Category: Economy

Sharon Bowles – 2022 Speech on the Growth Plan (Baroness Bowles of Berkhamsted)

The speech made by Sharon Bowles, Baroness Bowles of Berkhamsted, in the House of Lords on 12 October 2022.

My Lords, the Government have U-turned on some of their insensitive Reaganomics, giving tax cuts and perks to the wealthy during a cost of living crisis for the wider population, but a harsh right-wing agenda is an integral part of the Tory Brexit plan. It may not have headlined beyond the Singapore-on-Thames misnomer—thought just to mean light-touch financial regulation—but disruption and asset price adjustment are part of it, as the Prime Minister has revealed in various things that have been said.

Those kinds of adjustments are painful and require a long policy horizon, broad and deep support and good communication, as do any challenges to market orthodoxy. But done naively, two years before an election, with none of the accompanying platform—no wonder the markets took flight. The mini-Budget and growth plan set in train faster and further falls in sterling and gilt prices, and rises in interest and mortgage rates, than would otherwise have happened.

The gilt glitch triggered Bank of England intervention to save defined benefit pension funds that had tried to manage mark-to-market gilt valuations with derivatives and borrowing, collateralised by the gilts themselves: an incestuous systemic linkage, which sounds crazy anyway, inherently vulnerable to a doom loop, created and perpetrated by and around regulated entities, warned about to the Bank of England, and deemed acceptable or untouchable by regulators.

This was a systemic accident waiting to happen. Dodgy derivatives, shifting risk horizons, timelines and effective ownership change—has nothing been learned from 2007? The issue that has driven the invention of liability-driven investments and the recent gilt-sale doom loop is the mark-to-market requirement of accounting standards and applying it to hold-to-maturity gilts within pension fund assets. It has caused 20 years of instability in the pensions sector.

Gilts held to maturity are not volatile; the coupon and end return are either fixed or linked to inflation. As Terry Smith pointed out in his opinion piece in the FT last week, LDIs are not hedging risk—which is the total realised end return—but attempting to hedge the accounting valuation with all its short-term noise and volatility. The only gainers are the peddlers of exotic products; the losers are the public and pensioners who foot the cost of the rescue and the finagling.

Why is this done? Because of universal mark-to-market accounting standards dogma, also embedded in other regulation. Maybe it makes audit less work, requiring less judgment, but what good is that when the consequences and get-arounds open the door to extreme systemic events?

I know that the noble Lord, Lord Callanan, follows the infallibility of accounting standards mantra of BEIS—it is probably being scribbled down in the Box right now—but there are dangerous flaws and absurdities, and it is negligent if government, BEIS, the Treasury, regulators and the Bank will not get their heads around issues in accounting standards. It is no defence to say that accounting standards are independent; they are a closed shop defended by their acolytes. We are not all bamboozled, but those with power must take off their blinkers.

October 12, 2022
Roger Liddle – 2022 Speech on the Growth Plan (Baron Liddle)

The speech made by Roger Liddle, Baron Liddle, in the House of Lords on 11 October 2022.

I join the noble Lord, Lord Lamont, in welcoming the noble Baroness, Lady Neville-Rolfe, back to the ministerial Bench. There is much in the speech made by the noble Lord, Lord Lamont, with which I agree. We all want growth, and it is a realistic ambition to try to turn Britain back to the 2.5% growth figure that we enjoyed until the financial crisis. The question is how to do it in a way—I think this is an important point—where the whole of society benefits. The fact is that the growth we have seen since the financial crisis has not trickled down. People on median wages and below have not seen any increase in their standard of living. This is an important thing that future government policy has to address.

As for the details of the plan for growth, there are some things in it with which I agree, but it is limited in its vision. If the Government had paid attention to business, business would have put skills at the top of the list and said that what is needed is more apprenticeships and more people with higher technical qualifications. On pages 19 and 20, which talk about getting more people into work with the right skills, there is not a single mention of that agenda and what the Government are prepared to do about it.

On housing, there is the cut in stamp duty but no clarity on how planning law is to be changed. We know that Conservative MPs in the Commons hate this. There is no mention of any need for social housing.

On infrastructure, there is a sort of half-acknowledgement of guilt that it was the Conservative Back-Benchers, again, who stopped onshore wind—one of the most positive things we could have done to cut energy bills. Let us see whether the objections to onshore wind can now be overcome.

Things such as Northern Powerhouse Rail, which we have been talking about for a decade or more, are on the list of things that the Government might do, but what credibility is there that they will actually do them? Investment zones are an interesting idea, but I have read the academic evidence and it is not very positive on whether they produce results.

There is a point that I think is original. A lot of the Johnson levelling-up agenda was about how we reinvigorated our town centres. Lots of government money is being funnelled into that. These investment zones will be on brownfield sites outside town centres; this seems to be a fundamental contradiction. If I were to encourage investment in my home town of Carlisle, I would want to see it in the centre and on the fringes of the centre, not on some site outside.

The fundamental thing about this Government’s policy is that they have lost the reputation for macroeconomic stability that is fundamental to encouraging business to invest. It was the most irresponsible and reckless Budget since Barber’s in 1972. It caused turmoil in the markets, which threatened the future of people’s pensions. It will lead to spiralling mortgage costs. As the noble Lord, Lord Macpherson, pointed out, there are risks here of a contradiction with monetary policy.

On the fiscal plan that the Government are committed to coming up with, I do not believe the numbers can be made to add up by public spending cuts, which would be both counterproductive in their impact on growth and politically undeliverable. I agree with the noble Lord, Lord Macpherson, that some of the announced tax cuts should be cancelled.

This is not a plan for growth. It is an economic disaster.

October 12, 2022
Norman Lamont – 2022 Speech on the Growth Plan (Baron Lamont of Lerwick)

The speech made by Norman Lamont, Baron Lamont of Lerwick, in the House of Lords on 11 October 2022.

My Lords, it is a personal pleasure to follow the noble Lord, Lord Burns, who always gave me very wise advice in the Treasury, just as he has to the House today. I also welcome my noble friend Lady Neville-Rolfe back to her position on the Front Bench. We have lost a doughty Back-Bencher but regained a formidable Minister.

