Economy: Budget Statement — House of Lords, 2018-11-13
Topic: Macroeconomics
John Horam (Conservative, Centre-right): My Lords, I hope that the noble Lord, Lord Haskel, will forgive me but I am not familiar with Table B.1 on page 89 of the Red Book. I am afraid I have not got quite that far into the detail of the Budget but I want to make a couple of other points, which he might agree with First, the central objective of economic policy should always be to keep economic growth going at the maximum sustainable level. I am looking directly at the noble Lord, Lord Skidelsky, as I make those remarks. If you keep economic growth going in that way then every other problem, whether it is deficit, debt or inflation—I see that the noble Lord, Lord Skidelsky, is nodding and I feel a glow of pride at that—becomes more manageable. That is the point of getting economic growth at the maximum level where you can sustain it. By that token, therefore, the Chancellor is entirely right to do what he did in the Budget because the fact is that economic growth is very anaemic at the moment, as many noble Lords have pointed out. The Chancellor was right to give a boost and he did so, and all the indicators and predictions by economists are that that will give a mild stimulus—a very mild stimulus, of course—to growth The second good thing about the Budget is that it was a restrained boost and rightly so, because he had to keep in his back pocket or behind the sofa—wherever Chancellors put these things—some money for the difficulty that we will face if we have an even worse problem over Brexit than we appear to face at the moment. It was the right call, first, in that it gave a boost and, secondly, in that it was a restrained boost. However, it was of course short-term to face the present situation over the next six to nine months. We all know—the point has been made several times during the debate—that there are other big issues which we have to face Here, I think the noble Lord, Lord Haskel, will agree with me: we cannot deal with these issues other than by raising taxation. These are issues such as poverty and what has been revealed by the rolling out of universal credit, for example. There are some of the decisions that we have taken in previous years, not just on the levels of benefit—I certainly welcome the Government’s improvement on those—but on the actual framework. How has it come about that people in some circumstances have been left for five weeks between the end of benefit and the beginning of universal credit? How could anyone conceive of that being a sensible thing to do? These are people who have no savings. They probably have debt, never mind any savings. How are they to manage for five weeks with nothing coming in Equally, despite many people thinking the other way, I am afraid I was always opposed to having benefits paid under universal credit every four weeks. Most of these people are used to budgeting every week, not every four weeks. I know that can be changed and that there are arrangements under universal credit for it to be adjusted if circumstances dictate so, but I bet that they have to go through a very bureaucratic process to get that adjustment made. This is therefore a fundamental error, which I deplore, with the system. None the less, it is being tackled and I am very glad that it is The other issue, among many others I might mention, is skills. Many people in this country now have credentials, diplomas, degrees and all the rest of it but they do not have skills. Employers and businesses need skills but too many people have chalked up a huge debt from tuition fees to get something almost irrelevant to a prospective employer. That needs to be tackled in a major way. To do these things, as well as all the other things many noble Lords have mentioned, taxes will have to rise. My noble friend Lord Northbrook quoted some figures but I slightly disagree with him. The figures I have from the Institute for Fiscal Studies suggest that, at the moment, taxes in the UK are 35% of national income. In Germany, the equivalent figure is 39%; in the Netherlands, it is 41%; in France—I love the French—it is 47%. This shows that, by comparison with our European neighbours, we are a lightly taxed country. We are also a lightly regulated country, I might add to some people who think the reverse. There is therefore room for us to increase taxes to deal with some of the serious social and economic problems that we face For example, why are capital gains and dividends not taxed as highly as earned income? They were under Margaret Thatcher and I am a Thatcherite on this: let us go back to what she did. They were taxed at the same rate and so they should be. Again, when councils are short of money, why is a house worth £1 million taxed at the same rate for council tax as a house worth £10 million? Why do we not have two extra bands of council tax to deal with the issues? That would surely give local authorities more money to deal with the problems that they face One eminent tax accountant made a point the other day about all the allowances, remissions and loopholes in the tax system. He reckoned that there are 1,200 such reliefs, taking away £400 billion from the Exchequer. He gave as an example the entrepreneur’s relief if a person sells his company or small business. Why should he get any relief at all? That costs the Exchequer £2.7 billion. If you invest in the AIM stock market, you get relief on that. Pension relief costs us £30 billion; I defer to my noble friend Lady Altmann on that, but surely anyone who can squirrel away more than £40,000 does not need a greater incentive to do so. All this is available. Then there are more unconventional ideas, such as those mentioned by my noble friend Lord Gadhia, about unwinding QE and having an infrastructure sovereign fund, which is a very attractive idea There are immense long-term social and economic problems that we need to face. There are the resources to deal with them if we tackle them in a sensible way. I applaud the Budget for what it was—as a short-term, judicious fix—but I hope that the next Budget is much bolder and much more ambitious.