Category: Economy

  • Andrea Leadsom – 2014 Speech on Financial Technology

    Andrea Leadsom – 2014 Speech on Financial Technology

    The speech made by Andrea Leadsom, the then Economic Secretary to the Treasury, on 2 July 2014.

    I’m very glad to be here this morning.

    And I’d like to start off with three quotes.

    One:

    Technology is a word that describes something that doesn’t work yet.

    That was Douglas Adams.

    Two:

    Technological progress has merely provided us with more efficient means for going backwards.

    Aldous Huxley.

    And three:

    Computers are useless, they can only give you answers.

    Pablo Picasso.

    So if you were to listen to some of the greatest wits and writers and artists of the last 100 years…

    You might be tempted to believe that technology is a terrible phenomenon, driving us into some dark and depressing future.

    But then you might read some of the headlines from last week.

    One.

    New technology helps brain signals move paralysed hand.

    Time Magazine.

    Two.

    How technology is being used to foil cheats.

    The Telegraph.

    And three.

    Technology firm creating 31 jobs in Belfast.

    The BBC.

    And I think that those three headlines…

    Capture three of the real opportunities that – when developed with the right intentions – new technology can present.

    First. As with the paralysed hand, technology can help people.

    Second. As with stopping cheats, technology can make life fairer.

    And third. As in Belfast, technology can create jobs.

    And it’s exactly those three things that I want to talk about today.

    I want to talk about how the work you’re doing can help people.

    I want to talk about how we can use technology to make competition fairer.

    And I want to talk about how we can use new technology to create and support jobs.

    And within that, I want to talk about the work we in government are doing to help.

    So first, how can financial technology help people?

    Put simply, we need you to keep using the latest technology…

    To ensure that our financial sector works for the people who use it.

    And I think that’s an area where we’ve really seen progress over the last few years…

    With new systems and ideas continually making life easier for your customers.

    We’ve seen the introduction of:

    GoCardless, which makes it easy and cheap for small businesses to take debit payments
    TransferWise, which provides people and businesses with a lower cost alternative for sending money overseas
    Funding Circle, where people can directly lend to small businesses in their community online
    And I’m sure there are hundreds more inventive products that are making a real difference to businesses

    I think it’s crucial that you keep developing products like that…

    That keep making it easier for people to carry out the transactions they want.

    We’ll keep doing our bit to help.

    Soon we’ll be legislating for cheque imaging,

    Which will see customers able to pay in their cheques using their smart phones.

    And we’re also doing our bit to support the new Financial Conduct Authority (FCA) project – Project Innovate.

    For those of you that don’t know, Project Innovate is a clear signal from the FCA…

    That they want to make sure UK financial technology companies – many of which will be run by people here today – are supported by our regulatory environment.

    And as part of the project the FCA has said it will open its doors to any firm who are developing new approaches…

    Which either aren’t explicitly addressed by current regulation – or where the current guidance may be ambivalent.

    They’re also supporting innovation…

    First, by providing help to firms who are developing new models or products, so they can navigate the regulatory system.

    And second, by looking for areas where the system itself needs to adapt to new technology or broader change – rather than the other way round.

    These are all really positive developments that the government strongly welcomes…

    And they should go a long way towards creating an environment in which firms – like yours…

    Can compete, grow and – most importantly – keep innovating for your customers.

    So, second, what can we do with FinTech to make things fairer?

    For me, the number one priority of my time in this role is to improve competition between companies that provide banking services.

    Because while there has always been competition…

    That competition hasn’t always been fair.

    And one of the big changes we’ve made here – to help you – has been in legislating for a new Payments Systems Regulator.

    Now – as you’ll all know – every time someone:

    gets paid directly into a bank account
    takes money out of a cash machine that isn’t owned by their own bank
    moves money around by some other method
    They are relying on payment systems to get their money to the right place, safely, reliably and efficiently.