I welcome many of the measures in the Government’s growth plan, particularly the radical deregulatory ones—IR35, the pensions cap and the planning reforms. Provided they can be delivered they are the sorts of measures that will make a real difference to our growth rate. I also welcome the energy price guarantee. It is a major intervention but, as the Minister said, one that, because of the death of the Queen, was not widely recognised and is still not widely known among the public. The package is very important not only for the relief it gives to hard-pressed consumers but economically, because of the 5% it knocks off the rate of inflation. This by itself could help to stave off a deep recession, as high energy prices can be both inflationary and deflationary.

However, it has to be recognised that the energy price guarantee is potentially a massive commitment and adds huge uncertainty to the borrowing figures. The Government’s support to consumers as a percentage of GDP, according to the Goethe Institut and Conservative Central Office, dwarfs that of other countries. It is, potentially, more than double that of Germany, which funded its package out of taxation. It was the hugeness of the money at stake, together with the absence of the OBR assessment of the cost of tax cuts, that produced the market reaction that it did. The Government also made something of a rod for their own back with some of the rhetoric that was carried forward from the leadership election about rejecting orthodoxy and the attacks on “bean counters” and people peddling “abacus economics”. I am sure it was not intended to, but it sounded very like a Conservative belief in the magic money tree. Since then, the Chancellor has emphasised that he believes in fiscal discipline and in a declining debt-to-GDP ratio.

Going for growth is a certainly laudable objective, but it has to be recognised that there can be a conflict between going for growth and getting inflation down. A stimulus to growth from unfunded tax cuts may mean that inflation stays higher for longer, and that could mean higher interest rates holding back growth. If fiscal and monetary policy point in opposite directions, the result is again likely to be higher interest rates and thus slower growth. So the stage is set for something of a battle between the Treasury and the Bank of England as the Government push for growth and the Bank raises interest rates to tame inflation.

This dilemma could of course be resolved if tax cuts always paid for themselves. That would be wonderful—we would never have to discuss taxation again—but as the noble Lord, Lord Burns, said, they do not always pay for themselves. It depends on whether the rates are set at confiscatory levels or, technically put, where precisely the rate is on the Laffer curve. Ronald Reagan’s tax cuts resulted in increased debt, a fact that he later acknowledged and regretted.

Fiscal responsibility is not the enemy of growth. It produces the stability that is essential for it. I welcome the fact that the Chancellor is drawing up a debt reduction plan and plans to bring forward the OBR assessment of that plan. It is very important that the plan set out is credible and does not consist of just easing the present fiscal rules or back-ending all the pain that is going to be necessary. If we do not face reality, reality is going to face us. Fortunately, the Chancellor has, I believe, the resolve and determination to face these challenges, and I wish him well.

October 12, 2022
Alison McGovern – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by Alison McGovern, the Labour MP for Wirral South, in the House of Commons on 11 October 2022.

Before I get into the Bill, I want to note some of the remarks made by the Government on their energy package and the speed with which that was brought forward. Given that this is the first opportunity we have to discuss these financial matters, I want to record that it felt during recess as though almost every day in August people were begging the Government to act, and they did not. We waited and waited, while they had an internal debate when they could have acted. For 12 years, in fact, it has seemed that the British economy has had both deep-rooted problems and significant shocks. Given the situation before us and the chaos we face, would not any Government want to act?

That brings us to today’s Bill, which is essentially a U-turn. As colleagues have said, the Government are showing here that they can U-turn, but what we need now is much more significant action. We can say with certainty that the Chancellor has already made a considerable impression on the economy. He inherited a cost of living crisis and for good measure added a cost of borrowing crisis, an interest rate crisis, a mortgage crisis, a sterling crisis, a Government bond crisis and a pension funds crisis.

Inflation was already at its highest rate in 40 years, devouring household wages and savings; Shell, ExxonMobil and Chevron recorded their highest ever profits and household energy bills doubled within a year. Thanks to this Government, the pound has slumped to its lowest value against the dollar since Britain went decimal in 1971, and the Bank of England has been forced to launch an emergency £65 billion bond-buying scheme that, as we saw yesterday, has barely stopped the chaos.

Thanks to this Government, in the blink of an eye the average homeowner now faces a monthly mortgage payment that is £500 more expensive and food bank use has soared to such an extent—[Interruption.] Do not say it is global. The food bank increase is not global; it is a feature of the UK economy, and it has soared to such an extent that volunteers will need either to turn people away or to reduce the size of emergency rations. That is the situation we face, and that is why this Bill must not represent the last U-turn from this Government.

We have heard from various Conservative Members that they are the party of tradition, so let me commend the Government on respecting a long-standing Conservative tradition in their conduct relating to our economy. Just like on 16 September 1992, Conservative Governments always end up sacrificing family finances to pay for their chaos.

This Chancellor, in his airy disregard for experts, produced a Budget so complacent, so unfunded and so unconvincing to the markets that the cost of our long-term borrowing soared. His doubters are now not just the members of the Labour party; they include bond traders, the currency markets, the civil service, the OBR, the Bank of England, the IMF and the British public.

The Conservatives have pierced a hole in the British economy, and the effects are widespread and severe. Pension funds were brought to the edge of collapse and, before the Bank of England intervened, we risked falling into a self-perpetuating spiral,

“threatening severe disruption of core funding markets and consequent widespread financial instability.”

To be so ignorant, so high-handed and so willing to risk impoverishing people is unforgivable.

It is some small comfort that today the Tories are reversing their own rise in national insurance. U-turn follows U-turn and we return to square one. However, this zig-zagging incoherence is not just a waste of parliamentary time and energy, but damaging to our stability and our credibility. No matter whether they raise taxes or lower them, high-quality public services and economic growth will continue to elude the Conservatives. That is because, as has been said so often, economic strength does not come just from the top; it starts in the everyday lives of working people right across our great country. The hon. Member for South Suffolk (James Cartlidge) explained well what is happening right now for people trying to work. Thanks to the Conservatives, record waiting lists see acute conditions becoming chronic and more and more people having to leave the labour market. Do not crow about unemployment being at historically low levels when inactivity—people simply unable to work—is shooting up again, as we found today.

