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.

Financial Markets: Stability

Lord Bilimoria Excerpts

Thursday 3rd November 2022 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, between 8 and 19 September, after Her Majesty the Queen sadly passed away, the whole world looked to this country with the utmost respect thanks to that wonderful lady. On 23 September, it all came crashing down. I had been travelling around the world, in Asia and in Europe, and people said to me, “What is your great country doing to itself?” On 24 October, on Diwali day, our first south Asian-Indian Prime Minister, Rishi Sunak, was appointed. What happened on 23 September? Liz Truss and Kwasi Kwarteng’s plan was a good plan with its intentions for growth and to cut taxes. When I was president of the CBI, I constantly said to Rishi Sunak, when he was Chancellor, “Please don’t put up taxes”. The Indian Budget in 2021 deliberately did not put up taxes. The Indian Government said, “We do not want to stifle the recovery and hamper growth, because that is what will happen if we put up taxes, and businesses have suffered enough”. Instead, we have the highest tax burden in 70 years.

In life, more often than not, it is not only what you do but how you do it. I remind noble Lords of the irrational exuberance of Liz Truss and Kwasi Kwarteng on 23 September, pulling rabbits out of a hat, including removing the cap on bankers’ bonuses. This is the right thing to do to make the City of London more competitive, but not when people are going through the most acute cost of living crisis in memory. Reducing the top rate of tax from 45% to 40% is absolutely the right thing to do. It was 40% under Margaret Thatcher, John Major, Tony Blair, and Gordon Brown, who put it up to 50%. Then it was taken down from 50% to 45% by George Osborne, and not to 40% because of the coalition with the Liberal Democrats. He would have taken it down to 40%; it should be at 40%, but not now—timing is everything.

The markets were spooked of course, because there was no OBR report to back up and support the so-called mini-Budget. There was no plan and no budgeting. Removing the national insurance rise of 1.25% is again the right thing to do. The Labour Party itself said that it would not have increased national insurance. Now everyone is focused on this black hole of £50 billion. No one talked about the black hole of £400 billion that was spent during the pandemic. Our debt to GDP is, at the moment, about 100%. It is the second lowest in the G7. Japan is at 250%, America is at 150%, Italy and France are both over 110%. Our debt is not that high. It is all about perception, and about the Government and the Treasury having a plan, and the Government and an independent Bank of England working together.

Before the financial crisis in 2008, we had an average growth rate of 2.5% and interest rates of about 5%. After the financial crisis we had austerity. Austerity did not work; it led to no growth and declined productivity. We had almost 0% interest rates for over a decade. We must not go down the austerity route. We need efficiencies in public services. We are all grateful for the National Health Service; its expenditure has gone up from £110 billion to £150 billion, and will continue to increase. It needs root and branch reform. We need to be able to continue to offer health, social and dental care free at the point of delivery, and that will need efficiencies.

Putting up corporation tax from 19% to 25% is going to hamper our competitiveness and will harm businesses in every way. To counter that, the Government should encourage investment. The super-deduction of 130% has been taken away. I ask the Government if they will introduce a 100% tax deduction for capital investment, innovation and R&D to encourage investment? We need to invest in skills and to reform the apprenticeship levy. Can the Minister tell us if the Government will reform it?

We are crying out for the reform of business rates. The rates we have are some of the most expensive and unfair in the world. They are killing our high street, hospitality and retail sector. Will the Government reform business rates? Will the Government agree that business needs help right now to survive this winter, in the face of a recession? We need to temporarily reduce VAT to 10% for the hospitality sector, as we did in the pandemic. We need to give business rates relief, as we did before. We need to activate the shortage occupation list. Do the Government agree that we need a revamped Migration Advisory Committee, much like the Low Pay Commission that sets the minimum wage, and the independent Monetary Policy Committee that sets interest rates? We should have an independent MAC that activates shortage occupation lists, sector by sector, granting one or two-year visas, to give industry the workforce it needs.

We need access to cash flow and government-guaranteed loans. That way businesses will survive. If not, we will have 10% of hospitality going bust. We need the help now. I would rather do that to prevent unemployment and businesses going bust. We need a credible plan and a credible budget, not irrational exuberance, and to continue to invest in education, infrastructure and defence—and I am sorry to say I think that 3% defence expenditure is going to be required.

We now have a Prime Minister and a Chancellor with business backgrounds. We have interest rates that have gone up to 3%; they will go up to 5%. We must focus on investment, growth and this country’s strengths, with its strongest combination of hard and soft power in the world, and a reputation for integrity, which is why we have been trusted historically by the world.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I join in welcoming the Minister to her role and thank all noble Lords who have spoken. It has been a quite exceptional debate, both for its quality and new ideas and the wide range of contributions. But while we have been standing here, the Bank of England has raised interest rates by 0.75 of a point to 3%. That is the biggest hike since 1989 and it is forecast that the UK is facing a “very challenging” two-year recession, which would be the longest on record.

I say to the Minster, since she is here, that this calls for the Chancellor to come to Parliament and to speak more generally to the nation. So many people will now be desperately worried about what will happen to them. Several speakers today—I am thinking of the noble Lords, Lord Young, Lord Best and Lord Campbell-Savours—focused on housing, both on mortgage costs and the immediate impact on the rental market. That will feed through to people long before we get to the Autumn Statement on 17 November. Will the Minister ask the Chancellor to reassure the nation before then, rather than leave people twisting, quite frankly, with overwhelming concerns? All three of those speakers talked about longer-term reforms. Those things matter, both for housebuilding and for the rental sector, but we have an immediate crisis, and that is what I ask the Minister to focus on and deal with immediately.

