Lord Myners
Main Page: Lord Myners (Crossbench - Life peer)European Communities (Amendment) Act 1993
Lord Myners Excerpts
Lord Myners
My Lords, I hesitated for a moment to rise to speak because I was assuming that there would be contributions from the other side of the House. However, not only has the Minister, the noble Lord, Lord Sassoon, decided to desert the House on what is a particularly important day for an economic announcement and debate, but we have not had a single speech from the other side, and, as far as I can see, not a single Member on the other side of the House is even trying to speak in this debate.
Let me suggest that the Government’s proposal to accord with our obligations under Article 121 of the European Union Treaty on Functioning could be achieved in a better way than by submitting 500 pages of documents, as is proposed. I suggest that the Chancellor instead write a shorter letter to Commissioner Barroso, as follows.
“Dear Manuel, here is our annual submission on convergence. The news is good. We are converging with Europe on policies—austerity is the byword for everything we talk about now here at Horseguards—and we are converging on outcomes: we are back into recession, just like most of Europe.
“We are now officially into recession. In fact, output at the moment is 4.5 per cent below the previous high. We are seeing a contraction in output capacity. We are contemplating the inevitability of the longest recession for over 100 years. I have had to reduce my growth forecasts, or those produced by my Office for Budget Responsibility, on five occasions, and increase my debt forecasts each time. Between you and me, Manuel, I am beginning to lose confidence in Mr Chote and his two colleagues. To put it at its mildest, they have made an absolute Horlicks of their economic forecasting. Now I am afraid that they are going to tell me that lower growth and taxes will mean even greater public sector spending cuts in order to meet the fiscal policy constraint that I have imposed on myself.
“I also suspect that they are going to tell me very shortly that the output gap is even smaller than they previously believed it to be and accordingly the cyclically adjusted deficit and the adjustments that I will have to make in public expenditure are going to be even greater. You may remember that I was able to tell Parliament during the last Budget that we were still on course to meet my fiscal objectives. I did rather fudge the issue, as I pushed out the target date, and, importantly, pulled the wool over the eyes of my Liberal Democrat colleagues by pointing out that I was going to make a further £16 billion of unidentified public expenditure cuts in the two years after the general election—cuts which the Liberal Democrats will presumably have to reflect in their own manifesto at the time of the next election.
“I am loath to admit that perhaps Vince Cable and Andrew Tyrie were on to something when they said we needed a credible and coherent strategy for growth. I have promised Parliament on many occasions that I will produce a strategy for growth, but somehow I have not been able to find one. But needs must: I have painted myself into a corner with a policy of expansion through fiscal contraction. By the way, if you can give me any examples of where this has worked elsewhere in the world, or some academic sources, to rebut the evidence that comes at me from the Opposition Benches and Cross Benches in the House of Lords, that would be most welcome.
“I take some comfort from the fact that you in Europe are, on the whole, following the same policy. By the way, how is it going for you fellows—do you see any light at the end of the tunnel? Things have not been helped here in the UK by inflation. The Bank of England appears to have got this completely wrong: in all the time I have been Chancellor it has never hit the inflation target for a single month. Now the inflation figure is rising again. This is really squeezing consumption, particularly for the poorest in society, who, regrettably, have had to bear the largest burden of the fiscal adjustments I have announced to date. I must not, of course, be too critical of the Governor of the Bank of England. The governor keeps reminding me that he is older, wiser and more experienced than me, and writes me regular letters—one every three months—explaining that, when it comes to inflation, everything will be fixed before he leaves next year. By the way, he appears fixated now with his legacy.
“We continue to do this QE thing. I am damned if I can really understand it, but the governor says that it will be easier to reverse than to implement. I cannot see that myself, but I cannot risk asking him about how he has reached this conclusion, in case he does not know the answer, or I will not like it.
“Consumer demand in the UK economy has not been helped by unemployment. The news is not too bright here. We now have the highest level of unemployment since we were last in office. We have 1 million young people out of work, and the figure is increasing. We have the highest level of female unemployment for over 30 years. Business investment is also a bit in the doldrums. They say it is all about confidence. I do not understand that myself. There is some better news on manufacturing and exports, which are up. But this is largely due to trade with Europe, which rather pulls the rug from beneath my feet when I say that our economic problems are caused by the difficulties currently being experienced in Europe.
