Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Bilimoria Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Government have spoken about growth as their priority from day one and, to be fair, they are doing a few good things. They have carried on the Help to Grow: Management programme, which was started by the previous Government. Some 10,000 businesses have already gone through the programme; 12,000 are enrolled on it and it is delivered by 60 business schools around the country, and I am proud to be patron of the Small Business Charter, which I took over from my late friend, Lord David Young. It is a 12-week mini-MBA—just the right thing to be doing.

The noble Baroness, Lady O’Grady, spoke about small modular nuclear reactors. When I was president of the CBI in 2020-22, I was like a stuck record saying, “Let’s build these, let’s build these”. Finally, now, five years later, we are starting to build them. In entrepreneurship, it is problem, solution, action—but quickly. I am glad the Government are finally doing that.

On the priority of research and development and innovation, we spend 1.7% of GDP; America spends over 3%. We need to increase expenditure on R&D and innovation. I am chair of the International Chamber of Commerce UK; the ICC is the largest business organisation in the world, with 45 million members. We have promoted digital trade, which I am glad to see the Government have taken as part of their industrial strategy. The UK now stands at a crossroads. Outdated paper-based systems are stifling growth. The UK can be a leader; our trade represents £1 trillion of the UK economy. Does the Minister agree that implementing digital trade would see benefits such as £25 billion in trade growth, £224 billion in efficiency savings, 35% efficiency gains for SMEs, £22 billion in SME working capital unlocked, trade transaction times cut from two months to one hour, an 80% reduction in trade transaction costs, shipping costs reduced by 18% and workforce productivity increased by 60%? I thank the noble Lord, Lord Elliott, for initiating this debate.

The Government talk about growth, yet so many of the measures they have implemented are anything but helping growth. They are hampering growth, whether this is through the rise in employers’ NI, inheritance tax on farmers and family businesses, VAT on private schools and removing business rates exemptions for private schools, or VAT reclaim for tourists, which was taken away by the previous Government. Should the Government not bring back that relief? Then we would have more tourists spending money on goods as well as on staying here and on restaurants.

Due to the non-dom regime change, over 10,000 people already have left, including many people I know. They pay £8 billion of taxes, employ people, invest, and conduct philanthropy in this country. We will lose all of that, because money walks. Now there is talk of the £30 billion hole to be filled and of more taxes going up in the Budget—which, sadly, is on my birthday.

We have 1 million NEETs in this country—young people who do not work—and we have 9 million people of working age who do not work. We need to get these people back to work.

I co-chair the All-Party Parliamentary Group for International Students. Will the Minister confirm the talk that a levy on international students is going to be introduced in the Budget and that the two-year post-graduation work visa is going to be reduced to 18 months? These international students bring in £42 billion to the economy. We treat them as immigrants. Should they not be taken out of the net migration figures?

There is a fear of immigration. Bad immigration is bad for this country, but good immigration is great for this country. Without the 16% of ethnic minorities, this country would not be the sixth-largest economy in the world.

I was part of the PM’s delegation to India last month—it was fantastic. I spoke in the Finance Minister of India’s conference, the annual Kautilya Economic Conclave, the title of which was “Seeking Prosperity in Turbulent Times”. India is growing at 6.5% a year, with a target of 8%. In our latest figures, released today, we have grown at 0.1%—a flatlining economy. We have a debt to GDP of 100%; high debt servicing costs; the highest tax burden in over 70 years; high government expenditure; unemployment of 5%; inflation almost double the target at 3.8%; and defence expenditure that needs to go up to 3%. We need a plan—we need to be bold.

I conclude with this. In June, I visited Argentina and met President Milei and his whole team. He has a very clear plan of bringing down expenditure and inflation. Every single Minister we met sang from the same hymn sheet. This Government need a plan; they need to be bold. Then we can get growth.

UK-US Trade and Tariffs

Lord Bilimoria Excerpts

Thursday 3rd April 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

I thank my noble friend for that comment, and I agree that the best decisions are often made with cool heads. Sometimes it can be challenging to maintain that cool head, but I think that as a Government we have done well to make sure we navigate that on a calm and pragmatic basis. There is so much uncertainty, and I can feel the desire for clarity in this uncertain world. I feel that the request for input from business is a good way of crystallising some of that clarity, as we understand the impact and possible opportunities for next steps.

But have no fear: although the deadline for that conversation or dialogue is 1 May regarding the request for input, there is continuous and ongoing engagement with our US counterparts about how we draw together an agreement. If such an agreement were to come into place, we have not put any artificial deadline on when that should or should not happen—and nor should we, because it would put the negotiations under undue strain. I am pleased and encouraged that the conversation and dialogue are happening regularly, that they are well received on both sides and that access is able to happen.

So I agree—I hear the need for an informed decision about such responses. A debate on any response, as and when that comes to a position where it is more formed, is absolutely where we can provide some real value, and that would be a worthy place.

[Lord Bilimoria (CB)]

I congratulate the Minister on her appointment. This is our first interaction. We served on the GREAT campaign advisory council for many years until her ministerial appointment. I am reassured to hear that the Government want to be cool, calm and collected. I am also reassured that the Government are doing their best to try to get a deal with the United States of America. Donald Trump likes deals, so let us try to get one with President Trump.

However, although the United States has £300 billion-plus of trade with the UK, we have £126 billion in services exports to the US—a huge services surplus that nobody talks about—which is not applicable for these tariffs. We should make the most of that strength. Even in goods, we have a small surplus. But the United States is only 13% of the world’s trade. Surely we should work with the other 87% of countries around the world to make sure that we continue with the rules-based multilateral trading system.

Secondly, the Minister mentioned growth, and I will raise one of the best ways to generate growth. I am chair of the International Chamber of Commerce here, ICC UK. The ICC is the largest business organisation in the world, with 45 million members. Before these tariffs were announced, we laid out a plan for growth that could unlock £25 billion in trade growth. By digitising trade, we can take what takes three months on a paper-based trade down to one hour. Why do we not, as leaders, champion digital trade around the world and take a leadership role in these turbulent times?

