Autumn Statement 2023

Baroness Noakes Excerpts

Wednesday 29th November 2023 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I warmly welcome my noble friend to her new ministerial brief, but I am sorry that I cannot be as welcoming to the Autumn Statement. I know that all sides of the House, with the possible exception of our Green colleagues, who are not in their places, want to see a significant boost to the UK’s economic growth. They will not find that in this Statement.

Our growth prospects are uninspiring: the OBR says 0.7% next year and only 1.7% at the end of the forecast period. The Chancellor announced quite a lot of allegedly pro-growth policy measures, but the OBR calculated that they would increase potential output by only 0.3% at the end of the forecast period. Of course, that is better than nothing, but it does not transform our economic prospects by a very long way. I and many of my Conservative colleagues believe there are three foundations for growth: low taxes, low regulation and a small state. This Autumn Statement achieves none of these things, and for us it is not surprising that economic growth remains feeble.

On taxes, full expensing has been welcomed by the business community and by many noble Lords today, but it is very expensive and achieves very little. The policy costs £30 billion over the forecast period but produces extra investment of only £14 billion. I cannot see that this is a good use of taxpayers’ money.

A much bigger driver of business investment is the headline rate of corporation tax, which the Chancellor has kept at 25%. This is the main reason that the UK has plummeted down the competitiveness league tables for tax. The latest OECD figures show us at number 30 out of 38 countries.

I am sure that those in work will welcome the national insurance reductions, but they probably do not realise that they are paying for this themselves through fiscal drag. For all the talk in the Autumn Statement about tax cuts, there has been nothing to change the trajectory for this Parliament to be the biggest tax-raising one since the Second World War. Taxes as a percentage of GDP continue on an upward path and are even higher than at this year’s uninspiring Budget.

The Autumn Statement does nothing about reducing the size of the state, with total managed expenditure still around 43% of GDP at the end of the forecast period. The Chancellor missed another opportunity to get rid of the triple lock, which remains one of the biggest fiscal sustainability risks identified by the OBR. I applaud the efforts by my right honourable friend the Secretary of State for Work and Pensions to get more people into work, and to bear down on the bill for out-of-work benefits. However, he is barely making a dent in that bill, or cutting the nearly 9 million economically inactive people of working age who are a major drag on the economy. Apart from welfare, the Autumn Statement said nothing about cutting the size of the state.

Similarly, the Autumn Statement said nothing about cutting regulatory burdens. It bragged that the Government are

“bringing forward an ambitious package to supercharge small and medium sized enterprises”.

I got quite excited about this, until I read five meagre paragraphs. These include something on faster payments —I have lost count of the number of times that faster payments have been announced as an initiative—and something arcane about HMRC rewriting its guidance on the tax deductibility of training costs. SMEs need something more transformative than this.

The Chancellor announced in his Statement that he had 110 growth measures. I had expected the Autumn Statement documents to set them out. There are some costings covering 67 policy decisions in chapter 5 of the Statement, and a separate policy costings document which has detail under 55 headings. However, quite a lot of these could not conceivably be regarded as growth measures. Chapter 5 also has 200 paragraphs on policy decisions, some of which presumably have growth implications, but this is not always clear. The OBR has some analysis of the main policy decisions, but it does not reference the growth ones specifically, so I cannot find anything that says, “These are the 110 growth measures”. My question for my noble friend the Minister is: what are the 110? If nothing in the public domain sets them out, will she undertake to write to me and put a copy in the Library of what those 110 measures actually entail? I should be clear that if even by some miracle she has a list of the 110 measures in her briefing for this evening, this is not an invitation to her to read them out.

GDP growth of 1.7% at the end of the forecast period is nothing to be proud about. We must not be self-congratulatory about merely being in the pack with other G7 countries. This country needs more ambition and more imagination—certainly much more than this Autumn Statement provides.

--- Later in debate ---

[Baroness Vere of Norbiton (Con)]

I will probably write to the noble Lord with clarity on that, because I would like to make a little progress.

A number of noble Lords tried to pull out one element of the Autumn Statement and made the point that it will benefit rich people more than poor. One cannot look at one measure in isolation. The Government have conducted extensive assessment of the policies announced both in this Autumn Statement and in previous years. It shows that, across all government decisions dating back to the 2019 spending round, the combined impact of tax, welfare and public services spending measures has benefited the lowest-income households the most.

I will touch briefly on welfare reforms. I am grateful to my noble friend Lord Jackson for his support for these reforms. We want to see people who can work be able to work; we are absolutely willing to provide support for them.

