Autumn Statement

Lord Flight Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Flight (Con)]

My Lords, in his absence, may I add my congratulations to my noble friend Lord Rose on his maiden speech and welcome him to the House? I would like to put on record my congratulations to the Chancellor on what I am going to call an Autumn Budget, both in an economic and political sense. Others have said much about the surprising success of the UK economy over the last five years, particularly in comparison with continental Europe. I will focus in particular on the entrepreneurial explosion that is going on—the greatest I have known in my business lifetime and something that will be extremely good news for the future.

As well as that, the Chancellor, supported by the OBR, has set down his long-term plans for the economy, which are, amazingly, to achieve a budgetary surplus of £23 billion by 2018 and to bring public spending down to 35.2% of GDP by 2019-20. That is a commitment to a competitive, low-tax economy, which is the only way in which we are going to generate the tax revenues to finance the constantly increasing costs of the National Health Service.

I will point to one or two interesting statistics that came out of the Autumn Statement. The first are simply the revised figures, showing 8% growth of the UK economy since 2010. I am not sure whether the noble Lord, Lord Skidelsky, was up to date with the revised figures. Secondly, although the deficit remains too high—indeed, as the noble Lord, Lord Desai, pointed out, we have had a strong element of Keynesian support of the economy—the annual deficit is now down to 5% of GDP, a halving of its extent since 2009. Thirdly, we have all heard that business investment is far too low, yet I note that rather than being growth of 4% it is actually growing at 27%, which must be one of the highest growth rates on record.

The decline in youth unemployment is extremely good news. The whole issue of what is happening to wages is also quite interesting. The Statement points out that, for those in employment, increase in pay is currently running at 4% per annum, even though the average is far lower, largely because of all the new jobs for the young. I was interested to note some recent comments by former Chancellor Darling, to the effect that he was saddened that, while tax credits had been introduced with the intention to boost living standards, they had served largely to keep down wages: why would employers pay when the Government would top it up? That has had a material impact on wage growth and on poor productivity figures.

A key political measure has been reform of the extremely unfortunate stamp duty “slab” system, which the Labour Government brought in. Some 98% of the population will benefit from that. Moreover, the rather harsh 12% stamp duty charge on properties worth more than £1.5 million will serve to kill, one way or another, the wholly impractical mansion tax proposals.

I will highlight one small measure for which I have campaigned for a number of years, which is that the surviving spouse can now inherit her husband’s or his wife’s ISAs intact, with their tax benefits. It always struck me as unfair that, while that occurred for pension saving for retirement, a lot of self-employed people use ISA savings for retirement, so that the widow was quite often, to my mind, robbed of the tax incentives that ISAs offer. I am grateful to the Chancellor for having finally implemented that.

To comment on some of the measures to raise taxes and address things that needed addressing, I would just say that the 12% stamp duty at £1.5 million is on the high side and anti-aspirational, particularly for people living in London. Secondly, on the additional £4 billion of tax on the banks by disregarding 50% of past losses, I am pleased to note that the Government excluded new banks from that for their first five years. However, I think that there is some risk. If you want the banking system to lend more, it needs more capital, with capital requirements going up. If it is constantly being fined due to extra amounts being taxed, there is only one thing that can happen, which is that bank balance sheets contract and lending reduces. I think that that needs to be borne in mind.

While the 25% special tax on multinationals transferring profits is certainly justifiable, when put together with the big increase in non-doms taxation, we need to be careful not to kill the goose that lays the golden egg. This country has benefited hugely from talented entrepreneurs—I refer to the likes of my noble friend Lord Rose—coming to the UK and living and establishing their businesses here. If we get the reputation of being tax-unattractive, that can be nothing other than damaging. However, overall this is an excellent Statement and it demonstrates that this Government have done remarkably well with our economy in very difficult times.