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

Before my noble friend answers the noble Lord’s question, I urge all noble Lords to keep their remarks brief and put questions to the Minister rather than making this Statement an occasion for wider debate. This will allow all noble Lords who wish to receive answers to their questions to do so.

Spring Statement

Lord Bilimoria Excerpts

Thursday 27th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for highlighting a very important point. The Governor of the Bank of England, in his speech last week, highlighted the link between productivity growth and living standards, so we know how important it is to increase productivity. Public sector productivity is one of the few issues that the noble Baroness, Lady Neville-Rolfe, and I agree on: I know that she, too, is focused on increasing public sector productivity. The difficulty is that the previous Government spoke about it but never took any measures to do anything about it. Yesterday, the Chancellor announced a £3.25 billion transformation fund to increase the productivity in our public sector, so that we can spend more money on the front line and get money in public services where it is needed. In terms of the private sector, in answer to my noble friend’s question, the thing I would point to most in yesterday’s Statement, is the importance of capital spending. We know that continual cuts to capital spending, under the previous Government, seriously restricted our productivity growth. The IMF consistently said to us that lack of public sector investment was a serious barrier to growth in our economy, because it is a serious barrier to productivity. Protecting, yesterday, £100 billion of capital spending, that we put in the Budget, is a central point for getting productivity up in our economy. The other thing I would point to is skills investment; we know that we need the higher-skilled workforce in order to do the construction work we are setting out.

[Lord Bilimoria (CB)]

My Lords, would the Minister agree that neither the Autumn Budget nor the Spring Statement mentioned trade at all? I have been appointed as the chair of the International Chamber of Commerce—the ICC UK—and we have just unveiled that we could unlock £25 billion in trade growth, £224 billion in efficiency savings and £22 billion in SME working capital by digitising trade and cutting transaction times, from two to three months to one hour, and reducing trade transaction costs by 80%. So why do the Government not run with this, full steam? With the trade and tariff wars emanating from the United States of America in full flow, digitising trade is the way ahead; modernising trade is the way ahead.

[Lord Livermore (Lab)]

The noble Lord is quite right to focus on trade and the importance of trade to growth. I think he is wrong to say that neither the Budget nor the Spring Statement mentioned trade; I think both did, because clearly trade is a big part of our growth strategy. We want to increase our trade flows with our nearest neighbours and biggest trading partner, the European Union, through our reset of our relationship with the EU. The Chancellor has been to visit China, the third largest economy in the world, which I think the previous Government had not engaged with it at all since 2019. We are engaged in trade negotiations with India and the GCC, and we have just acceded to the CPTPP, so trade is absolutely at the heart of it. Of course, many of the conversations already have revolved around our trading relationship with the United States, which again is a very incredibly important trading relationship to us. On digitising and streamlining trade, he is absolutely right. The Government have an agenda in that respect, but it is very expensive and we need to move ahead when fiscal conditions allow.

Small Farms and Family Businesses

Lord Bilimoria Excerpts

Thursday 12th December 2024 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Government’s Budget proposals talk about addressing the £22 billion fiscal gap, but, as a result, they are undermining the viability of our family-run farms, disrupting food security and having a long-lasting effect on our rural communities. I refer to the reform of agricultural property relief, or APR, and business property relief, or BPR. This will, in effect, lead to 20% tax over a value of £1 million, on top of a national living wage increase of 6.7%, which will raise labour costs for farmers, as well as the phasing out of direct payments.

I think that many farmers will regret voting for Brexit, as many of them did, and losing so many subsidies as a result, which have not been replaced by Governments since then. On top of that, there are food security concerns and the combined effects of rising costs, land consolidation and a reduction of direct payments, all destabilising food production. The UK’s reliance on food imports increases the risk of food insecurity, with the global supply chain disruptors.

I thank the noble Earl, Lord Leicester, for initiating this debate. As has been said before, we produce 60% of our food for consumption but we rely on imports for nearly half of it. However, domestic food production is vulnerable to many factors: climate change; the prices offered by purchasers; high energy costs—in the UK we have some of the highest energy costs in the world; the international supply chain—we saw fertiliser costs shooting up after the Ukraine war started, for example; labour shortages; biodiversity and water quality; and biosecurity and animal health.

The Government say that 73% of APR claims come from estates with qualifying assets worth less than £1 million. But the National Farmers’ Union says that 75% of farmers are affected. Will the Minister clarify why there is a huge difference between what the NFU thinks and what the Government think? They say that the agricultural property relief addresses a loophole, but Alistair Carmichael, chair of the Environment, Food and Rural Affairs Committee, said:

“Agricultural property relief is not a loophole; it has been a deliberate policy of successive Governments for the past 40 years, designed to avoid the sale and break-up of family farms … These changes will have a ripple effect across the whole rural community.””.—[Official Report, Commons, 4/11/24; col. 24.]


The NFU has said why it feels that the Government’s assumptions are flawed. It says that there is a failure to adjust for inflation, an unfair inclusion of non-commercial holdings and an underestimation of the tax burden of APR and BPR combined. Does the Minister agree? Further, on the economic impact on working farms, the NFU says that there are unsustainable tax liabilities. It says: “Medium-sized firms will face annual inheritance tax instalments that far exceed their profits”. Of course, it is a fact that farming is asset-rich and cash-poor. On top of that, NFU analysis shows that the £1 million threshold means that cereal farms will see their returns entirely wiped out by their tax liabilities. Dairy farms will lose approximately 50% of their returns to inheritance tax. On top of that, there will be implications for food security, the undermining of domestic food production, the disincentivising of long-term investment and a contraction in available farmland.

I do not know who is advising this Government. When I was president of the CBI, Keir Starmer and Rachel Reeves had good intentions but, since coming into government, they have upset pensioners, farmers and family businesses. They have upset the business community with a £40 billion tax rise and a £25 billion national insurance rise. They have upset employers with regulations that will make us less competitive, at a cost of £5 billion. The Government rightly want economic growth, but how can we have economic growth if we kill the goose that lays the golden egg?

