Budget Statement

Lord Desai Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, I have always admired the Chancellor. As I have said before, I knew him before he became a Minister, and I have a very high regard for him. He did extremely well in facing the pandemic, which was a very unusual challenge for anybody, and he coped with that very well.

Having said that, I have to say that I am not all that happy with the Budget. Given that the Chancellor had favourable forecasts for GDP growth for two years in succession and given the size of those forecasts—ultimately of 6%—the first thing was to be cautious. How is the economy compared to the pre-Covid level when you have had those two growth figures? It is not all that much higher. We are not about to grow at 6% for ever and ever. As economists long ago pointed out, families spend their permanent income and not their current income—income may be high, or it may be low; you balance things out. The first thing that the Chancellor should have done was to look very carefully at the future prospects of the economy and how far we have come relative to the long-run path of the economy. That is why the economy goes down to 1.3% or 1.5%, which has been the historic growth rate of the British economy since 2010—almost since 2009. One has to be careful in fashioning a long-run strategy and not start a bonanza of champagne and this and that, giving money away frivolously.

If the Chancellor had the money, he should have restored the £20 cut in universal credit. The history of that is shameful, because it was George Osborne who took it away. It was then restored last year, and then, at the first excuse, it was again removed. Did the Chancellor know that he had a favourable growth rate forecast before he did it? If he had even a slight inkling that the growth rate was going to be favourable enough to cut champagne taxes, he should not have cut the £20 from universal credit.

Turning to the tax burden, I am a well-known friend of high taxation and I make no bones about it. People say tax is very high. I have said this before in your Lordships’ House: if you call it a taper it sounds very nice, but the 63% taper on the poorest people is a 63% rate of income tax. Then, when it is cut to 55%, everybody hails the Chancellor and says how kind he is. Why can he not go down to the average basic rate of income tax?

On the one hand, we are encouraging people to seek work; they cannot be on benefits for ever. The whole logic of the universal credit system is to encourage people to seek work. Then, when they do, you tax them 63% or 55%—no middle-class family would tolerate that. However, you can make the poor pay an incredibly high tax rate and call it a taper, and everybody is very happy. It is shameful that we have even a 55% taper on the poorest people in the country. Anything that the Chancellor can do about that, even at this late stage, would be welcome.

There has been a very welcome drift of the sentiment in today’s debate regarding this idea that we want to be a high-productivity, high-growth, high-wage economy but with a low tax burden. I think that is impossible. Let us get it straight: it is not possible, not given our growth rate and the huge backlog of things we have to correct, especially the National Health Service, social care and so on.

As many noble Lords have pointed out, the average tax burden in western Europe is 40% plus. A tax rate of at least 40% ought to be factored in, and then let us find out where we can get that money. I was very happy to hear the noble Lord, Lord Turnbull, with his Treasury credentials, propose a tax that I proposed a while ago in your Lordships’ House: a tax on the frozen capital gain that every householder has. You have to unfreeze that capital gain and put it on the council tax base, and if that can be done, we will have good social care financed by councils and a decent system of taxation. I will not go into detail because time is short.

If you want a good growth rate, do not worry too much about the debt to GDP ratio. We have been through high debt to GDP ratios and come out of them. That is old-fashioned economics: when we want to borrow, we can borrow, and we will pay it back. It is important that we correct the long-term deficiencies in the economy regarding education, health and social care. We have learnt during the pandemic that these deficiencies are costing us quite a lot. They may not be costing us financially, but they are physically and in terms of people’s health and welfare. There is still time to correct these things, and I hope that the Chancellor does it.

Homes: Affordability

Lord Desai Excerpts

Thursday 28th October 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, I thank the noble Lord, Lord Bird, for proposing this subject. We are having a discussion on the economy before we have a real discussion on the Budget next week, and that is always a good thing.

