Economy Update

Lord Agnew of Oulton Excerpts

Tuesday 10th November 2020 Lords Chamber

[Baroness Kramer (LD) [V]]

My Lords, last week the Minister was not a bit keen on my call for an extension of the 80% furlough scheme to June. Now it looks as though I will get that until at least April, unless there is a poison pill in the January review—though I suspect, quite frankly, that the Government would not dare. I also called on the Government to feed the kids. What a difference a week makes. I am glad they have finally faced up to the realities and have U-turned on quite a range of issues.

They should still do more for the self-employed, whose income support grant ends at the close of December. They cannot be left out in the cold at the turn of the new year. Again, not a thing has been done for the 3 million excluded. The clue is in the name: excluded. There is no point in the Minister quoting programmes that these people cannot access and use. Letting them down is unacceptable.

On the same day the Chancellor made the furlough announcement, the Bank of England announced another £150 billion of QE, which will bring its holding of government debt to over £900 billion. There is a widespread market sentiment that this policy has come to the end of the road. Will the Government comment on that and the implications of negative interest rates, which are now being explored by the Bank? Are we really saying that savings are worth nothing, and that ordinary people need to take increased financial risk in a time of such uncertainty, created by not just Covid but an imminent economic Brexit?

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

I thank both noble Lords for their comments. I will first address the noble Lord, Lord Tunnicliffe.

The Government have always made it clear that economic support would continue past the end of October and had announced the Job Support Scheme to do just that. Extending the CJRS, or furlough, responds to the latest economic conditions and the national lockdown in England and similar restrictions in the devolved Administrations. The Government have acknowledged that they have not been able to support everyone in the exact way they would want, but they have been proactive in addressing gaps in the scheme where possible. This partially addresses the points of the noble Baroness, Lady Kramer; for example, under the second SEISS grant, self-employed traders facing reduced demand or who are temporarily unable to trade due to Covid were made eligible. It has not been practically possible to include certain groups without introducing unacceptable fraud risks.

The vast majority of the British public has come together, followed the law and helped to prevent the spread of the virus. We are confident that communities will rise to the next challenge and play their part as we come together to fight the second wave this winter. The noble Lord asked about compliance. To ensure that people can continue complying, we have introduced a comprehensive package of support, including extended SSP to employees when they are asked to self-isolate, and for workers on low incomes a one-off payment of £500 under the self-isolation support payment scheme.

Individuals who are asked to self-isolate by NHS Test and Trace because they have tested positive for coronavirus, or been identified as a contact, may be eligible for the test and trace support payment provided that they meet the other criteria. If individuals are identified as a contact by the NHS Covid-19 app but they have not been contacted by NHS Test and Trace, they cannot currently apply for the scheme. App users are anonymous, which means that the local authorities that administer the payment scheme cannot confirm that they have been asked to self-isolate. Further work is ongoing to determine if the scheme can be extended to individuals who have been identified as a contact only through the app, while adhering to data privacy requirements.

We have legislated to prevent employers from requiring workers, including agency workers, subject to the duty to self-isolate to attend work. Employers who breach this are subject to a £1,000 fine, rising to £10,000 for repeat offences.

The noble Baroness asked about the potential for negative interest rates. I cannot predict the future, but the noble Baroness will know that we are very against that at the moment. I hope that it can be avoided. I share her concern that negative interest rates put pressure on savers beyond that which has existed over the last 10 years of very low interest rates. It is illustrative of the balancing act that the Government must take between support for people during this crisis and the long-term impact on the Government.

[The Deputy Speaker (Baroness Morris of Bolton) (Con)]

My Lords, we now come to the 30 minutes allocated for Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Lord Robathan (Con)]

My Lords, last week a Cabinet Minister said that there had been no impact analysis done on the effect on the economy of the various rate restrictions, the previous lockdown and the current lockdown, which is a pity, because I would have thought that was rather important. I will not ask the Minister to give me an impact analysis today, because that would be rather unfair, but can he tell me whether the Government have worked out how long it will take for our children to repay the humungous debt that we are running up? Will it be one decade, two decades, three decades or longer?

