Budget Statement

Lord Bilimoria Excerpts

Monday 4th December 2017 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the UK economy is forecast to grow by 1.5% in 2017, and we still have debts of £1.7 trillion. Within eight months, the OBR’s GDP forecasts for the next five years have been revised down to the lowest in our history. In those eight months since the last Budget, our productivity growth forecasts have been drastically reduced and, in eight months, the OBR expects the UK to perform worse than our main competitors, with the table of real GDP per capita growth in the G7 from 2016 to 2022 listing in the following order: Germany, France, United States, Japan, Italy, Canada and then the UK. The IMF says 6%; the OBR is even lower at 5%. It makes for pretty grim reading. Mr Johnson of the IFS says that,

“We are in danger of losing not just one but getting on for two decades of earnings growth”.


So what are we going to do about this? George Osborne talked about fixing the roof while the sun is shining. He wanted to achieve his growth by balancing the budget by 2020. This is a pipe dream; it is not going to happen. The IFS calculates that it will be,

“well past 2060s for debt to fall to its pre-crisis levels of 40% of national income”.

There have been some indications recently that we might be heading for recession within the next year and a half. Does the Minister agree? Every 10 years, whatever happens, we have a recession. Are we going to have another? And then we face the longest period of falling real incomes since records began more than 60 years ago.

There are some good things in this Budget. For example, the Government listened to the Economic Affairs Finance Bill Sub-Committee, on which I sit, when we said of making tax digital that they should trial it out and not implement it straightaway. I am grateful for that. They will pilot it and limit it to turnovers above the £85,000 VAT threshold.

When it comes to research and development and innovation, the good news is that the Government say that they will invest more in this area. But what is “more” and what is required? We spend 1.7% of GDP on R&D and innovation; Germany and America spend some 2.7% and 2.8% respectively. Two billion pounds a year is a good move, but it is £20 billion a year that we need just to catch up with them, let alone the backlog.

What about agriculture? The National Farmers’ Union said that it was,

“disappointed to see no meaningful measures to help prepare farming businesses prepare for life outside the EU”.

Just wearing my Cobra Beer hat, I am grateful to the Government for the fact that duty on beer was frozen. On a very serious note, the British pub desperately requires encouragement and protection. This measure will help the great British pub at the heart of our communities.

It is good that the Government want to reduce single-use plastics waste, and there is no question but that the 5p carrier bag charge has reduced the use of plastic bags by 80% in the past two years. I applaud the Government for going down that route.

On business rates, much more needs to be done. Yes, there has been a move to CPI, but more needs to be done. Where rates are concerned, there is an initiative for pubs in England to continue to receive a £1,000 discount. Much more needs to be done there, too. Will the Minister agree to that?

And, of course, the Oxford to Cambridge rail line being revived is wonderful news. I congratulate the Government on that.

The noble Lord, Lord Tugendhat, has mentioned the £3 billion to prepare for Brexit over the next two years. However, in spite of the national living wage and national minimum wage being increased, we know how low they are going to be. In February 2016, this country was flying: we were the fastest-growing economy in the western world. We were at the top table of the world. Today, I am ashamed to say that we are no longer at the top table. There is only one reason: Brexit. There is only one reason behind this Budget being called lacklustre and boring: well, the Chancellor survived. Alan Milburn resigned because he said that social mobility is not happening. He said that many people voted Brexit because they were dissatisfied with the Government of the day—it was an anti-establishment, dissatisfaction vote. Just yesterday, the poverty figures were released. Britain, a rich country that spends £800 billion a year on government expenditure and is the sixth-largest economy in the world, has poverty today. That is what the focus needs to be on; that is where the Budget needs to focus.

