Budget Statement

Lord Haskel Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I start by thanking the usual channels for giving us an extra week in which to consider the Budget before we debate it. Things that first of all seem too good to be true often benefit from this rather longer consideration. For instance, the pension reforms mentioned by many noble Lords may be welcomed a little bit less when you realise that annuities are an important source of long-term finance for investing in our infrastructure—investment which concerns many noble Lords. Or is the Chancellor after the early tax revenue from the consumption that early withdrawals will produce? My party is absolutely right to call for a more considered and careful scrutiny. Pensions have to be a consensual matter, not a political toy. The noble Lord, Lord Stoneham, just reminded us of the pensions mis-selling scandal which resulted from a previous change.

What about the public finances? I think the Minister told us that they are not bad. Headline borrowing is down. However, my noble friend Lord Myners reminded us that the OBR tells us that, if you take into account the upswing in the economic cycle, the figures are actually worse than a year ago. Growth estimates are not going to do very much for this because what the Minister did not say is that the OBR is concerned that the recovery may not last, as it is largely cyclical.

Where are we looking for the recovery? The Minister mentioned industry. There are modest incentives to invest more, export more, train more and do more research. This will require better management by business—the people referred to by the noble Viscount, Lord Eccles. I put it to the Minister that it also requires better management by government.

Every year, the Government pay some £90 billion to private contractors and the voluntary sector to provide public services, and that is going to rise. Unless this is well run, we will end up with a weak and sickly state and poor civic life. Most of this money goes to a small group of companies that seem to be good at winning contracts but mediocre at delivering services. In some cases, they are dishonest. These services are central to our civilised society, as is banking. Like the banks, these companies are becoming too big to fail. I put it to the Minister that part of a Budget should be to examine the Government’s competence to manage these enormous sums, and not just hide behind commercial confidentiality, as happens at present. It is no good having a policy if you cannot manage it. The few figures released in the Budget show that failure of the Government’s contractors to deliver on things such as disability benefits, the jobs programme and other schemes is stacking up huge costs for the state.

The Minister declared that raising productivity is most important, and I agree. Does he agree that subsidising low pay through the tax system also encourages low productivity? Instead of subsidising low pay, surely it makes more sense for the Government to encourage people to run their businesses better. With his background, the Minister must know that subsidising low-paid, low-skill jobs through the tax system encourages a low-productivity economy. Housing benefit paid to people in work is also rising sharply. I put it to the Minister that this is another way of subsidising a low-pay, low-productivity economy. I agree with my noble friend Lord Myners that low pay is no way to encourage economic growth.

On 20 February, the Office for National Statistics gave the final productivity estimates for last year. It told us that output per worker fell compared with the previous year. We were told that we are 21 percentage points below the average for the rest of the major G7 industrialised economies. I agree with the Minister that we are not going to pay our way in a globalised economy if we stay like that, and neither is that how we are going to increase our exports to deal with our balance of payments. It is this that leads to the inequality described so graphically by the right reverend Prelate the Bishop of Chester. Unless we address this inequality, the economic recovery for which we are all working cannot be healthy and will not be balanced, as the Minister promised and as the right reverend Prelate the Bishop of Sheffield called for.

The TUC’s fair pay campaign demonstrates that many jobs being created are low pay and low productivity. Many exclude security, training and good prospects. Some employers insist on dehumanised terms and working conditions. Successful leadership means that people have to think that you believe in what they believe in, otherwise you get the social problems referred to by a number of noble Lords. No, it would not be difficult for a Labour Government to manage this better because the current level is so low.

I welcome the Budget’s encouragement for training, apprenticeships and qualifications to raise productivity, but the economy is changing, too. We are moving into the kind of economy that does not pay you just for your qualifications and knowledge but for what you innovate, as my noble friend Lord Kestenbaum explained. That kind of knowledge economy requires a different kind of investment that is less tangible. I put it to the Minister that it is strong investment in these less tangible assets that explains the success of many of our younger, newer rising businesses. Although you cannot touch these investments now, they are made in the hope of benefit in the future—not only in training but in designing a new service, in building a database or in producing something that is copyrighted. They involve branding and marketing. In this changing world, this kind of investment is just as important as the more tangible investment in machinery, buildings and transport.

I mentioned this in last year’s Budget debate, and someone must have listened because, on page 73 of its outlook, the OBR says that we do rather well at this kind of investment—better than most of our competitors—and we have kept it up. Good for us. So why do we not recognise this in the Budget’s tax and incentive systems? Surely this is part of our journey away from the low-tech, low-pay and low-productivity economy. It is this kind of economy that demands more and more group enterprise—the kind of enterprise that depends a lot on leadership, collaboration, adaptability, and ability to learn and relearn. It is the absence of these less tangible skills that concerns so many employers today.

There was a time when we were promised an industrial strategy that would produce balanced and sustainable growth. However, as many noble Lords have said, it looks as if we are getting a recovery based on low productivity, a housing boom, consumption involving households dipping into their savings, and increased borrowing. Instead of a recovery that works for us all, it is working for the few. Many have to make do with low wages and dehumanised working conditions. This Budget is going to produce neither the economy nor the society that I would like to see.