Budget Statement — House of Lords, 2017-12-04
Topic: Macroeconomics
Christopher Samuel Tugendhat (Conservative, Centre-right): My Lords, many years ago, I was the Parliamentary Private Secretary to Willie Whitelaw. As many noble Lords will recall, one of his most famous comments about politics was that things are never quite as good or quite as bad as they seem This saying came into my mind when I heard about the OBR’s downgrade of our productivity. It is understandable, after the OBR’s overestimates in the past, but I wonder whether the situation is quite as bad as it appears; I think that there is scope for looking further and deeper into its estimates. I say this because when one considers, on the one hand, the impact of hi-tech developments on the way in which services are bought, sold and produced in this country and, on the other, the impact of the gig economy, it is very difficult to believe that the situation is as dire as the OBR points out. I also feel that the way in which tax revenues have held up rather better than expected is another reason why one ought to query whether the OBR’s figures are as sound as they appear. This is not a criticism of the OBR at all. We all know that models are very difficult things; it is very difficult for them to keep up with changes in the economy. I wonder whether we can be confident that the model being used by the OBR is fit for purpose in the present circumstances. I hope that a good deal of work will go into looking at that and determining whether the situation is as it currently appears, despite all that is happening in the realm of hi-tech, despite the gig economy and despite the way in which tax revenues have held up My next point concerns the housing market. I do not wish to carp; I welcome what has been done. However, there is no getting away from the fact that what has been done is modest. As the Institute for Fiscal Studies pointed out, the extra spending will amount to about £1.5 billion a year and the target is 300,000 new houses. That was pretty good when Harold Macmillan did it, but a target that was regarded as good in the 1950s seems a little modest when we are almost in the 2020s. The stamp duty concession is certainly helpful, but I do not think anybody would suppose that it is game-changing. How much better it would be, as the noble Lord, Lord Darling, pointed out, if there had been changes in the planning rules as well. Some time ago, we had a debate on intergenerational fairness; I, along with several noble Lords, made the point that if something was going to be done on stamp duty, it would push up prices unless something was also done about planning. Of course, I quite understand why nothing was done—the Government are not strong enough to do it. Political reality is what it is Of course, political reality has also made it very difficult for the Government to tackle another problem—the privileges of the elderly. That problem also came up in the debate on intergenerational fairness; my noble friend Lady Neville-Rolfe had some wise things to say on it a short time ago. Unless and until the Government are in a position to tackle the very privileged position of the elderly, many of whom are sitting around me—I am myself an octogenarian—it will be very difficult indeed to do anything to help the younger generation. I draw particular attention to the triple lock, which provides an extraordinary boost to pensioners’ incomes at a time when the average pensioner’s income is above that of people in work The third striking feature of the Budget was the £3 billion for Brexit. That is certainly a very wise precaution, but it confirms what many of us have said for a long time: whatever the long-term consequences of leaving the EU may be, the short-term ones are extremely expensive. The Government were wise to put the £3 billion aside, but they now need to be far more open and up-front about where the cost will fall in disruption and changes to existing practices. My noble friend Lord Bridges has from time to time pointed out the need for honesty in this respect. Until there is more clarity on that point there will be a very considerable cloud hanging over investment decisions. Certainly today, after the disappointing news from Brussels, that is particularly true Finally, as we all know, the Government’s record in office will be defined by Brexit. Whether we bring it off successfully or fail to do so, the amount of effort, time and energy Ministers have to put into Brexit leaves very little time or energy for other matters. There is very little time for tackling intergenerational unfairness, social inequalities and regional differences. These are the issues that the electorate will judge us by. To the extent we are unable to play on those wickets, we leave a huge gap for the Opposition to take advantage of. The more Conservative Ministers and MPs make it difficult for the Prime Minister to bring about an agreement and pursue her chosen course, the more difficult it will be for the Conservative Party to win the next election.