Economy: Budget Statement

Lord Davies of Oldham Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Davies of Oldham]

My Lords, this has been an excellent and wide-ranging debate, and therefore it is all the more difficult to wind up the issues from this side. Before we came into the Chamber, the Minister was kind enough to indicate that it is always the senior figure, in the Commons and here, who introduces the debate and the poor junior who has to cope with winding up. Of course, the Minister is playing both roles, so he has my greatest sympathy.

I hope that in responding to the debate the Minister will find time to address himself, in particular, to specific points that Members of the House have raised. They are difficult for me to develop in the limited time available but I think they are well worthy of consideration. My noble friend Lady Worthington drew attention to the extent to which this Budget challenges the Government’s green credentials, and the noble Lord, Lord Marlesford, indicated that property taxes are a pressing issue that we ought to address. My noble friend Lord Desai said that the Minister ought to consider what should have been done with the windfall of Royal Mail resources. The noble Lord, Lord Northbrook, indicated something that is of great concern to the nation—the imposition of an extra 3p on fuel duty later this year unless the Chancellor takes action.

In the limited time that I have, I will concentrate on the main themes of this debate. The main theme is obvious: this is a Budget presented in an age of austerity. That is why the country sought to respond to the concept that was presented a year or so ago—we are all in this together. The Government said that they were concerned about fairness in the necessary privations that would be visited on the nation as it emerged from these great difficulties. We were somewhat reassured last year when the Chancellor said that it was not the right time to remove the 50p tax rate, when others in society on much lower incomes were being asked to make sacrifices. Exactly, but what has changed? Only that the least well-off in our society—the poor; those who are losing their jobs as mass unemployment begins to emerge across the nation; those who are losing their benefits; those who are finding their pay frozen; and those who are threatened with regional pay rates at a lower level than they enjoyed in the past—are making sacrifices while the Government reduces the 50p rate of tax. It is payoff time for the Government’s supporters but payback time when the nation regards this issue as appallingly unfair.

Of course, the Budget did not come as a shock. As the noble Lord, Lord Higgins, indicated, there was very little left in the Budget that could cause any surprise because the press had been well briefed. My noble friend Lord Davies of Stamford asked whether Ministers knew that this briefing was going on. Is it conceivable that even the challenging folk in the Treasury would have been so brave as to give these leaks without sanction? Of course not; this was a carefully prepared position.

What was not revealed in the leaks beforehand was the granny tax. That emerged from the finer print of the Budget. As my noble friends Lord Wood and Lord Myners, who both demolished the totally contradictory defences that the Government have erected for the reduction in the higher rate of income tax, pointed out, everyone is scandalised by the Government attacking pensioners in such an obscure way. The reason for doing so is straightforward and has nothing to do with the Government’s defence of, “We haven’t hit pensioners hard enough yet so it’s their turn”, which seems an odd idea of fairness. Pensioners are on fixed incomes, with fixed expectations; that is why the change to the terms of trade in pensions is so acute and causes such anxiety. Members of the Government ought to appreciate just how significant that is in the response to the Budget.

However, even then, we are still discussing minor matters in relation to the economy. I think the noble Lord, Lord Higgins, first voiced the opinion, which was subsequently reinforced by a number of noble Lords, that the Budget did not have a great deal to do with the real economy. Given its neutral stance, it will have a marginal impact on the real economy. However, this debate is about the real economy and some of the interesting contributions have addressed that.

In a central part of an extremely challenging speech, my noble friend Lord Eatwell indicated that one of the crucial figures is that business investment, which was anticipated to be 7.7 per cent, is down to 0.8 per cent at present. That ought to be a source of real anxiety for us all. Is it because businesses lack cash? That is not what the Institute of Directors says. Its director-general says that we do not lack cash but we do lack consumers. Certainly, many of our major companies are cash-rich at present. However, they do not have confidence in the market. They are not confident that they will get a return on their investment. This is not the case to the same extent with the SMEs, which may not be so cash-rich. As my noble friend Lord Sugar pointed out, there ought to be a role for government. He was not the only speaker to voice this point but he was probably the first to do so. We need an investment bank that directs itself to provide resources for what would be the rapid growth areas of the economy, if we can only prime them successfully.

The problem is that the Government are massively reducing demand. They are reducing the resources available to people to spend. I am not, of course, talking about those who will benefit from the reduced rate of taxation and can afford to buy sports cars costing £40,000 to £60,000. The only tragedy about that is that those cars are almost certain to be German and therefore British industry gains little from those transactions. However, the vast majority of the population are exhorted not to spend what they do not have. The problem is that they have less, or they are anticipating that they are about to have less.

We are used to a Conservative Party which in times of austerity has a history of being quite prepared to run the country with high levels of unemployment. Reference has been made to the lessons of the 1930s, but there was high unemployment in the 1980s and we are now approaching similar levels of unemployment. That is a tragedy for all those who are unemployed. Those who think that the 1 million young people who are unemployed are unemployed because they prefer to hang around on generous benefits know nothing about the young people of this country. No young man or woman wants to be in a position where there is no possibility of getting a job or career. The reason why they are unemployed is because the jobs do not exist. The Government ought to address those issues a great deal more intensively than they do. Encouraging higher growth would give people a chance to get jobs.

The noble Lord, Lord Bates, and the noble Baroness, Lady Randerson, referred to the north-east and Wales respectively. Those areas, which have relatively low levels of income, are now being threatened by cuts in public sector employment, which will result in even lower levels of income. I heard what the noble Baroness, Lady Randerson, said about the Welsh economy. However, I have also heard representatives of the other place speak of their great concern for the Principality.

The great highlight of this debate was of course the presence and contribution of the noble Lord, Lord Heseltine. We all congratulate him on his maiden speech, although that phrase sits ill with me due to his contributions at Westminster over the years. We wish him well in the role that he is to play, particularly because, despite all the trials and tribulations of the immediate future, it is important that we have a longer-term perspective.

International comparisons can be of great benefit to us. We can learn from the way in which others tackle their business, not least because—let me make the obvious point—the US economy grew by 2 per cent last year. When the US car giants threatened to collapse, the US Government moved in. It might be that this Government should have a bit more confidence in doing so.