My Lords, it is always a pleasure to follow the interesting and entertaining viewpoints of the noble Lord, Lord Desai. I will talk first about the post-Budget emergency economic measures. Following the example of France and Portugal and the USA’s proposals yesterday, the Chancellor stated that he would do whatever it takes to get businesses through these difficult times. He unveiled a package of major assistance for companies and individuals: the £330 billion loan guarantee support and the £20 billion business assistance help—they are astonishing figures. I approve of the way the Chancellor said that:
“This is not a time for ideology and orthodoxy.”
First, I welcome the loan assistance package, with separate schemes for larger and smaller companies, but note other noble Lords’ concerns about the delay in banks processing these. For individuals, I commend the Chancellor’s decision to suspend mortgage payments for three months for those in difficulty. Secondly, I agree with the Government helping with companies’ fixed costs, again particularly with the larger and smaller company schemes regarding business rates relief, and with improved cash grants for smaller companies. Thirdly, I welcome the proposal to look at regulatory relaxation in sectors such as transport, airlines and airports. Finally, on these extra measures, I await the
“bold and ambitious employment package”,
which the Chancellor pledged to establish, having made a start with more generous statutory sick pay proposals.
I agree with many noble Lords that much more needs to be done. I was fascinated by the idea proposed by the noble Lord, Lord O’Neill, of helicopter money, which was supported by my noble friend Lord Lamont and the noble Lord, Lord Adonis, and put into historical perspective, regarding its use by other countries, by the noble Lord, Lord Razzall—I agree that there is less risk of inflation in doing it now. I agree with my noble friend Lord Leigh of Hurley that another simple route would be through the PAYE system.
I turn to the Chancellor’s original 2020 Budget, which I also welcomed. Even before such difficult circumstances, a different approach had to be taken after the election, especially to thank constituencies in the north and Midlands that elected Conservative MPs, wanting a new approach to improve their neglected infrastructure and business prospects. On monetary policy, I welcome the 0.5% base-rate cut, which is always a necessity in difficult economic times.
Moving on to fiscal matters, the Budget’s economic forecasts are now history, as the OBR’s estimates were completed before the Covid-19 outbreak really got going. Also, they assume that the Brexit negotiations are going to go entirely smoothly, with a “typical” trade deal with the EU. I ask the Minister to heed well the words of the noble Lord, Lord Adonis, on Brexit negotiation delay.
Economic growth, as predicted by the OBR for the Budget over the next five years, was not very exciting. Clearly, these figures will have to be revised substantially downwards. By way of comparison, the European Commission has revised its estimate for European GDP growth, now expecting a GDP contraction at 1% this year. Apparently—according to the Canadian National Post—unpublished internal estimates are more likely to indicate a contraction of 2.5%.
As many noble Lords have stated, the original Budget’s big spending boost over the period came in public sector net investment. Public sector spending is forecast to grow at 2.8%, twice as fast as the economy. Public sector net borrowing, excluding yesterday’s emergency measures, at its peak increases by 74% to nearly £67 billion by 2021-22. While this is a major increase, it is still a far cry from the huge figure inherited from Labour in 2010. In answering criticism from the Adam Smith Institute and the IEA, I maintain that while interest rates are low, this is the time to do this. Of course, as the IFS stated in its Budget review, the debt hike is vulnerable to changes in interest rates, inflation and economic growth. Obviously, the longer the Covid-19 outbreak continues, the worse the effect will be here. I also note that the fiscal rules framework will be reviewed in the autumn and doubtless tinkered with.
Looking at the figures in more detail, I welcome the initial £12 billion fiscal stimulation package, directly related to the outbreak, with £7 billion going to people and businesses. However, I am worried about liquidity problems for smaller companies; as I predicted, the £7 billion figure had to be expanded considerably due to the outbreak. The other £5 billion is going to the NHS—a good decision.
Turning to longer-term public net investment, I note the huge figure of £600 billion promised over the forecast period for gross public-sector investment but calculate the net figure at £451 billion. Can the Minister let me know about the major components that must be deducted to get to £451 billion? The big public investment figures mentioned for investment, R&D, new roads, the affordable homes programme, improving broadband, potholes, 70,000 new houses and a new building safety fund are all welcome, as long as they are properly implemented.
In other departments, I welcome the extra £6 billion of regular funding for the NHS, noting that it is in addition to the extra £34 billion over five years. I also welcome the announcement that the Government will give the NHS whatever it needs to fight the Covid-19 outbreak. Regarding the further education sector, I am sure that the Minister is as pleased as I am to see the further new capital promised to improve the condition of the further college estate. On the transport sector, I welcome the money to be invested in the transforming cities fund.
In summary, the OBR said that
“the Government has proposed the largest … fiscal loosening since the pre-election Budget of March 1992”.
All this money needs to be well spent.