Budget Statement

Lord Davies of Oldham Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, that was an excellent speech. We are destined to stay on the stony road, according to government plans. It was an excellent speech in a debate in which there have been many excellent speeches on both sides of the House. Inevitably, I took much greater solace from those on my side than from the government side, but nevertheless the Minister introduced the debate very competently, as we would expect, and to all who have contributed I pay due tribute as to the quality of the debate. In the wind-up it will be appreciated that mentioning all 30 contributions would be above and beyond the timescale on which any of us operates.

Let us get this absolutely straight about the Budget. We are engaged in the American experience. This is a year-long election campaign that we are starting. The Americans, of course, extend that to two years, or more. They have almost continuous election campaigns but we have the full-blown one year, or a little longer, election campaign because we were ridiculous enough to agree to establishing a fixed-term Parliament under the auspices of the coalition. It means, of course, that the Queen’s Speech will be cobbled together on the lowest common denominator between the two parties, which want to differentiate themselves before the election. A few dusty Bills that have been locked away in departmental cabinets for so long can now be brought out to keep Parliament vaguely occupied while the MPs do what they always do. They will go back to their constituencies as often and as much as they can. I have never met a Member of Parliament, male or female, who was not absolutely assured that when it came to winning votes the best place they could be was in their constituency.

That is what we are facing and that is what the Budget is about. It is a pre-election Budget. The Chancellor is setting out to shore up his core vote. That is why the noble Lord, Lord Higgins, reflecting on his past as a Member of Parliament for Worthing, emphasised that there would be much joy in Worthing. I am not at all surprised. I reckon that there will be much joy in most of the constituencies that return a Conservative majority of 20,000 or more. Of course, we expect the Chancellor to take some cognisance of the needs of the nation, rather than the needs of those he seeks to shore up against what he probably regards as a somewhat unfair UKIP threat.

The noble Lord, Lord Palumbo, expressed the view that we should begin to pursue the objective of a new politics. However, I would not advance that argument in a pre-election year. There is no way in which we can avoid the circumstances in which a polarisation of debate will take place over the coming year. The noble Lord will have to bide his time and try to win support for his arguments later.

This Budget is highly political. The most striking thing about it was how political the Chancellor was in springing pensions reform upon the nation. As the noble Lord, Lord Stoneham, identified and my noble friend Lord McKenzie emphasised, pension reform in this country has been built on the basis of the parties reaching some modicum of agreement. Of course it has. Pensions have to be sustained over a considerable period of time and are fundamental to the welfare of our fellow citizens. However, this pension reform is not a product of consensus. It is true that my party had indicated growing anxieties reflecting the public mood about the way in which annuities worked and that reform was needed, but this reform was brought in in one fell swoop as part of a carefully guarded government secret purely for electoral and political considerations.

It is all the worse for that because the Chancellor and others will have to wrestle over this coming year with the issues identified by my noble friends. These issues include: how adequate independent advice will be offered to so many people; how we will deal with the situation where some people cash in their pots and then, potentially, subsequently fall back on society; and how we deal with the fact that there will not be a collective response to the development of pensions. We are all at different levels of risk and chance elements as far as the grim reaper is concerned, and that is why the concept of insurance is so important. However, the Government are in danger of throwing people on to their own resources and takings risks, and that is why this reform should never have been introduced in this way.

The second issue on which I wish the Minister and the Government to respond relates to the point made by my noble friend about housing inflation, low credit terms and easy credit being the basis of this recovery. My noble friend Lord Hollick explained that it was exactly these factors that helped to exacerbate the collapse and the crisis that we all endured. How can the Government pretend that they are on the high road to economic recovery when it is based upon the same factors that brought disaster in the past? I hope the Minister will address that point because my noble friend Lord Hollick was emphatic that it should be answered.

There are taxation changes in the Budget which, on the whole, are generally regarded as neutral—of course they are. This is because many of them are lost upon anyone who cannot take a joke such as, “Please have a free pint of beer on the Chancellor after you have consumed 300 prior to that”, or something similar on the reform of bingo. These are the classic budgetary tactics which are adopted in a pre-election year. We got them in pretty full measure, if nothing else.

What my noble friend Lord Haskel sought to emphasise is that the Government are ignoring the cause of difficulties in other countries. They always identify the economic problems of this country as if they happen in isolation—until they begin to tackle them. They have to take on board the fact that we are in a worse position in terms of the length of our crisis than is any other state except Italy. We are boasting about these marginally increased rates of growth after several years when there was no growth at all, and we are ignoring the fact that the United States, for example, is operating on a growth rate at the present time of 5%. The Government had better wise up and realise that they have something to learn from other nations which have tackled these issues differently. They have pursued entirely different strategies, but the Government purport to suggest that their approach, that of austerity, is the only one.

The noble Lord, Lord Low, accurately and eloquently defined how austerity is biting and the significance of that, while the noble Lord, Lord Skidelsky, launched a bit of an Exocet at the Government on the basis of the strategy they are pursuing by explaining just where they have got things wrong.

The Chancellor has got things wrong. He made the fundamental claim that the deficit would be removed by 2015, the year of the next general election. Now he is saying that it is going to take a little longer, deeply into the next Parliament, but not too deep. Well, that looks like failure if it is giving us a promise of the adoption of the Government’s strategy. The Chancellor has also indicated that the recovery would see borrowing reduced in such a way that he will set an example in how he has conducted the economy. But the Government have borrowed more in five years than the previous Labour Government borrowed in 13 years. He has also emphasised that the crisis has been a difficult one, but that he will tackle it in such a way that the country can rest assured under his governance. What has that meant? It has meant austerity of such a kind—I do not think that this has been given a sufficient airing in this debate—that wage earners have seen an average reduction of £1,600 a year in their resources as a result.

As far as the Government are concerned, it is not possible to do anything about the recession except stimulate the demand for housing. We are already finding it very difficult to meet that demand and we all know about the shortage of housing in this country, particularly in the London area. What are the Government doing? They are doing nothing about supply; rather, they are encouraging the development of enhanced demand through their scheme of lending support for mortgages.

The Government have also done absolutely nothing for young people. We all know that there are differences between the needs of the different generations, but what is quite clear is that although pensioners have not seen an enhancement of their position in the way they might have hoped—they are now to get this particular bonus from the Government—it is our young people who are really bearing the weight of the recession. It is our young people who cannot get jobs. In case the House thinks that I am talking about people who cannot get jobs because they are incompetent, what is the developing crisis in the universities about if it is not that people are not repaying their fees? Why are they not? Because they are not earning enough money—£21,000—to be eligible to have to repay their fees. It is causing a crisis in university finance and young people are paying the price.

The Government are also of course taking advantage of those who cannot fight back so easily—350,000 people visit food banks regularly, which is an absolute indictment of the society in which we live. I accept the points the right reverend Prelates made about their concern with the distribution of wealth and the very important point which the right reverend Prelate the Bishop of Sheffield made about seeing that support and economic development occur widely across the country and not, as at present, remain concentrated almost overwhelmingly in the south-east, with the disastrous consequences we have seen for house prices in that region.

In case it is thought that I have been critical of the Government but not faced up to the fact that painful measures need to be taken, of course we recognise that. I emphasise that the first proposal for a welfare cap was made by my leader, Ed Miliband, in June 2013. We were aware of course that the issue of escalating welfare payments had to be tackled—but that does not mean that we can indulge in a Budget which is purely about electioneering and consolidating the Tory core vote.