Comprehensive Spending Review

Lord Peston Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Peston]

My Lords, my contribution is based on three premises: this is the most reactionary economic statement of modern times; the proposals will do serious damage to our economy; and, to echo the remarks of my noble friend Lord Myners, there is no immediate crisis and the Government should have adopted a much more deliberative approach.

The first sentence of the spending review Statement by the Chancellor said:

“Today is the day when Britain steps back from the brink”.—[Official Report, Commons, 20/10/10; col. 949.]

There was no brink; there is no brink. Britain is not, and never was, on the verge of bankruptcy. There was no financial catastrophe. The Chancellor’s reference to financial catastrophe merely indicates something that I deeply fear—namely, that he has entered into fantasy land. As one sees from reading the whole Statement, he never leaves it. As a devoted watcher of the “The Wizard of Oz”, I deeply appreciate his frame of mind, but I thought that this was a serious matter of economics confronting the country and that fantasy is not what the Chancellor really does. I regard his document, despite the damage that it does, as intellectually frivolous.

My noble friend Lord Myners referred to the alleged burden on future generations. Are the Government suggesting that we should have fought the Second World War on a no-borrowing principle? We have all gained from the defeat of the Nazis. The period did not strike me as being terribly bad, although I was only a child. We paid taxes then to finance the national debt that resulted. If we are now to defeat terrorism, are the Government asking us to believe that, if necessary, we should not borrow to finance the resources that we need to do so? The Government are in fantasy land. As my noble friend pointed out, we donate so many good things to future generations that there is, as far as I know from my limited knowledge of economics, no reason not to place a bit of the burden on our children. They will thank us for what we gave them.

The noble Lord, Lord Lamont, referred to recent GDP figures. There have been three good quarters. However, it has been overwhelmingly established by all the economic research that I know that what happened in that period was determined during the previous two years. Not a single bit of the recovery that we observe is remotely attributable to this Government. I looked in vain for the Chancellor in his Statement to thank his predecessor for the legacy that had been left him. He did not even have the courtesy to admit that that was the foundation that was given to him.

The Chancellor devoted a whole hour to a speech that, apart from being reactionary, was one of the most uninteresting of all time. He referred to the IMF. The IMF and the European Central Bank are the two last repositories of completely outdated and erroneous monetarism. They, too, believe in the doctrine, “Private expenditure good, public expenditure bad”. The noble Lord, Lord Lamont, et al tell us that this is not ideological; I tell them that it is entirely ideological. It is all about the kind of society in which we would like to live. We cannot avoid that.

The Chancellor said in his Statement:

“The creation of an independent Office for Budget Responsibility has brought honesty back to official forecasts”.

Since the official forecasting was done by the economists in the Treasury, who I assure your Lordships are of the highest quality, his remark is totally defamatory. If he had made it outside the Commons Chamber, I wonder what would have been said. The idea that those economists did not give a Chancellor of our time or the Chancellor of this time their best and honest views is preposterous. The Chancellor continued:

“I can confirm to the House that the OBR and its new chair”—

I always use the word “chairman”—

“have audited all the annually managed expenditure savings in today’s statement”.—[Official Report, Commons, 20/10/10; col. 949.]

Is there any published documentation corresponding to that statement and, if so, where can I find it so that I can read it?

[A noble Lord]

It is in the document.

[Lord Peston]

No, it is not in there. That is not a document from the OBR; it is a document from the Government.

To what extent is the Chancellor talking to the head and other members of the OBR, who are meant to be independent? If they are meeting, were minutes taken? If so, could we have copies of them so that, for the sake of transparency, we know the nature of the argument that we are dealing with?

The Chancellor tells us that we are all in this together. I refer to the great economist Michal Kalecki, who in 1943—note the date—wrote a brilliant article in Political Quarterly. He said, apropos of exactly what the Chancellor has said:

“For here a moral principle of the highest importance is at stake. The fundamentals of capitalist ethics require that ‘you shall earn your bread in sweat’—unless you happen to have private means”.

I wonder whom Kalecki, if he were alive today, might have in mind. Of course, they are not laughing, because they know what this is really all about.

[Lord Marlesford]

I was brought up on the great Kalecki and my recollection of one of his fundamental theses was that the only rescue and hope for capitalism was armament and war. That has not been proved true.

[Lord Peston]

That is not true—that was not his view. What is interesting, if I may give a lecture on the history of economics, is that we can distinguish Kalecki from Keynes, although Kalecki made the great mistake of publishing in Polish and therefore was never fully appreciated. Keynes was attacked, particularly by the American right, for being left wing, but he really believed that capitalism could be saved and advocated his policy so that we could go back to capitalist free enterprise. Kalecki believed that the ideology of capitalists was such that they would prefer to destroy the system rather than to allow Governments to intervene to save it. I am glad that the noble Lord is aware of Kalecki; the sadness is that his name still rarely appears in any of the economic textbooks.

I refer again to the problem of what we should be doing. The noble Lord, Lord Sassoon, said that none of us was telling him what he ought to do. I shall not send him a bill when I do tell him. I am a Back-Bencher so I speak only for myself. The first thing that I would do to save money, after what one of our major newspapers called the fiasco of the defence review, is to redo that review and realise that our whole future on the defence side depends on conventional weapons. We should announce immediately that we have no intention of wasting any money on the renewal of Trident; our nuclear deterrent is not a deterrent, because no one can tell us whom it deters and, in any case, it is not independent. What this country needs is a much improved set of conventional armed forces. The Government should go back and think about that.

My second recommendation to the Government is to abolish immediately the raising of VAT at the beginning of next year. It is the last thing that the economy needs. I speak only for myself; I have no idea whether others are deeply committed to raising VAT. My view is that abolishing the increase is the stimulus that the economy needs.

Thirdly, the Prime Minister, instead of looking for headlines in his attack on the European Community by telling us that he is a Eurosceptic, should realise that the biggest waste of money in the whole of Europe is the common agricultural policy. If he had any backbone, he would seek a row with the Europeans to abolish that policy. That would save us enormously more money than the trivial sums that we are talking about.