My Lords, I welcome this pragmatic Budget, which addresses a lot of the issues that voters have seen as needing to be fixed for some time. There is within the Budget an exhaustive list of such issues, both large and small. The Chancellor is fortunate that the public finances have improved substantially at a particularly convenient time. Economic growth for next year has been revised upwards to 1.6%, while employment has been revised up by 800,000 more jobs, and wages are forecast to rise above inflation for the next five years, considerably increasing living standards. We have met our borrowing target three years early and the annual deficit is down to 1.9% of GDP. Borrowing is £11.6 billion lower than forecast. We have also met our debt target three years early and delayed recovery from the 2009 recession implies that tax revenues are likely to continue to be better than forecast for some time, as was the case in the recovery from the 1990 to 1992 recession, for over 10 years.
Some improvement in productivity growth is forecast, but not enough; growth is forecast at 1.65% per annum rather than 2.6%. The main cause remains that it is cheaper and lower risk to produce more by taking on more staff than by committing to major capital investment. The 800,000 increase in employment by 2022 reflects this very point. The increase in the minimum wage addresses this issue in part, but employees will still benefit substantially from wage subsidies channelled via universal credit. History has shown us that where pay is subsidised by the state, productivity suffers.
Most of the budget stimulus comes from increased government spending as opposed to tax reductions, in particular the huge increases in NHS spending, amounting to some £20 billion per annum over five years. Interestingly, this is mostly NHS England catch-up. The other main increases in government spending are on universal credit at more than £1.7 billion, £1 billion on defence and £1.6 billion on local authorities, along with a total, looking seven years ahead, of £28 billion of investment in roads.
The main items of lower taxation are the increases in personal allowances and the higher rate of income tax band, together costing £2.8 billion, and reducing business rates by a third for values below £51,000. PFI has been abolished, but leaving some £200 billion to be paid off. The extent to which this and some £50 billion of student loans that are unlikely to be repaid have been provided for is not clear. There is also an undefined spending provision of £58 billion in the Red Book for “other, including EU transactions”. I wonder what that is about.
There are three main measures to help more people into home ownership, which others have addressed in more detail. I am disappointed and surprised that the Chancellor has not addressed the crackpot stamp duty regime introduced by George Osborne that is killing the housing market in London and the south-east and preventing people of my age trading down, thus vacating larger houses for people with young families. Among the welter of statistics in the Budget is one showing that the 2004 stamp duty take was a disaster. The confiscatory tax on more expensive property failed to raise the expected revenues. The Government got it wrong and forgot about the Laffer curve. Stamp duty revenue is forecast to fall by £1 billion this year and to decline in each of the next five years. At an affordable level of stamp duty, revenues should be at least double. The uncommercial hike in stamp duty flies in the face of the long-standing economic truth that if marginal rates are too high, revenues will fall. The Government should forget about being scared of cutting for fear of being attacked by Labour as the party of the rich. Osborne’s stamp duty was a mistake that has damaged the housing market and needs correcting urgently.