    But the system that’s currently in place, works in favour of the big banks…

    Because those are the banks that have always owned the payments systems…

    Which has always meant that FinTechs had no alternative but to accept the terms they’ve been offered.

    Often those terms have been unfavourable, which has given those big banks a big advantage over both new entrants…

    And companies that want to offer people a different customer experience.

    But the new regulator will have strong powers…

    And they will be able to ensure that smaller banks and alternative providers of finance – including FinTechs – can access these systems in a fair and transparent way.

    This piece of work is very nearly there.

    The government has switched on the Market Investigation Reference powers of the Regulator a year ahead of schedule…

    And this will give them the power to take competition action over payments systems…

    When they come into their full set of powers next April.

    All of which should result in a fairer – more even – landscape for your companies to operate.

    Thirdly, how can we use new technology to create jobs?

    Vitally – and as a mum myself, I’m particularly interested for my own son, who is desperate to get into this sector…

    There are a growing number of jobs in financial technology itself.

    The alternative finance market is expected to be worth over £1.5bn this year, with the potential to grow even further.

    And one of the ways I think we can help that growth, is by making it an even stronger export industry.

    According to current estimates, over the next 10 to 15 years…

    90% of global demand for goods and services will be generated outside of Europe.

    So we in government think that you in FinTech have a real opportunity to tap into this growth, and take advantage of new international business.

    Again, we’ll be doing our bit to help.

    That’s why – for example – we’ve created the Financial Services Trade and Investment Board…

    Which is a strategic body that brings together government and industry…

    And has been tasked with:

    attracting inward investment
    promoting external trade
    removing restrictions for the UK’s financial services sector
    And that board has – you’ll be pleased to hear – identified financial technology as one of its big priorities.

    It recognises that the UK is fast becoming a destination of choice for companies that want to establish a global presence in the FinTech sector…

    And working with UKTI, they have developed a marketing strategy to attract more overseas investment to support the work you do.

    But the growth and the employment opportunities here aren’t only in your sector.

    You all have a key role to play in supporting both growth and jobs in other sectors too…

    Especially by supporting small and medium businesses.

    We really want to open up the field of SME finance to Fintechs.

    And this goes back to the importance of competition, because – at present – the largest four banks account for over 80% of UK SMEs’ main banking relationships.

    Such high concentration levels are – quite frankly – bad for business.

    So we are fully committed to fostering a stronger, more diverse and more competitive SME banking sector, in which FinTech firms play a key role.

    And our work is well underway on this:

    we’re legislating to improve access to SME credit data, which will enhance the ability of new providers to conduct accurate risk assessments
    we’re looking at proposals that will match those SMEs that want to secure loans with new market players that want to provide them
    we’ve taken action to speed up the process for waivers or deeds of priority, which have made it easier for FinTechs to offer finance to SMEs
    Finally, we want the British Business Bank to keep working with you to unlock further funding for small businesses.

    Both the Business Finance Partnership, and its successor – the Investment Programme – have an explicit objective to support lending to smaller businesses through smaller and more innovative finance providers.

    They’ve already supported a whole host of providers like

    peer-to-peer lenders
    supply chain lenders
    debt and mezzanine finance funds
    And their funding has been matched with at least an equal amount – and usually much more – from private sector investors.

    We want companies like yours to keep taking advantage of the opportunities they offer…

    And to keep offering new and interesting ways of lending to small businesses.

    Because in very simple terms, the more small businesses we can support…

    The more jobs we can create…

    The more growth we can create…

    And ultimately, the more prosperity we can create for millions of families across the UK.

    And that’s why I’d like to end this morning by dismissing Douglas Adams!

    Dismissing Aldous Huxley!

    And dismissing Pablo Picasso!

    Because I really do believe that new financial technology:

    will work
    will move us forward
    will provide answers to some of the issues that have held back our sector
    So if I have one ask of you, it’s to keep doing what you’re doing.

