Covid-19: Economy

Lord Livermore Excerpts

Thursday 4th June 2020 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I thank my noble friend Lord Eatwell for securing this debate. I congratulate him on his wide-ranging opening speech. The Covid-19 pandemic has delivered a shock to economic activity, unprecedented in speed and severity. The OBR’s initial scenario sees GDP fall by 35% in the second quarter, unemployment rise by more than 2 million, government borrowing increase to £273 billion, and debt exceed 100% of GDP. As the IFS has observed, these figures are predicated on a swift recovery. Should the economy fail to bounce back, the picture would worsen further.

The Resolution Foundation has reflected this uncertainty with a range of forecasts, depending on whether social distancing lasts for three, six or 12 months. It estimates that GDP would fall this year by 10%, 20% or 24% respectively, with unemployment rising to 2 million, 5 million or over 7 million. Irrespective of how severe the coming recession turns out to be, this pandemic has exposed significant flaws in the UK economy. It has revealed deep inequalities, with the economic effects disproportionately experienced by the low paid and the young. It risks exacerbating them still further. Unemployment will be concentrated in the lowest-paid sectors. Those soon to leave school or to graduate will enter a very bleak labour market.

Addressing these inequalities will be key to building a stronger, fairer, post-crisis economy, with far greater resilience for the future. As we do so, we will need to see a radically different approach from that of the past decade, when we saw the slowest recovery for eight generations: living standards were undermined, public services weakened, and our welfare system underfunded. As the Government begin to restore fiscal sustainability, ensuring that the burden is borne fairly across society must be paramount. In the previous decade, while money was found to cut the top rate of tax, the poorest families had their incomes cut by more than 15%. As we repair our economy, we must learn the lessons of this crisis and of the past decade, so that we can build a new social contract, fit for the future.

Covid-19: Economic Package

Lord Livermore Excerpts

Wednesday 13th May 2020 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I am grateful to the Minister for repeating the Chancellor’s Statement. We welcome the extension of the job retention scheme, the additional flexibility provided and the fact that the Chancellor has listened to concerns by maintaining a level of support at 80%. Advanced briefing to the media suggested that people need to be “weaned off” state support. I hope the Minister shares my concerns about the use of such language and agrees that nobody ever wanted to find themselves in this situation. The amount that firms will be asked to contribute must avoid triggering further redundancies, so could the Minister confirm when employers will be required to start making contributions, whether these contributions will be phased in and what level of contribution they will be asked to pay?

[Lord Agnew of Oulton]

My Lords, all the details that the noble Lord has asked about are being worked out at the moment. That is why we will not be able to announce the full details until the end of this month. However, as was set out in my right honourable friend’s Statement yesterday, our overriding priority is to protect jobs in this country and to protect businesses. A balance needs to be struck to achieve those two things.

Income Equality and Sustainability

Lord Livermore Excerpts

Wednesday 6th May 2020 Lords Chamber

[Lord Livermore (Lab)]

My Lords, it is a privilege to pay tribute to the most reverend Primate the Archbishop of York, whose commitment to equality shone through in his opening speech, as it has done throughout his career. I hope that he will continue his campaigning work in the years ahead.

Britain is a deeply unequal society. Income inequality is the fifth highest in the OECD, and there are vast inequalities in wealth, opportunity, education and life expectancy. It is tempting to believe that the Covid-19 pandemic is a great leveller, yet these inequalities have become greatly magnified. The economic effects of the pandemic are disproportionately experienced by the low paid and the young. Those working in shut-down sectors are seven times more likely to be the lowest paid, and those under 25 are three times more likely to work in hospitality or retail—sectors that have closed entirely. The health risks are disproportionately borne by the poor, those from black and minority-ethnic backgrounds, and women, because they are more likely to be key workers, live in cramped accommodation, or have an underlying health condition.

Alongside exposing the inequalities in our society, this health emergency also risks exacerbating them further. Unemployment will be concentrated in the lowest-paid sectors, potentially scarring future employment and earnings. Those soon to leave school or graduate will enter a labour market in severe recession, with lower job prospects and wages. For school-age children, prolonged periods out of the classroom are particularly damaging to those from poorer backgrounds.

