Autumn Statement 2023

Lord Howarth of Newport Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Howarth of Newport (Lab) [V]]

My Lords, reducing national insurance contributions does nothing for people on the lowest incomes. Full expensing, at a cost to the Exchequer of £11 billion a year, seems an expensive way of securing an increase in annual business investment of £3 billion.

Before the Autumn Statement, the OBR projected a fall of £27 billion in borrowing in 2027-28 compared with its forecast in March. The Chancellor had a choice as to how to use this windfall between consolidating the public finances, improving public services or making tax cuts. Bullied by his party, and with an election coming up, he chose tax cuts. He has gambled that the wafer-thin margin forecast by the OBR will enable him to adhere to his fiscal rule that the debt to GDP ratio will be falling by the end of the period.

Of course, the OBR’s projection is no more than optimistic guesswork. The Chancellor has left himself with nothing in the bank for contingency, yet contingencies always occur. If the market should take the view that the fiscal framework is fanciful, the effects could be devastating. A rise in interest rates, coming on top of the vast debt service costs that the Government’s policies have already incurred—£116 billion annually—would wreck his flimsy plan. International confidence in the UK has already been weakened, not only by the Truss-Kwarteng episode but by this Government’s cavalier attitude to international law.

A different kind of unrealism and irresponsibility is apparent in the Chancellor’s decision to withhold resources for public services. Inflation that is boosting his tax revenues is also increasing the cost of public services. He claims that his tax cuts will enable public services to be better funded; the reality is that he has funded tax cuts at the expense of public services already shredded by austerity. In his plans, public spending on government departments is due to fall by £19 billion in 2028; if this were actually to happen, it would be appalling.

The Chancellor made the bizarre claim that we deliver world-class education. That is not so for those who are threading their way through our chaotic and underfunded FE system, nor for the generality of children who have seen the discrepancy in funding per pupil widen vastly between state schools and private schools. Faced with the crisis in the justice system, bound up with inadequate education—cut by 20% after 2010—the Chancellor offered nothing.

With the Home Office budget also unprotected, how are the Government going to control immigration? The Autumn Statement showed a wilful evasiveness about the challenges to the British state. To court popularity with the pensioner vote, there is an 8.5% increase in the state pension—way above the 6.7% indexation of social security benefits—yet the Chancellor knows that the triple lock is fiscally unsustainable. He ought to recognise that it is socially damaging as well, widening the gulf between generations. The defunding of universal credit over the years has widened the gulf between the affluent and the destitute. On average, the Chancellor’s measures will give £1,000 a year to the top 20% of earners but only £200 to the bottom 20%.

Who are the employers who will provide all this work at home for people with mental health and mobility problems? Although the Nuffield Trust calculates that the NHS faces a £1.7 billion deficit, the Chancellor made no significant health funding announcements. Moreover, he provided nothing to support local government to pay for better social care and public health to ease pressure on the NHS. Demographic developments mean that, with an ageing population and a deteriorating dependency ratio, the Government will be faced with reduced tax revenues from people of working age and higher outlays on health and social care. The demands of the NHS, year after year, exceed the rate of growth of the economy. The days are gone when, to pay for the welfare state, the Government could raid the defence budget, which they have now said they want to increase.

Aside from his douceur to people who live near new energy infrastructure, the Chancellor showed no recognition of the scale of public expenditure that will be required to meet our commitment to a green transition. The Climate Change Committee and the OBR estimate that the Government must spend £25 billion per year between now and 2050 to achieve net zero. Where is the provision for that? His arithmetic assumes that he will index fuel duties next spring. We shall see. What is sure, though ignored by him, is that with the phasing out of petrol and diesel-powered vehicles, fuel duty—currently raising about £25 billion—will evaporate. VAT at 5% on domestic gas and electricity use, like the freezing of fuel duty and the tax treatment of air travel, subsidises fossil fuel consumption while we struggle towards net zero.

This Chancellor shows no interest in tax reforms such as introducing a progressive carbon tax and road pricing. There is a whole agenda of tax reforms that would be beneficial to the economy. The Government should at least extract the best value they can from the existing tax system, whether by merging national insurance and income tax into a properly progressive system, tackling the chaotic complexity of VAT, addressing the damaging effects of the stamp duty regime or removing the anomalies and injustices of council tax, but the Chancellor shies away from all this. Following the Statement, he said:

“I hope we are able to reduce the tax burden still further in the future”.


Instead, he should have told the truth—that low taxes are a fantasy. We are heading towards a tax take of 38% of GDP. That will still leave public services threadbare and the great challenges I have mentioned unaddressed. He said it was

“an autumn statement for a country that has turned a corner”,—[Official Report, Commons, 22/11/23; col. 337.]

but we have not. To transform productivity so as to achieve the growth that will improve living standards and fund decent public services, far more needs to be done on education and skills, NHS waiting lists, infrastructure, availability of capital, tax reform and rejecting the lobbying of vested interests.

The legacy that this Chancellor and his Conservative predecessors will leave is dire. We need a Labour Government to grapple with it. For the next Government and for our country, the road ahead will be arduous.