Economy

Baroness Kramer Excerpts

Monday 28th September 2020 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful for the chance to respond to this Statement. The timing, just over a month before the winding up of the furlough scheme—which has caused anxiety for millions across the UK—is regrettable. Other countries have been quicker to provide businesses and workers with certainty, and bolder in the steps they have taken.

The Statement fits the now-familiar pattern of the Government’s handling of coronavirus. It was not scheduled in the usual way and instead announced at short notice, in response to an Urgent Question submitted by the shadow Chancellor, Anneliese Dodds. The Treasury says it replaces the planned Autumn Statement. It is another example of Ministers reacting to events, rather than attempting to shape them—of allowing problems to grow, rather than acting quickly and decisively to prevent them in the first place. We have seen it on test and trace and now on the economy.

We recognise and welcome that the Government seem to have acknowledged what we have been saying for months: that action was needed to avoid a cliff edge for workers. The Statement offers a degree of certainty for some, even if it is not as comprehensive as we would like. The continuation of the scheme for the self-employed, for example, is a positive step, even if its well-known shortcomings remain. A new form of wage support is also welcome. It is not perfect but it is something. However, my overall impression is that the measures offered amount to too little, too late.

In relation to the new job support scheme, it is worth noting that Labour has long called for a change in the Government’s approach. The Chancellor has been asked to reconsider the planned one-size-fits-all withdrawal of job support on no fewer than 40 occasions. The Treasury cannot pretend that there was not time to get this right. While it is of course welcome that some workers will enjoy the protection of the new scheme, the cracks are beginning to show. Labour Party analysis observes that it will be cheaper for many businesses to retain one full-time member of staff than to preserve two jobs on short hours. The impact of that on unemployment could be, and probably is, profound.

As with the current furlough arrangement, there is virtually no conditionality on businesses. No commitment must be made to keep jobs open in the medium-to-long term. Instead the Chancellor is now admitting that jobs will be lost. He says that the new scheme has been designed with that in mind, with his priority to protect those jobs and people whose futures are deemed “viable”. What a callous word to use. Many loyal, talented and hard-working people will lose their jobs as a result of the economic difficulties we are facing. It will be no reflection on their character or ability; in many cases, businesses will agonise over the arbitrary decisions that they are required to make. Many businesses are operating with low capacity, not because they are not viable but because they are compliant with HMG’s public health guidance.

On 12 August, the Chancellor promised that

“no one will be left without hope or opportunity”.

For probably more than a million people, there will be no opportunity. Does the Chancellor believe that these human beings should survive on hope? I have been unemployed three times in my career. My abiding memory is one of terror, not hope. Until one has faced the loss of self-worth after multiple rejections, one cannot understand unemployment.

We accept that it is not possible to save every single job. However, each job loss is a personal tragedy and deserves to be recognised as such. I hope that the Minister takes that on board and ensures that he uses different language. Can he outline why the Government have not offered meaningful support to those who have already lost their jobs? Why is there no mention of help for those who may be about to lose their jobs as a result of recent policy decisions based on the Treasury’s modelling? Just how many jobs are expected to be lost during the lifetime of the scheme? Why is there nothing substantive on skills and training? Labour and the trade unions have consistently called for concrete action to help to reskill people so that they can find good-quality jobs when the economy recovers. Why are the Government content to leave certain people behind?

Why are the Government still not providing tailored support for those sectors most in need of help? Hospitality venues are required to close early, having only recently reopened. Theatres and music venues are still unable to reopen, and we are familiar with the challenges facing sports clubs outside the top tier. Tourism and aviation will also continue to be impacted, probably for quite some time. The Minister will no doubt point to various pots of money that have been found over the past six months. However, consistent with my earlier point, such funds have been established only when sectors have reached breaking point. Early assistance could have made more meaningful differences.

I recognise that the Government cannot single-handedly fix every problem faced by the UK economy. However, the points that I have raised are neither new nor likely to go away. A competent Government would have addressed them long ago. Just how long are we going to have to wait?

