Economy: Budget Statement

Lord Bilimoria Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Bilimoria]

My Lords, when I found out yesterday that the noble Lord, Lord Heseltine, was going to be making his maiden speech today, luckily I was sitting down. I remember very clearly bumping into the noble Lord soon after I joined your Lordships’ House. I asked him whether it was true that he had not made his maiden speech, having already been in the House at that time for five years. He said it was absolutely true, and I asked why. He replied, in a very humble manner, “Who wants to hear from me?”

He was in the other place for 35 years; a Cabinet Minister for over 20 years; what a shame it is that we, as a House, were losing out on all that wonderful experience. Yesterday was the Chancellor’s day, as all Budget days are, but it was also the birthday of the noble Lord, Lord Heseltine. Yesterday was also a special day for me as a Zoroastrian Parsi, as it was our new year, the first day of spring. So it is an excellent new year’s resolution for the noble Lord finally to make his maiden speech, more than a decade after joining your Lordships’ House.

Look at what we have missed out on. I am sure that some of your Lordships would have wished for a decade’s silence from certain of our fellow Peers, but certainly not from the noble Lord, Lord Heseltine. We know the wonderful apocryphal story about Michael Heseltine, as a young undergraduate, jotting down his future on the back of an envelope: “Millionaire at 25, Cabinet Minister at 35, party leader at 45, Prime Minister at 55”. Of course, the noble Lord denies this, but the reality is that he has achieved so much, and he could have—and many would say should have—become Prime Minister.

The noble Lord might not have reached this final milestone, but there was never a dull moment in his career. He was in the unique position of being a truly successful entrepreneur in his own right, while also serving as a very successful politician. He was an impactful president of the Board of Trade in the early 1990s. There is no better person to have been selected by the Government to chair a review into the potential for links between the state and private sectors. How the Chancellor would have benefited from having that review before yesterday’s Budget. Thanks to this, we in this House have now had the benefit of hearing the fantastic contribution of the noble Lord, Lord Heseltine, today, and we hope that his famine of speaking will turn into a veritable feast for us in the years ahead.

[Noble Lords]

Hear, hear.

[Lord Bilimoria]

My Lords, our economy has been in recession, and thereafter bumping along the bottom, for coming up to four years now. There is no question that the Government’s tough stance and posturing with regard to austerity have sent out the message internationally that has enabled our borrowing rates to remain extremely low. It has also sent out a message to the country that we need to tighten our belts and make sacrifices. To that extent, the Chancellor has had to try his best to balance his books. Of course, a balanced budget is a very prudent thing indeed. However, we have to ask ourselves, what is the point of a zero-sum game? As Martin Wolf said in the Financial Times today, this is:

“A Budget without economic significance”.

On the one hand, as an entrepreneur I have been thrilled with so much of what the Chancellor announced yesterday. The reduction in corporation tax rates, which will give us one of the lowest rates in the G20, is an excellent decision. The removal of the 50p rate of tax, albeit not back to 40p where it should have gone, is at least a move in the right direction and makes a huge impression in attracting investment and the brightest talent to this country from abroad. Psychologically, the 50p rate was over the tipping point, and I am happy to see it removed.

On the other hand, this Budget has hurt a great many people. Our fuel taxes are the highest in Europe by far. Consumers have been squeezed with high inflation, and in many cases falling earnings, and higher taxes such as VAT. In my own industry, as chairman of the Cobra Beer Partnership, a joint venture with Molson Coors, I have seen the damage excessive taxes have done. While we are fortunate that our brand is growing, the beer industry in Britain has shrunk by nearly 30 per cent in 30 years.

As Mark Hunter, chief executive of Molson Coors UK, said in today’s Times:

“There are no winners from the beer duty escalator. Ordinary British drinkers are paying more tax to drink less beer, reducing overall government tax revenues and forcing British brewing into a deeper, duty-fuelled decline”.

Mark Hunter also happens to be the chairman of the British Beer & Pub Association. He said further:

“Beer drinkers in Britain already pay a whopping 40 per cent of all European beer tax and yet drink only 13 per cent of the beer—and we are disappointed that the Government has chosen not to end this crippling policy”.

