Autumn Statement: Economy — House of Lords, 2016-11-29
Topic: Macroeconomics
Ranbir Suri (Conservative, Centre-right): My Lords, first, I am glad that this will be my last response to the Autumn Statement—not that I am going anywhere, but I am relieved that the Chancellor has decided to have only one large, set-piece fiscal event a year. In previous years, the Autumn Statement has become disconcertingly like the Budget, locking us into a frustratingly short-term mindset. I remember the need for it when it was first announced in 1975, when all the financial indicators were warning of terrible times, but we now, thankfully, live in more stable times, not least because of the measures taken by the former Member for Finchley, more recently of this place. Indeed, I believe the noble Lord in whose name this debate is tabled served briefly in her Government Moving forward to the present day, I find plenty to be pleased with in this latest set of data. Growth is projected to outstrip that in the eurozone, and a number of assumptions made by the Treasury prior to the referendum have been proved false. I was not a Brexiteer, and campaigned hard for remain, but even I was sceptical about much of the material put out by the Government. Growth has not collapsed and will be 2.1% next year. Inflation has not skyrocketed. Unemployment has actually fallen significantly. A recession is not occurring, and the OBR is not even predicting one. Indeed, even business investment has held up well, despite great uncertainty. All of this is testament to the resilience of our country’s economy and puts us on a firm footing heading into the Brexit talks However, there are some indicators which I am worried about. The likelihood of debt hitting 90% of GDP greatly concerns me. I feel that I must remind all my noble friends that borrowing is always a burden that we choose to undergo but do not bear the costs of paying back. The cost of servicing the debt last year was equivalent to 3% of GDP or 8% of government revenues. Every percentage point we pile on to that figure means fewer nurses, less funding for academies and an ever-diminishing number of warships. The Chancellor has changed the debt reduction timeline to allow himself fiscal headroom, quite sensibly. However, there are a number of areas where I feel expenditure could be diverted to more productive investment and therefore boost growth without adding further funds Some time ago, I spoke about the enormous and swelling HS2 budget. The Eddington report was clear that that the pressing rail capacity issue was overcrowded commuter lines around big cities, especially London, Bristol and Manchester. The case for spending £55 billion on a high-speed connective link is weak when it makes more sense to invest the money in higher-capacity and faster regional and metropolitan services. I can confidently predict that, as with most big infrastructure projects, that figure will rise during construction. That may also be the case with the projects I suggest, but at least they will be more manageable The obvious cure for the uncertainty felt by business is to set out a transparent timetable for Brexit. If the Government lose the Supreme Court appeal, they must come to Parliament with a concise Bill authorising the triggering of Article 50. This House would be ill advised to frustrate the will of the people, and I am confident that it would not be so foolhardy and brash. Beyond this, the Government have to just show that Britain remains open for business and is willing to provide a friendly atmosphere. The announcement of high-speed broadband and a new runway at Heathrow have both been large steps towards this aim, but another key one would be corporation tax cuts. Although we currently have the lowest taxes of any major economy, President-elect Trump has pledged to cut his to 15%. We must match any changes, not only to make ourselves attractive but to recompense businesspeople who could be negatively affected by less free access to the single market.