Autumn Statement 2023

Lord Livermore Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I join others in welcoming the noble Baroness to her new role. It is a privilege to take part in today’s debate, and a pleasure to hear contributions from so many eminent and expert noble Lords.

All of us here have benefited from the intervening week between the Autumn Statement and today’s debate, allowing us to consider in greater detail the Green Book and the Office for Budget Responsibility’s report, as well as analysis from other independent forecasters. What has become clear is the extraordinary difference between the story told to us by the Chancellor and the reality revealed to us by the numbers themselves.

The Chancellor told us the economy had turned a corner but in reality, growth was downgraded—revised down next year, the year after and the year after that. The Chancellor told us inflation had fallen, but he omitted to mention that the inflation forecast has actually been increased every single year for the next three years. The Chancellor told us that debt will be lower. What he did not tell us was that debt will actually now be 28% higher than when this Government came to power 13 years ago and is set to surpass £3 trillion for the first time ever. The Chancellor told us that take-home pay is going up, but he did not reveal that real household disposable income is set to fall next year, or that we are now seeing the biggest ever fall in living standards since records began. Of course, the Chancellor also told us he was cutting taxes, when in reality the tax burden will now rise every single year for the next five years, making this the biggest tax-raising Parliament ever, with the tax burden now set to reach its highest ever level.

Increasing growth is clearly the biggest economic challenge our country faces, with the Governor of the Bank of England warning since the Autumn Statement that the current economic outlook is the worst he has ever seen. It is therefore no surprise that many noble Lords mentioned growth in their contributions to this debate, including my noble friend Lord Eatwell in his excellent opening speech, and the noble Lords, Lord Macpherson of Earl’s Court, Lord Willetts, Lord Dobbs, Lord O’Neill of Gatley, Lord Londesborough, Lord Leigh of Hurley, and Lord Desai, and the noble Baronesses, Lady Noakes and Lady Lea. The UK’s growth record over the past 13 years has been poor. We have languished in the bottom third of OECD countries, with 27 OECD economies growing faster than us since 2010. Looking ahead, over the next two years no fewer than 177 countries are forecast by the IMF to grow faster than the UK. For this year and next, we will be 35th out of 38 OECD countries for growth.

Against this backdrop, we were told to expect an Autumn Statement for growth, and several noble Lords have mentioned the Chancellor’s 110 measures for growth. Yet, the Office for Budget Responsibility, having seen those measures, actually downgraded its growth forecast in each of the next three years. The economy is now forecast to be £40 billion smaller by 2027 than the Chancellor expected as recently as March. The latest outturn figures for GDP show that there was no growth at all in the third quarter of this year. Growth in 2024 is now forecast to be just 0.7%—more than halved from the 1.8% predicted in the Budget. The Bank of England’s view is that even this is too optimistic. Its latest forecast shows no growth at all in any of the next three years: no growth this year, next year or in 2025. Restoring growth to Britain must be our priority, and Labour has set out a plan to deliver that mission. Indeed, many of the Chancellor’s announcements last week were simply pale imitations of measures we have already set out.

As my noble friend Lord Davies of Brixton mentioned, the Chancellor spoke about unlocking capital by reforming pensions. However, Labour has already announced that we would go further, encouraging investment in British start-up and scale-up firms. On planning, the Government are simply attempting to follow Labour’s lead on how to encourage communities to host grid infrastructure, and on speeding up planning decisions. We also welcome the Chancellor’s announcing permanent full expensing—another measure we have been calling for. However, that does not make up for the years of uncertainty businesses have faced. How many billions of pounds of investment has our economy missed out on because of the Government’s delay?

Several noble Lords focused on inflation, including the noble Lord, Lord Howell of Guildford, the noble Baroness, Lady Lawlor, and the noble Baroness, Lady Goldie, in her very enjoyable speech. In the Autumn Statement, the Chancellor tried to suggest that the cost of living crisis is now behind us. In reality, the inflation forecast was actually increased by the OBR in every single year of the forecast period, and consumer prices in 2027-28 are now set to be 7% higher than previously expected in March. Inflation is still more than double the Bank of England’s target rate, and the Bank now expects inflation to stay above target throughout next year, with interest rates remaining at their current levels for “an extended period”. Indeed, on Monday of this week, the Governor of the Bank of England warned that interest rates will not be cut “in the foreseeable future”.

Interest rates have now risen 14 times to a 15-year high of 5.25%, while the average two-year fixed-rate mortgage at one point rose from 2.6% to over 6%. As a result, those re-mortgaging since July have seen their mortgage payments rise by an average of £220 a month. Some 1.6 million families have seen their mortgage deals end this year; next year, a further 1.5 million families will face a similar fate.

Therefore, the outlook for living standards remains truly bleak. It is of course welcome that the Chancellor has accepted this year’s recommendation of the Low Pay Commission on the minimum wage, but real wages are set to fall this year and real average weekly earnings are now set to remain below their 2008 level until 2028—a shocking two full decades of pay stagnation. According to the Resolution Foundation, this Parliament is now on track to be the first ever in which real household incomes fall, and we are now seeing the biggest ever fall in living standards since records began.

The centrepiece of the Autumn Statement was of course the Chancellor’s claim to be cutting taxes. Several noble Lords spoke about the Chancellor’s tax plans, including my noble friends Lord Howarth of Newport and Lord Sikka, the noble Lords, Lord Macpherson of Earl’s Court, Lord Tugendhat, Lord Northbrook, Lord Balfe, Lord Horam and Lord Desai, and the noble Baronesses, Lady Noakes, Lady Featherstone and Lady Meacher. The reality of this Autumn Statement is that the tax burden now rises every single year for the next five years, rising to its highest ever level and making this the biggest tax-raising Parliament ever.

We on this side have argued that taxes on working people are too high and that we want them to be lower. We opposed the manifesto-breaking increase in national insurance that the Prime Minister tried to implement last year when he was Chancellor. Going into this Autumn Statement, the Government had already put in place 25 tax rises, amounting to £90 billion. That is the equivalent of a 10p increase in national insurance. So, while welcome, the 2p cut does not remotely compensate for the tax increases already announced. Indeed, the Resolution Foundation has calculated that, even after the measures announced by the Chancellor, households will still be £1,900 worse off.

As several noble Lords have observed, greater than expected fiscal drag also means that nearly 4 million more people will pay income tax, and 3 million more people will pay the higher rate. The combined effect is an average tax rise of £1,200 per household. According to Paul Johnson from the Institute for Fiscal Studies, the cut in national insurance rates

“pales into … insignificance alongside the long-term increase in personal taxes created by the six year freeze in allowances and thresholds”.

The IFS has calculated that—extraordinarily—almost every single person in the UK liable for income tax or national insurance will now be paying higher taxes overall. As a result, the tax burden will now reach 37.7% of GDP by the end of the forecast period, an increase equivalent to an extra £4,300 in tax for every household. This was not an Autumn Statement that cut taxes.

The reality of this Autumn Statement is very different from the story presented to us last week by the Chancellor. Despite the picture he tried to paint, the reality is that the economy is just as weak, if not weaker, after this Autumn Statement than it was before. The Government cannot undo the damage done over 13 years, because their economic approach simply is not working.

Growth was low before this Autumn Statement; it is even lower now. Living standards were falling before this Autumn Statement; they are now seeing the biggest fall on record. Taxes were high before this Autumn Statement; they are now set to be the highest in history. Far from turning a corner, as the Chancellor claimed, the economy is stuck with low growth and high taxes, and working people are still worse off.