Spending Review 2020

Lord Horam Excerpts

Thursday 3rd December 2020 Grand Committee

[Lord Horam (Con)]

My Lords, I agree with what the noble Lords, Lord Desai and Lord Razzall, said about debt. As an economist, I am a qualified supporter of what is called modern monetary theory. MMT says that the economic policy should balance the economy, not the budget. Worrying too much about deficits is a mistake. Thus, Rishi Sunak is entirely right to borrow mind-blowing amounts of money because the essential task is to keep the economy going. Fiscal hawks will say that this all our money and it has to be paid back. Well no, it is not actually all our money. A lot of it is the Government’s money, which they generate from the printing presses of the Bank of England. We need to offset this only if we run the economy too fast for its natural speed and thus produce inflation. Then, and only then, do we have the need to raise taxes to damp down demand.

The advantage of MMT is that it enables Governments to concentrate on what should be done to improve the economy and society, and not be perpetually bogged down in arguments about how to pay for it, which often prevents necessary action. Of course, the Government of the day have to make wise choices, and, to my mind, the levelling-up agenda should be top priority at the moment. Regional inequality in the UK is much the worst in western Europe. Also, sheer poverty needs urgent action. Even after all the billions spent on Covid, we still have some fiscal space to do the things that need to be done, so we should do them, though we should, of course, prioritise. I hope that the Government have the courage and judgment to follow this path.