Three reasons were given for Brexit, and they are all linked to the Budget. The first was: take back control of our money; take back control of £8 billion a year, the net contribution. I have just said that £800 billion is our government expenditure per year—a pie chart, a line, an arrow: 1% of our government expenditure per year is Brexit. A second reason was: take back control of our laws. I ask people and businesses, “What laws? Tell me one law that affects you on a day-to-day basis”. They cannot name one, because the laws that affect us every day are made over here in this Parliament, in this House and in the other place. The third reason was: take back control of our borders. There are no exit checks at our borders. Whatever the Minister may say, there are no physical, visible exit checks at our borders. I ask people what percentage of our population of 65 million is made up by the 3 million people from the European Union. The answer is less than 5%. It is said that that 5% is a “burden” and causing our public services to collapse; without them, the public services would collapse, with 130,000 EU citizens working in the NHS and care sector alone and 250,000 working in the construction sector.

Then we talk about skills. The university sector is hardly mentioned in the Budget. International students alone bring in £26 billion to the economy. There are 450,000 international students—I am president of UCISA, representing them—with 130,000 from the EU. What will happen if we leave? They count as domestic students; they are entitled to loans. What if they reduce the billions of pounds with which they enrich our universities? What about research funding from the EU and research collaboration with the EU? What about the academics from the EU? Some 20% of academics in most of our universities are from the EU. These are the things that will affect our economy, because when it comes to R&D and innovation, it is investment in university research and innovation that is going to work.

What about the negotiations now? They have stalled. We have heard the news: the lunch was lunch; fudge was served. The bill is to be £40 billion to £50 billion, yet Boris Johnson said they could go whistle and Priti Patel said words that I could not repeat in this House. We are now prepared to pay £40 billion to £50 billion and perhaps give some control to the ECJ. Then there is the question of the Irish border. We will not allow Brexit to break up our union. And then there was the £3 billion in the Budget for Brexit expenses. What about all the expenses that have already taken place?

I conclude on the issue of trade—again, not mentioned much in the Budget. Fifty per cent of our trade is with the EU and another 20% is through free trade agreements via the EU, including now with Japan. Seventy per cent of our trade is FTAs and Liam Fox talks about going after the other 30%, of which the Commonwealth makes up less than 10%—including India, Australia and Canada. We need to do more with those countries, but the Indian high commissioner said very clearly, “Yes, we’ll do a free trade deal with you, but it might take till 2030 and, by the way, it includes the movement of people as well”.

This Budget is completely overshadowed by Brexit. It is only a matter of time before the British public wake up to the realities, realise that the Brexit emperor has no clothes and we will not be leaving the European Union.

--- Later in debate ---

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I thank all noble Lords for their contributions to this extraordinarily good debate. It has focused on all the issues, which tended to coalesce around five themes which I will direct my remarks to: housing; social care and the NHS; living standards and social mobility; business and industrial strategy; and Brexit. It has been good for me and my noble friend Lord Young to have the benefit of all the contributions, but I will single out those from my noble friends Lord Balfe and Lord Dobbs and the noble Lords, Lord Goddard and Lord O’Neill of Gatley. I do so because they began with an optimistic outlook. I confess that I am an optimist: my blood group is B-positive. I am afraid I am drawn to that concept. If the House will indulge me I will take a few minutes to point to the many good things that are happening.

I begin with the noble Lord, Lord O’Neill of Gatley, who has a distinguished record and made observations on the global economy. His forecast—which I trust very much—was that the economy might grow by as much as 4%. If it does, and you take the global economy as somewhere between $70 trillion and $80 trillion, I make that growth of the size of the United Kingdom economy being added to the world economy this year. There is therefore a huge opportunity out there for us to tap into. The noble Lord, Lord Horam, talked about export potential and there is an example of it. The world is growing, markets are growing and most of the fastest-growing markets are outside the European Union. That global strategy therefore strikes a chord.

We should also remember that employment is up by over 3 million, with over 32 million people in work. The noble Lord, Lord Balfe, referred to the hard-working people of this country. The challenge that we face is to add to their hard work increased productivity—which I will come on to later. Unemployment is down by over 1 million since 2010. The unemployment rate has not been this low since 1975. We had lots of nostalgia in this debate, not least for Led Zeppelin and Dusty Springfield. Even Lord George-Brown had a look in among the distinguished figures from the past, including Lord Whitelaw and Lord Healey, the latter’s Budget debate being the first to which my noble friend Lord Wakeham contributed. I believe it was also the first Budget for my noble friend Lord Young.