In a strange way, the economy is both the economy of the noble Lord, Lord Bilimoria, and that of the noble Lord, Lord Bird. On the one hand, the Chancellor told us yesterday that we have fantastic growth of 6.4%—we have not seen 6.4% growth for a long time—because of the V-shaped recovery from the pandemic, and we are in the up phase of the V. But a lot of things have not been fixed. That 6.4% figure is a blip and very soon it will go back to 1.3%, our normal rate of growth.

Of course we have borrowed—we have borrowed like there is no tomorrow—but we always borrow for the better-off, never for the poor. In 2008, when the markets collapsed, banks were queuing up for money, and we generously gave it to them. We bought banks, including bankrupt banks; they got into a lot of trouble and we spent money on them like there was no tomorrow. It is when it comes to spending for the poor that suddenly the Budget constraints bind.

I shall give your Lordships an interesting example. Yesterday, the Chancellor did something that was hailed as a progressive measure: he cut the universal credit taper from 63% to 55%. What is the taper? The taper means that if you are on universal credit and you get a part-time job, for every pound you earn, 63p is taken back. Suppose that income tax were 63% at the margin—you would hear howls of protest. The noble Lord, Lord Bilimoria, said that high taxes are back, but the highest taxes in this country are paid by the poor. They are not called taxes though; they are called nice things like tapers. So the taper has gone from 63% to 55% and we have to be grateful.

Now, there is all this money. Yesterday, everybody said that the Chancellor was spending money like there was no tomorrow, but he did not find money to restore the £20 which was taken away from universal credit holders. It would not cost very much—it would cost a fraction of the £37 billion that test and trace wasted, for which, so far, nobody has been fined and no money has been taken away from anybody. So we have £37 billion to be wasted on test and trace but we do not have any money for people on universal credit, who were given the £20 that had been suspended in George Osborne’s day. Even now, after many years, they gave it back for one year and the next year they took it away. Of course there is money—the Chancellor told us yesterday how much money there was. These are choices. It is not that we do not have money; we make choices about who gets the money. Decisions have been made. In every crisis that we have been through, regardless of whether it was a global or a local crisis—in 2008 or the pandemic—you can predict, without any analysis, who will suffer: women, the elderly, the homeless and children. It is not rocket science. That is the way we are.

It is very good of the noble Lord, Lord Bird, to focus on many of the crises, especially the housing crisis. I arrived here in 1965, having come from America, and I was renting. Everybody told me that renting was complete nonsense and that I should buy. Why? Because buying was subsidised; there was a tax concession for buying. So I bought, of course, and I benefited from that—I am not complaining. Mrs Thatcher sold the council estates, which is not a bad thing, because lots of poor people got property for the first time. But we stopped building new council houses and we have never restored that public building activity, which was a solid basis of post-war recovery. To the extent that the post-war welfare state was a success, it was because of not just the National Health Service and full employment but this solid base of building houses.

The Labour Party has not built houses throughout all the years of its existence—nobody has. People say that they want to build affordable houses, but why would anybody build unaffordable houses? Every house is affordable, depending on who is buying it. “Affordable housing” is a misnomer, because you know that nobody will be able to buy it.

The same thing applies to housing benefit, and the noble Baroness gave us a nice example of what is happening in her area. But housing benefit fixes the level about which all rents will be determined; not a single house will be rented at or below the level of housing benefit. There is an old law of economics: put in rent control and rented property disappears.

We have to say that, every year, we will build so many houses. The Government have said that they want to invest 3% of GDP every year, or whatever it is, which is a very nice thing. Yes, we want to have innovation, and research and development, but let us also have something in the social sector. Let us invest new money in housing, health or education, so that we make up for the rising demand, year after year. We do it now and then, but we do not do it with the sincerity with which we need to do it and given the demand.

I can tell your Lordships one thing: on tax levels, it is always economical to cut corporation tax. Why? Because we know who it benefits. But it is never beneficial to raise universal credit; it is a small amount of money. These are choices that we make. Whatever gloss we put on it, some of the problems are permanent.

