Spring Budget 2024

Lord Horam Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Horam (Con)]

My Lords, as an economist as well as a politician, I have always believed that the economy should work for everyone. As a northerner, I am also keen on levelling up, because I am conscious that the rest of the country has fallen behind London and the south-east over the last few decades. From that perspective, I thought it was a good Budget, and the points were made by my noble friend Lady Vere with her usual vim and vigour.

Despite one slug of money for Canary Wharf, there was a lot going for many provincial areas where it is badly needed and will be greatly appreciated. The 2p off national insurance was a sensible help to ordinary people when the economy needs a bit of a stimulus. There was also £3.4 billion of help for improving productivity in the NHS. As a former Health Minister, I can see where that can be used, although it will probably be misused in some respects. As we know, public sector productivity is a big problem. Raising some money by abolishing the current regime for non-doms was fair. I have always thought that the nom-dom arrangement was both antiquated and indefensible.

The Government can also take credit for the heavy lifting of taxation over the last few years. The general level of tax needed to be raised, and a pragmatic Conservative Government have done what is necessary. That is conservativism at its best: realistic and responsible. The level of tax is high by UK standards but still a lot lower than our European neighbours. Therefore, in the short term, the Budget gains high marks, but if you take a longer-term perspective, I am afraid some of the remarks made by the noble Lord, Lord Eatwell, cannot be ignored.

On nominal gross domestic product, we are the sixth-richest nation in the world. But looking at GDP per capita, we drop down to 21st. If you measure GDP per capita by purchasing power parity, we drop even further down to 27th. The Taiwanese and the Singaporeans are now richer than the Brits, and the South Koreans have caught up. In Europe, we are the second-richest nation after Germany on nominal GDP, but 12th on GDP per capita. If you combine that with the huge increase in inequality that has developed over the last few decades, you can see why many citizens in the provinces are pretty disenchanted with politics and politicians. Just look at the result of the Rochdale by-election; that will tell noble Lords a great deal about ordinary people’s view of politics and politicians. What can we do about this? The first thing to do is get the framework for policy right. Only if you get the framework right do you get the right policies.

The first thing I would do is to abolish the Office for Budget Responsibility. That was put in place to assure the markets that the Government were being responsible, but it has now become a problem in itself. As Martin Sandbu said in the Financial Times, it encourages “opaque and erratic” political games and

“undermines serious debate about what the economy needs”.

As my noble friend Lord Leigh pointed out just now, it also quite often gets its forecasts wrong. I would replace it with something like the Council of Economic Advisers, which helps the US President. This should be staffed by businesspeople and economists with a remit to enhance economic growth. Positioned like the OBR, it should be able to nudge the Treasury away from for ever balancing the books in a candle-end sort of way to taking a more growth-oriented view. I believe that the markets would respond well to a Government who were obviously doing sensible things rather than tying themselves to the Procrustean bed of the OBR.

Incidentally, I think we should have only one Budget every year. The noble Lord, Lord Hammond, tried to do that but got swept away by the politics. Having more than one Budget every year reinforces uncertainty and often produces underexamined tax changes and too many short-term spending decisions.

We also need a worked-through industrial strategy. Alongside the macro view of the council of economic advisers, this should be looking at the micro view of where growth can be best assisted by public support. Greg Clark was quite right about that when he was the Minister responsible for business affairs; Kwasi Kwarteng was quite wrong.

We also need more urgent action on skills. This has been said often enough, but we still have not given this the priority and financial support required. The apprenticeship levy is not working well enough, and we still do not fund further education as well as we could.

Finally, we need to do something about the large number of our fellow citizens who are not working: 9.3 million are not in work. The problem has been made worse by Covid and it needs urgent analysis, as the noble Lord, Lord Lamont, pointed out. Britain is a great place to do business, as I know from personal experience, having helped to establish a very successful company. But the fact is that we are not fulfilling our potential and we will not do so, despite this excellent short-term Budget, until we have a firmer, clearer and more comprehensive long-term strategy.

Autumn Statement 2023

Lord Horam Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Horam (Con)]

My Lords, viewed from the position of strict Treasury orthodoxy, this was a highly intelligent Autumn Statement. Indeed, the noble Lord, Lord Macpherson of Earl’s Court, who spoke earlier, said that it was above average, which I think is high praise in mandarin-speak. It was well thought out. I very much doubt whether it will fall apart, as some have in the past, and expectations in particular were well managed.

The main point, as is surely right, was help for business. The Chancellor said he was actioning 110 different ways to help business. Personally, I think that was about 100 too many, but none the less the thought was clearly right. In particular there was making investment fully expensed against corporation taxation. I know from my business career how important it was, when we came to that part of the year when we made investment decisions, to have the feeling that those investments were fully set against corporation tax. That would be a huge relief and a big incentive.

