Economy: Budget Statement

Lord Skidelsky Excerpts

Tuesday 13th November 2018 Lords Chamber

[Lord Skidelsky (CB)]

My Lords, I welcome the general thrust of the Budget. As the OBR says, it represents the “largest fiscal loosening” since 2010. Noble Lords have suggested that the Chancellor is spending his windfall, but I mistrust the language of “windfalls”. Windfalls are only forecasts of revenue based on forecasts of growth; they are not there under the bed, so to speak, and should be given the credence they deserve—which is very little.

Let us put that aside. We are not here to discuss the Budget, over which we have no control. We are here to discuss, as per the terms of the debate, the economy in the light of the Budget Statement—that is, how the Budget will affect the economy. The answer is: very little. The loosening of which the OBR speaks is much too small to repair the damage caused by eight years of austerity. An adequate loosening would have required an economic understanding and a moral compass beyond the reach of this Government.

The Conservative Party’s narrative has been unchanged for 10 years. The Conservatives say that the recession was caused by the Labour Government; Mr Hammond twice called it “Labour’s Great Recession” in his Budget speech. He said that the austerity policy had nothing to do with ideology: it was simply necessary to clear up the mess Labour had left. Let me put it as bluntly as I can: this narrative is economically illiterate and morally fraudulent, yet the Conservatives have lived off it for the past eight years. That makes me very angry. Take the myth of “Labour’s Great Recession”. The idea that Labour was somehow responsible for the recession is ludicrous. The banks caused it, and Governments were left to clear up the mess. The Chancellor would have been more honest had he talked about the “Bankers’ Recession”—but no Conservative Chancellor can talk that way about his friends.

A slightly more reasonable version of Mr Hammond’s story is that the Labour Government left a fiscal mess. This does not run, either. The economist Simon Wren-Lewis of Oxford University has made a detailed—and far from uncritical—analysis of Labour’s fiscal policy between 1997 and 2010. I will quote just two sentences. He said that,

“any claim that the UK fiscal position was dire before the onset of the Great Recession is not tenable”.

He also stated:

“The line that the Labour government was responsible for leaving a disastrous fiscal position … is pure spin”.


I want to emphasise that, although Professor Wren-Lewis supports Labour, no competent analysis of Labour’s fiscal record would differ greatly from that summary. In any of its forms, the story of “Labour’s Great Recession” is a myth.

Let us exclude the myth and ask whether austerity was a necessary policy in 2010, as the Chancellor claimed and as the noble Lord, Lord Higgins, who is not in his place, accepted. The answer is no. The economics of the matter are straightforward. If the private sector reduces its spending, the Government have to increase their spending to plug the gap. If they cut their spending as well, it deepens and prolongs the recession. The only counterargument is that austerity was needed to give confidence to the markets. But the evidence is unarguable that any confidence-boosting effect of cutting spending—on the poor, it must be said—was overwhelmed by its depressive effect on total spending.

No competent economic authority now disputes that this is what happened—so why go on denying it? Martin Wolf of the FT called austerity a “large unforced error”. That well-known left-wing firebrand Mark Carney, Governor of the Bank of England, estimated at the end of 2016 that austerity had,

“on average, subtracted around 1 percentage point from demand each year”.

Cumulatively, that has left the British economy about 6% smaller than it would have been; in round numbers, it knocked £125 billion off the economy in that period. We are told that the divorce settlement from the EU will cost £35 billion or so, but the coalition Government cost the economy £125 billion.

I do not want to claim that the past eight years have been a tragedy like the First World War, which we remembered recently, or even the great depression. I do claim that the coalition Government inflicted quite unnecessary harm on the British people, which they have never acknowledged or apologised for.

The Budget has to be judged by the extent to which it sets about repairing the damage. It is not enough to say that austerity is coming to an end; it has to be reversed sufficiently to make up for the harm that it has done. This cannot happen unless the harm is acknowledged.

The damage is most clearly seen in the low growth figures, which other noble Lords alluded to. Far from bouncing back as vigorously as is usual after a deep collapse, the British economy has been growing at less than 2% a year since 2010. That is well below its historic trend and, as the noble Lord, Lord Hain, pointed out, things are expected to get worse. The OBR forecasts growth to be 1.5% on average over the next five years.

