Budget Resolutions and Economic Situation

Rather than the big transformative Budget we needed, this Budget simply papers over the cracks. If this had been a Budget for the long term, it would have had a plan—a plan to protect our NHS; a plan to fix social care. I can tell the House this: a Labour Budget would have had the NHS and care homes front and centre. But this Budget is almost silent on those questions. If this had been a Budget to rebuild the foundations, it would have fixed our broken social security system. Instead, the Chancellor has been dragged, kicking and screaming, into extending the £20 uplift in universal credit, but only for a few months—once again, deferring the problem. As a result, insecurity and the threat of losing £1,000 a year still hang over 6 million families. [Interruption.] They ask what we would do. We would keep the uplift until a new, fairer system could be put in place.

If this Budget was serious about rebuilding our shattered economy, it would have included a credible plan to tackle unemployment. The Chancellor said very little about the kickstart scheme, no doubt because—

This Budget fell far short of the transformative change that we need to turbo-charge our recovery for the decades to come. There was no credible plan to ease the burden of debt hanging over so many businesses, which is estimated at £70 billion. This Budget asks businesses to start paying that money back whether they are profitable or not. That affects millions of businesses. It will hold back growth, because businesses will have to pay back money they never wanted to borrow, instead of being able to invest in their futures and create jobs in their local areas. It is both unfair and economically illiterate.

This Budget also falls far short of what was needed to support the self-employed and freelancers, unless, of course, they are one of the Chancellor’s photographers. After a year of inaction, we will look at the details of what the Chancellor announced, but, from the figure of 600,000 that he mentioned, it certainly looks like millions will still be left out in the cold.

The Chancellor’s one nominally long-term policy was in his references to levelling up, but what does that actually look like? It is not the transformative shift in power, wealth and resources that we need to rebalance our economy. It is not the bold long-term plan that we need to upskill our economy, to tackle educational attainment or to raise life expectancy. It certainly is not a plan to focus Government resources on preventive services and early years. For the Chancellor, levelling up seems to mean moving some parts of the Treasury to Darlington, creating a few free ports, and re-announcing funding. That is not levelling up; it is giving up.

Instead of putting blind faith in freeports, the Chancellor would be better served by making sure that the Government’s Brexit deal actually works: for Britain’s manufacturers, now facing more red tape when they were promised less; for our financial services, still waiting for the Chancellor to make good on his promises; for the small businesses and fishing communities, whose goods and produce are now left unsold in warehouses; and for our artists and performers, who just want to be able to tour.

Turning to other parts of the statement, we will wait for the detail about the so-called super deduction, but it is unlikely to make up for the 10 years when the levels of investment growth have trailed so many other countries. Of course we welcome the creation of the national infrastructure bank, which is something for which we have called for years, although it would have been better if the Government had not sold off the Green Investment Bank in the first place. We also welcome the introduction of green saving bonds. I have to say what a good idea it is to introduce a new set of recovery bonds.

The trouble is that the scale of what the Chancellor announced today is nowhere near ambitious enough. The long-overdue commitments to extend furlough, business rate relief and the VAT cut on hospitality are welcome, but there is no excuse for holding the announcement of that support back until today, and of course we will look at the detail.

There are very few silver linings in this Budget. The IMF and the OECD have said that now is not the time for tax rises. We are in the middle of a once-in-300-years crisis. Our economy is still shut and our businesses are on life support, so it is right that corporation tax is not rising this year or next. In the long run, corporation tax should go up. The decade-long corporation tax experiment by this Government has failed, but no taxes should be raised in the teeth of this economic crisis, so it is extraordinary that the Chancellor is ploughing ahead with a £2 billion council tax rise affecting households across the country. Why is he doing that when every economist would tell him not to? Perhaps we find the answer in this week’s Sunday Times, which quoted a source saying that the Chancellor’s argument was:

“Let’s do it all now as far away from the election as possible.”

The Telegraph on 27 January reported:

“Raising taxes now means they can be reduced ahead of the next election, Rishi Sunak tells Tory MPs”.

The Mail in September reported that the Chancellor was to hike taxes and then lower them before the next election. Let me be crystal clear: the proper basis for making tax decisions is the economic cycle, not the electoral cycle.

