Budget Resolutions

Stephen Hammond Excerpts

Thursday 7th March 2024 Commons Chamber

[Sir Geoffrey Clifton-Brown]

Again, I hope we will not have my right hon. Friend’s welcome ambition to reduce national insurance traduced in the way that it has been. I do not think we will get very far by continuing that argument. Indeed, you will probably reprimand me, Madam Deputy Speaker, if I go too far down that rabbit hole.

I was going on to say that it is not just workers, through the reduction in national insurance, who will benefit from this Budget, because of course pensioners will too. Pensioners will see a significant increase in their pension through the triple lock of a huge 8.5% this year. Together with the enormous rise in the personal income allowance that we have introduced over the years, from £8,500 to £12,500, that will affect not only those on the basic state pension but also those who earn a little bit of income on top. They will see that our measures have considerably benefited the amount that they receive in their pocket.

Moving on to our commitment to families, we recognise the importance of easing the financial strain, especially for parents. I have listened closely to those constituents in the Cotswolds who have contacted me about how they have had to tighten their purses since the covid pandemic, when so many found their work interrupted, as well as about the cost of food and energy price rises in the years following. People in rural areas will be particularly pleased to see another freeze on fuel duty, because they rely very much on having to use their cars.

I am pleased that the threshold for the high-income child benefit charge has risen from £50,000 to £60,000. It will directly impact nearly 500,000 families, providing an average boost of £1,300 per household, empowering families and ensuring that every child has the support they need to flourish. I welcome the British ISA, which allows for a £5,000 investment. It should have been more. I also welcome the incentivisation of nuclear investment assets. Rather than hitting savers, we bolster economic resilience and pave the way for a brighter future for generations to come. I welcome the disclosure moves for local government pensions that will encourage investment in UK infrastructure projects.

Our commitment to families and businesses remains unwavering, from child benefit to increasing VAT registration from £85,000 to £90,000. That should have been more, but it will help a number of businesses.

[Stephen Hammond (Wimbledon) (Con)]

One of the key measures yesterday, alongside what happened in the autumn statement, was the extension of full expensing relief to leased assets, which will drive up growth. Growth is now even tracked. As a percentage of GDP, business investment is now the highest it has been for many years, substantially higher than in the whole time Labour was in power.

[Sir Geoffrey Clifton-Brown]

My hon. Friend is entirely right. The Chancellor’s announcement in the autumn statement of £10 billion for full business expensing was one of the most important economic announcements of this entire Conservative Government. He is trying to address the problem of leasing that my hon. Friend just asked about. That is contained in the Red Book and the Chancellor is now looking at that important piece, so I welcome my hon. Friend’s intervention.

Before I turn to public sector productivity, let me put it in context. Paragraph 2.14 is one of the most important paragraphs in the Red Book. It says that over the next 25 years, growth will be at 1.7% but spending will be at 2.5%. That is unsustainable and every Government in the next 25 years will have to address that. When average growth is 1.7% and health spending in modern, civilised countries like ours is growing at 4%, that too is unsustainable. So we have to do something to address public sector productivity.

From my role as Deputy Chairman of the Public Accounts Committee, I know that one of the quickest and easiest ways to deal with that is to increase the use of digital methods, as the Committee found when we visited Denmark. The Danes have their health service properly digitalised and they are a long way ahead of the NHS. Everything from booking patient appointments, patient experience in hospitals, procurement of equipment and medicine, and everything to do with the health service is digitalised. It works incredibly efficiently. That is why I welcome the £3.4 billion for NHS digitalisation. Such investment in productivity can yield huge dividends in future outputs.

It is not just in the health service where digitalisation can have an impact. The Secretary of State for Levelling Up, Housing and Communities is currently consulting on a relatively small investment in the digitalisation of the planning system. Every business, everywhere, wanting to do anything, complains about the slowness of the planning system and that local authorities do not have enough planning officers. Digitalisation will cut some of the bureaucracy for planning officers, allowing them to take better and quicker decisions. It will help productivity enormously and have a huge knock-on effect for businesses.

