Autumn Statement 2022

Viscount Chandos Excerpts

Tuesday 29th November 2022 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, what can a Back-Bench speaker this late in the order usefully do other than allow your Lordships to get home as early as possible? It is not to repeat arguments powerfully made by other speakers on every side of the House, nor is it to usurp the role of the Front-Bench spokesman in winding up—although speaking late after my noble friend Lord Eatwell so passionately opened for these Benches prompted happy memories of my winding-up debates which he opened when I was his apprentice in 1995 to 1997. What a time of justified optimism that was.

My noble friend drew comparisons between the austerity inflicted by George Osborne and that now proposed by Sunak and Hunt. As Marx said, history repeats itself,

“the first time as tragedy, the second as farce,”

although in this case, the farce came under Truss and Kwarteng, followed by a repeat of tragedy for millions of people as the Government resort to overkill in a certainly vain attempt to restore confidence in their shattered economic and financial credibility—a sticking plaster over a deep wound. For the avoidance of doubt, I am more inclined to follow Marx for his one-liners than for his economics.

I propose to use my time to cover a couple of points raised by the Minister which have perhaps not received particular attention. The Minister talked proudly of investing in capital—the noble Lord, Lord Horam, just emphasised how important that is—and then tried to spin a budgeted freeze in nominal terms in public investment at a time of rocketing inflation as confirmation of this, whereas, as the Resolution Foundation has calculated, it represents a £15 billion cut in real terms in capital investment.

Why do these cuts have to take place? A number of noble Lords have highlighted the hugely increased debt service cost that is causing the Government to look for savings elsewhere. The noble Lord, Lord Lamont, highlighted the increase in index-linked debt from 6% in 2001 to 22% now, the vast majority of that coming under Conservative or Conservative-led Governments. However, as important a factor in the increase in the debt service cost are the projected payments by the Treasury to the Bank of England under the indemnity that has been entered into for the operations of quantitative easing.

At the Economic Affairs Committee meeting earlier today, the Governor of the Bank of England said that he did not believe in hindsight and therefore he would not agree with his own chief economist’s evidence earlier this month that maybe too much quantitative easing had taken place in the period since the start of the pandemic. Quantitative easing represents a huge interest rate swap or a hedge fund carry trade, so that debt service has been lower than the last 10 years as payments under the indemnity have gone from the Bank to the Treasury. However, this is payback time. Even John Redwood has noticed this.

The Minister also made a point of the tax rises on wealthier individuals—wealthier but not the wealthiest. Growth in inequality over the last 12 years, as the noble Lord, Lord Willetts, has highlighted, has been much more in terms of wealth and capital than in income. I hope my friendship with the noble Baroness, Lady Noakes, who I am glad to say is not in her place, will survive my advocating a much more significant increase in the taxation of wealth than the phased reduction of the capital gains tax tax-free allowance, whose impact anyway is much more relevant to the relatively wealthy but is a rounding error for the very wealthy.

I am not as convinced as my noble friend Lord Sikka by the arguments for equalising the rate of CGT with that of income tax. Evidence from the tax take after that doctrinaire socialist, the noble Lord, Lord Lawson, equalised the rates suggests that it may not be the optimal policy. Equally, the right rate in terms of both tax take and fairness is almost certainly not the 50% of marginal income tax that currently applies.

Finally, inheritance tax is so important. The noble Lord, Lord Livingston, highlighted the question of why gifts should be taxed at a lower rate than income. The great reform of inheritance tax that is needed is the restoration of the taxation of inter vivos gifts as applied in capital transfer tax, introduced by Denis Healey. It is worth saying that this is particularly relevant for non-doms because, even if a non-dom volunteers to pay income tax on income from assets held overseas, the potential avoidance of UK inheritance tax deprives the Exchequer of substantial revenue, as the Prime Minister and former Chancellor must be aware. Increasing rates of VAT, personal tax and corporate tax is often said to be the only way of raising substantial amounts. However, just as public expenditure is made up of a mix of large items and smaller items, so the raising of tax is a combination of large, cash-generating taxes and smaller ones such as CGT and inheritance tax.