Autumn Statement
John McDonnell Excerpts(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
This morning, we heard the verdict from the trial, following the tragic murder of Jo Cox. That murder robbed this House of a fierce advocate for social justice and a passionate campaigner. Her killing was an attack on democracy itself. Our thoughts are with her family.
Today’s statement places on record the abject failure of the last six wasted years, and offers no hope for the future. The figures speak for themselves. Growth is down; wage growth, down; business investment, down. [Hon. Members: “Sit down.”] The Government’s own deficit targets are failed; the debt target, failed; the welfare cap, failed.
Mr Speaker
Order. Let me say now that if Members from either side want to shout out, they should not bother to stand, because they will not be called. I say that to Members on both sides—stop it. It is juvenile, low grade and hugely deprecated by the public, whose support we should be seeking and whom we should try to impress, not to repel.
John McDonnell
Thank you, Mr Speaker.
We have heard today that there will be more taxes, more debt and more borrowing. The verdict could not be clearer. The so-called long-term economic plan has failed. As the Treasury’s own leaked paper reveals, the Government knew it had failed before the referendum result was announced. We now face Brexit—the greatest economic challenge of a generation—unprepared and ill equipped. The new Chancellor acknowledged the failure of the economic strategy in October when he promised a reset of economic policy.
Today, we expected a change of direction after those six wasted years. Instead, we have seen further cuts to earnings for those in work through cuts to universal credit, and a living wage increase that is lower than expected under the previous Chancellor. This is a new Conservative leadership with no answers to the challenges facing our country following Brexit, and no vision to secure our future prosperity.
Labour respects the decision of the British people to leave the European Union, but the chaotic Tory handling of Brexit threatens the future prosperity of this country. The Chancellor must now do the right thing for British workers and businesses. He must insist on full, tariff-free access to the single market. He and the Treasury know that that is what will get the best deal for jobs and prosperity here. It may not be in the Chancellor’s nature, but in the national interest I urge him to stand up to the Prime Minister and the extreme Brexit fanatics in her Cabinet. If he stands up for British businesses and jobs by fighting for single market access, he will have our full support.
After six wasted years, wages are still lower than they were in 2008. Self-employed people are, on average, paid less than they were a generation ago. Six million people are earning less than the living wage. Too many people are having to worry about buying school uniforms, affording a family holiday or even just paying the rent or mortgage.
We have had a month of briefing from the Conservative party on those people who are called “just about managing”—the JAMs. To the Conservative party, these people are just an electoral demographic. To us, they are our friends, our neighbours and the people we represent. Let me tell the House why those people are just managing. It is the result of Tories imposing austerity on an economy that could not bear the strain. We have seen productivity stagnate, but there is nothing in the autumn statement on the scale needed to overturn those six wasted years.
If the Chancellor really wants to make a fairer tax system as well, he can start by bringing back the 50p tax rate for the richest in our country. We have heard familiar hollow rhetoric from the Tories on tax avoidance, when they have cut the resources of Her Majesty’s Revenue and Customs—the very people who collect these taxes. The resources available to HMRC today are 40% less than they were in 2000.
The Chancellor has frozen in-work benefits at a time when food prices are rising and we do not expect wages to keep up. We need an economy that is fundamentally more prosperous and where prosperity is, yes, shared by all. The increases in the national living wage announced today are lower than expected and leave the poorest-paid workers still earning less than they need to live on. So I ask the Chancellor to adopt a real living wage level, as Labour has pledged, and abandon his predecessor’s empty rhetoric.
Regrettably, the Chancellor is still going ahead with some of the cuts to universal credit. Thanks to pressure—I pay tribute to Members of all parties who have campaigned on this issue—he is offering to soften the blow. We do not want the blow softened; we want it lifted altogether. Today’s changes will leave a single parent on average at least £2,300 worse off. These are the very people who are working hard to deliver for their families, and the Government are betraying them.
