The Growth Plan

Lord Redwood Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

All I remember is the financial crash of 2008, which the right hon. Gentleman’s party presided over and managed to engineer. I would also mention that the 40p rate was the rate for 20 years, and it was the one adopted by his party when it was successful and used to win elections.

[John Redwood (Wokingham) (Con)]

I strongly welcome the growth plan and the tax cuts that will help deliver it. Does the Chancellor agree that there are more obstacles to be swept aside so that we can grow more of our own food, produce more of our own energy and supply more of our goods, in order to raise living standards and generate the better jobs we all want for our constituents?

[Kwasi Kwarteng]

As so often, my right hon. Friend is 100% right.

Delivery of Public Services

Lord Redwood Excerpts

Tuesday 28th June 2022 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I beg to move,

That this House notes that UK economic growth is forecast to grind to a halt next year, with only Russia worse in the OECD; further notes that GDP has fallen in recent months while inflation has risen to 9.1 per cent and that food prices, petrol costs and bills in general are soaring for millions across the country; believes that the Government is leaving Britain with backlogs such as long waits for passports, driving licences, GP and hospital appointments, court dates, and at airports; and calls on the Government to set out a new approach to the economy that will end 12 years of slow growth and high taxation under successive Conservative governments.

It is my pleasure to speak to the motion in the name of the Leader of the Opposition, and those of me and my right hon. and hon. Friends. The Prime Minister told us at the weekend, speaking from the Commonwealth Heads of Government meeting in Rwanda, that he was “actively considering” his third term in office. The shadow Secretary of State for Transport, my hon. Friend the Member for Sheffield, Heeley (Louise Haigh), replied that she was actively considering marrying Ryan Reynolds.

While the Prime Minister considers his future, here at home concerns are more prosaic and more real. In area after area of life, standards of service that used to be taken for granted have crumbled, leaving people facing delays and backlogs for basic services, and all this is coming on top of the cost of living crisis, which is biting deeper with each passing week. As each new backlog and delay builds up, the Government look more and more powerless to address them. Even the Government’s supporters do not seem to believe that the announcements made by No. 10 will be followed through with any proper delivery. The Government were supposed to take us forward to the future, but as we read the news each day, it feels more and more like a step back in time towards the 1970s.

In another, more candid remark, also on Saturday, the Prime Minister admitted that since the Conservatives took office the UK economy had

“not grown as it should”.

[John Redwood (Wokingham) (Con)]

Does the right hon. Member agree with me that if you wish to improve service you do not go on strike and if you wish to pay for higher wages you do not go on strike? Will he give that advice to the rail unions?

[Mr McFadden]

I had anticipated one or two interventions on strikes, so let me say to the right hon. Gentleman that whoever’s responsibility the strikes are, it is certainly not that of a party that has been in opposition for 12 years. He and the Ministers he supports will have to take responsibility for the industrial strife they are presiding over. I say that to him in the anticipation of other interventions in the same vein.

--- Later in debate ---

[Mr Clarke]

I agree with my hon. Friend. It is crucial that the NHS continues to reform and, frankly, become more fit for a technological age, as well as for one in which we can anticipate these problems ahead of time. We should act to improve the use of all the technologies, which will mean that we get more value for taxpayers’ money. With an ageing society that is plagued by so many avoidable and preventable conditions, we need to be able to catch them in time, and that planning and foresight will be crucial for the future.

[John Redwood]

When I asked representatives of the Health Department how many chief executives there were in NHS England, they said that they did not know. Has my right hon. Friend had any more success than I have in finding out how much senior management there is, how it is aligned with the interests of patients and how wisely it is going to spend the extra money he is giving it?

[Mr Clarke]

My right hon. Friend is right to say that with this budget for the NHS comes a responsibility for that organisation to be absolutely open and candid—in a way that, frankly, it has too often not been—about where its resources are deployed, and certainly to avoid funding a culture of managerialism at the expense of the patients. We have had recent success in securing some of the data that we have been looking for, but this is a subject where ongoing pressure from across the House for greater transparency is welcome. Certainly if there is any data that we hold that my right hon. Friend would like to see, I will do my best to facilitate that.

UK Gross Domestic Product

Lord Redwood Excerpts

Monday 13th June 2022 Commons Chamber

[John Glen]

As ever, I am grateful to the right hon. Gentleman for his remarks. I do not accept his characterisation of the situation. What I said in my response to him was that today’s data point can be explained by the specific impact of the rapid fall-off in the testing programme. Mass testing ended on 1 April, and that constituted 0.5% of headline growth. We have also seen the impact of the Russian invasion and the impact on the supply chain across the economy. Many economies across the G7 are experiencing a significant impact on their economies and their level of growth.

The Chancellor has been clear in his long-term plan for growth and in his Mais lecture that the Government are committed to investing in research and development, investing in infrastructure and looking at how we can adjust the fiscal burden for business, in particular, to enable that growth to happen. Of course, in subsequent fiscal events, those options remain open to him.

[John Redwood (Wokingham) (Con)]

Why are the UK Government the only Government of an advanced country making a big increase in the tax burden this year and next, at exactly the same time as we are seeing very necessary monetary tightening to control inflation and a huge hit to net incomes from that inflation itself? Is that big tax rise not bound to make things worse and slow the economy too much?

[John Glen]

We always listen carefully to my right hon. Friend. As he will know, we cut taxes earlier this year for hundreds of thousands of businesses though an increase in the employment allowance. We have also slashed fuel duty and halved business rates for eligible high street firms. We will continue to support growth through tax incentives, including the annual investment allowance and the super deduction—the biggest two-year business cuts in modern British history.

As I said in my response to the right hon. Member for Wolverhampton South East (Mr McFadden) a few moments ago, we look forward to working closely with him and Back Benchers to construct the right agenda going into the future.

Economy Update

Lord Redwood Excerpts

Thursday 26th May 2022 Commons Chamber

[Rishi Sunak]

I know that, for some people, it will never be enough. That is why the SNP’s plans would leave Scotland with, I think, a 20% budget deficit and bankrupt the country. That is not something that we will ever do to the people of Scotland or the United Kingdom.

