Budget Resolutions and Economic Situation

Sajid Javid Excerpts

Wednesday 3rd March 2021 Commons Chamber

[Sajid Javid (Bromsgrove) (Con)]

Over the course of the past year in countries not too dissimilar to our own, people have been asked to choose between protecting their livelihoods and protecting their lives. That has not been the case in our country, and for that we have my right hon. Friend the Chancellor to thank. He said, right at the very start of this pandemic, that he would do whatever it takes to protect jobs, to protect businesses and to protect public health, and he has delivered on every count, and this nation has rightly given him its gratitude.

Despite his success, the Chancellor will be in no mood for a victory lap. Comprehensive support, as he has said today, has come at unprecedented pressure on our public finances. To date, as we have heard, the Government have already spent more than £300 billion, every penny of that borrowed. While low interest rates have certainly helped, we cannot expect such a benign lending environment to last forever. With national debt already close to national output, as we have heard, just a 1% rise in gilts would mean an additional yearly cost in debt servicing of £25 billion by 2024. That is more than half of the annual defence budget. Indeed, we are already seeing rising pressure, especially because of rising global inflation expectations, so we cannot allow the inflation tiger to prowl unchecked.

The faster our economy can bounce back, the easier it will be to manage our debt in the future. Thankfully, I believe that our prospects for a sharp, strong recovery look very promising. Thanks to the Government support, the vast majority of businesses are ready for the shutters of the economy to be lifted. The Bank of England has shored up confidence with monetary easing. Households are sitting on some £100 billion of excess savings and, unlike in wartime recessions, there has been no physical destruction of capital. Above all, the Government are delivering on their vaccination programme—a programme that is the envy of Europe and that will lead this continent out of the lockdown. For these reasons, I am very optimistic about the recovery, and I think it will happen rapidly.

[Andrew Griffith (Arundel and South Downs) (Con)]

My right hon. Friend was of course part of the legacy that has put us in a strong position to make the support packages of my right hon. Friend the Chancellor. Does he agree with me that small businesses are the absolute lifeblood of our recovery, and that my right hon. Friend the Chancellor has brought forward, in the Help to Grow package today, two really insightful schemes that will support the nation’s smallest businesses?

[Sajid Javid]

I thank my hon. Friend for his comments, and I very much agree with that. I think there are actually more than two schemes, if we are honest. There are a number of schemes that will help businesses, not least the speed and the scale of the recovery that I have talked of. I especially welcome those measures, but also the super deduction and the support through grants for businesses.

In the medium term, we will put our country back on to a firmer financial footing by tackling some of the systemic issues that were around long before this pandemic hit, such as low productivity and regional inequality. That is why I also welcome the Chancellor’s emphasis on infrastructure investment. Not only will this provide an immediate increase in economic activity, but it will drive long-term productivity improvements and will make sure that growth is even better distributed across the entire United Kingdom.

However, I would urge the Chancellor not to take his eye off delivery. Successive Governments have had a poor history of delivering infrastructure projects on time and on budget. I therefore hope my right hon. Friend will consider complementing his very welcome changes to the Green Book and the new national infrastructure investment bank with a comprehensive cross-government delivery strategy.

While grants and support schemes have been consumed by our generation, they will be paid for by the next. That is why the Chancellor was absolutely right to level with the British people and to set out so candidly the pressure on the nation’s finances. While slamming the brakes on spending now would be self-defeating, the Government should be drawing up medium to long-term plans to manage debt. That is why I welcome many of the initiatives the Chancellor set out today, including his commitment to try to avoid borrowing for day-to-day spending. That commitment starts with new fiscal rules. The Chancellor should ensure that those rules are in place by year end, ideally alongside the next Budget and the comprehensive spending review. Having run four spending Departments and the Treasury, I am left in no doubt that a fiscal anchor is essential to control spending and to control debt.

Lastly, in the long term, putting the country back on a firm financial footing means that we need to build resilience against future disasters, as the Chancellor recognised in his Budget speech. Of course, not every disaster is a black swan and it would be foolish to prepare for crises we cannot foresee while we ignore those that we can. In terms of their potential impact on the future economy, few crises are more existential than climate change and declining biodiversity. That is why, as Chancellor, I set Professor Dasgupta very ambitious terms for his independent review on the economics of biodiversity. It makes clear that biodiversity is declining faster than at any other time in human history. If we continue to undermine the resilience of the natural world, we will introduce new sources of serious financial uncertainty, not least the increased spread of infectious diseases. While of course it will take time for the Treasury to digest Professor Dasgupta’s review, the Treasury should make a start on one of his most central recommendations: the need to recognise the value of the natural world in our national accounts. I urge the Chancellor to formally ask the UK Statistics Authority to review how that might be done. The Office for National Statistics is one of the most widely respected economic institutions in the world. If it can lead by example, it can make such a difference in trying to persuade other countries and financial institutions to do the same. We can lead on this, not least because of our chairmanship of the G7 and the COP26 conference this year.

