My Lords, it is a privilege to introduce today’s debate on behalf of the Government. Given the challenges that the Government have faced this last year and that they continue to face, this is an important opportunity to review their approach to what we all understand has been a grave shock: a health emergency and an economic emergency. I am pleased to have this opportunity to debate and discuss the measures that we are introducing to protect jobs and livelihoods, as the economy recovers from the Covid-19 pandemic—as we are all determined it will.
The Government’s efforts to tackle the economic damage threatened by the pandemic have been broad and deep. A comprehensive and sustained economic shock was met with a comprehensive and sustained response, recognising the difficulties faced by individuals, families and businesses across the country. The Coronavirus Job Retention Scheme has helped to support over 11 million unique jobs since its inception and the Self-employment Income Support Scheme has supported a further 2.7 million people, with grants worth over £19 billion. Individuals and families have also benefited from increased welfare payments, a stay on repossession proceedings and mortgage holidays.
Support was given to renters through increases to the local housing allowance rates for universal credit and housing benefit recipients and an additional £500 million was made available to councils last year through the hardship fund grant to support households struggling to meet council tax payments. This money was used to provide recipients of local council tax support with a further £150 reduction in their bills. Government has delivered over £75 billion in guaranteed loans to more than 1.6 million businesses, as well as providing tax deferrals, grants and a business rates holiday worth over £10 billion.
In sum, the Government have taken unprecedented action to support our economy and public services in response to the pandemic. Taking into account the significant support announced at the 2020 spending review and this year’s Budget, the total financial support for the economy is over £350 billion across last year and this year, or around 17% of 2020 GDP. This includes £55 billion in 2021-22 to support the public service response to the pandemic.
All of this has made a very real and tangible difference. In fact, the Office for Budget Responsibility now expects the UK economy to recover to its pre-crisis level six months earlier than originally expected—by the end of the second rather than the fourth quarter of 2022. Meanwhile, unemployment is expected to peak at around 6.5% instead of the nearly 12% feared last summer. As the Resolution Foundation observed,
“This would be by far the lowest unemployment peak in any recent recession, despite this being the deepest downturn for 300 years.”
Our focus was on the preservation of jobs and livelihoods and that is what we have sought to deliver.
My Lords, I congratulate the Government on the steps they have taken, so eloquently described by my noble friend Lady Penn, to protect jobs and livelihoods during the pandemic. Where they prevented businesses operating, albeit for good reason, they were morally obliged to compensate those prevented from earning a living. But there is something odd about the title of this debate. It refers to the steps taken to
“protect jobs and livelihoods as the economy recovers”.
But it is economic recovery that will effectively protect and replace the jobs that were threatened or destroyed during the pandemic.
The conventional wisdom is that to bring about a recovery we need a fiscal stimulus. Most recessions are caused by a shortfall in demand, and the remedy then is to boost monetary demand. But this recession is unique: it is caused by the suppression of supply. So a precondition of recovery is to end the lockdown as soon as possible, now that all those at risk have been offered the vaccine.
Moreover, while businesses have been prevented from producing the goods and services they normally deliver, most people have been paid, not least through the furlough scheme, and many have been unable to spend all their earnings—so there is considerable pent-up demand. As we relax the lockdown of supply, most sectors will therefore recover quite rapidly. But some will find that part or all of their previous demand has moved elsewhere. To create jobs for people displaced from those sectors, we will need existing businesses to expand and new businesses to be established. I will return to that in a moment.
First, should we—as the slogan has it—build back better? This has been universally accepted as both desirable and possible. But who builds an economy? A market economy is built by myriad interlocking individual decisions: people choosing to produce goods and services that other people want to buy. The alternative would be for government to override those decisions by regulation, taxation, public spending or state provision, and thereby induce people to produce and buy goods and services that they would not otherwise choose to produce and buy.
My Lords, in my contribution to this debate, I want to talk mainly about the situation in Wales and, in the light of today’s ONS figures showing that the number of workers on UK payrolls has dropped by 813,000 since March 2020, like the Minister, I want to look at the challenges ahead.
Over the past 20 years, Wales has, of course, benefited from European funding and has seen improvements in infrastructure and advances in business development, but, as that funding comes to an end, the truth is that we are still playing catch-up. Wales remains the part of the UK with the lowest incomes and some of the worst instances of poverty. Before the Covid pandemic, a report by the Joseph Rowntree Foundation found that 700,000 people—a quarter of the population—were living in poverty. Now we are living with the aftermath of Brexit as well as Covid, both of which have caused further damage to our already fragile economy.
Over the past year, Wales, like the rest of the UK, has seen its economy supported by the introduction of the furlough scheme and by business support grants, among other UK Government measures, ensuring that families received an income and that businesses could survive to open up again as circumstances improve. As we continue our tentative release from our latest four-month lockdown in Wales, and as we approach the Senedd elections on 6 May, we need to recognise the massive challenges that the new Welsh Government will face and the decisions that they will need to make about how they use their powers and their budget to protect jobs and livelihoods and, crucially, to carve out a better future for businesses in Wales.
Our economy suffers from a structural problem that has received little recognition and has hampered plans for growth. We have a huge number of microbusinesses and a small number of branch operations from inward investors, which many jobs rely on. We need to continue to support these, of course, but we also need to promote the growth of stable, medium-sized companies by investing in infrastructure, technology, skills and training and by working with business leaders. My party in Wales wants to see the development of a long-term plan to support businesses and enable small businesses to grow, including establishing an economic recovery council grounded in real experience and the voices of small businesses from across Wales.
