UK Economy

– in the House of Commons at 3:32 pm on 19 February 2024.

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Photo of Rachel Reeves Rachel Reeves Shadow Chancellor of the Exchequer 3:32, 19 February 2024

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK economy entering recession.

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

High inflation remains the biggest barrier to growth, which is why halving it is still our top priority. Thanks to decisive action supported by the Government, inflation has fallen from over 11% to 4%. The Bank of England is forecasting that it will fall to around 2% by early summer, in only a matter of months, which is much faster than previously thought.

It is important to put all this in context. Just over a year ago, the Bank of England was forecasting the longest recession in 100 years. That has not happened, and the British economy has proved resilient in the face of unprecedented shocks. Forecasters, including the Bank of England and the International Monetary Fund, agree that growth will strengthen over the next few years, with the IMF forecasting that we will grow faster than Japan, Germany, France, Italy and many others, on average, over the next five years. Wages have been higher than inflation for six months in a row, unemployment remains very low, and we are backing British business by delivering the biggest business tax cut in modern British history and rewarding work by cutting taxes for working people.

These are all reasons to be positive about the economy turning a corner. If we stick to our plan, we can be confident of seeing pressures reduce for families and of achieving healthy economic growth. At the autumn statement, we unveiled 110 growth measures, including unlocking £20 billion of business investment. This includes a substantial labour market package, delivering a tax cut to national insurance for 27 million people, as well as reforming pensions and extending investment zones. The real risk to economic growth and prosperity in this country is the fact that the Labour party has no plan for growth—no plan at all. While they may pretend that they have abandoned their £28 billion pledge, they are still committed to their damaging 2030 energy policy, which, as the Leader of the Opposition has said, costs £28 billion. All of us across this House know what that means: higher taxes and lower growth with Labour.

Photo of Rachel Reeves Rachel Reeves Shadow Chancellor of the Exchequer

The Chancellor should be here explaining why Britain has fallen into recession. Will the Minister explain why he has been left to answer these questions, and where exactly the Chancellor is? The Chancellor should be accountable to MPs and to our constituents, and answer for his failure in the House. What an insult to all those people who go to work every day and experience the reality of 14 years of Conservative economic failure that he has simply failed to turn up.

Does the Minister accept that the Prime Minister’s promise to grow the economy is now in tatters? Will the Minister explain why the economy is now smaller than when the current Prime Minister entered 10 Downing Street? Does the Minister accept the misery that this Government have caused homeowners with their kamikaze Budget, leaving a typical family renewing their mortgage paying an additional £240 every single month?

The Chief Secretary is also notable for her absence today, and was last seen refusing or simply failing to recognise that their target measure of debt as a share of GDP is rising, not falling. Following her rebuke this morning from the chair of the UK Statistics Authority about misleading the public, can the Minister inform the House whether the Chief Secretary will again be relying on incompetence as her best defence?

It is not good enough. The whole country knows that the economy is not working for working people under the Conservatives. It is time for change. If the Government seriously think everything is fine, why do they not take their record of failure and let the British people decide?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I am coming to that.

The right hon. Lady started by talking about the Chancellor; as Economic Secretary, I am perfectly entitled to answer on behalf of the Department and I will do so today. The main thrust of her remarks was on growth; let me deal with that in detail.

The first point to recognise is the international context that we all find ourselves in. [Interruption.] It happens to be true. For example—to describe that international context—10 EU countries were in recession in 2023. In relation to forecasts, the Office for Budget Responsibility’s original forecast was that there would be a contraction of 1.5% in the economy; we have significantly outperformed that. As I have said, the Bank of England forecast the longest recession in 100 years; we have significantly outperformed that. On wages, I think this is the sixth month in a row when wages have been higher than inflation, which, as I have said, we have more than halved.