Despite this bleak picture, the response to the virus has shown us a better way. While homelessness has doubled over the past decade, funding has now been found to house more than 90% of rough sleepers. Meanwhile, air quality has dramatically improved, as nitrogen dioxide levels have halved. No one, of course, would choose for life to continue as now, but we do face a choice about the society we want to be. As we commemorate VE Day, let us remember how that victory signalled a desire for change, and go forward with the same determination to build a new social contract, fit for the future.

Budget: Economic and Fiscal Outlook

Lord Livermore Excerpts

Tuesday 5th May 2020 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the Covid-19 pandemic has created an unprecedented shock to the economy. In response, the Government’s fiscal policy measures are unparalleled. At 20% of GDP, it is the largest peacetime fiscal expansion in British history. Against this backdrop, the March Budget, just eight weeks ago, already feels like a plan for a different age, yet it was clear even then that the Chancellor presided over an economy with serious underlying weaknesses, presenting the worst average growth forecast on record and rapidly deteriorating public finances, with debt having doubled to £2 trillion, reaching nearly 80% of GDP.

The impact of coronavirus on the economy will be vast. The OBR has published an initial scenario in which GDP falls by 35% in the second quarter, unemployment rises by more than 2 million to 10%, government borrowing increases to £273 billion—the largest single-year deficit since the Second World War—and debt exceeds 100% of GDP. As the IFS has observed:

“These figures are predicated on … a swift recovery. Should the … economy fail to bounce back, the picture would worsen further.”


The Resolution Foundation has reflected this uncertainty with a range of forecasts depending on whether social distancing lasts for three, six, or 12 months. It estimates that GDP will fall this year by 10%, 20% or 24%, with unemployment rising to 2 million, 5 million or more than 7 million. In its three-month scenario, government borrowing reaches 11% of GDP, higher than during the financial crisis, 22% in its six-month scenario, higher than any point in peacetime, and 38% in its 12-month scenario—more than the UK has borrowed in any single year in history.

Faced even with economic consequences on this scale, the Government will apparently still end the Brexit transition period this year. There is a clear risk of no deal, which according to their own assessment would reduce GDP by 9% and, even if they achieve the free trade deal they are seeking, on their own figures this would reduce GDP by 6% compared to staying in the single market, putting additional strain on the economy, which is already under unparalleled pressure.

However severe the coming recession, policymakers will need to manage a protracted period of disruption to livelihoods and finances. There will be an urgent need to rebuild the economy and we will need a radically different approach to the past decade, when we saw the worst period of pay growth for 200 years.

In time, the Government will also need to begin restoring fiscal sustainability; again, we will need a very different approach to what has gone before. In the previous decade, while money was found to cut the top rate of tax and some of the richest families gained £1,000 a year, the poorest lost £3,000—15% of their income. The financial resilience of many families was undermined and our economy and public services were weakened, ill-prepared and ill-equipped for the storms ahead. Subsequent Budgets must move away from the failed strategy of the past and build a new social contract that is fit for the future.

Tax Avoidance

Lord Livermore Excerpts

Wednesday 29th April 2020 Lords Chamber

[Lord Agnew of Oulton]

My Lords, all the support that we have offered has been aimed at keeping businesses going and securing employment, mostly through the furlough scheme. While I take on board the noble Lord’s concerns, I believe that the rapid action that we have taken, which has to be general by the definition of the time period that we have had to operate in, has helped to secure businesses’ long-term future, which is our priority.

[Lord Livermore (Lab)]

My Lords, many other countries have set out strict requirements to prevent state support enabling not only tax avoidance but excessive executive pay and high dividend payments. Do the Government support a moratorium on dividend payments and share buybacks for companies that receive state support, and will they introduce specific rules to prevent tax-avoiding companies benefiting from government schemes?

[Lord Agnew of Oulton]

I assure the noble Lord that all these things are continuously under review. As I mentioned briefly in the previous Question, we have introduced in days things that could often take years, so by definition we are keeping a very careful eye on them. To give the noble Lord some reassurance, with most of these loan schemes, businesses have to show that they are viable, and if they are going to continue to pay dividends the banks will take a view on that and decide whether it is appropriate. These are not automatic entitlements; they have to be justified.

