Convergence Programme

Lord Tunnicliffe Excerpts

Wednesday 9th April 2014 Lords Chamber

[Lord Pearson of Rannoch (UKIP)]

My Lords, can the noble Lord remind the House of what exactly is the UK’s convergence programme? With what is the United Kingdom economy supposed to be converging, and why? As we are never going to join the euro, are we not wasting time? While I am at it, could the noble Lord remind us what is the European semester? But above all, why do we go on submitting the state of our economy to an institution which has not had its own accounts signed off, even by its own internal auditors, for the past 18 years? By its own estimation, at least £120 billion per annum goes walkabout and in each of its institutions the Mafia is rife and active.

In short, what is the point of this debate and, more generally, what is the point now of the European Union at all?

[Lord Tunnicliffe (Lab)]

My Lords, the Minister will be pleased to know that I shall not be resisting the Motion. I am reassured by his assurance that there is no new information in the documentation being provided, but will just spend a few minutes commenting on that information and what it says.

We have been presented with a quite a glowing picture. In particular, if one did not listen too carefully, one could be left with the impression that the reduction in the deficit has been achieved as per the 2010 emergency Budget and the subsequent Autumn Statement. My recollection is that the intention was to have eliminated the deficit by now. The noble Lord can correct me if that is not the case.

We have heard that things are going well, but this is not how people up and down the country are feeling. They are facing a cost of living crisis. Working people are £1,600 a year worse off. The OBR has confirmed that people will be worse off in 2015 than they were in 2010. Energy bills are up almost £300 since the election, while childcare costs have spiralled since 2010. The number of young people out of work for 12 months or more has nearly doubled since this Government came into office. We have a record number of people who want to work full time but are being forced to work part time. Families will be £974 worse off by the next election as a result of tax and benefit changes. After three years of flatlining, it is good that we finally have some growth. However, for millions of people, this is no recovery at all. There is much more that could be done to help working people but the Budget was just another missed opportunity.

We should be getting young people back into work. Despite the Government’s rhetoric on full employment, there are no new policies to deliver this. The Work Programme is so unsuccessful that people are more likely to go back to the jobcentre than find work. Only 5% of disabled people on the Work Programme have found work through it. We need a compulsory jobs guarantee to ensure there is a paid job for every young person under 25 who has been out of work for a year.

We also need practical measures to tackle the cost of living crisis, such as tackling rising energy bills or helping families with childcare costs, within this Parliament. We would expand free childcare for working parents of three and four year-olds from 15 to 25 hours a week.

We should be cutting business rates for small and medium-sized enterprises. The Government are focusing their help on the 2%—the largest multinationals—and not doing enough for 98% of British businesses, the small and medium-sized enterprises. We need action from the Government to ensure a strong, sustained and balanced recovery. Manufacturing, construction and infrastructure investment are all down. Consumers are having to dip into their savings, and the OBR predicts that growth may well slow in the future when those savings run out. Indeed, the OBR sees households’ gross debt to income ratio rising from 124% in 2014, which was a 10-year low, to 165% in 2019, which is near to pre-crisis levels of indebtedness. Exports are falling, not rising. Nothing in the Budget tackles the productivity crisis that has emerged in recent years.

--- Later in debate ---

[Lord Newby]

My Lords, I am grateful to both noble Lords who have spoken in today’s debate. In a short speech, the noble Lord, Lord Pearson, succeeded in asking very fundamental questions about Britain’s position in the EU. Without spending too much time on his final, semi-rhetorical question, I should like to respond to his earlier questions about the convergence programme and the European Semester.

The convergence programme stems from the Lisbon treaty, which requires the UK Government to report regularly to the European Commission on the economic situation and forecasts in the UK. The report is drawn from previously published material, as I said. It is part of a Europe-wide programme. Under the stability and growth pact, all member states are required to submit either stability programmes, for euro-area member states, or convergence programmes, for non-eurozone member states. The European Semester is a common timetable for the submission and consideration of fiscal policies via the stability or convergence programmes and macroeconomic policies via national reform programmes.

The noble Lord asked: what is the point of all this? As the crisis in much of Europe has shown, it is in everybody’s interests that member states do not run up excessive deficits, because if they do the consequences of putting those deficits right are not confined to those member states. The UK economy suffered very significantly because of the eurozone crisis. To pick up one of the points made by the noble Lord, Lord Tunnicliffe, this is one of the reasons that the forecasts we made in 2010 were blown off-course. Given the very high proportion of trade we have with the eurozone countries, we are very much dependent on those countries prospering and therefore it is very much in our interests that they keep their public sector finances under control.

[Lord Tunnicliffe]

It is a detail, but the Minister said that the requirement comes from the Lisbon treaty. I thought that it had come from the Maastricht treaty, which we put into law in 1993. Am I mistaken?

[Lord Newby]

The difference, I believe, is that the Lisbon treaty requires the convergence programme to be submitted to the Commission in the form that we are describing today, whereas the underpinning requirements about budget deficit and levels of growth were in the Maastricht treaty. What came out of Lisbon were the very specific mechanics of trying to co-ordinate via the submission of national plans every year which the Commission can then scrutinise and comment on.

[Lord Tunnicliffe]

I hope the Minister will forgive me, but I put a little bit of study into this. Article 103 of the Maastricht treaty—which may have been elaborated at Lisbon—states pretty bluntly:

“In order to ensure closer co-ordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Community as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment. For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary”.

I thought today that we were responding to that part of that treaty. I want to draw out the point that our being here this afternoon at this late hour is the fault of all Governments, not perhaps just one.

[Lord Pearson of Rannoch]

Before the Minister replies, perhaps I may say that I support the noble Lord, Lord Tunnicliffe. He is of course right that the whole process in the Maastricht treaty was, I am afraid, waved through by the Conservative Government under Mr John Major when, if your Lordships remember, he was winning game, set and match. I am grateful to the Minister for his answer, but I would still like to press him on why the United Kingdom has to take part in this demeaning and absurd process. I understand that it might be useful for the countries which have unfortunately joined the extremely destructive process of the euro and everything that goes with that, but why should we, if indeed our economy is recovering in the way that the Government claim, have to go cap in hand to Brussels and discuss with them anything that we want to do, especially as we are, luckily, thanks to the Treasury, not in the euro?