Queen's Speech

Lord Lawson of Blaby Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Lawson of Blaby]

My Lords, it is a great pleasure to follow the right reverend Prelate, who speaks with such authority about some of the problems of rural England. I also congratulate most warmly my noble friend Lady Wilcox on her maiden speech as a Minister. I cannot pretend that I agreed with every single word that she uttered, but she uttered them with enormous charm. Above all, I wish the new Government every success in the massive task before them and the resolve to stick to that task despite the deep unpopularity that inescapably lies ahead.

I warmly welcome the statement in large type at the end of the coalition’s agreed Our Programme for Government, which states:

“The deficit reduction programme takes precedence over any of the other measures in this agreement”.

Quite right. There must be no sacred cows and no sacred departments.

Meanwhile, I welcome the start that has been made in cutting public expenditure and reducing the public deficit, with an in-year cut of a little under 1 per cent of total public spending. This is, of course, only a minuscule fraction of what has to be done, but essentially it is an earnest of the Government’s intentions. The first Budget of my right honourable friend Mr George Osborne later this month will need both to get to grips with the immediate crisis and to set out, in convincing terms, the financial prospect and programme for the next five years. I wish him well.

I detect unease in some quarters about the promised increase in capital gains tax rates. In so far as I understand it, I fully endorse what the Government have in mind, which is perhaps not surprising, since I introduced a similar reform in my 1988 Budget. I do not have time to set it out now, but I refer noble Lords to cols. 1004-06 of the Official Report for 15 March of that year. That reform—it is not without interest that the Reagan Administration in the United States introduced much the same reform at much the same time for much the same reasons—worked very well and lasted successfully for more than a decade.

The previous Government’s foolish decision to undo that position, abolishing both indexation and the tapering relief, which was a rough and ready substitute for it, and replacing it with a capital gains tax rate of 18 per cent, has had three main consequences: it created a bonanza for short-term speculators; it led to a massive increase in tax avoidance and thus a serious and continuing loss of income tax revenue—the point is the income tax revenue, not the revenue from capital gains tax; and it greatly stimulated the buy-to-let boom, thus hugely inflating the housing market, which has been a major cause of the worst boom and bust that we have suffered since the war.

I welcome the fact that my right honourable friend the Prime Minister chose to make the economy the subject of his first major speech as Prime Minister. However, I have some questions about what he called “rebalancing our economy”, which he explained meant less dependence on banking and finance and a boost to manufacturing. Banking and finance are not only a major growth industry in the age of globalisation but one of the few major industries in which this country is a world leader. To have the objective of shrinking it would both amaze and delight our overseas competitors. Of course there need to be changes to reduce greatly systemic risk and I welcome the new Government’s decision to have an independent commission to look into how best to separate traditional retail and commercial banking on the one hand from high-risk investment banking on the other. As the Governor of the Bank of England, among others, has cogently argued, that badly needs to be done.

I have to observe that, far from assisting manufacturing, the Government, like their predecessor, appear to be hell-bent on clobbering it further by substantially increasing its energy costs in the name of an intellectually incoherent climate change policy. There is no time to elaborate on this today, but I commend to noble Lords the excellent and grim speech made by the eminent engineer Sir Alan Rudge to the Royal Academy of Engineering some six weeks ago. I hope that the Government will read it and ponder it. I add only that to impose this burden on British manufacturing industry unilaterally—for none of our competitors has the slightest intention of following suit—is not only suicidal but completely pointless, since even those most concerned about carbon emissions agree that it is only global emissions that matter. At the very least, I ask the Government to undertake to hold a fundamental review of UK climate and energy policy in the light of the outcome of the United Nations climate change conference to be held in Cancun in December.