Covid-19: Self-employed

Lord Livermore Excerpts

Thursday 23rd April 2020 Lords Chamber

[The Lord Speaker (Lord Fowler)]

Baroness Ritchie of Downpatrick. Baroness Ritchie? Okay, we will move on to the noble Lord, Lord Livermore.

[Lord Livermore (Lab)]

My Lords, as noble Lords have made clear, there are significant gaps in the current scheme. My noble friend Lady Young asked about the numbers not covered by it. How many self-employed people will now see substantial reductions in their income as a result of not being covered by the existing scheme? Will the Minister consider additional measures to provide protection for them?

[Lord Agnew of Oulton]

My Lords, we estimate that 95% of small businesses will benefit from the structure of the schemes we have been discussing. Beyond that, we have made enhancements to the universal credit system that will benefit small business proprietors who are caught and do not benefit from the broader measures. I can put into Hansard a detailed explanation of how those changes work, because they are quite complicated and I am conscious of the need for brevity.

Buckinghamshire (Structural Changes) (Supplementary Provision and Amendment) Order 2020

Lord Livermore Excerpts

Monday 23rd March 2020 Lords Chamber

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, this order has been laid before this House and the other place, which approved it on 18 March 2020. It will update the membership arrangements of the Conservation Board of the Chilterns Area of Outstanding Natural Beauty to take account of the restructuring of local government in Buckinghamshire. We expect that this will be the final statutory instrument connected to local government restructuring in Buckinghamshire.

The order bringing about local government reorganisation in Buckinghamshire came into force on 23 May 2019. It provided for a reorganisation date of 1 April 2020, when the new Buckinghamshire council will assume the full range of local authority responsibilities and the five existing councils—the county council and the four district councils—will be wound up and abolished. That order established a shadow authority and shadow executive, which has been managing the transition to the new council. I am very pleased that all the councils have been working closely together to deliver the new unitary council and I thank them for their hard work and dedication.

The Conservation Board of the Chilterns Area of Outstanding Natural Beauty, which is the subject of this order, is made up of members appointed by the relevant local councils, parish council representatives and members nominated by the Secretary of State for Environment, Food and Rural Affairs. The board’s composition is set out in the Chilterns Area of Outstanding Natural Beauty (Establishment of Conservation Board) Order 2004. The conservation board is responsible for conserving and enhancing the natural beauty of the Chilterns and increasing the understanding and enjoyment of its special qualities, which are so loved and well known by so many.

As I have said, local government restructuring in Buckinghamshire will abolish all five of the Buckinghamshire councils that currently nominate a member of the board. Some changes are needed to the board membership arrangements to take account of these changes. The Chilterns board currently has a total membership of 27: one representative for each of the 13 councils specified in the 2004 order, two parish council members for each of Buckinghamshire, Hertfordshire and Oxfordshire, and eight members nominated by the Secretary of State. Without this order, the new Buckinghamshire council will only be able to appoint one member, instead of five, to the conservation board. However, 50% of the Chilterns Area of Outstanding Natural Beauty falls within Buckinghamshire. The shadow executive of Buckinghamshire Council has, therefore, requested that the status quo be maintained so that the new council will nominate five members to the board to provide adequate representation for the area. It considers that the current membership arrangements, with five board members for Buckinghamshire as a whole, better reflect the extent of the Area of Outstanding Natural Beauty that falls within the new council area, and the Government agree. Furthermore, the Countryside and Rights of Way Act 2000 specifies that at least 40% of the AONB board membership must be from local authorities and at least 20% from parish councils. These changes ensure that that statutory requirement continues to be met. There are no other changes to the membership of the board.

In conclusion, this order will amend the membership arrangements of the board of the Chilterns AONB to retain a total of 13 members nominated by local councils, five of whom will continue to be nominated from the Buckinghamshire area, for the reasons explained. There are no changes to membership of the board otherwise. I commend the order to the House.

