Budget Statement

Lord Adonis Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Adonis (Lab)]

My Lords, it is a great privilege to follow the noble Lord, Lord Skidelsky, the biographer of John Maynard Keynes. It appears that we are all Keynesians once again. As the most reverend Primate put it, it is now “us” and “we”, in place of “I” and “me”. But I am not sure that Keynes himself would have been overly impressed with the position we are in at the moment. In his last speech in the House of Lords, in 1945, he said that

“everyone talks about international co-operation, but how little of pride, of temper or of habit anyone is willing to contribute to it when it comes down to brass tacks.”—[Official Report, 18/12/1945; col. 777.]

That is exactly the position we are in now.

I was particularly impressed by the speech of the noble Lord, Lord O’ Neill, who laid out the big agenda that we need to follow. We need precisely the international co-operation that Keynes was talking about in 1945, and which he did so much to foster in his own age in respect of Breton Woods and Anglo-American co-operation. We need that in this crisis. Ideas of the kind that he put forward, including the people’s QE, are very timely and need to be taken forward as a matter of great urgency.

I was especially impressed that the noble Lord, Lord Lamont, who I do not always agree with on matters of politics and ideology, rowed in strongly behind that. At the moment, we face a massive demand shock and a massive supply shock, and we need to address them directly and immediately. That is true not least because dealing with the pandemic itself involves—as the noble Lord, Lord Lamont, rightly said—giving people reassurance, not just about their medium and long-term future but that they can go off sick tomorrow when they develop coronavirus symptoms, without thinking that their livelihood, and potentially their job, is at stake.

The situation is very serious. The absence of international co-operation and exchange is a huge challenge. I hope that the Minister, who we hold in high regard, will take these ideas back to the Treasury and the Cabinet Office and see that they are acted on immediately.

Martin Wolf, in today’s FT, in a very Keynesian article, said that we need to:

“Think big. Act now. Together.”


Thinking big, acting now and doing it together must be addressed through two particular priorities: sustaining people through this crisis and sustaining businesses through this crisis. On sustaining people, I do not want to go through the specific points that have been made so far, but I want to direct a few additional questions to the Minister.

The first question is about provisions in respect of sick pay. The Minister will have picked up that there is huge dissatisfaction about this, concerning the gig economy and the self-employed, and the fact that sick pay is only £94.25 a week. That people on high or moderate established incomes are expected to go down to £94 in one go will be a big disincentive to people to declare themselves sick and self-isolate.

The biggest outgoing that people have is of course accommodation costs. It is not acceptable that we are still in a state of great confusion about this. The Chancellor, in his statement last night, announced that there would be a mortgage holiday of three months for those who are suffering from coronavirus. That is good, but we still do not know what the position is in respect of renters. We are told that people will not be evicted, which is a big step forward, but will there be a rent holiday similar to the proposed mortgage holiday? The Minister needs to tell us that at the end of the debate.

The other crucial point is the big injection of loans and potentially straightforward subsidies that has been put into maintaining businesses. The first big question is whether the right approach is for this £330 billion to take the form of loans, or whether some of it should be turned into straight grants. The fiscal stimulus that has been referred to crucially depends upon whether the state is expecting these loans to be repaid. The confidence with which companies will take them up depends upon the same thing.

The noble Lord, Lord Lamont, raised an extremely pertinent point. The reason for giving loans or grants to companies is twofold: to sustain businesses but also, crucially, to sustain employment. He is absolutely right to say that, if the state is going to make a big investment in businesses up and down the country to keep them going—as it should in this crisis—part of the deal should be that they maintain their employees. There should be a straightforward contractual agreement between the Treasury—or the banks, or whoever the Treasury will channel money through to directly make these loans—and all recipients that, for the duration of the coronavirus crisis, they will not make anybody redundant or in any way reduce people’s terms and conditions. That seems to be a straightforward and very basic point, and it goes a long way to providing the kind of people’s QE that the noble Lord, Lord O’Neill, referred to. I would be grateful if the Minister responded to that, explained the Government’s thinking and said whether he can see any issues arising.

Next week we have coming before us the legislation, which I am told is of doorstep proportions, and we will want to address a lot of issues in it. The security of workers—which is absolutely crucial to the long-term health of the economy but also in the short term in dealing with the pandemic—will be vital.

