Sir Geoffrey Clifton-Brown criticises raising taxes and borrowing by a staggering £40 billion each; with increases in inheritance tax, capital gains tax, mortgages, stamp duty, and employment costs. He raises real concerns that proposed changes to agricultural and business property relief will significantly impact farmers and rural communities, leading to the fragmentation of family farms and changes to national insurance will make it harder for small businesses to grow.
Sir Geoffrey Clifton-Brown (North Cotswolds) (Con)
May I start by paying a huge tribute to the hon. Member for Worcester (Tom Collins) for his maiden speech? It was clear, and he paid a sincere tribute to his predecessor, for whom we all have a great deal of affection. I am sure that the hon. Gentleman will have a great future in this place, and I look forward to hearing more speeches from him.
I agree with the final remark made by the Chancellor of the Duchy of Lancaster: this Budget marks a new chapter in the economic performance of this country, it is true, but I suspect that his predictions and mine, which I will make clear in my speech, are rather different. Starting on the plus side, there are measures in the Budget that we should welcome. My constituents who live in rural areas will be particularly pleased that fuel duty is to be frozen for another year, because often they have very little choice in how to get to work; they must do so by car. As I said in an intervention yesterday, I welcome certain Government contingencies, such as on the infected blood and Horizon scandals, that have now been funded. The onus is very much on the new Government to ensure that the people affected are paid as quickly as possible, even if only with an interim payment, so that they can start, at long last, to rebuild their life. Spending on special educational needs in Gloucestershire is a particular problem, so increased funding will be welcomed by parents whose children need help in that area.
The Public Accounts Committee held several sessions in the last Parliament on rebuilding schools and hospitals, particularly those affected by asbestos and reinforced autoclaved aerated concrete, commonly known as RAAC. We also looked at the huge project of restoration and renewal in this House. If the Government gets those investment projects under way, I will welcome it, but the PAC will scrutinise them to see how we can get value for money.
Contrary to what was said in leaks to the press before the Budget, the pensions industry appears to have been largely untouched in the Budget—perhaps Ministers will confirm that when they wind up the debate—and the trick now is to encourage large pension funds to invest in UK infrastructure. We did not hear anything about that in the Budget yesterday, but I know that the Government are thinking about it.
As predicted, we have a higher fiscal burden in this country under this Labour Government than ever in our history. The Office for Budget Responsibility could not find the fabled £22 billion black hole; instead, it found £9.5 billion associated with deteriorating circumstances, and that will happen to any Government in any fiscal year; £9.5 billion is equivalent to some of the public sector pay increases that we have seen, particular to highly paid train drivers.
The Chancellor has increased taxes and borrowing by a staggering £40 billion each—the largest increase in any Budget for 30 years. The Conservatives left office with low inflation, high employment, particularly for younger people, and the fastest growing economy in the G7. In stark contrast, in this Budget the Chancellor has put up national insurance, and we have inheritance tax up, capital gains tax up, mortgages up, stamp duty up, employment costs up, and business confidence down. The OBR has downgraded our GDP growth, based on the Budget, in every year of the next five-year forecast. That will affect everybody in this country; they will continue to see their living standards fall as a result.
There are lots of topics that I would like to cover, but I have chosen to cover those that will affect my constituents most adversely. First is national debt. UK national debt is £2.5 trillion, which is not far off 100% of GDP, and it is growing at a staggering rate of almost £16 million an hour, or £400 million a day. The interest for servicing the debt has now reached more than £100 billion, which is equivalent to the budget of the fifth largest Department, and it is completely dead money. As a result of the Budget, the debt will rise even further, by £50 billion, involving even higher servicing costs, which will result in higher taxes to pay for it in future years.
On a really important point, the OBR has forecast that national debt will triple over the next 50 years. That is completely unsustainable and should be a real wake-up call to the fact that we have to correct that dire structural problem. But the Budget has made the problem far worse. We cannot just change the rules to make the results sound better. Interest rates, including mortgages, will be higher for longer, and our children and grandchildren will now be saddled with the debt, which they will have to repay, for longer.
Alex Ballinger (Halesowen) (Lab)
I congratulate the hon. Gentleman on his recent appointment as Chair of the Public Accounts Committee. Would he like to apologise for the £22 billion black hole that the previous Government left behind, and the contribution that made to the awful debt situation that the Government inherited?
Sir Geoffrey Clifton-Brown
I thank the hon. Gentleman for his comments about my election, and the PAC looks forward to scrutinising all Government expenditure carefully. He has fallen into the same trap as everybody else. Unfortunately, the OBR said yesterday that it could not find the £22 billion black hole. I do not have the exact quote, but the Government were advised, “When in a black hole, stop digging.” I suggest gently to Labour Members that they stop digging, because it could not be found.
