PARLIAMENTARY DEBATE
IMF Economic Outlook - 31 January 2023 (Commons/Commons Chamber)

This Government have three economic priorities; our plan for this year is to halve inflation, grow the economy and get debt falling. It is a plan that will alleviate the pressure on businesses and families today, and equip us to become one of the most prosperous countries in Europe. As the International Monetary Fund said in its press conference today, it thinks that the UK is “on the right track'”. It also said that the UK had done well in the last year, with growth revised upwards to 4.1%, which is one of the highest growth rates in Europe for 2022. Since 2010, the UK has grown faster than France, Japan and Italy. Since the European Union referendum, we have grown at about the same rate as Germany. Our cumulative growth over the 2022 to 2024 period is predicted to be higher than that of Germany and Japan, and at a similar rate to that of the United States of America. The Governor of the Bank of England has said that any UK recession this year is likely to be shallower than previously predicted.

The actions we are taking, from unleashing innovation across artificial intelligence, financial services and a host of other sectors, to improving technical education and protecting infrastructure investment, will spur and fuel economic growth in the years to come, benefiting industry and communities alike. However, the figures from the IMF confirm that we are not immune to the pressures hitting nearly all advanced economies. We agree with the IMF’s focus on the high level of inflation in our country, which is why this is our first priority. Inflation is the most insidious tax rise there is, and so the best tax cut now is reducing inflation. That will help families across the country with the cost of living. As the Chancellor has said, short-term challenges, especially ones we are focused on tackling, should not obscure our long-term forecasts. If we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years. That will help us deliver a stronger economy, one that is growing faster and where everywhere across our country people have opportunities for better-paying, good jobs. That is what the people in this country expect and what we are working tirelessly to deliver.

The right hon. Lady talks about 13 years of failure. Let me just repeat the facts of the matter. Since 2010, the UK has grown faster than France, Japan and Italy. She talks about the next two years. As I have said, the forecast from the IMF says:

“Cumulative growth over the 2022-24 period is predicted to be higher—

in the UK—

“than in Germany and Japan, and at a similar rate to the US.”

I am grateful to the shadow Chancellor for quoting the IMF, because I, too, wish to quote the IMF. Let us go to the IMF press conference at about 3am this morning, which, Mr Speaker, I am sure you were eagerly watching, and quote the economic counsellor Pierre-Olivier Gourinchas who said:

“Let’s start with the good news: the UK economy has actually done relatively well in the last year. We’ve revised”—

growth—

“upwards to 4.1%...that’s one of the highest growth rates in Europe, in that region, for that year”—

2022.

The shadow Chancellor did make a passing reference to the pandemic, but it is usually Labour’s habit to airbrush out of history completely the fact that we as a Government have overseen two of the greatest challenges in the country’s history: a pandemic followed by the invasion of Ukraine. [Interruption.] I know why the shadow Chancellor does not want to talk about the pandemic. Back in December 2021, when the Labour Welsh Administration wanted to lock down in the face of omicron, we took the brave decision as a Government not to lock down in England. Let us remember what the shadow Health and Social Care Secretary said at the time. He said that plan B was “insufficient” and that there were additional measures that were “necessary”. Labour would have kept us locked down for longer. We took the decision to keep our country open. We did so because of the vaccine that we brought forward, which is something that Labour would not have done.

The crucial issue, as I said, is bearing down on inflation, which will give us the best chance of restoring sustainable growth. A key facet of dealing with inflation is fiscal discipline. We have heard from the shadow Chancellor recently that Labour is suddenly the party of sound money. Since the speech—I think it was two weeks ago—in which the leader of the Labour party promised to put away the great big Government cheque book, Labour has made £45 billion of unfunded spending commitments. We all know where that ends. Labour starts writing blank cheques, and it ends with a letter from its Chief Secretary to the Treasury to the rest of the country saying, “There’s no money left.”

The Chair of the Select Committee is spot on. Instead of talking down our economy, she makes the key point that, despite all those challenges, we had strong growth last year because of British enterprise. That is why, on Friday, the Chancellor, himself a former entrepreneur—there are not many of those on the Opposition Benches—said that we will back advanced manufacturing in the high-growth sectors to ensure that we continue to live with that level of growth in the future.

