Budget Statement

Lord Tugendhat Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, there is much to admire in the Budget—and I do admire it—but I should like to take the opportunity this evening to make what I hope the Government will regard as some constructive criticisms. I begin by drawing attention to the Chancellor’s Statement, in which he said:

“Public spending should reflect public priorities”.—[Official Report, Commons, 8/7/15; col. 324.]

Of course it should, but those priorities are bound to change with the passage of time, and the Government need flexibility to respond accordingly. That may seem obvious, but this Government have denied, and are denying, themselves that flexibility by each year increasing the number of so-called protected departments and items. The result is to freeze priorities and to give the impression that some departments are more important than others. Thus, the protected aid budget looks, and is, treated as though it is far more important and central to the Government’s concerns than the Foreign and Commonwealth Office.

Another bad effect is that having a protected budget and guaranteed increases inhibits innovation and creative thinking. It leads to sticking to the old ways of doing things and asking for more money each year. It also means that at a time like the present, cuts have to be concentrated on the diminishing base that is unprotected, with the result that massive cuts occur in those areas in which the knife falls. I think here particularly of housing benefit and tax credits. I do not dissent from the line of the Government’s march or from the policy itself, but the cuts have been very aggressive and will not be compensated for by the living wage, which will benefit a different group of people.

So on the one hand is an ever expanding group of departments and items that are protected and, on the other, those that are being cut and cut again. I see today that some departments are being asked to produce plans involving savings of 20% to 40%. Over time, that is bound to lead to an extremely unbalanced budget and to the freezing of priorities, and getting out of that bind will be quite difficult. We have heard much in recent years of my party—the Conservative Party—breaking free from the shackles of the coalition, so it is ironic that the Chancellor should restrict his freedom of action in a manner that will become increasingly burdensome to him and make his ability to respond to changes in circumstances much more difficult.

I now turn to the living wage. As many have pointed out, this is a proposal that, if put forward by Labour, let alone by Brussels, would be attacked from these Benches as an unjustifiable invasion into the way in which business operates, particularly small businesses. The Chancellor has taken it upon himself to determine by fiat the level of wages over a wide area of the economy. Although his aim—to push wages up rather than hold them down—is different from that in the 1970s, it is a return to the policies of the Wilson and Heath Governments. Neither is usually held up as an exemplar by Ministers in this Government but we are returning to those days, as my noble friend Lord Higgins, who was in the House of Commons with me at that time, may agree. I see him nodding. Those of us who remember those days know what is likely to happen. The living wage is likely to become an instrument of electoral tactics, just as the setting of interest rates used to be before the Monetary Policy Committee was established.

I understand that the Government are aiming to improve this country’s low productivity, as the Minister pointed out in his introductory speech. He wants a high wage, high productivity economy, which is a good thing. However, the danger is that the Government may be taking us down the French route of exchanging low productivity for high productivity, coupled with high unemployment—especially among the most disadvantaged. Normally when the Conservative Government look across the channel, we do so in order to criticise the way the French do things. Here, we seem to be looking across the channel in order to copy what the French are doing, and it may very well have the same consequence.

It is right for the Government to determine the direction of the economy and take the big strategic decisions, but in a number of areas implementation is best depoliticised and left to experts. That is why I support the Monetary Policy Committee and the Low Pay Commission. I very much hope that, having neutered, or rendered null and void, the Low Pay Commission, the Chancellor will not now turn his fire on the Monetary Policy Committee.

As I said at the outset, there is much to admire in this Budget but now is the time—especially in this House—when constructive criticism is required, and I hope that the Minister will take what I have said in that spirit.