The first proposition is that the Chancellor has failed to meet his deficit reduction targets. In 2010, he said that the deficit would be down to zero by now; this year he is set to borrow £70 billion, and the balancing is postponed for five years. To me the explanation is clear enough: the Chancellor’s policies depressed the growth of the economy, especially between 2010 and 2012, and therefore postponed the closing of the gap between spending and revenue. Perhaps the noble Lord, Lord O’Neill, will tell me why I am wrong.
Secondly, productivity, which was already low before the crash, has collapsed, as the noble Lord, Lord Shipley, pointed out. Between 1971 and 2007 productivity growth was fairly constant at between 2% and 3%. Since the crisis it has been closer to zero. Productivity growth did not collapse like this in previous cycles. The gap between our productivity and that of the rest of the G7 is now at the highest since records started in 1991. I have an explanation for this collapse, which is that recovery has produced a huge expansion of low-productivity jobs in retail, hospitality and suchlike,
and that is the truth behind the much-vaunted recovery of employment. Does the noble Lord, Lord O’Neill, agree, and, if so, what do the Government propose to do to create that high-wage economy that Ministers constantly proclaim as their goal
Thirdly, investment, already inadequate, fell from 19% of GDP pre-crash to 15%, and it is still at the pre-crash level. A robust recovery would expect to see investment for a time exceed its pre-crash level. This has not happened. Why? I have an explanation. Money which would have gone into investment in a healthy recovery has gone into speculation. Investment is down, but we have had a wonderful boom in asset prices, including house prices, which has mightily benefited the rich. Does the noble Lord, Lord O’Neill, think that this is healthy?
Fourthly, instead of borrowing to modernise our infrastructure, the Chancellor has encouraged foreign money to do it, even if the foreign companies, such as Deutsche Bahn, are state-owned. Now, he and the Prime Minister have gone bananas over China. What effect is that going to have on our balance of payments and therefore on our ability to increase exports? We privatised lots of our own public utilities because we thought they wasted money; now, we sell them to foreign state-owned enterprises because we want to save money. Public enterprise is apparently good if it is not British.
“it is necessary to move the bank off the public balance sheet if it is to raise additional funding through borrowing”.
I feel sympathy for the Chancellor trying to balance his budget on the back of bogus Treasury accounts but, instead of challenging the Treasury’s accounting rules, the Chancellor has committed himself to running an overall surplus in normal times, just like Victorian Chancellors, who never borrowed for anything except defence.
Failure to meet his budget targets, low productivity, low wages, low investment, a bonanza for speculators, rising inequality and still more austerity to come: these are the Chancellor’s bequests to the British economy. They have brought enormous harm to the country and will continue to do so unless he finds the confidence to challenge the Treasury’s view. But there is not much time.