Autumn Budget 2024

Baroness Penn Excerpts

Monday 11th November 2024 Lords Chamber

[Baroness Penn (Con)]

My Lords, we have had a long debate today, where, as usual, your Lordships’ House has brought its considerable expertise to bear, dissecting last month’s Budget. Not least, the eloquent maiden speech by my noble friend Lord Booth-Smith demonstrated the value that he will undoubtedly bring to this House. I shall try not to delay us much further, but the large number of speakers that we have had is befitting of a Budget with such large sums involved.

It has been the largest tax-raising Budget in history, with the tax burden now at a historic high. There will be an additional £142 billion of borrowing over the forecast, with debt interest payments of £100 billion every single year—all to fund an additional £70 billion of spending, on average, every year.

The Minister has tried to claim that Labour has a mandate for this Budget, but it does not. And what is the result of these decisions? Lower wages and lower living standards, lower growth and lower private investment, and higher inflation and higher interest rates. People’s bills will go up and their wages will go down.

I turn first to tax. Before the election, the Chancellor promised people that Labour’s policies would be

“fully funded and fully costed—no ifs, no ands, no buts”.

Just last month, the Prime Minister made an absolute commitment to not raise taxes on working people. When the former Prime Minister, my right honourable friend Rishi Sunak, told people that Labour would raise their taxes by £2,000 over the next Parliament, Rachel Reeves and Keir Starmer said he was lying. To be fair, he did get the figure wrong: it was not £2,000 over the course of the next Parliament but £2,000 every single year.

The Government continue to not be straight with people now, claiming that the £25 billion rise in national insurance is not a tax on working people. National insurance is literally the only major tax that exclusively hits working people. If noble Lords do not believe me, ask the Chancellor, who said the problem with national insurance was that

“it is a tax purely on people who go to work and those who employ them”.

If, understandably, noble Lords do not quite trust the Chancellor on this after October’s Budget, how about the Resolution Foundation, which has said that national insurance is a tax on jobs? Meanwhile, the IFS has described it as a straightforward breach of a manifesto commitment. I know that those in the party opposite will not take any advice from these Benches, but perhaps they will listen to Paul Johnson of the IFS, who said:

“The continued pretence that these changes will not affect working people risks further undermining trust”.


However, the problem with this Budget is not just the scale of the tax rises but the choices they have made. By reducing the threshold at which employers pay national insurance, they have increased proportionately the cost of employers employing workers at lower wages the most, making it more expensive to take on entry-level workers and to employ people part time. The noble Lord, Lord Londesborough, set out eloquently the wider impacts of this change. Can it really be the right decision at a time when one of the biggest challenges for this Government is to support people off benefits and into work?

As many noble Lords have pointed out—including the noble Baronesses, Lady Warwick, Lady Thornton, Lady Tyler and Lady Bull, the noble Lord, Lord Shipley, and my noble friend Lord Dobbs, among others—nor does it seem that the Government have thought through the impact of an increase on this scale when it comes to their other policy commitments. GPs, care homes, nurseries: the Government are asking them all to deliver more, but with the national insurance rise they are making it harder and more expensive for them to employ the people they need to do it.

Combined with Labour’s £5 billion bill for its employment rights legislation, the change further increases the incentive for self-employment, distorting people’s decisions in the labour market and taking them out of employee protections, employee benefits and the pensions system, and I am not sure that is something that people on the Benches opposite want to see.

What about other taxes? The tax on family farms makes it impossible for family farms to be passed on to the next generation and threatens the position of tenant farmers. I hope the Minister will listen carefully to the strength of feeling, and the strength of the arguments made, in this House today on that issue.

A tax on family businesses, just at a time when Labour claims it wants to encourage investment and long-term stewardship, means it is making it harder for the very kinds of businesses that often take this the most seriously. There are higher taxes specifically for first-time buyers, who find it hardest to move on to the housing ladder, and further increases in stamp duty, which the IFS has warned will drive up rents. There are taxes on education and on savings. As the former Prime Minister said during the election campaign, “You name it, they’ll tax it”.

The noble Lord, Lord Desai, had some ideas to add to this further and, with the Labour Party’s new approach to taxation, maybe he will be welcomed back on to its Benches some time soon.

I turn next to borrowing. Before the election, the Chancellor promised she would not

“fiddle the figures or make something different to get better results. We will use the same models the government uses”—

referring to public sector net debt. But changing the measure of debt used in the new fiscal rules is a multibillion-pound fiddle.

We have heard in the debate today, from both sides, the case for more investment in our economy. I agree, but there are still choices to be made in where that investment comes from and how to make sure that it delivers growth. On the first point, the last Government took action to promote higher investment from the private sector, for example through the introduction of full expensing. Under this Government, the OBR predicts not only that private sector investment will fall over the forecast period but that it will fall by even more than the amount of extra investment caused by public investment going up.

This brings me to my second point. As my noble friend Lord Lamont and others pointed out, we need to be really clear-sighted that investment is not an end in itself. The test is: does it lead to greater economic growth? There is very little in this Budget to give us confidence that it does. Indeed, as my noble friend Lady Finn pointed out, areas such as transport are being cut, where you would expect to see higher levels of investment if you were focused on growth.

The scope for waste and inefficiency with this additional spending is significant. The Government have reassured us that this will not happen because they are establishing a new office for value for money. As my right honourable friend the leader of the Opposition has said, if you need an office for value for money, what is happening across the rest of government? Surely, value for money needs to be built in to how all public money is spent.

This brings us to another challenge that the Chancellor may face with her new measure of debt: its volatility. With such little headroom against her fiscal rules already, small changes such as increases in borrowing costs or the threat of tariffs from a major trading partner could easily blow her off course. That would lead us back to the worst of all worlds of stop-start investment, driving up costs and undermining confidence from private investment.

Record taxes and record borrowing lead us to record levels of spending. The challenge is to make sure that additional spending is not simply going to be absorbed by higher wages but drives reform in the public sector. But I am afraid that, after less than 20 weeks in office, we have already seen Labour’s tax record and it does not look good. It has cancelled plans to reduce the Civil Service to pre-pandemic levels, increased the salaries of train drivers by £10,000 and given junior doctors a 22% pay rise, all without asking for a single productivity improvement in return, and all while removing the winter fuel payment from three-quarters of a million pensioners on low incomes.

The incredible front-loading of the additional planned spending will make it incredibly difficult for the Government to spend effectively, but the Chancellor has promised that she is not coming back for more. But what about the commitment to grow defence spending to 2.5% of GDP? As we have heard in this debate, we live in a more dangerous and uncertain world than ever. What about the commitment to restore aid spending to 0.7% of GNI? This was called for by the noble Lords, Lord McConnell and Lord Oates, and also committed to in the manifesto of the party opposite. What about the commitment to fully decarbonise the grid in just six years’ time—a commitment that has been estimated as needing £40 billion of investment a year to deliver? Perhaps the Chancellor is keeping her fingers crossed that improved economic growth will ride to the rescue. I hope, for not just the Chancellor but the country, that this will be the case. But the OBR is not so sure. It forecasts growth down, investment down, inflation up, interest rates up and living standards down.

The Minister will doubtless say in his winding-up speech that these are Labour’s choices and it stands by them. But I would say to the noble Lord, and to all noble Lords opposite, that these were not Labour’s choices to make. They were choices that it should have put to people at the general election. But Labour did not trust people to make up their own minds and, in return, I doubt, after this Budget, that the public will put their trust in this Government for very much longer.