Economy: Budget Statement

Lord Livermore Excerpts

Tuesday 13th November 2018 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the Budget presented two weeks ago by the Chancellor revealed a Government incapable of being honest about the true state of the British economy, about the real impact their Brexit plans will have or about the ongoing austerity the people of this country continue to face. Far from being a Budget for hard-working families, as the Chancellor claimed, it was a dishonest Budget with the sole purpose of delivering a dishonest Brexit.

In his Budget Statement, the Chancellor claimed he had an economic record “to be proud of”, as he announced growth forecasts of 1.6% in 2019 and 1.4% in 2020. What he failed to mention was that, in each of those years, growth was forecast before the referendum two years ago to be substantially higher, at 2.1%. Neither did he mention that for the two subsequent years, 2021 and 2022, his forecasts are now actually even lower than they were just this time last year. He also did not mention that at no point since the Second World War have there ever been five consecutive years of GDP growth below 2%, until now. Nor did he say that, having been at the top of the G7 growth league before the referendum, Britain is now at the bottom or that we are now also at the bottom of the EU growth league.

The truth is, as the director of the IFS has observed, that these growth forecasts are dreadful compared to what we thought in March 2016, dreadful by historical standards, and dreadful compared to the rest of the world. The Chancellor in his Budget also sought to highlight the new fiscal forecasts from the OBR, and of course the improvements in forecast borrowing since March are very welcome, but what he again failed to tell the country is that borrowing this year will actually be £30 billion more than was forecast in March 2015. He did not own up to the fact that borrowing next year will be £40 billion more than was forecast in March 2016, immediately before the referendum, and neither did he say that while pre-referendum plans were for a £10 billion surplus next year, he now forecasts a £30 billion deficit. The reality, which the Chancellor at no point acknowledged, is that we have seen over the past two years an enormous Brexit-induced borrowing downgrade. The Chancellor has now given up any serious desire to eliminate the deficit by the mid-2020s, and he has also abandoned his fiscal objective of achieving a budget surplus in the next decade.

Throughout his Budget Statement, the Chancellor seemed intent on concealing the damage already done to our economy by the vote to leave the European Union, but nowhere was this desire to conceal more shocking than in his denial of the longer-term economic consequences of Brexit. His claim in the Budget that he would,

“harvest a double ‘deal dividend’”,—[Official Report, Commons, 29/10/18; col. 654.]

must surely be one of the most egregious falsehoods ever spoken by any Chancellor. It was disgraceful to hear a Chancellor claim what he knows to be untrue. This Government’s own impact studies, produced by his own department, show a 5% reduction in GDP from leaving the single market. They show future trade deals making up only 0.2% to 0.7% of that reduction. They show a devastating hit to every nation and every region of the UK, with an 11% reduction in GDP in the north-east and an 8% reduction in both the north-west and the West Midlands, not from no deal, but from their own preferred Brexit plans.

Far from delivering a boost to the public finances as the Chancellor claimed, his own figures show that the Government’s preferred Brexit outcome would result in an increase in borrowing of some £40 billion a year—a cost of Brexit of some £615 million every week. These falsehoods were made not out of strength or confidence, but out of weakness and fear. The Chancellor is now too afraid of the Brexit extremists in his own party to be able to be honest with the British people about the real impact Brexit will have. So, rather than now preparing cautiously for such an uncertain future or showing the prudence that this moment requires, when he was handed a £74 billion windfall by the OBR he was so frightened that he gambled on the public finances and spent it all, acting not in the long-term national interest but in his own narrow short-term party interest, trying to persuade his own MPs to back a deal that he knows will make this country immeasurably poorer.

The Chancellor used that short-term spending to claim that,

“the era of austerity is finally coming to an end”.—[Official Report, Commons, 29/10/18; col. 653.]

Yet he knows full well that this is not the case, either for the hard-working families of this country or for the public services on which they depend. While announcing tax cuts costing £2.8 billion—from which 90% of the gain goes to the top half of the income distribution, and nearly half of the gain goes to the top 10% alone—he chose to maintain £4 billion of cuts to working-age welfare over the next five years. As a result, a couple with children in the bottom half of the income distribution will lose £200 a year while a single parent working full-time on the minimum wage will be £1,940 a year worse off. Looking at the overall impact of tax and benefit changes since 2015, the IFS has calculated that the poorest decile will now be £1,100 a year worse off, while the poorest working-age families with children will lose £3,000 every year—15% of their income. This is hardly the end of austerity for those families.

