Budget Resolutions and Economic Situation

Theresa Villiers Excerpts

Thursday 16th March 2023 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

The reality of yesterday’s Budget is clear: long-term growth downgraded, household incomes falling, public services on their knees. Families are facing the biggest hit to living standards since records began. The only surprise was a huge handout to the richest 1% of pension savers. Yet again, working people and businesses—the key to our economic success—have been put at the bottom of the pile. 

The questions people will be asking themselves after 13 years of Conservative Government are these. Am I and my family better off? Are our school, hospitals and transport systems working any better than 13 years ago? Frankly, is anything in Britain working better today than it did when the Conservatives came into office? The answer to those questions is a resounding no. 

Labour believes that the tax burden must be shared fairly. That is why I have announced today that Labour will reverse the changes to tax-free pension allowances. It is the wrong priority, at the wrong time, for the wrong people. Instead, we would create a targeted scheme to encourage doctors to work overtime and not to retire early. That could be done at a fraction of the cost, as the British Medical Association has said.

The Government’s policy to give tax cuts to the wealthiest 1% is unravelling before our eyes. Paul Johnson, the director of the Institute for Fiscal Studies, says that even on the “optimistic” Office for Budget Responsibility costings, it will cost an eye-watering £100,000 per job retained. The Resolution Foundation said:

“The beneficiaries from these reforms stand to gain large amounts, and they are heavily concentrated among the very rich”.

It added that

“this giveaway could lead to inheritance tax ‘abuse’”.

Pensions expert John Ralfe has said that

“this is not about supporting a hard-pressed NHS, it is really a tax giveaway...for the very highest earners.”

Labour recognises the mess that the Government have got into with our NHS workforce planning, and we have called for changes to doctors’ pensions, but we will oppose this untargeted scheme for the wealthiest and we will put this measure to a vote in Parliament next week. I defy Conservative Members to vote in favour of a policy that they know will do absolutely nothing to lift the living standards of their constituents.

Last autumn we saw the Chancellor of the day announce reckless tax cuts to help the richest, too. Why does this keep happening? The reason why the Tories get the wrong answers is that they have the wrong priorities for our country and the wrong analysis of the economy. Wealth does not just trickle down from the top; it comes from the efforts of millions of working people and thousands of businesses. That is Labour’s approach to growth.

[Theresa Villiers (Chipping Barnet) (Con)]

The right hon. Lady denounces the abolition of the lifetime allowance, but it was actually something that never applied under Labour at all. If Labour is so concerned about its loss, why did it not introduce it in the first place?

[Rachel Reeves]

Gordon Brown introduced a lifetime allowance for pensions savings, as I am sure the right hon. Lady remembers. However, the point here is about priorities. For all our constituents, there is an average tax increase per household of £650, starting next month with the freezing of the tax thresholds and the increase in council tax. Yet yesterday, the only permanent tax cut provided in the Budget was for people who already have pensions savings of more than £1 million. I just do not believe that that is the priority for our constituents, and I think hon. Members right across the House, if they think about it, know that too.

Mr Deputy Speaker—is that what I call you?

--- Later in debate ---

[Theresa Villiers (Chipping Barnet) (Con)]

The worst health emergency for 100 years and the worst energy price shock for 50 years have done severe damage to our economy in the last few years, but the Budget has demonstrated the positive impact of the difficult decisions taken in the autumn statement to repair the public finances and restore stability after the damage done by global economic turmoil. As we have heard, unemployment is near a 50-year low, productivity is higher now than it was before the pandemic, and the OBR predicts that we will not go into recession, that inflation will fall and that growth is returning. That means we are on track to meet the first three of the Prime Minister’s five priorities, which are to halve inflation, grow the economy, reduce debt, cut NHS waiting times and stop the boats.

At the heart of the Budget and the Government’s wider economic policy is helping people with cost of living pressures. Taken together, the measures in the Budget and those previously announced are worth £94 billion over this year and next—one of the largest support packages in Europe—which is an average of more than £3,300 for every household in the country. In advance of his statement, I asked the Chancellor for the continuation of Government support for energy bills. I also made the case for families struggling with childcare costs, raising the issue alongside others in Parliament just a week or two ago, so I am really pleased with the plan to extend the 30 hours of free childcare for working parents to cover children from the age of nine months to four years. It is also very welcome that the childcare component of universal credit can now be paid up front.

This package is a truly radical set of changes, and investing in early years education and childcare is a sound economic move. Not only will it bring more parents back into the workplace to help address labour shortages; high-quality early years provision can also be an engine of social mobility, helping children to get the best start in life in order to enable them to realise their potential and succeed in their aspirations. The increase in the rates to be paid to childcare settings for delivering the free entitlement is a crucial part of this endeavour. It has been a key ask of the sector, but what is now proposed is still a very big change and implementation will not be easy, so I will be scrutinising progress carefully as a member of both the all-party parliamentary group for nursery schools, nursery and reception classes, and the APPG on childcare and early education.

I welcome the changes to the pension tax rules, which have been pushing experienced GPs and hospital doctors to cut their hours and retire early, just when we need them most. I have raised that problem with successive Health Secretaries and Chancellors of the Exchequer. The lifetime allowance is, I am afraid, a classic example of where taxes get so high that they deter work and depress economic activity. It is not just about the very high taxes paid if a person hits the lifetime allowance limit; it is also about the uncertainty, which means that doctors have cut their hours even if they have not hit the limit, because they fear reaching it. Both are causing problems with the retention of our hard-working doctors, so I believe that the changes announced by the Chancellor yesterday will play an important part in reducing those NHS waiting times in the way that we all want. I hope that it will also mean that my constituents have faster and better access to GP appointments.

Finally, I want to highlight some areas where further action is needed in relation to Budget matters. Implementation of reforms relating to the regulatory climate for artificial intelligence and the approval of medicines, as announced yesterday, are welcome, but I would like to see a more concerted push to improve regulation to make it more targeted and more agile and to ensure that it keeps up with technological change. This area can play a crucial role in raising productivity, boosting growth and making this country the science super-power that the Prime Minister wants it to be. It is also crucial to raising living standards in the long term.

The taskforce on innovation, growth and regulatory reform set out a blueprint for starting this reform process, and I would ask the Minister to report back on progress in implementation of the taskforce’s recommendations. I welcome the indication by the Chancellor that he will come back with a plan for one of TIGRR’s key proposals —to unlock productive investment from pension funds—but we do need to get on with this. The freedom to make our own choices on regulation and design these rules according to our own national interest is a key benefit from Brexit, and we need to grab the opportunity that it presents.

Lastly, I fully back, of course, the caution shown in this Budget on the public finances. Bearing down on inflation and getting debt under control must be our top priority. But as the economic situation, I hope, continues to improve, I would ask my right hon. Friend the Chancellor to strive to find the room for further pay increases for the public sector and, of course, for wider tax reductions in the longer term.