Behind the spin, the videos and the photo ops, we all know that the Chancellor does not believe in an active and enterprising Government. We know he is itching to get back to his free market principles and to pull away support as quickly as he can. One day, these restrictions will end. One day we will all be able to take our masks off, and so will the Chancellor, and then we will see who he really is. This Budget sets it up perfectly, because this is a Budget that did not even attempt to rebuild the foundations of our economy or to secure the country’s long-term prosperity. Instead, it did the job the Chancellor always intended: a quick fix, papering over the cracks.

The Conservatives spent a decade weakening the foundations of our economy. Now they pretend they can rebuild it, but the truth is that they will not confront what went wrong in the past and they have no plan for the future.

I want to focus on three important areas for business and jobs, and comment on what the Chancellor had to say in that respect. The first is corporate debt. The situation is that the data shows that larger businesses have a great deal of cash in the bank, and it is perhaps not surprising that they have been cautious, that they have received quite a lot of support from Government and, of course, that a lot of them have not been investing. However, among small and medium-sized enterprises the picture is less clear. I have a concern that many of those businesses will struggle with the level of the debt that they have, that they will not be growing when we want them to be creating the jobs of the future and that they will be focusing on de-leveraging their balance sheets. I would like to see something from the Chancellor as to how that particular problem might be addressed. If it is not, the risk is that many of these SMEs will go out of business and markets will become more concentrated and less competitive as a consequence.

Secondly, on investment, I was hugely encouraged by what my right hon. Friend said about the super deduction. My own view was that there should be an increase in the annual investment allowance. It seems to me that this goes significantly beyond that. The devil will be in the detail, but certainly, if the kind of projections for investment that he has just outlined by way of the OBR’s figures are correct, as I understood them, this will be a huge shot in the arm for corporate UK and very welcome. I welcome the three-year loss carry-back arrangements—also something the Committee has pressed for.

My third point is around skills. I have been very impressed with all the announcements that have been made around encouraging apprenticeships, and there was more in the Budget statement just now. On the kickstart scheme, it is imperative that we get this right and that we maximise the efficiency of the transfer of parts of the labour force from those parts of the economy and businesses that are contracting to those that are expanding. I think the Treasury needs to play a very proactive role in making sure that those schemes are successful.

One of the big tests I set in my mind for my right hon. Friend’s Budget was to what degree he navigated successfully the requirement not to put up taxes too early and choke off growth, but at the same time making it very clear to the markets that he and the Government are serious about dealing with the deficit and debt in the more medium term. I have to say that, once again, I have been pretty impressed with what I have heard. I want to see the detail. However, it seems to me that the tax increases and the threshold freezes that my right hon. Friend has announced do not kick in straightaway but he has charted a clear road map for how those taxes and thresholds will be dealt with between now and the end of this Parliament.

If I could just say, on the issue of corporation tax, that it is quite a hike from 19% to 25%. However, we still will remain internationally competitive, and I believe that President Biden, during his campaign for the presidency, suggested US rates might rise from 21% to 28%. So I think, on balance, this is a reasonable move, given that none of the possibilities is particularly palatable, and I welcome the carve-out for small businesses through the small profit rate.

It was pleasing to hear from my right hon. Friend that the OBR’s current projections have improved, and that we are hopefully going to get back to pre-pandemic levels of economic output six months earlier than was thought in November. But of course we still, as he has identified, face a huge challenge going forward, not just around covid, but with the issue that we will have a smaller economy and less taxes that will be able to be raised. Of course, we have demographic pressures going way into the future, with an increasingly elderly population and the pressures that will put on our finances. My right hon. Friend knows that it is critical that we deal with these pressures in a timely manner, or interest rates will rise—and, as he has stated, a 1% rise would mean an eye-watering £25 billion increase in the cost of servicing our debt.

That brings me to the principles that my right hon. Friend has set out today: not borrowing to fund day-to-day expenditure at some point in the future; and having an eye to seeing the level of debt as a percentage of GDP decreasing over time. Those are welcome signals from my right hon. Friend.

I want to turn briefly to an issue that I think is an underestimated threat that has not been discussed enough in an economic context: a return of inflation. Andy Haldane, the Bank of England’s chief economist, has pointed to this risk recently. We know that if inflation increases and spikes, the Bank of England would need to tighten monetary policy to try to keep inflation under control. We would have bond markets in which the Government and the Bank of England were potentially both sellers, with increased upward pressure on interest rates and all that would follow.