In our public services, while extra money for the NHS is of course welcome, the Chancellor’s numbers imply ongoing cuts in other day-to-day public services, from prisons to schools and local government. Unprotected departments will see cuts in every year from 2020 and their per-capita real-terms budgets are set to be 3% lower by 2023 than in 2019. At the same time capital limits were cut in the Budget by £7 billion for 2021, further undermining long-term investment in our economy and infrastructure. Again, this is hardly the end of austerity, as the people of this country were led to believe.

The Chancellor cynically pretends that austerity is over, solely with the aim of delivering a Brexit deal that he knows will decimate the public finances, making further, far more severe and long-lasting austerity inevitable. Yet with every cynical, short-term, false promise that they make, this Government build expectations that they know can never be met, further fuelling the betrayal myth that unscrupulous politicians of both left and right are only too ready to exploit. What will the Chancellor tell the people of this country when he delivers not a “double dividend” but the destruction of jobs, living standards, livelihoods and public services?

Surely it is now time for an honest conversation about the real impact that Brexit will have. It is time for us now to ask: is this really the right path for our economy? Is it really the future we want for our country?

Economy: Spring Statement

Lord Livermore Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I add my congratulations to the right reverend Prelate the Bishop of Lincoln on his maiden speech. In his Spring Statement on Tuesday, the Chancellor devoted just 75 words to the UK’s departure from the European Union. Yet, concealed in his numbers, the consequences of Brexit now cast a dark cloud over the entire British economy. The Chancellor sought to present himself as the great optimist, dressing up the OBR’s latest growth forecasts in a positive light. Of course, the 0.1% increase for 2018 is indeed welcome, but what he did not mention was how much lower those growth forecasts now are because of Brexit. To quote the OBR:

“The vote to leave the European Union appears to have slowed the economy”.


The real picture is that, in each and every one of the next three years, economic growth will be significantly lower than the Government’s pre-referendum forecasts.

The Chancellor said that growth is now forecast to be 1.5% in 2018, 1.3% in 2019 and 1.3% in 2020. What he did not mention was that, before the referendum, the forecast for each of those years was 2.1%. In his Statement, the Chancellor described growth in the subsequent years, 2021 and 2022, as “picking up”. Yet, compared to his Autumn Statement, the growth forecasts for those two years have in fact been revised down to 1.4% and 1.5% respectively. The Chancellor also failed to mention that at no point since the Second World War have there ever been five consecutive years of GDP growth below 2%—until now. Neither did he mention that the UK economy is forecast to grow 24% slower than the economy of the euro area over the next five years. Nor did he say that, having been at the top of the G7 growth league before the referendum, Britain is now not just at the bottom of the G7 but bottom of the entire G20.

The director of the Resolution Foundation said:

“Because it feels like old news the danger is we come to ignore quite how awful these economic forecasts are”.


The director of the IFS observed that these growth forecasts are,

“dreadful compared with what we thought in March 2016, dreadful by historical standards and dreadful compared with … the rest of the world”.

The Chancellor might describe himself as “particularly Tigger-like”, but it is doubtful that the British people will be enjoying themselves quite so much.

There were some other notable omissions from the Chancellor’s speech—on investment, trade, productivity and earnings. Investment is down in comparison with pre-referendum forecasts. The OBR noted that, by the end of 2017, business investment was almost 6% lower than the March 2016 forecast. The Bank of England has estimated that Brexit uncertainty has already lowered investment by between 3% and 4% and the OBR now expects investment growth to,

“remain subdued in the face of Brexit-related uncertainty”.

