Budget Statement

Lord Horam Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Horam (Con)]

My Lords, the noble Lord, Lord Rooker, was absolutely right in his reference to the Rooker-Wise amendment in 1977. I remember it all too well, though I think that he fairly acknowledged that he and the late Audrey Wise only got it through with the help of the Opposition Treasury spokesman, then one Nigel Lawson, now my noble friend Lord Lawson.

Indeed, it is the case that there is no such luck today: no indexation of that kind has been made possible by the Government. I understand why and I think that the noble Lord may well understand why as well. The fact is that Britain has, for too long, been trying to get European levels of public service and welfare at US levels of taxation. The crunch has now come. The Government have given clear indication that they prioritise maintaining, and if possible improving, public services and are therefore prepared to put up taxation to the same extent.

That is fundamentally right, because of the point that the noble Lord, Lord Turnbull, has just made. He said that, at one time, he thought that as people got richer they would spend more of that money in their own private way. Indeed, the opposite is now happening, as he pointed out. As we get richer, we need more of the services that the public sector mainly provides: education, health, care, addressing issues such as climate change, as well as levelling up—particularly from this Government.

I certainly support the levelling-up agenda. I particularly admire what the Germans are doing for some of their towns such as Dresden, Weimar and Erfurt, which were knocked about a bit during the Second World War and then went through the GDR period. However, it costs money to do that. If we are going to do the same sorts of things for our northern towns, we will need to spend a lot of money to make those improvements.

That sort of improvement for the north and the midlands, the so-called levelling-up agenda, is also good for the south. As Boris Johnson, when he was a journalist—and he was Mayor of London before he became Prime Minister—said, do we really want the south of England to be endless suburbia from Charing Cross down to the south coast? No, we do not. If there is better balance in the country, that is good news for both ends of the country.

That means that taxation has had to rise. As has been endlessly pointed out since it happened, tax as a percentage of GDP is now going to be 36.2% at the end of this Parliament as opposed to 33.3% of GDP today. As my noble friend Lord Lamont pointed out, looking at it that way is purely insular. Look at what has happened across Europe: today, by comparison with our 33.3%, the average in Europe is 41%—hugely higher. In Germany it is 37.5%, in the Netherlands 39%, in Belgium 44% and in France, amazingly, 46%. Compare that with our 33%.

Some people will argue that, if you go to a higher level of taxation, you will adversely affect growth. Is that the case? There is no evidence for it. Growth rates across Europe over the last few years are almost identical between France, Germany and us; there is very little difference at all. There is therefore no evidence that a higher tax rate, within the sort of limits that we are talking about, necessarily adversely affects the rate of growth. In fact, to bring together—maybe to their surprise —my noble friend Lady Noakes and the noble Lord, Lord Eatwell, a factor that is important is the way in which you use the money that you have raised. That is crucial.

Despite what I have just said about the link between taxation and growth, I agree with the noble Lord, Lord Fox, that this is going to be a difficult year. As Paul Johnson from the Institute for Fiscal Studies, perhaps the best and most respected commentator on these matters—I always read him first, anyway—has pointed out, living standards are going to be hit by the increase in inflation for all sorts of reasons, including Brexit, Covid and energy prices, so we are going to have a difficult year. The Chancellor has sensibly opted to hold back some of the money that he could otherwise have spent or saved for use in this period. He therefore has some firepower to deal with any faltering of growth that may occur.

One area where I would be critical is that I do not think that we should have scrapped the £20 uplift in universal credit. I appreciate that the Chancellor has put in a taper, but only 38% of people who receive universal credit are in work. The remainder are out of work and they will lose substantially. The Treasury has said that it would cost a lot to keep the £20 uplift, but the fact is that the poor in this country are very poor and they face a bleak winter. I refer to the excellent speech by the right reverend Prelate the Bishop of Newcastle, in which she referred to the moral code. Archbishop Temple, while not putting in place any particular solutions because of his reluctance to get involved in the technicalities of how we deal with these things, referred to a moral code and, because of that, I think that he would have looked askance at the Government’s failure to keep the £20 extra for universal credit. It is a pity that they have done that; as a rich nation, we could and should have afforded it.

With that blemish, though, I none the less think that the Government’s overall strategy of meeting the extra spending that is necessary, and which will inevitably be followed by extra taxation, has been broadly right.