Pre-Budget Report 2009

My Lords, I declare that I am chief executive of London First, a not-for-profit organisation whose members include the capital’s leading businesses and universities. I begin by thanking the Government and the noble Lord, Lord Myners, for saving us from the abyss in October of last year. We should all be grateful for the leadership and courage shown at that point. The Government are right to note that the banking sector owes a debt to the British people for standing behind them in their hour of need. Although not quite "God’s work", some bankers do assume the role of St Nicholas—for instance, in supporting city academies in the East End. Actually, the financial services community in the past decade has, through taxes, paid enough to rebuild all UK schools several times over. With the right business environment, it will do so again. However, the Chancellor’s tax on bank bonuses is simplistic, avoidable and a poor proxy for the institutions that benefited most. Britain is the second largest exporter of services in the world. The UK, led by London, is an extraordinary global talent hub. If you are clever, creative and ambitious, you come here to develop your career. University College, London, is now fourth among world universities, joining Oxford, Cambridge and Imperial in the top 10. That talent, whether attracted by our universities, career opportunities or the buzz of London life, is then marketed worldwide. Lawyers and accountants from London are the Wise Men in the East, advising in Dubai; engineers and architects are active in the Far East; and businesses currently working on the Olympic site have seen a star above Rio de Janeiro and are offering their expertise. These people operate in a globally competitive market, and the globally mobile seek globally competitive compensation. The unpredictability represented by the banker tax, the non-doms fiasco and the April 2010 50 per cent income tax rate is a barrier, real or perceived, to their commitment to London. The Institute for Fiscal Studies calculates that the marginal rate of payroll tax for someone earning £100,000 in 2011 will be 66.6 per cent. For the first time in a decade, London First’s business leaders cite tax as the foremost challenge to operating in the UK. The risk to London’s competitive position far outweighs any short-term gain. To address our structural deficit, we need to grow the economy. We should be fattening the goose so that there is more for us all to share, not shooing it away. So are the Chancellor’s other measures up to the scale of the task? The proposed efficiency savings would be most welcome, were I confident of their delivery. Sparing so-called front-line services means that other economically vital services such as transport will bear a heavy burden. The Chancellor’s reiterated commitment to infrastructure investment and to Crossrail are welcome, but will there be "room at the inn" of public spending for Tube modernisation or other valuable infrastructure once politically sacrosanct but economically feeble crucial projects have occupied the best rooms? I fear that even those economically crucial projects will be squeezing for space in the stable, like rush-hour commuters in Northern Line carriages. The national insurance rise has the merit of raising a significant amount by taxing a broad base, but a tax on jobs in the fragile economic years ahead seems a perverse choice—as perverse perhaps as the timing of a business rate hike of over 10 per cent for many thousands of businesses in April 2010, which the PBR disappointingly failed to address. Finally, on a more positive note, and in recognition of the first snow of Christmas today, I shall be taking advantage of the boiler scrappage programme—in time, I hope, to stave off the bleak mid-winter. If I can recruit an enthusiastic cabal of nine colleagues to do likewise, perhaps you will even see 10 Lords a-leaping.