I wanted to share my thoughts with you about the political and economic events yesterday and over the weekend.
As a Conservative, I fundamentally believe we must grow our economy to keep taxes low, create better-paid jobs, and pay for better public services. This is why I voted for Liz Truss to lead the Conservative Party.
Inflation is rising around the world, caused primarily by the recovery from covid and the Russian invasion of Ukraine, which has been accompanied by Russia’s ‘weaponisation’ of gas supplies, which has sent energy prices (the largest contributor to inflation) soaring.
This has in turn caused interest rates to rise around the world - including in the UK - as central banks attempt to deal with inflation.
In the UK, annual growth for the two decades prior to the financial crash of 2008/09 used to average 2.5%. Since the financial crash, annual growth rates have averaged 1.8%, which is sluggish. The recent two financial quarters have recorded very small growth rates of a fraction of a per cent, meaning that the country is on the edge of a recession.
Recession, coupled with high inflation, high energy costs and rising interest rates would be exceptionally difficult for the country and the government’s wishes to avoid this by returning the country to the average 2.5% annual growth rate we used to enjoy.
This was what the ‘UK Growth Plan’ announced on 23rd September was intended to do.
However, the tax-cutting measures set out in last month's proposals were poorly communicated by the government, and the former Chancellor made a mistake by not publishing them alongside a forecast from the Office of Budget Responsibility and this resulted in market instability. I'm disappointed by how the government handled it.
First and foremost, we must ensure economic stability as the foundation on which to grow our economy and cut taxes. Last month's fiscal event did not get the balance right, so it was clear that Ministers must change their approach to restore stability so we can build a high-growth, low-tax economy.
Yesterday the new Chancellor, Jeremy Hunt, has acted to restore stability. Given the global economic turbulence, the government has cancelled its plan to reduce the basic rate of income tax from 20% to 19%. It is also proceeding with the planned increase to corporation tax until the economic circumstances allow for it to be reduced.
However, the cut to national insurance and stamp duty will remain to help households and support homeownership. The energy price guarantee will also continue until April 2023 to shield families from the gas crisis, so the danger of bills that could have reached £6,500 this winter will be avoided.
We face three immediate challenges the new Chancellor must address - high energy bills, high inflation, and rising interest rates - each putting pressure on families and businesses.
We cannot keep interest rates low without controlling inflation.
We cannot control inflation without tackling the energy crisis.
That's why the government must build cheap, secure British energy, including renewables and new nuclear, and continue to support vulnerable households and at-risk businesses beyond April next year until the energy crisis abates.
I wish the new Chancellor luck in reassuring the markets. As your MP, I will work with him to deliver for Orpington, shield people and businesses from the energy crisis, tackle inflation and limit interest rate increases.
But I urge Ministers to use our Brexit freedoms to steer the UK toward a high-growth, low-tax economy that benefits everyone.