Lord Hollick (Lab)

My Lords, when the Chancellor took office, she made economic growth founded upon fiscal stability her priority to escape the fiscal straitjacket that she had inherited. She has made a good start by raising and then maintaining public investment to 2.7% of GDP throughout the forecast. That is 18% above the trend since 2010, and well above the trend data of 1.6% over the last 40 years. Our infrastructure and the public realm fail to meet the demands of a growing economy and a population which has grown by 10 million since the turn of the century. Restoring fiscal stability after the battering that it has taken over the last two decades is essential. This Budget helps to achieve that by increasing headroom to a more realistic £21.7 billion, but the spending, including the welcome decision to drop the pernicious two-child benefit cap, is front-loaded and, with fiscal consolidation, achieved only at the end of the forecast. The many tax changes include moves to improve fairness through the introduction of a mansion tax and the taxing of unearned income nearer to the level of tax paid on earned income. It is therefore surprising that magic circle lawyers on £2 million a year continue to save £300,000 by avoiding national insurance. However, other tax changes have increased the cost of business, which will dampen growth and employment, particularly for the young. The reduction of tax-advantaged salary sacrifice to only £2,000 will reduce the level of savings and investment into the economy and weaken pension security. Many of the measures have added to the complexity and unpredictability of our tax system. The Government should publish, as my noble friend Lord Eatwell said, their strategy to make tax policy fair, simpler and predictable. The OBR is predicting low growth and low productivity up to 2030. Radical and bold measures to address the root causes of our economic malaise must be implemented now if growth is to be delivered in the near term. The generous triple lock has given pensioners in recent years a 10% real increase in income compared with the average worker. The lock has become an unfair intergenerational transfer and an unsustainable cost. Reform is overdue. The attempts to reform welfare need to be revisited urgently to address the unaffordable rising costs and the growth of worklessness, particularly among the young. The Chancellor has announced a welcome improved offer for under-25 apprenticeships. This should be part of a range of policies to increase training for people of all ages, many of whom will need to retrain as the adoption of AI sweeps across the workplace. The construction industry alone has assessed that 1 million additional skilled workers are needed to build 1.5 million homes and the infrastructure we are building for the 21st century. There is an urgent need to repair some of the damage from Brexit, now described in the Telegraph, surprisingly, as an unmitigated disaster. The latest forecast of up to 8% GDP and an annual loss of £100 billion of trade means that government must accelerate the negotiations to move us closer to the trading terms of the customs union. The recent commitment of £38 billion into UK research, innovation and AI is a welcome move to capitalise on many of the UK’s great strengths. The OBR forecast is not able to include any boost from these exciting growth opportunities, but my forecast is that AI will significantly boost both productivity and growth.