The noble Lord, Lord O’Neill, mentioned the northern powerhouse and the growth taking place in the regions. It is worth mentioning—the noble Lord, Lord Goddard, echoed this—that employment numbers are growing faster in the north-west than anywhere else in the country. That is something to welcome. It is not happening by accident; it is happening because of a designed policy—a long-term economic plan to rebalance the economy.

We have cut income tax for over 30 million people, taking 4 million people out of income tax altogether. We have frozen fuel duty for eight years in a row, saving the average car driver £850 since 2010. Last month we doubled free childcare, which is worth £5,000 a year to families—an issue referred to by my noble friend Lord Farmer. We have also invested in 3.4 million apprenticeships. The noble Baroness, Lady Kramer, and the noble Lord, Lord Rooker, speculated as to whether the investment plans would be manifested. So far since 2010, we have invested £500 billion in infra- structure projects and have delivered 1,000 such projects.

At the same time, we have seen corporation tax for small businesses—a concern of my noble friend Lord Wakeham—go down from 28% to 19%, making it one of the lowest tax rates in the G20. An interesting point in looking at the yield from corporation tax is that, as the noble Lord, Lord Darling, will recognise, it is not just the tax rate that counts but the tax take. When we had a corporation tax of 28%, the revenue was about £43 billion a year. With a current tax rate of 19%, the amount of money being brought in is close to £50 billion. Therefore, although the rate has come down, the take has gone up. Should any opposition party be foolish enough to postulate that reversing that beneficial and benign occurrence of falling taxes and rising revenues would somehow be a way to reduce the deficit, I suggest that it might not be the way forward.

Perhaps I may address some of the points that were raised concerning international attitudes towards this country. The noble Lord, Lord Lea of Crondall, talked about foreign direct investment here. The UK remains the leading foreign direct investment recipient in Europe, attracting a record total of 1,144 financial foreign direct investment projects since 2016—an increase of 7% over 2015. So people here may be losing confidence in themselves but it is noticeable that the world is not losing confidence in Britain. With our world-class universities, our incredible market and our technical abilities, the UK attracted $254 billion in 2016, second only to the United States.

At the launch of the industrial strategy, referred to by the noble Baroness, Lady Randerson, we also celebrated two major new investments in cutting-edge pharmaceutical companies—MSD, which will develop a research facility in London by 2020 aimed at finding new drugs, and Qiagen, a leading diagnostics company, which, partnered by Health Innovation Manchester, will develop genomics and diagnostics at its campus in the city. Facebook announced just today that it will create another 800 new jobs in the UK in 2018, and not quite the low-skilled jobs that some noble Lords referred to. Toyota announced a £240 million investment to upgrade its car plant in Derbyshire, Rolls-Royce announced a £150 million investment in UK aerospace, and BMW will build a fully electric version of the Mini in the UK. All these are investments in the UK. They express a belief in the United Kingdom and what we, the people of the United Kingdom, have to offer. That point was touched on by the noble Lord, Lord Skidelsky, who then rightly asked us to focus on the importance of investment. I will come to that point first.

In the Budget, we proposed that an increased amount will go into the productivity investment fund. This will bring investment in R&D to its highest level in over 40 years—again, another welcome forecast.

The OBR forecast that the UK contribution to the EU, net of public sector receipts, will be £7.7 billion over 2017-18. This figure does not include receipts received by the private sector.

On the points raised by my noble friend Lord Maude, obviously he did a tremendous amount of work in raising activity across the public sector during his time as Cabinet Minister in the Cabinet Office. The figure he quoted of £50 billion saved in the delivery of front-line services has made a tremendous difference to the working of government and to the impact on our financial position. My noble friend Lady Neville-Rolfe said that we ought to maintain pressure on this and not let up, because the battle was not won, and she is right that we should focus on that.