My Lords, I am glad to follow the noble Baroness, Lady Humphreys, as it is heartening to see that there is at least one noble Lord on the Liberal Democrats Benches who has an interest in economic recovery.
I hope the Minister will forgive me if I do not spend my time on her policies to protect jobs and livelihoods. She has already read out her brief on that. I support what the Government are doing. In particular, my right honourable friend the Chancellor of the Exchequer has provided excellent financial support, which has lessened the impact of the pandemic. We now need to focus on the recovery of the economy, because a successful economy is the only way to protect jobs and livelihoods in the long run, and I am aligned with my noble friend Lord Lilley on this.
The pandemic has had a devastating impact on the economy. We are on track for debt to be 100% of GDP, and GDP last year was down by just short of 10%. There is one thing we should be clear about: the pandemic did not cause this. The scale of the economic losses was a direct result of the Government’s lockdown policies. The Government prioritised their public health response with apparent disregard for other harms: namely, non-Covid health harms, both physical and mental, and very great economic harms. The public health zealots and modellers who seem to have had a grip on policy formulation have positively discouraged rational debate on the balancing of harms, which has amplified the economic consequences.
Even today as the economy is allowed slowly to emerge from its suspended animation, the Government seem hell-bent on making life as difficult as possible for the hospitality and leisure sectors to operate efficiently: sit outdoors only, no more than six people, table service only, keep lots of records and so on. There was no evidence that hospitality venues were a prime source of the spread of Covid infections, but they were brutally shut down and are struggling to reopen in a way that makes money. The goalposts have moved so often on Covid actions and strategy that it is hard for businesses to be confident about how they will be allowed to operate in future. Music festivals are the latest casualty.
My Lords, I welcome the opportunity to take part in this timely and important debate and, in particular, to follow the thoughtful contribution of my noble friend Lady Noakes. Although she clearly feels that the Government have perhaps put too great an emphasis on protecting the health service from the cost of the economic impact, she highlighted the challenge that they faced in their approach. In effect, we are talking about the three points of a triangle: one point represents the economic impact; one point represents the physical impact; and the third point represents the welfare of the nation. In trying to keep the ball in the middle of that triangle, as soon as you protect one corner, it has a disproportionate impact on the other two. In hindsight, the Government may not have got it entirely right, but I for one do not underestimate the challenge that they faced in trying to maintain a balance between those points of the triangle.
In my brief comments, I want to cover two distinct areas. First, I want to recognise the contribution that the Government have made in delivering financial support to the economy. Secondly, as a key plank in helping to deliver the economic recovery as we transition from these emergency measures, I urge the Government to look carefully at the ways in which we can support individuals, not only through updating and maintaining their skills but potentially through retraining them to ensure that we as a nation have the skilled workforce that we need.
As we have heard, there can be little doubt that the Government have stepped up to the plate and delivered when it comes to offering the economy financial support throughout the crisis, seeking as they have to protect people’s jobs and livelihoods while also supporting business and public services. As of the end of February, the Government claimed in their response to the Economic Affairs Committee’s report on Covid and the economy to have
My Lords, it is a pleasure to follow the noble Lord, Lord Lancaster of Kimbolton. I agree with much of what he said, particularly his endorsement of the Open University, which has always seemed an admirable substitute for three years spent away from home living the high life.
I thank the noble Baroness, Lady Penn, for the way she introduced the debate so comprehensively. As many have said, the Government have done much that should be applauded since Covid struck. The furlough scheme was introduced promptly and has been very effective. However, we know that job losses have hit younger people, women and ethnic minorities particularly hard. It is a statistic that should make anyone feel uncomfortable that between the third quarter of 2019 and the third quarter of 2020 the number of white women in employment fell by 1%, and the number of black, African and mixed ethnic women in employment fell by 17%. Are there any specific plans for dealing with that very specific issue?
It is also the case that, inevitably, school closures impacted particularly on women, yet 70% of furlough requests from women with caring responsibilities were denied. While the Government cannot redress that now, it highlights the importance of childcare in enabling carers to work effectively in the workplace. The Government have been proactive in providing help such as rate relief to nurseries, but the issue of adequate childcare will continue to have an impact on workers long after Covid. Could the Minister say whether the Government have plans to do more on this front, beyond the existing nursery vouchers, as we try to rebuild the economy?
This could of course have a big impact on productivity. Interestingly, the ONS has reported that productivity actually rose by 0.4% last year, despite the deepest recession for 300 years. This highlights the deep division in productivity levels across our economy, an issue that we have failed to get to grips with for many years. The food and beverage sector, one of the major employers, was forced to close for large parts of the year; ironically, that produced a statistical boost to productivity because that is one of the sectors that is 54% less productive than the average for the economy. The high-productivity sectors—accounting and computer and legal services, for instance—were largely able to continue, working remotely, and they bring a great benefit to the economy, as we know. Low productivity continues to be a drag on our economy and will be for many years to come, unless we come up with some very positive ways of addressing it. It is clearly important that our development of the economy requires that we find ways not just of increasing our involvement in already high-productivity sectors but of increasing the low productivity in other sectors. Industrialisation was the first step, but we now need to make sure that every sector makes full use of computers, information technology and, eventually, artificial intelligence.
My Lords, faced with the triple effects of climate change, the global pandemic and Brexit, our economy—indeed, every economy in the world—is seeking solutions. Not all have the added strain of Brexit, of course, but on that basis it may well be that our experience and solutions could be shared with other countries, perhaps particularly with Commonwealth countries.
