Autumn Statement 2023

Lord Londesborough Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Londesborough (CB)]

My Lords, just two weeks ago during the debate in this place on the King’s Speech, I admitted to being baffled by the Prime Minister’s comments in his introduction. He talked about a “vibrant economy”, which had “turned the comer” and was making investors excited. I should declare that I am an investor in British SMEs, so I was somewhat concerned, rather than excited, to see that the Chancellor appears to have been drinking from the same bottle of Kool-Aid.

In his introduction to the Autumn Statement, the Chancellor says that he is delivering

“the biggest business tax cut in modern British history”

backing

“British business with 110 growth measures”.—[Official Report, Commons, 22/11/23; cols. 325-36.]

He said that we sit in “Europe’s most innovative economy”, which is soon to become an “AI powerhouse”.

That is mouth-watering stuff but, before I rush to invest, let me indulge in some due diligence with the help of the OBR. First, GDP growth of 0.6% this year will accelerate to only 0.7% next year. The tax burden will continue to rise over the next five years to 38% of GDP, the highest rate in modern history, and our interest payments on debt will grow to £122 billion per annum. That is triple what it was a few years ago, raising questions around debt sustainability. Your Lordships may well ask how 110 growth measures deliver so little growth. Is the OBR being excessively pessimistic? Apparently, it is not; the Bank of England is forecasting 0.1% growth next year and just 0.2% in 2025, and most independent forecasters are more bearish than the OBR.

Whichever forecast we take, the problem remains: there is virtually no growth momentum in the economy. As we know, that so-called fiscal headroom to usher in £20 billion of tax cuts was driven by inflation. That is fiscal drag, not economic growth, and it is set to continue. That is why we are heading for the highest tax burden in 70 years: it is a percentage of something that has ceased to grow. Our GDP is stuck at around £2.3 trillion, which is not sufficient to finance public services for an ageing and increasingly unfit population of 67 million, let alone to invest in the nation’s infrastructure.

The Chancellor is rightly concerned about our low productivity, especially in the public sector, yet there is little in this Statement to address that, bar reducing the size of the Civil Service. If we are serious about the “long term”, which is an expression that the Prime Minister and the Chancellor keep harping on about, we need relentless focus on our productivity, which continues to lag behind France, Germany and the US by disturbing margins.

This is not just about pushing up low levels of business investment or providing tax breaks, such as full expensing—welcome though those measures are. Ask employers around this country what the biggest block to productivity is and they will tell you that it is the workforce, not just the supply of labour but the calibre. We need a long-term qualitative approach to improving worker productivity. That involves skills, training and proper levels of investment in education, yet our education budget is not even keeping pace with inflation. In fact, we will pay more interest on our debt this year than we will spend on the Department for Education’s entire budget.

We are still waiting for per-pupil funding to return to 2010 levels, in real terms—a pledge, incidentally, that Rishi Sunak made several years ago as Chancellor. We now have 9 million adults in England who have low basic literacy and numeracy skills. That is a huge productivity blocker in itself.

At the other end of the spectrum, 40% of our graduates are leaving university unable to find graduate-level employment, while saddled with an average £40,000 debt that they will struggle ever to repay. That is a damaging mismatch of skills and vacancies, and a terrible waste of talent and money. We need to address it.

As for skills and training, the Chancellor is stumping up a derisory £50 million over the next two years to increase the number of apprentices in engineering and “other key growth sectors”. To put that in perspective, it is less in annual terms than the wage bill of a second- tier football club such as Norwich City—no disrespect to the Canaries.

I find myself, for the fourth time in my relatively short career in this place, urging the Government to set up a permanent productivity council, headed not by politicians but by leading practitioners from both the private and public sectors, to address the long-term challenges of generating real economic growth. I would appreciate the Minister’s response to this suggestion, for we are in desperate need of a long-term plan for the economy and to generate a growth culture. This Autumn Statement, like its predecessors, simply misses the mark.