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PRESS RELEASE : Launch of the Energy Markets Finance Scheme [October 2022]

The press release issued by the Treasury on 17 October 2022.

The EMFS was announced by the Prime Minister on 8 September, and in The Growth Plan the then Chancellor confirmed that it will provide a 100% guarantee to commercial banks to provide additional lending to energy firms.

Delivered with the Bank of England, this scheme addresses the extraordinary liquidity requirements faced by energy firms operating in UK wholesale gas and electricity markets as a result of margin calls.

Energy prices have been high and volatile in recent months. As a result, large amounts of collateral are required to enter into contracts firms use to effectively insure themselves from price fluctuations, or otherwise firms must accept large credit exposures to their counterparties.

The details of the scheme are being announced today, and firms can start to apply via the Bank of England. Applications will be accepted for a period of three months.

The scheme is aimed at providing a backstop to support energy firms facing large and unexpected margin calls. Pricing and conditions will reflect this objective. The scheme will provide resilience to energy markets and therefore help to reduce the eventual cost for businesses and consumers.

Further details on the structure of the scheme can be found on the Bank of England’s website and the market notice published today. To apply to the scheme please contact EMFS-Applications@bankofengland.co.uk

Scheme Eligibility
As part of the application process, firms will need to demonstrate that they meet the eligibility criteria.

The EMFS is intended to support energy firms who are facing short term liquidity challenges but would be otherwise in sound financial health. Eligibility will be considered based on the following criteria:

Firms must demonstrate they are in sound financial health (firms must be otherwise solvent and solvency will be assessed through robust due diligence processes)
Firms must be Ofgem-licensed (or have an Ofgem-licensed entity), and have a pre-existing relationship with an approved commercial bank or banks;
In addition, firms must also demonstrate they are making a material contribution to UK energy markets through meeting one or more of the requirements outlined below:

They make material contribution to the UK electricity or gas markets and can demonstrate that they are likely exposed to large margin calls;

They are heavily inter-connected and the loss of activity would have a significant impact on markets or other energy firms.

Eligibility will be assessed by the Bank of England and an Advisory Committee convened by HMT, who will make a recommendation for the Chancellor to make a decision to approve or reject each application.

Eligible firms who wish to apply for a guarantee will be required to comply with a set of policy conditions, such as restrictions on executive pay and capital distributions. For the full list of conditions, please refer to the market notice.

Financial institutions, state owned enterprises or commodity trading houses are not eligible for this scheme. State owned enterprises should seek to access alternative support from their relevant governments before approaching the Government.

Application process
Firms can apply to the scheme for the next three months. Each loan facility agreement will last up to 12 months and will begin from when the guarantee is issued by the commercial lender.

Applications will be assessed initially by the Bank of England, and then by Advisory Committee, who will make a recommendation for the Chancellor to decide whether to approve or reject an application.

17/10/2022
PRESS RELEASE : £6.4 million boost for employers to support disabled people [October 2022]
The press release issued by the Department for Work and Pensions on 17 October 2022.
- Drive to create more inclusive work environments and equip employers with advice on how people from all backgrounds can thrive at work and grow the economy
- Businesses and disability groups invited to test and shape new service which supports employers to employ more diverse and inclusive workforces
Thousands of businesses across the UK will benefit from a new £6.4 million online service to help employers better support disabled people and those with health conditions in the workplace.

The early test version of the Support with Employee Health and Disability service provides essential information about supporting and managing employees with disabilities or health conditions at work.

Any employer can access the service, which provides free advice on how to manage staff who may be in or out of work with a disability or long-term health condition in a user-friendly online Q&A format.

The service is aimed at smaller businesses, many of which do not have in-house HR support or access to an occupational health service and will help them to build more diverse and inclusive workforces.

The new service also covers potential changes an employer could make to help them return to and stay in work, supporting a government drive to boost numbers of people in employment and ensuring everyone has the opportunity to benefit from being in work.

