John Glen is Chief Secretary to the Treasur, and is MP for Salisbury.
Yesterday’s Budget is an important step on our journey to restore the Conservative Party’s reputation for economic competence. After the adverse market reaction in the autumn to proposals to fund tax cuts through additional borrowing, the Chancellor’s Autumn Statement in November played a key role in regaining market confidence.
While competent crisis management was of course essential in seeing us through some very choppy waters, we now have to push on beyond it, and chart a course to return the British economy to growth. We cannot base our reputation purely on being able to escape from a tight spot: we need to demonstrate we have a long-term plan for the economy, and a vision to increase the prosperity of communities in all corners of the United Kingdom.
Projections from the OBR show that our economic policies are already working and having an effect. Compared to where we were in November, the key metrics are trending in the right direction. Despite the economic headwinds from the war in Ukraine and continued impact of the pandemic, the contraction of the economy is now forecast to be significantly shallower, with both inflation and debt falling faster in the forecasts than thought possible just four months ago.
These things were never predestined to happen, regardless of our policy choices. We are not passive beneficiaries of wider international events beyond our control. The improving economic outlook is a direct result of the Government’s willingness to take the difficult decisions necessary to instil fiscal discipline, reduce borrowing, and cut inflation.
Assessing options to tackle the challenge of economic inactivity has been a key feature of my meetings with the Chancellor in the Treasury this year. The UK continues to perform relatively well compared to many of our peers, but the labour market has still not recovered to where we were before the pandemic. This is not a matter for abstract concern for economists, or only of interest for the personal financial circumstances of those people who have left the workforce. Increasing labour market participation is critical for boosting economic growth and properly funding our public services. I am therefore delighted with the package of measures we have been able to announce this week.
The affordability of childcare has been holding back some parents from returning to the workforce. Therefore, this week’s announcement on expanded provision is very welcome news. Thirty hours of free childcare for every child over nine months will allow tens of thousands of parents to be able to afford to return to the workforce, as well as being a huge benefit to parents already in the labour market and struggling with high childcare costs. Returning to the workforce will also be more attractive for parents on Universal Credit, with changes announced in the Budget to pay UC childcare support up front rather than in arrears.
We are not just focussed on returning more parents to the labour market. A new Universal Support scheme will assist 50,000 disabled people into the workforce and abolishing the Work Capability Assessment will make it easier for disabled people to work. And we are increasing job search requirements for all those who are working under 18 hours a week or not working at all. We are also focused on bringing more people over 50 back into the workforce or incentivising them to stay working.
The pensions annual allowance will increase from £40,000 to £60,000 and the lifetime allowance is being completely abolished, not just increased as the media had been speculating pre-Budget. These measures will make it easier for older people to stay in employment. I know with correspondence from constituents that this change will be particularly welcomed by senior doctors who will no longer be effectively incentivised to retire early. Indeed, the British Medical Association described this policy shift as “an incredibly important step forward” and “potentially transformative for the NHS.”
As well as boosting the labour market, the Budget is forecast to increase business investment. I recognise the discomfort that some colleagues and party members have with the Corporation Tax increase. I have always been instinctively a low tax Conservative. However, we will have the lowest headline rate in the G7 – lower also than under the last Labour government – and the overall tax burden remains lower than Italy, France and Germany. On top of this, we are replacing our Super Deduction policy with full capital expensing, enabling UK firms to deduct the cost of capital investment from their taxable profits – equating to a £25 billion tax cut during over the next three years, which the OBR says will result in three per cent growth in business investment for each year the policy remains in place.
The Budget is also focussed on tackling cost of living challenges. Given ongoing concerns with high energy costs, the Energy Price Guarantee will be extended at £2,500 for three months and we are ending the inequity of those on prepayment meters – often the most vulnerable people in society – paying more than everyone else. On fuel, we are extending the freeze on duty at the pumps for a thirteenth year in a row, which saves the average driver in the UK approximately £200. There is also good news at the pub where draught duty is being frozen, meaning duty will be lower than in supermarkets. With the local pub part of the fabric of communities up and down the country, this will be very welcome and only possible because of the freedoms enabled by our exit from the European Union.
After stabilising the economy with our interventions in the autumn, this Budget sets us up for growth through increasing employment levels and boosting business investment. According to the OBR, the policy measures outlined by the Chancellor in his Budget speech have resulted in the largest upward revision to their growth forecasts in their history. As Conservatives, we should be proud of our economic record and the reality that our recent policy decisions are already having a tangible impact on the economy.
It has undoubtedly been a bruising past 12 months for the Party but, following the Budget, we have a plan to grow the economy and a trajectory ahead of us over the next 18 months which gives us a platform to campaign proudly on our economic record during the next general election campaign.