After the events of the past weeks, I hope we no longer have to deal with discussions that question the need for financial stability. It is a prerequisite for a functional economy, and fiscal responsibility clearly underpins that stability. I have been listening for years to people who have claimed that we can print money, borrow, cut taxes and spend, with almost no limit. I pick up the phrase of the noble Lord, Lord Kestenbaum, who said that one day the music will stop. We have to take proper responsibility.

We also need to recognise that we are not the US economy with the almighty dollar and a domestic market of 350 million people. We are not in the EU with a domestic market of 450 million and 27 countries at our back. We are a medium-sized European economy, adrift since Brexit from any significant trading bloc and with a currency that is no longer a globally used trading vehicle. We have made our economy significantly more vulnerable. I pick up the point made by the noble Lord, Lord Desai—that the UK is an inherently fragile economy and we have to recognise that in the decisions and actions we take.

I also hope—I really disagree with the noble Lord, Lord Bilimoria, here—that we have heard the last from those who claimed that very low corporate taxes, reducing taxes on the richest, slashing regulation and cutting public services are the answer that will hand us growth.

[Lord Bilimoria (CB)]

I did not say cutting public services.

[Baroness Kramer (LD)]

I misunderstood; I thought the noble Lord was advocating cuts in public services to balance the books.

[Lord Bilimoria (CB)]

I said efficiencies.

[Baroness Kramer (LD)]

I would like to deal with that issue of efficiencies and cuts. After so many years of cutting out the fat and getting to the bone and flesh, the word efficiency is used extremely casually. Very often, it is expensive to make the change that underpins efficiency, so I will be looking to see if the noble Lord, Lord Bilimoria, speaks out against cuts in the real financing of public services.

We have been through this low-tax strategy and, frankly, it is an ideology that has been proven to be wrong. It may have suited or looked sensible when first implemented, but we have seen consistently over a long period that it does not deliver growth in the UK economy. I shall be fascinated to hear speeches from the Conservative Benches after the Autumn Statement. I am sure there will be lots of support for whatever the new orthodoxy is, and I look forward to seeing how Members opposite align that with the enthusiastic speeches in favour of the mini-Budget.

Businesses are now trying very hard to get the Government to hold back from their other false growth claim, which is slashing regulation. I noted that even the noble Lord, Lord Wolfson, said in this House that business is not looking to cut or change existing regulation. Last week I was at Mansion House to hear the Lord Mayor of London trying to impress on the Government and regulators that the City and financial services depend on the accreditation and confidence that regulation provides. If ever we needed to understand that regulation, having standards and getting it right are important, it is in light of the crisis triggered by LDI.

Numerous speakers picked up that point, including my noble friends Lady Bowles and Lord Sharkey, the right reverend Prelate the Bishop of St Albans and the noble Lord, Lord Sikka, as well as the noble Lord, Lord Davies, who looked specifically at the need to reform the way we think about and structure pensions. These are not deregulatory actions; they will often incur different, but firm, regulation. Regulation is a mechanism for enforcing standards, and the casual notice that a deregulation agenda somehow leads to growth is something most of industry is pleading with the Government not to adopt.

In the end, it is ordinary people and small businesses that pay the price of decisions that fly in the face of the real world and the experience we have been through. The noble Lord, Lord Kestenbaum, made the point that market instability hits many ordinary people. I will not repeat the many conversations that have taken place today on the impact of the rising cost of living, mortgages and rents; that has been very well laid out. The noble Lord, Lord Liddle, made the point that we cannot ignore poverty, the right reverend Prelate the Bishop of St Albans talked about the problems of in-work poverty, and all the conversations about rental reform very much feed into these concerns. I have simply no idea how most families manage when the cost of the very basics for living are up by 17%.

The Government are going to have to confront the impact of declining real wages. You cannot clap nurses one week and push them to food banks the next. I disagree again with the noble Lord, Lord Bilimoria, that uncapping bonuses is just a timing issue. You cannot say that one group of people cannot work effectively unless they have uncapped bonuses, then look at nurses and say that they can work effectively even with declining real wages. That bonus system, together with light-touch regulation, played a huge role in driving the 2007-08 crash that still scars us today. There is an old saying: fool me once, shame on you; fool me twice, shame on me. We have to be very careful about how we handle the financial services industry, for which I have great respect but where the wash of money tempts people to find a workaround in so many different ways. Indeed, LDI is a very good example of the industry trying to find a workaround.

We wait to see the Autumn Statement on 17 November. I think everyone here is very well aware that Shell announced last week not just quarterly global profits of $9.5 billion, over twice those for the same period last year, but that it also paid no windfall taxes. BP had almost the same earnings and paid a tiny bit of windfall tax. The House might be interested to know that the oil and gas sector has in just this quarter paid out $29 billion to shareholders. This, if anything, demonstrates that this tax has been very badly structured. I understand the Chancellor wanted to put in many thoughtful loopholes, but they desperately need to be removed and this must become a meaningful tax. To pick up on points made largely by the noble Lord, Lord Liddle, one of the things we need to think through is a shift from taxing earned income so heavily to looking at unearned income.

I agree with the noble Lord, Lord Bilimoria, that small businesses are under terrible pressure, and that needs to lead to reform of business rates and various schemes that will let them manage the debt they are carrying, many for the first time. Of course, I also join with others in calling for the uprating of benefits in line with inflation and protection for the triple lock.

There are many things that I do not forgive this Government for, because for years they have ignored the fundamentals of growth in the economy. That may be a point for a different debate—I would love the opportunity to develop it. The Chancellor faces hard choices. The Conservative Party has over the last decade brought those choices on itself, but the unfortunate part is that it has also brought them on the country.

