Autumn Statement 2022

Lord Fox Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Fox (LD)]

My Lords, this is my first chance to welcome the noble Baroness, Lady Penn, back to her position at the Dispatch Box, and obviously my first chance to welcome the noble Baroness, Lady Lea, to her position on the Conservative Benches. I draw attention to the fact that I am on the executive of both the All-Party Parliamentary Motor Group and the Chemical Industry All-Party Parliamentary Group.

For this debate to be so long after the Statement has given time for perspective to develop—that is perhaps putting a gloss on it. Reports have been published and analysis probing the implications of the numbers and projections is available, and I am sure that your Lordships will draw on that research in various ways. For example, the Institute for Fiscal Studies concluded that the Chancellor was

“hemmed in by rising interest payments and poor growth prospects”

and in this position

“decided to allow borrowing to rise, and to put off properly tough decisions”

until after the next election. For example, I note that the vast bulk of the projected cuts in the benefits budget are scheduled to start in 2024.

That means that borrowing will take the strain in the near term, with the great majority of the planned consolidation due only after the next election. Decisions like this indicate that the Financial Statement was informed not just by a lack of headroom but by fairly cynical politics. I would judge that Chancellor Hunt has adopted either a Micawber strategy—“Something might turn up”—or what I would call the advance Liam Byrne strategy: he has already left a note for the next incoming Chancellor that says, “There’s no money left”.

However, the serious side is what this is doing to people, and how hard it is hitting and will hit families. Paul Johnson of the IFS was very clear when he said:

“The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals.”


The Office for Budget Responsibility—the OBR—reports that living standards will be down by 7% over this year and the next. This is the biggest fall in living memory and off the back of very poor income growth for many years prior. The effects of this will be felt across the country. To quote Paul Johnson of the IFS again, he said:

“This will hit everyone. But perhaps it will be those on middling sorts of incomes who feel the biggest hit … Middle England is set for a shock.”


What is clear is that Chancellor Hunt, and whoever is in that role after the next election, will reap the costs of Conservative chaos and a long-term failure to grow the economy. Combined with this are the effects of an ageing population, hundreds of thousands—if not millions—of people unexpectedly stepping out of the economy, QE and high levels of past borrowing. On this latter point, we face simply huge levels of expected spend on debt interest. Interest is more or less double what had been forecast and will hit around £100 billion a year by the end of the forecast period.

Without growth, however, the situation will be even worse and the Chancellor’s projections rely on growth built into the OBR projections. Yet it is very hard to see how this Statement helps that growth. Indeed, it is very likely that it will contract the economy rather than grow it. This is not helped by at least one change that actually undermines future growth. I shall use the rest of my speech to explain.

The Chancellor used his Statement to make changes in the R&D tax credit scheme. The scheme currently provides tax incentives for companies to invest in innovation, which is considered key to growing the technology base of the country. Indeed, we should take no word other than the Government’s, who trumpeted it as such a measure. In his Autumn Statement, however, the Chancellor made the incentives much less generous for small and medium-sized businesses. This is a very misplaced change, which some people have described as disastrous. For example, Make UK points out that about two-thirds of private sector expenditure on R&D is made by manufacturing companies and a large number of those will be hit by this change.

Elsewhere, the BioIndustry Association, which represents life science companies, warned that the changes would result in promising innovations, ranging from vaccines to cancer treatments, moving overseas. In taking from smaller companies, the Chancellor seems to be giving back to the country’s bigger businesses via changes in the R&D expenditure credit—RDEC—scheme. But it is in SMEs that key innovations often start, and to hit them is not sensible. I am not decrying the RDEC system, which has been shown to yield very positive returns. Increasing the generosity of RDEC, however, should not come at the expense of support for SMEs.

The Chancellor’s justification for this very detrimental change is that, in the view of the Treasury, the “generosity” —its word—of the scheme had made it a target for fraud. First, we should point out that the Treasury’s record on fraud is not glorious, given the billions of pounds shelled out during Covid that will never be repaid. Secondly, if there is an acknowledged problem in the administration of the scheme, surely the sensible thing to do is to administer it better. Yet reducing the value of the scheme means that genuine claimants are being punished for a failure properly to police the scheme. It is a very blunt instrument. If the Treasury was concerned about fraud, perhaps it could have instigated a system that properly checked the validity of the claims. If it wanted to drive growth, it should look at other systems of support and take the CBI’s advice, such as to look more carefully at the definition of R&D and to improve complicated HMRC and BEIS tax credit guidance.

It is clear that the Chancellor had a tough job, especially given the wreckage created by his immediate predecessor. However, while we are all agreed that growth is the key to digging the nation out of this hole, the Chancellor is introducing measures that will reduce growth. This is not only practically damaging but a very clear indication that this Government do not understand innovation—and that is very worrying.

Economy: Balance of Payments and Industrial Productivity

Lord Fox Excerpts

Thursday 10th December 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, my noble friend is technically correct that the balance of payments current account reflects the difference between our national savings and our national investment performance—one is the reverse side of the other. The best way to improve it is by reducing our domestic savings rate but remaining as attractive as we are to overseas investments.

