Budget Statement — House of Lords, 2017-03-14
Topic: Macroeconomics
Ian Wrigglesworth (Liberal Democrats, Centre to centre-left): My Lords, I am very pleased to follow the noble Lord, Lord McKenzie. I do not want to follow him down the road he has just been driving along, although that is the first sensible analysis of what should happen that I have heard in this debate or, indeed, anywhere else. Clearly, something needs to be done about national insurance contributions. There are anomalies all over the place and I hope that with the report that is coming we will get a rather more sensible decision than has been taken on this occasion There is certainly a need for reform but the major mistake that has been made by the Government—and on these Benches we should understand it very well—is the absurd manifesto commitment that was made by the Conservative Party at the last election not to increase income tax, VAT or national insurance contributions. I say it is absurd because what serious party of government, coming into office for five years, would suggest that it is not going to change any of those taxes during the next five years, when it does not know what is going to happen and what the circumstances are going to be? The Government deserve every little bit of criticism that they are getting for the change that has been made. I want to comment on two things: first, on the shape of the Budget and the economic forecasts that have been published; and, secondly, on the impact of Brexit on the Budget, which the Chancellor did not even mention and which, as many noble Lords have pointed out, is going to have an enormous impact on the economy in the year ahead and, indeed, in the five years ahead and beyond. The rather higher than expected growth rate, which has been a theme of a number of speeches today, has been driven by consumer spending. It rose by 3.2% in the fourth quarter—the fastest since 2007. Meanwhile, it was accompanied by a sharp fall in savings. The rate fell into negative territory, as has been pointed out in the debate, for the first time since 2008. It is an extremely worrying position where a large part of the consumer spending has clearly been taken by people out of their savings All this has been driven by low inflation and low interest rates but we have higher inflation and lower real wages coming down the track. As Paul Johnson from the IFS has noted, and has been referred to in the debate, in the forecasts, average earnings are no higher in 2022 than in 2007. He could not find an adjective to describe what an appalling situation that is. All this is against a background of low productivity, with business investment down 1% in the fourth quarter and 1.5% in the year as a whole. It is a very dangerous situation when the economy is driven by consumer spending in this way at the same time as investment is falling. We are on an extremely dangerous trajectory and the only way to overcome the debt problem—I am with the noble Lord, Lord Skidelsky, on this—is to increase productivity and growth. Any sensible business with the income to justify the borrowing will borrow and invest to increase its productivity and profitability and get itself out of trouble I note that the Government have £26 billion of unexpected undershoot in their borrowings. The Chancellor said that he was putting this into a "Brexit reserve". The cynic in me says that it is more likely to be a general election reserve. I can see what is going to happen to the extra £26 billion when we get to the year before the next election: there will be a very good reason for using it, if not for Brexit expenditure then for bribes as the general election approaches. It should instead be added to the investment in productivity that has been announced elsewhere in the Budget There was no mention at all of Brexit in the Budget, which is a very serious omission. There will be some very high direct costs and dangers to revenue arising from our leaving the EU—for example, new administrative burdens in agriculture, fisheries, immigration, border control and customs I want to say something about customs before I finish. Before I came to the House I was chairman of the biggest trust port in this country, the Port of Tyne, so I follow the port industry with some interest. I was interested to hear from the chief executive of Dover—the Port of Tyne is bigger than Dover—that one lorry comes through the Port of Dover every minute. Some 31% of our imports and exports pass through the Strait of Dover—£220 billion of goods. One lorry per minute: that is an enormous amount—160 kilometres of lorries coming over every day. If they were parked they would stretch along the motorways from Dover to Stansted. That is how many lorries come in through that port. It takes one minute to get each lorry through the port. If that increases by two, or three, minutes, there are massive logjams on our roads A lot of the goods coming in are food and perishable items. At present the system can just about cope. Consider, however, the warning from Christopher Booker in last Sunday’s Telegraph. I have chosen Christopher Booker because he has been the scourge of the EU for quite a few years—incredibly anti-EU. However, he says in last Sunday’s article, "our trade with the outside world has been governed by CHIEF (Customs Handling of Import and Export Freight), designed to handle 50 million customs items a year" In 2010, HMRC realised that it would need to be revised and it has spent all that time putting a new system in place. Time does not permit me to go through the full details, but the system will have to be revised again. It has taken HMRC all those years to put a new system in place. It does not yet know, and will not know until the negotiations are complete, what the system will comprise and it will be faced with the most horrible crisis at the end of this period if we come out with a hard Brexit or not knowing the details. If ports such as Dover—and many other organisations—cannot prepare for the onslaught that will face them as a result of Brexit it will cost the Government and the taxpayer a lot of money, and I would like the Minister to tell the House what preparations are being made for those eventualities.