Budget Resolutions and Economic Situation

Peter Kyle Excerpts

Wednesday 28th October 2026 Commons Chamber

[Peter Kyle (Hove and Portslade) (Lab)]

I notice that you are wearing a Sussex tie today, Madam Deputy Speaker. It is good to be called to speak by somebody wearing a Sussex tie. I am sure that you will be breaking the internet for another year running as a result—you have done so before.

It is a pleasure to follow the right hon. Member for Central Devon (Sir Mel Stride), who was so recently forced to leave shadow Cabinet. There may well be another grouping of Members in the Chamber, alongside that of the Select Committee Chairs; it is very good to be able to speak today from the Back Benches.

The Chancellor’s Budget statement has made real, concrete progress in the areas of the economy that I care about the most and that have the most impact on the people who live and work around our country, including in my constituency. I was very animated by the areas of the speech that focused on growth and innovation, and those are what I will focus my contribution on today. The trading allowance, the entrepreneurship allowance, doubling funding for the British Business Bank, the entrepreneurship scheme for women, and, crucially, the founders’ relief are all measures that we should be extremely grateful for. They will have a direct impact on the growth of our economy, keep innovation here and allow it to scale here.

Founders are quite unique people. They are able to commercialise innovation and tell stories about their products, and they act with such confidence that their charisma carries a lot of weight, which sometimes belies the amount of risk they take on and their hard work and determination on behalf of their company, their employees and our economy as a whole. The relief that has been offered to them is hard-earned.

[Sir Roger Gale (Herne Bay and Sandwich) (Con)]

I think I am right in saying that the right hon. Gentleman’s constituency, like mine, relies very heavily on the tourist trade. That industry is on its knees gasping for air. It does not need breathing space; it needs help. There was nothing in the Budget for that industry.

[Peter Kyle]

I am always grateful to hear from the right hon. Gentleman, whose constituency is in the region that I also represent. He may not have heard amid the noise in the Chamber at the time, but the south-east benefited quite considerably. In our part of the country, 47% of businesses in the retail, hospitality and leisure sectors will no longer pay any business rates at all.

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

Will the right hon. Gentleman give way?

[Peter Kyle]

I will make some progress, because lots of Members want to speak, and I have not even got on to the main argument that I want to make.

There are real benefits from this Budget. In my constituency, the council tax rebate will impact positively on 42,000 homes. The same will be true in the constituency of the right hon. Member for Herne Bay and Sandwich (Sir Roger Gale) and in others around the country.

The Chancellor also mentioned directly the defence dual use investment for companies doing dual-use innovations. When he was Defence Secretary and I was Secretary of State at the Department for Science, Innovation and Technology, we worked together, and it was the first time that the Secretaries of State of those two Departments came together to work on the strategic challenges and opportunities faced in the defence industry. I am really pleased that we now have a Chancellor investing in dual use. It will be based on the conversations and workstreams that we set up when we were those two Secretaries of State. Those two roles should work together going forward.

When Labour came to office in 2024, we inherited a growth emergency. Now we have taken solid steps forward, but we must still have the mindset that we are facing a growth emergency. It is my belief that we are on a motorway heading in the right direction but even now are only travelling at 30 mph.

I believe that the challenge we face is a complacency that was set down in previous times, when we took growth for granted. From the 1997 Government onwards, for a decade before the financial crash, I think it is fair to say that we felt that growth was dependable—that there was a sense of inevitability about growth. We could focus on all the social issues we wanted to tackle based on the proceeds of that growth, but we did not pay enough attention to underpinning growth and making sure that it was sustainable into the very long term.

[Graham Stuart]

I agree with every word that the right hon. Gentleman just said about the need to focus on growth. The question is: how do we get it? It seems that too many on the Labour Benches believe that it is by Government intervention rather than reducing the taxes that create disincentives for business. Is he as alarmed as I am at the more than £2.2 billion increase in taxes on business today—from writing down allowances to company distributions and business asset disposal relief, as well as the probable more than £6 billion reduction in lending that will result from the £1.5 billion bank tax?

[Peter Kyle]

The right hon. Gentleman’s intervention was longer than my speech has been so far. When I find that I agree with every word that somebody is saying, I usually sit down and listen to a bit more of it rather than trying to challenge it. Perhaps the rest of my speech will answer the questions that he raises.

In that decade, because of the predictability and certainty of growth, I think that growth policy was seen like any other policy. In other words, if there was a shelf with all the different policies of Government on it, growth would be one set of policies on that shelf. I know that there are a lot of analogies going around these days, and Liz Truss has blown a hole in analogy use as well as in our economy, but it is my belief that we now need to have the mindset that growth is the shelf itself. We cannot have successful social policies delivered in the way that all of us in this Chamber would like unless we have a solid, predictably-growing economy into the long term that provides security and prosperity and from which we can share investment fairly around the country.