This country’s farmers are precious; they are the backbone of our country. We need to appreciate our farmers and always be grateful for our farming community.

Autumn Budget 2024

Lord Bilimoria Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Government, the Chancellor and the Prime Minister keep talking about growth, but to do that the private sector has to be supported to grow. It is the private sector that creates the jobs that pay for the taxes that pay for the public services—no growth means no taxes, and if you put up taxes by £40 billion then you get no growth. That is the paradox.

Tax on employment generates £455 billion, which is 45% of total public sector receipts, but high employment taxes can discourage firms from hiring. On top of that, I am sorry to say that the previous Government are to be blamed for raising taxes to their highest level in 70 years. I implored Rishi Sunak, when he was Chancellor and I was president of the CBI, “Don’t put up taxes”. What did he do when he became Prime Minister? He put corporation tax up from 19% to 25%.

Higher taxation is associated with reduced labour supply. Studies show that a 1% rise in tax correlates to a 0.5% drop in hours worked, and studies indicate that higher labour taxes increase unemployment levels. The Labour Party has promised no increases in certain taxes. That is all very well, but, for example, removing the non-dom regime is going to have a hugely detrimental effect. Those 75,000 people pay £9 billion of tax a year; they invest and spend in this country; they are mobile, and that money will fly. What about IR35? There was no mention of that. Maybe the Minister could say why not.

GDP per person in the second quarter of 2024 was 0.6% lower than before the pandemic. Public sector net debt is now almost 100% of GDP. That is four percentage points higher than a year ago and at a level last seen in the early 1960s. According to the IFS, as a share of GDP, the rise in taxation by the end of the decade will be the second largest of any post-war fiscal event. The tax take is forecast to increase to a peacetime record of 38% of GDP.

The removal of inheritance tax relief in terms of a 20% tax for business and agricultural property, AIM shares and pensions is so harmful, particularly for farmers. I do not think that has been thought through. Some 70% of farmers will be hit by it. Will they be able to sell their land to be able to pay the tax? If they are tenants and do not own the land, they cannot even do that. How do you value businesses? How do you sell? This is going to be a disastrous move.

As for VAT on private schools, with £1.3 billion forecast to be raised, in the debates we have had previously we have demonstrated that it will probably cost the Government £1.6 billion, with a higher burden on the state sector and a drop in the number of international boarders. This is a penny-wise and pound-foolish move.

Total public spending is forecast to settle at 44.5% of GDP by the end of the decade. That is almost five percentage points higher than before the pandemic. This is not good news, although the Government are doing the right thing with the blood scandal and the Post Office Horizon scandal.

The OBR has forecast that real household disposable income per person will grow at just over 0.5% a year on average for the next five years. That is the joint lowest on record.

According to an article in the Telegraph today, for many businesses the biggest shock was not the rate increase but a near halving of the threshold at which they have to start paying national insurance, from £9,100 to £5,000. The hospitality industry has warned that this change will cost over £1 billion. Taken together, the changes mean that a company employing a part-time worker doing 15 hours a week will see its national insurance contribution bill increase by 73%. That is ridiculously high. Kate Nicholls, the chief executive of UKHospitality, describes this increase in costs as “eye-watering” and warns that it disproportionately hits companies in her sector given that many employ part-time staff in roles such as waiting and bartending.

Whenever you get a significant cost increase, what do you do as a business? You can put up your prices, reduce your costs or stop investing. The OBR has warned that all the measures in this Budget will lead to low growth. The highest forecast is 2%; most are just over 1%. Inflation is going to go up. Businesses are bearing the brunt of the £40 billion tax increase, and relief on business rates is going down from 75% to 40%. How are pubs and restaurants going to manage? How is the high street going to manage? On top of this, we have the £5 billion costs and the impact of employment regulation. We have one of the most flexible labour markets in the world. That is a huge advantage now being eroded.

After 16 years of financial crisis, austerity, Brexit, the pandemic, the Ukraine war, inflation at 11%, energy inflation, the cost of living crisis, 7 October, the tragedy after that and the uncertainty every way that you look, how much more can business deal with? How resilient can our businesses be? This is not a pro-business Budget or a pro-entrepreneurship Budget. It is government’s job to be a catalyst and create the environment for businesses and entrepreneurship to flourish and grow. I am sorry, but this Budget does exactly the opposite. I am afraid to say that I warn the Government that this Budget is going to come back like a boomerang and bite us.

Employment: Tax Policy

Lord Bilimoria Excerpts

Thursday 31st October 2024 Grand Committee

[Lord Bilimoria (CB)]

My Lords, the Government, the Chancellor and the Prime Minister keep talking about growth. The investment summit at the Guildhall had a huge sign saying “Growth”. But, to do that, the private sector has to be supported to grow. It is private sector growth that creates the jobs that pay for the taxes that pay for public services—no growth; no taxes. If you put up taxes, you get no growth. That is the paradox.

I thank the noble Lord, Lord Leigh, for his excellent opening speech. Taxes on employment generate £454.8 billion. That accounts for 45% of total public sector receipts. It is huge. Employment tax revenues represent almost 17% of UK GDP. For a married worker with two children earning an average salary, the UK has a tax wedge of 27%, above the OECD average of 25.7%. Higher employment taxes can discourage firms from hiring, reduce wages and affect workers’ decisions to enter the workforce or seek higher-paid jobs. Corporate and consumption taxes also influence that. Employment corporate taxes can deter investments in jobs. I am sorry but the previous Government have to be blamed for raising taxes to their highest level in 70 years and, in particular, putting up corporation tax from 19% to 25%. That was a huge mistake and should not have been done.

