Lord Northbrook (Con)
My Lords, in short, the election result will boost the UK economy in the short term as the major uncertainty about an extreme Labour Administration has been removed for the next five years. Anecdotally, I am already hearing about an upturn in financial transactions, especially in the private equity sector, and a revival of London residential property market transactions. Many of these deals had been put on ice ahead of the election.
However, a cloud still hangs over the UK with regard to the trading situation with the EU after Brexit. The idea that we can conclude a comprehensive trade deal by December of this year seems implausible. This means instead one of several scenarios: either we crash out without a deal, which would not be good news for the UK economy, or there is a fudge and we will have a deal in outline only, with the EU granting us an extension to sort out details. The third, and probably least likely, scenario is that we just have to ask for an extension to the transition period.
Overall, I am most concerned about the City of London losing out, as well as motor manufacturing and other just-in-time parts of the manufacturing economy, together with the food industry. According to the City of London Corporation, the City produced £75 billion of tax revenues for the Government in 2018—more than 10% of tax receipts for the year. According to the House of Commons Library, this represented 6.9% of total economic output for the year. So far, I have not heard about any likelihood of a deal with the EU with regard to financial services. This will leave a big hole in government finances. With regard to car manufacturing, hopefully there will be some agreement because, without a deal, the EU as well as the UK would be affected. With regard to the food industry, delays at ports due to extra paperwork would cause serious problems, particularly in the fresh food sector.
The other area that causes concern—I refer to my entry in the register of interests—is the rural economy. Small livestock and hill farmers will struggle to survive without some sort of government assistance. Hopefully, this will be taken into account in the agriculture Bill. I am also concerned about the possibility of penal tariffs for UK farmers’ exports if we crash out without a deal.
In the rest of the brief time available, I will touch on a few tax and financial matters. Business rates clearly need to be reduced, as the high street is suffering at the expense of the likes of Amazon. Its warehouses, for instance, should have to pay more. The Government should not lose their nerve in raising the threshold for higher rates of income tax and the top rate should be cut to 40% from 45%, which would only return it to the rate under the Blair Government. On pensions, the pensions Bill should include measures to weed out unscrupulous providers approved by HMRC without due diligence which have caused misery for those who took advantage of pension freedoms to invest their lump sum with these supposedly bona fide firms.
It is clear that the economy in the north needs boosting, but I am not convinced by the mixed performance of LEPs. Anecdotally, some are too weighed down by local politics or do not have enough business experience on board—although I have heard some good reports in other regions. My preference would be for the Government to fund sensible infrastructure projects and encourage private companies through tax breaks in certain geographical areas. For me, though, the jury is still out on the cost/benefit of HS2.
Finally, on a separate note, and again drawing attention to my interests in the register, I would voice concern about the renters reform Bill. While it is a totally laudable concept to crack down on rogue landlords, I am concerned about the abolition of Section 21, because it tilts the balance too much in favour of the vexatious tenant. Getting rid of tenants at fault under Section 8 is costly and time consuming. While I acknowledge that short-term eviction is undesirable, there can be cases when it is necessary, and, without it, landlords could be saddled with difficulty for a long time. So the right balance needs to be struck and the concerns of landlords listened to.
Overall, I welcome the return of a Conservative Government and, hopefully, the economic stability they will bring over the next five years.