Queen’s Speech

Lord Phillips of Sudbury Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Whitty]

My Lords, some have said that this Queen’s Speech is too thin. I do not have a problem with that. Frankly, it is an issue of quality rather than width. If the legislation proposed was going to do something about the economy and improve our economic and societal prospects, I would welcome it, however thin it was and however many Bills were involved. As it is, I welcome some of what is there, and welcome the opportunity to debate the rest. I am very glad that we are about to debate the Energy Bill and the water Bill; both will probably be discussed more tomorrow, but both are vital for issues of living standards and cost of living, and for our investment programme. The Energy Bill seems deeply flawed, and I am sure that we will have some serious debates on that. I agree with what is in the water Bill, broadly speaking, but there are great gaps in it—in particular any reform of the abstraction sector, which will be vital for the economic and environmental future of that sector.

I am glad, although it was not mentioned in the gracious Speech, that we will also get banking reform back before the House. However, I am pretty dubious about the present proposal’s ability to reform a sector which both caused the financial crisis by its recklessness and which is failing and holding back the recovery by its caution. It is a sector in this country which, despite the dramatic changes since 2007, has somehow retained, broadly speaking, the same structure. Some institutions are under different ownership, including state ownership but, basically, we have not tackled the problem of the structure of the banking sector in particular. I was hoping that we would see a more decentralised and more segregated banking system, both horizontally and vertically, and an absence of organisations which, for the future, would be “too big to fail”. I regret that we are not yet in that position, and I cannot see that this proposition on banking reform will get us to it.

On other legislation in the gracious Speech, I think I welcome the Mesothilioma Bill, which should—although it requires some detailed scrutiny—right a serious, long-standing and distressing situation. On the deregulation Bill, I hope that it will raise burdens on small and medium-sized firms, but I suspect that it is largely another rehearsal of saloon bar prejudices, and so I cannot give it an unequivocal welcome.

I hope I will be able to welcome the proposed consideration of the draft consumer protection Bill. As my noble friend Lady Hayter has said, the Government’s record on consumer issues in legislation has not been particularly good. They not only abolished my own organisation, Consumer Focus, but resisted proposals from noble Lords on all sides of the House during the previous Session to improve the protection of consumers in Acts that were passed in that Session. I hope that we will see some real proposals for improvements for consumers this time round.

In particular, I hope the Government will return to the issue that was mentioned by my noble friend Lady Hayter: that of collective redress, which I have been banging on about on every possible occasion over the past few years. It was to be included in one of the last pieces of legislation of the last Government, but unfortunately it was lost during the wash-up when it was objected to by the then Opposition. Collective redress would have avoided a lot of the hassle which consumers face, for example with PPI, where they are exploited first by financial institutions and then by claims companies. To have a proper system of collective redress for consumers would be a major step forward, and I hope that the Government have that in their sights in the production of the draft consumer protection Bill.

Excluded from the gracious Speech are some serious proposals on how to get out of the current economic recession. I follow the noble Lord, Lord Patten, in this, although I have seen the same bad example in Wincanton to which he refers. We need a massive housebuilding programme. The Government, after cutting back even on the rather inadequate programme they inherited from the previous Government, have finally realised this, and they are providing some significant support for the purchase of housing. However, as the noble Lord, Lord Shipley, said, that is not enough. In default of increasing the supply of housing—in other words, acting on the provision and capital side as well as supporting potential buyers and landlords—the net effect of underwriting and providing mortgages under Help to Buy and other schemes will be to raise house prices and increase housing costs, aggravating rather than resolving the problems of dysfunctional housing markets. Help on the capital side for building houses, by raising the limit on borrowing for local authorities and housing associations, by joint ventures and by supporting the private sector in housebuilding, is one way out.

Investment in housing ought to be accompanied by investment in infrastructure. The only serious mention of infrastructure in the gracious Speech was the reference to HS2. I broadly support it, but I will not enter into that controversy now. HS2 will bring jobs and serious investment only in several years’ time. We need investment in ready-to-roll projects now. There is an absence of that both in the Queen’s Speech and in the Government’s thinking.