I also support the initiative the Government have taken in asking my noble friend Lord Harrington to produce a special report on foreign direct investment. He has come up with some interesting ideas, such as a concierge service for such investment. He is not in his seat at the moment, but he might be amused that the film “Barbie”, which is the epitome of sunny California, was actually made in his former constituency of Watford. What we can do in this country is quite remarkable. I even saw some distinctly British scenarios lurking in the background of the film “Napoleon”, which was rather interesting. Our creative industries are clearly in great shape. So we are supporting our innovative industries.

Looking at all of this, it seems that we are getting towards what I would describe as an industrial strategy: if it walks like an industrial strategy and talks like an industrial strategy, it probably is an industrial strategy, and I am delighted that we have got there.

I was also pleased with the support for the lower paid. I am always in favour of increasing the minimum wage. I also appreciate the 2% cut in employees’ national insurance. I agree that that is more debatable in view of the pressures on public spending, but people need a little bit of cheer at the moment and it does help growth. However, I suspect that the noble Lord, Lord Macpherson, is right that we will soon be back to talking about higher taxation, in view of all the inevitable demands there will be on public services.

That is the short term. In the longer term, I am afraid to say that we have been running the economy since what I call the Blair-Brown days in a very sub-optimal way, because it has relied on high and increasing levels of immigration. Some people think that mass immigration is good for the economy; it is not. It increases the size of the economy but GDP per head, which is what matters, is not necessarily increased. Indeed, large-scale immigration may decrease productivity. Putting it in the simplest terms, a worker needs capital to become productive. An immigrant does not bring capital with him. Therefore, the country has to develop capital to make him productive, on top of the capital it needs to develop for the existing population. Frankly, we are not very good at that—or we have not been recently. As we know, immigration also has very big downsides, which I will not go on to in this speech.

It need not be like this. When Margaret Thatcher and John Major were Prime Ministers, net immigration was usually around 50,000 per annum and the annual rate of GDP growth was greater than it has been in the last 20 years. I do not believe for a minute that Margaret Thatcher would ever have agreed to allow immigration to get to the level of 745,000, which it was last year. I do not believe for one minute that she would have authorised that.

We can also look abroad. We have recently had a visit from the President of South Korea. That country had a ruinous civil war that ended only in 1953, but its gross domestic product per capita, measured on purchasing power parity, is now virtually the same as ours—and it has almost no immigration. The same can be said for Taiwan and Singapore, which have no immigration to speak of and are as rich or richer than we are—so it can be done.

I suggest that the Government at the centre, in Downing Street or the Cabinet Office, take a long-term, holistic view of the demographic, environmental, societal and economic trends in the country and start to adjust the economic model that we have been pursuing over the last 20 or 30 years. Otherwise, I fear that the quality of life in Britain will continue to deteriorate and other countries that take a more rational or long- term view will continue to overtake us.

King’s Speech

Lord Horam Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Horam (Con)]

My Lords, I congratulate my noble friend Lord Gascoigne on his maiden speech. He and I come from the Ribble Valley; he will know, as I do, that they speak a lot of common sense in that part of Lancashire. We will hear a lot of common sense from him in future years. I am also delighted, as usual, to follow the noble Lord, Lord Desai, who is a very distinguished economist. I am a much less distinguished economist, but I have followed economics closely ever since I read it at Cambridge many years ago.

My view at the moment, sadly, is that the economic model that all Governments have followed since the Blair/Brown days is leading us badly astray. Gordon Brown rather let the cat out of the bag when he said that what drove economic growth in the UK was immigration and construction. That approach continued under the following Conservative Governments. Even now, Jeremy Hunt will say that 50,000 more immigrants will give him an extra 0.1% growth in GDP—at the moment, he needs all the fractions he can get. Even the Labour Party now subscribes to this orthodoxy. Sir Keir Starmer has said that Labour will build 1.5 million houses within the Parliament if it is elected and has clearly indicated that it will be more relaxed about immigration.

The problem with this approach is that it has serious downsides. Immigration is not a free good, as the Treasury appears to presume. On the scale we have recently allowed it—net more than 600,000 last year—it reduces the incentive to invest in skills and machinery, which is vital to productivity. The noble Lord, Lord Liddle, made the point about productivity; many economists have said that the reduced productivity over the last two years is in inverse relation to the amount of immigration. It also increases poverty and low wages among people affected by it. Immigration also adds to the demand for housing. Labour is promising 1.5 million new homes in the new Parliament, but it has been calculated that even 1 million would mean covering an area the size of Bedfordshire. How much of our green and pleasant land will be left to our children and grandchildren if we go on like this?

