Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
John Lawrence Whitty (Labour, Centre-left): My Lords, I very much agree with the remarks of the noble Lord, Lord Brooke, on housing. I do not claim I will be able to match the erudition of the rest of his speech, however I was provoked into speaking in this debate by sitting through the whole of the Chancellor’s performance the other day. It was an amazing performance, full of new-found self-confidence, chutzpah, ringing phrases and even a few quite good jokes. But the one thing that was clear about it was that we are in an election period. I, therefore, have to abandon my normal consensual approach in this House and make it clear that I also am in an election period and that that election needs to be fought largely on the economic battlefield The speech, although showing a commendable Stalinist commitment to a long-term economic plan, was very tinkering. The Budget did not amount to very much; as one commentator put it, it was a good day for drinkers and a good day for the manufacturers of smoke and mirrors. Apart from that, the speech was, as my noble friends Lord Rooker and Lord Layard have already spelled out, a complete distortion of recent economic history. Indeed, arguably the most successful aspect of the Chancellor’s economic strategy has been to convince the media and large sections of the population—as my noble friend Lord Rooker says, even some members of the Labour Party—that the economic crash of 2008 was entirely due to the last Labour Government’s public spending profile. Never mind that the crisis started in America; never mind that it hit every western country; never mind that prior to the crisis Britain was relatively low in ratios of both debt and deficit to GDP; never mind that it was primarily a crisis of a corrupt banking system that, at the time, the then shadow Chancellor was arguing was far too overregulated; never mind that it was therefore a crisis of private debt, not public debt, and it was the state that had to bail out the financial sector. The Chancellor’s thesis appears to be to blame the cure and not the acute disease of the banking crisis If that position were just propaganda, we could probably live with it. The problem is that the Chancellor clearly has believed over the last few years quite a lot of his own propaganda—always a pretty dangerous thing for politicians. For the first three years of this Government, Budgets appeared to reflect that propaganda, and, with it, the nascent economic growth that we were beginning to see in 2010 was stalled and reversed at huge cost to many parts of the economy. Infrastructure spending was the first to go; public services, particularly local authority public services, were cut; housing spending was cut. The continuing lack of recovery, which the Chancellor was blaming on problems in the eurozone and commodity prices, was actually due to the deliberate decisions and austerity programme of the Government It is true that, after the rather disastrous Budget of 2013, the Chancellor appeared to panic and change direction a little. Thankfully, we have had some recovery. But most of that recovery is despite rather than because of the Chancellor’s ministration. After all, capitalist economies inevitably are cyclical and eventually there is always a recovery. But the recovery that the Government and the Chancellor are crowing about has, in reality, been the longest coming recovery from a depression in a century, and the nature of the rising tide that is now thankfully here is not one that has raised all the boats at the same time—it is a very unbalanced and divisive recovery. Nor is it really attaining major improvements in economic efficiency. As others have said, our basic productivity rates are behind most of our competitor nations and are very sluggish. Low productivity both causes and reflects the situation in the labour market of low pay. Yes, jobs have been created, but most of the new jobs are at relatively low levels of real pay and most workers have still hardly had a rise in their real wages under this Government. Many of the jobs are highly insecure as a result of a deregulated labour market with a weakened ability to enforce the rights for workers that still exist as they are watered down and access to justice is denied or priced out The recovery is deeply divisive: divisive between rich and poor; between old and young; between different parts of the country; between the south-east and the rest of the economy. Only in this last Budget has the Chancellor begun to recognise that the south-west and the north need substantial infrastructure investment. The recovery is socially divisive between those who have paid off their mortgage or are close to doing so and those who are forced to rent in the private sector, trying desperately to get on the housing ladder, or live in social housing. Indeed, this Government appear to wish to see the abolishment of social housing altogether. I have often warned this House that the housing crisis is perhaps the greatest economic disaster, as well as social disaster, that we are faced with, compounding dysfunction in all forms of housing tenure, with families with a head of household who is under 40 facing a continuing prospect of inadequate and overexpensive housing. This is particularly the case in London, but it affects many other cities and many villages and towns in our rural areas. Unfortunately, the Chancellor’s response has been simply to underwrite more pressure on the demand side and do nothing to increase the supply side of new housing. The inevitable result of this is an escalation in the housing benefit bill. More generally, the escalation in welfare payments is a reflection of the low incomes of in-work families and not a result of skiving or people trying to avoid their economic obligations to the rest of society The Chancellor’s record is one of nearly four years of unnecessary cuts followed by one year of unequal and divisive recovery—and what does he promise us for the next few years? Pretty much the same: three years of deeper cuts, with a bit of relaxation post-2018 Others, more informed than I, have talked about the problem of defining economic success in terms of the deficit and debt. The current level of debt, around 80% of GDP, is about the average for the last 200 years, as my noble friend has said. The deficit needs to come down, but not at the expense of economic performance. The repayment of debt depends on the cost of that debt and on the timetable for the repayment of it. If they are manageable, then the debt is manageable. That is indeed the UK’s case. We are not Greece and we never have been, despite the Chancellor’s propaganda. Closing the deficit depends on increasing the income to the Exchequer, as well as controlling expenditure, and that in turn requires a growing economy, not a further round of harsher public sector cuts and the prospect of another five years of a rollercoaster economy. There must be another way. This side of the House will support another way.