Spring Budget 2024

Lord Tugendhat Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, in his great novel Anna Karenina, Tolstoy remarked that:

“Happy families are all alike; every unhappy family is unhappy in its own way”.


How true that is of the situation in Europe today. Whether one looks at the Netherlands, Germany, France or Sweden, one sees Governments and society coping with severe problems, economic and social, that are very similar to our own. I make that point because there is a tendency in this country, which has been reflected during this debate, to assume that the problems with which we are confronted are somehow unique to us and the result of particular British circumstances. That is why my noble friends Lord Lamont and Lady Lawlor, and the noble Lord, Lord Macpherson, were right to draw attention to how, in a variety of areas, the British economy has outperformed forecasts and performed better against other countries than many people suppose. I agree very much with the points that they made and will not repeat them.

In the short time available to me at the end of a long debate, I had intended to make only three points. Before I make them, I would like to refer to something which my noble friend Lord Horam said when he was talking about GDP per head and GDP itself. He linked what he was saying to the very considerable rise in equality in this country and the effect that this has had on people’s attitudes to their own position, as well as to politics in general.

I turn to my three points. First, I congratulate the Government on shifting the balance of benefits in favour of those of working age and away from pensioners. Pensioners have done very well in recent years, as I and many other Members of this House know from our own experience. However, as my noble friend Lord Lamont said, there is a great need to encourage more people back into work. Making work pay is an important part of doing that. It is an important carrot; sticks are needed as well, but it is a very desirable policy change to promote work in this way. An additional advantage is that, if we could encourage more people back to work, we would have less need of immigration in order to fill so many of our public services, especially the NHS.

My second point is to congratulate the Government on the £3.4 billion that has gone to the NHS, specifically to improve productivity. I spent some years as chairman of the Imperial College Healthcare NHS Trust. Although it was some time ago, I can see how important this initiative by the Chancellor is. The effects of digitising operating theatre processes could be dramatic— the same number of consultants could do an extra 20,000 operations a year. This is exactly the sort of initiative that the NHS needs, and it provides a precedent for other public services.

Having praised the Government on two points, I am afraid that my third point is to criticise. In the defence debate last September, I called for a start to be made in increasing defence expenditure. Since then, the world has become a good deal more dangerous, as a result of events in the Middle East. In their rhetoric, the Government recognise the change that has taken place and continue, quite rightly, to send considerable quantities of military equipment to Ukraine. They are quite right to do that, but the effect is to deny our own forces that equipment. It will take a long time to fill the gaps. The Government talk a great deal in other circumstances about the increased dangers in the world, but they are not putting their money where their mouth is. An ambition to increase defence spending to 2.5% when economic circumstances permit is all very well, but, unfortunately, the dangers to this country do not follow the same rhythm as our economic circumstances. I regret that the Government did not take advantage of this Budget to take a first step towards increasing our defence expenditure.

The fact that the Secretary of State for Defence cannot even fly anywhere near the Russian border because his aeroplane does not have the right kind of equipment to prevent the Russians interfering with it is one example of the situation that we are in. The embarrassments that are being caused by our aircraft carrier are another. I very much regret that the Government did not take a first step. I hope that my noble friend the Minister can say something about that in her wind-up.

Autumn Statement 2023

Lord Tugendhat Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, like other noble Lords, I welcome my noble friend to her new position, and I am also very pleased at the Chancellor’s decision on full expensing. When he introduced that measure earlier—I cannot remember exactly when—I argued that it would be fully effective only if it was made permanent, and I am delighted that it has been. It is the single best way to encourage capital investment available to him at the present time.

I also welcome the cut in national insurance payments, for precisely the reasons set out by the noble Lord, Lord Macpherson. There is one other thing I welcome very much. As a former chairman of the Imperial College Healthcare NHS Trust, I welcome the Chancellor’s imaginative decision to award it, along with Imperial College, £5 million to establish an Alexander Fleming centre to mark the centenary of the invention of penicillin at St Mary’s Hospital in Paddington. This sort of gesture is modest in financial terms but makes, I think, a big impression on those involved. It is a particularly welcome one on this occasion.