Inflation might come through increased friction in global trade, and we have seen increased friction in trade with the EU27 as a consequence of Brexit. It could come through the exchange rate, although recent movements have been in a positive direction, as the virus is being clamped down on and our prospects have improved relative to other economies. Inflation could also come through increases in energy costs and the price of oil, or indeed the unwinding of some of the tax cuts, for example those relating to VAT.

But inflation could also come through the interplay between the supply and demand sides of the economy as we recover. On the supply side, it remains uncertain how quickly companies will bounce back. We know that many of them have been severely damaged. On the demand side, it is also the case that we will not know at this stage the extent to which consumers will re-engage with the economy in the way they did before the pandemic, even though the virus is diminishing. We also do not know what will happen to the huge amount of effectively enforced savings as people have been unable to engage in the economy in the usual fashion—perhaps up to £200 billion or £300 billion by the summer, the Bank of England has suggested. If a lot of that goes back into the economy quickly, it will have a huge stimulus effect. If very little does, clearly the opposite will be the case.

It is therefore absolutely right that my right hon. Friend is ready and prepared to use the fiscal levers as appropriate over the coming months. If he comes back to the House of Commons many times to do so, I think that should be seen as a position of strength, rather than weakness. I wish him well. The Treasury Committee will continue to be critical of him where appropriate, but also supportive in our common endeavour of putting the economy back on track.

In conclusion, I broadly welcome this Budget. It comes against the backdrop of one of the worst economic crises outside of wartime. Yet there is hope that springs from the past, and the strength that we held going into this crisis, of strong and stable financial institutions, record levels of employment, and hard-won improvements in our public finances. But now hope springs also, it seems to me, from the future: from the thousands of men and women—our scientists, health workers and volunteers—who appear to be on the brink of little short of a miracle, the wholesale turnaround in our country’s fortunes due to vaccination. Therefore, in broad terms I welcome my right hon. Friend’s Budget today, but I conclude by supporting each and every one of them.

Of course, the Tories do not regret the austerity that they have inflicted over the last decade. They are nostalgic for it. We are told by the Chancellor that there have to be cuts to spending. We are told that there have to be tax increases, but we know that he is deliberately setting out a false choice, because we heard nothing today about the need not just here, but right around the world to create the circumstances for investment-led growth. Where is the agenda that the UK is going to take to the G7 to make sure that we work collectively to deliver a better future for everybody out of this pandemic? Every credible economist knows that to protect and secure the public finances, we must create the circumstances for recovery for growth and that this has to be investment-led.

As we look forward to the months ahead, we need to deliver a vision of a better future and we need leadership to do this. So, for the people of Scotland this Budget comes at a critical moment of choice. Post-Brexit and post-pandemic, Scotland now has a choice of two futures: the long-term damage of Brexit and more Tory austerity cuts, or the opportunity to protect our place in Europe and to build a strong, fair and green recovery with independence. This May, every citizen will cast their democratic decision on who they trust to rebuild our society and our economy in the wake of the pandemic. It will be a clear choice: Scotland’s future in Scotland’s hands, or in the hands of the Tories and this Prime Minister and Chancellor. Let’s just say that we are looking forward to the verdict of the Scottish people.

Let me turn to the immediate priorities that this Budget should have dealt with. I am sorry to say that the Chancellor stood up today and doubled down on exactly the same mistakes that he has been making throughout the pandemic. Temporary extensions and temporary support can only ever mean a temporary reprieve for those millions who have been crippled by uncertainty for months. The Chancellor’s temporary timelines for pandemic financial support completely contradict his own Government’s policy. On the one hand, the UK Government rightly tell people that they will follow data not dates when it comes to public health, but when it comes to financial support, Tory policy is defined by dates, deadlines and cliff edges.

Businesses and workers on furlough needed certainty last March and last autumn, and they need it now. Frankly, Chancellor, to expect businesses that have been closed to make increasing contributions to furlough is simply unacceptable when they do not have the cash flow to pay for it. More temporary extensions and the tapering off of furlough fall well short of what businesses need. The Chancellor should make the commitment that full furlough support at 80% wage support will remain available to businesses as long as restrictions remain in place—no deadlines, no dates, no ifs and no buts. That is one clear commitment that would immediately stabilise support for every struggling sector.

