Economy and Finance — House of Lords, 2016-06-09
Topic: Macroeconomics
Bryan Davies (Labour, Centre-left): My Lords, I of course congratulate my noble friend Lord Haskel on securing this debate and on introducing the third of our economic debates in recent times with issues of real moment and substance as far as the future of the UK economy is concerned. Inevitably, in a debate in which a very substantial number of my noble friends and other noble Lords in the House have discussed Europe, I have to make some reference to it. However, I bear in mind that my noble friend Lord Haskel wanted us to focus on other issues in the economy and will therefore dispense with Europe in fairly short order: first, because I expect the Minister to express the predominant views of the Prime Minister, which my own party substantially supports as far as the referendum is concerned; and secondly, because nearly all the opinions expressed in the House today have been clearly in favour of remain. In fact, where is the noble Lord, Lord Pearson, when we need him? We have had no alternative stance, not least because noble Lords participating in this debate know enough about economics to recognise that there is in fact no case for leaving Europe I will make the obvious political point as well: no serious major industrial country in Europe is going to give good terms to a country which withdraws from the European Community and then seeks to negotiate reasonable terms. It is not going to happen, and Brexit better take on board the fact that we would face a calamitously difficult negotiating position if the referendum went the wrong way. I am grateful to those noble Lords who articulated that case. The noble Lord, Lord Shipley, identified that only Patrick Minford had put any kind of case forward in economic terms for the Brexit position—and even he recognised that it would be a sacrifice for our manufacturing industry. I am grateful to all my noble friends, including my noble friend Lord McFall, who I had hoped might talk about banking again, because he does it with a luminosity and accuracy that we all value. But I respect the fact that he concentrated on Europe today I want to get back to what I think my noble friend Lord Haskel wanted us to cover—the fundamental position of the economy, and some of its obvious weaknesses. I heard the noble Lord, Lord Leigh, put forward a very interesting case on the progress made thus far. I think that he has to concede that we have made the slowest recovery from a recession in modern times, and we are still struggling with the consequences of our slow progress. We will all recall that the Chancellor was meant to hit his deadline in 2015 for the elimination of the deficit. He is now asking for four more years to create a surplus, and is rated by the IFS as having a 50:50 chance of doing so, so the Government’s progress in these terms is pretty limited We have crucial issues to face—and I am grateful to the noble Lord, Lord Stoneham, who has just spoken, and to my noble friend Lord Hanworth, who emphasised the unsatisfactory response of the Government to our questions about the balance of payments. I am also grateful to my noble friend Lord Haskel, who after all opened up the debate on some of these issues. We have a critically difficult trade deficit position, and the gap is widening—and it is causing serious economists to identify that our situation is parlous. We need a strategy for improving our response to the gap in our balance of payments, and to tackle the other issue, the disastrous position of productivity. Are we prepared to accept that we are sixth out of the seven top countries for productivity and that a Frenchman produces more in four days than the British counterpart does in five? Germany is, of course, much more successful than that. Do we honestly think that the economy can recover while its productivity levels are so dismal? My noble friend Lord Haskel drew our attention to those difficulties. We have to recognise that our productivity is growing at 0.25% a year, when prior to the crisis in 2008 we were used to productivity growth of 2.5%. Productivity growth is crucial to the nation’s welfare The Government are facing a major problem with the issue of the skills agenda and support for our enterprise and industry. Although the Government boast about the number of apprenticeships, they are pretty poor value compared with the apprenticeships of the past with their rigour, training and skilling of the nation. People who go into apprenticeships from graduate level are taking on apprenticeships that basically embrace A-level skills, while those who go in at A-level level are involved in apprenticeships that stretch them about as far as GCSEs. In other words, these are not apprenticeships that are sufficiently rigorous to really skill the nation, and it will not do for the Government just to bandy the general figures; we have to establish criteria for the levels at which apprenticeships operate. That means that, for a very significant section of our population, particularly young people, their chances are blighted by the lower level of skills that they obtain Furthermore—and I have said this in the past, although I have never had a response from the Dispatch Box opposite—the construction industry is poised to have enormous demands made on it. At some stage, the Government will get their act together to get an increase in housebuilding and, at some stage, they will translate promises on infrastructure into real commitment of resources—although, as my noble friend said in talking about the north-east, that area is being neglected. Only one in 13 infrastructure projects that the Government envisage is in northern England. So much for the northern powerhouse We need recognition from the Government of what my noble friend Lord Haskel established—that we have to increase our levels of productivity and increase the skills of our nation, ensuring that our nation is more competitive in the workplace. Instead we have the overwhelming commitment to austerity, which both the IMF and the OECD have said has been taken so far that it might have been better if the UK had pursued a growth strategy than concentrating solely on the issues of fiscal reform and the improvement in the budget. Why do the Government persist against that evidence? It is because, overwhelmingly, their commitment is not to the advance of the economy but to the realisation of their own political and ideological agenda, and it is costing the country dear.