Consumption taxes create a wedge affecting labour, demand and supply. Higher taxation is associated with reduced labour supply, and studies show that a 1% rise in tax correlates to a 0.5% drop in hours worked. Of the 17 OECD studies, only five found no significant negative impact of taxes on unemployment. The remaining studies indicate that higher labour taxes increase unemployment levels. A 10% reduction in the tax wedge could lower equilibrium unemployment by 2.8% and raise the employment rate by 3.7%. That is what we are talking about. The fiscal drag that the previous Government put in place until 2028 is also hugely damaging, affecting 7 million tax payers.

The Labour Party has promised to maintain corporation tax at 25% and not raise income tax, employees’ NI or VAT. That is all great, but the noble Lord, Lord Leigh, mentioned the hugely damaging effect of the taxes on non-doms and the removal of the non-dom regime. Inheritance tax reforms will drive investment away from this country. I know many people who have already left. Some 75,000 non-doms pay £9 billion of tax; they spend and invest in this country. Those people are mobile and that money will fly.

The increase of capital gains tax from 20% to 24% was not as bad as we thought, but the elephant in the room is the £40 billion of tax increases. The OBR warned that this could weaken long-term growth in the UK economy. Sure enough, the forecasts for growth do not even reach 2% in the years ahead, at about 1.5% or 1.6%. Increasing national insurance by 1.2% to 15%, raising approximately £25 billion, is a tax on jobs. I agree with the noble Lord, Lord Davies, that if you spend more and increase infrastructure then that should help productivity, but our public spending will reach 44% of GDP by the end of the decade, funded by tax and borrowing. Businesses are bearing the brunt of this £40 billion tax increase. The threshold of NI going down from £9,100 to £5,000 will bring many more people in as well. The business rates discount put in place by the previous Government of 75%, which has really helped, is going down to 40%. How many pubs and restaurants and how much of the high street will be able to take that?

On top of that, we have a £5 billion cost on the impact of employment regulation, and we have flexible employment, which is a huge advantage over a country such as France. If you make our workforce less flexible, it has a cost to it, and it makes us less attractive for investment. Inflation is now predicted to go up to 2.5% or 2.6%.

To conclude, since 2008, over those 16 years of financial crisis, austerity, the Covid pandemic, the Ukraine war, with inflation up to 11%, energy inflation, the cost of living crisis, 7 October and the tragedy of that day and the tragedy since, and with the uncertainty in every direction you look in the world, how much more can business put up with? How much can business deal with? How resilient can our businesses be? As the noble Lord, Lord Leigh, said, 80% of the jobs are provided by it, and then there are the 5 million SMEs and the jobs that they provide. How can we carry on and deal with just one challenge after another? Then we get this Halloween Budget, burdening business with higher taxes. This is a tax, borrow and spend Budget, not a growth Budget. It is not a pro-business Budget or a pro-entrepreneurship Budget. The Government’s job is to be a catalyst and create the environment for businesses and entrepreneurship to flourish and grow. The Budget does exactly the opposite.

Budget Responsibility Bill

Lord Bilimoria Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, Rachel Reeves said:

“This Government’s defining mission is to deliver economic growth. However, growth can only come through economic stability and a commitment to sound public money so never again can a government play fast and loose with the public finances. This new law is part of our plan to fix the foundation of our economy so we can rebuild Britain”.


The decision by Labour gives the OBR the most power it has ever had since the Chancellor at the time, George Osborne, set it up in 2010. Of course, we know that forecasts can be wrong. The noble Lord, Lord Macpherson, said that they are invariably wrong, but he made an interesting point: what about opposition forecasts? Will the Minister respond to that?

The noble Lord, Lord Macpherson, also said very clearly that forecasts are based on assumptions. I know that. We in business continually make assumptions on all our forecasts and they are not always correct. Laith Khalaf, head of investment analysis at AJ Bell, said:

“Ironically Liz Truss and Kwasi Kwarteng did more to burnish the credentials of the OBR than any politicians since its inception. As things stand, the OBR is now more commanding than ever”.


The Bill will mean that the OBR, which monitors and checks the UK Government’s financial plans, has the power to make an assessment on announcements over the course of a financial year that make permanent tax or spending commitments worth more than 1% of the UK economy. That 1% is just over £2 trillion—just over £20 billion. My noble friend Lady Wheatcroft spoke about the black hole of £22 billion. This number keeps getting bandied around: it is not even 1% of GDP, yet it is made out to be the only reason why taxes need to be put up. If taxes are put up in the Budget coming forward—taxes such as CGT equated to income tax—it will be so damaging to the country and its economy and to investment.

The OBR provides independent analysis. It is meant to be absolutely independent. The Chancellor must request the OBR to produce forecasts at least twice a year. The initial Cabinet Office briefing note stated that the Bill’s purpose was

“to capture and prevent those announcements that could resemble the disastrous Liz Truss ‘mini-budget’”.

The briefing was republished with the reference to Ms Truss removed. Will the Minister confirm that? The absence of public OBR analysis is considered to be a factor in the negative reaction of the financial markets that followed. After Kwasi Kwarteng’s Statement, as we know, market volatility led to increased government borrowing costs and the devaluation of the pound against other international currencies. My friend Sir Anthony Seldon has just released his new book, Truss at 10: How not to be Prime Minister.

The fiscal mandate is a Government’s guiding fiscal objective, so tax and spending policy decisions should be made with this in mind. It is to ensure that public sector net borrowing does not exceed 3% of GDP by the fifth year of the rolling forecast period. The noble Lord, Lord Eatwell, made a very good point that I ask the Minister to respond to: what is the effect of this on automatic stabilisers? According to the Treasury, the effect of Kwasi Kwarteng’s and Liz Truss’s mini-Budget, which would have reduced income tax by around £45 billion, would have been to reach a trend rate of growth of 2.5%—that was a noble objective. It was reported that the OBR had provided the Chancellor with a draft forecast, but this was not made public. Opposition parties and the Conservative chair of the House of Commons Treasury Committee urged the Chancellor to publish the forecast, and the lack of that OBR analysis has been cited as the major factor that contributed to the negative reaction to the mini-Budget in the financial markets.