James Cartlidge

Just to clarify, what I said was that it was due to the pandemic—not entirely, but everything the Labour party says now is airbrushing out of history the greatest post-war trauma that the country faced, when there was an enormous surge in borrowing, which we all supported, to fund the support for businesses and people in our constituencies. At some point, will Labour recognise the impact that had and the action we had to take, which has led to decisions such as these tax increases?

Alison McGovern

The impact of the pandemic on our labour market and our health service has been profound. It should inspire us to see the capabilities of the people within our health service, and it should show us the undeniable truth that there will be no economic health in this country without securing the health of the people of this country. That is what the pandemic shows us. I simply ask that the party in government today, the Conservative party, learns that lesson.

If we look at what is going on with our labour market, we see that part of the growth plan must be to secure our health service, get waiting lists down and get people back to good health. We have heard that funding for health and social care services will be untouched, so let me assure the Government—already so elastic with their commitments—that their promise on the health service will be under heightened surveillance in months to come.

The Government say that they have a growth plan to end their cycle of stagnation and to radically overhaul what has been dragging us down, but that plan simply has no credibility. It is delayed and delayed. Until we see what they truly believe can help this country grow, all we see is the cost of borrowing growing, inflation growing, mortgage payments growing, food bank use growing and child poverty growing, while the true opportunities that this country has—its people and their talents—are left wasted.

Who asked for this? Who nodded happily at higher mortgage repayments? Who wanted public services to be slashed or spiralling inequality? There is no consent for this, as we have seen—not even consent on the Tory Back Benches. The resulting damage to our economy is immediate and sharp, but there is another danger that emerges slower but is just as great: the risk to our relationship with the British people.

I worry that we have short memories in this place. Only three months ago, more than 60 Ministers fled the Government of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson). For some time, that Government were viewed with real anger by the public, who overcame the pandemic through shared sacrifice, only to feel cheated, insulted and taken for fools by their Government. Well, the British people are not fools, Madam Deputy Speaker. They understand that this winter, whether it is due to soaring energy bills, surging inflation or the war in Ukraine, shared sacrifice is needed again. In return, they are owed compassionate, responsible leadership and a Government who can look them in the eye.

This is not a time for economic hobbyism—for testing pet theories like schoolboys in the common room—and ignoring the country. Not even two people in every 1,000 voted for the Prime Minister or her Chancellor. Britain did not choose to be experimented on in this way. When the Chancellor delivered his crazy Budget on 23 September, everyone in this country was united in experiencing that act of economic vandalism. When children are hungry, pensioners colder and families fearful, the Chancellor avoided the profits of energy giants and signed off unfunded tax giveaways for millionaires. In waving through bigger bonuses for bankers, he took a torch to our social contract. Instead of shared sacrifice, this gang of fanatics on the Treasury Bench turned to casino economics and gambled away public trust.

It is an old, old saying that you can judge a person by what they choose to do with power. After 12 years of the Tories in power, the veneer has worn off, revealing the same old ideas that have been tested to destruction in this country: run the country on the cheap, leave public services crumbling and make working people pay the price. The big society—remember that?—has been and gone, one nation conservatism is a painted shell, and the façade of levelling up has been abandoned, as they cut taxes for millionaires and look set to cut benefits for the poor. It does not matter whether it is this Prime Minister or whoever soon replaces her—this is the Conservative project and it has been there all along.

It is the single greatest privilege in this country to sit on the Treasury Bench. Instead of living up to that honour, the Conservative party is hopeless, reckless, callous and weak. There is no consent for this Government’s ideas, and they should be driven out of office. If they really are such a confident group of free thinkers, surely they have nothing to fear from taking their pitch to the country.

October 12, 2022
Peter Grant – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by Peter Grant, the SNP MP for Glenrothes, in the House of Commons on 11 October 2022.

I do not often say this, but I welcome the decision that the Government have taken, which is to U-turn on their increase in national insurance contributions, although I utterly reject any suggestion that it should be coupled with any watering down of the previous commitments on funding for health and social care services.

I do not think that national insurance is the right name for this tax. It is an income tax—a jobs tax—and we should be honest about what it is doing. It is a jobs tax because if a person has a job, they pay tax on the money that they get paid for doing their job— unless they are earning way below the minimum full-time wage. If they are an employer, they pay tax on the wages that they pay someone for doing the job for them. It is only if a person is lucky enough to be able to make most of their money from owning shares or property that they can earn significant amounts of money without paying national insurance on that income. I have to say that not many of my constituents who are struggling on a minimum wage and part-time jobs are that impressed by the fact that they can get national insurance-free income from their share portfolios, because they cannot afford to buy them in the first place.

This is a form of income tax—a jobs tax—specifically targeted at working people. It is not even an insurance as such. I pay insurance on my car. If I am involved in an accident, I have a guarantee that the insurance company will pay its share of the costs. People do not get that guarantee just because they have been paying national insurance contributions all their life. Just ask the WASPI women—of the Women Against State Pension Inequality Campaign—how much of an insurance scheme guarantee they actually get from national insurance.

The legislation that we are being asked to repeal today—and it looks like it will be repealed today without a Division—introduced a form of hypothecated tax, which is not something that I would generally support. Nobody has really mentioned that in this debate, and it did not get much coverage in the debate last year. Other than for very time-limited and precisely defined purposes, hypothecated taxes do not really work. Filling in a small part of the decades-long underfunding in some of our most important public services is neither time limited nor specific.

Whatever we are going to do to change the tax system to get adequate funding for these services, a single, specific hypothecated tax is never going to be it. I have been consistent on this. I find it interesting that nobody who has spoken in this debate in favour of repealing the levy has explained why they voted for it in the first place last year. I note that sometimes people are allowed to change their minds regularly, whereas at other times people are not allowed to change their minds from eight years ago.