Minister for Disabled People, Health and Work, Claire Coutinho said:

Since 2017 we have seen one million more disabled people in work, beating our target by five years. Now we want to go even further by giving more employers the tools and information they need to ensure disabled people and those with health conditions can succeed in the workplace.

As the new Minister for Disabled People, Health and Work, there is no end to my ambition to build on the success of the Department by making sure disabled people have the same opportunities as everyone else to start, stay and succeed in work.

The site is currently in test mode, with businesses and disability groups invited to have their say through a short online survey, to help shape the future of the service.

The site will be constantly updated and improved over the next three years, informed by feedback given from the survey

The service has been designed to give employers easy access to the advice they need to create the best environments for their staff with disabilities or long-term health issues, so that anyone from any background can start, stay and succeed in work.

Once fully developed, the service will also help employers understand their legal obligations, including how to make adjustments for disabled people and those with health conditions.

Over the next three years, the government will invest £1.3 billion in employment support for disabled people and people with health conditions. This money will go towards building up existing provision, including expanding employment support, to grow the economy and help people with the cost of living.
17/10/2022
PRESS RELEASE : Chancellor statement on the Medium-Term Fiscal Plan [October 2022]

The press release issued by the Treasury on 17 October 2022.

The Chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.

He will also make a statement in the House of Commons this afternoon.

This follows the Prime Minister’s statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.

The Chancellor will then deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31 October.

The Chancellor met with the Governor of the Bank of England and the Head of the Debt Management Office last night to brief them on these plans.

17/10/2022
PRESS RELEASE : Chancellor brings forward further Medium-Term Fiscal Plan measures [October 2022]
The press release issued by the Treasury on 17 October 2022.

The Chancellor of The Exchequer Jeremy Hunt has today, Monday 17 October, brought forward a number of measures from 31 October’s Medium-Term Fiscal Plan.
- Changes designed to ensure the UK’s economic stability and provide confidence in the government’s commitment to fiscal discipline
- Basic rate of income tax to remain at 20% until economic conditions allow for it to be cut, IR35 and dividend tax rate reforms no longer going ahead
- Treasury-led review of energy support after April 2023 launched
Following conversations with the Prime Minister, the Chancellor has taken these decisions to ensure the UK’s economic stability and to provide confidence in the government’s commitment to fiscal discipline. The Chancellor made clear in his statement that the UK’s public finances must be on a sustainable path into the medium term.

Today’s announcement represents another down payment following the reversal of the corporation tax cut announced on Friday 14 October by the Prime Minister. The Chancellor will publish the government’s fiscal rules alongside an OBR forecast, and further measures, on 31 October.

In his statement the Chancellor announced a reversal of almost all of the tax measures set out in the Growth Plan that have not been legislated for in parliament. The following tax policies will no longer be taken forward:
- Cutting the basic rate of income tax to 19% from April 2023. While the government aims to proceed with the cut in due course, this will only take place when economic conditions allow for it and a change is affordable. The basic rate of income tax will therefore remain at 20% indefinitely. This is worth around £6 billion a year.
- Cutting dividends tax by 1.25 percentage points from April 2023. The 1.25 percentage points increase, which took effect in April 2022, will now remain in place. This is valued at around £1 billion a year.
- Repealing the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. The reforms will now remain in place. This will cut the cost of the government’s Growth Plan by around £2 billion a year.
- Introducing a new VAT-free shopping scheme for non-UK visitors to Great Britain. Not proceeding with this scheme is worth around £2 billion a year.
- Freezing alcohol duty rates from 1 February 2023 for a year. Not proceeding with the freeze is worth approximately £600 million a year. The next steps of the Alcohol Duty Review announced in Growth Plan 2022 will continue as planned. The alcohol duty uprating decision and interactions with the wider reforms to alcohol duties under the Alcohol Duty Review will be considered in due course.
This follows on from the previously announced decisions not to proceed with the Growth Plan proposals to remove the additional rate of income tax and to cancel the planned increase in the corporation tax rate.

Taken together, these changes are estimated to be worth around £32 billion a year.

