Economy: The Growth Plan 2022

Lord Northbrook Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Northbrook (Con)]

My Lords, the Chancellor said his recent fiscal Statement represented

“a new approach for a new era”.

He continued by saying:

“For too long in this country we have indulged in a fight over redistribution”,


adding that the Government would focus on growth built around several priorities, including reforming the supply side of the economy and cutting taxes to boost growth. He argued that the growth plan would

“unleash the power of the private sector”,

with the aim over the medium term of reaching

“a trend rate of growth of 2.5%”.

We await his supply-side reforms, due to be announced in his medium-term fiscal plan on 31 October. He said these would cover

“the planning system, business regulations, childcare, immigration, agricultural productivity and digital infrastructure.”

I welcome his decision to reverse the national insurance increase proposed by Rishi Sunak. I also very much approve, as other noble Lords have said, of the repeal of the IR35 off-payroll changes of 2017 and 2021, the cancellation of the proposed corporation tax increase, the advancement of the basic rate tax cut by a year, the changes to the stamp duty threshold and the cutting of the additional tax rate from 45% to 40%, believing that, within reason, lower tax rates yield higher revenues and make the UK more attractive to international business. The huge energy support package also had my support.

So how could this Financial Statement have had such a bad reception? The first problem was timing. There was a perfectly respectable argument for reducing the 45% rate—after all, that is what it was during Tony Blair’s term in office and after—but the Government had to prepare the ground first. It is not immediately obvious that it could pay for itself, but it could easily do so if more big earners decided to declare their income in the UK. That takes time and patience to explain, especially at a time of such hardship when people are struggling with electricity bills, mortgages and cost-of-living expenses. People are also worried about the increasing effects of inflation. There could have been shrewder ways of doing this—namely, by raising the threshold for the start of the 40% tax bracket, since it now encompasses millions of middle earners who were never meant to pay this rate.

Going back to the proposed supply-side reforms com, the planning system ideas to encourage growth look sensible on the face of it, but there will be resistance to these, especially from Back-Bench MPs in southern rural seats. Every Government propose to tackle business overregulation, but generally there seems to be little overall success in this area.

The Government also completely failed to anticipate the market’s reaction to the unfunded tax cuts. The decision not to have the Statement’s financial effect costed by the OBR was a serious mistake. It also vaguely mentioned further tax cuts, further undermining market confidence.

I welcome the proposed reforms to the universal credit regime earnings threshold, which will mean that 120,000 more claimants will be helped to increase their earnings. However, I cannot see how much additional welfare reform is going to succeed as there will be serious opposition, including from the Government’s own Back Benches.

I am happy with the Government’s plan to introduce legislation to ensure minimum service levels on transport services and to require unions to put pay offers to a membership vote.

I await with interest more details of the proposed investment zones to be established across the UK, which will benefit from tax incentives, planning liberalisation and wider support for the local economy. Hopefully, the loss in tax take can be made up for by the new businesses attracted there.

Overall, the Government had some great ideas in the Financial Statement, but they were let down by poor preparation of the ground and in getting the Back Benches onside. Hopefully, as a result of the reaction to it, the Government will be more careful in these areas in future.