Our health and social care services are among our most precious public services. Universal healthcare—including free prescriptions—free at the point of delivery, based only on clinical need rather than the ability to pay, is surely an essential part of any civilised society. I would say the same about social care. I am proud that in Scotland we have free personal care for those who need it, regardless of whether they can afford to pay for it. I welcome the steps that the Scottish Government have taken to reduce the financial burden on those who need other forms of social care as well. All of these services are available to everybody and they should be paid for by everybody according to our means through general taxation. I am not ashamed to say that if I had to pay a wee bit extra tax that I could easily afford in order to provide a civilised society for my people to live in, I would do so willingly.

Those principles are now under direct attack, even more so than they were under the previous Prime Minister, and even more so than they were in the dark days of Margaret Thatcher. We now have a Prime Minister who has chosen to surround herself with people whose links to the NHS privatisation lobby are not hard to find. It does not need to be direct privatisation; it is very easy to privatise the health service by stealth, simply by strangling it of funds so that the waiting list becomes so long that people choose to pay for a health service that they have already paid for through their taxes.

That is why it is essential that we get a commitment from this Government that not only will there not be a reduction in cash terms in health service funding or in social care funding, but that those budgets will increase by enough to cover the cost of inflation as it hits those services. Historically, inflation in the health service has usually been higher than the headline rate of inflation. The headline rate of inflation is savage enough just now. It is likely that the true cost of inflation to the health service is even higher. I asked the Chancellor about this directly a few weeks ago when he issued his mini-Budget. Scandalously, he refused to give a commitment that funding in the health service will even keep pace with inflation, never mind increasing to meet what we can all see is an unmet demand.

Part of the reason that the NHS is coming under unprecedented pressure is that the policies and deliberate choices of this Government and their predecessors have forced people into poverty and destitution, and that has an impact on people’s health, which creates additional demand on the NHS. As others have pointed out, having people on health service waiting lists unable to work damages the economy. If the economy is damaged in such a way that it affects the funding of the health service—if, for example, people are given lower wages, are put under financial stress and are unable to afford the cost of living—that in turn damages our health, and to an extent that we perhaps have not properly realised until recently.

A recent study by the University of Glasgow and the Glasgow Centre for Population Health found nearly 335,000 excess deaths in the UK in the past seven years that were caused by austerity. Deliberate policy choices by this and previous Tory Governments since 2012 have killed more people than the covid pandemic. That is a scandalous thing to happen in any country that claims to be civilised. That is why we cannot fully consider the provisions of this Bill, or the provisions of the Act of Parliament that it seeks to repeal, in isolation from the wider policies of a Government who seem hellbent on plunging even more people into poverty, while lining the pockets of their own billionaire supporters and donors.

To give just one example, the Chief Secretary to the Treasury was delighted to tell us earlier that the combination of not increasing the national insurance levy and the previously announced changes to income tax thresholds will amount to a whopping £500 per year back in the pockets of my lowest-earning constituents. They are paying between £1,200 and £1,500 a year more just for the heat in their homes compared with last year, so the generous £500 a year that the Government are putting back into their pockets is less than half of what my constituents need just to stand still for electricity and gas prices. That is before they start to pay their increased costs of food, rent and mortgages for those able to buy their own homes.

That should not be inevitable. My constituents live in a country in which 85% of energy does not come from gas, so why do they see their bills doubling when there is a gas shortage? My constituents live in a country that supplies more energy than it needs and has a commodity that is in short supply, so why are they so much worse off when the value of the commodity that we have in surplus increases on the global market? Those are not questions that Treasury Ministers or other Ministers in this place do not know the answers to; they are questions that they are scared to face up to the answers to.

Repealing this legislation when the ink is hardly dry on the paper serves to illustrate yet again the total chaos that this Government are in. That chaos has spread to the whole of these islands, and they seem quite happy to inflict it on the financial markets, despite the impact they know it will have on people’s standard of living now and the pensions they will be able to rely on in the future.

The Government’s persistent refusal to provide a costed plan to ensure sufficient and sustainable funding for those vital services, directly through funding in England and indirectly through Barnett consequentials on the devolved nations, and their persistent refusal to put health and social care services on a proper and sustainable funding basis demonstrate clearly that our national health service can never be safe in the hands of this or any other Westminster Government.

October 12, 2022
Kim Johnson – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by Kim Johnson, the Labour MP for Liverpool Riverside, in the House of Commons on 11 October 2022.

I welcome this decision to repeal the regressive hikes to national insurance, which would have seen those least able to pay with the heaviest proportional tax burden to tackle the crisis in social care. This is the right thing to do, but it should never have happened in the first place. Tax rises on the poorest, especially during a cost of living crisis, are cruel and unnecessary.

We now need urgent reassurances from the Minister that new funding for adult social care will come from progressive taxation and the pockets of those who can most afford it. We must be clear that a U-turn is not a plan; it is the absence of one. We still have no answers from the Government about how they plan to tackle the crisis in adult social care or where the funding will come from, other than to wait until 31 October for the medium-term fiscal plan.

Twelve years of Tory austerity have already seen £8 billion taken out of the social care system. Now we are facing a winter of hardship driven by the rampant cost of living crisis. Instead of bringing forward measures that will help the poorest and those most in need, the Government are prioritising tax cuts for the rich and public service cuts for the rest of us. They have removed the triple-lock protections on pensions and are refusing to commit to raising benefits in line with inflation. They have made disastrous economic decisions that have crashed the economy and made the cost of living crisis one of the worst among comparable countries.

Local governments are being forced to make further crippling cuts, as well as find extra money for energy costs and inflation to maintain their public services. We know that adult social care provision will suffer. Liverpool has lost £465 million of our budget since the start of austerity, which is more than two thirds of our overall budget since 2010. Liverpool, like other cities, has a growing elderly population with increasing complex needs, including dementia.

We urgently need a big injection of funding to councils’ care budgets alongside a social care workforce strategy to meet rising demands. We are facing unprecedented staff shortages in the health and social care sectors, with more than 165,000 vacancies and a massive staff turnover of 30% a year. In Liverpool, 15% of our social care workers are employed on zero-hours contracts and we have a vacancy rate of over 10%. Without action, the consequences will be devastating. We must be absolutely clear: a shortage of staff costs lives. It is as simple as that.

