Economy: Government Policies — Debate

Part of the debate – in the House of Lords at 12:40 pm on 24th March 2011.

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Photo of Lord McFall of Alcluith Lord McFall of Alcluith Labour 12:40 pm, 24th March 2011

My Lords, I am delighted to participate in this debate and I congratulate the noble Lord, Lord Lawson, on choosing it. Enterprise, growth and the fundamental rebuilding of the economy are very relevant. I congratulate the noble Lord, Lord Hussain, on an excellent speech and I wish him well in his future in the House. I draw the House's attention to the Register of Lords' Interests as I make my speech.

This Budget is fiscally neutral but it is a gamble on growth because the underlying assumption is that there will be an economic rebound to trend. In fact, we need a thumping 3 per cent growth by 2015 if we are to keep on course. We have heard the mantra, "It's the debt, stupid", but regarding our present situation and the growth objectives the distinctive feature is the amount of private debt which we have in the country. We have seen a conversion of private to sovereign debt within this crisis, which is why we are talking about Portugal, Ireland and other countries today. Indeed, PwC illustrated that by describing it as a debt time-bomb, where we have a £10 trillion barrier to overcome by 2015.

Some people have stated that our having a public debt is to be celebrated, in the sense that Governments have intervened to save the private sector. While we should be mindfully relieved by that, we still have to attend to the issue of "too big to fail". If we do not attend to that, we are going to come back to a crisis in future so we have to be mighty thankful. We are going to live with these consequences for many years and ordinary people will be paying the price. They will have to pay off debt but also increase savings. I am very conscious of that as I undertake to look at occupational pensions over the next few years for the National Association of Pension Funds. There is no doubt that responsibility will be transferred to the individuals.

On enterprise, for me the economy needs a spare tyre. Adam Posen made that very point; we need it to lend to manufacturing, to small businesses and to infrastructure. We do not have that in our economy at the moment. I have been calling for a national investment bank for a number of years and I asked the previous Government about that issue. However, I noticed yesterday that Zac Goldsmith has expressed his dismay at the Government for not being bold enough on the green bank. We need to be bold on a national investment bank. The noble Lord, Lord Skidelsky, was saying in an article in the Financial Times the other day that we could have a limited fiscal commitment of £10 billion, with subscribed capital being drawn down over the next four years. That would allow the new bank to finance sufficient spend to more than offset the £87 billion of spending reductions planned before 2015. One thing I am certain of is that we need to be bold.

As the noble Lord, Lord Lawson, has noted, we need a fundamental rebalancing of the economy. If we are to make our way in the 21st century, we have to make things. We have to complement the giant, productive economies of China, India and the rest of Asia and we should not be beguiled by the arithmetical GDP figures. We need development in all areas of our country and GDP has to embrace social as well as economic criteria. We must preserve the social fabric, not rupture it. A generation of unemployed young people or a high number of unskilled people will not help finances in the long term. Having unemployment at 2.53 million at the moment, with almost 1 million young people aged 16 to 24 unemployed, is an inauspicious start.

I witnessed the destructive nature of unemployment on young people when I was a schoolteacher in Glasgow in the 1970s and 1980s. I was reminded of that at the weekend when visiting an old family friend, Mr Andrew McGroarty. He is aged 95 and has just lost his dear wife Agnes after 70 years of marriage. He is a deeply humble, gentle and spiritual man who has led an exemplary life. However, as we were talking last week he left me in no doubt with the force, the clarity and indeed the eloquence of his remarks about how socially destructive the unemployment was following the depression in the 1930s, when he was a young man. His was an authentic voice, warning of the perils of leaving families and communities to their bleak fate if the Government do not work for the common good. Those are wise words indeed. I finish by delving into history for the wise words of Lord Keynes, who said:

"I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity".

That bankruptcy is not just a financial reference; it also affects people and society.