Brexit: European Investment Bank (European Union Committee Report)

Lord Davies of Oldham Excerpts

Tuesday 16th July 2019 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I too congratulate the noble Baroness, Lady Falkner, both on her conduct of an excellent committee and a splendid report and on the speech in which she presented the issues. All other contributions really just reinforced the main points she made, which covered an excellent report that presents to the Government a series of very acute challenges. The Minister is of course adept at dealing with such things, but we expect some fairly clear answers to several of the issues that have been established on all sides this evening.

It is not often that I agree with the noble Viscount, Lord Trenchard, on economic issues, but I certainly agreed with him this evening when he indicated that we have to be careful about allowing the accountancy to dictate our whole strategy to meet the economic challenges we face. There have been many calls from all sides of the House that the Government really must not fall behind the old blocks of their defensive position on the problems of government debt, when significant levels of investment are obviously necessary. Of course, it is clear from the report that we have lost a very substantial part of our investment. For investment to drop by nearly 90% is a significant tragedy. This, after all, is one of the most significant investors in our infrastructure and it covers a wide range of areas. Noble Lords identified the environment, higher education and a range of other issues which will lose the investment that this bank provided. We all want to know what steps the Government are taking to repair the damage and provide the investment.

At the same time, the Minister has to address the fact that none of us in this House can understand how we reached an agreement in which we get the repayment of the capital that has not been utilised thus far but make no gains at all from our years of investing in the bank. Some government negotiation arrived at that judicious position. We all worry about the broader issues of negotiation with Europe, but this stands out as a pretty clear indication of how weak the Government’s position was at times.

We also recognise that infrastructure is a crucial aspect of the development of any economy, particularly an advanced economy such as ours. We have not had a good record in the past; the Government have to face up to the fact that their record is pretty dismal. The two areas on which they are making some progress were inherited from the previous Labour Government—HS2 and Crossrail, the latter of which is of course subject to fairly significant delays at present. Most of the other rail initiatives—the cross-Pennine route and the opening up of the London to Sheffield route—have been put into cold storage for the time being. It is not as if we have a surfeit of funds for infrastructure, yet we are discussing this evening how we have cut ourselves off from a crucial supplier.

We must also recognise how noticeable it is that regional issues are coming more to the fore. We all know why London has been pre-eminent for so long. We all know the significance of the City of London, but that does not mean that you do not have proper respect for regional development. There is absolutely nothing in the Government’s current position which gives us any encouragement on that, yet resources that we were getting from the investment fund from Europe offered some possibilities on that front. This is another crucial area which we lose.

My noble friend Lord Giddens asked us to consider a rather wider agenda: a future which related to the space industries, on which we have a past record of investment and in which we are well placed to play a leadership role. However, he identified that here, again, was a necessity for government action. Can any noble Lord recall, apart from my noble friend’s contribution today, the last time we had a debate on the space programme and the role that Britain might play in it? Of course, the anniversary of the moon landing was a pretty predictable date—there is bound to be colossal public interest at this time—yet I cannot recall the Government making any significant contribution on it.

Of course, the Government are not in a position to think about spending too much, because after a decade of running the economy they are still stuck with their hugely significant debt and the real problem of how they distribute it. It is true that a future Prime Minister can easily produce a massive tax cut for the very wealthy in our society, or certainly those earning over £80,000—but is that not the same individual whose bus suggested that enormous millions would accrue to the British economy from Brexit? Well, we are defining the reality of Brexit this evening, and we are not talking about hundreds of millions of pounds accruing to the British economy.

It is quite clear that the Minister must give some response to the gap which has opened up. After all, he knows that it is a product of the withdrawal agreement that we reached and the negotiation which took place at that time, and noble Lords have identified just what the cost is for us. Because the investment bank covers a wide range of British economic activities, the cost will be and is being borne across the board.

We on our side of the House enjoy a certain degree of criticism of the Government but we also have enormous respect for a disaffected electorate who want to see success from political leadership. That is why we are quite clear that, if we came to power, we would launch a national investment bank, address regional disparities, and set out to ensure that resources were directed towards improving our productivity as well as our wage levels, which have been so depressed over this last decade. We would also seek to ensure, through a rather more imaginative immigration policy than the Government pursue, that we have the necessary high-level skills to ensure that we get the levels that the financial services sector will demand. We should be wary of restrictive blocks on skilled people who are essential to our economy.

These are possible developments. They of course require a degree of commitment by the Government to a clear policy. But what the Government committed themselves to and are still largely saddled with is in fact clearing debt—not investment in the creative part of the economy at all, but seeking to ensure that their credit rating holds to a certain level. No one will decry that in its entirety, but one can overload that dimension of financial and economic life to the extent that the economy suffers constant low levels of growth and constant problems with our productivity.

There are solutions. I was grateful to the noble Viscount, Lord Trenchard, for mentioning the German bank and the role which it plays in the German economy. It is not as if we do not have a model of the way in which we can create productive resources which can be independent of government yet act as a reaction to any downturn in the economy. He made that point clearly. As I said, it is not often that the House is in total agreement, but if he and I can agree on a strategy this evening, we hope the Government can too.