The speech made by Sajid Javid, the Conservative MP for Bromsgrove, in the House of Commons on 3 March 2021.
Over the course of the past year in countries not too dissimilar to our own, people have been asked to choose between protecting their livelihoods and protecting their lives. That has not been the case in our country, and for that we have my right hon. Friend the Chancellor to thank. He said, right at the very start of this pandemic, that he would do whatever it takes to protect jobs, to protect businesses and to protect public health, and he has delivered on every count, and this nation has rightly given him its gratitude.
Despite his success, the Chancellor will be in no mood for a victory lap. Comprehensive support, as he has said today, has come at unprecedented pressure on our public finances. To date, as we have heard, the Government have already spent more than £300 billion, every penny of that borrowed. While low interest rates have certainly helped, we cannot expect such a benign lending environment to last forever. With national debt already close to national output, as we have heard, just a 1% rise in gilts would mean an additional yearly cost in debt servicing of £25 billion by 2024. That is more than half of the annual defence budget. Indeed, we are already seeing rising pressure, especially because of rising global inflation expectations, so we cannot allow the inflation tiger to prowl unchecked.
The faster our economy can bounce back, the easier it will be to manage our debt in the future. Thankfully, I believe that our prospects for a sharp, strong recovery look very promising. Thanks to the Government support, the vast majority of businesses are ready for the shutters of the economy to be lifted. The Bank of England has shored up confidence with monetary easing. Households are sitting on some £100 billion of excess savings and, unlike in wartime recessions, there has been no physical destruction of capital. Above all, the Government are delivering on their vaccination programme—a programme that is the envy of Europe and that will lead this continent out of the lockdown. For these reasons, I am very optimistic about the recovery, and I think it will happen rapidly.
Andrew Griffith (Arundel and South Downs) (Con)
My right hon. Friend was of course part of the legacy that has put us in a strong position to make the support packages of my right hon. Friend the Chancellor. Does he agree with me that small businesses are the absolute lifeblood of our recovery, and that my right hon. Friend the Chancellor has brought forward, in the Help to Grow package today, two really insightful schemes that will support the nation’s smallest businesses?
I thank my hon. Friend for his comments, and I very much agree with that. I think there are actually more than two schemes, if we are honest. There are a number of schemes that will help businesses, not least the speed and the scale of the recovery that I have talked of. I especially welcome those measures, but also the super deduction and the support through grants for businesses.
In the medium term, we will put our country back on to a firmer financial footing by tackling some of the systemic issues that were around long before this pandemic hit, such as low productivity and regional inequality. That is why I also welcome the Chancellor’s emphasis on infrastructure investment. Not only will this provide an immediate increase in economic activity, but it will drive long-term productivity improvements and will make sure that growth is even better distributed across the entire United Kingdom.
However, I would urge the Chancellor not to take his eye off delivery. Successive Governments have had a poor history of delivering infrastructure projects on time and on budget. I therefore hope my right hon. Friend will consider complementing his very welcome changes to the Green Book and the new national infrastructure investment bank with a comprehensive cross-government delivery strategy.
While grants and support schemes have been consumed by our generation, they will be paid for by the next. That is why the Chancellor was absolutely right to level with the British people and to set out so candidly the pressure on the nation’s finances. While slamming the brakes on spending now would be self-defeating, the Government should be drawing up medium to long-term plans to manage debt. That is why I welcome many of the initiatives the Chancellor set out today, including his commitment to try to avoid borrowing for day-to-day spending. That commitment starts with new fiscal rules. The Chancellor should ensure that those rules are in place by year end, ideally alongside the next Budget and the comprehensive spending review. Having run four spending Departments and the Treasury, I am left in no doubt that a fiscal anchor is essential to control spending and to control debt.
Lastly, in the long term, putting the country back on a firm financial footing means that we need to build resilience against future disasters, as the Chancellor recognised in his Budget speech. Of course, not every disaster is a black swan and it would be foolish to prepare for crises we cannot foresee while we ignore those that we can. In terms of their potential impact on the future economy, few crises are more existential than climate change and declining biodiversity. That is why, as Chancellor, I set Professor Dasgupta very ambitious terms for his independent review on the economics of biodiversity. It makes clear that biodiversity is declining faster than at any other time in human history. If we continue to undermine the resilience of the natural world, we will introduce new sources of serious financial uncertainty, not least the increased spread of infectious diseases. While of course it will take time for the Treasury to digest Professor Dasgupta’s review, the Treasury should make a start on one of his most central recommendations: the need to recognise the value of the natural world in our national accounts. I urge the Chancellor to formally ask the UK Statistics Authority to review how that might be done. The Office for National Statistics is one of the most widely respected economic institutions in the world. If it can lead by example, it can make such a difference in trying to persuade other countries and financial institutions to do the same. We can lead on this, not least because of our chairmanship of the G7 and the COP26 conference this year.
This has been a long hard winter and we have all been hibernating for many months, but, as case rates fall and the vaccination programme continues at pace, the frost has begun to thaw and we are beginning to see the first signs of spring. The Government have been given a precious opportunity not just to resurrect our economy but to reinvigorate our entire country. I am in no doubt that the Chancellor will rise to the occasion with the energy that this moment requires and the sense of purpose that history demands. I am pleased to say that his Budget is the first step to doing just that.