Budget Resolutions and Economic Situation
It is a pleasure to be able to contribute so early in this debate. I speak as a former Treasury Minister in the previous Government who sat behind four Chancellors in different scenarios. I acknowledge the enormous challenge that every Chancellor faces in trying to reconcile so many competing pressures, but when I reflect on my experience of listening to this Budget, I am left with a great sense that it has been a Budget of missed opportunities. It has 98 measures where the value of each individual measure is at a record low. It is a Budget that has not taken the opportunity that is necessary for our economy. All Governments face different circumstances. I was in the Treasury when covid occurred, and we had to make interventions on a scale that had never been seen before, and that obviously resulted in significant scarring to the economy. This Government face different challenges in terms of energy security as well as a fundamentally transformed context when it comes to national security risks. I was left feeling that, as Helen Miller of the IFS <span id="346" class="column-number" data-column-number="346"></span>says, there has been a lack of a “coherent vision”. It is as if everything has been kicked further down the road. That leads me to conclude that we are warming up for a general election, which will be framed around the need for more taxes to reset the economy. For a Chancellor to come in with a new Prime Minister and make 98 measures, all of which have a record low level of impact, speaks to a lack of ambition, while a position is held—on the back of £66 billion of tax rises—so that more can be done on the basis of whatever comes out of the summit with the EU next week. That is what I am anticipating. Of course, some of these small measures will be welcome, but when the effects of the tariff changes amount to 40p a week, for most people they will not be significant. I want to look at some of the tax measures. The increase in tax on savings is not a good thing. That higher level of tax take will risk incentives within the system, constraining economic activity by more than expected. That is what people are saying about this Budget. There is the renter tax—it has been determined that measures in the Budget collectively risk leading to a steady rise in rents, building on the additional taxes of last year. I take a close interest in financial services, having had some experience in that sector as the Minister. I note what the Chair of the Treasury Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), said about the rise in some share prices this morning. I think those services probably anticipated a larger increase in the surcharge, back up to 8%; the increase to 6%, therefore, and its time-limited nature, were reflected in a bump, as it was felt that that was not as bad as it could have been. However, looking at what UK Finance says about the implications of this change, I note that we need only a modest change—that is, if 7.4% of internationally mobile banking were to leave the UK—for the tax increase to generate zero net revenue. This is not some insignificant industry that is wholly located in London; it is an industry that provides the infrastructure for the wider economy. We will see the impact of that decision on interest and saving rates. When I was the Minister in this area, I used to have conversations with the CEOs of global banks, and they pointed out the aggregate tax rate—looking at corporation tax, the surcharge, the levy and the national insurance rate—and then compared our situation with others internationally. Our aggregate rate is now going to look really bad, after what has already happened with the national insurance increases. I want to reflect on what the Budget has not done for small businesses in my Salisbury constituency. I have been particularly impressed by one small businessman who I have got to know over the last few years, Ethan Davids. He is very young—in his early 30s—and has 15 hospitality venues, which are growing rapidly. He says to me that the combined effect of the increase on employer national insurance, the Employment Rights Act 2025 and the previously above-inflation increases in the national living wage, alongside the challenges of a reliable outcome from the planning process, actively discourages him from making investments. I fail to see anything in this Budget that has made a significant impact on the context in which his business operates and on the decisions he will make.