Autumn Statement

Lord Davies of Oldham Excerpts

Wednesday 3rd December 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I am grateful to the Minister for referring to this Statement. We have an economic debate scheduled for tomorrow, in which a very significant number of Peers will contribute to what I think will be a very fruitful debate. One is also conscious of the fact that the very limited amount of time that we have to deal with the Statement scarcely merits this particular form of parliamentary procedure.

We have four issues on which we want to challenge the Minister with regard to the Budget: living standards and wages; tax receipts and borrowing; growth and immigration; and taxation and the National Health Service. Is it not quite clear that a great deal of revenue has been lost this year despite the Government’s boast about increasing employment, because many people in work, far from paying taxation, are actually receiving social payments? The Government’s much vaunted boast about the improvement in employment is destroyed by the fact that, clearly, we are not improving productivity. The only key to Britain actually paying its way is by improving our balance of payments and trade. That means that productivity ought to be a key objective of the Government. From what I could see of the Statement this morning, there was just a glancing reference to the issue of productivity.

The OBR also indicates today that wage growth is again weaker than expected. We know that the Chancellor puts on his long-range spectacles at this point—almost a telescope—to let us know when wages might, in due course, exceed inflation in rise. However, we are once again in a position that we have had year after year in which living standards have been falling because real wages have been dropping. Working people are now £1,600 a year worse off than they were in 2010. Someone in full-time work is £2,000 a year worse off. The issue is quite clear: working people are facing a cost of living crisis. That is why the Government are facing their own cost of living crisis, in the obvious fact that tax receipts are far below what the Government used to promise and predict. As a result, we are in a position where the Government are obliged to come before this House and the other place with a clear record of failure.

The books were meant to be balanced by 2015. In fact, that was the cardinal point of the coalition proposals on the economy. What we are facing is downright failure; and, of course, the failure is attributable largely to the shortfall in tax revenues. The OBR says that, so far in 2014-15, weaker than expected wage growth is depressing PAYE and NIC receipts. Does the Minister agree with the analysis from that independent source? Is it not clear that there is a great drop in tax revenue, which makes an absolute mockery of the idea that the Government somehow had a long-term plan? The Government are therefore forced to borrow.

Back in 2010, the Chancellor and the Prime Minister pledged to balance the budget by the end of this Parliament and to see the national debt falling. In 2010, the Prime Minister said:

“In five years’ time, we will have balanced the books”.

The national debt is now forecast to rise again this year. Perhaps I may ask the Minister—clearly, he will acknowledge that the Government have missed their targets—whether he will give us the figures on how much more will have been borrowed in this Parliament than was planned in 2010.

The reason why wages, incomes and borrowing have been hit hard this year is that productivity growth has been weak. Yet the Chancellor announced that, on this year’s figures, he is forecasting growth not to accelerate but to slow down next year. I know that he wants to blame the poor performance on the eurozone and the international situation. The Conservative Party, in particular when it is in trouble, is pretty good at analysing the difficulties that the international situation presents for the economy while decrying completely any aspect of the collapse of American, German or French banks as regards the British problem in 2008. Instead, it attributes all to the government overspend, when it is quite clear that the problem in 2008 was the collapse of receipts. This Government are facing exactly the same failure with regard to receipts.

One reason why growth has been so weak is that the Government are constantly forecasting that it will be greater than is the case because they are content to measure the wrong figures. They should concentrate on productivity and the creation of real jobs and ensure that the British balance of payments begins to improve as opposed to what is happening at present. Is it not the case that since 2010 our performance in the G20 places us 22nd out of 28 countries in the EU as far as these figures are concerned? Business investment has also lagged behind that of our competitors and fell in the most recent quarter. Bank lending to business is below what should be available and is still falling. The number of apprenticeships for young people is down this year on last year’s figure. These are all issues which I hope the Minister will address although I recognise that he has to give an abbreviated reply to a Statement of this kind.

The noble Lord has responsibility for infrastructure, but what percentage of the planned construction is actually being constructed? How many houses are being built? How many roads have been started? Or is this just another promise that the Government are making for the next Parliament that they will not realise if we have the misfortune of seeing them re-elected? Is that not also the case with rail? The Chancellor referred to improving the rolling stock in the north of England but he did not put a date on it. There is never a date attached to plans for so-called improvements in infrastructure—there are figures but no achievements. In fact, the greatest achievement of this Government in infrastructure over the past few years has been Crossrail, the majority of which was planned and developed under a Labour Government. We expect the Government to produce a plan to create more good jobs and to adopt a more balanced approach. That is clearly not predicted in today’s Statement.

What about another promise that has bitten the dust: the promise that net immigration to the UK would be down to the tens of thousands? What is the actual figure? It is 200,000. That is yet another projection by the Government that is belied by the facts. The Prime Minister claimed in the Times a month ago that 80% of the Government’s planned spending cuts—which have so heavily cost so many people of limited resource—have now been made. He said 80%, but the Institute for Fiscal Studies says that it is 50%. Would the Minister care to say which is right? Spending on social security in this Parliament is more than £20 billion higher than the Government planned in 2010, so they cannot even get their sums right.

We have been promised an extra £2 billion for the National Health Service. The calculation for the first year has to take into account the fact that £700 million had already been allocated to the health service and is now somehow being reallocated by the Government. Why does the Chancellor not introduce an annual charge on the highest value properties, as we are suggesting, to enable an investment of £2.5 billion a year to be made in the National Health Service? That is the figure that is clearly necessary to avoid the great difficulties it faces.

I am aware that this is meant to be only an introduction, and tomorrow we will be able to deliver a rather longer statement. However, I hope that I have at least identified to the Government that they have some singular and important questions to answer, lest the country treats this Statement with the same level of credibility that the Government’s past performance merits.