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The Economy
22 May 2024
Lead MP
Bim Afolami
Debate Type
Ministerial Statement
Tags
EconomyTaxationEmploymentForeign AffairsEnergyBusiness & TradeBenefits & Welfare
Other Contributors: 18
At a Glance
Bim Afolami raised concerns about the economy in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
EconomyTaxationEmploymentForeign AffairsEnergyBusiness & TradeBenefits & Welfare
Government Statement
The Minister, Bim Afolami, announced that the Office for National Statistics reported a fall in consumer prices index inflation to 2.3%, down from over 11% when the current Prime Minister took office two years ago. This is described as the fastest reduction in nearly half a century and lower than major economies such as the United States, France and Germany. Additionally, food inflation has fallen for 13 consecutive months and energy bills are now over 25% lower than a year ago.
The Minister attributed these improvements to government decisions including reduced borrowing and support for the Bank of England's efforts to control inflation. He also highlighted that the effective tax paid by someone on an average salary has decreased from 24% in 2010 to 19%, resulting in a 35% increase in after-tax income for those on the lowest legally payable wage since 2010.
The Minister discussed the International Monetary Fund's recent report, which upgraded its forecast for UK growth from 0.5% to 0.7%. He emphasised that the focus has been on job creation, welfare reform, and business investment, with measures such as full expensing leading to a £15 billion increase in business investment over coming years.
The minister emphasised that despite improvements, more bold reforms are needed for continued growth and productivity, but ultimately argued that the government's plan is working and should not be changed.
John McDonnell
Lab
Glasgow South
Question
The Labour MP questioned whether the Minister truly believes that the UK is in a good place despite subdued long-term growth prospects as confirmed by the IMF. He also asked if the Government’s plan to cut taxes would benefit ordinary people rather than exacerbate inequality.
Minister reply
The minister responded by emphasising that inflation has returned to normal levels and that wages are rising, thus benefiting families around the country. He asserted that reducing taxes will lead to more economic growth without generating inflation.
Mary Robinson
Lab
Newcastle upon Tyne East
Question
The MP questioned the Government’s track record on job creation and welfare reform, citing higher unemployment in France as proof of inflexible labour markets leading to high unemployment.
Minister reply
The minister rebutted by asserting that the UK has one of the most flexible labour markets in Europe, contributing to low unemployment compared to France. He stated that Labour’s approach would impose burdens on employers and turn the job-creating factory into an inflexible French-style labour market.
Tulip Siddiq
Lab
Hampstead and Highgate
Question
I thank the Minister for advance sight of his statement. Of course it is welcome that the rate of inflation is finally slowing after three years of the Government missing every single target, but the tone-deaf victory lap we are seeing from the Government today will feel like a slap in the face to the British people who, after 14 long years of Conservative chaos, are still significantly worse off.
Minister reply
Let me start by welcoming the shadow Minister’s remarks, and by saying that no one on the Government Benches—certainly not me—feels that times are not still tough for many millions of people. We are acutely aware of that, which is why we have worked so hard over the last few years to make the difficult decisions that are required for us to guide the country through the difficulties wrought by covid, the biggest pandemic in 100 years, and by the energy shock from the war in Ukraine.
Harriett Baldwin
Con
West Worcestershire
Question
I welcome the Minister’s statement, which was crammed with useful facts and statistics. Yesterday, our Committee met representatives of the IMF in private, and we had a very interesting and informative discussion.
Minister reply
I do agree, but let me draw attention to a specific point that is often ignored. The Chancellor’s decisions over the last two fiscal events have set the country up for growth in the future.
Question
The Government, understandably, would like to paint the latest inflation figures as a win, but I think the House will forgive me if I do not join them in their victory lap. The reality for numerous households across Scotland, many of whom are continuing to struggle, is that the cost of living crisis is far from over.
Minister reply
My response to the hon. Gentleman, whom I respect deeply, is twofold. First, we are at an inflection point and the job is not complete. We know that many millions of people are suffering, which is why we are continuing to improve their incomes through cutting their taxes.
Question
Inflation is now lower than in France, Germany or the eurozone, growth has been upgraded by the IMF, and Britain has become the world’s fourth biggest exporter.
Minister reply
My right hon. Friend has put that incredibly well. Very good things have happened to our economy over recent months, particularly in my own area of financial services.
Dawn Butler
Lab
Brent East
Question
Sometimes this House really is a theatre. The Minister has come to the Dispatch Box all jubilant, but my constituents queue outside food banks for hours, from nine o’clock in the morning until nine o’clock at night.
