Below is the text of the speech made by Mel Stride, the Conservative MP for Central Devon, in the House of Commons on 11 March 2020.
There is no doubt that this Budget has been framed against one of the most challenging moments in this country’s economic history. As the Chancellor set out, many fundamentals of our economy are strong: record levels of employment; the lowest level of unemployment since 1974; low and stable inflation; and real wages that have risen over a two-year period. Nevertheless, the Chancellor was equally right to point to the huge challenges that lie ahead. He did not mention the trade deal that we are negotiating with the European Union, or—at least explicitly—the many accelerating challenges around climate change. Instead, he rightly and substantially focused on the challenge of coronavirus.
These challenges often emerge without much warning. In 2013, the then newly appointed Governor of the Bank of England, Mark Carney, was asked by the Treasury Committee about what he saw as the main challenges over the coming years, and he did not mention one of the three external challenges that I have just presented. These things come at us pretty fast and are sometimes very unexpected, and the Chancellor is to be congratulated on looking closely at those challenges, and coming up with robust responses.
None the less, at the heart of this Budget hangs an important question: are the fiscal rules to which we are working robust enough, and do the spending and taxation proposals in the Budget—we will, of course, pick over them in some detail over the coming hours and days— stack up in terms of maintaining the fiscal responsibility that the markets expect of us? I think the Chancellor said that he was fundamentally sticking to the rules in the Conservative party manifesto to ensure that day-to-day spending is in balance over a three-year horizon. I think the Chancellor also suggested that, given the OBR’s forecasts, in about 2022-23 the head- room around those rules would be something in the order of £12 billion. That is all well and good—that is a reasonable level of firepower—but he also pointed out that the impact of coronavirus will not, because the cycle of the Budget forecasting by the OBR will have had a cut-off about two weeks or more ago, have been taken fully into account. I suspect that one of the key questions we will be putting to the Chancellor of the Exchequer, when he appears before our Treasury Committee this time next week, will be to probe the figures around the headroom that is assumed in those particular numbers.
John Redwood (Wokingham) (Con)
Does my right hon. Friend not accept that in these very exceptional circumstances the rules have to be flexed for the temporary expenditure on the virus consequences, just as even the EU has said it to Italy, where Italy obviously has a very difficult problem?
My right hon. Friend is absolutely right that we flex the rules to accommodate the circumstances. My point is that when we talk about headroom within our fiscal rules, we have to make sure that the number we are focused on is as accurate as possible. Given what is happening with coronavirus and the fact that the OBR struck its forecasts some time ago, the current forecasts are almost certainly already out of date.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Once again the OBR figures show a downgrade, so do today’s Budget announcements not mask a decade of failure of economic policy by the British Government?
Quite the reverse. I began by pointing out that the fundamentals of the economy are strong. They certainly were not strong in 2010. We inherited something of a mess from the Labour party.
Sir Desmond Swayne (New Forest West) (Con)
Will my right hon. Friend reflect on the significant temptation that the Government can now borrow for 10 years at 0%?
My right hon. Friend intervenes exactly as I am about to move on to just that point. I assume that the Chancellor is adhering to the rules set out in the manifesto. In other words, we will borrow up to 3% of GDP, subject to a cap in the event that the interest on that borrowing meets or exceeds 6% of the Government’s revenues. It seems to me, from what I have quickly scribbled on the back of a piece of paper, that the kind of figures for public sector net investment he envisages rolling out—I think he gave a figure of £110 billion by 2024-25—probably pushes us right up against that 3% level. I am looking at the Chancellor and he is kind of nodding, slightly at least, so I am assuming that that is broadly correct. The Select Committee will want to probe how sustainable that is, particularly in light of possible recasting of forecasts going forward.
The Chancellor also raised a very interesting point about how to categorise human capital as between day-to-day spending and investment. I know he will be looking at that very closely. I can assure him that the Treasury Committee will be also be looking at that very carefully to make sure it is a rational and sensible thing to do, and not in any way shuffling the figures around to spend more and break existing arrangements. The announcements on greater spending on housing, green investment, flooding arrangements, roads, rail and the A303—thank you for what you are doing for the south-west, Chancellor—are all important, particularly given our historically low levels of productivity.
Caroline Lucas (Brighton, Pavilion) (Green)
There has been plenty of green rhetoric in the Budget for sure, but Treasury decisions continue to drive the climate emergency. There will be a freeze on fossil fuel duty, over £20 billion for new roads, compared to just £1 billion on green transport, and no commitment to removing the climate-destroying duty to maximise the economic recovery of fossil fuels. Does the right hon. Gentleman not agree that when it comes to showing how muddled he is on green issues, the Chancellor is absolutely getting it done?
I am afraid I have to completely disagree. To give them credit, the Government were in the vanguard of making the commitment to net zero by 2050. Indeed, the Chancellor made a very important announcement just now about a huge investment in carbon capture and storage, which could be a part of further revolutionising the production of power and energy in our country, and making sure it is greener.