[Lord Agnew of Oulton (Con)]

I share my noble friend’s concern about the huge impact of indebtedness that has gone on to the country’s balance sheets over the last few months. He is entirely right that the burden of this will be borne by the next generation, not by those of us sitting in this Chamber. That is why we are so anxious to do everything possible to avoid these national lockdowns, which have the huge costs of supporting people and which throttle economic growth. We are seeing the largest fall in economic activity in my lifetime certainly—and maybe even longer. We must come together to regrow the economy as quickly as possible, because only growth will pay down this debt.

[The Lord Bishop of Portsmouth [V]]

My Lords, I welcome the Government’s desire to protect jobs and livelihoods, but can the Minister confirm that the extension of the furlough scheme until March—a full five months—is based on the assumption and expectation that those jobs, or at least the vast majority of them, will be ready to return to unchanged? That is a bold assumption. If it is not the case, what strategy do the Government have now for addressing the transitional challenges for those whose jobs will disappear? This Statement was made late, in haste. Tackling the jobs issue in March is tackling it too late.

[Lord Agnew of Oulton (Con)]

I share the concerns of the right reverend Prelate about jobs. The honest answer is that we do not have enough visibility on the impact to the economy beyond March. Coming out of lockdown, we saw a steady reduction in the number of people using the furlough scheme. It dropped every month from July to August to September. I do not have all the information yet, but hopefully it will be published shortly. The key is whether we can avoid extending this awful lockdown beyond 2 December. I am confident that if we can avoid that, we will see a rapid pick up of the economy, which will hopefully reduce the number of job losses that the right reverend Prelate is so concerned about.

[Viscount Waverley (CB) [V]]

My Lords, could the Minister set out the vision from the perspective of his department as to how the various help initiatives, including the job retention and self-isolation schemes, can impact UK trade in delivering a sustainable economy at national and international level, given that our economy is in the eye of a perfect storm of incomplete Brexit-related negotiations, a changing of the guard in the US, direct and indirect consequences of Covid, including supply chain complications, and a worsening employment situation?

[Lord Agnew of Oulton (Con)]

I agree with the noble Viscount that we face an unprecedented storm of events, and I share his concern. On the role of the Treasury and, indeed, my other department, the Cabinet Office, we are doing a great deal to try to ameliorate some of this. For example, project speed, on which I deputise for the Chancellor, has brought together a number of initiatives to pump prime the economy—and we have published our first initiatives on that. We have a further possible 80 projects, which will be used to pump prime the economy, dealing with blockages to infrastructure, speeding up infrastructure, the commitment to building additional schools and accelerating the building of 40-odd hospitals. We have announced through the IPA some £37 billion of infrastructure, and I hope that we will announce around the time of the spending review the national infrastructure strategy, which will show further the investment that the Government are making.

[Baroness Altmann (Con) [V]]

My Lords, I welcome the extension of the economic and job support schemes and congratulate the Chancellor on his willingness to adopt flexibility and have the courage to change tack when the economy and public health winds changed. However, I have to say that I regret that a new lockdown was deemed necessary and believe that the damage caused to public health and the economy as a result needs to be much more thoroughly analysed.

Does my noble friend agree that the job support measures that have been introduced have been facilitated by the Bank of England’s quantitative easing policy? In combination with the job support measures, it is rather like helicopter money or people’s QE. What impact do Her Majesty’s Government expect it to have on UK defined benefit pension schemes? Would not it be better for the economy to encourage companies and pension schemes to invest directly in the economy to boost growth rather than encouraging them to buy more fixed income, as interest rates continually fall?

[Lord Agnew of Oulton (Con)]

The noble Baroness is right that QE is providing a level of financing for the interventions that the Government are taking at the moment. I think that she will understand that those interventions are having to be made extremely quickly to protect lives and livelihoods across the whole country. Long term, I absolutely agree with her that we need to get businesses to invest more in the economy. One initiative that I am exploring is to try to encourage local government pension funds to allocate a greater proportion of their investments to infrastructure; at the moment, it is a very low figure. I am sure that there is more we can do to loosen the rules without, of course, putting those pension assets at undue risk.

[Lord Bird (CB)]

I declare my interest as a founder of a social business, which is on the register. From where I am sitting, I am very impressed with this Government, who have pushed aside all the austerity measures that we were expecting. I think most of us expected that we would return to a Cameron-type, Clegg-type austerity. That involved laying the stones, filling up our hospitals and cutting social support to such an extent that, when we arrived at Covid-19, 85% of our hospitals were full of people who were troubled, poor and broken, largely because of the effects of austerity.

