Economy: Budget Statement

Debate between Baroness Kramer and Lord Hain

Tuesday 13th November 2018 Lords Chamber

[Baroness Kramer]

I think that we will have to debate this off-piste or I will talk for too long.

[Lord Hain]

I am sorry to intervene. I was agreeing with everything that the noble Baroness was saying until she embarked upon a disastrous defence of her party’s complicity in Tory austerity for five years. If she looks at the record until the banking crisis blew everything out of the water, she will find that borrowing was lower than we inherited from the Tories, the deficit was lower than we inherited from the Tories and debt was lower than we inherited from the Tories. Those three indices were much lower than the average of comparable countries.

[Baroness Kramer]

And Liam Byrne left us with the message that there was no money left. I shall try to move on quickly.

Much more could have been done for small businesses. It is time to deal with the underlying problem of business rates, which is a defunct way of taxing. I very much recommend that the Government look at our call for a land value tax—the commercial landowner levy—which would reward people for investing much more in both machinery and equipment.

Much of this debate has been about growth. I say to both the noble Lord, Lord Bates, and the noble Baroness, Lady Noakes, that I join others who are stunned that the Government are satisfied with the growth rate forecast that we face. Over the next five years, the best number is 1.6%, and it looks as though it will be 1.3% this year. That is awful and completely unacceptable. I am very worried that the Government are complacent about a number like that, and the noble Lord, Lord Livermore, highlighted that issue as well. Productivity is forecast to be at a trend rate of 1.2%, which will produce no future for any of our children. This year, I think that it is running at 0.8%.

On growth and investment, this year private investment has fallen from 3.3% growth, which is much closer to its norm, to 1%. The Bank of England has said that business investment growth has been 3% to 4% lower over the past two years as a result of the referendum. Those investment numbers are absolutely devastating. When people point to full employment, I ask them to look at the demographics. We have a demographic shortage of working-age people. It is not hard, in those circumstances, to have full employment. I ask the Minister to check the dependency ratio, because—although my calculation may not be right—I believe it is currently 1.7:1. So one person supports themselves plus 0.7 of another person, rising rapidly to 1.9:1, which is completely unsustainable.

We have to face up to the issues of productivity, our rising pensioner tail and our falling working-age population. With our migration policies, we are about to make that situation significantly worse. We are certainly not going to achieve economic recovery in a Budget like this.

I have not even touched on Brexit; many people raised it and it is absolutely pertinent, as it sets the framework. We know now that there is a technical agreement between the EU and the UK. It will be fascinating to see whether tomorrow, by the time the Conservative Party has worked through it, there is anything more substantial than that.

No matter what we do, by the Government’s own figures there is no scenario for Brexit that does not harm prosperity—a point made by the noble Lord, Lord Livermore, in great detail, and by the noble Lord, Lord Kerslake. From talking to City players today, I understand that the financial services industry has either paid, or is committed to pay, something in the range of £15 billion to cover the cost of adapting to Brexit—this assumes not that there will be a no-deal Brexit but a Brexit more in the Chequers mould. I have no idea what is falling on manufacturing, but those numbers are quite damaging to any kind of economic future.

This was a sticking-plaster Budget. In this atmosphere of uncertainty, without knowing where Brexit goes, the Chancellor has chosen—perhaps rationally—to do only the few things that impact on this year. Let us not overstate what he has done. We still face huge cuts to public services on every front. We have not dealt with the challenge of putting our taxes on a long-term and sustainable basis and we have not dealt with the underlying challenges of growth and productivity.