My Lords, I thank the noble Lord for introducing this debate, in particular for his intelligent and pragmatic approach in addressing not only the Budget but the Statement made last night. I assume that he will be responding to questions from noble Lords on last night’s Statement as well as the Budget itself. I note that he nods as I say those words.
Our post-Budget debates are often interesting affairs, not least because an extra week or two allows for greater scrutiny of the famous Red Book. I expect that this one will be even more enlightening, even if for the wrong reasons. As the Chancellor acknowledged in his Statement last week, the Spring Budget took place against an unconventional political and economic backdrop. Not only was it delivered by a Chancellor who had not expected his promotion, but it came as the global Covid-19 pandemic required a series of extraordinary actions from the Government.
We have since had a supplementary economic Statement from the Chancellor in which he announced additional measures to assist some of the businesses that will be worst affected in the weeks and months ahead. I want to be clear: to a large extent we support the action being taken. There are areas where we have concerns, but we appreciate the spirit in which Ministers have approached this challenge. Many of my noble friends have been engaged in meetings with their opposite numbers in recent days and have been able to put forward concerns and suggestions, which appear to have been taken seriously.
Before turning to our analysis of the economy, I place on record our thanks to everybody across the UK who is working to minimise the wide-ranging effects of Covid-19. Our NHS workers are once again demonstrating their heroism in the face of unprecedented demand. Public health and other authorities are reacting swiftly and decisively. Many members of the public are supporting friends and neighbours, helping them navigate these most unusual times. We thank them for all their hard work and community spirit.
I am grateful to all noble Lords who are due to participate in this debate and to those who have considered their own circumstances and decided to stay away on this occasion. We may not get to hear their words of wisdom this time, but we look forward to doing so in future.
As I have mentioned the coronavirus, I will raise our concerns about it now. As I have said, we largely support the measures that have been announced, but noble Lords will not be surprised that we have some concerns. This is a fast-moving situation and there will be more to come. Although it is perhaps a little late, we welcome the establishment of new government committees to enable swifter, joined-up responses to new developments.
Nevertheless, as we discussed in yesterday’s PNQ on entertainment venues, some recent announcements have caused confusion rather than offering clarity. The issues relating to insurance seem to have been resolved, but in such turbulent times it is vital that the Government are a calming influence, rather than causing further uncertainty. There remains the question of unequal treatment; banks are offering mortgage customers the ability to negotiate payment holidays, but there is a lack of action to ensure that renters are not adversely impacted by temporary cash-flow problems. We have been promised a statement by the Secretary of State for Housing, Communities and Local Government. When will this take place?
We have previously relayed concerns over the current level of statutory sick pay, which we believe introduces a risk that some will have to choose between health and financial hardship. This should concern us all. We have also expressed alarm that some firms have moved swiftly to lay off staff, pushing them towards benefits rather than guaranteeing stronger levels of protection. As the director of the Institute for Fiscal Studies has noted, it will remain expensive for businesses to pay their staff, particularly if demand drops. Therefore, we urgently need targeted government intervention to protect workers.
The crisis will inevitably create incidents of real hardship. We therefore welcome the funding of local hardship funds, but while the headline figure of £500 million sounds significant, it will be spread across hundreds of authorities. Will a top-up be available if required? What of the administrative side? Will costs be reimbursed by central government, or will councils have to deduct them from the funds allocated? We welcome the changes to the benefit system to improve access for those who fall on hard times. However, questions remain over universal credit, particularly regarding the five-week delay; is that being lifted?
As this is a debate on the state of the economy, I want briefly to touch on the overall economic picture. Last week’s Budget was delivered on a day when the Office for National Statistics estimated flat GDP growth for the last quarter. Manufacturing figures continue to cause alarm, and growth in services has been inconsistent. As the Resolution Foundation noted, pre-coronavirus, the Office for Budget Responsibility forecast average annual growth of just 1.4% in the coming years. This is even weaker than the sluggish rates we have seen in the post-financial crisis era. The economic hit from weaker growth, even on these incomplete forecasts, is around £300 per household this year, rising to almost £600 per year by the middle of the Parliament. To people up and down the country, this outlook, which must now be seen as a best-case scenario, does not sound like the Government fixing the roof.
Yesterday, the OBR’s Robert Chote warned that Britain faces “a wartime situation” and must do more to support households and businesses through the current health crisis, even if this leads to increased borrowing and national debt. Charlie Bean, a former deputy governor of the Bank of England said:
“If you damage the economy, you damage the public finances further down the road.”
Whether it is a financial crisis or something such as this, all the evidence shows that big action taken early is better than half-hearted action delayed. Last night’s economic Statement provided a step forward, but it is not yet clear whether Ministers have a firm grip on the scale of the challenge our economy faces. If we get one thing from the Minister’s response this evening, it is that I very much hope I am proved wrong.
Returning to the spring Budget, I was disappointed that we saw nothing substantive on social care. In his first Downing Street address, the Prime Minister told us that he had a plan that was “oven-ready”. It was said that the Government have recently decided to convene cross-party talks on the future of care. It has taken years to get to this stage, and while a level of consensus is clearly needed to address the long-term challenges we face, local authorities and care providers will continue to face an uphill struggle in the meantime. According to the Local Government Association, adult social care faces a funding gap of £810 million in 2021, rising to £3.9 billion in 2024-25. That gap accounts only for core pressures. When factoring in unmet and under-met needs, and workforce challenges, the cost will be much higher.
Speaking of local authorities, I note that other than one-off schemes relating to the virus, and the commitments to reviewing business rates, there is little to offer long -term reassurance on the provision of local services. Indeed, the LGA expressed disappointment that next year’s public health budget was not confirmed, despite the new financial year being just weeks away. This was addressed yesterday, but the cause of the delay is not clear.
While there have been real-term increases for the year ahead, these do not compensate for funds being reduced by £700 million over the past five years. After the cancellation of the last comprehensive spending review, the Chancellor has finally launched a new exercise. I hope that it addresses the fact that England’s councils face an overall funding gap of almost £6.5 billion by 2025, which is only to meet demand and inflation pressures. Improving local services will require significantly more. I hope that it will also enable the Government finally to get to grips with the many big challenges that our country faces. After calling and winning called an election, more was expected from the Prime Minister and his Chancellor. We have heard that the Government want to tackle low pay by increasing the national living wage, yet workers will have to wait five years for a modest increase, and only if the economic conditions allow for it. Even then, the basic wage will remain far below the level suggested by the Living Wage Foundation.
We are told that the Government want to tackle rough sleeping, which has increased exponentially since 2010, but did homeless services receive the £1 billion they needed to reverse previous cuts? No, they did not. Neither did Ministers commit enough money to tackling domestic violence. The £10 million provided for
“innovative new approaches to preventing domestic abuse” would need to be multiplied more than 15 times to meet the needs of refuges.
Ministers say that the UK has the most ambitious climate-change agenda in the world. However, this Budget barely mentions the climate crisis. The IFS said that in terms of reaching net zero
“the decisions made in this Budget don't provide great confidence that the government is willing to grasp the nettle.”
This is particularly disappointing since the UK is to host the COP 26 conference.
While I reiterate our general support for the actions relating to Covid-19, I express our disappointment that this Budget represents another missed opportunity. We hope that the negative consequences of a decade of austerity will finally begin to be addressed when we see the outcome of the spending review. We desperately need progress on social care, more funds for councils and steps forward on a variety of societal issues. However, on current form, and given the challenges facing the UK and global economies, there is little cause for optimism.