Economy: The Growth Plan 2022

Baroness Tyler of Enfield Excerpts

Monday 10th October 2022 Lords Chamber

[Baroness Tyler of Enfield (LD)]

My Lords, the last couple of weeks have left me bewildered but also angry. Frankly, the Chancellor’s “fiscal event”—the most significant Budget, in terms of size of new commitments, in 50 years—demonstrated a staggering lack of understanding of how markets work. By contrast, the energy crisis relief package had been trailed and, rightly, broadly welcomed, but—and it is a big but—failing to get the energy companies to carry a fair share of this through a windfall tax contribution was a major missed opportunity.

As we have heard today, the totally untrailed and completely unfunded £45 billion package of tax cuts—including for the highest earners, the banks and large corporations—spooked the markets and angered voters across the country. It also created the clear impression that the Government were not interested in wealth and income inequalities and that tax cuts for the well off were being privileged over support for those on low and modest incomes. I also find it odd that there has been very little focus so far today on how the freeze on income tax thresholds means that many households will not see any savings from the 1p cut to income tax. None of this remotely passes the “Does it feel fair?” test that I think is so important to the British people.

In short, as we have heard, this extraordinary package caused sterling to plunge to an all-time low, caused gilt yields to rocket and caused mortgage rates to rise by more than two percentage points. The Bank of England had to make a £65 billion emergency intervention to prevent major pension providers becoming insolvent. To calm markets further, the Bank of England was also forced to indicate that it would be making a major rise in interest rates in the short term. The housing market was badly hit. The severity of the markets’ reaction demonstrated also that they were, to say the least, unimpressed with the Chancellor sacking his Permanent Secretary and sidelining the OBR, thereby evading appropriate challenge, transparency and accountability.

In the middle of a devastating cost of living crisis, voters were left with severely increased levels of anxiety and uncertainty. Would they be able to make their new mortgage payments? Would they be able to buy the new house they had been dreaming of? The IMF issued a rare and brutal criticism of the Chancellor’s measures. The world’s Governments and media speculated that the UK was fast becoming a failing economy.

The Government’s response was, again, extraordinary. It sought to lay the blame for the entire meltdown on Putin. It claimed there was no meltdown. The PM finally admitted “communications issues”. This was not a case of communications weaknesses; this was a case of the Prime Minister and the Chancellor demonstrating their complete lack of understanding of how markets work and their total lack of empathy with the major concerns and anxieties of voters.

Following the welcome but humiliating U-turn on the scrapping of the top rate of income tax, the Government now have to decide whether working-age benefits stay in line with inflation. This will be another major test of their sense of fairness and what sort of society we are. Anything less than uprating these benefits in line with inflation will lead to untold anxiety and suffering among the most vulnerable, particularly those caught by the poverty premium, whereby those on low incomes pay more for essential products and services, such as energy. At the same time as the Prime Minister seeks to blame all her problems on her newly invented anti-growth coalition, NHS nurses are skipping meals in order to feed and clothe their children, with many hospital trusts now having to offer food banks to their staff.

I am pro growth and in favour of improving productivity—frankly, most people are, whether or not they live in north London—but it does depend on how the fruits of growth are used, who benefits, and how sustainable that growth is. I believe that the ultimate goal of public policy should be how GDP contributes to individual and societal well-being and becoming a better, greener and fairer society. Sadly, I hear precious little talk of such things coming from the Government.