Budget Statement

Lord McFall of Alcluith Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it is a pleasure to participate in this debate. I did not think I would see the day when Tory Back-Benchers cheered a Budget which introduced higher taxes, a Chancellor ordered wages in the country to go up by unilateral government fiat and a party ordered other people who owned homes—namely housing associations—to sell those homes. Perhaps next year the Chancellor will talk about getting the trains running on time.

The Chancellor said that this is a smaller-welfare, lower-tax economy—but it is absolutely not. This was a tax-raising Budget, not one of a tax-reforming Chancellor. There are £14 billion of tax increases, partly offset by £8 billion of tax cuts. We have perverse tax changes. The Minister mentioned the bank levy, which was introduced on 1 January 2011 and was intended to encourage banks to move to less risky funding profiles. The Parliamentary Commission on Banking Standards, on which I served, identified a bias in the tax system that encouraged banks to increase leverage and use debt rather than equity. We concluded that the tax system was “misaligned with regulatory objectives”. The commission recommended that the Government consult on introducing an allowance for corporate equity. Instead, in the summer Budget, the Government announced a reduction in the bank levy, offset by a supplementary corporation tax charge of 8% of bank profits. This change penalises the smaller, safer challenger banks which we all wish to see improve competition in the market. The winners are the larger, too-big-to-fail international banks. Instead of the Government following the recommendations of the parliamentary commission, the tax system is becoming less aligned to the objective of a safer and lower-leveraged banking system.

The first headline conclusion from the Budget is that its changes are regressive: the IFS has made it very clear that the Government take from the poorer rather than the richer households. Secondly, the Budget penalises hard-working people. George Osborne has talked about strivers and shirkers, but it is the strivers being penalised in this Budget. Thirdly, the Budget will do nothing for skills, work incentives or the productivity agenda. This Government have had the worst possible record on productivity for the past six years. The Governor of the Bank of England at the time, Mervyn King—now the noble Lord, Lord King of Lothbury—came before the Treasury Committee and said that productivity was the urgent issue for government, but nothing has been done to date. Lastly, there has been no attempt, as I mentioned, to simplify or reform a creaking tax system. The key fact is that the increase in the minimum wage cannot fully compensate for the major losses experienced by tax credit recipients.

We have seen one language for the campaign trail but another for legislating for regressive change. Already, one manifesto commitment—the £72,000 limit on an individual’s liability for care—has been abandoned. When it comes to strivers, 3 million receive working tax credits, which are there to supplement income, but they will all lose a minimum of £1,000 a year. Two out of three children growing up in poverty are from working households. What will this do for aspiration and social mobility? The Government have also abandoned the child poverty targets which they signed up to in the Child Poverty Act 2010. The Welfare Reform and Work Bill currently going through Parliament removes the four child poverty targets set out in the 2010 Act and the Government’s duty to meet those targets. The remit and the name of the Social Mobility and Child Poverty Commission have now been changed so that it will become the Social Mobility Commission. The term “child poverty” has been expunged from the language of government.

However, sadly, a dominant feature of the Government’s language is the pejorative use of the term “welfare”. Let us remind ourselves what welfare is. The welfare budget is £220 billion, £90 billion of which—41%—is the state pension. That will be untouched. We have housing benefit of £24 billion, or 11%, and we have tax credits of £30 billion. So when we talk about tax credits, let us get them into perspective in terms of the welfare budget and welfare provision. The Government have decided to protect the majority of the welfare budget, but that will produce intergenerational barriers. For example, under-25s are excluded from the minimum wage, penalised on housing benefit and discriminated against in terms of student grants. That is the experience being felt on the ground today.

A Caritas Social Action Network report dropped into my postbox this morning. Its overview says that it,

“has found that the welfare changes of the past five years and the delivery of those changes in the UK are pushing claimants and support staff to the edge of their capacity”.