I am a self-appointed historian. I was born in 1946 and I stopped paying for the Second World War in 2007, when Mr Blair signed a cheque for the last time. Did your Lordships know that in 1832 we raised £30 million to pay off the people who had to give up their slaves? We only finished paying that off last February. This generation is paying for previous generations, and those generations paid for generations before them. If this generation turns its back on its responsibility and does not do as the IMF said—spend, spend, spend, and keep the receipts—then we will have no economy and no society, and we will have an enormous amount of problems.

I am really blessed. I am grateful for the bounce-back loan and for the chance of having the furloughs so that I can look after my staff and still help those people who I have appointed myself to help on the streets of the cities of Great Britain.

I shall end on another problem. I know many self-employed people, including my brother, who cannot find their way through the intricacies of what is being offered by the Government; some 3 million to 5 million people are falling outside it. I suggest that we need to fine-tune ways of how we can help those people. News came through yesterday that 1 million people, the backbone of Britain, doing all their self-employed jobs, are now giving up on self-employment and trying to find jobs. That is because they are not getting the support that the Government are offering.

[Lord Agnew of Oulton (Con)]

I thank the noble Lord for his supportive comments. I completely agree with him that intergenerational solidarity is vital as we come through this crisis. I worry about the cliff edge of debt that we are generating, but I accept his point that we need to be here today for all those very vulnerable people who we have tried to help over the past six months. I hear what the noble Lord says about the complexity of eligibility. I am pleased to confirm to him that we are working to make clearer eligibility criteria. They have been introduced for the third SEISS grant, and we have committed to there being a fourth grant early next year.

[Baroness Bennett of Manor Castle (GP) [V]]

My Lords, I join the noble Baroness, Lady Kramer, and the noble Lord, Lord Bird, in focusing on the self-employed, particularly those who are missing out on help altogether. In figures out this morning, the LSE Centre for Economic Performance found that one-fifth of self-employed people anticipate quitting altogether, rising to 58% of those under the age of 25. The right reverend Prelate the Bishop of Portsmouth referred to the conditions of uncertainty that we are going to see in the new year. What will the Government do to enable the self-employed to rebuild their careers and their lives and to give them security as a foundation to do that? An unconditional payment, such as universal basic income, could be such a foundation. Will the Government consider it?

[Lord Agnew of Oulton (Con)]

The noble Baroness knows that this Government certainly do not support a universal basic income, but we are very aware of the vulnerability of many self-employed people. We have tried to close as many of the gaps as we can. As I mentioned in my answer to the noble Lord, Lord Bird, we have clarified the criteria in the latest round. The noble Baroness will know that we have made the entitlement more generous and extended it not just to November through until January.

[Baroness Warsi (Con) [V]]

My Lords, I welcome the Government’s decision to provide clarity and stability by extending the furlough scheme to March. I also draw the House’s attention to my entry in the register of interests. Can my noble friend provide some clarity for those businesses that took out coronavirus business interruption loans and bounce-back loans, many of which were taken out around April this year and therefore will be coming up to the anniversary in April next year? Has any thinking been done in government about what will happen to those loans, such as when repayments will start, what rates of interest are likely to be incurred and whether there will be an extension of the interest-free period to enable businesses to stabilise before those payments start?

[Lord Agnew of Oulton (Con)]

No firm decisions on that have been made, other than what was announced a few weeks ago, which was to extend the payment period of the bounce-back loans to 10 years and to confirm that those businesses that took out less than their 25% eligibility up to the £50,000 cap could return to top up to the full amount. We will of course keep under close review how the economy reacts as we come out of this pandemic, as we hope, and how quickly businesses are able to recover from it.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, I welcome the new economic measures announced by the Chancellor last Thursday in another place, but, like other noble Lords, I continually hear of cases of thousands of fellow citizens who, not because of fecklessness or negligence, are falling between the cracks—photographers, event organisers, dividend earners and the like, who have taken risks and built high-earning businesses, who are now prevented from earning a living or paying their debts and are being driven to despair through no fault of their own. In the light of the new quantitative easing measures, will the Government please have another look at support for these innocent victims of this pandemic?

