Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the hybrid Grand Committee will now begin. Some Members are here in person, others are participating remotely, but all Members will be treated equally. I ask Members in the Room to respect social distancing. If the capacity of the Committee Room is exceeded, or other safety requirements are breached, I will immediately adjourn the Committee. If there is a Division in the House, the Committee will adjourn for five minutes.
Covid-19: Economic Recovery
Baroness Penn
That the Grand Committee takes note of the steps taken to protect jobs and livelihoods as the economy recovers from the COVID-19 pandemic.
Baroness Penn (Con)
My Lords, it is a privilege to introduce today’s debate on behalf of the Government. Given the challenges that the Government have faced this last year and that they continue to face, this is an important opportunity to review their approach to what we all understand has been a grave shock: a health emergency and an economic emergency. I am pleased to have this opportunity to debate and discuss the measures that we are introducing to protect jobs and livelihoods, as the economy recovers from the Covid-19 pandemic—as we are all determined it will.
The Government’s efforts to tackle the economic damage threatened by the pandemic have been broad and deep. A comprehensive and sustained economic shock was met with a comprehensive and sustained response, recognising the difficulties faced by individuals, families and businesses across the country. The Coronavirus Job Retention Scheme has helped to support over 11 million unique jobs since its inception and the Self-employment Income Support Scheme has supported a further 2.7 million people, with grants worth over £19 billion. Individuals and families have also benefited from increased welfare payments, a stay on repossession proceedings and mortgage holidays.
Support was given to renters through increases to the local housing allowance rates for universal credit and housing benefit recipients and an additional £500 million was made available to councils last year through the hardship fund grant to support households struggling to meet council tax payments. This money was used to provide recipients of local council tax support with a further £150 reduction in their bills. Government has delivered over £75 billion in guaranteed loans to more than 1.6 million businesses, as well as providing tax deferrals, grants and a business rates holiday worth over £10 billion.
In sum, the Government have taken unprecedented action to support our economy and public services in response to the pandemic. Taking into account the significant support announced at the 2020 spending review and this year’s Budget, the total financial support for the economy is over £350 billion across last year and this year, or around 17% of 2020 GDP. This includes £55 billion in 2021-22 to support the public service response to the pandemic.
All of this has made a very real and tangible difference. In fact, the Office for Budget Responsibility now expects the UK economy to recover to its pre-crisis level six months earlier than originally expected—by the end of the second rather than the fourth quarter of 2022. Meanwhile, unemployment is expected to peak at around 6.5% instead of the nearly 12% feared last summer. As the Resolution Foundation observed,
“This would be by far the lowest unemployment peak in any recent recession, despite this being the deepest downturn for 300 years.”
Our focus was on the preservation of jobs and livelihoods and that is what we have sought to deliver.
Looking forward, in response to the current restrictions and the Prime Minister’s road map to easing the public health measures, the Chancellor announced at the Budget an additional £65 billion of economic support. The furlough scheme has been extended until the end of September, support for the self-employed will also continue until then and we have extended eligibility so that those who completed a 2019-20 tax return by 2 March will qualify for the fourth and fifth self-employed grants, potentially reaching a further 600,000 people with support. At the same time, the fifth and final grant will include a turnover test to ensure that support is targeted at those who need it most.
The Budget maintained the universal credit uplift of £20 a week for a further six months, provided working tax credit claimants with the equivalent support over the same timeframe and increased the national living wage to £8.91 an hour. For the first time since it came into effect in 2016, the age threshold for the living wage has been lowered from 25 to 23 years old, giving a pay boost to more younger people.
At the Budget, the Government launched a new restart grant to help businesses reopen and get going again, worth up to £18,000 per business, and a new recovery loan scheme to replace earlier bounce-back loan schemes and coronavirus business interruption loans. To support the cash flow and viability of around 150,000 businesses and to protect over 2.4 million jobs in the hospitality and tourism sector, the Government have extended the temporary reduced rate of VAT at 5% to 30 September 2021. To help businesses manage the transition back to the standard rate, a 12.5% rate will then apply for a further six months, until 31 March 2022. The Budget also announced a three-month extension of the business rates holiday, followed by a 66% capped relief for the remainder of the year. This is worth £6 billion to businesses in the retail, hospitality and leisure sectors and nurseries.
The reality is that the Government have continued to deliver a package that is unprecedented in scope and scale and reflects the wider strategy for cautiously reopening the economy, as set out in the Government’s road map. As we follow the road map and lift restrictions, there are reasons for optimism. Overall, household balance sheets have strengthened, with household savings in 2020 as a whole almost £139 billion higher than in 2019. At the same time, while many firms have been hit hard by the pandemic, data on corporate deposits at banks suggests that, in aggregate, firms accumulated additional savings of close to £100 billion between March and December 2020. Of course, those additional savings do not reflect the reality for many families and businesses hardest hit by the pandemic, on which the Government must now focus their support.
That is the briefest of summaries of where we are and what the Government have already done. What matters now is our future recovery. The key to that recovery is growth. Our plan to build back better will drive economic growth by investing in infrastructure, skills and innovation. It tackles long-term problems so that we can deliver growth that creates high-quality jobs across the UK and strengthens the union, as well as achieving the people’s priorities: levelling up across the whole UK, supporting our transition to net zero and supporting our vision of a global Britain.
Economic recovery was the thinking behind other new measures announced in the Chancellor’s speech at Budget last month, including the super-deduction, which will allow companies to reduce their taxable profits by 130% of the cost of investment that they make in plants and machinery—equivalent to a 25p tax cut for every pound that they invest. Worth £25 billion over the two years it is in place, the super-deduction represents the biggest business tax cut in modern British history.
That is just the beginning. The Budget also announced the creation of the first ever UK infrastructure bank, headquartered in Leeds and tasked with investing across the United Kingdom in public and private projects to finance the green industrial revolution. The Budget accelerates that green industrial revolution in other ways too, including by funding new port infrastructure to construct a new generation of offshore wind projects in Teesside and Humberside. This is in addition to £12 billion of government investment to create and support green jobs as part of the Prime Minister’s Ten Point Plan for a Green Industrial Revolution.
As the country recovers from the pandemic, we will rely hugely on the enterprise and endeavours of our small businesses. Two new schemes—Help to Grow and Help to Grow: Digital—will help tens of thousands of small and medium-sized businesses get world-class management training and help them develop their digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software. These are initiatives the Institute of Directors has called
“a big win for SMEs.”
We have also set out our plans to make the UK a scientific superpower—another means by which investment can help power our recovery. To support this ambition, the Government will invest £14.9 billion in R&D in 2021-22, meaning that UK government R&D spending is now at its highest level in four decades. We have also committed to providing £800 million by 2024-25 for the new Advanced Research and Invention Agency, ARIA, which is tasked with funding high-risk, high pay-off research and supporting ground-breaking discoveries which could transform people’s lives for the better.
Through our Plan for Jobs, the Government have provided unprecedented support to protect existing jobs, help people find work and support people in building new skills. For those who unfortunately lose their jobs, we are helping them to find new ones by doubling the number of work coaches and with additional tailored support such as the Kickstart scheme and Restart programme. So far, over 180,000 Kickstart jobs for young unemployed people have been approved by the scheme, and Restart will provide support to over 1 million unemployed people.
We are also doing what we can to make sure we have enough access to the talent that we need, both at home and abroad, through our apprenticeship and traineeship programmes, the lifetime skills guarantee, and the reforms we are making to our visa system to attract highly skilled migrants. We know that apprenticeships work, which is why the Chancellor has increased and extended the incentive payments for employers who hire a new apprentice. Employers who hire a new apprentice between 1 April and 30 September this year can now claim a payment of £3,000.
Crucially, our efforts to support an investment-led recovery target all four nations of the United Kingdom, with accelerated city and growth deals in Ayrshire, Argyll and Bute, and Falkirk, and three more in North Wales, Mid Wales and Swansea Bay, as well as funding support for the Holyhead hydrogen hub. Alongside these measures, our commitment to levelling up across the UK is reflected in the £4.8 billion levelling-up fund; more than a billion pounds for 45 new town deals; a £150 million fund to help communities across the United Kingdom take ownership of pubs, theatres, shops or local sports clubs at risk of loss; and in Her Majesty’s Treasury’s own commitment to open offices in Darlington to form a northern economic campus. This complements the inward investment that will be attracted through the announcement of eight new freeports in eight English regions, offering tax, customs and regulatory benefits, driving greater innovation and the creation of high-quality jobs.
Importantly, over time, once the economic recovery is secured, the Government will take the necessary steps to ensure the public finances are on a sustainable path. Given that the Government are providing businesses with over £100 billion of support to get through the pandemic, it is only fair and necessary to ask them to contribute to our recovery. That is why the Budget increased corporation tax to 25% from 2023, after which point the OBR has said recovery will be under way. The UK will still have the lowest corporation tax rate in the G7, and smaller companies who make less than £50,000 profit annually will be subject to only a 19% tax rate.
Significantly, the Budget did not raise the rates of income tax, national insurance or VAT. Instead, it maintained personal tax thresholds on income tax, inheritance tax, the pensions lifetime allowance and the annual exempt amount in capital gains tax from 2022-23 until 2025-26—that is, four years. This is a universal, progressive and fair measure to fund public services and help rebuild our public finances.
It is thanks to people’s hard work and sacrifice, supported by the success of the initial stages of the vaccine rollout, that there is now a path to reopening the economy. But the Government are not complacent. We understand, just as noble Lords understand, that there is much more to do. Our approach will remain flexible. As measures to control the virus evolve, so will government support. We will continue to listen to the views of people across the political spectrum, we will continue to take action on a number of fronts, and we will continue to do what it takes to engender the economic recovery that the country needs.
Lord Lilley (Con)
My Lords, I congratulate the Government on the steps they have taken, so eloquently described by my noble friend Lady Penn, to protect jobs and livelihoods during the pandemic. Where they prevented businesses operating, albeit for good reason, they were morally obliged to compensate those prevented from earning a living. But there is something odd about the title of this debate. It refers to the steps taken to
“protect jobs and livelihoods as the economy recovers”.
But it is economic recovery that will effectively protect and replace the jobs that were threatened or destroyed during the pandemic.
The conventional wisdom is that to bring about a recovery we need a fiscal stimulus. Most recessions are caused by a shortfall in demand, and the remedy then is to boost monetary demand. But this recession is unique: it is caused by the suppression of supply. So a precondition of recovery is to end the lockdown as soon as possible, now that all those at risk have been offered the vaccine.
Moreover, while businesses have been prevented from producing the goods and services they normally deliver, most people have been paid, not least through the furlough scheme, and many have been unable to spend all their earnings—so there is considerable pent-up demand. As we relax the lockdown of supply, most sectors will therefore recover quite rapidly. But some will find that part or all of their previous demand has moved elsewhere. To create jobs for people displaced from those sectors, we will need existing businesses to expand and new businesses to be established. I will return to that in a moment.
First, should we—as the slogan has it—build back better? This has been universally accepted as both desirable and possible. But who builds an economy? A market economy is built by myriad interlocking individual decisions: people choosing to produce goods and services that other people want to buy. The alternative would be for government to override those decisions by regulation, taxation, public spending or state provision, and thereby induce people to produce and buy goods and services that they would not otherwise choose to produce and buy.
There are many high-minded people who are convinced that their choice of the goods and services that people ought to produce and consume is morally, aesthetically and economically superior to that which the hoi polloi, left to their own devices, would make. Maybe. But experience teaches that, if we adopt this course, it will probably make people materially poorer, and it will certainly make the recovery slower. That is inevitable, because higher taxation, more burdensome regulation and bureaucratic decision-making inexorably undermine the dynamism of a free economy. Anyone who seriously believes that the economic recovery, let alone the subsequent rate of economic growth, will be accelerated by white elephants such as HS2 or by raising the cost of energy, which is what the advocates of a green economy would do, is living in a dream world.
I mentioned that we need businesses to expand and new businesses to be created. One little-noted positive lesson of the pandemic could help that. During the crisis, under political, public and parliamentary pressure, regulators suddenly discovered that they could take decisions in a fraction of the normal time. New diagnostic tests and vaccines were approved in record time, new designs for ventilators were authorised, local councils permitted restaurants to expand on to the pavement and so on. What slows down business expansion in normal times, and the formation of new ones, more than anything else, is the need to get permits and approvals for a whole range of things: planning, building controls, environmental approvals, health and safety inspections, product authorisations and so on. For a business even to open a new bank account can take weeks because of money-laundering rules.
Regulators are often afraid to make decisions speedily. When I was Trade and Industry Secretary, I was occasionally advised by the department’s lawyers not to give a speedy decision in case there was a judicial review and the courts might be persuaded that I had not given due consideration. But now that we have seen that regulators can make decisions speedily, we must maintain pressure on them. Wherever possible, regulators should be required to reach a decision within a set time, failing which there should be “deemed consent” and the application should be able to go ahead. Every public body with a regulatory function should be required to report at six-monthly intervals on how long it has taken to reach decisions—both the average time and the slowest decile. Select Committees should hold all regulatory bodies within their sphere of influence to account for delays in reaching decisions.
In short, the recovery will come as soon as we end the lockdown. There is enough pent-up demand to ensure a speedy recovery; any additional stimulus risks merely adding to the subsequent inflation. Attempts by government to tailor the recovery to some arm-chair ideal of fairness will inevitably slow it down, and the best way to accelerate it is to speed up decision-making by regulators.
Baroness Humphreys (LD) [V]
My Lords, in my contribution to this debate, I want to talk mainly about the situation in Wales and, in the light of today’s ONS figures showing that the number of workers on UK payrolls has dropped by 813,000 since March 2020, like the Minister, I want to look at the challenges ahead.
Over the past 20 years, Wales has, of course, benefited from European funding and has seen improvements in infrastructure and advances in business development, but, as that funding comes to an end, the truth is that we are still playing catch-up. Wales remains the part of the UK with the lowest incomes and some of the worst instances of poverty. Before the Covid pandemic, a report by the Joseph Rowntree Foundation found that 700,000 people—a quarter of the population—were living in poverty. Now we are living with the aftermath of Brexit as well as Covid, both of which have caused further damage to our already fragile economy.
