Budget Resolutions and Economic Situation

Pat McFadden Excerpts

Monday 8th March 2021 Commons Chamber

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

It is a pleasure to wrap up this debate for the Opposition. Whatever is happening elsewhere on our television screens, I want to begin by thanking all the hon. and right hon. Members for contributing to this debate, whether they did so physically or virtually. We have had a very wide range of contributions over the past few hours, and hon. Members have raised a whole number of issues in relation to the Budget. These included the Government’s business support schemes, the importance of technology, the creative industries, tourism, International Women’s Day and the differential impact of the pandemic on women, green finance, the universal credit uplift and its impending cut-off, unemployment and youth unemployment, the 1% NHS pay offer, the levelling up funding and those still excluded from Government support.

The backdrop is of course one of the most difficult we have known. There is a pandemic that has killed over 120,000 people and given us a huge hit to our economy. I want to focus on the taxation aspects of the Budget, because on this particular issue this was no ordinary Budget. The Budget announced by the Chancellor last week marked a watershed in taxation policy on the part of the Conservative party. For years, we have heard the mantra that lower taxation rates would lead to increased revenue by stimulating more economic activity.

Indeed, that was the previous Chancellor’s justification for cutting corporation tax in the first place back in 2010. He partly funded it by cutting investment allowances for manufacturing businesses, and he continued to stick to that justification for years afterwards. In 2016, the then Chancellor, George Osborne, said:

“Not only have our corporation tax cuts given us the lowest corporation tax rate of all the advanced economies of the world, but we have seen a 20% increase in receipts from corporation tax”.—[Official Report, 4 July 2016; Vol. 612, c. 625.]

This was not just a single policy and not just a political argument; it was an article of faith. It was the core of the taxation ideology of the Conservative party. It goes way beyond the Osborne-Cameron years and right back to Thatcherism itself. This is a stance that has lasted not years, but decades. Its believers include the current Prime Minister himself who, when campaigning to be leader of his party, said that

“every time corporation tax has been cut in this country it has produced more revenue”.



With the changes announced in this Budget and the increase in rates, we do not just have a different policy; we have a different philosophy. It is all there in the Red Book, set out in table 2.1 on page 42, under the heading “Strengthening the public finances”. By raising corporation tax rates, the Government hope to bring in an extra £17.2 billion in a few years’ time. That is the claim; that is the estimate of the increased revenue that the increased rate will bring.

If there was any lingering doubt about the sea change that this represents in the thinking of the Conservative party, it was swept away by the Chancellor the day after the Budget. He used his post-Budget interview on the “Today” programme to bury the argument of his predecessors. He said:

“the vast majority, if not all, of that increase in corporate tax receipts is probably more likely due to the cyclical recovery in corporate profits, which took a real hammering in the last crisis”.

He went on to say:

“There was an idea that they”—

cuts in corporation tax—

“could help spur business investment. And what we’ve seen over the past few years is that we haven’t seen a step change in the level of capital investment that businesses are doing as a result of those corporation tax decreases.”

So there it is: Thatchernomics and Osbornenomics buried in full public view by Rishinomics—no more Laffer curves; no more pretending that tax cuts always magically lead to more revenues; no more tax bombshell posters; “Singapore-on-Sea” laid to rest by Budget 2021.

With a Budget set to bring the overall tax take back to levels not seen since the 1960s, the Conservatives have surrendered the mantle of claiming to be the party of low taxation. The old Conservative slogan was that it was the party of low taxation. The new slogan could be, “Tax on families up, tax on businesses up, but nurses’ pay down.” Let the Chancellor put his signature on that. This is the platform to which he has now signed up the whole Conservative party. This is the change that the Budget represents.

When we look at what the Budget predicts further ahead, UK economic growth after this year and next is projected to be just 1.6% or 1.7%. The Budget papers predict a long-term hit to growth of 3% from covid, on top of the 4% hit to growth as a result of the Prime Minister’s agreement with the European Union. The more that we can mitigate this damage to growth, the better it will be for prosperity, family finances and the public finances. That is the heart of the country’s challenge—how to get economic growth going. After the long, hard year that business has had, we need to let companies grow, breathe and get back on their feet, not weigh them down with ever growing debts, so why have the Government set their face so firmly against the proposals that came from business groups themselves to turn the covid debt burden into a contingent tax liability in the future, dependent on future performance?

Last week, the all-party parliamentary group on the Black Country economy heard alarming reports from manufacturing companies about the forest of red tape, cost increases and delays that they have faced in trying to export goods since the beginning of January. Those businesses represent the finest Black Country tradition of making things and selling them all over the world. There is an old saying in the Black Country: “If you can draw it, we can make it.” But those businesses now find themselves hobbled and hamstrung by the mountain of red tape involved in the Government’s Brexit arrangements.

I appreciate that some Government Members may not regret that—in fact, some of them may welcome it—but the hard-working businesses of this country deserve more than to be used as components in the Government’s ongoing grievance factory against the European Union. They deserve more than to be used as pawns in a battle of ill feeling that will not create a single job or export a single product. We know that the Prime Minister has dismissed business, but that attitude is no good to hard-working exporters and manufacturing companies. They deserve support for their efforts.

Covid has exposed deep inequalities in our country, from the pattern of those killed by it to the frontline workers who have kept the country going. It has imposed on us all a responsibility to build a better economy out of this: one that combines prosperity and security; and one that combines the wealth creation we need with a commitment to heal the divisions exposed by what we have been through. Under new leadership, that is exactly the approach that my party will support.