Autumn Statement 2023

Lord Willetts Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Willetts (Con)]

My Lords, it gives me great pleasure to welcome my noble friend Lady Vere to her post in the Treasury. I also draw her attention to my entry in the register of interests, especially my role as president of the Resolution Foundation, on whose analysis of the Autumn Statement I will draw.

I agree with my noble friend Lord Frost that we must not fall into the trap of miserabilism, but I could not entirely work out whether his speech was example of it or an attack on it. My view is that this budget has some excellent measures and I agree with him and the noble Lord, Lord Macpherson, in particularly welcoming the full expensing of private capital investment. If anything, we think that the OBR may underestimate the effect of that measure in promoting private investment. It will of course particularly help physical investment in stuff. We should not forget that a lot of drive and innovation comes from investment in software and softer forms of investment that may not be supported; nevertheless, it is the right thing to do.

However, it is a striking contrast with the depressing cuts in the real value of public investment, partly because it will be held flat in cash, so the real value of public capital investment will fall. That means that, over the next few years, Britain will remain a country whose public capital investment is approximately half the OECD average. Where I part company with my noble friend Lord Frost is that I think the evidence is overwhelmingly that public and private capital investment can go together. They need not be alternatives; public investment in transport links can be a precondition of successful private housebuilding. It would be great if we were capable of promoting public investment as effectively as the Government are now trying to promote private investment.

There is certainly a need for a growth agenda. Again, I agree with my noble friend Lord Frost that, since the financial crash, Britain’s growth performance has been shockingly poor. We heard from the noble Lord, Lord Macpherson, about some of the areas where we should do more. I certainly agree with him on skills. I have to say that I very much regret that the Government are in the process of defunding BTECs—a widely recognised and used vocational qualification—and investing their hopes entirely in speculative T-levels, which are simply never going to come on stream and deliver qualifications to the numbers of young vocational learners currently served by BTECs.

Our analysis at the Resolution Foundation is that the fundamental problem is that Britain has become, overall, a low-mobility economy. The speed at which business sectors grow or shrink has diminished. The likelihood of people making job moves from one business sector to another has fallen—indeed, the likelihood of them making any job moves at all has fallen. We should be promoting economic change and mobility. Unlike my noble friend Lord Frost, I think that the single market and competitive pressure across Europe was an extremely good way of promoting economic change, and the evidence is that it was strongly associated with high rates of business change in the 1980s and 1990s.

However, there are other things that can be done. I would have stamp duty high up on my list of taxes to be cut, and promoting disruptive technologies—providing we do not imagine that we have the exclusive understanding of exactly how they will play out or which will have the biggest effect—can also be a very good way of challenging incumbents and promoting innovative new companies.

It is very important that we continue to promote work. Again, I agree with the noble Lord, Lord Macpherson, and my noble friend Lord Frost that the national insurance cut is very welcome. As a cut in a tax on earnings and work—a refreshing contrast to the previous preoccupation with income tax cuts—it is aimed much more directly at people in work.

That was part of a wider package promoting incomes and earnings, especially among people on benefits. We have heard about the increase in the local housing allowance. There is a very substantial increase in spending on wider benefits, notably, of course, the pension triple lock, expenditure on which—just to register its scale—will reach £172 billion by the end of the period covered by this Treasury Statement. This means that we have now reached the position in Britain where not only do the poorest 10% of pensioners, after housing costs, enjoy a higher income than the poorest 10% of non-pensioners, and middle-income pensioners, after housing costs, enjoy a higher income than middle-income people and families, but the most affluent 10% of pensioners have a higher income after housing costs than the most affluent 10% of families.

I end, therefore, by asking the Minister to reflect a little on how the shape of the state is changing. There is a debate about the size of the state; there is also a debate about the shape of the state. There is a pattern. One pattern is that, when you have such very large increases in the value of benefits and in debt interest payments—which will be running at over £120 billion a year—and a hidden cut in expenditure on many services, you essentially become a transfer payment state, not an investment or service delivery state. You put much more of your effort into paying out the pensions, the debt interest and the wider benefits, and less and less into investing in stuff and technologies. Is that a reshaping of the state that meets my noble friend Lady Goldie’s attractive account of what made her a Conservative?

It is also clearly a state focused on expenditure, services and benefits for older people and doing far less to invest in our future. A state that is for transfer payments and not investment, and which is for the old and not the young, is not the kind of state that I think should be an objective of government policy.