On the Chief Secretary, what she was explaining is that we were and are meeting our fiscal rule, which is that debt will be falling in the fifth year of the forecast excluding the Bank of England. That is what she explained, and that is what I am reiterating for the House. [Interruption.]

Labour Members do not like hearing this, but they have absolutely no plan on the economy. We have been clear about our plan, and it is starting to bear fruit with wages, with cutting taxes for working people starting in January, with higher business investment as a result of our full expensing in the autumn statement. The shadow Chancellor does not have to take it from me; the Office for Budget Responsibility said that the two fiscal events in 2023—the Budget and the autumn statement—would represent the largest increase to GDP that it has ever scored. What I say to her and the House is this: our plan is working; stick with the plan and do not throw it away with the Opposition.

Photo of John Redwood John Redwood Conservative, Wokingham

It is good news that unemployment has stayed low by European standards, and the economy is still generating plenty of job vacancies. Will the Government take more steps to help more people into those jobs, so that we can get faster growth, bring down the benefit bill and boost their incomes?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

The whole House knows that my right hon. Friend is somewhat of an expert on matters relating to the economy. To answer his point specifically, the national insurance tax cut was scored at the last fiscal event—the autumn statement—as significantly increasing the number of people in work. Although I will not speculate on fiscal events, that point has been very much noted by me and the whole Treasury.

Photo of Stewart Hosie Stewart Hosie Scottish National Party, Dundee East

The Minister spoke about resilience, but the fourth quarter contraction in the economy was the biggest quarterly fall since early 2021 at the height of the covid pandemic, so I am not sure he is quite right about resilience. He also spoke about growth, but the Government told us in November that growth is not forecast to exceed 2% in any year in the forecast period. How modest the Minister’s ambitions are.

National debt is still approaching 100% of GDP—£3 trillion. The consequences of Brexit are suppressing growth, and that poses a challenge to the UK Government’s fiscal targets. Although it is welcome that inflation has fallen, prices remain high. Prices are not falling; they are simply going up slightly less steeply than they were a month or two ago. It is obvious that what the economy needs is growth, and the investment to generate that growth, but given that business investment, according to the Government, is forecast down this year by 5.6%, private dwelling investment is forecast down this year by 6%, and flat at 0% next year, and general Government investment is forecast down in ’25, ’26, ’27 and ’28, where will the investment for growth come from?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I deeply respect the right hon. Gentleman, and I will take his points one by one. On resilience, the way we get resilience for ordinary people and for households is to ensure that real household incomes increase. Since 2010, they are up 12%. We are trying to increase business resilience with our full expensing regime, which is revolutionary in the advanced world. Full expensing will enable more businesses to invest and will deal with the chronic weakness of the British economy, which is weak investment. That is why we are doing that.

The right hon. Gentleman mentioned growth. Growth is not as high as we would like, and that is the case across the whole of Europe and the whole of the industrialised world. That is why the Chancellor in the last fiscal event put in place 110 growth measures. We have a plan for growth over the long term, and we will deliver it. The right hon. Gentleman mentioned debt. To repeat the point I made to the shadow Chancellor, debt is falling in the fifth year of the forecast according to our fiscal rule, which excludes the Bank of England. That is not just the fiscal rule now; it has always been the fiscal rule.

The right hon. Gentleman makes the fair point that lower inflation does not mean that prices are falling. Indeed, lower inflation is a lower rate of increase. We all know that in this House. That is why bringing down inflation is so important, and the Opposition, with their plan to recklessly jack up borrowing and taxes to the extent of £28 billion, will increase inflation.