The strange thing that happened during the pandemic —and I credit what the noble Baroness said—was that the whole economy suffered and got impoverished, which very rarely happens, through nobody’s fault. So the Government threw money at the whole economy through the furlough scheme, for example. The furlough scheme was for people who had good jobs; they were surprised to have no job and not used to being on universal credit, so they were told, “Don’t worry, we will cover you”. There was neither supply nor demand, so the Government had to spend money for both of them. It was very nicely done—but as soon as the pandemic has slowed down we are now back to the original stuff. We will again have homelessness and the distress of universal credit.

Think of the extra burden on national insurance, at 1.25%; it is not very much, but it is 25% above what it was. It is a 25% increase in the tax burden, but people do not put it like that. People do not say that a 63% taper rate is outrageous. We have tolerated a 67% or whatever taper rate all these years, despite people saying that universal credit aims to encourage people to work. How do you encourage people to work? With giving a 63% tax on every pound they make by getting employed. It is a strange world. It is a world for the top 10%, not for the bottom 10%. It has always been like that, and there is nothing we can do about it. I could go on like this for ever, but I think I have said enough.

Integrity of Electoral Processes

Lord Desai Excerpts

Thursday 21st October 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, I join other noble Lords in regretting that the noble Lord, Lord Tyler, has chosen to retire. One of the few advantages of this place is that you never have to retire. Why give up such a fun place? However, he has done it. I was somewhat surprised that he made a Second Reading speech on a Bill which is not yet before us. I shall not refer to what the noble Lord said in his speech because I thought he was talking about something else. As an economist, I know one thing: forecasts are always wrong. I think the noble Lord’s forecast about the future of the party will not be right. It will be here for a long time to come—when I and most of us present are no longer here.

My worry is about something very different. It is that our democratic system is outdated. The people outside, especially those below the age of 50, or perhaps 35, do not understand why we have to go to a polling booth on a certain day to vote. Your Lordships’ House has progressed to having a Peer hub. I remember that when I was on a committee to elect the Speaker in this place—that shows how long I have been knocking around here—I asked why we should not vote more mechanically, rather than having six minutes to count the votes. I was told that there had to be a process by which the water flows from one part of the bottle to the other, to ensure that it lasts for six minutes. I also suggested that the Speaker sitting on the Woolsack should have a little computer to tell them what is happening. I was told that that is not our practice.

Now, not only do we have a Peer hub, but most of our citizens would prefer not to go to a voting booth but to vote online. Why have we not even thought about that? When I talk to my children and grandchildren, they do not understand why elections are organised in such an antediluvian way. Elections should be much more citizen friendly. Citizens should be allowed to vote whenever they want to vote. Why must it be on a particular day? They should be allowed to vote on any day of a given week, for example.

There are other things to think about. MPs’ surgeries have been very much on our minds lately. Why are we doing this completely outdated thing? Why does a citizen have to see his or her MP face to face? We have learned during the pandemic that all that is completely unnecessary. You can do it online. It would be much more convenient for our citizens not to have to see their MP face to face. The fact that they have to do so shows that the system is not very efficient. I think I am being signalled to shut up, so I shall.

Health and Social Care Levy Bill

Lord Desai Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, an advantage of being the last speaker is that everybody has to come back into the Chamber to listen to you, because that is part of the rules of the game.

Let me say first that this has been a good debate. I mean, it is pointless, because we cannot amend a money Bill. The Commons has passed it, and the Government want to rush it through. Whatever we say, no notice is going to be taken, so we can be completely disinterested and make good suggestions—nothing partisan.

This is a bad Bill and a bad proposal. It is bad not so much from the point of view of the people who are going to bear the burden but from the point of view of the Government proposing it, because it is not very elastic in terms of raising revenue. It is procyclical, so the collections will fall any time life is hard and there is unemployment. Then we will have to do what Pitt the Younger set a good tradition for and raise the rates, so 1.25% is not the end of it. It is just the beginning and it will happen steadily if this tax stays on the books—and I am sorry to say that it will.