--- Later in debate ---

[Baroness Penn (Con)]

The noble Baroness is right that there is more than one regulator at play in this space. That point was also made by the noble Lord, Lord Davies of Brixton. If the noble Baroness will forgive me, I will come on to some actions taken after the 2018 stress test shortly.

The noble Lord, Lord Tunnicliffe, asked what the forthcoming Bill will do to promote financial stability. Allowing us to tailor our financial services regulation to the UK’s situation and needs will mean that we can create the best regulation for our circumstances. In a world where financial services are evolving all the time, with new developments and technologies requiring regular changes, the measures in the Bill will mean that UK regulations can remain up to date and effective.

It is also the role of the Government to ensure that their own decisions lead to trust and confidence in our national finances. Our responsible approach to managing the economy meant that we went into Covid and the current economic crisis with strong public finances, allowing us to intervene to support people’s lives and livelihoods. In that context it is important to acknowledge that, while well intended, the recent growth plan had unintended consequences for economic volatility.

Mistakes were made, and we have taken steps to fix them. Most of the tax measures in the growth plan have been reversed and the associated volatility dissipated. However, we are still faced with a profound economic crisis, with global inflationary pressures driven by increased demand post Covid, elevated energy prices after Putin’s invasion, widespread labour shortages and, in response, central banks across many major economies raising interest rates.

My right honourable friend the Chancellor of the Exchequer has been clear that we will take the measures needed to restore confidence and trust in the UK’s public finances and to deal effectively with the economic shocks that are being felt across the globe. In doing so there will be difficult decisions to take, but I hope that I can reassure the noble Lord, Lord Tunnicliffe, and others, that in taking them, this Government will protect the needs of the most vulnerable.

Specifically on recent events, the FPC noted in its July Financial Stability Report that the worsening global economic outlook had caused markets to be volatile in recent months. Since July, global inflationary pressures have intensified further. Specifically on the intervention by the Bank of England, all noble Lords will be aware that in late September there was elevated uncertainty in the UK bond market that resulted in gilt yields rising rapidly and significantly. LDI funds, many of which held leveraged positions in the gilt market, faced significant margin calls as a result. In some cases, these calls exceeded the cash buffers that they held, forcing them to raise cash by selling gilts into a falling market. Large sales of gilts into an already illiquid market led to yields increasing even further, in turn triggering further margin calls and forcing further gilt sales to try to maintain solvency.

This would have led to a spiral of falling prices but increasing pressure to sell gilts, so, within its remit, on Wednesday 28 September, the Bank of England started temporary purchases of long-dated UK government bonds, with the aim of restoring orderly market conditions. In line with the Bank’s statutory financial stability objective, the purpose of these operations was to act as a backstop to restore orderly market conditions and reduce any risks from contagion to credit conditions for UK households and businesses while the appropriate adjustment takes place. This operation was fully indemnified by the Treasury.

It is worth remembering that the Bank’s intervention served to keep the gilt market stable so that funds had time to adjust their positions in line with the changed market conditions. The speed and scale of repricing far exceeded historical moves, and therefore fell outside the expectations of risk management plans or regulatory stress tests. Throughout the intervention, the Bank worked with LDI funds and pension schemes as they built their financial resilience ahead of it coming to an end. Market conditions have since improved. The Bank’s usage of the scheme, at under £20 billion, was significantly below the maximum size permitted under its maximum daily auction size and below the increase in the indemnity provided by the Treasury. This stress in the LDI sector highlights the necessity of ensuring that the appropriate risk oversight and mitigation systems are in place for market-based finance.

I shall try to address the question asked by the noble Baroness, Lady Bowles, and the noble Lord, Lord Tunnicliffe, about what has happened since the 2018 exercise that looked at this. Since then, the Bank of England has worked with other domestic regulators, including the Pensions Regulator and the FCA, on enhancing monitoring of the risks. That included working with the Pensions Regulator on a survey of DB pension schemes in 2019 and prompting work to improve pension liquidity risk management. As the FCA noted in its letter to the noble Lord, Lord Hollick, and my noble friend Lord Bridges in March this year, the FCA contacted the largest LDI fund managers to ask them what plans they had in place to deal with increased volatility. It also probed large managers on the speed with which they could call money from underlying pension funds in the event of stress.

In response to many noble Lords, including the noble Lords, Lord Sharkey, Lord Sikka and Lord Davies of Brixton, and the right reverend Prelate, the Government recognise that there will be lessons that need to be learned from the market volatility seen in recent weeks. The regulators are working with the industry to improve their resilience to market shocks, and it remains a focus of the Government and regulators to ensure that we have a robust regulatory system.

In addition to the ongoing monitoring of systemic risks by the FPC, His Majesty’s Treasury and UK financial regulators have been working internationally as part of the Financial Stability Board, as I previously noted, to develop global approaches to identify and address vulnerabilities in market-based finance. The noble Lord, Lord Sikka, asked why we take a different approach to the regulation of banks versus non-banks in the financial system. Part of that is the international nature of the non-banking part of our financial system.

The Bank of England has also committed to working with the Pensions Regulator and the Financial Conduct Authority to ensure that appropriate levels of resilience are in place to mitigate risks to UK financial stability. As the Pensions Regulator chief executive emphasised earlier this month, DB pension schemes were not and are not at risk of collapse due to rapid movements in the price of gilts, and savers should not make any hasty decisions about their pension pots.

I turn to pensions. As I have just stressed, defined-benefit pensions remain strong, and members of those schemes that were invested in LDI funds are not at risk of losing out as a result of either the aforementioned volatility or interventions made by the Bank. Indeed, the independent Pensions Regulator issued a statement on 12 October for trustees of defined-benefit and defined-contribution schemes and their advisers, which communicated its expectations on matters for trustees to consider in relation to managing schemes and supporting savers.

