As I stand here, men, women and children are huddled in basements across Ukraine seeking protection. Soldiers and citizens alike have taken up arms to defend their land and families. The sorrow we feel for their suffering, and the admiration for their bravery, is only matched by the gratitude we feel for the security in which we live—and what underpins that security is the strength of our economy. It gives us the ability to fund the armed forces we need to maintain our liberty, the resources we need to support our allies, the power to impose sanctions which cause severe economic costs, and the flexibility to support businesses and individuals through crises as they emerge. We should be in no doubt: behind Putin’s invasion is a dangerous calculation that democracies are divided, politically weak and economically insecure, and incapable of making tough long-term decisions to strengthen our economies. This calculation is mistaken. What the authoritarian mind perceives as division we know are the passionate disagreements at the heart of our living, breathing democracy. What they see as chaos we know is the freedom to be dynamic and innovative. What they call the inherent weakness of open societies and free economies we know is the source of our strength.
We will confront this challenge to our values not just in the arms and resources we send to Ukraine, but in strengthening our economy here at home. When I talk about security, yes, I mean responding to the war in Ukraine, but I also mean the security of a faster growing economy, the security of more resilient public finances, and security for working families as we help with the cost of living.
Today’s statement builds a stronger, more secure economy for the United Kingdom. We have a moral responsibility to use our economic strength to support Ukraine and work with international partners to impose severe costs on Putin’s regime. We are: supplying military aid to help Ukraine defend its borders; providing around £400 million in economic and humanitarian aid, as well as up to $0.5 billion in multilateral financial guarantees; launching the new Homes for Ukraine scheme to make sure that those forced to flee have a route to safety here in the UK; and imposing sanctions of unprecedented scale and scope. We have: sanctioned more than 1,000 individuals, entities and subsidiaries; frozen the assets of major Russian banks; imposed punitive tariffs on key products; restricted Russia’s access to sterling clearing, to insurance, to the UK’s capital markets and to SWIFT; and we have targeted the Russian central bank, too.
Be in no doubt, these sanctions, co-ordinated with our allies, are working. The Russian rouble plummeted to record lows. The Moscow stock exchange has been largely suspended for a month, and the Central Bank of Russia has been forced to more than double interest rates to 20%. We warned that an aggressive, unprovoked invasion would be met with severe economic costs, and it has. I am proud to say, as the whole House will say: we stand with Ukraine.
But the actions we have taken to sanction Putin’s regime are not cost free for us at home. The invasion of Ukraine presents a risk to our recovery, as it does to countries around the world. We came into this crisis with our economy growing faster than expected, with the UK having the highest growth in the G7 last year. But the Office for Budget Responsibility has said specifically:
“There is unusually high uncertainty around the outlook”.
It is too early to know the full impact of the Ukraine war on the UK economy, but its initial view, combined with high global inflation and continuing supply chain pressures, means that the OBR now forecasts growth this year of 3.8%. The OBR then expects the economy to grow by 1.8% in 2023, and 2.1%, 1.8% and 1.7% in the following three years. The House will take comfort that the lower growth outlook has not affected our strong jobs performance. Unemployment is now forecast to be lower in every year of the forecast. It is already at 3.9%—back to the low levels we saw before the pandemic.
But the war’s most significant impact domestically is on the cost of living. Covid and global factors meant goods and energy prices were already high. Statistics published this morning show that inflation in February was 6.2%. That is lower than the US and broadly in line with the euro area. Disruptions to global supply chains and energy markets, combined with the economic response to Putin’s aggression, mean that the OBR expects it to rise further, averaging 7.4% this year.
As I said last month, the Government will support the British people as they deal with the rising costs of energy. People should know that we will stand by them, as we have throughout the last two years. That is why we have announced a £9 billion plan to help around 28 million households pay around half the April increase in the energy price cap. People should be reassured that the energy price cap will protect their energy bills between now and the autumn, but I want to help people now, so I am announcing three immediate measures.
First, I am going to help motorists. Today I can announce that for only the second time in 20 years, fuel duty will be cut. Not by 1p, not even by 2p, but by 5p per litre—the biggest cut to all fuel duty rates ever. While some have called for the cut to last until August, I have decided it will be in place until March next year—a full 12 months. Together with the freeze, it is a tax cut this year for hard-working families and businesses worth over £5 billion, and it will take effect from 6 pm tonight.
Secondly, as energy costs rise, we know that energy efficiency will make a big difference to bills, but if homeowners want to install energy-saving materials, at the moment only some items qualify for 5% VAT relief and there are complex rules about who is eligible. The relief used to be more generous but from 2019 the European Court of Justice required us to restrict its eligibility.
Thanks to Brexit, we are no longer constrained by EU law, so I can announce that for the next five years, homeowners having materials such as solar panels, heat pumps and insulation installed will no longer pay 5% VAT; they will pay zero. We will also reverse the EU’s decision to take wind and water turbines out of scope and zero rate them as well—and we will abolish all the red tape imposed on us by the EU. A family having a solar panel set installed will see tax savings worth £1,000 and savings on their energy bill of over £300 per year.
This policy highlights the deficiencies in the Northern Ireland protocol. We will not immediately be able to apply it to Northern Ireland, but we will be raising it with the Commission as a matter of urgency, and I want to reassure Members from Northern Ireland that the Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide. The Prime Minister will bring forward further measures to reinforce our long-term energy security in the coming weeks.
Finally, I want to do more to help our most vulnerable households with rising costs. They need targeted support, so I am doubling the household support fund to £1 billion with £500 million of new funding. Local authorities are best placed to help those in need in their local areas, and they will receive this funding from April.
We can only afford to provide this extra support because of our stronger economy and the tough but responsible decisions we have taken to rebuild our fiscal resilience. Today’s forecasts confirm that even after the measures I am announcing today, we are meeting all our fiscal rules. Underlying debt is expected to fall steadily from 83.5% of GDP in 2022-23 to 79.8% in 2026-27. Borrowing as a percentage of GDP is 5.4% this year, 3.9% next year, and then 1.9%, 1.3%, 1.2% and 1.1% in the following years.
At a time when the OBR has said that our fiscal headroom could be
“wiped out by relatively small changes to the economic outlook,” it is right that the central fiscal judgement I am making today is to meet our fiscal rules with a margin of safety. The OBR has not accounted for the full impacts of the war in Ukraine, and we should be prepared for the economy and public finances to worsen, potentially significantly.
The cost of borrowing is continuing to rise. In the next financial year, we are forecast to spend £83 billion on debt interest—the highest on record and almost four times the amount we spent last year. That is why we have already taken difficult decisions with the public finances, and that is why we will continue to weigh carefully calls for additional public spending. More borrowing is not cost or risk free. I said it last autumn, and I say it again today: borrowing down; debt down—only the Conservatives can be trusted with taxpayers’ money.
Our response to the immediate crisis in Ukraine has been unwavering, but we must be equally bold in response to the deeper and more fundamental challenge Putin poses to our values. We must show the world that freedom and democracy remain the best route to peace, prosperity and happiness. We will do so by strengthening our economy here at home. To that end, we are helping families with the cost of living, creating the conditions for accelerated growth and productivity, and making sure that the proceeds of growth are shared fairly. That is not the work of any one statement, but it does begin today, and with one of our most important levers: the tax system.
I told the House last autumn that my overarching ambition was to reduce taxes by the end of this Parliament, and we will do so in a way that is responsible and sustainable. Today, I am publishing a tax plan. We will take a principled approach to cutting taxes: maintaining space against our fiscal rules, as I have done today; continuing to be disciplined, with the first call on any extra resources being lower taxes, not higher spending; and, of course, carefully considering the broader macroeconomic outlook.
With those principles in mind, our new tax plan will build a stronger economy by reducing and reforming taxes over this Parliament, in three ways. First, we will help families with the cost of living; secondly, we will create the conditions for higher growth; and thirdly, we will share the proceeds of growth fairly, ensuring people are left with more of their own money. Let me take each in turn.
There is now a dedicated funding source for the country’s top priority, the NHS and social care, providing funding over the long term as demand grows, with every penny going straight to health and care. If it goes, then so does the funding, and that funding is needed now, especially as my right hon. Friend the Health Secretary’s plans to reform healthcare will ensure every pound of taxpayers’ money is well spent. When I said the Conservatives were the party of public services—the party of the NHS—I did not just mean when it was easy; it is a total commitment.
So it is right that the health and care levy stays, but a long-term funding solution for the NHS and social care is not incompatible with reducing taxes on working families. Over the last decade, it has been a Conservative mission to promote tax cuts for working people and simplify the system. That is why Conservative-led Governments raised the income tax personal allowance from £6,500 in 2010 to the new level of £12,570. But the equivalent thresholds in national insurance, which define how much people can earn NICs-free, are still around £3,000 less.
The Prime Minister pledged in the 2019 election that we would increase those thresholds. We made a big step towards that goal in my first Budget in 2020, increasing the national insurance threshold to £9,500. Today, we take the next step. Our current plan is to increase the NICs threshold this year by £300, but I am not going to do that. I am going to increase it by the full £3,000, delivering our promise to fully equalise the NICs and income tax thresholds—and not incrementally over many years, but in one go this year. From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or national insurance.
That is a £6 billion personal tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year, the largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade. The Institute for Fiscal Studies has called it
“the best way to help low and middle earners through the tax system”.
It creates what the Centre for Policy Studies has called a “universal working income”. It is a tax cut that rewards work, and around 70% of all workers will have their taxes cut by more than the amount they will pay through the new levy, once again showing that it is this Conservative Government delivering for hard-working families and helping with the cost of living.
The first part of our tax plan for a stronger economy is to support families with the cost of living, but as I set out in last month’s Mais lecture, to lift our growth and productivity, we need the private sector to train more, invest more and innovate more. People, capital, ideas: that is how we will create a new culture of enterprise—the second part of our tax plan. The plan sets out tax-cutting options on business investment and innovation, with final decisions to be announced in the autumn Budget, but these are significant and complex questions, so we will work with businesses over the summer to get the answers right. Let me explain to the House the direction of travel.
First, on people, we lag behind international peers on adult technical skills. Just 18% of 25 to 64-year-olds hold vocational qualifications, which is a third lower than the OECD average, and UK employers spend just half the European average on training their employees. We will consider whether the current tax system, including the operation of the apprenticeship levy, is doing enough to incentivise businesses to invest in the right kinds of training.
