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.

Autumn Statement Resolutions

Robert Syms Excerpts

Thursday 23rd November 2023 Commons Chamber

[Sir Robert Syms (Poole) (Con)]

I tend to participate in these debates, because I think they are very important, and when we look at the Government’s record and certainly this Chancellor’s record, it is sometimes best to look back at the last three financial statements and Budgets. Twelve months ago, the Chancellor produced an autumn statement where the predictions were that Britain would have a major reduction in GDP and a recession. The Bank of England also produced similar forecasts, and I can remember the debate about the £50 to £60 billion black hole that the Treasury would have to deal with, which seems to have disappeared. The truth of the matter is that when we are dealing with very large figures and forward projections, we have to take them all with a pinch of salt. In all the time I have been in this House, we have been hearing that we are either about to go bust, or about to boom. The reality is that when it comes to economic forecasting, things are usually not as bad as people think, or not as good as they think.

The Chancellor is turning out to be a very good Chancellor: he is steady, he is solid, and the decisions he has taken have resulted in a better economic out-turn than people projected. What happened over the past year—did we have a recession? No, we have had growth. Even if we look at the OBR report, the balance of payments is showing signs of narrowing; post Brexit, that looks very hopeful, and we are doing a lot of very good trade deals. If we look at the overall situation in terms of business investment, although I was a little sceptical about the rise in corporation tax—I would prefer us not to do it—full expensing has led to more people investing more money, and extending that for longer and making it permanent is a rather good thing. However, I would still like to see the top rate of corporation tax reduced, because I do think there is a point at which we benefit from having a lower rate, as the Government in Éire do.

We have seen a fall in inflation. It has been a bit stickier than people expected, but that is partly because the economy has been a little bit more robust than people have expected, and in reality, things have not been too bad over the past 12 months. People talk about falling living standards, but the Budget projected a higher rate of falling living standards than we have at the moment, and from the previous iteration of the autumn statement a year ago, people expected it to be even worse. The gap is closing; it may well be that by the time we get to a general election, there has been no fall in living standards over the last period of Government. Inflation could well be lower—many of my friends who are monetary economists think that will fall rather faster than people expect—and we all know that pay settlements may be a little higher. Combined with the reductions in national insurance that the Government have implemented, we may well be in a situation where people are not that much worse off.

The reasons for the problems include covid—the Government protected people as best they could, which had an impact on the economy—and the energy price spiral as a result of war in Europe. Again, we protected people: let us not forget that we extended the energy price support by a further three months. That is the reason why living standards are not at a higher level. We can talk about the 1950s, but most Governments since the 1950s have not faced pandemics or major increases in energy costs, and Governments have to deal with the world as it is, not as they would like it to be. The important point is that living standards will rise for most of the next 12 months.

I think the OBR is too pessimistic about growth in the short term. I have a slight fear about what is over the horizon: I think that the Bank of England, by pushing interest rates up as much as it has and doing quantitative tightening at the rate it is doing it, is reducing monetary growth. M2 has reduced substantially and M3X has also reduced, so there is the possibility of credit getting quite tight in about 12 months’ time. If we have a better inflation outlook, we need to see interest rates coming down. I know that the Bank always pretends it is going to be stronger for longer, but it would not surprise me if in reality, we got back on track with interest rates at around 4% rather than 5%, which is what the OBR said in its previous report.

If we look at the result of the past 12 months, we can congratulate the Government on the fact that we made progress, but more progress has to be made. The reduction in national insurance is good: clearly, tax rates are going up because of the freeze on allowances, but I hope that this is the start of a process in which the Government are able to give more money back to working people, who have had to struggle over recent years. However, when we look at this in the context of the £104 billion that we put in to help people with the cost of living, still being able to reduce tax is quite a good result.

I support the triple lock. We made a pledge; we gave our word, and I do not believe in breaking our word. I have constituents who retire for 30 years. In the first 10 years, they have savings and pensions, and as life goes by, they may still have an expensive flat, but their ability to earn more money and their reliance on the state pension becomes much more important. As such, I am glad that the Government have kept their word on the triple lock.

I am also pleased that the Government are being realistic about energy policy, in terms of both nuclear and taking advantage of oil and gas. Today, 75% of our energy comes from oil and gas. It will remain a major factor—we will still need it after 2030—and it seems sensible that we produce it at home, rather than import it. At business questions, the hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) raised the possibility of the closure of refining capacity in Scotland. He made a very good point: if we are to continue producing oil and gas, we need to improve our refining capacity as well. In the recent energy crisis, we saw the shortage of refining capacity in the west and our reliance on some Russian refining capacity, which caused a problem with diesel.

The Government’s approach has been to help businesses by making full expensing longer term; to help smaller businesses by providing help with the uniform business rate; and to help working people through a reduction in their national insurance contributions. Generally speaking, those are all good things, and we have also done our best to protect the most vulnerable in society by uprating benefits and giving them special payments. I do not think the Government have anything to apologise for; if I have any criticism of the Government, it is that sometimes they do not make the best case for what the Treasury is doing, which is actually a pretty good job.

It is going to be an interesting year. I suspect most of the speeches in this House are going to sound like party political broadcasts about who is doing what and who can do things better, but we all know that to some extent, “It’s the economy, stupid.” At the end of the day—in October or November of next year, I suspect—the question will be whether or not the Government continue to make progress, as they are doing, and whether the people accept that and decide to hold on to nurse for fear of something worse, or believe the rhetoric of the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) and others that they can do better. We have a very good political system—we have robust debate, and Britain benefits from that—but I still think that when it comes to deciding the future of our country, the British people will take a very sensible course.

I will end my speech with a couple of points. First, the flash purchasing managers’ indexes for the British economy have today been revised up to over 50, which means that we may well have higher growth. Secondly, the eurozone looks like it is getting into deeper trouble, so the relative position of the British economy in three months, six months or 12 months may look rather better than that of other economies around the world. Let us face it: there are problems, but they are problems that the French, the Italians and the Germans also have. We also have opportunities, and in many areas such as fintech and technology, we are doing pretty well as a nation. If we can do more of what we do best and less of what we do badly, I think we will meet with great success.