Economy: The Growth Plan 2022

Lord Kerr of Kinlochard Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

It is a great pleasure to see the noble Baroness, Lady Neville-Rolfe, back on the Front Bench. I welcome her. There is a great deal in the growth plan that she introduced that I welcome.

I plead guilty to living in north London, to chairing a think tank and to having been against Brexit, but I honestly do not think that I am part of a coalition against growth. I have not heard many in the Chamber arguing against growth, which, on the whole, seems to be something we should pursue, but I do not think the best way of pursuing it in the present circumstances could possibly be by tax cuts. The big-picture speech from the noble Lord, Lord Bridges of Headley, got this exactly right.

Nor do I think that tax levels explain our productivity problem. Our business tax levels are well below those of the French and the Germans. Brexit is, of course, partly the explanation. The OBR says it meant a 4% fall in long-term productivity as new non-tariff barriers inhibited the exploitation of comparative advantage—a point made by the noble Lord, Lord Inglewood. But our productivity problem long preceded Brexit. Investment is well below the level of our past and of our competitors. Tax cuts will not cure that.

My advice to the beleaguered Chancellor would be to study the first Budget presented by his distinguished predecessor, the noble Lord, Lord Lawson of Blaby. I was present at the creation. Corporation tax rates were reduced in 1984, but allowances—tax breaks—were scrapped, and the tax take went up; and so did investment, because business really liked the simpler system and the Lawson promise, which he wrote into the statute book, of further rate reductions in subsequent years. It was the simplicity, stability and predictability which unlocked the extra spending on plant and machinery, training and research.

That is why the sunset clause in the retained EU law Bill is so damaging for growth. Uncertainty is the real killer of investment. Major investments have long lead times, and what business needs is a clear, stable and preferably simple rulebook. Fifteen years ago, a European company with which I was privileged to work made a £12 billion investment in this country. It told me its main reason for doing so was respect for British regulatory competence and political stability. It prioritised predictability. The returns were, and are, better elsewhere, and taxes are lower elsewhere, but it has continued to invest more than £1 billion a year in this country, even after Brexit, and I really hope the chairman has not read the Birmingham speech. “Setting out to disrupt” sounds fine in a seminar, but wise Governments respect and try to create stability, and respect experience. Our Government have no mandate for moving fast and breaking things. It may be fun, but I am sure it is the wrong recipe for getting the growth we all want, and I join the noble Lord, Lord Inglewood, in his campaign for boring government.