Spending Round 2019 — House of Lords, 2019-09-25
Topic: Macroeconomics
George Young (Conservative, Centre-right): My Lords, I congratulate my noble friend Lord Duncan on his new responsibilities in your Lordships’ House, which have substantially increased the length of the frontier that he has to patrol. I thank him also for his kind words in his opening remarks. He will enjoy these set-piece debates on Budgets and spending reviews, which are always well-informed. I wish him well in summing up and in trying to reconcile his instinctive wish to be as generous as possible to all the requests that are made for more public spending with the unyielding notes that come from the Box telling him not to concede one penny of extra money Both the language and the substance of this spending review are different from their predecessors, as other noble Lords have said. Like others, I welcome the recognition that the time has come to be more generous with key public services. In particular, I hope that the extra resources in areas such as education, health and prisons will help to restore the morale of those who work in those services by enabling more generous pay settlements for them than have been possible in the past Other noble Lords have confessed to being economists. I fear I have two degrees in economics, which will doubtless devalue even further my comments on the review itself. I read the review and my only doubt about it—now that I am on the Back Benches, I am allowed the luxury of doubts—was what caught my eye on the Government’s website, "Spending Round 2019: what you need to know". The quote is this: "This Spending Round provides more money to support vital public services while being delivered within the government’s existing fiscal rules" Perhaps it is because I was once a Treasury Minister that the word "existing" caught my eye. I remember as a parliamentary candidate referring to the Labour incumbent as "the current MP", with the clear implication that he was not going to be there for very long—hence my interest in the insertion of the word "existing" as a qualification for the Government’s fiscal rules. As the noble Lord, Lord Fox, and others have said, whether or not these rules are actually being met would normally be clear, as we would have had simultaneously an OBR report that would have given an independent authoritative assessment of whether or not that was the case. One of the welcome reforms of the coalition Government was the introduction of the OBR, which moved away from the self-justificatory forecasts that we used to have from earlier Governments. However, because of the timing of this spending review, the OBR was unable to do that The next set of OBR forecasts—perhaps my noble friend will tell us when they are expected—are almost certain to reflect some deterioration in the short-term outlook both for the economy and for the public finances, and the £15 billion headroom that we heard about earlier may indeed have evaporated. The claim that next year’s borrowing is being kept below 2% of national income was based on earlier forecasts, which may need updating. We read in today’s papers that the ONS has reclassified some expenditure as borrowing, which the OBR reckons will add some £15 billion a year to borrowing Why is the 2% rule important? Without sounding pompous, I think it is crucial to maintain international confidence in the management of the economy. Our budget deficit was the same as Greece’s not so long ago, but we did not experience its problems because we were seen in 2010 to be on top of it. In the words of the Governor of the Bank of England, though, we are dependent on "the generosity of strangers" to borrow the funds that we need, and we should not risk losing a reputation that has been hard-won by taking too many risks with market confidence. Could my noble friend expand on the insertion of the word "existing" and whether we will take in our stride the changes in definition that I have referred to or whether the 2% target will have to be amended Having said that, I want to focus on one particular aspect of the spending review, namely housing, touched on briefly by my noble friend Lord Horam. Between February 1974 and May 1983—nine years—there were two Housing Ministers: Reg Freeson and John Stanley. Between 1990 and 1994, there was one Housing Minister. Since January 2015, less than five years ago, there have been five. However able you are, you simply cannot build relationships with local authorities, social landlords, financial institutions and then drive through the necessary reforms if you are a bird of passage. While we may not be able to return to the stability of past decades, we should aim at longer tenures of Ministers, and I think the same applies to other posts where we have seen a high turnover—Lord Chancellor and Secretary of State for Work and Pensions, for example The Government have to make choices, and page 1 of the spending review has a heading "choices and priorities". Now, housing is not one of these priorities, which are health and social care; education and skills; and crime. However, the spending review is basically about increased revenue support for the next year. The most important spending review, covering subsequent years, is still to take place. My plea today is for housing to be up there with the other three. I have a high regard for the new Secretary of State at Housing, Communities and Local Government, Robert Jenrick, who came from the Treasury. I know he will want to build on some of the initiatives introduced earlier in this Government: the lifting of capital controls on local government borrowing, renewed focus on social housing as well as affordable housing, the Housing Infrastructure Fund and disposal of public land for housing, to mention but a few. There was one sentence in the spending review inserted by a cautious Treasury official, I quote: "Investing in the people’s priorities inevitably means difficult decisions elsewhere".—[Official Report, Commons, 4/9/19; col. 188.] But no more difficult decisions for housing, please One final point I want to make on housing, which I hope the Government will address, and which was touched on by the right reverend Prelate the Bishop of Durham, is the local housing allowance. LHAs are meant to cover the lowest 30% of rents in an area so people in housing need on low incomes can live in decent rented accommodation. LHAs were frozen in 2016, whereas rents have continued to rise. Fewer homes are now within the limit and so more people are having to top up with other benefits, fall into arrears or move. Evidence from Shelter and Crisis shows that this is leading to homelessness. In Bath, for example, only 7% of homes are within the LHA level, instead of the planned 30%, and in central London there are none. We need the private rented sector to continue to do some heavy lifting in meeting housing need for those on low incomes until such time as our reforms have real impact and other tenures are available, and these LHAs are standing in the way To conclude, I hope my noble friend will convey two messages to the Chancellor, who was himself a former Secretary of State at Housing and Local Government, and so should be receptive. First, with the next spending review, housing must be a priority, and secondly, in the meantime, the local housing allowances need urgent review.