The hon Member’s point on food prices was surprising and slightly puzzling, given I have just returned from a meeting of Finance Ministers from around the world where everyone was talking about increasing food prices. As far as I know, they did not all leave the European Union, but I will leave that to her.

The hon. Member talked about benefits uprating. Perhaps she did not understand exactly what we were announcing. What we are doing for those on means-tested benefits is more generous than uprating. On average, uprating would be worth just over £500, whereas the one-off payment is worth £650.

The hon. Member also talked about timing. She mentioned many things that have happened this week. The other thing that happened this week is that we heard from Ofgem, and we got more certainty on what the price cap will be in autumn. That is the single most important factor in trying to size the support that we are providing to people, because it is energy costs that are the biggest driver of the inflation that we seeing now.

[John Redwood (Wokingham) (Con)]

When the Chancellor approved £150 billion of extra cash to be printed in November 2020 and gave a full guarantee against losses on the bonds, did he think that there could be any inflationary and public spending risk from that? I fully support giving back the huge windfall taxes that he is already collecting on energy, the VAT on fuel, the rip-off at the pumps and the much-enhanced profits tax coming from North sea oil and gas. That should be given back because people need some relief. On inflation, though, what did he think when he printed the money?

[Rishi Sunak]

I am grateful to my right hon. Friend for his question. He and I have talked about inflation for quite a while. He will know that I have long been concerned about the potential of rising inflation and interest rates. It is something that he and I discussed very early in my time in this job. That is why, from the beginning, I have been careful to protect our public finances against the costs of rising inflation and interest rates. I am glad that we took those decisions. Now, because of that, we are in a position to act and to support people.

Cost of Living Increases

Lord Redwood Excerpts

Wednesday 16th March 2022 Commons Chamber

[Stephen Flynn]

Absolutely—I could not agree more wholeheartedly with my hon. Friend on that. He makes an extremely important point, which he has been making for many months, and it is time the Government listened and took action in that regard.

[John Redwood (Wokingham) (Con)]

Would the spokesman and his party now agree that we need to get a lot more gas and oil out of the North sea, which would generate tax revenue that the Treasury could use to ease the squeeze, instead of paying huge sums of money to Qatar and Russia for liquefied natural gas?

[Stephen Flynn]

The right hon. Gentleman makes an interesting point. Of course, he will be cognisant of the fact that when the oil and gas comes out of the ground it goes into the hands of multinational countries. Do we want to be in a situation in which that gas benefits us here, rather than those abroad? Absolutely. Should we be importing from Russia? Absolutely not, and the Government have been right to take action on that. Nevertheless, what I want to see from his Government, which he should want too, is a turbocharging of investment in renewables. When are they going to come forward with their energy security strategy? I have heard talk about it in the paper, but there has been no clarity whatsoever. I shall come back to that later in my speech.

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[John Redwood]

Most of my constituents still have gas boilers. Renewables will work one day, but the immediate crisis is that we are short of gas. Do we have our own or do we have foreign gas? If we have our own, we get tax revenue.

[Stephen Flynn]

It is interesting to hear that we are short of gas when I regularly hear the opposite from the Minister for Energy, Clean Growth and Climate Change. That is the important point: Government Members can try to disagree with their own Government on these matters, but in real terms we are self-sufficient. Scotland is self-sufficient when it comes to oil and gas, but we can and must go so much further on renewables. If the right hon. Gentleman wants to hang around, he will hear me speak about that in due course.

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[Helen Whately]

We have the price cap in this country, which means that customers have been protected from the volatility in global energy prices over recent months. At the moment there is further volatility following the impact on those prices of Russia invading Ukraine, but that is not going to hit the vast majority of households’ energy bills over the coming months. We will have to get to October to see the implications of that. What we have done—as I have just mentioned; I am sorry if the right hon. Gentleman was not listening—is put in place a support package worth £9.1 billion particularly to help those who will find it more challenging to pay their bills.

[John Redwood]

Over the last year, the economy has grown a lot faster because the Treasury did not hike tax rates but instead went for growth. That was a great policy, so why reverse it? Is there not a danger that these tax rises and massive increases in energy prices will slow the economy down too much? If that happens, the Government will have a revenue problem.

[Helen Whately]

If my right hon. Friend will give me a little time, I will come on to the importance of growth to our economy, which is the right answer for the longer term in ensuring that we improve people’s standard of living.

Pressures on household finances are not generally the consequence of one single price rise; they are typically affected by an amalgam of different factors. Remedying the pressure on households therefore requires taking action on a range of fronts, not just on energy bills. Again and again, that is what this Government have done and are doing. We are acting in dozens of ways to support working families. For instance, over the winter, the £500 million household support fund has helped vulnerable households with the cost of essentials such as food, clothing and utilities. Local authorities in England have allocated the lion’s share of that funding to ensuring that it reached those who needed it most, with 50% ring-fenced for households with children. Additional funding was allocated to the devolved Administrations, including the Scottish Government, in the usual way.

We have also reduced the universal credit taper rate and increased universal credit work allowances by £500 to ensure that work pays. This is essentially a £2 billion tax cut for the lowest paid in society. It is helping around 2 million households to keep an average of an extra £1,000 per annum in their pocket. Next month, the national living wage is increasing by 6.6% to £9.50 an hour, again benefiting more than 2 million workers and meaning an increase of over £1,000 in the annual earnings of a full-time worker on the national living wage. And we are committed to going further, so the national living wage will reach two thirds of median earnings for those over 21 by 2024, provided that economic conditions allow. We have supported working families in other ways too: doubling free childcare for eligible parents, which is worth around £5,000 per child every year, and introducing tax-free childcare, which will provide working parents with 20% support on childcare costs up to £10,000.

Charter for Budget Responsibility and Welfare Cap

Lord Redwood Excerpts

Monday 10th January 2022 Commons Chamber

[John Redwood (Wokingham) (Con)]

Could my right hon. Friend comment on what difference, if any, he thinks it makes that a significant proportion of that debt is now owned by the Bank of England, which is 100% owned by the Government on behalf of the taxpayers?