Secondly, on ideas, over the last 50 years, innovation drove around half the UK’s productivity growth, but since the financial crisis, the rate of increase has slowed more than in other countries. Our lower rate of innovation explains almost all our productivity gap with the United States. Right now, we know that the amount that businesses spend on research and development as a percentage of GDP is less than half the OECD average, and that is despite us spending more on tax reliefs than almost every other country. Something is not working, so we will reform R&D tax credits so that they are effective and better value for money; we will expand the generosity of the reliefs so that they include data, cloud computing and pure maths; and we will consider, in the autumn, whether to make the R&D expenditure credit more generous.
Thirdly, on capital, weak private sector investment is a long-standing cause of our productivity gap internationally: capital investment by UK businesses is considerably lower than the OECD average of 14%, and it accounts for fully half our productivity gap with France and Germany. Once the super deduction ends next year, our overall tax treatment for capital investment will be far less generous than that of other advanced economies. We are going to fix that. In the autumn Budget, we will cut the tax rates on business investment, and I look forward to discussing the best ways to do that with businesses. People, capital, ideas—three priorities for business tax cuts this autumn.
But I want to help smaller businesses right now, so let me remind the House of our plan. Our business rates discount will take effect in April for retail, hospitality and leisure businesses. They will get a 50% discount on their business rates bill, up to £110,000. A typical pub will save £5,000. That is a tax cut for hundreds of thousands of small businesses, worth £1.7 billion, taking effect in just a week’s time. Our Help to Grow Management scheme offers businesses mini-MBAs, 90% funded by Government—a benefit worth several thousand pounds—and Help to Grow Digital gives businesses a 50% discount on buying new software, up to £5,000. We have also increased the annual investment allowance to £1 million, so that small and medium-sized businesses will feel the benefit of full expensing.
I want to respond to the specific calls from small businesses with one further announcement today. The employment allowance cuts small businesses’ tax bills, making it cheaper to employ workers. In my first Budget two years ago, I increased that allowance. Today, I am going further. From April, the employment allowance will increase to £5,000. That is a new tax cut worth up to £1,000 for half a million small businesses, starting in just two weeks’ time. Future tax cuts on business investment and innovation; a business rates discount worth £1.7 billion; Help to Grow schemes worth thousands of pounds per business; an annual investment allowance worth up to £1 million; and a new tax cut on the costs of employment, worth £1,000 per company—once again, it is this Conservative Government delivering for British business.
The tax plan I have announced today will help people and businesses to deal with rising costs, and will help raise the future growth rate of this country, but we want the proceeds of growth shared fairly—the third objective of our tax plan. The knowledge that people can keep more of what they earn is a powerful incentive for people to work hard. It means greater economic security, and we know that individuals spend their money better than Governments do. We have already announced today the equalisation of personal tax thresholds, giving over 30 million workers a tax cut worth over £330, and over time I want to go further; but tax cuts must be paid for, must be prioritised, and must fit the economic circumstances of the time. A clear goal for Conservative Chancellors, and even some Labour ones, has been to cut income tax. The fact that this has happened only twice in 20 years tells us how hard it is to do. Covid and the war in Ukraine have only added to the difficulty of achieving this by the end of this Parliament. I am sure that all Members of the House recognise and understand those challenges. It would clearly be irresponsible to meet that ambition this year, yet I refuse to let it wither and drift.
By 2024, the Office for Budget Responsibility currently expects inflation to be back under control, debt to be falling sustainably, and the economy to be growing. Our fiscal rules are met with a clear margin of safety, so my final announcement today is this: I can confirm that before the end of this Parliament, in 2024, for the first time in 16 years, the basic rate of income tax will be cut from 20p to 19p in the pound—a tax cut for workers, for pensioners, and for savers, and a £5 billion tax cut for 30 million people. Let me be clear with the House: it is fully costed and fully paid for in the plans announced today. Last year, I told the House that I would cut taxes for hard-working families, but I would do so in a responsible and sustainable way, and today I am delivering on that promise.
Cutting taxes is not easy. it requires hard work, prioritisation, and willingness to make difficult and often unpopular arguments elsewhere. It is only because this Government have been prepared to make difficult but responsible choices in order to fix our public finances that I can stand here and tell this House not only that taxes are being cut, but that debt is also falling while public spending is increasing. That does not happen by accident. We can deliver for the British people today and into the future because, unlike the Labour party, we have a plan—a plan that reforms and improves public services, a plan to grow our economy, a plan to level up across the United Kingdom, a plan that helps families with the cost of living and, yes, a tax plan that cuts taxes for working families by over £330. It cuts taxes on fuel by 5p per litre. It cuts taxes on business and, yes, for the for the first time in a long time, it cuts income tax. Let me end by simply saying this: my tax plan delivers the biggest net cut to personal taxes in over a quarter of a century, and I commend it to the House.
Thank you, Mr Speaker. Today was the day that the Chancellor could have put a windfall tax on oil and gas producers to provide real help for families, but he did not. Today was the day he could have set out a proper plan to support businesses and create good jobs, but he did not. Today was the day that he could properly have scrapped his national insurance hike, but he did not. Labour said it was the wrong tax at the wrong time, and the wrong choice; and today the Chancellor has finally admitted that he got that one wrong. Inflation is at its highest level for 30 years, and rising. Energy prices are at record highs, and people are worried sick. For all his words, it is clear that the Chancellor does not understand the scale of the challenge. He talks about providing security for working families, but his choices are making the cost of living crisis worse, not better.
The situation following Putin’s criminal assault on Ukraine remains gravely serious. Just one month after the invasion, so much has changed, and there will be repercussions for years to come. The Chancellor has today failed to explain why he chose to sign off on a reduction in our country’s armed forces last October. Will he confirm whether the Government’s target Army size is still being reduced by 10,000 troops? I say this to the Chancellor: Labour will support whatever is needed on defence and security, in order to keep our country safe.
The tremors following Putin’s aggression will impact Britain, including economically, but the cost of living crisis predates Putin’s attack on Ukraine. In October, inflation was already forecast to be double the Bank of England’s target, yet the Prime Minister said that fears of inflation were unfounded. Today we learn that inflation has reached 6.2%, and it is expected to go higher in the coming months. People are rightly looking to their Government to help them weather this storm. Labour will support sensible measures to ease the pressure, but what the Chancellor has announced today says everything we need to know about his priorities.
The cost of living crisis is hitting people particularly hard because incomes have been squeezed during the past 12 years of Conservative Governments. Ordinary families, disabled people, and pensioners are facing difficult choices. Mums are skipping meals so that their children do not. Families are struggling to buy new school shoes and uniforms for their children. Older people are hesitating to put the heating on, because they are worried about the cost.
At the weekend, the Chancellor was asked about fuel poverty, and he did not even know the numbers. That is shameful, because when Martin Lewis predicts that 10 million people could be pushed into fuel poverty, the Chancellor should sit up and listen. We know that pensions and social security will not keep up with inflation, and pensioners and those on social security will be getting a real-terms cut to their income. What analysis has the Chancellor done on the impact of benefits being uprated by less than inflation? How many more children and pensioners will drift into poverty because of the choices of this Government?
Who does the Chancellor prioritise? He continues to defend the record profits of oil and gas producers, who themselves admit that they have more money than they know what to do with. BP describes this crisis as a “cash machine” for it, but it is British people who are paying out. It is deeply regrettable that the SNP has joined the Tories in wanting to shield oil and gas producers from Labour’s progressive measures. When I set out Labour’s plans for a windfall tax in January, we estimated that it would have raised £1.2 billion. Because of the continued rise in global oil and gas prices, it would today raise more than £3 billion. That money could be used to help families, pensioners and businesses, with a cut to VAT being a real Brexit dividend that would help working families and pensioners across our country. A targeted warm home discount would see families and pensioners on the lowest and modest incomes supported by £600.
Today the Chancellor comes along, after 12 years of failure on energy efficiency, and announces a VAT cut on building materials. That is wholly inadequate. A proper energy efficient scheme, such as that set out by Labour, could cut bills by £400 for people from next year. The silence from the Chancellor about our energy intensive manufacturing industries is appalling. At this time of national crisis, people and businesses need a Government who are on their side.
The Chancellor spoke of difficult choices, and I agree. There are always choices to be made, such as who to tax and who to shield. Despite his reluctant measures, he is still taking money out of people’s purses and wallets with an increase in national insurance contributions. The changes he is making today prompt a question about why he embarked on them in the first place, despite warnings from the Labour party and from many, many others. It is one thing for the Prime Minister and Chancellor to disagree with each other, but the centrepiece of the Chancellor’s statement today is based on a disagreement with himself. For all his tax rises for millions in the middle, where is the increased tax contribution from the wealthiest in society? A landlord with a large number of properties will not pay a penny more in taxes, but their tenants will. Someone with significant income from buying and selling stocks and shares will not be paying any more in tax, but those people powering our economy will be. The Chancellor has made the wrong choices.
The Chancellor says that we cannot help everyone, which is absolutely true. But who has he been helping out? Those who have been swindling the taxpayer. The Chancellor left open the vaults for widespread waste, crony contracts, and a frenzy of fraud. It was, as his former Tory Treasury Minister put it,
“happy days if you were a crook.”
Seven billion items of personal protective equipment—not usable—are now being burned. Taxpayers’ money is literally going up in smoke, and £3.5 billion worth of contracts were awarded to friends, donors and pub landlords. And it gets worse. The Chancellor has been signing cheques to fraudsters, including organised criminals and drug dealers. Let us put the Chancellor’s fraud failure in context. He has lost a staggering £11.8 billion of public money to fraud. That is twice the amount that a previous Conservative Government lost on Black Wednesday. As a result of—let us face it—that jaw-dropping incompetence, the Conservatives have been funding crime instead of fighting it. Now the Chancellor has the audacity to come to British taxpayers to ask them to pay more to fill his black hole. There can be no cover-up to hide political embarrassments, so let us call in the National Crime Agency to investigate. We need answers and people to be held to account, because—let us be clear—taxpayers want their money back.
The truth is that people can no longer afford the Conservatives. Working families cannot, pensioners cannot and businesses cannot. The weak growth forecasts we have seen today should be flashing red on the Chancellor’s desk. The Chancellor said, in his statement, that the work starts today. Is he serious? The Conservatives have been in government for 12 years, not 12 hours. What has taken them so long? Since his party entered government, the UK has experienced the biggest downgrade in growth of any major economy. Under the last Labour Government, economic growth was 2.1% a year. In the last 12 years under the Conservatives, it has averaged 1.5%. Now we know that growth has been downgraded this year too. Growth is essential for funding our public services, keeping taxes under control and keeping a handle on public finances too. That is why Labour has announced a tough set of fiscal rules to get our debt and our deficit down. The truth is that, because of the Government’s failure to get the economy growing, the Chancellor has had to put up taxes on families and businesses a staggering 15 times.
