Autumn Budget 2024

Lord Altrincham Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for hosting this debate, for listening so carefully to so many speakers one by one, and for his good grace. I also thank the Treasury officials who have pulled together this Budget in extremely difficult circumstances, and the many other officials who contributed, including at the OBR. They managed to produce, yet again, an extremely good report, written in that almost unknown language of plain English and the related dialect of plain maths that we can all understand.

The OBR—to which the Government tied themselves very tightly, as we know, in their very first Bill of this Parliament—has been somewhat unhelpful to the Government. The Chancellor’s Statement was well received by the markets in the opening minutes, until the OBR report landed, when there was a sell-off in the 10-year rates almost immediately because its statements were quite strong. Maybe the Minister can comment on whether the Government will review the overall financial framework in which they are operating, some of which was set up long ago in different times. The Bank of England was made independent when tax to GDP was fully 10 points lower than it is today, and the OBR was set up in 2012, when debt to GDP was around 70%. In fact, debt to GDP has been moving up 2% a year since our Office for Budget Responsibility was set up, so, as we have discussed before, it is a rather unaffordable kind of budget responsibility.

The overarching framework is not that ideal, and other agencies, such as the financial agencies, are also somewhat autonomous of the Treasury. The noble Lord, Lord Eatwell, referenced bank investment, but of course, that is under the PRA and the FCA, and is again at one remove from the Government. Can the Minister comment on the overarching framework in which the Government are currently operating as they pull this Budget together?

The extraordinarily sensitive number in the Budget is the 38% of tax to GDP. The noble Lord, Lord Desai, believes that it could go to 44%. Just for a moment, let us hope that it gets to 38%, as it is extraordinarily important that we can fund the state on the basis of these forecasts. Getting to 38% is sort of unknowable; that is one year sooner than the previous forecast. The reason it is unknowable—to challenge what the noble Lord, Lord Desai, said—goes back to a comment made by the noble Lord, Lord Lamont: the tax system in this country is remarkably concentrated. We are resting our tax system on around 3 million people, and they are doing half of all income tax and a good deal of the rest of the tax raised by HMRC. This tax concentration has come about because our economy has changed so much, and we are now an economy of services. Britain was the world’s first industrial nation, and we are becoming the world’s first services nation. That concentration into high-value services is creating quite a bit of difficulty with our public finances. We need those services and employees in this country to keep going to support the kind of state we have—which has not been ideal even recently, as we have heard during the debate.

There is a good deal of evidence that those jobs are moving. For example, thousands of jobs have gone from the London Insurance Market, which were high-paid jobs in the economy. The commonplace observation that the graduate entry of big accounting firms has been restricted means that it is limiting high-paid jobs in 10 or 15 years’ time in accounting services. They are jobs that will not happen in this country; they may be in Atlanta or somewhere else.

The Government are quite rightly focusing on life sciences, which I will pause on for a moment. AstraZeneca has four worldwide research bases; it has only one in the UK. GSK has five worldwide research bases; it has one in the UK. Both companies employ fewer than 20,000 people in the UK; AstraZeneca employs below 10,000. The noble Lord, Lord O’Neill, referenced obesity. There has been an enormous miss in obesity wonder drugs in life sciences, which are accruing tremendous value creation in the US, Denmark and elsewhere, but not in the UK.

Then, there is the issue of tax migration. We hope that tax migration is not going on. It is very hard to measure, because sometimes the person moves and sometimes the person does not. The US is seeing tremendous internal tax migration, and that could easily come to us. One of the reasons why the US matters so much is that we have so many citizens already in the US, making it easy for people to travel. Maybe we should take a look at that.

I will turn briefly to one other point. We should thank Jessica Pulay at the Debt Management Office, who has done such a superb job in raising debt for the Government so consistently in all markets—but the DMO could also do with a little help. Pension funds have been buying gilts because they have been de-risking, and, as noble Lords know, foreign investors buy 30% of the market. Maybe this Government should look at incentivising domestic savers to hold gilts. Can the Minister comment on that too?