Economy: The Growth Plan 2022

Baroness Neville-Rolfe Excerpts

Monday 10th October 2022 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That this House takes note of the economy and the Growth Plan 2022.

[The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)]

My Lords, I start by welcoming the noble Baroness, Lady Gohir, to today’s debate. I very much look forward to hearing her maiden speech and to her future contributions. On a sad note, we are also hearing the valedictory speech from the right reverend Prelate the Bishop of Birmingham, who has provided so many mature, sensible and considered contributions to the House over the past 12 years.

It is a great privilege to open the debate on the economy. When the new Prime Minister was forming her Administration, I was honoured to be offered the post of Minister of State in the Cabinet Office, in effect replacing my noble friend Lord True, now the Leader of the House. I take this opportunity to express my admiration for his brilliant eulogy to Her late Majesty. I was briefed that most Cabinet Office work was, in the main, worthy, so I anticipated a future dealing with the humdrum detail of government work—below the radar, as it were. In the event—it is sometimes surprising how things turn out—I first come before your Lordships to outline the Government’s economic growth plan.

As the Prime Minister has made abundantly clear, growth is the core economic mission of this Government. With economic growth, everyone benefits. We cannot have, say, a strong NHS, good schools or effective defence without it. We have three priorities: cutting taxes to boost growth, reforming the supply side of the economy and maintaining a responsible approach to the public finances.

I will come to the details of the plan shortly, but first I will touch briefly on another important recent development that is an integral part of our whole economic package: our action on energy bills. The Prime Minister rightly took action on this crisis facing households within 48 hours of taking office. The energy price guarantee will limit the unit price that consumers pay for electricity and gas, so that for the next two years the typical annual household bill will be £2,500, in contrast to the £6,000 or so that some predicted. Millions of the most vulnerable households will also receive additional payments.

We are also helping businesses. The energy bill relief scheme, providing an equivalent guarantee to that for households, will reduce gas and electricity prices for all UK businesses, charities and the public sector, especially schools and hospitals. Finally, to support the market, we have announced the energy markets financing scheme, providing a 100% guarantee for commercial banks to offer emergency liquidity to energy firms in otherwise sound financial health that face high margin calls.

While early estimates suggested that our package could have cost as much as £160 billion, more recent estimates are much lower. The key point is that we are giving relief and confidence to a large section of the British people, something that will particularly matter to those at the lower end of the scale. Significantly, the measures have been designed to provide an incentive for fuel economy. There is a reduction in cost per unit, not an overall cap, so that it encourages people and businesses to minimise their energy use. More importantly, without this package it would have been a very brutal winter for millions of households and small businesses.

Our growth plan sets out our vision for a simpler, lower-tax economy. This Government believe that high taxes reduce the incentive to work, encourage tax evasion, deter investment and hinder enterprise. Hence we are cutting the basic rate of income tax to 19p in April 2023—that is, one year early—which will benefit virtually all taxpayers.

Noble Lords will have heard that the abolition of the 45% band will no longer go ahead. The Prime Minister and Chancellor have accepted that it had become a distraction from our growth plan. I point out, however, that 40% was the top rate from the date of the Thatcher reforms and all through the Major, Blair, and most of the Brown eras. Also, the top rate is 40% in the Republic of Ireland and 39% in Norway.

International competitiveness must remain a vital objective, so next year’s planned increase in corporation tax will be cancelled. That means that the rate will remain at 19%, the lowest in the G20, enhancing the attractiveness of the UK as a place to do business. We are also confirming that the annual investment allowance will be set permanently at £1 million, and we have introduced legislation to cancel the health and social care levy. Reversing the levy delivers a tax cut for 28 million people, worth on average £330 every year, and a tax cut for nearly a million businesses.

Planned increases in the duty rates for beer, cider, wine and spirits will also be cancelled. In addition, we want to help families aspiring to buy a home of their own. We have therefore proposed a series of reductions in the thresholds for stamp duty land tax, which will assist buyers, particularly first-time buyers.

Simplification is close to my heart. We are embedding tax simplification into the institutions of government and repealing recent changes to off-payroll working rules—the infamous IR35—which added complexity and cost for many businesses that engage contractors. I know that this will be particularly welcome to our Economic Affairs Committee.

We are introducing a VAT-free shopping scheme. We want our high streets, airports, ports and shopping centres to feel the economic benefit of the millions of tourists who visit our wonderful country each year. While the Government believe in lowering taxes wherever possible, achieving growth will take more than that. With more vacancies than unemployed people to fill them, we need to encourage people to join the labour market—getting more people into work by, for example, incentivising those claiming universal credit to secure more or better-paid work. We will also legislate to ensure that strikes can be called only once negotiations have genuinely broken down.

To drive growth, we need new sources of capital investment. We want to unlock billions of pounds to help British businesses—for example, in developing new technologies that can scale up. Hence we will reform the pensions cap and launch the long-term investment for technology and science fund.

We need global banks to create jobs here, invest here and pay their taxes here in London, not in Paris or New York, so we are scrapping the cap on bankers’ bonuses. To reaffirm the UK’s status as the world’s financial services centre, we will set out a package of regulatory reforms in the coming months.

We must also see our way to simplifying regulation and cutting red tape in key areas such as planning and procurement. The weight of complexity and compliance is absorbing precious resources and holding back productivity. I know from my time with the other noble Lords on our Built Environment Committee how important housing and infrastructure are to our growth and success. Sadly, our planning system for major infrastructure is too slow and fragmented. For that reason, we are accelerating infrastructure delivery in energy, road, rail and gigabit-capable broadband, with new legislation that will unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth, and we are getting the housing market moving by promoting the disposal of surplus public sector land for housing.

Finally, and of great significance across our country, we are creating a series of new investment zones. We will liberalise planning rules on agreed sites, releasing land and accelerating development. We are introducing an unprecedented set of tax and national insurance incentives for business to invest, build and create jobs in these zones.

The steps that the Government are taking add up to a radical and concerted effort to boost growth. In the coming months we will continue to work to bring forward further measures, with announcements on agriculture, business regulation, childcare, immigration and digital infrastructure.

Crucially, the Government understand that growth and sustainable finances must go hand in hand. I remind noble Lords that in 2021 the UK had the second lowest debt-to-GDP ratio of any G7 country, lower than Japan, Italy, France, Canada and the US. Even so, only continued fiscal discipline will provide the confidence and stability to underpin long-term growth.

Accordingly, as announced this morning, on 31 October —three weeks from now—the Chancellor will publish a medium-term fiscal plan setting out our responsible fiscal approach and how we plan to reduce debt as a percentage of GDP over the medium term. Further, he has asked the OBR to set out a full economic and fiscal forecast soon, and he continues to work closely with the Governor of the Bank of England.

In conclusion, I passionately want—we all want—our country to succeed and to live up to our past achievements. To achieve that, economic success is essential. To that end, we must get the economy growing again. We must do so while still dealing with the effects of the Covid pandemic and its impact on our public services. We are also rightly engaged in giving significant help to Ukraine—obviously at a cost. Success will not be easy.

Today we are here to listen to views from across the House and look forward to engaging in a constructive debate—but, however one looks at matters, achieving economic growth is vital if we are to achieve our ambitions. We need to do things differently and better. That is what the growth plan is all about.