Over the past year, Wales, like the rest of the UK, has seen its economy supported by the introduction of the furlough scheme and by business support grants, among other UK Government measures, ensuring that families received an income and that businesses could survive to open up again as circumstances improve. As we continue our tentative release from our latest four-month lockdown in Wales, and as we approach the Senedd elections on 6 May, we need to recognise the massive challenges that the new Welsh Government will face and the decisions that they will need to make about how they use their powers and their budget to protect jobs and livelihoods and, crucially, to carve out a better future for businesses in Wales.
Our economy suffers from a structural problem that has received little recognition and has hampered plans for growth. We have a huge number of microbusinesses and a small number of branch operations from inward investors, which many jobs rely on. We need to continue to support these, of course, but we also need to promote the growth of stable, medium-sized companies by investing in infrastructure, technology, skills and training and by working with business leaders. My party in Wales wants to see the development of a long-term plan to support businesses and enable small businesses to grow, including establishing an economic recovery council grounded in real experience and the voices of small businesses from across Wales.
One feature of the pandemic has been the success of local essential retail stores in towns and high streets, many of which have operated every single day serving our communities during what has been a difficult time. To ensure that our high streets can thrive and adapt, we want to see the creation of a £500 million fund to breathe life back into our town centres.
The past two weeks have seen the reopening of non-essential stores in Wales, and next week will see the opening of outdoor hospitality. I must admit that, along with so many people, I am longing for that first decaf cappuccino outside the café on the town square. As more businesses reopen after this four-month lockdown, there will be a struggle to continue in business, particularly as any outdoor operation in Wales is invariably affected by the weather. I therefore welcome the announcement in the Chancellor’s spring Budget that the business rates holiday will be extended until the end of June, that the furlough scheme will be extended until the end of September and that restart grants will be available to help the high street reopen. In addition, the Welsh Government have confirmed a business rates holiday for the full 12 months, up to March 2022, for retail, hospitality and leisure businesses. Coming from an area which relies heavily on tourism, and having seen the impact of the pandemic on the mental health of some of our hoteliers, I know that this will bring them a modicum of relief.
The Welsh Liberal Democrats want to go further, however. By their actions, both the Chancellor and the Welsh Government have recognised the burden placed on businesses by the imposition of business rates. It is an inequitable system desperately in need of reform, placing businesses on the high street at a disadvantage to their online competitors. We would freeze business rates for the lifetime of the next Senedd and, in the long term, replace them with a fairer, more supportive system. If the high street is to survive, this system must be reformed and replaced.
I began this contribution with a reference to the number of people living in poverty in Wales, and I want briefly to return to that subject. Wales has been afflicted by a vicious cycle of low pay, inadequate childcare and rising housing costs. In half of the households in poverty, at least one person is in work. It is simplistic to suggest that employment alone is a route out of poverty. Is it enough to protect the jobs and livelihoods of those who do not and cannot lever themselves and their families out of poverty? In an age of falling real pay, longer hours and rising living costs, how can a future Welsh Government ensure that the dignity of work leads to a reduction in inequalities and gives people a hand-up out of poverty? Our ambition is to make Wales a real living wage and a living hours nation. We want to draw on evidence from around the world and work with the UK Government to pilot a nationwide universal basic income in an effort to reduce the inequalities inherent in the present system. We would seek further devolution of the benefits system to Wales to bring Wales into line with Scotland and, using the powers that the Senedd now has, we would provide free part-time childcare from the age of nine months to three years for all parents, enabling them to return to work.
For those of us committed to seeking ways to mitigate the impact of climate change, the message is loud and clear: there can be no true economic recovery from this pandemic unless it is a green economic recovery. The potential for green investment to create new, long-term jobs, stimulate sustainable long-term growth and re-energise our communities is immense. Wales, with its wealth of natural resources, can play a role in contributing to these outcomes. It is crying out for investment in new green homes and the retrofitting of existing homes, as part of a large-scale investment programme in renewable energy and environmental protection measures leading to high-quality, sustainable employment.
The additional challenges of recovery that have to be faced by a new Welsh Government are many—tackling broadband and mobile phone connectivity problems in rural Wales, ensuring that funding schemes for our farmers provide not a penny less for farming and agriculture, investment in the supply of affordable and social housing in rural communities—and a major concern is how we rebuild our NHS after the pandemic, and how we build a 24/7 mental health service to address the problems faced by so many children and adults.
The measures taken by the Chancellor and in turn by the Welsh Government have helped to preserve jobs and businesses and have provided a baseline allowing many to survive and grow. The Chancellor and the Welsh Government deserve great credit, but the challenges ahead are real, not unique to Wales and cannot be ignored.
Baroness Noakes (Con)
My Lords, I am glad to follow the noble Baroness, Lady Humphreys, as it is heartening to see that there is at least one noble Lord on the Liberal Democrats Benches who has an interest in economic recovery.
I hope the Minister will forgive me if I do not spend my time on her policies to protect jobs and livelihoods. She has already read out her brief on that. I support what the Government are doing. In particular, my right honourable friend the Chancellor of the Exchequer has provided excellent financial support, which has lessened the impact of the pandemic. We now need to focus on the recovery of the economy, because a successful economy is the only way to protect jobs and livelihoods in the long run, and I am aligned with my noble friend Lord Lilley on this.
The pandemic has had a devastating impact on the economy. We are on track for debt to be 100% of GDP, and GDP last year was down by just short of 10%. There is one thing we should be clear about: the pandemic did not cause this. The scale of the economic losses was a direct result of the Government’s lockdown policies. The Government prioritised their public health response with apparent disregard for other harms: namely, non-Covid health harms, both physical and mental, and very great economic harms. The public health zealots and modellers who seem to have had a grip on policy formulation have positively discouraged rational debate on the balancing of harms, which has amplified the economic consequences.
Even today as the economy is allowed slowly to emerge from its suspended animation, the Government seem hell-bent on making life as difficult as possible for the hospitality and leisure sectors to operate efficiently: sit outdoors only, no more than six people, table service only, keep lots of records and so on. There was no evidence that hospitality venues were a prime source of the spread of Covid infections, but they were brutally shut down and are struggling to reopen in a way that makes money. The goalposts have moved so often on Covid actions and strategy that it is hard for businesses to be confident about how they will be allowed to operate in future. Music festivals are the latest casualty.
Whatever the Government assert, there is precious little evidence that lockdowns are the only way to deal with the pandemic. The differing experiences of various states in America show that. The biggest danger at the moment is nosocomial infection, and many of us suspect that it has always been a major driver of infection and mortality. It is much safer to go to a pub than to go into hospital, but that has been airbrushed away because it conflicts with the NHS-as-saviour narrative.
From the outset, Covid-19 was not a disease that had significant mortality among those under 50, and that remains the case, but the Government insisted on closing schools and locking everyone up regardless of health or age status, bringing the economy to a complete halt. That is why we have suffered so much economic damage and why the Chancellor has had to introduce the costly support policies that are driving the debt and deficit levels. There were alternative policies, which could have had a different outcome, but the Government have allowed themselves to be dominated by public health extremists.
The Government have done one thing outstandingly well in the vaccination programme, and I pay particular tribute to the work done last year by Kate Bingham. A very high proportion of the higher-risk groups is now vaccinated. We should already be back to normal, and that includes your Lordships’ House.
The best thing the Government can now do is to get out of the lives of our citizens and businesses. There should be a total ban on government departments planning any more interventions in the way that we live our lives. The whole set of Covid rules should be put on a bonfire: no gathering of personal data, no masks, no bans on meeting people in groups of whatever size, and certainly no more overzealous policing and fines.
The Government have published their plan for growth, which has lots of worthy things in it, but suffers from one fundamental weakness. It assumes that what government does is the most important contributor to economic growth. The short-term advantages of Keynesian stimulus must not blind us to the fact that at the end of the day it is the private sector in the shape of our businesses, large and small, which will grow the economy. The Government should focus on what they can do to liberate our business sector, so that it can do the job it does best: build profitable businesses that provide employment, tax revenues and innovation for the future.
I could spend all day talking about the things that the Government could do in this space, but let me outline just a few. We need a regulatory environment that supports enterprise, and fortunately we are no longer constrained by the EU. Regulation in particular strangles small and medium-sized businesses, and that is where the Government should focus their efforts. They should largely ignore larger businesses, which often benefit from regulatory burdens acting as barriers to entry. We need a tax system that is simple and fair and underpins low rates of taxation. Our tax system is notoriously complicated. We might laud the Chancellor’s super-deduction for investment expenditure, which my noble friend the Minister referred to, but that too is another layer of complication. A top rate of 25% is not a good destination, and I hope that it is allowed to fall by the wayside once the economy starts to prosper. Any thought of raising the top rate of income tax or capital gains tax rates would be a mistake, as the Treasury’s existing analysis undoubtedly already shows. High rates of tax are not accompanied by high yields—quite the reverse.
Education has taken a big hit during the pandemic, in schools and universities, and a priority for the Government must be to ensure that those entering the job market for the first time have all the skills that employers actually need. Now is also a good time to look again at higher education. We are still churning out too many graduates with degrees that do little to make young people fit for the world of work. It is no surprise that up to 25% of graduates fail to deliver a lifetime earnings premium that justifies the cost of student loans.
Lastly, the Government should ensure that British businesses can exploit export growth markets. I do not mean those sluggish economies the other side of the channel, guarded by EU red tape. The Government are doing great things through the Department for International Trade, with more than 60 trade treaties already in the bag and more on the way, including the CPTTP. Helping businesses to understand those opportunities in these exciting markets will be money well spent. We must put this pandemic era behind us as soon as possible and return to being a country of liberty and economic opportunity. That is the only certain way of securing jobs and livelihoods for the future.
Lord Lancaster of Kimbolton (Con)
My Lords, I welcome the opportunity to take part in this timely and important debate and, in particular, to follow the thoughtful contribution of my noble friend Lady Noakes. Although she clearly feels that the Government have perhaps put too great an emphasis on protecting the health service from the cost of the economic impact, she highlighted the challenge that they faced in their approach. In effect, we are talking about the three points of a triangle: one point represents the economic impact; one point represents the physical impact; and the third point represents the welfare of the nation. In trying to keep the ball in the middle of that triangle, as soon as you protect one corner, it has a disproportionate impact on the other two. In hindsight, the Government may not have got it entirely right, but I for one do not underestimate the challenge that they faced in trying to maintain a balance between those points of the triangle.
In my brief comments, I want to cover two distinct areas. First, I want to recognise the contribution that the Government have made in delivering financial support to the economy. Secondly, as a key plank in helping to deliver the economic recovery as we transition from these emergency measures, I urge the Government to look carefully at the ways in which we can support individuals, not only through updating and maintaining their skills but potentially through retraining them to ensure that we as a nation have the skilled workforce that we need.
As we have heard, there can be little doubt that the Government have stepped up to the plate and delivered when it comes to offering the economy financial support throughout the crisis, seeking as they have to protect people’s jobs and livelihoods while also supporting business and public services. As of the end of February, the Government claimed in their response to the Economic Affairs Committee’s report on Covid and the economy to have
“spent over £280 billion since March 2020”.
This has already been updated to £352 billion, and is still rising.
In its report, The Cost of Coronavirus, the Institute for Government states:
“The deficit is now expected to be £394bn in 2020/21, which is £339bn higher than had been anticipated before public health restrictions were first imposed back in March.”
I find it remarkable that some still claim that the Government have not done enough. Of course, the deficit is set to be so extraordinarily high because, as the Institute for Government states:
“The government has taken a raft of actions in response to coronavirus, most of which have involved additional spending. These can be divided into three areas: support for businesses, support for households and support for public services.”
Although the exact figures are still unknown, the Institute for Government conservatively estimates:
“Additional support to help businesses weather coronavirus is expected to cost £66bn. Of this, £44bn”
has been in the form of loans, tax deferrals, business rates relief, and general and sector-specific
“grants to businesses in badly affected sectors (such as hospitality and leisure).”
That area was mentioned by my noble friend Lady Noakes.
The Institute for Government goes on to say that “the remainder”—£22 billion—“is through tax changes” and further states:
“The biggest single cost is the anticipated future write-off of loans which the government has guaranteed. In total, £87bn is expected to be loaned to businesses under three separate schemes. Of that, the government is expected to have to foot the bill for £31bn that is expected never to be repaid.”
This, I confess, causes me some concern. Of course some businesses will not recover and will be unable to pay back loans but, equally, I hope that my noble friend the Minister can reassure me that the Government will not be too quick to write off loans but, rather, will work closely with the private sector to put in place realistic schemes where at least part of these loans might be recovered for the public purse without hampering growth.
As the Institute for Government states:
“Support for households has been provided through three policies … First, existing benefits have been made more generous, most importantly through a £20-per-week increase in Universal Credit payments”.
Given the pandemic, that is a reasonable move. However, I urge my noble friend to resist the calls for an early decision on whether this should be made permanent or at least not end until the autumn.
Of course, the largest programme of support is the Coronavirus Job Retention Scheme, or furlough scheme. As the Institute for Government states:
“At its height, it supported over nine million jobs”.
It has undoubtedly been a lifeline for many families across the UK, as the third strand—the Self-employment Income Support Scheme—equally has been. I welcome the fact that both these schemes will be extended until September.
It is clear that the economic package of support, which continues to provide businesses and individuals with certainty over this period, has been one of the most generous in the world. Although we can rightly be proud of that, it presents some major challenges—the obvious one being how the nation will pay for it, which my noble friend the Minister addressed in part in her opening remarks. There are also secondary challenges, such as those faced by some of the workforce. Through no fault of their own, they have not only got out of the routine of work but may find that their skills are out of date. Indeed, they may face the prospect of being forced to retrain as their jobs—or whole sectors, in some cases—simply do not exist anymore.