The noble Lords, Lord Sharkey, Lord Best and Lord Campbell-Savours, and my noble friend Lord Young of Cookham, rightly mentioned the housing market, and I want to respond directly. The fact is that interest and mortgage rates have been rising since last autumn in response to global trends. This is not a UK phenomenon, with the US Federal Reserve having raised its base rate since March 2022 and the ECB taking similar steps. In the UK, around 75% of residential mortgages are on a fixed rate and therefore, in the short term, shielded from rate rises. However, I know that, for those on variable rights and those who are seeing their own fixed-rate deals coming to an end in forthcoming months, there will be significant concern. Where mortgage holders fall into financial difficulty, FCA guidance requires firms to offer tailored forbearance options. While it is important to note that the pricing of mortgages is a commercial decision for lenders in which the Government do not intervene, the Government do offer support through Support for Mortgage Interest loans for those in receipt of income-related benefits and protection in court through the pre-action protocol.

Similarly, the setting of rates is a commercial decision for private landlords in which the Government do not intervene. However, we understand that many people will be worried about the impact of rising prices. My noble friend Lord Young of Cookham spoke more broadly about the reform needed in the private rented sector in order to provide more security to tenants in that sector. I agreed with much of what he had to say. Indeed, the Government’s programme of work to reform the private rented sector continues through, for example, our commitment to ban Section 21 no-fault evictions. We heard ideas from my noble friend Lord Young and the noble Lords, Lord Best and Lord Campbell-Savours, for other changes that we could potentially make in housing. I will take those back to the department and ensure that they are looked at carefully.

The noble Lord, Lord Sharkey, asked whether the local housing allowance would be uprated. He will know that, as part of our response to Covid, the rates of local housing allowance were increased significantly to the 30th percentile of the market, with 1.5 million households gaining just over £600 a year. We have maintained those rates at an elevated level last year and this year in order to ensure that claimants can continue to benefit from this. This is reviewed annually, and I will not comment further on the uprating of benefits.

More specifically, many noble Lords spoke about the difficulties that vulnerable people are facing this year with the rising cost of living. The Government absolutely recognise that and are focusing our support most heavily on those households. People are facing a difficult time. We have put in place an energy price guarantee and further support for those on income-related benefits, pensioners and those with disabilities. There is also discretionary support for local authorities to provide help in their local areas.

I am conscious of the time so I will begin to wrap up. Many noble Lords used this debate as an opportunity to look ahead to the Chancellor’s Autumn Statement. I welcomed the constructive efforts by the noble Lord, Lord Liddle, to make suggestions not just about areas of spending that should be prioritised but about ideas for tax reform to help to fund them, which always needs to come alongside. I will only say to him, on his suggestion for equalised pension tax reform, that we have heard in this Chamber in recent weeks about the challenges of keeping GPs and others in their roles because of the tax treatment of their public sector pensions, and the idea might perhaps be a bit more complicated than it may look at first sight.

[Lord Bilimoria (CB)]

My Lords—

[Baroness Penn (Con)]

I am afraid I am really short on time, so I will make some progress and finish.

As the Chancellor has said, and as I think the noble Lord, Lord Desai, and the noble Baroness, Lady Kramer, agree, stability is a pre-requisite for growth. It is vital for families across the country—from the jobs they depend on to mortgages they have to pay, and to savings for pensioners and businesses investing in the future—and vital for the Government’s ability to borrow and invest in our economy.

The Chancellor will deliver his Autumn Statement on 17 November. Many noble Lords have asked me to speculate on its contents. They will know that I cannot, but I can say at this stage that the Prime Minister and the Chancellor are clear that the priority will be to ensure economic stability by setting out a concrete plan to get debt falling in the medium term. However, they are also clear about their priorities when taking the difficult decisions that this will necessarily entail: to support the most vulnerable and to drive growth to ensure that we have a strong economy by building jobs for the future—and our resilience to future shocks, too.

Budget Statement

Lord Bilimoria Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, this has been described as an unambitious Budget. As the noble Lord, Lord Skidelsky, said, austerity continues to bite. The Financial Times shows clearly that between 2016-17 and 2019-20, departments such as the Foreign and Commonwealth Office will see cuts of well over 30%. Looking ahead, according to the Joseph Rowntree Foundation, ordinary working families will be worse off. Couples who work full-time on the national living wage and have kids are set to be £1,051 worse off, while a lone parent will be £3,363 worse off by 2020. Does the Minister agree?

The big news of this Budget was when self-employed people’s national insurance contributions were increased. There was an absolute outcry because, whatever the Government try to say, it was breaking a manifesto pledge. It was not a question of “Read my lips”—one can read many times that there would be no increases in tax or national insurance contributions. That is bad enough. But, regardless of what the noble Lord, Lord Desai, said, it sends out the wrong perceptions for a Government—particularly a Conservative Government who are known to encourage entrepreneurship and self-employment. For people who work so hard, it sent out a very negative message. Linked to that was the reduction in the dividend allowance as well, when we are meant to be encouraging entrepreneurship, and in particular start-ups.

We have heard that debt has risen for 16 years in a row. It is approaching £2 trillion and is worth 88% of GDP. Debt interest, even at low levels of interest rates, is £50 billion—far more than our defence budget. Our fiscal deficit is still too high and we have a current account deficit, while tax receipts are approaching £38 billion. As the noble Lord, Lord Gadhia, said, that is the highest we have known—but what nobody has said is that almost 50% of our tax take comes from national insurance and PAYE; it is from jobs. So, basically, if you create jobs, that employment generates taxes to fund the public services.