We must on both sides of the House be as animated about economic growth as we are about creating prosperity, spending it and challenging the social ills in our society. We must care as much about economic growth as we do about rough sleeping, social care and international development—I say that as someone who spent my early life in international development. Tackling those issues depends on economic growth itself.

Public services are incredibly important. They are enablers of growth. We cannot have growth if people are arriving late to work, are too sick to work or are stuck on a Tory waiting list for treatment. We need to have the right skills in the right places. All of those things are absolutely essential, but we should not kid ourselves that such growth is not built on by private enterprise.

Thanks to the Prime Minister deciding that I could have some time over the summer, I was able to write an essay—now that Tony Blair has brought them back into fashion. I know that many Members will have already read it, making some of my words today obsolete, but let me refresh their minds about what I focused on. I confined the essay to my experience in Government and how we can configure Government more assiduously and dependably to unlock the economic growth that our country needs so much—focusing on what Government themselves can deliver. That experience comes from leading two Departments as Secretary of State. I saw in both those Departments that civil servants can deliver boldly when they have the authority to and when incentives align.

I will use one example—the automotive sector—to illustrate to Members the challenges that the Government face to unlock growth. Delivering support for the automotive sector means aligning energy, trade, regulation and all these different areas of policy. All are held by more than one Government Department, and each of those Departments has its own priorities. As Secretary of State in the Department for Business and Trade, at times I was prioritising the automotive sector and recognising how important it can be for growth. Let us bear in mind, when Jaguar Land Rover suffered its cyber-attack, 0.2% was taken off our GDP. When it was up and running six weeks later, 0.2% was returned to our GDP. The importance of industry is still fundamental. When the Prime Minister and the Chancellor talk about reindustrialisation, hon. Members should not underestimate its ability to deliver growth for our overall economy.

We have another asset when it comes to the automotive sector in our country. When we talk about frontier technology—I am looking for the Minister for Artificial Intelligence, who was in his place a moment ago—we think about the AI labs, most of which are in California, with some in China, but we have a frontier industry here in the UK in the automotive sector, and it is Formula 1, because 11 of the 12 teams do all their research and development and all the deployment of their vehicles right here in the UK. No other country in the world has that asset, and that filters skills through our automotive sector. The ability to grow that sector is huge, but that needs Government to work in an aligned way.

I discovered how different Departments with different priorities have oversight over things like automotive, and how sometimes they can slow down those priority areas. We need the structures and incentives in Government to be much better aligned, because we cannot have all these important sectors depending on Ministers’ ability to WhatsApp each other to sort out problems. We should have a system of Government that is already on the side of making pro-growth choices.

I want to say a few brief words about defence, which has already been raised in the debate. I am grateful to the Chancellor for the statements he has made on this. We focus on the percentage of GDP allocated to defence, but the debate cannot just be about how big a share of our economy we spend on defence; it must also be about how big an economy we have. If we were to achieve five years of 3% annual growth, 3% of our national income on defence would deliver almost the same amount of money as moving to 3.5% in an economy of today’s size.

[Stuart Anderson (South Shropshire) (Con)]

Will the right hon. Gentleman give way?

[Peter Kyle]

I will continue.

That is the difference that growth can make to our national security: it does not remove the need for difficult spending decisions today, but it can give us greater strength to sustain our defence into tomorrow.

[Stuart Anderson]

I agree with the right hon. Member that it would be great to grow the economy to achieve the 3.5% spend, but the Chancellor has today set out multibillion pound in-year cuts this year—we see that in particular in the resource departmental expenditure limit budget at about 0.5% next year—so as it stands there will be far less for training and operations. That is before we even look at whether, in three-plus years’ time, the Chancellor has achieved that growth or not.

[Peter Kyle]

I agree. I realise that in seeking to make an intervention we stop listening to what is being said, but I did say before I gave way to the hon. Member that that would not be instead. I am not proposing that we look to start investing five years down the line after five years of 3% growth—of course, we must move towards those NATO targets, just as the Prime Minister and the Chancellor have promised—but if the debate is about getting cash into defence, this illustrates how there is more than one way of doing that. Immediately, yes, it is about increasing the percentage, but in the long term, on the back of economic growth of 3% and above, we could do so sustainably, and that would unleash enormous amounts of resource in addition to the reprioritisation that might need to happen.

Of course, the difference is that when the spending comes from growth, other Government Departments’ budgets can grow as well, and working people right across the country will be feeling it in their pockets. That is why growth is one of the driving social justice issues of our time.