This has been a long hard winter and we have all been hibernating for many months, but, as case rates fall and the vaccination programme continues at pace, the frost has begun to thaw and we are beginning to see the first signs of spring. The Government have been given a precious opportunity not just to resurrect our economy but to reinvigorate our entire country. I am in no doubt that the Chancellor will rise to the occasion with the energy that this moment requires and the sense of purpose that history demands. I am pleased to say that his Budget is the first step to doing just that.

[Jeremy Corbyn (Islington North) (Ind) [V]]

I am delighted to be able to speak in this Budget debate, but sadly this Budget does not reflect the reality of people’s lives. Just this morning I have come from a local food bank where people were queuing up to try to get enough food to get by. They are people who thought they would always be okay and have enough money to live on, but they do not and they therefore rely on food banks. To the tens of thousands of people who have volunteered in mutual aid groups all over the country, I think we should say a huge thank you. They have contributed, in a way that the Government have not, to the lives of so many people who would be in such great difficulty if those food banks were not there.

The Chancellor talks about extending the furlough scheme and protecting people on those wages. I point out to him that the scheme includes no floor and that 80% of minimum wage is a lot less than the money people need to live on. It was my right hon. Friend the Member for Hayes and Harlington (John McDonnell) who proposed a year ago that we should have a furlough scheme. He sent substantial papers to the Treasury in order to bring that about. Sadly, I do not believe that the Chancellor read all of them.

The scheme proposed by my right hon. Friend would have guaranteed everybody’s income and jobs, it would have had a floor, and it would have gone on to protect people’s conditions and wages, as well as those of people in all aspects of self-employment, including in the artistic sector. There are many people in work at the moment who are being threatened with fire and rehire, and there are companies trying to dismiss the whole workforce and rehire them on lower wages and with worse working conditions. British Gas and British Airways tried it on, and so many other companies are trying to do the same thing. Where is the protection for people’s living standards and jobs in this Budget? Sadly, it is desperately missing.

On public sector pay, many are going to be hit by the pay freeze and by a stealth income tax rise through the freezing of the tax allowance. I remind the Chancellor that a previous Government—a Labour Government in the 1970s—came a cropper on that one when the Rooker-Wise amendment was passed to prevent the Chancellor from the freezing the tax-free allowance.

Millions of public sector workers have contributed so much to dealing with the covid pandemic. Those working in our national health service, our care services and our local government have made super-human efforts to try to help people get through a desperate time, helping people through the mental health crisis and so much else. Their reward is going to be frozen pay and, for those working in local government, a continued underfunding of local government services.

For pretty well everyone across the country, there will be a 5% rise in council tax, as local councils desperately try to balance the books and deal with the increased demands on their services because of the covid pandemic. I hope that the Chancellor will recognise that we need a proper funding formula for local services across the country, and not just claps for the NHS, the care service and delivery workers, but actual pay increases to recognise the massive contribution that they are making to our society.

The Budget said a great deal about corporation tax and other business taxes, but it did not say very much about tax evasion or tax avoidance. From the Government’s statements, they propose to raise around £2.2 billion between now and 2025—in the next four years—from tax avoidance and tax evasion, yet the real figure is that something over £30 billion a year is lost to our public services through tax avoidance and tax evasion. If the Government were serious, they would have included measures in the Budget to deal with tax avoidance and tax evasion.

I hope, by contrast, that the Government will recognise that not increasing statutory sick pay while at the same time doing nothing about tax evasion and tax avoidance says it all about Tory priorities. Statutory sick pay is £95 per week. The Secretary of State for Health and Social Care himself said he could not live on that; I do not think that any Member would want to try to live on that, so why are we expecting anybody else in our society to do so? It has to be increased, and we need a guarantee of at least the £20 rise in universal credit, which at the moment is still a temporary measure.

The Chancellor had obviously read quite a lot of the proposals made by my right hon. Friend the Member for Hayes and Harlington before the last election, in which he pointed out that he wanted to move jobs to the north and ensure that the increase in public spending that we were proposing would help people across the north. The Chancellor made a big deal of about 750 jobs going to Darlington. Sadly, all that is cancelled out by the huge number of job losses in transport authorities across the north of England, particularly in Greater Manchester and Merseyside City Region. That is because the Government have not provided them with the funding package to support transport systems that they have in London and other places. This degree of unfairness between the north and the south will continue, and the degree of unfairness between the richest and poorest in our society will increase under this Budget.

Towards the end of his speech, the Chancellor managed to provide a great deal of greenwash for his proposals. Of course, we all support a green industrial revolution. It was central to Labour’s manifesto at the last election, but where is the commitment to net zero emissions by 2030? Where is the commitment on protection of biodiversity to protect us all for the future? This Budget is such a lost opportunity. At the end of it, our society will be more divided than it is at the present time, there will be greater stress and uncertainty in so many people’s lives because of this Budget. We can, should and must do much better than this.

[Sajid Javid]

On a point of order, Madam Deputy Speaker. At the start of my contribution, I should have reminded the House of my entries in the Register of Members’ Financial Interests. I hope that I can put that on the record now.