“Things would obviously be lot easier if the banks lent more. The Bank of England has just produced a credit report showing a further very substantial contraction in lending to SMEs. You may remember we tried that Merlin thing last year. Quite frankly, it did not work at all: the banks lent less in the end than they did before it started. We are now working on something called credit easing, although between you and me, it has all gone rather quiet on that front, and the banks do not seem very keen on it at all. Of course, it does not stop the bankers taking huge bonuses. Mr Diamond at Barclays is about to trouser another £20 million. There is very little prospect of any of that ending up in the accounts of HMRC, as he is a non-dom. In any case, he seems to have negotiated a deal under which his tax is paid for him by the bank.
“However, I must not get too annoyed about the bankers: it is not as if they got us into this problem in the first place. Nor must I get upset with the pension funds, which seem to be remarkably loath to step forward and support any of the infrastructure investment that I so proudly announced in my Autumn Statement last November.
“By the way, I am going to have to adjust the words in my speeches about the fact that the Government are increasing capital expenditure, because I realise that we confused a negative figure with a positive figure and, in fact, we are reducing public expenditure at a time when we have excess capacity.
“Interest rates, of course, are low. I claim this as one of our successes, and I have precious few others to offer in competition. But I recognise that this is largely because of QE, where we are buying back our own debt, and the generally recessionary tone of our economy. The consequence of low interest rates is hugely damaging to savers and pensioners. Please don’t mention to me the Japanese experience, where low interest rates had no positive impact on economic growth.
“I mentioned the poor earlier in my letter. I have just given 10,000 or so bankers, and others who are earning over £1 million a year, an extra £50,000 in tax benefit. Fat chance that they will give me any thanks for that. In fact, I am finding it increasingly difficult to get business people to speak up in favour of the Government’s economic policy now. All those people who signed letters just before the last general election seem reluctant to come to our kitchen suppers.
“House prices continue to fall—although fortunately not here in Notting Hill. We have introduced a new scheme, regarding which some people tell me I will be legged over by house builders, but at least we are seen to be doing something positive in encouraging new house building.
“You probably know that my opposite number, Ed Balls, is having a rather good run at the moment. Quite frankly, I find him very frustrating. But that hand gesticulation he makes about flat-lining is beginning to look as though it is right. Mr Balls has come up with a five-point plan for growth. Some of the ideas are quite good. In fact, one for abolishing or reducing VAT on housing improvements and repairs is rather a good one to me, although the house builders tell me that it isn’t. But I can’t really reduce VAT on repairs to domestic houses when I have just put VAT on repairs to cathedrals.
“Well, there we are. We are converging. We are tightening our buckles. We are tightening our belts. I even had to tell my father, after that rather injudicious interview he gave to the Financial Times’ How to Spend It magazine, that it really wasn’t sensible to say that my next ambition is to spend £19,000 on buying a desk. Yours ever, George.
“PS—it is going to be like a hole in the head if that Frenchman Hollande gets elected. How are we going to cope with that? By the way, can you please make sure that the IMF and the OECD don’t go through a further change of mind and begin to say that perhaps my fiscal policy is wrong and I should be doing something to encourage growth because that is the best way of reducing the deficit and the debt.
“As you know, Manuel, I have got to keep my distance from you because that is our policy as far as Europe is concerned. However, my colleague Jeremy Hunt says that you can always call me on the mobile”.
Lord Stoddart of Swindon
My Lords, I should like to join the noble Lord, Lord Myners, in pointing out that the Benches opposite are virtually, but not quite, empty. The one occupant is from the junior partner of the coalition. I have to sympathise with the Minister who is to reply, the noble Lord, Lord De Mauley, because his party has completely deserted him. It is a very serious matter for a Government when a Minister is confronted by so many erudite speeches from the Labour Benches and, indeed, the Cross Benches. The last speech that we heard was very amusing indeed. This has enabled the Opposition to make a concerted attack on the Government’s Budget, and their economic policy, without one criticism or speech of reply from the Benches behind the Minister. That is quite shocking and I hope that in future the Whips, or whoever else is in charge, will ensure that the Minister is far better supported than he has been this evening.
This debate is,
“to move that this House approves, for the purposes of section 5 of the European Communities (Amendment) Act”.
