Government Spending Review 2013

Lord Empey Excerpts

Wednesday 3rd July 2013 Grand Committee

[Lord Empey]

My Lords, I should like to make a few comments in the gap. Like many people in this country, I am disappointed and to a certain degree angry that the United Kingdom finds itself in its current economic powerlessness around the world. This has major implications for our foreign policy, our defence policy, and for a number of other matters. While a number of noble Lords have pointed at former Prime Minister Gordon Brown and others, this situation has been developing over a substantial period of time. It did not happen overnight. I think that the rock we perished on really goes back to the 1960s and 1970s when we turned our back on manufacturing, thinking it was old hat. It was about dirty, smelly factories, and the new way to do things was in the service sector, with finance and so on. We moved away from a broad-based and balanced economy with a portfolio spread across a range of areas. Indeed, our outward-looking expertise and our contacts throughout the world were not exploited to the extent that they might have been.

I want to make a point about the rhetoric that we are currently using, which other noble Lords have referred to in the debate. We have been talking about “savage cuts” of this, that and the other. The arithmetic disproves that. Spending and borrowing are going up. I did a brief calculation and worked out that as a country we have borrowed around another £80 million since the debate this afternoon began. Anyone who suggests that we are in the throes of brutal cutbacks is simply not being realistic. There are many things that we would like to spend money on and there are many groups in our communities that we would wish to help, but unless we as a nation can make the money to pay for those benefits, clearly they are not possible. Everyone will suffer if we lose that capability.

I have one question in particular for the Minister on pension funds. I asked his colleague, the noble Lord, Lord Freud, about this and received a Written Answer the other day. Pension funds in other parts of the world can buy into our electricity and water sectors, transport, airports, all sorts of things. Why are our own pension funds not doing the same thing? The answer is that there are too many of them and they are too small, so they do not have the capability to do so. An example of this is the Ontario public sector workers’ fund. It has 400,000 members and a huge balance sheet. We now describe a large fund as one with over 1,000 members. That is just not competitive. I know that the Government are looking at this, but there needs to be a radical step change so that the pension funds in this country have enough firepower to make the purchases that will bring revenue into this country instead of being broken up into tiny funds that are of no significance whatever.

I want also to ask about our exchange rates, a subject on which I tabled an Oral Question last week. I know that the lowering of exchange rates can have inflationary implications, but we are not playing on a level field. Other countries are flagrantly manipulating their exchange rates. China has been doing it for years, and Japan is doing it at the moment. Its exchange rate with the dollar has dropped by 15% since the new Prime Minister was elected a few months ago. There is no point in playing by the Queensberry rules while someone is taking the very bread out of your mouth, and that is what is happening. Will the Minister tell us, if he can, whether the Government are looking closely at the issue?

My final point is this. If we are trying to stimulate the economy and achieve some of our objectives in an atmosphere of reduced spending, will the Minister consider how VAT is applied to things such as the retrofitting of buildings? Such activity achieves the Government’s energy objectives by suppressing demand while at the same time increasing employment. We have to be more imaginative in how we use fiscal measures to achieve our objectives and generate further employment.