Minister reply
My response is that this Parliament has seen an unprecedented hit to people’s living standards because of covid—a once-in-100-years impact. Might I remind the House that this Government spent £450 billion in supporting the economy? We supported people through programmes such as furlough, supported small businesses through discretionary grants, and supported the NHS.
Robert Syms
Con
Poole
Question
Over recent months, we have had a number of statistics on the economy that have been unalloyed good news for this country. It is good news that the economy is doing better, that inflation is down, that growth is up and that trade is up. That makes us all richer, and provides more jobs and employment, which should be rejoiced in by everybody in this House, including the Opposition, who might actually end up in government and inherit the benefits of some of the things that this Government are doing. In truth, I am always a little surprised by how miserable the Opposition get when good news comes along.
Minister reply
My hon. Friend makes an important point about those on the Labour Benches. I must admit that I disagree with him on one key point: the idea that they might inherit this. We are not complete yet. We know that the economy still needs to continue to turn and that inflation needs to come down. We hope that that will lead to falling interest rates in due course, and that the measures we have put in place will come to fruition over the next Parliament.
Patricia Gibson
SNP
North Ayrshire and Arran
Question
The UK economy is smaller now, and living standards are lower now, than at the start of this Parliament—the first time this has ever happened. Does the Minister agree that it is a sign of the Tories’ increasing desperation that they consider it a cause for celebration that the UK economy has stopped shrinking? Growth is still lower than in Europe, Asia, the Americas and Australia, and we continue to pay the price of Brexit and Tory incompetence.
Minister reply
I am afraid I disagree with the hon. Lady on points of fact. I have already set out so many statistics that show that things are significantly improving in the economy, and at a faster rate than that experienced by most of our competitors in Europe. I completely disagree with her assessment.
Richard Fuller
Con
North Bedfordshire
Question
The Minister was right to update the House on the positive progress that we are making with inflation; right to make the point that people are continuing to find economic difficulties, and that we need to stick with the Prime Minister’s plan; right to point out the terrible risks to the economy posed by the Labour party’s polices on labour markets and taxes; and right to say that there have been external factors, and that policies to tackle one-off external factors are different from one’s policies looking forward. This Government have ended the period of quantitative easing, or printing money, and moved to quantitative tightening, or paying back money. The IMF’s report says that, by 2025, the balance sheet for the Bank of England should be settled. Will the Minister look at the longer-range forecasts that the Office for Budget Responsibility has put out, and see what flexibility they provide for the Government to cut taxes or increase expenditure?
Minister reply
I thank my hon. Friend for a characteristically thoughtful and informed question. I will indeed look at what he said about the Bank of England’s balance sheet being settled by 2025, and I will talk to him about that in due course.
Chi Onwurah
Lab
Newcastle upon Tyne Central and West
Question
Like the Chancellor, the Minister likes to talk about the difficult decisions that Conservative Administrations have made. The cost of a family shop has risen by £1,000 since the last election. The difficult decisions are the ones that families in Newcastle have to make every time they go to a supermarket. Is it not the case that the decisions that his party has chosen to make—austerity, stealth taxes on working people, and crushing growth out of the economy before crashing it altogether—are why my constituents are worse off?
Minister reply
I am afraid I disagree with the hon. Lady. It is very important that this House recognises and admits that, because there was a once-in-a-generation pandemic that cost the Government over £400 billion in supporting people, it was necessary for the tax burden to rise for a time to help pay for that. That was a difficult and responsible decision. Now that we have moved into a period of relative calm, there is choice about what we want the economy and our fiscal position to look like over the medium term. On this side of the House, we choose high business investment, high growth and lower taxes on working people, whereas the Opposition choose more union power, higher borrowing and higher taxes. I think the British public are going to stick with us.
Louie French
Con
Old Bexley and Sidcup
Question
The latest UK economic data is welcome news, with inflation falling again, real wages rising and the UK forecast to grow faster than many of its peers. The International Monetary Fund is now recommending that the Bank of England cut interest rates, and I agree. What does the Minister think of the IMF’s view?
Minister reply
As my hon. Friend knows, it is for the Monetary Policy Committee of the Bank of England to determine the policy on interest rates, but we hope that working in partnership with the Bank of England to cut inflation will mean that at some point later in the year interest rates will start to come down, as the IMF has suggested, as a result of inflation being at target.
