My Lords, the Queen’s Speech contained no emergency measures to address the cost of living crisis that households are experiencing. Rather, the Prime Minister said that
“for every pound of taxpayer’s money we spend on reducing bills now, it is a pound we are not investing in bringing down bills and prices over the longer term … this moment makes clear our best remedy lies in urgently delivering on our mission to turbo charge the economy … and spread opportunity across the country.”
But the challenge to that trade-off—less bread today but more bread and jam tomorrow—is rising inflation. It weakens plans to reduce regional inequalities, every pound of government spending is worth less and it is deepening inequality. Is there a point at which the Government would accept that families’ current struggle with the cost of living was too great and they would have to introduce emergency measures? If so, exactly what is that point?
Reversing the UK’s economic inequalities requires large-scale measures that are well directed and backed by substantial levels of funding over a prolonged period. We heard little about future funding in the Queen’s Speech. We know from Germany that closing regional inequalities takes time and huge sums of public investment. Germany has transferred around €70 billion a year for 30 consecutive years to level up its country.
So I ask the Minister: given that rising inflation means that departmental spending plans set by the Treasury in October are increasingly worth less in real
terms, what steps will the Government take to ensure that they meet their new national missions? Will they increase the budgets or lower their aspirations for what can be achieved by 2030?
The UK has one of the most centralised decision-making systems in the OECD, contributing inefficiencies to the imbalances in our country. National decisions are made without a full understanding of their impact on different geographies. The Government accept that a fundamental rewiring of the system of decision-making, locally and nationally, is required to address geographical disparities in England. We wait to see whether those leading the process have the will to deliver it, and whether the Treasury will actually relinquish powers. To quote from the Constitution Committee’s report on respect and co-operation,
“the West Midlands Mayor, Andy Street, said the future of English devolution should involve a sustainable financial settlement that ends the ‘begging bowl culture’ to Whitehall.”
A risk to achieving government aspirations on climate change and levelling up is the financial services Bill; I agree with the noble Baroness, Lady Kramer. The current aims of the PRA and FCA include protecting and enhancing the integrity of the UK financial system and promoting competition. The Bill introduces a new delegated power to promote “international competitiveness”—a chilling sense of déjà vu. Previously, the FCA had a duty to promote international competitiveness. In 2012, the Treasury and Parliament both found that that approach to regulation contributed to the 2008 crisis. In 2019, the Governor of the Bank of England, Andrew Bailey, observed that, previously, the regulator
“was required to consider the UK’s competitiveness, and it didn’t end well, for anyone”.
That is true. The pursuit of the profitability of large international firms trumps public interest. Austerity and rising inequalities followed. The Government now risk making the same mistakes, and, with that, the levelling-up and net-zero aspirations faltering.
Advances in ICT and fintech have been hugely beneficial. Our economy would not have been able to adapt so quickly to mitigate the impact of the pandemic if it had occurred 20 years previously. But such advances bring new risks: communities grapple with access to cash, they face exclusion from data-driven services, and card or online transactions are the new norm.
In 2021 the UK cybersecurity agency took down a record number of online scams—four times as many as in 2020. TSB revealed that impersonation frauds are up 300%. Consumer protections in the Bill are needed, but absent is an FCA duty to have regard to financial inclusion, which is a growing risk in our economy.