Economic Update

Baroness Garden of Frognal Excerpts

Tuesday 12th January 2021 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con) [V]]

My Lords, I am grateful to the noble Lord, Lord Tunnicliffe, for his comments. I shall to try to address some of his points.

It is clear that the UK, along with the rest of the world, continues to face economic disruption in the wake of the Covid pandemic. No major economy has avoided a dramatic fall in its GDP in the past year. In the face of the significant and far-reaching impact of Covid, the Government’s priority has been to protect lives and livelihoods with a flexible and adaptable response. This response is one of the largest and most comprehensive in the world, totalling more than £280 billion since March. The IMF judges the UK’s initial response as being aggressive, effective and an excellent example of well-co-ordinated action.

While we should expect the economy to get worse before it gets better, as my right honourable friend the Chancellor said yesterday, there are reasons to be cautiously optimistic for the future. The peak of the unemployment rate is expected to be significantly lower than that estimated earlier in the crisis. The OBR has revised down its central scenario from 12% in July’s estimate to 7.5% in November’s estimate. The household savings ratio has reached its highest level since records began in 1963. The corporate sector cash buffers have improved, with large businesses making large net repayments every month since May. The furlough scheme has seen some 1.2 million employers and almost 10 million employees supported and has been extended until April to provide certainty during these difficult times. We have provided significant support to the creative industries through the £1.5 billion Culture Recovery Fund and to the hospitality industry, which I recognise has been severely impacted by the restrictions. It has also been supported by cash grants, loans, VAT reductions and deferrals, and business rate holidays.

The support for the self-employed has been unprecedented and among the most generous of schemes in the world. It has so far supported almost 3 million people at a cost of nearly £20 billion. As the Chancellor has said, sadly we are not able to save every job and business and, in recognition of this, have boosted the welfare system by £7.4 billion in 2021.

I thank the noble Lord for mentioning the vaccine, which represents a significant sign of hope and a path out of the coronavirus. Vaccine rollout is our most important economic lever and we have made available more than £6 billion to facilitate that. We have now administered more than 2.4 million vaccine doses across the UK. By 15 February, we aim to have offered a first vaccine dose to everyone in the top four priority groups identified by the Joint Committee on Vaccination and Immunisation.

The road ahead remains tough, with significant uncertainties. The Chancellor and this Government will continue to work to support individuals, businesses and public services during this time. As the Chancellor said yesterday, he will provide an update on the next stage of our economic response to coronavirus and the economic outlook for the rest of the country in the Budget on 3 March.

On retaining the uplift in universal credit, referred to by the noble Baroness, Lady Kramer, as with all responses so far in the crisis, we have tried to adapt to changing circumstances and this matter will be kept under continual review. In the same vein, we have extended furlough until April, it already having been extended from an earlier time, and we will continue to be alert to the state of the economy.

On the noble Baroness’s point about the self-employed and the Federation of Small Businesses, my right honourable friend the Chancellor said yesterday that he was considering the ideas put forward by the FSB.

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

My Lords, we now come to the 30 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

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[Lord Agnew of Oulton (Con) [V]]

The noble Baroness will know that the Government are not in favour of a people’s QE. The QE that has happened this year has been more effective than the QE in the 2008-09 crisis; at least in this situation the money has gone directly into our economy to solve and help the problem, whereas in 2008-09, as far as anyone has ever been able to explain it to me, at least half the money left the country. We are learning, but there is a great deal of nervousness about something such as a people’s QE, because being able to print money without any comeback is almost too good to be true. Indeed, at the weekend, I bought a book by Ray Dalio on debt crises in history to try to understand more about this, because I feel we need to be very cautious about borrowing more and more money.

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

My Lords, the time allowed for this Statement has now elapsed. I apologise to the noble Lords, Lord Walney and Lord Holmes of Richmond, that we did not have time for their questions.