Chris Champions Increased Public-Sector Productivity & Lower Taxes In Commons Debate
Christopher Chope Conservative, Christchurch 12:50, 7 March 2024
It is a great privilege to follow Peter Grant, who speaks for the Scottish National party. What I did not really hear from him was the justification he and his party use for increasing taxes—something that is total anathema to almost everybody else speaking in the debate, who are complaining about the high level of taxes we already have.
I welcome the Government’s rethink on national insurance. As somebody who has regularly voted against increases in national insurance by previous Chancellors of the Exchequer, I am delighted by the change of heart.
I also welcome the rethink on the unfairness of the high income child benefit charge. When it was being legislated on, I put a lot of time and energy into asking questions about it and speaking and voting against it. However, I could not persuade anybody in the Conservative Government then that it was extremely unfair that a household with an income of £95,000 coming from one person was subject to this charge, while two earners were able to avoid it by each earning £45,000. That will now be put right; in my view, it is long overdue, but it is none the less welcome.
I would, however, be interested in asking the Minister a specific question arising from what was said about this issue: will the move to His Majesty’s Revenue and Customs using household-level information from 2026 enable the Government to introduce transferrable tax allowances and end the discrimination in the tax system against married couples? That would be an even bigger benefit of introducing household-level information and from taxing people on that basis. I hope that that will be one of the great spin-offs from this initiative, and I would be grateful if the Minister could respond to that point when he winds up.
I welcome the increase in the VAT threshold from £85,000 to £90,000. However, that is a pretty meagre 6% increase after seven years in which the threshold was frozen, and I would like to see it go even higher. I also welcome the Great British ISA, but why is it limited to £5,000?
Last night we had an amazing gathering in the Guildhall in London—I do not know whether any of my hon. Friends on the Front Bench were there. It was a celebration of the 50th anniversary of the Centre for Policy Studies, and it was a great occasion. It celebrated the work that Keith Joseph, Margaret Thatcher and Alfred Sherman did 50 years ago in setting up what has been the most successful Conservative think-tank of all time. I have to say, however, that there was universal disappointment in the audience that the overall tax burden has not peaked and that the Budget statement confirmed that it will rise even further in each of the next four years and beyond, despite the fact that we already have the highest tax burden ever. There seems to be no explanation as to why the Conservative Government are still pursuing that policy of increasing the tax burden.
As ever, the Prime Minister spoke eloquently, echoing the philosophy and founding principles of the Centre for Policy Studies. He spoke of the small state, the need for low taxes, and promoting enterprise and supply-side reforms. Indeed, his rhetoric chimed with the Chancellor’s own Budget statements, and I will quote three of them. The first was:
“Conservatives know that lower tax means higher growth.”—[Official Report, 6 March 2024;
Vol. 746, c. 837.]
The second was:
“Keeping taxes down matters to Conservatives”.
The third was that
“lower-taxed economies have more energy, more dynamism and more innovation.”—[Official Report, 6 March 2024;
Vol. 746, c. 848.]
I could not agree more. Yet we have a Budget that is actually increasing the overall burden of taxation and that seems to run counter to that rhetoric. My constituents are concerned about actions rather than words, and I hope that, in responding to the debate, my hon. Friend the Minister will explain why the Budget’s content does not fit with that rhetoric.
Where does that leave us? As we approach a general election—from my point of view, the sooner we have one, the better—I want to be able to tell my constituents that they have a choice between a Conservative Government who are really committed to the enterprise economy, following in the steps of the Centre for Policy Studies, Margaret Thatcher and Keith Joseph, and a Labour Government who are committed to ever higher taxes and burdens on individuals, with dire consequences for economic growth. At the moment, however, I am not sure that that is being spelled out with sufficient clarity to enable us to make the case as strongly as I would like when the general election comes.
Another issue raised in the Budget is that of low, if not declining, public sector productivity, which is a scandal of the highest order. Lip service was paid to addressing the problem of low productivity in the national health service, but low productivity has been endemic in the NHS for years. I was looking at a book produced by Lord Crisp—Nigel Crisp—when he worked for the NHS, and in it he refers to the low or declining productivity in the NHS between about 2000 and 2010. The latest figures also show a decline in productivity in the NHS. Two years ago, the Government committed themselves to productivity increases of 2% per annum in the NHS. I thought that that was already policy, but I see in the Budget statement that the head of the NHS, Amanda Pritchard, is saying, “Well, with the extra initiatives from the Government, we might even be able to get to a productivity increase of 1.9%.”
