Budget Statement — House of Lords, 2017-12-04
Topic: Macroeconomics
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, there is one area where I completely agree with the noble Lord, Lord Rooker, which is that the big news from the Budget was the absolutely appalling growth rate. It is the worst in my lifetime—and I am old—and is expected to remain between 1.3% and 1.6% throughout the entire forecast period. It was the noble Lord, Lord Bilimoria, who pointed out that in just 18 months we have managed to go from the top of the growth leagues, at around the time of the referendum, down to the relegation zone, which is where we absolutely sit now The noble Lords, Lord O’Neill of Gatley and Lord Haskel, also came in on this, talking about how extraordinary it is at a time when our economic and main trading partners are firing on all cylinders. JP Morgan last week said that the economy of the euro area is "on fire". It reports all key measures backing a euro area growth forecast of 3.1% of GDP this year. The CBI today made similar comments: a stagnant UK, a thriving eurozone and a global economy expected to achieve something in the range of 3.6% to 3.7% this year and next. It is an extraordinary situation. The drop in our growth rate together with the plummet of sterling has dropped us from the fifth-largest to the sixth-largest economy, and if India had not had a hiccup, we would have been seventh However, even that forecast is predicated on a successful Brexit with a frictionless trade in goods with the EU, no new constraints on the export of services including financial services from the UK to the EU, and new trade deals galore. It was the noble Lord, Lord Darling, who pointed out how unreal this all was, saying that the last thing our economy needs right now is Brexit. He was joined by the noble Lord, Lord Livermore, and my noble friends Lady Randerson and Lord Taverne. The one outlier in this was the noble Lord, Lord Dobbs—I could not possibly comment but the noble Baroness, Lady Donaghy, had him absolutely bang to rights. It was an excellent story of fiction I am a believer in industrial strategies, but the new industrial strategy was described by the Daily Mail as a "weak upgrade" with "feeble investment" in the economy. I think it is the first time that I have ever agreed with the Daily Mail, but we are facing critical problems in the industrial strategy, to which I will return in a moment As for the impact of the divisions within our society, the Resolution Foundation reports that the UK is facing the longest squeeze on living standards in 60 years, with the poorest 20% of families hit hardest. The noble Baroness, Lady Donaghy, talked about that, and the noble Lord, Lord Skidelsky, talked about the low-wage environment. At the weekend, as many noble Lords have mentioned, the entire Social Mobility Commission resigned in response to the Government being all talk and no action when it comes to tackling the deep and growing economic divisions in the country. Does the noble Lord, Lord Balfe, who asked where all the problems are, realise that there are £12 billion more in welfare cuts in the pipeline? There was a very minor amelioration of that number in the last Budget, but there are significant additional cuts, which are falling very much on families, especially on those with more than two children, and on the poor who are actually in work In many ways, the timing of this debate is perfect. In looking at that shocking forecast, though, we all agree that it is underpinned by a collapse in the growth of productivity in the UK. Actually it has been tepid for decades; it was running at a trend rate of 2% even before we hit the financial crisis. Still, productivity growth this year is only 0.3%, and in the end the OBR had no choice but to recognise that we would not at any time in the near future return to that 2% trend rate. Indeed, although it is forecasting not the 0.3% where we are now but something like 1.2%, many would say that recovering even to that level of productivity is indeed optimistic We all recognise what the elements are of improving productivity. However, my noble friend Lord Razzall talked about training and the Horlicks that has been made of the apprenticeship levy. It has not been a broadly discussed issue in this debate but I want to point out that, while I am totally in favour of T-levels, I am going to be dead before the youngsters training with them are playing a major part in this economy. We have to look at lifelong learning and upskilling people on a regular basis, and none of that was tackled in the context of this Budget Then there is the question of investment by business. The noble Lord, Lord Skidelsky, talked about investment, but private investment as well as public has basically fallen off a cliff. The noble Lord, Lord Livermore, pointed out that there was 0.2% growth in private investment in the last quarter, and we cannot survive on that kind of basis. In this context, I have a question for the Government. In the Budget, significant funds were announced to be funnelled through the British Business Bank to support small innovative businesses, but they seem to be pretty much the equivalent numbers to the amount that we are losing through our inability to tap EIF funds. Indeed, when I looked at the research, it seemed to be nothing more than an offset for money that we are losing from European research funds. Is there any additional money, or are we simply stepping in to patch up the losses that are coming because of our Brexit decision? That would be useful for everyone to know Overwhelmingly in this debate, one Member after another has talked about housing; I was going to try to name people until I realised it would be easier to name those who had not mentioned it. It was kicked off brilliantly by the noble Baroness, Lady Blackstone, but many others participated. There was a single message in all this—here I do not mean to be insulting; I am simply copying a slogan from the Clinton Administration—"It’s supply, stupid". I wonder whether the Minister could put that on a piece of paper and tape it up inside the relevant departments. The demand side is not where the problem lies. Member after Member from a wide range of ideologies, from different parties and with a wide range of experience all talked about those fundamental problems. The noble Lord, Lord Beecham, and my noble friend Lord Shipley focused specifically on housing revenue accounts, but the discussion was far broader. Will the Government begin to notice when they hear so many voices in such chorus with so much evidence I return to the industrial strategy. There is a huge focus on innovation and new sectors, and that is absolutely necessary. However, there are two points here. First, the noble Lords, Lord Wakeham, Lord Carrington and Lord Haskel, pointed out that it was a very narrow perspective on innovation and that there are much broader issues around the fourth industrial revolution—artificial intelligence and the gig economy, and the impact that all of that will have. The Budget did not begin to tackle those kinds of complexities. Secondly—no one has mentioned this particularly, and that surprises me somewhat—I noticed that there was pretty much nothing for the small, steady businesses that are absolutely the backbone of our economy. That is where productivity is at its lowest and where, if the Government do not focus, make changes and invest in bringing in the capability to introduce innovation at that level, we will never get the change that we need in productivity and the growth rate that we need for our economy.