Queen's Speech

Viscount Eccles Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Viscount Eccles]

My Lords, the noble Lord, Lord Skidelsky, has entertained us with much the same thesis on a number of occasions, but I wonder whether he does not exaggerate. He talks about the age of austerity; I suppose that he is referring to £6.25 billion of expenditure cuts, but the previous Government were, if I remember rightly, going to make £5 billion in efficiency savings. I suppose that economists would tell us that there is not really very much difference in outcome between cuts and efficiency. We will always live with economic uncertainty, but the question is: how capable are we of dealing with that uncertainty? All that we know for certain is that our economy is some 10 per cent smaller than it would have been if matters had proceeded smoothly, and that our structural deficit is unsustainably high. It may well be best if the pace of the deficit reduction was contingent on the pace of economic recovery. However, recovery first and debt management second is not a viable choice. It is always necessary for the two to proceed in tandem.

The Bank of England’s view of the near future re-emphasises the uncertainties. A 2 per cent central position between inflation and growth is so widespread between nil and 5 per cent that it amounts almost to a “don’t know”. In a period of such uncertainty, a mechanistic and one-solution analysis is of very limited use. The most favoured and oft-repeated parallel is the 1930s, because it is Keynes of 1936 who gets the star billing. I will not speculate upon how different his General Theory would be if written today. However, he would certainly take into account very differing circumstances—the most striking of which are the welfare state and the rise in per capita income which, in real terms and taking some account of lifestyle changes, is more than three times what it was in the 1930s. The economy of today is therefore radically different from that of the 1930s. Who, we might ask, is expecting Jarrow marches or some repeat of George Orwell’s The Road to Wigan Pier?

The underlying strength of today’s economy, its relative wealth and our welfare state mean that we can face up with flexibility to the judgments that need to be made as events take their course in a global economy. Our economy, even at a time of fragile growth, provides the room to take action and then to see how the unknown balance between economic recovery, indebtedness and inflation develops. We need to find out how much better we can do when the responsibility for finding solutions is shared between the centre and the many institutions which serve the people. We need to see how people react to changing circumstances. Many will solve their own problems.

The coalition is committed to fairness—equity between all members of our society—as we find our way back to economic and fiscal stability. I strongly support the test of fairness and carefully assessing public reaction. Despite the extraordinary mess which we are in and despite the absurdly centralised and bureaucratic mistrust of the people that we inherit, we will be agreeably surprised by the response to tough decisions and we will be able to promote fairness. I strongly support an increase in the personal allowance. It is right to replace the mechanistic, top-down and money-throwing recent past with freedom, fairness and responsibility.