 months, 3 weeks ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Madam Deputy Speaker, on 4 July, the country voted for change. This Government were given a mandate: to restore stability to our economy and to begin a decade of national renewal; to fix the foundations and deliver change through responsible leadership in the national interest. That is our task, and I know that we can achieve it.
My belief in Britain burns brighter than ever, and the prize on offer is immense. As my right hon. Friend the Prime Minister said on Monday, change must be felt: more pounds in people’s pockets; an NHS that is there when we need it; and an economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards. The only way to drive economic growth is to invest, invest, invest. There are no shortcuts, and, to deliver that investment, we must restore economic stability and turn the page on the last 14 years.
This is not the first time that it has fallen to the Labour party to rebuild Britain. In 1945, it was the Labour party that rebuilt our country out of the rubble of the second world war. In 1964, it was the Labour party that rebuilt Britain with the white heat of technology, and, in 1997, it was the Labour party that rebuilt our schools and our hospitals. Today, it falls to this Labour party—to this Labour Government—to rebuild Britain once again. And while this is the first Budget in more than 14 years to be delivered by a Labour Chancellor, it is the first Budget in our country’s history to be delivered by a woman. I am deeply proud to be Britain’s first ever female Chancellor of the Exchequer. To girls and young women everywhere, I say: let there be no ceiling on your ambition, your hopes and your dreams. Along with the pride that I feel standing here today, there is also a responsibility to pass on a fairer society and a stronger economy to the next generation of women.
Madam Deputy Speaker, the Conservative party failed our country: its austerity broke our national health service; its Brexit deal harmed British businesses; and its mini-Budget left families paying the price with higher mortgages. The British people have inherited the Conservative party’s failure: a black hole in the public finances; public services on their knees; a decade of low growth; and the worst Parliament on record for living standards.
Let me begin with the public finances. In July, I exposed a £22 billion black hole at the heart of the previous Government’s plans—a series of promises that they made, but had no money to deliver—covered up from the British people and covered up from this House. The Treasury’s reserve, set aside for genuine emergencies, was spent three times over just three months into the financial year. Today, on top of the detailed document that I provided to the House in July, the Government are publishing a line-by-line breakdown of the £22 billion black hole that we inherited, which shows hundreds of unfunded pressures on the public finances this year, and into the future too.
The Office for Budget Responsibility has published its own review of the circumstances around the spring Budget forecast. It says that the previous Government
“did not provide the OBR with all the information to them”
and that, had the OBR known about these
“undisclosed spending pressures that have since come to light”,
then its spring Budget forecast for spending would have been “materially different”.
Let me be clear: that means that any comparison between today’s forecast and the OBR’s March forecast is false, because the previous Government hid the reality of their public spending plans. Yet at the very same Budget, they made another £10 billion-worth of cuts to national insurance. It was the height of irresponsibility, and they knew it. They had run out of road, and they called an election to avoid making difficult choices. So let me make this promise to the British people: never again will we allow a Government to play fast and loose with the public finances and never again will we allow a Government to hide the true state of our public finances from our independent forecaster. That is why I can today confirm that we will implement in full the 10 recommendations from the independent Office for Budget Responsibility’s review.
The country has inherited not just broken public finances, but broken public services. The British people can see and feel that in their everyday lives: NHS waiting lists at record levels; children in portacabins as school roofs crumble; trains that do not arrive; rivers filled with polluted waste; prisons overflowing; crimes that are not investigated; and criminals who are not punished. That is the country’s inheritance from the Conservative Government. They had no plan to improve our public services and they had no plan to put our public finances on a sustainable footing—quite the opposite.
Since 2021, there have been no detailed plans for departmental spending set out beyond this year, and the previous Government’s plans relied on a baseline for spending this year, which we now know was wrong because it did not take into account the £22 billion black hole. They also failed to budget for costs that they knew would materialise, including funding for vital compensation schemes for victims of two terrible injustices—[Interruption.]
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. I have just spoken about respecting colleagues. The public are watching, and they want to hear what the Chancellor has to say. Simmer down.
Rachel Reeves
I would politely suggest that hon. Members listen to this, because it includes funding for vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office Horizon scandal.
The Leader of the Opposition rightly made an unequivocal apology for the injustice of the infected blood scandal on behalf of the British state, but he did not budget for the costs of compensation. Today, for the very first time, we will provide specific funding to compensate those infected and those affected in full, with £11.8 billion in this Budget. I am also today setting aside £1.8 billion to compensate victims of the Post Office Horizon scandal—redress that is long overdue for the pain and injustice that they have suffered.
The leadership campaign for the Conservative party has now been going on for over three months, but in all that time there has been not one single apology for what they did to our country. The Conservative party has not changed—but this is a changed Labour party and we will restore stability to our country once again. The scale and seriousness of the situation that we have inherited cannot be underestimated. Together, the hole in our public finances this year, which recurs every year, the compensation schemes that the previous Government did not fund, and their failure to assess the scale of the challenges facing our public services, means that this Budget raises taxes by £40 billion. Any Chancellor standing here today would have to face this reality, and any responsible Chancellor would take action. That is why today I am restoring stability to our public finances and rebuilding our public services.
As a former economist at the Bank of England, I know what it means to respect our economic institutions. I put on record my thanks to the Governor of the Bank, Andrew Bailey, and the independent Monetary Policy Committee. Today, I can confirm that we will maintain the MPC’s target of 2% inflation, as measured by the 12-month increase in the consumer prices index. I thank James Bowler, the permanent secretary to the Treasury, and my team of officials. I also thank my predecessors as Chancellor of the Exchequer for their wise counsel as I have prepared for this Budget. In particular, I thank the former right hon. Member for Spelthorne for his invaluable advice in this weekend’s papers, where he concluded that his mini-Budget “wasn’t perfect”. For once, he and I are in absolute agreement. Finally, I thank Richard Hughes and his team at the Office for Budget Responsibility for their work in preparing today’s economic and fiscal outlook.
Let me take the House through that forecast. The cost of living crisis under the last Government stretched household finances to their limit, with inflation hitting a peak of above 11%. Today, the OBR says that CPI inflation will average 2.5% this year, 2.6% in 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.
Moving on to economic growth, today’s Budget marks an end to short-termism, so I am pleased that, for the first time, the OBR has published not only five-year growth forecasts but a detailed assessment of the growth impacts of our policies over the next decade. The new charter for Budget responsibility, which I am publishing today, confirms that this will become a permanent feature of our framework. The OBR forecasts that real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029. The OBR is clear: this Budget will permanently increase the supply capacity of the economy, boosting long-term growth. [Interruption.] It may sound shocking to Conservative Members, but this Government are boosting long-term economic growth.
Every Budget that I deliver will be focused on our mission to grow the economy, and underpinning that mission are the seven key pillars of our growth strategy, developed and delivered alongside business, and all driven forward by our excellent Financial Secretary to the Treasury. The first and most important is to restore economic stability. That is my focus today. Secondly, increasing investment and building new infrastructure is vital for productivity, so we are catalysing £70 billion of investment through our national wealth fund, and we are transforming our planning rules to get Britain building again. Thirdly, to ensure that all parts of the UK can realise their potential we are working with the devolved Governments and partnering with our mayors to develop local growth plans. Fourthly, to improve employment prospects and skills we are creating Skills England, delivering our plans to make work pay and tackling economic inactivity.
Fifthly, we are launching our long-term modern industrial strategy and expanding opportunities for our small and medium-sized businesses to grow. Sixthly, to drive innovation, we are protecting record funding for research and development to harness the full potential of the UK’s science base. Finally, to maximise the growth benefits of our clean energy mission, we have confirmed key investments, such as carbon capture and storage, to create jobs in our industrial heartlands. Our approach is already having an impact: just two weeks ago, we delivered an international investment summit that saw businesses commit £63.5 billion of investment into our country, creating nearly 40,000 jobs across the United Kingdom. But we cannot undo 14 years of damage in one go. Economic growth will be our mission for the duration of this Parliament.
In our manifesto, we set out the fiscal rules that would guide this Government. I am confirming those today: our stability rule and our investment rule. The stability rule means that we will bring the current Budget into balance so that we do not borrow to fund day-to-day spending. We will meet that rule in 2029-30, until that becomes the third year of the forecast. From then on, we will balance the current Budget in the third year of every Budget, held annually each autumn. That will provide a tougher constraint on day-to-day spending, so that difficult decisions cannot be constantly delayed or deferred. The OBR says that the current Budget will be in deficit by £26.2 billion in 2025-26 and by £5.2 billion in 2026-27, before moving into surplus of £10.9 billion in 2027-28, £9.3 billion in 2028-29 and £9.9 billion in 2029-30, meeting our stability rule two years early.
