My Lords, there can be little doubt that the state of the economy is the most important issue facing the United Kingdom at the moment. The pressures facing individual households and businesses across the country are real and very difficult. I welcome the opportunity to speak on this Motion, not least since it has a wider focus than yesterday’s Budget Statement. However, that is not to diminish the importance of what the Chancellor of the Exchequer said yesterday.
We are wrestling with economic challenges on two main fronts: our own domestic budget deficit and the wider international concerns and potential threats in relation to the eurozone and oil prices. Growth in 2011 was lower than in 2010 and lower than the Office for Budget Responsibility’s forecast at the time of last year’s Budget. Prices have inflated more than previously predicted and, as a result, people have been able to afford less in their household spending. Our Prime Minister has been consistently clear that tough times call for tough measures, while some of those measures have not been politically convenient.
It has been refreshing to see decisions taken with a long-term view to nursing our economy back to good health. I was pleased to see that this disciplined approach allowed the Chancellor to make a number of positive announcements in yesterday’s Budget Statement. I welcome the raising of the personal tax allowance to £9,205 from next year. It is the largest increase in the personal allowance for the past 30 years. I am also highly supportive of the reduction in the top rate of income tax to 45p, which will help ensure that higher earners and businesses do not take their skills and practices elsewhere. I feel that this change in taxation will provide a fair deal for persons who help to create wealth in this country. The entrepreneurs, who include the high earners, provide employment for a considerable number of people.
The phasing out of child benefit for those earning more than £50,000 is also in my view a policy that is not only fiscally responsible but will have the support of the vast majority of hard-working taxpayers. We must be clear that giving people greater power and responsibility to manage their own budgets is a big step on the journey back to economic prosperity. Families and businesses across the country are living through these difficult times and it will be these families and businesses that help our economy to flourish once again with their spending power.
Thanks to this Government’s responsible fiscal policy, the OBR states that it now expects the economy to grow by 0.8 per cent this year, before rising to 2 per cent next year and higher in the medium to long term. Inflation has been a cause of concern and getting it under control is crucial. Therefore, I welcome the forecast that inflation will fall from 2.8 per cent this year to 1.9 per cent next year.
I have enjoyed a long career in business and have a strong connection with the City of London. As a chairman of companies and an employer I feel that I have an understanding and appreciation of how businesses and employers contribute to the economy, and the challenges they face in maintaining and increasing their productivity in such difficult times.
I have visited eight different countries in the past 18 months, where I have been privileged to meet various senior figures from politics and business and to speak at a number of conferences. Engaging with our overseas partners has reasserted my long-held belief that one of the best ways we can improve our financial position, both globally and domestically, is to place a much greater focus on trade. We are the world’s seventh largest economy and, as such, Britain’s economic health is closely intertwined with wider global stability. Our trade surplus and global market share in key industries such as aerospace and pharmaceuticals provide us with a solid base in manufacturing and research, and the City of London maintains its position as a major investment powerhouse. However, we must do more. I want to see more of our goods and services exported overseas. I was very pleased to hear our Chancellor make reference to the key role of trade in yesterday’s Budget. In addition to continuing cuts in the rate of corporation tax, he stated that we must help British businesses to expand and innovate, and that we want to double British exports to £1 trillion by the end of this decade. I believe that this will play an important role in helping our immediate economic recovery and ensuring that Britain remains a strong economic force for decades to come.
I applaud the work of UK trade and industry in encouraging more of our small and medium-sized businesses to focus on exports, and particularly in shifting focus to emerging markets. In regard to overseas trade, we should, of course, maintain our connection with America and Europe but we need to look for opportunities in India, China, Brazil and the Middle East; in fact, in every part of the world. We could do more to trade with the Commonwealth countries. We, of course, have a historic connection with the Commonwealth, which is indeed an advantage. The Chancellor announced yesterday that UK Export Finance will be expanded. This is all extremely welcome.
It is important that we clamp down on tax avoidance and tax evasion. No one can fail to have been impressed by the energy with which the Government have taken forward this effort since May 2010. It is to be welcomed that the Chancellor has given additional impetus to this effort in the Budget. People have a right to know how their money is collected and spent. The concept of personal tax statements seems very simple, and might beg the question why we have not made them available sooner. However, if we are truly to engage effectively with the public on public spending choices, these statements are a useful tool.
It is also good to see both the Foreign Secretary and the Business Secretary working with UK Trade & Industry. I hope that this paves the way for greater co-operation between these and other government departments. I believe that if we are truly to realise our potential in identifying key markets and developing and promoting our products overseas, we must consider even more long-term joined-up thinking between those in the Foreign Office, the Department for Business and the Department for International Development. I, of course, welcome the fact that the Government have made headway on this. One of the most effective means of promotion will come from the networking and coverage provided by international trade missions. We should organise more trade missions to overseas countries. I am pleased that recently I was able to assist in arranging a trade mission. We provide aid to foreign countries but we must consider giving more financial assistance to properly organised trade missions. Aid and trade can go hand in hand. In addition, our ambassadors and high commissioners overseas could play a more significant role in this respect.
Two years ago, this Government inherited one of the biggest budget deficits in the G20. Times since then have been turbulent and have involved taking a number of difficult and sometimes controversial decisions. Let us be under no impression that there are any quick fixes, but yesterday our Chancellor delivered a Budget Statement that will ensure we continue on our road to recovery and uphold the United Kingdom as a fair, attractive and prosperous place in which to invest. We have already had a positive reaction from GlaxoSmithKline, which has announced that the company will invest £500 million in new manufacturing facilities, creating 1,000 new jobs. I would like to conclude by saying that we are indeed on a road to recovery.