Economy: The Growth Plan 2022

Lord Carrington of Fulham Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Carrington of Fulham (Con)]

My Lords, I start by congratulating my noble friend the Minister on her appointment. I add a note of sadness as well, because we will miss her excellent leadership on the Built Environment Select Committee, but I am sure that we will get great things from her going forward.

There are many lessons to come out of the mini-Budget, perhaps the most important one well understood by people who have worked in the financial markets, is “No surprises”. All markets get spooked when the unexpected happens. Global financial markets lurch into panic when they see and hear the unexpected, as traders need to react very fast to protect their financial positions.

The other lesson is that everyone—or at any rate nearly everyone—agrees that growing our economy is the way out of our economic problems. The debate is about the best way of bringing about that growth. It is a debate that has been going on for as long as I have been aware of politics and economics. Indeed, it goes back to well before the Second World War, or possibly even before that, as it underlay the economic debates before the First World War in the famous tariff reform campaign.

Sadly, there is no simple formula to kick-start economic growth. In the past we have tried many different ways; they have all failed. We have tried laissez faire. We have tried central government planning. We have had direct investment in struggling companies. We have tried saying, “Let’s get rid of our companies and bring in the foreign companies because they know how to do it better”. We even tried that with the Bank of England, to no notable success. Each time we try something different, it has ended up the same way: our GDP growth rises briefly but then, after a short time, drops back down.

So what can we do? First, let us agree that there is no simple answer, because there is not. I have no doubt that businesses in the UK are just as capable of achieving success as any companies in our competitor countries that have higher growth rates, but we have to create a business environment where they can compete domestically and internationally. That means getting our tax framework right. It is far too complex. When I first started working in finance, our corporate tax laws were one volume of the yellow tax handbook. There are now five stout volumes. Instead of adding to them, we must simplify drastically. The same goes for the regulations and controls that we put on businesses of all types, including banks and other financial services companies.

As for employees, there seems to be a belief that people work in business for the fun of it. There is very little fun in hard-driving successful companies. Successful companies are run by people who do it for the money. To misquote Dr Johnson, no man but a blockhead ever worked in business except for money. If the UK tax and regulatory systems penalise employees and they find that they can keep more of their money by working in the USA or Singapore, they will do so. Having uncompetitive rates of tax and silly caps on bonuses are a UK own goal, encouraging successful businesses to relocate to friendlier climes and running the risk of severely damaging one of the few successful internationally competitive industries that we have: financial services.

In short, I think the mini-Budget was on the right lines and I encourage my noble friend the Minister to persevere with the ideas in it but, in future, to take a little more time to avoid spooking the markets.