Mr Pat McFadden (Wolverhampton South East) (Lab) (Urgent Question):
To ask the Chancellor of the Exchequer if he will make a statement
on today’s GDP figures. The Economic Secretary to the Treasury
(John Glen) Like other advanced economies, the UK is affected by
global economic challenges, including the unprovoked Russian
invasion of Ukraine. As the Chancellor said a few weeks ago, “A
perfect storm of global supply shocks is rolling through our
economy...Request free trial
Mr (Wolverhampton South East) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he
will make a statement on today’s GDP figures.
The Economic Secretary to the Treasury ()
Like other advanced economies, the UK is affected by global
economic challenges, including the unprovoked Russian invasion of
Ukraine. As the Chancellor said a few weeks ago,
“A perfect storm of global supply shocks is rolling through our
economy simultaneously.”
At the same time, the impact from the wind-down of the national
covid testing scheme is dragging on UK GDP data. Overall, the
figures for April, published by the Office for National
Statistics this morning, show that output fell by 0.3% on the
month, with the services sector falling by 0.2%, and production
and construction declining by 0.6% and 0.4% respectively. As the
ONS notes, the fall in GDP on the month is driven by the impact
of the wind-down of the NHS covid testing programme. Testing
volumes fell by 70% from March to April, which, alongside the
impact from vaccines, detracted 0.5 percentage points from GDP
growth in April. Looking through the impact of falling tests, we
see that the rest of the economy actually grew by 0.1%.
Importantly, GDP is still 0.9% above pre-pandemic levels, and
support provided over the past two years has put the UK economy
in a good position to deal with any economic headwinds, with
record numbers of employees on payrolls and a strong economic
recovery from the pandemic.
As the Chancellor has also said:
“The next few months will be tough. But where we can act, we
will.”
The Government are taking significant action to support
households this year, having announced an additional £15 billion
of further support for households just over a fortnight ago, on
top of the £22 billion announced at the spring statement. In the
longer term, the Chancellor has set out his vision for a lower
tax, higher growth, higher productivity economy based on the
three pillars of capital, people and ideas. The plan for growth
and the tax plan represent an ambitious strategy for boosting
growth and productivity in the years ahead. The Government’s
priority going forward is to put those into effect, including
through significant investment in infrastructure, skills and
innovation.
We will of course keep the data under close review, and that
includes monitoring the economic impact of Russia’s illegal
invasion of Ukraine, but our focus will continue to be on the
best solution for all: a growing economy that supports high-wage,
high-skilled jobs.
Mr McFadden
I am grateful to the Minister for his response. GDP down 0.3% in
April. A fall of 0.1% in March. Services down 0.3%. Production
down 0.6%. Construction down 0.4%. Inflation at 9%. Tax promises
broken. The trade deficit at £24 billion. The pound falling
against the dollar. The director general of the CBI saying
business leaders are “in despair”. The OECD forecasting that,
next year, the UK will have the lowest growth of any G20 economy,
with the sole exception of—Russia.
That is what the Government are presiding over. Britain is going
backwards under the Conservatives. Our businesses, universities
and people are all great, but they do not have the partner they
need in this Government. The chaos is affecting more and more
areas of life: passports, driving licences, GP appointments,
A&E waiting times, airports and delays in court trials. Time
after time what we used to take for granted is now another
feature of Boris Johnson’s backlog Britain.
Those on the Government Benches had a chance to change direction
last week. They had a chance to install new leadership that might
have given us some hope of a greater sense of grip on all this.
But what did they do? They decided that the best person to turn
the economy round, to sort out the chaos and the backlogs, and to
bring the qualities of focus, attention to detail and sustained
delivery to these matters was the current Prime Minister. That
was the judgment they made.
The question for the Minister today is simple: after making that
judgment—I do not know what he did, but that was the collective
judgment—and choosing to continue with the leadership that
brought us here, what will the Government do now to turn matters
around, and why on earth should anyone believe that the result
will be different from what went before?
As ever, I am grateful to the right hon. Gentleman for his
remarks. I do not accept his characterisation of the situation.
