The government is running up huge bills on industrial interventions that fail to deliver good results. Its ill judged price control on domestic fuel led to the bankruptcy of a large number of suppliers without preventing a subsequent huge surge in the prices consumers have to pay. taxpayers are now going to be sent a big bill to make good the losses at Bulb, now under state ownership.
Many industries which need to burn a lot of gas and or use a lot electricity have faced 20% VAT, carbon taxes and the Emissions trading scheme. this has made energy a lot dearer to U.K. industry than in many foreign competitor countries. this has led to the need for some offsetting* energy subsidy to U.K. industry. this is normally less than is needed to allow the U.K. to be properly competitive but an effective reduction is some of the penal taxation.
I read that the government is now concerned about U.K. steel’s lack of competitive prices. Why doesn’t it simply remove the special taxes on manufacture? It is a nonsense to impose carbon taxes here to price us out of the market, only to import energy intensive products from elsewhere with added CO2 from all the transport.
Most governments want higher productivity, or say they do. most grasp that if you get people to produce more goods or services in a working week you collect more revenue and can share that with employees.
Seeing that is not the same as selling it to those who need to deliver. Understanding it does not mean you can do it. Selling it requires explaining to people that the country can only afford more real pay if it produces more for people to buy with it. If you pay more money but there is no increase in goods you get inflation.
You then need to reassure people that you not saying they have to work harder or longer hours to raise their output. You want to help them work smarter. They may need training to add more value, or need more automation to speed their tasks.
Government Ministers can urge this but they need to show they can do it in those parts of the public sector they directly manage. The truth is the public sector has been particularly disappointing for productivity growth. Ministers now tell us they can slim the civil service. They should have a comprehensive ban on external recruitment to allow natural waste age to cut numbers. This gives employees more promotion opportunities. ministers could authorise external appointment where there was no suitably skilled person in the current civil service.
It was a strange idea that in the Red Wall seats Labour voters had lent their votes to the Conservatives in 2019. It was an even stranger idea that that meant those voters wanted a Conservative government to behave more like a Labour one.
A vote is a vote. People mean it at the time. They will change at a later election if the party or person they voted for lets them down. In 2019 Conservative voters voted for Conservative ideas and abilities. They wanted levelling up tory style, where government gives people more chances to earn a good living, keep more of their own money, buy a home, get training and education to help them get on in the world. They look for a hand up not a hand out. They did not vote Conservative to have a bigger bureaucracy, more government or higher taxes.
Today in the aftermath of a couple of bad by election results the soul searching by Conservative Ministers should be easy. They should ask why haven’t they yet delivered the lower taxes, the greater freedoms, the better opportunities to start a business, grow a company, own a home and all the other features of a successful growth and prosperity strategy. Why are taxes going up and why is the economy slowing down?
The way to recover is not to double down with Treasury austerity, new taxes and higher taxes. The way to recover is to live the dream, restore the brand – being a Conservative is all about backing people to succeed, getting out of the way of those who can do well and offering appropriate help to those who want to follow them.
Rt Hon Sir John Redwood MP (Wokingham) (Con): This Parliament is the main guarantor of our rights and liberties; it created them in battles over many centuries for the benefit of us all. Would not this great role be strengthened if our Supreme Court were indeed supreme and not answerable to foreign courts that do not understand the mood of the British people and what they expect of their legislators?
Dominic Raab, Deputy Prime Minister, The Lord Chancellor and Secretary of State for Justice: My right hon. Friend is absolutely correct. I know that when he gets a chance to peruse the proposals, he will find those principles and that spirit reflected in the Bill of Rights, and I look forward to discussing these matters with him further.
Rt Hon Sir John Redwood MP (Wokingham) (Con): I thank my right hon. Friend for all that he is doing to advance UK prosperity and growth, including this Bill. The common fisheries policy sunk many of our fishing boats. Can we have a policy to replace that fleet? The EU policy ripped up many of our orchards with grants. Can we have some UK money and a policy to replant our trees? The EU imposed VAT on us and has left us with a burden on our energy. Now surely is the time to use our freedoms and cut VAT.
Jacob Rees Mogg, Minister for Brexit Opportunities and Government Efficiency: My right hon. Friend is right: it is one of our freedoms. In his spring statement, the Chancellor announced some amelioration of VAT. I will ensure that my right hon. Friend’s suggestion is passed on to the Chancellor.
The Treasury tell us that imposing a windfall tax and raising taxes to tackle a budget deficit is exactly what Mrs Thatcher did, so they should do the same again. What they do not go on tell you is Mrs Thatcher only followed that Treasury advice for the first two years. It is true she inherited inflation that was far too high and very weak state finances from a spendthrift Labour government. When she took the Treasury measures it helped put the UK into recession, took the Conservatives to 23% in the polls and needed a change of policy to sort the economy out.
She and the Chancellor shifted policy to relax the squeeze and then embarked on a series of cuts to Income tax, taking it down from 30% to 25%. Various smaller taxes were abolished. The economy started to grow again, which was much needed both to bring the deficit down as revenues picked up, and to cut unemployment which had been far too high in the 1970s.
