Autumn Budget 2024

Lord Bridges of Headley Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, I welcome my noble friend Lord Booth-Smith to his place. I very much look forward to hearing his speech and his contributions.

I will pick up on what my noble friend Lord Forsyth and the noble Lord, Lord Burns, said, and I will focus on one word: debt. Taking a step back, global public debt is expected to exceed $100 trillion this year—about 93% of global gross domestic product. As a number of noble Lords have said, our debt here is sky high, and we need to ensure that it remains sustainable and that we can service it while overcoming other challenges. I have spoken of these before, and they also begin with “d”: defence, demographics, decarbonisation and deglobalisation. As the recent Economic Affairs Committee inquiry into the sustainability of our debt concluded, tackling these challenges means that we must take tough decisions this Parliament—I stress that—if our debt is to be put on a sustainable path. The committee also said that

“to maintain the level and quality of public services and benefits that people have come to expect”,

the choice is between tax rises or the state doing less.

Meanwhile, as so many noble Lords have pointed out, we must ratchet up our growth and improve our productivity, as my noble friend Lady Neville-Rolfe just said. That obviously involves choices—about tax, spending and borrowing. So this Budget was, in so many ways, about how we choose to make our debt sustainable. My position is simple: I trust people to decide what is best for themselves and to spend money as they wish. Like my noble friend Lord Forsyth, I believe that Governments do not create growth; people do. Their hard work, inventiveness and risk-taking are what drives us forward and what Governments should reward and support, not crush. This is the best way to get the growth we need, not just to support the public services we want but to put our debt on a sustainable path.

The brutal truth is that, during 15 years of Conservative government, our record on growth and productivity was not as good as it should have been, as my noble friend Lady Neville-Rolfe said. We can all argue why this was so: we can cite Brexit, Covid and the energy shock. But, as the Chancellor said—here, I agree with her—there is no escaping the fact that we have become a high tax, low growth country. Now is decision time: on that we can agree. We have to choose how to make our debt sustainable while supporting growth.

That brings me to the Budget. As the Minister said, Labour has made its choice. It is there—£70 billion higher spending every year, paid for by historically high levels of taxes, and £32 billion more borrowing every year. We can, should and must hold Ministers to account for breaking their manifesto promises and picking their own so-called tax lock on not raising taxes on working people. But more serious, in my mind, are the consequences of this Budget and what it will do to growth. As has been remarked, after an initial sugar rush, it will lower growth in the medium term, between 2026 and 2027. As my noble friend Lord Lamont said, only some time in the next decade will growth perhaps rise to a sustainable level. When I read the Budget, the only growth I can be absolutely sure of is 5,000 more tax inspectors.

Meanwhile, underlying debt, excluding the Bank of England, rises as a share of national income in every year of the forecast. So, unsurprisingly, the Chancellor did what she said before the election that she would not do: she changed the debt rule to find more so-called “headroom”—which is, by the way, an absurd concept, as if money can be whistled up from thin air. But this is the point: even her new rule is forecast to be met by just £16 billion. That would be wiped out entirely if the Government met their commitment to spend 2.5% of GDP on defence, and it would be wiped out entirely if interest rates or bank yields were 1% higher. If annual productivity growth—which, as I said, we have struggled to improve—were just 0.5% lower, borrowing would rise by £40 billion. Put that together and it is not surprising that, just last week, the OBR told the Economic Affairs Committee that the Budget increases the risk of our debt becoming unsustainable.

So we are on a tightrope, which has become even more precarious after last week’s election in the US. How do we finance increased spending if the US pulls back? How would new US tariffs hit growth? President Trump’s plan is forecast to increase debt by a total of $7.75 trillion. Who is going to buy all that?

Labour promised to turn the page on an era of high tax and low growth. We have turned that page and what do we read? Higher taxes, lower growth. The Government promised to kick-start economic growth. Instead, they have kicked growth into touch. Finally, they said that they would build strong national finances. Instead, they have weakened the foundations, increased the risk of our debt becoming unsustainable and made matters worse.