My Lords, I applaud the judgment of my right honourable friend the Chancellor in making this the last spring Budget. In my time as a City editor, the Budget was one of the worst elements in the calendar. It was a challenge to look through all the small print that came from HMRC and the Treasury to find what was missing from the Chancellor’s speech. This being a competitive business, it was not a good thing to miss the story. Having two Budgets a year compounded the agony, so one is definitely a relief in the right direction.
I also commend the Chancellor for not burying the bad news. The national insurance increase was right up-front and I support it. I cannot see why it is being greeted as quite such an appalling blow to the entrepreneurial spirit of this country when, as my noble friend Lord Willetts, pointed out, it is a perfectly rational move to begin to align these two national insurance contributions, as benefits are being aligned. That makes sense. The Institute for Fiscal Studies greeted it as “modest but welcome”.
My noble friend Lord Macpherson of Earl’s Court suggested that there may be no-go areas when it comes to tax. I do not think that we should accept that. I see no reason why national insurance any more than other taxes—of course, it is a tax by any other name—should be beyond the Chancellor’s writ. As the Chancellor pointed out, he does not have wads of cash to shell out. With our net debt standing at an astronomical £1.7 trillion—a whopping £62,000 for every household —we are having to keep on borrowing on a prodigious scale.
We have already heard many dissections of the state of our national finances but I would like to concentrate on just two issues. I will not drone on about Brexit. My views are clear and others have made it perfectly clear that they too have grave fears for the economy, but let us hope that the Government are right.
I would like to talk about productivity, which has been mentioned by other speakers. As the Chancellor said, it remains stubbornly low, and there is certainly no denying that. We are 35% behind Germany and 18% behind the average of the G7, and GDP per capita is barely 2% higher than it was before the crash. That means that the economy has grown by little more than 2% over nine years, which is just about what you might hope it would do in a single year. Of course, the ramifications of that poor performance are painful. According to government forecasts, average earnings in 2022 will be no higher than they were in 2007—15 years without a pay rise, which is painful. As my noble friend Lord Willetts pointed out, for many people it has been much worse than that average figure. No wonder some people are feeling deeply disillusioned and perhaps showing their disillusionment at the ballot box.
The productivity gap has been much discussed but nothing seems to make any difference. Only last year, the then Business Secretary, Sajid Javid, outlined his suggestion for making things better. There were 15 key areas and two pillars. What it amounted to was infrastructure and training and all the things we have talked about over the years. Of course, I am delighted to see the emphasis on technical education in this Spring Budget. However, there may be another problem. Certainly, the Productivity Leadership Group, chaired by Charlie Mayfield, came to the view that one of the biggest problems with productivity in this country was bad management. The Chartered Management Institute did its own survey and found that 43% of managers rated their own line managers as “ineffective”.
Therefore, I ask the Minister whether the Government have any plans to help business improve its not entirely impressive record on management as a means of improving productivity growth. It is certainly worth fighting for that growth. As we know, households are suffering and could do with more national income. The OBR records that average household debt has reduced from the peak of 160% of income down to about 140% but is now on the rise again. The OBR even suggests that in the final quarter of last year people were dipping into their savings to go shopping—and this at a time when it is absolutely essential that the country saves more. We need the money to pay for our old age and social care, not for an increased spend on consumer goods now. Can the Minister say what she thinks would help improve the savings ratio? I suggest that a national savings bond with an interest rate of 2.2%, when inflation is heading towards 2.4% this year, might not be the answer.