Budget Statement

Lord Stevenson of Balmacara Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank all noble Lords who have contributed to this very good debate, and the Library for its briefing, which was very informative and useful. As a result, this has been a very high-quality debate held against a fast-moving scenario. The noble Baroness, Lady Kramer, just mentioned the noble Lord, Lord Bates. He encouraged us to be optimistic about everything, so I will try to thread optimism in, although sometimes when I have been reading some of the detail, I have been rather depressed by it all.

My noble friend Lord Tunnicliffe said that the timing of this debate is normally such that we reflect on the Budget and on the reaction to it. That is what has made this debate so interesting, as the many excellent contributions today have benefited from such a rich picture.

We have also benefited from having seen how the Government have responded in real time to the economic aspects of the coronavirus pandemic, and many contributions today focused on that. Indeed, the contributions of the most reverend Primate the Archbishop of Canterbury, the noble Lords, Lord O’Neill, Lord Lamont and Lord Skidelsky, my noble friend Lord Adonis and several other noble Lords have broken new ground, which I hope the Minister will take back to his department and prosecute with some vigour.

The main challenge facing the Chancellor, on which I think he was largely successful, was how to make sense of the Conservative Party’s new clothes and, in particular, how the end of austerity U-turn was going to be achieved without destroying the Conservative Party’s alleged reputation for managing the public finances. What we got, as the noble Lord, Lord Skidelsky, reminded us was a reaffirmation of Keynesian economics. The Chancellor tried to persuade us that his party now has a large appetite for increasing public spending combined with far less appetite to raise taxes and a growth in public sector debt unseen in modern times. Timing is all, apparently. As the Resolution Foundation commented:

“The result is a Conservative Chancellor now planning a bigger state than was seen under Tony Blair, financed through higher borrowing than Gordon Brown ever saw as Chancellor”.


The Office for Budget Responsibility described it as the “largest sustained financial loosening” since 1992. So this new Conservative economic policy approach may be a third way in its imitation of some of the tropes of new Labour, but it is certainly not fiscally conservative. Time will tell, and there are enough uncertainties out there to blow even the best-laid plans off course but, as my noble friend Lord Tunnicliffe, said, we support much of what has been proposed.

As my noble friend Lord Livermore said, the most recent OBR forecasts were completed long before the widespread domestic impact of coronavirus was clear, but even so they make grim reading. The OECD forecast suggests that the UK economy will grow at 0.8% for the next two years, which will bring the UK’s annual growth outlook down to an average of just 1.2%, the worst average annual growth forecast on record. When he comes to respond, will the Minister comment on those figures?

This Budget reflects the Government’s goal to be seen to turn the corner on the austerity over the decade of the 2010s. Successive Chancellors have been increasing capital spending since 2016-17. Bringing austerity to a close on current spending is new, and very welcome, but the sober truth is that in less than five years the Government’s ambitions have gone from shrinking the state in order to run an absolute budget surplus to growing public spending to almost 41% of GDP and actively aiming to borrow around £60 billion each year. This is the new reality. The good news is that the spending review later this year will therefore be able to apportion day-to-day spending growing by an average of 2.8% a year, well above the rates of the past decade, but it is less than was promised in September last year by the previous Chancellor—4.1% was his figure—and is below the growth rates prevailing in most of the years after 2000, but it is an increase and we welcome it.

According to press reports, overall real-terms, day-to-day public spending per capita will return to 2009-10 levels by 2024-25. However, the figure is more nuanced. As we have heard from others, austerity will continue for many departments, with spending increases being sufficient only to reverse around a quarter of the real cuts per capita in the departments which have not been protected since 2010; that is, those other than health, defence and international development.

The real picture is that the Budget does almost nothing to offset the considerable welfare cuts put in place by George Osborne in 2015. As my noble friend Lady Lister and the right reverend Prelate the Bishop of Rochester said, these factors mean that not only will the incomes of the poorest families fall over the next period, but there is a significant risk that, despite the extra spending, child poverty may reach record levels by the time of the 2024 election.