The Chancellor has raised taxes more in the last two years than any previous Chancellor in the last 50. He says it is all down to the pandemic, but the truth is that the Conservatives have become the party of high taxation because they are the party of low growth. I understand that the Chancellor has a portrait of Nigel Lawson above his desk. Well, today we have an energy price crisis, record prices at the pumps and inflation is back. The truth is that he is not Nigel Lawson: he is Ted Heath with an Instagram account.
Labour would get the economy firing on all cylinders, ensuring that we buy, make and sell more in Britain, scrapping business rates and replacing them with a fairer system fit for the 21st century, something that small and high street businesses are crying out for, and the Chancellor mentioned not at all in his statement today. Labour would make a climate investment pledge to decarbonise the economy, create good jobs in every part of Britain and strengthen our energy security too. Businesses are seeing unprecedented increases in their costs right now, but all we hear from the Chancellor today is the promise of jam tomorrow, not the support that is needed now. Today’s statement lacks the long-term plan for productivity, skills and growth. Where is it?
I cannot help but feel that in both the Chancellor’s recent Mais lecture and his statement today we are presented with increasingly incredible claims. Perhaps the Chancellor has been taking inspiration from the characters in Alice in Wonderland or should I say, Alice in Sunakland? Because nothing there is quite as it seems. It is the sort of place where a Chancellor celebrates giving people £200 to help them with their spiralling energy bills, before explaining that he needs it all back. In Sunakland, the Chancellor proclaims, “I believe in lower taxes”, at the same time as hiking Alice’s national insurance contributions. So Alice asks the Chancellor, “When did lower taxes mean higher taxes? Has down become the new up?” The Chancellor follows Humpty Dumpty’s advice and says,
“When I use a word…it means just what I choose it to mean—neither more nor less.”
Alice knows that under the Conservatives taxes are at their highest level in decades, as a result of the policies of this very same Chancellor. In fact, he was the only G7 finance Minister to raise taxes on working people during this crucial year of recovery. Curiouser and curiouser. As Alice climbs out of the rabbit hole to leave Sunakland, she recalls the words of the White Rabbit and concludes that perhaps the Chancellor’s reality is just different from hers.
The actual reality is that the Chancellor’s failure to back a windfall tax, and his stubborn desire to pursue a national insurance tax rise, are the wrong choices. In eight days’ time, people’s energy bills will rise by 54%. Two weeks today, the Chancellor’s latest tax hike will start hitting working people and their employers. His national insurance tax rise was a bad idea last September, and he has admitted that it is an even worse one today. The Chancellor is making an historic mistake. Today was the day to scrap the tax rise on jobs. Today was the day to bring forward a windfall tax. Today was the day for the Chancellor to set out a plan to support British businesses. But on the basis of the statement today and the misguided choices of the Chancellor, families and businesses will endure significant hardship. The Chancellor has failed to appreciate the scale of the challenge that we face and, yet again, he is making the wrong choices for our country.
I thank Rachel Reeves for her reply. She raised several points that I will come to in due course, but listening to her speech it sounded as though covid, and the huge damage it did to our economy and public finances, had never actually happened. It sounded as though we did not have to introduce furlough, support businesses and provide emergency funding to schools, councils and, yes, the NHS. While her party supported all those policies at the time, it now seems unwilling to pay for them. There is a pattern there. Labour is always happy to spend taxpayers’ money, but not to take care of it.
On some of the hon. Lady’s specific points, it was telling that she opened her statement by yet again calling for a windfall tax. On this side of the House, we want to encourage more investment in the North sea, and we want more domestic energy and more jobs for the UK. A windfall tax would put that off, which is why the Prime Minister will bring forward a comprehensive energy security strategy in the coming weeks to address that.
The hon. Lady talked about business rates and supporting businesses. In just a week’s time, small businesses in the retail, hospitality and leisure sector will get a 50% discount on their business rates bill. It is the biggest cut to business rates outside of coronavirus since the business rate system was created—£1.7 billion. I know that she has said that she would like to abolish business rates. She also says she has some fiscal rules, but I have not quite figured out how she will pay for the £25 billion of tax cuts that that would involve—I look forward to hearing it. She talked about defence spending. It is all very well to talk about the size of the Army. At least Labour now seems to think that we should actually have an Army, which is a welcome conversion. It is because of how seriously we take the nation’s security that in 2020, when we had decided to do short-term spending settlements for most Departments, we singled out one Department for special treatment and gave it a four-year settlement in advance of everyone else—that was the Ministry of Defence. In that settlement it received £24 billion of new cash, the largest uplift to defence spending since the end of the cold war, ensuring that we are not just the second-largest spender in Europe in NATO but the fifth largest in the world, a record of which we on the Conservative Benches are very proud.
The hon. Lady talked about pensions. Again, thanks to the actions of Conservative-led Governments since 2010, we put in place the triple lock—not something the Labour party ever did when it was in power. It means that pensions are now £2,300 higher than they were in 2010 and £700 more than if the triple lock had not been in existence during that time. I am pleased to say that the state pension, relative to earnings, is now at its highest level in over 30 years. This party will always be on the side of pensioners.
Turning briefly to the hon. Lady’s comments on tax—fair enough, it is a short time in which to have to respond, but I am not sure if she fully understood the implications of the tax cut announced today. The increase in the national insurance thresholds to equalise them fully is a £6 billion tax cut for 30 million UK workers. It is the largest increase in thresholds ever, the biggest personal tax cut in a decade, and it is worth £330 for those workers. I do not know whether she realised this, because she talked about the levy and making sure that we direct our policy at those who need our help, but there is a reason the independent Institute for Fiscal Studies called this increase the best way to help low and middle earners through the tax system: 70% of workers will pay less tax, even accounting for the levy. It is more generous than the policy she is advocating. Combined with the other tax cuts we have announced today, this plan represents the biggest net cut to personal taxes in a quarter of a century.
Let me conclude by saying this. The plan we have announced today has only been possible because we have taken tough decisions with the public finances. They have not always necessarily been popular, but they always been responsible and always honest. It is two years to the day that the country first entered lockdown and suffered the biggest economic shock in over 300 years. An unprecedented collective national effort was undertaken and two years later this Government have not only fixed the public finances but people are back in jobs, debt is falling and taxes are now being cut. No Government can get every call right. We learn from our mistakes and we strive to improve. But even if they will not admit it, Labour Members will recognise this day as an achievement that we all can celebrate. I have said it before to the Labour party and I will say it again: there is a fine line between reasonable criticism and political opportunism, and in my experience the British people can always tell the difference.
I think the shadow Chancellor’s remarks will be best remembered for pointing out that the Conservatives won the 2010 election and the 2019 election. It is probably a very good thing for the country that we did.
The Chancellor has met the major obligations on public spending which helps the economy to grow and which allows for more jobs and more Government revenue. As he pointed out just now, the changes to national insurance do the things that Martin Lewis, as well as the institutes, would applaud. Those three sources of support—he has my support, too—are very welcome.
May I ask the Chancellor to remember that pensioners do not just have the state pension? Many have fixed pensions on top and getting inflation down as fast as possible is vital to them. They cannot go for a bigger pay increase if they are not at work.
Finally, some areas of public spending do not make it easy to have efficiencies. If teachers’ salaries make up most of the cost of education, it is very important to ensure that we do not squeeze education and wreck our schools and our pupils’ future.
On cladding, when amendments to the Building Safety Bill come from the other place, can my right hon. Friend please not keep his purse completely shut? If money needs to be advanced so that homes can be safe and saleable, will he please consider that openly?
I thank my hon. Friend for his support and he is right to highlight some of the independent commentators who have supported the policies announced today. I will touch on one of the things he said, which was about education spending. I agree that it is vital for our country’s future that we support our teachers and children. That is why the Prime Minister announced, in total, £5 billion of catch-up funding to help children to recover the learning they lost during the pandemic, why we are raising per pupil cash amounts by £1,500 over the Parliament, and why we are raising teachers’ starting salaries to £30,000, as our manifesto committed to doing.
This tax plan that the Chancellor has announced is very thin. It is lightweight and it is superficial. It is exactly what we have come to expect from this Chancellor. What we heard today from the Chancellor was not enough. It was utterly detached from the needs of our constituents up and down these islands.
This cost of living crisis has been a decade in the making, layer upon layer: austerity, which stripped back public services and punished people through brutal social security cuts; Brexit, which has driven away skilled workers and increased costs for businesses and individuals; covid, where we saw public money splurged in its billions on crony contracts while some people were entirely excluded from support, and now those who got support under the self-employment income support scheme are expected to pay tax on it, just to add insult to injury; and now home energy costs, which were already soaring before the increase in hostilities in Ukraine, are forcing households to the brink. Inflation running at 6.2%, its highest rate in 30 years, is hitting the poorest the hardest. Food prices are rising, especially for the basics, and foodbanks are seeing record numbers of people coming through their doors. The Chancellor says he is going to increase the household support fund, but is that it? Is that it? People are desperate and they need a good deal more help than that.
We know that sanctioning Russia is not cost-free, but the Tories cannot use that as a sleight of hand to distract from the layers of pain that lie beneath the current crisis. Each of those layers has seen political choices and opportunities for change squandered by this UK Tory Government and their predecessors. We see it again today. This Chancellor has increased taxes more in two years than Gordon Brown did in 10, while people are struggling. The Treasury Committee issued a report this morning, which states that the UK Government
“must take further action to support UK households, in particular those on lower incomes to manage the subsequent rise in energy and other costs.”
The Chancellor’s announcement on national insurance contributions is welcome. We have been calling for it for years. It is not something that the Chancellor should have brought today; it is something he should have brought to the House a long time ago. Hiking national insurance is a tax on individuals, but it is also a tax on jobs. Employers are already facing increased costs in energy and materials, and many businesses will not be able to bear such pressure. Small and medium-sized enterprises in particular need more support. Hospitality and tourism have struggled through the pandemic and now the Chancellor is moving VAT from 12.5% back to 20% at a time when consumers have much less money in their pockets. We on the SNP Benches called for the cut before the Chancellor brought it in, and we support UKHospitality’s “VAT’s enough” campaign.
Universal credit has been cut by £20 a week at a time when people need it the most. Carly, a single mum, spoke at the Gingerbread reception on Monday and told us all how important it was that that money was there, because things are tighter than they have ever been. There is no further support for people on legacy benefits and disabled people who often face higher energy costs and have no option on those costs. A taper has been put in place that helps only people who are in work. Benefits are just not going far enough, as they do not keep pace with inflation, and the welfare cap punishes people for their circumstances. There has been an end to the triple lock on pensions and there is nothing for the WASPI women, who are campaigning outside today, who are still losing out on what should have rightfully been theirs.
