Queen’s Speech — House of Lords, 2017-06-26
Topic: Macroeconomics
Sheila Masters (Conservative, Centre-right): My Lords, we are facing a two-year Parliament dominated by the legislation that will implement the historic decision taken by the British people last summer. This is an awesome task but I hope that this House will stick to its core competence of scrutinising and improving legislation and will not try to change that legislation’s intent The task of dealing with the legislation for our exit is so immense that there is not much time left for other legislation. That is a very good thing. Obviously, we have to have the Bills related to exiting the EU. The next priority must be to keep citizens safe from harm and I welcome in particular the proposed legislation on domestic violence and abuse, and on digital safety. However, we should be sceptical about the need for any more laws. It is not clear to me that all the remaining Bills are worth while. I will single out just one. In the previous Session, we had HS2 legislation, and I pay tribute to the noble Lords who did hard labour on the special Bill Committee. Now we are promised another HS2 Bill. I remain unconvinced about the project. It is not clear that its benefits outweigh its massive costs, which are on some estimates up to £200 billion. That is on top of the disruption and destruction that will be part of the project. It is not too late to change course on HS2; there are far more deserving homes for the taxpayers’ billions Today’s debate includes economic affairs, and that is the focus for my remaining remarks. If we had believed the forecasts that the Treasury produced as part of "project fear" last year, our economy should now be in recession. Wrong—our economy has continued to grow. Although that growth slowed in the first quarter of this year, the outlook is not gloomy. For example, the CBI reports that the UK’s manufacturing order books are at a 30-year high. The Treasury said that unemployment would jump by half a million. Wrong—unemployment has continued to fall and employment is at a record high. The Treasury said that foreign investment in the UK would fall, but there is no sign of that happening and a number of significant corporations have recommitted to investing in the UK. Of course there are some issues, and rising inflation is a problem in particular for households that face lower income growth, but the long-term outlook for the UK is still positive, with signs that many non-EU countries are keen to enter into new trade deals that will take effect when we leave the EU. We have always been a great trading nation and I look forward to the Bills on trade and customs that will underpin our ability to forge our own trading destiny in the future As other noble Lords have reminded us, we must not forget that a large fiscal challenge faces us. Debt is expected to peak at just short of 90% of GDP, and the previous Budget paved the way for an even longer timeline for removing the deficit. We cannot wish away those facts of life. More than anything else, we need to stimulate economic growth, which is why building the foundations for international trade will be so important for us The gracious Speech had little to say on economic growth beyond legislation that relates to electric cars and commercial satellites. That is good; Governments cannot legislate for growth. The most important thing that they can do is create an environment where businesses can prosper. Tax is an important part of that environment. Corporation tax rates are on a path towards 17% and I applaud the Government for that commitment. We need companies to invest and grow, and success should not be penalised. However, we still have tax rates on individuals that are too high at both ends of the spectrum. The top rate of 45% is uncompetitive and is above the EU, OECD and global averages, and some marginal rates are even higher. At the bottom end, the Government rightly claim credit for the basic rate threshold of £11,500, but the ultimate stealth tax of national insurance still kicks in at about £8,000 per annum and at a rate of 12% Tax is not just a question of rates; it is also about complexity, and we have one of the most complex systems in the world. Low tax rates have been proven to raise yields, but one does not have to be a devotee of the Laffer curve to believe that pervasive low rates, together with a system that was stripped of complexity, would hugely boost our economic strength. I commend that to the Government as something to complement their huge efforts to promote our nation’s economic good health.