We should not go on like this. Fortunately, there is an alternative in the Far East. Countries such as Taiwan, South Korea, Singapore and Japan do not rely on mass immigration and associated housebuilding. They have little or no immigration. They invest in the skills and machinery needed to make their existing populations more productive. Instead of focusing on the size of their economy—crude GDP—they look at GDP per capita, which measures the wealth of the country. They have gone in for the more productive kinds of manufacturing. Taiwan makes two-thirds of the semiconductors in the world; South Korea has nine times as many robots as we do in the UK; even Japan, which has long had a very unfavourable press in the West, now benefits from massive investment by Warren Buffett, the American investor. As a consequence, they are now richer than we are. Per head of population, Singapore is much richer than the UK and South Korea is nearly as rich. Taiwan is richer than the UK per head of population and even Japan is closing fast. Their approach works. They have even got to grips with the problems of an ageing population by extending the working life of ordinary people and using additional technology.

We need to look at this. We need to change. I sense that the Prime Minister may have a glimmering of this, since he said in his conference speech that we need to change from what we have been doing for the last 20 or 30 years. He was derided for saying so, but he has a point. One way he could tackle this is to form a small committee of economists and businessmen—rather like the US President’s committee of economic advisers—and give them six months to come up with an industrial and labour force strategy that does not rely so much on construction and immigration. The Prime Minister has shown that he is prepared to take a refreshing view of his Cabinet and the people who work in government; he should now have a refreshing view of our policies.

Budget Statement

Lord Horam Excerpts

Thursday 16th March 2023 Lords Chamber

[Lord Horam (Con)]

My Lords, I certainly agree with the noble Lord in his disappointment about universal credit. That is one of the achievements of the last period of Conservative government. The noble Lord, Lord Eatwell, mentioned in his scintillating speech the economic progress—or lack of progress, in his view—of the Conservative Governments of the last 13 years, but universal credit is a significant change and improvement. Without it, we would not have got through the Covid period with the success that we did. So I agree with that point of the noble Lord, Lord Bird; he is always interesting to listen to.

I think we will find that it is always interesting to listen to the noble Baroness, Lady Moyo. I congratulate her on her maiden speech, which was excellent. I became a fan of hers when I read How the West Was Lost, which is a scintillating attack on the complacency of the western world and our strength. Much of it has indeed come to pass, although not quite in the way she envisaged, because I think the East has not been quite so successful, but the West is beginning to realise that we have to fight back. I am also glad that she has joined the House of Lords because she is another economist. I am sorry to disagree with the noble Lord, Lord Bird, on this, but I like economists. I am an economist myself, and I think economists should run the world; I really do—economists rather than lawyers. The noble and learned Lord, Lord Brown, is shaking his head—the distinguished lawyer. The interesting thing about the next general election is that it will be a lawyer versus an economist: it will be interesting to see how that pans out. Anyway, I am glad that the noble Baroness, Lady Moyo, is here: I welcome her and what she has to say.

On the Budget itself, I think the FT summed it up pretty well when it said that it is a step in the right direction: it is a step, that is all. With the constraints that were on it, I think that is the right remark. My noble friend Lord Griffiths said that the Chancellor displayed honesty and realism in what he said. I think he also displayed courage, because there was a big move before the Budget to persuade him to reduce corporation tax to 19% from the 25% it will now be. He resisted that, and I think he was right to do so, because the way he is doing it, via incentives for investment, is much more efficient than having a general corporation tax at the level it was presumed to be. As an economist, after I left university and before I came into politics, I eventually set up an economic consultancy and I know from personal experience that corporation tax was not a factor in making decisions: decisions were made on much more elementary facts, such as the quality of your product, the competition and all the rest of it, not on the level of corporation tax. I think he got that right.

The only mistake he made, I think, was to limit it for three years, because I think it should be for ever, more or less—unlimited. I think the reason for the three years is the usual Treasury mistake of rounding up the figures to make everything fit, and therefore three years was all they thought they could afford at the moment. That is the sort of mistake that Treasury officials very often make and it is a pity they feel they have to do that.

The other aspect that corporation tax brings into play is the whole level of taxation in this country, which my noble friend Lord Bridges referred to in his excellent counter to the remarks of the noble Lord, Lord Eatwell. Corporation tax brings in about £18 billion, a huge sum of money, and we have to look at taxation and have a debate about how much tax we want to pay.

Recently, we have tried to get European levels of social welfare on American levels of tax. That is not going to work for very long and people are beginning to see that. Paul Johnson, the director of the Institute for Fiscal Studies, has written a very interesting book, Follow the Money. It is another excellent book and in it, he points out that, given what we want to do in society—what we will have to spend on the NHS in an ageing society, for example, what we are committed to do in defence, what we want to do on social care, poverty, universal credit and all those things—we are going to need a huge amount of public spending. It is no use not facing that fact, so all the calls for less taxation have to deal with that reality. We cannot have responsible levels of social welfare and low taxation, which brings me to the other point about taxation.

We have to have tax efficiency. Much of our taxation system is now inefficient. Take council tax: it is done on valuations from 1991, so a person in a modest house in Darlington can now pay the same level of taxation as someone living in Kensington. That is completely unfair and out of date, and it needs reforming. We need to look at the level of taxation and the efficiency, or otherwise, with which we level it.