It adds:

“Staff of CSAN charities are under increased pressure to provide support in the face of a rigid welfare system, which they see as a return to ‘Victorian’ poverty, and which prevents them from addressing the underlying, long-term issues in their clients’ lives”.

For short-term gain, the long-term issues have been ignored. That is Caritas saying that, not anyone else.

The FT has also stepped into the argument. I am not talking about the Morning Star here, but the FT, which I have been looking at over the past few days. It has said that because of the abolition of local government watchdogs, the changing and diminishing role of local government in England has been starkly exposed. There have been £18 billion of cuts in real terms since 2010, with another £10 billion due by 2020—twice the rate of cuts to UK public spending as a whole. What does that mean? The FT is very clear what it means. That £18 billion budget cut affects the elderly: 65 out of every 1,000 people aged over 65 were receiving care in their own home in 2009-10; the equivalent figure for 2013-14 was 46. There were 694,000 children on the Children in Need register in 2009-10; the equivalent figure now is 781,200—a 12.5% increase.

This is against the background of a severely weakened international system—one that, not least, has not been assisted by the debacle in Greece. We have seen one-third wiped off the value of the Chinese economy in the past month, equivalent to €1.5 trillion being destroyed, enough to write off Greece’s debt five times over. We have seen a political Chancellor directly intervening in the market, but without explanation, consultation or a measured approach. Maybe the Chancellor is master of the Treasury and the Government, but as time passes, perhaps he will be a servant of the economy.

Budget Statement

Lord McFall of Alcluith Excerpts

Wednesday 25th March 2015 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it is a pleasure to engage in this debate. I want to focus on three areas: first, the fantasy figures given by the Government in the Budget; secondly, the productivity puzzle; and, thirdly, the issues raised in Who is my Neighbour?, the Church of England document, which was welcome.

The Budget last week was nothing other than a party political broadcast with fantasy figures. The OBR was very clear: it is a rollercoaster by which public spending will fall to the floor for the first two years of the next Parliament, with cuts the gravity of which has not been seen to date. But miraculously, it will all recover the year before the next election, with £12 billion extra spending for largesse. It seems that the Chancellor’s reputation grows with every failure. Would he balance the books by 2015? Easy. He failed. In the Autumn Statement last year he predicted a £23 billion surplus. He failed; it is now £7 billion. He promised £12 billion in future welfare cuts. When asked to explain from where they would come, he could not explain. Notwithstanding all the rhetoric on social security, it has done nothing because the social security budget was £220 billion in 2010, and is still £220 billion. The policy in those areas has failed.

As the IFS has said, we are left guessing about radical cuts. The NAO’s Amyas Morse has said that the Government are performing radical surgery without knowing where the heart is. This has ensured that the election debate to come will be about spending cuts. The OBR has said that that sharper squeeze in 2016-18 is indeed savage. The IFS questions whether cuts on that scale can ever be delivered. This is against a background of the slowest recovery on record. Paul Johnson of the IFS was clear. He said that household incomes crawling back to pre-recession levels seven years after the crisis is no cause for celebration.

We have a Chancellor under whom consumption, rather than production, has defined the economic approach. The biggest failure has been mentioned: the lack of productivity growth between 2010 and 2015. It has been stable for the past 40 years, although not at great levels; but it was nonexistent from 2010 to 2015, thereby undermining wages and incomes. The failure to understand productivity undermines confidence in the accuracy of any figures produced by this Government. The economy normally grows at lower rates after financial crises, but stagnation in productivity is extremely rare, and that is what we have witnessed. The question for the next Government is: is this temporary or permanent? The answer will determine our future economic prospects.

