Lord Ashton of Hyde
Main Page: Lord Ashton of Hyde (Non-affiliated - Excepted Hereditary)
Lord Ashton of Hyde (Con)
My Lords, I, too, thank the noble Lord, Lord Haskel, for leading this debate and all noble Lords on all sides who have contributed. This is a complex area, with no easy answers. I am sorry that my noble friend Lord O’Neill could not be here—and I was even sorrier when I heard the contribution from the noble Viscount, Lord Hanworth. My noble friend is in America, working on addressing the threat of antimicrobial resistance, which is a key problem for the future that could kill 10 million people a year by 2050 if we fail to act. I am sure noble Lords will join me in wishing him well in that vital work.
Turning to the discussion today, this Government are continuing to carry out a long-term plan to strengthen the British economy. A long-term and strategic view is what many noble Lords have referred to, and I shall come back to that. The foundation remains the principle that we should not spend more than we can afford. Back in 2009-10, the Government were borrowing around £150 billion a year. That is not only unsustainable but leaves the country increasingly vulnerable to any unforeseen economic shocks. That is why we made a commitment to the British people to bring public finances under control, and we are delivering on that promise. We have brought the deficit down by almost two-thirds and we remain on course for a surplus by the end of this Parliament. The results of our action to foster long-term growth in our economy are also clear to see, as ably outlined by my noble friend Lord Leigh. Since 2010, we have been the second fastest growing economy in the G7, and in some years the fastest. Last year, our GDP was up by 2.3%, and we have seen over 2 million extra people in work since 2010. However, although our economy is now in fundamentally better shape, there is still more to do.
I shall respond to some of the issues raised in the debate and highlight some of the key steps the Government are taking in a minute, but I feel that I really have to address the EU, to which many if not most noble Lords have referred. As they noted, this is the key decision which will affect our economy in the short and medium-term future. The noble Lord, Lord McFall, mentioned, among other things, the harmful effect to the UK’s economy and science base. The “rant” by the noble Baroness, Lady Armstrong, as she called it, was not a rant but was very persuasive. She talked about the impact of leaving the EU on the north-east of England, as did the noble Lord, Lord Shipley. She noted that the chairman of Hitachi said that he would prefer to remain in the EU and that the EU was helping to secure the region’s future. I could go on.
The noble Lord, Lord Shipley, also referred to the benefits. We agree that remaining in the EU is the best decision for all the regions and nations of the United Kingdom. The noble Lord, Lord Lee of Trafford, made a persuasive contribution on the importance of the EU, and included the interesting fact that he shares a tailor with my noble friend Lord Leigh of Hurley, but perhaps, by the look of it, not the same shirt maker. The noble Viscount, Lord Chandos, also focused on the benefits of the EU.
I think it is important that I make the Government’s position clear and outline the benefits in a way that is, I hope, positive and does not contain any wild and dramatic facts that people can disagree with. We are clear that we will be stronger, safer and better off in a reformed Europe than out on our own. We will be better off because, as the noble Lord, Lord Haskel, and many other noble Lords reminded us, British businesses will have full access to the European free trade area of 500 million people, bringing jobs, investment, lower prices and financial security. Since we joined the EU in 1973, living standards in the UK have risen more than in the US, Canada and Australia, as well as in other EU members such as France, Germany and Italy. We will be safer because we can work closely with other countries to fight cross-border crime and terrorism, giving us strength in numbers in a dangerous world, and we will be stronger because we can play a leading role in one of the world’s largest organisations from within, helping make the big decisions that affect our future. The noble Lord, Lord Haskel, reminded us that we have the presidency of the EU in 2017.
We also have a duty to point out the downside risks of leaving the EU. I do not regard this as Project Fear. I agree with my noble friend Lord Patten of Barnes that it is Project Sanity, Project Reason and Project Real World. As noble Lords are aware, on 18 April, the Treasury published analysis looking at the long-term economic impact and I think noble Lords know the results of the central scenario. Some people have derided this work, but the assumptions are clear and open and it is a genuine attempt to estimate the effects of Brexit. I do not see any comparable document from the other side. All the alternatives to membership that have significant access to the single market would require the UK to implement its rules, but the UK would no longer have a vote on those rules. No country has been able to negotiate a better deal than the alternatives considered in this analysis, and it would not be in the EU’s interest to agree such a deal for the UK. What incentive would there be for it when it exports only 7% of its goods to us, whereas we export 50% of our goods to Europe?
The Treasury has also considered the short-term impact of a vote to leave the EU. Analysis published on 23 May came to a clear central conclusion: a vote to leave would represent an immediate and profound shock to our economy. Who is most affected by shocks to the economy? It is the worst off, the low paid, those with no savings, those looking for work and the young. Leaving means risk at a time of uncertainty. It is a leap in the dark.
The noble Lord, Lord Haskel, is right that despite the crucial importance of the vote on 23 June, we must also concentrate on the future and look to improve the working of the EU. In respect of the UK, the noble Lord asked why we are not listening to the IMF and the OECD and why we are not investing. Our long-term security hinges on the fact that we are significantly reducing our debt-to-GDP ratio. With a recession every eight to nine years over the past 60 years, responsible fiscal policy should allow room for these risks. We have prioritised investment over day-to-day spending, funding key infrastructure while delivering an overall budget surplus by 2019-20, all the while exceeding our commitment to invest £100 billion by 2020.
