Finance (No. 2) Bill

Lord Haskel Excerpts

Thursday 26th March 2015 Lords Chamber

[Lord Haskel (Lab)]

My Lords, it is a pleasure to speak in the Second Reading debate with such a short and, perhaps I may say, select list of speakers. I start with a question. There is one ingredient which, if inserted into the Finance Bill, would raise pay, raise the tax intake, reduce welfare costs, increase exports, raise our standard of living and cut our deficit. What is that magic ingredient? The Minister will not be surprised to learn that it is productivity. He and I have debated it many times over the years, and I think that he agrees with me.

So why is there no strategy for raising productivity in the Finance Bill? The Bill makes some announcements which may help the nation’s economy. The Minister has mentioned some, but there are others: help for northern cities and the energy-intensive industries; encouraging online sharing; apprenticeship vouchers; and, yes, the tax avoidance that he spoke about. But that is not a strategy. It is not a coherent whole; it is not a clear vision; it is just reacting to events.

The Government do not understand that because they have a one-sided view of the economy. By concentrating on total GDP, they ignore the fact that our GDP per head is 1.8% lower than it was in 2008. Total GDP has risen only because of population growth—largely because of immigration, we have been told. Output per person is 1.8% lower. In his speech, the Chancellor took pride in the fact that Yorkshire had created more jobs than the whole of France. What he did not tell us is that four people in France produce as much as five people in Yorkshire, and we work longer hours. Perhaps that is because the French taxpayer is reluctant to subsidise low wages.

On Budget day, the BBC’s “Today” programme went to Reading. Among others, it interviewed a man who works for a company, not identified but said to be nationally recognised, that guaranteed him seven hours’ work per week. The rest of his hours were subject to summons by text message with 30 minutes’ notice. Not only is that unfair to the employee; it is unfair to the taxpayer. Why should we subsidise that job with housing benefit and tax credit when it would appear that, with better management and a more acceptable business model, the company could reduce the employee’s dependence on taxpayers’ support? Low productivity is enabled—indeed, it is facilitated—by exploiting workers through low pay and unfair terms of employment, and the absence of a sense of public value.

In raising these matters, some accuse us of not being business-friendly. Not true. Does the Minister not agree that the wider interests of business are better served not by leniency towards dubious business activity by people and companies, not by special treatment for powerful lobbies, not by subsidies given to compensate for poor management but by a clear business strategy, especially one to raise productivity? Yes, the Government have tried to have a business strategy, a strategy consisting of helping exports, encouraging those sectors which show promise, innovation stimulus centres—the Minister mentioned others—but they could work a lot better. Why? Because increased productivity is what is really needed to make those initiatives work. The two are interdependent.

What should be in the remaining 337-page Finance Bill to deal with that? Jonathan Portes, director of the National Institute of Economic and Social Research, said:

“The question is: what should the government do? It should go hell for leather on doing whatever it can to boost productivity, like infrastructure investment and housing. We should be throwing the kitchen sink at it.”

In this era of low interest rates, now is the time to boost the supply side. The world is awash with cheap capital, so let us use it to have the blitz on productivity called for by Jonathan Portes.

What makes it more urgent is this. The Chancellor tells us that unemployment has fallen to 5.5%. We are reaching the unemployment norm, which means that future growth depends on raising our productivity. Indeed, without growth in productivity a growing economy means that we will continue to see rising inequality and rising immigration, perhaps reaching a point where things could really become quite nasty. A strategy for productivity means planning for the long term—not changing grants and allowances or doing a lot of the things that the Minister has just mentioned, but spending evenly spread and not what the OBR calls “a rollercoaster profile” for public spending, with a big drop followed by a big rise. That is no way to do it.

If the Government really want to be business-friendly, what about having another 10-year plan for science? What about raising the proportion of GDP that we spend on research? What about introducing the long-term values into our business culture, so that we can take advantage of this? I put it to the Minister that this is what is being business-friendly. This version—our version— will encourage business to be more productive, to invest and to create the kinds of inflation that build the value of our goods and services. What I would like to see in the Bill is a long-term strategy that is business-friendly in its widest sense.

Yes, we have some wonderful companies that take a long-term view and, yes, they will benefit from some of the aspects of this Bill. But it is too little and too slow to deal with today’s productivity challenge. I know that the Minister has heard much of this before, from me and from others, but it does not make it any less true. These are honest, consistent and responsible elements—elements which, I am afraid, are hard to find in the Bill.

--- Later in debate ---

[Lord Newby]

I will do that very readily. Finally, the noble Lord, Lord Davies of Oldham, described this as a mean-spirited Bill, and he did not have a huge number of positive things to say about the Government’s track record during this Parliament. This is now the end of the Parliament and we have been in government for five years. We came into the coalition to turn the public finances around and to put the economy on a positive track, and that is what has happened. I think of the position that we were in, even when I first stood at this Dispatch Box three years ago, on growth, employment and our prospects in virtually every respect, and I look at the situation now. We have the quickest growth in the G7, the claimant count has come down a third in this Parliament, there are 400,000 fewer households with children with no one in work, and record numbers of women, both absolute and proportionately, at work.

Nobody can claim that the economy has yet reached a state of perfection—that will never happen—but looking at the progress that this Government have made in turning the economy around and making it fit for the challenges that we face, I am very happy to fight a general election on that basis. This Finance Bill completes the process by the Government in that respect and I commend it to the House.

[Lord Haskel]

Is the noble Lord aware that the figure I used for productivity per person comes from the Institute for Fiscal Studies? I think it can be considered to be pretty good and independent. On skills and qualifications, the Minister spoke of numbers, but it is important to speak of standards, because that is what will help our economy. We do not need what the OBR calls the rollercoaster attitude towards science; we need the continuous support over many, many years.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.