Economy and Finance — House of Lords, 2016-06-09
Topic: Macroeconomics
Benjamin Stoneham (Liberal Democrats, Centre to centre-left): My Lords, this has been a wide-ranging debate and I will start by recalling the words of the noble Lord, Lord Leigh, who is sadly not in his seat, who reminded us in his speech that the country voted for the Conservatives’ economic plan last year—but not quite by the massive mandate of his imagination. More pointedly, the noble Lord, Lord Haskel, said that the Government are still searching for a strategy and are mainly just filling in the gaps. That has been one of the themes of this debate I thank my own colleagues: my noble friend Lord Shipley, for the very strong case that he made for remain in respect of the north-east, and my noble friend Lord Lee who, with all his investment experience, warned us of the great dangers of uncertainty for the British economy. Whatever else we must assume from this debate today, I think we would probably all agree that the economy is at a turning point or even on a knife edge. We have had very hard times over the last six years to get the deficit down. We have to ask ourselves: can we sustain the growth in jobs and employment that we have had, and the economic growth, so that the benefits can be shared by those who have experienced the pain of the past six years I would say that after 23 June, this country will still have to ask itself four basic questions in respect of the economy. First, can we still close the current government spending deficit while protecting long-term investment in infrastructure? Can productivity, which has recently been flatlining, be improved so that we can close the gap with other G7 nations? Can we reverse the worrying trend of the past three years of recovery, during which the balance of trade, as explained by the noble Lord, Lord Haskel, and the noble Viscount, Lord Hanworth, has actually worsened? There is currently a £100 billion deficit on the current account. We should be more worried about paying our way in the world as well as paying our way at home The fourth question is broader than the ones that the debate has tried to encompass so far. Can we counter, through our economic policies, the populism of Trump, Farage and Le Pen? They are feeding on the concerns of working and middle class people, who see their previous certainties and security undermined by globalisation. We are seeing a very slow growth in real income: that has been so over the past 10 years among these groups. The pace of change has been undermining the old skills and making them redundant, and driving people out of well-paid jobs into lower-paying and less secure jobs. There is constant pressure on industry and all other sectors to lower costs and improve efficiency. Home ownership is out of reach of the children of these people unless they downsize and help their children into ownership. There are pressures on public services which people previously took for granted. Pension security is being undermined as well On top of globalisation, we are having to deal with digitalisation, robotics, and the transformation of job structures by the application of artificial intelligence to replace layers of routine administrative and support jobs. The insecurity and uncertainty are increased by a growing resentment or outrage in our society at the hollowing-out process whereby it appears that there are a few rich people benefiting from all this while the rest—certainly those at the bottom—have to rely on lower-paying and very flexible jobs. In this very uncertain and insecure world, should we now be baling out from the principal organisation designed to develop and extend our trade within a fair, competitive environment It needs explaining to people that this organisation is about developing trade while ensuring that unfair competition does not deplete jobs and that we also retain reasonable working conditions for people in the Union. Of course government, immigrants and distant organisations such as the EU—or London, if you live in Scotland—get all the blame, but that is not a rational analysis. We joined the EU to take advantage of a bigger market in order to raise productivity and growth and to improve competition. So as we look beyond 23 June, whatever happens, let us just return to the principal concerns that we should have: the need to improve productivity; the need for more exports; the need to deal with the deficit and the problem of capital spending; and the impact of digitalisation What are we going to do? The Government have been dealing with the steel industry over the last six months, and I hope that they will use that experience. The Secretary of State for Business should give more attention to the industrial strategy initiated by his predecessors. Developing skills, funding research and helping to restructure the development of businesses all require a partnership between business and the state. There is also a vital role within the EU to ensure fair competition Our advanced manufacturing sector—whether it is the automotive, aerospace, defence, nuclear or rail sector—requires the development and manufacture of new steels. But here is the rub: development and research can be undertaken more rapidly in this field if we retain our domestic steel production as a partner in the research that needs to be done, alongside end-users, research institutes and universities. Reliance on overseas producers of materials will simply slow the pace of development and risks leading to the offshoring of this whole supply chain. After dealing with pension issues, energy prices and Chinese dumping, using the negotiating power of the EU, we should also as a country set up a materials catapult focusing on technology developments to support future growth in manufacturing The second issue is that of supply chains. I do not think that the complexity of supply chains crossing borders is understood in the EU debate. The more we can do to have supplies in this country the better, but, given the complexity of these supply chains and the benefit we get from them, there will be total disruption if we leave the EU. The benefits of sourcing lower supply costs help the competitive position of our exports. It is a little-known fact that in the motor industry, the export of cars has been slower within the EU than in the outside world, which undermines the argument that Europe is holding us back. The export of cars outside the EU between 1998 and 2014 grew from £2.9 billion to £13 billion, against growth inside the EU from £8 billion to £11.9 billion. The complexity of sorting out cross-border sourcing of supply without the EU framework is frightening. We have the opportunity for the UK to source more components here—but, without the EU, all the potential investment will go The third area is infrastructure. As we rightly address the current deficit in the public sector, we need to separate out the capital account. Transport, communications and housing are all underinvested in, and a decision on airport capacity will perhaps be symbolic for the business community; the Government will be taking years of underinvestment and stagnant productivity seriously again The EU provides a framework to open up trade and ensure fair play. It provides a framework against excessive competition, protects wages and conditions, prevents a driving down of taxation rates and prevents government spending or subsidies going up through unfair competitive practices. It is a framework which still needs reform and better understanding, but, with the issues we need to confront in the next five to 10 years, remain is essential to the current debate over our social and economic progress as one nation.