Budget Statement

Lord Borwick Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Borwick (Con)]

My Lords, there has been much focus on specific elements of the Budget Statement in the week gone by, and rightly so. Each policy should be analysed to discover whether it will be good or bad for businesses, be helpful or harmful to those on the lowest incomes and simplify or complicate the tax system. But amidst the rush to take a scalpel to the Red Book and unearth a hidden nasty, we have to remember an important big-picture fact: the Government have done a very good job of steering the economy through some choppy waters.

The deficit we inherited from Labour has been trimmed back, taxes have been cut and the direction of travel has been very favourable for business, but the job is not yet done. There is no room to be complacent, like at the last Autumn Statement, when the Government found an extra £27 billion to spend over the course of the Parliament. Times are tough, but they are necessarily so because of the mess we inherited from Labour. We have to ensure that we maintain a robust stewardship of the economy to help businesses, taxpayers and those who rely on public services.

That is why I was pleased to see so many good measures in the Chancellor’s Statement. There were welcome moves to encourage enterprise, with a package of tax cuts to boot. Reducing the headline rate of corporation tax shows that we are serious about attracting and retaining businesses. The cuts to capital gains tax will increase economic activity, too, and evidence shows that lower rates of CGT bring in higher revenues because of the additional economic activity. There is a lesson in there for the Government in other areas of taxation, most notably with the additional rate of income tax. Speeding up the increase in the 40p income tax threshold will also encourage those who want to work hard and earn more for their own families.

However, while tax cuts on entrepreneurs and businesses signalled a shift in the right direction, some fiddly changes to the structure of corporation tax and CGT will add more pages to the gargantuan tax code. On the sugar tax, for example, I appreciate that obesity is a problem—I certainly claim that for myself—and I would also say that there is some dreadful obesity in the national debt and some absolutely appalling obesity in the tax code. However, I cannot imagine anything more addictive than offering the Inland Revenue a completely new tax, which is far worse than giving a doughnut to an obese teenager.

It is said that the UK has more accountants than the rest of the EU combined, and their numbers are sure to be bolstered with more tax complexity. I have an affection for the accountancy profession, having once been awarded the “Saying of the Year” in AccountancyAge. However, I am not sure that the number of accountants we have in the UK improves our competitiveness. Changes to business rates seem positive on the surface, but it remains to be seen whether entirely exempting certain businesses simply means that their rent will increase.

There is also a legitimate debate to be had about the Government’s spending priorities. The row over welfare spending has dominated the post-Budget analysis and we should now start to seriously contemplate why we continue to implement spending reductions on in-work benefits but continue to protect all spending on pensioners. We know that it is not right for the richest pensioners in the country to be sent a cheque for their household energy bill, paid from the taxes of a warehouse worker who pulls night shifts to pay the rent. The richest over-75s should not get to watch the BBC for free thanks to the taxes of the cleaner who gets up at 4 am to do her first shift.

A poll for YouGov at the end of last week found that 44% see spending reductions as necessary, against 33% that do not. Despite all the hyperbole about savage cuts and the gloomy warnings of so-called austerity, the truth is that the public gets it. Now is a good time to think about the entire profile of spending reductions. It is not just welfare. The Chancellor’s welcome big-picture strategy is somewhat hamstrung by the decision to ring-fence certain areas of spending. Overseas aid is a perfect example, but we have also protected defence, health and education, quite often putting a wall up around waste and inefficient practices. A move towards pulling down ring-fences should be discussed in the run-up to the Autumn Statement and next year’s Budget.

Having covered the good and the bad, I should continue my homage to the spaghetti western and discuss the ugly—our complicated tax system. Indeed, the Chancellor himself once called the tax rules a “spaghetti bowl”, to stretch the metaphor. Is it a coincidence that the most dense and most incomprehensible legislation is our tax legislation—the stuff that is not improved by the attention of your Lordships’ House? The tax code now reportedly runs at over 21,000 pages, and it is for this reason that nobody trusts it. There is simply no way that HMRC can keep up with such a system, and real tax simplification should now be a strategic priority. I have a small, modest proposal. What would happen if, in another place, we required that the Chancellor of the Exchequer should read out in full the Finance Bill, and only those honourable Members who had been whipped to listen to it would be allowed to vote on it? This would require the Finance Bill each year to at the very least be readable.

The great British public voted for a Conservative Government because we are more reliable stewards of the economy. That much is clear. The last Government—and this one—have seen us through some tough times and the economy has created millions of jobs at the same time as returning to growth. However, there is still an awful lot more to be done.