It is not to finance social care. Let us get it absolutely straight: social care is in the title of the Bill but this is not to finance it. It is to make up the NHS gaps, but they can never be filled. That is very clever, because people have this folk memory that the Beveridge plan created national insurance to finance the National Health Service when it was set up. That is the folk memory I was brought up on. So, everybody will say, “This is quite a nice tax because we will finance our NHS” and even poorer people will say, “I am willing to pay a little bit more to finance the NHS because it is very close to me.” As the noble Lord, Lord Hannan, said, people will be asked, “Will you pay extra tax?” They will say, “Of course I will pay extra tax for the NHS” because, as people have said, we only have one religion in this country and that is the NHS.

Financing social care will have to be done later on and I will come on to that. We have this tax, and lately there has been a flurry of excitement in the newspapers that the Tories are becoming a high-tax party and people are asking what will happen. Do not worry, I say to these Benches; you are not being taxed—the poor are being taxed. That is what the Conservative Party came into power for, so relax, you are all safe. The question of how we will finance social care will remain. How will we organise social care is for another day, but how are we going to fund it?

Before I get into those sorts of things, I have a technical question for the Minister, and I would like a reply. I have been working hard. Will the carried interest of private equity firms be subject to the levy or not? I would like an answer to that because that may bring in a bit more money. The noble Lord, Lord Sikka, shakes his head. I can see that he knows the answer. I do as well, but I will not go into it. He suggested various schemes in which money can be raised. I have always thought that I have a very clever device to raise money. I do not think anybody would like it and I have a record on this; I was sacked twice from the Opposition Front Bench for proposing new taxes nobody liked. Here goes, as I am no longer on the Front Bench.

The original problem is this: the better-off middle classes have property, and they do not want to sell the property to finance old-age care. I think the noble Lord, Lord Hunt, pointed this out. Instead of tackling that problem, the thinking is, “Oh, the poor better-off people want to hang on to their house and pass it on to their children. How can we save them from the terrible problem of having to sell a house?” Fine—let us respect that wish. People do not want to sell their house. The house is the one asset more widely owned in this country—not by the majority but more than any other asset. Quite rightly, people want to hang on to their house. Houses are a very good investment because you have an unrealised capital gain. My question is: how do you tax unrealised capital gains? That is the essence of the problem: making sure that people do not have to sell their house but pay part of its unrealised capital gain. Your Lordships can see where this is going and no one is going to like it, but it is very lucrative for raising money.

I shall take my own example because that is a very simple thing to do; I am not making up the numbers too much but I will not give your Lordships the true numbers. I have a house, which I have had for 17 years, and it has quadrupled in price. No other asset that I know of would give me that high a return, and every middle-class family knows this. However, I have paid the same council tax based on the original price at which I bought the house so I have pocketed all of its unrealised capital gain. The poor council has not got anything out of it, even though it has higher expenditure for collecting my garbage and so on.

How can we release that unrealised capital gain to councils? The answer is very simple. You do not have to raise a council rate; you have only to raise the value of the base on which the tax falls. Since I am a very ambitious person when it comes to imposing tax, I would do this annually but you could do it quinquennially: we could have a national commission for valuing property that valued all properties across the country by different types—one bedroom or two, garden or no garden, SW1 or NE17 or wherever—and it would announce a number for each type of house where the price had gone up by X per cent.

The base of the council tax for those kinds of houses would go up. I would not be taxed fully for the quadrupling of my house price but I might be taxed for its doubling, so I would pay more council tax while I was living in the property. When I came to sell, I would make a capital gain. I would not lose money. My children, or whoever I wanted to pass my property on to, would get the property. The property would not be gone, it would stay with its owner, but we would milk a little bit of the capital gain that accrues every year because of inflation and growth. People think that is impossible but it is not. Anyway, I am not running the country.

I believe that some sort of flexible, elastic tax like that is required. To take care of the problem of the postcode lottery which the noble Lord, Lord Forsyth, mentioned, where a poorer council would not get it but a richer council would, one could equalise because the increase in the base rate would be national. There would be some partial exchange. I cannot solve all problems in this short speech but I can solve some.