What I said in my response to him was that today’s data point can
be explained by the specific impact of the rapid fall-off in the
testing programme. Mass testing ended on 1 April, and that
constituted 0.5% of headline growth. We have also seen the impact
of the Russian invasion and the impact on the supply chain across
the economy. Many economies across the G7 are experiencing a
significant impact on their economies and their level of
growth.
The Chancellor has been clear in his long-term plan for growth
and in his Mais lecture that the Government are committed to
investing in research and development, investing in
infrastructure and looking at how we can adjust the fiscal burden
for business, in particular, to enable that growth to happen. Of
course, in subsequent fiscal events, those options remain open to
him.
(Wokingham) (Con)
Why are the UK Government the only Government of an advanced
country making a big increase in the tax burden this year and
next, at exactly the same time as we are seeing very necessary
monetary tightening to control inflation and a huge hit to net
incomes from that inflation itself? Is that big tax rise not
bound to make things worse and slow the economy too much?
We always listen carefully to my right hon. Friend. As he will
know, we cut taxes earlier this year for hundreds of thousands of
businesses though an increase in the employment allowance. We
have also slashed fuel duty and halved business rates for
eligible high street firms. We will continue to support growth
through tax incentives, including the annual investment allowance
and the super deduction—the biggest two-year business cuts in
modern British history.
As I said in my response to the right hon. Member for
Wolverhampton South East (Mr McFadden) a few moments ago, we look
forward to working closely with him and Back Benchers to
construct the right agenda going into the future.
Mr Speaker
I call the SNP spokesperson.
(Glasgow Central)
(SNP)
It is interesting that the Minister talks about the covid testing
scheme. Is it perhaps the case that the covid testing scheme is
artificially inflating GDP, rather than the opposite way around?
The UK is lagging behind every single OECD country apart from
Russia. Manufacturing, construction and services are all
suffering. That has all been made worse by a Brexit that Scotland
did not vote for.
British Chambers of Commerce research shows that input inflation
is running at 17%. Businesses simply cannot afford to absorb
those costs when faced with increased energy prices with no
additional support, employee costs through the national insurance
tax hike—a tax on jobs—and wage pressures, so will he provide
extra support to businesses to protect them and their consumers
through this period, or will he wait until these additional costs
in the supply chain are further passed on to the already
struggling consumer? How does he expect people to eat when food
prices are soaring, and for manufacturers to make things in
factories when they cannot afford to get the goods to produce
them never mind get them out into the shops and have people buy
them?
Most people across the country will be very grateful to the Prime
Minister for the judgments made on the vaccine roll-out and on
the testing regime that followed. Quite obviously, given the
scale of that intervention, it was going to have a significant
impact on the economy and the growth figures overall. The
Government have never been complacent about the impact of the
inflation levels on the people of this country. That is why just
two weeks ago the Chancellor introduced a significant package of
interventions in a number of dimensions that focused on the most
vulnerable—those who will not be able to earn more, particularly
those on means-tested benefits, the disabled and universal
additional support for pensioners. Respectfully, I do not accept
the hon. Lady’s characterisation of how the Government have
handled the situation, but those are the facts, as she well
knows.
(Winchester) (Con)
The Minister will be acutely aware of the perfect storm of
inflation and surging energy costs, which UKHospitality warned
about just last week. Kate Nicholls warned that the sector is
facing as big a crisis, if not bigger, than there was during the
pandemic. One suggestion is for a temporary reduction in VAT on
business energy bills from 20% to 5%. Is the Treasury is tempted
by that idea to stave off what could otherwise be significant job
losses in the sector?
My hon. Friend always makes constructive suggestions. He will be
aware of the interventions that have already been made, including
the cut on VAT on energy efficiency measures, equivalent to £240
million, as well as the £6.7 billion of investment across this
Parliament in energy efficiency measures. None the less, he makes
a reasonable point and I am very happy to follow it up with him
and discuss it further as we construct that set of interventions
in the autumn.
Sir (East Ham) (Lab)
It is, I think, clear that, as anticipated, we are starting to
see an economic penalty from the new barriers to our trade with
the European Union. Does the Minister agree that we need to work
hard to improve relations with the EU with a view to reducing
some of the barriers that are causing problems for us?
