Spring Budget 2024

Baroness Kramer Excerpts

Monday 18th March 2024 Lords Chamber

[Baroness Kramer (LD)]

My Lords, as the first of the winding-up speakers, I start with three very quick comments. To the noble Lord, Lord Kempsell, who is racing to get back into his place, I say: what an excellent maiden speech. But I suggest that his taste for the nitty-gritty in evaluation and analysis means that he is in the right House and the right portfolio. We look forward to his engagement in the future.

I say to my colleague, the noble Lord, Lord Lee, that his proposal that some of the NatWest shares currently in public hands should be shared with secondary schools as part of inspiring financial education and creating a new way of looking for so many of our young children is a brilliant idea, and I hope that the Government will take that up.

I say to the noble Lord, Lord Bird, who made those comments on social housing—in effect, that it should be a launchpad and not a trap—that that was an important piece of discussion in this debate.

Perhaps I should say sorry to the noble Lord, Lord Sherbourne, because of his most recent comments, but most normal people have already forgotten what is in this Budget. The Chancellor’s headline measure —a reduction in the rate of national insurance contributions—has been dismissed, as people realise that it is just a reduction in a relentless tax rise driven by the freezing of thresholds. Indeed, I quote the OBR:

“Tax as a share of GDP is forecast to rise to 37.1 per cent of GDP in 2028-29, 4.0 per cent of GDP higher than the pre-pandemic level”.


Meanwhile, public borrowing will increase by

“an average of £8 billion a year”.

Frankly, it leaves us in a fiscal vice.

The IFS—the Institute for Fiscal Studies—describes living standards as remaining “dismal”. I pick up on the excellent discussion of the noble Lord, Lord Horam, which others have mentioned, about GDP per capita by comparison with other countries. It is a woeful position to be in at this moment in time. Looking at a narrower group, pensioners, the Resolution Foundation forecasts that they will, on average, be £1,000 worse off per year by 2027-28.

My party will not oppose the national insurance rate cut, given the ongoing struggle of so many people with the cost of living. But the focus for the Liberal Democrats remains the dire state of the NHS and the missed opportunity in this Budget to provide it with the resources needed; closing loopholes in the oil and gas windfall tax, which noble Lords may remember was extended but the investment loophole through which everybody storms had been left wide open; attacks on share buybacks, as most of us wish to see investment not share buybacks, which have become increasingly popular; and restoring the levy on banks, which, frankly, have been raking it in thanks to high interest rates, and not passing it on to savers. All those kinds of sources could have helped us make a real difference on resources for the NHS.

However, we had two debates around most of those issues in February and I do not want to rehash all the things I said then—I am sure most people are tired of them. I want to look forward, and I do so with a certain real anxiety for what the UK faces. I want to understand what this Conservative Government plan for public services and for local government, recognising the dire state that most are in. We have a few pieces of information. The Government have instructed the OBR that real departmental spending on public services will fall by 1% of GDP over the next five years. According to the IFS, this means a fall in public capital and infrastructure spending of £18 billion a year in real terms, and a fall in day-to-day departmental spending for the unprotected departments, again in real terms, by £20 billion a year. That number is absolutely huge. I pick up the concerns of the noble Baroness, Lady Lister, about local authority cuts.

The Government constantly tell us that they have a plan for public services. What I am now asking the Minister is: show us that plan. When I look for where these public spending cuts will be replaced with new public productivity, the only thing I can really see is some vague notion that artificial intelligence or other kinds of digital change will deliver this kind of extraordinary efficiency. I share the scepticism of the noble Lord, Lord Lamont, about productivity improvements coming so easily, and the noble Lord, Lord Macpherson, told us how he had seen many an efficiency plan come and go. I say to the Government: tell us the plan and tell us in detail so that we can judge how credible that crushing reduction in expenditure and investment in public services is going to look.

We also have a promise from the Chancellor that national insurance will be abolished. It is not in the Budget, but in effect it accompanied it. That step would remove £46 billion a year in revenue from the Exchequer. Will that mean huge new borrowing? Will it be 7p on the basic rate of income tax? Will it again mean a decimation of public services? If so, which and when? That amount is virtually the whole schools budget, or that for justice and defence put together. We need to understand where the money to replace that national insurance abolition will come from.

Once, innocently, I thought the Government’s freezing of tax thresholds was a temporary, emergency measure, but it is now becoming clear to all of us that using threshold freezing to bring the lowest earners into tax is actually a key part of the Conservative plan. I remember the days of coalition: lifting tax thresholds to remove tax from lower earners was a central Liberal Democrat policy, and many on the Conservative Benches—I see some here; you know who you are—were furious with the Liberal Democrats for forcing it on the coalition because they felt very strongly that tax cuts should go to top earners, not people down at the bottom. It now seems this is actually the Conservative plan: to return to a focus on low-income people as a major source of new tax revenue. Indeed, it is well under way: we have seen the freezing of the thresholds and it carries on now for further years. Perhaps the Minister will openly confirm the change of direction: lower earners to pay more and more tax.

I end by turning to the vital issue of economic growth. The OBR is more optimistic than other forecasters, but even it sees only the most anaemic growth—here I pick up the comments of the noble Baroness, Lady Moyo—of 0.8% this year rising to 2% in the middle of the decade, and that estimate depends on immigration higher than previously anticipated. UK businesses are desperate for skills. Where is there anywhere in this Budget or in policy a proper reform of the apprenticeship levy? The Government announced some useful steps today, but they are not the fundamental overhaul that is absolutely needed to drive up the quality of skills in this country. The post-Brexit fall in trade intensity was initially forecast at 15%. It now looks as though the actuality is significantly worse. Our trade in services is strong, but the UK’s growth in goods trade is well below expectations and well behind the rest of the G7. That in turn has a huge impact on productivity.

Where is the trade plan that means reviving our trade with Europe? Let us not pretend that the new trade deals, although they are much vaunted, are more than, frankly, a rounding adjustment with some modest potential. Where are the mechanisms to seriously raise investment in UK businesses and infrastructure? Many in this debate focused on that issue—the noble Baroness, Lady Moyo, perhaps most particularly—but in a sense it was the subject of the speech by my noble friend Lady Bowles, focusing on investment trusts, which are a key vehicle that is disappearing because of slow government action. Where are these mechanisms to help us increase that investment? The new British ISAs and the Edinburgh reforms are useful but let us be frank: neither is a game-changer. The Government seem to have made some useful changes on the definition of SMEs, but could the Minister please tell us what the scope is of that and what the implications are? She can write if she does not have that to hand.

Behind this scattering of limited changes, there is no long-term policy certainty and no meaningful commitment to priorities. Every policy is unstable. That includes tackling the major crisis that my noble friend Lady Sheehan focused on: climate change. The number one request from businesses, according to research by the Business Magazine is:

“A clear and concise industrial strategy”.


Will the Minister please tell us why we do not have one?

We have a workforce shortage made far worse by NHS waiting lists of 2.7 million people. Others have talked about the huge number—9 million—who are of working age but inactive. The economically inactive range across the young as well as the old. As the noble Lord, Lord Sherbourne, said, most of them, or a very good number of them—one-third—are inactive because of long-term sickness. Few measures would drive our economy forward more rapidly than fixing the NHS, which is the mechanism to get so much of our inactive population back to work.

Andy Haldane, the former chief economist of the Bank of England, described these Budget measures as “macroeconomic marginalia”. I thought that a brilliant description. I suspect most of your Lordships agree. I say to the Minister: this is not a Budget that meets the needs of our times.