The government’s reversal of the National Insurance increase and the Health and Social Care Levy, and the cuts to Stamp Duty Land Tax, will remain benefitting millions of people and businesses. The £1 million Annual Investment Allowance, the Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment.

Energy bills support review

The government has announced unprecedented support within its Growth Plan to protect households and businesses from high energy prices. The Energy Price Guarantee and the Energy Bill Relief Scheme are supporting millions of households and businesses with rising energy costs, and the Chancellor made clear they will continue to do so from now until April next year.

However, looking beyond April, the Prime Minister and the Chancellor have agreed that it would be irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices. A Treasury-led review will therefore be launched to consider how to support households and businesses with energy bills after April 2023. The objective of the review is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need. The Chancellor also said in his statement that any support for businesses will be targeted to those most affected, and that the new approach will better incentivise energy efficiency.

The government is prepared to act decisively and at scale to regain the country’s confidence and trust. The Chancellor stated in his speech that there will be more difficult decisions to take on both tax and spending. This means doing what is needed to lower debt in the medium term and to ensure that taxpayers’ money is well spent, putting public finances on a sustainable footing.

In light of this, government departments will be asked to find efficiencies within their budgets. The Chancellor is expected to announce further changes to fiscal policy on 31 October to put the public finances on a sustainable footing.
17/10/2022
David Howell – 2022 Speech on the Growth Plan (Baron Howell of Guildford)

The speech made by David Howell, Baron Howell of Guildford, in the House of Lords on 10 October 2022.

My Lords, I welcome my noble friend Lady Neville-Rolfe back to the Front Bench and I congratulate the noble Baroness, Lady Gohir, on her maiden speech. I am sorry that the right reverend Prelate the Bishop of Birmingham is leaving us.

I begin by reminding your Lordships of something they probably do not need reminding of, but the media and many critics of the Government certainly do. After the two years of shutdown of the entire economy during Covid, plus now a war in Europe, after a huge swelling of public spending to cope with all that, and now the enormous energy cap finances and subsidies to stop the bleeding, it cannot be any surprise at all that we are in a very tight public finance situation.

I cite the Office for National Statistics in saying that public sector debt, excluding public sector banks, at the end of last month was running at £2.428 trillion. That is a couple of hundred billion more than this time last year. That puts net public debt at 96.6% of GDP. That is a net level last seen here in the 1960s and just slightly lower than at the end of the Second World War, or some of the levels experienced in the 1930s. This is not the highest in the world by a long chalk. In fact, it is the 11th highest in Europe. I see no harm and some good in judicious tax cuts, especially those that would bring down the CPI, which has an enormous effect downwards on government finances, or those that actually increase revenue, such as lowering fuel tax or going back to the income tax top rates the country enjoyed under Tony Blair, Gordon Brown and Alistair Darling, which were quite happily accepted then but now seem to cause such agitation.

But when all that is done, it is obvious that very big steps are now needed on the spending side. I beg Ministers to understand that the sane and effective way of bringing public finances into some sort of reputable balance is to identify and remove functions from the public sector, rather than slashing budgets all round by 10%. That is the classic Treasury style. The functions approach, which is questioning systematically the objectives of endless departmental activities and why they need to be in the state sector at all, was what we tried in the 1970s and later in the 1980s when I worked with John Hoskyns, as has been mentioned, which eventually led to taking most major industries out of state ownership, a healthy restoration of the balance between the state and the market, a real reduction in civil service manpower and a major contribution to growth.

I take my last minute to argue on another point: to make the real case for levelling up. By that, I mean by universal capitalism, rather than trying to do it by universal income redistribution. Assets and savings in the bank are what every family in the land needs for their security and dignity. Measures to bring about a capital-owning democracy and a much fairer and more widespread form of social capitalism than we have now are what Governments of the last 50 years have shied away from again and again. Now is a much better time to approach this. This is the real levelling up—the capitalism working for everyone everywhere that Theresa May used to speak about. It is time for serious action on that front to make a real difference to people’s prosperity, certainty and prospects.