On trade, the OBR now believes that the negotiation of a new trading relationship with the EU will slow the pace of import and export growth over a 10-year period and it expects export growth to flatline by 2022. Productivity growth has also been downgraded yet again in every year from 2019 and is now even lower than the extraordinarily bad projections made at the time of the Autumn Statement. Earnings will now not return to their pre-financial crisis peak until 2025, leaving Britain barely halfway through a 17-year pay downturn. Lower growth, a weaker economy, poorer people—all direct consequences of Brexit, yet none of them mentioned by the Chancellor.

One set of figures that the Chancellor did focus on were the OBR’s updated fiscal forecasts, where he sought to talk up the Government’s performance on both borrowing and debt. In his Statement, he made reference to debt being revised down, although debt will still continue to rise from £1.74 trillion this year to £1.83 trillion next year and £1.88 trillion by 2020. Of course, when the previous Labour Government left office, the debt-to-GDP ratio stood at 57.1%, whereas this year it will be 85.6%.

On borrowing, the £4 billion improvement in this year’s deficit since the autumn is of course welcome. However, the improved forecasts only reverse one-third of last November’s enormous Brexit-induced borrowing downgrade and the structural deficit in 2019-20 is almost completely unchanged. As a result, the Chancellor remains a decade off meeting his target of eliminating the overall deficit and any hopes of an end to austerity are sadly misplaced. While the former Prime Minister and Chancellor congratulated each other on Twitter on the elimination of the current deficit, they were seemingly unaware of the misery that their policies had caused, with homelessness doubling and child poverty rising by over 1 million to the highest level since records began. Now, under this Chancellor, cuts to day-to-day spending are set to continue well into the next decade. Funding to local government will fall by a further 20% over the next two years and, as my noble friend Lord Haskel said, nearly 80% of the benefit cuts announced in 2015 are still to take effect.

In his speech, the Chancellor claimed to be building,

“a country that works for everyone”.—[Official Report, Commons, 13/03/18; col. 722.]

Yet as a result of the tax and benefit changes that this Government have made, the entire bottom half of the income distribution will now see their incomes fall. The second-poorest decile will lose £1,500 a year—a 10% fall—while the second-richest decile will gain £600, a 2% rise. The poorest working-age families with children will see an extraordinary 20% fall in their incomes, losing over £3,500 a year. Again, none of this was mentioned by the Chancellor. Throughout his Spring Statement, he seemed intent on concealing the damage done to our economy and the working families of this country.

We saw the exact same desire to conceal when the Government sought to avoid publishing their impact studies into the longer-term economic consequences of Brexit. These impact studies, finally published last week, show an even more significant cost of Brexit than we have seen so far. They show a 5% reduction in GDP from leaving the single market. They show new trade deals making up only 0.2% to 0.7% of that reduction. They show a devastating economic hit to every nation and region of the UK, with an 11% reduction in GDP in the north-east and an 8% reduction in both the north-west and the West Midlands. They show that leaving the single market would further increase borrowing by some £55 billion.

In his speech, the Chancellor speculated that the Labour Party could put at risk the recovery, threaten British jobs and burden the next generation, yet that is precisely what his own figures prove conclusively that his policies will do. Having seen the cost of Brexit so far and having commissioned their own Brexit impact studies, where the consequences are laid out in black and white, the Government have still chosen to pursue a policy that will demonstrably damage Britain’s economy. This is surely the first time that a Government have ever deliberately put aside the national economic interest and embarked instead on an economic policy that they know will make the country poorer. Why? Because this Government are now taking decisions not for the economic needs of the nation but for the ideological needs of the Conservative Party. As the economic costs of Brexit become clear and as we see the further devastating impact that the Government’s policy will have for decades to come, we must surely now ask: is this really the right path for our economy? Is this really the future that we want for our country?

Brexit and the Labour Market (Economic Affairs Committee Report)

Lord Livermore Excerpts

Thursday 8th February 2018 Lords Chamber

[Lord Livermore (Lab)]

My Lords, in the UK, as elsewhere, politics has taken a nativist turn, and the debate about immigration has become a conversation only about how far and how fast it should be controlled. There is almost no discussion about its benefits, nor about the nature and the extent of our economy’s need for it to continue. As a result, we have a political debate in this country that is failing to serve the interests of the public. Although there is continuing strong support among voters for reducing immigration, there is little or no consideration of the consequences of doing so for national prosperity, individual living standards, or specific sectors of the economy. Certainly, the debate about immigration during the EU referendum campaign strained the boundaries of acceptable public discourse. Nevertheless, the Government decided that it was central to the referendum’s outcome, and chose to make a red line for the negotiations not growth, jobs and living standards, but reducing immigration regardless of the economic cost.

