Contribution
Thank you, Madam Deputy Speaker. I am sure the best is yet to come.
I am pleased to address the House on a day with bond yields falling, growth figures for the year revised upwards, and an opportunity to reflect on the announcements made yesterday and what they mean for people in Welwyn Hatfield. I want to try to address two of the macro trends that shape the UK economy today, and which would frame the choices available to any Chancellor, irrespective of their party allegiance.
The first trend is the happy reality that people in the UK are living longer than ever before. Millions of Brits are living longer and healthier lives, staying active, spending more time with grandchildren, playing sport, music, doing charitable work and enjoying holidays. That is unquestionably and unequivocally good news, but inequality among older people is stark and real. Lifespans vary hugely by postcode, and this Government’s focus on the NHS is essential if we are to close that gap. However, one challenge is perhaps even more profound, because the ratio between the working-age population and those who are retired has been transformed. Since the creation of the welfare state there has been almost a doubling of what is called the “dependency ratio”, and we see that vividly in how it impacts Government spending.
By 2030-31, welfare spending supporting pensioners will have increased to £195 billion per year. Welfare spending supporting families with child benefit, including the changes announced yesterday, will be £14 billion per year. Welfare spending is going up
disproportionately to support pensioners. That reflects the happy truth that people are living longer, but when we discuss the future of welfare in this House, let us always be mindful of the facts.
I am afraid that the second theme relates to the biggest act of economic self-harm in a generation. The Brexit deal put up trade barriers with our closest and largest trading partners. We have 16,000 fewer businesses in the UK exporting to the European Union, a surge in food prices, bureaucracy at the border, and a hit to our economy of at least £100 billion. We must repair the damage. It is critical that the Government continue to drive forward the UK-EU reset, and do so at pace, with a sanitary and phytosanitary deal that could reduce food prices, and a youth mobility deal that will be good for growth and for cultural connections. UK-EU relations were on the floor thanks to the last Government. We are rebuilding the relationship, and I will continue to advocate that my colleagues in Government do that at pace, with urgency, and with increasing ambition, because it is so fundamental to all our growth prospects for the future.
I commend the Chancellor on increasing the headroom on her stability rule. The markets were looking for reaffirmation that the Government are serious about meeting their targets, and they got their answer. Bond yields fell yesterday, meaning the cost of borrowing fell too. Coupled with the inflation figures last week, the case for another cut in interest rates looks stronger than ever. If the story of this Parliament is interest rates falling and lower mortgage repayments, then the story of yesterday’s Budget was one that coupled stability with fairness.
Removing the two-child limit was morally and economically the right choice. I spoke a moment ago about the relatively small cost of this measure to the Exchequer in the context of welfare spending, but in practice we are talking about £17.25, a very modest amount to many people, but a sum that will be transformative to the families currently living below the poverty line.
On the cost of living, the Budget set out a series of decisions that will help the day-to-day lives of ordinary people in Welwyn Hatfield and across the country: the bus cap maintained, train fares frozen for the first time in 30 years, prescription charges held steady, and a major intervention on energy bills that will see them fall universally by around £150 next year, in addition to the warm homes payment this winter, which will benefit at least 10,000 people in Welwyn Hatfield and 2.7 million across the country.
The economic fundamentals are challenging. In these circumstances, it is an even more significant achievement by this Labour Government to meet the fiscal rules, to calm the gilt markets, to provide extra support on the cost of living and to drive down child poverty. This Budget is responsible and fair, and it sets a foundation on which to build in the future.