Contribution
The Secretary of State opened this debate by saying that we should look at the backdrop of the general election, which was a surprising way for him to open discussion on the Budget, not least because a central theme of the Budget is Labour doing the very opposite of what it said it would do at the general election. That can be seen first and foremost with the £26 billion of additional tax—on top of the £40 billion in tax in the Government’s first Budget—when Labour said at the general election that it had fully costed proposals and that it would not need to tax working people. Indeed, Labour said at the general election that growth was its No. 1 policy objective, and yet what do we see in the official documents from the OBR? We see growth forecasts down every year of the forecast.
Even the topic of this debate—“bearing down on inflation”—is the opposite of what the OBR says is happening, with inflation staying higher for longer as a result of the measures the Government have taken. Labour inherited inflation at 2%, and yet it is now forecast to stay at 3.5% next year and to be at 2.5% the year after. Indeed, on the topic of the cost of living, nothing hurts people’s incomes more than inflation, which pushes up bills and the cost of food and erodes people’s income.
The Government also promised to deliver jobs, but we can see the consequences of their first Budget: the changes to national insurance—the jobs tax—have meant that unemployment has been up every month that the Government have been in office, and the graduate recruitment situation is the worst on record. In response to this Budget, the OBR forecasts that unemployment will be at 4.9% in 2026-27. This Budget is supposed to be “bearing down on inflation”, but inflation is up. The Government talk about addressing the cost of living, but people are being taxed more, and more people are unable to get a job. Graduates in particular are being hit. We can see the difference between what Labour said at the general election and what it is delivering.
That all matters, because away from the big numbers—the billions that get quoted in Budget documents—are a whole series of individual measures that will bear down on people’s incomes and prospects. The Government’s measures will bear down on the small business owner who does not have the same security as a big public sector organisation, and who has put their own capital at risk; they will see a 2% increase in the dividend tax, on top of the corporation tax that they already pay. The measures will bear down on the pension saver, through the changes being made to salary sacrifice. The Government are also freezing income thresholds.
It is interesting that Labour Members cheered a Budget in which the Chancellor did the opposite of what she said last year that she would do. Last year, she said that it would be a breach of the manifesto to extend tax threshold freezes, and that is exactly what she did this time. It is worth looking behind the headlines, and bearing in mind what the official data says this will cost: in today’s prices, by 2030, the measure will cost a higher-rate taxpayer £600 extra, and a basic-rate taxpayer £220 extra. Those decisions will have real consequences on people’s take-home pay.
I represent a rural constituency, but this Government seem to dislike rural communities. We saw that last year with the family farm tax, and we are seeing it with the electric car mileage scheme, which disproportionately penalises rural communities. Again, that change was not in their manifesto. Looking at the consequences of the last Budget, the Institute for Fiscal Studies has said that national insurance changes are costing the average worker £900. These policies have real costs.
The tax changes are being sold as raising more money for, among others, the NHS. At the general election, the Government said that they would end the resident doctors’ strikes, but another one has been announced today. The NHS Confederation has said that this is not a Budget for the NHS, and under the Budget, an estimated £3 billion extra in drug prices will have to be absorbed. An announcement has been made that standards may be changed so that real mental health funding is flat, and just goes up in line with inflation, which is not the change that the Government promised.