[Baroness Kramer (LD)]

My Lords, the Government have not really grasped the double whammy of Covid and our departure from the single market and the customs union, even assuming that there is a free trade deal.

The measures announced last week, including job support modelled on the German Kurzarbeit, are welcome but fall far short. Many jobs in sectors such as the creative industries, sports and hospitality are long-term viable if they can survive the next six months, so can the Minister explain why the Chancellor has not targeted the necessary funds to get them through that six-month period? Three million members of our workforce were excluded from support the first time around, especially a swathe of independent contractors. Why are they excluded again, especially when so many who have become redundant will become independent contractors if they are to live?

The pace of companies being dropped from European supply networks is accelerating. Future FTAs outside the EU only marginally offset the lost business. This is completely aside from the issue of chaos at the borders. Why are these injured firms and workers not getting meaningful help? Are they now considered non-viable? Where are the scaled-up and innovative retraining schemes that are needed to deal with over a million redundancies by year end? Firms of all sizes are accruing levels of debt that will cripple their future growth. Where is the fund to recapitalise overindebted SMEs? Can the Minister explain how Scotland and Wales can meet their constitutional responsibilities to set a budget with no Budget this year from the UK? When will we hear from the OBR and get a good working forecast that deals with the situation as we now understand it? Being £2 trillion in debt may be something which the Government are comfortable with, but most of us would like to know what the principles are going to be on how that will be tackled and how it will eventually be reduced and repaid.

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

My Lords, in replying to the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, I gently remonstrate with him on us being “reactive”. We have tried to move as quickly as possible at all stages of this crisis but, as we can see from across the world, it is extremely difficult to be ahead of the curve. The announcements made by my right honourable friend the Chancellor last week demonstrate that a lot of hard thinking has gone on over the last two or three months, and the fact that the Statement might have been prompted by a Question shows that the work had been done.

I do not accept that it is too little, too late. The amount of support that we have provided for the economy over the last few months is almost without precedent, with £39 billion on the furlough scheme protecting at one point up to 9.5 million jobs—that figure has now reduced to some 3 million because many millions have come back to work—and £5.6 billion for almost 2.2 million self-employed people under the second grant self-employment income support scheme. I could go on.

The noble Lord asked about the intention of the job support scheme to keep part-time workers rather than to just go for a single full-time worker. The idea is to keep as many people in work as possible with their skills so that, when the economy recovers, the skills have not been lost. While on a hard, simple basis, it might be more viable to keep one person, in the longer term any employer would try to keep part-time people. I suggest that the noble Lord takes on board the job incentive scheme: £1,000 for those coming back into work between now and January.

The noble Lord asked about good-quality training. Earlier in the year we announced the kick-start scheme, a £2 billion scheme for young people which subsidised employment, as it was a concern that 800,000 young people left school and education over the summer.

The noble Baroness, Lady Kramer, asked about the hospitality sector. We have extended the reduction in VAT for that sector. We also have in place the grants and rates support, again a very considerable sum of money. She asked about us formally leaving the European Union and customs. She will not like it, but that is a major employment opportunity for that sector. We have only 5,800 customs intermediaries. They all need to increase employment. We have provided grants for them to upscale. Another example of new training needed is police officers. Sectors of the economy will grow, and the Chancellor’s comments are to encourage people to move across to those over the next few years.

On the devolved authorities, we have made considerable grants to them under the Barnett formula. While the Budget has been postponed, we are working at pace on the comprehensive spending review which, I would suggest, is a more important long-term method of looking at how we are going to rewrite the economy after the crisis that we have faced over the past six months.

The noble Baroness also asked about the debt. The debt is very worrying. No one is going to pretend that it is not. It was last at 100% of GDP in the year I was born—1961—and, therefore, we are going to have to be very careful over the next few years about how we address that. We were fortunate that, having got the economy and the financial position into a relatively stable state over the past few years, we had the headroom to do what we have been able to do, which has all been about trying to reduce the impact on citizens over the past seven months.