Budget Resolutions and Economic Situation
Ranil Jayawardena Excerpts(1 year, 8 months ago)
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Mr Ranil Jayawardena (North East Hampshire) (Con)
The Chancellor always has people asking for more than he could possibly grant, but what I know is that everything that we on the Government Benches ask for is designed to help back British businesses and to go for growth, so that we can create more jobs and boost people’s wages. We do that because all of us know that it is not just about those policies, particular taxes or lines of expenditure, but people and their families out there. This Budget makes positive steps to support families and to ensure that we are supporting the future of our country by helping with childcare, providing the footings for a great education, helping people to get a GP appointment and clearing the NHS backlog.
On that last point, to which I would like to turn first, the abolition of doctors’ taxes in this Budget shows that tax reform does not necessarily mean putting money in people’s pockets, good though that is. Tax reform can be for a simpler tax system that creates positive outcomes for our country and backs our public services. By abolishing the lifetime allowance, and by increasing the annual allowance and the money purchase annual allowance, we are helping people to provide for their own futures and supporting our NHS.
I ask my hon. Friends on the Front Bench and the Chancellor to bear in mind that there is always more to do. There are still tax traps for some of our doctors. For example, there is the 62.5% tax trap between £100,000 and £125,000, which affects some of our most qualified medics, whom we want to retain in our NHS to help provide the care we need. The rate goes down to 45p after £125,000, which shows that it is a trap, and I hope that the Government will look at that in the weeks, months and years ahead. There is also a 71% tax trap for families between £50,000 and £60,000, which affects some of our younger doctors, and we should be finding ways to deal with that.
I welcome the Chancellor’s commitment to helping families with the cost of childcare specifically. It is a great starter for 10. Finding ways to keep down the cost of childcare for parents is important, but we must not lose sight of keeping down the cost of childcare for the taxpayer too. It is extraordinary to see some on the Opposition Benches and elsewhere attack the alignment of the system in England with the system in Scotland, increasing the ratio from 1:4 to 1:5, but what is missing is choice. For 25 years, the consensus has been that everyone should go to work, and the state will provide ever more free childcare, except that it is not free—taxes are at a 70-year high—and I contend that choice is missing from the equation.
Instead of a one-size-fits-all system from Whitehall, families should be able to decide what works for them. Instead of the Government dictating how many hours of free childcare and from who in the years ahead, how about moving to a system of tax reliefs, so that parents can pay for the childcare they want, and from whom they want? Indeed—a radical thought—one parent could even choose to stay at home, allowing the other to work extra hours, if that is what they want to do.
I therefore urge the Treasury to consider reigniting the review into family taxation. Things may have changed since 2019, but I recall that in 2019 single people without a family paid 8% less tax than the OECD average, but a single-earner couple, with two children, paid 26% more. There is an injustice in this that I hope the Government will address in the not-too-distant future by commissioning a family tax review.
That tax review should reflect the fact that familial support not only for childcare but for elderly relatives provides about £1 trillion of unpaid care in this country, which people could decide to pass to the state. I do not believe that is desirable, and I believe that the state should in turn provide the environment that allows people to take responsibility for themselves.
On wraparound childcare, this is an excellent step to help working parents and for them not to have to worry about what happens after school time, but I urge the Government to ensure that we give that money directly to schools and academies to do what is right, providing a co-curricular offer that is suitable for their particular community and their children, who they know best, rather than any Government Department, or indeed any local authority.
We cannot pay for any of this without strong British businesses, and I welcome the full expensing of the business investment. This is a good step to ensure that businesses can take decisions today, but as my right hon. Friend the Member for Wokingham (John Redwood) mentioned a moment ago, we should still seek to revisit corporation tax in the months and years ahead, because any increase in corporation tax will make us less competitive, reduce investment in the long run and stifle job creation, all of which are required for growth. We have seen that with AstraZeneca deciding to move what would have been a £300-million investment in north-west England to Ireland, which means not only a lack of business taxes being paid in this country, but also the personal taxes that would have been paid by the hard-working people who would have worked at that plant. It is not necessary to believe me: even the Institute for Fiscal Studies says the increase in corporation tax will not raise the expected revenue currently suggested by some, and Europe Economics says it will muffle our growth potential, with £30 billion less over 10 years.
