Spring Statement — House of Lords, 2019-03-20
Topic: Macroeconomics
Thomas Lyttelton (Labour, Centre-left): My Lords, I welcome the chance to debate the Chancellor’s Spring Statement and, as the noble Lord, Lord Shipley, noted, to do so—whatever the charms of the Moses Room—in this Chamber. I draw your Lordships’ attention to my entry in the register of interests As my noble friend Lord Tunnicliffe has already observed, the Chancellor of the Exchequer did not wish the Spring Statement to be a fiscal event. In that, at least, he has succeeded. It is indeed a small and imperfectly formed non-event, which I intend to mark with as brief a speech as possible What are the overriding responsibilities of the Government? The defence of the realm is indisputable and, although that is not the subject of this evening’s debate, it is worth noting that the Ministry of Defence’s budget has been cut by 10% in real terms between 2010-11 and 2019-20. The Secretary of State for Defence may have been noisy in his campaigning for an increase in his department’s budget but it is hard not to get the impression that he is more focused on leadership manoeuvres than naval ones, other than those that would have needlessly have jeopardised our economic and trade relations with China. These cuts, of course, are modest compared to the 40% reduction in the budget over the same period suffered devastatingly by Defra and the Ministry of Justice I suggest that next, after securing the security of our country, the maintenance of a stable and positive environment for business is a key responsibility of any Government. There may be varying views on different sides of the House on when and how the Government should intervene to address market failures, but the principle of maintaining confidence, domestically and internationally, in the UK as an attractive place to do business is shared right across the House. In this respect, the Government have abjectly and comprehensively failed. GDP is already 2.7% lower than was forecast three years ago, meaning that £50 billion in money, and perhaps £15 billion or more in tax revenues that could have been invested in public services, have been cut and cut over the nine years of Conservative-led Government—and we have not seen the half of it Even if the Prime Minister’s irresponsible brinkmanship—"reckless" in the words of her own deputy—gets her deal for Brexit approved by the House of Commons, allowing an Article 50 extension for its implementation, the chaos and uncertainty of the past month, for which the Government must take responsibility, will prove to have inflicted further damage on business confidence, with a corresponding reduction in economic activity and investment. GDP growth for the current year has already been downgraded from 1.7% to 1.2%, as I suggested was likely when your Lordships debated the Finance Bill last month. It would be no surprise if the outturn was worse still—barely no growth at all in GDP per capita—as a result of the Conservative-inflicted crisis that can only deter investment and damage confidence further This anaemic projected growth was posited on agreement being reached, I assume, on a timely basis with the EU. There remains, whatever the efforts of Parliament, an unnerving risk that we could in nine days’ time find ourselves tumbling into a disorderly Brexit, the adverse economic consequences of which the Chancellor reiterated in the Statement, and which the Treasury has quantified as an estimated 5% reduction in GDP. That is £100 billion in real money, of which £30 billion or more of tax revenues would be lost The Chancellor in his Statement described my right honourable friend the shadow Chancellor as living in a parallel world. In listening to the Minister’s introduction and re-reading the Chancellor’s Statement, I am trying to reconcile their tone with the figures I have set out, let alone the appalling hardship suffered by the least well-off in our society. I suggest it is the Minister and the Chancellor who are living in a parallel universe Compared to the effects of the Government’s incompetent planning and negotiation of Brexit, and the risks of a disorderly Brexit, the issues outlined in the Spring Statement are infinitesimally modest. The Chancellor has shown the zeal of the convert—which in principle I welcome—in his proposal for a review of the national living wage regime. I hope that the Dube review, and indeed the Furman review of competition in the digital market, enjoy a speedier timetable than the hugely important Augar review of further and higher education, which we still await The noble Lord, Lord Macpherson of Earl’s Court, who is not in his place, spoke with his undoubted authority on fiscal consolidation. I was pleased that he acknowledged that what the Conservative-led Governments have achieved has proved to be no more than that planned and started by the Labour Government and my noble friend Lord Darling, as Chancellor. He noted that Labour’s plans involved different means of achieving that fiscal consolidation, a critical difference, not just in the dispassionate Treasury analysis, but much more importantly, to those who have suffered most from the macho austerity policies pursued by this Government and their allies In our debate last month, I think the Minister may have misunderstood, and did not answer, my question about the implications of the decision by the ONS on accounting for student loans—which, for the avoidance of doubt, I welcome. The noble Lord, in his introduction, spoke proudly of the reductions in borrowing, and has been congratulated on them by the noble Lord, Lord Macpherson. The OBR has noted that these figures do not make any adjustments for the proposed changes to the accounting of student loans. I ask the Minister again: in conducting the spending review for the next three years, when those adjustments can be made, will the Government effectively ignore them in setting public expenditure, and not penalise the country for the imaginative accounting adopted previously I end by noting that the Minister highlighted the Government’s investment of £79 million in ARCHER 2, the supercomputer in Edinburgh. He did not repeat the Chancellor’s jolly quip: "I am told that with the right algorithms it might even be able to come up with the solution to the backstop".—[Official Report, Commons, 13/3/19; col. 350.] I have already stressed the importance of a solution—with or without the algorithms available from ARCHER 2.