The Scottish Government, by contrast, are doing what they can within their limited budget, to support people: uprating the eight Scottish social security benefits we control by 6% and increasing the Scottish child payment to £20 a week—a lifeline to families. This UK Government should be doing the same. Taking 5p off fuel is something, but it does not help those who are paying for trains and buses. The Chancellor cut air passenger duty during COP26 but he still offers nothing for the millions of commuters who use public transport every day.
I do not know if the Chancellor has ever had a prepayment meter—I do not think they fit them for swimming pools. However, 4.5 million people—[Interruption.] Hon. Members say it is “pathetic”, but 4.5 million people across these islands experience the stress and despair of watching the money on their prepayment meters run out. Prepayment customers already pay higher bills than those on direct debit and they may struggle even to access the Chancellor’s “heat now, pay later” loan—if it does not automatically go to pay back the debts on that meter. The Fuel Bank Foundation, which provides top-ups to those on prepayment meters who are struggling, has seen a 75% increase in demand already. That was before the prices that we are seeing now.
There was nothing either from the Chancellor for customers using heating oil or LPG, who must fill up by the tank. Those on heating oil have seen their tank costs—for 500 litres in a tank—go from £250 to between £600 and £900. They have no choice about how to get that energy. Where are they in the Chancellor’s priorities today?
Nuclear energy—which the Government touted an awful lot before today and which, interestingly, was missing from the Chancellor’s statement—is not the answer to reducing people’s bills. It is slow and eye-wateringly expensive. We know from the Nuclear Energy (Financing) Bill that the Government’s proposals will add £63 billion to people’s energy bills. They should instead fix the long-standing inequality of grid charging, invest more in onshore and offshore wind, tidal and solar, and bring carbon capture and storage in the north-east of Scotland off their reserve bench. They should make it a real net zero transition worthy of the name.
The Government could invest in a national programme of heat pumps, retrofitting and insulating. I was glad to see the Chancellor’s announcement on home energy efficiency and repairs, because we have called for that for a long time. However, this paltry announcement does not go nearly far enough and does not even meet the significant home energy interventions that Scotland is making.
The Chancellor has choices. He could have looked at a windfall tax on profits. The shadow Chancellor, Rachel Reeves, was right about oil and gas, but why should Amazon, Serco and Netflix not have to pay up for their mega-profits during the pandemic?
The Chancellor has had a windfall of his own. Tax revenues are higher than expected and the deficit is £30 billion lower than planned. If we look at the OBR report that came out today, we see that VAT has gone up by £21.7 billion—that is £21.7 billion extra in the Chancellor’s coffers—and that the amount from self-assessment is up by £5.2 billion more than was forecast late last year. That could have been used to cushion the cost of living crisis and to invest in renewables and wean us off fossil fuel.
MoneySavingExpert’s Martin Lewis was stark in his warning on Sunday morning:
“As the ‘Money Saving Expert’ who has been known for this, I am virtually out of tools to help people now.”
He said, while watching this statement, that his “head …sunk”. There is no help for people on energy.
In conclusion, people face a crisis that the Chancellor could have done more to avert. In so many ways, he has made the choice not to act. There is nothing for Scotland in his announcement today. We on the Scottish National party Benches look forward to the day when Scotland has a Government with the full fiscal powers to make sure that all our people can have a decent standard of living, and that no child goes to bed with an empty tummy in a cold home.
The hon. Lady said that there is nothing for Scotland in this statement, but maybe she missed the part about the UK-wide fuel duty cut, which, together with the freeze, will save a typical driver £100 and a typical van driver £200 this year. Perhaps she missed the part about the largest increase to personal tax thresholds ever. That £6 billion tax cut will help 2.4 million people in Scotland, starting in just a few months’ time. Indeed, 75,000 businesses will benefit from the employment allowance—again, that £1,000 tax cut for Scottish businesses will come in very shortly.
The hon. Lady mentioned that Scotland, as ever, wants more fiscal autonomy. Scotland already has a considerable degree of fiscal autonomy, and I did not hear whether the SNP will deliver the same income tax cut for Scottish taxpayers that the UK Government will deliver—as paid for in these numbers—in 2024. I look forward to hearing from her that the Scottish Government will cut taxes for their taxpayers with the powers and funding that they will get.
I always want to make sure that we look after the most vulnerable in our society. The hon. Lady mentioned a single mother she knew. I am pleased with and proud, in fact, of this Government’s actions, because by increasing the national living wage in April by 6.6%, by cutting the UC taper rate and through the increase in personal thresholds today, we have ensured—if we take all tax and welfare changes together—that a single mother of two children working full time on the national living wage will now be £1,600 better off.
The hon. Lady made a point about businesses. We are providing a business rate discount for business, and Scotland has received a Barnett share of that money. A business rate discount will come in here for retail, hospitality and leisure businesses in just a few weeks, and I know that the Scottish Government will have the resources to do the same thing.
Lastly, the hon. Lady made a comment about prepayment meters. I am acutely aware that millions of families rely on prepayment meters. That is why, when we designed the energy support package that we announced in February, we had particular care for those people to ensure that they would receive the same benefit. Indeed, we made sure that 40% of them will automatically get the £200 rebate in October. For the remainder, we are working with BEIS and the industry to ensure that all those people get the same benefit as well. They will receive a voucher, a cheque in the post or something called a “special access message” on their phone, by SMS, so that when they go to one of the retailers that they use to top up their meter, they will also benefit from our actions, because this Conservative Government is on the side of everyone.
I call the Chair of the Treasury Committee, Mel Stride.
I broadly welcome my right hon. Friend’s statement. Of course, the devil will always be in the detail and we look forward to seeing him at the Treasury Committee next week, along with the OBR and various economists, including from the IFS, which he mentioned.
I welcome the cut to fuel duty. That will help motorists and consumers and be important for businesses. The VAT reduction relating to energy efficiency and solar is very important in the context of the sanctions on Russia and energy self-sufficiency, where we can achieve it. The hardship fund will be a very targeted measure, which is important, and small businesses will be delighted to have heard about the increase in the employment allowance to £5,000, which was a key ask of the Federation of Small Businesses.
Along with many others in the House, I would have liked the NI increases for next year to have been scrapped in their entirety. However, the threshold increase that my right hon. Friend announced today has been very significant—far more significant than I imagined it would be.
This is the big question that my right hon. Friend will be asked: in the context of the fiscal targets, which I think we all agree that we need to meet, has he used enough of the headroom now as opposed to having that as a hedge against future uncertainties, to which he alluded and which are very real, in terms of inflation, interest rates and the effect on the cost of Government borrowing? Will he say a bit more about the fiscal headroom—he will have had the advantage of seeing the OBR figures, which I have not—and his assessment of that, particularly around the deficit target?
On growth, my right hon. Friend pointed out the OBR downgrades, which are not surprising in a high inflationary environment, and the dampening effect that they will have on consumer demand. I was very pleased that he referred to his Mais lecture, because it will be essential for us to focus on innovation, people and driving up capital investment.
My right hon. Friend referred, I think, to a consultation on how to improve capital investment, on which we lag behind our G7 competitors. Will he tell us more about the timeline for that consultation and when he expects to be able to provide important certainty for businesses in that respect?
I thank my right hon. Friend for his words of support. Let me briefly address his two substantive questions.
The tax plan published in the spring statement document today has a range of options for cutting taxes on investment. I look forward to having a conversation with my right hon. Friend, with colleagues and with the business community about the right way to achieve the outcomes that we want. The final decisions will be announced in the autumn Budget and will take effect in spring 2023 after the super deduction ends; I will not get into the detail now.
We have about 1% of GDP as headroom against both the stock and the flow rules on debt falling and on borrowing. On the borrowing side, that is approximately in line with previous Chancellors. On the stock rule, it is a bit less: the average over the past decade has been about 1.7%. The headroom includes the tax cut in 2024, which has been fully paid for and costed in these numbers. I believe that we are taking a responsible and pragmatic approach, but my right hon. Friend is right to point out the risks. The OBR has said that relatively small changes in the macroeconomic outlook could wipe out the entire headroom. That is why it is right that we continue to be disciplined on public spending.
Order. I would like to try to get everybody in. That will mean Members not making short statements, but asking just one question so that the Chancellor can give one answer.
At Prime Minister’s questions, the Prime Minister batted away a question about fraud during covid by suggesting that it was just about delivery, but it was the Chancellor who gave the ministerial direction for the bounce back loans to be paid at such speed. With a check that was even 48 hours longer, the Government might have avoided the fraudulent duplicate claims that were not stopped until a month later. The £4.7 billion that was lost to fraud could have mitigated measures such as the national insurance increase. Does the Chancellor now regret that he did not pause for thought and that he was not more cautious about fraud?
I have a lot of respect for the hon. Lady, but on this matter I believe she is wrong. She has incredible hindsight to point out now issues that neither she nor anybody else raised at the time. Quite the opposite, in fact: I was told daily in this Chamber to get money out not in weeks and months, but in hours and days. Putting longer fraud checks in place would have taken weeks, so I stand by the decision that we made.
We have put various safeguards in place. We have blocked £2 billion of bounce back loans—60,000 because of the checks at Companies House. The National Investigation Service and the National Crime Agency are in the process of successfully prosecuting dozens of people. We are striking people off from Companies House and we are investing more today in the NCA, NATIS and the British Business Bank so that they can work on the interventions that we know are doing very well. I think it is wrong for hon. Members to pretend now that they wanted to do something at the time, when they did not.
I congratulate the Chancellor on a tax-cutting, deficit-cutting, tax-simplifying statement that is very much in the tradition of Nigel Lawson. He mentioned research and development tax credits. Are we on track for our target for investment in R&D across the economy to reach 2.4% of GDP by 2027? When will the changes to R&D tax credits come into effect so that further progress can be made?
I thank my right hon. Friend for his support; I know that this is an area of particular interest and concern for him. The 2.4% comprises two things: what the Government spend and what private businesses spend. I can reassure him that we are more than on track for the Government bit of it: we already spend the OECD average on the 2.4%, and that spending will go up by 50% over this Parliament, so the Government are doing our bit. As I said in my statement and in the Mais lecture, the private sector lags significantly internationally in how much it spends.
The changes that we are making to R&D will all come into effect in the spring next year and will be announced finally in the autumn Budget. My right hon. Friend wrote the foreword to a very helpful report on this topic. I look forward to working with him, with his Committee—the Select Committee on Science and Technology—and with others so that we get these changes right and drive up private sector investment in R&D.