Monthly public sector finance data show that Government borrowing in the first six months of this year was already running significantly higher than the OBR’s March forecast, and the OBR confirmed today that borrowing in this financial year is now £127 billion, reflecting the inheritance left by the Conservative party. The increase in the net cash requirement in 2024-25 is lower than the increase in borrowing, at £22.3 billion higher than the spring forecast. Because of the action that we are taking, borrowing falls from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast. Public sector net borrowing will be £105.6 billion in 2025-26, £88.5 billion in 2026-27, £72.2 billion in 2027-28, £71.9 billion in 2028-29 and £70.6 billion in 2029-30.
Before I come to tax, it is vital that we are driving efficiency and reducing wasteful spending. In July, to begin dealing with our inheritance, I made £5.5 billion of savings this year. Today we are setting a 2% productivity, efficiency and savings target for all Departments to meet next year by using technology more effectively and joining up services across Government. As set out in our manifesto, I will shortly be appointing our covid corruption commissioner. They will lead our work to uncover those companies that used a national emergency to line their own pockets, because that money belongs in our public services, and taxpayers want it back. I can confirm today that David Goldstone has been appointed chair of the new office for value for money to help us realise the benefits from every pound of public spending.
Today, I am also taking three steps to ensure that welfare spending is more sustainable. First, we inherited the last Government’s plans to reform the work capability assessment. We will deliver those savings as part of our fundamental reforms to the health and disability benefits system that my right hon. Friend the Work and Pensions Secretary will bring forward.
Secondly, I can today announce a crackdown on fraud in our welfare system—often the work of criminal gangs. We will expand the DWP’s counter-fraud teams, using innovative new methods to prevent illegal activity, and provide new legal powers to crack down on fraudsters, including direct access to bank accounts to recover debt. That package saves £4.3 billion a year by the end of the forecast.
Thirdly, the Government will shortly be publishing the “Get Britain Working” White Paper, tackling the root causes of inactivity with an integrated approach across health, education and welfare, and we will provide £240 million for 16 trailblazer projects, targeted at those who are economically inactive and most at risk of being out of education, employment or training, to get people into work and reduce the benefits bill.
Before a Government can consider any change to a tax rate or threshold, they must ensure that people pay what they already owe. We will invest to modernise His Majesty’s Revenue and Customs systems using the very best technology, and recruit additional HMRC compliance and debt staff. We will clamp down on the umbrella companies that exploit workers, increase the interest rate on unpaid tax debt to ensure that people pay on time, and go after the promoters of tax avoidance schemes. Those measures to reduce the tax gap raise £6.5 billion by the end of the forecast, and I thank the Exchequer Secretary to the Treasury for his outstanding work on that agenda.
I know that for working people up and down our country, family finances are stretched and pay cheques do not go as far as they once did, so today I am taking steps to support people with the cost of living. It was the Labour Government who introduced the national minimum wage in 1999. That had a transformative impact on the lives of working people. As promised in our manifesto, we asked the Low Pay Commission to take account of the cost of living for the first time. I can confirm that we will accept the commission’s recommendation to increase the national living wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker. And, for the first time, we will move towards a single adult rate, phased in over time by initially increasing the national minimum wage for 18 to 20-year-olds by 16.3%, as recommended by the Low Pay Commission, taking it to £10 an hour—a Labour policy to protect working people, being delivered by a Labour Government once again.
Secondly, I have heard representations from colleagues across this House, including my hon. Friends the Members for Shipley (Anna Dixon) and for Scarborough and Whitby (Alison Hume), and the right hon. Member for Kingston and Surbiton (Ed Davey), about the carer’s allowance and the impact of the current policy on carers who are looking to increase the hours that they work. Carer’s allowance currently provides up to £81.90 per week to help those with additional caring responsibilities. Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the national living wage per week—the largest increase in the carer’s allowance since it was introduced in 1976. That means that a carer can now earn over £10,000 a year while receiving carer’s allowance, allowing them to increase their hours where they want to, and keep more of their money. I am also concerned about the cliff edge in the current system and the issue of overpayments. My right hon. Friend the Work and Pensions Secretary has announced an independent review to look at the issue of overpayments, and we will work across the House to develop the right solutions.
Thirdly, we will provide £1 billion from next year to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. Fourthly, having heard representations from the Joseph Rowntree Foundation, the Trussell Trust and others, I will reduce the level of debt repayments that can be taken from a household’s universal credit payment each month from 25% to 15% of their standard allowance. That means that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty, and those who benefit will gain an average of £420 a year.
Our plan to make work pay will also protect working people. I know that Conservative Members are deeply interested in our plans. Having seen their colleagues repeatedly dismissed at short notice, I know that they are worried about their future under the right hon. Member for North West Essex (Mrs Badenoch). They should rest easy knowing that our plan will protect working people from unfair dismissal; it will safeguard them from bullying in the workplace; and it will improve their access to paternity and maternity leave. I hope the new shadow Cabinet will soon be grateful for those increased protections at work.
It is right that we protect those who have worked all their lives. In our manifesto, we promised to transfer the investment reserve fund in the mineworkers’ pension scheme to members. I have listened closely to my hon. Friends the Members for Easington (Grahame Morris), for Doncaster Central (Sally Jameson), for Blaenau Gwent and Rhymney (Nick Smith) and for Ayr, Carrick and Cumnock (Elaine Stewart) on this issue. Today, we are keeping our promise, so that working people who powered our country receive the fair pension that they are owed.
Our manifesto committed to the triple lock, meaning that spending on the state pension is forecast to rise by over £31 billion by 2029-30, to ensure our pensioners are protected in their retirement. That commitment means that while working-age benefits will be uprated in line with CPI at 1.7%, the basic and new state pension will be uprated by 4.1% in 2025-26. This means that over 12 million pensioners will gain up to £470 next year, up to £275 more than uprating by inflation. The pension credit standard minimum guarantee will also rise by 4.1%, from around £11,400 per year to around £11,850 a year for a single pensioner.
While I have sought to protect working people with measures to reduce the cost of living, I have had to take some very difficult decisions on tax. I want to set out my approach to fuel duty. Baked into the numbers that I inherited from the previous Government is an assumption that fuel duty will rise in line with the retail prices index next year and that the temporary 5p cut will be reversed. To retain the 5p cut and to freeze fuel duty again would cost over £3 billion next year. At a time when the fiscal position is so difficult, I have to be frank with the House that that is a substantial commitment to make. I have concluded that, in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working people. It would mean fuel duty rising by 7p per litre, so I have decided today to freeze fuel duty next year, and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.
The last Government made cuts of £20 billion to employees’ and self-employed national insurance in their final two Budgets. Those tax cuts were not honest, because we now know that they were based on a forecast that the OBR says would have been “materially different” had it known the true extent of the last Government’s cover-up. Since July, I have been urged on multiple occasions to reconsider those cuts—to increase the taxes that working people pay and see in their payslips—but I have made an important choice today: to keep every single commitment that we made on tax in our manifesto. I say to working people, I will not increase your national insurance, I will not increase your VAT, and I will not increase your income tax. Working people will not see higher taxes in their payslips as a result of the choices I am making today. That is a promise made and a promise fulfilled.
Any responsible Chancellor would need to make difficult decisions today to raise the revenues required to fund our public services and restore economic stability. So in today’s Budget, I am announcing an increase in employers’ national insurance contributions. We will increase the rate of employers’ national insurance by 1.2 percentage points to 15% from April 2025, and we will reduce the secondary threshold—the level at which employers start paying national insurance on each employee’s salary—from £9,100 a year to £5,000. This will raise £25 billion per year by the end of the forecast period. I know that this is a difficult choice; I do not take this decision lightly. We are asking businesses to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too, as the OBR has set out today. [Interruption.]
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. Our constituents are watching—they need to be able to hear the Chancellor. Simmer down.
Rachel Reeves
In the circumstances I have inherited, it is the right choice to make. Successful businesses depend on successful schools, healthy businesses depend on a healthy NHS, and a strong economy depends on strong public finances. If the Conservative party chooses to oppose this choice, it is choosing more austerity, more chaos and more instability. That is the choice our country faces, too.
As I make this choice, I know it is particularly important to protect our smallest companies. Having heard representations from the Federation of Small Businesses and others, I am today increasing the employment allowance from £5,000 to £10,500. This means that 865,000 employers will not pay any national insurance at all next year, and over 1 million will pay the same or less than they did previously. This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages.
