Budget Statement

Lord Haskel Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Haskel (Lab)]

My Lords, this Budget promises more austerity. I join my noble friend Lord Eatwell and many others in feeling that we are becoming victims of austerity as practised by this Government. Much of the Budget is designed to put right the low investment in infrastructure, training, the disappointing exports, disappointing tax receipts and poor productivity —caused by austerity. Alan Milburn pointed out in his recent report on child poverty and social mobility that much of this falls unfairly on generation Y. With welfare now added to the many areas of expenditure that are closed to the Chancellor for cuts, he may be forced to find the new approaches suggested by many noble Lords. The noble Lord, Lord Higgins, referred to a rather large black hole.

The Minister spoke of the need for resilience. Economic security is not just a matter of accountancy and government bookkeeping. The Government and other noble Lords continue to tell us that the economic crisis was caused by excessive public expenditure and public debt during the Labour Administration, but endless books, articles, learned papers and research tell us that the crash was all to do with global banks extending huge amounts of credit to inappropriate borrowers—banks with insufficient capital of their own to cover these and their own speculative losses. Internal bookkeeping will not protect us from these pressures. We have to raise our game in the financial industry and a robust and properly regulated financial system is required to protect us from outside financial pressures. My noble friend Lord McFall told us how weak the system is. What are the Government planning to do about it?

In his Budget speech, the Chancellor said that the most significant observation from the OBR was the slow-down in the growth of productivity. The Minister reminded us of this and so have many other noble Lords. The Minister has said that the Government are going to deal with this through investment in education and infrastructure. In support of this the Government speaks of the roads, railways and flood defences that are on the way. My noble friend Lord Darling told us that what the Government do not tell us is that much of this expenditure is on feasibility studies and design, on organisation and preparation—all essential, but not for now. It is for the next generation but one. For the next generation are the many small and local projects that are essential to cut bottlenecks and to help local businesses. But as the noble Baroness, Lady Kramer, pointed out, starved local authorities are struggling to support this. Instead we hear about the promised prestige projects that are a long way off in the future. What efforts will the Government make to help local authorities to carry out these small but urgent projects?

Government investment in science and engineering is key to raising productivity and, yes, there are several welcome signs of this investment all across the country. At last, there is even investment for studying the feasibility of building mini nuclear reactors. Also welcome is the decision to make loans available to many more adults training in further education, particularly for science and engineering. However, as the noble Lord, Lord Bilimoria, pointed out, compared with other areas, this is not nearly enough. Nor is it adequately managed. A few days before the Budget, the National Audit Office was strongly critical of the quality of the information used for the Government’s investments in science capital projects. I hope the Government will pay proper attention to that. These projects must be properly planned and funded from start to finish and not from Budget to Budget.

One of my major concerns is that the Government do not seem to understand the way that the world of work is changing and the impact that this has on productivity. We have long argued that the Government are giving insufficient attention to those less tangible investments. We now have an important ally in Sir Charles Bean. In his recent report he, too, points out that intangible investment is not properly reflected in our figures. He gives some interesting examples: go to a travel agent and book a ticket and that becomes part of our GDP because of the investment in the travel agent, but be more efficient and book it over the internet and it does not appear. If you travel by taxi, this is in our GDP because a taxicab is an investment, but if you travel by Uber it is not, because you are probably riding in somebody’s privately owned car. Many small businesses and self-employed people now use websites, platforms and apps to sell their services and products. Where do they appear? We have to get this right. The Bank of England’s chief economist, Andy Haldane, warns us that up to 12 million jobs in Britain are at risk because of these powerful tools to raise productivity.

I welcome the increased minimum wage. My noble friend Lord Eatwell pointed out that many firms have said that they will pay for the increased minimum wage with less hours, less overtime and fewer benefits. So we are not going to see much growth in earnings. This increase in pay should be financed by increased productivity. If the means of achieving this are not recognised, all we will get is a race to the bottom—as the noble Lord, Lord Skidelsky, indicated—which is an outcome that none of us wants. When will the Government bring us into the 21st century? I put it to the Minister that in failing to understand properly what is going on we are in danger of solving yesterday’s problems, not today’s. The Minister laughs, but I think it is a very serious matter.

Many noble Lords have spoken of our complicated tax system. What this means for business taxation is a lack of a sense of constant strategic direction, and it makes us nervous. The Minister welcomed the cuts in capital gains tax. Like many other noble Lords in this Committee, I spent much of my working life building a business—a business that I am pleased to say supplied John Lewis, so I welcome the noble Lord, Lord Price. During that time—some 30 years—the tax we would have to pay on selling out our businesses varied between 45% and 18%. Indexation was introduced and then withdrawn. From time to time, the definition of business assets was changed. Our strategic concern was to achieve success. The Minister may say that the Government’s intention was to encourage investment, but it has not happened. Others could interpret this as tempting us to enjoy the fruits of success rather than continuing to invest in the business. And yes, in this Budget the rules are changed again, so I put it to the Committee that this is a wrong strategic aim in a country such as ours which depends on people like us building long-term, successful businesses. I agree with others that this is where continuity and reform are needed.

We need Budgets that understand the economy, build a robust and secure economy and which invest in long-term business, industry, the environment and skills and services—not Budgets designed to deal with the self-inflicted damage of the Government’s version of austerity.