Queen’s Speech

Lord McFall of Alcluith Excerpts

Tuesday 15th May 2012 Lords Chamber

[Lord McFall of Alcluith]

My Lords, I am very pleased to participate in this debate. At the beginning of the day, the Minister said that the debate would be about the kind of society that we want. With that in mind, we should focus on things like character, competence, cuts and confidence, the first two relating to the personalities and actions of the Prime Minister and the Chancellor and the latter two relating to the well-being of society as a result of the Government’s policies. We have seen, even today, that austerity alone has been discredited in Europe and the UK. As a result, we need a new vision and a narrative that have been missing to date. I suggest that it is on that acid test that the Government’s character and competence will be measured.

The truth that is catching up with the Prime Minister and the Chancellor is that the problems in the UK were not exclusively home-made. The proposition that we were like Greece is absurd. The reality is that while the Chancellor has tried to peddle the UK as having been more like Greece, he has made us more like Spain in the process. In 2009-10, growth as a result of Alastair Darling’s stimulus was 3.2% while Spain’s was zero. Now, after six quarters of UK negative growth, we have 0.2% negative growth compared with Spain’s growth of plus 2.4%. What is missing from the lexicon is the “g word”—growth. There were hints before the Queen’s Speech that this would be addressed, but on the day after it the front page of the Telegraph said, in bold:

“Why was there no plan for growth?”,

while the Sun editorial said:

“Plans to boost the economy amounted to tinkering rather than a full-blooded assault on unemployment”.

Those are two comments with which I fully agree.

The Chancellor has to show his character here. Let us forget about him admitting that his strategy is wrong; but he has to address the concept of growth. Without that, confidence in the country is seeping away day by day. Justin King, the chief executive of Sainsbury’s and a member of the Prime Minister’s business advisory group, has said that he has not seen a consistent pursuit of a clear policy. The consequences will be greater inequality, a greater north/south divide, increasing welfare dependence, increasing unemployment and ambition and social mobility checked at source.

On the issue of cuts, the IFS has said that the real-terms spending cuts of £100 billion targeted between April 2011 and March 2017 will see £33 billion of them falling in the final two years of that period. So in 2015, an election year, sizeable cuts will still have to be delivered. If you want to see how austerity measures are killing confidence, look at the company sector, which took £72 billion out of the economy in 2010 and £80 billion last year. Non-financial companies increased their holdings of currency in bank deposits by £48 billion in 2010 and £62 billion in 2011. That takes the total to £754 billion sitting in companies’ balance sheets doing nothing—a staggering 50% of UK GDP—while we have youth unemployment of 1 million. My experience as a teacher in Glasgow in the 1980s was that these young people with no chance end up in a lifetime of penury, social inability and the likelihood of mental health, alcohol and drug problems, and the result is that they have an increasing reliance on the state rather than less reliance on the state.

That is why I welcomed the coalition’s commitment that it would adopt the Labour Government’s 2020 target to eliminate child poverty. However, the IFS is saying at the moment that the Government’s spending plans are putting into reverse the progress that had been made on that in the previous few years. I suggest to this House that an increase in child poverty is not an example of the broader shoulders taking the greatest burden. The Government promised that the poorest 10% would lose the least, but the reality is that the poorest 10% are losing more than anyone except the richest 10%.

I have two suggestions for the Government. The first is to postpone the change to the hours rule for couples claiming working tax credit. That was predicated on OBR predictions in 2010 that the economy would swing back to strong growth. That is not happening, and as a result 200,000 low-income families will be affected by this. It will dramatically worsen child poverty in its extent and severity and will create a situation where people will be better off leaving their jobs, to the detriment of the economy. I suggest that the Government’s slogan of “Making work pay” has a hollow ring.

The second issue is rebalancing the ratio of spending cuts to tax rises. The Government have said that that ratio is 4:1. That will dramatically change the situation against people on low incomes. The Conservatives’ approach during the recession of the 1990s was to adopt a ratio of 1:1. It is for this Government to realise that 4:1 guarantees that the distribution of the burden will be skewed towards those at the lower end of the income distribution scale.

The electorate are looking for authenticity and empathy, and those have been missing from the debate just now. If we are looking at what type of society we want, there are a number of fundamental questions that should guide us. Are the increasingly high levels of economic inequality in society a problem? Should the Government be concerned at the high social and economic cost? The Joseph Rowntree Foundation says that child poverty is costing the UK £25 billion per annum. What action should we take to reverse the scandalous situation where the poorest children are likely to live for 10 years less than the more wealthy? Do we have an obligation to tackle this? We do, but it can be done only if the Government demonstrate their character and competence in these bleak times.

The death slogan “Austerity alone” needs discarding. Confidence needs to be restored in order to give individuals and communities hope for the future. Only by doing that will the Government demonstrate the authenticity and empathy suggested by the slogan, “We’re all in this together”. Otherwise it will be seen merely as an empty gesture.