Global Economy

Debate between Lord Sassoon and Lord McNally

Thursday 11th August 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful for the opening remarks made by the noble Lord, Lord Eatwell, but subsequently I heard little that I could recognise as a coherent alternative or even critique of the Government’s policies. On the one hand, the noble Lord talks about the austerity imposed by this Government, which seems to imply that he would like more spending; on the other hand he complains about the dangers of a rising deficit and the forecasts of a rising deficit.

The noble Lord says we should be spending more. Well, if we did not have to spend £120 million a day on debt interest we could be spending it on more police, schools, hospitals—you name it, we could have it. It is precisely because of the record debt, the largest deficit, that we inherited from the previous Government that we are in the bind that we are. That is the answer to his first question about why the UK growth performance has been so weak. We are struggling under the massive burden of debt that was inherited.

The noble Lord challenges the comparison that my right honourable friend made between the stronger performance of the UK economy in recent months compared with the US economy. I give him another statistic: in the UK we now have unemployment of 7.7 per cent, while in the US it is 9.2 per cent. Again, the idea we can somehow look at some mythical way of stimulating the economy to get us out of the bind that we are in is the stuff of dreams.

There were one or two things on which I agreed with the noble Lord, Lord Eatwell. We share an agreement that the eurozone needs to strengthen its institutions. As my right honourable friend the Chancellor said in his Statement, we would welcome the strengthening of the eurozone’s institutions to have real bite in the fiscal co-ordination that there needs to be. If strengthening the eurozone’s management of its fiscal affairs requires treaty changes among eurozone members, we will look sympathetically at that. But as my right honourable friend made clear, that is for the eurozone; the UK will be supportive of its efforts but we will not directly be part of them.

On growth, the noble Lord quoted various things from the Bank of England’s report. The critical thing in yesterday’s report—this is consistent with the Office for Budget Responsibility’s analysis—is that the Bank of England’s forecast for UK growth is 1.5 per cent this year and 2.1 per cent next year, rising to 2.6 per cent in the year after. Although the economic and market conditions are very difficult and fraught with danger, we must not forget that, provided we hold to our plan, provided we remain the safe haven that the UK has become, provided we continue to give our householders and holders of mortgages the benefits of very low interest rates and we continue to give businesses the ability to refinance their debt at those low interest rates, it is that that will underpin the confidence that business needs to invest and individuals need to spend their hard-earned money. That is the fundamental basis on which growth will come.

As my right honourable friend has said, we had a significant plan for growth six months ago. Within the past six months the Treasury has published a progress report to show how far we are getting, including tackling some of the most difficult issues such as the planning rules in this country. We will come forward with more growth-supporting measures this autumn, and that is what will enable this country to get out of the mess that we inherited from the previous Government.

[Lord McNally]

My Lords, I remind the House that we will now go to a 40-minute session that will follow the precedent of the previous Statement. There will be no immediate answers from the Front Bench but a response at the end. I suggest that we start with my noble friend Lord Oakeshott and then circulate as usual. Forty minutes, even for economists, should be okay.