There is a dissonance between what the Government state is a “long-term economic plan” and what is happening in the country. Help to Buy ISAs and pennies off a pint are insignificant compared to what is happening in the country, particularly when put against the big picture. That big picture, on which the Government have failed, is a lack of a national infrastructure board, a lack of decentralisation to ensure that local economies prosper, and a lack of a productivity plan. We need a 20-year productivity plan, with annual reports to Parliament, so that we get this right. The Government have gone on about supply-side policies, but such policies on transport, housing and skills have been wanting. I am a member of the Economic Affairs Committee, which today published a report on HS2. The £50 billion of public investment, with £31.5 billion in direct subsidy, should be set against the background of no national transport infrastructure plan. How can one plan for a country without that? When Sir David Higgins came before the committee he was very clear. He supported an east-west line for the north. I asked him why. He said, “I talked to people in Manchester, who told me that it was a good idea, and I accepted that”. That is not the way to go about developing our transport and economic policies.

In 2013 we completed the lowest number of houses since 2010, and that includes a reduction of 5% in 2012. There was a time, in the 1950s, when a Tory Government under Harold Macmillan had an ambition to build 300,000 houses, and they did. Sadly, there is no ambition here on one of the most pressing problems facing people in this country, particularly young people.

This Budget is a manifesto for a meaner Britain. We need to re-inject a politics that is about beliefs and society. That is why I welcome the Church of England report, Who is my Neighbour?. It is very clear that today in Britain it is impossible to support a family on the minimum wage. The report notes burgeoning in-work poverty, whereby 75% of the welfare cuts are to the working-age population. The stark truth is that parents with low-wage jobs and young people have suffered most in this crisis. If we are to recommend a manifesto that is more tolerant, efficient and productive for the country, we could start with the six key values which the Church of England bishops have written in their letter regarding the general election.

The debates about the Budget have centred on the dry currency of figures, rather than on people’s lives. But we have a choice. A no less august body than the Financial Times was very clear in its leader when it said:

“Nothing is inevitable about Britain’s fiscal path”.

We can:

“Pursue an absolute surplus with further tax cuts”,

and thereby have,

“deep cuts in welfare and unprotected departments”,

Or we can:

“Raise £10bn in tax and allow borrowing for investment, and public spending austerity may come to an end next year”.

Those are the words of the Financial Times, not mine.

These are all feasible choices. No one can say at the next election, “There is no alternative”. People’s future livelihoods are indeed at stake at a time when there is disengagement and disillusionment among the electorate. The centre is being questioned as to whether it can hold in Westminster. There is a duty to consider the human and the societal elements, and the sentiments embodied in Who is my Neighbour? are a good start.

“The care of human life and happiness, and not their destruction, is the only legitimate object of good government”.

Those words are not from the Church of England document or Labour, but Thomas Jefferson. That cry is still relevant hundreds of years later. The Government have failed in all three areas and it will be up to the next Government to tackle these important subjects after the election comes in fewer than 50 days.

--- Later in debate ---

[Lord Deighton]

Inequality has not increased at all between the previous Government and this Government. That is not to diminish the problems that people at the bottom end of the scale face. This Government have tried to deal with the root causes of poverty: worklessness, low earnings and poor education. That is where the Government’s premier programmes have been addressed. The number of workless households has fallen by about 600,000 under this Government. Many noble Lords, including my noble friend Lord Shipley, have commented on the situation with respect to employment and the number of jobs that have been created. The noble Baroness, Lady Smith, asked how tax receipts could come down when employment went up. The reason was that we moved up personal allowances and took people out of tax. It is as simple as that.

This Government intervened in many critical ways to protect living standards for people. I shall not go through the list again because we do not have time. The noble Baroness, Lady Thornton, and the noble Lord, Lord Davies, cited zero-hours contracts. They represent just over 2% of the total workforce. Of the jobs created, the majority are at the high or middle end and the vast majority of them are full time. The party opposite should accept that creating 2 million new jobs is okay. It does not have to keep describing what the problems with it are. It is actually a good thing; it is part of the recovery. It is much better to have those people in work. As I have said, the jobs are principally at the middle and high end and they are permanent jobs.

Our focus has been on trying to protect the young and old. We have protected pensioners through the triple lock. The measure again tells us that pensioner poverty is at an all-time low. I listened carefully to the comments made by the noble Baroness, Lady Thornton, about disability. Probably my most rewarding experience in the past 10 years was working on the Paralympics and seeing the difference that they made to people’s perception of the ability in disability. That is a legacy that, on a cross-party basis, we should absolutely build on.