Apart from tax, what businesses want more than anything else is stability and continuity, and a sense of strategy coming from government. Recently, there has been far too much politics and far too little government. We have to look at how we can change that balance, so that people feel that a course of action is being followed through in detail—the way that there was during the Thatcher period, when people understood the way that the economy was being handled and, by and large, supported it.

For example, on levelling up we have a plethora of measures to help level up the economy, most of which I welcome, as in some aspects of devolution. But look across the channel at what Germany has done: Germany was faced with similar problems to the ones we were faced with when it looked at the former areas of East Germany, which had been under Nazi rule and then part of the German Democratic Republic. I am thinking of places such as Dresden, Weimar and Rostock. What did Germany do? It put on a solidarity tax, which raised €35 billion a year.

Germany spent that solidarity tax for 30 years—it has just been abolished—and if you now go to those towns and cities in the north of Germany, you will see splendid places attracting tourism, just as we would like to see the places in the north of England and the Midlands rebuilt, while being proud of their architecture and history. That is the way they tackled it: with a consistent policy for 30 years, whereas we have changed policies endlessly. We have been dipping around from one policy to another and got nowhere near as far as Germany has in levelling up the different parts of our country.

Take manpower, which is probably the wrong word to use. Let us say staff questions, which the Chancellor addressed in his Budget with help to improve pensions, so that doctors would stay on longer, and to attract more people into the NHS. Yet at the same time, just before the Budget, the Treasury was objecting to increasing the number of medical schools. It was doing that on the grounds that they were too expensive. It was looking too carefully at the pounds, shillings and pence of it, when the need has been clear for many years. The Chancellor himself produced a report on manpower in the NHS when he was chairman of the Health and Social Care Committee in the House of Commons, so it has been clear for years that we needed a far greater understanding of what staff were required. We simply have not done it. Even now, we do not expect to have a proper understanding of what the NHS’s manpower needs are until next month yet, at the same time, the Treasury was penny-pinching over how many medical schools there should be.

HS2 is another example of short-term thinking. In my view, it probably would have been better for the coalition Government to cancel HS2 when it came in than to allow what is now happening. Inevitably, people are looking at the escalating costs and the benefits which have now been compromised by people working at home, and, as a result, lots of it has been called into question and there is uncertainty. The biggest piece of infrastructure-building in Europe is surrounded by uncertainty, and that is not the right way to run a country.

My view is that we need to come back to a more strategic view, and the Government need to come back to having a clear strategy with clear paths along the way. This is the right first step, but the Government really have to build on it.

Autumn Statement 2022

Lord Horam Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Horam (Con)]

One of the good things about the financial Statement was its brevity. The documents accompanying it were about one-third the length of those that normally accompany a Budget Statement. I was profoundly relieved; not only were they brief but they were clear. I actually read them. Usually I skip them or look at the summary in the newspapers, but these were a delight. I say to my noble friend Lady Penn that I hope this point can be repeated for future economic Statements.

As for the content, I had the advantage of no fewer than two briefings from the Chancellor before the Statement. In both, he said that he was aiming for stability, growth and compassion. I notice that, in the eventual Statement, “compassion” had been translated to “public services”. Perhaps the Treasury could not quite bring itself to use the word “compassion” and had to say “public services” instead. I can understand the mentality. None the less, whatever it was—compassion or public services—I know what the Chancellor meant. With regard to stability, clearly he achieved a great deal. That was not too difficult after the turmoil of the previous few weeks, but he unquestionably achieved it.

On compassion/public services, the Chancellor also did well. Universal credit was fully inflation-proofed, as was the living wage, and there was the energy price guarantee. I noticed that, in her speech, the right reverend Prelate the Bishop of Gloucester welcomed the emphasis on these factors in the Autumn Statement. I say to her that I am enormously impressed by the work that the Church of England does with food banks. It is a pity that these must be so extensive; none the less, it can be enormously proud of their vital contribution to helping the poorest in our society. Not only that, but there was more spending for the NHS, more social care spending and a continuation and extending of the levelling-up agenda. That is good too, on compassion and public services.

On growth, the Budget is clearly less good. We do not know what is happening and anything could change. In the next few months there could be a resolution of the war in Ukraine and gas prices could come down. We simply do not know, and forecasting in this area is extremely difficult. We will probably have a world recession—almost every country. In particular, the situation in China is very worrying. However, as my noble friend Lord Lamont pointed out, the timing of the Budget was very clever from that point of view because it did not squeeze things now. Things may be squeezed in about two or three years’ time, but for now it kept public spending up, which is vital during this very difficult period.

Overall, then, I agree with those who say that it has been a solid start for a new Government. I notice that even the shadow Chancellor in the other place did not really criticise the Budget measures themselves, apart from one reference to non-dom taxation. Her comments, like those of the noble Lord, Lord Eatwell, today, were about the whole 12 years, of which she was understandably critical. Criticisms of the Budget were much less marked.