Let me now come to capital gains tax. We need to drive growth, promote entrepreneurship and support wealth creation while raising the revenue required to fund our public services and restore our public finances. Today, we will increase the lower rate of capital gains tax from 10% to 18% and the higher rate from 20% to 24%, while maintaining the rates of capital gains tax on residential property at 18% and 24%. This means that the UK will still have the lowest capital gains tax rate of any European G7 economy.
Alongside these changes to the headline rates of capital gains tax, we are maintaining the lifetime limit for business asset disposal relief at £1 million to encourage entrepreneurs to invest in their businesses. Business asset disposal relief will remain at 10% this year before rising to 14% in April 2025 and to 18% from 2026-27, maintaining a significant gap compared with the higher rate of capital gains tax. Together, the OBR says that these measures will raise £2.5 billion by the end of the forecast.
In a sign of this Government’s commitment to supporting growth and entrepreneurship, we have already extended the enterprise investment and venture capital trust schemes to 2035, and we will continue to work with leading entrepreneurs and venture capital firms to ensure that our policies support a positive environment for entrepreneurship in the UK.
Next, I turn to inheritance tax. Only 6% of estates will pay inheritance tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today. First, the previous Government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030. That means that the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.
Secondly, we will close the loophole created by the previous Government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into inheritance tax from April 2027. Finally, we will reform agricultural property relief and business property relief. From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with a 50% relief at an effective rate of 20%. This will ensure that we continue to protect small family farms, with three quarters of claims unaffected by these changes.
I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the alternative investment market and other similar markets, setting the effective rate of tax at 20%. Taken together, these measures raise over £2 billion by the final year of the forecast.
Next, I can confirm that the Government will renew the tobacco duty escalator for the remainder of this Parliament at RPI+2%, increase duty by a further 10% on hand-rolling tobacco this year, and introduce a flat-rate duty on all vaping liquid from October 2026, alongside an additional one-off increase in tobacco duty to maintain the incentive to give up smoking. We will increase the soft drinks industry levy to account for inflation since it was introduced, as well as increasing the duty in line with CPI each year going forward. These measures will raise nearly £1 billion per year by the end of the forecast period.
We want to support the take-up of electric vehicles, so I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first-year rates of vehicle excise duty from April 2025. These measures will raise around £400 million by the end of the forecast period.
Let me update the House on our plans for air passenger duty—and I can see the Leader of the Opposition’s ears have pricked up. Air passenger duty has not kept up with inflation in recent years, so we are introducing an adjustment, meaning an increase of no more than £2 for an economy class short-haul flight. But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50%. That is equivalent to £450 per passenger for a private jet to, say, California. [Laughter.]
Let us now turn to our high street businesses. I know that, for them, a major source of concern is business rates. From 2026-27, we intend to introduce two permanently lower tax rates for retail, hospitality and leisure properties, which make up the backbone of our high streets across the country, and it is our intention that it is paid for by a higher multiplier for the most valuable properties. The previous Government created a cliff edge next year, as temporary reliefs end, so I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26 up to a cap of £110,000 per business. Alongside this, the small business tax multiplier will be frozen next year.
Next, I can confirm that alcohol duty rates on non-draught products will increase in line with RPI from February next year. However, nearly two thirds of alcoholic drinks sold in pubs are served on draught, so today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%—[Hon. Members: “Hear, hear!”]—which means a penny off the pint in the pub.
Alongside the changes I am making today, I am publishing a corporate tax road map, providing the business certainty called for by the CBI, the British Chambers of Commerce and the Institute of Directors. This confirms our commitment to cap the rate of corporation tax at 25%—the lowest in the G7—for the duration of this Parliament, while maintaining full expensing and the £1 million annual investment allowance, and keeping the current rates of research and development relief to drive innovation.
In our manifesto, we made a number of commitments to raising funding for our public services. First, I have always said that if you make Britain your home, you should pay your taxes here, too, so today I can confirm that we will abolish the non-dom tax regime, and we will remove the outdated concept of domicile from the tax system from April 2025. We will introduce a new, residence-based scheme, with internationally competitive arrangements for those coming to the UK on a temporary basis, while closing the loopholes in the scheme designed by the Conservative party. To further encourage investment into the UK, we will extend the temporary repatriation relief to three years and expand its scope, bringing billions of pounds of new funds into Britain. The independent Office for Budget Responsibility says that this package of measures will raise £12.7 billion over the next five years.
The fund management industry provides a vital contribution to our economy, but as our manifesto set out, there needs to be a fairer approach to the way that carried interest is taxed, so we will increase the capital gains rates on carried interest to 32% from April 2025, and from April 2026 we will deliver further reform to ensure that the specific rules for carried interest are simpler, fairer and better targeted.
In our manifesto, we committed to reforming stamp duty land tax to raise revenues, while supporting those buying their first home. We are increasing the stamp duty land tax surcharge for second homes, known as the higher rate for additional dwellings, by 2 percentage points to 5%, which will come into effect from tomorrow. This will support over 130,000 additional transactions from people buying their first home or moving home over the next five years.
Next, we are committed to reforming the energy profits levy on oil and gas companies. I can confirm today that we will increase the rate of the levy to 38%. The levy will now expire in March 2030, and we will remove the 29% investment allowance. To ensure that the oil and gas industry can protect jobs and support our energy security, we will maintain the 100% first-year allowances, and the decarbonisation allowances, too.
Finally, 94% of children in the UK attend state schools. To provide the highest-quality support and teaching that they deserve, we will introduce VAT on private school fees from January 2025, and we will shortly introduce legislation to remove their business rates relief from April 2025, too.
We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5 billion in the final year of the forecast. I can confirm today that they will in fact raise over £9 billion to support our public services and restore our public finances. That is a promise made and a promise fulfilled.
I have one final decision to announce on tax today. The previous Government froze income tax and national insurance thresholds in 2021, and then did so again after the mini-Budget. Extending their threshold freeze for a further two years raises billions of pounds—money to deal with the black hole in our public finances and repair our public services. Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips. I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions made by the previous Government. From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this Government choose to protect working people every single time.
Those are the choices I have made to restore economic stability and protect working people. My next choice is to begin to repair our public services. In recent months, we conducted the first phase of the spending review to set departmental budgets for 2024-25 and 2025-26. I thank my right hon. Friend the Chief Secretary to the Treasury for his tireless work with colleagues from across Government. Because I have taken difficult decisions on tax today, I am able to provide an injection of immediate funding over the next two years to stabilise and support our public services.
The next phase of the spending review will report in late spring, and I have set out the overall envelope today. Day-to-day spending from 2024-25 onwards will grow by 1.5% in real terms, and today departmental spending, including capital spending, will grow by 1.7% in real terms. At the election, we promised that there would be no return to austerity, and today we deliver on that promise, but given the scale of the challenge that we face in our public services, there will still be difficult choices in the next phase of the spending review. Just as we cannot tax and spend our way to prosperity, neither can we simply spend our way to better public services. We will deliver a new approach to public service reform, using technology to improve public services and taking a zero-based approach, so that taxpayers’ money is spent as effectively as possible, and so that we focus on delivering our key priorities.
In the first phase of the spending review, I have prioritised day-to-day funding to deliver on our manifesto commitments. I want every child to have the very best start in life, and the best possible start to their school day. I know that my right hon. Friend the Secretary of State for Education shares my ambition, so today I am tripling investment in breakfast clubs to fund them in thousands of schools. I am increasing the core schools budget by £2.3 billion next year to support our pledge to hire thousands more teachers in key subjects. So that our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education. Finally, this Government are committed to reforming special educational needs provision, to improve outcomes for our most vulnerable children and ensure that the system is financially sustainable. To support that work, I am today providing a £1 billion uplift in funding—a 6% real-terms increase from this year.
There is no more important job for Government than keeping our country safe, and we are conducting a strategic defence review, to be published next year. As set out in our manifesto, we will set a path to spending 2.5% of GDP on defence at a future fiscal event. Today, I am announcing a total increase in the Ministry of Defence’s budget of £2.9 billion next year, ensuring that the UK comfortably exceeds our NATO commitments, and providing guaranteed military support to Ukraine of £3 billion per year for as long as it takes. Last week, alongside my right hon. Friend the Defence Secretary, I announced, in addition to that, further support for Ukraine, on top of our NATO commitment. That support comes through our £2.26 billion contribution to the G7’s extraordinary revenue acceleration agreement. That will be repaid using profits from immobilised Russian sovereign assets.