Perhaps one of the most inspiring contributions was from my noble friend the Duke of Wellington, who talked about the King’s College maths pilot school. Of course, we recognise that if we are to compete in the world and attract more foreign direct investment of the type we are talking about, building more tech companies in this country, we need to attract high- quality maths teaching. That is why we announced in the Budget that we will invest £42 million in a pilot teacher development premium. We will also triple the number of fully qualified computer science teachers from 4,000 to 12,000, raising maths attainment packages through a support plan. I am happy to convey my noble friend’s recommendation of the noble Baroness, Lady Wolf, who was behind that particular school, and I commend them for their work.

A number of noble Lords referred to social mobility issues: the noble Lord, Lord Tunnicliffe, the noble Baroness, Lady Donaghy, my noble friend Lord Farmer and the noble Lord, Lord Skidelsky. It is worth recognising at this point that some other things are of note. The number of young people from the most disadvantaged areas who attend universities has increased to its highest level on record—19.5% for England—and, as my noble friend Lord Balfe mentioned, income inequality is down to its lowest level. The noble Baroness, Lady Donaghy, referred to the impact of the Budget on women; in April 2016 the gender pay gap for full-time employees decreased to 9.4%, and there are record numbers of women in the workplace.

On comments by the noble Lords, Lord Lennie, Lord Beecham, Lord Goddard and Lord Shipley, particularly on the north-east of England, people who work in that area will benefit from an ambitious devolution deal in the north of Tyne area, covering Newcastle, North Tyneside and Northumberland, which will give them greater freedom—which my noble friend Lady Eaton called for—to get on and do the work they are supposed to be doing on investment and looking after their local communities. That will be worth a significant amount—£600 million over the next 30 years or, more precisely, £20 million per year. There is also the mayor of Tees Valley’s initiative on the SSI site, to which the noble Lord, Lord Lennie, referred as well as the investment in rolling stock on the Tyne and Wear Metro, which again is something that should be welcomed and shows that investment and prosperity are heading out across the UK.

I turn now to universal credit. The right reverend Prelate the Bishop of Portsmouth referred to that and the measures that were being taken. We are ensuring that households that need it and have an underlying entitlement to UC will have access to a month’s worth of support within five days via interest-rate-free advances. Universal credit is paid monthly and in arrears to mirror the world of work. We have listened to representations from your Lordships’ House, among others, and have made changes that will continue with the principle but ease the impact as the programme is rolled out.

Housing was raised by my noble friends Lord Ryder and Lord Horam, the noble Lords, Lord Darling and Lord O’Neill of Clackmannan, and the noble Baroness, Lady Blackstone. The issue that we have at the moment is one of unaffordability. The noble Baroness, Lady Kramer, referred to the issue of supply. Of course it is about supply, which is one reason why we have announced the housing White Paper, Fixing Our Broken Housing Market, and announced a whole series of initiatives within that package of £15.3 billion about how we release more sites for development. That is entirely a supply measure. The housing infrastructure fund at £5 billion is a supply measure. Oliver Letwin has been asked to undertake a review about the situation referred to by the noble Lord, Lord Shipley, and my noble friend Lord Ryder where developers are granted planning permission but do not go on and build the houses that are necessary. That is looking at blockages in the supply area. It has to be seen that the focus is not just on demand, such as the measure on stamp duty; there are supply measures as well.

The noble Lord, Lord Beecham, and my noble friend Lord Horam referred to the Homelessness Reduction Task Force. That has been established to develop a cross-government strategy with the initial focus on delivering a commitment to halve rough sleeping by 2022 and eliminate it by 2027. There will be three housing pilots—the first in Greater Manchester, the next in the West Midlands Combined Authority and then another in the Liverpool City Region.

The noble Lord, Lord Campbell-Savours, asked about online VAT fraud and how HMRC will implement and monitor it. HMRC has discretionary powers that it will use on a case-by-case basis where there is clear evidence that a UK business trading via an online marketplace is not complying with VAT rules. Compliant UK sellers who are legitimately trading below the VAT registration threshold or are VAT registered correctly accounting for all VAT due will need to be addressed in this particular context. The requirement to display a valid VAT number applies to those companies that are provided with one.

