Queen’s Speech

Lord Taverne Excerpts

Monday 1st June 2015 Lords Chamber

[Lord Taverne (LD)]

My Lords, it is quite clear that in the next five years we will face a great constitutional upheaval. Major taxing powers for Scotland and government plans for English votes for English laws will both have profound implications for Wales and Northern Ireland, and then there is the issue of devolved power to cities with elected metro mayors. This hugely ambitious programme of constitutional reform cannot possibly be achieved bit by bit. The noble Lord, Lord Forsyth, made a magnificent speech that provided unanswerable arguments in favour of a constitutional convention. Such a programme must be coherent and acceptable to the different nations of the UK and should strengthen the union.

However, there is one missing piece, to make sense of the whole. We are going to face something that is in effect much more akin to a federal Britain. The question arises: how will these different elements in a much more federal Britain be properly represented? In fact this presents an opportunity: in a federal Britain we could then transform the House of Lords, which has resisted previous rather poorly prepared and unacceptable attempts to do so. We could have a new upper Chamber that in effect performed some of the functions performed in Germany by the Bundesrat. Such an upper Chamber could be greatly reduced in size. That would also cure our present intolerable overcrowding, which prevents the proceedings of this House from being as efficient as they should be.

There is another proposal in the Queen’s Speech that has not been mentioned but which sets a profoundly undesirable constitutional precedent: a statutory limit on income tax and VAT. The new Government may well face a major economic crisis: our recovery is fragile because a sharp decline in productivity has caused a huge trade deficit, the largest in the OECD, that has been financed by the inflow of hot money. We are on our way to a new housing bubble caused by rising house prices. The eurozone may be in deep trouble if Greece is forced out, and foreign investors may get scared by the possibility of Brexit. That hot money may flow out very rapidly and cause a major crisis. If we face an emergency and the need for drastic measures to protect the pound, the Treasury’s hands will be tied by its inability to raise taxes and it will be forced to rely on ever-deepening spending cuts.

Personally, I am completely out of sympathy with the Government’s aim of a shrinking state. Lower taxes should not be our primary concern as a matter of principle. The lowest-taxed industrial societies are the most dysfunctional, as shown in that seminal book The Spirit Level by Wilkinson and Pickett. As the famous American judge Oliver Wendell Holmes observed:

“Taxes are the price we pay for a civilised society”.

Contrary to Conservative belief, higher-taxed democracies on the whole, in the decades before the crash, had a faster, not slower, record of economic growth. We already have a society with huge inequalities. Income tax and, to a lesser extent, VAT are progressive. Cutting public spending even more will be deeply regressive. Moreover, at some point ever-greater austerity inflicted on the poorest in society may not work. An economic crisis will lead not to one nation but to an even more broken society.

I have one further point, which may comfort those who fear that we are in for a long period in the doldrums for the Labour Party, or the disappearance of the Liberal Democrats. In 1959, after a calamitous defeat for Labour, many forecast that they would never again see a Labour Government. Roy Jenkins, a very wise man with a great sense of historical perspective, wrote in an article at that time that things did not look good, but that we should remember 1902, when there was not a cloud on the horizon for Salisbury’s Conservative Government, with the Liberal Opposition deeply divided in the aftermath of the Boer War. Within four years there was the greatest anti-Conservative landslide in history. Things may not prove quite as they look at present.