As we approach Remembrance Sunday, it is vital that we take time to remember those who have served our country so bravely. I am today announcing funding to commemorate the 80th anniversary of VE and VJ Day next year, to honour those who served at home and abroad. We must also remember those who experienced the atrocities of the Nazi regime at first hand. I would like to pay tribute to Lily Ebert, the Holocaust survivor and educator who passed away aged 100 earlier this month. I am today committing a further £2 million for Holocaust education next year, so that charities such as the Holocaust Educational Trust can continue their work to ensure that those vital testimonies are not lost, and are preserved for the future.
To repair our public services, we need to work alongside our mayors and local leaders. We will deliver a significant, real-terms funding increase for local government next year, including £1.3 billion of additional grant funding to deliver essential services, with at least £600 million in grant funding for social care and £230 million to tackle homelessness and rough sleeping. We are today confirming that Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year, giving mayors meaningful control of funding for their local areas. To support our high streets, we are taking action to deal with the sharp rise in shoplifting that we have seen in recent years. We will scrap the effective immunity for low-value shoplifting introduced by the Conservative party, and having listened closely to organisations such as the British Retail Consortium and the trade union USDAW, I am providing additional funding to crack down on the organised gangs that target retailers, and to provide more training for our police officers and retailers, in order to stop shoplifting in its tracks.
Finally, I am today providing funding to support public services and drive growth across Scotland, Wales, and Northern Ireland. Having discussed the matter with the First Minister of Wales, Eluned Morgan, my hon. Friend the Under-Secretary of State for Wales (Dame Nia Griffith), and my hon. Friend the Under-Secretary of State for Justice (Alex Davies-Jones), I am today providing £25 million to the Welsh Government next year for the maintenance of coal tips, to ensure that we keep our communities safe. To support growth, including in our rural areas, we will proceed with city and growth deals in Northern Ireland, in Causeway Coast and Glens, and the Mid South West. We will drive growth in Scotland, which is a key priority for Scottish Labour and our leader, Anas Sarwar, including through a city and growth deal in Argyll and Bute.
This Budget provides the devolved Governments with the largest real-terms funding settlement since devolution, delivering an additional £3.4 billion to the Scottish Government through the Barnett formula—funding that must now be used effectively in Scotland to deliver the public services that the people of Scotland deserve. This Budget also provides £1.7 billion to the Welsh Government, and £1.5 billion to the Northern Ireland Executive in 2025-26. I said there would be no return to austerity; that is the choice I have made today.
To rebuild our country, we need to increase investment. The UK lags behind every other G7 country when it comes to business investment as a share of our economy. That matters. It means that the UK has fallen behind in the race for new jobs, new industries, and new technology. By restoring economic stability, and by establishing the national wealth fund to catalyse private funding, we have begun to create the conditions that businesses need to invest, but there is also a significant role for public investment. For too long, we have seen Conservative Chancellors cut investment and raid capital budgets to plug gaps in day-to-day spending. The result is clear for all to see: hospitals without the equipment they need; school buildings not fit for our children; a desperate lack of affordable housing; and economic growth held back at every turn. Under the plans I inherited, public investment was set to fall from 2.5% to 1.7% of GDP, but in Washington last week, the International Monetary Fund was clear: more public investment is badly needed in the UK.
Having listened to the case made by the former Governor of the Bank of England, Mark Carney, the former Treasury Minister, Jim O’Neill and the former Cabinet Secretary, Gus O’Donnell, among others, I am confirming our investment rule. As was set out in our manifesto, we will target debt falling as a share of the economy. Debt will be defined as public sector net financial liabilities—or net financial debt, for short. That metric has been measured by the Office for National Statistics since 2016 and forecast by the Office for Budget Responsibility since that date, too.
Net financial debt recognises that Government investment delivers returns for taxpayers by counting not just the liabilities on a Government’s balance sheet, but the financial assets, too. That means we count the benefits of that investment, not just the costs, and we free up our institutions to invest, just as they do in Germany, France and Japan. Like our stability rule, our investment rule will apply in 2029-30, until that becomes the third year of the forecast. From that point onwards, net financial debt will fall in the third year of every forecast. Today, the OBR says that we are already meeting our target two years early, with net financial debt falling by 2027-28 and £15.7 billion of headroom in the final year.
So that we drive the right incentives in Government investments, we will introduce four key guardrails to ensure capital spending is good value for money and drives growth in our economy. First, our portfolio of new financial investments will be delivered by expert bodies, such as the national wealth fund, and must by default earn a rate of return at least as large as that on gilts. Secondly, we will strengthen the role of institutions to improve infrastructure delivery. Thirdly, we will improve certainty, setting capital budgets for five years and extending them at spending reviews every two years. Finally, we will ensure greater transparency for capital spending, with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the Office for Budget Responsibility at every forecast. Taken together with our stability rule, these fiscal rules will ensure that our public finances are on a firm footing, while enabling us to invest prudently alongside business.
The capital plans I now set out to drive growth across our country and repair the fabric of our nation are possible only because of our investment rule. Let me set out those investment plans. Today, we are confirming our plans to capitalise the national wealth fund to invest in the industries of the future, from gigafactories to ports to green hydrogen. Building on those investments, my right hon. Friend the Business Secretary is driving forward our modern industrial strategy, working with businesses and organisations such as Make UK to set out the sectors with the biggest growth potential. Today, we are confirming multi-year funding commitments for these areas of our economy, including nearly £1 billion for the aerospace sector to fund vital research and development, building on our industry in the east midlands, the south-west and Scotland; more than £2 billion for the automotive sector to support our electric vehicle industry and develop our manufacturing base, building on our strengths in the north-east and the west midlands; and up to £520 million for a new life sciences innovative manufacturing fund.
For our world-leading creative industries, we will legislate to provide additional tax relief for visual effect costs in TV and film, and we are providing £25 million for the North East combined authority, which it plans to use to remediate the Crown Works Studios site in Sunderland, creating 8,000 new jobs.
To unlock these growth industries of the future, we will protect Government investment in research and development, with more than £20 billion-worth of funding. This includes at least £6.1 billion to protect core research funding for areas such as engineering, biotechnology and medical science through Research England, other research councils and the national academies. We will extend the innovation accelerators programme in Glasgow, Manchester and the west midlands. With more than £500 million of funding next year, my right hon. Friend the Secretary of State for Science, Innovation and Technology will continue to drive progress in improving reliable, fast broadband and mobile coverage across our country, including in rural areas.
We committed in our manifesto to build 1.5 million homes over the course of this Parliament, and my right hon. Friend the Deputy Prime Minister is driving that work forward across government. Today, I am providing more than £5 billion of Government investment to deliver our plans on housing next year. We will increase the affordable homes programme to £3.1 billion, delivering thousands of new homes. We will provide £3 billion-worth of support in guarantees to boost the supply of homes and support our small house builders. We will provide investment to renovate sites across our country, including at Liverpool Central Docks, where we will deliver 2,000 new homes, and funding to help Cambridge realise its full growth potential.
Alongside this investment, we will put the right policies in place to increase the supply of affordable housing. Having heard representations from local authorities, social housing providers and Shelter, I can today confirm that the Government will reduce right-to-buy discounts and that local authorities will be able to retain the full receipts from any sales of social housing, so that we can reinvest them back into housing stock and into new supply. By doing that, we will give more people a safe, secure and affordable place to live.
We will provide stability to social housing providers with a social housing rent settlement of CPI plus 1% for the next five years, and we will deliver on our manifesto commitment to hire hundreds of new planning officers to get Britain building again. We will also make progress on our commitment to accelerate the remediation of homes, following the findings of the Grenfell inquiry, with £1 billion of investment to remove dangerous cladding next year.
The last Government made a number of promises on transport, but failed to fund them. Working with my right hon. Friend the Transport Secretary, I am changing that. We are today securing the delivery of the trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester, delivering fully electric local and regional services between Manchester and Stalybridge by the end of this year, with a further electrification of services between Church Fenton and York by 2026, to help grow our economy across the north of England with faster and more reliable services.
We will deliver East West Rail to drive growth between Oxford, Milton Keynes and Cambridge, with the first services running between Oxford, Bletchley and Milton Keynes next year, and trains between Oxford and Bedford running from 2030. We are delivering railway schemes that improve journeys for people across our country, including upgrades at Bradford Forster Square station, improving capacity at Manchester Victoria and electrifying the Wigan to Bolton line.
My right hon. Friend the Transport Secretary has also set out a plan for how to get a grip of HS2. Today, we are securing delivery of the project between Old Oak Common and Birmingham, and we are committing the funding required to begin tunnelling work to London Euston station. That will catalyse private investment into the local area, delivering jobs and growth.