I repeat that investment has been a long-term weakness of the British economy. We are taking long-term measures to deal with it, and I hope that in the next fiscal event—the Budget—we will continue in that vein.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

May I thank my hon. Friend for his distinguished service as a voice of His Majesty’s Government? I refer him to what the former chief economist of the Bank of England, Andrew Haldane, said today, referring to a “double blow” to the credibility of the Bank of England, which was late to put interest rates up and missed inflation, and has been slow to reduce them, hammering the economy. Does my hon. Friend agree that the Bank of England is no longer showing itself to be competent and that its independence must be questioned?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I do not think that I will quite agree with my right hon. Friend. It is very important that we leave the Bank of England to do its work and respect its independent mandate, but that, from the Treasury, we do what we can to bring inflation down and support it in that mandate. As I said, the Labour party’s plans—whether it claims to have dropped them or not—will lead to an increase in borrowing or an increase in taxes, which will significantly damage that aim.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I think the Minister is failing the audition. Labour will not take lectures from him about borrowing, which was at 67% of GDP when we left office and is now nearly 100%. He is claiming that somehow growth is happening, but we are actually in a recession, which means that there is no growth; in fact, there is negative growth. GDP per capita fell in every quarter of last year, meaning that everybody is getting worse off under his appalling stewardship of the economy. Is it not time that the junior Minister went back to his boss and told him, “It’s all over. Time’s up. Call the general election.”?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

It is definitely above my pay grade to call elections. In relation to GDP per capita statistics, which are important—the point of them is to try to get a sense of what is happening to individuals or to individual households and families—I would say—[Interruption.] Let me—[Interruption.] I wish the shadow Chancellor would allow me to respond. Real household incomes, which are as good a measure as any to see what is happening to individuals and families in our economy, are up 12% since 2010. If we are looking at people at the bottom of the income scale, the rise in the national living wage that comes in in April will mean a rise since 2010 of about 30% in real terms for people on full-time minimum wages. Those two statistics are examples of what has happened to real people on the ground.

Photo of Rachel Maclean Rachel Maclean The Minister of State, Home Department

I thank the Minister for updating the House. Does he agree that people in Redditch and elsewhere are concerned about negative economic news—although it almost always turns out to be wrong? Most of all, does he agree that the greatest risk to my constituents in Redditch and those across the country is a Labour Government? Labour has said it can somehow magically get £28 billion of green growth benefits without paying for them. We all know that my constituents will be paying for that through extra borrowing and higher taxes.

Photo of Stella Creasy Stella Creasy Labour/Co-operative, Walthamstow

The Minister says the Government’s priority is backing British business, cutting inflation and reducing the pressure on British families. When the Government admit this measure will increase inflation, when British business is tearing its hair out at the chaos caused by not knowing what the charge will be and who will pay it—with less than 10 weeks to go—and when British consumers will find that it causes food shortages and an increase in food prices, why on earth are the Government going ahead with the Brexit border tax? Will the Minister commit here and now to cancelling it, so that we can stop this inflationary measure—yes or no?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I thank the hon. Lady for focusing on inflation. She is right that it is critical, and bringing it down is a focus for the Government. The House has heard her point about the European Union, but I would add that we have a clear plan for bringing down inflation, which we will continue to carry out. She has to ask those on her Front Bench why they do not have one.

Photo of Edward Leigh Edward Leigh Conservative, Gainsborough

For too long, too many people in the Treasury—not my hon. Friend, who is an excellent Minister—have thought that the best way to grow the economy is to fill the country with more and more people. Will the Government recommit to insisting that anyone who comes here to work should earn the average UK earnings of around £33,000 a year? That means no shortage schemes and no exemption for care workers or the NHS, but that in those sectors we pay proper wages, we get people off benefits—too many people are on them, dragging down our economy—and we seriously cut mass legal migration; and, by the way, if there is a general election, let us give our people something to vote for.

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

My right hon. Friend makes an important point about migration. I completely agree that we need higher earnings for British people, not an economy where we import too many people and keep earnings down. That is why we have been focusing on raising the national living wage and ensuring that ordinary household incomes will go up as a result of this Government’s policies, as I have explained. It is worth pointing out that certain things happened last year, such as people fleeing Ukraine and Hong Kong, which meant that the immigration numbers were particularly high. The broad thrust of what my right hon. Friend said is correct: we want a high-skill, high-wage economy.

