Queen’s Speech — House of Lords, 2015-06-04
Topic: Macroeconomics
John Horam (Conservative, Centre-right): My Lords, I add my warm welcome to the two maiden speakers, the noble Lords, Lord O’Neill and Lord King. Both are economists, as am I. I tend to think that economists ought to run the country, but I doubt that I would carry the House with that thought. None the less, the noble Lords are very welcome, particularly since we are having an economic debate. Perhaps we could leave it that economists might be rather better than lawyers at running the country; that might be something that the House would agree to A recent issue of the Spectator purported to list the top priorities of what it called "Cameron’s inside gang". It did not actually spell out what "Cameron’s inside gang" was, which might have been more interesting, but it listed the priorities. They were, "keeping economic growth going, getting an acceptable deal from Europe, securing the Union at home, showing that their policies benefit the poorest in society and ensuring that more houses are actually built" That rather cheered me up: first because there were only five priorities. Usually Governments have a long laundry list of issues that they say they are going to prioritise, but five is quite enough. Secondly, I rather agree with the priorities. You can say, with Groucho Marx, that if you do not like them, I have others—but if I had to settle for five at the point of a gun, those five are not too bad My problem is—and this is what I want to say a few words about—the difficulty there will be in achieving priority one, keeping economic growth going, and priority five, getting houses built. On economic growth, the US recovery is proving feeble, the BRIC countries, which were made famous by the noble Lord, Lord O’Neill, are slowing down and our exports are suffering. Jaguar Land Rover sales fell by 20% in the first quarter. Manufacturing is not doing particularly well at the moment. The international situation is not very promising and growth is rather fragile I am also concerned about the Government’s stance. Here I get into questions of Keynesian economics and so forth. The Government are saying that they are giving top priority to growth, according to the Spectator, but the economic section in the manifesto is all about deficit reduction, and the Queen’s Speech also centred on this. This reminds me of the beginning of the last Parliament, when priority was given to deficit reduction, and expenditure, particularly capital expenditure, was cut pretty drastically. The result was that the rather feeble growth went into reverse. Macroeconomists at the Lords seminar on austerity under the chairmanship of the noble Lord, Lord Bilimoria, which I attended before Christmas, suggested that this might have cost us 4% in GDP growth over the two years at the beginning of the last Parliament Only after the infamous "omnishambles" Budget did the Chancellor realise that the advice he was getting was wrong and quietly change tack, becoming rather more Keynesian. As someone who learned his economics in Cambridge during the post-war Keynesian heyday of the 1950s, I can only commend that, as well as his political flexibility—but I do not want to see the emphasis on deficit reduction repeated in the first Budget of this Parliament. That would be a serious mistake I would much prefer the Government to stick to their general proposition that they will give priority to maintaining economic growth and, consistent with that overriding objective, keep firm control of current government expenditure and endeavour to reduce the deficit year on year. I believe that the Chancellor now has real credibility as a result of his success—plus, for the first time in many years, a decent majority in Parliament—and the markets would not mark him down for adopting such a posture. It would be much more sensible that trying to meet the rather implausible figures that were mentioned in the Queen’s Speech My second and final point is about housing policy. The fact is that housing policy in the UK has been a disaster for the last 40 to 50 years. In 1968 we built 425,000 houses. Last year it was 140,000, but we need 250,000 a year. As a result, prices have soared and we spend £24 billion a year on housing benefit—a huge sum that, if it were spent on actually building houses, would revolutionise the situation. As John Kay, the FT columnist, put it the other day, the trends over the past 40 to 50 years, "are … entirely explicable by reference to changes in … policy" In other words, it is our fault—or rather the fault of Governments and Parliaments over the past 40 or 50 years Now the Government want to go back to selling more social housing—this time, that owned by housing associations. This is a mistake. It does nothing to increase supply: indeed, it will reduce it. I therefore endorse the remarks made on Tuesday by the noble Lords, Lord Kerslake and Lord Best, in this Queen’s Speech debate. Since the Government appear determined to bring forward a Bill to transfer housing in this way, I beg them to subject it to pre-legislative scrutiny so that expert opinion on housing can be fully heard by both Houses of Parliament. Then we will see exactly what people who really know about the housing situation think To be fair to the Government, they have relaxed planning controls and encouraged the assembly of large parcels of land. I believe that the cost of land is a fundamental issue that has to be tackled in a radical way if we are to get more housing. I also believe, as the noble Lord, Lord Kerslake, said, that in Greg Clark we have an extremely able Secretary of State to deal with these matters. The fact is, though, that if we are going to get a decent housing situation for our children and particularly our grandchildren, with the sort of benefits that we enjoyed when we were young, we must have a much bigger and bolder effort by government to deal with the housing problem. Harold Macmillan did it in the 1950s when he oversaw the building of 300,000 houses a year, and if the Government are going to be truly a one-nation Conservative Government, they should be emulating him.