Autumn Statement — House of Lords, 2015-12-03
Topic: Macroeconomics
Sheila Masters (Conservative, Centre-right): My Lords, I congratulate my noble friend Lord Carrington on leading today’s debate on the Autumn Statement. It is a pleasure to follow the noble Lord, Lord Skidelsky. I always enjoy his glass-half-empty analyses of the Chancellor’s policies but I hope one day to hear a cheerful critique of them In one of George W Bush’s characteristic statements, he said of a budget: "It’s clearly a budget. It’s got a lot of numbers in it". This is clearly an Autumn Statement—it has a lot of numbers in it—and indeed the accompanying report from the Office for Budgetary Responsibility has even more numbers. As we have already heard, the OBR’s numbers are particularly important because its forecast of higher tax revenues, in particular, has in effect allowed the Chancellor to increase government spending. However, the fact remains that in this Autumn Statement the Government continue to plan for annual deficits—albeit on a declining scale—until the last year of this Parliament One benefit of the steady growth which has been referred to is that public sector debt will fall as a percentage of GDP every year, but the end point will still have GDP at over 70%, which is an uncomfortable level. This is no austerity Autumn Statement. Expenditure will continue to go up every year. Lots of budgets continue to be protected. Of course, some departments will have to make tough choices but I have every expectation that efficiencies will be found. That is what the history of public sector management tells us I am sorry that the Government have again ignored one of the easiest ways to cut public sector costs: reshaping the bloated departmental structure of Whitehall. But I live in hope that one day they will see the light on this. The Government are on stronger ground on not hoarding assets. I particularly welcome the £4.5 billion-worth of land that has been identified for release and sale All this is sensible but not radical financial planning. The good news is that, if the forecasts are met, public expenditure will be comfortably below 40% of GDP at the end of the Parliament. Within that, importantly, welfare expenditure will fall to its lowest percentage for 30 years. I entirely agree with my noble friend Lord Carrington that we can certainly go a lot lower than 40% on public expenditure The Autumn Statement is not a place for major tax changes, although there are some in it, but importantly it is the back-drop to next year’s Budget. The Government have already announced their path to a low rate of corporation tax, at 18%. That is excellent, and one of the factors contributing to Britain rising up the international competitive league tables again—we are now sixth for ease of doing business. But there is a lot of work still to do on taxation. In particular, the top rate of tax at 45% is still too high. It is above the top rates in the US, the global average and the EU average—and it is no comfort that it is below Zimbabwe’s top rate We also have one of the highest rates of inheritance tax and the yield from other capital taxes is forecast to rise significantly in the coming years. I understand completely that the Government need to raise taxes to balance the books. But they also need to be careful that the cumulative impact does not drive out incentives for wealth creation. The Government are aiming, rightly, for a lower tax and higher growth economy, but there is a lurking danger of achieving the reverse I completely agree with my noble friend Lord Carrington that complexity in the tax system is a major problem. The Chancellor has not helped in this regard, having increased the length and complexity of the tax code. It is time that the Government devoted more attention to streamlining the tax system This was a welcome Autumn Statement, but, as ever, there is much still to do to.