Photo of Emma Hardy Emma Hardy Shadow Minister (Flooding, Oceans and Coastal Communities)

I do not know whether the Minister realises quite how infuriating people find watching his Government tell them, “Everything is fine”, “It is all going really well” and “There’s nothing to see here”, when every day they feel poorer and small businesses are closing. If the Prime Minister and the Chancellor cannot face reality, how on earth can anyone trust them to solve the economic crisis that their Government created?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

Let me be clear with the hon. Lady, whom I have a huge amount of time for as a very good Member of Parliament: it is not our position that everything is okay. There has been a challenging international context: a once-in-100-years pandemic, and an energy crisis caused by Putin’s war in Ukraine. This Government have done everything we possibly can to build an economy for growth, and I hope we have her support.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

What distinguishes this recession is the 800 jobs that have been created every day since this Government came to power in 2010—the very antithesis of anything ever achieved by a Labour Government, who have always left unemployment higher than they found it—is it not?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

It is—and I would add something else: the figures for home repossession were much higher when there was a recession under the Labour Government in 2008-09, in comparison with our record now, and unemployment now is much lower than it was then. Though we are in challenging times, the economy is turning a corner. Our record compares very favourably Labour’s.

Photo of Keir Mather Keir Mather Labour, Selby and Ainsty

The Chancellor said last May that he was comfortable with the prospect of a recession. Now that my constituents in Selby and Ainsty are suffering under that recession’s effects, would the Minister chalk it up as a job well done?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

The hon. Gentleman will do well. There is nobody on the Government Benches who welcomes adverse economic situations for anybody. That is why we are doing everything we can—straining every sinew—to grow the economy. All the measures I have laid out will continue, but they would be put at risk by those on his Front Bench being in office.

Photo of Duncan Baker Duncan Baker Conservative, North Norfolk

Before I came to this House, I was a director of quite a large retail group in North Norfolk. No one has made the point that in the last quarter of the year the country saw Babet, Ciaran, Debi, Elin, Fergus and Gerrit—six major storms and floods. How many were there in the previous year? Absolutely none at all. Will the Economic Secretary tell everybody that of course the economy will not function properly in the grip of storms and floods every fortnight? We are not in recession, but the more we talk it up, the more we will be.

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I thank my hon. Friend for that question—I would say that the loss of large retail groups in Norfolk is the House’s gain. His point about the international context is serious and important. Although Labour Members do not like to hear it, facing a once-in-100-years pandemic and Putin’s illegal war in Ukraine, which caused energy prices to skyrocket, will have adverse impacts on the economy. The country understands that and the House understands that; the Labour Front Bench should also understand it.

Photo of Wera Hobhouse Wera Hobhouse Liberal Democrat Spokesperson (Transport), Liberal Democrat Shadow Leader of the House of Commons, Liberal Democrat Spokesperson (Energy and Climate Change)

This recession is a direct result of the choices that this Government have made. Years of potential growth have been missed, and the Government have failed particularly to capitalise on the green transition. Green investment will be worth £1 trillion globally by 2030, including half a million jobs in this country. When will the Government bring forward a green investment programme to match the ones in the US or in Europe?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

First, our record on decarbonisation beats anywhere else in the G7, so we do not take lessons from the United States or any other country in that regard. In relation to the green investment plan by 2030, the hon. Lady should direct her ire at those on the Labour Front Bench for not being clear as to what their plan is. The Leader of the Opposition says—[Interruption.] Well, it is important because politics is a contest of ideas, as indeed it is a contest between two parties. If Labour Members believe they can spend an extra £28 billion without that having an impact on taxes and borrowing, they are trying to pull the wool over the eyes of the British people.