I urge the Government to consider this, although not now because they do not have the opportunity. In fact, if not the Government then perhaps, as the noble Lord, Lord Forsyth, said, we in the House of Lords ought to form a committee to solve this problem. Members down the Corridor are not going to solve it because they do not have the time, but we do, and being elderly is our problem so we have a stake in this. We ought to genuinely look for elastic, high-yielding ways of taxing property without, as far as possible, affecting people’s desire to hang on to their property while they live. If we could do that—and only the House of Lords could; no one else can—that would be a very good thing. I urge the Government to make room to implement that proposal and then take our propositions seriously.

House of Lords Appointments Commission

Lord Desai Excerpts

Monday 6th September 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, I quite agree with the proposition that we should have a statutory commission, but I argue that that is not the problem with this House. The problem is that this House has no legitimacy of its own. It is not an elected Chamber, and its only legitimacy comes from the fact that one elected person—the Prime Minister—will be trusted to make the correct appointments.

I know things go on which should not go on, and I know that many of the people here work very hard and are not here only for the honour. But, unfortunately, the honour is such that more people desire it than really deserve to be here. Unless we improve the legitimacy of this House—noble Lords will not be surprised that I would like it to be elected—we can devise as many appointments committees as we like, but the legitimacy will come only from the Prime Minister and no one else. That is our problem.

Every time this House defeats the Government, the Government are tempted to add another three dozen Members because they want this House to comply with what the other place does. That is our problem, and statutory commissions are not going to cure it, no matter how honest and good they are.

Budget Statement

Lord Desai Excerpts

Friday 12th March 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, I must start by saying that I have known the Chancellor since before he joined the Government. Therefore, whatever I may say about him should normally be taken to be biased. I think he is a very good Chancellor.

I like high taxation so I welcome a chancellor who can manage both to have the highest burden of tax ratio to GDP and, when needed, to spend so that we have the highest debt burden for a long time. Both were necessary, the spending and the high taxation. If we are serious about the Dasgupta report, greening the economy and so on, we shall have to face much higher taxation. We have to stop the illusion that we can have low taxation and high spending, and that in some miraculous way the numbers will add up; I can assure noble Lords that they will not.

The clever thing about the Budget is that the Chancellor has found a way of not disturbing tax rates that much, but he has expanded the tax base. The freezing of personal allowances is an example of that. By doing so, he will collect more income tax without changing tax rates. It should become a permanent policy that the indexing of personal allowances should not be done unless the rate of inflation exceeds the Bank of England target of 2%. There is no need to go overboard. My personal forecast is that inflation is now out of the system and will not come back any time soon. However, I cannot go into that in two minutes.

I welcome the suggestions made by the noble Lord, Lord Butler. I hope that the Government will take seriously the idea that we can tackle the problem of nurses’ pay with a one-off levy on people paying more than 40%.

Financial Services Bill

Lord Desai Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Desai (Non-Afl)]

My Lords, first, I apologise for being slightly late when the noble Lord had started presenting the Bill. It is my good luck to be able to congratulate the noble Lord, Lord Hammond. I briefly knew him when he was a Foreign Office Minister, and he gave me a very nice breakfast the day we unveiled the statue of Mahatma Gandhi in Parliament Square. I do remember that. Of course, I also congratulate the noble Baroness, Lady Shafik, who is director of the London School of Economics. As I am an emeritus professor, she is my boss, so I welcome her.

I was also, as the noble Baroness, Lady Falkner of Margravine, said, a member of the EU Financial Affairs Sub-Committee, and I have been through some of this in an earlier phase. I remember saying to some City witnesses that the City should not think it is popular in the country. When push comes to shove, the Government will go for fishermen, not the City. I said fishermen, but there are others to which that would apply. And I think the Government did go for the fishermen, not the City, because the City is not popular in the country.

We may say proud things about the City, but what has struck me—I state this observation—is that in the Bill, we have missed the chance, as many other noble Lords have said, to tighten up regulatory structures in the City. I was alarmed when I saw how much power the FCA is going to have. The FCA is not a very efficient regulatory institution.