I shall say something about tax levels, which were commented on by my noble friend Lord Tugendhat. As he said, it is quite normal for Conservative Governments to increase taxation. George Osborne did it; Geoffrey Howe did it. For heaven’s sake, Benjamin Disraeli did it. When the Liberals were promising to end income tax altogether, he maintained it because it was necessary for important public works. Mind you, Disraeli also said, “They give you the figures, don’t they?” Never mind that—he was rather more cavalier about these things than we would perhaps accept today. It is the case that Conservative Governments, when necessary, increase taxation.

At the moment, tax levels are at about 33% of GDP in the United Kingdom, going up to about 35% as a result of these measures, possibly even more. These are certainly the highest levels since the 1930s, which is a pity. None the less, to take this as just the UK position is an insular point of view. Looking across Europe, the average level of tax as a percentage of GDP in the European Union is 41%. In Germany it is 40%, in Belgium 46%, in Denmark 47% and in France over 47%. It is argued that if you have high taxes, you diminish growth. But look at the growth of, say, France or Germany compared to the UK. There is not a lot of difference over the past 20 or 30 years, despite their having higher taxes. We should be careful about this argument that the Tories should always be a low-tax party—I am not at all convinced. High taxes are necessary from time to time and we should not fear them.

The advantage of having higher taxes in this case is that we get better public services—and not only that but greater equality. We have been able to help the poor more than we otherwise would have done under the Truss economics. We can also help levelling up. I go to Germany a lot and see what has been done in north Germany, in the old German Democratic Republic. There has been huge improvement in places such as Weimar, Stralsund and Dresden. Why? Because they had a solidarity tax of €35 billion a year for 30 years —levelling up with a vengeance. We can only dream of levelling up on that sort of scale. So that is an advantage.

Finally, the present need is for more investment, and since private investment is so low, the public sector needs to help. I disagree with many of the things that the noble Lord, Lord Eatwell, said, but he was entirely right about that: public sector investment must step in, and it does not crowd out or hinder private investment but helps it. For example, in America at the moment they have a new CHIPS and Science Bill going through to help the semiconductors industry, which is so important to our world. That is an example of the public sector helping the private sector, and we need more.

This is a solid Budget. Undoubtedly, we will have a tough 12 months, but I believe we are heading in the right direction.

Budget Statement

Lord Horam Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Horam (Con)]

My Lords, having been granted the enormous privilege, at least according to the Whips, of being the last speaker from the Back Benches, having dodged in and out during the course of the day I have enjoyed the debate enormously. It has been distinctly more objective and certainly more knowledgeable than the debates I used to take part in along with other noble Lords further down the corridor. My own personal verdict on the Budget was perhaps best summed up by Martin Wolf, the authoritative economics editor of the Financial Times—I always hide behind someone more distinguished—when he said that it was an,

“act of well-judged caution in risky times”.

I think that that is right.

I fully acknowledge the points made today by our terrible twins of economic debate here, the noble Lords, Lord Desai and Lord Skidelsky, who I think had a point when they said that you can certainly overdo the deficit issue. Absolutely—and all Governments have been guilty of that. Debt is 80% of our total GDP, and it costs no more to finance than when it was 30%, so low are our interest rates. It is a wonderful time to invest. The Government should understand that lesson very clearly.

I also agree with my noble friend Lord Porter, who said that the right thing to do is to invest in housing. Shovel-ready schemes for housing are absolutely the right thing socially and economically. He said that he does not want to be a Treasury Minister, but releasing my noble friend on the Treasury would be a very good thing: it would shake them all up and give a very good counterpoint to the conformist attitudes that I too often detect there. I hope someone takes note of that on the Front Bench—although, of course, I would never want to displace my noble friend Lady Neville-Rolfe.

I agree with my noble friend Lord Carrington of Fulham that the balance is right in the present circumstances, when we are waiting to see what happens about Brexit, although we should bear in mind what our economic friends said. But a theme throughout the debate, particularly mentioned by the noble Lord, Lord Bhattacharyya, whose work in this area I fully applaud, is the need for more technical education. We all know that this country has been very bad on this for decades, under all Governments. As my noble friend Lady Neville-Rolfe said, Germany has been particularly good. I see that Angela Merkel, the Chancellor of Germany, is today in America, talking to President Trump. I hope that she cuts through all this nonsense about protection and so forth and just whispers into his ear, “Vorsprung durch Technik”. It is the secret of German strength in the car industry—to lead through technology—and we should embrace it as much as the Germans do. As the noble Lord, Lord Bhattacharyya, kindly said, we are getting the outline of a new framework. There are criticisms of the details, but the broad picture is clear and young people are getting the message that it is cool to be an apprentice and cool to have a technical education, which is wonderful.