We can go into the analysis—by the BBC, for example—of key aspects and consequences of the mini-Budget: unfunded tax cuts, a funding shortfall, market reaction, an impact on interest rates and pension funds, Bank of England intervention, loss of market confidence, political and economic repercussions, reform and an emphasis on credibility. The noble Baroness, Lady Noakes, made a very important point: why is this a money Bill? This means we have a limited influence on the Bill; I do not think that this should have been a money Bill.

To conclude, the Bill has received support from many quarters, including from the CBI, of which I was president for two years, from June 2020 to June 2022. Louise Hellem, chief economist at the CBI, said:

“Market stability is a key foundation to enabling economic growth and business investment. Ensuring large changes in tax and spending policy are always subject to an independent assessment by the Office for Budget Responsibility will give businesses and investors additional confidence in the stability of the public finances”.

UK-EU Relationship in Financial Services (European Affairs Committee Report)

Lord Bilimoria Excerpts

Wednesday 17th May 2023 Grand Committee

[Lord Bilimoria (CB)]

My Lords, it is seven years since we voted as a country to leave the European Union. I often ask, in the speeches I give to international audiences, what the world thinks of this decision. Last month, I spoke to a group of 100 business leaders from around the world, and 99% of them thought that it was a big mistake for the UK to leave the European Union. Yesterday, I spoke at a conference here in London of international businesspeople. I asked the question again, and well over 80% of them said that it was a big mistake for the UK to have left the European Union. This, whether we like it or not, is what the world thinks of our decision.

That said, the UK-EU Relationship in Financial Services report concludes that overall, the outlook for financial services after Brexit seems relatively positive, in contrast to some other sectors of the economy. However, the report says that the UK

“is at an early stage of the adjustment to life outside the EU and there is no room for complacency, particularly as the impact of Brexit on the sector has not yet fully played out. We therefore urge the Government not to disregard the importance of a cooperative and constructive UK-EU relationship in financial services”.

That is why it is absolutely key that the Northern Ireland situation is sorted out, that the Windsor Framework is accepted and implemented, and that the Northern Ireland Parliament resumes as soon as possible. We will then be able to address the TCA, because the basic EU deal is basic. It could be far more comprehensive, particularly in financial services, where we could strengthen our co-operation and agreement.

I thank the noble Earl, Lord Kinnoull, and the European Affairs Committee, for the UK-EU Relationship in Financial Services report, although as the noble Lord, Lord Liddle, mentioned, it is already a year out of date. The noble Earl mentioned some statistics in his excellent opening speech. I will go even further and highlight some of these statistics, which show the strength of the sector in this country: 2.3 million jobs, £100 billion in tax contributions, a financial services trade surplus of £63 billion in 2020, and £11 trillion of assets under management in 2020. The UK is the second-largest asset management centre globally, it is the world’s largest centre for international debt issuance and it has the highest financial services trade surplus.

Some 117 companies chose to list on the London Stock Exchange in 2021, with £37.5 billion of PE and VC funding, yet sadly Arm, a company that is Cambridge born and raised, has chosen to list in the United States. That is not a good sign, because the United States remains the leading market for IPOs, whether we like it or not. The UK is the world’s largest centre for OTC derivatives trading. The UK’s insurance sector is relatively more important than those of other major European economies. The UK remains the world’s preferred regulatory regime for financial services. The UK is the leading hub for fintech investment in Europe. The UK is one of the most international fintech markets. Green tech investment in the UK is growing. These are fantastic statistics that we are all very proud of.

However, to strengthen the UK in this area, we must address the lack of skills and availability in the workforce in the City. We must be able to expand the immigration routes. The debate at the moment is whether immigration is too high. I pointed out in another debate recently that one reason why immigration is high is that we have an increased number of international students, which is really good—but they are included in the net immigration figures when they should be excluded. If you exclude the international students, you see that you need to get the workforce that the economy needs, sector by sector, including in the financial services sector. I have said time and again that we need to revamp and reconstitute the Migration Advisory Committee so that, in the same way that the Low Pay Commission sets the minimum wage every year, and the independent Monetary Policy Committee sets the interest rates on a regular basis, the Migration Advisory Committee should be able to say, sector by sector, including for financial services, so many thousand people for a one- year, two-year or three-year visa should be allowed in.

Dublin has been the winner when companies and firms have chosen to relocate. That is no surprise when corporation tax there is 12.5%. I will come on to that later.

The City of London has said that the committee’s report recognised that:

“The City of London and the financial services … sector based in the Square Mile … is a national, European and global asset, which helps fuel business development, infrastructure, jobs and growth across the UK, Europe and the world.”


We have the largest financial services cluster in the world, but here is the point: two-thirds of the sector is based outside London, so maintaining and further developing global trade investment and retaining the City of London’s position as a global financial services hub are also key to the future of the industry.

At the end of the transition period, the UK had onshored EU equivalence regimes in many areas. The Government and regulators should adapt the EU approach and determine third countries’ and firms’ equivalence using an outcomes-based approach, ensuring that the openness of the UK is not restricted by this equivalence overlay. Does the Minister agree with this?

The UK regulatory regime for financial services is one of the most robust. Our high standards are an asset and should be maintained. We should continue to be a global leader in regulation, promoting open global markets and high standards. We need to be an attractive location for financial services talent and— I addressed this earlier—we need to allow the best talent to come here. We saw the huge difference that the big bang made, when we opened up to competition and new technology. The Treasury is now implementing a programme of building a smarter financial services framework for the UK, which repeals retained EU law and transfers 43 core financial services powers to the regulators’ rulebook. This is a good opportunity for the UK.

