Cost of Living — House of Lords, 2022-06-09
Topic: Macroeconomics
Meghnad Desai (Labour, Centre-left): My Lords, it is a great pleasure to thank my friend, the noble Lord, Lord Eatwell. Like the noble Lord, Lord Brooke, I have known him for a very long time, and it is a great pleasure to be able to hear his erudition and the concern that he has always had. It was also a great pleasure to listen to my friend, the noble Lord, Lord Griffiths. I commiserate with the Minister, because she has only one good Tory friend on the Back Benches taking part in this debate, but I am sure that she will bounce back and give the answer that she has prepared I want to concentrate my six minutes on something that I think is worth remembering. We have been through this before. In the 1970s, when the oil price quadrupled, we had a supply shock in the energy sector like we are having now. At that time, a lot of things changed in our lives. First, we had stagflation for a very long time, with very high unemployment. That was when the consensus on a one-nation politics changed. The Butskellism collapsed, and we very soon had Thatcherism One thing I will say in defence of Thatcherism is that it was not all about cutting taxes. People have very short memories. They do not remember that the 1970s were very hard on the economy. When Mrs Thatcher got into power in 1979, the first thing that Geoffrey Howe did was to double VAT rates from 8% to 15%, if I remember correctly; it was not 16%, because they did not want to have vindicated the allegation that Labour had made that they would double VAT. They did not quite double it; it went from 8% to 15%. Then we spent all the North Sea oil revenue and all the proceeds from selling public industries on financing unemployment benefits. The tax cuts came only at the end of the 1980s. Mrs Thatcher waited quite a while before she knew that tax cuts were affordable. Right now, they are not affordable—let me say that here and now. People have already said that we need much more money for health and social care; we need much more money to restore a lot of social capital. It would be an incredible folly for the Government to listen to their Back-Benchers who are clamouring for tax cuts. What tax cuts always mean are tax cuts for the rich; they are never for the poor. The poor have wage cuts; the rich have tax cuts—that is the way this kind of policy works I like the suggestion made by my friend, the noble Lord, Lord Brooke—and the Greens have recommended it too—of a basic income. I have written about it over many years. A basic income is a citizen’s entitlement of income. I know that people think it is very expensive and so on, but, right now, perhaps up to 30% or 40% of families are suffering from severe hyperinflation. I have never seen things so bad in terms of people having to go to food banks and things like that. They are unable to heat their houses; their children cannot get hot meals unless they go to school The Government ought to treat this set of circumstances as a serious emergency. Stagflation will last about five to 10 years. It will not go away. This is not a temporary problem. Serious creative thinking is needed, just as the Government did during the pandemic, to say, "How can we, first, relieve the bottom 40%?" The key to that is not just universal credit. That does not cover everyone in that bottom 40%. How do we protect that bottom 40% A basic income would be the right idea. I can tell the Government more about basic income, as I have written quite a lot about it. People often say, "Oh, if you pay people to do nothing they will never work." That is not true. Women work without pay a lot of the time to sustain the social capital. Do not worry about people not working. Try to construct a basic income platform as soon as possible. If the Government do this, rather than thinking of tax cuts, we may yet get through this stagflation with less damage than we have done so far.