Many noble Lords have mentioned the LCF case, and I think what had happened at LCF was known, and it was a scandal because lots of ordinary people were deprived by that scheme. I am sorry to say this, but even when it was known that this had happened, the head of the FCA was promoted. I know he was printing money for the Government, but I still think it does not look good, especially if we are going to establish a global reputation. If we are going to be competitive in the world, we must have a much better reputation for our regulatory institutions than we have.

I have been in your Lordships’ House for a long time. We started with the Baring Brothers, the BCCI and all sorts of other scandals, and we do slip up. Now we are on our own and we have to compete globally, we will have to really tighten up and not be smug about it. I hope this Bill gets amended or something else happens to get a better regulatory structure, better rules for the FCA, better accountability to Parliament and proper punishment for people failing on the job.

Spending Review 2020

Lord Desai Excerpts

Thursday 3rd December 2020 Grand Committee

[Lord Desai (Non-Afl)]

My Lords, what the year has proved since the Chancellor’s first Budget in March, and now the spending review, is that no forecast can be trusted to be right. He did not expect the year that was coming when he presented his Budget in March. The spending review relies on some forecasts, but I would advise him not to trust them very much.

What we have seen is that, since the age of austerity under George Osborne, the fear of debt has gone. We concentrate much more on the cost of meeting the interest on debt, rather than the debt-to-GDP ratio. Interest rates right now are either zero or negative. Nobody expected that to happen, but we can more or less rely on interest rates remaining low and the cost of servicing debt not being very high.

We also noticed that the status of being poor, being on universal credit or being unemployed is not permanent for some. It can happen to anybody: it can happen to the self-employed and the employed, and we have furloughs and all sorts of conditions. Right now is a good chance to think of building the universal credit into a citizens’ income platform. It would take time and money, but that way you would avoid the effect of economic shocks on people’s livelihoods.

Lastly, I advise the Chancellor not to raise tax rates but to remove the concessions and loopholes in the income tax code, for example. There are 1,000 loopholes in the code that save people money. Stop them, keep the same rate and you will make much more money.

Covid-19: Economic Package

Lord Desai Excerpts

Wednesday 13th May 2020 Lords Chamber

[Lord Agnew of Oulton]

In response to my noble friend, unfortunately I cannot give any more information at the moment, but businesses will be made aware within the next 10 days to two weeks.

[Lord Desai (Lab)]

Will the Minister bear in mind that, given the prospect of higher unemployment for a long time, universal credit and other arrangements will have to be enhanced for a considerable period? Have the Government budgeted for an increase in unemployment benefit and universal credit?

[Lord Agnew of Oulton]

My Lords, we have improved the terms of universal credit since this crisis began by increasing payments by £20 a week. We have seen 1.6 million claims since the beginning of the crisis, and all new and existing claimants will benefit from the increased generosity of these payments.

Budget Statement

Lord Desai Excerpts

Wednesday 18th March 2020 Lords Chamber

[Lord Desai (Lab)]

My Lords, the one joy of speaking in a Budget debate in your Lordships’ House is that social distancing is not a problem. I have been sitting here, not in spitting distance of anybody. However, let me say this: rejoice! We seldom have such a beautiful crisis. This crisis is not caused by anybody’s bad behaviour. It is not caused by debtors’ behaviour or dubious mortgage equities or bankers’ bonuses. It is a purely exogenous black swan shock, and it is so big that it is totally global. Of course, whoever originated it in the backstreets of Wuhan, its spread is due to globalisation—due to the ease of movement. In one sense this is in fact a great opportunity. I am sure that right now, Greta Thunberg is the happiest person in the whole world, because all flying has stopped and people have stopped travelling—they have to sit at home and do nothing. Wow! Climate change will finally be tackled if we go on like this.

