Skip to main content

Covid-19: Economy

Volume 803: debated on Thursday 30 April 2020


Asked by

To ask Her Majesty’s Government what plans they have to protect the prosperity and wellbeing of British citizens from the effects of the COVID-19 pandemic on (1) the United Kingdom’s gross domestic product, and (2) the global economy.

The Question was considered in a Virtual Proceeding via video call.

My Lords, the Covid-19 pandemic is the biggest threat this country has faced in decades and we know that people are worrying about their livelihoods, as well as their health. That is why the Government have announced unprecedented support for public services, workers and businesses. These measures include, but are not limited to, £14 billion for public services, the Coronavirus Job Retention Scheme and guaranteed loans for businesses that will help protect them against the emergency and ensure that our economy recovers quickly.

I thank the noble Baroness for her Answer. I quote from a Conservative Party press release of 16 September 2019:

“Strong … economic growth means more money for our public services.”

Our economic management has relied on growth for employment, pensions and health. We have an expectation of a very large fall in GDP as a result of coronavirus, and years of recovery. Will the Government be making plans along the lines of the German Government’s 2018 report on the precautionary post-growth approach?

The Government are putting in place measures to respond to this crisis to protect against the economic harm that is being done now so that we can bounce back quickly. That is exactly why we have put in place schemes such as the job retention scheme, so that we can protect people while we have to have social distancing measures in place and ensure that the economy bounces back afterwards.

In Eastbourne, where I live, we are looking at a very substantial level of unemployment due to the restrictions on the hospitality industry perhaps lasting for really quite a long time. Will the Government encourage communities such as ours around the country to come forward with their own plans for their renaissance and support them, rather than trying to create plans in the centre, or even at LEP level?

One thing that is unchanged in this crisis is the Government’s commitment to levelling up across the country. The Government fully acknowledge the importance of local plans in building our economic recovery once we are through this pandemic.

My Lords, after the 2008 global financial crisis, UK productivity fell from an annual average rate of 2% to just 0.3%, with full recovery happening only after 30 quarters. Can the Minister assure the House that the lessons of 2008 are being taken into account in dealing with today’s crisis? In particular, what assessment has been made of the longer-term impact on productivity, and therefore on essential funds for public services, of failing to protect the goods and services sector alongside the understandable employment subsidies to protect jobs?

I assure the noble Baroness that we will reflect on all lessons from the past in dealing with the current crisis, although we have never seen anything quite of its nature before. One of our focuses, through the job retention scheme and the loans available to businesses, is to protect and maintain our productive capacity so that we can bridge this crisis, come out the other end, and protect our nation’s productivity and growth.

My Lords, 60% of private sector workers in the UK were employed by SMEs, with more than half—some 9 million—in microbusinesses. Many SMEs are struggling to keep their businesses alive and workers on their books. We know that, if too many fall, this will scar the economy and slow recovery. The Chancellor’s announcement of the bounce-back loan scheme is welcome, but at what rate do the Government now expect loan finance to flow to SMEs, what is the expected impact on the number of businesses that will stop trading, and what further refinements to the current schemes targeted on SMEs are the Government reviewing?

As the noble Baroness said, we introduced bounce-back loans just this week. We are moving at pace to make sure that all the measures that we have announced are implemented. Because of that pace, we will of course always keep those measures under review to see how well they are working and that the support is getting where we want it to be. If further measures are needed, we will keep that under review as well.

My Lords, what is essential? Does the Minister agree that mental stability is vital for prosperity and well-being? If so, does she agree that gardening and the arts are essential for the mind, just as food is for the body, to keep this nation prosperous and sane and to save lives?

The Government are very conscious of the impact that this pandemic may be having on people’s mental health and well-being. That is something that we will take into account as we look at the social distancing measures that we have in place. I know that many arts organisations are undertaking a lot of innovative work to bring arts into people’s homes. With regard to garden centres, we are working closely with the Horticultural Trades Association to see what can be done as we look at the easing of these measures.

Black and minority ethnic youths are twice as likely to be unemployed as their white counterparts and 48% more likely to be on zero-hours contracts. What plans do the Government have to mitigate this already shocking data, which could get very much worse?

I thank the noble Lord for his question. We are, of course, extremely concerned about the impact of Covid on employment. That is why the job retention scheme applies to all people on the PAYE system, including those on zero-hours contracts. We have also made the welfare system more generous during this period, including adding to the standard allowance on universal credit.

My Lords, farmers are vital to our food industry but, to make ends meet, many have diversified. This makes access to government support complex and difficult. Many are finding that the money is not reaching them, and they certainly cannot contemplate taking on more debt. This is causing hardship and they risk losing their farms. What can the Government do about this?

I thank the noble Baroness for her question. The Government continue to engage with farmers and the NFU to see what support we can put in place for the sector. Of course, all existing business support is available to farmers and we will look at any particular problems that they may have in accessing that support.

The noble Baroness’s Answer is typical of the Government’s response, which tends to be relatively short-term, looking just one or two months ahead. What work are the Government doing to develop longer-term scenarios, with proposals that look further ahead and are more holistic, fitting all sectors of the economy together in the overall consideration?

I agree with the noble Lord about the importance of a longer-term view. He is right that in the last five weeks we have focused on getting immediate support up and running for individuals and businesses, setting out those policies and making them operational, but that does not mean that there is not further work to be done to take into account the longer-term view of this crisis. It is true that facts are changing as we go along—the disease and our knowledge of it are changing—so we will want to take that into account as we develop our long-term plan.

QE was used very successfully by the Bank of England in the banking crisis. Are discussions under way for some form of people’s quantitative easing to deal with the ensuing economic crisis?

Of course, decisions around monetary policy are for the independent Bank of England. It has already taken action in this crisis, including cutting the bank rate from 0.25% to 0.1% and introducing the Term Funding Scheme with additional incentives to support small and medium-sized enterprises during this time.

Are the noble Lords, Lord Sharkey or Lord Hendy, there now? No? In that case, the time allowed for the first set of questions has now elapsed.