Can the Minister confirm what public spending is as a percentage of GDP? Is it actually 43% or 40%? When he was Chancellor, George Osborne wanted to get it down to 36%, which I always thought was far too unrealistic. The noble Lord, Lord Willetts, spoke about pensions. Has the Chancellor done enough with this Budget to cater for an ageing economy in terms of welfare and health? I do not think we are doing anything near enough. There is also nothing in this Budget on tax simplification. We have probably the most complex tax code in the world. To me, the Office of Tax Simplification is an oxymoron.

The Budget did not mention exports once. We are meant to be encouraging exports. India has a GDP growth rate of 7% and overtook the UK as the sixth-largest economy in the world, thanks to the devaluation of the pound after Brexit. We need to generate growth. We have done relatively well, but to grow as a business you have to invest. You cannot cut your way to growth. The Minister spoke about productivity and how we lag in it. The Budget is right on investment in skills such as T-levels, but what about real investment in R&D and innovation? We invest 1.7% of GDP in R&D and innovation; Germany and the United States of America invest 2.7% and 2.8%. If we were to catch up with them, we would have to spend £20 billion more per year just to start off with, let alone to catch up with the lag.

Universities were not really mentioned in the Budget. The University of Birmingham, where I am proud to be Chancellor, has just had an impact report. We contribute £3.5 billion to the local economy. Just imagine if we supported universities more. What about international students? We had a big vote yesterday. Universities UK reports that international students bring £25 billion into the economy. That is huge, yet we have immigration rules that put off international students and a net migration figure that includes international students. Does the Minister agree that we should take international students out of net migration figures?

The noble Lord, Lord Gadhia, said that lower immigration in future will hamper our ability to grow. We have 5% unemployment. Less than 5% unemployment by any standards anywhere in the world is a very good performance and the highest level of employment—and that is despite having 3 million people from the EU and from outside the EU working here. Our public services would not manage without them. In fact, we would have a labour shortage without them. We as a House did the right thing from the point of view of morals and integrity by voting to give a unilateral commitment to EU nationals that they would have the right to stay. I am very disappointed that it was not agreed to by the other place.

Brexit, the elephant in the room, got one mention by the Chancellor. It got barely a mention. Leaving the single market. Then the Prime Minister talked about “going global”. Liam Fox said “going global”. Which dream world is Liam Fox living in? Free trade agreements are not just about tariffs but about goods and services and people. The Finance Minister of India, Arun Jaitley, was here and made it very clear that a free trade agreement with India would be all very well, but it would be not just about goods but about people. In November, when our Prime Minister went to India, the Indian Prime Minister Narendra Modi said very clearly that it was about Indian students being able to study abroad.

The Prime Minister said that no deal is better than a bad deal. Would 52% of the British public have voted to leave the European Union if they had been told that it meant leaving the single market—the 50% of our trade on our doorstep? By the way, it was a manifesto pledge by the Conservative Party to stay in the single market, so that is another broken pledge. Would those people have voted to leave on the basis of a hard Brexit and no deal? No way. Now we have seen in just nine months that Brexit has overshadowed everything—and this is just the end of the beginning. For the next two years, we are going to see. I do not agree with the Scots asking for another referendum, but it was utter hypocrisy for our Prime Minister to say to Nicola Sturgeon that she is focused on just one thing—leaving the United Kingdom—and is neglecting her economy and her country. What are we doing here? We are focused on one thing—Brexit—and as a result we might be neglecting our country and our economy.

To conclude: this Budget was cautious but it ignored the biggest issue, the elephant in the room. As was said in recent debate, our Article 50 Bill was the shortest suicide note in history.

The Economy

Lord Bilimoria Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, just about every Peer taking part in this debate has spoken about Lord Peston. I have been here for coming up to 10 years and he showed me kindness and encouragement from the day I arrived and in the debates I was privileged to take part in with him. What I loved most about him was that there was always a smile when he greeted you. He was completely non-political—it did not matter whether or not you were a Labour Peer—and was respected by the whole House. We shall miss him greatly. He would definitely have been speaking in this debate about the steps being taken to build a stronger economy.

This morning I chaired a conference of the Westminster Higher Education Forum. Its theme was enterprise and entrepreneurship in higher education, culture, skills and encouraging graduate start-ups—music to my ears. I was privileged to introduce our keynote speaker, an individual who, when I came over from India as a student in the early 1980s, I used to see on television, read about in the newspapers and who helped to transform this country from being the sick man of Europe that it was at that time. In the Cambridge University that I attended in the 1980s there was no word such as “business” or business school—and as for entrepreneurship, forget it.

=It was clear to my family and friends when I came here in the early 1980s that this was a country where, if I worked here after I finished my studies, I would never get to the top. I would not be allowed to get to the top because, as a foreigner, I would come up against a glass ceiling. They were absolutely right, I am ashamed to say. So what has changed in this country over these last decades? What has enabled this country, which was the sick man of Europe in the early 1980s, to become the envy of Europe today? That is the theme of this debate—the steps taken to build a stronger economy. The glass ceiling has been well and truly shattered. Just look at the number of ethnic minority Members of Parliament we have now compared with only a quarter of a century ago when there was a handful.

The person I introduced to the conference this morning was hugely instrumental in changing “entrepreneurship” from being a word that conjured up images of Del Boy and second-hand car salesmen to now being a cool term, encouraged by all Governments. That individual was the noble Lord, Lord Young. The noble Lord is one of my colleagues who, at the age of 84, never stops. He was instrumental in helping to create the atmosphere of aspiration in which the glass ceiling has been shattered. It has gone so far that, as I have been saying for years, a British Asian will be Prime Minister of this country. The Prime Minister himself said recently that a British Indian will be Prime Minister of this country, but not too soon, please.