The right hon. Gentleman talks about tight fiscal monetary policy. We are faced with inflation; it is higher in the UK than in 14 countries in the EU. Inflation is a global challenge, so he is right: we do need to have that stance. Obviously, we want to get inflation down. The cost of energy bills is precisely why, this winter, a typical household in the United Kingdom will have received £1,300 of support, £1,400 in cost of living payments, and the energy price guarantee, estimated by the OBR to be worth £900 for the typical household. That support is provided to every single part of the United Kingdom.

The right hon. Gentleman’s specific suggestion—to be fair, he is making a specific fiscal proposal in relation to the allowance—will hurt one particular sector: the North sea and investment in UK energy. Does he know what the long-term answer to this is? It is not supporting families—we are doing that very generously at the moment—but energy security, investing in nuclear and in the North sea as part of our transition to net zero.

With great respect to my right hon. Friend, who is very consistent on such points, I am bound to point out that, even with the forecast increases, corporation tax will still be the lowest in the G7 headline rates, and, of course, roughly 70% of businesses do not pay that higher rate because of the small business rate that pertains. I have not received any representations from the Opposition, other than a pledge for sound money from a party, which, since promising to put away the great big Government cheque book, has announced almost £50 billion of unfunded spending commitments.

I am pleased to say that there is very colourful support on our Back Benches today. I am sure that there will further pertinent and brilliant questions to come. The hon. Lady quotes the IMF, but I simply reiterate what its economic counsellor said this morning about the UK. He said:

“Let’s start with the good news: the UK economy has actually done relatively well in the last year. We’ve revised”—

growth—

“upwards to 4.1%...that’s one of the highest growth rates in Europe”.

That is exactly what the IMF said.

The IMF always stresses the importance of sustainable growth. It is sustainable growth that matters, and, of course, my right hon. Friend is absolutely right: exports are crucial to that. The City and financial services are a massive UK success story. We want to build on that, which is why we have announced the Edinburgh reforms and further measures to strengthen UK financial services. We are quite clear that the future for this country is optimistic and we will get there by backing brilliant British business.

On the contrary, the whole point of why we mention the pandemic is not to say that we are the only country affected, but to explain the global headwinds that we face as a country. The hon. Lady talks about energy costs, but the Office for Budget Responsibility’s forecast is that the energy price guarantee will reduce the peak of inflation in this country by 2.5%. Inflation is an issue and it is global, but we are taking strong measures to ensure we deliver the Prime Minister’s target of halving it.

My hon. Friend makes a brilliant point and reminds us that not only did the IMF talk this morning about our strong performance in 2022, but at the autumn statement it welcomed those measures and recognised that a balance must be struck between fiscal consolidation and supporting the most vulnerable. The best example I can give is that from April, far from support with high energy costs being withdrawn, there will be a new £900 payment for families on benefits. That shows we are getting the balance right between the fiscal discipline necessary to work with the Bank of England to reduce inflation and ensuring that families are supported through these challenging times.

I did not question the IMF forecast—that is not correct. I simply quoted what the IMF said, that cumulative growth over the 2022 to 2024 period is predicted to be higher than in Germany and Japan and at a similar rate to the US.

My right hon. Friend speaks with great expertise as both a former Secretary of State and a Select Committee Chair, and he is absolutely right. Whatever forecasts say, we have a clear strategy for long-term growth in this country that comes from supporting high-growth sectors. I am glad he mentioned the Chancellor’s speech on Friday, which spoke about the fact that we are only the third economy in the world with $1 trillion tech sector—I know the shadow Chancellor does not like that fact, but we are—and we should be proud of that. Of course we want to build further on that. That is how we will deliver strong, sustainable growth in every part of the United Kingdom.

I am grateful to the hon. Lady, as ever. Of course she misses out the fact that we have the lowest unemployment for the best part of 50 years. We should all be very proud of that. We know the scars caused by high unemployment and we know that when the pandemic started, unemployment was predicted to finish 2 million higher than it ended up because of the measures taken by this Government and by the Prime Minister when he was Chancellor, with furlough and so on. We will continue to support households. The hon. Lady talks about a winter of discontent, but, as I said, we are providing £1,300 of support for a typical family with their energy bills this winter. That shows we are on their side, but we need to go further, and we do that by delivering on the target to halve inflation.