This perspective—that the economic well-being of the nation matters less than the politics of control—has driven the Prime Minister to pursue the hardest interpretation of Brexit. Her argument is not that it will make Britain more prosperous but that controlling immigration is so important that it is worth pulling Britain out of the single market and customs union to achieve. So this report from the Economic Affairs Committee, of which I am a member, feels timely, both to scrutinise the Government’s intentions in the EU withdrawal Bill and as we await the much-delayed immigration White Paper.

It is right that we should ask whether EU migration has had the negative labour market consequences often claimed by its detractors, and it is right that we should examine the impact that reducing immigration would have—in particular, whether it would achieve the benefits that those who support Brexit claim. As we do so, it is vital that we proceed on the basis of facts, and I wholeheartedly endorse the comments of the Justice Minister, Dr Phillip Lee, when he said:

“The next phase of Brexit has to be all about the evidence …there would be a serious question over whether a government could legitimately lead a country along a path that the evidence and rational consideration indicate would be damaging”.


He went on to say:

“It’s time for evidence, not dogma, to show the way. We must act for our country’s best interests, not ideology and populism, or history will judge us harshly”.


So it is fitting that our report begins by voicing concern about the absence of facts and, specifically, the poor quality of the available migration data. We were astonished to hear witnesses repeatedly tell us how little accurate data is collected, how haphazardly it is done, and how great is the margin of error. As our report says, the data,

“fail to provide an accurate number of migrants entering or leaving the country … The data, based upon flawed sample surveys, are wholly inadequate for policy making and measuring the success or otherwise of the policies adopted”.

Whatever your view about the levels of immigration, surely, as the chairman of the committee, the noble Lord, Lord Forsyth, said when our report was published, and again in his speech today, the Government must have reliable statistics before they formulate their new policy, otherwise they will be making crucial decisions of vital importance completely in the dark.

In this respect, the Government’s response to our report is disappointing. They describe the International Passenger Survey as,

“the best source of information to measure long-term international migration”.

We certainly did not meet many witnesses who agreed with that. Instead, our report calls for the reintroduction of counting those entering and leaving the UK and the better sharing of data, such as national insurance data, across departments.

What evidence, then, did we find to support the claim that EU migration has a negative impact on the UK labour market? I have always found it odd that anti-immigrant tabloid propaganda accuses EU nationals simultaneously of coming here to sit about on benefits and, at the same time, taking all our jobs. Presumably it would need to be one or the other. The more likely explanation of course is that it is neither. There was little evidence presented to us that foreign workers took jobs that British workers wanted. Many witnesses told us of an unwillingness among British workers to carry out particular types of work. We learned that only one in 50 applicants for vacancies at Pret a Manger, for example, is British, and the Agriculture and Horticulture Development Board told us:

“Attempts to fill vacancies with UK workers have proved difficult in the past”.


Neither does it seem that domestic workers have been priced out of the labour market. Professor Jonathan Portes from King’s College said that,

“the emerging consensus is that recent immigration has had little or no impact overall”,

while Stephen Clarke from the Resolution Foundation told us that it would be wrong to say that any negative effect had been large.

The evidence is scarce because—although it is one of the great unsayable truths of British politics—the fact is that immigration is good for our economy. The benefits are clear: it increases growth, provides more tax revenue and helps pay for an ageing society. By raising aggregate demand it creates new job opportunities, brings skills into our economy and makes us more competitive. Indeed, there is substantial evidence that reducing immigration would damage our economy and would, by lowering tax receipts, put great strain on our public services. The Office for Budget Responsibility has shown that we would need to borrow an additional £16 billion by 2020 to make up for the reduced tax take from falling migration, with a further cost of £8 billion every year thereafter. The Government’s own secret Brexit impact analysis, leaked last week, sets out clearly the cost to the British economy of cutting migration from the EU.