Jim McMahon Shadow Minister (Levelling Up, Housing, Communities and Local Government)
I will give the hon. Gentleman a second to take a breath. Does he accept that the NHS does not sit in isolation? It is part of a wider ecosystem of public services, and it reflects local communities. So many preventive early intervention services, such as those provided by local government, have been taken away, and that has an impact. Like me, the hon. Gentleman will be aware that we have seen 900,000 fewer workers in local government since 2010, but 900,000 more workers in central Government, and the civil service has grown too. That shift has definitely had an impact on productivity.
Christopher Chope Conservative, Christchurch
I agree with the hon. Gentleman that, by expanding the public sector and the number of administrators, we are undermining our attempts to increase productivity. The OBR says that a 5% increase in productivity would give us a £20 billion dividend, so instead of fussing about £1 billion here, £100,000 there or whatever, why do the Government not concentrate on productivity?
One example of the lack of productivity is the increase in bed blocking. I have an example from my constituency, which I raised in a parliamentary question recently (WQ 15833). On 31 January, 308 patients in acute hospitals in Dorset were there with “no criteria to reside”, which is how what used to be called bed blocking is described these days. If we take a ballpark figure and say that each of those beds costs about £1,000 a night, that is £300,000 a night. If we multiply that by the 365 days of the year, we get an enormous figure. Money is being wasted through the NHS’s inability to address that long-standing problem.
Despite the establishment of integrated care boards, the problem is getting worse, rather than better—the whole essence of integrated care boards was to try to link together all the players.
Matt Western Shadow Minister (Education)
Does the hon. Gentleman agree that not enough appropriate sheltered housing has been built over the past 14 years? Given the ageing population, surely we should be making greater provision.
Christopher Chope Conservative, Christchurch
My constituency has an enormous amount of sheltered housing and housing specifically for pensioners. A lot of it is vacant—it has been built, but it is not occupied at the moment. I am not giving a plug for Churchill or any of the other housing developers, but I do not think that issue is really the key. The key is knocking some heads together and getting them to realise that when somebody is ready to leave hospital, they do so and that there are significant penalties if they do not.
There are lots of other examples of where we have a productivity crisis. It is worth recalling that Sir Roy Griffiths, who was brought in by Margaret Thatcher in 1985 to try to introduce greater efficiency into the health service, said
“if Florence Nightingale were carrying her lamp through the corridors of the NHS today she would almost certainly be searching for the people in charge”.
One could bring that up to date now and say that today Florence Nightingale would almost certainly be looking for anyone willing to get to grips with low productivity in the NHS. I hope that the Government will get a lot more serious about the issue than they have been hitherto.
My final point is about the dynamism that comes to the economy if we reduce taxes and encourage growth through that means. In his speech, the Chancellor made passing reference to Arthur Laffer and his curve. Some of my hon. Friends may have been present at a previous dinner organised by the Centre for Policy Studies at which the speaker was Dr Laffer himself; I still treasure a napkin that has his handwritten curve on it. Why are we not applying the principles of his curve more widely?
In his aside about Laffer, in the context of reducing capital gains tax from 28% to 24%, the Chancellor was more or less saying, “Well, at last my officials are waking up to the importance of this.” But who is in charge? If the Chancellor of the Exchequer and the Prime Minister believe in the virtues of the Laffer curve and the dynamism that comes from a low tax, low regulation economy, surely they should be getting a grip on that rather than leaving it to anonymous officialdom.
I hope that we will be able to make more progress on these key issues and demonstrate to the public that there is indeed a big chasm between the two parties vying to form the next Government. We believe in the virtues of low taxes promoting enterprise and increasing productivity, particularly in the public sector. The other lot are beholden, particularly to the unions, which takes me back to where I started off in politics: when I was first elected to Wandsworth Borough Council, 50 years ago this week.
-
Later in the same debate...
Jackie Doyle-Price Conservative, Thurrock
I acknowledge that there have been cuts to local authority budgets, but the root of this is that so much local authority funding comes from the centre. Where is the accountability? As far as local electors are concerned, the council can spend only what it is given. Given the cuts, it is incumbent on councils to make sensible decisions. They cannot have their cake and eat it. They have to live within their means.
Given the rainbow coalition that Grahame Morris has just described, I suspect that there is an awful lot of playing to the gallery. We expect our councillors to be more mature.
