My Lords, it is now commonplace to agree with the evidence of the Chancellor to the House of Lords Economic Affairs Committee that we are facing a recession like no other we have seen before, and that it is not obvious that there will be an immediate economic bounceback. The facts are stark. As other noble Lords have said, currently, the Government are paying 80% of wages of employees on the furlough scheme, which has now been extended to October, and this covers 35% of private sector employees. With the addition of grants to the self-employed, this will have cost £100 billion by the end of October—more than the average forecast spending on defence and transport. As noble Lords have said, when the Government stop making these payments, serious redundancies are bound to follow, with the Bank of England forecasting unemployment rising to at least 10%.
What should the Government do? They were inundated with suggestions from leading economists, many of which have merit, and I shall highlight a few. Many of these proposals are technical. The first is to align the lower national insurance threshold with income tax at £240 per week, rather than, as now, £169 for an employer and £183 for an employee. The second is to create a fund to hold the bailout loans, to take them off banks’ balance sheets, as suggested by Howard Davies the other day. The third is to manage 10-year gilt yields down to close to 0%, to make it cheaper for the Government to borrow.
Some of these proposals will require alterations to the way our banking system works. To kick-start the housing market, borrowing rules for homebuyers could be relaxed. The Green Investment Bank could be reactivated to promote a significant increase in green technologies. Some proposals will require a significant change in direction by the Government. With the large erosion of opportunities for our young people, now is the time for a massive focus on further education and apprenticeships. There is a major need to focus capital expenditure on infrastructure investment.
It is absolutely clear that Keynes is back: this will be no time for austerity, otherwise we will see more lost jobs, more lost income and the familiar consequences of unemployment and poverty—poorer health, a crumbling infrastructure, and rising crime and xenophobia. And for heaven’s sake, let us extend the Brexit transition period while all this is being sorted out.