[Lord Livermore (Lab)]

My Lords, it is a pleasure to speak in this debate on behalf of my noble friend Lord Kennedy. The issue of restructuring local government in Buckinghamshire has been discussed by this House previously and is settled, so I do not intend to dwell on it today. This minor order is, however, the final statutory change necessary for the restructuring process and the House will recall that the initial public consultation on the creation of a Buckinghamshire unitary authority found that a majority of respondents opposed the change. I would therefore be grateful if the Minister confirmed whether the Government believe that the people of Buckinghamshire are now fully behind the merger.

Moving on to the order before the House, there are two small issues on which I would appreciate clarification. First, as the House will be aware, a shadow authority for the new unitary council has been in place since mid-2019, as part of the effort to aid the transition. Can the Minister confirm whether, during this period, a representative of the shadow authority has been sitting on the board of the AONB? Secondly, as this change will result in the five representatives who are currently distributed equally between the five authorities being replaced with five representatives of the new Buckinghamshire council, can he confirm that the new council intends to appoint five individuals from across the county, rather than multiple representatives from any single area?

[Lord True]

My Lords, I thank the noble Lord for his response and for speaking on behalf of the noble Lord, Lord Kennedy. On the question of transformation, which is slightly wider than this order, the process has obviously been the subject of repeated discussion. My understanding is that the shadow arrangements have been working well. I am sure that, over time, consent will continue to grow so far as the changes undertaken are concerned. The appointments will be a matter for the Buckinghamshire authority, but I am sure that it will take note of the noble Lord’s remarks. As a responsible local authority, it will obviously be able to decide that matter for itself.

I have a feeling that the noble Lord asked another question that I did not initially know the answer to, but I will look it up and respond to him; I am grateful for the response. This is a technical change but, as I explained, it is required for statutory reasons to keep the numbers up. The size of the area of outstanding natural beauty in Buckinghamshire also justifies that change.

I may be getting an answer to the noble Lord’s other question. The board membership will have been drawn from the membership of the shadow authority, as it comprises all elected members in Buckinghamshire. I ought to have been able to think of that answer myself, but I come late to the Buckinghamshire issue, given the coronavirus crisis, which I want to conclude on.

All of us are dealing with this matter. This is one of a number of small orders that are dwarfed by what is going on, but I am sure everybody in this House wishes that the day will come, after this period of enforced confinement, when the people of this country can go out and again enjoy the beautiful area of the Chilterns, for which the board is responsible. I commend the order to the House.

Budget Statement

Lord Livermore Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the numbers that matter most today are clearly not those that we might normally focus on in a debate on the economy—not numbers relating to growth, inflation or productivity, but instead the numbers of people who, in the UK and around the world, have been diagnosed with the coronavirus or have died from this pandemic. Alongside this tragic human cost and health crisis, there is now a growing economic cost and financial crisis for business owners, employees, their dependants, pensioners and pension investments. Already we have seen stock markets fall and the global economic outlook deteriorate dramatically in just a week since the Budget.

The Chancellor was right yesterday to recognise this as an economic emergency. He moved swiftly in announcing a further £330 billion of government-backed loans for business, the equivalent of 15% of GDP. His statement that more support will be available is also welcome, as help is still needed for workers ineligible for sick pay and for renters. The Government must act urgently to underwrite wages in exchange for businesses not laying off staff, as has been announced in Denmark, Sweden and Norway.

The required economic measures are unprecedented in their scale, yet in the Budget last week the Chancellor presented an economy already with a number of serious underlying weaknesses, raising substantial questions about its ability to sustain and support the necessary action in this crisis. The OBR’s focus was already for extraordinarily weak economic growth, averaging just 1.4% a year—well below even the 1.9% average growth in the post-financial crisis decade that we have just lived through. Even last week, the Budget forecast looked optimistic. It assumed that the economy would grow by 1.1% this year and 1.8% next year. This was in contrast to the OECD’s forecast, suggesting the UK would grow at just 0.8% in both those years. Simply replacing the OBR’s forecast for this year and next with the OECD’s forecast brings the UK’s annual growth down to an average of just 1.2%—the worst average annual growth forecast for the UK ever recorded.

