Economy: Spring Statement

Viscount Chandos Excerpts

Thursday 31st March 2022 Grand Committee

[Viscount Chandos (Lab)]

My Lords, I am delighted to follow the noble Lord, Lord Horam. It is more than 35 years since he and I were comrades-in-arms but he has just demonstrated that, although our political paths have diverged, our views remain similar in many respects.

“I am comfortable with the choices I have made.” So responded the Chancellor of the Exchequer to my honourable friend Angela Eagle’s question on Monday at the Treasury Select Committee about the decisions lying behind the Spring Statement. How revealing his language was. It conjured up visions of a Goldman Sachs trader reporting on the arbitrage trade he has taken at the morning meeting, or a hedge fund manager in the television series “Billions” justifying his trading decisions to his boss, Bobby Axelrod. I believe it was Henry Campbell-Bannerman who, when asked for his opinion of a now-obscure Chancellor of the Exchequer, responded dismissively that he thought he was “a very nimble accountant”. It is hard not to feel that the current Chancellor may have been a nimble hedge fund manager but has limited self-awareness, dubious values and poor political judgment. The independent Resolution Foundation summarised the Spring Statement as “not fit for purpose” and “focused on rebuilding” the Chancellor’s

“tax-cutting credentials within the Conservative Party.”

--- Later in debate ---

[Viscount Chandos (Lab)]

Promising a tax cut tomorrow while allowing benefits to fall today as prices soar just is not serious policy-making. But I suppose that at least the Chancellor acknowledged that he had made choices; his neighbour, the Prime Minister, does not appear to believe that choices ever really need to be made, at least not in the economic sphere—as opposed to the time and venue of the next party. On the other hand, at the time of the Thatcher Administrations—in other respects, it now seems, models of probity compared to the current Government—we were told that there was no alternative.

Rather than drilling into too much detail, I should like to examine the key choices made by the Chancellor, and ask what alternatives there are to his decisions. First, are the fiscal targets adopted before the pandemic still right? Secondly, are the amount and sources of tax revenues correct? Thirdly, are the resulting revenues and borrowing capacity used to best purpose?

In the chart in paragraph 3.13 of the OBR’s Economic and Fiscal Outlook, projected public sector net borrowing is shown, with comparisons with previous projections for the same period, from both March 2020 and October 2021. By 2024-25, net borrowing is projected to be lower than in either the October 2021 projections or even those for March 2020—essentially, pre-pandemic projections. That is despite an increase in debt service costs of £41 billion in 2022-23 and an average of £17 billion per annum thereafter, largely as a result of rocketing inflation’s effect on the cost of servicing the outstanding index-linked gilts. A year ago, in the debate on the Budget Statement, I noted that there was regret from all sides of the House at

“prioritising future fiscal consolidation over reversing the massive cuts of the past 11 years to so many unprotected areas of public services.”—[Official Report, 12/3/21; col. 1938.]

It is now 12 years. The UK’s sovereign credit remains strong and would not be damaged by a more gradual glide path towards lower levels of public net borrowing. I believe that intergenerational and other issues do not weigh too heavily against such a judgment.

Secondly, could the Government increase their targeted tax take and, if so, from what sectors? The Labour Party’s advocacy of a windfall tax on fossil fuel producers is well known, and I fully support it. My refinement would be to establish not so much a one-off windfall tax but a long-term framework for the taxation of hydrocarbon production, which would recognise and therefore balance the volatility of global energy prices. More broadly—and, in the long term, even more importantly—a fairer balance must be struck between taxation of earned income and taxation of capital and the returns from it. I look forward to the speech of the noble Lord, Lord Macpherson of Earl’s Court, as he has been a much more authoritative voice on this issue in your Lordships’ House and more widely.

Lastly, how well are the Government using these revenues and resources? I hope the Minister and her officials will have read the debate last week in this Room on the Economic Affairs Committee’s report on universal credit, though her speech showed no sign of it. Last week, on the very day of the Spring Statement, every speaker, apart from the beleaguered noble Baroness, Lady Stedman-Scott, as the relevant Minister, deplored the failure of the Government to address the devastating poverty, distress and unfairness caused by the unreformed implementation of the Conservative Government’s universal credit policy. The Resolution Foundation, which I have already quoted, wrote last week:

“Cuts to income taxes have never been well targeted ways of helping the poor, but now we’ve got UC they’re useless.”


The right reverend Prelate the Bishop of Worcester has already referred to the projected increase by 1.3 million of those in poverty, of whom 500,000 would be children. That represents a 30% increase of those in poverty in the period from 2020-21 to 2025-26. More generally, as the Institute for Fiscal Studies has pointed out, there will be huge pressure on the budgets of spending departments as a result of the difference in the effect of the GDP deflator from that of CPI.

The Chancellor has made his choices. In doing so, I think he has demonstrated both his own personal priorities and those of the Government. I do not believe that is going to change until there is a change of Government.