Lord Clinton-Davis
To ask Her Majesty’s Government what is their response to the report of the Institute for Fiscal Studies on the Chancellor of the Exchequer’s latest economic measures.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Government took decisive action at the Autumn Statement to ensure sustainable public finances and to meet the fiscal targets set at Budget 2010.
Lord Clinton-Davis
The Institute for Fiscal Studies has referred to higher inflation, unprecedented cuts, the longest wage stagnation in history and plunging incomes. Is it not appropriate in the light of this respected organisation’s report that the Government should change their economic course, to avoid a major shipwreck before it is too late?
Lord Sassoon
No, my Lords, that is precisely not the conclusion from the IFS report. What the IFS report also pointed out was that Labour’s plans—the plans of Mr Alistair Darling in his March 2010 Budget—
“would, if [they] had been implemented, now of course have implied even higher debt levels over this parliament than those we will in fact see. That would have left an even bigger job to do in the next parliament”.
There would have been £100 billion of additional debt if we had followed Labour’s plans, and that was under Mr Darling. Mr Ed Balls has so far announced unfunded commitments of £91 billion a year—£326 billion of unfunded expenditure. Mr Ed Balls wishes to pave the road to Rome, if not to Athens.
Lord Christopher
My Lords, did not the Conservative Party embrace Labour’s spending plans?
Lord Sassoon
My Lords, what my right honourable friend the Chancellor said we would do is to stick precisely to the spending plans that he set out in the March Budget and the subsequent spending review. That is what we will do, and that is what will keep our interest rates low.
Lord Vinson
My Lords, as part of their measures to see what can help this poor old country out of its troubles, would the Government look at our huge imbalance of trade—currently running at about £30 billion a year plus? I am not suggesting for one moment that all those jobs could be done in this country, but it is the equivalent of about 1 million jobs that we are shipping overseas. There are some areas of our economy that could be done here. For instance, why do we need to import so much cement, which we can make in this country just as well as importing it from other countries? Could we not look at a sensible policy of import substitution to try to create jobs in this country that are being created unnecessarily in other countries, when we could do the jobs perfectly well ourselves?
Lord Sassoon
My Lords, our exporters are leading the growth in this country and indeed, although it is early days, there are some signs from the figures over the past 18 months that at last, after a decade of a declining share of world trade, the UK’s share is increasing. It is a modest increase and it is early days but our exporters are performing very strongly.
Lord Barnett
I would like to welcome one part of the Statement from the Chancellor, when he said that he had negotiated £20 billion of funds from pension funds for infrastructure investment. That is very welcome. However, could the noble Lord tell us how exactly it is to be financed with the pension funds? Is it a PFI deal, or what rate of interest are they going to be paid?
Lord Sassoon
I am grateful to the noble Lord, Lord Barnett, for welcoming this important initiative. In fact it is a case of the pension funds coming to us. That particular group of pension funds has £800 billion under management. So it will be funds that they already have under management, and they wish to allocate a greater share to the infrastructure sector. It does not hit the public sector in any way.
Lord Newby
On that exact point, my Lords, the IFS says that the £20 billion of additional funds from the pension funds looks to be,
“more of an ambition than a done deal”.
It adds that they,
“have little clarity as to what the nature of this potential additional spending might be”.
Is the Minister able to tell us, first, what priorities the Government have assigned to that potential additional expenditure; and secondly, when he hopes the benefits of that additional funding might come through?
Lord Sassoon
My Lords, to repeat, the pension funds and also the insurance companies have come to Government and asked for our help. We have signed a memorandum of understanding to help them set up their vehicle as quickly as possible, because clearly they want to find an investment home for their money.
Lord Davies of Oldham
My Lords, does the Minister accept that the best deficit reduction strategy is in fact a growing economy? Why are the Government pursuing policies that have already reduced growth, and are destined to do so for several years?
Lord Sassoon
I do not accept that at all. Of course we all wish to see a strongly growing economy. The latest forecasts from the OBR are that the private sector will generate 1.7 million jobs over the forecast period. That is strong growth in the private sector.
Baroness Wheatcroft
My Lords, while cutting the deficit is essential, it will undoubtedly leave many people facing financial hardship. In the light of that, does the Minister have any comment on the stories this morning about the forecast growth in what is known as payday loans and the interest rates—some might say extortionate interest rates—charged on them?
Lord Sassoon
I completely agree with my noble friend that it is very concerning that people on low incomes should be exploited. Therefore, it is important that this issue is fully debated. However, I would also point out that the latest forecast from the IFS shows that real household disposable income will stabilise in 2012 and sharply rise in 2013.