Perhaps the Chancellor did not have time in his speech, but he did not mention international competitiveness and how the Government intend to address the increasing productivity gap between UK workers and those in the largest EU economies. The announcement of £600 million for new infrastructure investment is good news, albeit that the figure represents only a small increase on the Government’s existing plans, while some of the money is a reversal of cuts in previous decades. Nevertheless, it will bring public investment up to around 3% of GDP, and we await further details. Can the Minister say when we will finally see the national infrastructure strategy?

The proposed changes to how the Treasury calculates the benefit of infrastructure projects may also benefit lagging regions rather than focusing solely on public projects that are most likely to generate higher returns, which tend to favour those in London. It is hoped that the new proposals will place more weight on projects across the country. But there is no easy fix when it comes to reviving the regions that are lagging. New money for infrastructure projects will go only so far given that renewal also requires investment in better skills, support for business and knowledge networks, strong local public services and local government. When will we see those proposals?

The Chancellor announced an increase in public spending on research and development, more than doubling the current budget. This is good, but the Budget was quieter about using innovation to tackle other societal problems such as adapting to an ageing society and research around the creative industries, perhaps building on the Creative Industries Clusters programme. Can the Minister confirm that there is more to do in these areas?

Small businesses took centre stage as part of the Chancellor’s £30 billion Budget package to deal with the coronavirus outbreak. Increasing resilience in SMEs is crucial to help them overcome major economic shocks and requires bold and decisive action. As research shows, the uncertainty caused by Brexit and the global financial crisis is deeply harmful to UK SMEs. While on paper the Chancellor’s new lending measures seem appropriate in scale, they are very supply-side focused and assume that there will be uptake and demand from SMEs but, as we know from the global financial crisis, uncertainty typically leads to reduced demand. Given that, what about doing more? If these measures prove insufficient, do the Government have other plans such as a reduction in VAT for SMEs? As the noble Baroness, Lady Kramer, suggested, what about speeding up payments to SMEs and giving more powers to the Small Business Commissioner?

I turn now to the coronavirus announcement. A number of noble Lords have said that we have to work together as a country to overcome this threat, so we on this side make it clear that we pay tribute to the work of experts in the NHS and to the Government for their work so far, and we join the Chancellor in saying that we should do what needs to be done to get this sorted. However, as several noble Lords have argued, if we are facing an unprecedented demand and supply shortage shock, are we doing enough? People are being laid off today and thus losing their incomes. Gig economy workers and the self-employed are not getting the support they require. The general sense of today’s debate is that something along the lines of the people’s quantitative easing proposal made by the noble Lord, Lord O’Neill, may be required to ensure that the economy itself is not damaged beyond repair.

I was struck by the suggestion made earlier in the debate by the right reverend Primate the Archbishop of Canterbury and picked up by others that we may lack more of a moral dimension to some of the issues we face. One concern mentioned in the other place was the impact that all this will have on the charitable sector, which faces a bleak future if funding dries up. Have we thought through how we would function as a society if the third sector were not able to function after the end of the crisis? Let us take the recommendation to practise social exclusion. Why is the language being used so vague that those affected—hotels, restaurants, pubs, theatres, galleries and arts organisations—are not eligible to claim on the insurance cover that they have paid for?

As a result, as we have heard, premises are closing, jobs are being lost and the very fabric of our society is being destroyed before our eyes. It is morally reprehensible, but it is also economically illiterate. Take the early announcement to safeguard mortgage payers; no parallel announcement has emerged about those who rent. Housing is vital to survival, whichever choice of tenure you take. Surely, that is morally reprehensible as well as economically illiterate. Chasing loans for SMEs, which will be hard and slow to administer, may also encourage bad effects in a nation which already suffers from a personal debt problem. Is that fair or moral?

I could go on, but I will make just one further point, as made earlier in the debate, about the school closures which we now know are happening. I gather that the Minister has some expertise on this issue. Can he ensure that the wide impacts of this change—particularly as grandparents are apparently being asked not to help out with childcare—are taken properly into account? Free school meals have already been mentioned, but this is also about careers and future employment for older cohorts, as much as it is about learning social skills and growing up in our society for younger cohorts. How will that all be dealt with and by whom? Will it be sustainable and fair to all concerned? This has been a very interesting and somewhat inspiring debate, and I look forward to the Minister’s response.