As we look to the future, there is little doubt that much will never be quite the same again as the nation adapts to new ways of working and, in particular, the use of technology becomes the norm. Some might view this as a threat, but I genuinely believe that it is an opportunity to be grasped. While working from home is neither possible nor suitable for everybody, the opportunities and flexibility it brings will, I hope, continue to be encouraged and recognised by government, not least for the positive environmental impact it has through a reduction of vehicle journeys. There are, of course, downsides. We are social beasts and human interaction plays an important part in our lives, so clearly a balance needs to be struck.
As I have mentioned, for some it will simply not be possible to return to their previous profession. I will briefly turn to the need and opportunity to retrain and the support offered by government. In recognising the need for some to retrain if the economy rebalances itself as part of our road to recovery, I note that there has been some criticism that the Government have not made training more integral to schemes such as the CJR scheme. This is probably an unfair criticism, not least because of the speed with which this and other schemes had to be introduced, but also due to the underlying desire to keep schemes simple to administer and access.
In reality, the CJR scheme has never presented a barrier to training. Employees can undertake training while on furlough, and existing schemes provide an appropriate route for employers to access high-quality training and prepare individuals for the jobs of the future. It is also, of course, why the 2020 spending review committed funding for the Prime Minister’s lifetime skills guarantee, which will help adults to retrain and get into sustainable jobs, and give employers the skilled workers that they need.
The offer of free qualifications at level 3 for eligible adults in courses focused on these skills is welcome, and the full list of free level 3 courses for adult was published in February. While it is comprehensive, I ask my noble friend: what plans are there to review this list of courses to ensure that they mirror the skills employers require? I am equally pleased to see that the Department for Education has introduced flexibilities to ensure that furloughed apprentices can continue their training and assessments.
It is right that the Government have put front and centre access to skills and training, especially for those unemployed or at risk of unemployment as part of their economic response to the crisis. The approach of offering these schemes in parallel to employment support schemes such as the CJR, rather than wrapping them together and running the risk of making them overly complex, is, on balance, the right approach.
However, there is one area that has in my view been overlooked and that I will press my noble friend on: the opportunity for adults to retrain at degree level through distance learning for equivalent or lower qualifications. I should declare my interest in and long links with the Open University, whose headquarters are based in my former constituency in Milton Keynes. As the Minister might been aware, it has been a bone of contention for some time that those who already have a degree and are studying for an equivalent or lower qualification cannot access the same level of support that those studying for their first degree can. This dates back to a decision made by the last Labour Government and is, in my view, a mistake, especially now as so many adults look to retrain.
I simply ask my noble friend whether now is the time for the Government to look again at this issue. It also raises the wider point that, as people may look to update or refresh their skills, the reality is that they will be unable to study full-time but will look to institutions such as the OU to study part-time while continuing to work. For some time now the part-time sector has been disadvantaged in the support offered by government. Given the sector’s obvious importance, I seek assurance from my noble friend that the Government will look with fresh eyes post pandemic at the opportunities that institutions such as the Open University offer when it comes to delivering the skills we will need to recover from the pandemic.
Baroness Wheatcroft (CB) [V]
My Lords, it is a pleasure to follow the noble Lord, Lord Lancaster of Kimbolton. I agree with much of what he said, particularly his endorsement of the Open University, which has always seemed an admirable substitute for three years spent away from home living the high life.
I thank the noble Baroness, Lady Penn, for the way she introduced the debate so comprehensively. As many have said, the Government have done much that should be applauded since Covid struck. The furlough scheme was introduced promptly and has been very effective. However, we know that job losses have hit younger people, women and ethnic minorities particularly hard. It is a statistic that should make anyone feel uncomfortable that between the third quarter of 2019 and the third quarter of 2020 the number of white women in employment fell by 1%, and the number of black, African and mixed ethnic women in employment fell by 17%. Are there any specific plans for dealing with that very specific issue?
It is also the case that, inevitably, school closures impacted particularly on women, yet 70% of furlough requests from women with caring responsibilities were denied. While the Government cannot redress that now, it highlights the importance of childcare in enabling carers to work effectively in the workplace. The Government have been proactive in providing help such as rate relief to nurseries, but the issue of adequate childcare will continue to have an impact on workers long after Covid. Could the Minister say whether the Government have plans to do more on this front, beyond the existing nursery vouchers, as we try to rebuild the economy?
This could of course have a big impact on productivity. Interestingly, the ONS has reported that productivity actually rose by 0.4% last year, despite the deepest recession for 300 years. This highlights the deep division in productivity levels across our economy, an issue that we have failed to get to grips with for many years. The food and beverage sector, one of the major employers, was forced to close for large parts of the year; ironically, that produced a statistical boost to productivity because that is one of the sectors that is 54% less productive than the average for the economy. The high-productivity sectors—accounting and computer and legal services, for instance—were largely able to continue, working remotely, and they bring a great benefit to the economy, as we know. Low productivity continues to be a drag on our economy and will be for many years to come, unless we come up with some very positive ways of addressing it. It is clearly important that our development of the economy requires that we find ways not just of increasing our involvement in already high-productivity sectors but of increasing the low productivity in other sectors. Industrialisation was the first step, but we now need to make sure that every sector makes full use of computers, information technology and, eventually, artificial intelligence.
This takes me to the Government’s industrial strategy, which has had many incarnations, the last of which—before Covid—was announced by Theresa May in 2017. It was after that that the Industrial Strategy Council was launched, under the chairmanship of Andy Haldane, the chief economist at the Bank of England and a man renowned for his sometimes off-the-wall thinking—but he is always someone who comes up with ideas. Since the Government have revealed their Build Back Better strategy and plans to invest in the green economy, science et cetera, there is a slightly different industrial strategy to that of 2017. However, this year, the Government also abandoned their Industrial Strategy Council. It seems unnecessary to dispense with the services of a dozen very well-qualified people, who were prepared to bring their brains and ideas to bear to determine whether we are actually pursuing the strategy in the most effective way. Could the Minister say what external scrutiny might now be employed to monitor the Government’s progress in their industrial strategy, since we have abandoned the very effective mechanism that was in place?
Part of that strategy should include providing for all the needs of the country. While the Government are providing a host of different retraining awards, most are aimed at technology, but there are other needs that will have to be met. The Resolution Foundation has pointed out that the social care sector needs 180,000 new workers if it is to bring back the ratio of staff to carers that existed in 2014. This is one of the sectors where technology can improve things only so far; it is people—real-life carers—who are required. This fact was pointed out by the House of Lords Economic Affairs Committee in its report on Employment and COVID-19, published in December. It called on the Government to
“significantly expand the number of social care workers by increasing funding in the sector with stipulations that funding should be used to raise wages and improve training”.
The Government responded to that report in February this year. They simply ignored this recommendation, so I take this opportunity to ask the Minister whether she can now respond to this very sensible recommendation.
I turn to the businesses that need government support to survive the difficulties imposed by Covid and to rebuild for the future. The Government have instituted a series of measures that have been well received, including grants and loans, but this was surely the opportunity for the Government to establish a sovereign wealth fund, taking equity stakes in businesses. Many organisations called for this, hoping that Britain could take the opportunity to invest some taxpayers’ money not for the short-term effect of buoying up businesses that may or may not survive but for a long-term return, as countries such as Norway have done. In April last year, the Government announced that they would take a small step in that direction with the launch of the Future Fund, operated by the British Business Bank. With a minimum interest rate of 8%, I am not sure whether many companies, even those in dire straits, would have found this an attractive prospect. However, the idea was that the initial loans would be convertible into equity. The scheme was announced in April last year, with a closing date of September last year. That date was then extended to 20 April this year. If a company was struggling in April last year, it may well not have survived until now. Surely, speed was of the essence for such a scheme. Since the scheme closed today, I doubt that the Minister can give the exact number of companies that tried to take advantage of it, but perhaps she can give us an indication of how many companies have put forward their interest in the scheme.
There are positive things that the Government can do to stimulate the economy, but there are things they can do that will positively harm the recovery. I single out one in particular. From January this year, the Government ceased to allow duty-free shopping for those from outside the EU. The UK Travel Retail Forum believes that this puts 70,000 jobs at risk. Duty-free shopping brings in extra tourists, particularly from wealthy areas such as the Far East. Here I declare an interest as chairman of the Association of Leading Visitor Attractions, which is desperately upset at the end to this encouragement to visitors from overseas to come and make the most of the British economy. If they cannot do their duty-free shopping here, they will go elsewhere. So my final question for the Minister is: will the Government please think again about delivering such a body blow to a sector that has been one of the hardest hit by Covid?
Baroness Hooper (Con)
My Lords, faced with the triple effects of climate change, the global pandemic and Brexit, our economy—indeed, every economy in the world—is seeking solutions. Not all have the added strain of Brexit, of course, but on that basis it may well be that our experience and solutions could be shared with other countries, perhaps particularly with Commonwealth countries.
On the basis that, in order to build a new future, the role of government is to create the right environment to develop new ideas, create jobs and, as a free-trading nation, stimulate exports across a wide spectrum, the Government have clearly aimed to do this and have looked hard and well at solutions. I am grateful not only to my noble friend the Minister for her explanations today but to HMT for its useful background briefing.
I approach this from my perspective as a fairly new trade envoy, having been appointed last year, to Costa Rica, the Dominican Republic and Panama, and from my long-time background as a vice-president of Canning House, encouraging more trade with Latin American countries, leading trade delegations to those countries, and welcoming chambers of commerce and other leading industrialists from those countries. I must say that one beneficial result of Brexit is that the Government and businesspeople are looking for new markets and are well on the way to promoting and recognising trade opportunities in Latin America. The spread of Covid-19 has undoubtedly slowed down the process, and we need boots on the ground; we have to get people going out and looking for opportunities, which are now enabled by free trade agreements.
In all this, the Department for International Trade should be mentioned as a shining example of getting on with the job. First, it has negotiated new free trade agreements. Admittedly, many of those were rolled over from our EU days—the first, incidentally, was with Chile, in South America—but others, such as the Japan treaty, have brought in new, innovative and important sectors. Secondly, it has created a network worldwide of trade commissioners and support for our embassies as well as for the work of the voluntary trade envoys, all of which has, of course, been supported by the Treasury. Thirdly, it is delivering economic growth to all regions of the United Kingdom by encouraging new products to be manufactured, as well as services, for the export market.
I would like to dwell on that for a moment, because two excellent examples of regional activity can be seen in the northern powerhouse and the Midlands Engine, which co-ordinate and stimulate local industries and are preparing, as soon as it is possible to move around the world—they are already preparing virtually—to lead the sort of trade missions that I have mentioned to other parts of the world. I have a particular link with Liverpool, so I would like to mention that, here within Parliament, the All-Party Parliamentary Group for the Liverpool City Region is conducting an inquiry on building back better, which is currently looking at green travel, using low-carbon and hydrogen, and the role of ports. I hope to be very much involved with that.
I would also like to take this opportunity to emphasise the importance of joined-up government in our recovery from Covid. The Treasury, obviously, has the leading role, especially in the context of today’s debate. I am told that double tax treaties can be just as important for exports as free trade agreements, so of course the Treasury has a role there. I appreciate that the Treasury has consulted many bodies, but I hope that it will continue, along with other government departments, to monitor and consider the developments resulting from this package that we are considering.
My particular sectoral interests lie in education, energy and health—I spent time as the Lords Minister in all those departments—which are all regarded as priority areas both for trade opportunities and for the full national recovery from Covid. Some of those instances have already been mentioned.
Can my noble friend tell us if a cross-departmental mechanism has been set up to perform this ongoing role? I realise that co-ordination happens in Cabinet, but it does not always necessarily filter through to other levels in departments. If we are going to be efficient and successful, it is essential to have that sort of co-ordination.
The Government’s economic package to support and protect jobs, businesses and public services, and indeed this debate, is very welcome and important in highlighting all the issues.
Lord Horam (Con)
My Lords, macroeconomic policy is central to any discussion of jobs and livelihoods. I think the world economy is set for a very interesting period; many forecasters are predicting a roaring Twenties similar to the one following the Spanish flu in the 1920s, and they could be right. That is good news for the UK and jobs in the UK. As the Minister put it, there are certainly “reasons for optimism.”
We are particularly lucky that the Biden Administration have hit the ground running and initiated not one but two enormous stimuli. The first was a $1.9 trillion injection—what we call helicopter money—going straight into people’s pockets. This gives a wholly new and more favourable meaning to the phrase “the cheque is in the post.” A family on $145,000 a year gets $7,000 extra to spend. On top of this there is a second tranche, partly funded by increased taxes, to upgrade human and physical capital. Anyone who knows the USA very well would agree that that is necessary. The Federal Bank is further supporting this by committing to buying government bonds for the rest of the year to keep interest rates down.
The other bit of good news from the US is that President Biden is proposing a minimum global corporation tax. I agree that this will face a tough time in Congress but, if it comes to pass, it is estimated that the UK would stand to benefit to the tune of over £3 billion per year. This shows how much tax dodging is being done by international corporations. All of this shows the benefit to the world of having a sensible guy in the White House with economically literate advisers.
The US approach fits very well with what is called modern monetary theory, which has a lot to be said for it. MMT is not actually very modern. It was spelled out by American economist Abba Lerner at the same time as John Maynard Keynes, the greatest economist of all time, was doing his thinking in Cambridge. For today’s readers it is spelt out in a book called The Deficit Myth by Stephanie Kelton, and I hope that it is required reading in the Treasury. It says that the important thing is to balance the economy, not the budget. If you prioritise growth, you will get growth and be better able to pay off the deficit. If you prioritise cutting the deficit, you will lose growth and find it harder to bring down the deficit, as well as do social and economic damage.