Finally, as we come out of this crisis—and we will—we need to come out of it as strongly as we possibly can, which means giving the strongest possible incentives to reviving trade and international confidence. Yet what is the first thing the Government intend to do after we come out of the coronavirus crisis? To push us into a hard Brexit. I cannot think of anything more ill judged than to move from one massive shock to the national economy to another. I know the Government are saying at the moment that they will not change the timetable and all that. Everyone who speaks to anyone in Whitehall knows that preparations are being made for it, not least because at the moment it is not even possible to conduct the negotiations on the terms of our trade and economic relations with the EU after the end of the year. I do not expect the Minister—who would lose his job immediately if he indicated any flexibility on this—to give us any indication of what he really thinks on this, but he needs to hear the views of the House. I think most Members would regard it as absolutely absurd for us to move from the depths of one crisis to a massive self-inflicted crisis immediately afterwards. We should put Brexit on hold after this crisis. As John Maynard Keynes famously said:

“When the facts change, I change my mind. What do you do, sir?”

--- Later in debate ---

[Lord Agnew of Oulton]

That is excellent news. I do not want anyone to think that I am not in favour of it. We as a country have an enormous opportunity to lead the green energy revolution.

I was grateful for the calm comments of the noble Lord, Lord Brooke, and some profound questions about the value of growth itself. The problem is that growth is really the only way to improve the quality of lives of most of our population; the only other way is probably productivity. There is no doubt that this will give us the opportunity to reflect on such things as international supply chains, which have perhaps got too wide and impersonal over the last 30 years. These are the sort of moments when we should reflect on that. He asked specifically about the RPI link on the fuel escalator. The Government are nervous about putting up fuel prices because it is a very regressive tax and hits the less well-off hardest. There is a sensitivity to that; I am sure that it will be kept under review.

The noble Lord, Lord Maude, urged us that the money that we spend should be spent well. My title is Minister for Efficiency so I guess it will land on my lap if we do not spend it well. As other noble Lords have said, the key thing is to get the money out as quickly as possible. He asked about insurance. I think I have something on that which can give clarification. The Chancellor made clear in his Statement that for those businesses that have an appropriate policy that covers pandemics, the Government’s action is sufficient to allow businesses to make a claim against their insurance policy.

The noble Baroness, Lady Kramer, asked about the strength of the balance sheets for the insurance sector. It is worth remembering that they came through the 2008-10 crash very well, other than AIG, which was not really an insurance company. I would be cautiously optimistic at this stage. She seems to know about the financial sector; it has two layers above it: reinsurance and retrocession insurance above that. At this stage I would be reasonably confident but, again, this is a fast-moving picture.

The noble Lord, Lord Northbrook, if I heard him correctly, asked a question about the difference between the £451 billion and the £600 billion. The difference is depreciation; the net investment is the £451 billion. If he needs more information, he can by all means let me know. The noble Lord, Lord Judd, asked about a commitment for the charitable sector. I entirely agree that charities are often the hidden battalions helping some of the most vulnerable people. If he feels that they are not being given the focus that they should be, again, I hope he will let me know.

The noble Lord, Lord Livermore, asked about the distributional impact of the Budget. He claimed that the poorest came off worst but, in the spending round of 2019, we announced the fastest planned increase in day-to-day departmental spending for 15 years. Of course, it is those at the bottom of our society who benefit the most from our public services.

The noble Lord, Lord Stevenson, asked about the national infrastructure strategy. Yes, I am afraid it will be delayed. I do not know whether I am allowed to say this—it will definitely not happen now, anyway—but we were going to try to slot it in the middle, between last week’s Budget and the spending review, probably in July.

It is perhaps worth pointing out that, in the Budget, we put some more beef under the IPA—the Infrastructure and Projects Authority—which is the key organisation in ensuring that, we hope, a lot of the spending on infrastructure is done in a controlled and effective way. I think I am running out of time.

[Lord Adonis]

I want to ask the noble Lord something about the key issue raised by the noble Lord, Lord Lamont, and me. Could the £330 billion of coronavirus-related loans to keep companies going be made conditional on employment being maintained?

[Lord Agnew of Oulton]

That is an extremely good idea. I will certainly take it back to the Treasury, where we will investigate it.