Comprehensive Spending Review

Baroness Kennedy of Shaws Excerpts

Monday 1st November 2010 Lords Chamber

[Baroness Kennedy of The Shaws]

My Lords, I became aware during the Thatcher years that, if something that was untrue was repeated often enough, it acquired a life of its own and took on the clothes of truth. That political tactic meant, for example, the monstering of all trade unions rather than just of trade union excess, the demonising of single mothers and the trashing of the 1960s. That period of civil rights and of great progress for women, homosexuals and ethnic minorities was depicted as though it were the root of subsequent ills. Then there was the invention of hoards of feckless welfare scroungers, when in fact those who have fallen into the abyss of permanent unemployment have always been a minority. Very few people live well on benefits.

What politicians learned then was that, in the new world of soundbites and short concentration spans, the replaying of the same loop could create a sound track that stayed in people’s heads. Now the coalition’s mantra is, “We have to take terrible measures because of the horrifying financial mess we inherited from Labour”. Not a speech is made in this House without those on the government Benches claiming that they are faced with the “Labour mess”. We are back to the old saw that the only people who can run the economy are what Orwell called the “striped-trousered ones”.

The myth about the inherited state of the economy has to be nailed. We did not hear a peep out of David Cameron or George Osborne about Labour profligacy before the global crisis. Why were they not howling in protest if Labour was throwing money around with such recklessness, as they now suggest? Why did they promise to match Labour’s spending plans pound for pound right up to November 2008?

My sadness is, and was, that Labour was, in my view, far too Thatcherite in its economic policies. While it was absolutely vital that Labour worked well with business and the banks and encouraged entrepreneurship and wealth creation, Labour was far too sycophantic towards the City and the financial sector and too desirous of pleasing new friends. That was neither necessary nor, I think, in the national interest. New Labour was so anxious not to seem “old” that it even vacillated before taking Northern Rock into public ownership because it was fearful of excoriation by the Murdoch press and the Daily Mail.

If I may take us back, let us remember that the Conservatives did not want to take the dramatic action that the Prime Minister, Gordon Brown, took to save the banking sector and global capital. He led the world in that stance. Had that not been done, we would have seen interest rates rising through the roof, massive job losses, reclamation of houses on a grand scale and the economy going bust. For the coalition, in its new-found togetherness, to pretend that the vast majority of the deficit is due to Labour’s mishandling of the economy is a shameless spin on the truth—I say that as someone who has never been afraid to speak of new Labour’s flaws. For the Conservatives to pretend that their party would have been more regulatory or that they would have constrained banking excesses is absolutely risible. Enough former Conservative Ministers and friends of the Conservative Party who sat on the boards of banks failed to ask the questions that should have been asked to give us an idea of what the Conservative position was, and remains, on regulation.

Under Labour, the country entered the recession with low inflation, low interest rates, low unemployment and, as has already been said, the lowest net debt of any large G7 country. Our structural deficit in 2007 before the banking crisis was 3 per cent of gross domestic product. Two-thirds of that was borrowing for investment, as the House has heard. Therefore, our black hole was only 1 per cent of GDP. The reason that the structural deficit increased to 8 per cent is that we bailed out the banks and dealt with the subsequent downturn. Therefore, a lie is being told and repeated about the mess that was apparently left, when in fact that was where it came from. The larcenous greed of the bankers is now never mentioned. A vast part of the deficit is the consequence of the colossal borrowing that Labour had to undertake to prevent a crash.

Those on the Benches opposite insist that theirs is not an ideologically driven agenda, but I am afraid that the picture of Conservative Members of Parliament waving their Order Papers and cheering for the largest spending cuts in a generation made me feel sick and it defied that claim. The cuts will put 500,000 public sector workers out of jobs as well as thousands more in the private sector whose employment derives from public sector contracts. How will that help growth or regenerate the economy? The gamble that the private sector will create replacement jobs is a monumental one, and many businessmen who are Conservative supporters admit that it is a step into the unknown. This is voodoo economics. To reform welfare at the very time that the Government are taking a scythe to jobs and throwing people on the dole is a double whammy. Services upon which millions have come to rely will be scaled back or shut completely. Think what that will mean to disabled people and the elderly. The aim is a fundamental reconfiguration of the British state with the ultimate destination being a society that is less equal and less humane.