Sadly, we are still seeing 15 pubs close each week—pubs that are at the hearts of our communities. When you hit beer, you do not just hit pubs and the brewing and manufacturing industries, you also hit our farmers. Our beer is brewed in Burton upon Trent and 100 per cent of our barley is British, and we are proud of it.

What we have lost in this country over the past decades is a balanced economy. As president of the UK India Business Council, the origins of which are the Indo British Partnership, which was launched by the noble Lord, Lord Heseltine, when he was President of the Board of Trade in 1993, I know that India aims to have manufacturing making up 25 per cent of its GDP. In our case, manufacturing is heading towards 10 per cent of GDP. Increasing manufacturing increases jobs, and manufacturing jobs lead to services jobs, both directly and indirectly, and to jobs in the supply chain. My big concern about this Budget is that I do not believe it is doing enough to generate growth and jobs. In fact, the growth forecast is 0.7 per cent to 0.8 per cent, and then to more than double to 2 per cent next year. When can we believe any of these forecasts? Will the Minister give us some reassurance on that?

The Minister talked about the £20 billion of credit easing for SMEs, which is fantastic news. But I was disappointed that, sadly, the media hardly covered this. Will the Government talk more about the scheme? Will it be like the Government’s small firms loans guarantee scheme? Will this money flow to the banks? Already I have heard that HSBC will not sign up to it. How will the Government ensure that banks lend this money to the entrepreneurs who need it? The Government urgently need to flesh out their plans and communicate this to business and to the country because it has the potential to have an enormous impact on SMEs, which are, after all, the engine of the growth of this country.

As the noble Lord, Lord Heseltine, has said, we need to invest far more in research and education if we are to make this country competitive and improve our productivity. This is, unfortunately, where the United States, time and again, is way ahead of us. While we are bumping along the bottom, the United States economy has been growing. One of the main reasons for that is that it invests far more in higher education and in research and development than we do. I do not think that this Budget has done enough to close this gap. Will the Minister respond to that please?

As regards our Armed Forces, we have been in Afghanistan longer than World War I and World War II put together. We have lost precious lives and have so many badly wounded soldiers, which has caused huge loss, pain and grief to friends and families, and to our whole nation. But the monetary cost has also been huge. I am happy to hear that the Government will be reinvesting the money saved from an early pull-out from Afghanistan by putting some of it into the accommodation which is desperately needed for our troops and their families. However, I am greatly concerned that the Government have chosen to freeze the raise of our soldiers’ salaries to only 1 per cent. The soldier’s basic salary is £7,000 lower than the national average. Is this the way for us to uphold the military covenant? Is this the way we show our gratitude to our brave Armed Forces?

The Government rushed through the SDSR, destroying Nimrod, getting rid of Harriers and getting rid of our carriers. We could have used those carriers, those Harriers and those Nimrods in Libya. Now we learn that the change to catapult-based aircraft carriers will have to be scrapped, which will result in billions of pounds wasted and in cutting our capability. We did not predict the Arab spring. We need to be prepared for what will happen in the future.

As has been said so often, this Budget has also hit our pensioners. They are currently being squeezed by low interest rates, which are necessary but are affecting their savings. They have also been hit by high inflation. As I have said, I support the reduction of the 50p rate of tax but the so-called “granny tax” that the Chancellor announced makes this look like a Budget that is helping the rich at the expense of poor pensioners. Is that the message that the Government want to send out? As we have heard, it has been a PR disaster.

I have heard that the Budget Committee of the House of Lords, of which I was a member last year, will no longer be convened this year. Hence, we will miss out on the wonderful expertise that we have in this House. Will the Minister confirm that that will be the case?

In conclusion, I am grateful to the Government for the many business-friendly measures in this Budget. It is reassuring to see further cuts in areas where cuts are required, such as in welfare, which is the largest area of spend—£10 billion. The infrastructure spend, broadband and looking at a third runway at Heathrow are all essential. But I am afraid that this Budget has not addressed enough the fundamentals of economic growth, job creation, research and education. A balanced Budget is not enough—it cannot be a zero-sum game. A good Budget balances the books, gives a more balanced economy for industry and innovation, and encourages a growing and competitive economy.