What about the FCA and the PRA? They need to facilitate growth and international competitiveness. When implemented by the regulators, this can help ensure that the UK remains an attractive and competitive location for financial services. The international regulatory strategy practitioner-led group of senior leaders from around the UK, which is sponsored by the City of London Corporation and TheCityUK, has advised that there are several ways in which oversight can be conducted, one of which is to establish a new financial services Joint Committee. Another is to enhance the role of the House of Commons Treasury Select Committee and the House of Lords Economic Affairs Committee. Does the Minister agree with those points? Another was to establish a technical sub-committee of the Treasury Select Committee, focused solely on financial service regulation, but that committee is already doing good work.

Many people talk about equivalence. The UK has onshored EU equivalence regimes in many areas, but the EU equivalence-based framework is suboptimal compared to the previous UK national regime, which had a mix of approaches. We are now free to redesign this approach to oversee services and improve the EU model. The UK should not adopt a reciprocal or “fortress UK” approach. Looking ahead, the City of London Corporation encourages the EU and the UK to continue to make equivalence assessments pragmatically, with the interest of end-users foremost in mind, and to maintain existing equivalence in CCPs and on data.

The TCA excludes financial services, on the basis that we will have an MoU. I hope that, once we have sorted out the Windsor Framework, we get to a stage where we can have this MoU and strengthen our relationship.

The European Securities and Markets Authority, which previously traded in the UK, has largely shifted to EU venues in Amsterdam. This is worrying. The share of UK-based liquidity dropped from 25% pre-Brexit to 3%.

Another bit of good news is that there were forecasts of 70,000 jobs going to the EU as a result of Brexit, but only 7,400 jobs have been lost. We need to remain attractive. It does not help that we have the highest tax burden in 70 years or to put up corporation tax from 19% to 25%. The loss of passporting rights affects EU firms as well.

I conclude with this. Julia Hoggett, the chief executive of the London Stock Exchange, says that the UK needs to be “young, scrappy and hungry” to compete as a global financial centre, especially now that it can no longer rely on its position as the

“dominant centre for financial markets in the EU”.

The head of financial services at EY, Omar Ali—I qualified as a chartered accountant at EY—says that

“I have no doubt that both the UK and EU will continue to be world leading markets, driving innovation, progress and growth”.

Budget Statement

Lord Bilimoria Excerpts

Thursday 16th March 2023 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, this country, along with many others, has gone through hell for the past three years. There was the pandemic, followed by the sad war in Ukraine, which continues. Business and citizens have gone through hell. During the pandemic, when we thought we would bounce back and have a V-shaped recovery, it has been one crisis after another instead: inflation, supply-chain challenges, energy and cost of living crises, political crises including three Prime Ministers in one year. In September, the markets were spooked by the well-intentioned growth plans of Liz Truss and Kwasi Kwarteng, through their irrational exuberance and mini-Budget, with a reduction of 45% to 40% for the top rate of tax—absolutely the right thing to do, but the wrong time to do it—without the OBR to back up and validate their plan.

Since then, the Government have been trying to show calm and stability, quite understandably. Now, at last, six months after September, we have a proper Budget. We have a steady Prime Minister and Chancellor, both individuals from a business background and the Chancellor is a fellow entrepreneur, to boot. Whether an election takes place next year—and that is what the Government’s focus is on—or not, the path to growth and prosperity is crucial.

Earlier this week I was with the Nobel laureate Paul Krugman, the economist from the United States, at Cambridge. He said that we could get inflation down to maybe not the 2% target, but 3%. He said perhaps 3% could be the future target rather than 2%. The OBR has now said it will go down to 2.9%. He also said that unemployment might settle at around 4%; we had unemployment below 4% before the pandemic, and it has been very resilient. Where will interest rates settle down? They will be probably somewhere between 4% and 5%, which is what they used to be before the financial crisis, and thereafter we had over a decade of these near-zero rates which are completely unreal and abnormal.

The noble Baroness, Lady Lawlor, talked about government expenditure; it is now well over 44% of GDP. It should be well under 40%, and she gave evidence of how countries with lower government expenditure in proportion to GDP perform better. Our debt-to-GDP is close to 100%; it is going to be close to 100% five years from now. Had the OBR calculated Liz Truss and Kwasi Kwarteng’s growth plan, what is the bet that, ironically, the debt-to-GDP would not have been that much higher than the current Chancellor’s plans? If you look back to the end of World War II, you will see that our debt to GDP was 250%. In the last three years, we have gone through the biggest global crisis since the Second World War, and we have the lowest debt-to-GDP ratio of any G7 country. It is overprudent to say, “We don’t have the money; we have to be fiscally conservative and have a balanced budget”. What about being bold and going for growth, which will create the employment that will pay down the debt?

India has its Budget one month before ours. In February 2021, India had a Budget in the middle of the pandemic and said that it would not increase taxes because it did not want to stifle the recovery and hamper growth. To date, India has not put up taxes, even in its latest Budget. When I was president of the CBI, I said to Rishi Sunak, who was then Chancellor, “Come on, Rishi, don’t put up taxes. This is what India has said.” What has he done? He has just put up taxes after taxes for the past two years, so we now have the highest tax burden in 70 years. Instead of reducing tax, he announced that he is going to put up corporation tax from 19% to 25%. He countered it with the super-deduction of 130% to incentivise investment, which was fantastic news. The analysis that the CBI carried out said that that super-deduction genuinely has incentivised investment, but we have ended up with the highest tax burden since World War II at 38% of GDP.

If noble Lords remember, Rishi Sunak said that he was going to reduce income tax by 2024, but we spent £400 billion doing the pandemic that we have to recover, and we cannot reduce taxes now because we are in an inflationary environment. We were in a deflationary environment. I argue that inflation has not been demand-led; it was created by the Ukraine war and by energy prices, which are now well off their peak. Energy prices have come down.

Putting up taxes is stifling growth and the recovery. As history has shown, when George Osborne reduced corporation tax from 28% to 20% and then to 19%—he actually wanted to go down to 15%—we actually increased our tax take. Will the Minister acknowledge that? By trying to get £18 billion more a year and putting up corporation tax by almost one-third in one swoop, from 19% to 25%, you are killing the goose that lays the golden egg.