I am also funding significant improvements to our road network. For too long, potholes have been an all-too-visible reminder of our failure to invest as a nation. Today that changes, with a £500 million increase in road maintenance budgets next year—more than delivering on our manifesto commitment to fix an additional 1 million potholes each year. We will provide over £650 million of local transport funding to improve connections across our country, in towns such as Crewe and Grimsby and in our villages and rural areas from Cornwall to Cumbria. While the previous Government’s policy was for the bus fare cap to end this December, we understand how important bus services are for our communities, so we will extend the cap for a further year, setting it at £3 until December 2025. Finally, we will deliver £1.3 billion of funding to improve connectivity in our city regions, funding projects such as the Brierley Hill metro extension in the west midlands, the renewal of the Sheffield Supertram, and West Yorkshire mass transit, including in Bradford and Leeds.
To bring new jobs to Britain and drive growth across our country, we are delivering our mission to make Britain a clean energy superpower, led by my right hon. Friend the Energy Secretary. Earlier this month, we announced a significant multi-year investment between Government and business in carbon capture and storage, creating 4,000 jobs across Merseyside and Teesside. Today, I am providing funding for 11 new green hydrogen projects across England, Scotland and Wales—they will be among the first commercial-scale projects anywhere in the world—including in Bridgend, East Renfrewshire and Barrow-in-Furness. We are kick-starting the warm homes plan by confirming an initial £3.4 billion over the next three years to transform 350,000 homes, including a quarter of a million low-income and social homes, and we will establish GB Energy, providing funding next year to set it up at its new home in Aberdeen.
Overall, we will invest an additional £100 billion over the next five years in capital spending—that is possible only because of our investment rule. The OBR says today that this investment will drive growth across our country in the next five years and, in the longer term, increase GDP by up to 1.4%. It will crowd in private investment, meaning more jobs and more opportunities in every corner of the UK. That is the choice that I have made: to invest in our country and to grow our economy.
Today, I am setting out two final areas in which investment is so badly needed to repair the fabric of our nation. My hon. Friend the Member for Lewisham West and East Dulwich (Ellie Reeves) and I joined the Labour party because of the condition of our schools in the 1980s and 1990s under Conservative Governments. When we were at secondary school, my sixth form was a couple of prefab huts in the playground. My school, like so many others, was rebuilt by the last Labour Government, but after 14 years of Tory government, progress has gone backwards: school roofs are crumbling and millions of children are facing the same backdrop as I did. I will be the Chancellor who changes that.
Today, I am providing £6.7 billion of capital investment to the Department for Education next year—a 19% real-terms increase on this year. That includes £1.4 billion to rebuild over 500 schools in the greatest need, including St Helen’s primary school in Hartlepool, Mercia academy in Derby and so many more across our country. We will provide £2.1 billion more to improve school maintenance—£300 million more than this year—ensuring that all our children can learn somewhere safe. That will include dealing with reinforced autoclaved aerated concrete-affected schools in the constituencies of my hon. Friends the Members for Watford (Matt Turmaine), for Stourbridge (Cat Eccles) and for Hyndburn (Sarah Smith) and beyond, alongside investment in new teachers and funding for thousands of new breakfast clubs. This Government are giving our children and young people the opportunities that they deserve.
I come to our most cherished public service of all: our NHS. My right hon. Friend the Health Secretary is beginning to repair the damage of the last 14 years. In our first week in office, he commissioned an independent report into the state of our health service by Lord Darzi. Its conclusions were damning. While our NHS staff do a remarkable job, and we thank them for it, it is clear that in so many areas we are moving in the wrong direction. A hundred thousand infants waited over six hours in A&E last year. Three hundred and fifty thousand people are waiting a year for mental health support. Cancer deaths here are higher than in other countries. It is simply unforgiveable.
In the spring, we will publish a 10-year plan for the NHS to deliver a shift from hospital to community, from analogue to digital and from sickness to prevention. Today, we are announcing a down payment on that plan to enable the NHS to deliver 2% productivity growth next year. These reforms are vital, but we should be honest: the state of the NHS that we inherited after—I quote Lord Darzi—
“the most austere decade since the NHS was founded”
means that reform must come alongside investment. So today, because of the difficult decisions that I have taken on tax, welfare and spending, I can announce that I am providing a £22.6 billion increase in the day-to-day health budget and a £3.1 billion increase in the capital budget over this year and next. This is the largest real-terms growth in day-to-day NHS spending outside of covid since 2010.
Let me set out what this funding is delivering. Many NHS buildings have been left in a state of disrepair, so we will provide £1 billion of health capital investment next year to address the backlog of repairs and upgrades across our NHS. To increase capacity for tens of thousands more procedures next year, we will provide a further £1.5 billion for new beds in hospitals across our country, new capacity for over a million additional diagnostic tests, and new surgical hubs and diagnostic centres so that people waiting for their treatment can get it as quickly as possible.
My right hon. Friend the Health Secretary will be setting out further details of his review into the new hospital programme in the coming weeks and publishing in the new year, but I can tell the House today that work will continue at pace to deliver those seven hospitals affected by the RAAC crisis, including West Suffolk hospital in Bury St Edmunds and Leighton hospital in Crewe. And finally, because of this record injection of funding, the thousands of additional beds that we have secured and the reforms that we are delivering in our NHS, we can now begin to bring waiting lists down more quickly and move towards our target for waiting times to be no longer than 18 weeks by delivering on our manifesto commitment for 40,000 extra hospital appointments a week. That is the difference that this Labour Government are making.
The choices I have made today are the right choices for our country—to restore stability to our public finances, to protect working people, to fix our NHS and to rebuild Britain. That does not mean these choices are easy, but they are responsible. If the Conservatives disagree with the choices that I have made, they must answer: what choices would they make? Would they again choose the path of irresponsibility—the path taken by Liz Truss—and ignore the problems in our public finances all together? If that is their choice, they should say so. But let me be clear: if they disagree with my choices on tax, they would not be able to protect working people. If they disagree with our plans to fund public services, they would have to cut schools and hospitals. If they disagree with our investment rule, they would have to delay or cancel thousands of projects that drive growth across our country.
This is a moment of fundamental choice for Britain. I have made my choices—the responsible choices—to restore stability to our country and to protect working people. More teachers in our schools, more appointments in our NHS, more homes being built, fixing the foundations of our economy, investing in our future, delivering change and rebuilding Britain. We on the Government Benches commend those choices, and I commend this statement to the House.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Value added tax (private school fees) (motion no. 34);
(b) Stamp duty land tax (additional dwellings: purchases before 1 April 2025) (motion no. 35);
(c) Stamp duty land tax (purchases by companies) (motion no. 37);
(d) Rates of tobacco products duty (motion no. 46).—(Rachel Reeves.)
Question agreed to.
Madam Deputy Speaker (Ms Nusrat Ghani)
We come now to the motion entitled “Income Tax (Charge)”. It is on this motion that the debate will take place today and on the succeeding days. The questions on this motion and the remaining motions will be put at the end of the Budget debate on Wednesday 6 November.
Oral Answers to Questions
Rachel Reeves Excerpts(2 months, 3 weeks ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Ms Polly Billington (East Thanet) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
This is likely to be the last time that the shadow Chancellor, the right hon. Member for Godalming and Ash (Jeremy Hunt), is up against me at the Dispatch Box. We have had the privilege of these exchanges for just over two years now, and I have a huge amount of respect for him. He steered our country through a very difficult time after the mini-Budget, and I wish him well in whatever he chooses to do next.
If UK living standards, as measured by real household disposable income per capita, had grown by the same amount between 2010 and 2023 as they did between 1997 and 2010, the amount would have been over £4,000 higher in 2023. We are committed to boosting economic growth to turn that around. Although it will have been welcome news for millions of families that inflation is now below 2%, there is still more to do. Earlier this month, we delivered our first international investment summit, announcing over £60 billion of investment and unlocking nearly 38,000 jobs in the UK, all focused on creating and spreading opportunities to lift living standard.
Joe Morris
The Conservatives oversaw a living standards disaster. In places such as Hexham, Prudhoe and Throckley in my constituency, people saw hardly any improvements to their incomes in over 14 years. Surely the clearest sign of whether government is working is whether working people feel better off. Does the Chancellor agree that papering over Tory failure is not enough, and that in tomorrow’s Budget we must reset the foundations of our economy?
Rachel Reeves
My hon. Friend is right: the previous Parliament was the worst ever recorded for living standards. Tomorrow’s Budget is an opportunity to fix that and turn the page so that we can start delivering for families in Hexham and all around the country.
Ms Rimmer
The bottom 50% of the population owned less than 5% of wealth in 2021, while the top 10% stacked up 57% of it—up from 52.5% in 1995. In our communities, the less well-off are struggling with energy prices and other costs. What will the Government do to ensure that the gap closes?