On the basis that, in order to build a new future, the role of government is to create the right environment to develop new ideas, create jobs and, as a free-trading nation, stimulate exports across a wide spectrum, the Government have clearly aimed to do this and have looked hard and well at solutions. I am grateful not only to my noble friend the Minister for her explanations today but to HMT for its useful background briefing.
I approach this from my perspective as a fairly new trade envoy, having been appointed last year, to Costa Rica, the Dominican Republic and Panama, and from my long-time background as a vice-president of Canning House, encouraging more trade with Latin American countries, leading trade delegations to those countries, and welcoming chambers of commerce and other leading industrialists from those countries. I must say that one beneficial result of Brexit is that the Government and businesspeople are looking for new markets and are well on the way to promoting and recognising trade opportunities in Latin America. The spread of Covid-19 has undoubtedly slowed down the process, and we need boots on the ground; we have to get people going out and looking for opportunities, which are now enabled by free trade agreements.
In all this, the Department for International Trade should be mentioned as a shining example of getting on with the job. First, it has negotiated new free trade agreements. Admittedly, many of those were rolled over from our EU days—the first, incidentally, was with Chile, in South America—but others, such as the Japan treaty, have brought in new, innovative and important sectors. Secondly, it has created a network worldwide of trade commissioners and support for our embassies as well as for the work of the voluntary trade envoys, all of which has, of course, been supported by the Treasury. Thirdly, it is delivering economic growth to all regions of the United Kingdom by encouraging new products to be manufactured, as well as services, for the export market.
My Lords, macroeconomic policy is central to any discussion of jobs and livelihoods. I think the world economy is set for a very interesting period; many forecasters are predicting a roaring Twenties similar to the one following the Spanish flu in the 1920s, and they could be right. That is good news for the UK and jobs in the UK. As the Minister put it, there are certainly “reasons for optimism.”
We are particularly lucky that the Biden Administration have hit the ground running and initiated not one but two enormous stimuli. The first was a $1.9 trillion injection—what we call helicopter money—going straight into people’s pockets. This gives a wholly new and more favourable meaning to the phrase “the cheque is in the post.” A family on $145,000 a year gets $7,000 extra to spend. On top of this there is a second tranche, partly funded by increased taxes, to upgrade human and physical capital. Anyone who knows the USA very well would agree that that is necessary. The Federal Bank is further supporting this by committing to buying government bonds for the rest of the year to keep interest rates down.
The other bit of good news from the US is that President Biden is proposing a minimum global corporation tax. I agree that this will face a tough time in Congress but, if it comes to pass, it is estimated that the UK would stand to benefit to the tune of over £3 billion per year. This shows how much tax dodging is being done by international corporations. All of this shows the benefit to the world of having a sensible guy in the White House with economically literate advisers.
The US approach fits very well with what is called modern monetary theory, which has a lot to be said for it. MMT is not actually very modern. It was spelled out by American economist Abba Lerner at the same time as John Maynard Keynes, the greatest economist of all time, was doing his thinking in Cambridge. For today’s readers it is spelt out in a book called The Deficit Myth by Stephanie Kelton, and I hope that it is required reading in the Treasury. It says that the important thing is to balance the economy, not the budget. If you prioritise growth, you will get growth and be better able to pay off the deficit. If you prioritise cutting the deficit, you will lose growth and find it harder to bring down the deficit, as well as do social and economic damage.
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Looking forward, in response to the current restrictions and the Prime Minister’s road map to easing the public health measures, the Chancellor announced at the Budget an additional £65 billion of economic support. The furlough scheme has been extended until the end of September, support for the self-employed will also continue until then and we have extended eligibility so that those who completed a 2019-20 tax return by 2 March will qualify for the fourth and fifth self-employed grants, potentially reaching a further 600,000 people with support. At the same time, the fifth and final grant will include a turnover test to ensure that support is targeted at those who need it most.
The Budget maintained the universal credit uplift of £20 a week for a further six months, provided working tax credit claimants with the equivalent support over the same timeframe and increased the national living wage to £8.91 an hour. For the first time since it came into effect in 2016, the age threshold for the living wage has been lowered from 25 to 23 years old, giving a pay boost to more younger people.
At the Budget, the Government launched a new restart grant to help businesses reopen and get going again, worth up to £18,000 per business, and a new recovery loan scheme to replace earlier bounce-back loan schemes and coronavirus business interruption loans. To support the cash flow and viability of around 150,000 businesses and to protect over 2.4 million jobs in the hospitality and tourism sector, the Government have extended the temporary reduced rate of VAT at 5% to 30 September 2021. To help businesses manage the transition back to the standard rate, a 12.5% rate will then apply for a further six months, until 31 March 2022. The Budget also announced a three-month extension of the business rates holiday, followed by a 66% capped relief for the remainder of the year. This is worth £6 billion to businesses in the retail, hospitality and leisure sectors and nurseries.
The reality is that the Government have continued to deliver a package that is unprecedented in scope and scale and reflects the wider strategy for cautiously reopening the economy, as set out in the Government’s road map. As we follow the road map and lift restrictions, there are reasons for optimism. Overall, household balance sheets have strengthened, with household savings in 2020 as a whole almost £139 billion higher than in 2019. At the same time, while many firms have been hit hard by the pandemic, data on corporate deposits at banks suggests that, in aggregate, firms accumulated additional savings of close to £100 billion between March and December 2020. Of course, those additional savings do not reflect the reality for many families and businesses hardest hit by the pandemic, on which the Government must now focus their support.