The noble Lords, Lord Davies and Lord Haskel, and other noble Lords talked about productivity. I accept that productivity growth is a long-term problem. UK productivity has lagged behind other major advanced economies for decades; this is not a recent problem. For example, in 1990, UK productivity was 29 percentage points behind the US. In 2014, 24 years later, UK productivity was at a similar level behind the US— 30 percentage points. This is a long-term problem that the Government have identified, and we set out measures to address this issue in the productivity plan last year and the Budget this year. Sustaining productivity growth is not a problem which is limited to the UK. Since the financial crisis, all developed countries have experienced sluggish productivity growth. There are even problems in the US: in Q4 2015, productivity growth fell there. That is the problem. It is a general problem internationally, so what are we doing about it? We are investing in infrastructure, we are increasing public investment, which I will come to in a minute, we have the northern powerhouse and the midlands engine for growth, and we are investing in education and apprenticeships. I shall not go into those in detail because of time, but that is what we are doing.
The noble Lord, Lord Davies, also mentioned austerity. We set out our long-term plan to repair public finances. Let us not forget that the deficit inherited in 2009-10 was 10.3% of GDP, its highest level since the post-war period. The Government were borrowing £1 in every £4 they spent. Significant progress has been made since 2010 to put the public finances on a more sustainable footing. The deficit as a share of GDP has been cut by almost two-thirds from its post-war peak, reaching 4% of GDP by the end of 2015-16. The noble Lord, Lord Stoneham, asked whether we can meet the fiscal surplus while still investing at the rate we are. We made significant progress over the past Parliament to fix the public finances, but deficit reduction needs to continue to finish repairing them. While we are reducing the deficit at a rate of 1.1% of GDP, we are still investing in key infrastructure, exceeding our previous commitment to invest £100 billion by 2020. The consolidation of day-to-day spending has been deemed appropriate by the IMF and, paired with investment in key infrastructure, will lead to a budget surplus by 2020.
I shall talk a bit more about public investment and its long-term nature. As we are taking the necessary steps to put the public finances in order, we are able to make the long-term investment which we all agree we need to build a more prosperous and productive nation. The spending review laid out the Government’s key investment priorities including education and skills, science and crucial areas of economic infrastructure such as the transport network. Taken together, those plans mean that average public investment as a share of GDP is higher over this decade than under the whole period of the previous Labour Government. They include doubling the housing budget; investing £61 billion in the transport system, £20 billion more than in the previous Parliament, including the biggest investment in the nation’s roads since the 1970s; and providing nearly £7 billion in science capital funding to ensure that British science remains at the cutting edge. All in all, the Government are on track to comfortably exceed our commitment to invest £100 billion in infrastructure over the Parliament. In fact, we will invest £120 billion.
The Budget in March reiterated the Government’s commitment to well-calibrated long-term investment, with new funding in key areas like motorways and flood defences. We have brought forward £1.5 billion of public investment that was planned for later years, to ensure that the public benefit sooner. We gave the green light to Crossrail 2 and High Speed 3 between Leeds and Manchester. We are taking steps to ensure that every pound of investment is targeted to provide maximum returns for the public. That is why we are setting up the National Infrastructure Commission to determine infrastructure priorities and—crucially, as the noble Lord, Lord Davies, mentioned—hold the Government to account for delivery so that it is not just, as he said, a case of vague plans with no delivery attached.
My noble friend Lord Polak asked whether I could confirm that the Government will continue to support young entrepreneurs. Of course we will. That is why we want to invest in education, skills and apprenticeships, which will help small and medium-sized enterprises and entrepreneurs. My noble friend Lord Leigh mentioned other measures to support young entrepreneurs, such as reducing capital gains tax, which are crucial for the development of jobs and the economy.
In moving this debate, the noble Lord, Lord Haskel, asked what the single market will look like when we remain. He said that we need one rule across the digital single market in particular. The Prime Minister’s renegotiations, which come into effect only following the vote to remain on 23 June, mean a much more ambitious agenda of economic reform in the EU. That will include the next stage of development of the single market over the next 15 years. These reforms are centred on four priorities: the single market for services, the digital single market, the single energy market and external trade agreements. Further action will be taken to reduce —in the digital market in particular—barriers in cloud computing, payments and postal and parcel deliveries.
My noble friend Lord Suri and the noble Baroness, Lady Armstrong, asked about infrastructure investment and building a more productive economy. I have talked about infrastructure. We think that by prioritising vital capital investment, we have provided long-term funding certainty for key areas where infrastructure is publicly funded. As I mentioned, the £100 billion for infrastructure, which will move up to £120 billion, will include £60 billion for transport up to 2020-21. That is the biggest investment in transport infrastructure in generations, increasing spending by 50% to £61 billion this Parliament. We are committed to building the high-quality infrastructure needed to build and sustain a more productive economy.
I am afraid that in the interests of time I am going to try to duck out of the spat, if you like, between my noble friend Lord O’Neill of Gatley and the noble Viscount, Lord Hanworth, on the complexities of the balance of payments and the balance of trade, mainly because all the answers I would give are exactly what my noble friend would have given. I will draw the matter to his attention, though, and I think that the two economists can deal with this better than we all can today. That may be the coward’s way out but I think it is more productive.
In conclusion, we are making strong progress towards fixing our economy, as my noble friend Lord Leigh has outlined so clearly, and I thank him for his supportive remarks. We have more jobs, rising wages, steady growth and an economy on course for a surplus. Because of that, we can spend more on our hospitals, schools, defence and security, infrastructure and skills. We are creating a lower-tax, lower-welfare and higher-wage economy, with 1.3 million taxpayers taken out of income tax in 2010 and over 1 million workers due to benefit from the national living wage. We must continue along this path to deliver the sensible reforms that we need to live within our means and make our economy fit for the future. We will be relentless in our efforts to create the conditions for growth, whether that is supporting businesses, investing in infrastructure or putting money back into the pockets of working people. We will rebalance our economy to ensure that opportunities are spread across the UK. This is an economic plan for the long term that will lay the foundations for a strong, stable and sustainable economy.