Budget Resolutions

Robert Syms Excerpts

Wednesday 6th March 2024 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

In six minutes, it is difficult to put all the good things about this Budget in my speech, but I will try. I will start with the context. We faced the worst public health pandemic for 100 years. We took that on, and made some difficult decisions, because Boris Johnson wanted to save frail people from dying. We sometimes forget how scary and difficult it was dealing with that pandemic. I admit that I was somewhat sceptical of lockdown, and voted against it 16 times, but we cannot impugn the Government’s motives—they were trying to save lives—certainly in the first year, when we did not quite know with what we were dealing. An awful lot of the additional money was funded to keep businesses afloat, some of which have gone on for generations, and to keep people in employment through furlough. What we see today is fairly full employment in this country, and a lot of that is down to the fact that the Government invested money in people when there was a national emergency.

A lot of the problems for the Government over the past year or two are therefore the consequences of lockdown, its cost and the implications of that for public services with people working from home and so on. The first thing I would say is that things are starting to normalise, in the sense that we are getting a falling deficit, national debt is likely to fall and growth is likely to pick up over the next two or three years. As a result of that, for the second fiscal event in a row the Government have been able to cut taxation for 27 million people who are in work. That is to try to improve the incentives for those in work, and that is to be welcomed.

However, the Chancellor had a balance to maintain, because the most important thing is not just to cut tax, but to get interest rates coming down. Inflation is likely to be 2% in the next month or two, and that affords the Bank of England the opportunity to cut rates. Some people in the City think that will probably be on three or four occasions as we go into the summer. If we end up in a situation where we have inflation at 2% or 2.5% and pay increases of 5% or 6%, and we have tax reductions through national insurance and falling interest rates, inevitably the standard of living of many people in this country will go up. That means that people will have more money to spend and the economy should be able to grow. There is a plan, and it is working. I do not think single Budgets make much difference, but it does make a difference when we have a fiscal policy set out over two or three fiscal events and Budgets that want to take things in a particular direction.

I admit I am a bit of an OBR sceptic. Black holes tend to disappear and then arrive. Often it produces figures that are wrong, but on the whole, having a body to give an independent view reassures markets. I am a bit of a Bank of England sceptic, too. The comments of my right hon. Friends the Members for Wokingham (John Redwood) and for Haltemprice and Howden (Sir David Davis) are right: we need to look at the Bank of England’s remit. Growth should be in there, as well as inflation. An interesting thing is that we still pretend that the Bank of England is independent. The reality is that because of that, we do not give it precise advice on what it should do with the overhang from quantitative easing.

My right hon. Friend the Member for Wokingham made the important point that we have lost £40 billion or £50 billion on bonds that the Bank of England bought to get us through covid, and that is largely about timing. If we sell bonds when interest rates are falling, we get better bond prices, and if we sell when interest rates are rising, we get worse bond prices. The tax cuts in this Budget on national insurance are worth about £10 billion. The Bank of England, by mis-timing the selling of bonds it bought in quantitative easing, has so far wasted five times that. If one thinks of a world in which we had not had to pick up that bill and we had delayed getting rid of some of the bonds accumulated with quantitative easing to a time when interest rates were falling, the tax reductions we could have introduced today would have been far more ambitious.

I hope that as interest rates fall, the losses will fall from selling bonds and quantitative easing, and we will get into a better fiscal position. I am sure there is room for another fiscal statement before the next general election. If there is, I look forward to further tax cuts as we go ahead.