Queen's Speech — Debate (5th Day)

Part of the debate – in the House of Lords at 10:14 pm on 16th May 2012.

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Photo of Lord Whitty Lord Whitty Labour 10:14 pm, 16th May 2012

My Lords, my main theme tonight concerns economic strategy and the fact that the eurozone authorities and our own coalition Government got diagnosis and prescription profoundly and damagingly wrong, for the reasons that were spelt out so brilliantly by the noble Lord, Lord Skidelsky. First, I have some good news for the Government. Unlike my noble friend Lord Myners, but like another noble Lord who has just spoken, I strongly support the groceries code adjudicator. I champion the consumer, as does the noble Baroness, Lady Wilcox, but we both recognise that it is not in the interests of the consumer for the supermarkets to be able to wipe out farmers and other small producers who are part of the food chain in this country. Therefore, she will have my support on the Groceries Code Adjudicator Bill, although it needs a bit of strengthening.

I welcome other Bills in part. Some of the electricity market reforms proposed in the energy Bill are desirable but it will fail to tackle the problem of investment in nuclear and renewable energy and the problems associated with decarbonising our energy use and of fuel poverty. I had hoped that we would have a fully fledged water Bill. However, as the noble Baroness, Lady Parminter, said, pre-legislative scrutiny may give us a chance to sort out the abstractions regime. That is desperately needed in the light of the pressures imposed on our water resources by climate change and population increase. Therefore, I welcome the commitment with regard to a pre-legislative Bill.

I may also support a few parts of the enterprise and regulatory reform Bill. The rationalisation of the competition structure is sensible. I welcome the green investment bank although I think that it could go significantly further. However, I also fear that better regulation will lead to a substantial attack on environmental regulation and employment protection, which I do not wish to see.

As regards the Financial Services Bill, I welcome the implementation of much of the Vickers report, particularly in relation to the ring-fencing of bank activities. However, I am afraid that the rest of the Bill is mostly about the location, labelling and institutional structure of the regulators. Frankly, changing location from the FSA to the Bank of England or changing names on doors does not give much comfort to small businesses that cannot get capital from the banks, to those seeking first-time mortgages or to those who are excluded from conventional credit and are falling prey to legal or illegal loan sharks. Above all, I do not think that the Financial Services Bill goes very far to tackle the turmoil in the money markets and the failings of the banking system across Europe and much of the world. That is the backdrop against which we are discussing this matter.

Like the noble Lord, Lord Bates, I do not share the schadenfreude that is felt in relation to the problems of the eurozone. I also fear that the coalition is believing its own propaganda and adopting the wrong policies partly as a result. The only real success that the Government have gained from their statements on economic policy is that they have managed to convince a fair proportion of the press and the public that the crisis is all the fault of the Labour Government, despite its global nature. Frankly, the Labour Party has not been all that good at defending its record. We have heard that mantra repeated today. There was a Labour Government failure: namely, the failure of banking regulation, which was far too light touch. However, it was not as light touch as the present Chancellor then said; he wanted it to be considerably stronger. Nevertheless, it was not a failure of macroeconomic policy. Up until 2008, the UK debt to GDP ratio was lower than that of most OECD countries and lower than it had been for much of our history. Indeed, that applies also to other countries in the eurozone.

With the exception of Greece, this crisis is not primarily one of public finances; it is a problem with the banks. That was true in Ireland four years ago and it is true in Spain this week. By putting all the burden of resolving it on public finances, the symptom but not the cause of the problem is being tackled. We have the money markets behaving like packs of feral dogs trying to find the weakest link and Governments who are more afraid of the ratings agencies than they are of their own electorates. When their electorates pronounce, what happens? The Greeks are told to vote again until they get it right, and no doubt if the Irish vote no in the referendum, they will be told the same. However, they will not get it right on that basis because it is the wrong strategy.

I speak as a long-standing pro-European and indeed as a supporter of the euro, and I say this with a heavy heart. I think that what has happened in Europe, reflected here too, is that the decent instincts of post-war social democracy and Christian democracy in Europe have been replaced by a combination of the revival of the understandable German terror of hyperinflation and by ideological neo-liberalism, and lying behind the austerity strategy is the belief that you can win the battle against this crisis only by reducing the size of the state. That is what is behind the strategy in Europe and it is true here in Westminster. Who is paying for this? It is not the bankers, who caused it, but the poorest regions of Europe and of Britain, the youth of Europe and the most vulnerable workers, with inequality growing between regions, between rich and poor, between genders and between the generations.

I recognise that of course there has to be discipline in relation to public spending and the management of our debt, but that discipline has to take into account the profundity of this economic cycle and, if the financial stability pact is so inflexible that it cannot do so, then it is not only Greece that is likely to be the victim.

In the UK we have adopted much of the same approach. At the moment, it looks milder than it does in Greece and Spain but that may be a matter of time. We have only just had a Budget that rewarded the rich and penalised pensioners and pasty eaters, and of course 90% of the cuts have yet to come. We have now had a Queen's Speech that does even less to tackle this economic problem. It has not done very much for small businesses; it has done nothing at all to stimulate the housing market, despite the total dysfunction of that market; it has done almost nothing for green investment, although we could build on the green investment bank; it has done nothing for the regions, infrastructure or manufacturing-there is no investment bank, for example-and nothing for employment, except, bizarrely, to make it easier to sack people.

All our leaders can do is to repeat the mantras of the austerity strategy. The noble Lord, Lord Skidelsky, calls that denial. To me, it is a bit reminiscent of the dreadful twilight days of the Soviet Union, with leaders reasserting failed nostrums and phoney statistics in provincial tractor factories. The country deserves better, Europe deserves better and the Government need to do better.