I offer one final idea: I urge the Chancellor to look at the VAT threshold for small businesses into the future. Today it stands at £85,000: it has been there since 2017 and is planned to remain there until at least 2026. The fiscal drag means that 60,000 extra businesses are being dragged into this threshold, which halts their growth and pushes them into the grey market. A £250,000 profit is the threshold in the new planned corporation tax and perhaps it provides a round figure for a £250,000 turnover threshold for VAT registration in the future. By not increasing corporation tax or reversing it in the future, by raising the VAT registration threshold and by reversing IR35—which other Members may mention, but I will not—we would be delivering a £67 billion boost after 10 years on top of other growth in the British economy. Investment would be up, jobs would be created, and it would pay for itself.
Sarah Olney (Richmond Park) (LD)
Families were looking to this Budget for support, but the Chancellor, instead of throwing them a lifeline, has thrown them under the bus. Mortgage bills are up, the cost of the weekly shop is up and energy prices are up, all because of Conservative chaos, yet this Government have offered no immediate help with the cost of living. They are so out of touch they might as well be on a different planet.
The Chancellor could have done so much more if only he cared enough. He had enough money in the Treasury to cut people’s energy bills by £500 and take them down to last April’s levels, yet he simply chose not to. And while he may claim he is extending support, that is simply not true: people will pay more for their energy this year than they did last year, not less—even though gas prices are falling. In three months’ time there will be no extra help in place whatsoever. The £400 payment is also gone. Fuel poverty will get worse, not better. The Government will now cut energy support for businesses by 85%. Those shops and restaurants that will not be forced to close will have little choice but to raise their prices. The price of food, clothes and the pint in the local pub will all go up, and all because the Government are cutting support to businesses.
We heard the Chancellor say that this Government will grow the economy by getting people back to work, but his plan is merely tinkering around the edges of a system broken by his very own Government: changing pension rules that will not benefit the majority of people; piecemeal changes to a childcare system that needs wholesale reform; and forcing people with ill health to work by threatening to take away their benefits. Are we really meant to believe that that is the recipe for economic growth?
On this Government’s watch, more than 7 million people are waiting for treatment in the NHS and thousands cannot get discharged from hospital when they are ready because there is no one to look after them. I have some news for the Chancellor: people are not off work because they are on the golf course; they are off work because they are stuck on a hospital waiting list. We cannot fix the economy if we do not fix the workforce, and we cannot fix the workforce if we do not fix the NHS and social care. Giving care workers a pay boost of £2 an hour would be a good way to start. Finally, we should be fixing our crumbling hospitals, which are crying out for some proper investment, but the Government simply do not get that.
Liberal Democrats have been championing the need for properly funded, genuinely free childcare for years, but unless the Government fund free hours at the actual cost of providing them, they will make the problem even worse: a lack of providers and eye-watering fees for full-time childcare. It takes real nerve for the Chancellor to say he wants to get more people into work when he is the one who froze the personal allowance, an unfair stealth tax penalising people for every extra pound they earn.
Do not take it from me that this Government have no idea how to grow our economy: just look at the figures. Under this Conservative Government, the UK is the only major economy that is still smaller than before the pandemic. The International Monetary Fund expects Britain to see the lowest growth of any other G7 country. While, thankfully, it looks like a recession could be avoided, this Government seem content with growth moving at a snail’s pace. If the Bank of England is right, the Government’s economic policy could keep long-term growth stuck at 1%. What does the OBR make of the announcements we have just heard? By 2028, they will add no more than 0.2% to our GDP. What a waste that would be of all the talent and ambition I see across every part of the UK.
However, there is no greater indictment of this Government’s economic policy than their track record on living standards. The OBR today warned of the largest two-year fall in living standards in almost 70 years. According to the Resolution Foundation, the typical household income saw a hit of £700 this year and it is about to fall by another £1,100 over the next year. What is more, over half of that—£650—is due to Conservative tax rises. That is an eye-watering £1,800 over two years taken away by Conservative chaos and tax rises.
Sarah Olney
No, you’ve spoken.
This Government are letting people down all across the UK. In very tough times, the British people have shown remarkable decency and strength, but they are finding it harder and harder to make ends meet. Nearly 3 million people are expected to fall into poverty over the next two years, and in four years’ time over a third of children could be growing up in poverty—the highest point this century. That is the true cost of the cost of living crisis under the Conservatives.
That is why Liberal Democrats are calling for more help with energy bills and mortgages and investment in our public services. Many of these people will either be carers or be receiving care from a loved one, so one thing the Government could do to help right now is finally to raise the carer’s allowance. That would go a huge way towards helping some of the most vulnerable among us. All it takes is a Government who really care, rather than a Government who make people pay for their own mistakes.