Queen’s Speech — House of Lords, 2017-06-26
Topic: Macroeconomics
Peter Hain (Labour, Centre-left): My Lords, is it not a delight for the House that the noble Baroness has found her compellingly persuasive voice on the Back Benches? I welcome her to them. I also praise the brilliant speech of the noble Lord, Lord Low, which I hope speaks for everybody in this House The economy is not strong and stable but in deep trouble. It has been losing momentum for three consecutive years, and we now share bottom place with Italy in the G7 growth league. Even Greece is forecast to grow faster than Britain next year. Slower economic growth means lower tax revenues and higher government borrowing. The OBR expects borrowing this year to be higher, not lower, than last year and the budget still to be in deficit by the time of the general election in 2022. Over the next five years, the number of people aged 65 or over will increase three times as quickly as the population as a whole. Slow growth makes meeting the challenges of an ageing population even tougher—be it their health, social care or pension needs If the Government pursue their stated aim of cutting net immigration to the tens of thousands, it will hold back growth even further by reducing the supply of labour and aggravating skills shortages. The respected economist Jonathan Portes estimates that that alone would mean £6 billion more in taxes, public spending cuts or government borrowing Seven years of austerity, the Institute for Fiscal Studies reckons, have meant that UK average incomes in real terms are now 15% below where the 1961 to 2008 growth trend would have taken them. Living standards will certainly fall this year, with prices rising faster than pay and inequality rising. In real terms, pay is set to plummet, with earnings in 2022 no higher than they were in 2007, making this the worst decade for pay growth since before the Battle of Waterloo Oxford economist Simon Wren-Lewis estimates that austerity may cost the average household a colossal £23,000 per year in lost income by 2019-20—and there is still no end in sight to austerity, which began so catastrophically and so needlessly under George Osborne in 2010. This Government are now planning another tight fiscal squeeze up to 2019-20, hitting the poorest the hardest of all. According to the Institute for Fiscal Studies, the Tory manifesto means that the severest squeeze on the NHS since it was founded will be extended to 12 years. The Tories also now have the shrinking of school budgets in their sights In the private sector, big business is spending its cash mountain on company share buybacks instead of investing in the future, while the commercial property market seems to be at a standstill. Consumer confidence is down and consumer debt up, with more than 3 million people in persistent credit card debt. Last year alone, UK households borrowed a record £32 billion to buy cars, with 90% of private buyers using personal contract plans. That borrowing figure is forecast to exceed £40 billion this year. The Financial Conduct Authority now fears that banks might be hit by a sudden rise in car loan arrears, hitting car sales and hence wider economic growth Ten years ago, under Labour, £1 bought $2. Last June it bought $1.50. Now it is worth only $1.30—its lowest level for 30 years. Yet Britain’s foreign trade balance has worsened over the past year, not improved. We have a record trade deficit and we are about to leave the biggest, richest single trading bloc in the world on terms that nobody can foresee. UK productivity today is terrible, lagging far behind our key trading partners in Europe and America. This is not helped by the fact that 5 million adults—a sixth of our employed labour force—lack basic literacy and numeracy skills The Institute for Fiscal Studies reckons that there are more than 3 million frustrated workers: those who work part time but want a full-time job, plus those who are economically inactive but want to work. This is especially true in the regions outside London. The economics editor of Sky News, Ed Conway, recently argued that Britain’s tax burden will have to go up. Certainly we need to tax both property and income wealth more fairly. Grenfell Tower is surely a clarion cry for a clean break with austerity. As the Observer eloquently explained in an editorial on 18 June: "But this is more than a story of a benign state being hacked at by funding cuts and deregulation. Grenfell has peeled away the layers, to reveal an unaccountable, distant state, sheltering behind arm’s-length bodies to which it has subcontracted its most fundamental responsibilities for keeping people safe … It is hard to escape the conclusion that they fell victim to a culture shaped by indifference to the less well-off; that extols the virtues of the market over the positive role of the state; that scorns expertise and regulation and cuts corners in the name of trimming budgets. It should shame us all" Savage cuts and the shrinking of the state must stop. Some of our public services are dangerously close to collapse. It is time to invest in growth and end austerity, and to bring the public finances back into balance—and growth, not austerity, is the best way to do that.