Rachel Reeves
We have already announced the child poverty taskforce, which is working to publish a comprehensive strategy to tackle child poverty. We will publish that strategy in spring next year. We have also provided £500 million, including the Barnett impact, to extend the household support fund in England until the end of March next year, which will help the most vulnerable households to cover the costs of essentials such as food, energy and water.
Kirsteen Sullivan
Shamefully, under the last Conservative Government, the need for food banks soared to levels even higher than during the pandemic. Recent research shows that in my Bathgate and Linlithgow constituency, the number of food parcels distributed has risen by 77% over the past five years, and that in 2022-23, 27% of children were living in poverty after housing costs. What steps are the Government taking to reduce the need for food banks in the context of child poverty?
Rachel Reeves
I thank my hon. Friend for her question and congratulate her on her great work on the Co-op’s food justice policy. As she knows, we are right behind her in our commitment to raise living standards across the country. We made a manifesto commitment to update the remit of the Low Pay Commission so that, for the first time ever, it will take into account the cost of living when making recommendations about the minimum wage.
Ms Billington
As my right hon. Friend will be aware, coastal communities such as mine struggle with a low-pay, low-skill economy. Does she acknowledge the importance of the minimum wage in tackling this problem and supporting our communities and local economies?
Rachel Reeves
My hon. Friend is absolutely right. It is why we will ensure that the Low Pay Commission takes into account the cost of living, and why we will close the gap between the youth rate of minimum wage and the overall rate, so that all adults can be paid a fair wage for their work.
Dame Harriett Baldwin (West Worcestershire) (Con)
The living standards of a 90-year-old pensioner on a £13,500 income are falling sharply this winter as a result of the Chancellor’s decision to take away the winter fuel allowance. Tomorrow, she has the chance to increase the threshold. Will she take it?
Rachel Reeves
As the hon. Lady knows, because of our commitment to the triple lock, the basic state pension and the new state pension will continue to rise. This winter, the new state pension is worth £900 more than it was a year ago, and it is likely to rise by a further £450 next April. Indeed, during the course of this Parliament, because of the triple lock, the new state pension is likely to be worth £1,700 more—much more than the value of the winter fuel payment.
Jess Brown-Fuller (Chichester) (LD)
I am sure that the Treasury was pleased to receive £1.5 billion in a windfall tax from Octopus Energy. Would the Chancellor consider using that money to reinstate the winter fuel allowance for one year until the Treasury has had the opportunity to find a better system of means-testing, so that my vulnerable residents and pensioners in Chichester are not falling off a cliff edge this winter?
Rachel Reeves
I can understand the hon. Member’s concern, but of course, that £1.5 billion was already baked into the forecast—it is not new money to spend on initiatives. As she knows, we inherited a £22 billion black hole in the public finances; we will set out the detail of that at the Budget tomorrow, but because of that, we have had to make very difficult choices. Even in those difficult circumstances, though, we have protected the winter fuel payment for the most vulnerable pensioners who are on pension credit. We have also boosted the uptake of pension credit, so that people get the support they are entitled to.
Graham Stuart (Beverley and Holderness) (Con)
Residents of Joseph Rowntree’s St Ellens Court all gathered recently to tell me about the devastating impact that the cut in the winter fuel payment will have on their living standards, and people in Withernsea gathered Saturday last to demonstrate against it. Tomorrow, the Chancellor can do the right thing; will she?
Rachel Reeves
I am sure the right hon. Gentleman told them about the £22 billion gap in the public finances that his Government left, which has required the difficult decisions this Government have had to make to clean up the mess left by the Conservative party.
Paul Holmes (Hamble Valley) (Con)
With the promised £300 cut in energy bills not materialising, the winter fuel payment scrapped for pensioners, and now the bus cap lifted for working people—whatever definition of that term the Chancellor is using today—can she honestly say that living standards will improve for everybody under this Government?
Rachel Reeves
On the bus price cap specifically, the hon. Member will know that the previous Government put no money in to extend that cap. We have put money in to ensure that the bus price cap remains at an affordable level for people, unlike the previous Government, who just had short-term gimmicks.
Dr Luke Evans (Hinckley and Bosworth) (Con)
Ben Coleman (Chelsea and Fulham) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
The Government’s growth mission will counteract 14 years of sluggish economic growth, kick-starting a decade of national renewal. We have wasted no time in getting to work: we have already launched the national wealth fund, introduced reforms to the planning system, and hosted the international investment summit, securing more than £63 billion of investments across the United Kingdom. Work continues, and I look forward to updating the House on our next steps for growth in tomorrow’s Budget.
Josh Simons
As co-chair of the Labour Growth Group, I welcome the Chancellor’s decision to unleash a revolution in investment in Britain, but the capital we must invest in is not just physical but digital. For years, Conservative Members cut capital investment in technology, depressing productivity and leaving workers with less money in their pocket. What steps is the Chancellor taking to boost long-term investment, especially in digital and technology?
Rachel Reeves
I thank my hon. Friend for his excellent work as co-chair of the Labour Growth Group. I know that he is passionate about how we can use data to boost productivity and improve public services, and he is working with Wigan council and his local NHS trust to build data-driven tools to better deliver preventive healthcare.
The Government recognise that attracting private investment into digital and technology is crucial for driving growth, which is why we have already prioritised them in the modern industrial strategy to ensure that we are creating the right conditions for investment. Since the Government took office, we have been pleased to welcome more than £25 billion of investment into UK data centres, helping to create thousands of jobs and meet the growing demand for data, artificial intelligence and machine learning.
Ms Minns
Does the Chancellor agree that a modern NHS that is fit for the future is essential to our country’s economic growth? Will she find time to visit the new Pears Cumbria School of Medicine when it opens in Carlisle next year?
Rachel Reeves
I thank my hon. Friend for that question. I absolutely recognise the important role of the NHS and the health of our nation in getting people back to work and in boosting the economy. That is why in tomorrow’s Budget we will set out further detail of how we will increase the number of elective appointments per week, delivering one of the Government’s first steps in office to reduce waiting times in the NHS.
I was delighted to meet Professor Hugh Brady from Imperial College London at the international investment summit. He shared the detail of important plans to partner with the University of Cumbria to help the next generation of medical professionals in my hon. Friend’s constituency and to address staffing shortfalls and healthcare needs in the area. I commend her work in this important area.
Dave Robertson
High streets in Lichfield and Burntwood in my constituency were let down as, for 14 years, the Conservative party fiddled while our high street economies burned. Can the Chancellor assure me that regenerating high streets, as the physical manifestation of how well our economy is doing, is a priority for this Treasury?
Rachel Reeves
I welcome my hon. Friend to his place, and he is doing a great job for the people of Lichfield. This Government are committed to delivering a decade of national renewal and ensuring that growth and prosperity are felt everywhere in our country. We will work in partnership with businesses and local communities to rejuvenate our high streets, which are the lifeblood of our local communities, including those in Lichfield and Burntwood. As part of this, we plan to introduce new powers to help fill vacant properties through high street rental auctions. We know that this is such an important issue for so many of our constituencies.
Ben Coleman
Thousands of my constituents in Chelsea and Fulham come from European Union countries, and they are all passionate about the UK economy doing well. Does the Chancellor agree that, for the UK to achieve its full economic growth potential, we need to deepen our trading links with the European Union? If she does, will can she say how the Treasury is working with other Government Departments to achieve this?
Rachel Reeves
I thank my hon. Friend for his question. Since taking office, this Government have been working to reset our relationship with our European friends and neighbours. The Prime Minister recently met the President of the European Commission and agreed to strengthen the UK-EU relationship to address global challenges such as the economic headwinds, geopolitical competition, irregular migration, climate change and energy prices. Improving our relationships will be good for business and good for consumers.
Harriet Cross (Gordon and Buchan) (Con)
I am not going to ask the Chancellor to pre-empt tomorrow’s Budget, although I might actually have some luck if I did, based on current form. Instead, can she confirm to me that she fully appreciates how important agricultural property relief and business property relief are to the farmers and family businesses that do so much to grow local economies across the country?
Rachel Reeves
I recognise the importance of being able to pass on to the next generation the assets people have built up, and we will be setting out more details on all of our tax policies in the Budget tomorrow.
Wendy Chamberlain (North East Fife) (LD)
Shared prosperity funding has been used by local authorities such as Fife council to drive economic growth, particularly through support for small businesses. That funding is due to end in April 2025. Can we get a commitment from the Government that funding for these kinds of schemes will continue?