Of course, behind all this is the problem of the economy, which manifests itself in a number of ways. The political obsessions at the moment with the EU and with immigration are a reflection of the failure of the economy. It is probably too late at night and I have too small an audience—actually, the audience is distinguished enough for me to go into a bit of a rant about the economy. Brussels, Frankfurt and Great George Street are all in thrall to a dangerous economic ideology, and they must get out of it if we are to see any economic progress in this country and in Europe.

The effect of the eurozone and the ECB’s view on how they should impose austerity on the rest of Europe is pretty clear. A single currency requires the transfer of resources and credit from the richer part of the EU to the poorer part. The fact that the Deutsche Bundesbank, German politicians and the ECB do not see that sufficiently clearly will, if they are not careful, ruin the eurozone. I speak as a passionate pro-European. I was even broadly in favour of the single currency at some point. However, they are failing to manage it properly because they are in thrall to an ideology that says that the only way out of economic recession and a public finance crisis is to impose austerity in a way that impacts most detrimentally on the poorest part of the eurozone.

Having been critical of the eurozone, I say in a less dramatic way that we are pursuing the same policy here. The Chancellor likewise is locked in the same ideology. The one great success of the Treasury in the past three years has been to convince the bulk of the press and a large proportion of the British public that the current difficulties in the economy and the public finances are entirely the fault of the previous Labour Government. The noble Lord, Lord Hodgson, who is no longer in its place, said that the Labour Party was in denial about this. My assertion tonight is that it is the Government who are in danger of believing their own propaganda. The financial crisis was started by private debt in America and in Europe. It was compounded by the failure of the banks, and compounded further by the fact that Governments throughout Europe and North America decided that they were going to bail out the banks. That is what caused the crisis in public finances.

The UK was more impacted than others because we are more dependent than other countries on the financial sector. The long-run record of the Labour Government was that before 2007-08 we had a debt-to-GDP ratio that was roughly the average of the OECD countries. It got worse because of our dependence on the financial sector. That is something that this Government have to pick up. However, they should not try to do so by imposing a form of austerity on the whole of the country in a way that minimises our chances of getting out of the recession. In particular, they should not focus on the social security budget and misrepresent the way in which it has increased over recent years. The vast majority of that, of course, has been because of the increase in the part of the population of pensionable age. The other two elements include the increase in housing benefit, which has got seriously out of control. But that is due to a failure of the housing market, not of social security policies, and housing benefit should not be included within the universal credit system until we have resolved the problems of the housing market in a way that does not lead to huge increases in housing benefit for those dependent on ever-decreasing opportunities within the housing sector.

If you look at the Government’s credibility in international markets and their inability to stimulate investment within this country, despite the fact, as somebody said, that significant money is available in corporate accounts and pension funds, you can see that people are not investing in the UK because they do not have confidence in this Government’s ability to get growth going in the UK.

[Lord Phillips of Sudbury]

I am grateful to the noble Lord for giving way. I cannot resist asking him, on his second reference to our position in the international markets—he talked about our credibility—whether the most vivid example of where we stand in the eyes of would-be speculators against sterling is not the fact that the rate at which we have to pay on our admittedly massive international debt is little if any more than the Germans pay. Had we not adopted a programme of some austerity, the cost of our borrowing would have been enormously greater.

[Lord Whitty]

No, my Lords, I do not accept that. I accept the first part of what the noble Lord, Lord Phillips, says, but not the second. The ability to borrow in international markets, as with borrowing in almost any context, depends on a number of things. It depends on your ability to have a low rate of interest and low cost of borrowing; a reasonable term of borrowing; and an ability to service that borrowing and to repay the borrowing. On all those counts, throughout the desperate period of 2007 to 2011, the UK retained credibility and could borrow at relatively low rates over relatively long periods. The final qualification is that the markets have to be confident that the Government can raise enough money to repay those debts over the medium to long term. What has lost credibility in this Government is the slow growth and flat-lining of the economy, as well as the downturn of financial income for the Government as a direct result of that economic failure, which has reduced the markets’ confidence in the ability of the UK to repay loans. That is why the credit rating has gone. It was not Gordon Brown who lost the credit rating—it is actually George Osborne and his failure to get economic growth within this country. Unless the Government recognise that and start changing course by investing in infrastructure and housing and getting us out of this economic recession, they will be going down the wrong road. I think that they have already gone too far down that road, but there is still time even for this Government to change their direction.