The business situation has changed dramatically. I am proud to say that today Cambridge University has a business school. In January I was appointed as chair of the advisory board of the Cambridge University Judge Business School. As serendipity would have it, the day my appointment was announced, the Judge Business School was named in the top 10 in the world NBA rankings after only 25 years. The Harvard Business School was founded in 1908. Today the largest society at Cambridge—apart from the Cambridge Union—is the Cambridge University entrepreneurs. We have come a long way.

In the last Budget there was encouragement for entrepreneurship. There was a lowering of certain taxes and increasing of the entrepreneurs’ relief, encouraging wealth creation. Yet, based on this morning’s conference, I had recommended to Vince Cable when he was Secretary of State for Business that we should have a competition in the country for 100 growing businesses to attend courses such as the business growth programme, which I attended at the Cranfield School of Management, and the diploma in entrepreneurship at the University of Cambridge. One hundred of these would cost the Government £1 million but would pay back billions in growth. Vince Cable was excited about it but his civil servants shot him down. Does the Minister think it would be a good idea to encourage entrepreneurship in growing businesses in that way?

Many noble Lords have spoken about productivity. We are lagging behind and we need to do much more. We have heard that we do not invest enough. The noble Lord, Lord Bhattacharyya, spoke about how our investment as a proportion of GDP in R&D and innovation has gone down from 1.3% of GDP to 1%. The noble Lord, Lord Mair, spoke of the importance of investment and innovation and how much more we could do if we were to invest the 3% of GDP that Germany invests.

Let us look at what this country can achieve. I was privileged to visit CERN, where the professors heading the two experiments which discovered the Higgs boson particle are the leader of CMS, Professor Sir Tejinder Virdee of Imperial College London and the leader of Atlas, Professor David Charlton of the University of Birmingham, of which I am proud to be Chancellor. We can go further. This year we had the announcement of the discovery of gravitational waves, finally proving 100 years later Einstein’s theory of relativity. Among the key professors of this discovery were two from the University of Birmingham, Professor Alberto Vecchio and Professor Andreas Freise. One of the instruments that helped in the discovery of those gravitational waves from 1.3 billion years ago was designed and made in Birmingham.

The scientific papers produced by British universities are completely disproportionate to our population, let alone to our investment in research and innovation. Just imagine how much more we could achieve if the Government were to ramp up their spending on R&D and innovation. Does the Minister agree that we should have tax incentives to encourage companies to invest more in innovation? I could tell noble Lords story after story about the glass ceiling being shattered. Earlier I was sitting next to my noble friend Lord Rees, who apart from being the Astronomer Royal was President of the Royal Society—the prime achievement for a scientist. Who is the current president of the Royal Society? It is none other than Professor Sir Venki Ramakrishnan. He is of Indian origin, from Trinity College, Cambridge and a Nobel Laureate.

If we leave the European Union, we will lose a huge amount of research and development funding. It will hamper something that is already underfunded. We will also lose the high level of collaboration that exists between British and European universities. What most people do not realise and is rarely highlighted is the fact that the UK is the number two country in the world for foreign direct investment. Almost half of that is in financial services, but we are still second in the world. Would we be able to retain that position if the EU referendum leads to Brexit? In the perception of overseas countries, there is no question about it. Forget what President Obama said, especially whether he used the word “queue” or “line”. Hillary Clinton has herself, unprompted, confirmed that she too would be concerned if we left the European Union.

People from every single country I have spoken to say this. Whether I speak to members of the Indian Government, the Indian Administrative Service or businesses, they all ask, “How can you leave the EU? We see the UK as the gateway to Europe. We want you to remain a part of Europe”. The IMF has said that we should not leave, let alone the CBI and the Bank of England. I have spoken to professors from Harvard Business School and once again they were unanimous in saying, “You cannot possibly leave the EU”. The noble Lord, Lord Newby, listed many of the myths about Brexit, and there are accusations from the Brexiteers of scaremongering by the Government and the Remain campaign about the uncertainties.

There is no question about it. If we leave the EU, I have no doubt that this country will survive and possibly thrive because we are a hugely adaptable, flexible and resilient nation. I am openly Eurosceptic. I think that the structure of the European Parliament is appalling. MEPs have no connection with the regions they represent. Unlike Members of Parliament where there is a clear connection between Members and their constituents, I do not know anyone who knows who their MEP is. MPs have a clear line of accountability and responsibility that does not exist in the case of MEPs. The European Parliament has to move once a month to Strasbourg. Can noble Lords imagine what it would be like if every month we had to move out to Belfast or Edinburgh—and not just us, but everything? It is ridiculous.

The euro is a proven failed project because one size cannot and will not fit all. I used to think that by not being in Schengen we were losing out on tourists and business people, but now we realise that from a security point of view, we are lucky that we have retained control of our borders. We are not part of an ever-greater integration and there will never be a united states of Europe. I hail from India, which is a truly federal country. There is a central Government, a central defence force, foreign service and tax system, but there are states with chief Ministers who have autonomy and a great deal of flexibility. That combination makes for a truly federal country, but that will not and cannot happen in Europe. The only person in history who has ever united Europe was the Emperor Charlemagne in 800 AD.

