Autumn Statement Resolutions

Simon Clarke Excerpts

Monday 21st November 2022 Commons Chamber

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

Given that it is my first chance to speak from the Back Benches, I would like to pay tribute to the officials at both of my former Departments for their exemplary work supporting me over the course of the past couple of years. I found them consistently outstanding, and I am very grateful to them for all their support. I know, at the Treasury in particular, just how much work would have gone into the autumn statement, and I pay tribute to them for that.

I also thank my right hon. Friends the Members for Uxbridge and South Ruislip (Boris Johnson) and for South West Norfolk (Elizabeth Truss) for giving me the privilege to serve in their Cabinets. It is a remarkable experience to serve in Government. I know that my right hon. Friend the Chief Secretary to the Treasury, whom I am glad to see in his place, will be experiencing the full weight of the responsibilities that rest on him, and I wish him luck with his new portfolio.

The autumn statement was important as it had stability at its heart. This addressed the fundamental challenge that was levelled at the mini-Budget in September, delivered by my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng). This is clearly at the heart of what went wrong with that mini-Budget. There is obviously a very important debate to be had about the willingness of our financial institutions to conduct dynamic modelling of the impact of both economic reforms—supply-side economic reform and also lower taxes—on economic growth. However, noting that we are where we are, it would clearly have been better for that statement to have been accompanied by a full spending review, and I regret that that did not happen. It would have allowed us to have shown that tax and spending were going to be set in alignment, and we would have been able to set out a plan for lower tax and also a smaller state, which would have been more conducive to economic growth.

[Andy McDonald (Middlesbrough) (Lab)]

I am very grateful to my constituency neighbour for giving way. If that mini-Budget was so disastrous and ill-thought through, why did he support it?

[Mr Clarke]

It is precisely because I do not believe that the mini-Budget was disastrous and ill-thought through. I believe very firmly in the merits of a lower tax, higher-growth economy. Indeed, that is why I sit on the Conservative Benches and he sits on the Labour Benches. It was the lack of alignment with our spending plans, which would have been addressed through a spending review. That would have allowed us to set out the runway—if you like—to the landing zone that the Government were intent on delivering. It was the lack of ability to model the benefit of robust supply-side reform and lower taxation properly that was, I think, at the heart of what went wrong.

[John Redwood]

Did my right hon. Friend notice that the week before the mini-Budget was presented, the Bank of England and the Federal Reserve Board were deliberately driving down bonds on both sides of the Atlantic, wanting rates higher, and that the Bank of England hit the market more when it announced that it would start selling bonds worth £40 billion into a falling market?

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[Mr Clarke]

Indeed, my right hon. Friend, I am afraid, is correct in that. There is no doubt that, while the Bank has a very difficult mandate to discharge, it has been slow in addressing some of the fundamental issues around inflation risk in particular over the year that led up to the mini-Budget.

I will make three major points about the autumn statement shortly, but before doing so, I want to turn to two specific areas where I believe urgent action needs to be taken to benefit the public finances. The first is in regard to the future of the Homes for Ukraine scheme. We owe a debt of gratitude, which I think is recognised across the House, to all those families who have opened their doors to Ukrainian families. However, tens of thousands of sponsorship arrangements that have been established are due to elapse over the weeks ahead, and it is directly in our interests that those arrangements should be renewed. Clearly, quite apart from the benefit to the Ukrainian families themselves of being with host families, there was a massive saving to the Exchequer. If those families end up either in hotels or in homelessness accommodation, the cost will be dramatically higher—more than tenfold higher—than if they had been accommodated in homes. Getting that established as quickly as possible—renewing the sponsorship arrangements—is an urgent priority for the Government.

[Andy McDonald]

I thank my constituency neighbour for giving way. I think he will find that the scheme has been renewed—that is the information that has come through to me. He may want to check that, but that is what I hear.

[Mr Clarke]

It is critical that it is renewed over the foreseeable future, because the reality is that the issue is not going away. If we are to be serious about addressing the fundamental concerns that exist about the duration of the conflict and how it will affect people for many months to come, it is vital that the scheme is renewed long into the future.

The second is the need to resolve the current crisis of illegal immigration. Clearly, it is unacceptable for the country to spend some £5 million a day on hotel costs. It is a multi-dimensional challenge. I welcome the deal that was agreed with France last week, but the Home Office clearly needs to do more to secure lower cost accommodation and to improve the processing times for asylum claims, which are both key drivers of the backlog that has been allowed to accumulate. The Home Office received funding in the spending review in 2021 precisely for that purpose, and addressing that is vital.

We also need to alter the incentives that drive people into the arms of people traffickers. That means making the Rwanda scheme work and doing all that is required over the months ahead to ensure that it is able to be enacted. Both of those problems, if allowed to persist, would represent a risk to the public finances, and I very much hope that we can get an update on them from Ministers.

