Queen’s Speech — House of Lords, 2015-06-04
Topic: Macroeconomics
Colin MacKenzie Low (Crossbench, Unknown): My Lords, I add my word of welcome to the new Minister to his position. I have heard him on the radio frequently; he is a big hitter, and will add much authority—I nearly said "much-needed authority"—to the Government and to our proceedings in this House. To judge from his speech this morning, he will add much dynamism as well. I also congratulate the noble Lord, Lord King of Lothbury, on a maiden speech every bit as distinguished as we would expect The Prime Minister and the Conservative Party are to be congratulated on their surprise victory—a surprise, I believe, as much to themselves as to anybody else, although people are now coming out of the woodwork to claim that they saw it coming. I myself believed that it was the one outcome that could not possibly come to pass. Mr Clegg has described it as the triumph of "grievance and fear" over liberal values. I have great respect for our Lib Dem colleagues, but I have to say to them that if that is the case it is something that they have connived at for the last five years In truth, the election was won on a fraudulent prospectus of over-promising and under-delivering. The record for competence, especially economic competence, was rubbish, with the loss of our AAA credit rating and flagship deficit reduction and immigration targets missed by miles. Instead of the much-denied top-down reorganisation of the health service, we got a top-down reorganisation of the health service, only a costly one of byzantine confusion—and the jury is still out on universal credit, with major question marks still hanging over its deliverability The Prime Minister is now impaled on a number of promises that he probably did not expect to have to keep. On public expenditure, the figures simply do not add up. How are £7 billion worth of tax cuts, raising the threshold for inheritance tax to £1 million, subsidising the sell-off of housing association property and £8 billion more a year on the NHS to be squared with the removal of £30 billion from the budget is anyone’s guess, especially given the absurd lock on raising VAT, income tax and national insurance. Perhaps the Chancellor will tell us on 8 July, but I am not holding my breath. Against this background, seven-day working, along with extra doctors and nurses for the health service, is surely for the birds. If anyone else had exhibited such a cavalier approach to the nation’s finances, they would have been torn to shreds It is widely agreed by economists that the Government’s austerity measures at the beginning of the previous Parliament delayed the recovery by two years, entailing a permanent loss of resources to the economy conservatively estimated at 5%. When the recovery failed to materialise, the Chancellor abandoned his austerity policy, and the pace of the recovery quickened up to the present time. The Chancellor and his followers never tire of describing this as his long-term economic plan and claiming credit for holding to it. Indeed, the Chancellor achieved the singular feat of persuading people to accept a policy of austerity on the grounds that, although unpalatable, it is good for us, even when he has abandoned it himself. This is only a long-term economic plan if by "long-term plan", you mean shrinking the state in the first two years of a Parliament with a view to expanding the economy again in the run-up to a general election The noble Lord, Lord Desai, and I had a slight difference of opinion over this when we last debated it shortly after the Budget when the noble Lord gave the Chancellor credit for sticking to his guns. It is true that the slowdown in the pace of deficit reduction in 2012 owed as much to disappointing tax receipts as to the Government reducing their expenditure. However, the Chancellor could have stuck to his original deficit reduction plan by raising taxes to compensate for this, or cutting spending still further, but the important point is that he chose not to do so Labour is said to be facing an existential crisis stemming from the unravelling of traditional class identities, its failure to come to terms with Scottish nationalism and its failure to speak to those left behind by the damaging effects of market individualism and global market forces. It certainly faces a herculean challenge which will not be overcome by vague appeals to back aspiration. It is said that Labour’s dilemma is that it needs to appeal to different audiences simultaneously, but I am not so sure. I think the problem was that it simultaneously colluded with the narrative on austerity and Labour’s part in the crisis while cautiously hinting at something a bit more radical, with the result that the trumpet gave forth a very uncertain sound. Whenever the Labour Party was taxed with the deficit, all it could do was go on about the good things it had done with it. It had just about screwed itself up to say that the deficit did not cause the crash but did not seem to be able to take the crucial step of explaining that it was the crash that caused the deficit. If Labour’s analysis is so poverty stricken, how can it expect anyone to get the message? Yet whenever I heard a strong lead being given in opposition to austerity, people resonated strongly with it. This is what happened in Scotland, and people voted for it. Labour needs to learn the lesson from this and stop giving so many mixed messages I fear that the Government are about to make the same mistake that they made at the beginning of the previous Parliament and inflict another bout of austerity. A number of speakers have anticipated this concern. This would not only be wrong in itself but risks choking off the recovery, which is not so strong that it can easily withstand another austerity shock. Attention focuses principally on stagnant productivity these days, but this should be viewed against the background of a host of other deep-seated problems with the British economy. It was reassuring to note the Minister’s awareness of them in his speech Investment is too low, the economy is unbalanced, our manufacturing base is too small and we rely too heavily on the service sector, particularly financial services. We have chronic balance of payment problems, debt levels remain too high, but growth, rather than further consolidation, is a much better way of addressing this. The recovery is too dependent on consumption artificially boosted to unsustainable levels by rising asset values and asset sales. There is even ominous talk of another crisis, worse than the previous one, looming. I was not sure how far this ominous talk was loose talk. The noble Lords, Lord Desai and Lord Skidelsky, referring to it this afternoon should lead us to take it very seriously The IMF has just said that deficit reduction is no longer the priority that it was, so there are many good reasons to be concerned at the prospect of a further round of austerity on economic grounds. It would seem to be counterproductive, even in the Government’s terms of delivering a programme of one-nation compassionate Conservativism. What price seven-day working in the NHS then?