Homes: Affordability

Lord Bilimoria Excerpts

Thursday 28th October 2021 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, in May, I was privileged, as chairman of the CBI, to chair the B7 before the G7 in June. I remember very clearly one of our speakers, Dr Gita Gopinath, chief economist of the IMF, saying that Britain was one of the countries around the world that would have a V-shaped recovery, because we had invested huge amounts. The Government had invested £400 billion in saving the economy, saving jobs and saving businesses, which in absolute terms or per capita terms was one of the highest in the world. Also, we had an excellent vaccination programme that, even by May, was progressing at speed. That was in May. What has happened since then?

We have had labour shortages. We all hear about lorry drivers, something that I mentioned in a speech over here in June; we have had shortages of butchers, something I mentioned in a speech for the CBI to the Employers Federation in June. In hospitality, in financial services, across the board, in just about every sector, we have had shortages.

I thank the noble Lord, Lord Bird, for introducing this debate. We are one of the wealthiest countries in the world. We are still the sixth largest economy in the world, yet you see poverty in your face in this country. I was born and brought up in India, and I have seen things there, but to see it here, in a country that is so wealthy, is unacceptable. We have food banks in one of the wealthiest countries in the world. We have homeless people in one of the wealthiest countries in the world—and, of course, what the noble Lord, Lord Bird, has done with the Big Issue is an inspiration to the whole world.

We have had the fuel crisis. We have had queues at petrol pumps. I remember driving back from Birmingham at midnight, seeing these queues and saying, “Is this real?” I pinched myself: “Is this really happening, in this country, today?” We have had the energy crisis. We nearly run out of CO₂. Thankfully, the Government stepped in and got one of the manufacturers to start again. With my own business, Cobra Beer, without CO₂ we cannot make our product, and there are many others like us.

We have had inflation now across the board. I remember asking the Chancellor, Rishi Sunak, in a meeting that I was hosting for the CBI in March, which he spoke at, whether he was worried about inflation. Now we see that inflation went up to 3.3%, then down to 3.2% but is predicted to go to 4%. Many are saying it will go even higher and wage inflation is much higher than that—almost double it or more.

I said to the Chancellor in March: “Follow the example of India”. At the Indian Budget in February, they did not increase taxes because, as they said clearly to me in a meeting which I held with the chief civil servant in charge of that Budget, “We didn’t increase taxes because businesses have suffered enough in this pandemic and we don’t want to endanger or stifle the recovery”. I said to our Indian-origin Chancellor “Listen to India”; well, he listened to an extent, but he announced that corporation tax would be going up from 19% to 25% in two years’ time. He announced the freezing of allowances, but he also announced the super-deduction—a fantastic measure with a 130% deduction to encourage investment by businesses.

Then we fast forward: we have had the announcement of national insurance going up by not 1.25% but 1.25% multiplied by two, because it covers employers as well as employees. Our country now has a tax burden that is at its highest in 70 years. We have had £400 billion of spending for the pandemic and we now have the highest level of spending since the 1970s. High spending and high taxes is not a good place to be.

On top of this we have had the £20 uplift in universal credit, which has now stopped. There were 5.8 million people on that credit. To put it in context, before the pandemic and the lockdown in March 2020 there were 3 million, so almost 3 million more people were having to use this help.

Interest rates are now at their lowest since the Bank of England was founded in 1694, at 0.1%. If that interest rate goes up, just 1% extra in interest rates adds £26 billion to the Government’s bills, because 25% of government debt is linked to interest rates. That will hit mortgages, consumers and businesses.

Going back to March last year, we had just been hit from nowhere by the pandemic. Nobody predicted that a global pandemic would happen. We had the ambiguity and uncertainty staring us in the face. I was then the vice-president of the CBI. I remember that we had a board meeting where I was asked, “Karan, you have been through some tough times in your business. What do you think we will need to do now?” I had nearly lost my business three times and I said “If we go into lockdown, businesses will shut. There will be many businesses that cannot operate if their sales dry up. If your sales dry up, then your cash dries up. You need cash, but if you go to the bank it will not lend any money to you because of the uncertainty in the environment”. The banks were going to have to have a guarantee from the Government to lend. I said, “If they guarantee 80% or 85%, that is not going to work. The banks will not be willing to take that risk of 15% to 20% exposure”.

The Government did not listen initially and the bank lending did not flow through. The CBILS loans started and I kept saying “You’ve got to guarantee the loans 100%”. We used the examples of Switzerland and Germany, which had started to guarantee 100% loans and the money was flowing through. Eventually, the Government listened and we had the bounce-back loans. Over 1 million businesses have received those loans. I give full credit to the British Business Bank; it had an £8 billion loan book before the pandemic but it has an £80 billion loan book today, and a big chunk of that is bounce-back loans.

Yesterday, I was in Teesside and I met its dynamic young mayor, Ben Houchen, who has plans to energise and bring investment into his region. I went from there to visit the oldest warship afloat in the world, except for the USS “Constitution”, which I do not count as it has been 99% rebuilt. It is HMS “Trincomalee”, built 200 years ago in Bombay by the Wadias, who were Zoroastrian Parsees like me. My great-aunt Sheru was a Wadia, so I was proud to go on board this ship that was built barely 20 years after the Battle of Trafalgar.

