My Lords, let me take this opportunity to join in the many thanks to Her Majesty the Queen and express our pleasure at seeing her in such good form over the weekend.
“Yesterday upon the stair,
I met a man who wasn’t there.
He wasn’t there again today”.
How better to describe this Government’s abject failure to recognise the scale and urgency of the cost of living crisis facing ordinary people? The Minister said that the Government must store up contingency resources for the future crisis. This is the future crisis: it is here now and action is required now. It has nothing to do with personal budgeting, home cooking or somehow getting a much higher paid job next week. Inflation continues to surge, especially on energy and food, and interest rates are rising. We have the spectre of stagflation.
The National Institute of Economic and Social Research reports that 1.5 million people will see soaring food and energy costs outstrip disposable income this year, forcing them to drain savings or go deeper into debt. The Yorkshire Building Society and the Centre for Economics and Business Research expect average household spending to exceed average income by over £100 a week within two years. Almost 60% of SMEs are now relying on the absolute no-no of borrowing to cover their basic insurance payments. A cost of living crisis is being followed by a debt crisis.
The Government are AWOL when they should be acting. They should immediately restore the £20 uplift to universal credit, cancel the increase in national insurance contributions and cut VAT temporarily from 20% to 17.5%, as my party has been calling for. That VAT cut would put an extra £600 into a typical family’s pocket, as well as support businesses, especially small businesses, who had hoped that they were recovering after Covid but are now slipping into crisis.
We can pay for it. The Government may finally be considering a windfall tax on the super-profits of the oil and gas companies—which interestingly my party called for while Labour was still contemplating the issue. However, a windfall tax does not undercut future investment, despite what we hear from Ministers. Shell has announced £8.5 billion in share buybacks for 2022, and BP is expecting to do at least £6 billion in share buybacks and hopes that the market will accept more. Companies buy back shares when they have set aside money for every reasonable investment and are still awash with cash. There is no investment risk.
It is not only the oil and gas companies that have had a windfall. The surge in prices because of inflation delivered the Chancellor an unexpected extra £9 billion in VAT by last January and will deliver at least another £40 billion of windfall VAT by the end of Parliament. Indeed, because of the freeze in thresholds, soaring inflation will also drive thousands more people into
higher income tax brackets, with another unexpected windfall for the Treasury. The noble Lord, Lord Forsyth, made the point that the rising revenues of the oil and gas companies are also leading to a windfall for the Treasury. If you took less than half of that VAT windfall, along with an oil and gas windfall tax, you could pay for the cost of living rescue which I have just put forward. I understand that the Government want to hold back unexpected tax revenues for a dramatic tax cut just before the next general election, but surely even this Government cannot remain that cynical in the face of the immediate economic crisis in so many lives.
The Queen’s Speech also failed to address the fundamentals of economic growth. The OBR forecast for growth is dire. I am talking not just about the drop in GDP in March but the OBR’s longer-term running rate of growth; at just 1.75%, that is a level which cannot support our current standard of living. We have a working-age population shortage across the whole skills spectrum, with the dependency ratio rising sharply to a dangerous 57%. The OBR estimates 1.2% long-term scarring from a workforce shortage.
Our productivity growth continues to struggle, at a shade over 1%. Two key drivers of productivity are market size and market access, and we threw those out of the window with Brexit. Business investment is the lowest in the G7 by far, and CBI forecasts suggest that it will stay in that dreadful position. Remember, the trade deals and the magic deregulation that the Government boast about are already assumed in those dreadful forecasts. The OBR has identified a sharp decline in Britain’s trading capacity:
“The UK … appears to have become a less trade intensive economy, with trade as a share of GDP falling 12 per cent since 2019, two and a half times more than in any other G7 country”.
For us, dependent on commerce in trade, this is some of the worst news that we could ever have received. We must restore our trading relationship with the European Union, and quickly. The answer is certainly not getting ourselves into a trade war.
Personally, I will work on the Treasury Bills in the Queen’s Speech, and so will make a few remarks on those. We have seen the UK Infrastructure Bank Bill, and we have a reasonable idea of what will be in the financial services and markets Bill. However, the UK Infrastructure Bank is a midget compared to the European Investment Bank and the money that it used to supply here, and we are going to have to think far more ambitiously. The fact that housing does not qualify for support from the UK Infrastructure Bank strikes me as really quite shocking.
The financial services and markets Bill will be huge but, as the Minister pointed out, one of its key issues is to make competitiveness a target for the regulators. I just remind this House that we used to win the race to the bottom on competitiveness and it gave us the 2007-08 crash. This is an issue about which we have to be extraordinarily careful.
Both Bills continue—and this is a fundamental constitutional issue—the Government’s project to shift power from Parliament to the Executive and regulators, eliminating effective accountability. I struggled with this because, one day, a different Government might be in power, but a local Conservative gave me the answer.
He told me, “We, the Conservatives, expect to win the next election with a very thin majority, so it is critical to take power away from Parliament now and give it to the Executive while we can”. We can best describe these Treasury Bills as massive Henry VIII Bills.
My colleagues will address many other sectors and issues, not least the inadequacy of the response to climate change, which also embeds huge economic opportunity and was pretty much ignored in the Queen’s Speech. Indeed, the Queen’s Speech Bills are basically culture wars, wedge issues and a grab of power from Parliament by the Government. Embedded within a lot of it is quite a good dose of nasty. I have been on the doorstep in the last few weeks and the public are increasingly sickened by nasty. Pretty much everyone I spoke to demanded that the Government address the cost of living crisis as an emergency and take action now.
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