Economy: The Growth Plan 2022

Lord Horam Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Horam (Con)]

My Lords, I first congratulate my noble friend Lady Neville-Rolfe on her elevation to the Government. We have fought many battles together in the past and I know how effective she will be.

The Chancellor has said that he wants to focus on growth and believes that cutting taxes is the way to achieve this. In support of this assertion, he points out that taxes in the UK are at their highest level for 70 years. That is indeed the case—but if one takes a wider view, the picture changes. In the UK, tax is 35% of GDP; in the eurozone, it is not 35% but 41%—significantly higher. Logically, therefore, if the Chancellor is right, Britain ought to have been growing faster than the eurozone countries for the last decade or so. It has not; we have grown at roughly the same rate as the eurozone countries. Also, speaking personally as an economist who has founded a very successful business, it is not my experience that the sort of tax change that he is proposing makes much difference to the level of entrepreneurship and growth. What businessmen want more than anything else is steadfastness and certainty.

There is also a big downside to cutting taxes. If you do it the wrong way—as the Government clearly did on this occasion—you get a reaction from the market that increases interest rates and mortgage rates and you take away far more than you have given in the income tax cuts. Moreover, once you get talking about tax cuts, you inevitably eventually talk about spending cuts. Now we are talking about possibly no indexation of benefits. That is absolutely wrong. There is a problem of absolute poverty in this country—as the right reverend Prelate the Bishop of Durham pointed out very eloquently—and we simply cannot make the people who are already poor even poorer. That is totally morally wrong. Also, if you cut taxes, the Government have less revenue, so how do we finance the extra spending on the NHS, social care, defence and security, the skills agenda, public expenditure, public infrastructure and all the rest?

Given the very excellent government proposals on the energy price guarantee, there was actually no need to have a Budget. If the Chancellor had been wiser, he would have postponed it until he could see what ensued and how clear the picture was. But he went rushing in and came a cropper. That is the situation that we are now in and the only way out of it is for the Government and the Chancellor to listen, learn and show some political common sense. I am glad to say that has begun. I entirely welcome the decision to bring forward the review by the Office for Budget Responsibility to 31 October; we will need more measures of that kind, and the sooner the better.