Before I go on to weightier matters, we have had in this debate one specific radical idea, which was articulated by a number of noble Lords, including the noble Lords, Lord O’Neill and Lord Skidelsky, and of course it is also part of the Green Party’s programme. I declare an interest: I have been going on about a citizen’s income or basic income for well-nigh 30 years. This is the opportunity for us to institute a temporary citizen’s income. In a sense, given the supply shocks and all the uncertainty, we do not know who will be deprived of income and for how long. Instead of people worrying about sick pay—there are all sorts of things they should be worried about—a citizen’s income should be given to everyone on the electoral register. It need not be a large sum of money; I am always rather thrifty, so I would say £100 per week for everybody on the electoral register until such time as the Government decide that things have returned to sort of normal. Okay, if you want to make it £200, I do not mind—it is not my money.

With something like that, the universality is important. In universal credit, which is a disgrace—I will not go into that right now—there are too many side conditions that people have to satisfy to qualify for a benefit. That by itself ruins the good of the scheme. The thing about a basic income or citizen’s income is that everybody gets it by being a citizen; it is like the right to vote. Right now, it would do a tremendous amount for a lot of people at least to have pocket money—especially, for example, women who are not part of the labour force. Anybody who is not part of the labour force will still get it.

I urge the Government, since they are in a spending mood, to let the Chancellor come tomorrow and throw another £20 billion or whatever the sum is at this. That money will go a long way and will plug a gap in the system.

Having said that, let me say that British economic politics are a battle between either 35% or 45% of GDP being spent by the state. If you look at the data for the last 50 or 60 years, it goes between 35% and 45%. The Conservatives want to be near to 35% to 40% and Labour wants to go a little further, but there is not much in it. If your income is down, then the proportion is high, but actual expenditure is not very much. People go on about austerity, and my noble friend Lord Brooke challenged me to own up to the fact that I supported austerity—and I do. I was the only person in Parliament to sign a letter to the Sunday Times on that back in February 2010. I do not want to defend myself, because it is a hopeless task, but I would say that if you look at the Budget Red Book—tables 1.2, 1.3 and so on—the proportion of GDP spend between 2010 and 2020 was higher than 40% every year, and was higher than the proportion of GDP spent in the 10 years of the Blair Government. In a sense, these are proportions, so I am slightly cheating. If you look at the employment numbers in chart 1.3, employment has grown throughout, as the noble Lord, Lord Skidelsky, was saying, and we are right now in full employment—in the last year of austerity. Those numbers are to be taken with a pinch of salt.

I became a balanced-budget ayatollah way back when the Conservatives were in power and the noble Lord, Lord Lawson, gave a double mortgage concession after winning the election. I thought it was ridiculous; why should anybody give tax concessions after winning an election? You do it before. Anyway, then we had a recession. I believe in balanced budgets when balanced budgets are important and in deficits when deficits are important—horses for courses. I will not resile from that.

To return to the present crisis, we are back to Butskellism—thank God—and now it is a compromise where the Conservative Government are willing to spend money when there is the necessity to spend money. I had been saying before the coronavirus problem came up that this was a very good time to borrow money, because interest rates were low—so therefore borrow as much as you can at a low rate of interest. Interestingly —I think I have spoken for too long; I will sit down—we had excess savings in the global economy, and, with coronavirus, that excess saving will be mopped up by Governments. Perhaps we may reach equilibrium faster than we otherwise would have.

--- Later in debate ---

[Lord Agnew of Oulton]

I disagree that we have had needless, destructive austerity. For example, we have created some 3.5 million jobs over the past 10 years, and until this crisis hit us in the last few days we have seen steady growth in earnings over the last year to 18 months. We are probably never going to agree, I am afraid, but let us at least put our points of view on the record.

The noble Lord, Lord Leigh, asked for faster action. I think some of the points he made on liquidity and the relaxing of insolvency laws were well made. I will certainly take those back to the Treasury. If he has any more information on that, I would certainly be interested to learn about it.

In relation to entrepreneurs’ relief, the noble Lord, Lord Leigh, and the noble Baroness, Lady Finn, were disappointed that we had increased the tax rate. But it is worth pointing out that the capital gains rate is 20% and it was reduced from 28% in 2016. It is hardly a rapacious rate of tax. I would be surprised if that put entrepreneurs off. We all have to pay our share of tax.

