Economy: Budget Statement — House of Lords, 2018-11-13
Topic: Macroeconomics
Bryan Davies (Labour, Centre-left): My Lords, this has been an excellent debate. The Minister began it in the normal way that Ministers do; he described the Budget and took us through it in considerable detail as if these were normal times. The noble Lord, Lord Higgins, said it was his 60th Budget, and he is therefore in a position to know that there is something a little abnormal about this Budget. The noble Lord, Lord Skidelsky, called on us to talk about the economy and not the Budget. The Budget, in a sense, was not the Chancellor’s creation. We cannot recall him earlier talking about the end of austerity or the sunny uplands now facing the economy. He is always referred to as the cautious, somewhat gloomy Chancellor. But there was a conference speech by the Prime Minister on the necessity of ending austerity, and the Chancellor found himself forced by that speech—and by the pressure of public opinion; we should not underestimate the extent to which the country is reacting against austerity—to follow her will as a consequence. He took the opportunity to follow the somewhat fortuitous forecasting advantages and found himself able to predict greater expenditure than he otherwise would have done As my noble friend Lord Wood of Anfield pointed out early in the debate, the expenditure proposals fall a long way below the level necessary to make a real dent in austerity. The most graphic area of government responsibility identified has been local government, as the noble Lord, Lord Kerslake, referred to, among others. It is quite clear that the kind of crisis that came to public attention in the Conservative authority of Northamptonshire—and is common to so many other local authorities—is not remediable by a small, one-off addition from the Chancellor. It may be an earnest of intent—that if things go well with other matters, such as Brexit, local authorities may be promised greater resources—but at present everybody is aware that there is a crisis, to whose resolution this Budget makes a very limited contribution indeed The Budget terminates not austerity but the long-term economic plan. Do we all remember that Chancellor Osborne in 2010 set out to eliminate the deficit by 2015? There was a slight extension, which enabled the Conservative Party to edge the next election—shedding its colleagues in coalition as it went—on the basis that it was still fully in control of the major priority that it had identified for the nation: the elimination of the deficit. The Conservatives would do it in three years—fairly shortly after the 2015 election. There is none of this nonsense from this Chancellor, is there? He does not make any pretence or question that the realisation of that objective will obtain in the mid-2020s. Most commentators, even the OBR, think that is rather optimistic. The major priority of the Conservative Administration over the past eight years—carrying all the consequences, some of them very detrimental indeed, for so many people—has been the elimination of the deficit. They are nowhere near achieving even that as yet. But they have hit departmental spending, and the services that the Government are responsible for providing to the nation, very hard indeed. The Chancellor indicated that we should not take the present situation quite so seriously, because departmental decisions would be taken next year, when he deals with the spending plans. So this Budget gives a very limited indication of what is to be done; the real work comes in almost a year’s time. Perhaps that helps to explain why, as every noble Lord who has spoken in this debate in any kind of critical mode has identified, extra expenditure for departments falls a long way from the position that the departments actually face. It does not matter which area of policy one chooses. It is quite clear that the Chancellor’s decisions at this stage are inadequate to be much more than even a token towards ending austerity The second point the Chancellor makes is that this is a very difficult time in which to draw up a meaningful Budget. Have we ever seen greater uncertainties? The answer almost certainly is no. Brexit is creating such turmoil across the whole economy, and no one can foresee the outcome with great accuracy. You can see enough, and with sufficient accuracy, to put a spending plan for a huge amount of money on the side of a bus, but no one who is actually serious about allocating public resources thinks that this is a time in which fruitful decisions can be taken. The Chancellor indicated that he might have to bring another Budget in mighty soon if, in fact, the Brexit position proves that to be necessary. Far from this Budget being the focal point of a change in the economy and a big advance in the nation’s fortunes, it is pretty well a holding mechanism until things begin to clear, so that the Chancellor can identify his priorities later That does not alter the fact that in every policy area, as my noble friends were keen to point out in this Budget debate, the additional resources that the Chancellor has allocated are inadequate. The most insulting concern the schools budget. In circumstances where schools have taken cuts over the past eight years, that they should be beneficiaries of the "little extra" that the Chancellor can find seems a gratuitous insult I applaud the recognition on the other side of the Chamber that, however welcome the £1.7 billion towards social credit is—and it is of course welcome—it is a long way below the amount necessary to pick up all the needs of those who depend on benefits. The Chancellor would have to allocate £7 billion if he was going to ensure that the freeze on the rates of working-age benefits destined for next April would be taken off the agenda. So the story goes on, through all policy areas I pick up a point made most strongly by colleagues on my side of the House, I must admit, but that should be borne in mind by the whole House: austerity has failed the economy. As the noble Lord, Lord Skidelsky, said from the Cross Benches, and my noble friends Lord Hain and Lord Livermore said from behind me, this past eight years has in fact been a period of growth below the period after the Second World War. It has cost this country dear. When you operate from a position of 1.6% growth, you are selling the country short on economic success. In that period, we saw not just the fall in government resources available to people but wages not rising for the most extraordinary length of time As my noble friend Lord Haskel presented in his very clear speech, investment is falling in the United Kingdom. At present, UK business investment is the lowest in the G7, and public sector investment is £18 billion less than it was in 2010. There was also, of course, considerable discussion on the issue of the United Kingdom’s productivity. I agree that we need to think clearly about what would improve our productivity. But it is absolutely clear that this Government, in almost every Budget speech, continually emphasise their concern about productivity, yet it is 15% lower than in the other major economies in the G7. As my noble friend indicated, if in fact we had been serious about improving productivity, we would have put more investment into training and into supporting those sectors that specialise in vocational education. Instead, those sectors have been decimated. Further education colleges have taken a devastating cut over these past eight years and part-time education, which was always looked upon as a possible source of people changing jobs in a changing economy, has been almost wiped out This is not a Budget of success. It is an indication by the Chancellor of the fact that he had to pay more than lip service to the question of austerity. He would never have chosen that as his objective, given the mammoth task that awaits the country in ridding itself of the costs of austerity. But the Chancellor did what he was obliged to do. He presented a Budget that the whole party on the other side will try to sell to the nation as a huge success, and as the end of austerity and the expansion of the economy, even when the predicted growth rates are lower than they have been over recent years.