Autumn Statement

Lord Palumbo of Southwark Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Palumbo of Southwark (LD)]

I add my congratulations to the noble Lord, Lord Rose, on his excellent maiden speech. We look forward to his future muscular contribution.

The Autumn Statement goes like this: the Chancellor stands up and says what a wonderful job he has done; the Opposition respond with a ritualistic attack. There is no sanction for the Government having missed all their targets. The “would-be Prime Minister” is not dismissed for showing basic economic illiteracy and the Prime Minister is not censured for his previous comment, “We are paying down Britain’s debts”.

Let us look at some of the promises made versus the outcomes achieved. We were promised a deficit of £35 billion this year; it is £100 billion. We were told that debt would fall to 67% of GDP next year; now the OBR tells us that it will be over 80%. At last the welfare beast was going to be slain with £19 billion of promised savings; instead spending this year will be the same in real terms as in 2010. We were promised that there would be restraint in public spending; this year it is 42.5% of GDP, higher than Alistair Darling planned in his final Budget, and next year it will be £732 billion which, accounting for inflation, is almost exactly the same as in 2010. Any one of these failures would be instantly sackable events in the private sector but bear no immediate penalty in democratic politics. As a businessman, it seems to me that in the political world there is a disconnect between words and deeds.

We can debate the Autumn Statement all we like but the reality of our country’s financial situation is this: government debt is now £1.4 trillion, double its level in 2010; unfunded pensions are double this amount; bank debt is even more; and private sector debt—mortgages, households, business—adds another layer. Then there is debt—off-balance sheet/private finance initiative—which politicians like to pretend is not debt, even though it really is. On any basis, our debts are 600% of GDP. This makes us one of the most indebted countries in the world.

Given this, it might be worth looking at the system which has produced these results. It strikes me that the skills a politician needs to succeed in a democracy are increasingly irrelevant to those required to run a country. In a media-obsessed world, voters want politicians with good personal appearance, likeability and communication skills and, of course, who promise nice things. In what way are these connected to running a country? What the country needs are skills in getting things done, managing people, finance and economics and, most of all, total honesty, the basis for solving all problems.

However, I do feel a certain sympathy for my colleagues in the other place. As we all know, in a modern democracy it is impossible to speak hard truths and get elected. For example, we all sense that the extra £2 billion which the Chancellor has promised for the NHS will not solve its long-term problems. It needs wholesale reform, but who dares say so? To say so risks the accusation of failing to support the NHS, or worse, of advocating its privatisation. This is the great hypocrisy of our times. People complain about the dishonesty of politicians, yet any politician who spoke the truth would be annihilated in the polls. “All truth is good”, goes the proverb, “but not all truth is good to say”. This is what Jean-Claude Juncker meant when he said, “We know what to do, but we don’t know how to get re-elected once we’ve done it”.

So our politics is stuck: benefits, votes, debt. Europe has 7% of the world’s population but 50% of its welfare spending. Is this sustainable? What happens if it is not? Over the past 50 years, voters have been given ever more benefits and public services. But here is the great paradox of our time—nobody is happy. People today loathe politicians—we can see it all around us and in other European countries—but no one questions the system in which politicians operate. People hate the practice but never question the theory. I wonder whether one day the Autumn Statement and tit-for-tat debate which follows will be held to serve no purpose, politicians will be held to account in the world of financial reality rather than that of electoral politics, it will not be possible to miss targets or spin figures, cliché and ritualistic attack will no longer be acceptable, and excellence, ability to deliver and doing things properly are held to be the greater virtues. Let us hope that, should that time come, it will not be too late.