Budget Statement

Lord Davies of Oldham Excerpts

Thursday 21st March 2013 Lords Chamber

[Lord Davies of Oldham]

My Lords, I am grateful for the contribution of the noble Lord, Lord Brooke, and that of the right reverend Prelate the Bishop of Bristol, who emphasised the progress towards the aid target of 0.7% of GDP, which this Government have fulfilled. It was driven towards strongly by the preceding Administration, so at least we have a note of unity across the House on the successful achievement of that position and its ring-fencing.

Another note of agreement—I am certainly happy with it and I get the impression from the debate that this might be so across the House—is that, as my noble friend Lord Desai said, this Budget does not do anything very much. That is certainly the case because the Chancellor has placed himself within a straitjacket and there is not much he can do when he is so constrained by his singular commitment to one objective. Of course, no one underestimates the challenges facing the Chancellor. We all know the difficulties over the debt and that external forces, particularly the difficulties in the eurozone, our largest overseas customer, do not help exports and the potential for an emergence from this crisis through export-led growth.

However, I cannot recall the Government or a government spokesman putting the crisis of 2008 into an international context. I cannot remember them ever since suggesting that there were difficulties other than those attributed to the Labour Administration struggling with the problems of international finance at that time. We all know that the first manifestations of crisis were in the United States, and subsequently in Europe, before Northern Rock reached a pitch at which we had to act. The international context rubs both ways.

We need to recognise from the experience of Northern Rock some of the dangers in the Government’s proposed housing measures. A number of noble Lords emphasised their support for these measures. The noble Baroness, Lady Kramer, quoted the Business Secretary as having expressed these views in the New Statesman, and he certainly did. Why did he choose the New Statesman? It is because he thought it was read by a thoughtful, constructive audience who had already been campaigning for an emphasis on housebuilding to inject some demand into the economy and some earnings into the construction industry. We all know that the construction industry is one of the fastest to regenerate if the demand is there.

I appreciated the point made by the noble Lord, Lord Flight, and the noble Baroness, Lady Browning, a moment or two ago, that we have to be careful with regard to this issue because we know that it was overborrowing for house purchasing that precipitated the crisis in the United States. I hope the Minister will respond to the questions addressed to him by my noble friend Lord Eatwell in his contribution to the debate. What, in the Government’s view, will the guarantee scheme mean for house prices? What is the cost of the scheme over the three-year period that it is meant to obtain? How much dead weight is involved in the scheme? Will there be support for purchases that have already been made? I hope the Minister will address these points, if only because anxieties about this issue were expressed as strongly on his side of the House as on mine.

We have questions as to whether the Chancellor has matched up to the challenge before him. So far, progress has been limited to almost the point of marginality. The Chancellor has failed to hit every target that he identified when he first took office. Of course, I recognise that one or two elements in this Budget have found favour. The noble Lord, Lord Bilimoria, declaring his interest, mentioned that a penny off the pint of beer was most welcome. I cannot think how many pubs will be saved by a reduction in the price of beer by 0.3%. However, I do not have quite the experience of the industry of the noble Lord, Lord Bilimoria.

I am grateful to the noble Lord, Lord Marlesford, who also indicated that we should have reservations about the intention to freeze taxation on fuel. There will be escalating costs involved in that over time, and the noble Lord identified them very clearly. That aspect may gain the Chancellor a little short-term credibility but it raises considerable problems. The Chancellor will be aware that these little gimmicks to brighten life up for the nation are happening two years before the next election, but of course there is a lot that needs brightening up.

Something that has not featured enough in this debate is what it means for a nation to be told that its living standards, which have already decreased significantly over the past few years, are destined to be reduced over the next two years, if not longer, as well. That shows itself most in the more desperate sections of our community, among the poor, who have of course been subject to the Government’s unremitting ideological onslaught on welfare, but it also reaches right across the community save, perhaps, for those millionaires who stand to see a considerable increase in their incomes from the decision taken last year to cut taxation from 50% to 45%.

We have had some interesting contributions on the question of infrastructure, and I hope that the Minister will respond to the questions put by my noble friend Lord Eatwell. How much has been spent on infrastructure this year? The problem with the Budget is that it is all jam tomorrow—or not tomorrow, in fact, but some 700 days after tomorrow. It is two years before the expenditure on and investment in infrastructure is due to take place. We need to know how much was spent in 2012 and how much will be spent in 2013. I fear that the answers may be somewhat bleak.

Within this framework, perhaps I may also emphasise the anxieties expressed by my noble friend Lady Worthington on the question of electricity prices. There are within this Budget and in the Government’s policies hidden costs that will manifest themselves in the most appalling way; that is, directly on those who are least well able to cope with them. Unless one is in a position to invest significantly, the consumption of electricity is a given cost in bills that have to be met when they are presented.

On my side of the House, my noble friends Lord Kestenbaum and Lord Haskel, along with my noble friend Lord Bhattacharyya in considerable detail, emphasised the fact that we need investment. We cannot get out of this situation without it. The IMF has told the Government that they cannot get out of this situation without paying attention to growth. My noble friends pointed out that at last the penny is beginning to drop in government to a marginal extent, but for the past three years there has been an unremitting commitment to one objective to the exclusion of any considered investment related to growth. That is why we consider that the Government have a difficult case to argue.

I appreciated the contribution of the noble Lord, Lord Shipley, who shifted the debate on to the local and regional dimension and referred to the Heseltine report. It is encouraging that the Government are at least paying lip service to some of the noble Lord’s proposals. When we talk about development in the regions and the problem of the domination of London, it is worth recalling that one of the first acts of this Government was to destroy the regional development agencies. I recognise that the local enterprise partnerships are different and it may be that they are able to make progress, but there is no reason other than the wilful action of the Government at the beginning of their term why things are so very difficult in the regions at this time.

I apologise for slightly overrunning my time. I hope that the Minister will recognise that we want to put this debate in the context of a Government who are failing the nation and causing a great deal of distress among many members of our community.