It is my belief that government needs to become organised around growth, and that growth needs to become the organising principle of government. In the essay that I published, I give some practical suggestions based on my time in government for what I would do if I had the opportunity.

First, the Government need to adopt a taskforce mentality when it comes to growth. The Prime Minister should back a 90-day plan to unblock investment. Of course, we need Cabinet accountability, but we have these great boards in government—experts on the Board of Trade and non-executives on Departments’ boards—and all sorts of different specialist groups and outside experts coming in and sitting on boards across Government. We should pick from those boards those people who are best placed because of their understanding of Government from the work they are already doing, and jump to a taskforce-based approach to looking at different Government Departments and the opportunities we have to act fast in Departments. They should identify areas that need legislative change, and for that we can introduce a growth Bill, if that were appropriate. I believe that it is.

[Sir Bernard Jenkin]

Legislating for growth?

[Peter Kyle]

Well, we should certainly legislate to remove the barriers to growth, because some barriers require legislation. Let me illustrate that with one point.

When I was Secretary of State, I visited a fantastic company called Ocean Infinity down in Southampton, which is building and deploying globally—it is a global leader—autonomous marine vehicles. I was taken to see one of its vehicles, which was 36 metres long, being built. These are huge investments, with these vehicles doing extraordinary work autonomously for marine biology and drilling, going to remote marine places on Earth. I was taken one deck below on an autonomous vehicle and shown one room. I was asked, “What do you notice in there?” There was a washing machine and a tumble dryer—in an autonomous boat. Why? Because the law requires any boat more than 34 metres long to have a washing machine and a tumble dryer for its crew.

Conservative Members may laugh at my suggestion of a growth Bill, but there are some things that need to change in the law to unlock the stupidity out there in how we regulate certain sectors simply because of the passage of time. I say to all hon. Members who worry deeply about deregulation or the modernisation of the regulatory landscape that there are absurdities out there that are holding businesses back. If we aggregate that one example of a tumble dryer and a washing machine across our economy, we can start to see the need for real positive action.

[Mike Martin (Tunbridge Wells) (LD)]

Would the right hon. Member back a national security exemption for regulations such as those he cited whereby, if what is being developed is clearly for our national security, health and safety and other regulations fall away to enable us to get that into the field quickly?

[Peter Kyle]

I am grateful for that constructive intervention. I am certainly in favour of looking at mechanisms for when we discover absurdities in the regulatory system. We know how long it takes to get legislation through the House or even introduced to the House as there are so many priorities, so we need to be able to act in the interim. We should look at that, and the House should give those powers where needed in such circumstances. Of course, national security is the No. 1 priority of any Government at any moment in time—it certainly should be.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

Will the right hon. Member give way?

[Peter Kyle]

I will make some progress.

We also need a tax growth test, with outside experts reviewing all investment, hiring, innovation, revenue and incentives from HM Treasury and judging those against a growth test. That does not mean we would not still redistribute, invest and use tax in ways that are not always conducive to growth, but we do need to know in aggregate form exactly how the incentive landscape and the policy landscape in HMT align with the need for growth.

I am pleased that the Chancellor has made a lot of statements and some good progress on procurement. We should really be using that far more effectively to champion British innovation and support British scale-up companies. In procuring products and services, they have access to over £400 billion of spending, which eclipses investment we can make through Innovate UK, the British Business Bank, the National Wealth Fund or UK Research and Innovation.

I could not understand this as Secretary of State, and I still cannot when looking on. We went through a period, with my encouragement, of taking equity stakes in scale-up companies as part of our scale-up plan. There was all the due diligence that goes into making those decisions and which lead to the British Business Bank, through the independent and thorough work of its investment committee, taking an equity stake. Yet once that is done, there is no preferential access to any other part of Government. That should change.

The Regulatory Innovation Office should be upscaled and there should be local rewards for businesses that are growing fast. I have spoken—I will not speak in any more detail—about my frustration that this economy and the continent of Europe have never produced a $1 trillion company. Some of the wealth from those companies, when it is fairly distributed among their workforces and the communities in which they are sited, is an astonishing vehicle for levelling up. We need to ensure that we understand the reasons why our economy seems to have some kind of glass ceiling. It is a continental European challenge. Taiwan can produce a $1 trillion company that produces the wealth and power that goes alongside it, but there is nothing that Taiwan has that we do not have here in Britain.

Social justice and growth are intertwined. I started by saying that we are on a motorway going in the right direction, but at 30 mph. Fairly distributed growth delivers security, freedom and prosperity. If that is what the destination looks like, why would we not we put our foot down and try and get there faster?