Economy: Spring Statement

Lord Taverne Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord Taverne (LD)]

My Lords, what I find extraordinary about this Government is their complacency. I do not accuse the noble Lord, Lord Bates, of complacency, but I am surprised because I would not have expected it from Philip Hammond. He told us in his Spring Statement that we have now turned the corner and there is light at the end of the tunnel. However, as those two respected think tanks, the IFS and the Resolution Foundation, reveal, his plans reek of complacency. In the words of Paul Johnson, director of the IFS:

“The reality of the … fiscal challenges facing us ought to be at the very top of the news agenda”.


I suppose I should declare an interest, because in 1971 I was the first director of the IFS when it was launched. Indeed, I am proud to have acted as midwife to this infant, which has grown into such a formidable institution. I should also mention that in 1961 I was Member of Parliament for Lincoln and therefore I look forward with particular pleasure to the maiden speech of the right reverend Prelate the Bishop of Lincoln.

Let me refer to the findings of the Resolution Foundation, which was, after all founded by a very distinguished Conservative ex-Minister, the noble Lord, Lord Willetts, generally known as David “Two Brains” Willetts. It says that the plans of the Government depend profoundly on further deep cuts in public spending. There will be a further £2.5 billion of cuts to benefits for those of working age in the next financial year and even bigger cuts the year after. The poorest fifth of households will be the hardest hit. Will the Government be able to enforce such extreme hardships?

Indeed, I believe that there is more bad news in the pipeline—more bad Brexit news—than is generally expected. The Government still rely on proposals for a new trade deal that they hope to negotiate. These may bring temporary unity to the Conservative Party, but such proposals are almost certain to be rejected by the 27. For instance, in her Mansion House speech Mrs May suggested that in its new trade deal the UK should act on the EU’s behalf when goods are imported into the UK from the rest or the world and collect the EU tariffs and pass them on to Brussels. It would be a system that exists in no trade agreement anywhere else. When this was reasonably described as “magical thinking” by officials in Brussels, the alternative held out was the Government’s notorious plan for invisible, frictionless borders. Anyone who listened to or read the speeches in yesterday’s debate on Ireland, particularly the excellent speeches by the noble Lords, Lord Hain and Lord Patten, the noble Baroness, Lady Kennedy, and, especially, the noble and right reverend Lord, Lord Eames, must realise quite how hare-brained and damaging these proposals are. No one outside Britain regards them as credible.

In fact, without a dramatic U-turn by the Government, can they propose any trade deal that is realistic and has a chance of being acceptable to our EU partners? For that matter, how can there be a deal with Ireland if we stay outside the customs union, as the Government intend? If we stay outside, there is no way to avoid a hard border in Ireland and it is clear that the 26 will give their full support to Dublin. If it becomes more generally regarded as possible or likely that there may be no deal, the reactions in the market, the effect on the pound and on investment, will make our economic prospects infinitely worse. And this may come sooner rather than later: particularly in the case of financial services, the moment of truth may be nearer than we think. I recommend that people look at the speech of my noble friend Lady Kramer in the middle of the night in last Monday’s debate.

Lastly, I have another fundamental criticism of government policy. The burden of austerity has been borne by the public sector. Many speeches, including the speech of the noble Lord, Lord Haskel, have pointed out the extraordinary damage which austerity has caused, including the suffering by local authorities —in some cases spending has been cut by 50%. These cuts have materially reduced the quality of life in many sections of Britain, especially among the poorest. Yet the Government rule out any tax increases and persist in further devastating cuts in public spending. Already the taxes we pay as a percentage of GDP are 13% lower than in Germany, 17 % lower than in the Netherlands and 21 % lower than in France. All three have a higher standard of living than us and very much higher productivity. Lower taxes are not the path to more prosperity; they are more likely to be the way to a dysfunctional society. We spend a significantly lower percentage of GDP on health and social care than the Netherlands, France and Germany. Meanwhile, the NHS is heading for a crash, and will be further hit by EU nurses and doctors going home or no longer wanting to work in Britain, because of Brexit.

I am glad it is the policy of the Lib Dems to put 1p extra on income tax instead of further cuts in services. No one spoke a truer word—completely contrary to the philosophy of the Government—than the famous American lawyer Oliver Wendell Holmes, who said:

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