The European Union makes up a tiny percentage of the world’s population at 7%, and yet it has 25% of the world’s economy. It also has 50% of the world’s welfare spending. How sustainable is that? The European Union is in urgent need of reform. I turn to the concessions and reforms that the Prime Minister managed to get recently. However well intentioned he was, I am sorry to say that every single person I have spoken to has confirmed that they will not influence them one iota in making their decision on whether to stay in Europe. But in spite of this, and in spite of my being a Eurosceptic and all my concerns about it, I think that we should stay in Europe. PwC predicts a reduction in GDP if we leave and the uncertainties are real. The shock to our economy would be huge. The Minister talked about our current account deficit being high. Our budget deficit remains high, let alone the effect of Brexit on our currency. I do not know if we would be able to withstand those shocks, and being the most successful economy in Europe would not last very long.

Everyone talks about the WTO. The noble Lord, Lord Newby, was absolutely right to ask why all those free trade agreements with the WTO are the cure to everything. He discussed the Swiss, Norwegian, Canadian and Albanian models, but every one of them would still require us to contribute to the European Union and possibly allow the free movement of people.

I shall conclude on that point: the free movement of people. When the subject of immigration was brought up at the conference this morning, the panel spoke of the concerns of those in higher education about our Immigration Rules, which are hampering our universities. That drew applause from the audience. Some 30% of the academics at our top universities like Oxford, Cambridge and Birmingham are foreign-born. Overseas students are still categorised by the Government so that they fall into the immigration figures. Does the Minister agree that we should take foreign students out of those figures? Recently I spoke to the new Australian High Commissioner to India in Delhi. She said, “Thank you for the UK immigration policy because Indian students are now coming to us instead of going to the UK. We are benefiting from the brightest and the best”.

The most important point is this: is it the EU or is it NATO that has maintained the peace over the past 70 years? I would say that it has been both. This was summed up for me by a senior vice-chancellor of a European university who said to me the other day, “How can the UK as a country even think of leaving Europe? You have saved us twice. You are seen to be the beacon of freedom, liberty and democracy. How can you even think of being responsible for what might potentially destroy the European Union? Would you be able to live with that?”. I do not think that is what our country does; we do not operate alone, we work together. The title of the debate concerns the steps to take in order to build a stronger economy. It is relevant to say that it depends on whether we stay in Europe or not. The vice-chancellor of the University of Cambridge summed it up in his opening address for the last academic year:

“If you want to travel fast then travel alone. If you want to go far travel together”.

Budget Statement

Lord Bilimoria Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Bilimoria (CB)]

My Lords, it is wonderful to follow the noble Lord, Lord Darling; this is the first time I have taken part in a debate with the noble Lord since he joined us. I remember very clearly leading a delegation to India as the chairman of the UK India Business Council, accompanying Gordon Brown, who was then Chancellor, and the noble Lord, Lord Darling, who was then Secretary of State for what is now BIS. I remember saying at one of the speeches I made there, “We have with us possibly—probably—the next Prime Minister and the next Chancellor”. Of course, on 27 June 2007 that came true. It is wonderful to have the noble Lord with us as well as the noble Lord, Lord Price, whom we welcome. I say this not just because Waitrose is a very good customer of Cobra beer. The noble Lord is a hugely respected established figure in the food and drink and retail industry—that feeling is unanimous; I have never heard a bad word said about him—and we are very lucky to have him with us.

Looking ahead, there is huge uncertainty. We have the election for the Mayor of London, the EU referendum, the Iraq inquiry report, the decision on Heathrow and Gatwick, which the noble Lord, Lord Darling, mentioned, which has been delayed until after the mayoral election, the American elections, and the Middle East situation and Daesh-IS. There is wretched, awful terrorism in places such as Paris and Brussels. What a backdrop for a Chancellor to produce a Budget against. Just look back to November, when the Chancellor was riding high—there was £27 billion extra and a rosy outlook—then within weeks he was backtracking because the outlook for the global economy was weaker, and the UK is not immune to slow-downs elsewhere.

This Budget has some excellent measures in it. Capital gains tax, which I have talked about time and again—which used to be 18% under the old Labour Government, increased to 28% and should go back to 18%—is down to 20%. That is wonderful news, and with the basic rate going down from 18% to 10%, that will help wealth creation, which I will come back to later. Entrepreneurs’ relief has also been extended, which is also fantastic. On business rate relief, 630,000 small businesses will pay no business rates at all next year, and reforms to national insurance will abolish class 2 contributions. That is all good news.

Cutting corporation tax down to 17% is absolutely tremendous and I will come to that later. Improved loans for doctoral students and loan systems for postgraduate students are also great. They are not quite where they should be but it is great progress. I declare my interest when I say that beer duty being frozen is very good. On a serious note, it is good for the pub industry, jobs and the consumer. There is investment in infrastructure—whether you agree with it or not—such as Crossrail 2 and HS3. I think that is terrific. There is also investment in roads.

However, the Government have made serious mistakes in the Budget, for example with the PIP. The IFS calculated that 370,000 people were affected by the change to the PIP criteria, and that it worked out to an average loss of £3,500 per person per year. The comments of my noble friend Lord Low on this issue have been vindicated as the public have agreed with them and the Chancellor has had to backtrack. As regards our complicated tax system, as a member of the Economic Affairs Finance Bill Sub-Committee, I know that a huge overhaul is needed vis-à-vis tax simplification, and I will come to that later.

The most important point concerns the uninspiring efforts to improve productivity, which was referred to by the noble Lord, Lord Eatwell. The OBR pointed out that productivity will be a serious issue. Chris Giles of the Financial Times said that the OBR had “flip-flopped” by giving the Chancellor,

“a £27bn windfall to play with over five years in the Autumn Statement”,

but that the OBR,

“has now removed £56bn in these Budget forecasts”.

Does the Minister agree with that?

The director-general of the Institute of Economic Affairs, Mark Littlewood, described the Budget as “slow, steady” and “rather unimaginative”. I think that is rather unfair. However, he went on to say that,

“at least the Chancellor hasn’t thrown out his target of a Budget surplus for 2020, even if he has almost no margin for error in hitting that target”.

