Autumn Statement

Lord Hunt of Chesterton Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Lawson of Blaby (Con)]

My Lords, I shall begin by saying that I agree very strongly with my noble friend Lord Wrigglesworth. In no way does it make sense to continue with ring-fencing in the next Parliament. All public expenditure has to be judged on its merits, whichever department happens to be responsible for it.

In the short time we have, I do not want to talk about the particular measures in the Autumn Statement—I will discuss wider issues—save to say one thing. I know that my right honourable friend George Osborne is very anxious to go down as a tax-reforming Chancellor. This year, he has lived up to that with the reform of the annuities system in the spring Budget and the reform of the stamp duty system in this autumn budget—because that is what it is. Both of them are substantial and, in my view, welcome reforms.

On the wider issues, nothing is perfect in this wicked world, but by any reasonable standards the British economy is a success story. It is a success story despite, I have to say, the difficulties of conducting economic policy in coalition with my noble friends the Liberal Democrats. It has made the task immensely harder and I hope that this will not continue and we will be able to conduct policy untrammelled by this complication; it is difficult enough without them. It has also been a success story despite the public deficit having been halved. It is still too big but it has been halved, which puts into perspective the views of the naive Keynesians, some of whom are in our midst. I welcome in particular the consensus we now have between the two major parties that it is important to continue to bear down on the deficit. The two parties may have different ideas about how this should be done, but there is a consensus that it needs to be done.

One of the signs and proofs of the success of the British economy is to be seen across the Channel. The difference between the British economy and the economies of the rest of Europe is striking. There are two main reasons for this. One is that we are not members of the eurozone, which is a disaster. I regret that because I do not wish our neighbours to be suffering under the regime, but there it is. The other reason, which is probably more important, is that the massive range of supply side reforms brought in by the Conservative Governments of the 1980s have made the British economy far more flexible than any other economy of Europe. Fortunately, most of those supply side reforms have stuck. They have endured because even the Labour Party can see that they were successful in the 1980s and have remained a great strength for this country.

Looking ahead, much has been said about the warning lights flashing about the world economy. The world economy is tremendously important to a major trading nation such as ours, but it is very much a mixed picture. There is both bad and good. On the bad side, there is the eurozone, which I mentioned a moment ago, and also the problem of Japan going back into recession despite a massive Keynesian boost. The good is that the emerging world is still powering ahead. Obviously, no one would expect China to continue at the huge rate of growth it was achieving, but it is still growing and so is much of the emerging world. The other thing is the reduction in the oil price, which is hugely beneficial.

What do we need to do to continue with our success? There are two areas of importance. I have not got much time so I will mention one just briefly. We have to do far more to clean up the British banking system, which is so important to us as a great world financial centre and to the rest of British industry. The other thing is that we have to radically change our energy policy. We have an absurd energy policy, predicated confidently by DECC and its Secretary of State on an inexorably rising oil and gas price. In fact, the price has fallen and since the things that made it fall continue to exist, it is likely to continue to be weak. We have moved from a market-driven energy policy to one of state control of everything—and largely unaccountable state control. It is damaging for British industry, damaging for the poor and it is deterring investment in electricity and energy generally. We have to move back to a market policy for energy.

[Lord Hunt of Chesterton (Lab)]

My Lords—

[Lord Lawson of Blaby]

I do not have time to yield to interventions. That is the nature of a debate in which we are limited to five minutes each. We cannot accept interventions. But my time is already over so I will end by saying that I warmly commend my successor-but-five, George Osborne, on his Autumn Statement yesterday and on his stewardship of the economy over the past few years.

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[Lord Hunt of Chesterton]

My Lords, I enjoyed that speech. I join in welcoming the noble Lord, Lord Rose, and comment, which others have not done, that Marks & Spencer has always been a very progressive capitalist organisation. Indeed, one of its founders—Lord Marks, I think—used to contribute openly to the Labour Party, so it obviously knows that that party exists.