It would be a pleasure, as ever, to write to my hon. Friend. He mentions countries dependent on gas, but we should be very proud that last year more than 40% of our electricity was generated from renewables and just 1.5% from coal. We have had the fastest-falling emissions in the G7, and a recent report in The Times confirmed that we can get those lower emissions with higher growth. The report said that jobs in net zero sectors pay £10,000 more than the national average, and that south Yorkshire, north Derbyshire, Tyneside and Teesside are all hotspots for net zero jobs. That shows we can deliver on net zero and economic growth.

It is very far from a unique mess when 14 European Union countries have a higher rate of inflation than we do. That is why we are focused on reducing inflation, which, to be clear, will take some difficult decisions. It would help in that regard if Labour Members, instead of living in a parallel universe where their leadership and their shadow Chancellor talk about sound money but not a single one of them even ventures to understand it, started showing what difficult decisions they would actually take. That is how you run the country.

My hon. Friend is absolutely right. I spoke about high-growth sectors; one of the ways those sectors drive up sustainable growth is through R&D. That is incredibly important. The Government are on track to spend £20 billion in public expenditure by 2024-25. We are also committed to a competitive regime of R&D tax credits to ensure that the private sector does its part to enable the highest possible level of R&D so that we can deliver investment and research into the industries of the future.

We must deliver growth in every part of the United Kingdom. The hon. Lady knows the work that is happening across Departments on the protocol. I have already mentioned energy support; she knows that there are specific conditions that pertain to the Northern Ireland energy market, but we have still put huge support in place, including the recent £600 payment. That shows that we are on the side of families in every part of the United Kingdom, including Northern Ireland.

My hon. Friend is an absolute champion. He talks up this country and he is right: the facts back that up and show that we should be optimistic. Of course there are challenges, and we want to get on top of them, which is why we must work hard to support our independent Bank of England in getting inflation down. But, like him, I am optimistic that if we do that, we can see the sort of growth we had last year. That is what the IMF shows; its cumulative forecast is that over 2022 to 2024 we are predicted to have higher growth than Germany and Japan and at a similar rate to the US.

I am happy to stress, for example, the hugely important Solvency II reforms that we will undertake, which will free up enormous amounts of investment in infrastructure. Of course, infrastructure is crucial to future growth. As the Minister with responsibility for alcohol duty, I am pleased to say that we will have reform in August, meaning that we could have a duty differential between pubs and supermarkets. That is only possible because of Brexit. I think the most important thing by far is that when we faced the pandemic—the greatest challenge outside war time—this country was able to move fast with an amazing vaccine programme because of its independence, which reduced deaths, freed up our economy and allowed us to reopen and get growing again.

I am sorry to hear that. I do not know the specific circumstances. Obviously, we want to see strong investment and growth in this country, particularly in manufacturing. I can tell the hon. Gentleman that, as he is aware, unemployment is about the lowest it has been for decades in this country—we are very proud of that fact. But where there are challenges, we want to look at them, and if he writes to me with the details of that case I will happily look into it.

The hon. Gentleman mentions defence, but he might want to explain to his constituents why, at the last general election, he backed the right hon. Member for Islington North (Jeremy Corbyn), whose policy would have had us leave NATO and undermine the nuclear deterrent.

We have stood by the people of Ukraine in the face of a real war. We have not deployed into the theatre, but we have done everything possible short of that, including training the Ukrainian army since 2015. So yes, I will tell the hon. Gentleman’s constituents the truth: they should be proud of what this country is doing for the people of Ukraine.

I am happy, once again, to refer to what the IMF said. At this morning’s press conference, Pierre-Olivier Gourinchas, the IMF’s economic counsellor, confirmed

“the good news: the UK economy has actually done relatively well in the last year. We’ve revised”

growth

“upwards to 4.1%...that’s one of the highest growth rates in Europe”.

It is astonishing that the hon. Lady would say that all our problems are solely down the Brexit. We have record energy bills. In the last year, as a country, we have had to find an additional £150 billion to fund energy because of the invasion of an independent sovereign country by Russia. That was not our fault, and nor was the pandemic—[Interruption.] She talks about austerity. We put in place £400 billion of support during the pandemic, and almost £100 billion of cost of living support and help with energy bills. That is not austerity. I will tell the House what it is: the United Kingdom Treasury backing every single part of the United Kingdom.

