Budget: Economic and Fiscal Outlook

Lord Shipley Excerpts

Tuesday 5th May 2020 Lords Chamber

[Lord Shipley (LD)]

My Lords, eight weeks ago, several important announcements were made in the Budget about infrastructure investment. There was to be a significant rise in borrowing to fund this, to be paid for by future growth. That Budget was said to represent an end to austerity.

Just eight weeks later, the Government are paying the wages of 6 million people, with one in four employees in furlough. The Chancellor has said there is “no limit” to the funds available in the face of the OBR forecast that the economy could shrink by 35% in the second quarter and by 12.8% for 2020 as a whole. We now know that the Government might borrow £273 billion this year—the largest annual deficit since 1945. How do they plan to pay for this underpinning of our economy in the face of declining tax revenues? Will it be simply through anticipated growth?

I would like to ask the Minister three further questions. First, he referred to the Prime Minister’s promise of a levelling-up agenda for the whole country. I would like to suggest that this should mean investment in our domestic manufacturing base in the face of a likely decline in global supply chains, as well as the need for greater security of supply. Will the Government confirm that they will still rewrite the Green Book rules to help those places where growth and productivity are lower?

Secondly, we seem to be witnessing the closest working between the private and the public sectors since 1945. Does the Minister accept that government support must carry on after lockdown ends? Enabling the economy to recover will inevitably be a gradual process and, crucially, the Government must protect the job retention scheme beyond the end of June, otherwise it will become in effect become a scheme that just delays redundancies.

Thirdly, I should like to ask about Britain’s future debt levels, which will shortly stand at 95% of GDP. Coronavirus could well cause a reduction of 10% in our GDP and there is evidence that a no-deal Brexit could add an extra long-term loss of a further 5%. How will the Minister respond to this and does he accept that a no-deal Brexit is not in this country’s economic interests.

In conclusion, I have two further points. Will the Minister undertake to look at the merits of municipal bonds, which could help in the current situation, and might the Government consider allowing the state to take a bigger share of land value uplift when planning permission for housing is granted? If they did, I think that would help the public finances.