My Lords, the Budget raises taxes by £40 billion as we repair the public finances and rebuild our public services. Borrowing falls from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast. The current budget moves into surplus from 2027-28, ensuring that we do not borrow to fund day-to-day spending.
My Lords, after delivering the biggest tax-raising Budget on record, the Chancellor rightly said at the weekend that she was wrong to rule out those tax rises ahead of the election. She also said that this Budget
“wiped the slate clean … set the spending envelope for the remainder of this Parliament”,
and that
“we don’t need to increase taxes further”.
Will the Minister repeat the Chancellor’s reassurances today and rule out any further tax rises in future Budgets, or should we not believe what the Chancellor has said this time round either?
We had to take some very difficult decisions in the Budget. They were the right decisions to clear up the mess that we inherited from the party opposite, to rebuild the NHS after years of neglect, to choose investment and not decline, and to keep our promises to working people. However, the noble Baroness is absolutely right and of course I agree with what the Chancellor said. This was a very significant Budget, because of the need to repair the public finances and rebuild our public services simultaneously. We have now wiped the slate clean, meaning we never have to do a Budget like this again. The noble Baroness asks about tax, and I point out that we have kept every single promise that we made on tax. Her Government, when she was a Treasury Minister, froze income tax thresholds, costing working people nearly £30 billion. We could have extended that but we chose not to.
My Lords, is it not the case that the last Government’s plans would have taken tax as a share of GDP to 37.1%? Even then, they subsequently announced, but failed to account for, billions of additional public spending while promising unrealistic tax cuts. Does my noble friend agree that last week’s Budget measures were necessary to fill the last Government’s black hole and get this country back on track?
My noble friend is absolutely right in what he says. We faced a £22 billion black hole at the heart of our public finances, which we had to take steps to address. We also faced promises for compensation payments, which the previous Government had completely failed to put a single pound behind, and we had to repair public services simultaneously. In the process, though, we kept every single one of our manifesto commitments to restore stability, invest in our public services and protect working people.
My Lords, the Budget basically ignored social care providers, even though the sector is on its knees and taking the NHS with it. Will the Minister take seriously the need to exempt care providers from the increase in employers’ NICs?
The noble Baroness is absolutely correct: we had to take some very difficult decisions on tax. We have acknowledged that the impacts of those measures will be felt beyond business. We have chosen to compensate the public sector with £5.1 billion, to ensure that there is sufficient funding to support our vital public services, including the NHS. On social care, the Government have provided a significant funding top-up to local government, which can be used for pressures, including adult social care.
My Lords, the Minister will know that the OBR has forecast that growth will peak at 2% in 2025 and thereafter fall back, after 2026, to around 1.5%. Does the Minister regard that as a satisfactory outcome of a Budget that imposed £40 million in taxes?
It was £40 billion in taxes. The noble Viscount is right that growth was one of the biggest failures of the previous Government, and we are absolutely determined to turn that around. We cannot undo the damage of the past 14 years in just one Budget. The OBR has said that growth is largely unchanged over the Parliament; that is in the context of a Budget with some very difficult decisions on tax to clear up the mess that we inherited. Of course, we need to go further and we need to go faster. That is why we are doing planning reform, pension reform and skills reform, all of which will boost growth and none of which is included in the OBR’s forecast. Let us remember that, under the previous Government, we were the only G7 country with investment below 20% of GDP. Our growth rate was dismal by OECD standards. Their Brexit deal imposed new trade barriers on business equivalent to a 13% increase in tariffs for manufacturing and 20% for services. They crashed the economy, with interest rates peaking at 5.25%.
My Lords, the noble Lords opposite have some difficulty in understanding the arithmetic of coming through the black hole of £22 billion. Even if they cannot do the arithmetic, they can see that the prisons are full, waiting lists in the NHS are the highest they have ever been, schools are crumbling and there is a lack of police on the streets. It is their failure. Would the Minister agree that that is the core of the failure that this Budget is designed to correct? Is there not one important word missing in statements from the party opposite? That word is “sorry”.
I 100% agree with my noble friend. It is incredibly striking that, in everything we have heard from the party opposite, not once has it apologised for the record we inherited. One of the reasons this is a once in a generation Budget is that we have had to simultaneously repair public finances and rebuild public services. That is why it is such a historic Budget. My noble friend is absolutely right that what we have not heard from those in the party opposite is an alternative. Would they not have repaired the public finances? Would they not have prioritised working people? Would they now cut funding to the NHS and schools?
My Lords, the Labour Government are taking money from pensioners this winter, taxing family farms on the death of a loved one, and hiking taxes on the hospice and care sectors, all while handing out inflation-busting pay rises to train drivers with no strings attached. Can the Minister confirm that this practice will stop and that there will be no more above average inflation pay rises without an agreement on productivity improvements and reform?