John Glen is Chief Secretary to the Treasur, and is MP for Salisbury.
Yesterday’s Budget is an important step on our journey to restore the Conservative Party’s reputation for economic competence. After the adverse market reaction in the autumn to proposals to fund tax cuts through additional borrowing, the Chancellor’s Autumn Statement in November played a key role in regaining market confidence.
While competent crisis management was of course essential in seeing us through some very choppy waters, we now have to push on beyond it, and chart a course to return the British economy to growth. We cannot base our reputation purely on being able to escape from a tight spot: we need to demonstrate we have a long-term plan for the economy, and a vision to increase the prosperity of communities in all corners of the United Kingdom.
Projections from the OBR show that our economic policies are already working and having an effect. Compared to where we were in November, the key metrics are trending in the right direction. Despite the economic headwinds from the war in Ukraine and continued impact of the pandemic, the contraction of the economy is now forecast to be significantly shallower, with both inflation and debt falling faster in the forecasts than thought possible just four months ago.
These things were never predestined to happen, regardless of our policy choices. We are not passive beneficiaries of wider international events beyond our control. The improving economic outlook is a direct result of the Government’s willingness to take the difficult decisions necessary to instil fiscal discipline, reduce borrowing, and cut inflation.
Assessing options to tackle the challenge of economic inactivity has been a key feature of my meetings with the Chancellor in the Treasury this year. The UK continues to perform relatively well compared to many of our peers, but the labour market has still not recovered to where we were before the pandemic. This is not a matter for abstract concern for economists, or only of interest for the personal financial circumstances of those people who have left the workforce. Increasing labour market participation is critical for boosting economic growth and properly funding our public services. I am therefore delighted with the package of measures we have been able to announce this week.
The affordability of childcare has been holding back some parents from returning to the workforce. Therefore, this week’s announcement on expanded provision is very welcome news. Thirty hours of free childcare for every child over nine months will allow tens of thousands of parents to be able to afford to return to the workforce, as well as being a huge benefit to parents already in the labour market and struggling with high childcare costs. Returning to the workforce will also be more attractive for parents on Universal Credit, with changes announced in the Budget to pay UC childcare support up front rather than in arrears.
We are not just focussed on returning more parents to the labour market. A new Universal Support scheme will assist 50,000 disabled people into the workforce and abolishing the Work Capability Assessment will make it easier for disabled people to work. And we are increasing job search requirements for all those who are working under 18 hours a week or not working at all. We are also focused on bringing more people over 50 back into the workforce or incentivising them to stay working.
The pensions annual allowance will increase from £40,000 to £60,000 and the lifetime allowance is being completely abolished, not just increased as the media had been speculating pre-Budget. These measures will make it easier for older people to stay in employment. I know with correspondence from constituents that this change will be particularly welcomed by senior doctors who will no longer be effectively incentivised to retire early. Indeed, the British Medical Association described this policy shift as “an incredibly important step forward” and “potentially transformative for the NHS.”
As well as boosting the labour market, the Budget is forecast to increase business investment. I recognise the discomfort that some colleagues and party members have with the Corporation Tax increase. I have always been instinctively a low tax Conservative. However, we will have the lowest headline rate in the G7 – lower also than under the last Labour government – and the overall tax burden remains lower than Italy, France and Germany. On top of this, we are replacing our Super Deduction policy with full capital expensing, enabling UK firms to deduct the cost of capital investment from their taxable profits – equating to a £25 billion tax cut during over the next three years, which the OBR says will result in three per cent growth in business investment for each year the policy remains in place.
The Budget is also focussed on tackling cost of living challenges. Given ongoing concerns with high energy costs, the Energy Price Guarantee will be extended at £2,500 for three months and we are ending the inequity of those on prepayment meters – often the most vulnerable people in society – paying more than everyone else. On fuel, we are extending the freeze on duty at the pumps for a thirteenth year in a row, which saves the average driver in the UK approximately £200. There is also good news at the pub where draught duty is being frozen, meaning duty will be lower than in supermarkets. With the local pub part of the fabric of communities up and down the country, this will be very welcome and only possible because of the freedoms enabled by our exit from the European Union.
After stabilising the economy with our interventions in the autumn, this Budget sets us up for growth through increasing employment levels and boosting business investment. According to the OBR, the policy measures outlined by the Chancellor in his Budget speech have resulted in the largest upward revision to their growth forecasts in their history. As Conservatives, we should be proud of our economic record and the reality that our recent policy decisions are already having a tangible impact on the economy.
It has undoubtedly been a bruising past 12 months for the Party but, following the Budget, we have a plan to grow the economy and a trajectory ahead of us over the next 18 months which gives us a platform to campaign proudly on our economic record during the next general election campaign.