Queen’s Speech — House of Lords, 2015-06-04
Topic: Macroeconomics
Francis Thomas Baring (Conservative, Centre-right): My Lords, the electorate spoke and trusted the Conservatives to carry on the rescue mission for the economy that was started in 2010 by the coalition. Then, we inherited an economy on its knees. We had emerged from the most severe recession in post-war history. We had a big structural deficit. Government debt was 60% of GDP and rising. It has been hard work over the past five years to restore the economy to a state that resembles health. I note today the recent OECD survey, which said that we will have the fastest-growing economy in the G7 this year The job is still work in progress, but there is much to cheer about. Recent economic news has included better than expected April budget deficit news, the construction business confidence survey and buoyant UK retail sales. Unemployment has been falling rapidly, and the growth in jobs is notable because they are focused in the private sector. Real disposable incomes are starting to rise again. Manufacturing industry is generally on an upward path. The Chancellor has been correct to reduce the deficit largely through expenditure reductions rather than taxation and has been wise not to adopt wholly Keynesian measures to resolve the dangerous situation we inherited So how are the Government planning to reduce the budget deficit in part 2 of the rescue plan? I welcome the full employment and welfare benefits Bill, with its aim to freeze working benefits, tax credits and child benefits from 2016-17 for two years. I also welcome the planned reduction in the benefit cap. I support the scrapping of the automatic entitlement to housing benefit for 18 to 21 year-olds. I await with interest the plans for the remaining welfare cuts, amounting to £12 billion in total In the area of business, I applaud the enterprise Bill, with its pledge to free entrepreneurs from burdensome regulation by cutting at least £10 billion-worth of red tape and to create a small business conciliation service, as many other noble Lords have mentioned, to address late payments to suppliers. Government promises to do away with pointless rules and bureaucracy are nothing new, but this latest deregulatory drive is the first that will require wholly independent regulators to contribute. Business groups have been supportive of the commitments. However, as the British Chambers of Commerce has pointed out, since many of the costly regulatory burdens originate in Europe, genuine cuts to red tape may rely as much on reforms to the EU as on anything a domestic Government can do I also welcome the trade union Bill, which makes it harder for strikes to be called. It is only fair to make the stipulation that 50% of union members have to turn out in a vote for strike action for the walkout to be legal. I also approve of the proposal that, for essential public services, a strike will also have to have the support of 40% of workers eligible to vote I approve of the plans in the enterprise Bill to pledge 3 million new apprenticeships. However, the plan to fund these by a new visa levy for those employing foreign labour has been queried by the EEF manufacturers group. According to the Financial Times, the EEF’s head of employment policy, Tim Thomas, said that the levy proposed seemed high. With regard to the proposed EU referendum, the director-general of the British Chambers of Commerce, John Longworth, said that the vote should take place, "as soon as is practicable", to minimise uncertainty. Overall, I think that we will have a more business-friendly regime at BIS for the next five years On the subject of taxation, I note the plan in the national insurance contributions and finance Bill for a tax lock to ban rises in income tax rates, VAT rates or national insurance contributions for individuals, employees and employers, but I am just not sure whether that is a good thing for a Government to legislate on, to stop things happening. I like the proposal to exempt from income tax those working 30 hours or more on the minimum wage, which would incentivise work over welfare. I also welcome the plan to raise the income tax threshold to £12,500 a year. However, more should be done at the higher rate of the tax scale to reduce the rate to 40%, which after all is only what it was under much of the Labour Government, and to raise that threshold to £50,000 While I am full of praise for how the Government cut corporation tax over the last period, this has not been matched by the cutting of personal taxes. I am a great believer in the Laffer curve theory, which says that within reason lower taxes bring in higher revenues; this was certainly the case a few years ago when I got a study done by the House of Lords Library which stated the beneficial effect when corporation tax was cut from 52% to 30%, as it was at that time On the theme of tax, I move on to tax simplification. My noble friend Lady Noakes made an excellent speech highlighting this a year ago, and it is still valid today. Her first point was that the Office of Tax Simplification has done a great job but its recommendations have not all been heeded, and more than 2,000 pages of complex tax legislation had been added by the end of the last Parliament. She stated that the Chancellor had used the principle of dynamic modelling to underpin his reductions in corporation tax the year before last, and this should be extended to income tax. The 2020 Tax Commission, which was sponsored by the TaxPayers’ Alliance and the Institute of Directors, echoed the conclusion of the work done by my noble friend Lord Forsyth of Drumlean’s Tax Reform Commission nine years ago. Its proposal, which is truly radical, was to abolish most taxes and replace them with a single rate of income tax of 30% and a total restraint on taxes as a percentage of national income of around one-third. It said that this would add over 9% to GDP over 15 years and the annual growth rate would be improved by 0.4% I make no apologies for bringing this topic up again for our new Minister, the noble Lord, Lord O’Neill of Gatley, whom I would like to warmly welcome and congratulate on his maiden speech. I am sure that he will keep up the high standards attained in recent years by my noble friends Lady Noakes, Lord Sassoon and Lord Deighton. If he is as clever with government legislation as he is with his acronyms, we are all going to be very fortunate. His appointment continues the Goldman Sachs involvement in this House. Could I ask him for his thoughts on these tax simplification views Overall, I welcome the humble Address measures with regard to business and economic affairs and wish them a fair passage through this House.