We are about to face a second round of Tory austerity, with £43 billion to be slashed from public services that have already been decimated during 12 years of Tory Government. Instead of more cuts, we need a serious injection of cash into adult social care and a plan to bring those services back in-house to end the rampant profiteering of companies backed by private equity funds, which sucks public money out of the system and out of services and straight into tax havens in the Cayman Islands to be hoarded by the super-rich. Decent pay, terms and conditions for undervalued employees must take centre stage of any serious plans to tackle the deep-rooted structural issues in the social care sector along with a long-term workforce strategy and improved quality and standards of care.

The Secretary of State for Health and Social Care has committed to maintaining the same levels of funding on health and social care despite today’s cancellation of the levy. However, the Prime Minister and the Chancellor are crowing about this reversal to national insurance contributions as a key victory in their tax-cutting agenda, which will see £43 billion slashed from public services. Will the Minister confirm whether the Government will commit to spending the same planned £12.4 billion a year over the next three years that would have been raised by this levy? A simple yes or no answer would be great, thank you.

October 12, 2022
Sarah Olney – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by Sarah Olney, the Liberal Democrat MP for Richmond Park, in the House of Commons on 11 October 2022.

The Liberal Democrats were opposed to this tax to start with. We opposed the national insurance levy when it was introduced last year. Our argument at the time was that it would disproportionately impact lower earners and hit working families at precisely the time when they were struggling to pay their bills and prices were starting to increase in shops. We are really pleased that it is being reversed, and we support this Bill.

We must not ignore the fact, however, that a great deal of damage has been done in the past six months, during which employees, the self-employed and employers have been charged with this levy. During that time, employees and the self-employed will have paid about £2.5 billion, and businesses about £3.8 billion. One of the main disruptions is that it has been incredibly disruptive to businesses. I speak with some feeling as an accountant who in a previous life spent many hours working on payrolls and forecasting employee costs. I can only imagine what it must have been like for businesses over the past three years. In 2019, a Conservative Government came in promising not to increase any business taxes, but in 2021 they increased national insurance, and now here they are in 2022 reversing that increase. That is an awful lot of change for businesses to have to deal with, and that is quite apart from the increased costs that they will have borne over the past six months.

Let us think about the impact that that cost will have had on businesses. They will have been thinking, “Which employees can we have? If we want to grow our business, how many employees can we afford to take on?” They will have revised those assumptions in the light of the increased cost of national insurance, so we can only assume that the six-month increase will have stunted the very growth that the Conservatives say that they want to see, and that it will have contributed in part to the economic slowdown, not least because the impact on employees will have decreased their take-home pay, and that, of course, will have decreased their consumption.

What businesses need above all is certainty and stability, but that has been continually undermined by this Government and their constant chopping and changing of national insurance. This, of course, is happening at a time of a huge increase not just in inflation but, as has been mentioned several times, in energy costs, primarily as a result of Putin’s illegal invasion of Ukraine. That is also having a massive impact on businesses in this country, and the chopping and changing of the costs of employing staff will not have helped.

It has always been our argument that tax could have been more productively raised by an expanded windfall tax, which we have been calling for since last autumn. We are very pleased that the Government took on board some of our suggestions, but both Shell and BP have said that the Government could have gone further. Potentially up to an extra £60 billion of taxes could have been levied on oil and gas firms, which would have negated the need not just for the national insurance increase but for many of the other unfunded borrowing commitments that the Government made on 23 September.

Now that we are repealing the health and social care levy, it is important to remember—the hon. Member for South Suffolk (James Cartlidge) made this point very well—that we still have to deal with a crisis in health and social care. The Government must immediately set out their plans. We all anticipate the much-awaited fiscal event on 31 October with a huge amount of excitement but, more than anything, we need to hear from the Government their plans for health and social care, because there is no doubt that the backlog in NHS hospitals is in itself having an impact on growth. I saw figures today that suggested that the number of people suffering from a long-term sickness that prevents them from working is at a record high. We can all see how that has come about from the events of the past few years, but these are people who cannot be available for work and who cannot contribute to the Government’s “growth, growth, growth” agenda; they are not able to take up posts in what we know now is a record number of vacancies simply because they are waiting for treatment. We welcome this reversal, but the Government must state, and soon, what they plan to do to address the backlog.

Of course, this is not just about health; it is also about social care. There are 130,000 vacancies across our social care sector, and we know that that is caused by chronic underfunding. It cannot offer the kinds of salaries that care workers can find in other sectors. The shortage of care workers and of places in care homes is having a knock-on impact on our hospitals. I was at Kingston Hospital recently and was told that the reason it has problems, and one of the big contributors to its backlog, is that it cannot discharge patients because there is no care package for them to be looked after in their homes. The issue of social care, health and the backlog needs to be addressed urgently. It was not being addressed when the legislation to increase national insurance was first brought in, and it is not being addressed now. We urgently need to hear more from the Government on that.

I say to the Government that we would support an increase in the windfall tax and that we oppose their plans to reverse the planned increase in corporation tax, which I believe is what is creating the biggest need for the additional borrowing announced on 23 September. The Government urgently need to look at that again and at all the plans announced by the Chancellor on 23 September, and I for one am very keen to see what they come up with on 31 October.

October 12, 2022
David Rutley – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by David Rutley, the Conservative MP for Macclesfield, in the House of Commons on 11 October 2022.

I am grateful for the chance to speak on Second Reading and to follow considered speeches by right hon. and hon. Members. I am particularly pleased to see the Economic Secretary to the Treasury, my hon. Friend the Member for North East Bedfordshire (Richard Fuller), in his place. I knew him for many years before coming to this place and he brings real expertise to the Front Bench, notwithstanding the fact that he has very big shoes to fill—that’s for sure.