I ask noble Lords whether they have ever seen the hurt and despair in the eyes of those suddenly told that they are redundant or the fear that floods their soul at the prospect of being forced to be “idle”—a word that haunted my childhood—and possibly unable to find other work. Has proper thought been given to the destruction and demoralisation that joblessness wreaks? There are currently people up and down this country waiting in fear for news on whether the axe will fall on them. The impact of such experience on families is huge. The sheer audacity of the programme is such that it is peppered with claims that we will all feel the pain equally, but that is a sleight of hand. The poorest in our society will be hit hardest. They are being used as guinea pigs for this experiment, as the Institute for Fiscal Studies has made clear.

I accept, like everyone, that cuts are necessary, given the banking crisis and the consequent debt that it has placed on our shoulders. The Government talk of creating a country that is fair. If austerity is the need of the day, it must mean more than money. There has to be a corresponding set of ethics. However, I have heard insufficient about tackling tax havens used by the rich. Large companies continue to minimise their tax bills by basing their operations abroad. In the spirit of fairness, surely non-dom status should be abolished altogether. That might not mean a lot in money terms, but it would mean a lot in terms of fairness. America does not tolerate it, so why should we? Sir Philip Green, the Government adviser on waste, holds almost all his assets in the name of his wife, who is resident in Monaco and pays no UK tax. Why do we not renegotiate the tax treaty with Monaco? What about Mr Murdoch and News International? What is his and his company’s tax status? As for the contribution made by the banks, the coalition levy of £2.5 billion is not nearly enough. It should have been much closer to £5 billion or £6 billion. Then we might have been talking about fairness.

Memories are short, so let me remind people of the state of public services when Labour took office. Our schools and hospitals were in a disgraceful state of neglect, but Labour radically renovated our public services. Like many others, I am not content with all the ways in which that was done. The introduction of phoney markets has not been a productive way forward and has, indeed, been disastrous in some areas. Increased layers of management within public services have become a serious handicap to effective service delivery. Bureaucracy and red tape blight our health and social services. I also think that aspects of our welfare system are in need of reform, but any reform at this time must be carried out with very great care.

Communities where there is intergenerational unemployment need to have those cycles broken, so we should look with care at projects such as the Harlem Children’s Zone project, which is innovative in tackling the horrifying consequences of urban poverty. I remind noble Lords about the other economists, not just those who have been mentioned in this debate, who have reminded people of the folly of our Government’s policy. The Nobel Prize-winning economist Paul Krugman says that our Government’s boldness is going in completely the wrong direction. That view is reiterated by Robert Engle, Eric Maskin, Daniel Little McFadden and, indeed, Christopher Pissarides, all of whom say that the Government’s policy did not work for Herbert Hoover and will not work for us. Welfare benefits have more social value in a recession when jobs are scarce, and it is capital spending that creates jobs. That has not been accepted in the policies that are now being promulgated. Having worked in the law all my life and seen up close the effects of deprivation, job loss and poverty, I dread the consequences of such divisive and unjust policies. The social as well as the personal cost will undoubtedly be great.

I understand very well why the Liberal Democrats entered into the coalition after the election. It is perfectly right to want to be in power. We on these Benches want to be in power, too. What I cannot accept is that these are policies that decent Liberal Democrats can condone. I hope that, with noble Lords on these Benches, they will make their voices heard in opposing much of what is being advanced. I remind noble Lords about power. Martin Luther King said:

“Power without love is reckless and abusive”.

There is not enough love being shown just now.