That is the briefest of summaries of where we are and what the Government have already done. What matters now is our future recovery. The key to that recovery is growth. Our plan to build back better will drive economic growth by investing in infrastructure, skills and innovation. It tackles long-term problems so that we can deliver growth that creates high-quality jobs across the UK and strengthens the union, as well as achieving the people’s priorities: levelling up across the whole UK, supporting our transition to net zero and supporting our vision of a global Britain.
Economic recovery was the thinking behind other new measures announced in the Chancellor’s speech at Budget last month, including the super-deduction, which will allow companies to reduce their taxable profits by 130% of the cost of investment that they make in plants and machinery—equivalent to a 25p tax cut for every pound that they invest. Worth £25 billion over the two years it is in place, the super-deduction represents the biggest business tax cut in modern British history.
That is just the beginning. The Budget also announced the creation of the first ever UK infrastructure bank, headquartered in Leeds and tasked with investing across the United Kingdom in public and private projects to finance the green industrial revolution. The Budget accelerates that green industrial revolution in other ways too, including by funding new port infrastructure to construct a new generation of offshore wind projects in Teesside and Humberside. This is in addition to £12 billion of government investment to create and support green jobs as part of the Prime Minister’s Ten Point Plan for a Green Industrial Revolution.
As the country recovers from the pandemic, we will rely hugely on the enterprise and endeavours of our small businesses. Two new schemes—Help to Grow and Help to Grow: Digital—will help tens of thousands of small and medium-sized businesses get world-class management training and help them develop their digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software. These are initiatives the Institute of Directors has called
“a big win for SMEs.”
We have also set out our plans to make the UK a scientific superpower—another means by which investment can help power our recovery. To support this ambition, the Government will invest £14.9 billion in R&D in 2021-22, meaning that UK government R&D spending is now at its highest level in four decades. We have also committed to providing £800 million by 2024-25 for the new Advanced Research and Invention Agency, ARIA, which is tasked with funding high-risk, high pay-off research and supporting ground-breaking discoveries which could transform people’s lives for the better.
Through our Plan for Jobs, the Government have provided unprecedented support to protect existing jobs, help people find work and support people in building new skills. For those who unfortunately lose their jobs, we are helping them to find new ones by doubling the number of work coaches and with additional tailored support such as the Kickstart scheme and Restart programme. So far, over 180,000 Kickstart jobs for young unemployed people have been approved by the scheme, and Restart will provide support to over 1 million unemployed people.
We are also doing what we can to make sure we have enough access to the talent that we need, both at home and abroad, through our apprenticeship and traineeship programmes, the lifetime skills guarantee, and the reforms we are making to our visa system to attract highly skilled migrants. We know that apprenticeships work, which is why the Chancellor has increased and extended the incentive payments for employers who hire a new apprentice. Employers who hire a new apprentice between 1 April and 30 September this year can now claim a payment of £3,000.
Crucially, our efforts to support an investment-led recovery target all four nations of the United Kingdom, with accelerated city and growth deals in Ayrshire, Argyll and Bute, and Falkirk, and three more in North Wales, Mid Wales and Swansea Bay, as well as funding support for the Holyhead hydrogen hub. Alongside these measures, our commitment to levelling up across the UK is reflected in the £4.8 billion levelling-up fund; more than a billion pounds for 45 new town deals; a £150 million fund to help communities across the United Kingdom take ownership of pubs, theatres, shops or local sports clubs at risk of loss; and in Her Majesty’s Treasury’s own commitment to open offices in Darlington to form a northern economic campus. This complements the inward investment that will be attracted through the announcement of eight new freeports in eight English regions, offering tax, customs and regulatory benefits, driving greater innovation and the creation of high-quality jobs.
Importantly, over time, once the economic recovery is secured, the Government will take the necessary steps to ensure the public finances are on a sustainable path. Given that the Government are providing businesses with over £100 billion of support to get through the pandemic, it is only fair and necessary to ask them to contribute to our recovery. That is why the Budget increased corporation tax to 25% from 2023, after which point the OBR has said recovery will be under way. The UK will still have the lowest corporation tax rate in the G7, and smaller companies who make less than £50,000 profit annually will be subject to only a 19% tax rate.
Significantly, the Budget did not raise the rates of income tax, national insurance or VAT. Instead, it maintained personal tax thresholds on income tax, inheritance tax, the pensions lifetime allowance and the annual exempt amount in capital gains tax from 2022-23 until 2025-26—that is, four years. This is a universal, progressive and fair measure to fund public services and help rebuild our public finances.
It is thanks to people’s hard work and sacrifice, supported by the success of the initial stages of the vaccine rollout, that there is now a path to reopening the economy. But the Government are not complacent. We understand, just as noble Lords understand, that there is much more to do. Our approach will remain flexible. As measures to control the virus evolve, so will government support. We will continue to listen to the views of people across the political spectrum, we will continue to take action on a number of fronts, and we will continue to do what it takes to engender the economic recovery that the country needs.
There are many high-minded people who are convinced that their choice of the goods and services that people ought to produce and consume is morally, aesthetically and economically superior to that which the hoi polloi, left to their own devices, would make. Maybe. But experience teaches that, if we adopt this course, it will probably make people materially poorer, and it will certainly make the recovery slower. That is inevitable, because higher taxation, more burdensome regulation and bureaucratic decision-making inexorably undermine the dynamism of a free economy. Anyone who seriously believes that the economic recovery, let alone the subsequent rate of economic growth, will be accelerated by white elephants such as HS2 or by raising the cost of energy, which is what the advocates of a green economy would do, is living in a dream world.