The repeal of the health and social care levy is part of the Government’s growth plan. The key elements of the plan to address cost of living challenges, caused largely by President Putin’s savage attacks on Ukraine, are most welcome. The energy price guarantee helps to limit the price of fuel bills for households across the country for two years, while the energy bill relief scheme provides similar support for businesses right across the country. Those steps are particularly welcome to the small and medium-sized businesses, both in Macclesfield and across the country, which have felt particularly exposed to the sharp increases in energy costs.

I understand the desire for greater growth and for reducing the tax burden. I recognise that many businesses and working people will be pleased to see the health and social care levy being reversed. They will be able to keep more of what they earn and decide how best to use the saving for their own business or household. I acknowledge that many business owners will welcome another element of the growth plan: the planned rise in corporation tax will not go ahead either. That said, I believe it is important to see the removal of the health and social care levy, and other proposed tax reductions, in the context of the wider economy and our public finances.

Financial markets have shown concerns about the cumulative effects of the policies set out in the growth plan, as was eloquently set out by my hon. Friend the Member for Salisbury (John Glen) earlier, and the lack of an associated OBR forecast to help set out an independent view has been unsettling. The forecast will help provide an independent view of the plan’s impact on our public finances and on the levels of the Government’s borrowing and debt. That is why I was pleased to learn that the Chancellor will bring forward to 31 October his statement on the medium-term fiscal strategy, and that Treasury Ministers and officials will, as is necessary, work closely with the OBR over the weeks ahead. It is vital that the Chancellor sets out his fiscal strategy soon, to help explain how the measures in the growth plan, including the impact of reversing the levy, will be funded and what they will mean for the Government’s spending plans, such as the funding for NHS backlogs and social care that the levy sought to address, as highlighted very well by my hon. Friends the Members for Winchester (Steve Brine) and for South Suffolk (James Cartlidge).

The latest timing also means that documents will be available before the next meeting of the Bank of England’s Monetary Policy Committee on 3 November. They will help provide additional, much-needed information for the markets, to colleagues here in Parliament and, of course, to our constituents. As the Prime Minister has said, in hindsight more could have been done to roll the pitch and communicate the growth plan before the Chancellor’s statement on 23 September.

In addition to the steps to lower taxes, such as the reversal of the levy, and to tackle energy cost challenges, the growth plan includes several innovative plans, such as the investment zones to help drive growth. In Cheshire East, our vibrant life science sector and industrial hubs would represent an exciting opportunity for such a zone to drive sustainable economic growth. That is just an idea, of course, for the Chief Secretary.

I wish that we could spend more time talking about such opportunities, but we have to accept that we cannot wish away market concerns. We have to recognise where we are, and the Treasury needs to take the time to communicate and explain its plans in more detail and in the context of the wider economy. With that in mind, I am pleased that the Chancellor earlier agreed with the Chair of the Treasury Committee on the need to further engage with and counsel colleagues in this House over the weeks ahead.

To conclude, this Bill will see the health and social care levy reversed. That policy and the implementation and phasing of other measures in the growth plan aim to help lift growth and will have wider economic consequences, so let us take the time to understand them more fully. Like many colleagues, I am a strong supporter of free enterprise. I recognise that lower taxes have a role to play in driving growth. As is often said, there is a time to every purpose, and at heart I am a fiscal conservative.

October 12, 2022
Richard Thomson – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by Richard Thomson, the SNP’s economic spokesperson, in the House of Commons on 11 October 2022.

It was a little over a year ago that the then Chief Secretary to the Treasury told the House that this health and social care levy

“will enable the Government to tackle the backlog in the NHS. It will provide a new permanent way to pay for the Government’s reforms”.—[Official Report, 14 September 2021; Vol. 700, c. 845.]

That was quite a spectacular U-turn on the Conservative party’s 2019 manifesto. Page 2, signed by the then Prime Minister, made a solemn pledge:

“We will not raise the rate of income tax, VAT or National Insurance.”

To be back here, just over a year later, seeing a reversal is really quite something. Describing it as a U-turn does not do it justice. An antisocial driver doing donuts in the car park of the local supermarket is the best analogy for how out of control this approach seems to be.

The UK Government published a health and social care levy policy paper when the levy was introduced, and I distinctly remember this quote:

“This levy provides a UK-wide approach which enables us to pool and share risks and resources across the UK”.

It was therefore highly enjoyable to listen to the current Chief Secretary to the Treasury claiming that, now the levy is being repealed, the reverse also happens to be true, in terms of the UK-wide approach to pooling and sharing.

I spoke in the debate when the levy was introduced, and I recall that there was a sparsity of Back Benchers prepared to provide political cover for their Government’s change of heart. Quite clearly, an awful lot has changed since then. We have a new Prime Minister, who makes much of the fact that she is prepared to be unpopular, which is probably just as well in the light of recent events. She also tells us, and the Chief Secretary repeated it today, that there is apparently a sinister grouping at work outside this place—the anti-growth coalition. I will not go through all the groups that supposedly comprise this coalition, but it seems to be anyone who has the temerity or the audacity to disagree with the Prime Minister, so it probably includes about half the Cabinet and most Conservative Back Benchers.

Hywel Williams

I am grateful to the hon. Gentleman for raising the Government’s assault with such frivolity. Does he know how one joins this anti-growth coalition? When does it meet? Does it provide lunch? Does one have to apply through the currently absent Minister? Is there a form on the internet, as there is for everything else?

Richard Thomson

I am sorry to disappoint the hon. Gentleman, but I do not have any answers. From a Marxist perspective—a Groucho Marxist perspective—I would not want to be part of any club that would have me as a member. I am sure the T-shirts are being printed and will be available very soon.

The Government Benches were rather sparse in our previous debate on the levy. Judging by some of the contributions and the exceptionally well-targeted friendly fire, the Government clearly have some way to go to persuade their Members on not only the sincerity of their commitments on health and social care, but their broader approach to managing the economy.