Christopher Chope Conservative, Christchurch
Does my hon. Friend agree that one of the problems is that we gave local authorities a power of general competence, and that we should have concentrated their mind on the things that they really have to do?
Jackie Doyle-Price Conservative, Thurrock
Yes, I agree. With hindsight, that was a big mistake. It was done with the best of intentions. Given that local authorities were in a new set of circumstances, there was a desire to give them freedom to be more relevant and to have fewer constraints, but it has given licence to risky behaviour. We will see further consequences of that in due course.
Clearly, we would all like to be in a much better place with regard to the strength and growth rate of our economy and the state of our public finances, but we need to reflect that the last 15 years have been challenging. We have had three significant shocks that have cumulatively made us poorer than we would like to be—that is just a fact. The 2008 financial crisis had to be managed, and we have had the consequences of the pandemic; one way or another, we locked down our economy for the best part of two years, which has clearly had a massive impact on growth. The billions that we spent on keeping people in their jobs still have to be paid for. There is also Ukraine. Not only do we need to support the people of Ukraine, but we need to address the consequences for energy prices.
Returning to the need for responsible leadership, we should level with the public about what these things mean. The public are not stupid, and they are not deceived by spin and rhetoric. They know that these shocks have consequences. If we do not treat people with the respect that they deserve by levelling with them, they will show us the same lack of respect. They understand that this all needs to be paid for. If we do not face up to that, we will end up compounding the challenges created by those political choices.
I return to the financial crisis. Clearly, there was a need for a massive intervention to prevent the whole banking system collapsing, but we got addicted to quantitative easing. The correction that should have taken place following that financial crisis never happened, because, guess what, we do not want middle-class people who vote to have a reduction in the value of their property. By sticking with that policy, we ended up with interest rates that were artificially low for a very long time, which completely distorted asset class prices. That meant that everyone put all their investments into property, which has contributed to massive inter- generational unfairness, because people cannot now afford to buy a house. Does that not just show the short-termism and the failure to get real, explain things to the public and make long-term financial decisions that will do the most to grow this country? We all bemoan the lack of growth in our economy but if we have generated a system where there is more profit to be made by investing in housing than in business and wealth creation, this is where we end up. We all need to make a determined effort to be more long-term in our decision making and not just pursue the retail benefits of going up a few percentage points in the opinion polls.
We spent billions during lockdown to keep people in their jobs, but, again, that has to be repaid by the taxpayer. People do understand that; they know that nothing can be made for free. We also need to address the wider consequences of what we did in lockdown, because there is a longer-term impact on our nation’s productivity. We were all psychologically damaged by being taken out of social circulation for two years, and we have ended up with work practices that are not always the most efficient. Worst of all, we have an expectation that the state will deal with every problem. Again, we need to get back to having the leadership that says, “We’ve all, collectively, got to fix this problem.” Fighting covid is the equivalent of fighting a war. After the second world war, everyone knew that there was going to be a massive effort to get our country back together again. We have pretended, never more so than on public services, that the situation is easier than it is.
I hear over and over again about underfunding, but what does that mean? If there is not enough money to deliver what people are expecting, we have to be honest about that and cut our cloth; we have to recognise that nothing can be delivered without being paid for, so we must either increase taxes or look at what we are delivering. We all want to get to a position where we are much richer and can pay for a lot more, but concessions will have to be made before we get to that place after the shock we have had to deal with.
We also need to have a much more honest debate about what we should be spending our money on. The situation in Ukraine clearly illustrates the need to spend more on defence. Since 1989, we have taken our eye off the ball, but we now face a more challenging and unstable world. To keep our energy prices low and stable, the best measure is to invest in defence at an increased rate.
The two biggest challenges that face us are perhaps not the focus of mature debate or leadership by this place. First, there is no doubt that the public think we have too much immigration, on which we have become dependent as a source of cheap labour. From 2006, the UK’s openness to immigration from eastern Europe had a very positive effect on growth, but it was “growth” as in the overall quantum. The impact on individual productivity, earnings and GDP per capita was poor, because earnings were depressed. Overall, the resentment towards immigration comes from a lot of those people who found their earnings diminished as a consequence. We think about the “Auf Wiedersehen, Pet” generation of builders and labourers who earned lots of money by going overseas. Post-2006, they found that their earnings were depleted because people here were choosing to employ Lithuanians and Poles, because that was cheaper labour. Naturally, they will have a clear view that immigration has reduced their earnings.
- ENDS -