Rachel Reeves
We will set out more details in the Budget tomorrow, including the consequentials that will go to the Scottish Government.
Sir Desmond Swayne (New Forest West) (Con)
Investment requires a measure of optimism, not the collapse in business confidence that the Chancellor has engineered. She would have done better to stress some of the positives that she inherited, wouldn’t she?
Rachel Reeves
It is good to have an explanation of how to do my job from one of the Conservative Members who crashed our economy. Some £63.5 billion of investment into the UK was announced at our international investment summit—investment in life sciences, investment in data centres and digital, investment in clean energy—because businesses have confidence that this Government are bringing stability back to our economy and working with businesses to seize the opportunities. I am really excited about doing that in all parts of our country and working with business to do so.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Can the Chancellor tell us, to the nearest £10 billion, how much extra would be available for long-term investment were it not for the fire sale of UK Government bonds by the Bank of England, costing the taxpayer dearly?
Rachel Reeves
I started my career as an economist at the Bank of England, and unlike Conservative Members, I think it is incredibly important to recognise the independence of our economic institutions, including the Bank of England and, indeed, the Office for Budget Responsibility.
Daisy Cooper (St Albans) (LD)
Small businesses are the engine of our economy, but many of them are penalised for investing in their businesses because of the broken business rates system. Will the Chancellor ensure that investment is exempted from business rates, and will she ensure that the Budget tomorrow is the final Budget in which business rates are a permanent feature?
Rachel Reeves
I thank the hon. Lady for her question, and I too welcome her to her place.
Small businesses and high street businesses are the lifeblood of all of our communities, including hers in St Albans, and it is important that we support them. In our manifesto, we committed to reform of our business rates system. I will be setting out more details in the Budget yesterday tomorrow, as well as a business tax road map, which will give businesses certainty about the tax environment they will be working with for the next five years.
Mr Tom Morrison (Cheadle) (LD)
John Grady (Glasgow East) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
In July, a Treasury assessment of public spending showed that this Government inherited a £22 billion black hole in the public finances. I took immediate action—[Interruption.] Those on the Opposition Benches may not like it, but it is true. [Interruption.]
Mr Speaker
Order. I cannot hear the Chancellor, and I will hear the Chancellor.
Rachel Reeves
There are not many Conservative Members, but they still make quite a lot of noise.
I took immediate action by identifying savings and making reforms to the spending and fiscal framework to ensure that never again can a Government be allowed to make unfunded commitments, and to leave their successors with a massive black hole, as the Leader of the Opposition and the previous Chancellor did. As my right hon. Friend the Chief Secretary to the Treasury said to the House yesterday, the Budget will confirm the detail of the robust fiscal rules—this was set out in our manifesto—and will set out tax and spending plans, alongside an updated forecast from the independent Office for Budget Responsibility.
John Grady
Does my right hon. Friend agree that being honest and transparent about the state of public finances is the right thing to do, and that having a long-term plan to fix the foundations of our economy and the public finances is preferable to the short-term, chaotic approach taken by the SNP in Scotland, which has led to three consecutive years of emergency in-year budget cuts?
Rachel Reeves
This Government are committed to sustainable public finances, unlike two of the Opposition parties. A stable economy built on stable public finances is a key foundation for growth, which is why Labour is on the Government Benches, and the SNP and the Tories are on the Opposition Benches. The robust fiscal rules set out in our manifesto will put the public finances on a sustainable path, so that we can move the budget into balance, with day-to-day costs being met by revenues, and get debt falling as a share of our economy. Given our challenging inheritance, that will require difficult choices, but this Government will make them to fix the foundations of our economy.
Josh Babarinde (Eastbourne) (LD)
The last Government left Eastbourne borough council in a position in which it spends 49p in every pound it collects in council tax on temporary accommodation. We need a solution, because that is not sustainable for councils or families. Will the Chancellor commit to supporting councils with the cost of temporary accommodation, and to investing in preventing homelessness in the first place?
Rachel Reeves
The hon. Member is absolutely right: the number of people housed in temporary accommodation is a scandal, and the amount that costs taxpayers in Eastbourne and around the country is a double scandal. We made a commitment in our manifesto to building 1.5 million homes during this Parliament. Conservative Members oppose that, but we are determined to do it, because that is the way to bring down the cost of temporary accommodation and ensure that all families have a safe and secure roof over their heads.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
My right hon. Friend is right about the challenge it will be for the Government to balance the public finances. A stiff target of 2% in-year efficiency savings has been set for Departments. What is she doing to make sure that the target is robustly applied, and that Departments do not game it by putting off decisions, which will end up costing more?
Rachel Reeves
I thank the Chair of the Treasury Committee for that question. She is absolutely right that in our July statement, we set a 2% productivity target, not just for the Department of Health and Social Care, as the previous Government did, but for all Departments. Ministers are absolutely determined to deliver against those targets, because that is the way to ensure that we have resources for the frontline public services—our schools, hospitals and police—that we all rely on.
Nick Timothy (West Suffolk) (Con)
Under the last Government, the Chancellor said that interest rates and gilt yields were driven by Government policy. Will the Chancellor guarantee that neither will rise higher than they did under the Conservatives?
Rachel Reeves
The last Government crashed the economy with a mini-Budget and sent interest rates and mortgage rates soaring, putting huge pressure on the costs borne by families and businesses. We will set out our Budget tomorrow, including robust fiscal rules on paying for day-to-day spending through tax receipts and borrowing only to invest, whereas the previous Government borrowed for day-to-day spending, which is why we are in the mess we are in today.
Alan Mak (Havant) (Con)
Last Wednesday, in Washington, the Chancellor announced changes to the debt rules to allow Labour to borrow more. However, published Treasury advice says that increasing borrowing risks interest rates staying higher for longer. Does the Chancellor agree with her Treasury civil servants?
Rachel Reeves
Last week, when I was in Washington, I was very pleased to hear the International Monetary Fund say how important it is that countries, including the UK, borrow to invest in their capital infrastructure. Under the plans we inherited from the previous Government, capital spending as a share of GDP is due to fall from 2.6% to 1.7%. If those decisions were to go forward, it would mean plans delayed and cancelled. We will set out our plans tomorrow in the Budget, but it is crucial that we have rules ensuring that we pay for day-to-day spending through tax receipts, and that we borrow only to invest, unlike the previous Government.
Tim Roca (Macclesfield) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
The Conservative party oversaw years of chaos, which cost not only families but businesses. The Government are committed to delivering the economic stability needed for investor confidence. Our commitment to a credible Budget, strong institutions and robust fiscal rules are at the heart of that plan. Earlier this month, we announced a record-breaking £63.5 billion of investment at our international investment summit. That shows that the UK can attract investment from around the world, to boost jobs and growth here in Britain, through serious, stable Government policy.
Tim Roca
When does the Chancellor think that the Conservative party lost its fiscal credibility? Was it with the Liz Truss mini-Budget? [Interruption.] Was it when national debt rose from 65% to nearly 100% of GDP? Or was it when they made the farcical promise to abolish national insurance?
Mr Speaker
Order. Who wants to go for that cup of tea? Normally this happens at Prime Minister’s questions; I do not want it starting in Treasury questions.
Rachel Reeves
All of the above. That is why my hon. Friend is in his place and Conservative Members are on the Opposition Benches.
Jim Shannon (Strangford) (DUP)
If the Chancellor wants to increase investor confidence, the thing to do is help small and medium-sized enterprises. Tomorrow she will have the opportunity to do that. What will be done to help them? In Northern Ireland, 85% of businesses employ 10 or fewer employees. If she helps the SMEs in Northern Ireland, that will increase employment.
Rachel Reeves
I know that the hon. Gentleman is a proud supporter of businesses big and small in his constituency and across Northern Ireland. I will set out more detail in tomorrow’s Budget, including on business rates, but I recognise how important it is for us to support small businesses, so that they can grow and create jobs right across the United Kingdom.
Gareth Davies (Grantham and Bourne) (Con)
Clearly, the Chancellor is desperately trying to raise old ghosts, along with debt and taxes, but her own broken promises are coming back to haunt her and are frightening investors. It does not have to be Halloween for socialists to spook British business. Why does she think that business confidence has fallen faster in the past three months than at any point since the pandemic?
Rachel Reeves
I would judge this Government on their record: we secured £63.5 billion of investment right across the United Kingdom, creating nearly 40,000 jobs in constituencies up and down our country—good jobs that pay decent wages. That is more than twice the investment that the previous Government secured at their international investment summit. That shows how important it is to return stability to economy and work in partnership with businesses—something that the Conservative party might want to learn a lesson from.