May I draw attention to two stories in the Sheffield Star today? Sheffield is still a city of steel. Ben McIvor, president of Forged Solutions Group, which employs 400 skilled workers in the steel industry, is begging for help with the rise in energy costs, because the company simply cannot pass on those costs to its customers. Workers at Liberty Steel are protesting about the Prime Minister’s broken promise that if we left the EU, he would cut energy bills for steel companies. Why has the Chancellor chosen to break the Prime Minister’s promise?
No, we have provided over £2 billion-worth of support for energy-intensive industries over the past several years—including, I believe, over £600 million for the steel industry. That support comes in a variety of ways, including free allowances and compensation for the emissions trading scheme and other carbon price mechanisms. We also announced hundreds of millions of pounds in the spending review to support the industry to make the transition to using cleaner energy.
In the spending review, the Chancellor gave a lifeline to maintained nursery schools by confirming supplementary funding, but not all schools qualify for that funding. May I appeal to him to work with the Secretary of State for Education to identify the modest additional funding needed to put all maintained nursery schools on a stable financial footing for the future?
It would be churlish not to accept that the Chancellor has sought to deal with many of the issues that working families today face, but given the windfall in taxes that he has experienced, I believe that more could have been done to help with fuel costs, energy bills and other cost of living increases. It is significant that the Chancellor could not apply all his tax cuts to Northern Ireland because of the Northern Ireland protocol: that shows that the protocol needs to be dealt with.
At the start of his statement. the Chancellor referred to Ukraine, but surprisingly there was no mention of additional resources for defence—for the defence of this country, the defence of democracy and the defence of values in the face of Putin’s aggression. Why was that absent today?
On fiscal windfalls and headroom, I refer the right hon. Gentleman to my answer to the Chair of the Treasury Committee. Our headrooms are relatively small by historical standards and could be wiped out very easily by small changes in the macroeconomic outlook, so I think that it is wrong to say that there is a huge windfall. Indeed, borrowing for the forthcoming year will be higher than was forecast in October.
On defence, I refer the right hon. Gentleman to my answer to the shadow Chancellor. We increased the defence budget by £24 billion in 2020—the largest increase since the cold war. The Ministry of Defence was the only Department that got a four-year settlement when all the others got just one year. That is how seriously we take the issue.
I congratulate the Chancellor on the statement and particularly on the 5p reduction in fuel duty, which I note is temporary. Will he remind all Members of this House that temporary does not mean permanent, and that as the reduction costs £5 billion, if it becomes permanent we will not be able to reduce income tax, which also costs £5 billion, if we are to meet our tests of fiscal responsibility?
I thank my hon. Friend, as ever, for his support. He is right: the fuel duty cut will benefit all our constituents, particularly those in more rural areas and on lower incomes. He is also right to make the point that we need to remain disciplined on public spending. We have fully accounted for the income tax cut in our plans, but it will require collective discipline to deliver those tax cuts and others that we want to see over the remainder of this Parliament.
The Government have been warned privately and publicly not to make up employment statistics, so alarm bells rang when the Chancellor of the Exchequer glossed over the employment numbers in his statement just now. The small print reveals that unemployment is forecast to rise next year and then plateau, so may I ask him what the Department for Work and Pensions is playing at?
Unemployment is at an almost record low level of 3.9% at the moment. The OBR’s forecasts overall are lower than its October forecasts and are still at very low levels of 4.2%-ish throughout the forecast period. We are very proud of this Government’s track record on jobs, with record numbers of people on payroll. Despite the forecasts of millions of people unemployed, we have managed to successfully get everyone back to work, with a record number of job vacancies, and we will continue to focus on that.
With the world economy facing unparalleled challenges from at least two of the four horsemen of the apocalypse—death from plague and war—and with all the challenges that the Chancellor faces, I wonder whether anybody seriously believes, after a decade of unfunded spending promises, that tax would be any lower under a Labour Government. That is a question that I think the Labour party should answer.
May I ask a question on behalf of people of pensionable age? More and more of them are having to wait a long time—up to two years—for so-called minor operations, which can be very debilitating and very painful. More and more people on middle incomes are dipping into their savings or going into debt to pay for private operations. Will the Chancellor keep an open mind about helping those people with some sort of tax relief—if not on insurance, on the cost of operations that are delayed for up to two years?
I am always happy to take suggestions from my right hon. Friend. He has identified a pressing problem faced by all our constituents who are waiting longer than we would like for elective treatment in particular. Every penny of our new health and care levy will go to the NHS and social care so we can make a start on that backlog. We are backing the NHS to help it to reduce its backlogs, and my right hon. Friend is right to raise this issue.
Households are facing the biggest hit to living standards on record, and they were looking to the Chancellor today to offer them some hope. We know from the OBR forecast that the Treasury will take an additional £13 billion in VAT thanks to inflation. Will the Chancellor tell us why he has not announced the emergency cut that the Liberal Democrats have called for, which would put £600 back into the pockets of the average family? VAT is an unfair tax that puts up prices for every single family in the UK, and makes up half of all the taxes paid by the poorest households compared with less than a fifth of those paid by the richest.
I think it wrong to suggest that there has been a VAT windfall. If the hon. Lady looks at the numbers in the OBR forecast, she will see that its projection for VAT receipts in the forthcoming year is lower than its previous projection in October. We are helping working families, with a £6 billion tax cut which will put £330 into the pockets of 30 million workers across the United Kingdom.
I think that when my right hon. Friend gets back to his office, that portrait of Nigel Lawson will be looking down at him admiringly. This is a Conservative plan that we can all get behind. It rewards work, it gets the deficit down, and it incentivises investment from businesses rather than penalising them with windfall taxes.
As my right hon. Friend knows, energy prices are very volatile, so he is right to stand by the £9 billion package that he introduced previously and wait until the next update on the energy price cap in the late summer. If it does indeed show that energy prices are going to rise substantially, that will have a big impact on the poorest households. Will my right hon. Friend assure us that he will keep this matter under review, and will consider further measures if necessary to protect those households?
I thank my right hon. Friend for his warm words of support, and I can reassure him that we keep everything under review. We have stood by the British people over the past few years, and we will continue to stand by them. It is thanks to the responsible decisions of this Government that we are able to provide the support that is required when the times call for it.
Consumer spending is vital to the growth of our economy in the aftermath of the pandemic, but with inflation at its highest level for 30 years—the Chancellor has seen the data—consumer confidence is declining, hitting our small businesses hard and setting back their recovery from the pandemic. Why on earth is the Chancellor not fully U-turning on his rise in national insurance contributions at this time—a rise that the Government themselves have admitted will increase inflation and decrease spending power?
The hon. Lady may not realise that for 70% of people, this is more generous than doing what she suggests. Those people will pay less tax as a result of this policy as opposed to the one that she advocates, and I believe that it is the right policy. We are on the side of hard-working people, and this will help them at a time when they need that help.
I thank the Chancellor for his statement, which has been warmly welcomed by the people and businesses of Wimbledon, and commend him for his analysis of some of the challenges to the economy. One measure that he could move from temporary to permanent is the super deduction, so will he consider that as part of his consultation? I think it is already evident that this would be the most effective way of changing behaviour and securing greater R&D and capital expenditure.
I thank my hon. Friend for what he has said, and look forward to discussing those topics with him over the coming months. The document outlines a range of options for cutting taxes on investment. Hopefully he will have a chance to digest those, and I look forward to discussing them with him.
The Conservative party introduced universal credit, but instead of uprating it in line with current inflation, the Chancellor has chosen to increase the size of the household support fund. Those who have heard of it have to go to their local councils to receive it. What evidence, if any, does the Chancellor have that the fund is effective in delivering help to the families who need help most?
The feedback that I receive from colleagues suggests that it has been effective, and I trust councils to know who are the people in their areas who most need our help. I used to be a local government Minister, and, as the right hon. Gentleman knows, I have enormous respect and regard for local authorities. However, we did not just do that: in the autumn Budget, we gave a £2 billion cut through the tax rate on universal credit to nearly 2 million people on the lowest incomes.
I thank my right hon. Friend heartily for the cut in fuel duty, and for waiving the national insurance threshold. I hope I can now retire from campaigning on that issue; it would make my life a lot easier! My right hon. Friend has stood up for workers and for people on low incomes, and we should not forget that. As he said, it is this party that is the true workers’ party of the United Kingdom.
When my right hon. Friend considers a reform of the apprenticeship levy, will he ensure that at its heart is a focus on enabling more disadvantaged young people to take up apprenticeships, including degree apprenticeships?
I thank my right hon. Friend for his support, and I can give him that reassurance. Apprenticeships are fantastic and we want to ensure that they are continually supported, but we will look at all aspects of this to ensure that we also provide incentives for the training that we want to see. My right hon. Friend is right to emphasise that this is the party of the workers, and that is in no small part thanks to his campaigning. I congratulate him on making the case so well.
It is clear from the Chancellor’s statement that he wanted the buzzword to be security, but one of the issues that did not appear in the statement was food insecurity. Given that 60% of Glaswegians do not possess a car and many of my constituents do not own their homes to put solar panels on them, what does the Chancellor say to the people whose children will go to bed hungry tonight, and why was there no mention of that in his statement?
We have already created the holiday activity and food programme, which provides both food and enriching activities for children outside term time. There is also the household support fund, and Barnett consequentials will enable the Scottish Government to provide the same support for vulnerable families in their communities.
I warmly welcome the Chancellor’s statement and, in particular, the rise in the national insurance threshold. It will not only help low earners, which is important, but bring a welcome simplicity to the system. I also welcome the reform of the apprenticeship levy, but will the Chancellor look at the amount that can be transferred through the annual levy transfer? It is currently capped for larger organisations, and that restricts the amount that they can give to smaller organisations. A reform would see much better use of the apprenticeship levy, which would help small and medium-sized enterprises, local authorities and others.
I thank my hon. Friend for his support. He is right to point out that the significant increase in personal tax thresholds is particularly well targeted at those on lower and middle incomes, and I look forward to discussing with him, over the coming months, potential reforms in the way in which we tax training and apprenticeships.
I have just received a message from Michael, who is a carer for his disabled wife in Hull. He says:
“So no help for the disabled. I guess I’ll have to put my wife into hospital next winter so she can stay warm”.
What would the Chancellor say to Michael, who does not drive a car and is not planning to install solar panels on his rented home?