    Keep looking for new and inventive ways to help individuals and businesses.

    Keep looking for new and inventive ways to shake up the system, and make competition stronger.

    Because the outcome of all of that will be a system that works better for people.

    That is fairer.

    And that supports jobs.

    And that’s something that will be great for your sector, and our country.

    Thanks for listening.

  • Rishi Sunak – 2021 Comments on the Super Deduction Tax Allowance

    Rishi Sunak – 2021 Comments on the Super Deduction Tax Allowance

    The comments made by Rishi Sunak, the Chancellor of the Exchequer, on 31 March 2021.

    The super-deduction is the biggest two-year business tax cut in modern British history – driving our economy by helping businesses to invest, grow and support our Plan for Jobs.

    I urge firms across the UK to invest in our recovery by taking advantage of this great opportunity.

  • Anneliese Dodds – 2021 Comments on David Cameron and Greensill

    Anneliese Dodds – 2021 Comments on David Cameron and Greensill

    The comments made by Anneliese Dodds, the Shadow Chancellor of the Exchequer, on 18 March 2021.

    These revelations raise extremely serious questions about the Chancellor’s priorities in the middle of a pandemic. The Government must leave no stone unturned with a full and thorough investigation into this.

    Taxpayers and businesses deserve answers about why it appears Greensill was given so much access to the Treasury at a time when the Chancellor was refusing to engage with groups representing the millions of people he excluded from wage support.

    The Chancellor must urgently set the record straight.

  • Ed Miliband – 2021 Comments on the Government’s Green Jobs Announcement

    Ed Miliband – 2021 Comments on the Government’s Green Jobs Announcement

    The comments made by Ed Miliband, the Shadow Business Secretary, on 17 March 2021.

    Once again, the Government talks a big game on green but doesn’t deliver with nearly the scale or ambition that’s necessary. None of this money is new – these announcements simply allocate money already announced.

    Strip away the rhetoric and we see the fact that while Germany is investing 7 billion euros in a hydrogen strategy our Government is investing a tiny fraction of that.

    We had a Budget that failed the steel, automotive and aerospace sectors and once again the Government appears to have nothing to say about those key sectors.

    And on buildings, we still have no long-term government strategy about how to decarbonise housing and no accounting for the £1bn cut to the Green Homes Grant.

    We need an ambitious green stimulus to support industry to decarbonise ​and secure jobs for the long-term, starting with a £30bn green recovery. The Government has failed to deliver yet again.

  • John Eatwell – 2021 Speech on the Budget Statement

    John Eatwell – 2021 Speech on the Budget Statement

    The speech made by John Eatwell, Baron Eatwell, in the House of Lords on 12 March 2021.

    My Lords, in these very uncertain times, it is inevitable that some of the Budget measures will prove an unexpected success and some an unexpected failure. So, instead of dealing with detail, I will focus on the inspiration and what the Budget tells us about the Chancellor’s thinking—his economic philosophy, if you like.

    Fortunately, that philosophy is summed up in the Budget speech:

    “The only reason we have been able to respond as boldly as we have to covid is because 10 years of Conservative Governments painstakingly rebuilt our fiscal resilience.”—[Official Report, Commons, 3/3/21; col. 255.]

    Note that he said: “The only reason”. For the Chancellor, the prime objective of government policy must be fiscal resilience—the heartbeat of austerity. There was no mention of the impact of those 10 years on public services desperately understaffed as the pandemic hit, no mention of the lack of 35,000 nurses in the NHS—indeed, no mention of the NHS at all—and no mention of the fact that we entered the pandemic with a little over six intensive care unit beds per 100,000 population, compared with double that number in France and Italy and five times that number in Germany.

