Helen rose during the Budget Resolutions debate to challenge the Chancellor on his silence over Brexit.
I think everybody agrees that the most interesting thing about the Chancellor’s speech was what he did not say. The biggest economic change in the past year has been the 12% fall in the exchange rate since the Brexit vote. For the past six months, the uncertainty about our future trading relationship with the EU has damaged business investment, but it has not damaged consumption, which is why growth has continued faster than expected. Nevertheless, as the independent OBR’s forecast shows, that will not continue. As inflation rises, it will put a squeeze on real incomes. The boost we are currently seeing in export earnings is likely to be followed by a squeeze on margins for many businesses over the next few months. I notice that the Chancellor has put aside £26 billion, which is half what Michel Barnier says he will ask for in the negotiations. Meanwhile, public services are showing serious signs of strain, and we need to tackle the UK’s poor productivity record.
The best thing the Chancellor could do is to start to win battles on Brexit in the Cabinet. He needs to start to win the arguments on the customs union and on the need for harmonised regulation for industry on everything from medicines and chemicals to aviation and railway safety. It is uncertainty about those things that is causing the economic uncertainty and the fall in the exchange rate. New barriers will make real dents in our economic efficiency that we cannot afford, and they will be felt in lost jobs and lost opportunities.
The Chancellor’s money for productivity is welcome; this is a time not for short-term fixes but for long-term reform to address economic weaknesses and social discontent. His extra money for adult skills is welcome as far as it goes, but he is not yet offering maintenance loans for people in further education. Parity of esteem with higher education means parity of treatment.
On the money for schools, the Chancellor began by saying that education is the key to inclusive growth, but then went on to spend a lot of money on selective grammar schools—surely shome mistake. My constituents will be appalled by that move. In St Helen Auckland, where 48% of children are on free school meals, each child will get £609 less over the course of this Parliament. In Woodhouse Close, where 83% of children are on free school meals, there will be a cut of £571 per child. In Butterknowle, the cut is £1,881 per child. It is totally unfair to pour all the money into a tiny number of schools. The measures on school transport are unfair as well, as they do not take account of the long bus journeys that people have to make in rural areas.
The Resolution Foundation has published some interesting work recently, showing that the incomes of pensioners have overtaken those of working-age people. That problem will get worse over the next few months. We know that, for people in the bottom 10%, £1 in £6 is spent on food; for people in the top 10%, it is £1 in £12. At this moment, when we have higher inflation, the Government have decided to go ahead with a freeze on tax credits and child benefits, which are the income supports for the low-wage working poor. The Chancellor could have unfrozen those benefits to help millions of people had he not been committed to going ahead with inheritance tax cuts
Does hon. Lady agree that one of the other things that the Chancellor failed to mention was inflation and the fact that it is going through the roof?
Absolutely. The Chancellor said very little about Brexit, the exchange rate or inflation. Those are the major changes in the economy over the past six months.
The Chancellor could have unfrozen those benefits that go to the low-paid working poor had he not been committed to going ahead with cuts to inheritance tax, capital gains tax and corporation tax. To cut corporation tax to 19% may be good for competitiveness, but to cut it to 17% is surely unnecessary at this moment.
I want to throw a lifeline of support to the Treasury team who seem somewhat embattled on the issue of national insurance. I do not know whether they want a lifeline from me, but I will offer it to them anyway. It is reasonable, on equity grounds, to even up the tax that is paid by people in employment and by those in self-employment. We need to look at that whole matter more closely.
I am pleased also that the Chancellor has eschewed the gimmicks of his predecessor. The commitment not to raise income tax and national insurance whatever the circumstance was exactly one such gimmick. However, if we are to look at national insurance, let us look at the fact that it kicks in at £8,000, below the personal allowance.
The one thing on which we all agree across the House is the importance of tackling tax avoidance. What the Chancellor did not say was that the largest amount of money that he is taking in—this is in the final section of the chapter—is an extra £500 million from tax credits, which amounts to another cut in tax credits. The Red Book says that it is a pre-announced cut, but it cannot be pre-announced because the extra savings of £500 million are new.
One of the problems with the Government’s productivity plan is that it is not sufficiently inclusive in respect of workers and people at the top, and of the regions. The Government should really start thinking about making this country more equal, both as an economic efficiency measure and as a social justice measure. The fact is that people with predictable and secure incomes can take on more commitments, and that in turn will boost the economy in the medium term.
You can read coverage of Helen's speech in the Chronicle