The cut-off date for entry into job retention schemes should also be revised, ensuring that support is available to the growing numbers who have started new jobs since the end of last October. We welcome the VAT cut, but it should have been retained at 5% for much longer, and it should be extended to businesses such as hair and beauty businesses, which also need the support. While we welcome the ongoing support for rates relief, it does not go as far as the Scottish Government have in providing 100% rates relief for the calendar year across the retail, hospitality, leisure and aviation sectors.

One of my biggest criticisms of this Budget is that it completely fails to recognise the sheer scale of the other pandemic our communities are suffering—the poverty pandemic. After a decade of underinvestment and Tory cuts, the last year has deepened the UK’s poverty crisis and widened gaps in inequality. Yes, many have been in a position to save and build up financial deposits during these lockdowns, but Chancellor, millions more are literally struggling to survive. Some 14.2 million UK adults are now categorised as having low financial resilience. That is an increase of 3.5 million since the beginning of the pandemic. Let me take an example from my own constituency. In January 2020, the community food bank in south Skye and Lochalsh delivered 25 food parcels in one month. In December 2020, that same food bank was delivering 200 bags of food per week.

Last year, this Government were forced into providing a £20 uplift for universal credit. It was literally a lifeline for millions. It was needed then, and it is needed now. Six million people are now claiming universal credit—a 98% increase since the pandemic began. Today, this Tory Chancellor is telling those 6 million people not to get too comfortable with that lifeline, and that in a matter of months it will be gone. Where is the compassion, Chancellor? Where is the support for people? Does he really think that this is good enough and that it is acceptable that so many people—so many families and so many children—have been left in poverty? He can avert his eyes and look away because he does not want to know the harsh reality. The Chancellor does not understand what it is like to be poor in Boris Johnson’s Brexit Britain. Chancellor, do the right thing. This should never be temporary; it should be permanent, and let us make sure, out of this Budget, that that policy is changed. Making the £20 universal credit uplift permanent must also extend to legacy benefits. And Chancellor, while you are at it, finally abolish the cruel benefit cap and end the two-child limit.

The Chancellor should also be using this Budget to support those most impacted throughout the pandemic. The Women’s Budget Group found that women were twice as likely to be key workers as men but are far less likely to be eligible for statutory sick pay. It also found that young women were disproportionately likely to work in the sectors that were hardest hit by previous lockdowns. The Chancellor could support these women by finally introducing a real living wage and a liveable sick pay for all.

We know that after a decade of Tory decisions, child poverty has risen to alarming levels. The Joseph Rowntree Foundation and baby bank charity Little Village found that 4.2 million children are living in poverty, including 1.3 million babies and children under the age of five. This is supposed to be a civilised society. It is supposed to be a caring society. The Chancellor has just congratulated himself on his Budget. Chancellor, where is the plan to get these 4.2 million children and their families out of poverty? Where is the plan to get these young children and babies out of poverty? Where is the sense of responsibility from a Government? What we can see is a Chancellor who is not even prepared to engage; he is looking away—and no wonder, because this Chancellor should be embarrassed by what he has done. This Government need to wake up to the scale of the child poverty crisis, and they could start by matching the Scottish Government’s game-changing £10 child payment.

While we are on the subject of fighting poverty, let me say how disappointed I was by the failure of the Labour shadow Chancellor at the weekend to state her party’s clear support for making the universal credit uplift permanent. In the space of a week, Labour told us that its position on wasting billions on Trident nuclear weapons on the Clyde is non-negotiable but cannot even say what its position is on keeping this lifeline for struggling families. We know we are living in strange times when George Galloway pledges his support for the Tories and the Labour party sits on the fence when it comes to Tory cuts. We would nearly feel sorry for the new Scottish Labour leader, severed at the knees by his Westminster bosses before he even gets started.

Not only does this Budget signal the return of Conservative cuts; it also confirms that the Chancellor continues to snub the excluded. In time, when people reflect back on this period, it will be a damning indictment of this Tory Government that they were prepared to coolly ignore 3 million of their own citizens during a pandemic.

The Tories have reneged on promises to support carbon capture schemes in the past, so the Chancellor will forgive oil and gas sector workers in the north-east of Scotland who have developed a healthy scepticism about Tory promises. Chancellor, to really stimulate the green economy, you need finally to reform contract for difference to deliver support for wave and tidal generation and guarantee that Scottish suppliers will be used.

