Michael Forsyth – 2022 Speech on the Growth Plan (Lord Forsyth of Drumlean)

The speech made by Michael Forsyth, Lord Forsyth of Drumlean, in the House of Lords on 10 October 2022.

My Lords, I must say, I agree with almost every word that the noble Lord said. Now that we have put Brexit behind us, I think we could form a good partnership.

What a great Budget Statement it was in terms of content. IR35 was an all-party recommendation from the House of Lords Economic Affairs Committee. The energy cost programme is an open-ended cheque for two years to save people from stress and worry in their homes and businesses. It goes far further than anything that the Labour Party proposed—its meagre proposal was for six months—yet we hear little about it. The other day, Laura Kuenssberg moved a Minister on because he had mentioned it before. It is a huge commitment on the Government’s part. To argue that the proposal to cut the top rate of tax, which would have cost £2 billion, crashed the economy is grossly irresponsible.

The noble Lord, Lord Bilimoria, is absolutely right that the presentation of the mini-Budget was perhaps not ideal—it certainly created a reaction—but it was the spark that lit the tinder box, the tinder box being the fact that we have been living on printed money for far too long. In 2020, through QE, we increased the government bonds owned by the Bank of England by £450 billion. That is how Rishi Sunak was able to fund all those Covid measures, from Eat Out to Help Out to the furlough scheme and all the rest.

The truth of the matter—both opposition parties need to recognise this—is that the era of cheap money is over. In the United States, Jay Powell is absolutely determined to drive down inflation, and rightly so. He is doing it by putting interest rates up. Those people who think that the mini-Budget caused the collapse of the pound—that is, the reduction in the value of the pound versus that of the dollar—need to recognise that the Bank of England put interest rates up by 0.5% when the market was expecting 0.75%. When the Americans are committed to a severe programme of interest rate increases, any economics undergraduate will tell you that the exchange rate is determined by the relative interest rates. So the campaign being pushed by the Labour Party to try to present the Government as having created an economic crisis is stuff and nonsense. The duty on all of us—[Interruption.] No, I will not give way; I have only four minutes.

Noble Lords

Oh!

Lord Forsyth of Drumlean (Con)

Fine, I will give way.

Lord Liddle (Lab)

How does the noble Lord explain away the fact that the Government introduced the largest set of tax cuts and the biggest increase in the budget deficit since the time of Anthony Barber in 1972?

Lord Forsyth of Drumlean (Con)

How does the noble Lord explain away the fact that his Front Bench supported all of it, including the reductions in national insurance and the basic rate of income tax? They did not support the corporation tax cut but that is presumably because they do not recognise the importance of having investment in our country. Where does investment come from? It comes from retained profits after tax; that is how I would explain it. It is actually to the credit of the Opposition that they supported the populist things. But they concentrated on the cut to the top rate of tax, which the Government have since decided not to go ahead with.

Inflation is the enemy. Jim Callaghan, a great Labour Prime Minister, warned us that

“inflation is the father and mother of unemployment”.

That is why the Government are determined to try to get growth, and why we need to recognise that continuing with QE on the present scale will result in inflation and a disaster for both unemployment and our country’s prosperity. The era of free money is over. We need to concentrate on wealth creation, not wealth consumption. We need to save every penny; we could start with our own front door in this place, which is costing £2.5 million. Use the candle ends. Look at programmes and decide on priorities. Personally, I think that increasing universal credit should be a priority. However, if that is to be funded, people must recognise that it will mean cuts elsewhere.

So I say this: all support to the Prime Minister. Stop the personal attacks and look at the reality, because if we get this wrong people’s mortgages and costs will go through the roof—and they will not be able to blame the Government.