My Lords, I too thank my noble friend Lord Leigh for holding this debate. We should all take at least some cheer from the recent employment figures, which show that employment rates are at a record high and unemployment is at a record low. Signs that demand for labour is finally working to help drive up wages is particularly welcome. There is all this good news despite the chronic uncertainty facing our country as we continue to an ever-more polarised debate about our nation’s future.
As with most good news, it does not come without complications and challenges, not least the huge questions around low productivity and inherent inequalities, which I shall return to. Before I do, I will cast our minds back to a decade when the financial crisis and the following recession started, because we would be wise to remember the long and painful journey to restoring our public finances, not as an exercise in self-congratulation—however tempting—but so that we should not forget away our hard-fought victories.
In 2010 the coalition Government inherited one of the biggest deficits in the western world. We were hurtling towards economic disaster. If we ask ourselves what that actually means in terms of people’s lives, we had only to switch on the television and the answer was right in front of us: images of riots in the street of Greece, hard-working families queuing at soup kitchens, lives ruined thanks to mismanagement of the economy. An unstable economy means failing businesses, high unemployment, high interest rates putting stress on mortgages, and money that could be spent on a hospital or a school being spent on servicing our debt.
Sound finance is not just some accountant’s dream; it protects people’s lives and futures and it should be the first call of any competent and responsible Government, which it was under the Cameron-led coalition. How was this achieved? First, it was by cutting the deficit, which we did by two-thirds so that we returned to living within our means, not maxing out our nation’s credit card and passing debt down to our children. By 2014 we were one of the fastest-growing economies in the western world. We also started a national conversation about welfare. We were clear that we must help those who cannot support themselves, but for those who can we should help them stand on their own two feet. It was a conversation about what was fair—fair to the people who needed support, but also fair to those who paid for it.
We also asked ourselves: was it fair to entrench worklessness by making it pay not to work? That was the simple but strong idea behind many of our welfare changes and the introduction of universal credit. It is worth remembering that after the 2015 election the then acting leader of the Opposition, Harriet Harman, urged Labour to support our welfare Bill and to listen to what people were saying.
Changes to welfare, however, involve difficult and highly emotive judgment calls. We got some things right, but not everything. These are adjustments that should be made carefully, with Ministers in listening mode as they go. I welcome signs that our Secretary of State, Amber Rudd, is mindful of this as she rolls out universal credit to some of the most vulnerable in society.
First came the growth and then came the jobs— 2.5 million of them by the following election—but it remained a great concern to us that wages were so sluggish for so long. There was also an uncomfortable feeling among some that those who had caused the financial crisis had got away scot free, while those who had not took too long to feel the benefits of the recovery. As a Government, we have tried to mitigate this with the increase in the minimum wage and then the introduction of the national living wage, which was a big step in the right direction. Last week a report for the Resolution Foundation said that the national living wage had had a beneficial knock-on effect for low-paid workers—welcome news.
Taken together, there is much in this success story to celebrate, but also much to mull over. At the core of our democracy lies a fragile commitment to respect the will and authority of the Government—whether we voted for them or not—to live by the rule of law and to play our part in society. That is what some like to call the social contract. But it can feel stretched to breaking point if majorities take a winner takes all attitude to governance; if people feel alienated and that they have no voice; if inequalities are so large that it feels as though people live in parallel worlds; if businesses disregard pay restraint on boards and do not care or think about the relationship with their employees; if we allow women to do the same work but not be paid the same as men; if we ignore the challenges of other generations, with young people burdened by debt from their university and with little hope of being able to buy their own homes; and if, as a Government, we do not face up to difficult choices and are straight with the electorate about what they are.
While we move away from austerity, we should not lose sight of the need to deliver a stable economy. If you spend more money, ultimately you need to make a choice of how that is paid for. Is it by borrowing more, taxing more or making other cuts? There is no magic wand, only hard choices. We should not forget that it was through tough decisions and the hard work of the citizens of our country, who are responsible for the figures we celebrate today—figures that translate into hope and opportunity for people and families—and remember that our economy is built on competent governance and that we face many challenges ahead. Yes, we should pause and for a moment smile, and then reflect on all that we must do next.