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My Lords, I draw attention to my interests in the register, including as co-founder of a start-up with my noble friend Lady Finn.
It is a great pleasure to follow the noble Lord, Lord Brooke. He and I had dealings some 30 years ago when I was Financial Secretary and he was leading the Inland Revenue Staff Federation. He was calm, courteous and moderate then, as he is in your Lordships’ House today. Thinking about that time, it was said after the Chancellor’s Budget last week that this was the biggest fiscal stimulus since the Budget in 1992, introduced by my noble friend Lord Lamont. Looking at the Red Book from that time, issued in my name as Financial Secretary, my noble friend reminds me that the fiscal stimulus then amounted to some 0.25% of GDP, whereas last week it was a heroic 1% of GDP.
Of course, that has been made to look nugatory in the face of what has happened since then because that Budget inevitably has been very much overshadowed by the necessary and desirable response to the intensity of the Covid-19 crisis. This is troubling for a fairly unreconstructed smaller state, sound money Conservative, but these are utterly extraordinary circumstances and so an utterly extraordinary response is required. Last week, long-term decisions were made in the Budget on investment in infrastructure and spending more generally, while short-term palliative measures were introduced earlier this week. A different approach is required for each, but in both cases, the huge increase in spending makes it more necessary to focus on how the money is spent. I have some general points and some specific ones.
On the general points, our experience from the coalition Government is that a lot of money spent by Government is not spent very well. By dint of applying some disciplines that are commonplace in successful businesses but very uncommon in government, we were able to save from what are essentially the running costs—the overhead costs of Government—some £52 billion over those five years cumulatively, one year added to another. Some of the reforms we introduced persist, some have advanced, while others have regressed, and I am delighted to see that the role of my noble friend the Minister is to accelerate those reforms. It is necessary for him to be successful because it is his job to ensure that public money is spent well. It could be easier than it might have been because it has been shown that it can be done. However, it will be more difficult because when there is a sense that the sluice gates have been opened, it is tougher to persuade the spending Ministries to accept the centrally imposed disciplines that are essential to drive the effort successfully. I wish him every good fortune in the task he has taken on.
I come now to what we all hope will be the short-term measures that have been introduced to address the effects on the economy of Covid-19. We do not know what they are yet, but they will be severe in the short term, and immediate. One of my daughters had a part-time job in the hospitality sector while she undertakes a course of study, but she no longer has that job. There will be many people in those circumstances. She is being protected by the Bank of Dad, but many more are not in that position. The effects of all of this are very immediate. Further, while this may be surprising in view of what I was saying earlier, it is important that the Government should not be too fussy about trying to ensure in advance that all of the money is spent perfectly. It will not be because speed trumps everything else in this regard and getting the money out of the door.
How should that be done? A number of noble Lords have spoken of increasing the amount of leverage, the amount of debt in our economy, which is a real and genuine concern. I have a great deal of sympathy with the argument made by the noble Lord, Lord O’Neill, about whether this is the moment to print money. Some 30 or 40 years ago, that would have been anathema to us all, but we have seen in the response to the global financial crash that quantitative easing—printing money, as we used to call it—did not unleash inflation in the way that we feared. I think I heard the noble Lord say on the radio earlier this week that if we suddenly see a burst of inflation, that would be a quality problem for us and we could deal with it.
I have a couple of questions for the Minister about the measures that were announced a couple of days ago. On insurance, we have heard different things about the effect on business. Will those who have cover for these circumstances be able to claim on their normal business interruption insurance? An answer on that would be welcome.
What of the economy as we emerge from this crisis? There will be effects, and some of them may not be bad. As an economy and as organisations, we should be much better at organising and managing people remotely. There are huge benefits if more people work from home, which means being more sophisticated in how they are managed, managing them by output rather than by presenteeism. That can be a massive boost to productivity if we learn the lesson well of making a virtue out of necessity.
We used to talk in the coalition government about the big society, and we were sometimes mocked for that. However, the reality is that while the Government have an absolutely indispensable role in addressing the challenges that come out of this dreadful crisis—this dreadful virus—there is an enormous amount that people can do, such as working with each other in organisations, supporting each other, although less so physically. Thank God for the internet and for the connectivity that enables people to support and connect with each other without being physically present. The damage that would be done without that would be intensely worse. Therefore, there are potential benefits to come out of this. These are dark clouds indeed, but let us make sure that when the silver linings emerge—they may just be flickering—we do not waste them.