Economy: Growth

Lord Higgins Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Higgins]

My Lords, it is a pleasure to follow the noble Lord, Lord Hollick, and I congratulate him on obtaining this debate. He certainly made a very thoughtful speech. It is interesting that he presented no alternative to the Government’s views; rather, he presented a series of ways in which the present policy could be enhanced. Each of the items that he mentioned deserves careful consideration.

As the noble Lord pointed out, we had an opportunity last week to consider cuts and the rate and extent of them. I remain firmly of the view that the Government are doing the absolute minimum required to get the economy back on an even keel, because, as the OBR report and the Red Book make very clear, even at the end of the five-year period, despite all the cuts and the tax increases, the actual amount of debt will have gone up rather than fallen. The longer one delays in taking action, the bigger the amount that you eventually have to pay off in total.

Perhaps I may make another point. As the noble Lord also rightly points out, the time available for debate today has been extended, but it is still down to four minutes per speaker. It is very difficult to deal with the points that he has made in a speech of four minutes. We should seriously consider whether a really extended debate in the Moses Room in which we could go into the OBR’s report in depth, because it is a very good report indeed and raises a number of issues, would not be more to the advantage of the House than time-limited debates on the Floor of the House.

I distinguished last week between two ways in which the expression “growth” may be used. It may be used to represent the fact that existing spare capacity is being used up more and therefore there is growth, or it may be used to represent increasing the underlying productive potential, which the noble Lord largely concentrated on. The course which the OBR is setting in gradually mopping up that excessive capacity—it anticipates that the end of the cycle will come in about 2016—is the right way to go. That is very similar, I feel bound to say, to what was attempted back in the early 1970s, although unfortunately that was wrecked by a massive increase in import prices. We are faced with the same problem. It was stigmatised as a dash for growth. I do not think what we are now proposing is that, nor do I think that it was then. What we have to do is get a steady increase in the amount of demand in the economy.

As regards the underlying productive potential, certainly we need to have more investment but we also need more saving. The reality is that those who have saved prudently, particularly those on low fixed incomes such as my former constituents in Worthing, find that their savings have been seriously attacked. It is very difficult to think why anyone should save at the moment, given that it is virtually impossible to get a real rate of return on savings. Therefore, as far as the productive potential is concerned and the Keynesian relationship between saving and investment, I would very much hope that the Government will now take further steps to increase the level of saving and give some real incentive for savers in the sense of an actively positive rate of return.

I find that I am already out of time and I have a speech for about the next two hours. Alas, I shall resist that temptation. None the less, the noble Lord has got the debate off on a very sound footing and I look forward to hearing what follows.