Autumn Budget 2024

Lord Moynihan of Chelsea Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Moynihan of Chelsea (Con)]

My Lords, I refer to my entry in the register of interests.

This Government say that their first priority is to achieve economic growth, which, as the noble Baroness, Lady Neville-Rolfe, pointed out, must be in GDP PC—growth per capita, not just GDP. The money they are lavishing on the economy cannot be paid for unless the economy grows, and without growth they will not get elected in five years’ time. But for the economy to grow, they need to spend and tax less. Does this Budget do that? Not so much. Spend rises by £70 billion a year. Tax rates increase, with the dubious claim that they will pay for only half of the new spend. Borrowing increases dramatically. The OBR describes all this as

“one of the largest fiscal loosenings of any fiscal event in recent decades”.

We have not grown much for many years; real wages are still 5% lower than they were 17 years ago. Other countries have recovered economically from Covid and the great financial crisis, but we have not. The Budget will make things worse.

The Budget plays all sorts of jolly japes with the numbers. Spending is dubiously described as “investment” rather than what it is—cash out. National debt is redefined to be lower because of amounts that we expect to receive from future student loan repayments. This is meretricious when that debt calculation at the same time excludes our £2.6 trillion liability, growing every year, for future public sector pension payments, because of which our national debt is twice as large as we claim it to be.

Higher government expenditure causes lower growth because a larger, unproductive public sector squeezes out the growth-producing private sector. Increasing employers’ NIC and the minimum wage and putting VAT up on private schools means that businesses can neither afford to employ as many people nor grow their companies as they might otherwise have done. The reality of that is already coming home to the Government, with furious complaints from almost all business sectors: there will be lower receipts on corporation tax, income tax, employers’ and employees’ NIC and capital gains tax. Extra tax revenues will not be £36 billion; tax revenues will not rise to 38% of GDP.

There will be further diminution in economic growth from the flood of entrepreneurs, non-doms, young high achievers, millionaires, billionaires, people planning to sell their businesses and people avoiding inheritance tax all leaving the country. There will be the most astonishing level of departures, and so even less tax revenue and economic activity. HMRC could tell us and the Government how many people have left or become economically inactive, but why spoil a beautiful illusion about tax revenues going up by getting factual?

There is worse even beyond that, with disability and mental health numbers climbing, the slow-motion car crash of public sector pension payments, the triple lock on the state pension more and more out of control and the folly cost of net zero rapidly becoming clear. The deficit, already a disastrous 4.5% of GDP, will widen rather than decline. It is not sustainable.

Over the past two decades, we have joined ourselves to that class of social democrat economies in countries such as France and Germany where GDP PC growth is a thing of the past. Surely, we can do better. One pines in vain for our own Javier Milei or Elon Musk to chainsaw our bloated, inefficient, unproductive public sector. One pines in vain for a Margaret Thatcher to explain that, sooner or later, one runs out of other people’s money. One pines for politicians who will tell the truth to the people of this country: that there is no money; that we have brought this on ourselves in the past 20 years by overspending and overtaxing, making our country poorer and making it impossible to provide those things that we would like our citizens to have. A Budget that cut spend and taxes would be a great start to solving this dilemma.