I shall talk about spending cuts as there is significant concern about the potential impact of continuing, in the words of the noble Lord, Lord Layard, the dismantling of public services. That is absolutely not the intention of spending taxpayers’ money more carefully, of looking at ways of reforming public services, of being focused on the outputs and of being more efficient about the inputs that go into them. There is still significant opportunity for reform in delivering public services more efficiently, and that is where the focus of the spending cuts should and will be.

The noble Viscount, Lord Hanworth, asked where privatisation fitted into it. I make no apology for this party being careful with taxpayers’ money. If you really want to look at the record of this Government, we adhered precisely to the spending plan we set out five years ago. We have delivered that in a disciplined way with the public’s view of public services being that they have in fact improved. That is the evidence.

A number of noble Lords, including the noble Lords, Lord Bilimoria and Lord Davies, referred to the defence budget. Let me restate that at £34 billion, we have the second-largest defence budget in NATO. It is the largest in the EU. We are currently spending 2% and we will decide what to do at the next spending round. Again, my preferred approach to spending is that we have to have a plan and understand what we are trying to accomplish, and the budget numbers flow from that. It is about what you are trying to accomplish. I am delighted that the right reverend Prelate the Bishop of Portsmouth was able to acknowledge the tripling of the church roof fund.

Let us switch to the deficit. It is at the heart of the differences in fiscal policy between the parties. We have discussed the case put by the noble Lord, Lord Skidelsky, over the past few years. I was taught Keynesian economics at the feet of the noble Lord, Lord Eatwell, so I certainly understand the theory, but in 2010 this country had a massive, unsustainable deficit and the practical situation was that action needed to be taken to reduce that deficit in order for the public and the markets to have confidence. Frankly, we were faced with no other option but to deal with that as the primary objective and responsibility of government at that time. Had we not dealt with it as effectively as we did, it would have been an irresponsible act and would have left us substantially exposed to future debt costs. It is a bit like a vastly overweight person saying, “I’m going to start a diet in two years’ time, but in the mean time, keep serving me the chips and chocolate”. That is how it would have been.

[Lord McFall of Alcluith]

The Minister talks about the debt, but let us think of the debt that they inherited in 2010, which was £870 billion. That figure has now almost doubled to more than £1,500 billion. Why has that debt doubled in a period when there has been a mania from the Tory Front Bench about having to pay off the debt?

[Lord Deighton]

Technically what happened was that we stuck to the spending plans, growth did not recover as we expected, principally because the rest of the world was in recession, so the tax receipts did not come in, and the deficit continued to go up. That is the reality of the situation. If you listen to the two sides on the deficit argument, one is asking why we have not cut fast enough and the other is saying that we have to cut a little slower. I think that, given the circumstances, my right honourable friend the Chancellor has navigated the balance very effectively. My noble friend Lord Flight made that point.

[Lord McFall of Alcluith]

The Minister has failed to answer. In the light of his failure to answer, will the Government adopt a more modest approach to this situation and recognise their failure on debt over the past five years and the kid on that they are trying to exercise on the British public?

[Lord Deighton]

The Government’s strategy is crystal clear. The benefit of getting the deficit under control is absolutely worth it in terms of fixing the roof while the sun is shining. That is the philosophy. To do it over a two-year period and to get control of our public finances so that we can then grow and focus on, for example, the productivity argument I shall speak about in a minute is the critical part of the argument.

Economy: Public Finances

Lord McFall of Alcluith Excerpts

Tuesday 24th March 2015 Lords Chamber

[Lord Newby]

My Lords, last month’s trade figures were the best for 15 years. No doubt the noble Lord would say that that is not good enough. However, we have spent more money more effectively through UKTI in building up our trade with less traditional countries such as China. Further support was given to that in the Budget.