As I promised the Minister, I will now turn to tax-free shopping—he would be disappointed if I did not mention this subject as there was disappointment that there was very little mention of it in the Budget. There is a small mention in the Red Book and the OBR has produced a separate report, which I will come to shortly. In the debate on the autumn statement, in response to an intervention I made, the Chancellor said:

“We changed policy on this issue a year ago because it cost around £2.5 billion a year and we did not think we could afford to continue it, but we are looking again at the numbers in the light of the most recent data and we can see what has happened to comparative shops in Paris and Milan. We will review this to see if it is still that expensive, and I hope that it is not.”—[Official Report, 22 November 2023; Vol. 741, c. 349.]

Yesterday’s OBR review was not a full review. All it did was review its very limited 2020 forecast and its own figures, with no reference to how badly the UK is performing relative to our continental competitors. The OBR made no mention of the costs and benefits to the Exchequer of extending the scheme to EU visitors, and the OBR has never been asked to look at that.

I give the Government credit where credit is due. We have a new doctrine in the OBR, and it starts to address some of the points that my hon. Friend the Member for Christchurch (Sir Christopher Chope) was making. The Chancellor said that

“if we reduced the higher 28% rate that exists for residential property, we would in fact increase revenues because there would be more transactions. For the first time in history, both the Treasury and the OBR have discovered their inner Laffer curve.”—[Official Report, 6 March 2024; Vol. 746, c. 849.]

If they can do it for the cut in capital gains tax, why can they not do it for the reintroduction of the tourist tax?

I will acquaint the House with one or two figures, because I have some figures for what is going on in the real-world economy. If the Minister will bear with me, I am not sure the Treasury is truly taking them into account. When he and the House hear the figures, they will begin to think we should be investing in this. First, let me refer to two independent reports. One is the well-respected and well-renowned forecasting by Oxford Economics, which predicted that restoring VAT RES—the VAT retail export scheme or, colloquially, the tourist tax—could increase GDP by £6 billion. Another report predicted £7 billion. We are dealing with huge stuff here, and a potential huge benefit, so I cannot see why the Government will not at least do a proper study.

We know from our figures that British businesses lost out by £1.5 billion in 2022 and by even more in 2023. The measure would benefit many of our big retailers, hospitality venues, airports and cultural destinations, particularly tourist destinations, such as the Cotswolds. The report also shows that Britain is losing out on a £10 billion EU market, and that the measure would give the Exchequer a net benefit of £500 million in VAT alone.

The figures on how we compare with our competitors are stark. In 2022, spending by American visitors to Britain was at 101% of the pre-covid level of 2019, but guess what? In France, it was 226%. In Spain, it was 206%. In Italy, it was 190% of pre-covid levels, as compared with our level pegging with the situation pre-covid. This is big stuff, and I cannot understand why the Treasury will not study it properly. In 2022, spending by visitors from the Gulf Co-operation Council states in Britain was only at 65% of 2019 levels, but it was 198% in France, 158% in Spain and 166% in Italy. Those are not my figures, but figures from real traders that have given the Association of International Retail their actual figures audited from their books. They are not made up. I gently suggest that the Chancellor and the industry—industry would fund it, if necessary—jointly commission a proper independent study into the full impact of tax- free shopping on British businesses, the economy and the Exchequer, so that we can have a real evidence-based decision on this huge and important area. Will the Chancellor meet me and industry representatives to discuss it further?

I am delighted that we have seen inflation fall from 11.1% to 4%. Wages are rising, mortgage rates are starting to fall and interest rates will hopefully fall towards the latter end of this year. It has been a tough few years. Pandemics and wars cause economic strains that few countries have managed to avoid. I was vocal last year on rising energy and food prices, which are a regressive cost hitting low earners the most. I am pleased now to see the cost of living easing.

The people of The Cotswolds want to see their hard work pay, the innovation of small and medium-sized businesses encouraged, and public services such as schools and the NHS well funded but operating efficiently. However, those services can improve only if our economy is strong and thriving and the UK is seen as the best place to do business. That is why I am so pleased that yesterday my right hon. Friend the Chancellor’s Budget covered so many world-leading sectors, including the creative economy, unicorns, artificial intelligence, and the financial and pharmaceutical sectors. We have much to be proud of in so many sectors, and the Chancellor did a lot yesterday to encourage every single one of those businesses, with their innovation and energy. I commend his Budget.