Obviously it is hard for me to comment on individual circumstances, but in general I am proud of this Government’s support for those who are disabled. We have spent some £58 billion on disability welfare. When I last checked the figures, the OECD ranked us higher than many other countries, including the United States, Canada, Australia, New Zealand, Germany and Austria, so we are generous and compassionate in our support for those who are disabled.
We are taking a range of measures, not least spending £1 billion to help people with disabilities into work and providing £1.5 billion for the disabled facilities grant to improve the conditions of their homes. Today we announced a small amount of extra funding to improve the provision of Changing Places toilets across the country, an issue about which I care passionately. That funding will increase their number by 40%, so that the quarter of a million people with complex disabilities who need access to such facilities will now find one closer to where they need it.
I thank the Chancellor for what I thought was an excellent spring statement, and look forward to seeing how it will benefit my constituents. I was particularly pleased to hear about the cut in fuel duty. However, I was a bit disappointed not to hear anything specific about an increase in funding for mental health. Is that something that the Chancellor will consider in the future?
I am happy to tell my hon. Friend that we announced a significant increase for the NHS back at the spending review in the autumn, with a record NHS spending settlement including big increases for mental health. The Department of Health and Social Care will be able to provide him with the exact split, but he can rest assured that we are making good progress with dedicated funding for the cause that he rightly champions.
Let us be absolutely clear that benefits and pensions are going to rise by 3.1% while inflation is predicted to be between 7% and 10%. That is a cut for some of the poorest in our society. I want to make this specific appeal to the Chancellor. The people I am desperately worried about in my constituency are those who are forced to live on benefit, largely through disability or ill health, and the poorer pensioners. We know that energy prices are rising rapidly, and that the assistance provided so far will not enable them to cope. When we get to November, those people will be freezing in their own homes and lives will be put at risk. One simple solution is to double the winter fuel allowance. Can I appeal to him to go away, think about that and come back sooner rather than later to give vulnerable people some confidence in the future?
All the people the right hon. Gentleman mentioned will benefit from the proposals we put forward last month, with £9 million to help everybody. The doubling in size of the household support fund is there for his local council and others to use to support those most in need, and he is right to highlight the winter fuel payments, which are payments of up to £300 for those pensioners. Many of those on pension credit will also have access to the warm home discount, which is an extra £150.
As a member of the Treasury Committee and chair of the Conservative Back-Bench Treasury committee, I congratulate the Chancellor on this spring statement’s tax cutting and tax simplifying, with many measures to help hard-working families make ends meet and to promote economic growth. I also very much welcome the publication of the tax plan. Too often, Governments are tactical about their tax policies, leaving great uncertainty for businesses about what will happen next. We now have a strategy for the years ahead. Tax policy must be informed by a strategy; it also needs to be credible and fair. Can my right hon. Friend confirm that, in all the measures the Treasury has introduced since 2019, it is the poorest households that have benefited the most and the wealthiest that have contributed the most?
I congratulate my hon. Friend on his new appointment and look forward to working with him in both his committees over the coming months, particularly to flesh out the business tax options that we want to finalise by the autumn Budget. He is right to say that the distribution analysis published today, which looks at all tax, welfare and spending decisions, shows that this Government have been highly progressive in their actions and that those on the lowest incomes have benefited the most.
Once again, quite incredibly, there is climate-shaped hole at the heart of this statement. Once again, the Chancellor did not even mention the word “climate”. That is all the more unforgivable as the measures we need to tackle the climate crisis and those we need to tackle the cost of living crisis are the same. With 6 million people now facing fuel poverty, where is the home retrofit revolution and the investment that we need to make 19 million homes warmer by 2030, saving families £400 on their bills and creating hundreds of thousands of jobs in the process? How many more people will have to freeze in their homes before he will act?
We already acted in the spending review last autumn to outline billions of pounds to improve the energy efficiency of hundreds of thousands of homes across the country. The hon. Lady is right to say that that saves £300. We have grants available of up to £20,000, depending on the scheme, that will do that over the remainder of this Parliament. Also, the energy company obligation does the same thing for hundreds of thousands of people in fuel poverty through their energy bills. So we already did it; we are getting on with it. And I think she missed the fact we have just cut VAT today on energy-saving materials.
I welcome the statement from the Chancellor today, and in particular the way in which the most support is being provided to those who will need it most. Can I ask specifically about the section on the research and development review? Much of our economy is going digital and we are seeing an increasing focus on the knowledge economy and the creative sectors. Will that be at the core of his investment plans for the future, since that is how we will secure future growth?
My hon. Friend, as ever, makes a thoughtful point. Innovation, broadly defined, along with multi-factor productivity, accounts for about half our productivity growth. The pace has slowed recently and we need to reinvigorate it. I set out a strategy to do that at the Mais lecture, and key to that will be driving up private sector investment in R&D and innovation. The tax cuts and reforms we will put in place in the autumn will help us to achieve that end.
Can the Chancellor confirm that someone in employment who is on universal credit will see an increase in the taper between £9,500 and £12,500—a £1,290 clawback to the Chancellor? What is he doing to address that issue, which will involve the poorest workers in the country facing a £1,290 increase in their taxes?
I think the hon. Gentleman is describing how the taper works. It withdraws benefits as people’s incomes rise. That is how the system is designed. However, I can tell him that, because we took action to cut the universal credit taper rate last autumn, we delivered a tax cut of £2 billion for almost 2 million people. I gave the example earlier of a single mother with two children who is renting and working full time on the national living wage. As a result of all our tax, welfare and wage changes, that person will be £1,600 better off.
I commend my right hon. Friend for his statement, as far as it went. He is right to say that he cannot print more money, borrow more money or spend more money. Can I ask him to bring forward the tax cuts, particularly for the lower earners, because as he rightly says, they spend their money far more wisely than the Government do? That will put more cash in their pockets to meet the increasing bills.
That is exactly what we are doing. The increase in the personal tax threshold in July was brought in far quicker than these things normally are, but we wanted to do it as quickly as possible. This will put £330 in the pockets of 30 million people up and down the country.
The hon. Lady is describing the impact of inflation on people’s incomes. Of course that will have an impact; we have been very clear and honest about that. That is not just happening here; it is happening everywhere across the world as we grapple with higher inflation, but the measures we are taking today will make a significant difference to support working families in weathering some of the challenges ahead. Again, for those who are most vulnerable, we started this journey in autumn with a tax cut to universal credit, and we are doubling the household support fund today to £1 billion.
I welcome the Chancellor’s statement today. It will do a lot to help many of my constituents in Rushcliffe. Can he reassure me and my constituents that the tax-cutting measures announced today will continue to be the focus of this Conservative Government and that they are just the start of what is possible if we continue to build a stronger, greener economy?
My hon. Friend is absolutely right. We started in October, and we have made progress today. The tax plan published today shows that we will continue to make progress, cutting taxes for businesses and people over the remainder of this Parliament.
The Chancellor is of course the Conservative and Unionist Chancellor for all of the United Kingdom, but is it not a fact that because of the deficiencies in the Northern Ireland protocol, none of his flagship programmes will apply to Northern Ireland until he goes cap in hand to the European Community and seeks its permission to apply these VAT differentials to Northern Ireland? If the European Community says no, what is the Conservative and Unionist Chancellor going to do for our part of the United Kingdom?
The hon. Gentleman is right, and I have specifically highlighted the deficiencies of the protocol. I look forward to having those discussions with the Commission. Obviously these are not particularly traded goods, because they are installed, so there ought to be a strong argument that they are included, particularly as we are all now collectively grappling with an energy crisis. However, I do not want to pre-empt the Foreign Secretary’s conversations on the protocol. It is not right to say that the flagship policies do not apply to Northern Ireland. The increase in the personal tax thresholds, the income tax cut and the fuel duty cut will apply to Northern Ireland, and I know that they will benefit his constituents and millions of others across Northern Ireland.
I welcome the announcements that my right hon. Friend has made about national insurance thresholds, fuel duty and the increase in the household support fund. The past two years have been very challenging for the poorest and most vulnerable, and it is going to get a whole lot tougher. As we saw with his swift and right decision to raise universal credit at the start of the pandemic—this was too hastily reduced—the best way of targeting support for those who need it is through the benefits system. May I urge him to look closely in the coming days and weeks at the levels of UC and other benefits, and the means of uprating them?
I thank my hon. Friend for that. I strongly believe that the best way to help people sustainably is to move them off welfare and into work. That is what this Government are doing. Our record on doing so is incredibly strong, and we are throwing the kitchen sink, in terms of both money and policies, which the International Monetary Fund has described as “well targeted”, at supporting people as they make that transition and putting more money in their pockets.
The Chancellor really has not helped those in greatest need. The Joseph Rowntree Foundation says that the current uprating of working-age social security benefits will mean 400,000 people falling into poverty this year. With inflation now forecast to average about 8% in 2023, will he reflect on the very different circumstances the country finds itself in and uprate benefits by the inflation rate forecast in the OBR’s economic and fiscal outlook?
The way that benefits and indeed pensions are uprated is the same every year, and it has been done in the same way for more than a decade. We are making sure that we support people from welfare into work, which is the most sustainable way to help them. Someone moving from UC into full-time work at the national living wage is £6,000 better off. That is why I am pleased that because of our management of the economy there are now record numbers of job vacancies and the support to help people get those jobs.
Thousands of people across my constituency will welcome the targeted measures announced by the Chancellor today. Will he reconfirm for the House that he agrees that the best way to tackle the cost of living issues that people face is through the dignity of a job and the security of a regular pay cheque? That is why it is so important that unemployment—[Interruption.] I ask Opposition Members to listen. It is why it is so important that unemployment has fallen every month for the past year, and they should welcome that.
My hon. Friend is absolutely right and puts the point eloquently: the best way to help people is to get them into work. That is why we are creating record numbers of jobs and then making sure that not only are those jobs well paid, but people keep more of the money they earn. That is the approach of this Conservative Government.
There appears to be no plan from the Chancellor, glossy or otherwise, for farming and food security. Is he aware that hundreds and hundreds of farmers are leaving the industry because of the botching of the transition from the old basic payment scheme to the new system? If he were to peg the basic payment scheme at its current rate, rather than halving it over the next two years, he would at least give time for farmers to be able to catch up and get into the new schemes. As it stands, farmers are leaving the industry just at the moment when we are facing an international food security crisis. Will he rethink and back British farmers?
As the hon. Gentleman knows well, given that we are constituency neighbours, I also represent plenty of farmers and I listen to their concerns. The Agriculture Secretary is doing an excellent job of transitioning from the old system to the new. The overall funding for farming has been protected by this Government and the same level of funding is available, as we promised it would be. I want to see more British food grown here and to see us supporting British food—of course I do, and I think the British public will as well.
