Autumn Statement 2023

Lord Northbrook Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Northbrook (Con)]

My Lords, when I listened to the Autumn Statement, it seemed to contain only good news. On the economic front, public sector net borrowing is reducing; on the tax front, national insurance rates are being cut; with regards to pay, the national living wage is going up by nearly 10%; on benefits, working-age benefit is increasing by nearly 7%; pensions are receiving an 8.5% increase; and businesses are getting permanent full expensing for the cost of qualifying plant and machinery. In other areas, I welcomed help with business rates for smaller companies, reforms of the planning system, additional investment zones, assistance for landlords with housing benefit, and permission for property conversion.

All these measures are most welcome, but when you stand back and look at the overall economy, wage, benefit and tax situations, a much less rosy picture emerges. I am in the camp of my noble friends Lord Frost and Lady Noakes on this. Looking at economic growth, other noble Lords have highlighted the weak growth figures for 2024 and 2025, so I will not repeat that. However, I make a plea to the Minister to make equivalence for the asset investment management business a priority, since this industry has been thrown to the wolves since Brexit.

I move on to the borrowing situation. Our total government debt was £2.6 trillion in October and interest on the debt is forecast at a horrendous £116 billion this year. Not helping on the debt front was the fact that there was too little monitoring of some handouts, especially in the area of Covid bounce-back loans.

On the minimum wage front, the large increase could put considerable pressure on businesses struggling with their overall costs. According to the Sunday Times, business leaders are sounding the alarm that the 10% increase in the minimum wage will substantially drive up their costs and undermine efforts to reduce inflation. The jump was beyond the top of the range recommendation of the Low Pay Commission. Although business leaders recognised the moral case for the rise, they are fretting over the economic impact. Steve Morgan, the founder of the housebuilder Redrow, said that the Government

“don’t realise the knock-on effect of wage rises”

on inflation and

“on those higher up the pay scale”.

Adrian Hanrahan, who runs the Midlands-based chemical company Robinson Brothers, warned that the ripple effect would extend to skilled workers as they saw their less-skilled colleagues gaining ground on their pay. He said:

“They want a differential”.


On benefits, we have a record 2.5 million people who are economically inactive. Although I respect the problems of genuine long-term sickness and disability, this figure is still far too high.

On pensions, I feel that the triple lock system should be changed and increases tapered so that more support can be given elsewhere.

For businesses, the Chancellor failed to point out that, overall, the benefits of the full expensing of qualifying capital expenditure are more than cancelled out by the increase in the corporation tax rate from 19% to 25%. This is proven by looking at table 3.3 in the OBR’s economic and fiscal outlook and comparing it with table 4.3. The benefits of full expensing to companies forecast in the five years from 2023-24 is £19.6 billion, while the extra corporation tax burden in the same period is forecast as £42.8 billion. It does not take complicated arithmetic to work out that these corporate tax changes have an overall net cost to companies of an additional £24.2 billion.

For individuals, the tax and living standards situation is no better. I am sure the Chancellor was not happy that the OBR highlighted both these issues in its economic and fiscal outlook. According to it, the tax burden rises to 37.7% of GDP by 2027-28; that is the highest since the Second World War. The freezing of the personal allowance at £12,570—the point at which people start to pay income tax—means that, as the noble Lord, Lord Sikka, has already said, that 4 million more people will be expected to pay income tax between 2022-23 and 2028-29, according to the OBR. It also estimates that 3 million people will move into the higher rate band and 400,000 people will move into the 45% band. Living standards have recorded their largest reduction since the ONS’s records began in the 1950s.

The Government can turn round and say that all these tax rises were necessary to recoup the costs of state support during Covid and support for Ukraine. They could also point out that the inflation rate is outside their responsibility as it is meant to be controlled by the Bank of England. The sharp increase has deeply affected living standards; I am glad to see it falling. So I have some sympathy with the Government’s reasoning.

Also with regard to inflation, I repeat my previous assertion that the Governor of the Bank of England was asleep at the wheel, carrying on with quantitative easing for far too long and failing to recognise that earlier action was needed with regard to interest rates. In my view, there were obvious signs of price increases, such as in building materials, which should have raised inflationary alarm bells.

I was disappointed that the Chancellor failed to do anything on inheritance tax. I remind noble Lords that, when the then shadow Chancellor announced he would raise the threshold to £1 million in 2007, it was such a popular move that it stopped Gordon Brown holding a general election as the Conservatives surged in the opinion polls. If the Government are nervous about any change and wish to hold back until the Spring Budget, I cannot see any reason for this delay; there will be exactly the same criticism as now. The now well-respected GB News political commentator Piers Pottinger agrees with me that, while the Government are so far behind in the opinion polls, a bold measure such as this is required to win back Conservative voters.

I am also unhappy that the Government did not do anything about the “tourist VAT tax”. The extra benefits of scrapping it include the fact that it brings in additional tourists, who then spend extra money, particularly in shops, restaurants and hotels. In my view, that more than makes up for the revenue lost on VAT.

So, overall, although I am happy that the Autumn Statement did not spook the markets, I am sorry that it did little to reduce the overall tax burden—not that Labour are likely to do this; it could even increase it. The Conservatives are meant to be the party of lower taxation—something we need to remember.