Financial Services: Mansion House Speech

Lord Desai Excerpts

Thursday 21st November 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and the expertise he brings to this conversation. This comes back to the issue of growth that the noble Baroness, Lady Neville-Rolfe, began with; we see these reforms as part of our wider growth strategy and want these significant consolidations and amounts of money to flow, in part, into UK infrastructure and assets to contribute towards our growth strategy. That is a key part of our investment objectives.

[Lord Desai (CB)]

My Lords, does the noble Lord agree that it is not fair to blame the present growth rate on the Labour Government? There are long and variable lags in economics, so whatever investment we make now will take some time to be reflected in the growth statistics. We all ought to calm down, let this policy go through and then see its effect, rather than immediately blaming whatever we do as having failed.

[Lord Livermore (Lab)]

I am very grateful to the noble Lord. It will not surprise anyone to hear that I agree with the sentiment behind his question. He is right that you cannot undo 14 years of damage in one Budget. Our economic strategy is based on the principles of stability, investment and reform; the Budget was about restoring stability to the public finances and therefore stability to the economy, which is the essential underpinning of any growth strategy. The Budget also talked about increasing levels of public investment in our economy; these Mansion House reforms are part of increasing private investment into our economy. The noble Lord is correct that there will be lags in that investment, but we very much hope to see growth coming through in due course.

Autumn Budget 2024

Lord Desai Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Desai (CB)]

I welcome the Budget. I give it about two cheers, not three, for reasons I shall describe.

First, I am very much in favour of high taxation. Indeed, I am notorious for having been sacked twice from the shadow Front Bench for proposing higher taxation when I was in the Labour Party, so I am very pleased that my recommendations, or desires, have been fulfilled. As the noble Lord, Lord Liddle, said, we have to stop believing that we can have an American level of taxation and a British level of welfare state. We should be much more like the northern European countries, which have a 40% or 45% taxation of GDP.

Unless we get to a seriously good rate of taxation we shall have a bad welfare state, bad schools and no growth. We have to stop this delusion that tax cuts lead to growth. We tried it for 14 years during the Conservative Government, and every tax cut destroyed the infrastructure more and more. We cannot go on living like that. When we compare ourselves with America, we forget that in America there is not just the federal tax rate but the state tax rate. Americans have no healthcare and very expensive education, unlike what we have here. We should stop comparing ourselves with Americans and compare ourselves with Sweden, Denmark, Finland and countries like that, which know how to sustain a welfare state in a healthier way. We have to congratulate the Chancellor on having made a beginning to changing this old psychology of having tax cuts all the time and putting us on the path to finally getting a decently financed welfare state.

Having said that, I cannot resist proposing one more tax. It is necessary to say that growth does not come only from investment and, even if it does come from investment, we have to ask how we can encourage people to save more than they do. One of our problems is that the personal savings rate, or investment by private citizens, is not as high as it should be. I think that is because our tax structure is biased against investing in equities and encourages investing in bricks and mortar. There is only one asset in this country that is tax-free. If you have your own house and invest in it, when you sell it, if it is your principal residence, you do not get taxed on the capital gain. Imagine an asset with a 0% taxation rate for capital gains. Obviously, everybody from a very young age wants to get on to the mortgage ladder. Everyone wants to go on investing in housing. In continental Europe, there is a good, healthy rental market, but we do not have a healthy rental market because we destroyed it 50 years ago. I think we need to make people invest not in bricks and mortar but in stocks and shares. If you are going to do that, you have to tax capital gains from housing properly. I urge the Chancellor, next time she has the chance to have a Budget, to tax bricks and mortar properly so that people will stop investing too much in housing and go into stocks and shares.