“That £3,000 rise of threshold to £12,570 is a gain of £330 a year and more than offsets the…rise for many on lower incomes. Good call.”
Just what proportion of workers will now be getting more money from the higher threshold than they pay in the health and social care levy?
I am grateful to my hon. Friend for sharing that helpful tweet with the House, but I would say to him that the number he is looking for is 70%—70% of workers will pay less because of the increase in thresholds, even taking into account the new levy. That is why this Government are on the side of hard-working British taxpayers.
I do not think the Chancellor understands the depth of despair and fear among the very lowest-income households in this country, for example, those whose incomes were already below the thresholds for national insurance or tax—those who have to rely on social security benefits as they are not able to work because of caring responsibilities, health or disability. To uprate benefits by less than half the rate of inflation at the same time as families face particular pressures on paying for the basics of energy and food will simply leave those families destitute. Will he please heed the calls from around the House this afternoon and look again at his benefits uprating policy?
As I have said, for those who are most vulnerable we are providing an extra half a billion pounds, and we are doubling the size of the household fund—local authorities are best placed to direct that funding. But we do want to support people into work, which is why I am proud of the record we have.
I warmly welcome the tax cuts announced today, especially with the focus on low and middle earners. I note that the OBR has said today that interest payments on debt will quadruple next year. Does my right hon. Friend agree that with interest payments on our debt at £80 billion we need to maintain discipline on spending going forward?
My hon. Friend makes an excellent point. She is absolutely right; the increase in debt payments is historic and it gives a glimpse of some of the risks facing us going forward. That is why it is right that we maintain headroom against our fiscal rules, and the best way to do that, in order to deliver a lower-tax economy, is to remain very disciplined on further public spending.
The Chancellor has detailed a small number of fiscal interventions and they will be a small mercy for the poorest in our society. May I ask his advice on what families with a child suffering from a life-shortening condition will receive as a result of his measures today? Children suffering from life-limiting conditions are often at home, where they need to be kept warm 24 hours a day, seven days a week, often with specialist equipment running. The Children’s Hospices Across Scotland charity is receiving alarming calls from people whose energy bill estimates are going up in the region of £268 to £720 a month. What hope for them, Chancellor?
In the autumn spending review we announced record funding settlements, not just for health, but across the board. That resulted in Barnett consequentials of, if I recall it correctly, about £4.5 billion annually for the Scottish Government. Obviously, they can use that to support their local communities in the way that they feel is best. Again, there have been further Barnetts today as a result of the household support fund.
With a 5p cut in fuel duty, the lifting of the national insurance threshold and a plan to cut income tax, will my right hon. Friend reiterate that this Government are a tax-cutting Government? On the Government side of the House, we trust people on how best to spend their own money.
My hon. Friend makes an excellent point and he is absolutely right: we want people to be able to keep more of their own money. The tax plan announced today represents the biggest net cut to personal taxes in a quarter of a century, proving that we very much are on the side of hard-working British people.
Many of my constituents are having to choose between putting food on the table or heating their homes. At my local food bank last week, staff told me that they were facing levels of demand that they had never seen before. Meanwhile, the boss of BP’s salary has increased to almost £4.5 million. Surely the Chancellor must see that it is time for a windfall tax on oil and gas, to tackle rising energy bills.
I have already addressed this and I urge the hon. Lady to wait for the Prime Minister’s forthcoming energy security strategy, which will ensure that British people have affordable, secure and reliable energy and, most importantly, in the process will support British jobs and British investment.
I welcome this statement and I agree with the Chancellor that this is a statement for the Union, because in these uncertain and unusual times it is the strength of our economy that helps us in positions on defence, trade and more. We are maintaining generous levels of support for devolved Administrations, in Scotland, in Wales and in parts of England. So it is vital that UK taxpayers can be assured that they are receiving value for money for expenditure behind devolved curtains. Will the new Cabinet Efficiency and Value for Money Committee be paying attention to that?
My hon. Friend makes an excellent point. I look forward to taking up his suggestion and having further conversations with him about it. I am glad that over 1 million Welsh taxpayers will benefit from the announcements we made today.
The richest Member of Parliament just spoke about how he understands the impact that the cost of living crisis is having on millions of people, but what he said will sound like a cruel joke to people across the country. Energy bills are rocketing, while fossil fuel giants BP and Shell are set to make £40 billion in profits this year. Why has the Chancellor refused to introduce a windfall tax on those companies to fund the restoration of the old, lower, energy cap? Is it because he would rather squeeze the livelihoods of ordinary people than the profits of the super-rich?
With regards to the livelihoods of ordinary people, they have just received a £330 tax cut today and a discount on their fuel bill, with more tax cuts to come. This Government are on the side of hard-working British families.
I want to ask about the national insurance threshold change—the one that Martin Lewis described as “the big one”. Can my right hon. tax-cutting Friend confirm that this will result in an actual tax cut for more than 30 million people—in fact, for anyone who earns less than £35,000?
My hon. Friend and constituency neighbour is absolutely right, and I thank him for his support. This change will put £330 in the pockets of 30 million hard-working British families, including many in Stockton South, and it means that 70% of workers will be better off, even accounting for the new health and care levy.
In his reply to my hon. Friend Mr Betts on steel, the Chancellor talked a lot about the steel compensation that has been paid. While that is, of course, welcome, the fact is that British steelmakers are still paying 61% more than their German competitors. Steel is a foundational industry that is about good jobs, decarbonisation and our sovereign capability, so why is there absolutely nothing in the statement for our steel industry?
We have programmes in place to support our energy-intensive industries, and we remain in close dialogue with all companies in all sectors. Our track record on supporting industry is strong, and we continue to create jobs and make sure that British workers are well supported.
I welcome the Chancellor’s announcements today, which will help people across Old Bexley and Sidcup with the cost of living, and support local businesses as our local economy recovers. However, in stark contrast to these announcements, people in outer-London areas such as Bexley are facing an eye-watering 8.8% increase in the Labour Mayor of London’s council tax precept, which we continue to see little benefit from. Even worse, drivers and local businesses face the prospect of paying more than £4,000 a year as a result of the ultra low emission zone expansion. That is clearly a tax raid that will have little proven environmental impact on outer London. Does he agree that this tax raid by Sadiq Khan on hard-working people across Bexley should be stopped?
My hon. Friend makes an excellent point. Even if the Labour Mayor of London is not standing up for his constituents, I know my hon. Friend will stand up for his hard-working constituents in Bexley and Sidcup. He will have seen today that we are on their side; we are cutting their taxes.
The Chancellor is still not agreeing to a windfall tax on the super profits of the oil and gas giants. Such a tax would hit the shareholders, not workers and their jobs. It would not hamper business from operating successfully. Why is he protecting wealthy shareholders?
I fear this is getting a little repetitive. I believe that we will see more investment in British industry, more investment in the North sea, more energy security and more jobs created. I look forward to companies bringing forward their plans for that in the coming weeks and months.
I am old enough to remember when levelling up was the centrepiece of the Government’s domestic policy. People will be incredulous that we did not hear a single mention of it from the Chancellor this afternoon. He talks of low growth; we have low growth because we are not unleashing the potential of the regions of this country. It is time for the Chancellor to just admit that levelling up is a sham.
The White Paper from the Secretary of State for Levelling Up, Housing and Communities was in fact warmly welcomed by many colleagues from across the House. More broadly, is backed up with tens, if not hundreds, of billions of pounds of extra funding. The results are seen in our employment growth, which has been strongest in those regions outside London and the south-east.
The Chancellor confirmed a business rate discount for businesses up and down the country, to a rateable value of £110,000. A number of businesses in my constituency do not qualify for that. A number of businesses across London did not get any benefit during the pandemic. One of the key ways that the Chancellor could help many businesses—not just those in Vauxhall—is through VAT cuts for tourism. People are not coming back to the tourism sector; we have seen record low numbers. Does the Chancellor agree that a permanent cut to 12.5% will help those businesses get back on their feet?
All statistics show that the hospitality industry is recovering very well: cash balances are healthy, and business insolvencies are down. That is in part thanks to the support that we have put behind that industry. The uncapped business rate discount will provide support to hundreds of thousands of businesses. It is right that we target support at those who need our help most, whether they are businesses or families and individuals.
All official development assistance announcements are handled by the Foreign Secretary. Within the overall budget, there is always contingency, and space annually for responses to humanitarian disasters that cannot be foreseen. It is not a question of squeezing other things out at all; this is part of planned spend.
I commend the Government’s action on Russian sanctions, but we cannot possibly think that this is “job done.” Mariupol still burns; children are fleeing the bombing of their home. We still have not even introduced a sanction regime that is as tough as the sanction regime on Iran. Can I urge the Chancellor to go a bit further? We need to sanction all the Russian banks, not just 60% of them. We need to tackle the trust funds, such as that recently set up by Alisher Usmanov to protect his assets in the UK. We need to tackle the families and the hangers-on, such as Lavrov’s family, who are in the UK, and we need to tackle shipping. We must do all these things for the people of Ukraine as fast as possible.
I have been working very closely with my counterparts in G7 economies and beyond to co-ordinate our financial and economic sanctions, which I am more responsible for. I am highly confident that what we have done is world-leading, particularly with regards to acts on bank freezes. We are constantly in dialogue with our partners to make sure the action we take is effective when it is co-ordinated.
No, it is not remotely, actually. There has been good unity in the House on this topic. The hon. Gentleman claims that somehow we are behind other countries when it comes to sanctioning Russian banks; it is simply not true. This Government are taking a leading role in this. We are ahead of most of our peers. He does not know, but I know, because I am in the conversations with Finance Ministers about where else they are prepared to go. I am very confident that we have done a lot and have played a leading role internationally in bringing others along with us.
We have heard the Chancellor try to excuse his failure to increase benefits in line with inflation. He has referred to the universal credit taper and the national living wage, which help those people on benefits who are in work. However, does he recognise that the majority of people on benefits in the UK are not in work, and there is nothing in this budget to help them?
I think the hon. Gentleman missed the household support fund announcement, which is specifically for local councils, so that they can help those who are most vulnerable. Many of those people who are not currently in work can, with the right support, care and attention, be supported into work. That is something that this Government are spending a lot on doing.
Today, the Welsh Government announced a £500 payment to unpaid family carers, to recognise their commitment during the pandemic. Unpaid carers in Scotland receive the carer’s allowance supplement. Meanwhile, carers in England get a miserly carer’s allowance, which is increasing by only £2 this year. That means not only that the sacrifice and commitment of unpaid carers in England is going unrewarded, but that carers are being driven further into financial hardship. How many more need to be pushed into poverty before this Government act to value carers, and give them the targeted support they deserve?