[Mr Clarke]

The Bank of England has obviously helped to underpin our wider response to the crisis that we face. Clearly, it does have a bearing on the relevant significance of debt, but it would be simply irresponsible to leave ourselves exposed in the manner in which we risk being if we fail to constrain the borrowing, which risks otherwise becoming an unacceptable burden and which would leave us very vulnerable. A 1% rise in interest rates would cost the Exchequer £22.8 billion in 2025-26. That is a meaningful level of exposure and one which we want to take action to address.

[Mr Clarke]

My hon. Friend is absolutely right. We are certainly not saying that we are in an untenable situation, but we are saying that it is important to meet our fiscal rules and to get debt falling as a percentage of GDP. As Conservatives, we believe that and we have won elections four times in the past 12 years on that basis. It is important that we continue to uphold that.

[John Redwood]

Further to that point, is my right hon. Friend not quoting a gross figure for the impact of a rise in interest rates, and quite a bit of that would be credited back to the Bank of England, which, in turn, could pay it back as a dividend to the Treasury?

[Mr Clarke]

I think it remains the case that we need to make sure that our debt-to-GDP ratio is more sustainable than it is at present, and I do not think colleagues would significantly demur from that. I take the point that, obviously, there is an interaction—some of these interactions are of a relatively circular nature—between the Bank and Exchequer, but none the less, it is important that we control our public debt. Indeed, we were able to respond to the pandemic as comprehensively as we did precisely because of the fiscal space created since 2010. The fact that we faced two once-in-a-generation shocks in just over a decade highlights why we must have the buffers to provide support when it is needed most and why we must act to rebuild those buffers, so that we are ready for any future shocks. In its most recent “Fiscal risks report”—not an easy one to splutter out—the OBR said:

“In the absence of perfect foresight, fiscal space may be the single most valuable risk management tool”

that we have.

The third and final reason we need to keep our debt under control is simple: our public finances are the legacy we leave for future generations, and the decisions we take now will have a material impact on the lives and livelihoods of our grandchildren. They will help or hinder their future ability to tackle long-term challenges, from climate change to an ageing population, or indeed to seize the opportunities that lie ahead.

The charter for budget responsibility contains new fiscal rules to guide us back to fiscal sustainability in a fair and responsible way. The rules will ensure that we get debt down over the medium term. They will allow us to deliver a significant uplift in capital investment, in turn driving economic prosperity, but without burdening future generations with borrowing to fund our day-to-day spending. The new rules require that underlying public sector net debt, excluding the impact of the Bank of England, must as a percentage of GDP be falling. The current budget must be in balance, which means that everyday spending must be paid for through taxation. Both rules must be met by the third year of every forecast period, giving us the flexibility to respond to events in the near term, such as omicron, while credibly keeping the public finances under control.

Finally, a third rule will ensure that public sector net investment does not exceed 3% of GDP on average over the forecast period. This rule will allow the Government to deliver on our ambitious plans for investment over this Parliament, with the highest sustained levels of PSNI as a proportion of GDP since the late 1970s. With this rule, we are delivering on plans to invest more than £600 billion in gross public sector investment over this Parliament to spread prosperity across the UK. The £4.8 billion levelling-up fund is part of that. An unprecedented investment package of £5.7 billion for eight English city regions to transform their local transport networks is also part of it. On top of these commitments, the UK Infrastructure Bank is now open for business and is expected to support more than £40 billion of infrastructure investment. Crucially, the rule also mitigates the risk of increasing debt to an unsustainable level. Our fiscally responsible approach supports growth while keeping debt under control.

Combined, these rules will guide responsible decision making. The International Monetary Fund has noted that

“Countries that have followed a debt rule have typically managed to reverse a jump in debt...significantly faster than other countries”,

and it recently assessed that the

“new fiscal rules have anchored fiscal policy well”.

Thanks to our support for the economy and early responsible decisions to strengthen our public finances, in its October forecast, the independent Office for Budget Responsibility confirmed that the rules were met. The current budget is in surplus and underlying debt is forecast to fall in the current target year, 2024-25. The rules will guide fiscal policy for at least this Parliament and will be reviewed at the start of each Parliament to ensure they reflect the economic context and mean that we can deliver for the British people.

In addition to the rules in this charter, we will go further, becoming one of the first countries to formally consider the broader public sector balance sheet in our management of fiscal policy. The OBR will now forecast broader measures, including public sector net worth, which it says provides a fuller picture of fiscal sustainability and allows for more sophisticated analysis.

The charter also retains the welfare cap in order to keep welfare spending on a sustainable path and to support the other rules in strengthening the public finances. Since the cap was last set at Budget 2020, the covid pandemic has had a significant impact on the medium-term outlook for welfare spending. To reflect that and to align with the updated fiscal framework, the level of the cap is being reset in line with the latest forecast. That leads to an effective increase of £10.5 billion in the cap by 2024-25.

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[John Redwood (Wokingham) (Con)]

Let me return to the subject of the debate, the charter for budget responsibility. I will not follow the Opposition into a debate on the general state of the UK economy, which I am sure we will have other opportunities to discuss.

I see this as the Maastricht rules tribute debate. Every year under the Maastricht treaty, whether under Labour, coalition or Conservative Governments, we used to have a debate. We had to look at the two fiscal rules, which of course both came from the European Union: rule one was that the budget deficit had to be 3% of GDP or less; and rule two was that we had to either be below 60% of GDP with our state debt, or we had to show how we were going to get down to 60% of GDP with spending cuts or tax rises. The UK normally favoured the tax rise route, rather than the spending cut route.

That was characterised by the Opposition parties of the day, once the Conservatives or the coalition were in office, as austerity economics, although they would never accept that the cause of the austerity was the rules designed in Brussels. They would point out, when I made that point, that, “Oh well, because the UK is not a member of the euro there are not the same penalties imposed if the UK fails to comply.” The fact was, however, that the whole UK economic machine—Bank, Treasury and officialdom—believed they were very serious commitments and that, as they were treaty commitments, the UK had to keep to them. So when we finally got out of the EU, I was one of those voices saying to the Government, “Let’s scrap all that. Let’s not have those Maastricht tribute debates”—although I think we had one even after we left—“and let’s have our own UK framework.” That is what we should be debating tonight.