    For the Chancellor, fiscal resilience is paramount and the unique determinant of economic success. Hence the grandstanding on future tax rises in the Budget. For the future is to be dominated not solely by higher taxation but by cuts in government spending on top of the cuts already announced in the autumn. These are deemed necessary to pay off the debt. Overall, it is deflation in excess of £30 billion a year—year after year. How well founded is the Chancellor’s assertion that austerity is

    “The only reason we have been able to respond”?

    As is evident from the OBR report, the increase in government spending to counter the pandemic was funded almost entirely by the Bank of England. Does anyone really believe that the Bank would have refused to fund the increase?

    Is the Chancellor right to suggest that fiscal resilience should be his principal objective, or is his obsession distorting the Government’s entire approach to economic policy? Let us be clear: the prime objective of government economic policy should be the management of demand for the nation’s real resources, labour and productive capacity. The Government should set fiscal policy to ensure the very best use of resources today and development of resources for the future. If this involves more debt, then that is the best economic decision; if it involves more taxation, then that is the best decision. The role of taxation is not to pay off the debt but to be part of a balanced programme of fiscal and monetary policy to stimulate the real output needed for the achievement of the Government’s goals: health, education, defence of the realm, decent living standards, tackling climate change and so on.

    Of course, the mixture of taxation, spending and debt decrease or increase may have other consequences that must be taken into account. For example, the OBR demonstrates that quantitative easing has lowered the maturity of UK debt, making it more interest rate-sensitive. That is serious. There may be other effects in the money markets. For example, holders of government bonds may come to believe that current policy will increase inflation. It does not matter whether the belief is true or false; if the result is that they sell off bonds, interest rates will tend to rise. Given his important responsibility of managing expectations, there is market danger in the Chancellor’s suggestion that fiscal resilience should be the paramount goal.

    If, instead, we view the Budget through the lens of a programme of monetary and fiscal policy that secures the highest real output, some key consequences emerge. In a speech last week, the Governor of the Bank of England defined the ideal post-pandemic economic policy: the cost of the Covid shock

    “has to be managed, and it will be easier to do that with a higher trend rate of growth, boosted by stronger investment.”

    Have the Government provided a plan for stronger investment? The approach in the Budget is best characterised as, “There’s a problem, so throw money at it and hope it works. There’s a lack of investment, so throw money at super deduction for two years.” The result is spelled out by the OBR: long-term investment will not be increased, just shifted around. There will be a two-year boost to take advantage of the subsidy, then a decline. For companies to invest, they do not need super deductions; they need the prospect of growing demand for their products. What does this Budget offer them? Miserable rates of demand growth: 1.5% in 2023, 1.6% in 2024 and 1.7% in 2025—no long-term strategy for investment.

    Similarly, there is a housing crisis. Let us throw money at it in the form of stamp duty holidays and a mortgage guarantee. The result? Sharply rising house prices and a few more houses. Has the Chancellor not noticed that house prices have risen by 8.5% in the midst of the worst recession of modern times? There is no long-term strategy for housing.

    So, where is the plan for investment? Well, there is what I can only describe as a PR brochure, Build Back Better: Our Plan for Growth, published by the Treasury. It is full of wonderful, glossy photographs and a lucky dip of proposals on infrastructure, skills, innovation and the environment, but the photos fail to disguise the fact that there is no unifying framework, a complete absence of any plan for implementation or monitoring, no institutional oversight and no evidence of consultation —nothing to encourage the commitment of private investment, and no strategic thinking for an investment decade. How could there be when fiscal resilience and spending cuts have to come first?

    The pandemic has imposed a massive cost on the British economy, the real cost of lost output, lost jobs, furloughed idleness and collapsed businesses, the highest death rate in the G7 and the biggest fall in production. But there is an economic opportunity. New thinking can define a break from the policies of the past 10 miserable years. Just as, after the war, Britain built a better society, we can build a new economy and a new society now, but only if monetary and fiscal policy are the servants of a building programme; not if, as for the Chancellor, the real economy is to be squeezed in the service of outdated fiscal orthodoxy.

