Autumn Statement: Economy — House of Lords, 2016-11-29
Topic: Macroeconomics
David Edward Lea (Labour, Centre-left): My Lords, some years ago a trade union colleague used to spend his holidays once a year in Cuba. He used to go for a drink on a terrace overlooking the Caribbean with Fidel Castro, which was all very nice. On one occasion, after a few years, he said, "Fidel, may I ask you a question?". "Certainly, Alex," said Castro, "what’s your question?". My colleague said, "I’ve been coming here all these years and you’re normally smoking a big cigar about that long. This year you’re smoking a smaller cigar that’s only this long. Is there any particular reason?". Castro said, "Well spotted, Alex. The answer is that I’m trying to get closer to the people". Aren’t we all? But it is not easy I think the noble Lord, Lord O’Neill, who has just made an interesting piece of analysis about income distribution, knows well that I do not accept that the Gini coefficient, to which I think he was referring, is a credible measure these days. I cannot go into that now, but we have a methodological dispute. It is quite right to mention that in connection with all the other factors, such as the apartheid in our educational system I echo what the noble Lords, Lord O’Neill and Lord Adonis, among others, are jointly responsible for in our minds about infrastructure investment. Although you would think the idea had been invented only last week, it is one that all of us have been looking at, with differing degrees of enthusiasm, over many decades. In the roads programme, for example, there have been huge troughs and peaks that do not seem to have had any particular economic rationale. Until recently we were told that it could not be done but now we are told that borrowing an extra £23 billion can be done. Talking of changes of doctrine, another thing we were told could not be done was increasing revenues from tackling tax avoidance, but now we are pledged to getting an extra £2 billion from that source In response to a point made by the noble Baroness, Lady Noakes, whose assessments on these matters are always very much worth pondering, I say that what I would call a competitive reduction in corporate tax rates is precisely, in my way of looking at the world at the moment with regard to multinational corporations—not least Apple and Google—the race to the bottom that ignores the question. If we are going to spend significant sums on the health service, as my noble friend Lord Whitty and others have pointed out, the sums of money that we are not getting from multinational corporations are not chickenfeed; they amount to trillions. People say, "Take back control", which is a highly tendentious way of looking at the world. Take back control from what—multinational corporations, Brussels or something else? This is not the same sort of idea but there is that same disquiet, if not disaffection, in many of the industrial democracies The collapse of standards in the labour market and the rapid spread of zero-hours contracts—come back Ed Miliband, all is forgiven—have been very accurately analysed by the Labour Party now for four or five years, and its time has come; actually, it is overdue. There is an idea that we should see this as some sort of benign future economy but the economy is actually going in the opposite direction from where it should be going if we are going to give people the security of employment, the pensions and the tax contributions that in the other half of our schizophrenic brains we are advocating, almost in the same paragraph The pound is worth 15% less in international terms than before the Brexit vote, while I think the pound in our pockets, as Harold Wilson would agree, has been devalued by 2% to 3%—at least that is what the supermarkets are saying, if that is a good guide. Workers having had a real-terms pay freeze for some time, they will want to get that back—hard enough in any event at any time after a devaluation—unless there is a supplement to national income with a significant impact, and I cannot see that coming from exports, especially if you glance at the terrifying graph in the OBR report showing the downward fall in our share of world exports. So we have 7 million Britons with little or no job security, a figure that has grown by almost 2 million in the past decade, according to the highly respected labour market economist John Philpott I have a background proposal to try to staunch the damage that Brexit is doing to our future prospects, as currently it is overhanging discussions like a spectre. The problem with the so-called binary is that it was a binary comparing something we knew about with something we knew nothing about. I think that was a stupid thing to do, but the British public will start to figure out what the opposite side of the binary actually means. I want to bring in a point that, interestingly, is mentioned in a story in today’s Guardian. It quotes the Prime Minister’s spokesman—not the lady carrying the notes that were photographed—as saying that we cannot stay in the single market simply under membership of the European Economic Area because membership of the EEA entails being a member of either the EU or EFTA. I have tried to point out twice in my modest contributions that no one has ever opposed our membership of EFTA. No one in the 1950s opposed our membership of EFTA—apart from one or two fringe people; the great majority was for EFTA I happen to have chaired the last meeting when Britain was a member of the EFTA consultative committee of trade unions and employers in Vienna in December 1972, before we joined the EEC on 1 January 1973. We knew—everybody knew—that EFTA itself had rules. In the Stockholm treaty of 1958, there were rules on state aid and many of the things that we now associate with interference or other people trying to run our affairs. This is what Norway, Switzerland and the other countries are members of, more or less I now advocate that we rejoin EFTA. I think that would deal with the objection of the Prime Minister, if it is her objection, that we cannot join the EEA because it would entail us being a member of either EFTA or the EU. Okay, let us become a member of EFTA again. That is my proposal, and if it is carried forward, bringing with it the internal market as well as the customs union, as I understand it, we could remove one huge incubus from the terrifying arithmetic set out by the OBR and the IFS in the light of the Autumn Statement.