[Lord McFall of Alcluith (Lab)]

My Lords, in 2010 the Government inherited £786 billion of debt. Five years later that figure is now £1,540 billion—almost double. The Chancellor in his Budget said that the Government were paying the debt down. Was he telling the truth?

[Lord Newby]

My Lords, it is no secret that this Government have borrowed over half a trillion pounds as we have slowly got to grips with the mess we inherited. Debt has come down by about 1% of GDP for each year we have been in government—the level of consolidation that the IMF says is most appropriate in these sorts of circumstances.

Income Tax: Top Rate

Lord McFall of Alcluith Excerpts

Monday 16th March 2015 Lords Chamber

[Lord Newby]

My Lords, there has been a reduction in the amount paid in bonuses in the City. This will undoubtedly have meant a fall in the amount of tax on those bonuses, but I am sure that the whole House will welcome that development and hope that it will lead to something of a change in bank culture.

[Lord McFall of Alcluith (Lab)]

My Lords, I refer the Minister to a recent ONS study which looked at the combination of direct and indirect taxation and found that the group paying most—paying more than the really well-off—was in the bottom quartile. Is not the big social injustice in the tax system in this country that the poorest are indeed paying the most? That is not helped by the Chancellor, George Osborne, and his cohorts rubbishing social security and welfare payments. Does the Minister not agree that that only compounds and exacerbates the problem that we have in our iniquitous tax system?

[Lord Newby]

But, my Lords, the top 1% of income tax payers is now paying between 27% and 28% of all income tax, which is a higher proportion than at any point during the last Labour Government. The two changes that I have mentioned, which bring in more than £6 billion extra a year, apply only to the highest earners.

Small Businesses: Finance

Lord McFall of Alcluith Excerpts

Wednesday 25th February 2015 Lords Chamber

[Lord Newby]

I am extremely grateful to my noble friend for his suggestion.

[Lord McFall of Alcluith (Lab)]

Can the Minister explain why the British Chambers of Commerce has stated that small and medium enterprises are being increasingly left out in the cold by lenders?

[Lord Newby]

As I explained, gross lending to small businesses was up by 25% last year. That is the figure, my Lords. The noble Lord shakes his head, but that is the figure. Banks have not been as open-handed to small businesses as they were before the crash, partly because at that stage in some cases they were lending irresponsibly and partly because they have had to strengthen their balance sheets—something which the noble Lord has been very keen to encourage.

Credit Unions

Lord McFall of Alcluith Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Newby]

Absolutely, my Lords, and I commend the noble Lord for his work in this area. Increased collaboration is vital if the sector is to become more competitive and grow. The Credit Union Expansion Project, to which the noble Lord referred and which the DWP is funding to the tune of £38 million, is aimed at doing exactly that—for example, by providing shared back-office services to cut costs. However, the sector would also be strengthened if it were able to speak with one voice, which requires a reduction in the number of trade associations currently operating in the sector.

[Lord McFall of Alcluith (Lab)]

My Lords, our ambitions for the growth of credit unions on a national scale have a long way to go. Given that banks and building societies have extensive networks and operational systems, is there now a case for the Government to consider establishing a community reinvestment Act, as in the United States, as a solution to the problem of providing affordable finance for all individuals?

[Lord Newby]

My Lords, there is scope to look at a whole raft of new initiatives, to make sure that there is access to finance for people on more modest incomes. One development in recent weeks has been agreement with the banks on fee-free basic bank accounts, which will be a good improvement for many people who are currently denied even the most basic bank accounts.

National Infrastructure

Lord McFall of Alcluith Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, I congratulate the noble Lord, Lord Adonis, on generating this debate. I shall focus on three areas: the mindset of the Government, the present strategy, and the consistency or inconsistency of approach. The Government’s mantra has been fiscal consolidation, which is nothing more than a euphemism for cuts in public spending. That view was shared by the IMF, but it changed its tune dramatically in October, in its World Economic Outlook, where it said that there was a need for a substantial increase in public infrastructure investment globally. It asserted that properly designed infrastructure investment would reduce, rather than increase, government debt burdens. In other words, it would pay for itself. There is therefore an overwhelming case for investment now, and on a substantial scale.