17/10/2022
John Birt – 2022 Speech on the Growth Plan (Lord Birt)

The speech made by John Birt, Lord Birt, in the House of Lords on 10 October 2022.

Announcing unfunded tax cuts in the Government’s mini-Budget was all but universally condemned. There was no advance consultation, no leaning on expertise. The Permanent Secretary to the Treasury was summarily fired, the OBR’s offer of a forecast waved away. This appeared a back-of-the-envelope, “we know best” plan.

The immediate consequences of course were dramatic. The Bank of England was selling UK debt one moment and buying it back the next. It had to mount a massive and costly rescue of pension funds. We experienced a rapid rise in interest rates, impacting both individuals and business. The estimates of the future level of government debt ballooned and the cost of financing that debt rose to 4% and is still rising.

The impact of all these factors on redistribution will be chaotic; the full consequences ahead for public services are still unknown. The rationale, of course, was growth, and we all want more growth. The World Bank published a league table of growth rates for the G7 countries from 2008 to 2021. Is Britain in the relegation zone? No. In fact, we are near the top; we are third, behind the United States and Canada, and ahead of Germany, France and the rest—hardly a crisis.

The US is clearly top of the tree with a 1.9% average annual growth rate versus our 1.1% over that period. So, yes, it would be nice to be up there with the US—but how? Where is the analysis: not another back-of-the-envelope plan but a deep and evidenced diagnosis to help us understand what really stands in the way of higher growth in the UK? The notion that stimulating the economy at a time of full employment and high inflation will do the trick sustainably is widely condemned and wide of the mark.

One requirement for growth is clearly investment, yet we have now spooked the markets. Investors have a global perspective: they look for opportunity but will shy away if we fail to offer them reliability and stability too. Beyond that, what can government do?

We know that we have vast labour and skills shortages across the economy: crops unpicked, short-staffed restaurants unable to open on the days they used to, and too few doctors and nurses. I know from my own exposure to the real economy that we are short of many more skills—for example, data scientists, digital marketeers and engineers. The Institution of Engineering and Technology estimates a current shortfall of 200,000 across the economy. We need a massive drive to bring our system of education and skills into line with the UK’s economic needs.

Moreover—I experienced this very strongly myself—modern workers no longer live just down the road. Executives and specialists often fill jobs hundreds of miles from home, travelling huge distances each week to reach their work, crashing locally mid-week. Other workers commute long distances daily, and all travel to and from work unproductively in our crowded country, on the worst road and rail infrastructure in the developed world.

Addressing these and other problems will improve the trend line of UK growth, but problems largely ignored for decades will take decades to put right. The notion that we can suddenly accelerate beyond the US to a sustainable annual growth rate of 2.5% is manifestly unachievable. The sooner the Government come back down to earth and face reality, the better for us all.

17/10/2022
Joan Walmsley – 2022 Speech on the Growth Plan (Baroness Walmsley)

The speech made by Joan Walmsley, Baroness Walmsley, in the House of Lords on 10 October 2022.

My Lords, the Chancellor’s special economic operation was not as tragic as Mr Putin’s appalling special military operation, but it was pretty tragic for the economic prospects of ordinary people. Since the Budget that was not a Budget, I have met a small business that has shelved its expansion plans, a person with two jobs who is now looking for a third, and a mother of four who got extra blankets from the charity shop to avoid putting the heating on.

Planning to cut taxes for top earners shows whose side the Conservatives are on, and I am glad that they have decided to reverse that idea. In their defence, they say that they will reduce the basic rate of income tax by 1p next April—that is if we all get through the winter. However, 5 million people earn too little to pay tax, and the freeze on the tax threshold means that the average family will be £290 worse off next year anyway, and the tax cut is worth only about one month’s mortgage payment increase for some people.