Absolutely. We must always, with all our trading partners, seek
to develop the best possible relationships. That has been my
objective in conversations that I have had on visits to Berlin,
Luxembourg, Madrid and the US over the past six months on
financial services and as regards the work that the right hon.
Gentleman is undertaking as we advance the conversation with the
Swiss on the mutual recognition agreement. I was there last week
to build on that. It is absolutely right that we build those
trading relationships in goods and services across the globe in
markets that are mature and in those that are yet to develop
fully.
(Dudley South) (Con)
With the largest ever research and development budget, the
Government are securing the UK’s status as a science superpower.
Does my hon. Friend agree that when it comes to growth that
status is vital in making sure that we attract high-skilled,
high-paid jobs? Does he also agree that locating the Advanced
Research and Invention Agency in the west midlands will allow the
west midlands to lead the growth that the UK needs and
deserves?
My hon. Friend predictably, and reasonably, makes a plea for
investment to be located in his constituency, but he also draws
attention to the significant investment of £20 billion in R&D
by 2024-25. He is right to stress that to get a
high-productivity, faster-growing economy we need to make those
sorts of strategic investments and build on what we have already
done. I will look constructively at his suggestion about his
constituency and region.
(Leeds Central) (Lab)
Figures published recently by Her Majesty’s Revenue and Customs
show that the number of UK businesses exporting goods to the
European Union fell by an astonishing 33% between 2020 and 2021.
Do the Government recognise that the cost, bureaucracy and
paperwork that they have imposed on businesses, particularly
small ones, are the principal cause of that loss of export
opportunities for British firms?
No, I do not. I accept that that was a challenging period for
economies everywhere. There was a period of adjustment, and the
Government will be working in a co-ordinated fashion to remove
any frictions and to ease the passage of trade, particularly for
smaller businesses.
(Hitchin and Harpenden)
(Con)
Much of the discussion in the House today has been about the
fiscal aspects of inflation, but a huge part of the rise in
inflation in this country and across the western world is the
monetary system, in particular quantitative easing, which has
continued long beyond the financial crisis, when it was put in
place. We all know the Bank of England is independent in setting
interest rates, but what is the Treasury’s view on working with
the Bank of England to bring down inflation, bearing in mind the
significant impact that quantitative easing has had on that? Will
the Minister say a bit more about that?
As hon. Members would expect, the Treasury has a strong and
frequent dialogue with different members of the Bank of England
and deputy governors. However, our main inflation tools for an
independent monetary policy—fiscal responsibility and supply-side
activism—will remain the best weaponry for dealing with the
challenges we face, and we will work in a co-ordinated fashion
with an independent Bank of England to address those
pressures.
(Edinburgh West) (LD)
Today’s figures should be a wake-up call to the Government.
Instead of reciting a list of events that are affecting other
countries across the world and being better dealt with by other
Governments in the G7, do the Government not recognise that the
time has come to change direction? They must get away from the
massive tax hikes that are pulling the squeezed middle into debt
and creating misery across this country—tax hikes that include
the £11 billion national insurance hike, which was wiped out by
the Government’s own incompetence in not insuring against the
money created for quantitative easing. Will the Government
recognise that they are getting it wrong and, instead of making
excuses, act to change things?
The Government will always look constructively at all the
options. In light of the representations made across this House
and across the country for more interventions to support those
facing increases in the cost of energy at home, we made those
interventions. The Chancellor has made clear that we will reform
and cut taxes on investment in the autumn to spur that growth and
productivity, and we are working closely with industry on the
best possible way to make those interventions.
(Stroud) (Con)
Like most MPs, in my constituency I have businesses that the
Government spent billions of pounds supporting through the
pandemic that are now incredibly stressed by the current
conditions. Most understand that the state cannot fix everything;
they are looking at wider options and not expecting hand-outs. UK
hospitality businesses are asking the Government to look at
pausing green levies for businesses to relieve energy cost
pressures, as other countries are doing or are considering. Will
my hon. Friend say more about what the Treasury are looking at in
that regard and whether that is something they are seriously
considering?