MMT, despite having the same initials, is not a magic money tree. It recognises that if you ramp up demand too much, you will cause inflation. If that happens, you will have to increase taxes to take the steam out of the economy. So far, I am glad to say that the Chancellor has gone along with this vein of thinking and has been willing to spend without worrying too much about the budget deficit. Indeed, he has even received praise from Martin Wolf, the FT’s chief economic adviser, who spent the last 10 years criticising Conservative and coalition Governments. Martin Wolf made the point that, at the moment,
“it makes sense for the government to borrow to spend”.
As an old FT man myself, I am pleased that they are at last on board. The European Union, by the way, is a bit of a lagger on all this. Christine Lagarde, the current boss of the European Central Bank, has said that the eurozone should boost spending by 3.5% of GDP. I certainly hope that it follows her advice.
So the macroeconomic prospects are good and we can look forward, I think, to two or three years of strong economic growth, which is essential for jobs and living standards. The vital question, as always, is how the money will be spent. Everyone will have their own views on this, and many have been aired in this debate, but I will suggest two, and I hope that the Minister will comment on them.
The first is the relief of poverty. Poor people with few means have had a very tough time in this pandemic, and undoubtedly the number of people in poverty has increased. What this means is that we must get universal credit right. I was appalled to read that HMRC was trying to claw back money from people on UC who were accidentally overpaid, in some cases many years ago. This is absolutely deplorable, and I would like to know from the Minister what has been done to curb this distasteful practice. I note, by the way, the comment of the retiring chief constable of Merseyside, who said that increased crime was caused by increased poverty, and that if the Government were to give him an extra £5 million to spend, he would spend only £1 million on increasing policing and £4 million on trying to reduce poverty.
The second issue I will raise, which is vital for the future of jobs, is technical education. As an economist said in the Times only yesterday, it is time for apprenticeships to take centre stage. There must be a much bigger and better organised push by government to get companies to contribute more to workplace training. I heard what my noble friend Lady Penn said in her opening remarks, and I certainly hope that that will prove adequate. We do need something big and well organised. There should also be more support for the further education sector, which has not received the sort of attention we have lavished on universities. I totally agree with my noble friend Lady Noakes about degrees. The fact is that a thriving FE sector is not only a key to economic growth but utterly crucial to the levelling-up agenda that is at the heart of this Government’s approach to the economy.
So we are, in my view, at the beginning of a period of great opportunity, and I hope that this time we can get it right.
Lord Vaizey of Didcot (Con) [V]
My Lords, this is a great opportunity to talk about the British economy and how we will recover from the pandemic. If you had asked me a few months ago what kind of economy we would be facing, I would have predicted that it would be completely wrecked. But, though I am not a trained economist, the economy seems to be doing much better than expected. We have lower unemployment than we expected, we have a booming stock market and we have rising house prices. Those are not necessarily good news for everyone in our country, but they are certainly very strong economic indicators that we will recover very quickly as we move out of the pandemic. Certainly anecdotally, looking around as we gradually unlock, the ability of hospitality businesses, for example, to start catering for people has been very welcome indeed.
I have to say that the Government deserve a lot of credit for the position we are in today. I was one of the people who was quite happy to jump on the bandwagon a year ago and highlight some of the mistakes the Government might have been making, and certainly I have a great deal of sympathy with what my noble friend Lady Noakes said earlier about there being far too much emphasis on lockdown and not enough on the impact on mental and physical health and on our economy. Having said that, I certainly think that the road map out of lockdown that the Government set out a few months ago and have adhered to, and the enormously successful vaccine rollout programme, are two things for which they deserve a great deal of praise.
My noble friend Lady Penn laid out in great detail some of the financial and direct support that the Government have provided to the economy over the past year, and, as other noble Lords have pointed out, the figures are pretty staggering: some £352 billion of support; 1.3 million employers taking advantage of the furlough schemes, supporting 11.5 million jobs, at a cost of £58 billion; 1.63 million loans to businesses, at a value of £75 billion; 2.7 million people benefiting from the self-employed scheme; £5 billion in restart grants for hospitality; the recovery loan scheme; and taxes forgone, such as the business rates holiday and the reduced VAT rate for tourism and hospitality. There are also some innovations which may stick: for example, the Future Fund where the Government have invested, alongside private investors, to support innovative new tech companies. Obviously, something close to my heart is the £1.57 billion that the Government have provided to support the arts during this very difficult time. Those are all measures which I think have been welcomed.
I would say partly as an aside, having said earlier that I am quick to jump on the odd bandwagon if the Government make a mistake, that it is worth pointing out the dogs which have not barked. A lot of the work done over the years by the Government Digital Service really came to fruition during this time. I certainly found, again anecdotally, from people I know who applied for bounce-back loans and so on that they found the technology process of applying online—this is not an insignificant point, and it also applies to universal credit, which my noble friend Lord Horam talked about earlier—to be very smooth and easy. That is no mean achievement.
However, I want to use my brief remarks to look forward. This is perhaps a chance for me to play fantasy politics: what I would do if I were in charge and able to wave a magic wand to help transform the British economy? I feel this yearning for Britain to really lean into the fact that we are a modern, digital economy. We have enormous opportunities to lead the world in various economic sectors. Perhaps I may pick up on what my noble friend Lord Horam said earlier—I am sorry that I did not begin my remarks by praising his excellent speech—when he rightly focused on the importance of technical education and further education. No one wanted our children to be educated from home on Zoom calls but we are certainly long overdue a revolution in our school system. It is a common and very boring refrain of mine that any of our Victorian ancestors could wander into almost any school and feel quite at home. We really need to focus on digital skills and to carry on a revolution, which the previous Government started, so that apprenticeships and technical education can begin to take on the same status as academic education and education becomes flexible, with the opportunity for people to dip in and out, and to upgrade their skills when necessary.
The skills of the future that we need are for the economic growth sectors of the future. We will be hosting COP 26 at the end of this year. We already see that cities such as Hull, for example, are booming thanks to the investment in renewable energy. Britain has a great opportunity to take advantage of renewable technology, yet we seem still not be leaning into this. It is a win-win, providing us with not only measures to combat climate change but energy security and technology leadership. The same goes for the space sector, which is linked quite closely to climate change given the ability to make an impact on climate change by using satellite technology. In the week when NASA has flown its helicopter in the first flight outside our atmosphere, we in the UK also have a massive opportunity to take the lead in space technology. As the former MP for the Satellite Applications Catapult, this too is a sector close to my heart.
I mentioned earlier the Future Fund which the Government have created. We are the technology capital of Europe; we have more start-ups than France and Germany combined but do not yet have a strategy to ensure that those start-ups become scale-ups. In fact the most successful scale-up company created recently was probably the European super league, which the Government are now busily trying to stop.
I take note of the fintech review by Ron Kalifa, which shone a light on a sector where Britain, again, has natural leadership. I would like to see the Government lean in on that and to implement the Hill review to ensure that great British companies can float in this country. I am looking forward as well to the ARPA legislation, which again shows the Government’s intent to lean into modern and future technology.
Finally, I would point to the boring, old but very important issue of infrastructure: broadband and 5G, but also roads and HS2. There has to be an opportunity to renew our infrastructure in this country, as President Biden is doing across the pond.
Coming out of the pandemic feels like coming out of a war. When we came out of the last war, we came out with the Beveridge report, which shaped British politics for 30 or 40 years. I hope that the Government can put together all the wonderful initiatives that they are overseeing into a really compelling narrative of what the modern British digital economy could look like in the future.
I will conclude simply by referring to the industries that I am really passionate about: the creative industries and the cultural industries. I noted before the pandemic how the film industry had contributed to our economic growth and helped us to avoid going into recession. I hope that the Government will support the creative industries and our cultural industries as much as possible.
I noted what my noble friend Lady Wheatcroft said earlier about the tax rise imposed on duty-free shopping, which is going to hit our tourism and luxury goods industries in the solar plexus. The Government need, where possible, to join up their thinking, identify the fantastic strengths that we have in this economy, bounce back from the incredibly successful way they have managed the pandemic over the past few months and take Britain forward.
Lord Griffiths of Fforestfach (Con)
My Lords, it is a great pleasure to take part in the debate and to follow my noble friend Lord Vaizey, whose optimism and view of technology and what can be done I very much agree with.
As my noble friend Lady Penn reminded us when she introduced this debate with an excellent speech, the Government should be rightly proud of their economic record over the past 12 months. They have avoided what could have become the catastrophe of mass unemployment. Facing a 10% fall in output—one of the largest ever falls in peacetime—great global uncertainty and the knock-on effects of Brexit, the Chancellor, Rishi Sunak, acted decisively and boldly to support jobs and business. Over the past year, the Chancellor has kept on announcing new measures, slightly adjusting the policy as required. The result is that unemployment today is far lower than forecast last year and an economic recovery is well under way. The official estimate for GDP growth this year, even in the Budget, was only 4%. I say that because, by contrast, some reputable forecasts have put it at nearly double that figure for this year, followed by another 5% to 6% next year. As my noble friend Lord Lilley suggested, the potential of a market economy to create prosperity is truly remarkable.
We heard from my noble friend Lady Penn in her opening speech of the endless measures the Government have introduced to deal with the pandemic crisis. People will say that much more could have been done. I shall comment on two aspects. Two-thirds of the rise in unemployment over the past year has been among the under-25s. We have youth unemployment of nearly 1 million in the UK. This is an extraordinary, depressing and dispiriting form of rejection for young people. The longer a person is out of work, the more long-term damage is done to their career and livelihood, involving long-term unemployment and permanently reduced earning power. They are frequently the last to be hired and the first to be let go. The evidence of the damage done in Spain and Greece over the past decade should concern us.
I have no doubt that it will take years, not months, to tackle the problem. The Government will rightly say that they are aware of it and have taken a number of steps to deal with it, and today’s announcement of flexible apprenticeships is absolutely welcome. However, I have a nagging concern that we could be doing more in a co-ordinated way, with one Minister wholly responsible for driving the policy. I am not suggesting I have easy answers, but I believe the problem is a festering sore in our society and something easily exploited by subversive ideologies.
The second area I want to comment on is investment. It is clear that the Chancellor’s intention is that this recovery should be investment led, hence the provision of the super-deduction tax break on investment spending. It seems that certain industries, such as construction and IT, will not be eligible for the tax break because they lease or hire short term rather than buy. In view of the importance of investment for this recovery and for longer-term growth, does the Minister not think that this area should be looked at again?
As I hope is clear, I am wholly supportive of the Government’s commitment to the recovery and to the return of full employment. But, as my noble friend Lady Penn mentioned in her opening speech, the debate is an attempt also to review what has been done. However, I have two have major concerns for the future and believe that the present is the time to begin to address them.
While the sun is shining, it is very easy for any Government—we have seen it in the past—to postpone taking the decisions that are critical if recovery is to be sustained and stronger economic growth achieved, so that we have growth not just this year and next year but in the following years as well. In this context, the Government must be prepared to allow a structural challenge in the economy to take place. The fact that the bank rate is at 0.1%, the lowest in the Bank of England’s 374-year history, while the recovery is roaring ahead, gives no incentives for heavily indebted companies, popularly termed “zombie companies”, to put their house in order. These companies can just about manage to pay interest on their debt but have little chance of ever repaying the debt itself. However, they employ capital and people who could be much better employed from society’s point of view in new and growing firms, using state-of-the-art technology, leading to higher productivity. The Government must allow this change to take place. Of course, there will always be exceptions for individual firms, which can be accommodated by special assistance. However, for the change to take place, the time has come for the Bank of England to begin changing the stance of monetary policy.
The Bank is committed constitutionally to working with the Treasury and not against it, even though it has operational independence. When a year ago the pandemic hit, the Treasury, the OBR and the Bank of England assumed that the major problem we faced would be deflation. As a result, the Bank cut the basic rate to 0.1%. It has continued with that low interest rate ever since, as well as extending the policy of quantitative easing: namely, increasing liquidity in the economy each month. It also alerted the banking system to the possibility of negative rates. However, I believe that deflation is no longer a realistic prospect, and that is the tone of today’s debate. If the Bank wishes to continue with a policy of quantitative easing and keeping interest rates at rock-bottom level, it must set out its case in detail, accompanied by evidence to back it up. I do not believe it is doing that at present.
Such a change made by the Bank in resetting monetary policy would help the Treasury in another way. The Chancellor has been decisive and bold in tackling the pandemic crisis, but it has involved a huge increase in public spending and an aggressive easing of monetary policy. To pay for the increase in the excess of expenditure over taxation, we have to borrow at an unprecedented rate for peacetime, and this will fall on those who will pay the tax—maybe not those of us taking part in debate but our children and grandchildren. To do this and keep interest rates low, the money supply has expanded by 15% over the past year.
The lead letter in the Financial Times today was from the Shadow Monetary Policy Committee, chaired by Tim Congdon, warning of the dangers of what is happening. It has been evident for some time now that the combination of this extraordinary fiscal stimulus and aggressive monetary easing has raised the spectre of inflation. The public do not like inflation; they feel cheated by higher prices. We know from the history of the 1960s, 1970s and 1980s that, while it initially stimulates employment, inflation—when it has run its course—ultimately destroys jobs.
In my judgment, the return of inflation will prove no friend of the Chancellor in protecting long-term jobs in the UK economy, which is another reason our success in the recovery must be set within a long-term monetary and fiscal framework, rather than just the immediate future. I believe this requires no major policy changes but a signal from the fiscal and monetary authorities that they are determined to keep the rate of inflation at its present objective level of 2%.
Lord Bilimoria (CB) [V]
My Lords, the world’s most defining crises come out of the blue, unpredicted, and when they happen their outcomes are also uncertain. This global pandemic came out of the blue last year. It has been a supply shock, a demand shock, a health crisis and an economic crisis, with a domino effect reverberating around the world.
The challenge for government has been enormous from day one, and right up front I give credit to the Government, including Chancellor Rishi Sunak and his team, for acting with speed from March last year to try to help save businesses and jobs against the backdrop of enormous uncertainty and ambiguity and a virus we have been learning about every day. There have been ground-breaking initiatives such as the furlough scheme, protecting well over 10 million jobs, and more than £400 billion in support, which in absolute or per capita terms is one of the highest levels of support given by any Government to their economy, businesses and citizens.