Scottish National party Members had concerns about the levy at the time as a means of achieving the policy objectives outlined. In our view, it was unclear what the additional resource would be used for, other than in the broadest of terms. The near £13 billion levy seemed to us to be an arbitrary amount, unconnected to any clear plan for how the funds might be used to tackle the pressures in the NHS—far less for how that resource, and how much of it, would end up being passported through to meet the challenges in the care sector. We also remarked that there was no sign of the accompanying reforms that would be necessary to get better outcomes on integrating health and social care services in England, as has been done in Scotland and as will be built on through the establishment of a national care service by the end of the current Scottish parliamentary term. The levy was also introduced, and is now being withdrawn, without our having had any indication from the OBR—although we believe the work has been done—of the impact not just of this but all the other fiscal choices that now sit around it.

To say that the UK Government are in complete disarray in their approach not just to health and social care but to managing the economy, would be a kindness and an understatement. They are abandoning the national insurance rise in favour of increased borrowing, just as the Chancellor’s limited fiscal event has resulted in borrowing growing considerably more expensive. They are introducing tax cuts, which are intended to be funded in part by cuts to public expenditure, and those will inevitably feed through to pressures on the health and social care sectors that the levy was supposed to be bolstering. With the rampant inflation we now see in our economy, any resource that makes it through to the health and social care sectors will not travel as far as it would have done—those pounds will buy less. The huge post-pandemic health and social care problems that we face in common across these islands have also been made that much worse by the botched nature of the mini-Budget.

John Appleby, the director of research and chief economist at the health think tank the Nuffield Trust, is surely correct when he warns that the funding ball is now back in the Government’s court, saying:

“They will have to fund the commitment through some combination of borrowing and deprioritising other public spending”.

Let us be realistic about this: that is a far more likely set of outcomes than seeing the commitment being met through ambitions for growth, no matter how loudly and repeatedly they are stated.

To be clear, SNP Members never believed that a levy on national insurance was the way to achieve the objectives of meeting those challenges. It is tempting to go back to what was said on 24 March, when Paul Johnson, the director of the Institute for Fiscal Studies, called the Government to account in The Times newspaper, saying:

“Why promise to spend billions cutting the basic rate of income tax whilst going ahead with an increase in NI rates? That will make the tax system both less equitable and less efficient. It will increase the wedge between higher taxes on earnings and lower taxes on pensions and unearned incomes. And wouldn’t that money have been better spent sooner helping those most in need?”

That was an excellent question then and it remains so today.

Let us be clear that the funding challenge goes beyond the challenges of the economy, to meeting the parallel challenge presented by the growing and complex demands of an ageing population. In meeting that challenge, it is important that we are able to meet the demands and needs of patients, service users and staff with dignity and compassion, while making sure that the responsibility for contributing towards that financially is a burden shared fairly and equitably.

In financial terms, that is going to be met through a combination of revenue spend and capital spend. The way in which that cost is shared will come down to political choices over how much is to be borrowed and how the tax system is to be balanced over the longer term. We certainly wait with a mixture of bated breath and nervousness as to what the Chancellor will finally bring forward later this month. I make no apology for repeating this point: it must be fairer, as a general principle, to spread the burden by increasing income taxes across the board on both earned and unearned income, as well as to look again at areas such as inheritance taxes and capital gains, so that the totality of the wealth right across the nations of these islands can be taken into consideration when sharing that burden.

Instead, we seem to have a piecemeal and incoherent approach to reform from this Government, allied to an equally piecemeal and incoherent approach to taxation and the wider economy. It is often said of a person’s character that, when someone shows you who they are, you should believe them. My goodness, haven’t we in the past three weeks seen exactly what the essential character of this Government is when it comes to their priorities? We have seen that instinct revealed in the decision to unapologetically lift the cap on bankers’ bonuses. We see it in the attempts to cut taxes for the richest, to give least to those who need it most and to hack back on the public services that enable people to live the best lives they possibly can, irrespective of their personal circumstances. We see it in the resulting economic chaos and the fiction that out of that chaos growth will emerge, which somehow makes all of this additional borrowing affordable.

In some kind of conclusion, it is clear that the problems that led to this levy being identified as a solution in health and social care have not disappeared, even if the levy itself is about to. The Chief Secretary repeated the Prime Minister’s lamentable jibe about the “anti-growth coalition”. As the chaos that has emerged from the mini-Budget shows, the solutions to the myriad problems we face are not going to be found among the dangerous, disruptive ideologues who cause mayhem by supergluing themselves to the policy prescriptions of the Institute of Economic Affairs. They can be found only by building long-term value in the economy and making sure that the burden for doing so is shared equitably among all people and all businesses that can make the contribution that they need to.

October 12, 2022
James Cartlidge – 2022 Speech on the Health and Social Care Levy (Repeal) Bill

The speech made by James Cartlidge, the Conservative MP for South Suffolk, in the House of Commons on 11 October 2022.

It is fair to say that it is a bit of a novelty for me to be called so early, and without a time limit, in a debate. I am very grateful, not least because how we pay for healthcare is one of the single most important subjects in British politics. That is essentially what we are debating today, and I feel strongly on this subject. The core principle must be one that I have always held as a Conservative, which is that we are fiscally responsible. As with the environment, we must aim to leave things in a better condition for future generations and, with the public finances, have in mind at all times the impact on those yet to be born—on our grandchildren—so that we are fiscally responsible. That is the fundamental belief of my party, in my view.

With that in mind, there is a lot of excitement about what the OBR will say on Hallowe’en, but it has already pronounced on the matter of health expenditure. In July it published “Fiscal risks and sustainability”, a fascinating bedtime read. The crucial thing is what it says about the OBR’s estimate for the future cost of healthcare in this country. It predicts that the current spend on health and adult social care will go from around 10.3% of GDP to 17.5% of GDP in 50 years’ time. That is an extraordinary increase—almost double—and it would take up so much more of our wealth and public expenditure. The OBR’s track record is very accurate on estimating health spend. It is based on a lot of cautious variables that are obviously difficult to predict, but essentially this is, if you like, cutting the mustard in telling us the future cost we have to face up to.

To put this in context, the OBR estimates that the headline estimate for public debt that we will be passing to our grandchildren will be 100% of GDP in 30 years’ time and that in 50 years’ time it will be 267% of GDP. That is what it says in this document. If we carry on as we are, we will have a national debt of 267% of GDP because of the rising cost of what is called demographics. That is mainly healthcare but also the state pension and other aspects of the pensions system. Overwhelmingly, however, it is healthcare. Adult social care will double as a percentage of GDP as well.