  • Theodore Agnew – 2021 Statement on the Budget

    Theodore Agnew – 2021 Statement on the Budget

    The statement made by Theodore Agnew, Baron Agnew of Oulton, in the House of Lords on 12 March 2021.

    My Lords, the Budget that the Chancellor set out last week has three key elements. First, it protects jobs and livelihoods and provides additional support to get the British people and businesses through the pandemic. Secondly, it is clear and honest about the need to fix the public finances. Thirdly, it starts the work of building our future economy, including by providing opportunities to level up across the country.

    The Budget announced additional measures worth £65 billion to support the economy through the pandemic this year and next. Added to last November’s spending review, the number is £352 billion and, taking into account measures from the spring Budget last year, the figure rises to £407 billion. The OBR now expects the UK economy to recover to its pre-crisis level six months earlier than originally expected—in the second rather than the fourth quarter of 2022.

    Importantly, the Budget extends the furlough scheme until the end of September. Support for the self-employed will also continue until September, with an additional 600,000 people now potentially eligible to claim. The universal credit uplift of £20 a week will be maintained for a further six months and working tax credit claimants will receive equivalent support over the same timeframe.

    Among other things, the Budget also reaffirmed the Government’s commitment to increase the national living wage to £8.91 an hour from April. It also announced a new restart grant in April to help businesses to reopen and get going again, as well as a new recovery loan scheme to replace our earlier bounce-back loans and coronavirus business interruption loans.

    The Chancellor was also open about the longer-term fiscal challenge that we now face. The Budget does not raise the rates of income tax, national insurance or VAT. Instead, it maintains personal tax thresholds on income tax, inheritance tax, the pensions lifetime allowance and the annual exempt amount in capital gains tax, with higher earners affected the most. It also announced an increase in corporation tax to 25% from 2023. Importantly, 25% is still the lowest corporation tax rate in the G7 and companies that make less than £50,000 profit annually will only be subject to a 19% tax rate. Given that the Government are providing businesses with over £100 billion of support to get through the current crisis, it is only right to ask them to contribute to our recovery.

    The third component of the Budget is a series of initiatives and measures to support the investment-led recovery that the country needs. A new super deduction will, in some cases, allow companies to reduce their taxable profits by 130% of the cost of the investment that they make in plants and machinery, which is equivalent to a 25p tax cut for every pound that they invest. Worth £25 billion over the two years that it is in place, the super deduction represents the biggest business tax cut in modern British history.

    The Budget also announced, among other things, the creation of the first ever UK infrastructure bank, headquartered in Leeds. Two new schemes—Help to Grow and Help to Grow: Digital—will help tens of thousands of small and medium-sized businesses to get world-class management training and help them to develop their digital skills. We are helping to ensure that we have access to the talent that we need through the reforms that we are making to our visa system.

    Achieving an investment-led recovery means allowing investment to flow more freely, which is why we want to give the pensions industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures. Alongside these measures, our commitment to levelling up across the United Kingdom is reflected in the £4.8 billion levelling-up fund; accelerated city and growth deals in places such as Ayrshire, Falkirk, north Wales and Swansea Bay; more than a £1 billion for 45 new towns deals; and a £150 million fund to help communities across the United Kingdom take ownership of pubs, theatres, shops or local sports clubs at risk of loss. This complements the inward investment that will be attracted through the announcement of eight new freeports in eight English regions.

    The country has experienced the worst fall in GDP in three centuries—not the 1976 sterling crisis, not the Second World War, not the First World War, not the Napoleonic War; this has been harder financially than all those. In response, the Chancellor has presented a plan that will continue to protect jobs and livelihoods and to support British people and businesses through this moment of crisis. It will begin to fix the public finances and will start the work of building our future economy through investment-led recovery.

