Spring Statement — House of Lords, 2019-03-20
Topic: Macroeconomics
Denis Tunnicliffe (Labour, Centre-left): My Lords, the Chancellor set out to make a Spring Statement that did not constitute a fiscal event. This is a slightly strange objective for a Chancellor of the Exchequer, but one which he achieved, with the director of the Institute for Fiscal Studies commenting: "We should not complain. One fiscal event a year is plenty" However, while the Chancellor may have cleared his own rather low bar, this Statement marks a missed opportunity. He did little to instil confidence in either the Government’s handling of Brexit or their claim that austerity has come to an end. As we have grown to expect, despite some limited additional funds and the launch of several consultations, he failed to tackle the big issues of the day. Like the Prime Minister, he kicked the can down the road Some may say that this is hardly a surprise, given that this Spring Statement was delivered against the backdrop of Brexit uncertainty. Indeed, with the House of Commons having convincingly rejected the Prime Minister’s withdrawal agreement for a second time the previous day, Mr Hammond delivered his speech to an impatient Chamber, with MPs more interested in voting to oppose a no-deal outcome The Chancellor was clear that the outlook for the economy was premised on an orderly Brexit. He warned that performance will meet expectations only if MPs pause, reflect and fall into line by backing Mrs May’s deal at a third time of asking—whenever that may be. To bring the point home, he threatened that this summer’s spending review could be delayed in the event of Britain crashing out without a deal in place. This is a worrying state of affairs, given the many hours spent debating statutory instruments in the name of ensuring life goes on after a no-deal Brexit Businesses up and down the country will have tuned in, expecting answers to the big questions. But, as has become customary under this Government, they were left with less certainty about the future rather than more. It is no secret that business confidence is low, that investment is falling and that jobs have unnecessarily been put at risk. In his speech, Mr Hammond claimed that by backing the withdrawal agreement, a "deal dividend" would bring about a, "recovery in business confidence and investment".—[Official Report, Commons, 13/3/19; col. 347.] That is a clear acknowledgement of the problems the economy faces as a result of the Prime Minister’s botched negotiations Thanks to Mrs May’s red lines, however, and her Ministers’ failure to grip the detail of Brexit, much of the damage has already been done. Our manufacturing sector is struggling. Numerous employers, large and small, have announced job losses or relocations. Many food producers are in despair as they simply do not know whether they will be able to fill the shelves in a fortnight’s time. It is little wonder that the director-general of the Confederation of British Industry remarked that, "this is no way to run a country" While the Chancellor tried his best to present the Office for Budget Responsibility’s economic outlook as a success story, the truth is that it is anything but. This Government have presided over the slowest economic recovery since the 1920s. The deficit has not been eliminated, despite the previous Chancellor promising to achieve that years ago. Real wages are still lower than they were 10 years ago and, according to the OBR: "Average earnings growth remains below the rates typical before the financial crisis" Household debt is plugging the gap, with debt relative to income expected to increase over the forecast period. While the Prime Minister and Chancellor are living on borrowed time, too many households are relying on borrowed money Last week, the OBR revised GDP growth down to a level consistent with the European Commission’s winter forecast—the same one that suggests that the UK will languish at the very bottom of the European league table in future years, even in the event of a soft Brexit. Let us be clear: 1.2% annual growth is far below what our economy is capable of. If that is all that is realised, the Government will have failed in their duty to unlock the country’s potential Ministers are merely storing up problems for the future. Nowhere is this truer than in the Chancellor’s announcement of £100 million for police overtime to tackle knife crime. That amount covers just a fraction of the £2.7 billion of real-terms cuts in direct government funding to police forces since 2010 Not enough is being done to future-proof our economy. Britain’s infrastructure ranks bottom in the G7 for quality, and the rate of public investment is among the lowest in the OECD. Despite this, planned public sector investment has been cut. What possible justification can there be for that? And, while the Chancellor may have mentioned the environment this time around—something he failed to do in his Autumn Budget—all we were promised are consultations and reviews, rather than action to deliver green jobs and growth The biggest disappointment is that, despite the warm words of the Prime Minister and the Chancellor, austerity is not over. While limited pots of money have been made available for certain projects, any major spending commitment has been postponed until the spending review at the earliest. The can has been kicked again. Even if the Government come good on their promises to end austerity, it will have taken a full year for Ministers to have taken their first tentative steps. That pace is simply unacceptable. It is not what was promised to hard-working people across the country At the same time as the Government’s action on tax avoidance falls well short of expectations, benefit claimants have been told that the cruel benefit freeze will continue for a fourth year. Ten million families will have lost an average of £420 a year as a result, exacerbating existing issues with in-work poverty and high rents. Concerns about universal credit continue to be raised by claimants and charities alike, yet there is no mention of the scheme, or further measures to rectify it, in the Chancellor’s speech Something needs to change, and not just the Chancellor’s approach to these important Statements. The Government’s priorities are wrong. Their inability to address the imbalances in our economy is stifling too many people’s life chances. Real change is needed between now and the Autumn Budget to ensure that departments have the money they need to deal with the many pressing non-Brexit issues facing the country, to ensure that legitimate concerns are listened to and acted on, and to restore faith in our democratic system. This will mean listening to local councils, which are struggling to provide services to local communities, and to schools, where teachers are having to pay for supplies out of their own pockets, and it will mean taking action on the other pressing challenges we face, be it a shortage of affordable social care, problems in prisons and a failing probation service, or rising poverty and homelessness As my noble friend the Leader of the Opposition has observed on a number of occasions, Brexit seems to have brought the usual business of government to a halt. Our hopes for future fiscal events, therefore, are not very high. That is why we will continue to set out our alternative approach to managing the economy, as my noble friend Lord Davies of Oldham will do in his closing remarks. In the meantime, this debate provides an opportunity for the Government to begin the listening exercise I referred to. This House has a wealth of experience. The Chancellor and his Ministers would be well advised to listen to advice and act accordingly.