Turing briefly to the remarks the Chancellor made in respect of the Green Book and how investments are analysed, it is very important that we get that right, not least in encouraging green investment. The Chancellor might want to look at the kind of discount rates we apply to green investment propositions to make sure that the Government are encouraged to invest upfront rather than further back in time. On levelling up, the Green Book needs to accommodate the fact that we need to get away from the natural returns we get in London and the south-east, and get investment out into the regions, particularly the south-west of England. [Interruption.] I see the Chancellor nodding again. That all helps to meet our net zero quest.
Rushanara Ali (Bethnal Green and Bow) (Lab)
I am very grateful to the right hon. Gentleman, a fellow member and Chair of the Treasury Committee, for giving way. Does he agree that while there should be a rebalancing, it is important to recognise that inequality has to be tackled in cities like London as well as in towns and across the country? For instance, my constituency has the highest rate of child poverty in the country. We need a much more nuanced and granular response to inequality. Will he say something about the fact that the Chancellor has left out much-needed investment in local government? The investment in housing is welcome, but it needs to go a lot further to tackle the housing crisis.
On where the investment is going, I have yet to pore over the granular detail, as the hon. Lady suggests, in the Red Book. What I do know, with regard to looking after the less advantaged and the lowest paid in our society, is that important reference was made by the Chancellor to the increase in the national living wage, worth £1,000 a year. Of course, this is a Government who increased the personal allowance, taking millions of people, particularly the lowest paid, out of tax altogether. The changes to the threshold of national insurance contributions to £9,500 will also serve that particular purpose.
Turning to the support that the Chancellor has identified for small and medium-sized enterprises, this is absolutely vital and lies at the core of how we will cope, or otherwise, with what is to follow over the coming weeks and months. We face both a supply and demand-side effect for SMEs. The Bank of England dropped the base rate by 0.5% today, which was clearly co-ordinated with the Budget, and made changes to the counter-cyclical buffers that banks have to hold. That is all well and good and will help banks to put more money into those businesses, but the real issue will be around the fiscal measures that the Chancellor has announced, particularly relating to business rates, time-to-pay arrangements and the deferral of taxation.
I will just say to the Chancellor that the Committee will look at three particular aspects, the first of which is how quickly help can be got out there and whether HMRC is spring-loaded to ensure that businesses are aware of what is available and how to take advantage of it as quickly as possible. I am encouraged by his comments about the helpline. Secondly, is it enough support? That needs to be monitored very carefully. Finally, there is the targeting aspect. Businesses in particular sectors are hurting more than others. We need to make sure that additional help is provided for them, just as we did in similar circumstances in the 2001 foot and mouth crisis, when the agricultural sector needed support. We need to recognise that there are particular types of businesses in that situation.
I am conscious of the time that I have taken and the fact that other Members will want to come in, so I will end by touching on a specific measure that the Chancellor raised: entrepreneurs’ relief. He has taken a brave step, and the right step, in that respect. He is absolutely right that making the changes that he suggested—a reduction from £10 million to £1 million—is not about beating up on the self-employed or entrepreneurs; it is about making sure that tax reliefs are fit for purpose. The changes that he has made, including the increase in R&D tax credits, the more generous treatment in the structures and building allowance and the changes in the employment allowance, will be much more meaningful and powerful in supporting small businesses than entrepreneurs’ relief ever was.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
Does the right hon. Gentleman share my concerns that the Chancellor is not doing enough to tackle the problem of the quality of social care, given that he barely mentioned it in the Budget statement and that 87 people a day die waiting for the care that they need?
The Prime Minister has been consistently clear that we will engage with other parties over the issue of social care, and those discussions will occur. My plea to the House is that people do not seek to take political advantage of the situation and that they engage in a constructive manner.
Finally, the fundamental review of business rates is most welcome. We know why business rates have generally been there—they are easy to collect and it is difficult for tax avoidance and so on to occur—but they are a huge burden on many small and medium-sized enterprises up and down the country. There was no mention in the Chancellor’s remarks of the digital services tax, and I hope I can take that to mean that we are going ahead with that—he is nodding—in the matter of a short few weeks. It is right that we do that.
Google, Facebook and Amazon—those kinds of businesses—need to pay fair taxes in our country. It is not a case of tax avoidance, but of the international tax regime being unfit for the 21st century. We have to get away from attributing tax rights simply to where the bricks and mortar, the people and the intellectual property are, and where management decisions are taken, and look more at where value is created. In the case of those businesses, a huge amount of that value is created here and we must tax it appropriately. I know the Americans will apply quite a lot of pressure and have done so already, but I urge him to stand up to that. We have engaged multilaterally with the OECD and the European Union for the preferred outcome of a multilateral approach, which will avoid double taxation problems and issues associated with going unilaterally, but we have waited too long. We must not, like other countries, step back under pressure. We must go forward with that tax as of the start of the next tax year.
I say to the Chancellor that we in the Committee are his candid friends and we look forward to working with him. Given the kind of pressures and difficulties for our economy and our country at the moment, we are, right across the House, all in this together, and we look forward to him appearing before our Committee on Wednesday next week.