The second issue is strategy. The Government’s strategy needs to embrace the entire country. That is mentioned in their document on transport, Rebalancing Britain, but it has to mean what it says.

I note that the Prime Minister is in Scotland today. He has to emphasise that the tools to deliver such projects need to come from the decentralisation proposals which will be implemented in England and the devolution proposals which will be implemented in Scotland, Northern Ireland and Wales.

The Economic Affairs Committee is looking at HS2 at the moment. I had a revealing exchange recently with Sir David Higgins, who is in charge of that. Sir David is a man of great integrity and impeccable professional credentials. However, I questioned him about his statement that we need an east-west train line in the north of England. He had called for that to be built alongside HS2, at a cost of £15 billion. It was revealing that Sir David replied:

“I do not think we were even talking about east-west six months ago, and as I started spending time with northern politicians, a number of them said, ‘Why do you not at least consider the issues?’ … the more I thought about it the more I thought that this debate needs to be had”.

Under questioning from me on whether the six-month timescale added up to a national strategy, he replied:

“You are right, so it is not a national transport strategy”,

so we are building HS2 without a national strategy. His advice to the committee was that,

“you need to say, ‘There needs to be a national transport strategy’”.

Two conclusions can be drawn from that: first, that we have a London-centric approach; and, secondly, that we have a lack of clear strategic planning. The Public Accounts Committee report published last week was very clear that the Department for Transport is making decisions about which programmes to prioritise for investment on unclear criteria. Indeed, it has still to publish proposals for how Scotland will benefit from HS2, including whether or not the route is extended into Scotland. What goes for transport goes for other areas such as energy, airports and housing, which have been mentioned.

The third issue is inconsistent government policies. To deliver projects there needs to be public-private collaboration. There was a great initiative a few years ago whereby pension funds were going to invest £25 billion in infrastructure projects. However, for them to do so, they needed to match their investment with long-term liabilities. The Chancellor radically redesigned the pensions landscape in the 2014 Budget. The result will be a net gain to the Treasury in the next four years of £3 billion, and £17 billion a year by 2030 at 2013-14 prices, but uncertainty for pension funds and long-term investment.

There is a case for greater certainty in long-term strategic policy. That can be delivered only by an independent national infrastructure commission, as has been said. Sadly, that task will be left to the next Government, who need to make it a primary responsibility.

Childcare Payments Bill

Lord McFall of Alcluith Excerpts

Wednesday 17th December 2014 Lords Chamber

[Lord Newby]

My Lords, I absolutely take that point. However, as my noble friend will be aware, the chairman of the committee wrote to my honourable friend and she replied to the chairman of the committee a couple of days ago, I hope giving useful information which will be for the benefit of the committee.

[Lord McFall of Alcluith (Lab)]

My Lords, on the issue of childcare, as chairman of a civic welfare and benefits group in Scotland, along with my colleagues in the churches, trade unions, local authorities and charities I visited a food bank in Drumchapel last week. We were informed there that over 25% of the clients were working poor, mostly women with childcare needs. That supports research for the Joseph Rowntree Foundation which stated last year that there were more working poor in the UK than non-working poor households. Given that situation, if the Government are to live up to their rhetoric of helping hard-working families, is there not a case for Iain Duncan Smith—who, incidentally, visited Drumchapel—to look at this situation urgently so that we can indeed help the working poor and so that the Government can live up to their promises?

[Lord Newby]

My Lords, the Government are doing a whole raft of things to help the working poor. One of the main reasons why the working poor are quite so poor is that they are not working as many hours as they would like to work. One of the interesting findings from recent survey evidence is that nearly a quarter of employed mothers said that they would increase their working hours if they could arrange reliable, convenient, affordable and good-quality childcare. Many of those are exactly the kind of parents to whom the noble Lord referred.