I am not sure whether the hon. Lady was here for my maiden speech—I entirely recognise that she may not have been—but I said:

“I am a one nation Conservative,”

because I believe in

“not going back to dark and divisive days of high unemployment.”—[Official Report, 3 June 2015; Vol. 596, c. 636.]

And here we are, with the lowest unemployment in almost 50 years.

On regional earnings specifically, I can confirm that pay has grown faster in every region outside London since 2010. That shows that we are succeeding in our levelling-up agenda.

The hon. Lady is an experienced colleague. She is well aware that we have an independent Bank of England, and interest rates are its responsibility. The crucial thing is that we need to work in partnership with the Bank, and we do that by ensuring that fiscal policy does everything possible to support a stable framework in which inflation falls. That is why we have set a target to halve inflation, and if we do that, interest rates will be lower than they would otherwise have been.

The hon. Lady is right to mention small businesses, which make such an important contribution to our economy. My message to small businesses is that we have put in an enormous amount of support to help them with energy costs, including the £18 billion energy bill relief scheme over the past six months, and we will continue to support them from April onwards. Of course, the best way to support them is to provide a stable platform for growth, and that means keeping inflation under control. That is the great challenge that we face, and it is why, as the Chancellor said on Friday, the greatest tax cut we can provide is reducing inflation. That is what we are committed to doing.

Of course, the hon. Lady knows about the work that is happening across Government in respect of the protocol. She talks about our “economic decline”, but let me be absolutely clear: since 2010, the UK has grown faster than France, Japan and Italy. She knows that, as I said earlier, 14 EU countries have higher inflation than we face at the moment. These are global challenges that we face, but we have the strengths to get through them. One example, as the Chancellor pointed out on Friday, is that there are only three economies in the world with a £1 trillion tech sector. Tech is a huge part of our future economic growth. One of those countries is China, one is the United States, and the other, I am pleased to say, is the United Kingdom.

I do not know the specific circumstances of why the café the hon. Gentleman refers to is struggling to recruit; I have no specific knowledge of it. I am sure it offers a wonderful breakfast when it is able to do so. What I can say is, talking in aggregate, and as is our slogan, we are proud to have almost the lowest unemployment for the best part of 50 years. It does present challenges when we have a tight labour market. That is why we think the best way forward is to ensure that we have the apprenticeships, skills and training to deliver the workforce to meet our growth ambitions.

I was clear about the challenges this year in respect of inflation, which is why we need to have fiscal discipline. That is not something the Scottish National party has the slightest understanding of, because I only ever hear SNP Members ask for more spending and more tax cuts—all unfunded. Meanwhile, their fundamental policy, were they to be independent, is to have a currency without a lender of last resort. That is an extraordinary proposition for economic instability, so we take no lectures from them. We have done everything possible to support people in every part of the United Kingdom, including Scotland.

The hon. Gentleman knows there is enormous benefit to Wales from being part of the United Kingdom. I have set out the many ways that we are boosting this country, and I gave the example of the changes to Solvency II regulations. They will hopefully see a significant increase in infrastructure investment, which will be of massive benefit to every part of the United Kingdom, including Wales.

The hon. Lady makes a very good substantive economic point, which is that when inflationary pressures are higher, as they are at the moment, it is discretionary consumption that comes under pressure—and that means, for example, demand in pubs and shops and so on. I can confirm that we have taken huge steps to support hospitality, as we did in the pandemic. We recently announced that the 50% reduction in business rates would be extended by another year and go up to 75%. I announced in December a six-month extension to the freeze in alcohol duty, but hospitality is an important sector that is creating jobs, and we want to see what more we can do to support it.

As ever, the best is saved for last. The hon. Gentleman is absolutely right to continue to be a stalwart champion of SMEs and small businesses in his constituency and, indeed, in Northern Ireland. That is why we are focused on growth in the whole United Kingdom. Underpinning that, however, has to be fiscal stability and, ultimately, falling inflation. That is why the Prime Minister has set the target to halve inflation. To get that down would be the best thing for consumers, for small businesses and for our whole country.