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It is a pleasure to reopen proceedings. I welcome this Finance Bill and I support the Government in dealing with this most difficult challenge of covid-19 and the lockdown that has been required. It is right that we protect the NHS and increase its capacity; I am proud of the part that Somerset has played in that, with firms such as Numatic, Oscar Mayer and others doing a brilliant job, helping to manufacture PPE, get meals out and get involved with ventilator production and with looking for vaccines and treatments.
Test and trace is clearly the way to go, and it is right that we stay locked down for a few more weeks, because we absolutely need to avoid a second lockdown, which would be a proper catastrophe for the economy. It is worth buying time now to be able to control the virus’s spread, so that we can spring back with confidence about our health, our travel and our interactions with others.
However, the scale of the downturn that we are in globally even now makes lifting the lockdown as soon as possible of critical importance. At that time, a new Budget and a new Bill will be needed, for incentive for research and development, for investment and reinvention. I believe that the multi-year scope and huge scale of this downturn mean that it will not be V shaped.
The scale of the destruction of consumption and supply that is going on and the crisis in real demand, which is seen in things such as unemployment—for example, in the United States they are now expecting 30% unemployment by the summer—mean that it is a massive challenge. Just expanding the money supply does not conjure up that demand. We are seeing major problems in the oil markets; money is being printed to support them, but nevertheless, large swathes of oil production around the world will be taken out and there will be major debt crises in emerging markets coming down the road.
The other problem we have seen with massive monetary easing is that it destroys the mechanism of the markets for discovery of prices of different types of assets. We have a massive challenge coming down the line. However, as I said, I support these measures to keep the economy from its heart attack; even if those immense problems are being stored up for the future, there is really nothing else to be done about it.
It is right that we support those who genuinely cannot work through this crisis, but the furlough is creating some of its own issues and it cannot be afforded forever. We need to incentivise people to get back to work and companies to get back into operation as soon as we can.
The other thing to understand is that it is massively important that we maintain confidence in markets in our public finances. At 100% borrowing as a percentage of GDP, it really makes a difference whether we are paying 1% or 5% on the debt service: 5% would give us a very big problem and would see 25% to 30% of Government spending going on debt service. It is an unpalatable choice that we and nations around the world will face about how to deal with that—whether to go for some element of inflation, whether more monetisation is the order of day, whether there might even have to be debt forgiveness, such as happened in the 1930s, or whether we have extra taxation. The point is that all those things are massively challenging and are, in one way or another, an assault on the value of money. Maintaining confidence in money itself will be one of our key tasks.
We need our economy here to be ready to spring out, powered by research and development and reinvention. We need to be open to trade and innovation. We must not be seduced by the sirens of protectionism that led us into a terrible place a century ago. We must, as a nation, pursue a US trade deal. We must pursue deals with all nations around the world, and we must not be scared into thinking that we need to be protectionist at all costs. I want to say to people in Somerset: you are doing a brilliant job—keep going. We need to come out of this in the right way, and everything you do now is going towards that.