Budget Statement — House of Lords, 2017-12-04
Topic: Macroeconomics
John Wakeham (Conservative, Centre-right): My Lords, I am delighted to follow the right reverend Prelate the Bishop of Portsmouth. I do not quite live in his diocese—I live on the very edge of it, in Winchester—but I have heard him speak on many occasions. I do not usually agree with him and I am not sure that I entirely agree with him this time, but he always makes his case very persuasively and he adds greatly to the debates in the House. I congratulate him I first spoke in a Budget debate in the spring of 1974 following Denis Healey’s first Budget, and I have spoken in most of these debates ever since. I am pretty sceptical about the Budget forecasts that Chancellors make on growth, inflation, productivity and what have you. I am not saying that they are always wrong but they seem to be wrong as often as they are right, and it remains to be seen whether this Chancellor is right or wrong. I hope that things will be better than he suggested. I can well understand why George Osborne subcontracted the forecasting problem to an outside body, so it is not revolutionary to be somewhat cautious about Budget forecasts Of course, our productivity is too low, and I welcome the steps that the Chancellor is taking to improve matters, but I am particularly concerned about the way we make comparisons regarding our productivity without mentioning the level of employment in this country. Employment and low unemployment are, in their different ways, both at record levels, and I do not believe they can be totally dissociated from productivity. They are things which any civilised society ought to be proud of. If you add to that Brexit and the need to recover from the economic disaster of recent years, my view is that the Chancellor did a pretty good job in his last Budget Looking at the measures that have or have not been included in the Budget, I think that one or two things could have been done differently. The last time I spoke on these matters—it seems only a few days ago that my noble friend spoke from the Front Bench—I was very critical of the level of consultation between HMRC and professional bodies over taxation matters. Maybe I was a bit unfair, as I was very pleased to see from the Red Book that the Government will consult before making any changes to taxing the self-employed. That is good, but the Government have a role in that. They need to make the differences in taxation and national insurance between the self-employed and the employed as small as possible. It is not easy but, the more they can do that, the less of a problem they will have When I was in business years ago, Jim Callaghan, as Chancellor, gave capital allowances at more than 100% for a short while. That increased capital expenditure and was particularly valuable to a number of small businesses, and is another thing the current Chancellor could do Perhaps I may for a moment look back to when I ran a small businesses. My difficulty with getting working capital was due not to the cost of the capital but to my inability to persuade the banks to lend me the money that I needed. That was much more difficult than the rate of interest I had to pay. Of course I wanted the lowest rate I could possibly get, but that was not the main factor. Currently, many people who are not in business—I guess that some here today are—have money in their bank current account, whereas if they put it on deposit they would get interest of 0.5% or 1%. I just wonder whether the banks could be encouraged to find a way of lending money to smaller businesses to a greater extent than they currently do, and perhaps give a slightly greater return to those with deposits The Government will know—there is no need to go over the subject again—how carefully we shall be watching their progress on the Making Tax Digital initiative. What they are doing is highly desirable but, as I said in the last debate, they have set about it in the wrong way. HMRC knows what has to be done to make these desirable reforms happen. The Government need to encourage it to do it in an acceptable way I will finish on a much bigger issue facing us, and in particular the Treasury and HMRC. The Chancellor certainly referred to it, but we have not yet got to the problem. I think all of us realise that we are at the beginning of a massive industrial revolution in which technology will revolutionise our whole economy. Much of this is good, but there are dangers. The five biggest companies in the world are now internet companies. They will fundamentally change the fiscal landscape, and that trend will continue. We have to work out how to handle that in terms of taxation and a competitive marketplace. These enormous companies can make their profits and pay tax, I suspect, pretty much where they like, and as a result corporation tax will become yesterday’s tax before very long. The answer is that if you are a small business based in the UK, you will pay corporation tax; if you are a big, powerful company that trades internationally, you will have many other options Coupled with this is the ability of any of these supra-national corporations to enter virtually any business they want and put the competition out of business through predatory pricing. That runs the risk of standing on its head virtually every norm on which our economy and many of the world’s economies have been run, changing them beyond recognition. I think the Government understand this, and I hope proper consideration is being given to the problem of the downsides, as well as the upsides.