Queen’s Speech

Lord Flight Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Flight]

My Lords, as the noble Lord, Lord Deighton, pointed out, there are some useful, detailed provisions in the gracious Speech for the economy, but it seems to me that there is really nothing of great substance. The national insurance allowance is welcome for small businesses. The help to buy scheme is extremely unwise in that it applies to existing property and not just to new builds and is in danger of feeding yet another housing bubble. It is perhaps inevitable, with two years before an election and with a coalition Government, that this is not a time for radical change. However, both the Labour Party and the IMF are by mistake or wantonly misreading the situation. The reality is that this Government are still running a deficit of £120 billion and they have financed most of the spending of £380 billion by printing money. They could not be much more Keynesian than that, in truth, whatever may be being said. In my book, we are erring on the rather incautious side in that territory and telling a slightly different story from the underlying reality.

I repeat that it is a question of what is politically practical at this stage of the cycle but, in principle at least, I would like to see radical supply side measures. Taxes are still too high, the state is too large, the incentives to work, invest and save are too low, regulations are too burdensome and increasing and the lack of planning reform is still the key delay to new housebuilding. The energy reforms will do nothing to reduce prices. Energy policy needs radical change to encourage fracking, given what is happening to the US economy as a result of that. There is plenty of potential here in that regard. We have a crackpot policy of massively subsidising unreliable and expensive wind power, which will result in ridiculously high tariffs for manufacturing industry and impoverish consumers. I am greatly disappointed that the Government have not yet got round to reviewing what is clearly a mistaken policy. The childcare scheme discriminates unjustly against single-earner families. Although I am absolutely convinced that the noble Lord, Lord Deighton, is doing his best, infrastructure investment needs to be released to a far greater extent than is the case. It is still hugely delayed by planning and environmental red tape. It is pathetic to continue to put off a decision on the airports serving London, which is clearly a very pressing decision relevant to overseas investment in this country.

However, my particular concerns are what I call “kicking the can down the road” measures, things being done today which do not attract much opposition from the Opposition or the media but will be the source of major cost in the future. It seems to me that care for the elderly will saddle the taxpayer with huge future liabilities, is a regressive extension of the welfare state and does not really solve the fundamental problems. Shifting the burden of identifying illegal immigrants onto landlords just adds to their costs and is unlikely to be successful. We have spent time in this House debating the Public Service Pensions Bill. Nobody seems to be concerned that by 2017 there will be an annual cash flow deficit of somewhere between £20 billion and £25 billion per annum. I question whether the Government of the day will be able to afford that, whichever party is in power.

The House of Lords Library recently presented a most interesting report which forecasts that the proportion of students who do not repay their student loans will rise from 28% to 40%. Forty per cent of a total of £80 billion is £32 billion to write off on the student loan book. There are two problems here. One is that a lot of students simply do not earn enough because their degrees have no commercial value. A second category of students either go overseas or return to Europe and do not repay their loans. The whole machinery needs to be tightened up. I have been told by students in Europe that they would be happy to repay their loans but do not how to do so because it involves getting a standing order from a bank account in Europe, which is in euros, translated into a sterling order over here and finding a representative bank to pay it. However, behind that there is a much more serious problem of the establishment still not attaching sufficient value to vocational training. The figures show that people doing proper vocational training get jobs more easily and earn more than those doing a lot of liberal arts degrees. Their debts are much lower because it takes much less time to complete vocational training. The truth is that the policy of trying to send 50% of the population to university, and then saddling them with massive debt, is wholly mistaken. What we need in this country is much more vocational training and for it to have the status it deserves given its economic value.

I now want to switch to a much more positive angle because it seems to me that few people realise that the UK economy is recovering extremely well. That is not just according to the latest figures, which I will come on to. What is happening is that the impact of the depreciation of sterling is finally working its way through. The second quarter showed 0.8% growth, strong factory output and particularly strong advertising spend, which is always a pretty reliable precursor to wider economic recovery. The true picture in relation to what has been happening for the past four years has also emerged. There has been a major reduction in North Sea oil production, and if you take that out of the equation the private sector has been growing by an average of 1.3% annually—more than 5%, which I said was the case when we debated the budget. That is where all the new jobs have come from. In comparison to much of continental Europe, the UK economy, as a matter of fact, has been doing surprisingly well. That is extremely good news and is not adequately recognised. In that context, it would be mistaken for government policy to overegg what is already happening of its own accord. In Birmingham South, you have an economic region in Europe that is among the most successful.

I want to close by picking up on the odd comment on the eurozone. In the 1930s it was the gold standard and reparations which caused chronic unemployment, particularly in Germany, and which, bluntly, let directly to the rise of Hitler. It is horrific that people are standing by and seeing some 50% youth unemployment in Spain and some 30% youth unemployment in Italy. This risks causing dangerous political reactions. It is a crackpot policy, all in the name of keeping the euro together. It is absolutely clear that the characteristics of southern and northern Europe mean that they cannot comfortably share a currency. The reality of that needs to be addressed. The German policy of getting away with doing as little as possible and temporarily financing it through the ECB ignores completely the political risks that are staring us in the face. The fact that Germany of all countries, having lived through what happened in the 1930s, cannot see that is completely extraordinary. Whether it is Italy or perhaps, eventually, Germany, I hope that they wake up to the dangers and realise that there has to be currency adjustment within Europe if they are to avoid severe political dangers. I hope that it is going to happen sooner rather than later.