Those are specific issues, but I now wish to turn to the three broad principles that the autumn statement spans and on which we need to touch today. The first is the balance of tax and spending. Clearly, we are living through hugely challenging times. We have already rightly heard reference from the Front Bench to Putin’s illegal war in Ukraine. The Chancellor was right to say that this is a recession made in Russia and, of course, it comes hard on the heels of the covid pandemic. There are simply no easy choices here, and I recognise that, but faced with the available options I would have preferred to see a much greater emphasis in the statement on spending reductions rather than tax rises.

We simply cannot ignore the fact that the OBR says that the tax burden will now rise to its highest sustained level since the second world war, hitting 37.1% of GDP by 2027-28. Faced with that, I would have curbed our capital spending in particular more sharply. Most Departments have pronounced covid-related underspends and for many projects, such as HS2, the business case no longer looks as robust as it once did, after the pandemic. On current spending, I would not have increased spending on out-of-work benefits in line with inflation at a time when wages clearly will not rise in the same way, and I believe that there is a strong need to drive NHS efficiencies. At a time when we spend the equivalent of the GDP of Greece on our health service, we need to make sure that there is a robust plan to get maximum value for the taxpayer. While many NHS trusts perform fantastically, including mine in South Tees, we need to make sure that we measure outputs rather than simply inputs in the health service.

[Ms Lyn Brown (West Ham) (Lab)]

I just wonder whether the right hon. Gentleman lives in the same world as I do. I have families who pay £2,000 per calendar month to live in a really grotty basement flat, and he thinks that they can do without a percentage uplift on their benefits. Really?

[Mr Clarke]

It is very important that we do not indirectly increase the disincentives to work. That sits at the heart of the wider debate around the affordability of the welfare system. The hon. Lady is quick to forget that we spent some £37 billion compensating people for the cost of living increases they have suffered in the past year, including £1,200 for any family on benefits.

The second issue is one where I believe spending does need to increase, and that is defence. We heard reference to this earlier, and I note that the former Prime Minister committed us to spending 3% of our GDP on defence by 2030. I believe that is a pledge that should be honoured. In a world where the challenge not only of Putin’s Russia, but frankly of China, too, is only worsening, we need to make sure we do not regard ourselves as having some kind of peace dividend. The only dividend of peace is peace. As my hon. Friend the Member for South Dorset (Richard Drax) said in his intervention, defence spending during the cold war was significantly higher as a percentage of GDP. We should return to that, not least because delivering our existing defence commitments will require some 2.5% of GDP by the middle of this decade. There is a clear priority for us to move on defence.

Ultimately, the only sustainable way to fund public services is if we can grow the economy, and that leads to the third and final point that needs to be addressed in today’s debate. We need to facilitate more robust underlying economic growth. I welcome what my right hon. Friend the Chancellor said about solvency in his statement, too. This is a welcome opportunity to address that. Our reforms should be delivered at the maximum possible pace.

I put on record just how strongly I would oppose any move to a Swiss-style relationship with the European Union, which the Prime Minister has addressed decisively today. I just put a marker down that I do not believe that would be the right approach. We need more divergence, rather than less, if we are to make a success of Brexit.

We have to confront the harsh reality that the typical British family are set to be poorer than a Polish family by the early 2030s if we do not achieve more robust growth. That will not come if we have a blizzard in taxes and regulation under the Labour party; it will come if we deliver robust supply-side reform. The most important reform we can offer is on housing. There are specific challenges here around nutrient neutrality, but there are also general ones about our attitude to new homes, which need to be addressed. We need to make sure that, on the Government Benches, we are standing in support of families who wish to own homes of their own by building them where they are needed, but the challenge is not restricted to housing. We need to adjust childcare ratios, which are driving up the cost of childcare unnecessarily, and we need to tackle the cost of judicial review and the curse and problem that so much infrastructure is thwarted or delayed by abuse of that system.

We also want to see rational energy generation, including the use of onshore wind. I will give the Government my loyal support in the Lobby tomorrow, but if we can address these fundamental pro-growth measures, we will be in a much better position to weather the challenges that lie ahead. I look forward to hearing more from Ministers in this debate and over the weeks ahead about how we will deliver the growth that ultimately was the whole purpose of the autumn statement in September, and which needs to be the animating principle of this Government over the years ahead.

[Several hon. Members rose—]

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[Sir Stephen Timms (East Ham) (Lab)]

On 10 November, a week before the Chancellor stood up to make his statement, the Trussell Trust published its latest figures on the number of emergency food parcels that it has delivered over the first six months of this financial year. The number was 1.3 million, which is an increase of one third on the previous year, and it looks as though around 2.5 million will be delivered over this financial year as a whole. That will be a more than fortyfold increase compared with the number of emergency food parcels handed out by Trussell Trust food banks in 2010-11.

Why is the number so much more in this financial year than it was in the previous financial year? Part of the reason is undoubtedly that there has been a big real-terms cut in benefit levels this year. Universal credit was increased by 3.1% in April, when inflation was nearly 10%. According to the House of Commons Library, the consequence of that is that the headline rate of benefit is at its lowest level in real terms for 40 years—since 1982-83. Of course, a real-terms cut this year means significantly more people being forced to go to food banks than in the previous year.