Those who support the Government’s policy talk in delphic terms about how the economy will “adjust” and how businesses will “adapt”. Our report acknowledges that what this actually means is higher prices for consumers. But even we fail to say that these adaptations and adjustments will too often be reduced production, diminished competiveness or increased mechanisation—in all cases meaning fewer jobs.

At a time when it is so vital for the UK to remain a globally dynamic economy reaching out to the world, the national interest requires politicians of all parties to speak the truth and to have the courage to make the positive case for immigration. This includes those who support continued membership of the European Union, as I do, who now need to make a strong positive argument for the continued free movement of people to and from the EU, rather than accepting the characterisation of this as a “price worth paying” for single market membership.

As a first and immediate step, our report calls on the Government to secure an early agreement on the rights of EU nationals currently in the UK in order to prevent an unwanted exodus from our country. Unfortunately, the “common understanding” reached in phase 1 of the negotiations fails to sufficiently protect Europeans in the UK and British people in the EU. Just last week, the Prime Minister again sought to play politics with people’s lives, claiming that she would not extend EU citizens’ rights in any transition period, when she knows full well that she will eventually have to back down to secure the transition she needs. Our report was equally clear that the Government’s target of cutting net migration to the tens of thousands is the wrong approach. We recommend that the Government refrain from setting artificial numerical targets for net migration because, as our report says,

“such a target runs the risk of causing considerable disruption by failing to allow the UK to respond flexibly to labour market needs and economic conditions”.

We also recommend that students should not be included in the net migration figures.

Much of the evidence we collected during our inquiry also suggests that making substantial cuts to immigration is not just undesirable but will prove extremely difficult to achieve. Several witnesses highlighted that there are large numbers of migrant workers who will not easily be replaced by domestic workers. Many parts of the UK are already experiencing significant levels of labour shortages and many sectors, such as hospitality and tourism, and farming and food processing, are already on a cliff edge. Our report therefore recommends that any new immigration system should not make an arbitrary distinction between higher-skilled and lower-skilled work on the basis of whether a job requires an undergraduate degree. We believe that British business must have access to expertise and skills in areas such as agriculture and construction that would at present be categorised as lower-skilled occupations. We also ask the Government to acknowledge that, in order to achieve some of their other policy objectives such as their homebuilding target, continued lower-skilled immigration may well be needed to provide the necessary labour.

Taking all this together, it seems entirely possible that, as the economic consequences become clear, the debate on immigration may move from how we reduce it to how we ensure that it is sufficient for the needs of our country. This report is convincing in its argument that the Government’s policy of reducing immigration will have many deeply undesirable impacts on our labour market and our economy—but it is the political impact of the Government’s approach that could have many more far-reaching consequences. It remains the case that the greatest hostility to immigration, and the greatest support for reducing it, are to be found in those parts of our country where there are fewest immigrants. Despite politicians of both main parties advocating immigration control to solve the problems of these areas, the reality is that the problems will not be solved in this way, despite the promises made, because the problems were never caused by immigration in the first place. We will therefore damage our economy by leaving the single market, only to find that the supposed political dividend of control was itself a fiction. In this gap between expectation and reality, the politics of extremism lies in wait. There is now an urgent need to change the terms of debate, focusing not on offering false solutions or raising expectations that can never be met but instead on seeking genuine solutions to the very real problems that the people of this country face.

Budget Statement

Lord Livermore Excerpts

Monday 4th December 2017 Lords Chamber

[Lord Livermore (Lab)]

My Lords, this Budget reveals an economy that is weaker, less resilient, and unprepared as we approach the biggest economic challenge faced by our nation in decades. It confirms that the Government’s economic plan is failing; that the price of Brexit is severe damage to our economy; and that those who can afford it least will be those who pay the most.