We were worried that we would have a double whammy in this Budget: an increase in corporation tax and a taking away of the super-deduction. Again, I spoke to Rishi when he was Chancellor and said, “Please bring in a replacement for the super-deduction”, and he said, “I will”. The Government have stuck to that and come up with this 100% tax deduction for investment in plant, machinery and technology, which is fantastic and just what we need.

But the point about corporation tax is not the absolute tax rate itself; it affects our perception and our inward investment. Historically, this country has been the second-largest or third-largest recipient of inward investment in the world, but now we have a situation where AstraZeneca, as the latest example, with more than £300 million of investment, is going to Ireland, which has a corporation tax rate of 12.5%. We have a rate that is double that. Arm, a company that we are so proud of, which was founded in Cambridge and whose technology we all have in our mobile phones, has decided to list in New York. Although our Government keep saying that our corporation tax is the lowest in the G7, it is now higher than the OECD average. Image and impression count.

On the positive side in this Budget, the investment zones are great news. They are based on something that I and the CBI have been championing for a long time: clusters based around our world-class universities. This is great news. We need to do more of this. I was in India last month, leading a University of Birmingham delegation as its chancellor. I spoke at the QS World University Rankings annual conference. I was so proud making my keynote speech that Britain, at 1% of the world’s population, has four out of the top 10 universities in the world; America has five and Switzerland has one. We have 17 out of the top 100 universities in the world, of which Birmingham is one. But is there anything in the Budget to help our universities? They have been managing on £9,250 fees that have been frozen. If you take that in real terms, we are now managing at £6,000. How are we meant to carry on being the best in the world when we are underresourced and run on the cheap? This cannot go on for ever.

I was on the Times Education Commission that reported last year. Our private schools cover 7% of our schoolchildren and are some of the best schools in the world by far. The funding for a private school child is three times the funding for a state school child. Where is the education spending in this Budget? Investment in education in the last decade has hardly increased, whereas in areas such as health it has increased hugely. Investing in education is the best investment. It will increase productivity. That is our future.

On SMRs—small modular reactors—this Budget gives another bit of good news: prioritising nuclear and saying that it will be treated as green is spot on. The Government say that they are going to look into SMRs. Why are we “looking into” SMRs? Why are we waiting? Rolls-Royce has the technology. These small modular reactors can give power to 1 million people, and cost one-sixth of a large plant such as Sizewell. They take five years to make, and we have not even started building one. Nuclear has been neglected by every Government, whether Labour, Conservative, or the Liberal and Conservative coalition. Nuclear has been neglected to our peril and I am glad that we are giving it focus.

There was nothing about housebuilding in this Budget. We need more houses desperately.

The shortage occupation list was addressed in the Budget, but just for construction. What about hospitality, agriculture, financial services and technology? Every sector of our economy has shortages. I have said time and again to the Government: why not have a revamped Migration Advisory Committee? As the Monetary Policy Committee sets interest rates each month and the Low Pay Commission sets the minimum wage every year, have the Migration Advisory Committee advise the Government sector by sector on the shortage occupation list. Would the Minister agree that we need to do that?

Here is the point. Immigration is made into this big bogeyman. Net migration is going up, but why? Because international students are included in the figures. We are now beating all records on international students—there are 690,000—and because they stay for a minimum of one year, they are treated under UN rules as immigrants and are counted. They are not immigrants. If you take international students out of those figures, the whole picture changes. Why are the Government making a rod for their own back? Why do they not, like many other countries, report to the UN but domestically exclude international students from the net migration figures? Could the Minister respond on that please?

Let us talk about energy. It is so good that the energy cap is being maintained for consumers, who need the help, but where is the help for businesses? There is no help for businesses, which have been devastated by energy costs.

IR35 reform is needed to help self-employed people but there is nothing in the Budget. The apprenticeship levy needs reforming desperately to help skilling, but there is nothing in the Budget. Our business rates are the most expensive in Europe and need to be reformed—the Government keep saying that they are going to reform this—but there is nothing in the Budget.

Fuel duty being frozen is very welcome, but alcohol duty is increasing. Pub after pub has been closing but the Government go and put up alcohol duty. As the founder and chairman of Cobra Beer, I am very grateful that draught beer duty has been frozen.

Defence expenditure will go up to 2.5% when it can, but it needs to go up to 3% right now. There is a war in Ukraine and we need to be prepared for the worst. At the end of the excellent Ukraine debate that we had recently, I quoted my Cambridge University contemporary and friend, Brigadier Justin Maciejewski, the head of the National Army Museum:

“Armies need might and mass to win. That means good weapons, good people and enough of them to be a credible deterrent. Without effective defence, everything that you treasure is threatened. Defeat in war means you lose everything: no health, no pensions, no education and no safety”.


He ends by saying:

“We need to be prepared, and preparation has a price.”

To conclude, the IFS has just reported on the Budget. It is very gloomy and has said we are stuck in a “lost decade” of falling living standards. The stealth tax of freezing thresholds until 2028 is going to raise over £120 billion. It is going to cost people on the lowest level of tax £500 more per year. On Brexit, the IFS says that the nation’s output will be 4% lower in the long term. We are avoiding a recession thankfully, but look at what is happening on the sidelines. Look at Silicon Valley Bank and Credit Suisse. We have got to be prepared. The noble Lord, Lord O’Neill, said that the Government have a narrow vision of credible fiscal rules.

This country has so much potential. The noble Baroness, Lady Moyo, who we welcome, spoke in her excellent maiden speech about economic growth. We need to grow; we need to reduce taxes; we need to invest. Debt will then fall, and the sixth-largest economy in the world will continue to be one of the top economies in the world. We will show our excellence in combatting climate change, in wind power, and in innovation and creativity. We have to have faith; we have to have belief; and we have to be bold.

