Budget Statement

Lord Bilimoria Excerpts

Thursday 21st March 2013 Lords Chamber

[Lord Bilimoria]

My Lords, last year we had the omnishambles Budget, with measures such as a “pasty tax”. Last year we had the Government making U-turn after U-turn, and the criticism that the Treasury had not thought things through or listened. This time, the Budget has so much in it that shows that the Government are genuinely trying to listen. For a long time, many of us have been saying that employers’ national insurance is a tax on jobs and that it should be removed and reduced for new businesses and SMEs, and the Government have listened and shown that in their NI initiatives in the Budget. Of course, they should go further, but this is a great start. Our fuel duties are some of the highest in Europe, and the Government have listened and cancelled the fuel duty rise in September.

In the brewing industry, in which I have declared an interest, we have suffered from beer sales drastically reducing for decades, and we have had the wretched and hated beer duty escalator, introduced by the previous Government, increasing the price of beer above inflation for years. There has been a tireless campaign by the British Beer and Pub Association and the Campaign for Real Ale, and the work of Andrew Griffiths, the MP for Burton, where I was yesterday with my joint venture partners Molson Coors at its the headquarters in the UK. All these campaigns have asked the Chancellor to stop that escalator. Eighteen pubs a week have been closing, with two pubs in London alone closing every week. Jobs have been lost and the average Briton has found that the cost of one of life’s simple pleasures has gone up. I pay credit to the Treasury Minister, Sajid Javid, who has listened to those concerns and not only removed the beer duty escalator but cut the price of a pint by a penny. Of course, the campaigns on both the fuel duty and beer duty were ones that the Sun newspaper got behind. In spite of that newspaper’s criticism of the press reforms, calling the Government the “Ministry of Truth”, it would claim that, “It’s The Sun Wot Won It”.

Could the Minister confirm that the Government have checked that they will be able to go ahead with the beer duty reduction? There have been complaints from organisations such as the WSTA that claim that it breaches EU rules by reducing duties for beer but increasing duties for wines and spirits. Could he confirm that the beer duty reductions could and should go ahead?

On the face of it, the Government have listened to business. They are concerned about business and have listened to consumers, and they are concerned about consumers. They have paid particular attention to the less well off consumers by raising the tax threshold to £10,000, but the reality is that we are two years away from an election, and this was the Chancellor’s last chance. The political reality sadly overshadows everything. We all know that the situation is so bad that we need drastic measures. Getting down to a 20% corporation tax is fantastic news, but we know, for example, that Ireland has gone down to 12.5%, which has made a huge difference in attracting inward investment and spurring growth. It was a bold move. We need to get this into perspective. Corporation tax brings in barely over 5% of tax revenue, but reducing it sends out huge signals.

The reality is that although the Government have reduced the deficit, they promised to eliminate it by the end of Parliament in 2015. We all know that they will be nowhere near achieving that, and the noble Lord, Lord Eatwell, who is not in his place, spelled that out clearly. Public sector net debt is predicted to double from £800 billion at the start of this Parliament to more than £1.6 trillion by 2017-18. Just this year alone, in spite of seeing the lowest ever interest rates, the Government’s debts will cost the taxpayer nearly £50 billion. That is far more than the entire defence budget. The reality is that the Government’s austerity plans for the past three years have not worked, because they were based on projections that showed that the economy would be growing at 3% a year by now. We know not just that growth has been slow but that the economy has been flatlining or been in recession. The reality is that the OBR has halved its growth forecast from 1.2% to 0.6%. In other words, we will be bumping along the bottom once again.

The Government have made a rod for their own back, once again for purely political reasons. I am sorry to say this, but the Opposition would probably have done the same: ring-fencing certain areas of the Budget such as health, international aid and schools. When you add all those ring-fencings together, it makes up well over 50% of the Budget, which means that what you can cut is under 50% of the Budget. In defence, for example, although the Government are helping the Armed Forces by giving the fines raised from the banks’ LIBOR scandal to the Armed Forces charities, which is terrific, and increasing the pay of those in the services by 1.5%, the reality is that in real terms all our workforce is being squeezed. Inflation has been well over 2% for three years, and real wages for all the people in this country will have seriously shrunk over the course of this Parliament. People are worse off, and are going to be worse off. With defence, we have had spending cuts, including nasty cuts in our troop numbers and our capability, when we continue to have black swan and grey swan threats. Yet we continue to intervene globally to the extent that even the current Defence Secretary has spoken out in protest.

Of course, the further good news in this Budget is that the Government are going to give the Governor of the Bank of England flexibility to help to generate growth in the economy, but why have the Government not been more specific about that growth remit? Why have they not set a specific nominal GDP growth target for the Bank of England, for economic growth and job creation, as well as targeting stability?

Of the more than £700 billion of public spending, welfare, social services and the National Health Service account for more than half the amount. Huge savings need to be made in those areas. Public spending as a percentage of GDP has reached 50%. This Government are reducing that proportion, but can the Minister confirm that they have a target of reducing public expenditure as a percentage of GDP to 40%? At that level, this country can still provide the world-class services that a top-10 nation such as ours deserves and still provide the safety net that our people deserve, while still providing the environment to generate growth where we need to invest.

This Budget has saved the Chancellor from his last chance saloon, but it will not have saved the country. Unfortunately, political reality has got in the way. The Government have failed to deliver growth in the past three years and failed on the promise to eliminate the deficit over this Parliament. Yes, there have been external causes, the global economic crisis, the eurozone crisis and the uncertainty of the world in which we live, which would have been challenging for any Chancellor. The previous Government blamed external factors for getting us into this mess, and this Government blame external factors for not being able to get out of it.

We must give credit where credit is due; there is much to be happy about both for consumers and for business. However, in this increasingly global world, there is nothing in the Budget about incentivising and increasing exports and doing business with countries such as India and China: the BRICs. As founding chairman of the UK India Business Council, I know that the good news is that Britain is still one of the top 10 economies in the world. When I accompanied the Prime Minister to India last month, I advised him that the global race is competitive. We need to be bold and optimistic and shout from the roof tops that we have the best of the best in the world, whether it is in education, professional services, accountancy, law, design and high-end engineering. We have the best institutions in the world, yet there is not enough in the Budget, as the noble Lord, Lord Kestenbaum, said, to invest in science and technology, innovation and higher education. We need to be bolder in getting our priorities right and generating growth and confidence for our consumers and business. In the words of the Duke of Wellington, “Fortune favours the brave”.

The Minister said that this was an “aspiration nation” Budget. My great grandfather’s motto was to “Aspire and achieve”, and my business’s motto is to “Aspire and achieve against all odds, with integrity”. That is just what this country needs to do.