[Lord Fox (LD)]

My Lords, I draw attention to my interest in the register of Members’ interests. I am sure that the Minister has seen the verdicts of the EEF—the manufacturers’ association—on the current downbeat mood in manufacturing and of the respected OBR, which says that the apprentice levy is a workplace tax. Does he agree with those verdicts and can he explain how they will help with fixing the foundations and uplifting the mood of manufacturers?

[Lord O’Neill of Gatley]

My Lords, there were at least three questions there but I shall try to be brief. I speak frequently to the EEF and its survey unfortunately reflects similar and growing evidence from surveys all over the world of weakness in manufacturing. The UK’s most regular monthly survey of the degree of optimism, or otherwise, in business shows that it remains one of the strongest in the G7 countries.

Queen’s Speech

Lord Fox Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Fox (LD)]

My Lords, before I begin, I should draw attention to the Members’ register of interests and the fact that I am a member of the executive team of GKN plc and that I hold shares in Smiths Group plc, a former employer. They are both global engineering companies with a strong manufacturing footprint in the United Kingdom.

I feel very fortunate to participate in today’s debate, it having been graced by two such excellent maiden speakers. The noble Lords, Lord O’Neill and Lord King, should be congratulated, as indeed they have been, on those speeches. I feel less fortunate in coming in as speaker number 35 in this debate, not least because I am following some absolutely excellent speeches from other Members. However, I will try my best not to repeat what has been said and to add a few other points.

A large proportion of the debate has focused on productivity, as, I am afraid, I was intending to do. The diagnosis is agreed and it was set out by the noble Lord, Lord O’Neill, very clearly at the beginning: the UK is very much falling behind the G7 in productivity. So we agree on the diagnosis, although the noble Lord, Lord Desai, begged to differ a little and tried to split up the sector. There are statistics that to some extent support what he said. The manufacturing statistics and data put out by the Engineering Employers’ Federation, for example, show that manufacturing and advanced manufacturing are delivering productivity at a rate different from that of some of the other sectors, particularly the services sector. Therefore, perhaps it is not a one-pace economy and we have to think about these things in a number of different ways.

Then, the economic big guns were rolled out. In a way that is perhaps heartening, almost all of them have had a different suggestion as to the solution to the productivity problem. This kind of confirmed what I found when I started to really look at this. I went to the Bank of England’s writing on it and was even more heartened when I found that it confessed to being puzzled by the situation. It does worry me a little when the Bank of England is puzzled. It cited the position in the cycle, where we are in fact growing capacity ahead of the need for that capacity. It cited the redeployment of people from productive tasks to business development. It talked about lower investment—I will come back to lower investment in more detail in a minute—and the inefficient allocation of capital. For a scientist, not an economist, all these things seem feasible. However, at the end of it all, the Bank of England did say that it was puzzled. This illustrates, as this debate has illustrated, that more work is necessary if we are going to explain the issues around the productivity gap. I ask the Minister to confirm that her team, and perhaps the Treasury and DBIS together, are working on a better understanding of some of the key issues.

For us to work together on this, we have to have confidence in the statistics. A number of doubts have been expressed about those statistics. Sometimes, if the message is not what we want to hear, we throw doubt on statistics. It could not possibly be true, for example, that France is more productive than us—or is it? We need to start to have some focus on the key levers that we ought to be pulling in this area.

As an aside, I want to talk a little about investment. The availability of capital, particularly for SMEs, is a key issue. Finance for working capital, for expansion and for start-up is vital. It does seem that, during the recession, this had dried up. The tendency has been to blame banks and banks alone for this drying up. I suggest that banks are not necessarily the right sort of lender for many of these kinds of activities. Their risk profile, particularly of late, often does not match the sort of financial package that people are looking for. As noted today by several other speakers, we need to be in a position where we are fostering a more diverse source of capital and a broader pool of finance.

The Competition and Markets Authority is, to some extent, looking at SME banking. Its interim report is, I think, due some time in the autumn. I ask those in the ministerial team whether they would be able to bring back some of those interim findings. Perhaps using the expertise of the noble Lord, Lord O’Neill, in this area the team can lend some light to how we can put in place quite quickly some broader mechanisms to deliver finance to SMEs.

My second and much briefer point is around the industrial strategy, because I have not heard anything about it. There was nothing in the Queen’s Speech and nothing today. I am a little disappointed because it is very much an important centrepiece of what Government can do in conjunction with business. Noble Lords will be aware that, during the last Parliament, industrial strategies were established between Government and 11 key business sectors. I declare an interest that my own company was involved in two of those. There was a tremendous level of co-operation, discussion and exchange of shared ideals between the various segments involved. It should be acknowledged that that is really important work. The aim of industrial strategies is to establish the structures and relationships to give business the confidence to invest in the future, invest in the necessary R&D and capital, and to foster the development of the skills that we will need, not just in 10 years’ time but now.

I would like to take this opportunity to ask the Minister to assure us that these long-term initiatives—along with the work around Catapult and innovation centres, which is another important part of innovation fostering—and the focus on STEM skills will continue to be an important part of the work that goes ahead. We need continuity and a sense of certainty to encourage business to participate in investing in the long term in this country. I hope that the Minister can give business that sense of continuity.