My noble friend Lord Balfe asked whether we could introduce a surcharge on foreign-owned empty residential properties. The Government are keen to encourage owners of empty properties to bring the properties back into use, which is why the Budget announced we will give the power to local authorities to increase the council tax premium on empty homes from 50% to 100%.

The noble Lord, Lord Ryder, asked about stamp duty and observed its impacts on the housing market. Stewart Baseley, executive chairman of the Home Builders Federation, has said that first-time buyer’s relief will provide the certainty of demand to allow builders to invest with confidence, directing and increasing supply.

The noble Baroness, Lady Young of Old Scone, asked about housebuilding measures and whether they will have a negative impact on standards. The Budget confirms the Government’s commitment to maintain existing green belt protections. We are consulting to make sure that minimum densities are set at the right level for all concerned, including local people who will live in the homes. I will take her suggestion of green villages back to the Treasury, if I may.

My noble friend Lady Neville-Rolfe and the noble Baroness, Lady Randerson, asked about railway investment, Heathrow, local roads and the national planning infrastructure fund. That £1.7 billion fund will be used for transport in cities. It is spread across the regions, with £250 million for the West Midlands, £243 million for Greater Manchester and £377 million for the north-west for intra-city transport.

The right reverend Prelate the Bishop of Portsmouth asked about UK defence. The UK will meet the NATO target to spend 2% of GDP on defence. In the 2015 spending review, the defence budget was protected and increased by 3.1% in real terms until 2019-20.

The noble Lord, Lord McKenzie of Luton, referred to debt falling only due to the housing association reclassification. My answer is no: we would have met the fiscal targets in 2021, regardless of the change to the classification of housing associations.

The noble Lord, Lord Tunnicliffe, asked whether deficit reduction has failed, to which the answer is no, it has not. Of course, we inherited a deficit of 9.9% of GDP in 2009-10; that has been reduced to 2.3% in 2016-17.

The noble Lord, Lord Livermore, questioned whether we will reach the Government’s targets. In November 2017, the OBR forecast that the Government will meet both their fiscal targets for this Parliament. The deficit is forecast to be 1.1% of GDP in 2022-23—the lowest level since 2001-02—and debt is forecast to peak in 2017-18 at 86.5% of GDP, then fall every year of the forecast period to 79.7% in 2022-23.

My noble friend Lord Balfe asked about tax avoidance and evasion. Since 2010, we have introduced 100 measures, including in this Budget, to tackle tax avoidance and evasion. As a result, the tax gap is now at its lowest level and is one of the lowest in the world—some 6% of the total forecast.

I come to social care. The noble Baroness, Lady Bakewell, asked me to ensure I mention social care in my winding-up speech. I am happy to do that, as I mentioned it in my opening speech. There is a critical element that we need to bear in mind. One of the most staggering statistics we have come across is that there are some 15,000 centenarians living in the UK. From the population in this country living now, that figure will rise to some 10 million. Therefore, the issue to address in social care is intergenerational fairness, which was referred to, and the impact on areas such as those mentioned by my noble friend Lord Freeman, including pension funds. Those are vast concerns that will have to be addressed over the long term and reflected on. There will have to be Green Papers and discussion papers. Some £2 billion was announced in the Spring Budget. That will have to be kept closely under review in the light of any Green Paper.

I think I have addressed a number of the questions, though I am sure not all the points raised. In conclusion, I simply say that this is a Budget that invests in the infrastructure, skills and technology we need to succeed while providing immediate support where it is needed the most.

[Lord Bilimoria]

I am so sorry to interrupt the Minister as he is winding up after 23 minutes. He has addressed so many issues. Right up front he said, “And I will address Brexit”. Many Members have mentioned Brexit. It is the elephant in the room that overshadows the whole of the Budget and the Minister has not given it one minute.