I want to devote my speech mainly to talking about how public expenditure and taxation are discussed in relation to GDP and the implications for policy, whether under this Government or under another. As my noble friend Lord Frost indicated in his speech, it is constantly pointed out that they are at the highest levels since the post-war years, as if this was some sort of historical aberration and a bad thing that needs to be put right —they are in fact not out of line with other similar countries. I believe that the approach epitomised by my noble friend Lord Frost is very much the wrong one. They are at these levels because we are in a situation very similar to the post-war period, by which I mean that so many of the problems our country faces, like other similar economies, are big state problems. That is to say that they are problems that primarily require government action and government expenditure to be progressed, let alone resolved. Unless that action and expenditure are forthcoming, the private sector will not be able to function effectively.

These problems are well known to us all. They are the consequences of climate change; the impact of the ageing population on the NHS, social services and the public purse generally; the need to renew our crumbling infrastructure, as well as to prepare it for the digital age; the need to rebuild our defences; and the need to prevent public debt running out of control. To get a grip on this list requires the Government to spend money and to raise money. Nothing has done more damage to the present Government’s reputation than the widespread perception that this country is not working properly. That is because too often it is true. It is because the battle is being lost on too many of these problems that growth is held back and the country is not working as it should. It is not a case of having to choose between public and private: the private depends on the public.

I hope we can stop obsessing about the weight of the overall tax burden and the proportion of public expenditure to GDP. Instead, we need to consider far more carefully how to spread the tax burden fairly and how best to use it to encourage those economic and social projects and activities that will enable our country to be more competitive and a better place to live in. Some taxes certainly can be cut, but others must yield more.

Finally, a serious Government need also to be frank with the public about which public expenditure programmes outside the protected departments they intend to prioritise in the coming years and the costs involved. With an election looming within the next 12 months or so, this Autumn Statement does not do that, and nor does the Opposition’s response. A big test of whoever is in charge after the election will be the extent to which they are willing to be frank on these matters.

Budget Statement

Lord Tugendhat Excerpts

Thursday 16th March 2023 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, it gives me great pleasure to begin by congratulating the noble Baroness, Lady Moyo, on her notable maiden speech. The combination of her force and clarity made a great impression upon me and I look forward to hearing her apply those gifts on other subjects in the future.

As far as the Budget is concerned, I welcome it. I welcome its general direction, underlying philosophy and a number of its detailed proposals. However, I am going to deal with only a few. It is an extremely far-reaching speech, and I will just concentrate on a few points that I would particularly like to draw to the House’s attention.

In his speech, the Chancellor referred to something which happened before he stood up, which was the masterminding by the Government of the sale of the British arm of the Silicon Valley Bank to HSBC. It was rather overshadowed in the media by the dispute between Gary Lineker and the BBC, but it is a major coup on the part of the Government. Had the British end of the Silicon Valley Bank gone down, the crisis that would have overtaken the tech sector in this country would, as the noble Lord, Lord O’Neill, said, have created a very different atmosphere for this debate today.

The Government not only prevented a crisis, something for which they deserve a lot of marks, but did so without costing the taxpayer a penny, which has not always been the case in banking crises. The operation and the speed with which it was carried out bear eloquent testimony to what a good place Britain is in which to do business, especially for start-ups and scale-ups in exciting new areas such as tech and life sciences. I hope very much that foreign and British entrepreneurs will take note of that, and that those wondering whether to enlist in London or New York will also bear this event in mind.

Turning to what might be called the Chancellor’s micro-approach to achieving the macro-objective of improving the British economy, in the corporate sector I am sure that he is right to focus on incentivising investment rather than the headline rate of tax. This will do most to encourage established companies, in established areas such as infrastructure, and new companies in new sectors. However, it is important to remember how long projects take. Usually, they take a good deal longer than three years. Therefore, it is vital that the Chancellor fulfils his intention to make full capital expensing a permanent feature, to quote him,

“as soon as we can responsibly do so.”—[Official Report, Commons, 15/3/23; col. 839.]