The Government have come up with a charter for budget responsibility, which I welcome, but reading the detail, it has a familiar ring to it. What are the two main rules in the charter? One is that we must keep the budget deficit down to 3% or below. It has been repackaged in relation to investment, but it is basically the 3% Maastricht budget deficit rule. The second rule is that, by the third year, debt should be falling as a percentage of GDP. Of course, our debt is well above 60%, and it will be quite a long time before we get back to 60%, if at all. It is now built into the framework as a regular review item, although it has the extra twist that it is a three-year average, so there is a bit more scope for flexing things.

I think we can do better than this Government. We could come up with an economic framework geared to the modern needs of an independent country, and I would suggest that our charter should embed two great aims of economic policy. The first aim that it should definitely embed is controlling inflation. It is right that the so-called independent Bank of England—this House regularly changes the rules and shows that it is actually in charge of the Bank of England—is charged with the duty of keeping inflation down to around 2% on average. I have no problem with that as a target, but the Government need to adopt it as a target as well, because as Ministers must well know, we cannot do all of the heavy lift through monetary policy—we cannot do it all through interest rates or quantitative easing. We also need to have a sensible fiscal policy.

Above all, the Government, who control such a huge chunk of the economy, need to manage their own affairs well, in terms of productivity, sensible real wage growth and so forth, and they have a duty to follow an anti-inflation strategy for the public sector directly under their control as a back-up to what the Bank and monetary policy are trying to do. I think that we should embed the inflation policy more firmly in the charter and that the Treasury should have to tell us how it is contributing to controlling inflation. It will be very topical this year, because clearly inflation is considerably above where we would all like it to be and there is no immediate sign that it is about to drop down, although I think it will drop down towards the end of the year, unless policy is particularly foolish.

The second criterion or objective that I would put in the charter is a growth objective. Labour made an entirely fair point by saying that what matters is growth. The faster the growth—as long as it is not inflationary—the more we would solve our deficit and debt problems. Our economy and our figures are incredibly sensitive to the growth rate. In the first half of the current financial year, we had very fast growth. It was a recovery phase and things were going fairly well from the covid lockdowns. As always, the OBR and the Treasury completely misjudged what favourable impact growth has, so they overstated the deficit for the first six months of the year by a whopping £50 billion. The deficit tumbled by £50 billion more, with no tax rises. But there was a huge tax rise—it was called tax on growth. More people went to work, and more people earned higher wages, bonuses or salaries. More people spent more money, so there was more VAT. So income tax receipts, VAT receipts and other receipts in the economy greatly outperformed the OBR and Treasury forecast, demonstrating that, if we can go for growth, we will make much better progress on the debt and deficit, which we need to do, than if we go for austerity economics, slowing the economy with tax rises and a too abrupt monetary deceleration.

I urge the Government to look again at whether they can improve on the objectives in the charter, to reflect on it and to see how an independent Britain can have a growth policy. If the Government established a growth target—they would not always hit it, but they could establish it—it would start to inform the actions of every Government Department that has a bearing on the strength of our economy, new jobs and all the rest of it. That is what we want. We want a Whitehall that is positive about Britain, not one that is trying to hold it back. We want a Whitehall that thinks Britain can achieve things—can invest here, have more jobs here and substitute for imports—rather than a negative Whitehall that says, “Gosh, there is too much borrowing, What can we cut? What can we tax? What can we stop?” We want less stopping and more positive going. We want more ability, generated by a growth policy, to show that an independent Britain can produce more of its own energy, grow more of its own food, catch more of its own fish, and make more of its own personal protective equipment and of its own medical requirements.

[David Linden (Glasgow East) (SNP)]

That speech would perhaps have done even better with “Jerusalem” on in the background. The right hon. Gentleman speaks about growing more food, but can he tell me who is going to pick that food from our fields?

[John Redwood]

It will be picked by people paid decent wages, and if that requires wages to go up a bit, I have no problem with that. It will also be picked by the growing mechanisation of agriculture. Our agriculture is not as fully mechanised in a lot of farms as it is possible to do when there are better capitalised farms, like those that have been growing more food elsewhere. How pessimistic that was—why is the hon. Gentleman not proud of the United Kingdom, Scotland or wherever, thinking that we can achieve more and do more? Why do we always have to be stopping people doing things, and saying that nothing is going to work and so let us import all our vegetables from Spain, all our flowers from the Netherlands and all our energy from Russia, Germany or the Netherlands or wherever because we are not able to do it here in Britain? It is just not good enough. We have this huge opportunity. We have a very talented people. We have many natural resources. We have a perfectly good temperate climate for growing most of our own food. So, Government, get on with it. Having a growth target would help energise a Whitehall that still seems to be very disappointed in the country it is trying to govern and seems to be trying to hold it back.

One other thing that the Chief Secretary mentioned in his remarks, which is mentioned briefly in the text we are debating tonight, intrigues me. It says that balance-sheet items are being worked on but have not yet reached a state of development where they can be shared with the rest of us. How long does it take? Why do the officials to the Government not know the asset and net asset position for the country? I believe there are some figures we can get from public sources that show that we do have some guesses about all that, but is it not rather important that when we debate the state of the nation’s finances, we understand the balance sheet as well as the income account and that we know whether the public sector is adding value and long-term wealth or not? If it is, why do we not claim some credit for it? If it is not doing enough of that, we need to ask the difficult questions about the wisdom of the investments, the productivity of the schemes and all the things that go into making that a success.

I did ask the Chief Secretary about a balance-sheet item. I think it actually makes a difference if you have bought in your own debt, because you owe the debt to yourself. I am not asking for anything imprudent to be done. I understand why we have gone through this rather tortured process, as has the European Central Bank and the Federal Reserve Board, and as, for many years, has the Bank of Japan. But we should not then fool ourselves into thinking that we have a worse problem than we have. The fact is that all these countries and currency areas spent a lot of money and created a lot of money to buy in debt over the pandemic, and we have got away with it, with a caveat that we have a little too much inflation. That debt is purchased; it is now both an asset as well as a liability of the state, so it is wrong to think that it is just a liability. The new argument is, “We owe the Bank of England and if the short rates go up, we owe the Bank of England more interest and so forth”. Yes, but it gets the receipt. If we want to do the transaction, the Treasury pays the Bank and the Bank can pay the Treasury back, because the Treasury owns the Bank. If I had bought in my mortgage from a mortgage company, I would probably just forget the whole thing. However, on Bank of England and Treasury logic, every month I would pay interest to myself because I still owe the mortgage, but then I could take that money back and spend it because I own the mortgage company and it is no longer a proper debt.

