Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Massey of Hampstead Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Massey of Hampstead (Con)]

My Lords, I thank the noble Lord, Lord Elliott of Mickle Fell, for initiating this important debate, and I congratulate him on his speech and his book. This is, of course, a very problematic time for the UK economy; we recognise this from all sides. We urgently need more growth and job creation. Yet while the Government have these objectives in mind, some of the measures taken in the last year actively undermine the stated ambition, as mentioned by the noble Baroness, Lady Foster.

The first problem has been the decision, as mentioned by many colleagues, to raise NI and the minimum wage, which creates disincentives to employ and has led to a creeping up of unemployment now to 5%, which is a four-year high. The Employment Rights Bill, which has been much debated and amended in this House, would exacerbate the situation further by reducing the flexibility of the labour market and imposing more regulation on business. This matters because it is businesses that will drive our economy forward, not transfer payments and debt-fuelled capital spending by government. We have now hit the 45% level of public spending as a proportion of GDP, and historically that is a peak which has proved unsustainable. I believe the Government recognise this, but in branding spending cuts as a return to austerity, they have boxed themselves in. They are now choosing to raise income tax, under pressure—some might say—from the left wing of their parliamentary party.

The Prime Minister has made it clear that the impact of these tax increases should fall on those with “the broadest shoulders”. He should take note that these broad-shouldered citizens are the same people who already pay 30% of income taxes, create the real jobs we so desperately need and run the businesses that can compete internationally. Rather than penalising this highly productive cohort, why do the Government not look at the benefit bill and take the political risk of tackling benefits, which now account for 15% of GDP and rising? As the noble Baroness, Lady Fall, and the noble Lord, Lord Young, have both mentioned, this could be a cross-party effort to reform this whole structure.

High levels of benefits are a double whammy—they impact the borrowing requirement, but they also lead to more immigration. The jobs that the local population cannot or will not take on still need to be filled, be they in the NHS, the care sector or hospitality. The result is increased net migration with all the negative side-effects on public services, rent levels and—some would argue—social cohesion, to which the noble Lord, Lord Goodman, also alluded.

The Government’s number one priority must be to get the economically inactive back to work; I do not think that is controversial in this House. For the upcoming Budget, I urge the Government to avoid two measures that would seriously undermine wealth creation and growth. Raising capital gains taxes or, even worse, equalising them with marginal rates of income tax will reduce risk-taking and produce no revenues for the Exchequer. Investors will simply hold on to assets and invest new money into bonds. It will reduce equity investing, which we urgently need, especially in small and mid-sized UK companies. Another tax to avoid at all costs—this has been mentioned by several Peers—is an exit tax, which would be a disaster for the UK’s reputation as a business-friendly country. However tempting it might be from a redistribution point of view, the idea of financially trapping people in this country will serve only to demotivate not only those who are running businesses here but those who would come here to build the businesses of the future.

We are at a crossroads for the economy, and I recognise that the political choices are very difficult for the Government. In a sense, there is a conflict between their ambitions for growth and their political ideology, but the opportunities for growth are there for the UK to seize. We can be a leader in the AI revolution and benefit from the productivity gains which can flow from its evolving capabilities but, for the UK to benefit from this, businesses need to be incentivised to take up these opportunities, not burdened by increasing regulation, rising taxes and higher interest rates, which result from excessive spending.