Autumn Statement

Lord Higgins Excerpts

Thursday 5th December 2013 Lords Chamber

[Lord Higgins (Con)]

My Lords, I very much welcome many aspects of the very imaginative Autumn Statement. Regretfully, I have to deplore once again the fact that many aspects of it were leaked in advance. I would have thought that the Treasury would have learnt the lesson from a previous Budget experience that this is not a good way of handling public relations—and is very discourteous indeed to Parliament. Parliament has the right to hear these matters first.

The good news, certainly, as my noble friend has just said, is that the economy is recovering faster than expected. Perhaps I might comment on why this has happened. There are, I think, two particular aspects. The first is that the deficit has not been cut as fast as we hoped and that consequently, the economy has picked up a little more, because of the effect on aggregate demand. None the less, I welcome the fact that the Chancellor has now set out a very firm timetable for getting down not only the underlying cyclical deficit but also the structural deficit. This is something to be welcomed. Up to now, we have rejoiced in the fact that we have cut the deficit by a third, but we are still continuing to borrow at two-thirds of the appalling rate that we inherited from the previous Government. It is very important that my noble friend agrees that that should be tackled.

The second reason, which gives more cause for concern, is the substantial reduction in saving—apparently the biggest fall in saving for 40 years. People have been using their savings, which has accelerated the growth of the economy, which may lead to concern. Given his particular responsibility for infrastructure, does my noble friend agree that it is absolutely crucial that we get savings up? The finance has to be provided for the infrastructure that the Government envisage.

In that context, I will ask one particular point. We seem to have got away from financing infrastructure in the usual way: that is, by allowing capital to be provided by whoever is launching the operation and then working it up in the usual way. Instead of that, we have been allowing monopolistic enterprises in particular to increase the prices on existing consumers. That has been the way in which we have been financing, for example, the railways and energy. Will he look particularly at whether this is the right way to proceed—because we are also then depending very largely on foreign investment rather than our own domestic savings and ownership?

[Lord Deighton]

I thank my noble friend for those incisive observations. He is absolutely right to say that the deficit was reduced in a measured fashion, which is part of the reason why the economy has been able to recover so quickly. He is also absolutely right that there is still a structural deficit, so we cannot simply allow for the natural recovery through the economic cycle to take care of our borrowing problem; we must continue to drive savings through the system. On the fall in consumer savings, again, my noble friend is absolutely right that it is a sign of a healthy economy to have a strong savings rate. On consumer behaviour, it is not surprising that, after a few years of belt-tightening, there has been a desire to begin spending again.

On the overall economy, as I mentioned, the recovery in business investment is the single most important change in the recovery of the economy over the next year. We anticipate that the recovery in consumer demand will give business the confidence it needs to increase its level of investment, which is what should sustain the recovery.

On infrastructure, my noble friend is correct. Essentially, there are two ways to finance it: directly from taxpayers or indirectly through the private sector and into the utilities, which then recover the investment through consumers paying. Of course, that is governed by independent regulators, who set the prices in those industries. It is absolutely part of our national infrastructure plan continually to assess the balance between the interests of the investing institutions and consumers’ affordability over the longer term.