In Gloucestershire, as across the country, we remain focused on
the challenges facing both small and large businesses. As my hon.
Friend mentions, during the pandemic we made a number of
sector-specific interventions for retail, hospitality and leisure
businesses, which will continue to benefit from the business
rates holidays. We are keen to ensure, however, that we achieve
better productivity, with more investment in capital, in ideas
and in measures that will lift us to a new level of growth. That
means interventions across the whole economy.
(Ellesmere Port and Neston)
(Lab)
In the past week or so I have been contacted by a number of
community nurses at their wits’ end because it is costing them
more to travel to see patients than they can claim back in
mileage allowance, and they are not alone—taxi drivers, couriers
and others, such as domiciliary care workers, are struggling
because of the surge in fuel costs. The Government have already
taken 5p off fuel duty, but given that they have raked in far
more in increased VAT receipts since then, how much more has the
Treasury recovered in VAT receipts this year?
Perhaps unsurprisingly, I cannot give the hon. Gentleman that
figure at the Dispatch Box at this point, but we have introduced
timely, temporary and targeted interventions. We recognise with a
real sense of empathy the fact that people will be struggling. We
have been very clear from the time we made this series of
announcements and over the past six months that we will not be
able to ameliorate the impact of every single additional cost.
The key intervention we need to make is to encourage that growth
and productivity in the economy in the context of fiscal
responsibility and the commitments we have made to intervene so
far.
(North East Bedfordshire)
(Con)
My right hon. Friend has rightly spoken about the importance of
growth in bringing together people, capital and ideas, but there
is a fourth element, which is regulation. What Conservatives want
to see is a comprehensive Government strategy for light-touch,
pro-growth deregulation. Can he tell me what he is doing in his
Department to set an example to other Departments of achieving
better regulation that will support growth?
Yes, I can. In a few weeks’ time I shall introduce to the House a
financial services and markets Bill that will fundamentally reset
the way that our financial services industry, which constitutes
10% of the economy, will be regulated into the future. That will
be underpinned by strong, independent world-class regulators in
the Prudential Regulation Authority and the Financial Conduct
Authority, but with an obligation to look at competitiveness and
global growth as a secondary objective. That is absolutely
imperative. We must make sure that we have an economy that takes
account of what is going on elsewhere and regulates
accordingly.
(Kingston upon Hull North)
(Lab)
In the coalition years, we heard from the Government about
rebalancing the economy, and under Chancellor Osborne and the
northern powerhouse, we were told that we were going to see the
proceeds of growth fairly shared across the country. Will the
Minister say something about the flagship levelling-up agenda,
how it will be implemented when we face a no-growth economy, and
whether the levelling-up agenda will really mean levelling down
for everybody?
No, it will not. It will involve targeted investments across the
country in schemes that will give us a lift in productivity and
address the fact that under previous Governments, despite all the
rhetoric, there was not that reset in investment across other
parts of the country and we did not see the level of growth that
was anticipated.
(Brecon and Radnorshire)
(Con)
I am grateful to the Treasury for the £77 billion package of
support that will stand alongside hard-pressed families and drive
the growth that we need to see. But as I drove into central
London this morning I saw fuel prices cheaper than where I live
in Brecon. Rural fuel costs are simply horrendous, and with next
to no public transport, that is really hampering growth in rural
areas. Can my right hon. Friend confirm that the Treasury will
continue to monitor that aggressively?
Absolutely we will. It is very concerning that we are not seeing
the savings passed on and we will continue to look very carefully
at what is happening.
(Eltham) (Lab)
The Minister has tried to explain away today’s disastrous figures
by suggesting that it is mainly to do with the winding down of
mass covid testing. That stretches credulity. Today the Office
for National Statistics said:
“All main sectors contributed negatively to growth in April
2022”.
Does that not show that the problem is much more widespread than
the Government are prepared to accept?
No, I think there is a pretty clear consensus that the rapid
wind-down of the testing had a significant effect—around 0.5% of
GDP. If that had not happened, we would have seen very modest
growth during this past month.