The latest figures show that Treasury austerity has badly slowed the economy this year compared to the world leading growth of last. Just as last year faster growth meant the borrowing kept on undershooting Treasury/OBR forecasts by a large margin, so now we see borrowing in excess of their forecasts. Let me try and explain again. The amount of borrowing, the gap between spending and tax revenue, is very sensitive to the growth rate. If you grow faster you get more tax revenue in and have less money going out on benefits to the unemployed and low paid. If you sandbag growth there will be less tax revenue coming in and more people need financial support.
So Treasury, give us a growth strategy, not more austerity.
We have the inflation. It is important to avoid the recession. It looks as if we will see peak inflation this autumn as the official forecasts now concede. The delayed increases in domestic heating bills will adversely affect the inflation numbers then and hit people’s budgets again at the next increase.
Next year inflation should come down. It is difficult to believe the prices of the basics could go up again by the magnitudes of the increases this year. Money policy this year is a lot tighter, whereas it was too loose last year. The economy is being slowed by the Bank’s policy and their higher interest rates, and by the big hit to real incomes caused by soaring fuel and food prices. Many people are responding by having to cut back on some discretionary spending to afford the basics. The reduction in demand from these measures will help cool prices.
It does not need a wide range of tax rises on top of the forces slowing the economy. VAT cuts on energy would be helpful, both by cutting the prices of some of the dearest items in budgets, and by returning a bit of cash to people who otherwise have to pass the money to the fuel companies, suppliers and government energy taxes.
Rt Hon Sir John Redwood MP (Wokingham) (Con): What has been the monthly rate of taxpayer subsidy to the railways so far this year? What additional flexibilities could managers use to try to get a bigger proportion of services running even on a strike day?
Grant Shapps, Secretary of State for Transport: My right hon. Friend is right to discuss the subsidy, which has been £16 billion as a whole through covid—or £16 billion committed, which means that we do not have the exact number yet for the amount of that which is still going towards the operations this year. One thing I can say to him is that without that support the railways simply would not have been able to operate. It is the equivalent of £160,000 per individual rail worker. To turn around and call these strikes is a heck of a way to thank taxpayers. We have lost around a fifth of the income from rail. I hear Mick Lynch, the leader of the RMT, claim that the Government are cutting the money that is going to the railways, but that is a fundamental misunderstanding on his part. The money that is missing is the £2 billion of passenger fares that are not being paid because people are not travelling.
Management and Unions need a plan to modernise the railway. Only they can hammer out the detail of services, safety, investment in automation and pay that can help the railway adapt. A business which has lost so much revenue needs convincing ways of wooing back customers and restoring turnover, otherwise it needs to adjust its cost base to the reduced usage of its service.
The best way to resolve the disputes would be an agreement to the joint purpose of restoring revenues. It would be a plan to put more training and automation to work so pay can go up backed by substantial productivity gains. Only an expanding passenger base allied to new ways of delivering good service can bring forward the cash for higher pay than is already on offer.
It is going to be easier expanding rail freight from here with environmental benefit of taking trucks off the road. Wooing back five day a week commuters is going to be more difficult as many like some working at home. Many have been put off five day a week rail travel by high season ticket prices and unreliable services. The railway is not going to sustain its current cost base by just relying on expanding the leisure railway with plenty of off peak discount fares, especially given the difficulties getting enough weekend rail capacity for special events. The railway should be able to slim its cost base without compulsory redundancies if there is a shared wish by the Union to modernise.
Four of the worst junctions on my way to work in Westminster would be easy to improve. The first is the junction of Millbank with Vauxhall Bridge Road on the Embankment. The lights allow twice as much time for traffic coming from the bridge heading north at the junction as they allow for traffic passing along the Embankment. As a result there are regularly unused periods of time when the Vauxhall Bridge northbound lights are green with no traffic, whilst there are nearly always queues along the Embankment requiring vehicles often to await two changes of lights to cross. A simple retiming of lights would cut traffic waits.
The second is the junction of Lyall Street, Elizabeth Street and Eaton Place. There they placed one of those sets of cross roads lights that have all red phases for traffic. I have never seen a pedestrian cross both ways at the same time, who would be the only person needing this all red phase. There are very few pedestrians as it is not a shopping or leisure area. The all red phases should be removed.
The third is the junction of Drummond Gate with Vauxhall Bridge Road. This is one of those junctions designed to maximise the take in fines from unwary drivers, with box junctions that make it difficult for vehicles turning right into Vauxhall bridge Road to find enough road space to do so against red lights ahead. There is plenty of road space for a sensible repaint. The timings of lights at the junction of Bessborough Gardens and John Islip Street does not give enough priority to the main road, adding to the chaos and increasing the back up to the close by Drummond Gate junction.
The fourth is the junction of the A4 with Warwick Road at Earls Court. There is not enough priority given to west east Cromwell Road into London by the lights. The other main flow to turn left out of Warwick Road onto Cromwell Road westbound could also benefit a longer left filter phase with suitable lane markings on the A4.
I give these examples as a few amongst many. We all need to review the failings of our local roads and submit proposals for change to our local Highways authority. I am doing such an exercise for my Wokingham constituency.