I should declare an interest in the sense that I had an indirect role in the creation of the health and social care levy, and it is fair to say that I have many reservations about what we are doing today. As colleagues know, the former Prime Minister—who deserves great credit for this—was determined that we would not just have another Green Paper or White Paper on social care. He wanted to actually deliver something for the country and he introduced the cap that had been promised by successive Governments, so that although people who have saved hard and have assets have to contribute to their care, they know that there is a limit. It is incredibly important that we brought that forward, and I sincerely hope that in removing the funding mechanism for the cap, the Treasury will resist the temptation to water it down. Local authorities are not yet aware of exactly what the cap will cover, and with the funding stream gone, the Treasury must resist the temptation to water the cap down. That is absolutely paramount.

When the Prime Minister came forward with wanting to pursue the cap, it was the view of the then Chancellor —my right hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), who I had the privilege of being Parliamentary Private Secretary to throughout the pandemic—that it must be funded, and that it could not just go on the national credit card. The social care cap on its own is massive rising liability. I have just set out what is going to happen to health costs more generally. So, how to fund social care? The most common suggestion was an increase in national insurance, for the simple reason that it applies to businesses and individuals and so raises the sorts of revenue we can get. It is not easily avoided, and it can give us the money in the bank to pay for these expensive costs that we face.

However, I submitted a paper to the Chancellor at the time and suggested that, rather than having just a narrow national insurance levy—a social care levy, as it were—we should have a full health and social care levy that should be hypothecated and appear as an explicit line on people’s payslips. It will be there on our payslips until November. I accept that we have not made the most of it, and there has been almost no enthusiasm from any quarter—possibly only from the social care sector—but with a transparent, hypothecated statement on payslips, if the NHS came back to us two years into a five-year funding settlement saying, “We need this additional big item,” we could say, “Fine, but it will come out of the levy.” That would be transparent, and it would have provided the discipline that we have terribly lacked in health spending for many years, under successive Governments. I thought it had great potential, but it is being vapourised today. The Prime Minister has a mandate for it and the whole House seems to support that view, as does the Labour party even though it does not have the foggiest idea how it would fill the gap.

Peter Grant

The former Prime Minister had a mandate to do what he did last year. The hon. Member for South Suffolk (James Cartlidge) says the new Prime Minister has a mandate to do this. Where did that mandate come from? I do not remember Parliament being dissolved for a general election in the last couple of months.

James Cartlidge

The new Prime Minister would rightly say that our manifesto said we would not increase national insurance, so she can draw on the mandate of the general election. We also seem to have vapourised our memory of the pandemic, but I would argue that it changed everything. The enormous borrowing accrued to this Government during the pandemic, which everyone supported—everyone wanted even more spending and even more support for businesses and individuals, as I remember because I was the then Chancellor’s PPS—made it exceptional, and we had to balance the books. I make it clear that this was not my preference, as I would not have wanted a levy to fund the NHS and social care. Given the politics of the time, it was the best way forward.

This is my personal view about how we should move forward. The key point is that the NHS is free at the point of delivery, which means we pay with time. When something is free, people wait and there are massive queues. Of course, those queues have been massively exacerbated by the pandemic, which is why the backlogs are so big, but it is blindingly obvious that the pressure on the NHS is overwhelming. There is almost infinite demand on finite capacity.

Labour Members will say in any election campaign, as we will. “We will do everything possible to increase capacity.” The Deputy Prime Minister and Health Secretary will, of course, do everything possible through her ABCD—ambulances, backlogs, care, doctors and dentists —strategy to improve outcomes in the NHS, but when we talk about funding the NHS, when we talk about the obligation to our grandchildren and the next generation, we have to be more radical, frankly.

In my view, we need a core NHS that is free at the point of delivery, but as a country we need to drive up the use of the independent sector and of private healthcare from all those brilliant companies that are seeing take-up shoot through the roof because of the backlogs. I know some of this territory is difficult to talk about, but I will give three key reasons why we should go down this route. First, every single person who pays to go private is freeing up space on the backlog. They are also boosting NHS capacity.

Secondly, this is standard in comparable countries. The Republic of Ireland, Australia and Germany have tax incentives for people to pay for their healthcare. There is an understanding that people who go to that trouble should have some kind of rebate, because they are doing everyone else a favour.

Thirdly, this is already happening. The post-Beveridge revolution is happening, and it is happening silently. There has been a massive surge in the number of people paying privately for healthcare. The Guardian recently published figures estimating that one in 10 adults in the UK has paid for private healthcare in the past 12 months, primarily because of the backlogs. Use has surged, according to the Independent Healthcare Providers Network. The number of people paying for hip replacements was up 193% in January to March 2022 compared with January to March 2019, and the number of people paying for knee replacements was up 173%. This is a huge surge in the number of people paying privately. It is true that many of them will not have wanted to do so, and I am not suggesting that they will have been delighted. Of course, we all want everyone to be able to use the NHS without long waits—that is clearly the ideal scenario—but it is not deliverable any more, not least with the demographic pressures we face.

We should look at the surging use of the independent sector and embrace it as a policy opportunity. Research from the Independent Healthcare Providers Network shows that 48% of people in this country will consider going private in the next 12 months because they know about the waits. This is about choice, and the most important thing is to have greater tax incentives for people to use the independent sector, so that people think about making a realistic choice. We should not settle for long waits for care any more. This is standard practice in comparable European and Australasian countries.

To be very specific, going back to the OBR document I mentioned, as a country we face a huge liability for health and social care. We should target increasing the percentage of our healthcare spend that goes to the independent sector so that we have a better balance, more like the balance in comparable European countries. If we did that, we would get much better outcomes, we would have more choice and we would finally have a 21st-century healthcare system with diversity of provision, which is the best way forward.

We should recognise that the revolution is happening, and it needs to happen with the Government’s backing and support.

October 12, 2022