I mentioned that we need businesses to expand and new businesses to be created. One little-noted positive lesson of the pandemic could help that. During the crisis, under political, public and parliamentary pressure, regulators suddenly discovered that they could take decisions in a fraction of the normal time. New diagnostic tests and vaccines were approved in record time, new designs for ventilators were authorised, local councils permitted restaurants to expand on to the pavement and so on. What slows down business expansion in normal times, and the formation of new ones, more than anything else, is the need to get permits and approvals for a whole range of things: planning, building controls, environmental approvals, health and safety inspections, product authorisations and so on. For a business even to open a new bank account can take weeks because of money-laundering rules.
Regulators are often afraid to make decisions speedily. When I was Trade and Industry Secretary, I was occasionally advised by the department’s lawyers not to give a speedy decision in case there was a judicial review and the courts might be persuaded that I had not given due consideration. But now that we have seen that regulators can make decisions speedily, we must maintain pressure on them. Wherever possible, regulators should be required to reach a decision within a set time, failing which there should be “deemed consent” and the application should be able to go ahead. Every public body with a regulatory function should be required to report at six-monthly intervals on how long it has taken to reach decisions—both the average time and the slowest decile. Select Committees should hold all regulatory bodies within their sphere of influence to account for delays in reaching decisions.
In short, the recovery will come as soon as we end the lockdown. There is enough pent-up demand to ensure a speedy recovery; any additional stimulus risks merely adding to the subsequent inflation. Attempts by government to tailor the recovery to some arm-chair ideal of fairness will inevitably slow it down, and the best way to accelerate it is to speed up decision-making by regulators.
One feature of the pandemic has been the success of local essential retail stores in towns and high streets, many of which have operated every single day serving our communities during what has been a difficult time. To ensure that our high streets can thrive and adapt, we want to see the creation of a £500 million fund to breathe life back into our town centres.
The past two weeks have seen the reopening of non-essential stores in Wales, and next week will see the opening of outdoor hospitality. I must admit that, along with so many people, I am longing for that first decaf cappuccino outside the café on the town square. As more businesses reopen after this four-month lockdown, there will be a struggle to continue in business, particularly as any outdoor operation in Wales is invariably affected by the weather. I therefore welcome the announcement in the Chancellor’s spring Budget that the business rates holiday will be extended until the end of June, that the furlough scheme will be extended until the end of September and that restart grants will be available to help the high street reopen. In addition, the Welsh Government have confirmed a business rates holiday for the full 12 months, up to March 2022, for retail, hospitality and leisure businesses. Coming from an area which relies heavily on tourism, and having seen the impact of the pandemic on the mental health of some of our hoteliers, I know that this will bring them a modicum of relief.
The Welsh Liberal Democrats want to go further, however. By their actions, both the Chancellor and the Welsh Government have recognised the burden placed on businesses by the imposition of business rates. It is an inequitable system desperately in need of reform, placing businesses on the high street at a disadvantage to their online competitors. We would freeze business rates for the lifetime of the next Senedd and, in the long term, replace them with a fairer, more supportive system. If the high street is to survive, this system must be reformed and replaced.
I began this contribution with a reference to the number of people living in poverty in Wales, and I want briefly to return to that subject. Wales has been afflicted by a vicious cycle of low pay, inadequate childcare and rising housing costs. In half of the households in poverty, at least one person is in work. It is simplistic to suggest that employment alone is a route out of poverty. Is it enough to protect the jobs and livelihoods of those who do not and cannot lever themselves and their families out of poverty? In an age of falling real pay, longer hours and rising living costs, how can a future Welsh Government ensure that the dignity of work leads to a reduction in inequalities and gives people a hand-up out of poverty? Our ambition is to make Wales a real living wage and a living hours nation. We want to draw on evidence from around the world and work with the UK Government to pilot a nationwide universal basic income in an effort to reduce the inequalities inherent in the present system. We would seek further devolution of the benefits system to Wales to bring Wales into line with Scotland and, using the powers that the Senedd now has, we would provide free part-time childcare from the age of nine months to three years for all parents, enabling them to return to work.
For those of us committed to seeking ways to mitigate the impact of climate change, the message is loud and clear: there can be no true economic recovery from this pandemic unless it is a green economic recovery. The potential for green investment to create new, long-term jobs, stimulate sustainable long-term growth and re-energise our communities is immense. Wales, with its wealth of natural resources, can play a role in contributing to these outcomes. It is crying out for investment in new green homes and the retrofitting of existing homes, as part of a large-scale investment programme in renewable energy and environmental protection measures leading to high-quality, sustainable employment.
The additional challenges of recovery that have to be faced by a new Welsh Government are many—tackling broadband and mobile phone connectivity problems in rural Wales, ensuring that funding schemes for our farmers provide not a penny less for farming and agriculture, investment in the supply of affordable and social housing in rural communities—and a major concern is how we rebuild our NHS after the pandemic, and how we build a 24/7 mental health service to address the problems faced by so many children and adults.
The measures taken by the Chancellor and in turn by the Welsh Government have helped to preserve jobs and businesses and have provided a baseline allowing many to survive and grow. The Chancellor and the Welsh Government deserve great credit, but the challenges ahead are real, not unique to Wales and cannot be ignored.
Whatever the Government assert, there is precious little evidence that lockdowns are the only way to deal with the pandemic. The differing experiences of various states in America show that. The biggest danger at the moment is nosocomial infection, and many of us suspect that it has always been a major driver of infection and mortality. It is much safer to go to a pub than to go into hospital, but that has been airbrushed away because it conflicts with the NHS-as-saviour narrative.
