Spending Review 2020

Lord Desai Excerpts

Thursday 3rd December 2020 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, what the year has proved since the Chancellor’s first Budget in March, and now the spending review, is that no forecast can be trusted to be right. He did not expect the year that was coming when he presented his Budget in March. The spending review relies on some forecasts, but I would advise him not to trust them very much.

What we have seen is that, since the age of austerity under George Osborne, the fear of debt has gone. We concentrate much more on the cost of meeting the interest on debt, rather than the debt-to-GDP ratio. Interest rates right now are either zero or negative. Nobody expected that to happen, but we can more or less rely on interest rates remaining low and the cost of servicing debt not being very high.

We also noticed that the status of being poor, being on universal credit or being unemployed is not permanent for some. It can happen to anybody: it can happen to the self-employed and the employed, and we have furloughs and all sorts of conditions. Right now is a good chance to think of building the universal credit into a citizens’ income platform. It would take time and money, but that way you would avoid the effect of economic shocks on people’s livelihoods.

Lastly, I advise the Chancellor not to raise tax rates but to remove the concessions and loopholes in the income tax code, for example. There are 1,000 loopholes in the code that save people money. Stop them, keep the same rate and you will make much more money.