On the wretched subject of class 4 national insurance contributions for the self-employed, which has been much criticised, it is very interesting to me that the criticism has essentially been that it is a departure from the manifesto. I do not quite go along with Benjamin Disraeli’s view of manifestos. Famously, he said when asked what his view of manifestos was in a general election in the 19th century, that he relied on the “instinctive genius” of the “British people”. That is possibly a little too casual, but the last Conservative manifesto contained 31,000 words and 600 commitments. That is going too far the other way. A balance in manifesto writing should be adhered to, and the Government could well understand from its self-inflicted wound that that is necessary.

But on the underlying issue, the truth is that people are switching to self-employment, as my noble friend Lord Willetts rightly pointed out, because they are better off. They save money and they save on taxation, to the tune of hundreds of pounds per person and maybe thousands in some cases, and that is eroding the tax base at a phenomenal rate. The Office for Budget Responsibility reckons that the Government will lose £3.5 billion by the year 2020, which no Government, Labour, coalition or Conservative, could sustain. Furthermore, the Government have tackled it in a perfectly fair way, and I therefore hope that when Matthew Taylor conducts his review we can come to some more rational and well-supported and perhaps better presented conclusions.

My noble friend Lady Neville-Rolfe said in her opening remarks that this Budget is neither large nor flashy. I agree: it is a realistic Budget, and we need a realistic Chancellor in these perilous times.

Autumn Statement

Lord Horam Excerpts

Thursday 3rd December 2015 Lords Chamber

[Lord Horam (Con)]

My Lords, I congratulate my noble friend Lord Carrington of Fulham on his excellent introduction to this short debate. If I can supply one small omission, it was Gary Player, the golfer, who said, “It’s funny, the more I practise the luckier I get”. My noble friend was commenting, of course, on the supposed luck of the £27 billion extra which the Office for Budget Responsibility discovered in the past few months. However, it was not luck. First, the Chancellor created the Office for Budget Responsibility—so it was an independent body which came up with this new figure—and, secondly, he has created the conditions in which the Office for Budget Responsibility could come up with such a figure. So, as my noble friend rightly pointed out, he deserved his luck.

As a consequence of that, we are exactly where a good, sensible Government should be. We have steady growth of roughly 2.5% per year and we are reducing the deficit in a steady, gradual way over the period of a Parliament. Whether we will achieve a small surplus at the end of this Parliament I rather doubt—the pressures on public spending are so great that, if we do not achieve that, I will not be bothered—but, none the less, we are heading in the right direction.

As someone who learnt his economics in Cambridge at the high point of Keynesian economic study, I am comfortable with a Chancellor who puts at the heart of the economy the need to keep economic growth going. That is the fundamental point of economic policy. If you get that right, most other things fall into place. I am not sure whether the noble Lord, Lord Skidelsky, who is a distinguished biographer of Keynes, will wholly agree with that because, as we know, no one economist ever agrees with another. None the less, I think that is the heart of the matter.

Let me put the central point of my short remarks to my noble friend Lord O’Neill of Gatley, who will be winding up shortly. This is a wonderful opportunity to invest in infrastructure and housing. Andrew Haldane, the chief economist at the Bank of England, pointed out that the Bank of England has worked out that interest rates are at their lowest since Babylonian times, 4,000 years ago. I hope the Bank of England’s historical research is rather better than its forecasting of interest rates but, if it is right, this is a unique opportunity for us to invest in the infrastructure and housing we so badly need.

On infrastructure, I am thinking of: obviously, HS2; more important in my view, as a northerner, HS3; more roads; as a former London MP, a third runway at Heathrow, please, for the sake of the London economy and others; power stations; and fracking. I was pleased to see in the review £1 billion extra for a shale gas sovereign wealth fund to help benefit local communities with the achievement of further fracking. That is good news. On housing, there is a vast gap to be filled. As the Chancellor said, one of the biggest social failures of our age is the failure to build enough housing. In particular, will the Government pay attention to low-cost rented social housing, which is as important as housing for people to buy?

All in all, this was a one-nation review, by a one-nation Conservative Chancellor, in a one-nation Conservative Government, and as a one-nation Conservative I applaud it.

Queen’s Speech

Lord Horam Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Horam (Con)]

My Lords, I add my warm welcome to the two maiden speakers, the noble Lords, Lord O’Neill and Lord King. Both are economists, as am I. I tend to think that economists ought to run the country, but I doubt that I would carry the House with that thought. None the less, the noble Lords are very welcome, particularly since we are having an economic debate. Perhaps we could leave it that economists might be rather better than lawyers at running the country; that might be something that the House would agree to.

A recent issue of the Spectator purported to list the top priorities of what it called “Cameron’s inside gang”. It did not actually spell out what “Cameron’s inside gang” was, which might have been more interesting, but it listed the priorities. They were,

“keeping economic growth going, getting an acceptable deal from Europe, securing the Union at home, showing that their policies benefit the poorest in society and ensuring that more houses are actually built”.

That rather cheered me up: first because there were only five priorities. Usually Governments have a long laundry list of issues that they say they are going to prioritise, but five is quite enough. Secondly, I rather agree with the priorities. You can say, with Groucho Marx, that if you do not like them, I have others—but if I had to settle for five at the point of a gun, those five are not too bad.