The Government’s Autumn Statement was, as expected, an occasion to announce further planning, further cuts in public expenditure and measures to make the UK a less fair and meaner society, which the Chancellor and, indeed, some Ministers seemed to relish, as we heard this morning. One can only be worried that these policies will continue. Over the relevant period, other countries such as the United States put more money into government. If we had had a Conservative Government from 2008 to 2010, doubtless these impacts would have been greater. Over the period in question, many people’s living standards fell and we now have food banks in the UK. Perhaps the one benefit of the Chancellor’s Budget is its provision of money to the churches so their roofs are all right while the food banks operate down below.

The main omission in the Statement is that there is no mention of the greatest fundamental risk to the future of the UK’s economy—that is, the threat posed by the UK leaving the European Union. That has not been mentioned this morning either. That seems to me quite extraordinary. If you were a trader seeking a loan or investment and, while seeking that loan, you did not tell your bank or backers that you were about to deliberately tear up the existing business plan and do something quite different, you would be considered grossly dishonest. Indeed, if you were a director of a company, I believe that you could well be prosecuted for not operating correctly. Perhaps this goes back to the point made by the noble Lord, Lord Palumbo. For example, I know that the noble Viscount, Lord Younger, who made an excellent opening speech but is not in his place, is firmly pro-Europe, although he did not mention that.

However, I want to make one or two positive points. I am sure that we all welcome the financial help given to health workers helping with humanitarian disasters such as the Ebola outbreak in west Africa. The only mention of that by the Chancellor was in connection with inheritance tax but many of these people will have no money to hand on as they are not rich. Surely we should be talking about significant ex gratia payments for people doing this extraordinarily dangerous and important work. I would like the Minister to comment on that.

It is also welcome that the Statement announces that small businesses will benefit. However, it should be remembered that there was considerable concern that the incoming Conservative Government would withdraw the tax relief for R&D. I know this as I am a founder director of a small company in Cambridge. There were many rumours going on all the time in these businesses and we had no idea what was going to happen. For two years we had great uncertainty about this investment. Now we are told that research is terrific and should be invested in, but that is not the way you run a country, with a stop-start process. In fact, Gordon Brown said that we no longer have a stop-go policy—but, of course, that happened under a Labour Government.

The Government’s remarks on infrastructure are another example of stop-go government. When the parties opposite came to power, they immediately cut expenditure on flood protection for no good reason. As Lib Dems generally have to walk around in gum-boots in many of their wetter constituencies, it is rather surprising that they did not demur, as they did not demur on most of the big cuts made by this Government. We are surprised, of course, that it has taken so long for the Government to come round to investing in flood protection. Our colleagues in the Netherlands were astonished by the incompetence which the UK has displayed in this area. Under the Labour Government, a Foresight programme was established which mentioned the need for further investment in flood protection, so now we are learning.

My next point is, again, positive—namely, that the Autumn Statement includes references to further funding for science and technology and that this expenditure should be maintained at an approximately constant level in real terms. The Government have outlined institutions that should be supported and expanded, such as the one in Manchester. However, I was at a meeting this week of a society of which I am a member, where real concern was expressed about the low salaries and weakening job opportunities for scientists. Of course, it is a good thing that there will be loans for postgraduate work but, if at the end of that there are not enough jobs, that is serious. Why will there not be enough jobs? One of the causes, of course, is the considerable uncertainty in the UK, and on the part of our partners, about the UK’s future in Europe. I tabled a PQ and the answer came back that there was uncertainty about that, so whether it is weather forecasting, high-energy nuclear physics, fusion physics or many other areas, doubt has been cast by government policy in that regard.

Finally, this Government, the Treasury and the City of London still do not understand that it is a good thing for the UK to have companies that are owned and based in the UK. Recently, we nearly lost a big pharmaceutical company. Fortunately, it had European directors who did not want to sell it. Now we have Airbus. It is no longer regarded by many people as a significant British company; they consider that we are subcontractors. Again, this is because the Treasury and the City seem to want us not to own businesses but just to have places where the businesses operate in the UK. Surely in the long term we should change that policy.

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[Lord Hunt of Chesterton]

Why not have a toll road? We never have toll roads in this country; perhaps, as a Tory finance person, the noble Lord could tell us why.