From the outset, Covid-19 was not a disease that had significant mortality among those under 50, and that remains the case, but the Government insisted on closing schools and locking everyone up regardless of health or age status, bringing the economy to a complete halt. That is why we have suffered so much economic damage and why the Chancellor has had to introduce the costly support policies that are driving the debt and deficit levels. There were alternative policies, which could have had a different outcome, but the Government have allowed themselves to be dominated by public health extremists.
The Government have done one thing outstandingly well in the vaccination programme, and I pay particular tribute to the work done last year by Kate Bingham. A very high proportion of the higher-risk groups is now vaccinated. We should already be back to normal, and that includes your Lordships’ House.
The best thing the Government can now do is to get out of the lives of our citizens and businesses. There should be a total ban on government departments planning any more interventions in the way that we live our lives. The whole set of Covid rules should be put on a bonfire: no gathering of personal data, no masks, no bans on meeting people in groups of whatever size, and certainly no more overzealous policing and fines.
The Government have published their plan for growth, which has lots of worthy things in it, but suffers from one fundamental weakness. It assumes that what government does is the most important contributor to economic growth. The short-term advantages of Keynesian stimulus must not blind us to the fact that at the end of the day it is the private sector in the shape of our businesses, large and small, which will grow the economy. The Government should focus on what they can do to liberate our business sector, so that it can do the job it does best: build profitable businesses that provide employment, tax revenues and innovation for the future.
I could spend all day talking about the things that the Government could do in this space, but let me outline just a few. We need a regulatory environment that supports enterprise, and fortunately we are no longer constrained by the EU. Regulation in particular strangles small and medium-sized businesses, and that is where the Government should focus their efforts. They should largely ignore larger businesses, which often benefit from regulatory burdens acting as barriers to entry. We need a tax system that is simple and fair and underpins low rates of taxation. Our tax system is notoriously complicated. We might laud the Chancellor’s super-deduction for investment expenditure, which my noble friend the Minister referred to, but that too is another layer of complication. A top rate of 25% is not a good destination, and I hope that it is allowed to fall by the wayside once the economy starts to prosper. Any thought of raising the top rate of income tax or capital gains tax rates would be a mistake, as the Treasury’s existing analysis undoubtedly already shows. High rates of tax are not accompanied by high yields—quite the reverse.
Education has taken a big hit during the pandemic, in schools and universities, and a priority for the Government must be to ensure that those entering the job market for the first time have all the skills that employers actually need. Now is also a good time to look again at higher education. We are still churning out too many graduates with degrees that do little to make young people fit for the world of work. It is no surprise that up to 25% of graduates fail to deliver a lifetime earnings premium that justifies the cost of student loans.
Lastly, the Government should ensure that British businesses can exploit export growth markets. I do not mean those sluggish economies the other side of the channel, guarded by EU red tape. The Government are doing great things through the Department for International Trade, with more than 60 trade treaties already in the bag and more on the way, including the CPTTP. Helping businesses to understand those opportunities in these exciting markets will be money well spent. We must put this pandemic era behind us as soon as possible and return to being a country of liberty and economic opportunity. That is the only certain way of securing jobs and livelihoods for the future.
“spent over £280 billion since March 2020”.
This has already been updated to £352 billion, and is still rising.
In its report, The Cost of Coronavirus, the Institute for Government states:
“The deficit is now expected to be £394bn in 2020/21, which is £339bn higher than had been anticipated before public health restrictions were first imposed back in March.”
I find it remarkable that some still claim that the Government have not done enough. Of course, the deficit is set to be so extraordinarily high because, as the Institute for Government states:
“The government has taken a raft of actions in response to coronavirus, most of which have involved additional spending. These can be divided into three areas: support for businesses, support for households and support for public services.”
Although the exact figures are still unknown, the Institute for Government conservatively estimates:
“Additional support to help businesses weather coronavirus is expected to cost £66bn. Of this, £44bn”
has been in the form of loans, tax deferrals, business rates relief, and general and sector-specific
“grants to businesses in badly affected sectors (such as hospitality and leisure).”
That area was mentioned by my noble friend Lady Noakes.
The Institute for Government goes on to say that “the remainder”—£22 billion—“is through tax changes” and further states:
“The biggest single cost is the anticipated future write-off of loans which the government has guaranteed. In total, £87bn is expected to be loaned to businesses under three separate schemes. Of that, the government is expected to have to foot the bill for £31bn that is expected never to be repaid.”
This, I confess, causes me some concern. Of course some businesses will not recover and will be unable to pay back loans but, equally, I hope that my noble friend the Minister can reassure me that the Government will not be too quick to write off loans but, rather, will work closely with the private sector to put in place realistic schemes where at least part of these loans might be recovered for the public purse without hampering growth.
As the Institute for Government states:
“Support for households has been provided through three policies … First, existing benefits have been made more generous, most importantly through a £20-per-week increase in Universal Credit payments”.
Given the pandemic, that is a reasonable move. However, I urge my noble friend to resist the calls for an early decision on whether this should be made permanent or at least not end until the autumn.
Of course, the largest programme of support is the Coronavirus Job Retention Scheme, or furlough scheme. As the Institute for Government states:
“At its height, it supported over nine million jobs”.
It has undoubtedly been a lifeline for many families across the UK, as the third strand—the Self-employment Income Support Scheme—equally has been. I welcome the fact that both these schemes will be extended until September.
