Spending Round 2019 — House of Lords, 2019-09-25
Topic: Macroeconomics
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, I am the first of the winding speakers, and I think I recognise a House that is, frankly, exhausted so I will try to limit my comments on this occasion. However, I cannot resist welcoming the noble Lord, Lord Duncan of Springbank, to his position. He knows how well-respected he is in this House and we are delighted to see him picking up this not-easy portfolio. The noble Lord, Lord Young of Cookham, may be relishing his freedom but, my goodness, the rest of us relish it as well. He made a speech of which I could not disagree with a single word What has struck me today, in such contrast to the Statement that we have heard from the Prime Minister, is the common voice across the House from different Benches. It strikes me that in pulling together we can find so much to do in order to take forward the prosperity and success of the nation. It makes you begin to think that perhaps we should be pulling party politics out of a lot of the activities that we are engaged with. I say that, of course, as I am about to become somewhat more political I have had many disagreements with Philip Hammond over the years but I always respected the fact that in looking forward to Brexit, whether with a deal or not, he recognised the significance of leaving fiscal headroom for a contingency. I say that because I have often talked from these Benches about the mistakes made by Gordon Brown, thinking that boom and bust were over and spending without leaving any kind of contingency so that when the financial crisis hit there was essentially no cushion to use to try to get over that immediate hurdle. Now I see the Benches that always applaud me when I make that statement proposing a spending review that destroys the contingency that had been identified by Philip Hammond. Between taking the student loan portfolio on to the books—that strikes me as appropriate and it should probably always have been there—and the £13.8 billion in this spending round, the contingency now disappears entirely. Most of us in this House know that Brexit is going to do damage. We might disagree on the amount of damage but the OBR has looked at even a mild form of no-deal Brexit and said that it is basically a blow of £30 billion a year for at least four years. We know that the Treasury in looking forward, even when it thought in terms of a deal, saw the economy running essentially at a much lower benchmark than it has done historically. While many people talk about the economy doing relatively well, because globally all economies are struggling at this time, we have also seen drops in investment and we know of the plans by many businesses to gradually move a great deal of activity overseas. Productivity is a problem that has not been tackled but underpins our economy; the rate of productivity growth is appalling. When you look at all those issues, it is nearly impossible to understand why that contingency has been dissipated. I assume as a consequence that this is simply the opening saga of a series of election pledges that, as far as I can tell, are going to be unfunded Others in this House—the noble Lord, Lord Livermore, hinted at it; the noble Lord, Lord Liddle, was more explicit; and we heard some of this from the noble Lord, Lord Young, and others—have talked about the importance of more public spending, because we need more of it on a wide range of priorities, but making sure that it is paid for. Borrowing is not the answer to paying for it. Now, I always disagreed with Philip Hammond over the funding of infrastructure; there I think you can argue for borrowing and we should have done much more of it to support infrastructure, particularly with interest rates being low. I pick up a point made by the noble Lord, Lord Liddle: as we look forward to a very different kind of economy, there may be other kinds of what is typically considered as soft spending—education could be one example—that could also go into that category of long-term investment. There are some issues there to explore and look at However, after all the years that we have spent bringing the deficit into line and all the pain that has been experienced in doing so, to look at a situation now where we have spent the entire contingency, when we know that we are about to receive a whole series of economic blows, strikes me as, frankly, quite extraordinary. Let us be clear: even if it is Brexit with a deal—and things will be far worse if it is a no-deal Brexit—we will be into at least seven more years of negotiation, uncertainty, stress and change. This is not a situation, as I think the Prime Minister sometimes would have us believe, where you carry through Brexit and then the world returns to normal immediately, or perhaps within three to six months. This is going to be a long struggle involving suffering and pain, and we have to be financially prepared for that I am not afraid to say on behalf of my party that we want to spend more, but we know that it has to be paid for by raising some taxes. We have argued for a hypothecated tax for health, for restoring capital gains taxes and for raising corporation tax. We will never present to the country a manifesto that is unfunded in the way that I fear, as I listen to the Spring Statement, this Government are intending to do. As I said, I do not want to keep talking. There have been many outstanding speeches today. It has been stressed that the spending review covers some issues but ignores others. The noble Baroness, Lady Stroud, talked about the importance of levelling up. The noble Lord, Lord Young, talked about the importance of housing, which is really not provided for in the review. Critical statements were made by the right reverend Prelate the Bishop of Durham, the noble Lord, Lord Liddle, and others demonstrating the failure to pick up universal credit and deal with the impossible situation faced by so many of the poorest, including the working poor. Not to have addressed that situation within a spending review is extraordinary. Then again, I think the items have been chosen because they are thought to have political appeal to a particular sector of the electorate, which tells us everything I have one last question to ask the Minister before I sit down. This is a genuine question because it is something that I do not know the answer to. Having realised that HMRC has revised corporation tax credit data and discovered that it is £4 billion worse off in cash terms than it expected, I do not understand how that translates into government accounting. Do we have even less headroom than we anticipated because of this correction to the accounts?