Covid-19: Economy — House of Lords, 2020-06-04
Topic: Macroeconomics
Robert Stevenson (Labour, Centre-left): My Lords, I congratulate my noble friend Lord Eatwell on securing this debate and delivering a masterful speech. I thank all those who have contributed. Two minutes is a ridiculously short time in which to express a fully rounded argument, but taken in the round we have covered a lot of ground and we anticipate a proper response from the Minister, perhaps backed up with letters if they are required My noble friend Lord Chandos said that it might be too early to draw lessons from this pandemic, but we already have a long list of issues that we need to address. Local government is starved of funds and responsibilities. Our NHS is brilliant, but not funded sustainability. Our social care system is neglected, fragmented and underfunded. The benefits system cannot cope when incomes drop unexpectedly, particularly for those in the gig economy or who are self-employed. Inequality is hard-wired into our society. In pursuit of a false goal of freedom from red tape, we have winnowed away the good regulatory base that is the foundation of all strong societies. Wages in our lower-income deciles are too low. We need to do something about the living wage. Our tax system is not fair. Productivity has stuck again and that is not capable of being resolved. Housing seems out of sync with needs, and we need to improve the treatment of those who face unmanageable personal debt. So we have a long list of starting points, not all of which we have covered in this debate, but which give us food for thought Yet ironically, as my noble friend Lord Darling reminded us, the crisis has also revealed the true power of the state. Joseph Stiglitz said recently: "when we face a crisis like an epidemic or a hurricane, we turn to government, because we know that such events demand collective action" The urgency with which the Government have acted so far demonstrates how their response to an emergency can be swift, decisive and at scale—for example, the furlough scheme, which now supports nearly 9 million people—but more is required as we move to the recovery stage. This has led some, such as the right reverend Prelate the Bishop of Chelmsford, to suggest that an entirely new approach may be necessary, perhaps something as radical and far-seeing as the Beveridge report of the 1940s, with its call for a country to unite in the aftermath of war and to legislate for all to employ gainful employment, adequate housing, access to educational opportunity, free healthcare and an adequate income. The language used nearly 80 years ago may be archaic but Beveridge’s aims remain appropriate, albeit that today we would need to add a sixth aim: to provide a cleaner, more sustainable economy We are fast approaching the point where the focus of the Treasury’s efforts has to change from ameliorating supply shock to boosting demand. As the pandemic eases, and assuming we do not suffer a second or subsequent waves, how will we persuade people to spend more than they do at present on goods and services? To do that, people have to trust the Government and believe that they are not just winging it. They have to feel secure about their income and employment, and certain that spending on immediate necessities today is not going to tip them into unmanageable debt tomorrow. Consumer confidence is vital for the economy, as well as for its own sake. According to Which?, in normal circumstances consumers spend more than £110 billion per month, which is around 60% of total GDP. We do not want to turn this great pause into a great depression At heart it seems simple enough: the Government need to consult widely and come up with a comprehensive rescue plan to drive up demand and reduce business uncertainty for the long term—a strategy which focuses on sustainable, high-quality job creation and long-term growth significantly above recent trend levels. They also have to secure the confidence of consumers and avoid any hint of austerity, which can only make things worse There are important choices to be made here. For example, writing recently in the Times, the most reverend Primate the Archbishop of Canterbury said: "There must not be a short-term fix and then simply a return to normal. We need a vision for the psychological, emotional, social and financial consequences. We must see the hope of a new way of living together." The Countryside Alliance says that while we must support those communities and services worst impacted —several noble Lords highlighted the problems of the creative industries, the hospitality sector and tourism—we must ensure that no part of the UK is left behind, especially seaside and rural areas. One of the persistent failures of Governments so far is to deliver on plans to provide gigabit-capable broadband to rural businesses and residents by 2025, as promised in the last general election manifesto. Can the Minister confirm that that is still the Government’s aim Recent polling suggests that the public also want something else. They do not want the economy simply to return us to where we were pre-pandemic; they want a new deal, with growing support for a green new deal. Voices are growing on all sides for the Government’s economic recovery plan to reflect the UK’s climate goals. Earlier this week, almost 200 chief executives from companies including HSBC, National Grid and BP signed a letter to the Prime Minister which said that "Efforts to rescue and repair the economy in response to the current crisis can and should be aligned with the UK’s legislated target of net zero emissions by 2050 at the latest." Can the Minister confirm that the recovery package is in planning and that it will look beyond shovel-ready projects and be focused on long-term investment in green industries to secure the recovery? Can we look forward to an army of workers planting trees, rewilding our countryside, insulating our existing housing stock and office buildings and working on green technologies? What about a scrappage scheme focused on switching private and public transport to electric vehicles? Such a package, taken together, could provide people—particularly in rural areas and those entering the labour force this year—with much-needed job security after this period of turmoil, and benefit everyone’s financial security through lower energy bills The current public investment in our economy is unprecedented, but does the Minister agree that such investments should be used to return benefit to the public good? Will we follow the lead given by other countries and ensure that any government support to private companies should be in the form of equity or grants? If it is equity, does he accept that there is a case for such support to be contingent on legally enforceable commitments for companies to reduce energy-intensive activity and achieve stretching zero-carbon targets Finally, as my noble friend Lord Eatwell said, the pandemic has exposed severe weaknesses in global production and trade. Countries are turning in on themselves, and we know that cannot be a good thing. Twelve years ago, major international efforts led by Gordon Brown stabilised international financial markets. Now we need a resilient, co-operative, international trading system, lest Britain becomes marooned alone in a hostile post-Brexit world Coronavirus has cruelly exposed global inequality, so different priorities for trade need to reflect a reoriented world. A sustainable trade policy could focus on securing opportunities for all sizes of businesses, human and employment rights, consumer interests and climate protection for the long term. How does the Minister see this playing out in the UK We need to use this opportunity to commission a Beveridge moment, and thinking on that should start soon, but we also need an immediate demand stimulus and a longer-term plan, under which the Government will work with all parts of society to secure the recovery based on a green new deal which shares the benefits of cleaner inputs and more sustainable outputs for the benefit of us all.