Parliament

Autumn Statement Resolutions

Published date : 21 November, 2022
Last week saw what I think was the most keenly awaited Budget statement from a UK Chancellor since the last one, a mere six weeks earlier. It is remarkable to think that, throughout 2022, we have gone through not one, not two, not three, but four Chancellors of the Exchequer. It was telling that the latest incumbent, the right hon. Member for South West Surrey (Jeremy Hunt), gave a speech that was notably short on cheer and levity. Nevertheless, he did his level best to welcome colleagues back into the fold of the anti-growth coalition. He spent just under an hour at the Dispatch Box unpicking what remained of the previous Budget statement.

The Chancellor, the Government and the Minister today have been keen to highlight what they refer to as “global headwinds” impeding the progress of the British economy. I would not wish to downplay in any measure the difficulties of some of the global circumstances that are common to all at present, but there seems to be a slightly harder headwind blowing at the UK economy right now, it is fair to say. It is hard to fathom, but in attempting to do so, we can point to a few self-inflicted wounds, and not just from the last Budget.

Let us address the elephant in the room that Brexit certainly has not helped in any way, shape or form. My travel arrangements today mean that I have not been able to keep up with the latest developments on whether there will or will not be a Swiss-style deal; I have no idea whether it is true. Free trade without corresponding freedom of movement sounds a little like measures that were tried before and thoroughly rejected by Conservative Members. The European Union and the Swiss Government seem to be having enough trouble with their own Swiss-style agreement, so the idea that the UK Government, with their track record of negotiations with the EU over the past few years, might even be given the opportunity to ask for and negotiate such a deal seems fanciful, at best.

We can clearly see why the Brexit anti-dividend is biting so hard. It has brought increased trade frictions with our closest trading partners and closed off what was previously a plentiful supply of skilled labour that brought nothing but benefit to our country and economy. From the last Budget, we can see the damage inflicted by the delinquent ideologues, who were out there causing mayhem and supergluing themselves to the economic prescriptions of the Institute of Economic Affairs, at enormous cost to the economy, leaving us with interest rates far higher than they would otherwise be. It means that the Government—I do not envy them—now have to perform a herculean task to rebuild their credibility, not just in the international markets, but among the public at large.

Let us be clear: the last Budget eviscerated the political credibility of the former Prime Minister and her Chancellor, as well as that of her party. It has also almost completely blown up any remaining credibility that the Scottish Conservatives might lay claim to. It might be a little unfair for me to pick them out, but I am going to do it anyway. On 23 September, we saw the mini-Budget and the abolition of the 45p tax rate. On 27 September, the hon. Member for Moray (Douglas Ross), in his capacity as leader of the Scottish Conservatives, was resplendent on ITV Border, calling for that move to be replicated by the Scottish Government. On 29 September, he was quoted in The Times, saying that he was worried about his mortgage, presumably as a result of the Budget. On 3 October, that 45p reversal was itself reversed, leading to a brutal headline in the Scottish edition of The Times:

“Scottish Tories welcome U-turn on tax cut they supported.”

As one leadership vacuum is at least partially filled in London, it is inevitable that attention will turn to the vacuity of the leadership of that party in Scotland.

The fact that the autumn statement represents a complete reversal and repudiation of Trussonomics will come as little comfort to those worst affected. The measures might have been reversed, but just as it is impossible to put toothpaste back in the tube once it is out, the damage that has been done over the last few weeks simply cannot be undone. The OBR forecasts that disposable household income is set to fall by 7% over the next two years, representing the worst fall in living standards since records began. If those are the figures coming out of the OBR with what we are invited to believe was a more sensible and balanced Budget, goodness only knows what figures it had prepared for the Budget that is now being unpicked. And all that after 15 years of stagnation and underperformance at the hands of successive UK Governments. Over that time, the gap between the haves and the hardworking have-nots has grown ever wider, and it is impossible to avoid the conclusion that a Scottish Government, with the full economic powers of independence, could have managed a much better and fairer job of it.

The OBR forecast warns that the UK economy will shrink by 2% as a result of a lengthy recession. It notes that

“Brexit has had a significant adverse impact on UK trade”

and forecasts that

“Brexit will result in the UK’s trade intensity being 15 per cent lower in the long run than if the UK had remained in the EU.”

It further notes:

“The medium-term fiscal outlook has materially worsened since our March forecast due to a weaker economy, higher interest rates, and higher inflation”.