The right reverend Prelate the Bishop of Manchester mentioned mental health. I agree with him that we must confront this issue in our country. It remains a priority for the Government. Alongside other recent mental health interventions, the back to work plan includes nearly £800 million over five years to expand talking therapies for those with mild or moderate conditions, as well as individual placements and support to be delivered within community mental health schemes for those with more serious conditions.

I will write to noble Lords on a couple of other things. I come back to growth because it is undeniable that growth in many developed nations has been difficult. Since 2010, when this Government first came to power, the UK has grown faster than many of its competitors, including France, Germany, Italy, Spain and Japan. Would I like to see us grow even faster than we currently are? Absolutely—indeed, the growth trajectory is on an upward trend after the first two years. The noble Lord, Lord Livermore, did not quite get to those numbers but they are higher, peaking at 2% a year. This Autumn Statement is focused on creating sustainable growth without adding to inflation or overall borrowing. It is sensible supply-side interventions that boost business investment.

This is in stark contrast to the plans set out by the party opposite, such as they are. It is not clear to me which parts of the Autumn Statement the Labour Party actively oppose or would do substantially differently, and the noble Lord, Lord Livermore, has not enlightened me. So not only do we have a cut-and-paste shadow Chancellor; it seems we have a cut-and-paste shadow Exchequer Secretary too. It is worth reflecting on the much-vaunted flagship Labour spending policy of £28 billion. For clarity, that is £28 billion per year. In the absence of significant tax rises or substantial cuts to public spending—and only the former is in the traditional Labour playbook—this £28 billion per year will just add to our national debt, piling pressure on future generations and busting through fiscal rules. As I said, this Conservative Autumn Statement is about sensible supply-side reforms to support British businesses and boost productivity.

The noble Lord, Lord Howarth, asked whether full expensing represents value for money. The Government have prioritised the business tax cut as a targeted way to support businesses which invest. It does this by reducing the cost of capital for UK companies. This policy will drive 0.1% GDP growth in the next five years, increasing to slightly below 0.2% in the long run. Whereas the benefits of the policy will grow over time, the costs will reduce. Full expensing brings forward relief that would otherwise be claimed over decades, meaning that the costs are highest in the policy’s introduction.

The noble Lord, Lord Londesborough, talked about a productivity council. The Government take a range of advice on matters of growth and productivity from all sorts of organisations, including public sector organisations such as the National Infrastructure Commission and the Competition and Markets Authority, but also from academics, think tanks and businesses. While I respect his idea, at the moment we will probably not take it forward.

There was some interesting comment around the pension reforms. The noble Lord, Lord Davies, welcomed the proposals. He asked for the timing of implementation of changes to retired benefit schemes. This will become clearer when the consultation period has completed. I will write on the second question about pensions, because I am conscious that I will imminently run out of time.

My noble friend Lord Northbrook and the noble Lord, Lord Lee of Trafford, asked why the Government are not bringing back the VAT retail export scheme. The Government continue to accept representations from industry regarding the tourist tax and are considering all returns carefully. It is about providing very robust evidence on this. At the moment, we feel that it is a little lacking.

The noble Baroness, Lady Featherstone, talked about the creative industries. There is a large number of specific asks for a very specific sector, so I will certainly write.

It is also worth noting some of the more general discussions that noble Lords had today, and I hope will continue to have in the future. There were considerations around the size and shape of the state, the amount of contributions that should come from taxpayers, and, from the noble Lord, Lord O’Neill, public versus private sector investment. My noble friend Lord Willetts talked about the shape of the state. These are things to mull on, definitely. They will not change government policy today or in the near future but are really important issues that should be debated.

I second what my noble friend Lady Noakes said about regulation. We need to look at regulation as our economy develops. It is most helpful for the Government when noble Lords can go into specifics. I am always very happy to hear about specific regulations that we feel are not fit for purpose and which need to be improved.

Also, to my noble friend Lady Noakes, on the 100-plus measures, I say that the details can be found in the “Policy Decisions” chapter of the Autumn Statement document.

[Baroness Noakes (Con)]

My request was quite simple. I did say that there were 200 paragraphs in Chapter 5 and a number of policy costings, but none of them actually shows what amounts to the 110, which was one of the leading statements made by my right honourable friend the Chancellor in his Autumn Statement. I am simply asking: which are the 110? Does my noble friend undertake to let me have that information if she cannot provide it now?