My problem is—and this is what I want to say a few words about—the difficulty there will be in achieving priority one, keeping economic growth going, and priority five, getting houses built. On economic growth, the US recovery is proving feeble, the BRIC countries, which were made famous by the noble Lord, Lord O’Neill, are slowing down and our exports are suffering. Jaguar Land Rover sales fell by 20% in the first quarter. Manufacturing is not doing particularly well at the moment. The international situation is not very promising and growth is rather fragile.

I am also concerned about the Government’s stance. Here I get into questions of Keynesian economics and so forth. The Government are saying that they are giving top priority to growth, according to the Spectator, but the economic section in the manifesto is all about deficit reduction, and the Queen’s Speech also centred on this. This reminds me of the beginning of the last Parliament, when priority was given to deficit reduction, and expenditure, particularly capital expenditure, was cut pretty drastically. The result was that the rather feeble growth went into reverse. Macroeconomists at the Lords seminar on austerity under the chairmanship of the noble Lord, Lord Bilimoria, which I attended before Christmas, suggested that this might have cost us 4% in GDP growth over the two years at the beginning of the last Parliament.

Only after the infamous “omnishambles” Budget did the Chancellor realise that the advice he was getting was wrong and quietly change tack, becoming rather more Keynesian. As someone who learned his economics in Cambridge during the post-war Keynesian heyday of the 1950s, I can only commend that, as well as his political flexibility—but I do not want to see the emphasis on deficit reduction repeated in the first Budget of this Parliament. That would be a serious mistake.

I would much prefer the Government to stick to their general proposition that they will give priority to maintaining economic growth and, consistent with that overriding objective, keep firm control of current government expenditure and endeavour to reduce the deficit year on year. I believe that the Chancellor now has real credibility as a result of his success—plus, for the first time in many years, a decent majority in Parliament—and the markets would not mark him down for adopting such a posture. It would be much more sensible that trying to meet the rather implausible figures that were mentioned in the Queen’s Speech.

My second and final point is about housing policy. The fact is that housing policy in the UK has been a disaster for the last 40 to 50 years. In 1968 we built 425,000 houses. Last year it was 140,000, but we need 250,000 a year. As a result, prices have soared and we spend £24 billion a year on housing benefit—a huge sum that, if it were spent on actually building houses, would revolutionise the situation. As John Kay, the FT columnist, put it the other day, the trends over the past 40 to 50 years,

“are … entirely explicable by reference to changes in … policy”.

In other words, it is our fault—or rather the fault of Governments and Parliaments over the past 40 or 50 years.

Now the Government want to go back to selling more social housing—this time, that owned by housing associations. This is a mistake. It does nothing to increase supply: indeed, it will reduce it. I therefore endorse the remarks made on Tuesday by the noble Lords, Lord Kerslake and Lord Best, in this Queen’s Speech debate. Since the Government appear determined to bring forward a Bill to transfer housing in this way, I beg them to subject it to pre-legislative scrutiny so that expert opinion on housing can be fully heard by both Houses of Parliament. Then we will see exactly what people who really know about the housing situation think.

To be fair to the Government, they have relaxed planning controls and encouraged the assembly of large parcels of land. I believe that the cost of land is a fundamental issue that has to be tackled in a radical way if we are to get more housing. I also believe, as the noble Lord, Lord Kerslake, said, that in Greg Clark we have an extremely able Secretary of State to deal with these matters. The fact is, though, that if we are going to get a decent housing situation for our children and particularly our grandchildren, with the sort of benefits that we enjoyed when we were young, we must have a much bigger and bolder effort by government to deal with the housing problem. Harold Macmillan did it in the 1950s when he oversaw the building of 300,000 houses a year, and if the Government are going to be truly a one-nation Conservative Government, they should be emulating him.

National Infrastructure

Lord Horam Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord Horam (Con)]

My Lords, as others have done, I congratulate the noble Lord, Lord Adonis, on introducing this debate. We all respect his great record in transport and education. Equally, I am glad that my noble friend Lord Deighton is answering for the Government because he is the great implementer, as the noble Lord, Lord Adonis, admitted in his remarks. Indeed, with the two of them together, the House of Lords leads once again over our colleagues in the House of Commons; I do not believe that it could field two such Ministers as we have today leading our debate.

Undoubtedly, infrastructure planning has been a problem for this country for many years, stretching over many different Governments. The noble Lord, Lord Adonis, said that we were now 27th in the league of international comparisons. I thought it was 24th but, whether it is 24th or 27th, it is far too far down for a country that is fifth overall in the economic league tables. Now we have the annual infrastructure plan, which is an excellent idea and has cleared up some of the chaos that we were left in by the previous Government due to their bad planning over PFI and their penury on the macroeconomic front. That has helped to bring an element of stability to the whole situation but it is not enough.

