Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
Karan Bilimoria (Crossbench, Unknown): My Lords, the Government are very proud of the good things in the economy at the moment. As the Minister said in opening the debate, we have low inflation, low interest rates, high employment and growth figures et cetera, but, as he said, it is austerity to prosperity, and he admitted frankly that productivity is too low and the deficit too high Earlier this month, my noble friend Lord Low held a debate which I chaired. The motion was: "This house believes that the Government’s deficit reduction plan involves cutting the deficit too far and too fast" The noble Lord, Lord Skidelsky, was present as well. We had Jonathan Portes, the well known economist, Simon Wren-Lewis, professor of economics at Oxford University, Roger Bootle and Doug McWilliams—all very well known economists. When the motion was put to the vote at the insistence of the noble Lord, Lord Skidelsky, it was carried quite comfortably. The point was made, as the noble Lord, Lord Skidelsky, has mentioned in the debate, that the calculations are that if austerity had not been as severe as it was, the growth rate could have been 5% to 10% higher over the five-year period. One needs just to do the sums to see the difference that that would have made. On the other hand, austerity has created confidence in the global financial markets and we have the security of a lender of last resort in the form of the Bank of England The Chancellor has, on the one hand, shown his commitment to long-term prosperity for the economy by sticking to the austerity agenda, but, on the other, he has not had the guts to invest in what will make this country truly competitive and increase the productivity that so many noble Lords have spoken about. For example, where in the Budget is an increase in investment in higher education? We invest less by far as a proportion of GDP than the United States, the EU average and the OECD average. This Labour proposal to reduce tuition fees to £6,000 is a red herring. What we need is more investment in higher education. What about investment in innovation? Where in the Budget is the major investment in R&D and innovation? Once again, we as a country invest way below the United States, the EU and the OECD average as a proportion of GDP. The patent box is tinkering at the edges. How can we get businesses and universities to invest more in innovation? Will the Minister tell us about that What about tax rates being competitive? A brilliant thing the Government have done is to bring corporation tax down to 20%. It is one of the best things they have done, attracting inward investment and making our companies more competitive. On the other hand, the Government do not have the guts to bring the income tax rate down to 40%. In his enthusiastic speech, the noble Lord, Lord Rooker, spoke about the catalogue of achievements of the Blair Government. It was the Blair Government who carried on with 40% rate of tax, until it was increased to 50%. It was the Blair Government who reduced capital gains tax to 18%, which was hugely competitive, while entrepreneurs’ relief was 10%, encouraging wealth creation, prosperity and tax competitiveness. On the other hand, the Labour Government’s mistake was to increase public spending to nearly 50% of GDP. This Government want to reduce it to 36% of GDP. I still believe that will require unrealistic and drastic cuts in the welfare state and the NHS, which make up a huge proportion of our public spending. Will the Minister explain how the Government are going to achieve that drastic cut? As the Chancellor said, the EU has 7% of the world’s population, 25% of its economy and 50% of its welfare spending. In the Chancellor’s words, we cannot go on like this. Will the Minister explain what he is going to do When it comes to defence, the Government refuse to commit to the 2% of GDP NATO commitment. Will the Minister commit to it? The SDSR was negligent. We do not have our Nimrods, which we now need with Russian submarine incursions. We have no aircraft carrier capability for Harriers, which we have needed several times over the past five years, let alone now with the threat in the Falklands. For one of the strongest defence countries in the world to have no carrier capability for a decade is negligent. The Army cannot even fill Wembley, which is negligent. The security of our country is our number one priority. We have physically destroyed the Nimrods and depend for carriers on the French—on the 200th anniversary of the Battle of Waterloo. Will the Minister tell us whether the back-up from the French has been effective When he speaks, will the noble Lord, Lord Davies, speak about Labour’s policies? We hear about the dangerous policies: the mansion tax; raising income tax to 50p; increasing corporation tax by perhaps up to 6%; employees sitting on boards of companies’ remuneration committees; employees being given first refusal when a company is sold; and employees being given a share of companies’ profits. To an entrepreneur and a businessman, these sound like real communist measures, and we know how successful communism has been. The business community has genuine concern about the leader of the Opposition and his care for, knowledge of and familiarity with business. He has missed out business in many major speeches. Will the noble Lord on the Front Bench confirm that these Labour measures will be implemented? What about the SNP? The leader of the Opposition says he will not go into coalition with the SNP, but what if the SNP props up a Labour Government? It wants to get rid of Trident, our nuclear deterrent. Would the noble Lord, Lord Davies, agree with that? Increase public expenditure and you have the nightmare scenario of Labour being propped up by the SNP. It reminds me that in the middle of the financial crisis, my fellow Fellow of Sidney Sussex College, Cambridge, Desmond Tutu, looked up and said, "Oh God, we know you’re up there, but can you make it a little more obvious?" It is a question of balance. Britain is number two in the world in inward investment. We have to protect that, and Governments have not been able to. If you look at the graphs in the Budget reports, Governments have not been able to balance their books. Public spending at 40% is the best a Government can achieve. That is what we should target, and getting a 40% tax take. With regard to debt interest, servicing it alone takes 2.5% of GDP. Will the Minister tell us what the plan is when debt interest goes up? How will the Government deal with that amount of more than £50 billion The Office of Tax Simplification is an oxymoron. Simplification of tax collection is in this Budget, but the tax code is still 11,000 pages long. There are huge issues here. As chancellor of the University of Birmingham, I chaired for the first time the university court and the university annual meeting. I was able proudly to say that it is a billion-dollar institution. It has revenue of more than £500 million, a healthy surplus, a healthy cash position and, most importantly, a £300 million infrastructure investment programme over the next five years, with a state-of-the-art swimming pool, libraries, a dental centre, new student accommodation and all the things that make it attractive to inward investment in terms of students and academics from around the world. If only our country could balance its books in that way and have an investment programme in the future, we would be able to get high productivity, get the deficit down and get our debt down.