I was interested to hear the right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) say that he would not have increased benefits in line with inflation next year. In September I asked the then Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), what his intention was on uprating benefits and he did not answer, but I suspect that what was said by the right hon. Member for Middlesbrough South and East Cleveland, who was a leading member of that Administration, speaks for that Government as a whole and that benefits would probably not have been increased in line with inflation. That would have meant several hundred thousand more people going to food banks in the coming year. The question we have to ask ourselves is why our economy is failing so badly that so many people are unable to obtain, through their work and other efforts, the means to sustain the absolute basics of living for themselves and their families.

I am extremely relieved, then, that the Chancellor announced that benefits will be uprated properly next April in line with the usual formula, meaning there will be a 10.1% rise. I do not think that will significantly reduce the problem of people going to food banks, but it should at least ensure that that problem will not get a great deal worse next year, as it has this year. For that we can be thankful.

I am also pleased that the benefit cap is to be uprated. It was introduced in 2012, and at the time we were told that it was to constrain the total of benefit that a household could receive in relation to median earnings. There was some sort of rationale given for the level that was set. But then it was frozen—there was no link at all with median earnings beyond the initial announcement—until 2016. That was the only time the benefit cap was changed, and it was significantly reduced, to another, lower level, whose significance was never explained to us, except that it was a lot less than the level at which the cap had been introduced.

Now, thankfully, the Chancellor is finally going to uprate the level next year by 10%, in line with inflation, but surely it should be uprated each year. If there is some rationale for the level at which the cap is set—presumably it is linked to inflation in some way—we ought to know what that rationale is, and then it should be raised each year. All this time that the level has been frozen, more people have crashed into it each year and had to go to food banks to obtain the means to maintain their lives and those of their families. So I am very relieved that the cap will finally be uprated—although it is a one-off—next April.

As I understand the statement published by the Secretary of State for Work and Pensions, he has conducted a review of the level of the benefit cap—something that he is required by law to do every five years. I very much hope he will publish that review, so that we can see what the rationale is for the level at which the cap has been set and get some idea of what the Government’s intentions are for the future of that level. The Secretary of State will be coming to the Select Committee next week—we look forward very much to our discussion with him—when I hope he will be able to tell us that that review will be published.

But as my right hon. Friend the shadow Secretary of State rightly pointed out, the thing that has not been uprated is the local housing allowance. It is worth spending a moment on the history of this, because the local housing allowance, which limits how much housing support can be provided, was initially set at 50% of the median rent in each area. The idea was that support would cover at least half the homes available for rent in the area. In 2011 it was reduced to 30%, so that it would cover only the cheapest three in 10 homes available to rent in the area, and then it was frozen for years—it was not increased at all. People increasingly had to dip into the rest of their benefit to pay their rent, and the pressure on them became tighter and tighter—until the beginning of the pandemic, when it was raised back up to 30%.

That was a very helpful move, but since then the level has been frozen again, and we are told that it will also be frozen next year. That will be three years in which it has not been raised at all, despite the fact that, as my right hon. Friend the shadow Secretary of State rightly pointed out, rents are surging, and the only way people can pay the rent is by dipping into the other benefit they receive, which is supposed to meet their other living costs. I think the idea is that, by keeping the local housing allowance down, the Government will restrain the increase in rents, but I have seen no evidence at all that that is happening; it is just making things harder and harder for families.

I agree with what the Chancellor said about inactivity. There is a big problem with the large number of people—again, my right hon. Friend on the Front Bench made this point—who have dropped out of the labour market since the pandemic. The former Prime Minister told the House 12 times, between November 2021 and July this year, that we had more people in employment than before the pandemic. That was not true, he knew it was untrue, and what the Chancellor said is correct: a lot of people have stopped working. We do not quite know what they are living on—whether they have dipped into their pensions earlier, or what is happening. The Chancellor is right that that needs to be addressed. We need to find ways of giving incentives and encouraging people to return to work. Again, we look forward to discussing that with the Secretary of State at the Work and Pensions Committee meeting next Wednesday.

I want finally to come back to the points I made at the start. Can we not all agree there must be a serious effort to reduce dependence on food banks? We cannot keep on, year after year, seeing hundreds of thousands more people having to go to a food bank, including people who are working, in some cases full time, who are unable to obtain enough to sustain their life and the lives of their family members. Surely, where people are working a full week, that ought to be enough to sustain their costs. Where people are unable to work due to illness or disability, surely our society ought to be able to support them sufficiently. They should not have to go to a food bank.

[Mr Clarke]

The right hon. Gentleman makes a persuasive case for the need to ensure that work pays. Does he recognise that one of the most welcome measures in the Chancellor’s autumn statement was the increase in the national living wage, which will stand at well over £10 from next April?

[Sir Stephen Timms]

I am glad that it is being raised; it certainly needs to be, and it will need to go further. The right hon. Gentleman would probably agree that if someone is working full time at the legal minimum allowed, that ought to be enough to enable them to live and to support their family, but at the moment it is not. Why is that, and what are we going to do to put it right? Part of the answer must be an adequate social security safety net. We do not have that at the moment, and we are going to need it in future.