UK Convergence Programme

Lord Davies of Oldham Excerpts

Tuesday 9th April 2019 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, I welcome the overall thrust of the statement made by my noble friend. It seeks to demonstrate that our seeming political meltdown over Brexit is not matched by an economic meltdown. This was brought home to me recently when I participated in a panel with the former Italian Prime Minister, Matteo Renzi, and the former Greek Prime Minister, George Papandreou. While they were able to have some fun at our country’s expense because of our Brexit impasse, I was able to take some reassurance from the fact that the UK’s sovereign credit rating is six notches above Italy’s and 11 notches above Greece’s. Does my noble friend agree that we need to do everything in our power to protect and safeguard the benefits of the fiscal consolidation that has been so hard won since the beginning of 2010 and which he referred to earlier in remarks he made in response to a Question from the noble Lord, Lord Hunt of Wirral?

[Lord Davies of Oldham (Lab)]

My Lords, I was somewhat taken aback by the Minister’s opening statement. I of course recognise that the process we are involved in is a largely technical one with a very short duration so far as the United Kingdom is concerned when we leave the European Union, but the Minister addressed himself to issues as if this extraordinary word “Brexit” had never been coined and the phenomenon had never existed. Every single question that has come subsequently related somewhere to the impact of Brexit. I hope the Minister will reply to these questions in full, because his opening statement dwelled on the sunny uplands and what he regarded as favourable forecasts at present. I do not find the OBR’s forecast on where growth is at present and where it will be in three years’ time as a particularly favourable position. Indeed, it is a lower figure than that which obtained over 30 years or so prior to 2010. I am amazed that the Minister seems to think the Government are on the high road to success with this rather deplorable figure, starting at 1.2%.

The noble Lord, Lord Vaux, indicated that there are real dangers of assets being transferred and the capacity of the British economy reduced during these Brexit developments. There was a great deal of commentary about the fact that that would happen and we should not be at all surprised that we are getting increasing evidence of it happening. Yet the Minister presented this document—this response to Europe—as if we were pretty well in steady state and the economy was easy to analyse and forecast.

In fairness to the OBR, it made it quite clear that this is a notoriously difficult time to present forecasts of any validity. Yet none of this seemed to cloud the Minister’s position in his opening statement. I hope the questions and points that have been made lead him to respond fully to the situation. After all, he knows that we are right at the bottom of the league table on productivity, and have been for most of the Conservative Government’s time in office—since 2010. All sorts of strategies have been presented that would go towards improving our productivity, but we are still doing very poorly. It is therefore no small wonder that we have problems with growth and competition.

We are well aware that big decisions are being taken which threaten our economy. The decline in the German economy may give us some comparative advantage, in that for a short period we have had a slightly more secure position. But its decline is overwhelmingly in the manufacturing industry, where we have the greatest difficulty presenting any real competition, and in the motor industry. What solace is that meant to bring to the Minister, given that he is about to be part of the process whereby we cast ourselves on to the international trade situation, while busy disentangling ourselves from our strongest economy—the European one? The two largest economies are pursuing policies of protection and are concerned about the development of trade. So it will not do.

I understand the Minister’s point that as far as Europe is concerned, in past years this particular requirement has been treated in a fairly light-hearted fashion in this House. So it should be, in normal times. However, we are not in normal times. We are in times of very real strategic threat to our economy. It will not do for the Minister to think that one can ignore the small aberration of Brexit at present because the economy is under good guidance. After all, he knows better than most of us here how crucial the financial services are—to the Treasury in terms of receipts and to our economy in terms of employment. Therefore, when it is identified that there are clear cases of the financial services transferring their assets from the UK elsewhere, we ought to be worried.

I ask that in his summing up, the Minister replies to each contribution that has been made. Each focused on the important dimension of anxiety about the economy, yet the noble Lord was busy glossing over this in an opening statement which looked as if he was more concerned with “The Wizard of Oz” than with the real economy.

[Lord Haskel (Lab)]

My Lords, the Minister told the House that we are going to have 1.6% growth. I imagine that this is because of lack of investment and low productivity. If we had 2% growth, we would then be faced with inflation, but that word did not appear in the Minister’s statement. If we do do better than 1.6% growth, are we going to have to deal with inflation? What are the Government going to do about that?