Budget Statement — House of Lords, 2020-03-18
Topic: Macroeconomics
Edward Timothy Razzall (Liberal Democrats, Centre to centre-left): My Lords, while thanking the Minister for introducing this important debate, I share the concern of my noble friend Lord Oates that the noble Lord seems to have delivered a speech that he would have delivered last Wednesday, without realising that the economy has moved on since then. As he has raised the issue of the Budget, I will touch for a moment on the criticisms that we have from these Benches. Clearly, the Chancellor had an extremely difficult hand, as growth rates have been revised down very significantly; we would say quite often that that was as a result of Brexit. Although that might be disputed, that was so even before the effects of the virus. I will make three brief criticisms before moving on to the wider issues First, there was no real mention of adult social care, which is one of the real issues facing the country. I would be grateful if the Minister could indicate, when he replies, what the Government are going to do about that. Secondly, as my noble friend Lord Oates indicated and as was said on the Labour Benches, there were rather disappointing statements about climate change. Personally, I think it was a great mistake not to take advantage of the significant drop in oil prices to remove the cap on fuel duty, which would be much less noticed by the consumer. Thirdly, the issue of shifting resources to the north seems to have been rather understated. As David Aaronovitch said in the Times last week, the policy seems to be simply to build more roads to the north so that people can get there However, as a number of noble Lords have indicated, the Budget has really passed us by now. We are really dealing with the statement of the Chancellor on the impact of the virus on our budget and his guaranteeing of loans of up to £300 billion, which is 15% of GDP. This is obviously unprecedented. As my noble friend Lord Oates indicated, from these Benches we welcome those proposals. But as the noble Lords, Lord O’Neill and Lord Lamont, asked, will this be enough? As we all know, following the Prime Minister’s statement on Monday, the leisure industry has seen a catastrophic fall in its revenues. Without immediate action, there will be bankruptcies of businesses, which will never recover. My concern is that if £300 billion is to be lent by the banks, the bureaucratic process for people to obtain those loans will be very slow. For many people, this will be too late. It will be too late for the self-employed and for workers on zero-hours contracts, who are laid off and today have no money I know that the Chancellor is considering further steps. The CBI is advocating a VAT freeze and the reversal of national insurance to provide immediate payment to business but I would go further, rather like the noble Lords, Lord O’Neill and Lord Lamont. I am glad that the noble Lord, Lord Lamont, raised the phrase "helicopter money". I like that phrase because it was coined by the guru of the right wing of the Tory party, Milton Friedman, who, when asked what he would do if there were another depression, said that the Federal Reserve should hire helicopters and drop dollar bills over every town in the United States, hence the phrase "helicopter money" The paying of—whatever we like to call it—a citizens’ dividend or business dividend has a reasonable pedigree. Ben Bernanke, the Federal Reserve governor in 2002, said that he would do that to combat deflation, defining deflation as a side-effect of a collapse in aggregate demand, which we are clearly heading for. Japan tried it in 1999, with some success. Australia in 2009 gave 950 Australian dollars to 8.7 million people earning less than 100,000 Australian dollars, and was one of the few countries to avoid recession; and Hong Kong has tried it in recent weeks, with a payment of 10,000 Hong Kong dollars to every Hong Kong citizen. I accept that probably just giving that sort of dividend to every individual might not be sufficient, and there would have to be a decision as to how you split that between business and individuals. However, I share the views of the noble Lords, Lord O’Neill and Lord Lamont, that this could be essential. The argument against it has always been that it is hugely inflationary. However, with the economy facing low growth or a recession, I submit that that is a risk worth taking At least coronavirus has enabled the Chancellor to avoid the trap set by his right-wing Brexiteers, who were advocating the creation of a Singapore-on-Thames following Brexit, with drastic cuts in public expenditure and significant deregulation. You obviously cannot deal with coronavirus and promote growth in towns that have voted Tory in the north and Midlands while cutting public expenditure and taxes. Therefore, at least the crisis has prevented the disaster for us of the creation of a Singapore-on-Thames. As a colleague said to me the other day, "With a crisis like this, everyone’s a Keynesian now".