Queen’s Speech — House of Lords, 2022-05-16
Topic: Macroeconomics
Questions: 2050—I am just 100 years out. Even if we get to that, a lot of countries in the world will not. Two things follow from that. The first is that climate change will not be significantly improved. We in this country produce 1% of the world’s emissions, so if we have all the struggles and make the vast expenditures but other countries do not, we will not have achieved anything so far as climate change is concerned Secondly, if we have spent an enormous amount of money improving our electricity and getting it all done, our electricity will almost certainly be more expensive than it is in other countries. There is a danger we have to watch, as the heavy industrial users of electricity will build their factories in other countries, not in those that have spent all that money on this. We have the time to deal with this, but we have to be very careful that that is not the end result of what we do.
James Bridges (Conservative, Centre-right): My Lords, as others have remarked, the spectre of stagflation now stalks our country. The make-believe world we have lived in of record low rates, inflation supposedly under lock and key, and the magic of QE has all been shattered. As others have said, the core question that overshadows the entire gracious Speech is simple: what is the strategy to tackle the economic crisis Before I turn to the Government’s programme, which I want to focus on, I will say a word about the Bank of England, which my noble friend Lord Forsyth and others have spoken about. As he said, last July the Economic Affairs Committee warned: "If the Bank doesn’t act to curb inflation it will be much more difficult to rein in later." We asked the Bank to explain how it will curb inflation if it is more than just short term. The answer we got in September was that above-target inflation is likely to be "transitory"—that was the word. Clearly, the world has changed dramatically since then, and "I told you so" must be one of the most irritating phrases in the English language. But with independence comes accountability, and a number of noble Lords have made very good points and raised serious questions about what the Bank has and has not done. In due course, the Bank will have to answer those questions In the short time available to me, I want to focus on the gracious Speech. The first line states that the "Government’s priority is to grow and strengthen the economy and help ease the cost of living for families." Let us just remember that sentence. If easing the cost of living for families is the Government’s priority, why are they walloping them with higher taxes? Why are they hitting businesses with higher corporation tax and a jobs tax? Why are they risking sparking a trade war with our largest trading partner? Why are they clobbering the self-employed with IR35? I could go on—examples are legion—but it is strikes me that this Government say one thing and do another This incoherence would be bad enough in normal times, but it is highly damaging in this economic storm. As we face the very delicate balancing act between curbing inflation and encouraging growth, we need a Government with a compass, a map, a path that they stick to and, above all, a clear set of principles that governs their thinking. I am sorry to say that I do not see any of these things Looking ahead, I put three thoughts to your Lordships. First, the Prime Minister now talks of stopping irresponsible spending. I am not sure what he means by that. After all, this is the Prime Minister who proposed building a bridge to Northern Ireland, and whose first Budget before Covid struck meant that day-to-day departmental spending would grow twice as fast as the economy, which, as the IFS then observed, was "obviously not sustainable for any prolonged length of time." I will believe prudence has moved into No. 10 only when I see evidence of a change in ways My second point is that there is, however, one area where more spending is absolutely needed now: to help those on the lowest incomes. The Prime Minister told the other place that he wanted to cut the costs of getting a passport or driving licence. I am sure many of us would agree, but the people who need help now have not got the money to go on holiday abroad or often to own a car. Measures in the Spring Statement offset only about a third of the overall decline in real personal disposable income and that is why, as others have said, the Government should have made the £20 per week uplift in universal credit permanent My third point is on tax. As my noble friend Lord Forsyth and others have said, Treasury coffers will be boosted by inflation. But the cost of servicing our gargantuan debt is set to hit an eyewatering £83 billion. Balanced on this financial precipice, we need to tread with extreme care. If there is room for tax cuts—if—I would look to help businesses, as they are the geese that lay the golden eggs. One fact is that we now rank 31st out of 37 of the OECD countries for tax competitiveness. That is nowhere near good enough if we aspire to be global Britain The Prime Minister said that the gracious Speech would get the economy "back on track". I am sorry to say that I am not clear what track the Prime Minister is on, and I am not sure he is either. Unless we get that clarity fast, we risk losing our way in an ever more violent economic storm.