These are dreadful figures. Britain is near the bottom of the G7 countries. If we take into account the growth in population and the large inequality in income distribution, there is little room for an improvement in the real living standards of most people in the next five years.

The reason for low economic growth is the collapse in productivity. British workers work longer hours than workers in Germany, the Netherlands, France and Denmark, but they produce less for those hours. Annual growth in productivity has plummeted from average annual rates of about 2.3% before the great recession to 0.4% in the past decade. The Resolution Foundation states that,

“had the pre-crisis trend continued, productivity would be more than 25 per cent higher than it is today”.

I agree with Andy Haldane of the Bank of England when he says that we have a “long-tail problem”, but our tail has become longer than it was because our path back to headline full employment—in itself very welcome—has consisted largely in multiplying the number of low-productivity jobs at the expense of high-skill services and manufacturing. Look at the cuts in investment in housing, education and public services since 2010 and you have a pretty good explanation for the collapse in productivity.

The Budget could at least have begun to reverse this trajectory. Instead, we are promised a bagatelle for the British Business Bank, “a little extra” for schools, public toilets and potholes, a little relief here and there—and yet another inquiry into the productivity puzzle.

Over everything hangs the fear of the deficit. Some commentators even fear that the Chancellor has given away too much, too soon if he is to balance his books—but balancing the books should never have been an objective of policy. Balancing the economy should have been the objective, with a balanced budget as the happy by-product of sensible policies for ensuring strong economic growth. The hard-working British people, whose praises the Chancellor never ceases to sing, deserve better than he is prepared to give.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I begin by echoing the words of the noble Baroness, Lady Noakes, in reference to the loan charge. I am also on the Finance Sub-Committee of the Economic Affairs Committee. This House will know that, in the other place, my colleague Stephen Lloyd, the MP for Eastbourne, put down an Early Day Motion on this issue; 100 MPs have signed it across all parties, reflecting the experiences of their constituents. These are ordinary people such as hospital cleaners, social workers and nurses, who found themselves moved out of their normal employment and did not have the scope or understanding to realise that they were being put into tax-fragile arrangements when they were moved over to work as contract workers. I ask the Minister to take this back. The public pronouncements that have been made, both by the Chancellor and the Financial Secretary, seem to suggest they do not understand that this is the kind of person affected rather than a handful of glamorous celebrities or footballers. It is crucial that that is drawn to their attention.

That was the first of the wind-up speeches; it is clear that the big announcement in the Budget was the £20.5 billion for the NHS. However, I pick up the point made by the noble Baroness, Lady Jolly, that this equates—if one looks across the whole budget for the Department of Health and Social Care—to a rise of only 2.7% in 2019-20, which is £3.2 billion short of the minimum increase of 3.3% necessary for the NHS and the full department just to stand still.

There is an impression created by the Budget that the problems in health have been solved. They have not. Health is still facing continuous cuts year on year. We have to be honest about that and many of us are very worried. Again, on mental health, to which the noble Baroness, Lady Jolly, drew attention, the money promised of £2 billion falls about £1.5 billion short of delivering the programme that was described. While additional money is welcome, it is well below the necessary promise. On social care, £650 million barely touches the borders of an overwhelming problem.

The noble Baroness, Lady Altmann, talked about how unprepared families are to deal with social care issues, saying that this Budget could have been used to deal much more widely with that underlying problem. The noble Lord, Lord Kerslake, and others referred to the LGA work which shows that by 2024-25 adult social care alone will face a £3.5 billion gap just to fund the national living wage and maintain existing standards of care. So even in health we are still in a cutting regime.

On the subject of non-protected budgets, the noble Lord, Lord Haskel, talked about further education but I should like to focus on schools. There was money for bits and bobs but we need £2.8 billion a year just to reverse the real-terms cuts per pupil since 2015. Schools need teachers to function but that has not been dealt with in this Budget.

Other non-protected budgets are those for prisons, police and local government, the latter of which was referred to by the noble Baroness, Lady Eaton. Picking up the point made by my noble friend Lord Fox, there are a few patches for this year but non-protected budgets will still be facing a 3% cut per person in real terms by 2023. I think that everyone in this House recognises the inadequacies of many of those departments when it comes to delivering the services needed by a reasonable and civilised society.

