Covid-19: Economic Recovery

Baroness Noakes Excerpts

Tuesday 20th April 2021 Grand Committee

[Baroness Noakes (Con)]

My Lords, I am glad to follow the noble Baroness, Lady Humphreys, as it is heartening to see that there is at least one noble Lord on the Liberal Democrats Benches who has an interest in economic recovery.

I hope the Minister will forgive me if I do not spend my time on her policies to protect jobs and livelihoods. She has already read out her brief on that. I support what the Government are doing. In particular, my right honourable friend the Chancellor of the Exchequer has provided excellent financial support, which has lessened the impact of the pandemic. We now need to focus on the recovery of the economy, because a successful economy is the only way to protect jobs and livelihoods in the long run, and I am aligned with my noble friend Lord Lilley on this.

The pandemic has had a devastating impact on the economy. We are on track for debt to be 100% of GDP, and GDP last year was down by just short of 10%. There is one thing we should be clear about: the pandemic did not cause this. The scale of the economic losses was a direct result of the Government’s lockdown policies. The Government prioritised their public health response with apparent disregard for other harms: namely, non-Covid health harms, both physical and mental, and very great economic harms. The public health zealots and modellers who seem to have had a grip on policy formulation have positively discouraged rational debate on the balancing of harms, which has amplified the economic consequences.

Even today as the economy is allowed slowly to emerge from its suspended animation, the Government seem hell-bent on making life as difficult as possible for the hospitality and leisure sectors to operate efficiently: sit outdoors only, no more than six people, table service only, keep lots of records and so on. There was no evidence that hospitality venues were a prime source of the spread of Covid infections, but they were brutally shut down and are struggling to reopen in a way that makes money. The goalposts have moved so often on Covid actions and strategy that it is hard for businesses to be confident about how they will be allowed to operate in future. Music festivals are the latest casualty.

Whatever the Government assert, there is precious little evidence that lockdowns are the only way to deal with the pandemic. The differing experiences of various states in America show that. The biggest danger at the moment is nosocomial infection, and many of us suspect that it has always been a major driver of infection and mortality. It is much safer to go to a pub than to go into hospital, but that has been airbrushed away because it conflicts with the NHS-as-saviour narrative.

From the outset, Covid-19 was not a disease that had significant mortality among those under 50, and that remains the case, but the Government insisted on closing schools and locking everyone up regardless of health or age status, bringing the economy to a complete halt. That is why we have suffered so much economic damage and why the Chancellor has had to introduce the costly support policies that are driving the debt and deficit levels. There were alternative policies, which could have had a different outcome, but the Government have allowed themselves to be dominated by public health extremists.

The Government have done one thing outstandingly well in the vaccination programme, and I pay particular tribute to the work done last year by Kate Bingham. A very high proportion of the higher-risk groups is now vaccinated. We should already be back to normal, and that includes your Lordships’ House.

The best thing the Government can now do is to get out of the lives of our citizens and businesses. There should be a total ban on government departments planning any more interventions in the way that we live our lives. The whole set of Covid rules should be put on a bonfire: no gathering of personal data, no masks, no bans on meeting people in groups of whatever size, and certainly no more overzealous policing and fines.

The Government have published their plan for growth, which has lots of worthy things in it, but suffers from one fundamental weakness. It assumes that what government does is the most important contributor to economic growth. The short-term advantages of Keynesian stimulus must not blind us to the fact that at the end of the day it is the private sector in the shape of our businesses, large and small, which will grow the economy. The Government should focus on what they can do to liberate our business sector, so that it can do the job it does best: build profitable businesses that provide employment, tax revenues and innovation for the future.

I could spend all day talking about the things that the Government could do in this space, but let me outline just a few. We need a regulatory environment that supports enterprise, and fortunately we are no longer constrained by the EU. Regulation in particular strangles small and medium-sized businesses, and that is where the Government should focus their efforts. They should largely ignore larger businesses, which often benefit from regulatory burdens acting as barriers to entry. We need a tax system that is simple and fair and underpins low rates of taxation. Our tax system is notoriously complicated. We might laud the Chancellor’s super-deduction for investment expenditure, which my noble friend the Minister referred to, but that too is another layer of complication. A top rate of 25% is not a good destination, and I hope that it is allowed to fall by the wayside once the economy starts to prosper. Any thought of raising the top rate of income tax or capital gains tax rates would be a mistake, as the Treasury’s existing analysis undoubtedly already shows. High rates of tax are not accompanied by high yields—quite the reverse.

Education has taken a big hit during the pandemic, in schools and universities, and a priority for the Government must be to ensure that those entering the job market for the first time have all the skills that employers actually need. Now is also a good time to look again at higher education. We are still churning out too many graduates with degrees that do little to make young people fit for the world of work. It is no surprise that up to 25% of graduates fail to deliver a lifetime earnings premium that justifies the cost of student loans.

Lastly, the Government should ensure that British businesses can exploit export growth markets. I do not mean those sluggish economies the other side of the channel, guarded by EU red tape. The Government are doing great things through the Department for International Trade, with more than 60 trade treaties already in the bag and more on the way, including the CPTTP. Helping businesses to understand those opportunities in these exciting markets will be money well spent. We must put this pandemic era behind us as soon as possible and return to being a country of liberty and economic opportunity. That is the only certain way of securing jobs and livelihoods for the future.