  • Anneliese Dodds – 2021 Comments on January ONS Figures

    Anneliese Dodds – 2021 Comments on January ONS Figures

    The comments made by Anneliese Dodds, the Shadow Chancellor of the Exchequer, on 12 March 2021.

    Today’s figures confirm that under the Conservatives we’ve had the worst economic crisis of any major economy.

    Rather than securing the recovery, Rishi Sunak’s budget last week risked weakening it through a combination of pay cuts and tax rises, and a looming cut to social security just as unemployment is set to spike.

    The Chancellor’s mask has slipped. He’s making irresponsible choices now and has no long-term plan for the future. The people of Britain deserve better.

  • Anneliese Dodds – 2021 Comments on £95 Billion of Tax Cuts

    Anneliese Dodds – 2021 Comments on £95 Billion of Tax Cuts

    The comments made by Anneliese Dodds, the Shadow Chancellor of the Exchequer, on 9 March 2021.

    Labour has argued for over a decade that cuts to corporation tax don’t boost investment or raise extra revenue – they just cost the Treasury billions that could have been put to better use.

    We welcome the Chancellor’s conversion to our point of view, but we can never get back the £95 billion lost to the Treasury over the last few years from this economically illiterate tax cut.

    That money could have been used to strengthen our economy going into this crisis. Instead the Conservatives slashed salaries for key workers, ran down our schools and hospitals, and cut 21,000 police officers from our streets.

    Never again should any Conservative government be allowed to use such a discredited economic argument to weaken the foundations of our country.

  • Douglas Ross – 2021 Speech on the Budget

    Douglas Ross – 2021 Speech on the Budget

    The speech made by Douglas Ross, the Conservative MP for Moray, in the House of Commons on 3 March 2021.

    I want to welcome the Budget on behalf of my constituents in Moray and of people across Scotland. There is a lot of good news in what the Chancellor had to say today. First, however, I want to pick up on a few remarks in the speech made by the leader of the Scottish National party, the right hon. Member for Ross, Skye and Lochaber (Ian Blackford). He accused members of this Government of not understanding what it was like to be poor. That is quite an incredible statement from someone who earned his fortune as an investment banker in the City of London before he rediscovered himself as a humble crofter.

    The right hon. Gentleman went on to say that this Budget lacked ambition, but I thought there was ambition weaved throughout the Chancellor’s statement. It has ambition for individuals, families and businesses in the weeks and months ahead, and ambition for our country in the years ahead. If the leader of the SNP at Westminster wanted to see a statement that lacked ambition, he should have looked at Nicola Sturgeon’s statement last week on her partial route map out of lockdown restrictions for Scotland. That was a document and a statement that lacked ambition, hope and clarity and one that we are seeing unravel at the moment as people in Scotland expect more from their Government.

    The final point I want to focus on from the right hon. Gentleman’s speech is his comment about how in Scotland there has been an extension to the freeze on business rates for a further year. That is true, but that further freeze, for another 12 months, was made possible and accepted by the SNP Finance Minister only because of an additional £1.1 billion of support from the UK Government to the Scottish Government. Kate Forbes stood up in Holyrood and said that she was able to do this only because of additional support coming from the UK Government to Holyrood, to the Scottish Government, so that is why we have the extension for a full year of business rates in Scotland.

    The right hon. Gentleman mentioned that newspapers were also covered. Of course, the SNP had to be forced to include newspapers in the business rates relief. A vote by the Scottish Conservatives in Holyrood, which the SNP was against to begin with, forced a U-turn. I will leave it to others to speculate why the SNP at this time would not want to support the newspaper industry in Scotland.

    Throughout the last year, in dealing with this pandemic, the UK Government have delivered unprecedented support for Scottish families and businesses: the furlough scheme and the self-employed income support, protecting 930,000 Scottish jobs; loans to over 90,000 Scottish businesses and an extension of the reduced rate of VAT for hospitality, leisure and tourism; the £20 a week uplift for universal credit to help those in our society who need it most, which is something I have been calling for since October last year; and £9.7 billion of additional funding for Scottish public services. With this Budget, the Chancellor is continuing those vital lifelines, extending furlough and the self-employed income support until September.