As we would expect, it comments on the strange circumstances surrounding September’s mini-Budget, for which it was not asked to prepare a forecast. It states that the process ahead of Thursday’s forecast

“has been unusual in both the time it took to produce and the process leading to its publication.”

That comes after the Bank of England Governor, Andrew Bailey, told the Treasury Committee on Wednesday that the UK has suffered a dramatically worse recovery than the US or the EU: he noted the “striking” difference in the UK’s post-pandemic economic performance from that of the US and the EU.

The overwhelming response to the detail of the Chancellor’s announcement last week, not just from me and my party but from people the length and breadth of Scotland, has been one of disappointment. Anyone who woke up on Thursday morning worried about how they would pay their bills and find their way through the cost of living crisis over the next few months and years will have been left wondering exactly the same thing after the Chancellor sat down. For all the cash-terms increases in spending that he announced, the fundamental fact is that they are mostly eclipsed by the inflation rate, which is at a 41-year high. There may be some increases in cash terms, but there are very few in real terms. In most cases, the purchasing power of any money that the Chancellor is announcing is being more than eroded as a result of cost inflation and demand inflation.

The Chief Secretary mentioned the Barnett consequentials arising from the autumn statement, which will lead to the Scottish Government being allocated an additional £1.5 billion. I am happy to be corrected if I am wrong, but I think he missed out the fact that that £1.5 billion will apply over two years, not a single financial year. To set that figure in context for hon. Members, it is less than the £1.7 billion by which the purchasing power of the Scottish Government’s existing budget, which was set last December, has already been eroded as a result of cost and demand inflation.

Although I accept that many of the measures that have been announced are better than nothing at all, in most cases they represent only a partial mitigation of people’s increased costs. To take a pertinent example that applies in my constituency and across parts of rural Scotland, England, Wales and Northern Ireland, the alternative fuel allowance has increased from £100 to £200, but that is still well below the £500 that in many places is the minimum cost of a delivery of heating oil. With the energy cap rising to £3,000, households will have to contend with higher bills next spring, which will be unaffordable for many. As Adam Scorer, chief executive of National Energy Action, comments:

“Sadly, this means there is now no end in sight to the energy crisis for struggling households.”

There are a few measures that the Chancellor could have taken if he were genuine and sincere in his desire for what he terms fiscal consolidation—the burden of increased taxation—to be placed on the shoulders of those best able to bear it. One such measure would have been expanding the windfall tax beyond energy companies to hit big retailers and ensure that they pay a fair share of their current excess profits. Another possible measure, which I accept might not have made the Chancellor terribly popular with his next-door neighbour, would have been to tax non-doms: closing that loophole would have raised an extra £3.2 billion that is not currently in the scope of the statement. Another option, as the IPPR has highlighted, would have been to tax company share buy-backs. Some companies have been channelling record profits through that mechanism; taxing it appropriately could have raised a further £11 billion. There is £55 billion of “consolidation”, but we can straightaway see more than £15 billion that could have been in scope, but was not. It could have been used to put more money in people’s pockets or reduce the tax burden on the people least able to afford it, but it simply was not. The Chancellor had the opportunity to make those choices, but he made the choice not to.

The price increases as a result of inflation are really hammering families. More needed to be done to put money in their pockets. More needed to be done to tackle the cost of energy, which is hitting not just household budgets but businesses’ input costs. Breaking the link between gas and electricity prices would have been one way of doing so.

Another way to funnel money directly to people would have been for the Chancellor to follow the lead of the Scottish Government and to match progressive policies such as the increase in the Scottish child payment.

Finally, I think we can all agree that it is not some great revelation that we need greater growth in our economy to achieve the outcomes we want and to earn the social democracy we should all want. However, again, the Government are completely missing the target. Investing in the dead end of nuclear power, this is a Government who seem to oppose socialism in all its forms, except when it comes to corporate welfare and bailing out energy multinationals to make their books balance. Furthermore, our research and development spend, despite the increase, will still lag significantly behind that of major competitor economies such as Germany. We should also not underestimate the impact that real-terms cuts will have on local authority capital budgets and the private sector activity that benefits greatly from them.

To paraphrase the right hon. Member for West Suffolk (Matt Hancock), people in Scotland will have looked at this Budget and this Government and said not, “I’m a celebrity. Get me out of here,” but, “This is a calamity. Get us out of here.”

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