Furthermore, the Government have continually listened to business and organisations such as the CBI, of which I am proud to be president, by being flexible and extending schemes when required. For example, the job retention scheme was due to end in May 2020 and has been extended periodically; it has now been extended by the Chancellor until September.
The VAT reduction from 20% to 5% has been extended; this will help hospitality businesses in particular. Hospitality and tourism employ 4 million people. This industry has been decimated by the pandemic. I know from my own business, Cobra Beer, which supplies 7,000 restaurants, how much the sector has suffered. What use is a VAT cut if your business is not open? It is absolutely right for the Government to extend this as the economy opens up, so that businesses and consumers can avail themselves of this measure when businesses are actually open. The Government have also extended the business rates holiday for hospitality, leisure and tourism.
There is also loss carry-back on corporation tax to help firms manage exceptional losses, and government-guaranteed loans have helped millions of businesses and jobs. Full credit goes to the British Business Bank. To think that before the pandemic the British Business Bank had a loan book of £8 billion. To date, as the Minister said, it has lent over £75 billion to 1.63 million businesses, including the 100% guaranteed bounce-back loans. In fact, government-guaranteed loan support has covered businesses of all sizes, from small businesses to multinationals getting support directly from the Bank of England. There has also been the £10 billion insurance, the trade credit guarantee. The Kickstart Scheme is excellent, but will the Government consider extending it by six months after December 2021 to give businesses a chance to benefit from it?
As a result of all these measures the Government have taken, unemployment—which was at 3.5% before the pandemic, one of the lowest levels since the 1970s—is today at only 5.1%. To put this in perspective, after the financial crisis of 2008-09, unemployment went up to nearly 10%. All these measures the Government have taken have saved jobs and businesses so that, when the recovery starts this summer, it will be able to unleash the “coiled spring” that Andy Haldane, the chief economist of the Bank of England, spoke of.
The Government need to encourage investment and the super-deduction is a super initiative, but the prospect of corporation tax rising to 25% in two years is a concern, as nothing should jeopardise the UK being a magnet for inward investment—consistently the second or third-largest recipient of inward investment in the world. Investment is needed so that we can continue to invest in R&D and innovation, currently at 1.7% of GDP. It needs to go up to the level of Germany and America, 2.8% of GDP. Just imagine that extra 1%, that extra £20 billion. That would power our productivity and power our economy forward.
One of the key messages of the pandemic has been the power of collaboration—businesses, universities and government working together, including globally. There is no better example of this than the Prime Minister creating the Vaccine Taskforce and appointing Kate Bingham from the private sector on 18 May last year. Hats off to her and her team on procuring 400 million doses of six different vaccines, with the first vaccination taking place less than seven months later on 8 December—V-day. That was through Oxford and AstraZeneca, a British-Swedish firm headquartered in Cambridge, collaborating with the Serum Institute of India and the Poonawalla family, the largest vaccine manufacturers in the world, with a 1 billion dose contract for the Oxford/AstraZeneca vaccine. That is global Britain in action, and today we have one of the most successful vaccination programmes in the world. Hats off to our Vaccines Minister, Nadhim Zahawi, for 33 million first doses and 10 million second doses already having been delivered in four and a half months.
The Prime Minister’s road map has offered hope. Schools reopened on 8 March, with little discernible rise in cases. However, the hospitality industry still has to wait until 17 May for inside drinking and dining—this after the industry has put so much time and effort into making premises Covid-safe. Where is the evidence of Covid spreading in Covid-secure hospitality venues? They need to open as soon as possible.
Could the Minister also confirm that the reopening of the economy is being driven by data, not dates? If the sad deaths and hospital admissions go down to zero, which has already started to happen in certain parts of the country, the economy can open up quicker, including hospitality. Could the Government confirm that?
From last summer I have been calling for the national rollout of rapid, affordable mass lateral flow testing. I am grateful that the Government finally listened and in November started to implement it.
The Deputy Chairman of Committees (Baroness Barker) (LD)
My Lords, the voting period has now elapsed, and we are ready to resume. I invite the noble Lord, Lord Bilimoria, to continue his speech.
Lord Bilimoria (CB) [V]
Today, not only do all businesses, of all sizes, have access to these tests but every citizen of the country can get them free, so people can test themselves regularly. It has been shown that testing two or three times a week picks up asymptomatic infectious cases. The cost benefit of this in keeping on top of the virus, in conjunction with vaccinations, is overwhelming.
Another aspect that not many people talk about is this: could the Government put the same focus, energy and investment as they did into the vaccination programme into turbo-charging, at speed, the research and trials for authorising repurposed therapeutics and drugs? Dexamethasone was the first, but there are quite a few others, including ivermectin, which could possibly cure over 80% of Covid cases. Such drugs, if proven, would literally be game-changers against this wretched virus.
With Britain ahead of the game in vaccinations and mass testing, we need to come up with a practical, affordable and risk-minimising travel protocol that allows both business and tourist travel, both ways, as soon as possible, using lateral flow tests as much as possible. The aviation and travel and tourism sectors have been destroyed by the pandemic; they need all the help that they can get to recover.
In the opening up, there also needs to be clarity on working from home, which, of course, is linked to public transport, the wearing of masks and the eventual elimination of social distancing. We need clarity on all these measures—can the Minister give us some, including on how Covid status certificates could operate in practice? Research that we have done at the CBI shows that businesses believe that Covid certification should be voluntary, science-led and time-limited, based on proof of either vaccination or a negative coronavirus result, simple to use and consistent across all four nations of the UK—do the Government agree?
Finally, as chancellor of the University of Birmingham, I have seen first-hand the efforts that universities have made to be Covid-secure, including the implementation of testing. Schools have been open since 8 March, but universities will not be able to open up until 17 May. Young people have lost out on so much during this pandemic as it is: university students have missed out on being on campus and on face-to-face teaching, and now, in the final term of the year—for many students, the final term of their university degree—they are being prevented from returning to the classroom. The vice-chancellor of the University of Portsmouth described the move to open up on 17 May as nonsensical and “unfathomable”, saying:
“That this date is after many universities will have finished their teaching year shows a Government with a cavalier disregard for details. This isn’t good enough … Students can now buy a book on British history in Waterstones and discuss it with a tattoo artist while they have their body decorated, but they cannot do the same thing in a COVID-secure environment with their university lecturer.”
The vice-chancellor of the University of York described the timing as “very late” and “disrespectful”. The president of UUK described it as “illogical”. The chief executive of the Russell group said:
“The Government’s announcement … means that … one million university students will be unable to resume in-person teaching until at least mid-May ... the Government’s decision … is a major blow. It fails to take into account the data which shows the safety of teaching spaces, and the very low infection rates at universities right now, despite the majority of students being on campus. We urge the Government to reconsider its decision to ensure these students are not forgotten and can resume in-person teaching as soon as possible.”
The response from the Government, including to universities and business, is:
“The movement of students across the country poses a risk for the transmission of the virus.”
Where is the sense in that? First, universities are offering regular testing when students arrive on campus. Secondly, the majority of students stay in digs, in their own private accommodation, near the university. There is nothing that the Government or universities can do to stop them returning to their homes. In fact, thousands of students have already done this. The move to open universities on 17 May is unfair, unjust, illogical and irrational for students, universities and our economy. Our students should be allowed to go back to university tomorrow, 21 April—not 17 May.
Earlier in my speech, I gave the Government credit for listening to business throughout the pandemic and for collaborating with organisations such as the CBI. We are very grateful for that. These are not U-turns; this is not flip-flopping, but a listening Government. Long may this wonderful spirit of collaboration continue.
The Deputy Chairman of Committees (Baroness Barker) (LD)
The noble Baroness, Lady Browning, and the noble Lord, Lord Bourne of Aberystwyth, are not taking part in today’s proceedings, so I call the noble Lord, Lord Carrington of Fulham.
Lord Carrington of Fulham (Con) [V]
My Lords, I start by bringing to your Lordships’ attention my interests as in the register.
Some businesses have undoubtedly done very well in the past 18 months, but many have seen their markets disappear and have struggled to pay their bills, even after all the support quite rightly provided by the taxpayer. Some companies will bounce back quickly, allowing them to protect jobs and invest for the future. However, most will find the next few years very tough indeed. They will be forced to retrench to survive while building back their capital base and, in particular, their working capital. As in the old cliché, cash will be king, and preserving cash will be the only way to survive.
These companies will need all the help they can get. Otherwise, jobs and investment will go, then productivity will crash. It will not be just small businesses that struggle; it will be firms of all sizes, with some industries hit worse than others. Help will have to come from banks and capital markets—even from lawyers, accountants and, improbably, consultants. The Government also have a big role to play: as they have during the pandemic, so they will during the recovery. The Treasury will have to continue pretty much what it has been doing already, by reducing the tax take from such struggling businesses through both tax holidays and tax delays. Of course, getting the country’s borrowing down is also vital. Timing is everything: if we get businesses growing and productivity rising, public sector borrowing will come down as night follows day.
The key is to get business cash flow growing fast. This is the time to stabilise or reduce taxes, not raise them. Frankly, it is pretty strange to plan to raise corporation tax ahead of the recovery. In terms of company planning, a proposed tax increase is the same as a present tax take. I hope that the Government will review the proposal to raise corporation tax and postpone or cancel it if it looks as though it will be damaging to corporate recovery.
However, as the pandemic has caused challenges, it gifts opportunities as well. If we want to reduce tax on business—as I think we should—now is the time for some much-needed reforms of our tax system. Let us start with business rates, an outdated tax unrelated to profit or turnover and a fixed, unavoidable cost for profitable and unprofitable businesses alike. It should be replaced with a tax related to a company’s cash flow.
Then there is national insurance and income tax. Let us combine them. I fully understand the cosmetic reasons for not doing so, but the objection is just cosmetic. Both are taxes on wages so combining them will raise the same amount of tax but allow for simplification of the tax system. This will be hugely beneficial to both employees and employers. While we are at it, we should get rid of employers’ national insurance contributions. They are a pernicious tax on employment at a time when we need to give employers every encouragement to take on and retain more staff.
Finally, I want to say something about clever financing schemes. Factoring invoices or, as it now seems to be branded, supply-chain financing, has a long and successful history, but it was never without risk. Indeed, it is always riskier than bank lending, which is why it has always been more expensive, but it is a banking risk that needs to be regulated by the bank regulator. To then combine factoring with the statistical manipulations that led to the subprime crash of 2008 was always going to end in tears. I suggest that if Her Majesty’s Government want to make their buying processes more efficient, they do that by reforming their procurement and bill-paying procedures. If this still, bizarrely, need to be financed externally rather than through the Debt Management Office, it can safely be done only through the regulated banking system.
The next few years will be very challenging for businesses of all sizes. Raising taxes and continuing with an unreformed tax system will add to industry’s problems in exporting and providing employment and will delay our recovery from this pandemic.
Lord Lea of Crondall (Non-Afl)
My Lords, there are so many different pictures in the press and among the think tanks at the moment that it is anybody’s guess how the economy will evolve, but given that this debate focuses on jobs, employment et cetera, I was struck by the remarks by a number of speakers, including, I think, the noble Baroness, Lady Noakes, and the noble Lord, Lord Griffiths, about the fact that we have not got our act together so far as employment policy is concerned.
This can be seen through the prism of the crisis in the universities, which is there. There is a crisis because we have a philosophical contradiction. If you were writing a philosophical book in the 19th century about the nature of the university—we all know that some famous books were written about that—it was not for job creation. It was not to meet the labour market. We are creeping about at the moment implying that universities are to do with jobs and the labour market, but the set-up in universities does not reflect that. I will get shot if I say that in more clear-cut terms because there is a huge establishment for the universities. People with good intentions, including new Labour et cetera, felt that there was a magic wand to be waved and that productivity was at the other end of investment in universities. Why would that be so? Where does the link come? There is no link at all. I agree that if you want to study the classics, ancient Greece et cetera, that is wonderful, but generally speaking that is not why we are putting untold billions into universities.
So how do we change the culture of this debate? It is connected with productivity, certainly. We had in the 1960s, of course, the idea of concerted action, à la Jacques Delors in the 1970s and so on, and I was a supporter of that. But at the moment we actually lack —I do not know whether the noble Lord, Lord Griffiths, said this, or perhaps the noble Baroness, Lady Noakes—a new department of employment. That is my language, not theirs. It could be the department of the labour market, if you like. Because there is currently no such thing.
Even when we had a department of labour and employment, when big economic decisions had to be taken, the Treasury was obviously the most important department—and now we have, side by side with that, the whole of the banking system, which I would say has much more influence than people who are studying the labour market. So I ask the Minister to comment on the question: do not we now need a ministry for the labour market? I know that it is a bit pathetic when you have to call for a new ministry, but the evidence is piling up, so we must not be shy and run away from it just because calling for a different government department is thought to be the last refuge of the scoundrel.
This of course would have to have as one of its concepts buy-in by young people. I do not think we have that. There is not a very bright prospect for many people in the universities at the moment, but more generally that is at what you might call the elite end of the system. But let us look at the statistics at the other end of the system. There is insecure employment: how many people can survive that? An article today in the FT, which is being quoted by everybody, says that
“Britain’s Living Wage Foundation published the results of two surveys last week, based on 2,000 responses … which found that almost two-fifths of UK workers were given less than a week’s notice of their shifts or work patterns. Among full-time low-paid workers, 55 per cent were given less than a week’s notice and 15 per cent less than 24 hours.”
Well, is that not crazy? Is that going to generate a highly productive labour market, particularly with these young people not having relevant qualifications?
So I must say that, if there is one thing that we do not have enough focus on, it is that, unless we see sustaining employment as to do with high productivity, there is a rather misleadingly attractive model in which we just want more jobs. But more jobs per se? You do not need to be, as it were, labour-theory-of-value over the top, but we need to see where the productivity is. At the moment, I am afraid that our productivity position, as well as our trading position, in all the OECD tables, is at the bottom. So I am a bit surprised—well, being a Labour speaker I am not surprised because I am representing this side. However, I think that the Government are lulling themselves into a false sense of security.