As the widespread impact of this pandemic becomes clearer, there will need to be further, even sharper downward revisions to reflect the impact of lost working hours, deferred consumer and investment spending and business failures. A recession is now surely unavoidable. Capital Economics has estimated that the UK economy could contract by 15% in this quarter alone, compared with a 6% drop from the peak to the trough of the 2008 financial crisis.

The Budget also illustrated how Brexit will continue to further weaken the British economy. Although unmentioned by the Chancellor, the OBR put the cost of Brexit so far at around 2% of GDP, or £40 billion a year. Yet the Government continue to pursue the most distant possible relationship with the EU, introducing significant non-tariff barriers to trade, which the OBR now believes will reduce UK trade with the EU by 15%.

The Government have refused to publish an economic impact assessment of their proposed trade deal, but in the OBR’s forecasts we can clearly see the cost: GDP will be some 4% lower over the next 15 years. With such profound risks to the global economy from the pandemic crisis, the fiscal policy response will come at huge cost to the Exchequer while tax revenues collapse, inevitably significantly widening the fiscal deficit. Indeed, a deficit of between 6% and 10% now seems likely.

While the Government are right not to focus on the deficit now, the Chancellor and his Budget presented not a sound platform from which to respond but already rapidly deteriorating public finances. As a result of the failed economic strategy of the past 10 years, UK net debt has doubled from £1 trillion to £2 trillion. In just five years, the Government’s ambition has swung wildly from trying to shrink the state in order to run an absolute budget surplus to growing public spending to almost 41% of GDP and actively aiming to borrow more than £60 billion each year.

The Chancellor set out unfunded spending commitments growing twice as fast as the economy, and debt was already forecast to rise relative to national income. If growth turns out even worse than expected, as it now surely will, debt will begin to move decisively upwards, now clearly heading to over 100% of GDP. To paraphrase a former Chancellor, the risk is that they did not fix the roof while the sun briefly shone.

As the Government shape their immediate and longer-term response to this crisis, policy could reasonably be governed by three guiding principles: sustainability, fairness and consistency. The Chancellor made clear in the Budget that he has no attachment to the existing fiscal rules. He maintained very little headroom against the current budget balance target, despite huge economic uncertainty, and in practice jettisoned the goal of debt falling over time, so it was no surprise that he announced a review of the fiscal framework. While maximum flexibility should govern his response to the immediate crisis—providing the economy with whatever support it needs—ultimately reviewing the fiscal framework should not lead to the removal of all fiscal anchors nor the abandonment of the idea that, in the end, day-to-day public service spending should be financed from taxation rather than borrowing. Here, ensuring that the burden is borne fairly must be paramount. Looking back, the austerity of the years after 2010 hit the most vulnerable disproportionately hard. While some of the richest working-age families gained £1,000 a year, the poorest lost £3,000 a year—15% of their income.

In this Budget, despite the Government signalling that austerity is over, the signs are not encouraging that their distributional approach will be significantly different. As a result of the tax and benefit changes announced in this Budget, the poorest decile is worse off in cash terms, while the eighth and ninth-richest deciles are the biggest winners, gaining over £100 a year. Despite significant increases in spending, the Budget did nothing to off-set the welfare cuts put in place by George Osborne in 2015, so child poverty is now set to reach record highs.

Finally, the Government’s response to coronavirus requires an unparalleled consistency of purpose. It is inconceivable that the Government have the time or capacity to respond adequately while also seeking to renegotiate the UK’s entire economic relationship with our closest trading partner. Reports that the negotiation period may now be extended are therefore welcome. This is an argument not about Brexit but about the pandemic crisis. Unless the Government are able to devote their entire attention to what is happening now, they will fail to produce an adequate response.

This does not feel like an economy in a robust position, capable of coping with the profound shocks it is now experiencing. The Chancellor’s forecasts will clearly need to be downgraded further, and he will need to reassess much more of his fiscal strategy than appeared to be the case just one week ago.

Universal Credit

Lord Livermore Excerpts

Thursday 16th November 2017 Lords Chamber

[Lord Livermore (Lab)]

My Lords, I thank my noble friend Lady Hollis for holding this debate today. She is a consistently powerful voice for those who too often have no voice of their own, and I admire her greatly for it.