I think we have to understand that something different has occurred with quantitative easing, and I do not think we should go on doing it. It is normally very inflationary and very dangerous. In the strange circumstances of a covid lockdown in which a huge amount of demand and activity were taken out of the system, we could get away with it; indeed, it was right to do it, and I supported the Government at the time and praised them for the stimulus they offered. However, that has gone, and we now need to have sensible finances. To run those well, I strongly recommend a firm inflation target—inflation is a little too high at the moment, and needs to be taken very seriously—coupled with a much more optimistic growth target, because that is the way to grow the balance sheet and get the debt and the deficit down.

Conduct of the Right Hon. Member for Uxbridge and South Ruislip

Lord Redwood Excerpts

Tuesday 30th November 2021 Commons Chamber

[Michael Ellis]

I will give way more than the right hon. Member for Ross, Skye and Lochaber, but not yet.

For my part, I relish the opportunity to set a different scene for the House of what the Prime Minister is achieving for the people who returned him to No. 10, many of whom voted Conservative for the first time. At the election, he made a clear commitment to spreading opportunity more fairly and to uniting our country.

Higher skills, higher wages, higher productivity—that is the United Kingdom that the Prime Minister promised to create and is creating, and SNP Members know it. He got Brexit done. Since, he has been using our hard-won freedoms outside the European Union—the catastrophists on the Opposition side do not want to accept it—to serve the interests of the whole precious United Kingdom with policies that encourage innovation and growth throughout the whole United Kingdom and that deliver for the whole United Kingdom.

[John Redwood (Wokingham) (Con)]

The Minister is making a good case. Does he find it strange that SNP Members are posing as defenders of democracy when they would not accept the result of the Brexit referendum in the UK or of the Scottish referendum on staying in the Union?

[Michael Ellis]

SNP Members are fair-weather friends to democracy, which, clearly, they support only when it goes their way.

Budget Resolutions

Lord Redwood Excerpts

Wednesday 27th October 2021 Commons Chamber

[Mel Stride]

My hon. Friend is absolutely right. I will come to the matter of wages and wage growth momentarily, but let me dwell on the challenges facing the economy.

Another thing that the OBR points out is the increased sensitivity to interest rate rises—the Chancellor made this point—and the damage that they can do to the public finances. I think my right hon. Friend gave the example of a 1% rise leading to a £23 billion increase in debt servicing costs. To put that in perspective, it would wipe out the value of the corporation tax increases and income tax threshold freezes that my right hon. Friend announced in the last Budget. That would be gone in one enormous gulp, so we must be careful about the vulnerability we have. Though we have low interest rates, and interest rates might move up in baby steps, that applies to a very large debt indeed.

Let me touch on inflation—I am pleased that my right hon. Friend spent quite a lot of time on it during his speech—and its impact on interest rates. We have already seen the Monetary Policy Committee beginning to divide on whether rates should go up, and there is an expectation, certainly in the markets, that rates will start to increase. We have seen 10-year gilts going up in more recent times, and it is possible that quantitative easing will start to unwind —perhaps passively initially—when we reach a certain trigger level of interest rates, so it is important that this credible plan is there to deliver on those fiscal targets.

The history, however, is not good in that respect. We have had Chancellor after Chancellor failing to meet their fiscal targets; they have either abandoned them completely or delayed or modified them in some form. Depending on what happens to demand in the economy relative to supply, there may be a case for fiscal stimulus even further down the line. One thinks of the removal of the universal credit uplift, the energy price increases, the labour market demand-supply mismatches and the rise in taxes, often taking demand out of the economy. None the less, and setting that to one side, the Chancellor’s default position must be to stick to those fiscal targets and resist the huge cacophony of demands for more and more expenditure, particularly the day-to-day expenditure that he is rightly targeting in his fiscal rules.

Some of those demands might end up being necessary. If we do not get back to the pattern of demand for public transport that we had before we locked down, it is conceivable that further subsidy will need to go to the public transport sector. Other areas, such as the health service, might have additional demands, but I point out to my right hon. Friend—he knows this more than most —that the NHS public expenditure take has risen in the last 10 years from 32% to 42%. He must get very good at saying no to Ministers when it is necessary to do so, and telling them to go back to their Departments, work harder and get more out of what they are given. That is a lesson for us all, incidentally, particularly those of us on this side of the House.

If we fail in that endeavour and inflation takes off, interest rates go through the roof, the cost of servicing our debt becomes ruinous and international markets lose faith in our economy, we will be back broadly where we were in 1992 when we had Black Wednesday. Conservative Members will remember the long, hard lesson of that: it took us a generation to re-establish our ability to look the electorate in the eye and say, “We can offer a fiscally responsible Government.”

There were some announcements on tax today. May I say first that the drop in the bank surcharge is absolutely the right thing to do? We are putting corporation tax rates up to 25% from 19%, so it would be absurd to cripple our financial institutions with uncompetitive international tax rates.

I was particularly delighted by the shift in the universal credit taper rate from 63% to 55%. That will help countless low-paid families to earn more and keep more of their money, and encourage more people into work. When I was a Treasury Minister, we looked endlessly at this and I pushed really hard on it. I know how expensive it is to do that—my right hon. Friend the Chancellor suggested £2 billion a year—so I take my hat off to him for having grasped that particular nettle.

My right hon. Friend is also right to set out an aspiration to get taxes down before the end of this Parliament. The same pattern occurred under Lady Thatcher, who is much referred to when we talk about tax. In the early years of the Thatcher Government, the tax burden rose quite strongly, and it was my right hon. Friend’s hero Lord Lawson who was able to bring tax rates down. Let us hope that my right hon. Friend is in a position to emulate that in due course.