Autumn Statement 2022

Lord Bilimoria Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Chancellor said the Autumn Statement on 17 November 2022 will lead to a shallower recession and higher long-term growth. He promised

“stability, growth and public services”,

£55 billion of increased taxes and spending cuts. Yet during the pandemic we spent £400 billion to save the economy, debt to GDP went up to nearly 100% and the OBR has predicted that in 2027-28 we will still have 97.3% debt to GDP. Here is the caveat: the OBR forecasts are forecasts, and invariably they do not actually transpire.

We have the highest tax burden in 70 years. The OBR has predicted that the tax burden will hit a record 37.5% as a share of GDP in 2024-25. Income tax thresholds are frozen. The fiscal drag will bring millions of people to either start paying tax or be dragged into higher bands. There is also the windfall tax on energy companies and corporation tax going up from 19% to 25%. As the noble Lord, Lord Bridges, said, high taxes will stifle the recovery and growth.

When it comes to spending, the good news is that schools are getting £2.3 billion, but that is a drop in the ocean. We have underinvested in schools for decades. As for the guaranteed 2% on defence, we need to go up to 3% because of the Ukraine war and other global threats. Does the Minister agree?

The OBR predicts that inflation will peak at a 40-year high of 11.1%. On growth, the OBR has forecast that we will be in recession—we probably already are—and we expect growth of 1.3% in 2024. Before the financial crisis we were growing at an average of 2.5%. Unemployment is at record lows rate of 3.6%; the OBR forecasts that it will go up to 4.9%. As the noble Lords, Lord Fox and Lord Bridges, said, the OBR has forecast a dramatic decline in real household disposable incomes—the lowest in memory.

What about the Opposition? The shadow Chancellor has said that the Government’s actions

“have forced our economy into a doom loop, where low growth leads to higher taxes, lower investment and squeezed wages”.

She said the UK was

“the only G7 economy that is still poorer than before the pandemic.”—[Official Report, Commons, 17/11/22; cols. 844-57.]

We recently had our CBI annual conference—I have just stepped down as president and am currently vice-president—in Birmingham, where I am proud to be chancellor of the university. There, Tony Danker, our director-general, said:

“Britain is in the middle of stagflation—hit with rocketing inflation and negative growth—for the first time”


in many years. He went on:

“Now, we know how to fight inflation. We know how to fight recession.”


But do we

“know how to fight them together”?

What about growth? He said that

“growth is good. It’s a precondition to a stable society. Without growth the NHS gets worse not better. Without growth, people’s lives get worse not better. Without growth, we lack the resources we need to transform ourselves to a zero-carbon world.”

Since the financial crisis, we have had low growth and flatlining, if not declining, productivity.

There is good news about business rates relief—the Government are finally going to address this—and about infrastructure and Sizewell C, but what about small modular reactors? Rolls-Royce has the capability. We can get them up and running in five years. A 500-megawatt SMR can power electricity for 1 million people. Why have we not started yet?

What about private sector investment? The 130% super- deduction was absolutely brilliant. Now that corporation tax is going up from 19% to 25%, we need permanent full allowances, because that will incentivise companies to invest. We at the CBI estimate that that would unlock an extra £50 billion in capital investment per year by the end of the decade. Do the Government agree?

What about trade? Our trade as a percentage of GDP is the lowest in the G7. Our biggest trade agreement is with the EU. That TCA needs to be unlocked, but we cannot unlock it unless we resolve the Northern Ireland protocol. We need to get round the table and resolve that now.

In his speech at the CBI conference, Prime Minister Rishi Sunak said that

“we … plan to grip inflation and balance the books … And critical to achieving all this is innovation.”

But we invest 1.7% of GDP in innovation and R&D, compared with 3.1% in America. The Prime Minister also said that

“we will … deliver our Lifetime Skills Guarantee to help people of any age retrain and acquire new skills.”

This is great news. When will this start? There are 1.3 million job vacancies.

In his speech, my successor as president of the CBI, Brian McBride, spoke about the good news of our tech unicorns. We have one of the highest levels of tech unicorns in the world. On the other hand, he said:

“We also have one of the biggest skills mismatches in the G7.”


We estimate that 90% of the UK workforce will need to retain by 2030.

Net migration is at 500,000 up to June 2022, yet there are job shortages in every sector, not just in low-skilled jobs. I was addressing the highest tech companies in the country. I asked, “How many of you are experiencing labour shortages?” Every single hand went up. I have said time after time that the Migration Advisory Committee needs to be revamped so that, like the Low Pay Commission and the Monetary Policy Committee, it can independently tell the Government to give one, two or three-year visas sector by sector: so many thousand jobs in this sector, so many thousand in that sector. Why do the Government not do this?

The good news about reskilling is the Help to Grow scheme launched by Rishi Sunak when he was Chancellor; I am on the council. Great—mini-MBAs for SMEs.

In his speech to the CBI, Keir Starmer said his party

“is proud of being pro-business.”

That is great news to hear. He said:

“We won’t ignore the need for workers to come to this country … Migration is part of our national story”.


Good migration has always been good for this country, yet we have fewer industrial robots than any other comparable country. He also made the point about investing in green growth. I believe we should invest in wind, hydrogen, solar, SMRs and, of course, the green industrial revolution, including HydroFLEX, the world’s first retrofitted, hydrogen-powered train, developed by the University of Birmingham with government and industry support.

We do not have an industrial strategy. Do the Government have a plan for an industrial strategy? The business department, BEIS, includes “Industrial Strategy” in its name. The apprenticeship levy is not flexible enough; we need to make it more flexible.

Finally, all this talk about reducing international students and restricting them to elite universities is absolutely wrong. As a third-generation international student from India, I know that international students bring in £30 billion to our economy. They enrich the culture of our universities, form lifelong and generation-long bridges and are one of the strongest elements of soft power in our country. Do not damage international students. We should increase their number from 600,000 to 1 million.

I conclude: growth; investment; address the immediate need for skills; address the long-term need for skills; bring in workforce from abroad; innovation; invest in the green industrial revolution; and let us be grateful and celebrate our universities and our international students.