I will make a final remark about the nature of improving productivity and how it relates to public policy. When we had the discussions with Ted Heath and so on at that time—not a lot of people will now say a good word about Ted Heath—in all the discussions there was a pretty targeted analysis of how all this related to productivity, prices and incomes and so on. We have now thrown out the baby with the bath-water by saying, “Well, that didn’t work, did it?” That is a sweeping generalisation. So we are running away from what many people here will remember: in the 1960s and 1970s—much-derided decades—we were actually pretty good in the international league tables. At the moment we are presupposing that we are well up there.
I will make a final remark about Brexit—which, of course, you need a special vaccination permit to speak on these days. Two or three years ago, I attended a meeting with the chief executives of six of the major companies responsible for foreign direct investment into Britain. We met over a meal. They said that, if we left the EU, FDI would collapse. I have to say, it has collapsed; the figure is more or less zero.
In other words, there are no new plants and factories. I do not want to characterise this as only manufacturing, but FDI has collapsed. It has—I will bet £10 that it has, and I will win that bet if the noble Lord thinks I am wrong. FDI has collapsed and this requires us to see a timescale in which we can reopen some conversations with the European Union about the internal market, which is the key to why it has collapsed.
I would like the Minister to make sure that, by the time she replies, she has the latest figures on foreign direct investment in Britain and how it compares with five and 10 years ago—and I will eat my hat if she tells me I have got it wrong.
Lord Hannan of Kingsclere (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Lea of Crondall. I do not have the FDI figures in front of me and I do not have a hat either, but I am glad he raised the vital question of higher education. I would like to associate myself with all the remarks made by my noble friends Lord Horam, Lord Vaizey and Lady Noakes, and the noble Lord, Lord Bilimoria, about the impact of closing colleges and universities.
I should declare my interest as someone who teaches at the University of Buckingham, which makes me acutely aware of how unsatisfactory it is to try to teach through the medium of Teams. It seems that, by keeping young people from their studies, we are exacting an especially high toll on the people who are least at risk from the epidemic itself.
I wish I could share the optimism expressed by so many of my noble friends about the condition of our economy as we come out of the lockdown. However, I fear that when things reopen, they will not go back to normal. The malign psychological changes wrought by the epidemic and its associated closures will last long after the immediate threat of the virus has passed. The world into which we emerge after lockdown will be poorer, colder, more pinched and more authoritarian. As we haul ourselves from the pupa, the chrysalis, of these closures, we will be transformed and—the evidence suggests—not in a good way.
I am not really talking about the economics. I have nothing to add to what my noble friend Lady Noakes said. She quoted figures on our debt, our deficit level and the hit we have taken. The hit last year was worse than in any equivalent period during either of the two world wars or the great depression. But eventually, after many years or decades, we will be able to make good that damage. What alarms me more is a phenomenon well attested to by behavioural psychologists: the way a collective threat, or a perceived collective threat, throws people back on their palaeolithic heuristics. It makes us warier, more suspicious, more illiberal, more hierarchical and more demanding of the smack of firm government.
My noble friend Lord Vaizey drew a parallel with 1945 and the Beveridge report. In general I think that parallels with the Second World War should be used sparingly in politics, but on this occasion it seems a quite valid linkage to make, because that was the last time we felt the experience of a collective threat of similar magnitude.
The result was that, once the emergency had passed, the demand for collectivist measures, which had been brought about by the changes in our economy and psychology during the Blitz and the mobilisation, endured. So, long after their notional justification was no longer there, we still had identity cards until 1952, food rationing until 1954 and full male conscription until 1960. Indeed, when it comes to some of the economic controls put in place in the first half of the 1940s, in many cases they lasted until the Thatcher reforms of the 1980s. Indeed, some aspects of education and healthcare are still there—products, essentially, of wartime thinking and full mobilisation.
What alarms me is that a similar change in public psychology and, therefore, in electoral calculations will endure long after the passing of this disease, and that Governments will cling on to powers that were taken on a supposedly contingent basis and will be reluctant to return them when the emergency passes.
After 1945, there was a demand for big spending and big government. People were not in the mood to listen to the argument that we were bankrupt, our Treasury was empty, our credit was exhausted and we had spent all our resources in the course of defeating Hitler. People felt that they had earned something more. So we went about an extraordinary expansion of the remit of the state. I can see similar arguments creeping in now. When was the last time that we heard anyone, either in this House or another place, make the case that we should cut grants to businesses or charities, or the uplifts in public sector pay or in benefits—pick pretty much any of them? It becomes almost impossible and pointless to make that argument when the mood is as it is. So debates in both Chambers come to resemble a kind of prolonged episode of the “Today” programme: a series of demands for additional spending, each individually defensible but collectively unaffordable.
I was very pleased to hear my noble friend the Minister say that the Government intend to move back to a balanced budget when circumstances allow, but I am equally very alarmed by the widespread view that this will have to be through tax rises. When you try to balance the budget with tax rises, you find that you are reducing the revenue-generating bit of the economy to sustain a rise in the revenue-consuming bit. That is no way to get rid of a structural debt; the way to get rid of that is for the economy to grow. How do you get the economy to grow? There is no magic formula; we have seen it happen every time it has been applied. You get an economy to grow by applying the principles of secure property, an independent judiciary, competitive regulations, free trade, open markets, and lower, flatter and simpler taxes. I was very pleased to hear what my noble friend Lord Carrington said about the simplification as well as the lowering and, in some cases, the abolition of taxes, particular on employment. If our priority is to get the economy moving again, then, far from raising taxes on investment and employment, we should look to reduce or at least suspend those taxes so that we get companies hiring again.
Of course, these were difficult enough arguments to make in normal times, even before we had the changes to our outlook wrought by the prolonged lockdown and we were thrown back on these palaeolithic instincts of wanting to keep things close, and to become more protectionist and introverted. If we could not win these arguments two years ago, is there any chance coming out of this that the country will have an appetite for significant deregulation or tax cuts? As the poet says:
“forward, tho’ I canna see,
I guess an’ fear!”
The Earl of Clancarty (CB)
My Lords, I will focus my remarks on the creative industries, particularly music, but with some detours along the way. I am grateful to UK Music and the Incorporated Society of Musicians for briefings.
In addressing jobs and livelihoods, I will also touch on the experience of the self-employed, in terms of both employment and unemployment. In this sense, the music industry is particularly relevant because, alongside others in the performing and visual arts, 88% of the workforce is self-employed, compared with 30% in the creative industries and 15% in the UK workforce as a whole at the end of 2019, according to ONS figures. This represents a trend towards greater self-employment in the economy during normal times. This trend has significantly stalled due to Covid.
The creative industries normally employ about 2 million people and are worth over £116 billion a year. As a whole, the sector is of course grateful for the support provided over the last year in the form of the JRS, the Self-employment Income Support Scheme, the Culture Recovery Fund and more, but more still needs to be done to support individuals who have fallen through the gaps in support and to provide schemes that will facilitate recovery.
The Government are now concentrating on a road map to recovery, yet, as UK Music points out, it will be necessary to continue support beyond the end of restrictions for individuals, organisations and industry as a whole to get our arts and creative industries back on track after such a devastating year. They will need to pay off debts, build up capital and get their businesses going again. Of course, that depends on the road map itself not significantly changing.
Music, like all the performing arts, has suffered particularly badly, yet it is hugely valuable to the economy and was worth £5.8 billion in 2019. Of course, it is part of the wider cultural landscape that, in normal times, encourages tourism to the UK and is a driver for the local economy. It will also be significant in restoring a sense of community. These are roles that it and so many of the other arts need to be playing again.
However, it is important to point out the damage: 70% of musicians got less than a quarter of their usual work in 2020, grass-roots music venues lost 75% of their income and technical supply companies lost 95% of theirs. The Government have listened to some of the requests from industry, but outstanding concerns include the need for a Government-backed insurance scheme for live events. Austria, Norway and the Netherlands have such schemes, and the UK has done this for film and TV.
Festivals are already starting to cancel since they cannot afford to take the risk. This potentially represents huge economic losses, not just for the businesses concerned but for the local community. Boomtown, in my area of Hampshire, is the latest to cancel. Will the Government also extend the VAT reduction on cultural tickets to the end of the year? This would considerably help the next festive season. Also, 100% rate relief should be extended to the end of 2021-22 for qualifying businesses in England, as is the case in Wales and Scotland.
Last month, the University of Leeds’s Centre for Cultural Value analysed data from the ONS’s Labour Force Survey, concluding that the current crisis for freelancers in the creative industries is hitting different demographic groups in markedly different ways. Women freelancers have been hit badly in certain areas, such as publishing and the film industry. Workers under the age of 30 have been more detrimentally affected than more established, older freelancers.
The self-employed do not have the traditional structures of protection afforded by established unions or even companies, and this possible loss of talent is hugely worrying. In this light, we need to rethink how the self-employed in the arts should be treated in crises such as this. The Minister will recall the reaction to blithe assumptions about retraining; this is not about the removal of dead wood. The loss to society of young people’s hard-won, and often innovative, skills would be substantial.
Therefore, I am glad that support for individual freelancers will be continued until at least September, but support is also needed for those estimated 3 million who have still received nothing for the last year for a variety of reasons, including being on PAYE or newly self-employed. Many of them work in the creative industries. Those problems have been laid out in detail in the excellent report by the Gaps in Support All-Party Group in late February. The Minister should take a look at it if she has not seen it because it contains recommendations that remain relevant this side of the spring Budget.
The problems ahead are wider in at least a couple of ways than the terms of the debate imply. First, it is not just Covid but, of course, Brexit which is having a negative economic effect. For many small businesses and the self-employed it will be less a recovery than a nightmare which has hardly begun. I will not make detailed points in this debate about Brexit, but it is worth saying that we cannot talk about economic recovery or otherwise unless we include Brexit in the equation.
Industries should also be trusted to know the difference between the effect of the pandemic and the effect of Brexit on their businesses. Many musicians, and others in the performing arts, depend on touring in Europe for their livelihoods. Tours are already being cancelled because of Brexit. In a new survey by the ISM, 94% of music businesses say that the Brexit trade deal has already had a negative effect on them, while 79% say that they are concerned about the future of their business in the next year or so, with particular regard to Brexit. These are not teething problems but the permanent result of the restrictions and red tape written into the TCA, unless the Government act to mitigate these effects most urgently through a separate, bespoke visa waiver agreement, which is strongly supported across the performing arts.
Secondly, the protection of jobs or indeed the creation of new ones is only part of the story of survival. As the Government themselves say, not all businesses can survive, but if this is the case we must do everything to help those who have lost work to prepare for a return to work. This is something we are signally fundamentally failing to do. As the noble Baroness, Lady Lister of Burtersett, pointed out in her debate on the inclusive society last week, a Heriot-Watt University-led study for the Joseph Rowntree Foundation, which the noble Baroness, Lady Humphreys, has already referred to, reported in December last year that 2.4 million people experienced destitution in 2019, before the pandemic even began—a 54% increase since 2017, including more than half a million children.
It needs to be said that £20 a week for many people in well-paid jobs is neither here nor there, yet such is the inadequacy of universal credit to provide, alongside other deficiencies in the system such as the delay in payment, that you may be in a reasonably paid job one moment and visiting a food bank the next. As ExcludedUK has pointed out, the self-employed, among others, are now losing their homes as a result of losing work during the Covid pandemic.
We urgently require a new way of looking at support for the unemployed. I am in favour of a basic income but, at the very least, people need to be properly supported whether in work or not. For too long we have had a system where so-called discomfort as a policy is built in to encourage people off benefits. It does not work. This policy needs to be recognised for what it is. It is, quite simply, cruel, and the only effect it has is towards greater poverty, as we can see from the huge rise in the use of food banks experienced by nine out of 10 councils, according to the recent survey by the District Councils’ Network. In the case of vocational careers the result will be a sad and avoidable loss of talent, which should be an investment for this country. Support for the unemployed needs to be significantly increased, and that should be part of an overall plan for recovery.
Lord Shinkwin (Con)
My Lords, my noble friend the Minister is surely right to describe the pandemic as a grave shock, as is my noble friend Lady Wheatcroft to mention certain groups that have been particularly hard hit. To her list I would add disabled people: 60% of those who died were disabled. The disability employment gap, which currently stands at almost 30%, is growing. It is therefore more important than ever that the Prime Minister is allowed to deliver on his bold and admirable vision of a society in which everyone is enabled to realise their potential. It is why the whole of government needs to get behind his manifesto promise to produce the most ambitious and transformative disability plan in a generation.
I for one question neither his sincerity nor the scale of his ambition. Unlike so many other politicians, the Prime Minister cuts through; he connects with people’s hopes and he thinks big. Now is the time for him to do all three, and his forthcoming national strategy for disabled people is the perfect opportunity for him to do so. Indeed, the success of his levelling-up agenda depends on it. The strategy is its first big test.
Some may ask what disability has got to do with the economy and our recovery from the Covid-induced downturn. I would say: a lot. Just a 5% increase in the number of disabled people in employment is projected to result in a £23 billion increase in GDP, with tax revenue up £6 billion by 2030. The purple pound—the spending power of households with one or more disabled people in them—is estimated to be worth one-quarter of a trillion pounds. I think the PM gets this. To his credit, he has nailed his colours to the mast. Disabled people, in turn, have pinned their hopes to it, but the question hanging in the air is whether all his Cabinet and ministerial colleagues have really thought through just how radical the reset required is, and what it will take for the reality to match the rhetoric.
What is clear is that now is not the time for yet more tokenistic tinkering or tweaks to policy. Rather, now is the time for a radical reset of policy and policy-making that matches the ambition of the PM’s vision. At the heart of that reset must be this simple principle: just as it has been with gender, the lived experience of disability around the boardroom table on merit is central to resetting the conversation. Equally important is an acknowledgement that a different conversation is never going to take place while the same sort of people are leading it—namely, well-intentioned, well-meaning but non-disabled people, in the form of successive Governments—and are telling disabled people what is good for them.