The noble Baroness, Lady Stroud, congratulated the Chancellor on the additional money for universal credit. However, I do not think it is adequate and nor, quite frankly, do most Members of this House. The money put back into work allowances equated to only about half the cuts made in 2015. The benefits freeze continues for another year and the newly self-employed continue to face overbearing minimum income requirements.

The noble Baroness, Lady Stroud, also talked about the tax credit debt rollover problem. According to the IFS, £4 billion more in welfare cuts is still to come—something that I think we all find reasonably challenging. I personally find it very unacceptable, and I wanted to pick up the point made by the noble Lord, Lord Horam. I am appalled that nothing has been done in this Budget to tackle the waiting time problem for people going on to universal credit. I have a personal friend—so I see it personally—who, because of the loan she had to take out to cover that period, is trying to live on £20 a week after rent. That is simply impossible and we should not have a universal credit system that puts people into that situation. The Chancellor missed an opportunity.

I was absolutely thrilled when the right reverend Prelate the Bishop of Chelmsford raised the green agenda, which we did not hear much about during this debate. This was a real opportunity to put down a marker, as the right reverend Prelate said, particularly after publication of the intergovernmental report on climate change. Why do we not have a 5p levy on plastic cups? I would have thought that the Treasury would welcome the money, as well as the impact that it would have on the overall plan to reduce plastics. Surely this would have been an opportunity to ban single-use plastics within three years, which is entirely doable.

The noble Baroness, Lady Altmann, talked about ultra-low emission vehicles and electric cars, the subsidies for which were cut, even though there were goodies in the Budget for oil and gas. That industry has real potential for the future of the UK. This would have been the occasion to reinforce that future and to make a substantial difference to the environment and the critical circumstances that we face.

I join various people in this House who have talked about our need to face up to the challenge of raising additional taxes. I think that we have a broken tax system and this should have been the Budget that began to deal with it. If we are to restore public services to the level at which we wish to see them and to do so in a fiscally responsible way, tax will be necessary. I do not just want a conversation on this; I want action. I have no problem with raising the personal allowance threshold for low earners, but at this time and in these circumstances it is surely inappropriate to raise the threshold for higher earners. I suspect that many, if asked, would gladly have forgone the promised £520 for the average high earner in order to help those left on the fringes of society. As one friend said to me, “It’s pretty hard to think I’m a priority when I see homeless people asleep in so many doorways”.

The Government could have made real headway with our public services and welfare crises if they had supported Liberal Democrat proposals to put a penny in the pound on income tax and dedicate it to the NHS and social care. Although they did not talk about the amounts, the noble Lords, Lord Kerslake and Lord Macpherson, pointed out the benefits of a hypothecated tax. The Government could have made real headway if they had returned corporation tax to 20%—I do not think that a penny of investment has been stimulated below that level. If they had restored capital gains tax to equate with income tax, if they had overhauled inheritance tax—many people talked about the importance of the challenge of taxing wealth as well as income—and if they had changed pension relief as we proposed, they could, as I said, have made real headway with our public services and welfare crises, delivering something like another £29 billion a year by 2020 to spend on those necessary and fundamental services.

Here I disagree with the noble Lord, Lord Skidelsky, because I think that fiscal responsibility is absolutely key to the future, and that is why I turn to tax-raising measures. I remember the Brown Government, and spending being based on the assumption that boom and bust had ended for ever. However, never underestimate the cycle—it comes back to bite you. His Government assumed that there would be no external events but we ended up with a phenomenal banking crisis. They also assumed a flow of taxes based on very high profits within financial services that, frankly, derived from abuse. When that abuse was ended, that revenue source disappeared. Therefore, I disagree fundamentally that there was no need for adjustment.

[Lord Skidelsky]

I intervene simply because the noble Baroness mentioned me. I am not against fiscal responsibility. Why on earth does she think that I am? I think that fiscal responsibility includes preventing crises, such as the one in 2008, and taking the right measures when a crisis has happened to restore the economy. I am not against fiscal responsibility. In fact, who is?

[Baroness Kramer]

I think that we will have to debate this off-piste or I will talk for too long.

Economy: Spring Statement

Lord Skidelsky Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord Skidelsky (CB)]

I am sorry to interrupt the noble Lord, but does he not remember that the debt-to-GDP ratio came down for all the years of Brown’s chancellorship until 2008?

[Lord Higgins]

Conveniently or not, I happen to have forgotten that. At all events, let me consider what the noble Lord has just said.

