Spring Budget 2024

Lord Horam Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Horam (Con)]

My Lords, as an economist as well as a politician, I have always believed that the economy should work for everyone. As a northerner, I am also keen on levelling up, because I am conscious that the rest of the country has fallen behind London and the south-east over the last few decades. From that perspective, I thought it was a good Budget, and the points were made by my noble friend Lady Vere with her usual vim and vigour.

Despite one slug of money for Canary Wharf, there was a lot going for many provincial areas where it is badly needed and will be greatly appreciated. The 2p off national insurance was a sensible help to ordinary people when the economy needs a bit of a stimulus. There was also £3.4 billion of help for improving productivity in the NHS. As a former Health Minister, I can see where that can be used, although it will probably be misused in some respects. As we know, public sector productivity is a big problem. Raising some money by abolishing the current regime for non-doms was fair. I have always thought that the nom-dom arrangement was both antiquated and indefensible.

The Government can also take credit for the heavy lifting of taxation over the last few years. The general level of tax needed to be raised, and a pragmatic Conservative Government have done what is necessary. That is conservativism at its best: realistic and responsible. The level of tax is high by UK standards but still a lot lower than our European neighbours. Therefore, in the short term, the Budget gains high marks, but if you take a longer-term perspective, I am afraid some of the remarks made by the noble Lord, Lord Eatwell, cannot be ignored.

On nominal gross domestic product, we are the sixth-richest nation in the world. But looking at GDP per capita, we drop down to 21st. If you measure GDP per capita by purchasing power parity, we drop even further down to 27th. The Taiwanese and the Singaporeans are now richer than the Brits, and the South Koreans have caught up. In Europe, we are the second-richest nation after Germany on nominal GDP, but 12th on GDP per capita. If you combine that with the huge increase in inequality that has developed over the last few decades, you can see why many citizens in the provinces are pretty disenchanted with politics and politicians. Just look at the result of the Rochdale by-election; that will tell noble Lords a great deal about ordinary people’s view of politics and politicians. What can we do about this? The first thing to do is get the framework for policy right. Only if you get the framework right do you get the right policies.

The first thing I would do is to abolish the Office for Budget Responsibility. That was put in place to assure the markets that the Government were being responsible, but it has now become a problem in itself. As Martin Sandbu said in the Financial Times, it encourages “opaque and erratic” political games and

“undermines serious debate about what the economy needs”.

As my noble friend Lord Leigh pointed out just now, it also quite often gets its forecasts wrong. I would replace it with something like the Council of Economic Advisers, which helps the US President. This should be staffed by businesspeople and economists with a remit to enhance economic growth. Positioned like the OBR, it should be able to nudge the Treasury away from for ever balancing the books in a candle-end sort of way to taking a more growth-oriented view. I believe that the markets would respond well to a Government who were obviously doing sensible things rather than tying themselves to the Procrustean bed of the OBR.

Incidentally, I think we should have only one Budget every year. The noble Lord, Lord Hammond, tried to do that but got swept away by the politics. Having more than one Budget every year reinforces uncertainty and often produces underexamined tax changes and too many short-term spending decisions.

We also need a worked-through industrial strategy. Alongside the macro view of the council of economic advisers, this should be looking at the micro view of where growth can be best assisted by public support. Greg Clark was quite right about that when he was the Minister responsible for business affairs; Kwasi Kwarteng was quite wrong.

We also need more urgent action on skills. This has been said often enough, but we still have not given this the priority and financial support required. The apprenticeship levy is not working well enough, and we still do not fund further education as well as we could.

Finally, we need to do something about the large number of our fellow citizens who are not working: 9.3 million are not in work. The problem has been made worse by Covid and it needs urgent analysis, as the noble Lord, Lord Lamont, pointed out. Britain is a great place to do business, as I know from personal experience, having helped to establish a very successful company. But the fact is that we are not fulfilling our potential and we will not do so, despite this excellent short-term Budget, until we have a firmer, clearer and more comprehensive long-term strategy.