Covid-19: Economic Recovery

Baroness Wheatcroft Excerpts

Tuesday 20th April 2021 Grand Committee

[Baroness Wheatcroft (CB) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Lancaster of Kimbolton. I agree with much of what he said, particularly his endorsement of the Open University, which has always seemed an admirable substitute for three years spent away from home living the high life.

I thank the noble Baroness, Lady Penn, for the way she introduced the debate so comprehensively. As many have said, the Government have done much that should be applauded since Covid struck. The furlough scheme was introduced promptly and has been very effective. However, we know that job losses have hit younger people, women and ethnic minorities particularly hard. It is a statistic that should make anyone feel uncomfortable that between the third quarter of 2019 and the third quarter of 2020 the number of white women in employment fell by 1%, and the number of black, African and mixed ethnic women in employment fell by 17%. Are there any specific plans for dealing with that very specific issue?

It is also the case that, inevitably, school closures impacted particularly on women, yet 70% of furlough requests from women with caring responsibilities were denied. While the Government cannot redress that now, it highlights the importance of childcare in enabling carers to work effectively in the workplace. The Government have been proactive in providing help such as rate relief to nurseries, but the issue of adequate childcare will continue to have an impact on workers long after Covid. Could the Minister say whether the Government have plans to do more on this front, beyond the existing nursery vouchers, as we try to rebuild the economy?

This could of course have a big impact on productivity. Interestingly, the ONS has reported that productivity actually rose by 0.4% last year, despite the deepest recession for 300 years. This highlights the deep division in productivity levels across our economy, an issue that we have failed to get to grips with for many years. The food and beverage sector, one of the major employers, was forced to close for large parts of the year; ironically, that produced a statistical boost to productivity because that is one of the sectors that is 54% less productive than the average for the economy. The high-productivity sectors—accounting and computer and legal services, for instance—were largely able to continue, working remotely, and they bring a great benefit to the economy, as we know. Low productivity continues to be a drag on our economy and will be for many years to come, unless we come up with some very positive ways of addressing it. It is clearly important that our development of the economy requires that we find ways not just of increasing our involvement in already high-productivity sectors but of increasing the low productivity in other sectors. Industrialisation was the first step, but we now need to make sure that every sector makes full use of computers, information technology and, eventually, artificial intelligence.

This takes me to the Government’s industrial strategy, which has had many incarnations, the last of which—before Covid—was announced by Theresa May in 2017. It was after that that the Industrial Strategy Council was launched, under the chairmanship of Andy Haldane, the chief economist at the Bank of England and a man renowned for his sometimes off-the-wall thinking—but he is always someone who comes up with ideas. Since the Government have revealed their Build Back Better strategy and plans to invest in the green economy, science et cetera, there is a slightly different industrial strategy to that of 2017. However, this year, the Government also abandoned their Industrial Strategy Council. It seems unnecessary to dispense with the services of a dozen very well-qualified people, who were prepared to bring their brains and ideas to bear to determine whether we are actually pursuing the strategy in the most effective way. Could the Minister say what external scrutiny might now be employed to monitor the Government’s progress in their industrial strategy, since we have abandoned the very effective mechanism that was in place?

Part of that strategy should include providing for all the needs of the country. While the Government are providing a host of different retraining awards, most are aimed at technology, but there are other needs that will have to be met. The Resolution Foundation has pointed out that the social care sector needs 180,000 new workers if it is to bring back the ratio of staff to carers that existed in 2014. This is one of the sectors where technology can improve things only so far; it is people—real-life carers—who are required. This fact was pointed out by the House of Lords Economic Affairs Committee in its report on Employment and COVID-19, published in December. It called on the Government to

“significantly expand the number of social care workers by increasing funding in the sector with stipulations that funding should be used to raise wages and improve training”.

The Government responded to that report in February this year. They simply ignored this recommendation, so I take this opportunity to ask the Minister whether she can now respond to this very sensible recommendation.

I turn to the businesses that need government support to survive the difficulties imposed by Covid and to rebuild for the future. The Government have instituted a series of measures that have been well received, including grants and loans, but this was surely the opportunity for the Government to establish a sovereign wealth fund, taking equity stakes in businesses. Many organisations called for this, hoping that Britain could take the opportunity to invest some taxpayers’ money not for the short-term effect of buoying up businesses that may or may not survive but for a long-term return, as countries such as Norway have done. In April last year, the Government announced that they would take a small step in that direction with the launch of the Future Fund, operated by the British Business Bank. With a minimum interest rate of 8%, I am not sure whether many companies, even those in dire straits, would have found this an attractive prospect. However, the idea was that the initial loans would be convertible into equity. The scheme was announced in April last year, with a closing date of September last year. That date was then extended to 20 April this year. If a company was struggling in April last year, it may well not have survived until now. Surely, speed was of the essence for such a scheme. Since the scheme closed today, I doubt that the Minister can give the exact number of companies that tried to take advantage of it, but perhaps she can give us an indication of how many companies have put forward their interest in the scheme.

There are positive things that the Government can do to stimulate the economy, but there are things they can do that will positively harm the recovery. I single out one in particular. From January this year, the Government ceased to allow duty-free shopping for those from outside the EU. The UK Travel Retail Forum believes that this puts 70,000 jobs at risk. Duty-free shopping brings in extra tourists, particularly from wealthy areas such as the Far East. Here I declare an interest as chairman of the Association of Leading Visitor Attractions, which is desperately upset at the end to this encouragement to visitors from overseas to come and make the most of the British economy. If they cannot do their duty-free shopping here, they will go elsewhere. So my final question for the Minister is: will the Government please think again about delivering such a body blow to a sector that has been one of the hardest hit by Covid?