Pre-Budget Report 2009

My Lords, this Pre-Budget Report is a clear example that, as a country, we seem to have lost our sense of balance. We seem to have lost our sense of priorities and, quite frankly, many people are saying that the Government may have lost the plot. The state has become too big and too wasteful; it is now not aiding society and business but burdening them. The polls clearly show that the public are vastly in favour of the one-off levy on bankers’ bonuses. We talk about moral hazard, but I do not think that anyone feels that it is right that the bankers, who have been saved by taxpayers, should continue to rake in the millions in these awful times. But it seems that we have entered a blame game and not a gain game. What about our bloated public sector, full of non-jobs and wasteful, inefficient, unproductive expenditure? What about the gold-plated pensions for those who work for the state, when companies in the private sector can no longer afford anywhere near those sort of pensions? In the past, there was a clear understanding and trade-off whereby a public sector job meant a lower salary compared with the private sector but a job for life and a generous pension. Today, the public sector has its cake and eats it, too. Many surveys show that average pay in the public sector is now higher than in the private sector. Where is the sense of balance? We have very high levels of government borrowing and one of the highest deficits, as the noble Lord, Lord Lamont, said, with a financial sector that has been propped up to the tune of more than £1.2 trillion. Yet businesses, especially SMEs, are still struggling to get finance from the banks, which are still not lending. I implore the Minister to do all that he can to put pressure on the banks that the taxpayer has saved to pass on the enormous support that we have given them by lending to business, particularly to SMEs, which are the engine of our economy. We have giant levels of government borrowing, but we have had far higher levels in the past—for example, after the Second World War. The big difference then was that there was a clear reason for those high levels of borrowing and, at the end of the war, there was a clear light at the end of the tunnel, making it easier for us to work our way out. Today, as demonstrated clearly by the Pre-Budget Report, there is no light at the end of the tunnel, there is no clarity and there is no confidence. As the noble Lord, Lord Lamont, said, the future is uncertain. Taxes in this country are far too high and the situation only gets worse. The national insurance hike in the PBR is a tax on jobs when unemployment is already dangerously high. The pros are vastly outweighed by the cons. The national insurance increase is the report’s biggest earner, from my understanding, raising about £9 billion by 2011-12, yet the consequences of such a move are not included in the number-crunching. How much money is it projected that the economy will lose through declining job creation in response to this tax? Talking of jobs, we have heard that we have a welfare state that has created a benefits trap where, particularly after this Pre-Budget Report, for many people on benefits there is hardly a financial incentive to work. I served on the National Employment Panel for many years. We often referred to Australia’s extremely successful welfare-to-work reform, instituted by Prime Minister John Howard. Why have we not learnt those lessons? Why have we not had the guts to implement the reforms here? It is only recently that serious reform has even been talked about, but where is the action? The Chancellor announced earlier in the year that the top-end tax rate was to be raised to 50 per cent, which widened the gap significantly between us and the economies with which we compete. Where there was a gap, there is now a chasm, with a difference of 7 per cent between the UK’s top rate of tax and that of Germany, one of our closest competitors. The report contains some positive moves for business, which the Minister outlined. Deferring the rise in corporation tax for small companies will be welcomed by many battle-scarred businesses, as will the time-to-pay scheme and the 12-month extension of the enterprise finance guarantee scheme. Yet, as I have said previously and will say again, the Government are providing not even a tiny fraction of their £1.2 trillion support for the financial sector and banks for businesses, enterprise and entrepreneurship. Once again, there is a complete imbalance of priorities, for it is after all business and growth that will get our economy out of the dire straits that it is in. It is government’s responsibility to create the environment and be the catalyst to enable business to flourish. We are not doing anywhere near enough. While we are in recession, countries such as China and India are roaring ahead. As the president of the UK India Business Council, I am grateful to the Government for the financial support given by UK Trade & Investment to the UKIBC. I am very proud of the work that the UKIBC does to help to promote bilateral trade and business between the UK and India. However, we could and need to do much more. When I talk to business audiences around the country, I always take a straw poll and ask, "How many of you do business with India?", and it always frustrates me no end that, disappointingly, only a small fraction of hands go up. Britain has to look outwards and be fully engaged with countries such as India. These are the sorts of priorities that the Government need to have. In the most recent quarter, the Indian economy grew by over 8 per cent. Talking of growth, what about us in the UK? We have heard the Government’s forecast for economic growth, but within the past two years the Government have got their forecasts wrong by over 6 per cent. Given that track record, it is hard for us to believe the projections for 2010-11, let alone for further than that. There is no question of cutting back our bloated public sector spending and creating an environment for the economy to grow, which are two clear solutions to our predicaments. Extortionate taxes, however, compounded by the non-dom levy, which is targeted at so many people who have helped our economy to prosper, will kill the goose that lays the golden egg. We are driving people out of this country. We have descended into the politics of envy, not the politics of aspiration. In my role leading the UK India Business Council I would speak proudly of our tiny nation always punching above our weight as the fourth largest economy in the world. Sadly, it appears that we may not even be in the top 10 very soon. This is déjà vu. We have gone back 30 years to 1979. This is Groundhog Day. Once again we have a winter of discontent. Once again our economy is on its knees. While others have started to recover, we have strikes back with a vengeance. Our state education system, the foundation and future of this country, is nowhere near as good as it should and could be. We are letting our children and our future down. Yet we have so much going for this country. We have the best of the best higher education and world-class high-tech manufacturing. We have the City of London, which, in spite of the financial crisis and in spite of everything, is still one of the world’s leading financial sectors. We have our strengths as a country of innovation, creativity and research and development. On the other hand, all this is being let down by a state that is overspending, overborrowing and overtaxing. It is not just us but our future generations who will pay the price for this. Surely, with the Pre-Budget Report, the Government should be making preparations for the next generation, not, as so many have said, for the next general election.