I am glad to see that the noble Lord, Lord Livermore, who had disappeared for a moment, is now back in his place, because what I really wanted to say is that although I did not agree with every single word he said, I very much agree with what he said in general. The Chancellor missed an opportunity to spell out how much more difficult his task had been made by implementing the results of the referendum.

In my view the referendum has produced a disastrous situation. Someone said at the time that people did not vote for a lower standard of living—but that is precisely what they voted for, and it is precisely what they are going to get. That is very deplorable indeed. I agree with the noble Lord who said that it would be helpful if the Chancellor had spelled out the fact that, because of the effect of that vote, we are facing even bigger problems than we otherwise would have done.

It is important that we should not go for a very hard Brexit. We had a debate yesterday about what was going to happen, and we had to reappraise the position. We were saying that we needed a meaningful vote on the result of the negotiations, and there was a long debate about that. Unfortunately, we did not have an opportunity to vote on the place we should start from. The trouble is that the Government started by saying that we are going to withdraw from the customs union and the single market. That will be dangerous and damaging. Parliament really must take a strong position and say that we cannot go along with the implications of Brexit if it means that the living standards of our people will be lower. I think that we have a duty to say that we will not go along with this.

Therefore, as it stands, it is a good Budget but it is a far less good Budget than it would have been if we had not been dealing with the initial implications of Brexit. The situation will certainly be better if we do not continue along that route but instead take a revised view on where the Government should stand on the single market and the customs union.

I add only one point, which was made yesterday, about the Irish border. If we do not leave the customs union, we do not have a problem, and if we do leave the customs union, we do not have a solution. That is the reality. However, overall I welcome the proposed changes to our financial proceedings and debates, and I believe that this is as good a Budget as one can produce in circumstances which are much worse than they would have been if we had not had the result that we did in the referendum.

--- Later in debate ---

[Lord Skidelsky]

My Lords, in his Spring Statement, the Chancellor saw,

“light at the end of the tunnel”.—[Official Report, Commons, 13/3/18; col. 718.]

The light is pretty dim, and the tunnel has been much too long. The two are connected, the dimness of the light being largely the result of the length of the tunnel, as I shall try to demonstrate.

First, I have a question about the light. Real GDP is expected to grow by an average of 1.4% a year for the next five years. This is just over half of the trend rate of growth before the crash. GDP per head is expected to grow by under 1% a year in that period. This is a picture of a stagnant, becalmed economy. In the 1950s and 1960s, Britain was often called the sick man of Europe because its annual growth rate was a miserable 2.8% a year. Now we are promised half of that as the new normal. Note that it is by no means the new normal for other countries. The United States is expected to grow by 2.2% over the next three years, the eurozone by 2% and the rest of the world by 3.7%. So our new normal is actually quite a lot worse than the expected new normal of most of our trading partners. The noble Lord, Lord O’Neill, asked whether this pessimistic estimate is credible; possibly not. I am not a great fan of five-year growth forecasts. But what I would say is that it has nothing to do with Brexit. As the OBR made very clear, these poor economic prospects that it sees are rooted in structural problems in the British economy, which have been there for quite a long time.

The OBR characterises the British problem as one of lack of supply, stating that the main indicator of this is,

“stagnation in productivity … since the financial crisis”.

I do not disagree with that, but what is lacking from the analysis is how a demand-side shock produced by the financial crash morphed into a supply-side problem. That is an interesting point of analysis which is underresearched. The explanation lies in the Government’s reliance on a market-led recovery. We now have a labour market that works pretty much as the classical theory tells us it should; that is, very flexibly and with a trade-off between wage growth and employment growth. With this kind of labour market, the economy rapidly returns to full employment, but it is a low-productivity level of full employment that leads inexorably to a low-productivity trap.

Output per hour worked grew by 2.3% between 1998 and 2008. Since the crash, it has grown by 0.3%. The fall in productivity growth would have been even greater had not hours worked fallen somewhat. The OBR has therefore said, rightly, that,

“a revival in productivity growth is essential”,

to sustain even the 1.4% annual growth of GDP.

This requires a return to the pre-crash level of investment. Public investment as a share of GDP has fallen from 5% in the 1960s and 1970s to roughly 3.5% today. Instead of compensating for the fall in private investment after 2008, George Osborne cut the state’s investment programme as part of his austerity Budgets. Low productivity is a direct consequence of the austerity policy.

