Asked by
To ask Her Majesty’s Government what assessment they have made of
the forecasts for the economy included in the Bank of England’s
Monetary Policy Report and Interim Financial Stability Report,
published on 7 May.
The Question was considered in a Virtual Proceeding via video
call.
(Con)
My Lords, the Bank of England has specific statutory
responsibilities for monetary policy and financial stability, as
well as operational independence from the Government to carry out
those responsibilities. The Monetary Policy Committee has
constructed an illustrative economic scenario based on a set of
stylised assumptions to inform its policy decisions. Given the
committee’s operational independence, the Government seek to
avoid commenting on its assessments and monetary policy
decisions.
(Con)
My Lords, I thank the noble Baroness for that reply. The Governor
of the Bank of England, commenting on the MPC report, said that
it would not be until the end of next summer that the economy
would fully come back. Given that that sombre assessment was
based on the assumption in the report that social distancing
would be phased out between June and September, do the Government
recognise that there are whole sectors of the
economy—hospitality, accounting for 10% of the labour force;
airlines and transport—that simply cannot operate profitably with
social distancing? While we all understand why social distancing
is necessary now, do the Government also recognise the awkward
truth that we will not get back to where we were with a full
recovery unless, as the MPC report assumes, we find at the
appropriate time a way for social distancing to be phased out so
that it does not become part of the so-called new normal?
In setting out this week their road map for the easing of the
lockdown, the Government have stated that step 3 would not take
place any earlier than 4 July. We will seek to reopen some of the
remaining businesses, particularly those in hospitality and
leisure, by finding ways for them to do so safely. However, we
acknowledge that this will be difficult for some businesses. We
will continue to be guided by the science and we will target
economic support based on how we progress with the phased
reopening.
(Lab)
My Lords, in the course of the Government’s efforts to mitigate
the collapse of demand in the economy with their furloughing
system and so forth, which I thoroughly approve of, they are
accumulating a lot of debt. Before this crisis, we were fast
approaching a level of public debt at 90% of GDP, which is
unprecedentedly high. At the time of the collapse of Lehman
Brothers 12 years ago, by comparison, we had a 60% public debt to
GDP ratio, so with each crisis we are reducing our freedom of
manoeuvre and our scope for absorbing shocks in the future.
Against that background, do the Government have a notion of the
maximum debt ratio which ought to be acceptable and which they
can use as a discipline in planning the fiscal deficit in future?
If so, will they say what that is?
The Government have set out their fiscal rules and continue to
abide by them. With this pandemic, we face unprecedented economic
circumstances. Our focus at the moment is on protecting health
and jobs, and supporting businesses. As the OBR has made clear,
the cost of inaction would be far higher.
(LD)
My Lords, will the Minister explain how the V-shaped economic
recovery contemplated by the OBR and the Bank of England is
consistent with the collapse in global trade and growing
protectionist sentiment? How do the Government square the UK’s
need to grow exports with their calls for favouring British
companies, extensive onshoring and shorter supply chains?
The Bank of England and the OBR have made it clear that what they
have produced are scenarios rather than forecasts. The Bank of
England’s scenario certainly took into account the effect of this
pandemic on levels of global trade.
(Con)
My Lords, the Bank’s report makes it clear that the construction
sector has been hard-hit by the lockdown. It is vital to revive
it, since it generates activity across the economy. Given that we
have learned that regulators can, under public pressure to
respond to the crisis, greatly accelerate their normal
decision-making processes without sacrificing standards, will the
Government urge all planning authorities to speed up
decision-making on planning applications immediately so that we
can get Britain building again?
We are keen that all planning decisions are made in a timely way.
Construction is one of the sectors where we have provided
Covid-secure guidance to allow people to get back to work, safe
in the knowledge that they will be returning to safe workplaces.
(CB)
My Lords, I draw attention to my declared interests. Economic and
population health modelling has suggested that regular, routine
and repeated testing for the SARS-CoV2 virus of the entire
population, rather than just symptomatic individuals and their
contacts, could facilitate mass labour participation and the
necessary consumer behaviour required to maximise economic
activity ahead of widespread vaccination. What assessment have
Her Majesty’s Government made of this approach?
The Government are clear that “test, track, trace, isolate” will
be a core part of the next phase of our response. We will seek to
do this in different ways, and to learn lessons from previous
pandemics and approaches in other countries. For example, we are
using asymptomatic testing in health and care home settings to
help reduce the spread of this disease.
(Lab)
My Lords, both the Bank of England and the OBR have forecast that
unemployment will double to 2 million, highlighting the severe
impact this crisis is having on those not covered by the
Government’s job retention schemes. Will the Minister therefore
commit to improving the generosity of universal credit and
consider introducing the active labour market policies seen in
other countries, including job search support and job guarantees
for the young?
The Government have already improved the generosity of universal
credit by £20 a week and raised the value of the local housing
allowance. The best thing that we can do in getting people back
to work is to get the virus under control and allow the economy
to be open. We will of course continue to keep under review any
further measures that we need to support people who have, sadly,
lost their job during this crisis.
(LD)
My Lords, once the lockdown has been eased, the trillions of
pounds invested globally in economic recovery packages will have
a significant impact on the Paris climate goals. A very recent
study in the Oxford Review of Economic Policy on choices for this
investment shows categorically that what is good for the economy
is also good for lower emissions. Will the Government give
thought to making green economic stimulus a central plank of the
UK-led COP 26?
We are very keen to have a green recovery which uses the
Government’s policies in working towards economic growth but
which also supports our commitment to net zero by 2050.
(Lab)
My Lords, pursuing the Question put by the noble Lord, Lord
Lamont, one of the—[Inaudible]—about the scale and speed of
recovery. It said that growth could hit 15% for 2021 as a whole.
Does the Minister not agree that inducing excessive optimism
about the speed of the recovery has its own risks, and does she
agree with the former Chancellor, , who said today that
a—[Inaudible]—unlikely?
The Lord Speaker ()
I am afraid that we got only part of your question. Minister, can
you make something of that?
I will attempt to do so. In terms of optimism, or otherwise,
about the speed of the recovery, the OBR’s and Bank of England’s
scenarios are not those of the Government. We do not make our own
economic forecasts. I would also point out that they are
scenarios rather than forecasts, and the Bank of England said
that the risk in its scenario was probably more on the downside.
The Government are focused on providing support now for jobs and
businesses so that they are protected during this time and so
that we can recover as quickly and as safely as possible.
(Con)
My Lords, we welcome the positive report by the Bank of
England—it has not always been so positive. However, we must be
mindful that it did not take into account the extension of the
furlough scheme until October and its total cost of £100 billion.
Would my noble friend the Minister like to comment on that and
perhaps ask the Bank of England to revise its estimation, given
the changes to the government handouts that have just happened?
I believe that the Bank’s scenario took into account the gradual
unwinding of the lockdown and of the support schemes matched to
it, completed by the end of quarter 3. However, the Bank makes
its own decisions about any scenarios or forecasts that it
produces to inform its own decision-making and policy-making.