Luke Taylor (Sutton and Cheam) (LD)
Rebecca Long Bailey (Salford) (Ind)
The Chancellor of the Exchequer (Rachel Reeves)
Tomorrow I will present my first Budget. It will be a Budget that fixes the foundations of our economy and delivers on the promise of change. It will turn the page on low growth and will be the start of a new chapter towards making Britain better off. It will mean more pounds in people’s pockets, an NHS that is there when they need it, and businesses creating wealth and opportunity for all.
Rebecca Long Bailey
I commend the Chancellor for recently outlining investment in social housing, but in the interim the Joseph Rowntree Foundation has stated that the previous Government’s decision to freeze local housing allowance rates will push 80,000 private renters on housing benefit, including 30,000 children, into deep poverty during this Parliament. Will the Chancellor now consider unfreezing the allowance and relinking it to the actual cost of local rents, so that those families can keep their heads above water?
Rachel Reeves
My hon. Friend makes a really important point, which I think is familiar to all of us in our communities, about the cost of housing outstretching people’s incomes. In our manifesto we committed to building 1.5 million new homes, including social housing, which is so important and can give security to people who would otherwise be left in insecure housing in the private rented sector.
Mr Speaker
As this is his farewell question time, let us now come to the shadow Chancellor.
Jeremy Hunt (Godalming and Ash) (Con)
This are indeed our final exchanges in the House, so before tomorrow’s fireworks I wish the Chancellor well for the future in her role. There has been a lot of common ground between us. For example, before the election she said that raising employers’ national insurance was a jobs tax that would take money out of people’s pockets. I very much agree with her on that; does she agree with herself?
Rachel Reeves
The right hon. Gentleman knows better than almost anyone else that there a was £22 billion black hole in the public finances. That will require difficult decisions, but even in those circumstances we will do everything in our power to protect the incomes of ordinary working people, so we are committed to ensuring that no working people will see higher taxes in their payslips after the Budget.
Jeremy Hunt
We all know why the Chancellor is inventing this fictitious black hole. Thirty times this year, before the election, she promised not to raise tax, and now she is planning to present the biggest tax-raising Budget in history. More consensually, however, as this is our final exchange, I welcome her announcement last week of a £2.3 billion loan for Ukraine. Does she agree that the strongest signal of resolve that we can send to Putin is a commitment to spending 2.5% of GDP on defence, and does she understand why so many people are worried by the fact that she has yet to do so?
Rachel Reeves
I have always respected the right hon. Gentleman, but I think it is important for us not to deny the seriousness of the situation that we face with the black hole in the public finances. Combined with the lashing out at independent economic institutions, it suggests that he has more in common with Liz Truss and Kwasi Kwarteng than perhaps we thought. I watched my party lurch towards an ideological extreme and deny reality, and we spent years in opposition as a result. The shadow Chancellor risks taking his party down the same path.
Adam Jogee (Newcastle-under-Lyme) (Lab)
Mr Tom Morrison (Cheadle) (LD)
Rachel Reeves
I thank the hon. Gentleman for his question. I went to school in the ’80s and ’90s, and I was taught in portacabins because there was not enough room in my school. I know how important it is that children are taught in proper facilities. We will set out more details of our capital investments at the Budget tomorrow.
Damien Egan (Bristol North East) (Lab)
Helen Maguire (Epsom and Ewell) (LD)
Rachel Reeves
Building the homes that our country needs is a top priority for this Government. In our manifesto, we committed to build 1.5 million homes in this Parliament, including social housing, so that people have access to secure and affordable accommodation and that every family have a roof over their heads. We will set out more details on all of this in the Budget tomorrow.
Mr Paul Foster (South Ribble) (Lab)
Ben Maguire (North Cornwall) (LD)
Rachel Reeves
I thank the hon. Gentleman for his question. This is an issue that resonates right across the House, with so many of us hearing terrible stories at our surgeries about the lack of support for some of the most vulnerable children in society. I know that it is a priority for the Education Secretary too, and we will set out more detail on departmental settlements in the Budget tomorrow.
Sam Carling (North West Cambridgeshire) (Lab)
Emma Foody (Cramlington and Killingworth) (Lab/Co-op)
Rachel Reeves
My hon. Friend is right to draw attention to the disastrous impacts of the Conservative mini-Budget just over two years ago, which is still having an impact on people’s lives as they pay higher mortgage bills. This Government have committed to return sustainability to the economy and to working with business to reform our planning system, our pensions system and our skills system. We have already brought in £63.5 billion of private sector investment to grow our economy in all parts of the country and deliver the jobs and better wages that constituents in Cramlington and right across the country need to see.
Saqib Bhatti (Meriden and Solihull East) (Con)
Small business owners are working people, and they are some of the hardest-working people that I know. The Labour party struggled to define them over the weekend, but does the Chancellor agree that any rise in fuel duty, which the Conservatives froze or cut for 14 years, would be a tax on those hard-working people or those hard-working small business owners?
Rachel Reeves
The previous Government factored into their forecasts an increase in fuel duty this year. I will set out our plans in the Budget tomorrow.
Caroline Voaden (South Devon) (LD)
In South Devon, the average house price is now 14 times the average salary, at £425,000. What measures is the Chancellor taking to ensure that rural and coastal areas, such as the South Hams, which face huge digital and transport connectivity problems, will be included in measures to boost economic growth?
Rachel Reeves
Our commitment to build 1.5 million homes is about ensuring that all our constituents get the chance to have a roof over their head, including in rural areas, with more social housing as well so that people can have a secure tenancy. The hon. Lady is also right to raise the issue of digital connectivity, and we will be setting out more details on infrastructure investment in the Budget tomorrow.
Sir Ashley Fox (Bridgwater) (Con)
During the last election campaign, Labour candidates across Somerset said that a Labour Government would cut energy bills by £300. Will the Chancellor set out the timescale for fulfilling that promise?
Rachel Reeves
I thank the hon. Gentleman for his question, and I note the number of Labour MPs we now have in Somerset and across the south-west of England. We will set out more detail in the Budget tomorrow, but our commitment to investing in home-grown energy will boost our energy security, create good jobs here in Britain and begin to reduce people’s bills, as will our programme to better insulate homes, which the previous Government failed to do.
Danny Beales (Uxbridge and South Ruislip) (Lab)
A hundred councils in England have come together to call for five key changes to unlock much-needed investment in new council homes. They will welcome the news of £500 million of additional grant and changes to the right-to-buy rules, but one issue they also raise is housing revenue account debt and finance. Will Treasury Ministers look specifically at debt allocations and how HRA debt is accounted for, to unlock much-needed investment in council homes?
Mr Gregory Campbell (East Londonderry) (DUP)
However “working people” is defined, does the Chancellor not accept that people on low incomes and part-time employees who earn up to £300 a week should be exempt from paying income tax?
Rachel Reeves
We will set out details of our tax policy in the Budget tomorrow, but this Government have made a commitment to working people that we will not increase their income tax, their national insurance or the value added tax they pay.
Support to Ukraine
Rachel Reeves Excerpts(3 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rachel Reeves)
The UK is committed, alongside our G7 allies, to supporting Ukraine for as long as it takes. Ensuring Ukraine’s security is in the interest of our own national security and shared values. We and our G7 partners have also repeatedly underscored that Russia’s obligations under international law are clear: Russia must pay for the damage it has caused to Ukraine.
The Government have today announced that the United Kingdom will contribute £2.26 billion—$3 billion —to the G7 “Extraordinary Revenue Acceleration” (ERA) Loans to Ukraine scheme. The ERA was announced on 14 June 2024. The scheme will provide Ukraine with approximately $50 billion of additional funding. This funding will be provided through budget support from the G7, repaid using the extraordinary profits generated on immobilised Russian sovereign assets primarily held in the EU.
This funding is additional to both the £3 billion per year of bilateral military support which the UK has committed to for as long as required, and UK Export Finance’s overall £3.5 billion capacity for Ukraine, including support for defence requirements. The UK has also committed to up to $5 billion in fiscal support through loan guarantees on World Bank lending to Ukraine since 2022.
The UK’s contribution to Ukraine under the ERA scheme will be used for budgetary support earmarked for military procurement, bolstering Ukraine’s capacity for self-defence in the face of Russia’s illegal war, and providing vital equipment and support to the front line.
The Government will introduce primary legislation, when parliamentary time allows, seeking parliamentary spending authority to provide this financial assistance. Subject to achieving Royal Assent and concluding a bilateral agreement with Ukraine, the UK will be able to begin disbursing funds to Ukraine and receiving repayments via the EU’s Ukraine Loan Co-operation Mechanism.
The Government intend to begin disbursals within this financial year.
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