I turn briefly to inflation, which is right at the core of what is happening in the economy. The threat to the public finances from inflation cannot be overstated. The big debate now is whether price surges and increases in inflationary expectations will be transitory or more persistent. My right hon. Friend referred to the surge in demand relative to supply, which of course will lead to price increases; all else being equal, one might imagine that it will pass relatively quickly.

We have seen the commodity, transport and energy price increases that my right hon. Friend referred to, but there are other price increases that we might expect to be stickier. There are bottlenecks that are often outside our control—a south-east Asian chip manufacturer can have a bottleneck that results in our being unable to produce cars in the United Kingdom. Structurally, the labour market has changed: as a consequence of the pandemic, there is now greater demand for goods relative to services. It will take time to mop that up.

The Bank of England MPC has expressed increasing concerns, in different ways, about inflation and has been constantly deferring the moment at which it believes inflation will peak. There is a debate as to when deferred “transitory” becomes “persistent”, but the huge danger is that we will go into a wage price spiral. One way in which that might happen is if we talk up wages by inducing companies to put them up without a coincident increase in productivity. That will simply feed the inflationary tiger. We have to be very careful on that point.

[John Redwood (Wokingham) (Con)]

Does my right hon. Friend agree that we need to be very careful about believing any of these forecasts from the OBR and the Bank of England? They said that inflation would be down at under 2% just a few months ago and have now had to change their mind. Does he also agree that when Lord Lawson cut income tax rates, we had a surge of extra revenue?

[Mel Stride]

It is certainly the case that the Bank of England’s projections on inflation have been under-baked. In fact, if we go back in time, we can see that its recent revisions have been more dramatic, which really illustrates my point. I have a feeling that there will be rather more inflationary pressure than many people imagine.

Some of the drivers of inflation are outside the control of my right hon. Friend the Chancellor, but some are very much within it. One of those is immigration. I totally accept the comment from my right hon. Friend the Prime Minister that we do not want to instinctively

“reach for that…lever of uncontrolled immigration”.

He is absolutely right: this country left the EU to get control of our immigration. However, what we must not do is avoid pulling the lever where there are genuine pinch points in the labour market in the shorter term. If we do not act to bring in skills if necessary, we will simply encumber businesses in a way that may mean many going out of business, and replace them with imports, which can also be inflationary.

The other such area is skills. Further to the point that the Chair of the Select Committee on Education, my right hon. Friend the Member for Harlow (Robert Halfon), made about the importance of skills, I was really pleased by the announcements from my right hon. Friend the Chancellor about post-16 T-levels and lifelong learning. Those announcements are vital to repurposing the workforce to get the challenges of the future sorted.

In the longer term, there is a huge opportunity for us in this country. We are a world leader in life sciences, FinTech, financial services and the digital sector and we have opportunities in artificial intelligence, robotics and genetics, but if we are to grasp those opportunities, we have to get the level of business investment up. I think that my right hon. Friend referred to that level increasing over time; that may be true, but it is still quite a long way below where it ought to be, looking at it historically.

The super deduction is a very important move that the Chancellor has already made, and the extension of the annual investment allowance to 2023 is very welcome, but I think we may need to look even deeper at how, beyond the end of the super deduction, we can continue to see business investment rise.

On research and development, it seems to me that in the plethora of announcements, figures, dates, schemes and adjustments to relief that my right hon. Friend identified, we may have slipped on our target of hitting £22 billion by 2024-25—if I heard him correctly, it has slipped to 2026-27—and I am not quite sure where we are on our target of 2.4% of GDP by 2027. Those are vital targets for us to meet in the longer term.

Finally, there needs to be an overarching examination of how the recovery is balanced. Those hit hardest by the pandemic have been the poorest in our society, who are much more likely to have faced the impact of lockdown and loss of income, and young people. My Committee will look very closely at all the issues that I have raised, including that point.

Once again, I welcome the Budget. The Chancellor has been in a very difficult position and I think he has put forward a very positive set of proposals. The devil will be in the detail; my Committee will look forward to examining that detail, including with my right hon. Friend on Monday.

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[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

Growth is the way that we need to proceed. Growth is the way to get us over the damage done by the pandemic policies. Growth is the way to deliver the optimism that the Prime Minister expresses so well about the economy. Growth is needed to level up. Growth is needed to help generate the more and better-paid jobs we require. And growth is needed to remove the supply constraints and shortages that are too obvious in our own economy and many others around the world trying to overcome the pandemic disaster.

We therefore need from the Treasury a more vigorous growth policy even than the one that has been envisaged today, which is largely public sector-led. We need also to engage the private sector, get innovation pulsing and make sure that people can enjoy the rewards of success. Let us look at taxation of small business and the self-employed. It still seems to me that the Government have a bit of a downer on that. We are going to be mightily dependent on the good spirits, good will and enthusiasm of all those who are setting up businesses or have small businesses, or who are taking that step to go and work for themselves. They find a tax regime that is becoming increasingly penal.

We need as well to look at our capacity in many areas where the Government are the great regulator, instigator and provider, where we need to harness more private capital. We are chronically short of energy in this country, yet we are an energy-rich part of the world. If only we would exploit it. Why do we import so much gas and electricity? Why are we making ourselves so dependent on wild and erratic world market prices and sometimes having to pay spot prices, when we could produce much more of our own electricity and gas at home, supply it under sensible average price contracts and give people proper security of supply?

The Transport Secretary is doing great work in, I hope, an early resolution of the heavy goods vehicle driver shortage. There was a Government problem there, in the number of tests, the training and the support. Indeed, the taxation of drivers is another issue, which I think has led to some leaving the profession or not joining it. Again, I ask the Government to please consider where they are engaged, where they are licensing in the wrong way or where they are not providing enough capacity, to allow the private sector to respond and to perform well.

My disagreement with the Chancellor in this Budget—I do have one—is that I think the way we get faster growth is to go for lower tax rates to promote it. Lower tax rates should not be a reward for achieving growth that is much more difficult to achieve if it is done against the background of much higher tax rates. I understand why the Chancellor was persuaded to put in the £12 billion from national insurance, but it is a tax on jobs. I was against it. It is deeply damaging and wish they would remove it. However, would the Chancellor have still put that in if he had known that, in the first six months of this year, he was going to collect £44 billion more in tax revenue than the OBR forecast as short a time ago as March?