We have now entered the Chancellor’s long tunnel and need to ask why it has been so long. This is the Chancellor on “responsible budgeting”:

“First you work out what you can afford. Then you decide what your priorities are. And then you allocate between them”.


This is absolutely fine, except that what you can afford is not independent of what you can do. If you can do nothing, there is an absolute limit to what you can afford, but that is not true of government. Government can raise taxes and increase its borrowing. The Treasury view, echoed by the Chancellor, is that such measures cannot bring about a net increase in government revenue because they reduce private sector activity by an equivalent amount. That is the real meaning of that little moral tale that the Chancellor has advanced.

This is exactly the same as the old Treasury view of the 1920s. For example, Winston Churchill when he was Chancellor of the Exchequer said in 1929 that,

“very little additional employment and no permanent employment can in fact and as a general rule be created by State borrowing and State expenditure”.

We thought that Keynes had demolished that doctrine, but it has returned with a vengeance. Since 2010, the Treasury and the OBR have been united in the view that there has been little or no spare capacity in the economy and therefore no scope for fiscal expansion. Rather, the only contribution fiscal policy could make to recovery was to cut the deficit. This would restore confidence and bring about a rapid bounce-back in private spending and investment. That was the doctrine; as far as I know, it still is. In fact, as the Minister says, the deficit has been coming down, but at a much slower rate than expected or forecast. And because austerity has lengthened the tunnel, it has postponed the solution of the budgetary problem.

Every competent authority agrees that the austerity policy lengthened the tunnel by two to three years and made the average household at least £5,000 poorer than it would have been. In doing this, it reduced the capacity of the economy to produce output.

Is there nothing fiscal policy can now do to raise the growth rate? Is it true that there is no spare supply in the economy? I should like to make two observations on that. The OBR estimates that unemployment, which is expected to stay at just over 4% over the next five years, is at an equilibrium rate. That is, that any expansion of fiscal policy now will simply lead to inflation, not produce any extra employment.

Is that true? I doubt it. I do not believe that headline unemployment figures are a true measure of spare capacity in the economy. I would question the idea that 4.4% unemployment represents the equilibrium rate of unemployment in this country, for two reasons. First, 4.4% is an average. It disguises the fact that there is overheating in some parts of the economy and underheating in others. In the south-east, unemployment is down to 3%; in the north-east, it is nearly 6%.

Secondly, and more importantly in my view, the 4.4% disguises the extent of underemployment—people working less than they want to. In 2016, the International Labour Office estimated that 6% of those in employment wanted to work longer hours than they were allowed to. In the United Kingdom, there are 32 million in employment, and 6% of that is 2 million. If we add this number to the headline unemployment figures, we get 3.4 million. That is an underemployment rate of 10.4%, not 4.4%. That seems to me a more accurate measure of the extent of spare capacity.

To conclude, I think there is more spare capacity in the economy than the OBR believes to be the case. If I were in charge of the Treasury—many noble Lords might say, thank goodness you are not—I would loosen fiscal policy, expecting to create a demand draught, and I would want monetary policy tightened to any extent needed to repress inflation. We have the spare capacity. What we lack is spare imagination.

[Lord Judd (Lab)]

Before the noble Lord sits down—I am certainly not one of those who turns white at the thought of him as Chancellor of the Exchequer—does he agree that it is not just a matter of people being underemployed? It is much more complex than that because some are very highly employed but their working conditions in this country are atrocious.

[Lord Skidelsky]

I completely agree. If you want to get a comprehensive view of what underemployment consists of, that would be a very important factor. I was just citing the most convenient measure we have, which is the measure of the International Labour Office: people who want to work more hours than they are allowed

Budget Statement

Lord Skidelsky Excerpts

Monday 4th December 2017 Lords Chamber

[Lord Skidelsky (CB)]

My Lords, I will concentrate, as is my wont, on the macroeconomic implications of the Budget. That is not to say that supply-side questions are not important—of course they are. I agree with the noble Lord, Lord Maude, that a Government should not be exempt from the efficiency expected of the private sector. However, in general, efficiency is closely related to investment. The more investment there is, the more efficient an economy is likely to be, for the simple reason that there will be much less resistance to cutting costs—which in practice usually means laying off workers—if there are plenty of alternative jobs available.

