Autumn Statement: Economy — House of Lords, 2016-11-29
Topic: Macroeconomics
John Lawrence Whitty (Labour, Centre-left): My Lords, I regret that I am not quite as optimistic as the noble Lord, Lord Flight, but I shall start by congratulating the Chancellor on a couple of things. First, I join the noble Lord, Lord Wakeham, in saying that it is time we got away from having two Budgets a year. I am not sure he was absolutely historically right to blame it all on Gordon Brown. My recollection is that what used to be a rather minor, low-key White Paper on public expenditure has been turned into an alternative Budget by successive Governments from Thatcher and Blair through to Cameron. It is time we abandoned that. I am not entirely sure that we will ever adapt to having a Budget in November rather than in the spring, as has been the case since Gladstone’s time, I understand, but I am sure we will get used to it The other thing I congratulate the Chancellor on is the presentation of the Autumn Statement. At least it has faced up to the fact that there is, on the best estimates—the OBR’s estimates—some detrimental effects of Brexit. That degree of realism from something which comes with a government package is very welcome There are a few small things I particularly welcome in the Autumn Statement, but not many large ones. The small things include the abolition of pay to stay, which was iniquitous. It threatened communities and was a disincentive to work. The measures on agents’ fees I very much welcome. I have been campaigning for them for many years as a consumer representative. I am also in favour of much of the infrastructure programme. I particularly thank the Government and the DfT for a very small part of the infrastructure budget which relates to safer roads—I declare my interest as chair of the Road Safety Foundation There are good things in the Autumn Statement, but we have to recognise that there are a number of things that it is not, some positive and some negative. First, it is clearly not a continuation of Osborne-omics: it is a clean break. It abandons deficit-figure fetishism after six years, and I welcome that. Secondly, the fact that we have abandoned that degree of fetishism does not mean we have abandoned austerity. Regrettably, the poor will still suffer, as my noble friend Lady Hollis said very eloquently, and the reality is that public services face a serious squeeze, and the divisions in our society are growing. Nor is it what was needed post-Brexit—not to any great degree, anyway—which is the fiscal equivalent of what the Bank of England did immediately following Brexit. The relatively good economic news since Brexit does not mean that the previous forecasts were wrong. It means that the Governor of the Bank of England, the person who was most reviled during the Brexit campaign, has acted like a good Bank governor should and provided a significant boost to the economy. Without that, the Daily Mail and the Daily Express would, ironically, not have been able to run their positive headlines last week and this week The effects of Brexit are being felt right through the economy. Not only did the Treasury, the Foreign Office and No. 10 not have a contingency plan; nor did many parts of British industry and business. They are now rapidly coming up with them, but we are all having to adjust to something that the metropolitan elite, as we are now calling them, in all their manifestations did not expect. That takes some time. Thank God that Mark Carney and the Bank of England did the right thing. I am not sure the Chancellor has matched his ambition in offsetting the effects of Brexit on the uncertain economic prospects we face The reality is that the Autumn Statement and the OBR forecast clearly show that despite the Government’s increased borrowing, real wages and real household incomes will fall over the next few years. Expectations of new business investment and of productivity rises have been written down. Social security has been made less of a safety net, and getting out of dependence on social security has been made more difficult and more regressive We are where we are on Brexit, and I am not one of those who wants to reopen that issue, at least at this stage. The Government face very tough negotiations, and we will be unclear for some time about what the trading arrangements for this country are going to be Despite the difficulties that Brexit has left us in, there are some things that the Chancellor could and should have done. In particular, he could have done substantially more on housing. It is unlikely that 40,000 new homes will solve the endemic housing crisis in all forms of tenure across our country. He needed to do more, in particular to free local authorities to engage with partners in housing associations and the private sector to build by further removing borrowing constraints. Possibly an even bigger omission was the failure of the Autumn Statement to mention anything about the crisis in social care. There is a huge problem in social care for our elderly and infirm, for which we are going to have to budget substantially over the years. I would have hoped that a new Administration and Chancellor could at least indicate how we are going to develop a new form of social care and the financing of it over the next few years The Autumn Statement could also have done something for those in whom the Prime Minister and the Government claim to be most interested. I, too, hate the term "JAMs", but I suggest those who are just about managing are likely to be managing slightly less in the next few months and years, following this Statement. Yet something could have been done with the distributional effects of this Statement, instead of primarily giving tax concessions to the already well-off, hitting the very poor and effectively leaving those in between slightly worse off over the coming years. There are many things that could have been done. The country faces many major economic problems, not least our lamentable productivity performance and industry as a whole adapting to Brexit It is worse than that, because we also face very considerable political, social and economic divisions in our society which have been manifest in the political developments of the past few months, not uniquely in the UK but in the US and potentially in France. The Brexit vote revealed dramatic multiple and cumulative divisions in our society. There are geographical divisions between north and south or, more accurately, between London and the south-east and the rest of the country. There are divisions on grounds of tenure—between established home owners, those having to rent in whatever sector and those trying to buy their first house. Perhaps most difficult of all, there are generational inequalities, with the real wages of those under 30 falling far faster than the wages of those in middle age or approaching retirement, accompanied by insecurity in the job market and no affordable housing In some senses, government policy over the last six years has favoured pensioners: those who are roughly the same age as your Lordships. That is a social judgment, but the Government have favoured them only up to the point at which they become infirm and require heavy investment in their health or social care. This Statement has provided for neither of those. What is needed is a new strategy, with new investment in social care and a recognition that individuals who are living longer, but in greater and greater ill health, require substantial resources being spent on them—not through the liquidation of their assets or those of their children but through the burden being taken on by society as a whole On affordable housing and on social care, this Autumn Statement has missed a real opportunity. Whatever time of year we have the next Budget, I hope the Government will have taken up those challenges and given us at least a sense of direction to get the country and society out of some of the terrible divisions and deprivation that so many of our fellow citizens currently face.