Harriett Baldwin welcomes the Chancellor’s budget plans to reduce Government debt, ease labour shortages and help the economy grow whilst keeping inflation in check.
Thank you very much, Madam Deputy Speaker; it is wonderful to have you back in the Chair.
After that torrent of socialist declinism from the Opposition, I want to start by saying how lucky we are to have a lucky Chancellor. He has been lucky this winter because the weather has been a lot warmer than it was when he stood here in November, and as a result the price of energy has come down. But he has also made some of his own luck. Thanks to the steps that he took, the financial markets have stabilised and he has had to pay less in interest than he was expecting to—about £4 billion.
It is hard to believe that this is the first official Budget we have had in this Chamber since October 2021. A lot of things have changed since then. Our world-leading NHS vaccination roll-out has ended the severe contagion of the pandemic, but Putin’s evil and illegal invasion of Ukraine has sparked the worst inflation for 40 years. The challenges that those events have placed on the public finances have been extraordinary, and the spending cannot all be borrowed and passed on to the next generation. That is why I welcome today’s news that the Chancellor is forecasting 3% lower debt in years to come.
The Treasury Committee welcomes the fact that the Budget is accompanied by forecasts from the Office for Budget Responsibility. We think it is important that that stands alongside a Budget. It is a key part of the independent framework for Chancellors and we will be taking evidence from the OBR next week on the underlying assumptions behind its forecasts.
What has changed most perniciously since the last Budget in October 2021 is inflation. It was only just beginning to rear its ugly head back then, and as a member of the Treasury Committee throughout this entire period, I have been like Cassandra in highlighting some of the inflationary risks that we faced. Far from being transitory, as the independent Bank of England hoped, inflation has become quite deeply embedded in the UK economy in wage inflation and in expectations. That is why I welcome the news today that the OBR is expecting inflation to go back down to 2.9% by the end of this year.
Inflation is the worst tax that we have on our economy. It is a tax paid particularly by the very poorest, who spend the highest proportion of their income on food and energy, so the Chancellor must not listen to the siren voices urging him to increase or abandon the inflation target that he gives to the independent Bank of England. The top priority for our economy this year must be to at least halve inflation.
It is to be welcomed that in his Budget today, the Chancellor has tried to focus on measures that help to achieve that inflation target. The extension of the fuel duty freeze and the cap on household energy costs will all help to keep inflation almost 1% lower than it would otherwise have been. These might not feel like giveaways but they do cost money against the do-nothing counterfactual option. It is good to see that they are being implemented because of better public finances, and that these tax cuts can be seen as consistent with the Government’s second priority of reducing debt.
In our recent Treasury Committee report, we called on the Chancellor to think again about the fiction that lies behind fuel duty forecasts. Every year, they get embedded in the fiscal outlook, and every year Chancellors realise that it is not an ideal time to raise fuel duty. I welcome the fact that the fuel duty cut has been extended for another year and that, once again, the fiction has not been followed through into reality, but we need to think long and hard about why a tax that is inflationary, that harms growth and that is heading the way of the dodo, as we all move to electric cars, is still in the forecast numbers.
The third economic policy of growing the economy in a non-inflationary way will involve all of us working more productively. The Stride review, named after my illustrious predecessor, has rightly focused on this key question. Many helpful measures have been announced in today’s Budget. With over 1 million job vacancies in our economy, we are still, as a country, working fewer hours than we were before the pandemic. Unlocking that human and economic potential is key to strong, productive, non-inflationary growth.
The steps that have been announced today on childcare and on pensions will help to ease the labour shortages that are pushing up wage demands and help to counter those inflationary pressures. The Treasury Committee looks forward to exploring all these issues in detail with our expert witnesses and with the Chancellor in our next evidence sessions, because the details really matter.
The Treasury Committee has highlighted the new benefit cliff edges that my right hon. Friend introduced last November, when he announced that, next winter, only low-paid households will receive the £900 help with their cost of living. We asked for it to be spread over six instalments to reduce the risk of cliff edges. We are sorry to hear that a somewhat clunky computer system means there will be three instalments instead. We worry that, if a person loses their job just after the qualifying date, they will miss out on a lot of help.
There are still cliff edges, taper rates and disincentives to work galore in our benefit and tax systems, whether they are around free school meals, childcare limits, child benefit tapers, tax-free childcare cliff edges and the withdrawal of the tax-free allowance. The very welcome measures announced today on all those fronts, and the pension cap abolition, will all be studied in detail by the Committee. We plan to work closely with our colleagues on the Work and Pensions Committee to find recommendations to smooth some of those cliff edges and distortions.
The Chancellor can see how these cliff edges are disincentives to working more hours, and every hour of work should pay. We have made huge progress towards that today. At any stage in life, and at any age, people should be rewarded more the more they work.
Speaking briefly as a constituency MP, I welcome the help for swimming pools, for pubs, for levelling up, for Malvern theatres and for childcare providers and nurseries. There is a lot of very good news for them today.
The Chancellor has had some luck since November and he has shared that luck with UK households today. He has a clear intention to bring down inflation, to grow the economy and to reduce debt. May good luck continue to follow him, and may the extra billions of pounds he has secured for the defence budget help our Ukrainian friends have good luck and to beat back the Russian invaders. Slava Ukraini.