Budget: Economic and Fiscal Outlook — House of Lords, 2020-05-05
Topic: Macroeconomics
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, I shall begin by picking up a point made by my noble friend Lady Northover and reinforced by the noble Viscount, Lord Chandos: this is not going to be a V-shaped economic recovery. There will not be a rapid bounceback to the normality of pre Covid-19. The noble Lord, Lord Birt, was very clear in describing the global crisis that has occurred and the impact on developed and not-developed economies. The OBR took none of that into consideration when it put together its forecast. The challenge for the Government now is to prevent an L-shaped economic disaster. They can do that, but only if they take the right actions Much of this debate has underscored that there is overwhelming support for the Government’s willingness to pour money into minimising the damage to the UK economy, and I applaud that. But the money needs to get into the hands of businesses, and we have a pipeline that remains stuck. The banks were always going to be a problem. The CBILS original framework programme has £300 billion for support for companies, but something like only £4 billion, £5 billion or £6 billion has actually been released. The Government need to redouble efforts to bring in alternative lenders As the economy opens up again—my noble friend Lord Shipley made this point—support for businesses cannot be stopped at a sudden cliff edge. The furlough scheme in particular will need to be pulled back gradually, or even firms with a viable future will make many workers permanently redundant because they do not have the cash and they do not want to take on additional debt. Frankly, neither our economy nor our society can afford the long-term unemployment of so many people. I recommend to the Government the "safe to return to work" scheme proposed yesterday by a number of my colleagues Even under an optimistic scenario, many people will not have a job to go back to. Self-employment will be an important route for them. As we go into rebuilding the economy, innovation will be key, and independent contractors are vital in driving innovation. We need this Government to stop presuming that self-employment is primarily a tax evasion scheme. They need to understand the critical role of self-employment and to provide a fair framework for future self-employment that engages with paying tax, which should not be avoided, and provides self-employed people with proper employment rights, or recognises where they do not have those rights We have had too much change during this period of Covid for the economy to return to the shape of 2019. This is our opportunity, as well as our responsibility, to build a new economy. I believe the Government’s dilemma is how much to let market forces decide the shape of that new economy, and how much the Government themselves and the public at large shape that economic change. I argue that the public now have little tolerance for a capitalism that does not embed social responsibility. There is a new respect for low-paid workers, a new understanding of the privations of being on benefits and a deeper admiration for so many of our public services. The public will also not forgive any Government who ignore the need to avoid future disasters. That includes pandemics, of course, but I put climate change into that category as well. I believe the public now understand the need to prepare, plan and act. We need a green recovery I also join those who feel that the Government cannot play fast and loose with fiscal management. The noble Baroness, Lady McIntosh, touched on some of these points. She made it clear that the Bank of England will not endlessly print money. My noble friend Lord Purvis and others underscored that debt can be a burden that we have to deal with. I hope there is not an implication in the statements of the noble Baroness, Lady Bennett, that we can simply build public sector net debt constantly and continue to carry it, no matter its level So far, this Government have treated tax increases as anathema. Some people had suggestions of taxes that could potentially be increased, but the underlying principle that it should be the broadest shoulders that carry those increases is surely something we all ought to be able to agree on, even if we spend time discussing the exact shape of that This is a time of global crisis. It is a truism, but we all hang together or we all hang separately. If we need time to work out our relationship with the European Union, we need to take that time. If, within the timeframe of the year end, we cannot negotiate decent rollover free trade agreements or new free trade agreements with countries that are all preoccupied with Covid—they may have intended to negotiate rapidly with us, but that has to be down at the bottom of the list for most of those economies today—surely we ought to ask for the additional time to allow that to happen. The point my noble friend Lord Purvis made was so overlooked, certainly by the Minister, and by the noble Baronesses, Lady Noakes and Lady Deech. All the new free trade agreements, even if they were to come on tap—and remember that they are embedded in the OBR forecast; the assumption is that they will be negotiated successfully —make nothing more than a marginal contribution to our future GDP and growth I argue that if Covid teaches us anything, it is that we have to build co-operation, not nationalism. I heard that strongly from the noble Lord, Lord Liddle. The point was made by the noble Baroness, Lady Falkner, who underscored that our economic future is always tied into the economic success of the European Union as our major market I was troubled by the number of times the noble Lord, Lord True, used the word "own"—it was "own" and again "own". The noble Baroness, Lady Noakes, picked up on this so much. If we all think "own", and that is the framework in which we operate, tragedies such as Covid will have huge, long-term, undermining consequences—not only for our economy but for the global economy. We cannot exempt ourselves from that just by focusing on "own".