In the personal sector, I am equally sure that the Chancellor’s pension and childcare measures are at different ends of the wealth and income spectrum, and are the right way to encourage people to stay in work and to return to work. They will have a more direct and targeted impact on the balance sheets of individuals and families than simply a cut in income tax.

I am a supporter of the Budget. I have just one caveat or warning, which refers to defence—a point made by my noble friend Lord Howell. I very much support the Government’s rhetoric and actions regarding Ukraine and China. However, I worry that our rhetoric is in danger of running ahead of our capacity to deliver. We talk a very good talk, but how many troops, ships and aircraft do we actually have at our disposal? I am delighted that we have helped the Ukrainians as much as we have, but how much do we have left? If we are to continue playing the role that we wish to play, defence is likely to cost more and perhaps a very great deal more, and we all know how that will have to be paid for.

Autumn Statement 2022

Lord Tugendhat Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, like my noble friend Lord Lamont, and unlike my noble friend Lady Noakes, I welcome the Autumn Statement. In the circumstances, it is a balanced and fair attempt to deal with the country’s current problems and to set a course for the future. It has also already done a good deal to restore confidence in the United Kingdom in financial markets, as the fact that the pound is now back to $1.20 shows—and that is no inconsiderable achievement.

However, I share the regret, expressed by my noble friend Lady Noakes, of many in my party that the Chancellor was unable to do more of a direct nature to encourage growth, and that makes me regret all the more the extent to which some Conservative MPs—ex-Ministers as well as Back-Benchers in the House of Commons—seem determined to hamper growth. Let me give examples. First, a number of them are making efforts to prevent the Government achieving their target of building 300,000 homes a year. Success in achieving exactly that number, in fulfilment of an election pledge, helped to lay the foundations of Conservative political and economic success in the 1950s. It really beggars belief that what Harold Macmillan and Ernest Marples could achieve in the early 1950s appears now to be beyond the capacity of a Government who have been in power for 12 years.

Secondly, there is the obsession of some sections of the party with distancing this country as far as possible from the European Union. I refer particularly to plans, opposed by the whole business community and the trade unions, to rid the statute book of EU-derived legislation, even when it was introduced and supported by the United Kingdom, thereby creating an atmosphere of maximum uncertainty for business across the whole range of the economy.

I also draw attention to the knee-jerk reaction against any suggestion of trying to remove the barriers to trade with the EU which were erected as a result of the particular way in which the Johnson Government negotiated our exit. If ever there was a case of putting of ideology before national interest, it is that.

I turn now to criticism of the Autumn Statement for raising taxation. Raising taxes is attacked by some members of my party as being fundamentally un-Conservative. A school of thought has grown up that appears to believe that a Conservative Government must always, and in all circumstances, be in favour of cutting taxes and reducing the size of the state. Of course, there is a strong preference in the Conservative Party for lower taxes and a smaller state, but it is not always possible to pursue policies in that direction. The preference for lower taxes and a smaller state has never been an article of faith; the party has traditionally been pragmatic rather than ideological in framing its economic policies. It has believed in providing good government in accordance with the needs and requirements of the time. Sometimes, that will involve raising taxes and increasing the size of the state. Classically, of course, that is the case in times of war, but by no means only in times of war; we live in such a time now. The challenge of climate change, the consequences of the pandemic, demography and the strains that it puts on the NHS and social care, plus defence and the threat posed by Russia, are all issues that, singly and together, can be tackled only by the state and require heightened public expenditure. In these circumstances, the Government and the whole of the Conservative Party should now recognise this reality, present the country with a set of prioritised policies that respond to the challenges it faces and explain to the people how they intend to spend their money to make their lives better and safer.