Autumn Statement 2022

Lord Horam Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Horam (Con)]

One of the good things about the financial Statement was its brevity. The documents accompanying it were about one-third the length of those that normally accompany a Budget Statement. I was profoundly relieved; not only were they brief but they were clear. I actually read them. Usually I skip them or look at the summary in the newspapers, but these were a delight. I say to my noble friend Lady Penn that I hope this point can be repeated for future economic Statements.

As for the content, I had the advantage of no fewer than two briefings from the Chancellor before the Statement. In both, he said that he was aiming for stability, growth and compassion. I notice that, in the eventual Statement, “compassion” had been translated to “public services”. Perhaps the Treasury could not quite bring itself to use the word “compassion” and had to say “public services” instead. I can understand the mentality. None the less, whatever it was—compassion or public services—I know what the Chancellor meant. With regard to stability, clearly he achieved a great deal. That was not too difficult after the turmoil of the previous few weeks, but he unquestionably achieved it.

On compassion/public services, the Chancellor also did well. Universal credit was fully inflation-proofed, as was the living wage, and there was the energy price guarantee. I noticed that, in her speech, the right reverend Prelate the Bishop of Gloucester welcomed the emphasis on these factors in the Autumn Statement. I say to her that I am enormously impressed by the work that the Church of England does with food banks. It is a pity that these must be so extensive; none the less, it can be enormously proud of their vital contribution to helping the poorest in our society. Not only that, but there was more spending for the NHS, more social care spending and a continuation and extending of the levelling-up agenda. That is good too, on compassion and public services.

On growth, the Budget is clearly less good. We do not know what is happening and anything could change. In the next few months there could be a resolution of the war in Ukraine and gas prices could come down. We simply do not know, and forecasting in this area is extremely difficult. We will probably have a world recession—almost every country. In particular, the situation in China is very worrying. However, as my noble friend Lord Lamont pointed out, the timing of the Budget was very clever from that point of view because it did not squeeze things now. Things may be squeezed in about two or three years’ time, but for now it kept public spending up, which is vital during this very difficult period.

Overall, then, I agree with those who say that it has been a solid start for a new Government. I notice that even the shadow Chancellor in the other place did not really criticise the Budget measures themselves, apart from one reference to non-dom taxation. Her comments, like those of the noble Lord, Lord Eatwell, today, were about the whole 12 years, of which she was understandably critical. Criticisms of the Budget were much less marked.

I shall say something about tax levels, which were commented on by my noble friend Lord Tugendhat. As he said, it is quite normal for Conservative Governments to increase taxation. George Osborne did it; Geoffrey Howe did it. For heaven’s sake, Benjamin Disraeli did it. When the Liberals were promising to end income tax altogether, he maintained it because it was necessary for important public works. Mind you, Disraeli also said, “They give you the figures, don’t they?” Never mind that—he was rather more cavalier about these things than we would perhaps accept today. It is the case that Conservative Governments, when necessary, increase taxation.

At the moment, tax levels are at about 33% of GDP in the United Kingdom, going up to about 35% as a result of these measures, possibly even more. These are certainly the highest levels since the 1930s, which is a pity. None the less, to take this as just the UK position is an insular point of view. Looking across Europe, the average level of tax as a percentage of GDP in the European Union is 41%. In Germany it is 40%, in Belgium 46%, in Denmark 47% and in France over 47%. It is argued that if you have high taxes, you diminish growth. But look at the growth of, say, France or Germany compared to the UK. There is not a lot of difference over the past 20 or 30 years, despite their having higher taxes. We should be careful about this argument that the Tories should always be a low-tax party—I am not at all convinced. High taxes are necessary from time to time and we should not fear them.

The advantage of having higher taxes in this case is that we get better public services—and not only that but greater equality. We have been able to help the poor more than we otherwise would have done under the Truss economics. We can also help levelling up. I go to Germany a lot and see what has been done in north Germany, in the old German Democratic Republic. There has been huge improvement in places such as Weimar, Stralsund and Dresden. Why? Because they had a solidarity tax of €35 billion a year for 30 years —levelling up with a vengeance. We can only dream of levelling up on that sort of scale. So that is an advantage.

Finally, the present need is for more investment, and since private investment is so low, the public sector needs to help. I disagree with many of the things that the noble Lord, Lord Eatwell, said, but he was entirely right about that: public sector investment must step in, and it does not crowd out or hinder private investment but helps it. For example, in America at the moment they have a new CHIPS and Science Bill going through to help the semiconductors industry, which is so important to our world. That is an example of the public sector helping the private sector, and we need more.

This is a solid Budget. Undoubtedly, we will have a tough 12 months, but I believe we are heading in the right direction.