Queen’s Speech — House of Lords, 2021-05-12
Topic: Macroeconomics
John Eatwell (Non-Affiliated, Unknown): My Lords, a debate on the economy must begin with the news this morning that the economy is 8.7% smaller than it was pre pandemic. Do not be fooled by claims of spectacular growth rates in the next few months; it is how soon we get to pre-pandemic levels that really matters Our economy has been permanently scarred by the pandemic and Brexit, permanently reducing output below previously attainable levels and therefore reducing the resources available to fund recovery. Consider the task before us: the NHS has a backlog of 4.7 million cases; the £1.7 billion pledged by the Chancellor to restore our schools has been labelled "nowhere near enough" by the Education Recovery Commissioner; the Crown Courts have a backlog of 56,000 cases, with some trials not scheduled to begin until 2023; and, all the while, economic relations with our major trading partner are mired in jingoistic rancour and red tape The Prime Minister is right to say that recovery is the biggest challenge since the Second World War. To face that challenge, we need a practical vision, clear goals and a framework to guide economic policy. Sadly, taking the Budget and the measures announced in the gracious Speech together, there is only incoherence. The gracious Speech is littered with promises of spending commitments. The Budget speech told us that public spending is to be cut by £4 billion per year, with major cuts targeted at local authorities—hitting hardest those areas promised the beneficence of levelling up. The much-lauded lifetime skills guarantee comes with a sting in the tail—the guarantee is to provide not training but loans to pay for training. So new skills will come with new debt The commitment to fund research and development is welcome. It would have more impact if the science base were not at the same time losing even greater funding from European research programmes In 1945, Clement Attlee, in far worse circumstances than we find ourselves today, presented a vision for post-war recovery based on three pillars: education, health and culture. The economic framework was simple yet profound; it was economics for the common good. Economics for the common good seeks to manage the risks of daily life by providing appropriate collective provision where individuals’ lives would be blighted. The NHS is a magnificent collective scheme with 60 million members. Similar collective commitment is necessary to mitigate the risks in social care, as Sir Andrew Dilnot has proposed Economics for the common good recognises the need for collective provision of the foundations of production that individual companies cannot or will not provide—hence the need for investment in infra- structure, where infrastructure, properly understood, is not just railways and internet connections but protection for the environment, education and cultural industries and affordable childcare. All require collective investment to attain national productive efficiency The two elements of risk and infrastructure come together in the collective funding of innovative research. It was no accident that the vaccine to tackle Covid was developed at Oxford University, nor that the science behind the BioNTech vaccine was developed at the universities of Mainz and Tübingen. Cutting-edge research is inherently very risky, which is why it must be funded by the public sector. I therefore welcome the commitment in the gracious Speech to more funding for research and development but I am doubtful about the need for yet another advanced research agency. We have a lot of those already—they are called universities The economics of the common good could transform the muddled economics in the gracious Speech. In particular, it would place in context the ominous commitment to "ensure that the public finances are returned to a sustainable path". No one would suggest that the public finances should be on an unsustainable path, but we all know that in the hands of this Government, "sustainable path" is code for "cuts in public expenditure". The economics of the common good suggest that we should fund the recovery from the pandemic and the reconstruction of our economy as it reels from the blows of Brexit by the same method as we funded the war and the post-war recovery: by eschewing the nonsense of Treasury fiscal orthodoxy and instead pursuing a balanced management of the public debt that funds recovery, maintains demand and secures full employment.