The noble Baroness, Lady Jones, said we were tinkering around the edges. But to announce within four days 15% of GDP as a bailout to the economy—I just do not accept that that is tinkering around the edges. As I said when I quoted the Chancellor at the beginning, we will continue to do more. This is a very fast-moving story and we are not going to sit idly by.

It was a rare moment of sunshine to hear from the noble Lord, Lord Bates. I share some of his optimism. Perhaps I am foolish and your Lordships will be able to berate me in six months’ time, but I think we will come through this as a stronger society. I think that sometimes an event such as this gives people pause for consideration about how things work. I am not as gloomy as many noble Lords were in the debate today. Indeed, just as I sat down earlier, I had a text from someone who says that there is already a possible vaccine being tested in Japan. I have no idea, but I think we have a good chance of finding a vaccine sooner than in previous outbreaks because the science has moved on so quickly. I read two weeks ago that they had already decoded the DNA of this virus within a few weeks of it becoming known in China. Last time with SARS and so on, this took months. I am probably putting my credibility on the line here, but a little bit of sunshine cannot go amiss.

The noble Lords, Lord Bruce and Lord Adonis, were worried about the EU. I gently and quietly remind them that we had a general election which put this absolutely fair and square to the electorate and, against the wishes of the vast majority of this House, and indeed many in the Commons, they gave a resounding thumbs up to what we were trying to do. What is going to happen now, I have no idea. But I do not think it should be used as an excuse to try to get us back into the EU.

The noble Lord, Lord Adonis, also asked about international co-operation. Of course, this will be extremely important. I hope he is reassured by our changes to the emergency government structure, which were announced yesterday. We have created four strands: health and social care; public services; economic; and international. We are very aware that this needs international co-operation. We have to be realistic, though, that in the next few weeks countries are going to be looking out for themselves. That is the brutal reality when supply chains have been broken and we are not able to get the things we want because other countries will want to keep them. Likewise with the closing of borders—that is an extraordinary thing for the EU to have done. That goes against all its principles, but it has reacted in a perfectly rational way. We have to accept that that is going to be the case over the next few weeks, but I think there will be a mammoth effort to come up with a vaccine and that will be a worldwide endeavour so I remain optimistic that it will prevail.

The noble Baroness, Lady Falkner, worried about prudent levels of debt and—like the noble Lord, Lord Skidelsky—that there is no free lunch. The noble Baroness, Lady Kramer, raised this at the end when summing up. We will just have to see what happens. I am not trying to duck the question. As a person about half my age said to me a few years ago—

[Lord Desai]

There is this obsession with debt levels and the ratio of debt to GDP, which is a mistake because debt is a stock and income is a flow. The thing to do is to compare income with the cost of servicing the debt. If the cost of servicing the debt is reasonable, we should borrow. Everybody who holds a mortgage knows that it is a large proportion of their income, but if you can service the mortgage you are all right.

[Lord Agnew of Oulton]

I do not fully agree with the noble Lord. Most people who have a mortgage do not increase the amount of the mortgage every year when they get a pay rise. A country needs to be mindful of that and not do the same.

A number of noble Lords, including the right reverend Prelate the Bishop of Rochester, the noble Lord, Lord Razzall, and the noble Baroness, Lady Lister, are worrying about social care. It is perhaps worth just summarising some of the things we have done over the last year or so. Over the last three years, between 2017-18 and 2019-20, we have cumulatively given councils access to up to £10 billion of dedicated additional funding for adult social care; we are increasing the funding of that next year.

The noble Baroness, Lady Bennett, talked about the bailout of the banks in 2008 and 2010 as though we should not have done it. It is worth just putting it back on the record that if we had not done it, the whole system would have ground to a halt. We would have been plunged back into the dark ages, which would have been great for our carbon but not for the millions of people who rely on a functioning economy.