Budget Statement

Baroness Noakes Excerpts

Wednesday 3rd November 2021 Grand Committee

[Baroness Noakes (Con)]

My Lords, I agree with my noble friend Lord Lamont and the noble Lord, Lord Fox, that this debate should have been held in the Chamber. Indeed, 10 years ago, when the noble Lord, Lord Davies of Oldham, and I were on our respective Front Benches, it never happened and never would have, not least because we would never have accepted a time-limited debate on something as important as the Budget.

I have a problem with this Budget: it does not feel at all Conservative. Low taxes, pro-enterprise measures and small government have all gone AWOL. I therefore struggle to be upbeat about it. The Budget is of course shaped by the choices that the Government made in responding to the Covid pandemic. The Government never published a proper cost-benefit analysis of their response to the pandemic, so there was no public debate about the right balance of measures that could have been taken.

One bright bit of news emerged last week in the shape of a leaked Cabinet Office document on the current Covid plan B, which fortunately has not been implemented. It shows that the Treasury is on the case in analysing the economic benefit, and it calculates that the cost would be up to £18 billion with very weak health benefits. It is a pity that the more careful analysis for which the Treasury is renowned was not more prominent in the last year and a half.

The economic impact of the Government’s Covid choices are now very visible. The lockdown tanked the economy and required extraordinary levels of support for individuals and businesses. That has left us with debt estimates of nearly 90% of GDP, albeit lower than previously forecast but still at levels that none of us expected to see in our lifetimes, especially under a Conservative Government. The OBR has estimated the long-term effects of scarring from Covid as a permanent loss of 2% of GDP.

The non-Covid outcomes also have to be paid for, with serious backlogs in health and education. The Government are pouring astonishing amounts into the NHS. The Department of Health and Social Care’s budget starts at around £140 billion and rises to nearly £190 billion. There is not a single word in the Red Book about efficiency or value for money in the NHS; the commentary is almost all about spending, which is how the NHS likes to frame the conversation. That cannot be the right approach to public expenditure, and I hope the Minister will assure me that the Treasury will not wait until the next spending review to tackle the black hole of NHS spending.

To pay for all this, we need serious growth in the economy. I am particularly concerned about the prospects of growth beyond the current bounce-back from Covid. As we have heard, the OBR forecasts that growth in the years beyond 2022 will fall below 2%, ending at 1.4% in 2026. Doubtless part of that is a result of the estimates of scarring, to which I have already referred, and one ray of hope is that there is still massive uncertainty about those estimates so it may not have such a dramatic effect. However, if the forecasts are right then we are creating an environment in which businesses will not prosper, the tax yield will decline and enterprise and investment will find no incentives in the UK, which will in turn lead to lower employment. We could be entering a downward spiral.

However, I simply do not believe the forecasts; if I believed them, I would be preparing to leave the country. The only thing that keeps me sane is a belief that the picture painted by the OBR is simply wrong—and not just in the scarring effects, whether from Covid or from Brexit. We know the OBR is resistant to dynamic forecasting, and that may account for some of it; the contribution of trade to GDP is “negligible”, and that feels wrong; and the OBR’s growth forecasts are at the bottom end of those by independent forecasters. So, I shall not be packing my bags just yet.

There were two good bits in the Budget speech. The first was the reduction in duty on champagne. As noble Lords may know, champagne is the dieter’s drink of choice for its low calorific content, so this is clearly consistent with the Government’s obesity strategy.

The second good bit has already been referred to by my noble friend Lord Lamont and read out in full by the noble Lord, Lord Eatwell, so I do not have to take up the Committee’s time by repeating it, but I remind noble Lords that it concludes that there are limits to government involvement in the economy. It was good to hear the Chancellor saying that. It was the most Conservative thing he said in his 34-page speech. I hope he means it, and that we can return to Budgets which reduce taxes, curtail the size of the state, reduce burdens on business and support the enterprise sector to grow and prosper.