The OBR was £44 billion out for the first six months of the financial year. That revenue came in because we were living through a period of lower tax rates—stamp duty surged because the rate had been cut, for example—and because we were recovering from covid on the back of a massive fiscal and monetary stimulus, a stimulus I always supported and for which I pay tribute, as others do, to the Chancellor and the Bank of England for organising. We needed that massive stimulus. We needed to go in behind the Federal Reserve Board, which really saved the advanced world at a time of great crisis and trouble with an even bigger monetary stimulus proportionate to the size of its economy.

Now, however, times are moving on. We have had a very sharp recovery, which the OBR and the Bank of England did not forecast correctly. We have more inflation than they said. They were forecasting inflation below 2% for this year. Now I see in the latest figures that they have upped the forecast to 4% for next year and they have had to up their forecast for this year a bit, although probably not by enough. The Bank of England was caught on the rise, not understanding the power of the economy to recover. I have never seen such big revisions to forecasts in six months. We have here today a very big increase in the growth rate, a big drop in the unemployment rate and a big rise in the inflation rate.

Those of us who were saying that the forecasts were wildly pessimistic in March were, unfortunately from the Government’s point of view, proved right, but the Government should celebrate that. They should also puzzle over how the official forecasts are now much more positive for this year and next year at the very moment the economy is actually slowing for a variety of reasons partly relating to tax policy and the threat of interest rate rises, which the Bank of England now seems to think it needs to administer. I urge the Government to pay less attention to official forecasts, because they are all over the place. I have no great confidence that this latest set will be proved right over four or five years any more than I thought the March lot would be. They point to a very disappointing growth rate in the last three years of the forecast period. That is why I am urging the Treasury to look again at its growth rate policies and to find ways to strengthen them.

My final point, to keep within time, is that of course I welcome more money if it will buy me more operations and treatments, and bring down waiting lists in my local health service. Of course I welcome more money if it finds its way to my local schools, enabling them to have more and better paid teachers, and the equipment they need. But these are very large sums of money. The health increases, which come out on a very regular basis now, are on top of a massive increase in health expenditure which was understandably needed to combat covid. The Treasury must push back on some of those sums. In the case of the health budget, we will not need the massive test and trace budget, with all its set-up costs. We are not going to repeat the experiment of building Nightingale hospitals and then closing them down once we have completed them. We are not going to repeat the need to procure in a hurry a vaccine that does not exist and set up a means of distributing it. We have done all that, so that money, which is still in the base budget, should be reallocated.

Before the Government give additional money to the health service, they should satisfy themselves that the money is being properly distributed and properly spent. Above all, we need a productivity revolution. I want to see much higher pay in this country and in the public sector, but that requires increasing productivity and there is no easy way of doing that. Ministers must galvanise the senior managers of the NHS to deliver it.

Budget: Pre-announcement of Provisions

Lord Redwood Excerpts

Tuesday 26th October 2021 Commons Chamber

[Mr Clarke]

It is important that we consider all the measures that have been trailed in the round. It is clear that the wider announcements that have been made are entirely accurate. The national living wage is to rise by £1,000 a year, which will take the benefit for a full-time worker on the national living wage to £5,000 since 2016. That is a substantial increase. It beggars belief that the Labour party can stand there and say that a 6.6% increase in the national living wage is somehow not enough. It needs to be considered in conjunction with all the other announcements that have been made, including the £500 million household support fund, the energy price cap and all the action that we have taken to freeze fuel duty and to keep bills low. We are acutely conscious of the pressures that face households and we take action to modify them.

On public sector pay, which the hon. Lady asked about, I am delighted that we will be returning to the normal processes that adjust public sector pay in the light of all the pressures that exist. It will be for the relevant pay review bodies to discuss that, in conjunction with the Government, in the normal way. I am not going to pre- empt that work, but we will work closely with them to make sure that what is announced is right. The Chancellor will have further details on that in his speech.

On the cost of energy, the energy price cap is protecting households, with up to £100 a year off their bills. That is the right thing to do. We all recognise that that is a priority for all our constituents.

On business rates, we will get the upshot of the fundamental review of how we can get the future of business rates right. The Labour party has committed to abolishing business rates, without any clear idea of how it would fund that. Indeed, the disconnect between what the Labour party has committed to and what it has actually identified the funding for is somewhere in the region of £400 billion of commitments with £5 billion of savings to pay for them. That is not a responsible way to run the economy.

What you will be hearing from the Government Benches tomorrow, Mr Speaker, is a clear plan to make sure that we can not only balance the books but take our economy forward in a way that works for the benefit of all our communities. That is obviously the priority for my right hon. Friend the Chancellor and for me.

[John Redwood (Wokingham) (Con)]

This is not the first Government who have wanted more than one day’s news out of a Budget, but the right way to do it is for all Ministers to observe complete Budget secrecy, for the Chancellor to announce the tax changes and the block totals on spending and then, in the days that follow, for Cabinet Ministers to come to the House to announce the detailed spending plans and subject them to our scrutiny. If that was right for all previous Governments, why is it not right for this one?

[Mr Clarke]

I thank my right hon. Friend for his question, and I completely share his assessment of the importance of this House, of which both the Chancellor and I are acutely aware. In 2013, the then Chancellor, George Osborne, asked the permanent secretary for Her Majesty’s Treasury to conduct a review of the practice of the release of Budget information under embargo on Budget day, and he set out a series of recommendations. His central conclusion was that the Treasury should introduce

“a ban on the pre-release of the core of the Budget…that is: the economic and fiscal projections, the fiscal judgement and individual tax rates, reliefs and allowances.”

We have observed that stricture in full and I am obviously totally committed to continuing to do that.

Health and Social Care Levy Bill

Lord Redwood Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Steve Barclay]

Again, this is why, as is standard practice, my right hon. Friend the Financial Secretary to the Treasury has published the tax information and impact note on the tax change. Of course, that will be dynamic because it will interact with the fiscal forecast that the Office for Budget Responsibility will set out alongside the Budget on 27 October. So that is dealt with in the normal way for measures such as this—

[John Redwood (Wokingham) (Con)]

rose—

[Geraint Davies]

rose—

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[Jeremy Hunt]

First, we passed the Care Act 2014, which put in place the legislative foundations for the proposals that we are now going to fund. Secondly, I happen to agree with the hon. Gentleman: the social care system has needed more money for some time. That is why it is so extraordinary that his party is to vote against this Bill.

