Autumn Statement 2022

Lord Hain Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Hain (Lab)]

My Lords, in both cheering on Wales tonight and praising everything that my noble friend Lord Eatwell said, I remind the House of some famous first words from the Prime Minister and some lesser-spotted last words from one of his predecessors as Chancellor—words that clarify both the ruinous fiscal policy the Tories have pursued since 2010 and the dreadful prospects set out in this year’s Autumn Statement, and which expose the true source and full extent of the real, gaping hole at the heart of Britain’s public finances.

Rishi Sunak concluded his first Budget speech in March 2020 with the breathtaking claim that

“the Conservatives are the party of public services.”—[Official Report, Commons, 11/3/20; col. 292.]

Their record since 2010 and their plans in the Autumn Statement tell a totally different story. Rishi Sunak and Jeremy Hunt are said to be the “numbers men”, so let us look at the numbers, courtesy of the Office for Budget Responsibility.

Last October, the OBR confirmed that nearly a decade of Tory austerity from Chancellors George Osborne and Philip Hammond had seen cuts in public spending amounting to more than 7% of GDP—savage cuts equivalent to £180 billion in today’s terms, which is almost as much as we spend each year on health and social care in England. Those public spending cuts made up 82% of the total Tory fiscal consolidation; tax increases made up 18%. Here lies the origin of the chronic and mounting staff shortages, industrial unrest, deteriorating standards and lengthening response times that are now only too typical of Britain’s struggling public services, especially in health.

This is why even Tory councils are warning that they face possible bankruptcy after enduring funding cuts for over a decade. George Osborne, once again welcome at Downing Street in advising the Chancellor and the Prime Minister, boasted of having squeezed the UK economy tighter than any of the advanced economies. He was more reticent about the plans in his final Budget in March 2016 for a further five-year fiscal squeeze—plans that would have added another £60 billion of public spending cuts to those actually made by Philip Hammond. David Cameron has confirmed that, had he stayed in office after 2016, he would have gone for even more spending cuts. The Government have now embarked on the kinds of cuts that Cameron and Osborne were exploring when they left office. They may differ in detail but it is a familiar formula, with the biggest spending cuts put off until three to five years’ time, conveniently after the election.

We can usually sum up a year’s key events with a simple phrase. In 1992, it was “Black Wednesday”, when the Tories lost whatever reputation they had for sound economic management in one turbulent day. This year, it has been “disastrous mini-Budget”, when they lost it again. Now, they are scrambling to undo the damage, but they are swimming against the tide of events. Their long record of miserably slow growth is well entrenched; their so-called plans for growth have always lacked potency and credibility. Today, Britain is the only G7 economy whose GDP is still below its pre-Covid level, and we are fast heading into recession. Slow growth is why the Government have missed all their targets for balancing the budget and bringing down Britain’s debt-to-GDP ratio since 2010. In March 2022, the OBR projected the debt ratio to fall below 80% in 2026-27, but the mini-budget and the energy crisis blew that off course. The OBR now expects it to fall in 2027-28, but to 97% this time. The Tories are going the wrong way: from bad to worse.

It is the same old story. Beyond the blue horizon waits a beautiful day but, like the horizon, Tory success is always out of reach. Fate has cast Rishi Sunak and Jeremy Hunt as the George Osborne understudies, called upon to take centre stage and share the leading role—a double act in a Whitehall revue, but not one that will run and run. This Autumn Statement will prove to be another Tory fiscal flop at the expense of the country. It is going to bomb at the box office, mercifully opening the door to a Labour Government delivering public investment, kick-started growth, business success and sound public finances, because these all go hand in hand.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, the statistics that I gave referred to overall levels of investment, not expressed as a percentage of GDP. I stand by the figures that I gave to the House.

[Lord Hain (Lab)]

I am very grateful to the Minister, but can I ask her to correct her statement about the last Labour Government’s record? We had 10 years of consistent economic growth, never surpassed in Britain’s economic history, with low inflation, high employment and massive investment in public services, prior to the global banking crisis, for which we were culpable only to the extent that every Government in the world were culpable. Surely, she should correct what she has said in argument to me.

[Baroness Penn (Con)]

I am not sure exactly which bit of what I said the noble Lord wants me to correct. I stated the Government’s record on economic growth since 2010, and I simply referred to the comments of the noble Baroness, Lady Kramer, on the recession that was also experienced under the previous Labour Government.

I return to the subject of energy. The noble Baroness, Lady Hayman, asked about energy efficiency. Warmer homes and buildings are key to reducing bills, creating jobs along the way and meeting our targets on climate change. That is why we are committed to driving improvements in energy efficiency, with a new ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. A new ECO+ installation scheme was announced earlier this week.

I disagree with the analysis that this is jam tomorrow; we have £6 billion of new government capital funding that will be made available from 2025 to2028, but that is in addition to the £6.6 billion allocated in this Parliament. The aim of that kind of longer-term projection of funding is to create consistency and allow businesses and the supply chain to build up and plan for the future, which can be something that we struggle with in the provision of energy efficiency measures. We are also launching the energy efficiency task force and expanding our public awareness campaign to help reduce bills for households and protect vulnerable people over the winter and beyond.

In response to my noble friend Lord Leigh of Hurley, on other tax measures and the taxation of US groups trading in the UK, the UK has long been committed to tackling base erosion and profit-shifting, which is why we introduced the diverted profits tax in 2015 and the corporation interest restriction rules in 2017. I am glad that he welcomed progress on Pillar 2, which we will legislate for in the spring 2023 Finance Bill, but I agree with him that we need to make further progress on Pillar 1. That is why we continue to work internationally on finalising Pillar 1, so that the corresponding multilateral convention can be ready for signature in the first half of 2023, allowing for implementation in 2024.

