I welcome the focus on financial support for households and businesses to cope with higher energy costs and economic growth by means of simpler, lower taxes, regulatory reform and investment zones. I am pleased that North Yorkshire is one of the 38 areas in discussions with government to establish an Investment Zone and hope that York will also take up the opportunity.
Due to the succession of economic shocks, it will be some time before we are able to balance the books on day-to-day spending. However, any spending cuts required must not impact on the infrastructure investment promised for the North, such as the dualling on the A64 and York Northern Ring Road and Northern Powerhouse Rail.
Clearly there are a number of economic issues at this moment that we would rather not have to deal with, not least the huge increases to the costs of energy. I welcome the intervention by the Prime Minister and Chancellor which will see the costs of energy to the average household capped at £2,500 per annum and similar support for businesses. This will come at a very significant price, however, likely to be in the order of £50bn for the next 6 months and ongoing costs may continue at this level due to the government’s commitment to cap prices for households for 2 years and business support where needed.
The costs of this must be met by borrowing. This is made more difficult when taking into account the current £100bn of annual borrowings even prior to this extra support and the Prime Minister’s commitment to tax cuts. In total, the annual deficit is likely to rise to over £200bn per annum. Although the majority of the extra costs of the intervention relate to the energy support measures, which as a proportion of spending help lowest income households the most, a number of my colleagues and I had concerns about the extra level of borrowing required due to tax cuts and the market reaction to it. This has proven to be the case and I welcome the intervention of the Bank of England to restore order to the bond market for gilts which will reduce the cost of borrowing.
I recognise the need for swift action to deal with the energy cost crisis, however, I did call for the usual Office of Budget Responsibility analysis to accompany the Chancellor’s statement. This may well have informed thinking and helped Parliament and the markets better understand the short and medium term implications of the new measures.
I will, of course, scrutinise the budget carefully both as a backbench MP and a member of the Treasury Select Committee and act accordingly.
