King’s Speech Debate

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Department: HM Treasury
Monday 13th November 2023

(6 months, 1 week ago)

Lords Chamber
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Lord Desai Portrait Lord Desai (CB)
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My Lords, it is a privilege to follow the noble Lord, Lord Sikka, but unfortunately he has said some of the things I was going to say, so, as the 57th speaker, I will have to invent something new. Let me say this: I am more worried about the Autumn Statement than about the King’s Speech, because the King’s Speech has passed and we have all spoken on that. I worry about what is about to happen. I think there is a sort of madness in this Government who have been here for 13 years, that somehow the way to proceed is to give tax cuts to the rich and tax the poor. It is a very simple sort of logic any time you say something. You want investment? Give money to the businesses, forgive their taxes and investment will go up. Empirical evidence says that that is never the case: giving tax incentives to investors has never led to investment.

The nearest example is what George Osborne did during the 2010-15 Government. He made corporation tax cuts while giving no concessions to the poorer people, and investment did not increase, because we know there was no growth. Interest rates were low in those days: remember, we had historically one of the lowest interest rates from 2008 to 2020. Investment did not increase; productivity did not increase. People just pocketed the money and spent it on whatever they liked, but talk about anything in universal credit—you want to increase universal credit by £1? Suddenly, fiscal responsibility comes to you: we cannot have a deficit. If you give money to the poor, you will cause a deficit. If you give money to the rich, growth will occur. These are two fallacies on which we have built a really weakened and second-rate economy.

In a sense, it is interesting how things are very topsy-turvy. The Prime Minister wants inflation to come down, and I wish him luck, but he also has to realise that it was inflation and him not adjusting income tax limits to inflation which has got him the surplus that is about to be spent at the Autumn Statement. The room that we suddenly have for ourselves is actually due to inflation, and when inflation stops, the room is going to go away, so he had better be careful.

There is a serious rise in child poverty in this country, which is supposed to be one of the richest countries in the world, we are told—the numbers have been given by the noble Lord, Lord Sikka, and others—and we ought to be ashamed of this. However, all the time the discussion is: how can we abolish inheritance tax? The poor rich people are worried about inheritance tax. The wealth creators need more money. Of course, the people who work do not create wealth, they just work. The wealth creators are people who do not work, who just hire people. I am sorry to be left-wing in these matters, but in a sense it is a perverse understanding of public finances and a perverse understanding of public welfare that have got us into this trouble.

Interestingly, nothing I have said does not have empirical evidence. If people want to see it, I can show them empirical evidence that tax cuts do not cause growth. After Nigel Lawson cut taxes—a great big historic moment in the Thatcher legend—we had a recession. I was here then; 1990 and 1991 were recession years. In the Autumn Statement, please do not cut taxes.