From there I went on to Crathorne Hall—the ancestral home of the noble Lord, Lord Crathorne—and spoke to the CBI north-east. At the end of my speech, the organiser came up to me and said, “The sound engineers would just like to have a word with you”, because I spoke about bounce-back loans in my speech. They were almost in tears, and they said, “We just want to thank you. Our business was shut for 18 months. We took a bounce-back loan, and that’s what saved us. Now we’ve got our business back, so thank you”. I could give your Lordships example after example of how these loans have helped.

One of the biggest restaurant caterers in the country and a customer of Cobra Beer, Madhu’s, shut for 18 months as there were no weddings or events. Three million people did not receive any help during the pandemic; they call themselves the “excluded”. Then we had this fantastic job retention scheme from our brilliant young Chancellor, Rishi Sunak. The JR scheme was meant to end in May last year—remember that? We said that it could not end and asked for it to be extended it to June. We said, “Are we going to have rolling cliff edges? Are we going to have a more flexible job retention scheme?” The Chancellor and the Government listened, and the CBI, the TUC, and all the other business organisations worked with the Government. When did the job retention scheme end? It was in September this year. It was fantastic: almost 12 million jobs, employed and self-employed, were saved—at a huge cost, there is no running away from that, but they were saved.

The Government gave support to retail and hospitality with rates relief. However, many did not get rates relief, including manufacturers and airports, which suffered so much during the pandemic. The rates bill of Heathrow Airport is over £100 million a year. Eventually they got some relief, but nowhere near enough. Aviation came to a standstill; it was down by 98% at one stage.

Business associations did their best. We at the CBI put out a free hub and not just for our members. We put out free webinars to everybody. We gave out free membership, with no obligation to join. We tried, and other organisations did similar things to help. The Government gave rent protection, saying that tenants could not be booted out if they could not pay their landlords. The Government tried their best.

Then we had that glimmer of sunshine when the economy opened up last summer. The Government listened and reduced social distancing from two metres to one metre. The difference was not twice as many people but four times as many—the difference between a business being viable and not viable. VAT was reduced from 20% to 5%; the Government listened on that. Then there was the Eat Out to Help Out scheme. Cobra Beer sales in August this year could not match our sales last year because that scheme was so successful in helping consumers go to restaurants, helping the restaurants and helping everybody.

The Government would not listen initially on lateral flow tests. Eventually they listened, and now any business or citizen can have lateral flow tests delivered for free. Those tests have been shown by Oxford, UCL and Havard to be very effective if you test regularly. Mass testing is better than mass isolation. I would go so far as to say that if we had applied those tests properly we might have even been able to avoid the second and third lockdowns.

The noble Lord, Lord Bird, mentioned debt from World War II. Debt to GDP after World War II went up to 250%, and it took until the early 1960s— 15 years later—to go down from 250% to 100%. We are now at just under 100%. This is a time of crisis. This is a time when we needed to do this.

When it comes to looking ahead, in 1942—in the midst of the crisis of World War II, when people did not know when it was going to end—Beveridge came up with a plan. When the war did eventually end in 1945, the Government implemented the Beveridge report and established the National Health Service and the welfare state. Similarly, the CBI has just produced, in the midst of the pandemic, our Seize the Moment strategy, looking ahead for 10 years. We think that there is an opportunity of £700 billion for this economy if we do certain things, looking at areas such as decarbonisation, skills, diversity and innovation, education, regional levelling up, health, well-being and global trade. All these things have to be put in place.

The Government have done so much to help us. The analogy I would use is that they have taken a big swing and they have hit the tennis ball, but if they stop at that stage and do not follow through, the ball will go into the net, not over it. Now is the time for the Government to follow through. We have suggested that the Government should set up a COBRA-style task force, with business and government working together. They have listened to an extent: there is the supply chain task force and the hospitality task force. We believe they should go further. We should have a joint task force dealing with the crisis now.

With the virus, we have a settlement that we suggest for the Government. Vaccinations and boosters should carry on. Hats off to the Prime Minister for empowering Kate Bingham to do what she did. Hats off to Nadhim Zahawi; what a fabulous vaccination programme he implemented. Today, 68% of the total population and 80% of over-12s have been double vaccinated.

Now, we just need to focus on innovation. We invest 1.7% of GDP but we need to invest 2.7% or 2.8%, like Germany or America, let alone Israel, at 4%. To do that would require £20 billion more a year—just imagine how that would power our productivity. We want high wages, but you cannot have high wages without high innovation, high skills and high productivity. So what we need now is growth. We need to encourage investment and growth. We do not need cuts and we do not need high taxes. We need growth, because it will generate the jobs that will generate the taxes that will pay down the debt.

On skills and apprenticeships, there was great news in the Budget about skills bootcamps, apprenticeships being much more flexible, and the Kickstart scheme. This is all fantastic stuff.

Business rates reform needs to happen desperately. Our business rates are four times higher than those in Germany and three times higher than the OECD average.

Next week, we have COP 26. The road to net zero is not a zero-sum game. Growth is now predicted to be 6.5%. There is good news and optimism. As Tony Danker, commenting on our Budget, said:

“the Chancellor has shown a genuine willingness to listen to business with measures that will get firms innovating and help the economy to grow … but … This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit post-Covid world. Businesses remain in a high tax, low productivity economy with concerns about inflation. But the Budget will have a positive impact across the economy and makes several changes that will be welcomed by UK businesses.”