Photo of Vicky Ford Vicky Ford Conservative, Chelmsford

The past couple of years have been very difficult economically, and I certainly do not treat the state of our economy as the giggle-fest that Labour Members seem to be having today. Over the past few weeks, I have met many businesses in my constituency—large and small—and a number have told me that they feel conditions are getting better, demand is growing and orders are coming back. Constituents have also told me that they have noticed food prices dropping in our supermarkets. Does the Minister agree that the most damaging thing that could happen to our economy now would be for those on the Labour Benches to continue to talk our economy down?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

My right hon. Friend is correct that things are starting to get better for many people across the country, including small businesses. We have more than halved inflation, which is now down below 4%; we think that in the coming months it will go to 2%, which is the target. Of course, once it hits that target, we hope that interest rates will also start coming down, which will make a big difference to ordinary people up and down the country.

Photo of Stephen Timms Stephen Timms Chair, Work and Pensions Committee, Chair, Work and Pensions Committee

I applaud the Minister’s willingness to take on this unenviable assignment, unlike his right hon. Friends. The international context that he refers to is that Japan and the UK are the only G7 countries in recession. Inflation in the UK, which he has referred to, is the highest in the whole G7. Why is the UK economy doing so much worse than comparable economies elsewhere?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

The right hon. Gentleman makes an interesting point, but I would say that our economy entered difficult times at a different point in the cycle from certain other economies. To fully assess the performance of all economies, we have to wait for the end of this whole period, so I would not prejudge exactly at this stage. I simply say that the difficulties we are facing have affected every single economy, although the nature of different economies means that they are affected at different times. We are putting in place comprehensive growth measures and comprehensive measures to bring inflation down. I also note that UK interest rates are roughly middle-of-the-pack compared with other countries of comparable size. We will keep all this under review and, at the next fiscal event, will take further measures to increase our potential growth rate over the long term.

Photo of Alexander Stafford Alexander Stafford Conservative, Rother Valley

Does the Minister welcome the news that the South Yorkshire Mayor has finally recognised the economic importance of Doncaster-Sheffield Airport and is at last starting to use the powers given to him to begin the process of getting it up and running again? Does he agree that that has taken far too long—it is years since the airport closed —and that the South Yorkshire Mayor should have used his powers years ago, rather than waiting until nine weeks before he is re-elected?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I thank my hon. Friend for pointing out once again what a brilliant champion he is for his constituency. I am sure his constituents have heard that comment, and that he will continue to make that point.

Photo of Chris Bryant Chris Bryant Shadow Minister (Creative Industries and Digital)

Lordy, lordy! It is like listening to the Red Queen in “Alice Through the Looking Glass”, who invented six impossible things before breakfast! How on earth can we have confidence in what the Minister says when the UK Statistics Authority had to tell off the Chief Secretary to the Treasury, Laura Trott, for making false claims about tax cuts; when Evan Davis had to school her at length and she refused even to understand how wrong she was about debt falling as a percentage of GDP, when it is going up; and when the Minister himself actually said that the NHS accounts for 42% to 43% of everything the Government spend, when it is only 15%? Can he confirm one fact: these two years will see the biggest fall in living standards since records began? That is why people are going to vote the Government out, isn’t it?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I have already explained the Chief Secretary’s comments. In relation to my own, I was referring to current spending and not overall spending. I clarified that as well. Look, there have been difficulties for so many millions of people across the country and, as the hon. Gentleman knows, I have never sought to minimise that from this position or from any other position in the House. We have faced once-in-a-hundred-years challenges. The Government have faced them and taken the right action to deal with them. The cost of living support package is worth over £100 billion, to the tune of more than £3,700 per person. We have dealt with those challenges and we have a plan now to grow the economy to grow our way out of them. I am afraid that Labour Members and the Labour Front Bench do not have that sort of plan, which is why I would not make the assumption that he makes about the election.

