Economy — House of Lords, 2015-09-10
Topic: Macroeconomics
Clive Soley (Labour, Centre-left): One of the great pleasures in taking part in a debate of my noble friend Lord Haskell is that he always comes to them with solutions, not just problems. He is absolutely right to focus on the issue of productivity. I have often argued for growth, but growth and productivity are very much part and parcel of the same thing. I do not agree with the noble Lord, Lord Howell, on the need just to put constant downward pressure on public expenditure, almost for the sake of it, which is the implication of what he was saying. The reality is that the problems we got into in the great banking and financial crash were not about public sector spending being too high in the previous years. In fact, under the Labour Government, there had been a lower public sector borrowing requirement to GDP ratio than there had been throughout the Thatcher years. That is an important factor. What blew the economy was the collapse of the banks and financial industries. At the time, anyone who would have argued against bailing out the banks would have been laughed out of the Chamber. The issue was bailing them out with public money, and that of course sent debt through the roof There are two ways in which to deal with debt: one is the austerity argument and the other is to get growth. Austerity, in a sense, is more of a political argument than an economic one. I know of no sensible economic policy with austerity at its heart. It is obviously a problem if there is too much debt compared with income, but the issue of growth is more important. My noble friend Lord McFall pointed out that there have been a number of occasions when the GDP-to-debt ratio in this country has been much higher than it was even after we bailed out the banks. That was particularly true, incidentally, in the 19th century. It did not matter because growth was increasing so fast that the debt level became sustainable That does not provide an easy answer to today’s problems, and I am certainly not in the camp that says, "We do not need to cut back public expenditure during the present time". One needs to do that, but making it the centre of one’s policy and presenting austerity as a political issue says to the public, "I am afraid that you have got to suffer in order to do better". That is a dangerous message because it also devalues the political process. Noble Lords should ask themselves why people are getting fed up with the political process. It is partly because they have been told, "You’ve got to suffer". That is not necessarily true Britain can and will do very well. There are a lot of examples of that but we can get things wrong, and the Government are not in a good position to complain. I am bound to follow the comments of my noble friend Lord Monks: when the last Labour Government left office we had given the green light for Heathrow to expand. Since then, we have had another five years spending literally millions of pounds producing a report explaining why we cannot carry out a major infrastructure project. Similarly, the noble Baroness, Lady Wheatcroft, was right about the enormous growth of the arts and its importance to the British economy. I hope she will remember that when it comes to dealing with the BBC, which is the big economic driver in that regard. If it is cut back on the grounds that its empire is too big, there will be a knock-on effect on the rest of the economy. I could go through a whole range of areas where that argument applies, not least in the aviation and aerospace industry generally I welcome the Chancellor’s announcement of an increase in the minimum wage. It is significant that he will apply it from the age of 25. He recognises the difficult balance that needs to be struck—it applies to all these arguments—between increasing productivity by making labour more expensive, and the danger of increasing unemployment. This is where we need creative thinking, particularly in the Labour Party. I would far rather pay less in benefits to young people but give them instead an ordinary pay rate in order to train. I do not care too much what that training or education is. I am impressed by the way young people use modern technology to set up their own companies and do things that make money. At times I think, "That won’t work"—and the next thing I know, I am buying it. Science and technology, along with education, should be the drivers. We should focus on our young people and start paying them to train for almost anything. Then, we might have a future workforce that will meet my noble friend Lord Haskel’s demand for greater productivity.