My Lords, as the first of the winders, I hope that the House will not mind if I narrow my remarks, because it has been a long day and I know that people have trains to catch. As I listened to the debate, there was one overwhelming theme that was repeated in speech after speech. It was a focus on public services. I think that the House will agree that the public have the same focus on those services. It is one of the most significant ways in which they will be judging the Government, and they have very high expectations.
The Minister led off those expectations by talking about significant additional spending on public services, but as I listened to comments made all around the House, one had to come to the conclusion that looking only at funding is not enough. The largest commitment of money is obviously to the NHS. It will be on a multiyear basis and it was welcomed over and over again, but, as the right reverend Prelate the Bishop of London pointed out, that amount of money does
nothing more than stabilise the NHS. I think that expectations are higher, and I suggest that the Government should think that through.
Additional money will also be made available for schools, but, as the noble Lord, Lord Griffiths, pointed out, as did the noble Baroness, Lady Blower, in her excellent maiden speech, that money merely restores cuts—and does not even restore them completely. As my noble friend Lord Storey pointed out, at this moment in time we have a bulge of children going through the school system, and we have a dearth of teachers. Surely another look has to be taken at the adequacy of funding for the schools budget.
The most speakers addressing this issue spoke of the need for more money for social care. We listened to the noble Lord, Lord Dubs, pointing out that £1 billion in new money was pretty inadequate when the need was for £8 billion. Frankly, the noble Lord, Lord Forsyth, whom I do not normally turn to when it comes to demanding additional money for a public service, absolutely hit the nail on the head—the noble Lord, Lord Horam, pointed out exactly that he did—when he said that the Government would have to write a big cheque to solve this problem.
As I look back on my own Benches—and not only my own Benches—I note that the whole range of public services outside the big three that were the focus of so much discussion, such as local government, policing, prisons, local transport and planning capacity—which, as the noble Earl, Lord Lytton, pointed out, leaves a lot of the housing industry with serious problems—have been cut to the bone. In both the Conservative manifesto and the Queen’s Speech, the austerity in those areas has become embedded. It is not turning around but becoming fixed on a permanent basis.
When we look at issues of welfare and benefits, it once again looks as though austerity is becoming embedded. It is not the beginning of a process of change or the end of austerity for those areas. The noble Baroness, Lady Greengross, my good and noble friend Lady Janke, the right reverend Prelate the Bishop of Portsmouth and others pointed out that the working poor are now a very large percentage of our population. They will not be relieved by a £2 per week reduction in national insurance contributions. I also point out that, while I very much welcome increases to the minimum wage, for the working poor, much of that will be clawed back by an offsetting cut in benefits.
As the noble Baroness, Lady Drake, said, the weakness we have in household resilience really reflects some of the fragile circumstances of so many of our fellow citizens. This Government will have to think again to understand whether they have identified the appropriate resources to tackle those fundamental problems.
Part of the Queen’s Speech sets a fiscal rule of having the budget in balance in three years. That is not an unreasonable goal where—here is my caveat—the Government are open to tax increases to make sure that the necessary public spending can happen, but borrowing is kept appropriately contained. But this Government have committed to no increase in income tax, national insurance contributions or VAT, and have made a very tepid decision to keep corporation
tax at 19% when they could very comfortably have raised it to 21%, for example, without undermining UK competitiveness at all. I do not join the noble Lord, Lord Flight, in hoping for further tax cuts. I am with the noble Lords, Lord Tugendhat and Lord Horam, in saying that the Government need to be open to the possibility of raising taxes to achieve the fundamental programme that this country needs.
I will make just a couple of comments on business aspects, because this is an economic affairs debate. It was not heavily pursued, I suspect because we have a Budget in a few weeks where those issues will be fundamentally addressed. But, as the noble Lord, Lord Skidelsky, said, if the economy is not performing, you can basically tear up any of the public spending promises. It is crucial that we have an effectively performing economy.
I totally believe in creating the skills and investing in building the institutional capabilities to realise all the benefits of the fourth industrial revolution and the digital economy—but, frankly, that is incredibly non-controversial. Nobody is going to argue against that strategy; I hope it has oomph and a great deal of success. But if we want to keep people in jobs, we have to hold on to high-volume manufacturing—and that really brings us back to the negotiation with the European Union. The car manufacturers are here as part of an integrated European supply network. The supply chains that spin off them are also dependent on that network, and we have heard nothing to give that reassurance. We may well end up with a zero-tariff regime, but if there is any friction in the form of non-tariff barriers, those costs will make it very difficult to retain that supply chain.
The noble Baroness, Lady Falkner, addressed the issue of financial services—an area with which I keep in very close touch. This House will know that the industry has acknowledged spending £4 billion so far to relocate operations to continental Europe; she is quite right. The biggest beneficiary has been France, where the AMF has taken over many of the roles of the SCA, particularly in regulating trading. That £4 billion is the acknowledged amount. The industry is using this coming year to complete major relocations. I have said before in this House that when you look at financial services, the clients are in continental Europe and the capabilities to provide financial services are here. You cannot move the clients, but you can move the capabilities. So the Government must have some strategy to retain that industry.
All we have heard about so far is equivalence, which everyone in this House knows is an inadequate regime; it is highly fragmented, it does not apply to deposit taking or insurance, it frequently requires a major presence in the EU regardless of the other aspects of its agreement, it often does not guarantee market access, and if you take a look at the experience of the Swiss—who have had to become rule takers in order to maintain market access on financial services—there are key issues there. Others have talked about the creative industries and services more generally.
I have one last comment to make. The noble Baroness, Lady Bull, brought up the issue of productivity, and other noble Lords echoed it. It is absolutely fundamental.
Frankly, it is appalling that, at this moment in the UK, growth in productivity is at 0.3%. That is terrible. I want to point to this because the country breaks into two sectors. Our medium-sized and small companies are very poor in terms of productivity growth. Our leading and advanced companies are brilliant; they are world beaters. Unfortunately, those are the industries for which it is most attractive to move to continental Europe or to shift their investment bias to continental Europe. So, if we are to tackle the productivity problem, we have to make sure that those companies stay and grow their operations here. That has to be central to all future trade negotiations.
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