Photo of Scott Benton Scott Benton Independent, Blackpool South

The number of those who are on long-term sickness benefits in Blackpool has increased fourfold over the last few decades. That represents an enormous loss of potential, and it is also hurting economic growth and productivity. The Government’s proposed reforms in this area are to be welcomed, but rather than delaying them until next year, what is preventing the Government from bringing them in this year?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I will take that point away. I think the hon. Gentleman is referring to the next financial year. At the next fiscal event, the Budget, the Chancellor will bear what he has said in mind.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Cabinet Office), Shadow Minister (Culture, Media and Sport)

Fourteen years of Conservative mismanagement of the economy are having disastrous impacts on working people. For example, musicians are waiting months to be paid because HMRC is failing to process A1 forms on time for musicians touring in Europe. The trade body LIVE—Live music, Industry Venues and Entertainment—told me that in one case 26 musicians, performers and sound engineers were not paid for more than three months after their tour to Spain, due to delays in processing A1 forms. Even worse, in response to written questions, I have been told that service standards for those forms will not be met by HMRC until at least April 2024. Does the Minister agree that those delays are totally unacceptable, particularly when our musicians are already having to cope with a challenging financial landscape, made worse now by the news of a recession?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I agree that we need to speed up the processing of A1 forms, as the hon. Lady describes. I am sure the Treasury heard that point and I will ensure my ministerial colleagues take what she says very seriously indeed.

Photo of Liz Saville-Roberts Liz Saville-Roberts Shadow PC Spokesperson (Home Affairs), Shadow PC Spokesperson (Women and Equalities) , Plaid Cymru Westminster Leader, Shadow PC Spokesperson (Justice), Shadow PC Spokesperson (Business, Energy and Industrial Strategy), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Attorney General)

Whatever spin the Government may put on it, forecasts show that the economy has officially entered a recession. However, people out there have been suffering grinding economic pressure for years. Average energy bills are 59% higher than they were in 2022, and more than 600,000 Welsh households are in fuel poverty. Meanwhile, the profits of energy companies such as British Gas have increased tenfold to £750 million. This is the Minister’s chance to make a difference to every household. He has referred to the next fiscal event. Will he act to extend and backdate the windfall tax on energy companies that are currently profiteering from households everywhere?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

The right hon. Lady is right that many people have had very challenging times over the last couple of years. Let me correct something that I previously said to the House: the increase in real household incomes since 2010 is actually 8%, while the increase in GDP per capita is 12%. I wanted to put that on the record. As for taxes, I cannot speculate about what will happen at the next fiscal event.

Photo of Clive Efford Clive Efford Labour, Eltham

According to the forecast, in five years’ time debt will be higher than it is now. Is this a reasonable time to be talking about tax cuts, and does their doing so not suggest that the Government have learnt nothing from the Budget of September 2022?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I assure the hon. Gentleman that this Chancellor and this Government are very different from those in September 2022 to which he refers. As for debt, I repeat that we are keeping to our fiscal rule, which is and has always been that debt will be falling in the fifth year of the forecast—falling, once we exclude the Bank of England. That has always been our position, and it will continue to be the case.

Photo of Kenny MacAskill Kenny MacAskill Alba, East Lothian

The Minister has made no mention of the importance to the UK Treasury of North sea oil, and indeed the danger to the Scottish economy of the closure of Grangemouth Refinery. Given that the UK Treasury received £8 billion in revenues from the North sea last year and is expected to receive £6.1 billion this year, can it not find the tens of millions—not the tens of billions that it will receive in revenue—to ensure that the HydroCracker can be restarted and the profitability of the refinery increased threefold?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I will take away the hon. Gentleman’s specific point and ensure that the Treasury gets back to him, but his broader point about offshore oil and gas in the North sea is very important. It is critical that we support the oil and gas sector, not just for the tax revenues but for the livelihoods and prosperity of the United Kingdom, and this Government stand four-square behind it.