Then there are energy bills. The Government have intervened to cut bills but they are still double what they were a year ago. The Prime Minister and the Chancellor, with their bungled Budget that was not a Budget, caused a massive increase in mortgage rates, connected exactly to the timing of the Chancellor’s statement. They spooked the money markets so badly that the Bank of England had to intervene to prevent pension funds going bust. All this adds up to ordinary families struggling, and then the Chairman of the Conservative Party tells them to go out and get a better paid job—shades of “Get on your bike”.

The Prime Minister has invented a new fantasy enemy: the anti-growth coalition. She even said in her conference speech that green issues are anti-growth—no; it was Brexit that was anti-growth. We on these Benches are not against growth but we are in favour of growth that works; growth from the bottom up rather than from the top down. We are in favour of the growth of well-paid jobs in science and technology industries, particularly green technologies to reduce emissions. That is not anti-growth; that is a vision for saving the planet.

Telling companies that they can keep more of their profits rather than increasing corporation tax is telling them that they can spend it on whatever they like—perhaps increasing CEO salaries. They should instead be saying that companies can keep more of their profits but must spend it on innovation and research and development to increase productivity and increase the skills of their workers. This can be done by various measures, including more tax credits.

The Lords Science and Technology Committee, in its latest report, heard evidence that growth comes from investing in science and technology. We welcomed the new national Council for Science and Technology, chaired by the previous Prime Minister, and recommended that it should meet more often—but the first thing the current Prime Minister did was to abolish it. Now all government departments are being asked to make cuts. What cuts will be made to the Chancellor’s former department, BEIS, reducing its ability to fund innovation and R&D?

I recognise that the Government have provided a significant amount of money to subsidise energy bills, but I have heard nothing about how they plan to reduce energy demand, thus improving energy security and cutting the amount needed for the subsidy and the cost of borrowing money for the subsidy, as well as ordinary people’s bills. Where, in the noble Baroness’s opening speech, was an emergency programme to insulate houses? Where are the improvements to building regulations and, importantly, enforcement to ensure that all new buildings are energy efficient? It saves families money, saves the Government money and creates jobs. What is not to like?

17/10/2022
David Frost – 2022 Speech on the Growth Plan (Lord Frost)

The speech made by David Frost, Lord Frost, in the House of Lords on 10 October 2022.

My Lords, it is a pleasure to take part in this debate and to follow the noble Baroness, Lady Fox, who is a voice of clarity and forthright speaking in this Chamber. I congratulate my noble friend Lady Neville-Rolfe on her appointment once again to the Front Bench, in the Cabinet Office.

This country faces serious underlying problems, which my noble friend Lord Bridges and others have set out, and in my view this Government are beginning to tackle them. This will create turbulence but there is really no choice.

My noble friend Lord Lilley referred to the achievements of the Thatcher Government in the 1980s. One of her close advisers, John Hoskyns, said:

“It is not enough to settle for policies which cannot save us, on the grounds that they are the only ones which are politically possible or administratively convenient.”

Unfortunately, too many of those who have opposed the Government’s growth plan seem to want to do just that, thinking that the right way forward is just more of the same: more super-zero interest rates, more public spending and more clever policies, and the whole thing run by clever officials and institutions who are very invested in how things are now. The task before us is different. It is to make politically possible what is necessary for the country to begin to recover, and I believe that this is what the Government are setting out in the growth plan. I welcome that. I have spent a lot of the last year, within and outside government, urging the Government to get more serious about low taxes, reform and change. I am very happy that they have begun to do so.

The situation that we face as a country is difficult but it is not as bad as that which many others face. It is not as bad as for those trapped in the eurozone, who have no control over monetary policy or much else of the normal role of a Government. The report a week or so ago from Deutsche Bank researchers attracted a lot of attention in the hysteria of the last couple of weeks, pointing out that our economy might shrink slightly, by 0.5% in 2023. What attracted less attention was it saying that Germany’s economy would shrink by 3% or 4%. We must keep these things in proportion.

We have had a productivity and growth problem since 2008—which I note in passing is the period of the deepest integration of this country in the single market and of the highest inward migration. Re-joining the single market and reversing those trends will not help our growth performance at all; it did not help then and it will not help now.

