Autumn Statement 2022

Lord Livingston of Parkhead Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Livingston of Parkhead (Con)]

My Lords, first, I commend fellow Peers of the English and Welsh variety for their sacrifice in being here tonight—speaking as a Scotsman, I can say that it has not been an issue.

As a number of noble Lords have said, the Chancellor was dealt an incredibly difficult hand. We can debate the mix of causes, but I would argue that a mixture of the after-effects of the pandemic, energy price rises, Brexit and its after-effects and the need to restore credibility after a close-to-disastrous mini-Budget dealt the Chancellor a really difficult hand. I think that he has largely stabilised the position. You just have to look at the pound and at gilts and you can see that he has done a reasonable job. However, we still have very high debt, very high borrowing, very high inflation, very high taxes and, as a proportion of the total economy, very high government expenditure—and we have to recognise that the hard yards are ahead of us. Much of the spending and fiscal retrenchment is actually in the future—we have to say that.

One thing on which I also commend the Chancellor is the return of the OBR. I do not agree with the noble Baroness, Lady Fox, that the OBR does not really matter—it matters a lot, and it matters because to the market it did not look like we cared about what the OBR was saying. So I am delighted that it is back, but I raise an issue—that we have Bank of England forecasts on which monetary policy is based, while fiscal policy is based on the OBR forecast. The two are very different: there has been about a 4% gap in GDP in three years’ time between the two. That is a huge gap. To put it in context, if the Government were using the Bank of England forecast, they would not have the same fiscal room and would have had to retrench further. If the Bank of England was using the OBR forecast, it would be looking at raising interest rates higher than it is otherwise doing. We are not quite in the situation of handbrake and accelerator that we were in under the previous Prime Minister. However—and perhaps the Minister can comment on this—I will ask: should we be in a situation where we are operating fiscal and monetary policy off two very different sets of forecasts?

As I said, the Chancellor has stabilised things, but we have to look and build on it, and we have to look for growth. Growth is good—growth pays for services, growth means that we can have lower taxation, and growth means that our children will have a better future than we had. That is something that we would all want. However, it has to be built on sound money; it cannot be based on unsustainable tax cuts. There are two elements to what Governments can do to help growth—and I agree that they can do a lot more to stop it. These elements are around taxation on one side and supply-side changes on the other. On taxation, I think we would all agree that we want a taxation system that encourages people to strive to achieve, promoting social mobility and growth. Yet large parts of our tax system do not do that today; we still tax earnings more than gifts. Why is it that, if a 20-something is lucky enough to be given by his uncle £40,000, he or she pays less or no tax than if he or she worked for 60 hours a week and earned that? There is something wrong—we are not supporting people who are striving to achieve.

Budget after Budget has, regrettably, taken money away from the young, and we have to redress that. The young are our future; they will be supporting us all and providing the growth and we need to support them to do it. We also need a tax system, as the noble Lord, Lord Bilimoria, said, that encourages investment in physical capital, human capital and R&D. The noble Lord, Lord Fox, was quite right in pointing that out. In all these areas, when we look at the major OECD countries, the UK is a laggard, so we need to do something about it. Reform is needed in all these areas before we push up taxes again. As the IFS said:

“Raising badly designed taxes will be more economically damaging than raising sensibly reformed ones.”


Turning to the supply side, I do not have time to go through what we need as a pro-growth trade policy, a pro-growth approach to immigration, a pro-growth approach to skills and a pro-growth recognition that we do not have sufficient numbers of people, particularly in the older workforce, participating in the economy. But there is one area I will dwell on, which is planning. This has been said by many noble Lords already but how can we expect the younger generation to have ambition when they cannot have a home? Of course, existing homeowners have to have a say, but they do not have a veto; nor should they have one. How can we do an affordable green transition when we will not provide the planning support for onshore wind? It is the cheapest way of providing the green transition. How can we have growth in centres of excellence such as Cambridge, when there is nowhere for people to live and new labs cannot set up? Speaking as an ex-Trade Minister who encouraged a lot of investment into the UK, how can we tell people to invest in the UK when we cannot guarantee that they can actually set up their factory, their business or whatever, or have any idea how long it will take? This is a real problem and something we have to address.

In conclusion, the Chancellor has made a start. At least he has formed a vaguely solid base. But now, he has to build on it. The fiscal position was undoubtedly economically difficult. The supply-side and tax changes he needs for growth will be politically very difficult. He has started dealing with the economic problem; he now needs to start dealing with the political problem. In that way, our children can look forward to something a little better than we have.