Financial Statement

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.

More!

Order. The House heard the Chancellor, quite rightly, and I want the same respect shown to the shadow Chancellor of the Exchequer, Rachel Reeves.

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.

I thank the hon. Member for Leeds West (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.

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

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.

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.

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?