Shadow Leader of the House Jesse Norman criticises the Chancellor’s Spring Statement in which her growth forecast has been halved, she increased cuts to welfare benefits, and has a projected record-high tax burden by 2027-28 with the threat of more tax rises to come.
Jesse Norman (Hereford and South Herefordshire) (Con)
May I start by thanking the whole House for their wonderful messages of condolence during last week’s business questions? I could not be more grateful. I single out, in particular, the Leader of the House for her very gracious remarks.
I turn from fathers to mothers, as this Sunday, of course, is Mother’s Day. The infant shadow Leaders of the House have been instructed—not that they needed it—on how to manage the occasion. I am sure that the whole House will want to join me in celebrating mothers at the weekend, and expressing ourselves in all kinds of ways to thank our mothers and the mothers we have among us for all the work they do.
This has been the week of the spring statement. The House will recall the October Budget in November of last year. It was described as a once-in-a-generation Budget, with no tax rises to follow. This week we have seen that the Chancellor’s own growth forecast just four months later has been halved, and she has increased cuts to welfare benefits. That follows the interesting strategy of abolishing NHS England, having just fired all the team running it. The tax burden is on track to hit a record high in 2027-28.
We should give credit where credit is due—the Chancellor has protected capital investment, which is a very important and correct decision—but there have also been wheezes. I am sorry to say that she has somewhat pulled the wool over the eyes of the Office for Budget Responsibility in relation to housing growth, which is the Government’s new “get out of jail free” card. It has never been included in an OBR estimate before, and it is very doubtful and unlikely that it will happen in any case, even at those levels—the target has already been downgraded from 1.5 million houses to 1.3 million houses—because of the planned upheaval in local government. Meanwhile, the immensely damaging Employment Rights Bill goes entirely unscored economically by the OBR. We will see what it says about that piece of legislation next time around.
The brutal fact is that although the Government claim to prioritise growth, growth has halved since they came into power. They have talked about little else, but even their own forecasts do not show growth getting back even to 2% by the end of the decade, and every major independent expert forecast of the economy’s future growth is lower than that of the OBR.
What do we see if we look more closely? The spring statement is not really about work at all; it is about moving people from welfare into lower-paying welfare. The cut to universal credit announced last week has been followed by a freezing of universal credit—why? It is because that appears to hit the Chancellor’s own fiscal headroom number to the decimal point. Last week we heard all the rhetoric about the moral case for nudging people back into work, but now it seems that this is actually an accounting exercise, and the economic and moral justification for the policy has been lost sight of.
The second point is the question whether artificial intelligence, which the Government have greatly emphasised, will actually have the effect of increasing growth. The Chancellor suggested that this idea was somehow obvious and conventional wisdom, but that is very far from true. The Nobel prize-winning economist Bob Solow famously said that the effects of the IT revolution could be seen everywhere except in the economic numbers. Other countries are scaling and deploying artificial intelligence with massive speed, and many experts believe that AI could increase unemployment and inequality, and raise the costs of retraining people and reintegrating them into the workforce. Far from creating economic growth, the advent of AI could end up forcing a Government—possibly this Government—into even more spending than they presently contemplate.
Finally, we get to the vexed and much-discussed issue of so-called fiscal headroom—or, to use a more technical phrase, the goolies-in-a-vice problem. It has been suggested that the definition of insanity is to keep doing the same thing expecting a different result. So far, we have seen minimal fiscal adjustment at the statement, and meanwhile the Chancellor has managed to recreate the same constraining conditions that existed beforehand. This is a situation entirely of the Government’s own making. It was the Chancellor’s decision to choose these fiscal rules, and it was her decision then to take measures that undermined economic growth. She has staked her own credibility and that of the Government on those decisions. The result is that we will now have endless uncertainty and avoidable speculation about the fiscal position every week, through the comprehensive spending review and into the autumn Budget.
The Chancellor has refused to rule out making more cuts to spending. Even so, she may have to impose tax rises, and those tax rises could come even sooner than anticipated if the US decides to go ahead with the tariff it has suggested. As such, my question is this: what will the Leader of the House feel in her own heart, and what will she say to her Cabinet colleagues over the next few weeks, as the full effects of these terribly damaging decisions become clear?