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It is a great pleasure to follow Kirsty Blackman, although I did not agree with a great deal of what she said. None the less, Scots have played such a valuable role in shaping the foreign affairs of the United Kingdom over such a long, protracted period, and, through that, those of the fifth largest economy of the world and, through that, the affairs of the world. I trust and hope they will continue to do so for many, many years to come.
It will not come as a great surprise to you, Mr Deputy Speaker to learn that I am not much of a mountaineer, but I have been told by those who are that the most dangerous point in climbing any mountain is after one has made the stupendous effort and reached the summit, and one then begins the so-called “easy descent”. In fiscal terms, after nine long and difficult years, the House finds itself nearing the summit. The struggle to rein in public debt is an immense and ongoing undertaking, but, according to the OBR, public sector net debt as a percentage of GDP peaks in 2017-18—this coming year—and in every successive year thereafter it falls. Whatever the very real temptations, encouraged by some one-off factors this year, to slow further the pace on deficit reduction, we owe it to future generations to finish what we have begun.
We are now in our eighth year without a recession. Unlike others, Conservatives do not pretend that we can abolish the business cycle. It is critical to our domestic economy and to our standing in the world that we rebuild our financial firepower so that we can tackle anything that comes our way. The 2% of GDP on defence and 0.7% on overseas aid, to which my right hon. Friend the Foreign Secretary referred, give us great hard and, indeed, soft power, but our allies need to know that our commitments are real and sustainable.
It was frustrating to hear the passionate words of Emily Thornberry. She bemoans efficiencies being made in the public sector, without recognising, in this Budget debate, how critical it is that we bring down the deficit and show our ability to act credibly abroad and to achieve long-term sustainable finances.
With our national debt topping out at some £1.8 trillion, our annual interest payments also represent the entire combined annual spend on defence and policing, as the Chancellor pointed out. That is why the proper, sensible husbanding of our resources is critical. Despite the huge increase in the national debt, we are currently spending the same on interest as we were 15 years ago. With the base rate bound to rise—something on which I agree with the hon. Member for Aberdeen North—that is not sustainable in the long term. The risk is compounded by demographic shifts, notably the retirement of the baby-boomer generation. Demographic changes are projected to increase the cost of the state pension by 40% and to drive up health and social care spending.
I recognise the efforts being made to enhance our productivity with T-levels; the half billion of extra spending on technical education for 16 to 19-year-olds; and the £300 million commitment to support the brightest research talent, including 1,000 new PhD places in science, technology, engineering and maths. Combined with transport spending, that will help to narrow our relative productivity gap.
Education is the key. I have literally studied line by line the financial projections of some of the schools in my Horsham constituency, so I can assure the Chancellor that, after years of being relatively underfunded, they run an extremely efficient and tight ship, with staffing costs often accounting for 85% of total spend. Schools in historically well-funded areas have much to learn from schools such as those in West Sussex and could potentially do more than is currently being asked of them. I am grateful for the Secretary of State for Education’s commitment to look carefully, as part of the fair funding consultation, at the minimum funding required by schools to deliver the standards and curriculum that students, and we, have every right to expect.
National insurance contributions have been much discussed in the media. I welcome the Taylor review, and feel sure that later this year his report will outline many ways in which the Government can support the genuinely self-employed and clarify the position of the virtually employed. The self-employed population is higher than ever before and steadily growing. It is a simple matter of maths that such growth undermines the tax base on which future generations will rely.
The Government are introducing a package of measures: the changes to class 2 and class 4 NICs and the enhancement to pension provision for the self-employed are coming in over the next two years and cannot be viewed in isolation. Some 60% of those affected by the changes to NICs will gain. For those at the higher end of the earnings bracket, the impact is capped at around £600 a year, and the average annual additional contribution is £240 a year. Meanwhile, self-employed pension benefits will be enhanced by £1,800 a year—a benefit which, if purchased in the open market, would cost some £50,000.
Those measures will help to support the self-employed in retirement. They are progressive, while still ensuring that being self-employed has tax advantages. Of course we will support the entrepreneurs who will help to drive our country forward in the new post-BREXIT environment, but by helping them to meet the costs of retirement while also narrowing the potential reduction in our tax base, these are proportionate, long-term steps in a Budget focused on the long-term financial health of the country, which I commend.