Florence Eshalomi
Lab Co-op
Vauxhall and Camberwell Green
Question
In response to the Minister’s last reply, even if interest rates are cut later this year, that will not make an impact for a number of my constituents in Vauxhall. According to the Bank of England, people have seen their mortgage and rent go up by over £240 a month, as my hon. Friend the Member for Brent Central (Dawn Butler) said. Over 10.1 million people are falling behind on their bills, according to research by Stop the Squeeze. The Resolution Foundation has found that annual bills in 2024 are now 67% higher in real terms than in 2021. This is not a time to celebrate. I know that, at my advice surgery in a week’s time, my constituents are going to come to me raising these issues. The fact is that they cannot afford to heat their home or keep up with their bills. Yes, these statistics may look good, but will the Minister accept that for real people this is another slap in the face?
Minister reply
What I will certainly accept is that there are millions of people in this country for whom the cost of living crisis is still real. That is why we are taking the action that we are taking. That is why working people—[Interruption.] As a result of cutting national insurance, a person on an average salary is £900 better off than they would have been a year ago. That is why we are focusing hard on making sure we bring down borrowing, rather than increase borrowing as planned by the Labour party. What I would say to the hon. Lady’s constituents if I were to speak to them at her surgery is that the economy is on the right track, that we are at the point where the economy is starting to turn the corner and that, if they go with Labour’s leadership, things are going to get a lot worse. That is why we need to keep on the plan that we have set out.
Neil Hudson
Con
Epping Forest
Question
I thank the Minister for the encouraging economic update. It is so disappointing when we get good news on the economy and it is talked down by the Opposition. Inflation coming down to 2.3% really shows that the economic plan from this Government is working. With national insurance reductions, pensions increases, boosting jobs and a growing economy, does he agree that it is only the Conservatives that can be trusted to manage the economy soundly?
Minister reply
I agree with my hon. Friend, who is a fantastic champion for his constituents in this House, as everybody in this House knows. The only thing I would add to what he has said is that we on this side of the House know what it is to take responsible decisions and take them for the long term.
James Sunderland
Con
Bracknell Forest
Question
Given the global macro-shocks faced during this Parliament, particularly the pandemic and the Russian invasion of Ukraine, it is quite remarkable that we have got inflation back down to 2.3%. It is testament to good fiscal policy, and we are leading the way within the G7. Does the Minister agree that, for those constituents living in Bracknell Forest who want low inflation, higher employment, higher wages and higher growth, sticking to the plan is absolutely the right thing to do?
Minister reply
My hon. Friend is a brilliant champion for Bracknell Forest, a part of the country that I know well, and I completely agree with his remarks.
Jack Brereton
Con
Ruislip, Northwood and Pinner
Question
This positive economic news is extremely welcome, and I have also welcomed the action taken by the Government to reduce the amount of tax on working families. Given this positive economic outlook, will my hon. Friend speak to the Chancellor about increasing the personal tax allowance, particularly to help working families but also to take more pensioners out of paying tax?
Minister reply
As my hon. Friend knows, the Chancellor keeps all taxes under review. I will ensure that he has heard my hon. Friend’s comments and pleas.
Christchurch
Question
Does my hon. Friend accept that today’s good news would have been even better if the Government had implemented the public sector exit payments restrictions that were legislated for in 2016 and were the subject of a consultation that ended 17 months ago, in respect of which they are apparently unable to agree a response? Surely the Government should be able to do something about this and save the £2 billion that this has so far cost. Is not this an example of a proposal being sabotaged by the civil service?
Minister reply
I have been in correspondence with my hon. Friend a few months ago on this very question, and I would be happy to engage with him on it again.
Shadow Comment
Tulip Siddiq
Shadow Comment
The shadow representative, Tulip Siddiq, criticised the Minister’s statement as tone-deaf, noting that while inflation has slowed after three years of missed targets, families are still worse off with a typical family shop having increased by nearly £1,000 since 2019. She highlighted the poor growth record under the Conservatives and pointed out that if the UK had grown at the OECD average in the last 14 years, it would be £140 billion larger with additional tax revenues.
Siddiq also noted selective quoting from the IMF report which confirmed lowest G7 growth under the Conservatives. She argued that a Labour government would not celebrate meeting inflation targets after years of stagnant growth and instead pledge economic stability and growth.
She emphasised that a Labour government's plans are fully costed unlike the Conservatives' unfunded commitment to abolish national insurance, and argued for an election due to the exhausted and failing Government.
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