(Stoke-on-Trent South)
(Con)
A recent report shows that Stoke-on-Trent is set to grow jobs
third-fastest, so does my hon. Friend agree that the record of
this Government economically should be judged by our jobs miracle
and in particular our efforts to level up our whole country with
better skills and better paid employment right across it?
Absolutely. It is clear we are seeing the best unemployment
figures for well over a generation. It is very pleasing to see
the impact that is having on constituencies such as that of my
hon. Friend. It is important that we build on that and look to
increase that investment to get businesses investing in new
capital and more productive jobs to increase productivity in the
economy as a whole.
(Rochdale) (Lab)
The Minister has already conceded that the Treasury wants to
reduce friction with our European trading partners—that is the
right thing to do—but can he tell the House whether Treasury
policy agrees that this is the right time to rip up the Northern
Ireland protocol and risk a trade war with Europe?
Clearly in different markets there will be different challenges.
We must make sure that we have a deep dialogue and look to find
consensus. Where we cannot, we must take action.
(Rhondda) (Lab)
Does the Minister accept that one of the problems in lots of
sectors is that they simply have not got enough staff to employ,
let alone staff with the right skills? For instance, in the
construction industry, there are projects on hold because they
cannot get enough construction workers. We have farmers ploughing
onions back into the fields, because they do not have enough
people to harvest them. Last year, 25% of British strawberries
did not get picked. We have bars, hotels and restaurants failing
to open full-time because they do not have enough staff. How do
we make sure that we have the staff—the workers—to be able to
grow the economy?
The hon. Gentleman will also know that the Government invested in
a seasonal workers scheme for 30,000 across agriculture, which
has made a significant impact. We will continue to work with
industry to see what further interventions can be made and need
to be made.
(North Ayrshire and Arran)
(SNP)
Cuts to VAT on fuel duty are now beyond urgent. Some £46 of tax
is paid on the average fuel tank, as fuel prices rocket to new
highs. As households and businesses struggle, the Treasury is
raking in additional billions in VAT on fuel, which is driving
inflation across the whole economy. Finally, can we at last have
a temporary 10% reduction in VAT on fuel to assist households,
businesses and consumers and to help get inflation back under
some kind of control, which will help everyone?
The hon. Lady will know that just two weeks ago, the Chancellor
came to this Dispatch Box and made a series of targeted
interventions, in a greater way than many were calling for, to
give assistance to the most vulnerable in our society—to
pensioners, to those on means-tested benefits and to the
disabled—with more support for pensioners on top of that. She
will also know that as we approach the fiscal event, we will look
at the state of the economy and the best possible interventions
to assist not only that growth narrative, but the most
vulnerable.
(Stoke-on-Trent North)
(Con)
It does not shock me that the Labour party uses any opportunity
it has to come in here and bash Britain and sneer at places such
as Stoke-on-Trent. It is thanks to this Conservative Government
and a Conservative-led council that thousands of new jobs have
been created through the successful Ceramics Valley enterprise
zone. We also have the 500 new Home Office jobs and up to 1,700
new jobs thanks to the Kidsgrove town deal. Does the Minister
agree that it is this Government who are putting places such as
Stoke-on-Trent firmly on the map?
I do not think Stoke-on-Trent could have a better advocate than
my hon. Friend, with his passionate desire to highlight the
successes going on in his constituency. I absolutely agree that
it is that positivity, and focusing on interventions that make a
real difference to people who live in his community, that people
will remember as we move forward.
(Strangford) (DUP)
I thank the Minister for his answers. In Strangford, small and
medium-sized businesses are the backbone of our society. Some of
them are crumbling at present due to high transport costs, which
are heightened in Northern Ireland due to the Northern Ireland
protocol. Can he confirm whether the Chancellor and the Treasury
will follow other nations in substantially reducing fuel duty to
aid transport costs as well as disposable incomes for families,
so that money can go back into the local economy and everyone
will gain?
The hon. Gentleman makes a reasonable point about the challenges
facing the rural economy, of which I know that he has great
personal experience and experience in his constituency. That is
why, as we made clear, there will be an additional £500 million
to supplement the household support fund and bring it to a total
of £1.5 billion, so that local authorities can give additional
money to those most affected where existing measures have not
been helpful.
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