Bank of England

Lord McFall of Alcluith Excerpts

Thursday 30th October 2014 Lords Chamber

[Lord Newby]

My Lords, that is an extremely sweeping statement and I would need prior notice before I felt that I could absolutely agree with it in every case.

[Lord McFall of Alcluith (Lab)]

My Lords, in 1999, Alex Salmond described the Bank of England as a “millstone round Scotland’s neck”. Fifteen years later, he was pledging his love and fidelity to it. Does that not prompt the question that, if it was good enough for Alex Salmond as the Bank of England, it is good enough for the rest of us?

[Lord Newby]

I am not sure that that is a general principle that one would wish to apply more widely.

Young People: Alternatives to University

Lord McFall of Alcluith Excerpts

Thursday 23rd October 2014 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, I warmly welcome the debate initiated by my noble friend Lord Monks on the grounds of my being an early school leaver at 15 years of age, who started off in the vocational line, and also subsequently as a deputy head teacher responsible for what we damagingly refer to as “Christmas leavers”. These were young people who were in school but were not going to university, damaging their self-esteem in the process. Compared with their contemporaries in full-time higher education, these young people in the vocational scheme had a lack of structured support and pastoral care. Consequently, the challenges facing them were considerable. They faced these challenges largely alone. The best advice matching their skills and abilities was absent.

Such individuals—and the poorer ones in higher education—are still coming off worst in Scotland. A recent study by Edinburgh University’s Centre for Research in Education, Inclusion and Diversity concluded that only students from relatively high-income homes enjoy consistent, superior benefits from the Scottish education system. It has seen a transfer from low-income to high-income households. It adds that the Scottish system of higher education does not have the egalitarian, progressive effects that are commonly claimed for it.

It is important to debunk these notions. The bias against poorer individuals and those not in higher education is even more skewed. If there is an opportune time to reappraise this bias it is now. Youth unemployment in the country is greater than 17%; there are almost 900,000 young people still not in work.

The age of austerity is giving way to the age of secular stagnation. The characteristics of this are high unemployment, increasing poverty, wage stagnation and debt burdens. As we have seen this week with this Government, debt burdens do not decrease. The buzzword in the markets, the IMF, the World Bank and other global institutions is “investment”. We need an economic system that offers hope, not despair, and one that serves the interests of everyone.

We have cheated our children through lack of public investment and a failure to provide jobs. The policy for young people has failed. My noble friend Lord Monks referred to the document, Sense and Instability, produced by the City and Guilds. That looked at the record for the past 30 years. He quoted a number of points, not least the 61 Secretaries of State. The policy has been flipped between departments or shared with multiple departments 10 times since 1980.

Given this catalogue of failure, we can conclude only that a single youth policy agenda across government departments is necessary. Devolution to local level, where the needs fit the training, is very important, because of the huge gap in skills. That way we could encourage diverse, high-quality routes into work. Is it not time to commit to a youth guarantee to fill that skills gap—a guarantee that gives high-quality training placement or a paid job? My noble friend Lady Taylor said that such a youth guarantee should establish parity of esteem between vocational education and the academic route.

We must recognise that the UK economic has been damaged since the financial crisis in 2008. The Institute for Public Policy Research concluded recently that full economic recovery will not solve the youth unemployment problem. The link between youth unemployment and economic growth, between youth unemployment and GDP, is broken—not least in the striking mismatch between what people are training for and the types of job available.

Without radical change by the Government focusing exclusively on a coherent youth policy and a decentralisation of the responsibility for skills development to local level, where the needs of availability of young people with the required skills coalesce, and without the parity of esteem between vocational and academic education, we shall simply repeat the mistakes of the past. The next generation’s economic, social and life-enhancing prospects are too important to allow such an opportunity to change course. We cannot allow that to happen by default.

This debate has been timely and crucially relevant. I congratulate my noble friend Lord Monks for instigating it.