My Lords, it is a pleasure to follow my noble friend Lord Hollick. I am currently a member of the Economic Affairs Committee but I was not a member when the examination of the tax proposals was carried out, so I do not propose to comment on that. I thank him for his kind remarks on the reduction of the deficit, which only goes to show how difficult forecasting can be, even in the comparatively tranquil times of 2010, never mind where we are just now. Before proceeding further I refer the House to my entry in the Register of Lords’ Interests; in particular, I am a director of Morgan Stanley.
I will start where the Minister started in his speech, by pointing out the obvious—we are debating a Finance Bill which comes from a Budget that was announced six months ago; in many ways it might have been six light years away. It is a long time ago and a lot has changed. The then Chancellor has now gone, although on a personal basis I always found George Osborne to be extremely courteous and helpful, both in government and in opposition. I am sorry that he has gone, but these things happen in politics, and maybe he will return one day. Of course, the economic circumstances in which we consider this Finance Bill are completely different to the ones that prevailed in March, when I guess a majority of people did not think that we would leave the European Union. Some of us saw the warning signs throughout the beginning of this year, but it is fair to say, and blindingly obvious today, that many of the people who campaigned to come out of Europe had no idea that they would win and still less idea of what might happen if they won. That presents a major difficulty.
Every day we hear, especially from those who campaigned to leave the European Union, “Things aren’t quite as bad as everybody thought they’d be”. There is a perfectly obvious reason for that. Nobody said that the day after the referendum the world would come to an end. Now we are in a classic phoney war where nothing is happening. People are not sure about what form these negotiations will take or what position the rest of the European Union will take. Therefore people continue with business as usual; of course they need to buy houses and spend money. No one suggested that they would immediately stop all that. The time we should be apprehensive about is during the course of the next 12 months or two years, when what our options are and what is likely to happen will become clear. I understand why it happened, but there is one thing that I find increasingly frustrating. I listened to the Chancellor last week, who was very clear about where he stood on the single market and was encouraging in many respects. However, when I compare what he said to what the Secretary of State with responsibility
for leaving Europe had to say two days earlier, I am none the wiser as to where the Government currently stand.
The Chancellor said something else that was interesting: that we could not be expected to have a running commentary—although we are getting something of that nature from Ministers on a daily basis. He said that the Government would work out their position, negotiate and then come back and show us what they had. But as people have pointed out, you cannot negotiate with 27 other member states and expect to have complete silence and confidentiality while these difficult matters are sorted out. We in this country need to know where the Government stand on key issues such as the single market. We need to know what they intend to do in relation to the vast bulk of European law that applies one way or another in this country, on immigration and other issues. Unless and until we have some idea of where the Government want to be, it will be very difficult for people to take long-term economic decisions.
As the House will know, tax policy has to be seen in the context of the economic and political environment against which people are expected to go about their business and businesses are expected to take decisions. We simply do not have that from the Government. I understand why, in the aftermath of the election of the new leader of the Conservative Party and the Prime Minister, it may be thought that a period of silence would be welcome. However, there will come a point this autumn when the Prime Minister will have to spell out where she stands on all these issues. People will want to know so that we can start to form a view as to what is likely to happen so far as this country is concerned.
I have heard another view expressed on the other side of the channel: all that will happen is that Europe will refuse to talk to us until after we engage Article 50, and then we will have two years, up against the clock. The default option will be that we just leave with nothing. That is not a satisfactory position for the fifth or sixth biggest economy in the world to be in. We need to see some leadership from the Government and some indication as to where and how they intend to proceed, so that we can all make up our minds as to whether we support them or want to see any changes to that. Critically, people in this country, whether in business or as individuals, will want to know where the Government stand.
That brings me to my next point. Obviously the Chancellor is now very much focusing on his Autumn Statement on 23 November. However, for the past six years, not just in this country but in Europe—and, to a certain extent, in the United States; although the US followed a policy very similar to the one that the Government of which I was a member were following up until 2010, and that is perhaps why its economy has been growing rather more strongly than the European economies—monetary policy has been expected to take the strain of our economic recovery. All central banks are either at zero, nearing zero or, in some cases, going into negative territory. On the latter, I am bound to say that I cannot understand how, if the Government are trying to encourage people to be confident and to
go out spend, they can tell them that things are so good we have negative interest rates—that does not seem to be a great way of going about it. Therefore, the Chancellor will have to consider in the Autumn Statement where fiscal policy comes in.
I was encouraged when, as my noble friend Lord Hollick said, Phillip Hammond spoke to us last week in relation to infrastructure projects. I know that that is something dear to the heart of the noble Lord who speaks for the Government today. I hope that the Government will consider some sizeable, but not vast, infrastructure projects, in different parts of the country and not just in the south-east of England, that will help boost the economy.
I have said on many occasions that I have never been convinced of the case for HS2. If nothing else, it is likely to absorb resources that need to be spent on other parts of the railway network. I spent some four years in the Department for Transport, so I am aware of what can happen if you start running down the basic lines on which you depend, day to day. Equally, there is the case of Hinkley Point. Look at the costs that will be imposed on consumers. How on earth can that be justified given that, in building a nuclear power station, the risk will never, ever go wholly to the private sector? I have never understood why it makes sense to ask the French Government, which is what EDF is, or the Chinese Government, who are involved in the lending arrangements, to take this on when we could actually do it ourselves. Who knows? We may be able to benefit British industry in the course of doing that.
As we have a new Prime Minister who has indicated that she is willing to junk an awful lot—she does not now have the embarrassment of her predecessor sitting behind her on the Benches in the House of Commons—perhaps the Government will take a sensible look at how investment in infrastructure could do more to ensure that fiscal policy is supporting monetary policy. I do not think that monetary policy can do this on its own, here or in continental Europe any more than it can in the United States or anywhere else. We need only to look at Japan to see what happens when you give up on fiscal policy. Everything that they seem to try seems to struggle somewhat.
There are many measures in this Bill that are welcome and will benefit people in this country, but we have to accept that the world has moved on and we are kidding ourselves. It may be sunny outside today and the economic conditions may be better than some people thought, but we are about to go into a period where some very difficult decisions will have to be taken. This could be something that we are in for the long haul, at the very time we are still living in the backwash, both political and economic, of the banking crash of 2008. I always thought that it would take a long time to recover from that and unfortunately so it has proved. We are now going into an extremely tricky period and I hope that when the Chancellor comes to his Autumn Statement, his Budget next year and we debate next year’s Finance Bill, we will have a clearer view of where we stand. We are certainly entitled to that and we expect no less of the Government.
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