Other noble Lords noted some strange political alliances that seemingly might have formed in the course of this debate. The noble Lords, Lord Sikka and Lord Howarth of Newport, but also my noble friends Lord Bridges and Lady Noakes raised concerns around the Government’s decision to freeze the personal allowance and other tax thresholds. I say to noble Lords that despite the need to increase taxes—I fully acknowledge that freezing thresholds is a tax increase, I am not trying to hide it in any way—given that the personal allowance nearly doubled across the last decade, it will still be £2,150 higher by April 2028 than it would have been had it been uprated by inflation each year since 2010. The noble Lord, Lord Sikka, also asked about the distributional impacts of tax. I cannot answer his specific point, but on average it is households in the poorest income deciles that are gaining the most next year as a result of decisions taken in the Autumn Statement.

I take seriously the concerns expressed by my noble friends Lady Noakes and Lord Bridges. The Government have had to take difficult decisions and we are being honest about that. We want a low-tax economy, but first must come economic stability, and we need everyone to contribute a little towards sustainable public finances. I know it will be little comfort to them to be reminded that the UK tax system remains competitive, with the tax-to-GDP ratio meaning that we are still in the middle of the pack within the G7 and lower than such countries as France, Germany and Italy. As I say, the Government take their challenge on growth seriously and we have taken some tax decisions to prioritise this; for example, keeping the annual investment allowance level that was set in the growth plan permanently at £1 million, rather than reverting to £200,000 from 1 April 2023.

My noble friend Lord Bridges rightly identified a greater range of actions that we must take to set the conditions of growth beyond tax policy. A key area and opportunity post Brexit is regulation, and I hope he will welcome the action on Solvency II that we have announced and the measures in the forthcoming Financial Services Bill, which we will seek to replicate across other growth sectors across the UK economy, such as life sciences, as spoken about passionately by my noble friend Lady Blackwood. Many noble Lords, including the noble Lord, Lord Shipley, and my noble friend Lord Tugendhat, raised the issue of housing. The noble Lord, Lord Shipley, spoke about the need to build more houses for social rent: that is exactly what the Government are doing, through such measures as removing the cap on councils borrowing against their housing revenue account. I reassure him also that we are still committed to ending no-fault evictions.

My noble friend Lady Cumberlege asked about our commitment to community pharmacists and the issue of funding there. The plan for patients set out the further expanded role of pharmacies agreed in the community pharmacy contractual framework for the next two years, as well as an additional £100 million investment to recognise the pressures facing the sector. The Government have also committed to look further by enabling pharmacists with more prescribing powers and making more simple diagnostic tests available in community pharmacies.

In response to the noble Lord, Lord Rogan, I welcome the 25th anniversary of the Belfast agreement and I am extremely pleased that we confirmed in the Autumn Statement that we are funding the planned trade and investment event in Northern Ireland. DIT will work with local partners as this is taken forward, including with Invest NI.

The noble Lord, Lord Bilimoria, asked about defence spending. As I said in my opening speech, we recognise the need to increase defence spending, but before we make announcements on that, we need to refresh the integrated review, which was drafted before Russia’s invasion of Ukraine.

The right reverend Prelate the Bishop of Gloucester referred to the benefit of women’s programmes for preventing female offending and the savings to the Ministry of Justice as a result. In September, the Ministry of Justice announced that almost £21 million will be invested in women’s services to tackle the causes of female offending and cut crime.

The noble Lord, Lord Livingston of Parkhead, asked an interesting question about the difference between the Bank of England and OBR forecasts. Given the number of recent changes in fiscal policy and the volatility in financial and energy markets, the range of external forecasts is wide. Differences will partly reflect when each forecast was produced and the differences in assumptions about government policy, interest rates and energy prices, but I take his wider point.

I congratulate my noble friend Lady Lea on her excellent maiden speech. I know she brings a wealth of economic experience, not least from her own time working in the Treasury. I look forward to working with her in the future.

We have faced two enormous shocks in the last three years. The pandemic has caused supply chain disruption, slowed growth and increased debt levels, and Putin’s war in Ukraine has caused energy prices to spike. This has added up to inflation at levels not seen in a generation, hitting the pockets of families across the country. That is why tackling inflation is our priority. It makes everyone worse off, especially the most vulnerable, so we have taken difficult decisions that will mean taxes go up and spending will not rise by as much as previously planned. When we take into account the need to invest more in areas such as our NHS, it means hard choices to be made elsewhere.

However, I remind noble Lords that we fight these economic challenges from a position of relative strength. Unemployment is close to the lowest level it has been in nearly 50 years, and the UK is forecast to have had the fastest growth in the G7 in 2022. We also have incredible strengths within our country that aid our mission: our teachers, our NHS workforce, our armed services, and everyone who works in our public sector—day in, day out—to deliver the services upon which we rely.

We are inventive and resourceful, and the innovative, intuitive and ambitious people who make up our private sector will drive our growth. Combine this with the decisions taken over the last 12 years and the results are clear to see: employment is up by millions compared to 2010; we have had the third highest real GDP growth rate in the G7 since 2010; renewable energy production is growing faster than in any other large country in Europe since 2010; thousands more children are in good and outstanding schools compared to 2010; and we have record numbers of doctors in the NHS. Now, because of the difficult decisions we take in our plan, we are strengthening our public finances, bearing down on inflation and supporting jobs—all while protecting public services.

The Autumn Statement is a plan that provides stability. It is a plan for growth and a plan for public services. I beg to move.