The right way forward is set out in the growth plan: the gradual normalisation of monetary policy, which is essential if we are to solve the productivity problem. Zero interest rates harm the motor of a free market economy. The only way forward is medium-term fiscal discipline while letting fiscal policy take the strain in the short run, and supply side structural reform.

When the economy does not grow, you get competition for static resources, which is why we have what my right honourable friend the Prime Minister called the anti-growth coalition. The fact that so many people do not like the term shows that it has captured something real about attitudes. These people’s vision of the country seems to be to keep everything as it is. They do not want change. They are happy to see our country as a shabby-genteel aristocratic family, trying to keep up appearances but not ready to go out to work.

This will not be easy. Politicians must explain what needs to be done. However, I take inspiration again from the words of Margaret Thatcher, who said:

“First you win the argument, then you win the election.”

If the Government stick to their guns, I am confident that they will do both those things.

17/10/2022
Claire Fox – 2022 Speech on the Growth Plan (Baroness Fox of Buckley)

The speech made by Claire Fox, Baroness Fox of Buckley, in the House of Lords on 10 October 2022.

My Lords, I am delighted to welcome the noble Baroness, Lady Gohir, and congratulate the noble Baroness, Lady Neville-Rolfe. One thing that is growing is the strong women brigade in here.

I welcome one aspect of this debate. I want to move away from the focus on the redistribution of a shrinking national cake. The answer is to bake a bigger cake. I am glad that so many noble Lords now profess that they are pro-growth because, until recently, those of us who were arguing for economic development faced lectures that growth was unsustainable, irresponsible, damaging for the environment, a recipe for greedy consumerism and so on.

My problem is that the measures announced in the growth plan are flimsy and insubstantial. The problems we face—here I disagree with the noble Baroness, Lady Smith of Newnham—were foreseeable, but they were denied by all sides politically. Those problems are far greater than the Government or the Opposition seem to acknowledge, even now. If only they could be fixed through the prism of cutting or increasing tax.

I have no doubt that the mini-Budget was a trigger for the present crisis, but we need to be honest that it is not the cause of Britain’s woes. Our stagnated, unproductive economy has deep roots of many years’ standing. For more than a decade, central banks have turned to easy monetary policies and vast amounts of quantitative easing both to keep interest rates near zero and to prop up and sustain a zombie economy. This was not called out by politicians. It could not have gone on indefinitely.

Closing down the UK economy for two years during lockdown, which received all-party support, and now the war in Ukraine have brought the UK economy’s underlying fragilities to the fore. However, the idea that tax cuts are an easy answer is pitifully inadequate—let alone those who blame Brexit; that is just pathetic.

Without things being produced, no wealth is created to generate incomes, profits and tax revenues to pay for public spending, so production is the key. But is the idea of the tax cuts that businesspeople, corporates and wealthy capitalists will spend their untaxed windfalls productively? Why would we think that? Since the 1980s, business has not been short of funds to invest but it has not been entrepreneurial and it has not invested in innovation, better technologies or the skills revolution. Instead, corporate culture itself has become risk-averse, playing it safe and playing with financial engineering.

A furious public are not just in terror about the short-term—their bills and mortgages—but dismayed at the lack of meat on the bone of the plans. Take the energy policy—the energy that we will need to fuel growth. There is no point in the Government loudly shouting, “Let’s frack”, and then whispering, “With local consent”, and continually reaffirming their net-zero targets. Green growth in reality means unreliable energy and eco-austerity. Let us get on with nuclear power. Let us get on with building those houses. At the moment, it is all soundbites. Never mind subsidising old industries, where is the concrete plan to invest in new sectors, with new jobs and new energy solutions? Where is the spirit of risk, courage and experimentation? We must create a new industrial revolution. That is the long-term plan that we need but it is sorely lacking, and the public need to hear more of it.

