My Lords, it is a pleasure to follow the noble Lord, Lord O’Neill, and I intend to agree with much of what he said.
As the noble Lord, Lord Oates, said in his excellent speech, the Budget on
To many people, the world economy must resemble a slow-motion apocalypse. As the noble Lord, Lord O’Neill, said, we have simultaneously both a supply and a demand shock. This was originally a health crisis, but the measures that Governments worldwide are forced to take to combat it add to the economic problems and to the crisis. The Chancellor of the Exchequer said that we will get through this. Of course we will, but there could be long-term damage to the world economy. In the last quarter of last year, the world economy was already teetering on the verge of recession; figures for Germany, Italy, Japan, China and the UK indicate that. A longer-term consequence might be a degree of de-globalisation, which I would regret. There are products that might have been launched that may never be. As a result of the measures yesterday, there will be loans to be repaid, which will be a big burden on the corporate sector, which in many countries in the world was already highly leveraged.
The world is not necessarily going to go back to exactly where it was before. People talk about a V-shaped recovery but it could be a U-shaped one or indeed L-shaped. People’s behaviour is going to change from what it was before. It may be that younger people will go back to how they behaved before but older people will behave differently.
The Chancellor was quite right to take advantage of low interest rates to invest in infrastructure, and for the package generally. The UK can now borrow for 30 years at less than 1%, so in real terms lenders are actually paying the borrowers for the privilege of lending. Of course people are sometimes inclined to argue that that is not without risk—for example, if we move into a period of deflation.
Since the Budget, markets have collapsed further, confidence has fallen further and businesses have begun to realise that the isolation of customers has huge consequences for them. The combined efforts of the Federal Reserve, the ECB and the Bank of England have had little effect. This is not surprising. A rate cut cannot stop the spread of a virus. This is not the sort of crisis that monetary policy can do a huge amount to ameliorate; it requires a fiscal response. It was therefore right that the Chancellor deployed his big bazooka with £350 billion-worth of guarantees, a business rates holiday and the business interruption scheme. Confidence is not going to return quickly—indeed, it probably will not return until progress is made in combating the virus—but the measures will be a bridge to that confidence.
I have two concerns about the Chancellor’s package so far. The first is what has been referred to by a number of noble Lords—the package as it refers to the self-employed and the gig economy. Self-employed people make up 15% of the labour force. I appreciate the measures on statutory sick pay that have been announced, but I question whether they really are going to be enough. We do not want people to have to choose between continuing to work when they are sick or staying at home with no money; we do not want sick people to be forced to work. Moreover, I am not convinced that universal credit or the employment support allowance will be wholly effective in the ways they need to be now, as we speak. We need to find a mechanism—although I appreciate that that is extremely difficult—to get money to those people who do not have any savings in reserve. If we cannot find such a mechanism, as the noble Lord, Lord O’Neill, suggested, it will be necessary to send a cheque or to do what President Trump seems to be thinking of doing: resorting to helicopter money. I too have had misgivings about this in the past, but I am convinced that it now needs to be considered.
My second concern is that the business take-up of loans will not go through to employees—that employers will not necessarily pay their workers. I do not mean to cast aspersions on employers, because of course most of them are concerned about their workers, their business and their other stakeholders. But they will be worried about the burden of the debt, and above all they will be concerned about whether their business will survive. Could we consider for the future perhaps making the loans conditional on guarantees about employment in individual firms? Can we take further action which the Chancellor has said there will be on employment support by making loans of this sort conditional?
I commend the Chancellor’s measures. They have been described as unprecedented in modern times and they may be unprecedented in the whole history of this country. The Government have not had much time to prepare for this emergency and we cannot expect to solve all these problems in just one day. Will more be required? Almost certainly, yes. The Chancellor has said that he is open-minded and prepared to do whatever it takes. That is the right approach and it is very welcome.