Economic Update

Baroness Smith of Basildon Excerpts

Wednesday 19th October 2022 Lords Chamber

[Baroness Smith of Basildon (Lab)]

My Lords, I hope we can get back at some point to hearing Ministers repeat Statements; I think it would be helpful to the House.

After listening to the Chancellor read his Statement on Monday, I came to the conclusion that Jeremy Hunt is either the luckiest or the unluckiest man in politics. He is unlucky in that he stood twice and failed twice to become leader of the Conservative Party and take over as Prime Minister. Perhaps he is lucky in that, despite being left out of the Cabinet because he did not back Liz Truss, he is now the most powerful person in government—he certainly has more authority than the Prime Minister—but he is unlucky again because he is the man inheriting the mess of the long- term damage inflicted on the economy in just 38 days by Kwasi Kwarteng. Worse than that, the co-architect of the policies that have caused such immediate turmoil—the person whose vision the former Chancellor said, in his resignation letter, he was following—technically remains in the top job.

The appointment of Jeremy Hunt as the fourth Chancellor in almost as many months and his first Statement on Monday may have brought some welcome, relative calm to the markets, but only because he signalled that he was undoing almost everything in the Prime Minister’s mini-Budget. Yet real harm has already been inflicted and the medicine on offer is even more pain for businesses, households and families across the country. Our economy is now weaker, as is our credibility across the globe, with international commentators likening our problems and economy to those of Greece and Italy rather than to any of the major economies.

There is further damage to public services, now threatened with additional painful cuts as the Government seek to regain market confidence. Most damning of all, for a party that has claimed economic competence in the past, is the damage to peoples’ hopes and aspirations as they are priced out of buying their first homes, renewing their mortgages or finding a rental property on a tightened budget.

We have also seen damage to the Prime Minister, who has lost the confidence of the public, Parliament and her own party. It is embarrassing when across the world the media picks up on the Economist editorial that says the Prime Minister’s likely shelf-life is shorter than that of a lettuce. Let us face it: the only reason she is still there is because her MPs know—as does this House—that they cannot change yet another leader without going to the country for a general election. It is a case of when, rather than if, she is forced out. I suspect there will be possibly a huge sigh of relief from the Benches opposite, most of whom have been quite honest with us and never supported her in the first place, having recognised that her fiscal plans were, in the words of Rishi Sunak, “fantasy economics”. Yet she and her first Chancellor pressed ahead, and the country is now paying a very high price.

We all recognise that there are huge global economic problems that need careful handling with immediate and short-term management and long-term planning, but this current crisis was made in, and existing problems were made worse by, Downing Street. They were not made in the US Federal Reserve, nor on the front line in Ukraine. One of the reasons why I hoped that the Minister would read out the Statement is because there is a line in it that I thought was astounding. It was when the Chancellor said:

“We have had short-term difficulties, caused by the lack of a forecast from the Office for Budget Responsibility alongside the mini-Budget”.


Seriously, whose fault was that? The Government silenced the OBR at the very time it would have been of most help. That was utterly disgraceful.

This whole saga has proved that the Government, and perhaps the wider Conservative Party, do not have the understanding, the knowledge or the right experiences to get our country back on track. While MPs hold back-room talks about the fate of the Prime Minister, interest and mortgage rates just go up and up. This is not a party game, where the job of PM is shuffled around like a game of pass the parcel. As for the Government’s growth plan, the only things that seem to be growing at the moment are inflation and mortgage rates. Today, ONS statistics suggest that food inflation is even higher than regular inflation, currently at more than 14%.

Yesterday, and I do not know whether the noble Lord the Lord Privy Seal will recall this, I asked him what I thought was a straightforward question: what do the Government say to those whose mortgage bills will be hundreds of pounds higher each month following the mini-Budget shambles? He did not answer the question. He did, however, concede that his son and other first-time buyers face a desperate plight in the current circumstances. I am going to try again to get an answer to what I think is a very pertinent question: as mortgage bills go up by £500 and more a month, what do the Government say to those paying such a high price for what was a staggeringly incompetent mini-Budget?

While the noble Lord revisits that question, perhaps he could also reconsider a question posed last Thursday by my noble friend Lord Tunnicliffe. We understand that the Bank of England is assessing the likely number of property repossessions in the coming months. Is the Treasury making its own assessment of that, because it could have a major impact on policy-making? If it is, when will Ministers have the information and the figures, and how would they be used to influence future government policy to avoid such repossessions? If this assessment is not being undertaken, can the noble Lord explain to the House why not?

One of the unexpected developments in the Chancellor’s Statement was the decision to U-turn on the energy price guarantee. Despite the Prime Minister having spent the weeks since the mini-Budget trying to reassure the public that they had certainty on their energy bills for the next two years, Jeremy Hunt has now torn up more of her plans. Is the noble Lord able to outline when the Treasury’s review of energy prices is likely to conclude? When will we hear more about the targeted scheme that will take effect, even though it is not until April 2023, after the winter bills? I would be grateful for a straight answer on this question: why, even at this stage, are the Government still not committing to extending the windfall tax on the excess profits of energy firms?

Early analysis suggests that reverting to a price cap, as the Government are now saying, would see bills rise to about £4,500. Where are families supposed to find that extra money—especially once you factor in increased mortgage costs, food costs, fuel costs, and, probably, rents? Will there be support for businesses beyond April, or will they have to fend for themselves? One of the key justifications for the so-called growth plan was to bring inflation down, but it is still rising. If energy prices rise again that will further fuel inflation—and, as a result, even more interest rate hikes. It is a Catch-22 of the Government’s own making, with the consumer paying the price.

However often the Conservative Party changes leaders or Chancellors, it will not restore that lost financial credibility of the last few weeks. We desperately need a genuine plan for long-term growth. We desperately need policies to support working people, rather than continually making life harder for them. I have often spoken, both here and at other events, about the positive case for politics, and the need for politics to be a force for good and to offer hope for the future. Under this Government, nobody now expects that. All we ask is that it does not get any worse.

--- Later in debate ---

[Lord True (Con)]

My Lords, obviously, I cannot comment on information to which the noble Lord is privy. I am here as Leader of the House of Lords to serve your Lordships’ House. I give priority to serving your Lordships’ House and have not been looking at WhatsApp during this exchange of views.

[Baroness Smith of Basildon (Lab)]

My Lords, I am grateful for that; the noble Lord is always helpful to this House. It would be helpful if we could have confirmation. The rumours are now that the Home Secretary has been sacked from her post. Given what has been said today about the necessity of a strong and stable Government, can he report back to your Lordships’ House at some point? There are probably Members of this House who would be happy to serve. That might be an answer to help out the Government.

[Lord True (Con)]

My Lords, I have nothing further to add.