    Just as this pandemic has gone on longer than any of us could have imagined back in March last year, so, too, has the broad support delivered by the UK Treasury to the people of Scotland. Yet this is not just a Budget to help the Scottish economy to survive the pandemic. It is also a Budget for our recovery, with investments to support the economy in the north-east in its transition towards green energy, an acceleration of the transformative funding for Scottish growth deals to bolster the local economies in Ayrshire, Argyll and Bute, and Falkirk, and a freeze on the fuel duty to back Scottish drivers, which is crucial to our remote and rural areas. Just look at how that contrasts with the SNP Scottish Government lobbying for an increase in fuel duty. It has gone widely unreported that the SNP is calling for an increase. When we look at the options for fuel duty, how will that go down with voters in rural Scotland in a few weeks’ time? And, of course, as the MP for Moray, representing more Scotch whisky distilleries than any other MP in this place, I warmly welcome the freeze on spirits duty. That is hugely important to the distilleries in my constituency and alcohol producers more widely in Scotland and across the UK.

    The Budget shows that the UK Government have a plan to rebuild Scotland’s economy after the immediate health crisis is over, to create jobs and opportunity in every part of our country as we pull together to deliver our recovery. The Chancellor said that the majority of these measures apply across the United Kingdom. We have a further £1.2 billion of spending going to the Scottish Government. We need to see the Scottish Government ensuring that that gets to the services and businesses that need it most. On the stamp duty freeze, we now see that holiday continuing in England until September, but in Scotland it has now ended. We need to see action on that in Scotland as well.

    Yet SNP Members cannot welcome this plan—they could not support the Budget because they would rather focus on another divisive independence referendum than our recovery from coronavirus. They say that they want to bring this referendum forward at the earliest opportunity, just when people are renewing their ties with friends and families and businesses are beginning to reopen. Their plan would damage not only our Scottish recovery, but that of the whole of the United Kingdom. That is the last thing we need right now. What families and businesses across Scotland want to hear from the Scottish Government is a full route map for ending restrictions, not a route map for separation. As I said earlier, they are looking for certainty and for hope. This Budget has delivered that by extending the vital lifelines that Scottish families and businesses are relying on. It is now time for the Scottish Government to do the same.

    The Chancellor has set out an ambitious programme that will not only secure the survival of many jobs and businesses in Scotland, but provide the basis for our economic recovery in the future. There was just one point that I agreed with the leader of the SNP on. He said that Scotland has a choice of two futures—we do. In the coming Scottish Parliament election, voters will decide whether they want the focus of all the politicians and all the parties within the Scottish Parliament to be on another independence referendum or on rebuilding Scotland from coronavirus. Let us not choose more damaging division. Let us instead rebuild Scotland and the whole of the UK together. Today’s Budget will help us do that.

  • David Davis – 2021 Speech on the Budget

    David Davis – 2021 Speech on the Budget

    The speech made by David Davis, the Conservative MP for Haltemprice and Howden, in the House of Commons on 3 March 2021.

    May I start by associating myself with the comments of the Father of the House, my hon. Friend the Member for Worthing West (Sir Peter Bottomley), on ExcludedUK and helping them, and on the leaseholder issue, which also requires help? I also associate myself with those on both sides of the House who have called for the uplift in universal credit to be rendered permanent, which I think in due course will prove sensible.

    When I applied to speak in this debate a few days ago, given the headlines in the press I thought that I might be challenging head-on the Chancellor’s strategy, in view of my concern that sudden tax increases would crush any recovery. It is therefore a pleasure today to find that that is not the case, and that I can be much more supportive of my right hon. Friend.