If the Government are serious about wanting the PM’s national strategy for disabled people to land well with its primary stakeholder group—disabled people—they will stop insisting that they have embarked on one of the largest-ever engagement programmes with disabled people when so many disabled people, me included, have been horrified to see what that engagement amounts to. If an online survey that is so offensive and inept that it is currently the subject of a legal challenge by the law firm Bindmans is meant to be a success, then I hate to think what failure looks like.
To ensure the PM’s strategy lands well and to support him, the Government need to listen to the business leaders who recently signed an open letter to the Prime Minister, urging him to show in his strategy that he had given careful consideration to the recommendations of the CSJ Disability Commission, which I was delighted to chair. Signatories to the letter included GSK, Pearson plc, the Post Office Ltd, Schroders, BNY Mellon Investment Management, Coca-Cola, PageGroup, Clifford Chance, Ashurst, Herbert Smith Freehills LLP, COINS, Aviva plc, ITV, Unilever, Clyde & Co LLP, Purplebricks, Stephenson Harwood LLP, Gapsquare and LGBT Great. The list goes on. They all say:
“Disabled people have waited long enough; now is the time for action.”
They are right, which is why the CSJ Disability Commission placed its employment recommendations at the heart of its submission to the PM’s strategy. Those recommendations include: extending mandatory gender employment and pay gap reporting, which a Conservative Government introduced and which Ministers in this Government have said is working, to disability; providing more supported routes into employment; leveraging government procurement, worth some £292 billion, to drive up the number of disabled people in employment; and reforming Disability Confident, which currently does not command the confidence of either business or disabled people, and Access to Work to make those schemes fit for purpose.
The PM has stuck his neck out, which is why I close with this point. I hear that some Ministers continue to argue against mandatory workforce reporting on disability by large firms with 250 or more employees, citing that old chestnut of having a philosophical objection as Conservatives to using the stick, as well as the carrot, to bring about progress. Well, this Conservative has a philosophical objection to failure. Some 26 years have now passed since the Disability Discrimination Act was passed. If the carrot alone was ever going to work, it would have worked by now.
The fact is that the opponents of giving business a level playing field on which to compete transparently and consistently for the best talent, whether disabled or non-disabled—as the extension of mandatory gender pay gap reporting to other protected characteristics, such as disability, would do—are behind the curve. They are in dogmatic denial. They protest that pay gap reporting cannot be done. Meanwhile, some businesses, such as Clifford Chance and EY, are already doing it. To them, I simply say thank you. To the Government, I say, “Please fulfil your responsibility, as the party of business and equality of opportunity, to create the conditions most conducive to fair and open competition”. That means a level playing field and mandatory pay gap reporting. Now is the time to lend the economy, disabled people, businesses and, most of all, the PM our support in ensuring that he can deliver on his promise for the most ambitious and transformative disability plan in a generation.
Baroness McIntosh of Pickering (Con)
My Lords, it is a great pleasure to follow my noble friend. I congratulate him on being such a champion for disabled people. We came into the House at the same time, and I yield to no one in my admiration for all he does in that quarter.
I am delighted to speak in this debate. I congratulate my noble friend the Minister on setting the scene and especially on highlighting the undoubted generosity of this Government. I will make two specific points in beginning. I said in the Budget debate, and repeat here, that I believe we are in danger of failing women, particularly younger women. They have lost out, particularly in the hospitality and retail sectors, although we do not yet know to what extent. We are also in danger of failing older woman, who find it so difficult to re-enter the market yet—I include myself in this—are being asked to work longer before they are entitled to take their state pension.
There is also one sector that I believe is worthy of perhaps more targeted support than we have given it at this time—the aviation sector. It is the sector to which my husband contributed more than 30 years of his working life, and one of which I have always been very supportive. As a Government we should recognise that its margins are particularly low. I hope we can recognise that it has probably suffered greater even than the hospitality and retail sectors. I believe we owe it to the sector to enable it to build back better once the economy starts to surge, as my noble friend Lord Hannan so enthusiastically says it will—and I do not disagree with him.
I shall focus my remarks on the levelling-up agenda, particularly from a northern and rural perspective. I am looking especially at the build back better possibilities that my noble friend set out. How will this work in a rural landscape, particularly looking to the food and farming sectors in the countryside and the role of market towns as hubs in this regard?
I welcome the commitment my noble friend highlighted: that we will send civil servants to Darlington, Leeds and other places. I hope they respond as enthusiastically to that call. To me, growing up near Darlington, it was a big day out, so I can commend the pleasures of Darlington to them without any hesitation. Obviously, the housing will be a lot cheaper than where they might currently live. I welcome that commitment, but specifically what policies we will introduce in rural areas, particularly in a northern context?
In preparing for today, I had an excellent briefing from North Yorkshire County Council. I pay tribute to the work it has done in setting up a rural commission and a climate change commission, leaning in—in the words of my noble friend Lord Vaizey—to the times and recognising where these twin challenges are coming from. We have challenges in rural areas such as North Yorkshire, particularly in transport and connectivity. I welcome all the support the Government are highlighting in this area, and I hope for even more support.
The rural bus network has taken a particular hit because obviously it is very difficult to entice passengers to travel to work on rural buses. The collapse in passengers during the pandemic, with more people working from home, has undoubtedly left a great dent. Broadband and mobile phones are woeful in rural areas, particularly the uplands of North Yorkshire, and that is something I take every opportunity—such as this—to highlight.
I live in despair about promoting electric vehicles in rural areas. I would like to travel the 240 or 250 miles to North Yorkshire and to think that there would be sufficient charging points to enable me to purchase an electric vehicle, if I could ever afford one, and run it locally before I travel back to London.
These are the everyday challenges we face in rural areas. It is important that, while North Yorkshire has benefited in some regards, being a desirable place to live and work—I think more people will purchase homes there—some negative sectors have emerged. We have been particularly hard hit in that food supplies to the catering sector during the lockdown absolutely collapsed. Also, large numbers of people have been furloughed and there is ongoing uncertainty about whether they will go back to jobs. Structural challenges in this regard remain.
I now turn to what we are planning to do, in particular BioYorkshire. I had an excellent briefing from the vice-chancellor of the University of York in this regard. BioYorkshire is a very exciting concept. It is a global bioeconomy programme to be delivered by the global leaders in the sector. It is a 10-year programme that will accelerate the translation and application of research discoveries into full-scale biotechnology applications using the region of Yorkshire’s world-class science base to deliver profitable bio-based production of chemicals, materials and fuels, building on the strengths we have in this regard of food, farming and the already well-developed food clusters we enjoy in North Yorkshire. I pay tribute to BioYorkshire and hope that it will enjoy the match funding required. It will need £430 million of government support to lever £570 million of co-funding. It is a partnership between the University of York and Fera Science, which I worked closely with for five years when it was based in my constituency and gave frequent evidence to the Environment, Food and Rural Affairs Select Committee, which I had the privilege to chair. Askham Bryan agricultural college will play a key role, as will private sector partners such as Ocado and Nestlé, which many noble Lords will be familiar with.
However, I want to ask a specific question on match funding, building on contributions from other noble Lords. The Government made an early and welcome commitment on leaving the European Union to make good the shortfall in university funding for the future. This is where I want to pin my noble friend down: is this for the foreseeable future—the next five or 10 years —or is it just until the end of a current EU programme such as Horizon, which expires, and the money runs out, next year? This is extremely important to projects such as BioYorkshire because, for it to succeed, the University of York and the match funding will require this money to be made good by the Government. My specific question is therefore: is it a long-term commitment from the Government that they will make good, on an ongoing, year-on-year basis for the foreseeable future, the shortfall that we have suffered since leaving the European Union, or is it only until the end of the current funding programme, such as Horizon and other programmes, in 2022? I repeat: to ensure the success of programmes such as BioYorkshire—which I am sure is replicated across the country—we need this match funding from the Government to make good the shortfall now that we have left the European Union.
On “levelling up” and “building back better”, which are phrases that are very easy to throw around but difficult to make good on, how will this work in a northern and rural setting such as North Yorkshire and the whole of the Yorkshire region? What specific policies and funds do my noble friend and the Government plan to make available to ensure their success?
Baroness Gardner of Parkes (Con) [V]
My Lords, the Covid pandemic has had a devastating impact on many aspects of our lives, and government schemes such as furlough, on the basis of which 5 million people are still employed, have helped so many during the past year.
I want to open by talking about how the pandemic has disproportionately affected women and what we can do as we emerge from lockdown and furlough to help them. Over the past year, statistics have shown that more women than men have been placed on furlough. They tend to work in industries with some of the highest job losses, such as retail, food services and accommodation. As furlough comes to an end, it is particularly worrying for them as to whether they will even have a job to return to, or whether there will be many new opportunities. These figures are even worse for women from a black, Asian or ethnic minority.
My daughter has mentioned that in her local row of 12 shops in London only the eateries have kept going, with the other nine closing down permanently. We need to provide business rates relief to shops such as those so that they can re-establish themselves and rebuild as part of the local community to provide local shopping and job opportunities.
Many women have borne the brunt of the impact of Covid, supporting their families, whether old or young, home-schooling and being the fabric that holds the family together financially and socially. For some women, working from home has enabled them to balance family commitments and manage work while allowing their partner to take more of a hands-on role. It is important that the right to work from home, or flexibly, is retained in legislation to help women to continue to work, and for men too. The Government’s employment Bill, as promised in the Queen’s Speech, cannot come soon enough.
It is important that we also focus training, money and effort to help increase the employment and employability of women, not just on building infrastructure, which tends to employ men, but for other industries. I know that the House of Commons Women and Equalities Committee called on the Government to fund training schemes specifically aimed at women using Kickstart and Restart and to increase the number of women in science, technology, engineering and maths careers and apprenticeships so that women will not lose out in the recovery. These steps are key to ensure that women are part of the future.
However, job losses are more likely for some as furlough comes to an end. I ask the Government to look at how those made redundant or who are already unemployed can be helped to avoid racking up debt by avoiding any hiatus between their final salary or furlough payment and moving on to benefits. Too often, we have seen people fall into debt due to the gap between them applying for and receiving universal credit. It is a debt that often starts small yet soon balloons to being out of control. Recovering is helping everyone as best we can.
Lord Tunnicliffe (Lab) [V]
My Lords, the last 13 months have been hugely challenging for everyone across our country. Using the 28-day measure, Covid-19 has, sadly, claimed the lives of more than 127,000 fellow Britons. The Office for National Statistics puts the death toll in excess of 150,000, while millions more have tested positive for the illness or have loved ones who have.
After a brutal second wave of the virus that stretched our NHS to its limits, the country and our economy are now gradually reopening. With the days growing longer and warmer, and with an increasing number of vaccines having been administered, it is heartening to see signs of a return to normality. However, we are on a long road and we must not repeat the mistakes of the past.
Despite the experiences of last autumn and the emergence of multiple new strains of the virus, there remain some who continue to call for restrictions to be eased more quickly. We support the current road map out of Covid-19 restrictions and hope that the Prime Minister will remain steadfast in his new-found commitment to being guided by the scientific data.
The number of cases, hospital in-patients and deaths are thankfully now down, but all three counts remain higher than we would like. Indeed, while we have not seen any sustained spikes since we began to exit lockdown, it is also true that we are experiencing some days where cases are higher than the corresponding day during the previous week. This adds to the case for remaining vigilant and taking time to assess the situation before moving on to the next step in the road map.
While the pandemic has been tough for everyone, there is little doubt that businesses and working people have found the last 13 months especially hard. We have previously acknowledged the unprecedented levels of economic support provided by the Government and I do so again today: the Treasury has put forward a significant sum of money.
However, despite the headline figures of 11.4 million jobs furloughed and 2.2 million applications to the Self- employment Income Support Scheme, the Government’s support package has ultimately fallen short of repeated promises from the Prime Minister and the Chancellor to do whatever it takes to get people through these tough times. For example, although we have finally seen some changes to the Self-employed Income Support Scheme’s eligibility criteria, it remains a major concern that the Chancellor was willing to exclude so many from receiving proper financial help, and for a full year.
Due to the nature of the scheme, money has gone to people with other sources of income while many individuals with nothing to fall back on have been forced to rely on universal credit. The Treasury cannot claim ignorance: we raised the issue on multiple occasions, as did a variety of trade bodies and campaign groups. Ultimately, the Chancellor refused to act.
The operation of the furlough scheme has been somewhat haphazard. Last summer, to the frustration of struggling firms, the scheme was completely redesigned. That decision was eventually reversed mere days before the changes were due to come into force. Subsequent announcements extending job support have come very late in the day and timescales have occasionally appeared divorced from reality.
Some may say that there was no harm done. However, the mismanagement of the furlough scheme has had a real impact. In addition to the jobs placed on hold, hundreds of thousands have been lost entirely. Numerous businesses that wanted to keep staff on ultimately made the call to lay them off. For some, decisions were driven by short-term concerns about patchy and unpredictable government support, while for others there are major concerns about what the economy will look like after the pandemic. The Minister will point to the provision which allowed businesses to rehire and re-furlough some of those who had been let go. Some have been given their jobs back, albeit after the stress of being let go. However, many have not.
A high proportion of the people who lost their jobs are in the 18 to 24 or over-65 age groups, creating specific challenges when it comes to their re-engaging with the labour market. This is an area where the Labour Party, trade unions and business groups have pushed the Government for action. We want to see a proper plan for reskilling the workforce, with a particular focus on helping young people. Initiatives announced thus far are far too limited in scope, ambition and resource.
Although some businesses have continued trading, even if at a reduced capacity, others have been unable to operate at all. In some cases, Treasury grants have not been sufficient to cover all the costs of keeping businesses going. This has been a particular challenge for hospitality, where firms often have significant fixed costs even after rent payments have been deferred and other bills covered by government support.
