My Lords, this has been described as an unambitious Budget. As the noble Lord, Lord Skidelsky, said, austerity continues to bite. The Financial Times shows clearly that between 2016-17 and 2019-20, departments such as the Foreign and Commonwealth Office will see cuts of well over 30%. Looking ahead, according to the Joseph Rowntree Foundation, ordinary working families will be worse off. Couples who work full-time on the national living wage and have kids are set to be £1,051 worse off, while a lone parent will be £3,363 worse off by 2020. Does the Minister agree?
The big news of this Budget was when self-employed people’s national insurance contributions were increased. There was an absolute outcry because, whatever the Government try to say, it was breaking a manifesto pledge. It was not a question of “Read my lips”—one can read many times that there would be no increases in tax or national insurance contributions. That is bad enough. But, regardless of what the noble Lord, Lord Desai, said, it sends out the wrong perceptions for a Government—particularly a Conservative Government who are known to encourage entrepreneurship and self-employment. For people who work so hard, it sent out a very negative message. Linked to that was the reduction in the dividend allowance as well, when we are meant to be encouraging entrepreneurship, and in particular start-ups.
We have heard that debt has risen for 16 years in a row. It is approaching £2 trillion and is worth 88% of GDP. Debt interest, even at low levels of interest rates, is £50 billion—far more than our defence budget. Our fiscal deficit is still too high and we have a current account deficit, while tax receipts are approaching £38 billion. As the noble Lord, Lord Gadhia, said, that is the highest we have known—but what nobody has said is that almost 50% of our tax take comes from national insurance and PAYE; it is from jobs. So, basically, if you create jobs, that employment generates taxes to fund the public services.
Can the Minister confirm what public spending is as a percentage of GDP? Is it actually 43% or 40%? When he was Chancellor, George Osborne wanted to get it down to 36%, which I always thought was far too unrealistic. The noble Lord, Lord Willetts, spoke about pensions. Has the Chancellor done enough with this Budget to cater for an ageing economy in terms of welfare and health? I do not think we are doing anything near enough. There is also nothing in this Budget on tax simplification. We have probably the most complex tax code in the world. To me, the Office of Tax Simplification is an oxymoron.
The Budget did not mention exports once. We are meant to be encouraging exports. India has a GDP growth rate of 7% and overtook the UK as the sixth-largest economy in the world, thanks to the devaluation of the pound after Brexit. We need to generate growth. We have done relatively well, but to grow as a business you have to invest. You cannot cut your way to growth. The Minister spoke about productivity and how we lag in it. The Budget is right on investment in skills such as T-levels, but what about real investment in R&D and innovation? We invest 1.7% of GDP in R&D and innovation; Germany and the United States of America invest 2.7% and 2.8%. If we were to catch up with them, we would have to spend £20 billion more per year just to start off with, let alone to catch up with the lag.
Universities were not really mentioned in the Budget. The University of Birmingham, where I am proud to be Chancellor, has just had an impact report. We contribute £3.5 billion to the local economy. Just imagine if we supported universities more. What about international students? We had a big vote yesterday. Universities UK reports that international students bring £25 billion into the economy. That is huge, yet we have immigration rules that put off international students and a net migration figure that includes international students. Does the Minister agree that we should take international students out of net migration figures?
The noble Lord, Lord Gadhia, said that lower immigration in future will hamper our ability to grow. We have 5% unemployment. Less than 5% unemployment by any standards anywhere in the world is a very good performance and the highest level of employment—and that is despite having 3 million people from the EU and from outside the EU working here. Our public services would not manage without them. In fact, we would have a labour shortage without them. We as a House did the right thing from the point of view of morals and integrity by voting to give a unilateral commitment to EU nationals that they would have the right to stay. I am very disappointed that it was not agreed to by the other place.
Brexit, the elephant in the room, got one mention by the Chancellor. It got barely a mention. Leaving the single market. Then the Prime Minister talked about “going global”. Liam Fox said “going global”. Which dream world is Liam Fox living in? Free trade agreements are not just about tariffs but about goods and services and people. The Finance Minister of India, Arun Jaitley, was here and made it very clear that a free trade agreement with India would be all very well, but it would be not just about goods but about people. In November, when our Prime Minister went to India, the Indian Prime Minister Narendra Modi said very clearly that it was about Indian students being able to study abroad.
The Prime Minister said that no deal is better than a bad deal. Would 52% of the British public have voted to leave the European Union if they had been told that it meant leaving the single market—the 50% of our trade on our doorstep? By the way, it was a manifesto pledge by the Conservative Party to stay in the single market, so that is another broken pledge. Would those people have voted to leave on the basis of a hard Brexit and no deal? No way. Now we have seen in just nine months that Brexit has overshadowed everything—and this is just the end of the beginning. For the next two years, we are going to see. I do not agree with the Scots asking for another referendum, but it was utter hypocrisy for our Prime Minister to say to Nicola Sturgeon that she is focused on just one thing—leaving the United Kingdom—and is neglecting her economy and her country. What are we doing here? We are focused on one thing—Brexit—and as a result we might be neglecting our country and our economy.
To conclude: this Budget was cautious but it ignored the biggest issue, the elephant in the room. As was said in recent debate, our Article 50 Bill was the shortest suicide note in history.