We do value carers. There are fewer people in poverty today than when we first came into office—1.7 million people fewer in absolute poverty than in 2010, after housing costs. Also, today we have topped up the household support fund, in order to provide support to the most vulnerable who need help.
This week it was revealed that 75% of people in my constituency are struggling to pay for basic groceries. The OBR’s analysis following today’s statement has said that we face the largest fall in disposable incomes since the 1950s. Will the Chancellor visit my constituency, sit down with the people who use the local food bank, many of whom are in work, and see just how little the policies announced today will do to support them, to get them into work, and to allow them to live with dignity in their community?
The hon. Gentleman is simply wrong. Those in work, particularly on low incomes, will benefit disproportionately from the policies that have been announced today. I have given plenty of examples already, but a single mother with two children who is renting, on universal credit, and working full time, earning the national living wage, will be £1,600 better off as a result of all the policies we have announced on taxes and welfare. We are supporting exactly the people the hon. Gentleman talks about.
The Climate Change Committee’s estimates suggest that the overall price tag for retrofitting the UK’s homes—considered some of the most leaky and energy-inefficient in Europe—is £27 billion a year over the next 25 years. Will the Chancellor recognise that this issue needs real commitment and investment, not just tinkering around the edges?
No. In the spending review, we announced the largest investment in upgrading home energy efficiency that this country has ever seen—billions and billions of pounds across a range of different schemes, helping hundreds of thousands of households with the costs of upgrading their energy.
I am very sorry to hear that, and I am hopeful—in fact, confident—that the policies we have announced today will help those who are most vulnerable. We have made sure, as we have over the last two years, that we are standing by the British people, and that is what the policies announced today do.
I am old enough to remember the rampant inflation of the 1990s, when I started my career. I am old enough to remember when, under Ted Heath’s Government, we had to go to the local café because we had no lights on in the house. However, I am not old enough to remember Anthony Eden and the 1950s. What does the Chancellor have to say today to pensioners who worked through the 1950s about the fact that he is presiding over the greatest fall in living standards since that time?
I am pleased that, because of the actions of Conservative-led Governments since 2010, the state pension is £2,000 higher today; 700 of that is specifically because of the triple lock. That shows that this Government are on the side of pensioners.
The Chancellor is proposing to cut the value of state social security payments by at least 4% and putting up tax rates for those on average and below-average incomes, yet he refuses even to countenance asking those who have extreme wealth, or the corporations that are making obscene profits, to pay a little more. Is not the truth, Chancellor, that this is just a plan to increase inequality in the United Kingdom?
We are asking companies—especially large successful companies—to pay more. That was announced last year and legislated for, and it will come into force next year. The corporation tax rate will rise from 19% to 25% to ensure that we do spread the burden fairly in recovering from coronavirus.
The household support fund exists only because, thanks to this Chancellor, people do not have enough income to eat or to pay their bills. With pensions and benefits set to rise by a measly 3.1% and the minimum wage by 59p, and with inflation peaking at over 7%, today’s uplift to the fund is more evidence of his continued failure to protect the hardest hit, isn't it?
The national living wage is actually going up by 6.6%—it is one of the highest increases we have seen in the national living wage, and it will mean that someone working full time on the national living wage earns £1,000 more this year.
The village of Altnaharra in my constituency is the coldest place in the UK every single winter. A great number of households in my constituency rely on domestic fuel for their heating—they have absolutely no choice. Right now, they are faced with crippling bills landing on their doorsteps. I do not want the Chancellor to feel that he has to repeat himself, but could I ask in the spirit of good will and co-operation whether he will agree to my meeting some of his ministerial team to look at different ways in which we could tackle this problem, which is hurting my constituents, in the coldest part of Britain, very badly indeed?
I am always happy to hear suggestions from the hon. Gentleman and, indeed, to arrange a meeting for him. I wanted to make sure that those off the gas grid still benefited from the energy package that we put in place in February, and it will work on electricity meters, so that will happen. As a rural MP myself, I appreciate the issue that the hon. Gentleman raises, and I will happily arrange the meeting for him.
Oil and gas giants are making £900 profit per second, while millions of people are having sleepless nights worrying about whether they will be able to heat their homes. Does the Chancellor think that the right of these firms to make these super-profits is more important than the right of people to stay warm? If not, surely now is the time for a windfall tax on these profits to fund lowering people’s energy bills.
I just remind the hon. Gentleman that we already have a supplementary corporation tax on oil and gas companies. They pay 40% corporation tax—twice as much as the rate paid by all other companies—and it is right that they do. Going forward, as the Prime Minister’s strategy will outline, we want to see more investment in the North sea, more British energy security and more British jobs.
Private sector tenants on low incomes in my constituency face ever-rising rents, which in many cases are well above local housing allowance levels. These are people on universal credit, and over half are working families who are having to make the choice of whether to heat or eat. What assessment has the Chancellor made of the levels of local housing allowance so that my constituents do not have to take £200, £300 and £400 from their non-housing element to pay their rent?
Because of the increases to local housing allowance that this Government put in place for the pandemic, and that they have maintained, about 1.5 million people—the poorest in our society—will have £600 a year more in local housing allowance, which will help. The hon. Lady talked about a family on low income. Just so that she is aware, as a result of all the tax and welfare changes we have made, including to the taper and the national living wage, a family with two children that is renting, with one parent working full time and the other working part time on the national living wage, will be about £3,000 better off. I know that that will help them through the challenging months ahead.
Brownings the Bakers makes and sells products and distributes them right across the UK through some of the major UK supermarkets. I wrote to the Chancellor highlighting the fact that its electricity costs have increased from £4,000 a week to £11,000 a week. If it wants fixed costs, it has been offered an eye-watering £17,000 a week for a two-year contract. Obviously, the Treasury makes more money in VAT returns out of these eye-watering increases, so rather than the Chancellor having to write back to me, can he confirm to me here and now that I can tell John Gall, the managing director, that he is doing nothing to help businesses such as Brownings the Bakers?
The hon. Gentleman is simply wrong on VAT. If he looks at the figures published today, he will see that the OBR’s estimate of VAT receipts in the forthcoming year is actually lower than the amount it had expected in the autumn. We are providing a tax cut for small businesses today—£1,000 due to the increase in the employment allowance, and that will kick in in just a couple of weeks.
As always, the Chancellor has forgotten the poorest—those claiming pensions, those claiming social security and those living below the minimum income threshold, who have been hit by the cost of living crisis. All that my poorest constituents want is food, warmth and shelter against soaring house prices. All they got was 6p a day from the housing support fund on average. Will the Chancellor go back again and review the rise in social security payments? Those people need that money, or else they will go hungry, they will experience hypothermia and they will be homeless.
With regard to supporting those who are homeless, the spending review in the autumn increased support for homelessness by 85%, compared with 2019 levels—to over £640 million, I think, a year. We are currently seeing the number of rough sleepers at very low levels, compared with the last several years, and hopefully at the lowest level in a decade by the end of this Parliament.
I have asked this of the Chancellor on numerous occasions. On Monday, I led a delegation to Downing Street to deliver a letter urging him to grant a right to food. With millions having to choose between starving or freezing in their homes because of the cost of living crisis, when will the penny drop with the Chancellor that hunger is a political choice, and it is he who controls the levers to eradicate it? Does he agree that it is a dereliction of his duty to the security of every household that we all serve not to enshrine into UK law access to food for all?
We have actually invested more than £200 million a year in the holiday activity and food programme to provide both food and enriching activities to hundreds of thousands of children across the country.
In Putney, 31% of children live in poverty. The biggest measure that the Chancellor could bring in is scrapping the two-child benefit cap, which is cruel and leaves children in poverty. Has he assessed the two-child benefit cap, and when will he scrap it?
I am pleased that there are now 300,000 fewer children in absolute poverty compared with 2010. The best way to make sure that children do not grow up in poverty is to ensure that they do not grow up in a workless household, and there are 700,000 fewer of those today as a result of the actions of this and previous Conservative Governments.
The National Audit Office has found that, in a single year, Her Majesty’s Revenue and Customs allowed more than £300 million of fraudulent claims for research and development tax relief. We also know from other NAO reports that the Treasury is woefully bad at producing evidence to demonstrate that any of the tax relief policies actually deliver the required objectives. With that in mind, what assurance can we have that the announcement that the Chancellor has made today will lead to a genuine real-terms increase in R&D spend, and will not just become yet another taxpayer-funded get-rich-quick scheme?
Government spending on R&D is increasing considerably over this Parliament, but the hon. Gentleman is right to point out some of the issues with our existing relief schemes. They do not work as well as they should. We are committed to tackling them. The final announcement will be made in the autumn for effect in the spring.
Figures from the National Institute of Economic and Social Research have shown that destitution has more than doubled from 197,400 to over 400,000. Destitution is defined as two single people living on £100 a week after housing costs. Is the Chancellor happy that none of the announcements today will benefit those who are in destitution?
That is categorically not the case. The policies that we have announced today will help British families up and down the country in all sorts of circumstances: we are making sure that work pays; we are supporting people into work; we are cutting the cost of fuel; and we have a plan to let our people to keep more of their own money in the years ahead. It is the right way to help people, and all the distribution analysis published today supports the fact that we are doing most for those on the lowest incomes.
We are grateful to carers everywhere for the fantastic job that they do. I am confident that they and their families will benefit from the policies that we have announced today.
I thank the Chancellor for the help that he has given to my constituents. However, a constituent of mine has recently been in touch to say that the removal of red diesel would see her business experiencing an unsustainable increase in the cost of sales by some £400,000 annually. I am not being churlish, but does the Chancellor agree that this increase has come at a breaking point for businesses, and will he make allowances for the continuation of red diesel until the economy gets back on its feet?
These changes were announced two years ago. They were consulted on and there are various exemptions in place, particularly to protect agriculture, which I know will be important to the hon. Gentleman. None the less, it is right that we go ahead with the changes as legislated.
On a point of order, Madam Deputy Speaker. I want to use this opportunity to allow the Chancellor to hear a clarification. He suggested that the Scottish Government might want to follow the UK Government in eventually introducing a 19% rate of income tax. Would it be possible to get the Chancellor to correct the record? There is already a 19% rate of income tax for the lowest earners in Scotland, so in fact it is the UK Government who have to play catch-up with the Scottish Government.
As the hon. Lady knows, the Chair is not responsible for the speeches of Ministers. I am sure that, if any incorrect information has been given, the record will be corrected. Obviously, the Ministers on the Front Bench have heard her point.