If we are going to take £12 billion a year out of people’s pockets, we need to avoid falling into three traps—and I say this as someone who has fallen into more traps in this policy area than anyone else in this House. The first trap that we need to be careful of is the workforce. If we put an extra £8 billion into the NHS but we do not have £8 billion-worth of additional doctors and nurses to do the extra treatments, the risk is that that money will hit the ground without touching the sides. That is why we need a workforce plan.

The Health Foundation says that the backlog will require 4,000 more doctors and 18,000 more nurses, but we have not had any workforce plan from the DHSC. I suspect that in the short term we will have to relax all the immigration requirements for doctors and nurses. That will not be great for developing countries, but it may well be our only choice. In the medium term, the best suggestion is what my Select Committee and many others have proposed: we should give Health Education England the statutory responsibility to produce independent workforce estimates and create a discipline, a bit like the OBR does for Budgets, to make sure that we are training enough doctors and nurses. That is the first trap.

[John Redwood]

rose—

[Jeremy Hunt]

I will make some progress, if I may.

The second trap is that we must not inadvertently sleepwalk into another Mid Staffs. People forget that when Mid Staffs happened, NHS budgets were actually going up. There was huge pressure to reduce waiting times and that ended up creating a targets culture in which numbers matter more than people. We have to be very careful that we do not make the same mistake again. I know that my right hon. Friend the Chief Secretary to the Treasury, who worked with me at the Department of Health and Social Care, understands that because of his commitment to patient safety.

The third trap involves social care funding. Although the settlement we are discussing is generous, if we are honest, in the next three years social care will not actually get as much money as it needs. The truth is that there is a risk that the NHS will continue to gobble up the lion’s share after that, which is why it is essential to ring-fence the amount of money that goes to social care after those three years.

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[John Redwood]

Does my hon. Friend share my surprise that the Treasury can be precise in saying that it needs £12 billion from a new tax when it overstated the budget deficit by £90 billion last year, which shows that it does not have a clue about how much money will come in anyway?

[Mr Fysh]

My right hon. Friend makes a good point. Yes, it would have been great to have had more detailed context of where we can get to in this economic recovery so that we could know where we were in terms of revenue before we make such momentous changes that affect the aspirations and potential of so many people within the economy. We also need to look at whether this measure will increase costs and cost pressures within the system that we are trying to help. Many local authorities outsource provision of social care to private contractors, and these private businesses will be very much affected by these plans for the tax. We have also heard that the plan will mean that private providers cannot cross-subsidise their state provision of residential care places with private places, which could risk taking capacity out of the system at exactly the wrong moment when we want to get health and social care operating correctly. There are ways of making this measure more intergenerationally fair and I look forward to trying to work with the Government on different and innovative ways of doing that.

Going back to my original point, I think that we marry in haste and repent at leisure. Let me be clear that I am not referring to my own marriage; it is a very successful one and I love my wife dearly. None the less, it would have been much better to have had more time to think about all the ramifications of this Bill and the associated plan. I hope the Government will engage positively with our ideas about how we can evolve things whatever the outcome today.

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[John Redwood (Wokingham) (Con)]

I urge the Government to think again about the health plans. On the Treasury figures, this year the health budget in the public sector overall is £230 billion—£64 billion higher than the 2019-20 budget pre-pandemic. I understand that there were lots of one-off and special costs in setting up and dealing with procedures for tackling the pandemic, and I, like everybody else, am very grateful for the work that went in from health staff and experts. But that cost will drop away, so what happens to that money when it is no longer pre-empted by the special costs of the pandemic, and can it not be applied?

I hope the Government will listen to the Chairman of the Health Committee, my right hon. Friend the Member for South West Surrey (Jeremy Hunt), about the need for a manpower plan, because if we wish to clear the backlogs it is quite obvious that more nurses and doctors are going to have to carry out more treatments and procedures. Some of that will be possible through reallocation and improved working of the staff we already have, but a lot of it will require additional recruitment.

I am also very worried about the lack of a detailed social care plan, particularly for my own area of Wokingham. We have a large number of self-payers at the moment. How could I be sure that if we went for this levy scheme, which is still not properly detailed, sufficient money would come from it to a local authority like Wokingham, already under enormous pressure on its social care budget?

I am very suspicious of hypothecated levies. It is particularly dangerous to hypothecate a levy that is a tiny fraction of the budget one is trying to improve. That will give some people the misleading impression that the social care levy will pay for social care, whereas, on the numbers, the levy would be able to match under one fifth of the total public social care budget. Pitted against the huge numbers for the NHS and wider public health budget, that is just over 4% of the total, so it is a very insignificant amount in relation to the huge sums we are already talking about for the health budgets. However, it is a big sum of money when it is broken down and becomes a tax burden on people on quite modest incomes and those struggling in self-employment or trying to get their little businesses going. The last thing they need, when we need rapid growth and a faster recovery, is a tax rise.

The economy does not need sandbagging with austerity economics; it needs promoting for faster growth. It is still below the levels of output before the pandemic hit. Up until this point, the Treasury has been magnificent in making an avalanche of money available to get us through a most difficult time. We have got away with it. It has been borrowed at very close to zero interest. In these unique circumstances, it was possible to take extraordinary monetary measures that one would not normally be able to rely on and would not want to, and I am very grateful that that was done.

I say to the Government: it is too soon to start braking the economy. The growth rate almost disappeared in the last month. I am hoping it is going to look a bit better in the next month or two when we get more opening. But before the economy is completely opened up, and people have stabilised their businesses and repaired some of the balance sheet damage that the pandemic measures did, is not the right time to take money off them. We need more spending power, not less; more demand, not less. If the Government back that, the revenues will come tumbling in to a much greater extent than if we put rates up. Do they not understand that they were £90 billion wrong last year because there was more recovery than expected? They are already £26 billion under this year because there was a fast recovery in the first few months. Do not kill the recovery and you will get the money.