My Lords, I thank my noble friend Lord Eatwell for securing this debate. I congratulate him on his wide-ranging opening speech. The Covid-19 pandemic has delivered a shock to economic activity, unprecedented in speed and severity. The OBR’s initial scenario sees GDP fall by 35% in the second quarter, unemployment rise by more than 2 million, government borrowing increase to £273 billion, and debt exceed 100% of GDP. As the IFS has observed, these figures are predicated on a swift recovery. Should the economy fail to bounce back, the picture would worsen further.
The Resolution Foundation has reflected this uncertainty with a range of forecasts, depending on whether social distancing lasts for three, six or 12 months. It estimates that GDP would fall this year by 10%, 20% or 24% respectively, with unemployment rising to 2 million, 5 million or over 7 million. Irrespective of how severe the coming recession turns out to be, this pandemic has exposed significant flaws in the UK economy. It has revealed deep inequalities, with the economic effects disproportionately experienced by the low paid and the young. It risks exacerbating them still further. Unemployment will be concentrated in the lowest-paid sectors. Those soon to leave school or to graduate will enter a very bleak labour market.
Addressing these inequalities will be key to building a stronger, fairer, post-crisis economy, with far greater resilience for the future. As we do so, we will need to see a radically different approach from that of the past decade, when we saw the slowest recovery for eight generations: living standards were undermined, public services weakened, and our welfare system underfunded. As the Government begin to restore fiscal sustainability, ensuring that the burden is borne fairly across society must be paramount. In the previous decade, while money was found to cut the top rate of tax, the poorest families had their incomes cut by more than 15%. As we repair our economy, we must learn the lessons of this crisis and of the past decade, so that we can build a new social contract, fit for the future.