Cost of Living — House of Lords, 2022-06-09
Topic: Macroeconomics
Denis Tunnicliffe (Labour, Centre-left): My Lords, let me begin by congratulating my noble friend Lord Eatwell on securing this debate. I am grateful to the other noble Lords who have participated. This discussion comes at an important time. Parties of all stripes talk about building back better after the pandemic. If we are to do that, we must, as the debate title suggests, consider how to boost social capital and make our economy more resilient to future shocks. Earlier, the right reverend Prelate the Bishop of St Albans made a particularly powerful contribution about the challenges faced by many individuals and communities across our country. The cost of living crisis is at the forefront of our minds at present, and rightly so. Even with the energy measures announced by the Chancellor before Recess, that crisis is going nowhere. Energy and other costs will rise further in the coming months and that may require further interventions from the Treasury However, we must acknowledge that as well as putting household budgets under strain, the current economic situation is subjecting people to numerous other pressures: there are concerns that personal finances may be taking a toll on people’s mental health; it may impact on the frequency and quality of interactions with friends, family and neighbours; and it may change how people interact with civic processes and institutions or core public services. Addressing these issues and, in doing so, developing social capital is not straightforward at the best of times. It requires time, political will and appropriate funding. Few in this country would consider these to be the best of times It is worth repeating that, despite the Government’s protestations, the current economic context is not solely the result of global trends and the war in Ukraine. As other noble Lords have noted during the debate, the situation has not been helped by the Government’s recent changes to tax and benefits, which have left many low-income people worse off in real terms. Neither has it been helped, as observed by my noble friend in his introductory remarks, by the fundamental weakening of some of our most important institutions and public services since 2010. It may not have been the policy intention, but the austerity agenda caused lasting damage to our National Health Service, to the education system and to communities through cuts to local councils and other services. We cannot have economic resilience in a broad sense if core public services lack it in their own right Many noble Lords will have seen recent footage of an A&E nurse at the Princess Alexandra Hospital in Harlow. She was filmed informing patients that they faced a wait of up to 13 hours, and that there might not even be a bed for them when eventually assessed and admitted. A 13-hour wait in A&E is not the result of a Covid backlog, nor, sadly, is it an isolated incident in 2022 Britain. Rather, it is symptomatic of wider issues with the direction of the health services since 2010, including the watering down of proven targets and a failure to properly address related issues such as social care. The Government argue that they are trying to address those issues through the health and social care levy, but that is taking more out of people’s pockets at the worst possible time There have been many other signs of our ever-decreasing economic resilience. While efforts are being made to measure things such as social capital, GDP growth remains the dominant economic indicator. Nobody can dispute that the UK economy has endured a disappointing time since the global financial crisis: we have averaged just 1.8% annual GDP growth since the change of Government in 2010. While other countries’ economies rebound strongly from Covid, our recovery has been inconsistent and stop-start. That cannot be blamed solely on Covid restrictions, as some other countries moved earlier and maintained them for longer. Although it is true that there is a global surge in inflation, the most recent figures suggest the UK is performing worse than any other G7 nation. The end-result of these different factors is that the UK economy now stands on the brink of recession. Indeed, just yesterday the OECD confirmed these fears, warning that growth will grind to a halt next year, with only Russia performing worse than the UK among the G20 nations An economic downturn would inflict even more pain on people up and down the country at the worst possible time. Of course, there is no single answer to the challenges we face. However, as I said earlier, change can be achieved given time, political will and funding. In her response, I am sure that the Minister will cite the Government’s levelling-up agenda and their spending on related initiatives. It will take time to measure the impacts of that agenda, but it is hard to have any confidence in it when the earlier White Paper left so many questions unanswered Elsewhere, the Chancellor has acknowledged the need to boost productivity, calling for increases to capital investment and a rapid improvement of skills in the workforce. Those ambitions are worthy, but do not seem to be backed up by concrete initiatives to bring them about. While the answer can never be public spending alone, we know that public investment in key sectors of the economy not only produces jobs but also unlocks private sector money. This has been acknowledged by the Treasury itself through its establishment of the UK Infrastructure Bank, which aims to achieve crowding in of private funds. There is no magic money tree, but there is room for spending wisely, taxing fairly and getting the economy firing on all cylinders The Chancellor recently adopted Labour’s policy of a windfall tax on energy producers, and perhaps he could adopt another. Is now not the time to accelerate investment in insulating homes and taking other steps to fight climate change? The first step would create immediate jobs, while sustained investment in the green transition would facilitate the high-skilled roles of the future. The Government clearly need to take control of the current economic situation. If they were to adopt some of the suggestions outlined today, perhaps the UK could achieve the higher levels of growth, resilience and social capital so desperately desired by my noble friend Lord Eatwell.