People with disabilities, who have been put through the ordeal of the discredited work capability assessment and are trying to get themselves ready to return to work—they are “just about managing”—still remain in the Chancellor’s firing line. He is cutting £30 a week from the support that these disabled people receive. In our society, that is scandalous.
Those who are “just about managing” also rely on our public services. They send their children to local schools; they depend on their local hospital; they rely on local council services to clean their streets, tend to their parks and playgrounds and open their libraries. The reality, however, after six wasted years is that our public services are just not managing. Today, the childcare that parents rely on remains underfunded, as the Public Accounts Committee has reported—and it will remain underfunded, even after today’s announcements.
I want to pay tribute to my hon. Friends the Members for Swansea East (Carolyn Harris) and for Erith and Thamesmead (Teresa Pearce) for the important work they did in bringing the issue of child burial fees to public attention. I ask the Government to do the right thing on child burial fees and reconsider making funding available for families in these desperate circumstances.
Councillors from all political parties are reporting that they are at a tipping point in the provision of social care. The previous Chancellor cut nearly £5 billion from social care, meaning that over 1 million people who need care are not getting it. They are not even “just about managing”, and they got little help today. We call for additional support for social care, because the funding being provided today is only a stop-gap measure. Our social care system will not be secure without long-term funding. Tonight, many elderly people will remain trapped in their homes, isolated and lonely, lacking the care they need because of continuing cuts to social care—and social care cannot be cut without also hitting the NHS.
The supposed £10 billion funding allocated to the NHS is a restatement of an earlier commitment, but the Health Committee described this £10 billion claim as “misleading and incorrect”. The real amount is less than half that claimed. As a result, we now have 3.9 million people on NHS waiting lists—more than ever—and many of those 3.9 million people are waiting in pain, and they got no relief today. Across the country, hospitals face losing their A&E units, their maternity units and their specialist units. This Tory Government are failing patients, as well as failing the dedicated NHS staff who serve us so well. This is the first time that healthcare spending per head has declined since the NHS was created, and I fear there will be a crisis in funding and care over this Christmas. The NHS cares for us, and we should care for the NHS.
Members of this Government have also overseen the biggest real-terms cuts in education for four decades. One pound in every seven has been cut from further education college budgets, and Conservative policy has saddled a generation of students with a lifetime of debt. How can a Government seriously talk about supporting a 21st-century economy when they are planning to pour tens of millions into the failed 20th-century policy of grammar schools, segregating our children at an early age?
As for housing, the Chancellor announced today that he was scrapping “pay to stay” proposals and letting agents’ fees—a U-turn that is a victory for Labour’s campaigns against both the “tenant tax” and letting fees. The Chancellor has spoken before about the dream of home ownership for the young. Nothing that he has announced today is of the scale that is needed to suggest that that will remain anything other than a dream. The hard facts are these. The Government of which the Chancellor was a member built fewer homes than had been built at any point since the 1920s, and there are now a third of a million fewer home owners under the age of 35. Today the Chancellor could have delivered the scale of investment that is required to build the homes that we need and to create a new generation of home ownership. He significantly failed to do so.
Thanks to campaigning by my right hon. Friend the Member for Wentworth and Dearne (John Healey), the Wentworth Woodhouse building will be saved. I am grateful for that. The accusation was that a Labour Government had sited an opencast mine near the building and threatened it. That, I believe, was in 1947. I only wish that some of the policies pursued by Tory Governments since the 1950s could be reversed so easily.
The Government’s biggest investment failure is this: the Chancellor has failed to address properly the Government’s most consistent shortcoming. His predecessor cut public investment to the lowest that it had been since the 1990s. Instead of delivering the ambitious investment that our economy needs throughout the country, the Chancellor has failed to recognise the scale of the challenge. He also risks repeating the mistakes from last year, with the national flood resilience plan failing to provide the protection that our communities need.
