Energy (oil and gas) profits levy
Debate between David Linden and Liam Fox(1 year, 5 months ago)
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Dr Fox
I entirely agree. The concept of the bloc in trade terms is very second half of the 20th century. We need to look at the growing markets that give greater opportunities for the United Kingdom in goods and services. The fact that they are not immediately geographically adjacent to us should not be our primary concern. We need to move with the trends in the global economy, not focus on what is a largely ossified view of the world based on the post-second world war consensus.
When we look at the origins of the inflation that we are facing in the United Kingdom, we see that there are several of them. They have been referenced a lot during this debate. The post-pandemic supply issues are still ricocheting around the global economy and particularly harming developing countries at the present time. Also, the central banks—not just the Bank of England but the Federal Reserve in the United States and the European Central Bank—got into a group-think on what they laughingly call the modern monetarists, which means that they are not monetarists at all. They believed that they had found some sort of monetary alchemy through which they could continue to print money faster than the economies were growing without creating inflation. I believe that is why there is higher inflation in the United States, the United Kingdom and Europe than in other countries—notably Switzerland, which sits in the middle of the eurozone but did not follow the same expansionist monetary policies.
By far the greatest boost to inflation has come from Putin’s invasion of Ukraine, however. That has come about in a number of ways, which I will come to in just a moment, but we must remind ourselves that inflation is not just an economic evil; it is a moral and social evil as well. The poorest people in our society are hit the hardest by inflation because they spend more of their income on non-discretionary items. It also transfers money from the savers to the borrowers in society, which is not something that a Conservative Government should want to see. The Government have done much in this statement to protect those on low and fixed incomes, including an extra £26 billion in cost of living support, particularly on fuel, on top of what we have spent already, and an extra £11 billion on uprating benefits. The Government introduced those two items to protect those on low and fixed incomes and, taken together, they are the size of the United Kingdom’s defence budget. These are not small sums. Our increased spending on education and health is hugely welcome, especially as we catch up on the post-pandemic disruption, but to be frank, even the generous sums put forward by the Government will largely be eaten up by inflation until we get it under control.
And that is before we come to the most frightening item of all, the fact that this year we will be spending £120 billion on debt interest payments. For reference, we spend only £134 billion on NHS England each year, so we are spending almost the NHS budget on debt interest payments. We need to recognise that we cannot increase our debt further. As my right hon. Friend the Member for North West Hampshire (Kit Malthouse) said, around 20% of our debt is now index-linked and is therefore very vulnerable to rises in the retail price index. Duncan Simpson, the chief executive of the TaxPayers Alliance, said:
“The spiralling cost of servicing the national debt is deeply concerning. Taxpayers’ money that should be spent on frontline services or keeping rates down is instead going towards interest payments that outsize the costs of government departments.”
If we cannot raise debt any further, either we have to see spending come down or taxes go up, or we have to increase Britain’s wealth from the rest of the global economy. The latter is difficult in current global conditions and the Government have correctly, but rather disappointingly, from a political perspective, had to see taxes rise. That sets a clear way in which to see our future priorities. The first thing is to bear down on inflation. At the same time, we have to get control of the public finances and then we have to get our taxes back down.
I hope the Opposition will reflect on this point today. We have heard from the Opposition Front Bench on both days of this debate that we are facing a recession made in Downing Street. Currently, the greatest source of global inflation is Putin’s invasion of Ukraine and rising global commodity prices, particularly food and fuel, which is causing potential starvation in vulnerable states, with widespread social dislocation and increased international migration.
Dr Fox
I will not give way.
Those who talk about a recession made in Downing Street might want to ask themselves how much they are absolving Vladimir Putin of the global inflation we see today and whether, in fact, they are neglecting their duty to be patriotic at this time.
Conservatives do not want to see taxes rise. If we have to see temporary rises in taxation, the necessary corollary is that, as soon as inflation starts to be controlled, we will see those taxes coming down again. I would go further than my right hon. Friend the Member for North West Hampshire in one respect: this is not just a debate about growth, because any dummy can borrow tomorrow’s money to spend today and call the increased activity “growth,” which has been central to every Labour Government since the second world war.
The Government need to focus on wealth creation, in which we turn our unique intellectual property into goods and services that do not exist today, or into better goods and services than exist today. That means dealing with the supply-side constraints on the economy, making more private capital available to scale up companies, getting more international investment in the United Kingdom and making us more competitive globally. No one in the world owes us a living, and no Government can guarantee increasing living standards to the next generation. Only a successful free-market country in a free-market world can achieve that, and the sooner we get there, the better.