Budget Resolutions — House of Commons, 2021-10-27
Topic: Macroeconomics
John Alan Redwood (Conservative, Centre-right): I have declared my business interests in the Register of Members’ Financial Interests Growth is the way that we need to proceed. Growth is the way to get us over the damage done by the pandemic policies. Growth is the way to deliver the optimism that the Prime Minister expresses so well about the economy. Growth is needed to level up. Growth is needed to help generate the more and better-paid jobs we require. And growth is needed to remove the supply constraints and shortages that are too obvious in our own economy and many others around the world trying to overcome the pandemic disaster We therefore need from the Treasury a more vigorous growth policy even than the one that has been envisaged today, which is largely public sector-led. We need also to engage the private sector, get innovation pulsing and make sure that people can enjoy the rewards of success. Let us look at taxation of small business and the self-employed. It still seems to me that the Government have a bit of a downer on that. We are going to be mightily dependent on the good spirits, good will and enthusiasm of all those who are setting up businesses or have small businesses, or who are taking that step to go and work for themselves. They find a tax regime that is becoming increasingly penal We need as well to look at our capacity in many areas where the Government are the great regulator, instigator and provider, where we need to harness more private capital. We are chronically short of energy in this country, yet we are an energy-rich part of the world. If only we would exploit it. Why do we import so much gas and electricity? Why are we making ourselves so dependent on wild and erratic world market prices and sometimes having to pay spot prices, when we could produce much more of our own electricity and gas at home, supply it under sensible average price contracts and give people proper security of supply The Transport Secretary is doing great work in, I hope, an early resolution of the heavy goods vehicle driver shortage. There was a Government problem there, in the number of tests, the training and the support. Indeed, the taxation of drivers is another issue, which I think has led to some leaving the profession or not joining it. Again, I ask the Government to please consider where they are engaged, where they are licensing in the wrong way or where they are not providing enough capacity, to allow the private sector to respond and to perform well My disagreement with the Chancellor in this Budget—I do have one—is that I think the way we get faster growth is to go for lower tax rates to promote it. Lower tax rates should not be a reward for achieving growth that is much more difficult to achieve if it is done against the background of much higher tax rates. I understand why the Chancellor was persuaded to put in the £12 billion from national insurance, but it is a tax on jobs. I was against it. It is deeply damaging and wish they would remove it. However, would the Chancellor have still put that in if he had known that, in the first six months of this year, he was going to collect £44 billion more in tax revenue than the OBR forecast as short a time ago as March The OBR was £44 billion out for the first six months of the financial year. That revenue came in because we were living through a period of lower tax rates—stamp duty surged because the rate had been cut, for example—and because we were recovering from covid on the back of a massive fiscal and monetary stimulus, a stimulus I always supported and for which I pay tribute, as others do, to the Chancellor and the Bank of England for organising. We needed that massive stimulus. We needed to go in behind the Federal Reserve Board, which really saved the advanced world at a time of great crisis and trouble with an even bigger monetary stimulus proportionate to the size of its economy Now, however, times are moving on. We have had a very sharp recovery, which the OBR and the Bank of England did not forecast correctly. We have more inflation than they said. They were forecasting inflation below 2% for this year. Now I see in the latest figures that they have upped the forecast to 4% for next year and they have had to up their forecast for this year a bit, although probably not by enough. The Bank of England was caught on the rise, not understanding the power of the economy to recover. I have never seen such big revisions to forecasts in six months. We have here today a very big increase in the growth rate, a big drop in the unemployment rate and a big rise in the inflation rate Those of us who were saying that the forecasts were wildly pessimistic in March were, unfortunately from the Government’s point of view, proved right, but the Government should celebrate that. They should also puzzle over how the official forecasts are now much more positive for this year and next year at the very moment the economy is actually slowing for a variety of reasons partly relating to tax policy and the threat of interest rate rises, which the Bank of England now seems to think it needs to administer. I urge the Government to pay less attention to official forecasts, because they are all over the place. I have no great confidence that this latest set will be proved right over four or five years any more than I thought the March lot would be. They point to a very disappointing growth rate in the last three years of the forecast period. That is why I am urging the Treasury to look again at its growth rate policies and to find ways to strengthen them My final point, to keep within time, is that of course I welcome more money if it will buy me more operations and treatments, and bring down waiting lists in my local health service. Of course I welcome more money if it finds its way to my local schools, enabling them to have more and better paid teachers, and the equipment they need. But these are very large sums of money. The health increases, which come out on a very regular basis now, are on top of a massive increase in health expenditure which was understandably needed to combat covid. The Treasury must push back on some of those sums. In the case of the health budget, we will not need the massive test and trace budget, with all its set-up costs. We are not going to repeat the experiment of building Nightingale hospitals and then closing them down once we have completed them. We are not going to repeat the need to procure in a hurry a vaccine that does not exist and set up a means of distributing it. We have done all that, so that money, which is still in the base budget, should be reallocated Before the Government give additional money to the health service, they should satisfy themselves that the money is being properly distributed and properly spent. Above all, we need a productivity revolution. I want to see much higher pay in this country and in the public sector, but that requires increasing productivity and there is no easy way of doing that. Ministers must galvanise the senior managers of the NHS to deliver it.