What he said about the increase in the 40% threshold is very good. However, on the capital gains tax, he says:

“The old top rate of 28% was actually losing the government income—high CGT rates damage economic growth by encouraging individuals to hold on to assets that would be better off under different ownership”.

Therefore, I congratulate the Government on that once again.

KPMG’s chairman referred to,

“a variety of measures aimed at the more traditional butcher, baker and candlestick-maker across the country but also the digital age ‘kitchen table’ entrepreneurs”.

Robert Chote, head of the OBR, says that the OBR has revised down productivity growth, meaning that,

“the cash size of the economy is about 3 per cent smaller … than we predicted in November”.

I ask noble Lords to keep that figure in mind—3% smaller than a few months ago. Robert Chote also said that the public sector net borrowing situation was £11 billion worse than previously forecast, and that weaker GDP growth means that debt to GDP ratio would rise, rather than fall, this year. Does the Minister accept that?

The Institute of Directors—not surprisingly—welcomed the measures that will help SMEs but also questioned how the Chancellor aimed to achieve the budget surplus he has promised by 2019-20 given the downgrade in the economic forecast. Simon Walker, the director-general, said:

“The UK faces risks on many fronts, and much heavy lifting will still be required to get rid of the deficit by the end of the Parliament”.

Does the Minister think that there is a realistic chance of doing this?

The Government have had the guts to do a lot but they have not had the guts to reduce the top rate of income tax down from 45% to 40%. That is what it was under a Labour Government for many years. They have reduced CGT; they should reduce the top rate of income tax down to 40%. That would make us more competitive. Does the Minister agree?

Government spending as a share of GDP touched nearly 50% under the Labour Government. It was at 45% of GDP by 2010. The Government want this to go down to 36.9% of GDP by 2020. Is that realistic? Given that the NHS and so many other areas are ring-fenced, does the Minister really think that we can get government spending down to 36.9% of GDP? The OBR forecasts are changing all the time. The Government are relying on them when it suits them. Now it does not suit them. It is like the Governor of the Bank of England bringing in forward guidance. What a ridiculously ludicrous idea. Of course, he has had to backtrack on that completely.

The Office of Tax Simplification is an oxymoron. The Government should be simplifying tax, not complicating it, but the Office of Tax Simplification does not have the powers it needs. I would ask the Government to look into giving it more powers and consulting it more, which they are not doing at the moment.

I congratulate the Government on security, about which the Minister spoke in his remarks. We have now finally agreed to the 2% defence spending, which is the NATO commitment and is wonderful, particularly given the environment we are in. Also, the SDSR 2015 is a huge improvement on the SDSR 2010.

We should keep things in perspective. This little country comprises less than 1% of the world’s population yet we have 4% of the world’s economy and 7% of the world’s welfare spending. That cannot really go on. We have seen welfare reform that was desperately needed, but on the other hand the reforms need to be fair or we will see headlines like that in the Sun, “Beware the IDS of March”. The disability benefit proposals were a huge mistake on the part of the Government and I think that the Chancellor now regrets that. Reducing corporation tax is great, but capital allowances are not as attractive as they should be. Does the Minister agree that they also need to be more attractive?

I turn to productivity. We are caught up in a short-term, five-year election cycle when what we really need more than anything else to improve our productivity is to invest in our universities. As a percentage of GDP our spend on universities is way below that of the United States, way below the EU average, way below the OECD average, and yet along with the United States we still have the best universities in the world. Cambridge University with its 92 Nobel Prize winners has won more than any other university in the world. Just imagine how much better we could do if we were to spend the equivalent in proportion to our competitors.

Linked to that is investment in R&D and innovation. We have great research papers and amazing fundamental research, and yet as a percentage of GDP we underinvest on R&D and innovation compared with the EU and the OECD average and are way below the United States; even South Korea invests more as a percentage of GDP on R&D and innovation than we do.

I think that the noble Lord, Lord O’Neill, said that when the forecasts change, our plans have to change with them. Perhaps we should rename the noble Lord as John Maynard Keynes:

“When the facts change, I change my mind”.

The facts have changed and they are going to continue to change, but will the Government be able to adapt quickly enough to be able to cope with that? The Minister also mentioned the Oxford-Cambridge corridor. That is brilliant news. The corridor will create a golden triangle between London, Oxford and Cambridge that will help with R&D and innovation and the university excellence that we have.

I conclude by saying that last week I was in Delhi in my new role as a food champion for Britain, having been appointed by Defra. We went to launch a food festival in Delhi. It was a curry festival—taking coals to Newcastle. British curry chefs were flown out to the ITC Maurya, one of the finest hotels in India, to serve British curry—chicken tikka masala and Balti, dishes that do not exist in India—to Indians. In my speech at the opening of the festival I said that we should just look back to the 1980s. Britain was the laughing stock of the world when it came to food. British food was sneered at. Today, this country has some of the finest cuisine in the world, and indeed London is the restaurant capital of the world. In the 1980s, this country was looked upon as the sick man of Europe, but today we are the envy of Europe. In the 1980s, this country looked down on entrepreneurship—Del Boys and second-hand car salesmen—but today we celebrate it because we are one of the centres of the world. We have the best of the best capabilities in every field that can be imagined, whether it be architecture, entrepreneurship, universities, the City of London, the creative industries, or culture and sport, we are the best of the best.

The Budget is there to help us, but Governments make mistakes. I think that the Chancellor has lived up to one of my favourite sayings: good judgment comes from experience and experience comes from bad judgment. So, a fair and competitive Budget.