It is clear that the economic package of support, which continues to provide businesses and individuals with certainty over this period, has been one of the most generous in the world. Although we can rightly be proud of that, it presents some major challenges—the obvious one being how the nation will pay for it, which my noble friend the Minister addressed in part in her opening remarks. There are also secondary challenges, such as those faced by some of the workforce. Through no fault of their own, they have not only got out of the routine of work but may find that their skills are out of date. Indeed, they may face the prospect of being forced to retrain as their jobs—or whole sectors, in some cases—simply do not exist anymore.
As we look to the future, there is little doubt that much will never be quite the same again as the nation adapts to new ways of working and, in particular, the use of technology becomes the norm. Some might view this as a threat, but I genuinely believe that it is an opportunity to be grasped. While working from home is neither possible nor suitable for everybody, the opportunities and flexibility it brings will, I hope, continue to be encouraged and recognised by government, not least for the positive environmental impact it has through a reduction of vehicle journeys. There are, of course, downsides. We are social beasts and human interaction plays an important part in our lives, so clearly a balance needs to be struck.
As I have mentioned, for some it will simply not be possible to return to their previous profession. I will briefly turn to the need and opportunity to retrain and the support offered by government. In recognising the need for some to retrain if the economy rebalances itself as part of our road to recovery, I note that there has been some criticism that the Government have not made training more integral to schemes such as the CJR scheme. This is probably an unfair criticism, not least because of the speed with which this and other schemes had to be introduced, but also due to the underlying desire to keep schemes simple to administer and access.
In reality, the CJR scheme has never presented a barrier to training. Employees can undertake training while on furlough, and existing schemes provide an appropriate route for employers to access high-quality training and prepare individuals for the jobs of the future. It is also, of course, why the 2020 spending review committed funding for the Prime Minister’s lifetime skills guarantee, which will help adults to retrain and get into sustainable jobs, and give employers the skilled workers that they need.
The offer of free qualifications at level 3 for eligible adults in courses focused on these skills is welcome, and the full list of free level 3 courses for adult was published in February. While it is comprehensive, I ask my noble friend: what plans are there to review this list of courses to ensure that they mirror the skills employers require? I am equally pleased to see that the Department for Education has introduced flexibilities to ensure that furloughed apprentices can continue their training and assessments.
It is right that the Government have put front and centre access to skills and training, especially for those unemployed or at risk of unemployment as part of their economic response to the crisis. The approach of offering these schemes in parallel to employment support schemes such as the CJR, rather than wrapping them together and running the risk of making them overly complex, is, on balance, the right approach.
However, there is one area that has in my view been overlooked and that I will press my noble friend on: the opportunity for adults to retrain at degree level through distance learning for equivalent or lower qualifications. I should declare my interest in and long links with the Open University, whose headquarters are based in my former constituency in Milton Keynes. As the Minister might been aware, it has been a bone of contention for some time that those who already have a degree and are studying for an equivalent or lower qualification cannot access the same level of support that those studying for their first degree can. This dates back to a decision made by the last Labour Government and is, in my view, a mistake, especially now as so many adults look to retrain.
I simply ask my noble friend whether now is the time for the Government to look again at this issue. It also raises the wider point that, as people may look to update or refresh their skills, the reality is that they will be unable to study full-time but will look to institutions such as the OU to study part-time while continuing to work. For some time now the part-time sector has been disadvantaged in the support offered by government. Given the sector’s obvious importance, I seek assurance from my noble friend that the Government will look with fresh eyes post pandemic at the opportunities that institutions such as the Open University offer when it comes to delivering the skills we will need to recover from the pandemic.
This takes me to the Government’s industrial strategy, which has had many incarnations, the last of which—before Covid—was announced by Theresa May in 2017. It was after that that the Industrial Strategy Council was launched, under the chairmanship of Andy Haldane, the chief economist at the Bank of England and a man renowned for his sometimes off-the-wall thinking—but he is always someone who comes up with ideas. Since the Government have revealed their Build Back Better strategy and plans to invest in the green economy, science et cetera, there is a slightly different industrial strategy to that of 2017. However, this year, the Government also abandoned their Industrial Strategy Council. It seems unnecessary to dispense with the services of a dozen very well-qualified people, who were prepared to bring their brains and ideas to bear to determine whether we are actually pursuing the strategy in the most effective way. Could the Minister say what external scrutiny might now be employed to monitor the Government’s progress in their industrial strategy, since we have abandoned the very effective mechanism that was in place?
Part of that strategy should include providing for all the needs of the country. While the Government are providing a host of different retraining awards, most are aimed at technology, but there are other needs that will have to be met. The Resolution Foundation has pointed out that the social care sector needs 180,000 new workers if it is to bring back the ratio of staff to carers that existed in 2014. This is one of the sectors where technology can improve things only so far; it is people—real-life carers—who are required. This fact was pointed out by the House of Lords Economic Affairs Committee in its report on Employment and COVID-19, published in December. It called on the Government to
“significantly expand the number of social care workers by increasing funding in the sector with stipulations that funding should be used to raise wages and improve training”.
The Government responded to that report in February this year. They simply ignored this recommendation, so I take this opportunity to ask the Minister whether she can now respond to this very sensible recommendation.
