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Economic Downturn

Volume 823: debated on Monday 18 July 2022


Asked by

To ask Her Majesty’s Government what assessment they have made of forecasts of an economic downturn later this year, and what steps they are taking in response.

Her Majesty’s Government do not prepare forecasts for the UK economy. In March, the independent Office for Budget Responsibility forecast growth of 0.3% and 0.2% for the third and fourth quarters. Recognising that the economic outlook has become more challenging since the OBR produced its forecast, in May the Government pledged a further £15 billion of support to help maintain consumer spending and head off the risk of an economic downturn.

The Minister has not mentioned rising inflation, rising hardship and inequality, low growth and productivity, strikes, a fuel crisis and, especially today, climate change. All tell us that the outlook is dire. What are we going to do about it? Judging by the Tory leadership hustings, we are going to cut taxes and cut public spending, either now or later. No wonder the Conservative-dominated House of Commons Treasury Committee accused Ministers of a

“lack of long-term thinking in economic strategy”.

Those whom we rely on to invest and grow the economy do not make decisions based on headline tax rates and soundbites. Even though we only have a caretaker Government, will the Minister urge her colleagues to start thinking through a proper strategy to deal with this economic crisis, or simply adopt Labour’s strategy?

My Lords, there was quite a lot in that question. I am not sure that the noble Lord listened to my initial Answer, where I referenced the support that the Government are providing to help people with the cost of living. That was extended by £15 billion in May, but of course previous support was announced, which takes that to £37 billion. He mentioned a long-term plan for economic growth, which is exactly what the Government have. At spending review 2020-21, we made a landmark investment in capital projects and we are increasing public investment in R&D to £20 billion a year by 2024-25. Those are just two of the measures that we are taking to support our economy.

My Lords, since our economy is facing a major backlog in almost every government department, is this not the time for our great public servants to be reminded that they are there to serve the public and in particular our business community—for instance, on passports, trade and business? Can we please ask them at this time to remove the backlogs that they are performing on at the moment?

My Lords, I think that our public servants have at the forefront of their minds when they do their jobs the service that they give to the public. My noble friend refers to backlogs. I am not sure quite which ones he is referring to. My noble friend is beside me and she would say that there are no backlogs in passport processing, and that applies to a number of other government services too. There are in the NHS—we absolutely acknowledge that—but the Government have a plan to deal with that.

My Lords, does the Minister remain committed to the assertion by the former Levelling Up Secretary, Michael Gove MP, that levelling up may be more difficult in a time of economic hardship but that it is even more important to tackle regional equality and that investment must continue to be made to be able to do that?

This Government are absolutely committed to levelling up. The former Levelling Up Secretary did an excellent job, but that commitment does not change with his departure.

The Recruitment & Employment Confederation found that the UK could lose up to £39 billion a year from 2024 if we do not resolve labour and skills shortages. What is the Government’s future workforce strategy? If the Minister tells me that there is one, could she indicate where to find it, because nobody, including industry, can seem to locate the bones or the substance of such a strategy?

My Lords, there are several prongs to that, one of which we discussed during the passage of the skills Bill, which the Parliament has just enacted, including increases in investment in skills and working with employers to ensure that the qualifications meet their needs. As part of that work, the Department for Education is also working with employers to look forward to what future skills the country will need.

My Lords, we all agree that soaring inflation is a great threat to the economy and is, without a shadow of doubt, fuelling the cost of living crisis, but new research from my union, Unite, shows that it is being driven by corporate profiteering and some greed, with profit margins of the FTSE 350 firms now 73% higher than pre-pandemic. What is stopping the Government bringing in a windfall tax on all companies found to be profiteering or price gouging, not just the oil and gas companies, as currently proposed?

The Bank of England’s independent Monetary Policy Committee said in its recent report that the vast majority of the increase in inflation over the past year reflects the impact of sharp increases in global energy and tradeable goods prices. On increases in energy prices, we have introduced the energy profits levy, and more than the amount that will be raised through that levy is being returned to households through our cost of living support.

Does my noble friend agree that the great success in this country of the unicorns—greater than that in Germany, France and Israel combined—could be enhanced with the relaxation of the EU state aid rules, particularly on EIS and SEIS companies?

My noble friend is right that the UK remains a great place to start a business and we will always want to make sure that our tax regime is incentivising businesses to start here. I am sure that he would agree that measures such as the super-deduction are a great initiative to help support that.

My Lords, can the Minister tell the House what she has discerned, having watched the interviews with the candidates to be Prime Minister, about their long-term thinking? None of them has talked about climate change. Is it not time, particularly on a day like this, that we started thinking about the need to travel less, to use less water in due course and to eat less? There is a whole range of areas where we need to do less, not more. When will we start that kind of debate and thinking?

My Lords, I was doing some other things this weekend, such as celebrating my daughter’s first birthday, and I will not comment on the leadership race. The noble Lord raised the need to have greater hybrid working, for example, and to look for other opportunities for efficiency in our economy and I absolutely agree with him on that.

My Lords, does the Minister agree that real economic growth will prove almost impossible in the long term while our workforce remains more than 1 million short? Given the current leadership debate, how long will we have to wait until the Government take action to address this growing labour crisis?

I reassure noble Lords that they will not have to wait at all. We are investing in skills across the range of our workforce to ensure that those who are out of work, or in work where they could be making better use of their skills, can find those opportunities. We need to encourage people back into the workforce—for example, older workers who moved out of the workforce during the pandemic—and we need to use migration in a targeted way to ensure that we get the right skills that this country needs.

My Lords, media reports suggest that Ministers are to launch a multibillion pound business loan scheme in an attempt to counter a looming recession. Can the Minister confirm whether an announcement will be made to Parliament before the Summer Recess? Can she also confirm what measures, if any, are being put in place to avoid the level of fraud seen under the Covid support schemes?

My Lords, I am not aware of any such plans, but I reassure the noble Lord on his question about fraud. In the Spring Statement, the former Chancellor announced a range of resources for the Government’s counterfraud function to ensure that measures to counter fraud are designed into programmes from the very start. I know that the context for the question is the bounce-back loan scheme and I remind noble Lords about the need for speed in getting support to businesses at the time of the pandemic.

My Lords, one way to help with the cost of living is to bring down prices by removing tariffs. We still have tariffs that fall heavily on clothing, footwear and foodstuffs. Those hit people with the lowest incomes hardest, because they have to spend a higher percentage of their income on those basic commodities. Could we not scrap some of those tariffs or, if we absolutely must indulge the idea that that would mean some kind of disarmament in advance of trade talks, could we not suspend them for 24 months during the cost of living crisis, with an option to renew at the end?

My Lords, I am not aware of any plans to take up my noble friend’s suggestion, but I will take it back to the Treasury. He will know that the Government are focused on increasing opportunities for trade deals and free trade to bring down those barriers and bring down costs to consumers in the long term.