Autumn Statement

Baroness Worthington Excerpts

Thursday 4th December 2014 Lords Chamber

[Baroness Worthington (Lab)]

My Lords, I congratulate the noble Lord, Lord Rose, on his excellent maiden speech, and in particular I congratulate him on his work at Marks & Spencer and his Plan A campaign, based on the very important principle that there can be no Plan B when we have a single planet.

Listening to the Chancellor’s speech yesterday, one could be mistaken for thinking that all is well and he has not in fact missed his targets or had to make a U-turn on the main elements of his economic plan. We are told that the UK’s economy is growing and that the plan, if it is not quite working as expected today, will definitely do so tomorrow. Whether people feel that this is indeed the case will be a big factor in deciding the next election. My concern relating to the Statement is the extent to which the Government’s management of the economy is sustainable.

If our measure of success is based on shaky foundations, the indiscriminate slashing of public spending and tinkering with tax cuts, the plan will not work. If we tell ourselves that all is well, but in reality our measurements of growth do not reflect external realities, it will not work and cannot work. If, as it appears, we are relying on growth based on another bubble in the housing market, on household, debt-based consumption at the expense of savings, on imports rather than domestic manufacturing, on receipts from oil and gas extraction rather than from clean energy and increased efficiency, on using fines from corporate malpractice to fund essential services and on relying on increases in population to spur growth but not investing in the infrastructure that that increased population must rely on, the plan can never work.

The noble Lord, Lord Skidelsky, in his characteristically concise and powerful speech, used the word “delusional” to describe the Statement, and I have to say that I agree with him. This is a document about a fantasy world and it is out of touch with the modern challenges of today. The Chancellor seems to inhabit a world where he believes that we can continue to rely on the past to prop up our economy and to have an almost delusional faith in future, as yet unproven, fanciful sources of growth—anything rather than face today’s reality. Blinded by a poorly defined “small government” ideology, the Government appear unable to grasp that state investment can be a spur to growth, boosting income and helping to pay down debt faster. Instead of delivering real growth in investment, the Chancellor appears to be relying on the old trick of changing the goalposts to hide the weak fundamentals—reclassifying business investment to include R&D and reclassifying public investment to include single-use military expenditure. These may have helped the figures look better than they really are but do not signify a big change or indeed a sustainable future.

The reason real investment is not happening is because the Government are relying on a strategy of enticing the private sector to invest, where the state could do so at lower cost and with a higher degree of certainty of delivery. We see this in the Chancellor’s inadequate and implausible flood defences plan. We see it too in energy. Over half of the projects in the Infrastructure UK pipeline relate to energy but the Government’s approach to securing this investment is confused and confusing. We can be grateful at least that the Chancellor has been persuaded to drop his damaging anti-renewable energy rhetoric and false boasts about not going further or faster than Europe in tackling climate change, but the lack of a logical plan is still frighteningly clear.

Not so long ago the Government were trumpeting their successes in reigniting investment in the UK nuclear industry. Obviously this involved the destabilising of the rest of the energy market but that seemed not to matter at the time. It has been suggested that Hinckley Point C is going to be the single most expensive infrastructure project ever built in the UK, yet it warrants not a mention. Could this be because the Chancellor is learning that leaving things entirely in the hands of the private sector—even a foreign state-run company masquerading as the private sector—is not a reliable strategy? You have to overpay and overincentivise, and you have no guarantee of delivery.

On renewables, the Chancellor has at least discovered two technologies he seems happy to mention: offshore wind and now the promise of tidal lagoons. The problem is that these are currently the most expensive possible options. Onshore wind, the cheapest source of clean power—which still has much room to grow if handled sensitively—is ignored. So are solar power and renewable heat—two technologies that enable individuals and businesses to join the energy generation market. Clearly, the widening of the number of players in the energy market is still not high on the list of the Chancellor’s concerns.

The Chancellor prefers to rely on the old industries, desperately hoping that even as oil prices decline we can somehow rely on the North Sea to keep providing us with income. If there is a plan to address the falling receipts that are inevitable, it is based on a fantasy—shale gas and the much hyped creation of the sovereign wealth fund for the north on the back of the receipts. This is not credible. It is likely that revenues will not be generated for at least 10 years and any wealth fund will need to wait another decade to be able to spend any interest on the money that has accrued—if it has indeed accrued. Why the sudden interest in the north? Perhaps close family members have pointed out that the desolation there makes it ripe for oil and gas exploration.

Finally, I will say a word about stamp duty, which of course has caught the headlines and been a very popular measure. The changes announced are clearly sensible and long overdue. However, an important opportunity to boost investment in the efficiency of our housing stock by reducing fuel bills and linking this to stamp duty has been missed. This is not surprising as the Chancellor shows no understanding of the benefits of increasing efficiency to boost our economy. The Statement was, in one sense, a triumph of fantasy over reality. Thankfully, the public live in the real world and, I am sure, will vote out this Government.