Budget Statement

Lord Macpherson of Earl's Court Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Macpherson of Earl’s Court (CB) [V]]

My Lords, I add my congratulations to the noble Lord, Lord Khan of Burnley, on his eloquent maiden speech.

There is much in this Budget which is sensible. It is right to support the economy at the current time. It is right to support people who cannot work and businesses that cannot open. Some of the measures are ingenious; I regret not having advised the then Chancellor Alistair Darling to implement a super-deduction. The Chancellor is also right to focus on repairing the public finances once this crisis is over. Unlike the noble Lord, Lord Eatwell, I do not think that we can rely on the Bank of England indefinitely buying the huge amounts of debt that the Government are issuing.

As they repair the public finances, I encourage the Government to be mindful of two issues. First, the proposed rise in corporation tax is very steep, and here I agree with the noble Lord, Lord Lamont. The deductions available against the tax are small. Britain risks becoming uncompetitive as a result, with activity moving to lower-tax jurisdictions. I am sceptical that the tax will raise as much revenue as the OBR suggests.

Secondly, the Government have further tightened their spending projections in the medium term. But, apart from cutting overseas aid and announcing a pay policy which may or may not be deliverable, they have shown little inclination to take the tough decisions to live within those plans. All the pressures in the coming period are going to be upwards—whether improving NHS capacity or the quality of social care. Meanwhile, demographic pressures are accelerating.

Controlling spending is hard work. The so-called unprotected programmes are now so small they cannot yield the savings that the Chancellor needs. He will have to take difficult decisions, and soon—for example, revisiting the triple lock on the state pension. But, in the end, I fear further tax rises will be necessary, so I continue to recommend a temporary social solidarity charge.