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Where's the strategy, Chancellor?

BryanDavies.jpgBryan Davies on the government’s continued failure to invest for economic growth

From a Treasury perspective, today’s Queen’s Speech debate on the economy could not have come at a worse time for this government. The recent Budget was the culmination of six years of Tory failure, with growth, wages, business investment and productivity all revised down – for this year and every year of this Parliament. 

We were told that despite this the books would be balanced by 2019-20. But yesterday, the Office for Budget Responsibility released figures which indicated that this is likely to be added to the long list of failures, reporting a deficit £3.8bn larger than forecast and a £49.6bn increase in public sector net debt to £1,596bn. On top of all of this, our country’s manufacturing and construction sectors remain below their pre-recession peaks. 

At the beginning of this month, the ONS revealed that UK industry fell back into recession as it shrank for the second quarter in a row. Compared with a year ago, manufacturing production in the first quarter fell 1.9% – the biggest fall since 2013. This further decline in output shows once again that our faltering recovery is built on sand. The government has failed to rebalance the economy and it is manufacturing companies in particular that are being hit hard by George Osborne's poor long term planning. 

This is the Conservatives’ track record. So we were looking to the Queen’s Speech for something that indicated that ministers were prepared to own up to their failures and start investing in our economy by building a strong foundation for future growth. 

We largely welcome the Treasury Bills on Lifetime Savings and the Soft Drinks Levy Bills. But we also need a serious industrial strategy to support the high-wage, high-tech industries of the future. The National Infrastructure Commission is a positive step, originally a suggestion by the Labour-commissioned Armitt Review. The government however, has so far failed to end underinvestment in the nation’s infrastructure, support key industries like construction and manufacturing, and tackle regional inequalities.

Boosting our productivity can only be achieved if all parts of the UK are contributing to that growth. The gap between our richest and poorest regions, in terms of disposable income, is the widest of any country in Europe. Little wonder that we fair so badly in terms of productivity when compared to our EU partners. 

Devolution of power will be key to ensuring that we get a more balanced economy. Too often the Chancellor has used the ‘Northern Powerhouse’ as an initiative to disguise the cuts he is imposing and the government’s own figures show that they are not delivering. Only one of the top 15 infrastructure projects receiving the most public funding is in the North of England. 

This same rhetoric is also true when we talk about tax avoidance, with the measures in the current Finance Bill just simply do not go far enough. Despite what this government might say, tax avoidance is still rife. The latest figures from HMRC put the tax gap – ie, the amount between what is owed and what is collected – at £34bn. Up one billion since 2010.

Labour will support measures to tackle criminal finances, so the proposals to hold corporations to account for failures to prevent tax evasion are welcome. Ministers however, shelved similar plans for an offence of a corporate failure to prevent economic crime in September last year. 

The government desperately needs to reassess its priorities and decide who it will stand up for. We need to invest for the long-term to ensure that we tackle the big challenges facing our economy on infrastructure, skills and technology. We also need to develop a proper industrial strategy and lays the foundations to exploit new opportunities and secure the jobs and growth our country needs

Lord Bryan Davies is a Shadow Treasury Minister in the House of Lords

Published 25th May 2016

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