Budget Resolutions and Economic Situation

Tobias Ellwood Excerpts

Wednesday 15th March 2023 Commons Chamber

[Mr Tobias Ellwood (Bournemouth East) (Con)]

There is so much to digest from this Red Book in such a short space of time, but let me begin by welcoming the Budget statement, which reflects not only a return to economic stability, but a viable plan to energise UK growth.

It has been a busy year since the last spring fiscal event. The Russian invasion continues afoot in Ukraine, causing geopolitical and economic ramifications and impacting on energy and fuel prices. There is the aftermath of covid, which cost the Government an intervention of £400 billion from the Treasury’s coffers. Let us also put up our hand about the fact that the political turmoil of moving through three Prime Ministers was testing for the markets and was not our finest hour. Certainly, stagnation summarises 2022, with slow economic growth inhibiting economic development or expansion, and inflation bringing rising prices, but falling GDP.

So it is good to see a return to fiscal responsibility, as efforts are made to bring inflation under control and restore confidence in the markets, and to secure new, reliable sources of energy imports and become more energy self-sufficient. That includes, I am pleased to say, investment in modular nuclear reactors. As the Chancellor stated, the forecast looks more optimistic, and as our economy begins to strengthen, growth is forecast to return. The Government’s key objectives of halving inflation, growing the economy and reducing debt are all on track.

However, significant challenges remain, as we have heard today. Many are still impacted by the cost of living crisis, there is still not enough investment in business to make our economy grow faster, and our labour market needs invigorating to entice many of the economically inactive back into work. The actions announced today address these very issues, and they will be welcome in Bournemouth East and, indeed, across the country. For example, there are those extending the energy price guarantee to help keep fuel bills low and freezing fuel duty, as well as extending childcare to include one and two-year-olds and providing additional funding to support nurses, so that more parents can return to work after building a family. I hope that increasing the annual pension allowance to £60,000 will encourage doctors in Bournemouth and across the country to delay thoughts of retirement.

What I did not see in the Red Book—I look to the Front Bench—were any plans to reduce VAT for the hospitality industry from 20% to 10%. Tourism destinations such as Bournemouth were affected by the pandemic. I am, of course, grateful for the Government’s intervention then, but as hospitality recovers today it is hit by the perfect storm of inflation driving up wages, higher food prices and increased utility costs. There is a petition on the parliamentary website about this, which has now reached over 11,000 signatures. I hope the Treasury will do the maths, lower VAT and allow hospitality operations to survive, build and grow, thus increasing productivity, which will help to advance our GDP. Please, Chancellor, I invite you to do the maths.

On defence, even today the Chancellor connected the state of our economy with events in eastern Europe. With around half our GDP subject to international headwinds, our connectivity, our access to international markets, and our ability to source global goods and services are all impacting on our economy. That has been powerfully illustrated by the conflict in Ukraine. Had the invasion not taken place, UK inflation would be at 4% today, not 10%. Imagine what would happen if the threat picture were to deteriorate. Yet that is exactly what the Government predict will happen, as written in the new integrated review:

“There is a growing prospect that the international security environment will further deteriorate in the coming years, with state threats increasing and diversifying in Europe and beyond. The risk of escalation is greater than at any time in decades”.

If ever there was a call to move away from peacetime defence spend, that was it.

I have crunched the numbers in the Red Book. Simply put, away from Ukraine support and ammunition replenishment, £5 billion has been allocated for the next two years, of which £3 billion goes to the new nuclear enterprise, leaving just £1 billion a year to improve our conventional forces. That will not allow our hollowed-out Army to be regenerated. It will not allow all the swathing cuts we saw in the last review to be reversed, such as tank numbers, troop numbers, armoured fighting vehicle numbers, and even Typhoon and Hercules aircraft numbers.

We should recognise—I say this loud and clear—that we are sliding towards a new cold war, as Russia and China further align themselves to challenge and exploit the frailty of our global order. As global security further deteriorates, a failure to invest in upgrading our peacetime defence posture now will not only harm our economy, as our markets are slowly closed off, but diminish our voice on the international stage. This is not the time to blink. We must have political courage, backed by hard power. That is what earned us a permanent seat on the UN Security Council. I urge the Treasury to reconsider its investment in our UK defence posture.

After the Windsor framework, the Paris summit and the AUKUS deal, what we saw from the Chancellor today was another example of statecraft returning to No. 10. Domestically, the Budget will help tackle the cost of living crisis, strengthen our economy and boost growth. I commend the Government for their actions here today, but with storm clouds gathering I hope they understand that I will keep pushing for an increased defence budget.