Autumn Budget 2024
Lord Elliott of Mickle Fell Excerpts(1 week, 3 days ago)
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Lord Elliott of Mickle Fell (Con)
My Lords, this is the first speech I have made in your Lordships’ House in the presence of the professor who taught me economics 101 at the London School of Economics. I suspect that the noble Lord, Lord Desai, will disagree with what I am about to say, but I put on record my profound regard and gratitude for his excellent teaching at the LSE. To coin a phrase, all errors are my own.
I want to address the number of wealth creators living here in the UK and the number choosing to move overseas. In recent years, there has been an exodus of wealth creators from the UK. Undoubtedly, the Budget will accelerate this trend. The figures are stark. The latest UBS global wealth report forecast that 17% of UK millionaires will leave the country by 2028. That is a conservative estimate. Given the Budget, especially the changes to capital gains tax, inheritance tax and stamp duty, the final figure will surely be higher than 17%. We should not kid ourselves that this is a problem facing all western economies. The UK is unique in this respect. Every other G7 country is forecast to have more millionaires in 2028 than they have today.
Why does this matter? It matters for two reasons—the amount of tax they pay and the number of jobs they create. They provide a huge tax contribution. For every top 1% taxpayer who leaves, 26 additional median taxpayers are needed to plug the gap. According to the IFS, the top 1% of earners pay around a third of income tax and the top 5% pay half of income tax. The exodus of wealth creators from the UK is generating a tax bill that will fall on the rest of us. The Government may strive to stop the additional taxes falling on working people, but who else will foot the bill?
Secondly, it matters because the individuals and families who are leaving the country create so many jobs in our economy. If the Government are serious about the laudable objective of increasing employment to 80% by helping 2 million people from welfare into work, they need entrepreneurs and investors to create those jobs. The problem is that wealth creators are heading for the exit. I am not talking hypothetically. It is happening as we speak. A recent Startup Coalition survey found that 72% of entrepreneurs are exploring leaving the UK and many have already done so.
I recently attended the GITEX conference in Dubai with more than 6,500 entrepreneurs from more than 180 countries. It was inspiring to see so many innovators enacting their ideas and creating the world of tomorrow. However, something was painfully striking: the number of young, British-born entrepreneurs who had left the UK to pursue their dreams. I asked them why they had chosen to do this, and a consistent theme was the UK’s business environment, including the level of taxation. These entrepreneurs, with their start-ups, create the vast majority of new jobs in the economy.
These are just two benefits that wealth creators bring to the country. I could list many more. There has been a spate of articles, for example, highlighting the impact of recent tax changes on the world of art, with many galleries losing some of their most generous benefactors. We should never forget the inscription at the entrance to Birmingham’s art gallery:
“By the gains of Industry we promote Art”.
I make all these points not to be a shill for millionaires but because the exodus of wealth creators will devastate ordinary working people across the UK. Entrepreneurs and investors lay the foundations for economic growth and the prosperity we all enjoy.
Two days after the general election a former Prime Minister wrote that
“we have reached the limits of traditional tax and spend to solve our problems”.
Those were not the words of Rishi Sunak or even a recycled quote from Margaret Thatcher. It was the advice given to the Government by Tony Blair. As another former Prime Minister, Winston Churchill, reputedly said: “You can’t make the poor richer by making the rich poorer”. By hitting wealth creators, entrepreneurs and family businesses, this Budget risks decimating the very people we need to create jobs and pay tax for generations to come. All our livelihoods, especially those of working people, depend on them.
Employment: Tax Policy
Lord Elliott of Mickle Fell Excerpts(3 weeks ago)
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Lord Elliott of Mickle Fell (Con)
My Lords, I congratulate my noble friend Lord Leigh on securing this timely debate, which feels like a dress rehearsal for the actual Autumn Budget debate on 11 November.
I wish to contribute three points today. First, I want to share some views from business leaders outside London on employment taxes. Secondly, I want to highlight what appears to be an inconsistency in government policy. Thirdly, I want to focus on the need to encourage UK-born entrepreneurs to stay here and create jobs rather than going overseas.
On my first point, I draw the attention of noble Lords to a report launched by the Jobs Foundation this week. As my noble friend Lord Leigh kindly mentioned, I am president of the Jobs Foundation, as declared in the register of interests. The report is called: Two Million Jobs: How Businesses Play a Crucial Role in Helping People from Welfare into Work. It is a ground-breaking piece of research that tries to help the Government to deliver on their highly commendable ambition to increase the employment rate to 80% by helping 2 million people from welfare into work.
The author interviewed business leaders, employees and stakeholders in four locations—Sheffield, Loughborough, Hartlepool and Pembrokeshire. These locations were chosen to cover the length and breadth of Britain, and represent the individual needs of a city, a town, a coastal community and a rural community. Many policy areas were discussed, and I know from these conversations that some elements of the Budget will have been very much welcomed, including the measures to improve transport links. But a consistent theme from the interviews was a concern about increasing taxes on employment, so I know that many of the business leaders spoken to, who are all involved in helping people from welfare into work, will be concerned about the announcement on employers’ NI in yesterday’s Budget.
That brings me on to my second point. Listening to the Budget, I was struck by the apparent inconsistency in government tax policy. On the one hand, the Chancellor announced an increase in the soft drinks levy, presumably to discourage people from buying sugary drinks; a rise in alcohol duties to discourage drinking; and an increase in tobacco duty
“to maintain the incentive to give up smoking”.—[Official Report, Commons, 30/10/2024; col. 819.]
All these tax rises are premised on the correct assumption that increasing taxation reduces consumption. But, on the other hand, there seems to be little recognition that increasing taxes on jobs by increasing employers’ NI will similarly reduce demand for employees, and potentially reduce the number of people in work. If increasing taxes on tobacco is designed to reduce smoking, surely increasing taxes on employment reduces the number of jobs? I would be interested to know whether the Minister expects the number of jobs in the UK to fall with the increase in employers’ NI. If that is the case, will it not hinder the Government’s laudable efforts to get 2 million people from welfare into work?
My third and final point is that we need to focus on how taxation affects where entrepreneurs locate themselves and their businesses. Earlier this month, I attended the GITEX conference in Dubai, which gathered together over 6,500 entrepreneurs from over 180 countries. It was a wonderful window into the future and so inspiring to see innovators enacting their ideas and creating the world of tomorrow. However, something was painfully striking: the number of young UK-born entrepreneurs who had left the UK to pursue their dreams and ambitions. I asked them why they had chosen to do this, and a consistent theme was the UK’s business environment, including, but not solely, the level of taxation. One might ask: why is this a problem? It is a problem because start-ups create far more new jobs than established companies.
A report by the Ewing Marion Kauffman Foundation in 2022 looked at the United States and found that, in 2019, companies in their first year created 5.24 new jobs each, while companies older than that created, at most, 0.4 new jobs each. Therefore, it is essential that we incentivise start-ups to locate here in the UK to create some of the 2 million jobs required to increase the UK’s employment rate. Sadly, some entrepreneurs are already looking to vote with their feet. A recent survey by the Startup Coalition found that more than 80% of the start-up founders it represents were considering leaving the UK. We need the young entrepreneurs I met in Dubai to want to stay here in the UK to build their companies and create jobs, and that requires a tax system that encourages entrepreneurship and incentivises wealth creation.