Photo of Debbie Abrahams Debbie Abrahams Labour, Oldham East and Saddleworth

There is overwhelming evidence that the lower the economic inequalities, the higher economic growth will be. We know from the Office for National Statistics that between 2021 and 2022 the disposable incomes of the poorest fifth of households shrank by 3.4% while those of the richest fifth increased by 3.3%, and that reflected the position in the preceding 10 years. What assessment has the Minister, or the Chancellor, undertaken to estimate the impacts of these increasing inequalities on our shrinking growth?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

When we are talking about people at the bottom end of the income scale, it is important to note that those on the full-time national living wage—which we will be increasing by the largest ever amount in April this year—will be 30% better off than they were in 2010.

Photo of Charlotte Nichols Charlotte Nichols Labour, Warrington North

News that the UK is officially in recession comes as no surprise to my constituents, who have been battered by this Tory cost of living crisis. Food inflation is still double the headline rate of inflation, and that is not only affecting the price of the weekly shop but having a hugely negative effect on my local pub and hospitality sector, with many businesses on the brink. Instead of their fantasyland spinning that everything is going fine, what measures will the Government introduce to bring food inflation down?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

As I have said many times this afternoon, inflation is a target for this Government: we aim to ensure that we continue to bring it down, and indeed we expect it to get to 2% in the coming months. In relation to food inflation specifically, at the last fiscal event we introduced full expensing, which will enable food manufacturers, supermarkets and others to increase their investment hugely, because it completely nets off against their tax—100% of the cost of their investment is netted off. The impact will be increased investment that will reduce their costs and reduce the cost of food in our shops. That is one of many measures that we are introducing to reduce food inflation.

Photo of Matt Rodda Matt Rodda Shadow Minister (AI and Intellectual Property)

The Prime Minister said he was going to grow the economy and he has obviously failed: we are now in recession. In my constituency, families and small businesses are under severe pressure. Can the Minister possibly explain how he is going to address these very serious problems?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

All I would say to the hon. Gentleman is that we are in a very challenging international context and we have performed better than the international forecasts. We had high inflation, which really bedevilled this economy a couple of years ago, but we have more than halved it. We have a plan to grow our way out of this, as was shown by the last fiscal event, where we unveiled, I think, 110 growth measures. That is our plan. The Labour Opposition do not have a plan. If this country sticks with our plan, we will grow our economy significantly over the coming months and years.

Photo of Patrick Grady Patrick Grady Scottish National Party, Glasgow North

The Minister keeps trying to hide behind the war in Ukraine and the impact of the pandemic, but the reality is that those are affecting every country in the world. Would he not admit that the exacerbating factor—the thing that has led most to economic decline, to massive labour shortages and to rampant inflation here in the UK—is Brexit?

Photo of Diana R. Johnson Diana R. Johnson Chair, Home Affairs Committee, Chair, Home Affairs Committee

The economy is in recession and the consequences for the public finances are not the fault of those people infected and affected through the contaminated blood scandal, the largest treatment disaster in the NHS. I was hoping to ask the Chancellor this question, but can the Minister confirm whether money has already been ringfenced to pay compensation to those people, as set out in the final recommendations on compensation by Sir Brian Langstaff in April 2023?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I believe that the right hon. Lady asked a similar question of the Chancellor at the last Treasury questions, and the Chancellor responded by saying that he was absolutely clear about the need to compensate people in the way that she has described. He will update the House in due course and indeed update her with further details in response to her question.

Photo of Nia Griffith Nia Griffith Shadow Minister (International Trade), Shadow Minister (Cabinet Office)

The Prime Minister has failed to get growth and industry has completely lost confidence in this Government. With projects cancelled, HS2 cancelled, Building Schools for the Future cancelled, hospitals never built and an absolute failure to bring down high energy prices, it is no wonder that business investment forecasts are down. With the US and the EU incentivising investment, what is the Minister now going to do to get the investment we need in the green manufacturing industries of the future?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

To increase investment we brought in full expensing at the last fiscal event, which should represent an increase over the forecast period of £14 billion of investment and deal with the chronic weakness of our economy over generations. That is what we are doing to increase investment. In relation to green investment in particular, what we are not doing is having a huge unfunded £28 billion plan—or maybe now it is not Labour’s plan; maybe it is a secret plan or maybe the Labour Front Benchers have stopped their plan. We have a responsible costed plan to increase investment; the Opposition do not have one.

