Budget Statement

Lord Hannan of Kingsclere Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Hannan of Kingsclere (Con)]

My Lords, I also congratulate noble Lords who have made their maiden speeches today. It is nice to see my old comrade, the noble Lord, Lord Khan of Burnley, opposite and my noble friend Lord Cruddas, whose experience will elevate and ennoble our counsel.

There are three ways to cut a deficit: you can raise taxes, cut spending or try to grow the economy so that the deficit falls in proportionate terms. I have to say, I am astonished by how quickly a consensus formed on all Benches, here and in another place, that the first of those was the correct option, because raising taxes is not a long-term solution to a debt and deficit problem.

Essentially, the higher you raise the tax, the more that you find you are squeezing the revenue-producing bit of the economy to sustain the revenue-consuming bit, and people change their behaviour in consequence. When tax rates get to a certain level, people will begin to work shorter hours, take earlier retirement or, indeed, move their activities to friendlier jurisdictions.

By the way, this is not some abstruse point of the Chicago school of economics that has never been tried; we saw in practice that cutting tax rates leads to greater revenue with the successive cuts in corporation tax to 19%, with each successive reduction leading to more income for the Treasury.

Instead of raising taxes, we should be looking intelligently to cut taxes, especially those on employment and investment, to get companies hiring again. I would have liked to have seen cuts in national insurance both for the employer and for the employee. If we get the economy growing then we get more people at work, we get them earning and paying taxes, we are shelling out less and, left to itself, the deficit will dwindle and fade.