We have 1.4 million people out of work—“too many”, the Chancellor rightly says. That would not be so bad if we could take those figures at their face value. Headline unemployment is down to under 5%, the lowest since 1975, and who would doubt that it is better to be in work than out of work? But we must remember that, as well as the wholly unemployed, millions of part-time workers say that they would work full-time if they could, many of them forced into precarious self-employment and zero-hours contracts, and there are those overqualified for the jobs they do. If we take just two categories—those claiming unemployment benefit and those who say that they would work longer hours if such work were available—about 11% of the British workforce is either unemployed or underemployed; they are unemployed on a wider definition which is accepted by the ILO.

Then we must also remember that 4.3 million families claim tax or child tax credits—subsidies to their earnings. Previous noble Lords have mentioned the study by the Joseph Rowntree Trust showing a big growth in child poverty. In my book—and this is my response to the comments by the noble Lord, Lord Balfe—an economy in which a large fraction, some 20%, of the workforce is permanently reliant on the benefit system for a living income is not a healthy economy.

The Chancellor asks us to look forwards not backwards, but we need to look backwards to explain why productivity has collapsed, why living standards have stagnated, and why the Chancellor has a Budget that remains unbalanced five years into recovery, despite his best efforts. The Chancellor said:

“The key to raising the wages of British workers is raising investment, both public and private”.—[Official Report, Commons, 22/11/17; col. 1049.].


He is quite right. But what has happened to investment?

In 2007, total investment was 17.4% of GDP; in 2016, it was 16.5%—1% lower. It may just have got back now. Over the same period, public investment has fallen from 3.4% of GDP to 2.6%. In other words, total investment has more or less recovered its pre-crash level, but public investment still remains below it. Instead of using public investment to offset the fall in private investment, the Government pointed public investment in exactly the same direction. One has to believe some very peculiar things to believe that a simultaneous fall in public and private investment will galvanise the economy into new and vigorous life, but they do believe those peculiar things. I wish that I had time to go into it, but they are peculiar.

In those statistics of investment are to be found a crucial explanation for tepid GDP growth, stagnant wage growth and low productivity. The British economy is forecast by the OBR to grow by an average of just 1.4% annually over the next six years. That is at half the rate that it grew between 1997 and 2007. The Chancellor places the blame for weakening growth on the collapse of productivity. According to the Office for National Statistics, output per hour is 21% below the pre-crisis trend. Why has that happened? I have been looking in vain for an explanation for that “mystery”, as it is called. But I do not think that it is actually much of a mystery. An economy whose lack of investment forces a large fraction of its workforce into low-productivity jobs is going to be a low-productivity economy.

We come to the vaunted industrial strategy. It is full of aspiration. But why is the Chancellor only now “laying the foundations”, as he puts it in his Budget speech, of the dynamic economy of his dreams? Is it because, as Anthony Hilton wrote in the Evening Standard on 16 November:

“Governments in Britain since Mrs Thatcher’s time have refused to have an industrial strategy and, as a result, we have very little industry left”.


When we come to the actual money that the Chancellor is prepared to commit to the strategy, we find some pretty thin gruel. I welcome the money for R&D.

There is also a promise of £44 billion for housing to build 300,000 houses a year, but it turns out that some of that has already been allocated and a lot of the rest is through guarantee. Why will it take another eight or nine years to reach the 300,000-house target? Harold Macmillan promised to build 300,000 houses a year in 1951, and he built 300,000 houses every year. Why is it now taking eight years to reach that target?

The answer is very clear. Since 2010, Governments have made liquidating the deficit and reducing the share of the national debt in GDP their top priority. No matter that they keep missing their targets, they return to them every year, but each time with a longer timeline. That means that they do not have the money available in their own world. You cannot have an industrial strategy without a much larger underpinning of public investment. It is the Government’s obsession with deficit reduction that leaves them with no money for an industrial investment strategy. We could put it technically. What they have done is concentrated on reducing the numerator—the deficit—without considering its harmful effects on the denominator, which is the economy.

I have often wondered why such clever people—and the Treasury is full of very clever people—have come to believe such a foolish thing. That is the real mystery, not the productivity puzzle. We do not have the time and certainly this is not the place to go into it, but it means delving quite deeply into the economic theory of public policy. As it is, all I can do is to remind noble Lords of the old adage, “Fine words butter no parsnips”.