Budget Statement — House of Lords, 2017-12-04
Topic: Macroeconomics
Simon Haskel (Labour, Centre-left): My Lords, the OBR’s Blue Book for this Budget is one of the most depressing that I can remember. My noble friend Lord Tunnicliffe and others have reminded us that the largest change it makes in its forecast is to revise down the trend or potential of productivity. The Minister does not need me to tell him the impact that this will have on our standard of living or the prospects for our economy. Virtually every other speaker has told him. Some noble Lords and some economists say that this forecast is too pessimistic. The Minister pointed to full employment and the increase in average hours worked, but much of this work is low skilled with low pay and does not lift people out of poverty. Much of the increased hours figure is due to inward migration, but the policy now is to reduce migration. Indeed, it is already happening, and it is difficult to see productivity gains coming from this or any other part of Brexit, so I would say that the Blue Book is probably about right International agencies, such as the OECD and the IMF, seem to agree. Indeed, they compare our gloomy prospects with the other 27 countries in Europe which are forecast to have their fastest growth in 10 years. Of course, the Minister enthusiastically announced some new spending, but not nearly enough to cover the cost of inflation. The Red Book and NHS executives indicate that the health service needs much more money to meet the pressures it is under, the right reverend Prelate the Bishop of Portsmouth told us that the Budget failed to resolve the health and social care split, and my noble friend Lady Bakewell explained why. The investment in housing is welcome but, again, not nearly enough, and the figure for universal credit for next year is too low, as other noble Lords have said The help on business rates is welcome, and so is the extra money for investment in research and development, but will it make up for the loss of European Union Horizon 2020 science funding? It is already dropping off. Meanwhile, we still need to discourage short-term corporate governance and do more to encourage private investment. The extra funding for the British Business Bank is welcome and so are the plans for working with industry to design a national retraining scheme, but I put it to the Minister that this is not nearly enough to deal with the size and scope of the problem we have, and it will not deal with our changing economy. That change is illustrated by the interesting fact that appeared last week that Babcock International, one of our major engineering companies, is being replaced in the FTSE 100 by Just Eat, a clever algorithm enabling thousands of low-paid messengers to deliver meals, largely from fast food restaurants and shops. This is a move towards the more intangible economy which we are only now beginning to understand. It helps to explain some of our inability to deal with inequality and productivity, but the Budget is silent on this, and that is another reason why drastic measures are required I agree with other noble Lords that the key to these more drastic measures must lie in the industrial strategy. If we take it seriously, if it becomes our priority, if it embraces society as a whole and not just the economy and if we reorganise all of government to carry it through and not just simply have the industrial strategy as part of a government department, we will have a chance of success, this time, because the other nine industrial strategies I remember have mainly failed. It has to involve everybody and teach skills to young and old. The digital monopolies and platforms that we depend on have to be properly regulated to allow for competition, as the noble Lord, Lord Wakeham, told us. It must deal with the tax loopholes which have only recently been revealed, not only overseas but here, as others have said. We have to be more serious about this. Certainly the strategy has to harness digitalisation and artificial intelligence, but driving all of this has to be part of the work of the proposed industrial strategy council. I hope that it will be a council equivalent to the Office for Budget Responsibility, that it will monitor and report sector by sector on what they need to do to be competitive and successful and perhaps push some of the improvements that the noble Baroness, Lady Neville-Rolfe, spoke about earlier. Why not have a branding campaign to go with all this, just to show that we are addressing it If we ignore this warning, and a period of decline sets in, we all know what will happen. It will polarise our society and politics even more around identity, nationality and income. Dealing with all these social problems will become even more difficult. Alan Milburn’s letter of resignation said it all, and so did the Rowntree report. So let us accept the OBR forecast, but let us prove it wrong by implementing our industrial strategy throughout government, throughout society, and throughout business and industry The noble Lord, Lord O’Neill, told us that this is a bigger challenge than Brexit. This could well mean perhaps putting Brexit on hold. I agree with my noble friend Lord Livermore that surely it is more productive to have hundreds of our best civil servants, and the £3.7 billion budgeted, working on this instead of on Brexit, when it looks as if we will have to retain most of our existing regulations anyway to keep trading with the EU. I agree with my noble friend Lord Darling that it would also provide time for the Government to unite behind a single policy and decide where we want to be and what that policy is to be I want to prove that forecast wrong. So let us change our priorities—and if this Government cannot agree on that, they will have to make way for one who will.