During 10 years working in the Treasury, I was privileged to play a small part in the introduction of the tax credit system. The principles underpinning those reforms remain relevant and right: to ensure work always pays more than welfare, to prioritise support for children, and in so doing to reduce child poverty.

Tax credits boosted the incomes of the poorest families, lifted millions of children out of poverty and helped many, including many lone parents, into work. Originally, universal credit looked to build upon the principles of these reforms. One benefit rather than six should help improve the visibility of rewards for work, boost take-up, and ensure claimants receive the money they are entitled to. Most importantly, the single taper is the embodiment of the “making work pay” goal, which should in theory greatly strengthen work incentives. Such a bold and far-reaching reform would, I think, have appealed to the Treasury I knew and the Chancellor I served. Unfortunately, under this Government a number of serious flaws now put the original aims at risk.

With relatively few working families currently on universal credit, the six-week lack of income is right now the most visible problem. But, in time, the consequences of the very significant cuts made to in-work support since the reforms were first announced will do even greater damage to the lives of the very families universal credit was created to help. The steady accumulation of cuts means universal credit will now be £3 billion a year less generous than the tax credit system it replaces. Some 3.2 million working families will be worse off, with an average loss of £48 a week. Some 600,000 of these will no longer be entitled to any support at all. Families with children will be hardest hit, with lone parents losing an average of £26 a week. Why, then, given the damage they will do, have these cuts been made?

The first reason is the previous Chancellor’s decision not just to reduce the deficit, which was of course a necessity after the financial crisis, but to tighten his fiscal rules still further, aiming to run a surplus. He made this not just an economic priority but an ideological goal, claiming that not doing so would be more than an economic failing: it would be a moral failing. Yet the Government have failed to meet a single one of the fiscal targets, and Britain now faces a third consecutive Parliament of austerity.

The second reason for these cuts is the choices the Government made about how to allocate resources within this fiscal straitjacket. At the same time as the previous Chancellor chose to cut working-age benefits in 2015, the Government also chose to cut £8 billion from inheritance tax. Indeed, since David Cameron introduced what he called “the age of austerity” in 2010, a cumulative total of £78 billion will have been spent by this Government cutting inheritance tax, all the while cutting £3 billion a year from low-income and middle-income families.

The IFS has calculated the distributional impact of changes to tax and benefits since 2015. The entire bottom half of the income distribution will see their incomes fall. The second-poorest decile will lose over £1,600 a year, while the second-richest will gain £400 a year. While the second decile will see an 8% fall in their income, the ninth decile will see a 2% rise. These are quite some choices the Government have made. They are not the inevitable consequences of reducing the deficit, nor the necessary result of living within our means, but deliberate policy choices reflecting their values: the choice to cut ever deeper into working families’ incomes, not out of economic necessity but ideological determination; the choice to cut £3 billion a year from the very poorest in society, while finding nearly £80 billion for the very richest; and the choice to see not meeting deficit targets as a moral failure, while failing to even measure child poverty targets.

You can see why. By cutting support for working families with children, the introduction of universal credit, far from reducing child poverty, will now increase it by over 1 million to 5.2 million, the highest ever level since records began. With 68% of children in poverty living in working households, universal credit should be tackling the problem of low pay, yet in fact it now does almost nothing to improve financial incentives. Working 25 hours a week will now leave a lone parent only £2 better off than working 16 hours under tax credits. Second earners will now keep only 37% of their pay. A family paying for childcare for two pre-school-age children will now keep only 6p in the pound, an effective marginal tax rate of 94%.

These reforms break the Government’s promise that work would always pay more than benefits, they betray a generation of children, and they expose a Government systematically targeting the poorest in our society while handing billions back to the better-off.

Public Bodies: Israel Boycotts

Lord Livermore Excerpts

Thursday 25th February 2016 Lords Chamber

[Lord Lester of Herne Hill (LD)]

My Lords—

[Lord Livermore (Lab)]

My Lords—

[The Lord Privy Seal (Baroness Stowell of Beeston) (Con)]

My Lords, I think that the House wishes to hear from my noble friend Lady Eaton.