Photo of Christian Wakeford Christian Wakeford Opposition Whip (Commons)

Let’s try this again. Public sector net debt is set to rise from 89% of GDP this year to 92.8% of GDP in 2028-29, according to the most recent Office for Budget Responsibility forecast. In case the Minister does not understand, that number is higher than today’s. The Prime Minister promised to reduce debt, but it is increasing. The plan isn’t working, is it?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

The Prime Minister and the whole Government are committed to reducing debt as we get to the end of this economic forecast period, which is what we are doing.

Photo of Justin Madders Justin Madders Shadow Minister (Future of Work), Shadow Minister (Employment Rights and Protections)

The Minister’s rosy picture of the economy shows a complete lack of awareness of what is actually going on in this country. He claims that the Labour party is somehow a risk to growth, but it is his party that has taken the country into recession. That shows a complete lack of self-awareness, too. That is the nub of the matter.

We are in a recession, yet the Chancellor is nowhere to be seen. I would have thought this was important enough for him to be here to answer questions. Given that growing the economy is yet another of the Prime Minister’s pledges that has not been met, who does the Minister think should carry the can for this failure: the Prime Minister or the Chancellor?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I will have to take the hon. Gentleman’s criticism of my self-awareness on the chin, but his broader point is serious. He is asking whether the Government and I are light-hearted or think that everything in the economy is absolutely fantastic, but it is not. That is why we have taken the measures that we have. It is why we cut tax for working people, beginning in January. It is why we are increasing business investment. It is why we had a more than £100-billion package of cost of living support, because we know how much many ordinary people in this country are suffering. And it is why we are trying to grow our economy overall, because that will result in greater prosperity for the country and more money for our public services. The Labour party puts all that at risk.

Photo of Janet Daby Janet Daby Shadow Minister (Youth Justice)

The Government are failing. An 81-year-old constituent told me that he cannot remember the economy and living standards ever being this bad. Can the Minister not see that, under his Government, Britain is worse off?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I do not agree with the hon. Lady. I will not repeat everything I just said to Justin Madders, but this Government and this Treasury are sticking to our plan for growth. That is all put at risk by the Labour party.

Photo of Richard Foord Richard Foord Liberal Democrat Spokesperson (Defence)

The Office for Budget Responsibility assessed Boris Johnson’s trade and co-operation agreement, which sets out the trading relationship between the UK and the EU, at the beginning of last year, and it said that the TCA has reduced long-run productivity by 4%. Why does the Minister think that is?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

We built on the trade and co-operation agreement through the Windsor framework, and the Opposition do not propose to change it. Indeed, the TCA is fundamental to the stability of our relationship with the European Union, and I do not think the country would benefit from unpicking it once again.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

I thank the Minister for all his answers. The questions have not been easy. The Office for National Statistics has revealed that there was a 0.3% decline in GDP between October and December 2023. Given that the strength of the economy was, and still is, the subject of one of the Prime Minister’s pledges, what steps is the Minister taking to reverse this decline, and to re-instil confidence in the Government’s economic plans?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I have already laid out the steps that we are taking, and there is a critical need to make sure that all the regions of our country benefit from those steps. That is one of the reasons why we put so much effort and focus into investment zones over the last couple of years. We hope that these investment zones will continue to increase growth in the economy, not only at a macro level, but for people in every region of this country—particularly in Northern Ireland and the other regions that perhaps did not benefit from this country’s previous growth. We are committed to strengthening that regionally.