I turn to the businesses that need government support to survive the difficulties imposed by Covid and to rebuild for the future. The Government have instituted a series of measures that have been well received, including grants and loans, but this was surely the opportunity for the Government to establish a sovereign wealth fund, taking equity stakes in businesses. Many organisations called for this, hoping that Britain could take the opportunity to invest some taxpayers’ money not for the short-term effect of buoying up businesses that may or may not survive but for a long-term return, as countries such as Norway have done. In April last year, the Government announced that they would take a small step in that direction with the launch of the Future Fund, operated by the British Business Bank. With a minimum interest rate of 8%, I am not sure whether many companies, even those in dire straits, would have found this an attractive prospect. However, the idea was that the initial loans would be convertible into equity. The scheme was announced in April last year, with a closing date of September last year. That date was then extended to 20 April this year. If a company was struggling in April last year, it may well not have survived until now. Surely, speed was of the essence for such a scheme. Since the scheme closed today, I doubt that the Minister can give the exact number of companies that tried to take advantage of it, but perhaps she can give us an indication of how many companies have put forward their interest in the scheme.
There are positive things that the Government can do to stimulate the economy, but there are things they can do that will positively harm the recovery. I single out one in particular. From January this year, the Government ceased to allow duty-free shopping for those from outside the EU. The UK Travel Retail Forum believes that this puts 70,000 jobs at risk. Duty-free shopping brings in extra tourists, particularly from wealthy areas such as the Far East. Here I declare an interest as chairman of the Association of Leading Visitor Attractions, which is desperately upset at the end to this encouragement to visitors from overseas to come and make the most of the British economy. If they cannot do their duty-free shopping here, they will go elsewhere. So my final question for the Minister is: will the Government please think again about delivering such a body blow to a sector that has been one of the hardest hit by Covid?
I would like to dwell on that for a moment, because two excellent examples of regional activity can be seen in the northern powerhouse and the Midlands Engine, which co-ordinate and stimulate local industries and are preparing, as soon as it is possible to move around the world—they are already preparing virtually—to lead the sort of trade missions that I have mentioned to other parts of the world. I have a particular link with Liverpool, so I would like to mention that, here within Parliament, the All-Party Parliamentary Group for the Liverpool City Region is conducting an inquiry on building back better, which is currently looking at green travel, using low-carbon and hydrogen, and the role of ports. I hope to be very much involved with that.
I would also like to take this opportunity to emphasise the importance of joined-up government in our recovery from Covid. The Treasury, obviously, has the leading role, especially in the context of today’s debate. I am told that double tax treaties can be just as important for exports as free trade agreements, so of course the Treasury has a role there. I appreciate that the Treasury has consulted many bodies, but I hope that it will continue, along with other government departments, to monitor and consider the developments resulting from this package that we are considering.
My particular sectoral interests lie in education, energy and health—I spent time as the Lords Minister in all those departments—which are all regarded as priority areas both for trade opportunities and for the full national recovery from Covid. Some of those instances have already been mentioned.
Can my noble friend tell us if a cross-departmental mechanism has been set up to perform this ongoing role? I realise that co-ordination happens in Cabinet, but it does not always necessarily filter through to other levels in departments. If we are going to be efficient and successful, it is essential to have that sort of co-ordination.
The Government’s economic package to support and protect jobs, businesses and public services, and indeed this debate, is very welcome and important in highlighting all the issues.
MMT, despite having the same initials, is not a magic money tree. It recognises that if you ramp up demand too much, you will cause inflation. If that happens, you will have to increase taxes to take the steam out of the economy. So far, I am glad to say that the Chancellor has gone along with this vein of thinking and has been willing to spend without worrying too much about the budget deficit. Indeed, he has even received praise from Martin Wolf, the FT’s chief economic adviser, who spent the last 10 years criticising Conservative and coalition Governments. Martin Wolf made the point that, at the moment,
“it makes sense for the government to borrow to spend”.
As an old FT man myself, I am pleased that they are at last on board. The European Union, by the way, is a bit of a lagger on all this. Christine Lagarde, the current boss of the European Central Bank, has said that the eurozone should boost spending by 3.5% of GDP. I certainly hope that it follows her advice.
So the macroeconomic prospects are good and we can look forward, I think, to two or three years of strong economic growth, which is essential for jobs and living standards. The vital question, as always, is how the money will be spent. Everyone will have their own views on this, and many have been aired in this debate, but I will suggest two, and I hope that the Minister will comment on them.
The first is the relief of poverty. Poor people with few means have had a very tough time in this pandemic, and undoubtedly the number of people in poverty has increased. What this means is that we must get universal credit right. I was appalled to read that HMRC was trying to claw back money from people on UC who were accidentally overpaid, in some cases many years ago. This is absolutely deplorable, and I would like to know from the Minister what has been done to curb this distasteful practice. I note, by the way, the comment of the retiring chief constable of Merseyside, who said that increased crime was caused by increased poverty, and that if the Government were to give him an extra £5 million to spend, he would spend only £1 million on increasing policing and £4 million on trying to reduce poverty.
The second issue I will raise, which is vital for the future of jobs, is technical education. As an economist said in the Times only yesterday, it is time for apprenticeships to take centre stage. There must be a much bigger and better organised push by government to get companies to contribute more to workplace training. I heard what my noble friend Lady Penn said in her opening remarks, and I certainly hope that that will prove adequate. We do need something big and well organised. There should also be more support for the further education sector, which has not received the sort of attention we have lavished on universities. I totally agree with my noble friend Lady Noakes about degrees. The fact is that a thriving FE sector is not only a key to economic growth but utterly crucial to the levelling-up agenda that is at the heart of this Government’s approach to the economy.
So we are, in my view, at the beginning of a period of great opportunity, and I hope that this time we can get it right.