The Chancellor and the Government need to give Ofgem a strategy objective to support the delivery of net zero. Transitioning to net zero is an economic imperative, but it is also a moral imperative. Last week, the United Nations Secretary-General warned that

“2021 is a make or break year to confront the global climate emergency.”

I genuinely say to all hon. Members that COP26 in Glasgow this November offers the chance to unite around an ambitious agenda to tackle the climate crisis.

It is possible for us to look forward to those opportunities only because of the actions of those who have protected us through the last 12 months. Our NHS has been on the frontline in the fight against covid-19. Our workers have been nothing short of heroes with their efforts to save people’s lives and provide care. If we are truly grateful for those efforts, we must secure the financial future of the NHS by introducing long-term investment and rewarding those who work for it. A good start would be matching the Scottish Government’s £500 thank-you payments and making them free from tax and benefit deductions. That also means matching Scotland’s current per head funding for the NHS, which would deliver an extra £35 billion for the NHS in England and £4 billion for NHS Scotland in Barnett consequentials. That, Chancellor, would be a fitting tribute to the institutions and the people who have bravely led us through the worst days of this pandemic.

This is the second Budget delivered by the Chancellor, and it is also very noticeable how little reference he made to Brexit compared with the first. Brexit is now the mess that the Tories and the Labour party dare not speak of, and it is little wonder why. The bad Brexit deal that the Prime Minister forced through the House in the final days of December is already proving more disastrous than predicted, and Scottish businesses, from fishing to farming, are losing millions of pounds every day as a direct result of red tape. This threatens to get worse, with grace periods and some food exports ending in April. Instead of taking responsibility for the Brexit mess they have made, the Tories have washed their hands and walked away.

The same is true for this Budget, which fails even to recognise that the very survival of thousands of food and drink exporters is now at stake. In December, the EU put in place a compensation package for those countries most affected by Brexit. Ireland alone got €1 billion. Chancellor, where in this Budget is a similar compensation package for Scottish businesses that are losing out every single day? Where in this Budget is a guarantee that the so-called shared prosperity fund will match the loss of EU structural funds? Today’s Budget gives no commitment, no clarity and no compensation. It only adds to the ever-growing list of broken Brexit promises.

Of course, the real agenda behind the Brexit betrayal is now emerging. For a year now the Tories have been in panic, privately planning for an independence referendum that they publicly say will not happen. The purpose of the internal market Bill, the Union unit and, now, the so-called levelling-up fund is crystal clear: they are all an attack on devolution.

The Chancellor is undermining our Parliament and centralising resources and decision making at Westminster. It is a naked power grab to bypass the devolved Parliaments and take control of funding in devolved areas. Oh, the irony: take back control. They are taking back control from our Scottish Parliament. That is not only the opinion of the SNP; it is the verdict of the former First Minister of Wales—[Interruption.] We hear Tory MPs representing Scotland chuntering away. They are supporting this power grab against the people of Scotland and, frankly, they should be ashamed of themselves. They are showing themselves up for what they have always been: the anti-Scottish Tory party.

Carwyn Jones said that the failure to apply Barnett to the new levelling-up fund would

“divert money away from Wales, Scotland and NI and give a greater proportion to England.”

Of course, the Prime Minister has form, because he talked about doing that in days gone by.

These attacks on devolution show what is now fundamentally at stake. As I said at the beginning of this speech, post Brexit and post pandemic, Scotland has a choice of two futures. At the heart of that choice is a simple question: who is best placed to lead Scotland’s recovery and build a better future? Is it Westminster Governments we did not vote for or independent Scottish Governments, of whatever party, chosen by us and with Scotland’s best interests at heart?

As we look ahead, we have every confidence in what is possible if we take our future into our own hands. We have the resources. We have the wealth. We have the talent. As an independent country, we can decide how best to use all those resources, all that wealth and all that talent. We will be the decision makers. We will be able to chart our own course and build our own future. The Tories can try to deny democracy all they like, but the inalienable right to self-determination cannot and will not be subject to a Westminster veto. There is no Boris veto on Scottish independence. We keep faith in the right and the power of the people to bring about democratic change. That choice is in the hands of Scotland’s people. It is they, and they alone, who will now decide that future.