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Budget Resolutions

It is a pleasure to follow the right hon. Member for East Antrim (Sammy Wilson), and particularly my right hon. Friend the Member for Haltemprice and Howden (Sir David Davis), who made an important speech, particularly as regards the OBR. It was telling that the

Chancellor started his speech by pointing out, at least inadvertently—it was not a deliberate attack—how many things the OBR has got wrong. That is a real problem for policymaking, because we treat the forecasts as if they were holy writ, authoritative and right. We make decisions on comparatively small amounts, assuming that the forecasts are fundamentally right, and that everything will add up—but of course it does not.

Let us look at the increase from £85,000 to £90,000 in the VAT threshold. That is an absolutely splendid and fundamentally good policy. It makes life easier for small businesses, is thoroughly welcome, and costs £150 million, or 0.01% of a Budget of £1.216 trillion. The cost is utterly trivial, yet the Government do not go further, saying that they cannot afford to. Of course they can. That amount is a rounding error, when we consider the total of what the Government do.

Unfortunately, that is the problem with the whole approach. As far as it goes, it is perfectly good. The economic circumstances have been tricky, and we spent £400 billion on support during covid, which was the right thing to do; but rather than nickel and diming, as is happening, we need to look at the fundamentals of our tax and spend policy. That £1.216 trillion is 44.5% of GDP that we are spending. That is too much. It is more than the country can afford; that is the starting point. It means that we are taxing too much.

A report in The Daily Telegraph states that we will not quite reach the figure for tax as a percentage of GDP that we did in 1948. We will just swerve having our highest level of tax in the post-war period, but that figure shows that we are spending too much. We need to get spending under control, so it was a pity that the Chancellor stuck with the 1% real-terms increase in public expenditure. We should be making public expenditure flat in real terms, and we need to recognise that the best way to afford public expenditure is through economic growth.

A matter for rejoicing—I know that the people in North East Somerset will be delighted, and the Chancellor mentioned this—is that at least the OBR and the Treasury have been willing to look at a particular tax to see if cutting it makes things better: the tax cut from 28% to 24% on property. I own property—I refer to my entry in the Register of Members’ Financial Interests—so the change may be beneficial to me, but moreover it shows that Laffer works when even the Treasury and the OBR come round to thinking about it.

Where else could that be done? The hon. Member for Solihull (Julian Knight) mentioned the tourist tax. It is the easiest tax for the Government to have got rid of. We know—all the evidence is there—that it costs the economy and the Treasury money, yet the Treasury ploughs ahead with the obstinate view that a tax rate produces a set amount of tax, which we know to be false. Go back to 1979, when 98% tax rates raised much less money than 40% tax rates ultimately did. That is why I am not at all keen on the attack on non-doms.

The OBR forecast expects 350,000 immigrants, net, to come to this country every year up to 2028-29. That is built into its forecasts. We need to get control of that. On the one hand, we need to get control of people coming in and undercutting the British workforce, lowering wages in areas such as social care. On the other hand, we want as many billionaires as are willing to come, because they are small in number yet contribute very

largely to the economy. Attacking them, and making things harder for them, might be a means of stealing the Labour party’s clothes, but it is not good economic policy.