Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
John Warren Shipley (Liberal Democrats, Centre to centre-left): My Lords, I should like to address three matters: first, the achievements of this Government in dealing with the state of the economy which they inherited in 2010; secondly, rebalancing the economy in terms of growth outside London and the south-east, particularly in the north-east of England; and, thirdly, the current level of debt and the cost of servicing it, the need to get the deficit down and the timescale for doing that The noble Lord, Lord Deighton, defended a number of the Government’s achievements, but they are important. We have the highest growth in the G7 in the last year and a record number of people in work. Almost 2 million extra jobs have been created since 2010; 80% of those are full-time, and 80% are in skilled occupations. Employment is growing fast in the north and the Midlands. Apprenticeships have nearly doubled to 2 million since 2010. We have the lowest inflation on record, which helps household finances. The number of university students from disadvantaged backgrounds is higher than ever. Unemployment is down from 8.5% at its peak to 5.7%. Of the 28 countries of the EU, only Germany and Austria have lower unemployment. Low interest rates are helping households too, which is important given that we still have high levels of personal debt. We should applaud this success, particularly that of my own party, which has led the policy of the increase in the personal allowance in income tax to £11,000. It was only £6,500 under Labour in 2010 The job is not done. There are a number of things that we still must do and there are two very big strategic issues that I agree are very important. Both have already been mentioned in the debate. The first is low pay. It simply must get higher. I do not understand why we have the minimum wage when a living wage is higher. I understand the constraints, but surely we have to have as a policy objective that low pay should be higher. We also need to increase our productivity, although there are some signs of this beginning to happen I think we have learnt that most growth under the previous Government was fuelled by consumption. We should recognise that the much higher level of growth now results from investment in infrastructure, plant and equipment, rather than real estate. When I look at the rebalance of the economy, the north is now growing faster than the south, taking a number of measures. This Government have done more to devolve power and responsibilities than any predecessor. There is now a new confidence and a greater understanding that devolution can drive growth. We have heard of the northern powerhouse and the plan for northern transport. City deals and the local growth initiatives, in which I have had an advisory role, have all made a welcome contribution The north-east of England has an impressive story to tell. Looking at the north-east LEP area—the figures I will quote are the LEP’s—it is clear that the north-east is closing the gap with the rest of the United Kingdom. We have record output and strong growth across many sectors. We have the highest employment rate on record, with 33,000 more people employed in the north-east LEP area since the Adonis review two years ago. Government and European funding have helped a lot, of course, which are worth well over £1 billion into the north-east LEP area. That funding is being committed locally by local people. The north-east has the lowest level of unemployment since 2008 at 7.8%. Exports in the north-east rose by 7.2% in the last year, despite a national fall of 3.9%. The north-east is the only English region still to have a positive balance of trade, amounting to £4.45 billion On productivity, GVA growth per head is growing at a faster rate than in most LEP areas, being the fourth highest in 2013. I contend that this would not be happening had the Government not got control of the public finances in 2010 and had my party failed to form a coalition Government to work in the national interest. The north-east is doing a remarkable job in getting out of the recession and everyone there should be congratulated for it, as should central government. There is a long way to go, but the north-east is headed in the right direction The trend in government finances seems to be headed in the right direction, too, for it is essential to maintain fiscal discipline. We are borrowing £90 billion this year to add to our debt, which will have almost doubled under this Government. There are understandable reasons for that, but interest payments have risen to the equivalent of £1,841 per household simply to service the debt. I doubt most households in the UK realise the amount the Government are spending in interest charges on their behalf when they could be spending it on the NHS or, say, on adult social care There is a difference between the two parties in the coalition in that the Chancellor’s overall aim, which is agreed, is to achieve £30 billion of further annual savings by 2017-18. I understand the need for that, but we need to be a bit clearer about where we come from. When I talk about annual savings, I am talking about cutting the annual deficit by 2017-18. I doubt the deliverability or desirability of cutting a further £13 billion from undefined Whitehall departments, £12 billion from welfare payments, but only £5 billion from reducing tax evasion, tax avoidance and aggressive tax planning. I prefer the Chief Secretary’s approach, which wants £6 billion more from tax dodging, and £6 billion from additional tax rises from the better off, those with high-value property assets, and the banking sector. That approach means that cuts in welfare and adult social care could be far, far lower. The deficit reductions should be achieved on a 50:50 basis: 50% budget reductions and 50% from extra taxation. That would enable further modest investment in the NHS to take place and it would also protect education spending I should declare my vice-presidency of the Local Government Association. I think it very difficult to protect the NHS, pensions and schools and at the same time effect the reductions in spending that the Chancellor seems to want. The impact on local government services, in particular on adult social care, could be very serious. I hope that the next Government will think very carefully about that I have one last point, which is an issue that impacts on the north-east and Cumbria, relating to the announcement on Northern Rock. The Chancellor announced that the Government are to sell off the mortgage assets of Northern Rock. It has been reported that the Government might make a profit on its staged sale. If they do, will they consider the strong moral case for donating 5% of the profit that it makes to the Northern Rock Foundation or to a successor body? My point is this: the foundation had been receiving 5% of pre-tax profits since Northern Rock became a bank. If the Government make a profit on the sale, it seems fair that a donation representing 5% of that profit should be passed to the foundation. I hope that the next Government will be willing to address that issue, because it is of great importance to those who have been receiving the additional charitable support from the Northern Rock Foundation in the north-east and Cumbria.