The Chancellor announced that she expects national insurance contributions to rise by a staggering £25 billion, although she promised in the election that they would not. During the election, she said that the measures would not be a tax on working people; clearly she believes that entrepreneurs, who spend their time, energy and talent forming new business, are different. They will be heavily taxed, and changing the employment rules will make it more difficult to employ extra people. A 15% national insurance tax and a savage cut to the threshold, down from £9,100 to £5,000, will harm any business in my constituency employing more than four people. It could be the difference between a business growing and providing more jobs and a business not surviving.
We must all remember that the private sector, and individuals who work hard and put their livelihoods on the line, take financial risks to boost productivity and provide the growth the country needs, and they must be nurtured if they are to succeed. Small businesses account for more than 90% of all businesses.
Graeme Downie (Dunfermline and Dollar) (Lab)
Will the hon. Gentleman give way?
Sir Geoffrey Clifton-Brown
The hon. Gentleman can have a try, too.
Graeme Downie
I ran a small business for at least 10 years. Does the hon. Gentleman welcome the increase in the Budget to the allowance on national insurance from £5,000 to £10,500, which will protect small businesses and help them grow?
Sir Geoffrey Clifton-Brown
I have run a business for a much longer time than that. There are many measures in the Budget that will be very deleterious, especially for the smallest businesses, and we will have to wait and see how they turn out.
The Budget will have serious implications for farmers and rural communities in my constituency. I refer to my entry in the Register of Members’ Financial Interests, as a farmer. I am incredibly disappointed that from 2026, agricultural property relief and business property relief will apply only to the first £1 million of assets. That will worry many in my farming community and those in many other constituencies. It will result in fewer farms to rent.
Equally damaging will be the cap on the amount that can be transferred to spouses for inheritance tax purposes. The purpose of that tax relief was to ensure that working farms that provide our food will not have to be split up after the death of a family member. Very few farms are valued under £1 million—basically only those of less than 100 acres are—and the rest will face a 20% tax. That will lead to the loss of jobs and livelihoods in the North Cotswolds and elsewhere. It will change the fabric of our countryside permanently. The structure and productivity of agriculture will change as more and more farms are split up and sold off as a result of this measure.
Alex Sobel (Leeds Central and Headingley) (Lab/Co-op)
I accept that the hon. Gentleman has great experience in farming, but did he read the analysis by Professor Andy Summers of the London School of Economics, which shows that the £1 million relief is on top of the £1 million couples allowance? The benchmark is really £200 million farms, and the average estate value is lower, so only about 200 estates will be affected a year. In this case, only a small number of UK farmers will be affected, and it is not the armageddon for farms that the Conservatives are claiming.
Sir Geoffrey Clifton-Brown
I suggest gently to the hon. Gentleman that, whatever the number, if the change causes damage to the farming sector and the productivity of food production, it is not helpful, and nor does it raise much money. What we surely want is measures in the Budget and elsewhere to boost the productivity of our agricultural sector so that we can produce more of the food we eat ourselves, rather than importing it from the rest of the world. I encourage the Chancellor to release any impact assessment she has done on this measure. I hope that she will reconsider this proposal, although I doubt she will.
I now turn to a topic that I have mentioned many times, and one that I will continue to raise with the Treasury. The Chancellor has talked about the difficult decisions that she has had to make on tax and spending to promote growth. May I suggest one specific policy area, tax-free shopping, which has the potential to increase growth considerably? Since we left the EU, British people have been able to shop tax-free in European states. However, we have not given the same advantage to wealthy visitors visiting the UK to spend their money here and benefit our economy. That disincentive to visit the UK will be worse if visa costs are increased. I have talked to some of the bigger businesses involved in this area, and they are seeing that instead of visiting the UK people are going to Paris, Madrid or Milan to do their duty-free shopping. We are losing out as a result.
That whole new market, unique to the UK, is worth an estimated £10 billion annually in foreign spending and would generate more than £3 billion for the Exchequer, based on an Oxford economist’s report that said that for every £1 spent by visitors, 37p was generated for the Exchequer. The only thing stopping Ministers in the last Government looking again at this issue was the Treasury’s 2020 forecasts, which unjustifiably—in my opinion—predicted little or no impact on EU visitor numbers or spending levels. That led to the wrong conclusion that there would be costs to the Exchequer, even without all the other added benefits I have mentioned for hospitality, airports and luxury goods manufacturers, which would help the economy. All the data on actual spending supplied by real businesses proves the opposite.
My only ask of the Chancellor today is that she takes the cost-free decision to review the 2020 impact forecasts in the light of overwhelming real data and this time, unlike the last, ask the OBR to scrutinise the Treasury’s forecast impact of extending the scheme to EU visitors. I would welcome the opportunity to discuss this with Ministers, and I could bring experts with me to help the discussion.
As the new Chairman of the Public Accounts Committee, I remind Treasury Ministers of the report produced in the last Parliament called “Lessons learned: a planning and spending framework that enables long-term value for money”, about how the Treasury should focus on getting the best value for every £1 of taxpayers’ money spent. The PAC will scrutinise the whole of the Government’s expenditure and help them to get better value for money.