Income tax (charge)

Tulip Siddiq Excerpts

Thursday 31st October 2024 Commons Chamber

[Sir Bernard Jenkin]

I am not going to give way any more. We need only look around the world to see that the idea that an ever-larger state makes the people richer is confounded by economic experience, otherwise the richest countries in the world would be those with the biggest state. It is businesses and free enterprise that generate the wealth that pays for the public services we need.

We can all recall Milton Friedman’s four ways to spend money. There is people’s own money that they spend on themselves: they think about it, spend it very carefully and make sure they get the maximum value for money. There is money that people spend on other people, such as when they buy a present: they may want to keep the cost down and may not be sensitive about whether the person really wants a particular gift or not. There is somebody else’s money that people spend on themselves: when people use expense accounts, they go on the most expensive aeroplane or get the biggest car their company will pay for. Finally, there is somebody else’s money that is spent on other people: that is what Governments do. It is a reality that Governments are the worst allocators of resource for ensuring future wealth creation. That is just a fact.

The record will always confirm that if we want to create more wealth, the smaller the state can be, the faster economic growth will be and the more we can afford to then spend on public services. This Government are profoundly un-strategic—just look at what the OBR says about investment:

“Tax rises in this Budget weigh on real incomes, so private consumption falls as a share of GDP”—

that means people are going to be getting poorer. It continues:

“Corporate profits are expected to continue falling as a share of GDP in the near term”.

It adds that

“business investment falls as a share of GDP as profit margins are squeezed, and the net impact of Budget policies lowers business investment.”

Is that good for the British economy? I submit not.

What about debt? If someone has too much debt, the one thing they should do is not borrow more money, if they want to get out of a debt trap—[Interruption.] Members on the Government Benches have surgeries attended by people who are in debt. The one thing hon. Members will tell them not to do is to stack up more debt, but that is what the Government have chosen to do. That is not a long-term policy.

Finally, what about GDP? I take no pride in saying that growth in GDP has been struggling for a decade or more—

[The Economic Secretary to the Treasury (Tulip Siddiq)]

For about 14 years.

[Sir Bernard Jenkin]

Yes, I do not think we did enough to dynamise the British economy. We did not do enough, but I was very grateful for the support of the Liberal Democrats for the first five years of the Conservative Government. That helped us to keep public expenditure under better control so we could begin that process.

GDP per head has really been flatlining. We are falling significantly further behind the United States, but what are the trends? On these trends, we will be overtaken by Poland by 2030 in terms of GDP per head. What are this Government doing to address the real long-term trends? Let us look to 2050. What is the shape of public expenditure going to look like in 2050? This Budget does not begin to address that. What will be our national debt on a long-term basis? What is happening to our demographic, including the ageing population and the ratio of people in work and out of work? What are this Government doing to address that trend and to address the immigration trend, because that is adding to the cost of our economy?

How will we be able to increase defence spending? The Chief of the General Staff has recently said that this country could well be directly involved in a war within the lifetime of this Parliament. We will have to spend more on defence, as well as controlling the rest of the public sector. It is many decades since health, education and welfare started swamping out every other kind of expenditure in the Government. If we are to survive as a country, we will have to address these very damaging long-term trends.