Autumn Statement: Economy — House of Lords, 2016-11-29
Topic: Macroeconomics
David Stephen Geoffrey Pollock (Labour, Centre-left): My Lords, the Chancellor’s Autumn Statement is invariably delivered in optimistic and upbeat language. Its customary hyperbole serves to divert attention from the substantive contents of the message, which may be unwelcome and unpalatable In reality, our economic circumstances are parlous. The Government’s budget deficit has persisted, and the deficit in the balance of payments of our international trade has reached an unprecedented level. Industrial productivity is disastrously low and economic growth has faltered. Masses of people are employed in jobs that barely enable them to make ends meet. To compound this misery, we have a housing crisis that is the equal of what Britain experienced at the end of the Second World War A testimony to this economic failure is an oversized welfare budget, much of which is used to supplement the inadequate incomes of working people. This Government have made strenuous efforts to restrain the welfare bill, but now they appear to have recognised that no further inroads are possible without creating widespread and severe destitution The financial circumstances of the Government, which prevent them taking effective remedial action, are a consequence of their unwillingness to raise the taxes paid on higher incomes and of the further reductions in corporate taxation that were proudly announced in the Autumn Statement. Nevertheless, the Government know that the British economy requires an upgraded infrastructure. They have reasserted their commitment to high-speed rail linkages and the need for an increased airport capacity. They have proposed relieving road congestion by advancing money to be used to ease traffic pinch-points. This is in denial of the modern nostrum of transport planning that such schemes serve only to encourage more vehicles on to the roads There has been a partial recognition of the demands of the housing crisis in an undertaking to encourage the building of more affordable houses. However, the concept of affordability is meaningful only in relation to the income and capital resources available to the people in question, and such housing has proved to be way beyond the reach of those in most need The most notable omission from the undertakings of the Autumn Statement that should arouse considerable anxiety is that there are no provisions to meet the worsening crisis in the health service and in the care for the elderly and other disadvantaged groups. Looming over this grim landscape is a dark cloud of uncertain contents called Brexit. At present, we are feeling the cold gusts that are likely to precede a major storm. The fact that the storm has yet to break has allowed some parties to evince an unreasonable optimism. I will not attempt to penetrate this cloud, but I may say that I expect that others in the European Union will wish to expel us from the European Economic Area, which will amount to a hard Brexit. Ultimately, the choice will not be ours to make; it will reside with the European Parliament Our current economic distress is the culmination of the persistent industrial and economic decline of the UK, which has been occurring ever since the end of the Second World War. A feature of our society that has accompanied our economic decline has been the ascendancy of the financial interest over the industrial interest. This has extended to the boardrooms of our companies, where accountants and finance directors have held sway to the exclusion of technologists and engineers Examples of the damage that has been inflicted on our industries by this distortion are too well known and too numerous to recount in detail. Nevertheless, to my mind, the paradigm of the destructive role of the financiers has been the demise of the great industrial conglomerate that was GEC. The finance directors of that company divested it of its heavy engineering in favour of the purchase of a handful of high-tech American electronics companies, which proceeded to fail spectacularly. One reason for the failures was the desertion of those companies by their technologists, who chose to establish competing enterprises. The obtuseness of the GEC directors in the face of this predictable outcome was stupendous, but it was also typical of many similar instances throughout British industry One might have expected that there would be some recognition of these problems by the Government—and one might have looked for this in the Autumn Statement. An overhaul of our rules of corporate governance that would restrain the depredations of the financiers is long overdue. There should be more stringent rules regarding hostile takeovers, which might prevent the easy capture of our industries by foreign interests. There was no sign of this in the Autumn Statement. Nor does today’s Green Paper on corporate governance reform address these issues in any way What we do find in the Autumn Statement is a promise to reduce corporate taxation, together with a repetition of the mantra that "Britain is open for business". This indicates a desire to attract inward financial investment, which can be seen as a response to the failure of our own industrial investment and a means of mitigating the imbalance of our international payments. The inward financial investment that the Government are keen to foster has two principal effects: it enriches the financial sector, which mediates the transactions, and it places the ownership of our industries and utilities in foreign hands A further effect of the inflow of funds has been to elevate the value of the pound. Recently, we have witnessed the inevitable collapse in the value of the pound. The immediate cause of the collapse was undoubtedly the vote on 23 June in favour of our leaving the European Union. Of course, devaluation was long overdue and there may be further devaluations to come. The devaluation of the pound was the subject of a debate in the House two weeks ago, in which conflicting opinions were expressed. Whereas it was conceded by some that, in theory, a weaker pound should stimulate our export industries, it was widely recognised that we lack the industrial capacity to profit significantly from this effect, which is bound to take time to materialise. In summarising that debate, the Minister declared that the Government have no policy as regards the level of the exchange rate and that they do not comment on its level. According to this doctrine, it is up to the markets to determine the exchange rate I do not hesitate to say that this amounts to a major dereliction of economic management. If the Government had been active throughout their tenure in maintaining the exchange rate at a sufficiently low level to allow our industries to compete in world markets, we would not now be faced with the inevitable catastrophe of a massive devaluation. We are bound to level a charge of economic incompetence against this Government. They have contributed significantly to the nation’s economic decline.