Queen's Speech

Lord Low of Dalston Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Low of Dalston]

My Lords, it is a pleasure to follow the noble Lord, Lord Whitty, and I, too, welcome the Ministers to their new positions. At the weekend I attended a lecture entitled, “Do we get the politics we deserve?”, which drew attention to the mixed emotions that the coalition has aroused. On the one hand we welcome the new politics of consensus and co-operation and of people working together for the benefit of the country. It would indeed be good if we could see a more bipartisan approach to the vexed question of social care and an end to the competitive auction on who can build and fill the most prisons. We breathe a sigh of relief at the prospect of stability and cheer on David Cameron as, like an auctioneer on speed, he knocks down the prized possessions of new Labour—going, going, gone. I welcome particularly the smack of firm government seen in the firing of the chairman and chief executive of the Student Loans Company.

Already, however, we can see the shine coming off as the Government begin to do the sort of things that Governments do: announcing measures to the media before Parliament; demonstrating the arrogance of power in a strident and partisan tone, so different from that of President Obama; tinkering top-down with the local government of Norwich and Exeter in a way that flies in the face of the proclaimed intention of pushing power downwards and outwards; and fixing the length of a Parliament in a manner that insulates itself against a loss of confidence. The answer to the last point is simple. Parliaments should be for five years unless the Government have first lost the confidence of the Commons. Lastly, the Government are threatening to swamp your Lordships’ House, which is already overloaded, with new creations in a manner that at one and the same time is unnecessary, runs counter to the Government’s longer-term aims and is antithetical to the spirit of the place. The Government have to be able to lose the argument. Will the coalition give rise, I wonder, to the canard, “Lloyd George knew my grandfather”? It will also be interesting to see whether Bills arrive here any better drafted and considered than before.

On the economy, the essentially parasitic nature of finance capitalism stands revealed for all to see. The noble Lord, Lord Skidelsky, spoke in this debate last year of the emergence of an insolent and largely footloose financial aristocracy or plutocracy as a direct result of the dominance of the financial services sector in our economy. I am amazed that this has not led to a greater crisis of legitimacy, for the shamelessness of the bankers far outstrips that of the expenses scandal. I suppose that the expenses scandal was a handy diversion. At all events, the crisis is still playing out. The markets coming after the banks is one thing—and it was a close-run thing—but we ought always to have been able to get over the meltdown in the financial sector when the banks had their Governments standing behind them. However, when the markets come after Governments, where do we go then? Have we now reached the bedrock on which the whole system rests?

We are certainly in a difficult position. Governments have had to raid their treasuries to an alarming extent. Even so, people question whether they have done enough and suggest that more might still be necessary. At this point, it is important to say that Gordon Brown has been unfairly criticised. The structural deficit was a manageable 2.6 per cent of GDP in the second quarter of 2008 when the recession struck and no one can seriously doubt that it was necessary to throw the kitchen sink at the problem at that point. Even so, the recovery is still fragile and the scale of renewed lending half-hearted. That being so, it seems to me a brave decision to take £6.25 billion out of the economy in 2010-11. I understand the need to reassure the markets, but I think that we should avoid turning reassurance into appeasement by buying into doomsday scenarios predicated on imminent bankruptcy and accept that a more measured approach not only is viable but may actually be less damaging. With the recovery still so tentative, at 0.3 per cent of GDP in the first quarter of 2010, taking 0.45 per cent of GDP out now runs the real risk of plunging us back into recession. It will certainly mean more job losses. David Blanchflower puts the figure at 140,000 and it should not be imagined that this can all be done just by freezing vacancies. Then there is the effect of the multiplier, which means that more jobs are lost because of reduced spending power. Recession costs much more to the economy in lost tax revenue and unemployment benefits than deficit reduction at a time of better economic growth.

It seems quite wrong that the ordinary citizen should be made to carry the can for bankers’ recklessness. With 55 speakers and still not half way there, I can give only the headlines, but perhaps I may mention five things that seem blindingly obvious even to a non-economist. First, there needs to be structural change. Retail and speculative banking should be separated. There is perhaps more to this than meets the eye, but the last Government were insufficiently robust on it. Secondly, we need a transaction tax. The sight of the bond markets opening in the middle of election night so that they could bet on the result was a barefaced example of the insolence to which the noble Lord, Lord Skidelsky, referred. Thirdly, those responsible for the deficit should pay proportionately more. Bankers’ bonuses, which amounted to £7 billion last year, should be subject to controls. Fourthly, contrary to what is frequently asserted, the UK has an internationally competitive tax regime. Taxation, particularly on high earnings, could afford to take more of the strain of deficit reduction. Finally, before general living standards are clobbered, it is imperative that big-ticket items should bear their fair share. I am glad that the defence review will include a wide-ranging review of Britain’s role as an international policeman—on Trident, I incline more to the Lib-Dem wing of the coalition—and it may be that economic necessity will succeed where penal policy has failed in reducing the demand for prison places.

If the coalition cannot adopt a balanced approach to getting us out of our present difficulties—recognising that we are all in this together—it risks undermining legitimacy and fuelling a widespread sense of injustice and even social unrest.