The public are not fools. They instinctively know that there is no pain-free route out of this. We need some frank talking, and a collective approach to solving the problems, beyond party politics. A huge transformation is needed in the economy, and everybody must be involved in shaping it. The words “Growth, growth, growth” are not enough. A lot more must be done. We must be humble and recognise that we have to take a lead on this but that we need the British public onside to make it happen.

16/10/2022
Colin Low – 2022 Speech on the Growth Plan (Baron Low of Dalston)

The speech made by Colin Low, Baron Low of Dalston, in the House of Lords on 10 October 2022.

My Lords, the economy is not in a good state. The Budget and the so-called growth plan are not about to make things any better.

The Prime Minister and the Chancellor would like us to believe that all our economic woes are the result of Putin’s war and the resultant energy price increases. They want us to focus on the energy-capping element of their economic strategy, but the truth is that, before Putin, there were already worrying signs of output constraints, labour market distortions and inflationary pressures resulting from the disruptive effects of both Brexit and the pandemic.

Now, inflation is at almost 10%, output is still below its pre-pandemic level and wages for many, especially those in the public sector, are lagging well behind prices. Meanwhile, public services are in urgent need of resources, not just to deal with the enormous backlog built up during the pandemic but to rebuild resilience following a decade of underfunding of health, social care, education and local authority spending. Not only that but the lack of healthcare resources is almost certainly having a significant, negative impact on the labour market and, consequently, economic output.

In these circumstances, the Budget on 24 September should have confined itself to introducing the new energy price caps, with a promise of properly considered tax and spending decisions—and funding arrangements to match—to come later in the year. Instead, the Chancellor succeeded in spooking the financial markets with the promise of massive unfunded tax cuts, thereby weakening the pound and, more importantly, pushing up the cost of government debt and raising interest rates more quickly than would otherwise have been needed.

With mortgage rates already increasing to over 6%, mortgage payments as a proportion of household disposable income will be at their highest since 1989, just before the crash in house prices of the early 1990s—and this on top of record energy bills. No wonder consumer confidence and business confidence are weak and there is every prospect of stagnation, perhaps even recession, in the coming months. What is the Government’s response? It is tax cuts for the rich, benefit cuts for the poor and the prospect of a new round of austerity in public sector spending, all dressed up as a plan for growth.

How, then, are we to explain the Chancellor resorting to swingeing tax cuts, worth £43 billion at the latest count, in conditions of high—and rising—interest rates and overstretched, underfunded public services? The Government’s position, at least in public, is that tax cuts will be paid for by increased economic growth, which they will also help to generate in combination with cutting red tape and easing planning regulations. The problem, however, is that almost no one—certainly not the markets—believes that these things are likely to happen. There is no evidence from either comparison across countries or past experience that lower taxes are associated with higher productivity growth and, hence, higher trend rates of growth in output. Of course, in the right circumstances, cutting taxes can stimulate demand and so raise output in the short run, but that works only when inflation is low and there is plenty of spare capacity, which is far from the case at the moment.

As for deregulation, easing planning regulations may help a little if it is not thwarted by local opposition, including from Tory interests. However, the perennial and often counterproductive war on red tape and gimmicks such as investment zones will have a marginal impact at best.

If we cannot rely on increased growth to fund the Chancellor’s tax cuts, there is only one option for avoiding an unsustainable spiral of increasing government debt: large-scale cuts in government spending. Perhaps it is not unduly cynical to suggest that shrinking the state may have been a secondary—even primary, in some quarters—objective of the tax-cutting strategy. That would certainly be consistent with the decision to sidestep the scrutiny of the OBR when the tax cuts were announced. In any case—

Baroness Bloomfield of Hinton Waldrist (Con)

The noble Lord has had quite a lot of latitude with the advisory speaking time but is now significantly over. Perhaps he could think about drawing his comments to a close.

Lord Low of Dalston (CB)

I am on my last sentence.

In any case, if the tax cuts are to be sustained, substantial cuts in government spending are on the way. The paradox is that this is the opposite of what is required for a credible growth plan.

16/10/2022