Help available to firms operating in the supply chain or other industries has been even less comprehensive. While it may not have been possible to implement special arrangements for every sector, there are examples where the Treasury seemingly ignored clear cases for tailored support.
The result is that many businesses in aviation and aerospace, steel, hospitality, travel and tourism, or the cultural and retail sectors, have had to take on significant additional debt. This is likely to act as a millstone around their neck, weighing down not only the recovery of individual firms but our country as a whole. We can already see this reflected in the disappointing economic forecasts attached to the Budget. Our recovery is likely to be modest, limited by the costs of recent inaction—including lower growth, lost tax revenue and higher than necessary unemployment.
None of this is simple, and the Minister knows that we try to approach these matters in a spirit of co-operation. However, that is a two-way street, requiring a willingness from the Government to listen and take ideas on board. Sadly, what we have seen in recent months suggests a lack of learning from past mistakes. The paltry 1% pay offer for NHS nurses is an insult to their heroism over the past 13 months. Severe cuts to departmental budgets for future years will stifle rather than nurture public services.
We all have an interest in building back better after this pandemic and securing a stronger, fairer economy where jobs and livelihoods are not only protected but enhanced. This will require creativity, particularly around the restructuring of business debts and the reskilling of the workforce. Let us meet this challenge with new ideas rather than resorting to yet more half-measures and failed austerity.
Baroness Penn (Con)
My Lords, I thank all noble Lords for their thoughtful and insightful contributions to this debate. My noble friend Lady Noakes will be relieved to hear that, instead of repeating my Treasury brief, I shall use my time in closing this debate to address the many points raised by noble Lords.
A number of noble Lords, including my noble friends Lord Lilley and Lady Noakes, noted the unique nature of this economic crisis and the recovery—namely, that much of the economic shock was a consequence of government decisions taken to close aspects of our economy in response to the pandemic. While I suspect that there will not be a meeting of minds on the need for some of those lockdown measures, I hope that perhaps there will be more so on the need for the most recent lockdown to be our last and for the pathway out of the pandemic that we have set out to be a lasting and sustained one.
The noble Lord, Lord Bilimoria, asked about data rather than dates. He is right that we will be driven by the data. He asked whether that would allow us to go faster than the road map that we have set out. The challenge there is that the gap between each stage of the road map allows us to gather the data on the outcomes of each set of changes before taking the next step. So while we will be driven by the data, we also need the time for each set of changes to take place and to gather the data on them, so we will not be moving faster than the road map set out. We hope to continue to make good progress along that road map.
In the unique economic crisis that we face, the fact that it has been caused by government decisions has been reflected in the scale of support provided by the Government to those most affected. The fact that so many businesses had to shut their doors as a result of government action meant that there was an unprecedented case for government intervention to support them. Noble Lords are also right that, as we progress on the road map out of lockdown, that direct support provided to businesses and jobs can be tapered away. The focus must then be on the long-term drivers of growth in our economy and what comes next.
The first item on that list from my noble friends was for the Government to get further out of the way and to reduce the regulatory burden on business, in particular, on small and medium enterprises. My noble friend Lord Lilley raised some very interesting points on the speed of approvals for vaccines and ventilators and the broad impact of regulatory delay. The Government will certainly consider where and in what ways the pandemic led to improvements that can now be implemented on a more permanent basis. The Government will also continue their work to identify and act on opportunities for deregulation, including those as a consequence of Brexit, making sure that we have a regulatory system that works for the UK.
The noble Baroness, Lady Humphreys, spoke about business rates. While they are devolved in Wales, the Government have committed to fundamental review of the business rates system in England. The Treasury has published its interim report setting out a summary of responses to the call for evidence. Further policy development is currently taking place and the review will conclude in the autumn.
The noble Baroness, Lady Humphreys, also raised points about economic support for Wales and what needs to happen in Wales to support the economic recovery. Of course, the Budget was, and is, for the whole United Kingdom, and one strength of our response to the pandemic has been the continued UK-wide support that the Government have provided in the current circumstances. That continues with the extension of the Covid support schemes, including the reduction in VAT for the tourism and hospitality sectors and the £20 increase in universal credit. The steps that the Budget took towards investment-led recovery—such as the extended annual investment allowance, new schemes to raise SME productivity and the UK Infrastructure Bank—would also benefit Wales’s economic recovery, as would the UK-wide place-based schemes empowering communities to drive local priorities.
As I mentioned in my opening remarks, the Budget also made some targeted interventions to support the strengths and opportunities in Wales. Those include, for instance, the £4.8 million Holyhead hydrogen hub, the up to £30 million invested in the global centre of rail excellence, and three city and growth deals in Wales.
A number of noble Lords—including my noble friends Lady Noakes and Lord Hannan and the noble Lord, Lord Bilimoria—raised the issue of education, and in particular the quality of higher education and the impact of lockdown on it. The Government expect universities to maintain the quality and quantity of tuition. We seek to ensure that all students, regardless of their background, have the resources to study remotely. The Office for Students has made it clear that all higher education providers must continue to comply with registration conditions relating to quality and standards. That means ensuring that courses provide a high-quality academic experience; that students are supported and achieve good outcomes; and that standards are protected regardless of whether a provider is delivering its courses in person, through remote online learning or through a combination of the two. The Office for Students has published guidance on this for universities and will keep this under review that ensure that it remains relevant to the developing circumstances of the pandemic.
The OfS is also monitoring the overall position at sector level, for example through the polling of students’ views, and, where appropriate, and in response to issues raised through this monitoring, it will issue further advice to the sector.
A number of noble Lords, including my noble friends Lord Lancaster and Lord Horam, raised the issue of further education, vocational training and retraining for people to skill themselves for the new jobs of the future. The Government have done quite a bit in this area in recent years to encourage more flexible learning, including greater support for part-time learners through maintenance support and removing restrictions that had prevented students being loan-funded for part-time STEM undergraduate degrees if they had qualifications at the wrong level. The Government have also provided greater incentives for providers of accelerated degrees and introduced degree apprenticeships.
However, we want to do much more, and we want to take more radical steps in this area. That is why the Prime Minister has announced plans to introduce a lifelong loan entitlement as part of the lifetime skills guarantee. This will give people the opportunity to train, retrain and upskill throughout their lives to respond to the changing skills needs and employment patterns that the economy will present.
My noble friend Lord Lancaster asked specifically about the list of level 3 qualifications that the Government will support. The Government will keep that list under review to ensure that it continues to reflect the needs of employers.
The noble Baroness, Lady Wheatcroft, and my noble friend Lord Vaizey asked about the future fund and its operation. The future fund has been incredibly successful. It has provided between £125,000 and £5 million of government funding through convertible loans to high-growth companies, with third-party investors needing to match fund at least the government contribution on each loan. To update noble Lords, as of 25 March, 1,236 companies have applied for the future fund and £1.2 billion-worth of funding has been issued.
My noble friend Lord Lancaster asked about the cost of a potential default on the business support loans provided during the pandemic. The default estimates for the Covid loan schemes are preliminary and speculative given the current level of economic uncertainty. The estimated credit losses do not take account of our pay as you grow options for bounce-back loans, which give businesses more time to repay and can help to reduce defaults.
On duty free, which was raised by the noble Baroness, Lady Wheatcroft, and my noble friend Lord Vaizey, outbound duty-free sales have been extended to EU-bound passengers for the first time in 20 years. This is a significant boost to all airports and rail terminals in England, Scotland and Wales, and smaller regional airports and rail hubs. However, duty free on arrival could undermine the UK high street and run counter to public health objectives, so the decision has been taken not to apply that currently.
My noble friends Lady Hooper and Lady Noakes made important points around both UK trade and foreign direct investment. The setting up of the Department for International Trade and the considerable success that it has had since its establishment show the importance of FDI and exporting to our economy, as well as the increased focus and emphasis that the UK will continue to place on them as part of our future economic success. However, I do not propose to settle the bet that seems to have formed between two noble Lords in the debate on the current FDI statistics; I will leave them to settle that themselves.
The noble Earl, Lord Clancarty, and my noble friend Lord Vaizey raised the creative industries. They will be familiar with the considerable support that the Government have put in place for the creative industries. We know that it has been a particularly challenging time for those who work in these industries. That is why, as I said in my opening remarks, one of the changes that we made to the Self-employment Income Support Scheme was to extend the eligibility to those who completed a tax return for the 2019-20 year, which could make an extra 600,000 people eligible for it. In the Budget, the Government also extended the support that they are providing to the events sector, with £600 million to support local and national arts, culture and sports institutions as they reopen.
On plans for reopening and mass events, the Government have committed in their road map to explore when and how larger crowd sizes can be accommodated. The events research programme, which is under way now, is conducting a number of pilot events to build evidence on the risks associated with transmission routes, the characteristics of events and surrounding activities, and the extent to which mitigation measures can effectively address these. The first of these was held at the Crucible over the weekend. Sadly, I was not there and only watching on the television. Evidence from these pilot events will be used to inform the Government’s decision on returning full audiences to venues and increasing event capacity in time for step 4 of the road map in June.
The noble Earl, Lord Clancarty, asked me a number of other specific questions on the creative industries sector. I would be happy to write to him on those.
Related to this, the noble Lord, Lord Bilimoria, asked about the role of vaccine passports or certification, or Covid certification, in the Government’s plans to reopen. On 5 April, we updated publicly on the progress that we have made on four reviews that we established during the road map. One of them is looking at Covid status certification. We believe that Covid status certification could have an important role to play, both domestically and internationally, as a temporary measure. Certification could potentially play a role in settings such as mass events, festivals or sporting events—or where large numbers of people are brought together in close proximity. Equally, the Government believe that there are some settings, such as essential public services, public transport and essential shops, where Covid status certification should never be required, in order to ensure access for all. The NHS is working on providing individuals with the means to demonstrate their Covid status through digital and non-digital routes.
A number of noble Lords, including the noble Baroness, Lady Wheatcroft, and my noble friends Lady McIntosh of Pickering and Lady Gardner of Parkes, raised the question of the pandemic’s impact on women. The Government recognise that this pandemic has had very different impacts on different sectors of society, and we have tried to tailor and frame our response taking that into account. Of course, we have done a huge amount in this area, and we will continue to do more, including putting in place more support for childcare and to help those who have been furloughed but who eventually lose their jobs back into the jobs market through personal coaching, work coaches and the opportunity to retrain and reskill.
My noble friend Lord Griffiths raised the important issue of youth unemployment, proposing a single Minister to tackle the issue. While I cannot comment on that, I reassure him of the Government’s commitment to taking youth unemployment seriously. I think that we have seen in the latest figures that young people have been disproportionately hit in so many ways by this pandemic, including in the jobs market. This is why we have put in place very specific support, including through the Kickstart scheme, to address youth unemployment—we have put that support in early, and it continues. I disagree with the noble Lord, Lord Tunnicliffe, on the scale of some of the programmes that we have put in place and whether they are designed to meet the task ahead of us. They are quite unprecedented in what we are seeking to do. The Government have been clear that early and large-scale action on this issue is our priority, to prevent the kind of scarring effects that you can see for young people.
My noble friend Lord Griffiths also prompted an interesting discussion about monetary policy and quantitative easing. He may not be surprised to hear me say that monetary policy is a matter for the Bank of England, but, of course, where instruments involve unconventional interventions in specific markets or activities, the MPC is also required to work with the Government to ensure appropriate governance and accountability. I reassure my noble friend on his point about inflation. The remit of the Bank of England Monetary Policy Committee is still that target for inflation, which we have to keep in mind as we look at the measures that we have in place to support our economic recovery.
I am afraid I am probably also going to disappoint the noble Lord, Lord Lea, not only in not settling his bet but on the prospect of a ministry for the labour market. The Department for Work and Pensions is doing a sterling job in the support it has ramped up during the pandemic, in having universal credit operate really effectively to support those who have seen their income change, in doubling work coaches, in the scaling up of support, in the real focus on getting people back into work and in giving them the support they need. We are well placed with our machinery of government in terms of the support we are giving.
My noble friend Lord Shinkwin raised the incredibly important issue of support for disabled people, who have been disproportionately hit by the pandemic. I will write to him on some of the specific points he raised on the Government’s strategy on this issue. I will also write to my noble friend Lady McIntosh of Pickering on the specific action we are taking to support rural communities. For example, we are investing in broadband with a specific focus on improving connectivity for those communities, but I am sure there is a lot more to say in response to her question, so I will write to her on that issue and on her question on Horizon funding.
Finally, on the questions asked by the noble Lord, Lord Tunnicliffe, the Government will continue to work with all those they can to support our economic recovery. The scale and record of the Government’s actions speak of a Government who are prepared to put in investment and support to support people and their livelihoods during the unprecedented time we have had with the pandemic. I disagree with him about a lack of comprehensive support. We have put in wide-ranging measures, such as the job retention scheme and the self-employed scheme. The self-employed scheme is almost unreplicated around the world. It is a very difficult thing to do and has involved some difficult decisions to determine the eligibility criteria. It was important to do it because of the effect of government decisions on people’s livelihoods.
I also disagree with the noble Lord a bit about not learning some of the lessons as we have gone through this. For example, I talked about expanding eligibility for the self-employed scheme where we have been able to do so while balancing the need to reassure ourselves on the use of taxpayers’ money. That does not mean that we will stop the process of learning and reviewing the policies we are undertaking and our future plans. That is the spirit in which we want to approach the emergence from the pandemic, the future economic recovery and the economic growth that we now plan to see.
I am sure there is a number of other points that I have not managed to address in my response to noble Lords in this wide-ranging debate. I will write to noble Lords on them.
I close by thanking noble Lords for participating in this debate. We are in unprecedented economic times and it is important to take the opportunity to discuss our response, the immediate support, our vision for the economy of the future and how the Government can support it and enable and empower others to chart that future for themselves.
The Deputy Chairman of Committees (Baroness Barker) (LD)
My Lords, that completes the business of the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.