Queen’s Speech

Lord Higgins Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Higgins]

My Lords, this Queen’s Speech has been debated against the background of the recent election results. It is true that all Governments have mid-term problems, but the recent ones seemed to be particularly obscure. Some were due to a degree of mismanagement and some to a high degree of bad luck. They also reflected contempt for Parliament by the Government in a number of respects. It was said that the Budget was bad; that was the general received view. In fact it was a perfectly reasonable Budget. What was true was that it appeared that the details were given to the press the day before—totally contrary to all the traditions of Parliament. Of course, that was the good news, so perhaps it was not surprising that the bad news got all the publicity the day after. I hope that those responsible were demoted or fired, or some other appropriate action was taken. Similar things happened with the Queen’s Speech. We must restore a situation in which important statements are made first to Parliament and not given to the press the day before, creating an anti-climax the day after.

There is also evidence of clear contempt in the programming of legislation in the other place. Perhaps my noble friend would like to speculate about how many Bills in the Queen’s Speech scheduled to be introduced in the other place will be programmed. That is an area where the Government are preventing the House of Commons doing its job. This is to be deplored. It is a fact that we have therefore carried a much heavier burden. This must stop. The practice was introduced by Tony Blair. We gave an assurance that we would not do it; and we are doing it. It must stop because the issues in the Queen’s Speech must be debated properly in both Houses of Parliament.

I will say a word about the amendment tabled by the noble Baroness opposite. It does not take sufficient account of the first six items in the Queen’s Speech, which all relate to what she complained about. It is also the case that the overall effect of the Government’s inheritance must be taken into account.

I will say a word or two about the fashionable item of the moment: growth, or stimulus. We should revert to the old-fashioned idea of demand management, with a clear statement by the Government on how they intend to proceed in stimulating demand so that we mop up excess capacity and, once we have got close to the limit we can reasonably achieve, increase demand in line with what we expect productive potential to be.

There is an intrinsic problem in stimulating growth by cutting the deficit and using fiscal means to stimulate that growth. The burden has been placed much more on monetary policy, which concerns me. Gordon Brown was criticised on many fronts, but not for the fact that monetary policy was handed over to the Bank of England. In fact, it was not monetary policy for many years, but an interest-rate policy. Certainly we have now virtually exhausted the possibilities of using lower interest rates to stimulate growth.

I am also concerned that more and more of the burden of economic policy has been placed on the Bank of England. There is a case here. In the course of introducing its monetary measures, the Bank must take into account the overall situation on unemployment, growth and everything else. The Treasury has very nearly abdicated the day-to-day running—and perhaps the longer-term running—of the economy to the Bank. We must consider, particularly given the additional burdens that we are now going to place on the Bank, whether that is the right way of proceeding. Perhaps the Treasury should reassert its authority.

Having said that, and given that we have to rely on monetary rather than fiscal measures to support growth, I welcome the introduction of quantitative easing. It has been a help to stimulating growth in the economy. However, the method employed is open to increasing doubt. My noble friend Lord MacGregor admirably set out the effect that it has had on companies’ private insurance and pension schemes. It is a very serious matter, which he spelt out very lucidly. Should we adopt other means of increasing the money supply? We could abandon the traditional fully funded rule by not funding the whole of the deficit. Part of the problem with the present system is that money goes to the banks, which hang on to a great deal of it instead of lending it to people who then invest it. We should perhaps consider other more direct means of stimulating growth by means of the money supply. Indeed, since we are clearly printing money, we could simply print the money and give it to whatever suitably investment-prone institution is likely to use it.

I turn finally to the question of the eurozone and in particular Greece. We have a situation where Greece has a debt problem and an exchange rate problem. The eurozone authorities are concentrating on the debt problem. They can go on bailing out Greece with the debt problem until Kingdom come, German generosity runs out or alternatively the streets of Athens go up in flames. This is an immensely depressing situation. But they have to face the fact that no amount of bailout in the foreseeable future will restore Greece to a competitive situation. The only way to cure the exchange rate problem is for the exchange rate to change by Greece leaving the eurozone.

One particular point has only become apparent in the light of various statements made by the different multi-political parties in Greece and the argument, “Oh well. Don't let’s bother with austerity: the eurozone will bail us out just the same”. The left wing parties are putting that forward and it may turn out to be right. But we also have to take into account the real dangers to the banking system as far as this is concerned. I will conclude in one moment. Paradoxically, the right answer in this respect may be to bail out Greece on the condition that it leaves the eurozone, because that will mitigate the otherwise disastrous effects on the international banking system. Again, we have underestimated the technical problems of all this. They are very great indeed but alas I do not have time to spell them out.