Autumn Statement: Economy

Lord Leigh of Hurley Excerpts

Tuesday 29th November 2016 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I echo my noble friend Lord Horam’s remarks: what a pleasure it is to see my noble friend Lord Young of Cookham—which is the neighbouring village to Hurley—at the Dispatch Box for this marathon debate. I begin by commending the direction of travel for policy-making set out by the Chancellor last week. All of us, whatever our views on the referendum in June, can at least unite around the sense of relief that an emergency Budget was not required and that we, and indeed the Chancellor, have had until this Autumn Statement to pause and take stock. Furthermore, the decision to switch to one Budget a year, in the autumn, is a sensible one. Not only will it give those affected by Budget measures time to plan ahead of the new financial year but, more importantly, one Budget event a year is the right approach to economic policy-making. It encourages long-term thinking, fundamental change and sticking to a long-term economic plan.

Speaking of a long-term economic plan—a phrase that some might recall—I am proud to continue to lend my support to the Government on theirs. While I think we are all concerned about the deterioration in the public finances and the delay in returning to surplus, we can at least be sure that under this Government our fiscal credibility is secure. The ONS has confirmed that the economy grew 0.5% in quarter four. Business investment grew by 0.9% quarter on quarter—the opposite of what some very distinguished economists predicted, some of whom have fessed up today—and exports grew by 0.7%. That is some positivity on which to refresh and secure our long-term economic future.

I turn now to some specific measures in the Budget, most of which I do not believe have been raised before. There are several to be commended. The first is the implementation of promised limits to interest deductibility —something I called for in my maiden speech some three years ago. It is quite right that interest on loans should be deducted as a legitimate business expense from a corporation tax bill. Such a practice encourages the natural flow of business, finance and growth. However, as is often the case, interest deductions had become abused—essentially, debt had replaced equity. Entire capital structures were being rejigged to appear as debt to allow for deductions, until there was no corporation tax left to pay. The limits now imposed will stop this without curtailing business activity.

A similarly just balance has been struck with non-domiciled individuals. We want to attract as much foreign investment as we can to this country, and the non-dom regime has helped us to do this—but only for those who are not in fact UK residents masquerading as non-doms. From April 2017, if such individuals have been resident for 15 of the past 20 years, they will pay UK tax. That said, the changes to the rules for business investment relief mean that legitimate non-doms who are taxed on the remittance basis will be able to continue to bring offshore money into the UK to invest in bona fide UK businesses.

I would also highlight that the Government are following through on termination payments, in making sure that where they are over £30,000 and subject to income tax, they are also subject to employer NICs. More broadly, the corporation tax road map continues to send out clear signals on what kind of business environment the UK will offer in the years ahead. I am slightly puzzled to see that the diverted profits tax is scheduled to raise only £100 million a year for four years. I think that that is a gross underestimate of how much tax will be paid by the foreign corporations that seek to send their profits abroad and ask my noble friend the Minister if his department might care to review that.

We may, finally, see light at the end of the tunnel on housing, with the new £2.3 billion housing infrastructure fund, as has been mentioned. Housing is important for all our citizens, but it is also vital for our economic competitiveness. People will not want to come to the UK, and to London in particular, if housing costs continue to run out of control. High house prices are not necessarily a sign of success and I am glad that the Government are taking action. However, I note in today’s Times that they seem to be planning a lot of houses in the Maidenhead area, which incorporates both Hurley and Cookham. I hope that the green belt will be spared. Of course, it was the brilliance of my noble friend Lord Horam who made me realise that perhaps the Marquess of Rockingham’s stately pile, with its estimated 365 rooms, will be turned into more suitable housing—there is a cunning plan.

I commend the continuing support for fintech. As Brexit negotiations rumble on, our financial services industry must be given the chance to succeed. However, as important is that we secure the future generation of financial services practitioners, and that is where rolling support for fintech is so important. I strongly recommend that the Government look carefully at the Politeia report published last week, A Blueprint for Brexit, which explains that the role of the financial services post-Brexit will be enhanced if we adopt either equivalence-based areas or the financial centre model and reject the passporting suggestions that others have mooted.

As these and other options become clear, in particular the need to leave the single market, I am more and more convinced of the great opportunities that will be afforded to this country outside the EU. This was highlighted in the debate in your Lordships’ House on international trade post-Brexit about a month ago, in particular by my noble friend Lord Bamford, whose speech gave us all great hope for this country’s opportunity to flourish and prosper outside the EU.

To be clear, although I am a Brexit supporter, I do not question the credibility of the OBR. We must have, and continue to have, robust economic forecasts that give the Chancellor and others the best available information. We may hope that it is wrong, but, instead of wishing it away, we must put in place credible long-term plans to deal with whatever may come. This Autumn Statement was a solid start.