As I have already said, what we have had, except for the excellent speech of the noble Lord, Lord Pearson of Rannoch, is a debate on the Budget and economic policy. I have to say that I congratulate all those who have spoken, because the speeches have in some ways been superior to those made in the House of Commons. That is something that noble Lords and people who read Hansard might care to consider when we debate, perhaps in the next Session, the future of this House.
First of all, I support what my noble friend, if I can call him that, Lord Pearson raised—the matter of Europe and whether we should be having this debate at all tonight. When I saw the item on the agenda, my mind went back to 1992 when the Maastricht treaty was before Parliament, having been signed by the then Foreign Secretary, who then said, “Perhaps I had better now read what it says”. We had a long debate about what was going to happen with regard to the Maastricht treaty. At that time, people such as me and the noble Lord, Lord Pearson, warned that what was contained in that treaty would eventually lead to many powers reverting from this House and the Government to the institutions of the European Union. So it has happened. As the noble Lord, Lord Pearson, rightly said, it is absurd and outrageous that we, the Government and Parliament, should have to send our economic policy and our Budget over to Brussels to be supervised by the Commission and 26 other countries. That is not self-government, if I can put it that way; it represents being governed from abroad by bureaucrats who are completely unaccountable and insensitive to what our own nation state requires, or what is required by the other nation states in the European Union.
The document I am holding here is the Convergence Programme for the United Kingdom, but convergence with whom and for what purpose other than to create a single European state? Why would we wish to be concerned with the basket-case countries on the brink of default and collapse? The Conservatives say that they want to be in Europe but not governed by Europe, but convergence is about government, and about European governance. As I have already said, it is outrageous that this country should be obliged to submit its plans to Brussels bureaucrats for oversight by 26 other countries, many of which are very much smaller and less important than us.
What if Parliament refuses to agree? We could have a vote tonight. Probably everyone has gone home, so we might even win it. What if Parliament refuses to agree to submit the convergence criteria? What then? The noble Lord, Lord Pearson, raised this matter. He told the House that it was impossible for the Commission—or the Community or the Union, as it is now called—to fine, but we have been amazed at the sort of things that the European Union and its institutions can do, so I am not at all certain that he is right that no attempt would be made to fine this country if we refuse to submit our economic policy under Section 5.
Lord De Mauley
My Lords, I am not going to enter into this discussion any further.
The noble Lord, Lord Davies of Stamford, talked about the general anti-avoidance rule. I am not sure it is entirely relevant to this debate, but I can say that the Government will consult on the GAAR in summer 2012 with a view to bringing forward legislation in the Finance Bill 2013. A targeted GAAR is the right solution to tackle the persistent problem of artificial and abusive tax-avoidance schemes. I will take the noble Lord’s specific points back to the Treasury and write to him on them.
In an amusing speech, the noble Lord, Lord Myners, referred to, among other things, IMF and OECD support. The IMF and the OECD support the Government’s policy. The IMF’s Madame Christine Lagarde said that under the current circumstances the policy in place is the “right thing to do”, and the OECD Secretary-General said on our Budget 2012:
“The Budget announced today is another important step towards a sound fiscal position for the United Kingdom. The confirmation of the UK’s fiscal consolidation programme should keep bond yields low and support the recovery”.
Lord Myners
Will the Minister also acknowledge that the OECD has said that if the UK’s growth performance is lower than that forecast by the OBR, it will be necessary to revisit the fiscal strategy being pursued, and to ask whether that was contributing to the problem rather than solving it? In the interests of completeness, the Minister should give the full position of the OECD rather than a highly selective summary.
Lord De Mauley
Perhaps I can come back to that in a moment. The noble Lord, Lord Layard, suggested that there were optimistic assumptions in the OBR forecast, in particular on oil prices and risks from the euro area. The OBR says that,
“oil prices remain a significant uncertainty and the possibility of a further temporary spike in prices represents a risk to our forecast”.
Renewed upward pressure from the record oil prices in recent weeks is also recognised as a risk to the Bank of England’s forecast, most recently in the minutes of April’s MPC meeting.
The noble Lord, Lord Lea of Crondall, spoke about what might happen in the forthcoming French presidential election. He will appreciate that it is not for me to speculate on the outcome of the French election. Of course, the UK is not a party to the fiscal compact; it does not apply to us. The SGP was strengthened last year. Any proposal for fundamental change would require treaty change and that would require the consent of all 27 nations.