The independent Office for Budget Responsibility has set out the facts: growth has been cut sharply, and will now average just 1.4% a year. Indeed, growth will stay below 2% in every single year of the forecast period for the first time in history. Productivity growth has been cut to just 1.1%, making this the worst decade for that crucial measure since 1812. Household incomes are set to fall for an unprecedented 19 successive quarters, the largest fall in living standards since records began. On the public finances—the centrepiece of the Government’s economic strategy and the metric on which they have repeatedly asked to be judged—borrowing is up yet again, this time by an additional £30 billion by 2021-22. As a result, the Chancellor has abandoned his goal of reducing debt as a proportion of GDP, and it will now stay at around 80% for the entire forecast period. Even these debt levels, as the Resolution Foundation points out, are dependent on avoiding another downturn.

The Chancellor was also forced to abandon his overall fiscal objective—indeed, it was a manifesto commitment—to reach an absolute surplus by the middle of the decade. That target has been pushed back to 2030, meaning that Britain is now only one-third of the way through an unprecedented 20-year programme of austerity, with growth and productivity falling, wages stagnating and borrowing rising. The Government’s economic strategy keeps failing; their targets keep sleeping, and their austerity keeps biting. The sun has barely shone, the roof has not been fixed, and now the Brexit storm clouds are beginning to gather. Indeed, this Budget makes crystal clear that this fragile and failing economy is utterly ill equipped to withstand the challenges Brexit will bring.

In this Budget, the price that we are already paying for Brexit is clear: Britain has now officially fallen from fifth to sixth place among the world’s largest economies. Before the referendum, Britain was the fastest-growing economy in the G7; now we are the slowest. While the UK is slashing its growth forecasts, the global economy is enjoying the most synchronised recovery since 2007, with the EU seeing its fastest growth in a decade. Our GDP per capita will now be 3.5% smaller than forecast before the referendum, a loss of £65 billion to the economy. Before the referendum, a surplus of £10 billion was forecast by 2022. That is now predicted to be a deficit of £35 billion, a £45 billion deterioration, with the deficit now lasting 16 years longer than planned. Average earnings will now be £1,400 a year lower than expected before the referendum. With inflation higher following the sharp devaluation of the pound, disposable income will be £540 lower per person. The ONS has confirmed that business investment fell to just 0.2% in the last quarter, and the OBR has remarked that the renewed weakness of productivity is exacerbated by Brexit.

Our nation is poorer and its people are poorer, now and for years into the future. But this is no accident, nor the result of bad luck—it is a direct consequence of the Government’s determination to pursue the most extreme interpretation of the referendum result and the hardest possible Brexit, a determination driven not by the economic needs of the nation, but by the ideological needs of the Conservative Party. So the Government continue to spend billions of pounds in order to damage our economy even further—another £3 billion for Brexit in this Budget, on top of the £700 million already spent, the £2.1 billion for extra civil servants and now, apparently, a £50 billion divorce bill. We are surely entitled to ask: what are we getting for our money? We are getting nothing. In fact, we are getting worse than nothing. We are paying billions of pounds to make our country and its people poorer, weaken our economy, diminish our influence as a nation and leave the world’s largest free trading area, leaving us with a far worse deal than the one we have now. This is an unforgiveable waste of money on an act of monumental self-harm.

The Chancellor began his Budget speech by repeating the asinine claim that leaving the European Union would bring new opportunities to Britain. I am sure we would all like to know who these opportunities will be for, because they certainly will not be for Britain’s working families. This Budget confirms that working people will now pay the heaviest price for this deteriorating Brexit economy and shows that many of those who voted for Brexit in the greatest numbers will be among those who suffer the most from the outcome.

We have heard much from the Prime Minister and the Chancellor about their concern for those struggling to make ends meet. However, the Institute for Fiscal Studies has spelled out the reality: the entire bottom half of the income distribution will see their incomes fall; the second-poorest decile will lose £1,500 a year, a 10% fall, while the second-richest decile will gain £600, a 2% rise; the poorest working-age families with children will see an extraordinary 20% fall in their income, losing over £3,500 a year; a lone parent in work will have their income cut by 10%; and an out-of-work couple with children will lose over 17% of their income, some £4,000 a year. By their actions and because of their values this Government have shown that they cannot govern for all in society. This Budget from a faltering Government reveals an economic plan that is failing, with downgraded forecasts, falling living standards and a poorer country. With the price that we are paying for Brexit now so high, it is a plan that can lead only to a deeper and still more devastating failure in the years ahead.