In quarter 3 of 2016, following the EU referendum, UK GDP growth was 0.6%, and the unemployment rate is now 4.8%. These figures show that not only was the economy stronger than we thought going into the referendum, it has been much more resilient than many people projected—“a brighter future”, in the Prime Minister’s words. The short-term pre-referendum analysis published by the Treasury was based on a specific set of assumptions, some of which have already proved invalid.
My Lords, what a joy it must be for us all to see business confidence rising and industry expanding; what excitement there is in seeing so many great, global countries recommitting themselves to Great Britain; and what a sadness for so many of us to see so many so-called experts having got it so wrong so frequently. Michael Fish got it wrong just once, not every night for six months. Does my noble friend agree that we have a clear objective, we have a clear agenda, and it is now time for all of us, no matter what side we took during the referendum campaign, to accept the very clear instructions of the British people and help to deliver the very best Brexit deal that common sense and common European interest can deliver?
I agree with my noble friend that we should try to deliver the best deal for this country that we can. Obviously, the analysis was based on a specific set of assumptions. They may have seemed sensible at the time but, with the benefit of hindsight, these things are always difficult. The Treasury also cited the uncertainty that a leave vote would cause, weighing on the economy, and it was therefore good to see certainty at the top of the Prime Minister’s list of objectives today.
My Lords, not all facts are as rosy as the noble Lord, Lord Dobbs, suggests. In hard facts, are we not dealing with a significant depreciation of the currency and a consequent rise in inflation which will cause difficulty for those of our fellow citizens who cannot readily raise their incomes? Is it not the case, whatever the rosy view on the other side of the House, that despite the drop in the value of the pound we have the highest levels of deficit on our current account ever recorded, so not much has yet fed through to our exporters?
As a new Treasury Minister, I am very aware that I should not comment on currency movements, but we are very lucky in this country to have the independent Bank of England. It has an inflation target; we do not target the exchange rate. The performance of the economy has been stronger since Brexit than any of us feared with, for example, good household consumption figures recently.
My Lords, does the noble Baroness agree with the Governor of the Bank of England, whom she has just praised, in his analysis but two days ago, when he said that the high levels of consumption in this country are kept up by unsustainable levels of household debt—that we are living now and will have to pay for it in the future?
I always listen with great care to what the governor says. Of course, unsecured debt as a share of household income is in fact lower than it was before the financial crisis. It is true that the savings ratio has come down more recently to 5.6%. That often happens in a recovery. I go back to the point that I made at the start: UK GDP growth has been strong relative to other leading OECD nations, and the unemployment rate is extremely low in this country, which is very good for working people across the UK.
Will my noble friend ignore the misery mongers on the Opposition Benches? Is she aware that some time back, long before the beneficent Brexit decision, the majority of economists, including the Bank of England, were saying that sterling was overvalued and needed to come down, and that inflation was too low—far below the 2% target—and needed to go up? When these things are gradually happening, they then say it is a disaster. Would she like to comment on that?
I very much agree with my noble friend that we always need to look at the opportunities. As I have often said, I am glass half full, not glass half empty. Like the Prime Minister, I am determined that we should pursue a good Brexit and a bold and ambitious free trade agreement with the European Union, if I may pick up the comments that were made in relation to Mr Ricardo.
My Lords, does the Minister understand some of the concerns at the kind of complacency that we have just heard expressed about a 20% devaluation of sterling, far higher than any recommended devaluation; soaring consumer debt, not quite yet at the crisis levels of 2008 but only a margin below; and inflation creeping into the system? I am sure that poor people will be glad to know that the noble Lord, Lord Lawson, celebrates the higher prices that they will be paying. Those have been recipes in the past for economic crisis. Should not the Government take more notice of what are not straws in the wind but major signals of problems ahead?
We have a system of carefully looking with the help of the independent OBR twice a year at where things are going and making the adjustments that we need. Indeed, I agree with the noble Baroness that there are long-term problems, and I am surprised that no one has mentioned the fiscal sustainability report that was published today—an independent and objective assessment, which looks ahead to the long term and will be an important catalyst for discussing some of the challenges we have in relation to the economy and how we fund the public services appropriately.