    Obviously covid-19 has led to incredibly difficult economic circumstances. The country has suffered the worst peacetime economic shock ever. Indeed, we have the worst outcome in the G7, and the deficit is the worst since 1944—a date that I will come back to—which, in and of itself, is extraordinary. The Chancellor faces quite remarkable economic problems that are worse than any Chancellor has faced in peacetime history, and he has handled it with remarkable sensitivity in the way he has put his policies together. I have a question about one or two, but broadly speaking, he has met this economic challenge of enormous magnitude with great skill.

    What do these numbers mean? These billions and trillions that are casually thrown about by supposedly expert commentators are incredibly difficult for ordinary people to understand. In my view, they are best understood when looked at in terms of the impact by household or by wage earner, because that gives a better idea of what they mean. For example, the latest deficit figures published before today were £394 billion a year. That is £14,000 per household—that is the size of the black hole we have to fill. Just looking at the size of the number tells us that no tax policy can solve it. The idea of imposing £14,000 per household of taxes is nonsense; it would be designed to destroy any economic recovery. Only a recovery policy designed to restore the tax base and remove the need for subsidies will close that gap, and I am pleased to see that the Chancellor has essentially adopted that strategy.

    The most recent estimate of the debt is well over £2 trillion and may be £3 trillion. Some £2 trillion or thereabouts amounts to £77,000 per household. I remember only a few days ago a BBC commentator talking about paying off the overdraft. I do not have an overdraft of £77,000. This is a big mortgage that is not paid off in one year. To pay off such a debt rapidly would be crippling. Again, the size says it all. It has to be paid off in the very long term—as the Chancellor said, over decades.

    Since this is the worst debt and deficit combination since 1944, we should treat it in the same way as they did then: with a 50-year time horizon on the loan—a war loan, if you like. Both the world war one and world war two debts were paid off this century, within the last 20 years, so that gives us an indication of what needs to be done. I have heard a number of people say, “The interest rates might go up.” To a large extent, two things are happening here. Every single country in the world has this issue, and therefore every single Government in the world has an incentive to hold interest rates down, and they now have the mechanisms to do it—they have done it time and again with quantitative easing, even before today.

    To close that £14,000 per household deficit, we need to increase growth, increase employment and increase wages. All those things will increase the tax base. The Chancellor said—and I am glad to hear him say it—that his first priority is employment. That is the centre of those aims, and that is exactly right. That requires higher domestic investment to achieve it. It requires higher foreign inward investment to achieve it. It requires higher new company formation and higher research and development, and it will, in turn, generate higher aggregate demand. Tax increases help none of those things.

    The issue of tax increases is not a Tory ideological issue; it is about what delivers the recovery. Income tax increases, whether direct or stealthy, reduce aggregate demand; they reduce the amount of money people can spend. Corporation tax increases suppress investment. Capital gains tax increases deter both domestic investment and foreign investment. The one thing I am worried about in this Budget is the proposal to go to 25% corporation tax in a couple of years. That will have precisely the deterrent effect I worry about with respect to inward investment. I am looking at my Northern Irish friend the right hon. Member for East Antrim (Sammy Wilson), who is nodding at me, because of course in the Province that is absolutely a central issue for us all. We have to worry about tax increases from that point of view.

    I was very pleased to hear the Chancellor’s emphasis on what he called the science superpower strategy, and, as he said, it is not hubristic; we are the country with the highest number of Nobel prizes per capita in the world and should be able to marshal something out of that. We have already had an announcement on setting up our equivalent of the Defense Advanced Research Projects Agency—the Advanced Research and Invention Agency; we have new strategies and new funding for science, and new tech visas. All those things will help as all—the whole kingdom—in improving our growth rate.

    What is a growth strategy worth? It is very difficult sometimes, particularly dealing with the Treasury, which is very difficult about dynamic taxation and indeed does not seem to understand it, despite the fact that the British Treasury under Nigel Lawson created the best dynamic tax demonstrator in history.