Urgent attention needs to be paid to two things that I want to stress to the Minister, which I hope he will pay attention to. The first is that we need to get going on fracking. There is an important decision being taken shortly—in the right direction, I hope—by Lancashire County Council. I speak as a Lancastrian who knows the area of Bowland extremely well; it is where I was born. That decision needs to go the right way. If it does not go the right way, I hope that the Government will intervene and overrule the council. We need to make progress on this matter, otherwise we will be left behind in this very important area of energy development.

Secondly, affordable housing was mentioned by the noble Lord, Lord Adonis, and in a very important speech by the noble Lord, Lord Rogers of Riverside. I agree with both of them: our housing record is appalling. We need between 200,000 and 250,000 houses a year. Even Harold Macmillan in the 1950s was able, from an almost standing start, to get up to 312,000 houses in two years. He was able to do that only by a careful and dynamic plan from the centre, organised by the Government. It will not be enough to rely on private housing providers. They will not build the houses in the right places for the country or for the people who need affordable housing. What is happening in London now is a disgrace in terms of the number of houses and flats that are being built and immediately sold off-plan to foreign buyers and are not available to people who live in London. That must not happen any longer if we can possibly avoid it.

I therefore say to my noble friend: I want to see in the next Conservative manifesto something very concrete on fracking and something very concrete on affordable housing.

Autumn Statement

Lord Horam Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Horam (Con)]

My Lords, I congratulate my noble friend Lord Rose of Monewden—I hope I have pronounced that correctly—on his maiden speech. We will all be interested to hear from him on business matters. I understand that he also has experience of turning round failing hospitals. As a former health Minister I shall be very interested to hear about that as well.

As this is the last Autumn Statement before the general election, it obviously has more than a whiff of politics about it. As an economist and as a politician, I have sometimes felt torn in two by the conflicting priorities that these occasionally impose—but not on this occasion. For the first time, the Chancellor of the Exchequer has seriously hit the holy grail of economic policy, which is economic growth with low inflation. He has done that partly through his own efforts, which have been somewhat more Keynesian, as the noble Lord, Lord Desai, implied, than he might perhaps have thought earlier on. He has also done it because of the enduring legacy of the Thatcher and Major years.

My noble friend Lord Lawson of Blaby referred to those years, but did not mention that he himself played a central part in the microeconomic management from which we still benefit. Ed Conway, the “Sky News” economics editor, wrote in the Times the other day:

“Europe is still awaiting its Thatcher moment”.

That is because of the regulations and problems of the labour market which are still prevalent, particularly in southern Europe. Even Germany has problems because it is still waiting for its Keynesian moment. It does not understand that there has to be some expansion from time to time in order to get the economy going. Believe you me, if you are in the eurozone and you have not had a Thatcher moment and you still have not had a Keynesian moment, you are in real trouble. That is the difficulty they face—and it will impinge on us in due course.

I welcome particularly the centrepiece of the Statement about infrastructure development. As a former transport Minister, I welcome the points about roads and railway development, although, as the noble Lord, Lord Adonis, rightly pointed out, under both Governments, far too often these have been stop-start projects. We should not forget one thing, which is that we have done particularly well on broadband. When this Government came to power, the UK was one of the worst countries in western Europe for broadband development; now we are the leader. That is a very good example of how government policy should be conducted.

Also in the context of infrastructure development, as a Lancastrian I particularly welcome the emphasis on the north of England. The HS3 project has everything going for it and makes total sense. I hope that my noble friend Lord Deighton is listening carefully: I hope that the Government will proceed with HS3 whatever happens to HS2. HS3 should take priority because it is good value for money and makes sense.

I think that we should proceed with fracking in a sensible way, while obviously taking the environmental concerns into consideration. Jim Ratcliffe, a fellow Lancastrian and the founder of Ineos in Scotland, took the right approach when he said that we should increase greatly the amount going to local communities as a benefit from fracking. He proposed that 6% of the revenue sales should go to local people, 4% to the owners of the land and 2% to the communities. That compares dramatically with the figure of 1% which the Government are proposing at present. If we are going to get going on fracking, we have to do something dramatic. Cheap energy is the new cheap labour. Now that China’s wage levels are coming up to ours, cheap energy is absolutely crucial and also has geopolitical implications in terms of the new Cold War with President Putin in Russia. This is something of vital importance which I hope the Government will focus on.

Finally, I will say something about low pay, which has rightly been mentioned by a number of noble Lords opposite. It has been reported that at the moment there are some 300,000 people in this country who have a job but are not getting even £6.50 an hour for it. That is a scandal. When Frances O’Grady, the general secretary of the TUC, recently came to speak to Conservative Peers, I asked her what should be done about this issue. She said that the first thing we have to do is enforce the minimum wage provisions. That is not being done as extensively as it should be in this country. I hope that the Government will listen to what Frances O’Grady said because she is a very sensible woman.