Budget: Economic and Fiscal Outlook

Baroness Northover Excerpts

Tuesday 5th May 2020 Lords Chamber

[Baroness Northover (LD)]

My Lords, the House of Commons did not even debate this assessment or vote on it. In fact, the Commons approved this without even seeing it as it was not published until yesterday. I am glad that the House of Lords is considering it.

The Budget and the OBR report on which it is based are, of course, very much out of date. Nevertheless, the Convergence document has just been produced. It notes:

“Early data releases suggest the short-term impact of Covid-19 on the global economy may be significantly larger than that of the global financial crisis.”

I note the word “short-term”.

The document states that the increase in borrowing is likely to be temporary. These findings assume a V-shaped bounce-back. That now looks highly unlikely, both in the United Kingdom and globally. There are therefore major implications for tax revenue and employment. Even when the lockdowns are lifted, certain industries will be affected long term. In China, it is noted that, whereas after the 2008 crash there was a problem with demand, now there is a problem with supply.

What we do when this pandemic is over will matter. We will have an economy to rebuild and a debt to address. People have drawn comparisons to the war, but closer comparisons surely need to be drawn to each post-war period. After the First World War, there was little co-operation and a financial crash with terrible consequences and the resultant rise of deadly populist movements. After the Second World War, a number of international organisations were set up. The Marshall plan was initiated for Germany. In the United Kingdom, the promises made during the war of a better, brighter future, including free healthcare, were largely delivered, though without social care.

Week after week, we have been standing outside clapping the NHS and essential workers. It will be very difficult for the Government not to address their needs. Can the noble Lord tell us the Government’s thinking? Does he agree that a further period of austerity brings huge social and political risk and that a different approach will be needed? As part of that, we need to look at our relationship with the EU. Clearly, we will not conclude adequate discussions with the EU by June, as it is required for all parliaments to approve the agreement; therefore, the transition must be extended. Surely the Government would not take the risk of crashing out and further damaging our economy and society at this time of crisis.