Budget Statement

Viscount Trenchard Excerpts

Wednesday 3rd November 2021 Grand Committee

[Viscount Trenchard (Con)]

My Lords, it is a pleasure to follow my noble friend Lady Foster of Oxton. I thank my noble friend the Minister for introducing this debate today and I congratulate the right reverend Prelate on her thoughtful and interesting valedictory speech.

I congratulate the Minister on the way in which the Treasury has reacted swiftly throughout the pandemic to support those sectors of the economy that would otherwise have suffered enormous and lasting damage. The bounce-back loan scheme and the furlough scheme have helped businesses across the board to survive through the dark months and many of them now contribute to the economy, which is recovering more strongly and quickly than many had predicted. The Culture Recovery Fund, administered by DCMS, has helped to ensure survival for many enterprises in the arts, cultural and heritage sector, helping to ensure that the UK remains the best place for talented artists to develop their careers and enrich our national life.

Many have suggested that this Budget indicates that the Government have abandoned their commitment to true Conservative principles, adopting policies providing a greater role for the state than we have seen since Lady Thatcher’s successful reforms. Some commentators argue that, following the success of the party in winning so many red wall seats, the Government now need to adopt tax and spend policies that reflect the priorities of their new supporters in constituencies that have never or not often elected Conservative MPs. However, the election of Ben Houchen as Mayor of Tees Valley on a platform of low taxes and support for innovative new companies and wealth creation shows that his supporters believe in Conservative ideals as the route to greater prosperity just as much as Conservative voters in the south-east.

I recognise that the Chancellor could not continue to borrow more and more, especially as the national debt has risen to an alarming £2.2 trillion, or 95.5% of GDP. This is the highest level since 1961. It is, however, encouraging that tax receipts in September 2021 have increased by 11.1% over the figure for September 2020 and government spending is modestly lower for that month. This is of course before the very substantial tax increases take effect. I worry that we are getting close to the optimal level above which further increases would be counterproductive, because they would stifle growth and act as a drag on GDP.

The UK has already become a relatively less attractive place to incorporate a company, because corporation taxes will increase by 6%—that is, an increase of 31.6% in the rate—from next April. On top of that is the effective 2.5% increase in national insurance, aggregating employers’ and employees’ contributions. I fear that we are likely to see a reduction in the number of start-up companies registered here. The costs of employment will act as a disincentive to the creation of jobs.

The Chancellor is optimistic about economic growth and the Government now need to deliver on pro-growth supply side policies that will support it. Can my noble friend tell your Lordships whether the Government recognise that we must be swifter and bolder in adopting a less cumbersome regulatory rule book for both services and goods? That means fewer quangos, not more. Many of the new Acts of Parliament being taken through your Lordships’ House establish new committees and commissions, often with increased regulatory powers. This is not what the country voted for in 2016. The Prime Minister welcomed the report of the Taskforce on Innovation, Growth and Regulatory Reform and he and my noble friend Lord Frost have said that the Government will drive forward necessary changes. Could the Minister confirm that the Government are indeed doing that?

My right honourable friend said in another place that the

“Budget increases total departmental spending over this Parliament by £150 billion. That is the largest increase this century, with spending growing by 3.8% a year in real terms. As a result of this spending review, and contrary to speculation, there will be a real-terms rise in overall spending for every single Department”.—[Official Report, Commons, 27/10/21; col. 277.]

However, the average annual growth figure shown in the Autumn Budget and spending review for the Foreign, Commonwealth and Development Office, on page 103, shows a reduction of 5% over the five years from 2019-20 to 2024-25. The FCDO is the only department facing a real-terms cut over that five-year period.

Is that the reason why the FCDO has been forced to propose the sale of around half the British embassy estate in Tokyo? Global Britain, our enhanced bilateral trade agreement, our application for accession to the CPTPP and our deepening collaboration in defence and security are all reasons why our relationship with Japan has become, without any doubt, one of our most important global partnerships. History and tradition are highly valued in Japan. Our embassy in Tokyo is the source of the special and unique status that the British Government and British people hold in Japanese society. If the embassy reduces its size, Japan will see it as the symbol of a smaller Britain. I ask my noble friend to recognise that the Treasury’s failure to provide the appropriate level of funding for our diplomatic presence around the world has led to this highly damaging proposal, which should be reconsidered as a matter of urgency.