[Lord Agnew of Oulton (Con)]

I share the noble Lord’s concern for those who have fallen through the cracks. We have issued a number of initiatives over the last few weeks and months to try to close the gap. For example, for the arts sector, there is some £1.5 billion of support, some of which will be available to vulnerable groups which have not been able to be part of the traditional self-employed schemes. We have also made funding available to local authorities, which are able to use discretion in the allocation of some of that money for vulnerable self-employed people.

[Lord Bilimoria (CB) [V]]

[Inaudible]—will be crucial. The news of the Pfizer/BioNTech vaccine is very welcome. Does the Minister agree with the recommendation of the CBI, of which I am president, about the creation of an economic recovery commission, uniting government, business and unions? It would be a vital step, as would the urgent rollout of affordable, regular mass antigen testing—with the Liverpool pilot, thankfully, having been started and now in full swing—along with investment in job-creating projects, with a focus on digital skills and green jobs. To reinforce what the noble Baroness, Lady Kramer, said, what can the Government do to help the 3 million excluded from the huge amount of government support that has been made available so far, for which we are all grateful?

[Lord Agnew of Oulton (Con)]

My Lords, the Government are in constant contact with the business community. They absolutely accept that the wealth creation engine of our economy is vital for us to recover from this pandemic. I share the noble Lord’s optimism about the vaccine. Of course, we need to be careful—we are not through the last hurdle yet—but it is certainly nice to have a little bit of good news occasionally. I have answered the point about the self-employed, raised by several other noble Lords. It is perhaps worth reminding the noble Lord that we have improved the universal credit system to try to provide a little more protection at that end of the system. We have also confirmed that those on mortgage holidays can extend to six months without any impact on their credit file.

[Lord Lea of Crondall (Non-Afl) [V]]

Three weeks ago, the Minister agreed with my remark—first made by the noble Baroness, Lady Kramer, I believe—that we have to integrate our employment assistance policy in relation to jobs that are affected by Covid-19 and jobs that are affected by Brexit. This task is becoming increasingly urgent. Looking forward, we will be in another crisis in which we are behind the curve. Will the Government commit to following up the Minister’s reply when I last raised this point and agree that there should be at least a White Paper or a Green Paper arising from the important talks in which, as the noble Lord, Lord Bilimoria, said, the TUC and the CBI agreed with the Government? Would it not be a good tripartite agenda for them to examine why there has been so much difference in how jobs have been affected by Covid-19 and how jobs have been affected by Brexit? The situation will be dreadful by the time we next have a Statement, as it is likely that Dover-Calais will shut down for many hours if we do not get a settlement, which is unlikely at this stage.

[Lord Agnew of Oulton (Con)]

The noble Lord raises a number of questions. Perhaps I may reassure him that the Government are in constant dialogue with business at all levels. He is right that we face some uncertainty on 1 January with the emerging exit from the transition period. It will certainly be helpful if we can get some kind of clarity within the next couple of weeks. However, he should also understand that, whether we get a deal or not, we are leaving on 1 January and we will be out of the customs union. The only real difference for businesses will be the tariff structures that exist and their preparedness for that. We are doing an enormous amount of work to support businesses in being ready for that, including work at the ports and inland sites to ensure that the disruption that the noble Lord is concerned about is minimised.

[Lord Hamilton of Epsom (Con) [V]]

My Lords, are my noble friend Lord Robathan and I alone in worrying about the accumulated national debt? How much will this furlough scheme cost if it lasts until the end of March? By how much will the national debt increase as a percentage of GDP, and at what stage does the national debt as a percentage of GDP become unsustainable? Let us face it, this lockdown may not even be necessary, based as it was on bogus statistics, and imposed at a time when the incidence of coronavirus was decreasing both in hospitals and in the numbers of people being infected.

[Lord Agnew of Oulton (Con)]

My noble friend asks about the cost of this current extension of furlough. I am not able to give him the answer to that yet simply because we do not know how many firms and employees will take advantage of it over the next few months. During the last lockdown we saw a very dramatic reduction in the numbers claiming each month as the economy opened up again. We have built in the flexibilities that we did not include initially in the first lockdown so that employees and employers can work as flexibly as possible to protect both businesses and their employees. I share my noble friend’s concern about the overall costs of this and the risk to our balance sheet.

House adjourned at 5.52 pm.