Just one in five of the projects in the investment pipeline is under construction, and shovel-ready projects worth £82 billion are still being delayed. The infrastructure gap between London and the rest of the country remains unbridged. London was scheduled to receive 12 times as much public investment per head as the north-east of England. The announcement of a £1.1 billion investment in transport is a reannouncement. The Oxford-Cambridge rail link is significantly delayed against Network Rail’s original planned completion date of March 2019. There are no new ideas here, just a promise to deliver what the Government have previously failed to deliver. This is press-release policy-making, not provision. All that we need now is the return of the high-vis jacket.
The “fourth industrial revolution” will not be delivered on delays, old news and reannouncements. The Government have, at last, realised their mistake, and now talk about an industrial strategy—words that Ministers refused even to refer to in the past—but it is not enough to change a few ministerial titles. The Government and the Chancellor need to deliver. We have yet to see the proposed Green Paper on industrial strategy that was promised over the summer.
The same Government who now talk up high-tech investment oversaw a real-terms cut of £1 billion in science funding during the last Parliament. The OECD recommends that developed countries should be spending 3% of GDP on science. On the basis of what we have heard today, the new spending will lift our expenditure from 1.7% of GDP to a mere 1.8%.
It is the same familiar story for business. The Chancellor is continuing the race to the bottom on corporation tax, and, while continuing the cuts in public services, he is cutting taxes for big business. We know that it is not headline tax rates that encourage long-term investment by businesses. Business investment has been revised down every year under this Government. What encourages businesses to invest is the knowledge that they have access to skilled workers, world-class infrastructure and major markets.
Today’s grim economic forecasts reveal the challenge that lies ahead. The Chancellor admitted over the summer that it was time for a change of course. He has now had to abandon the Government’s fiscal charter, with its failed hard surplus target. Labour warned that a hard surplus target lacked the flexibility to adapt to economic circumstances and the capacity to allow investment. The Chancellor’s U-turn today demonstrates just how right we have been over the past year.
Only weeks ago, the Prime Minister offered the hope of change and the Chancellor offered to “reset” economic policy. Today, we have seen the very people whom the Prime Minister promised to champion betrayed. The Chancellor has failed to break with the economic strategy of austerity. The country remains unprepared and ill-equipped to meet the challenges of Brexit and secure Britain’s future as a world-leading economy. I fear that, after all the sacrifices that people have made over the last six years, today’s statement has laid the foundations for more wasted years. Only a Labour Government will deliver on the ambition and vision to rebuild and transform our economy so that no one and no community is left behind.
Mr Hammond
Let me begin by associating myself with the right hon. Gentleman’s remarks about the Jo Cox trial and sending my deepest condolences to her family and friends, who will be suffering again today.
I congratulate the right hon. Gentleman on his appointment to the Privy Council. I only wish that I could have been present at the investiture. I remember the procedure quite well: they give you a little red book to hold. [Laughter.]
I listened carefully to the right hon. Gentleman’s response to my statement. His central argument appears to be that the deficit is too high and borrowing is too high. That is a bit of a problem, because, as I have understood it, his central proposal for our economy is to borrow more and spend more. Under his rule, Labour would always be borrowing, in good times as well as bad. His analysis of the problem of the last Labour Government is not that they spent too much money, but that they spent too little. Indeed, his rule has remarkable similarities to Gordon Brown’s “golden rule”, and we all know where that got us. His big idea is to spend an extra £500 billion, without any notion of how he would pay for it.
The right hon. Gentleman welcomed the industrial strategy. I am not sure that I welcome his welcome, but I warn him not to welcome it too quickly, because it will not look anything like an industrial strategy that would come out of his office. What he has heard about today is a responsible set of decisions, such as the decision to borrow £23 billion of tightly targeted investment while paying for every single penny of every other commitment that has been made.
The right hon. Gentleman talked about Brexit, and attacked us over the way in which we are handling the Brexit process. I honestly do not know whether he has ever been involved in a negotiation—I suspect not—but I invite him to look across the continent for a moment and note the admirable discipline that our negotiating counterparts are displaying in their messages, revealing nothing as they prepare to go into this negotiation with us. My advice is this: if we want to secure the best possible deal for Britain, we must keep our cards appropriately close to our chest.
The right hon. Gentleman may have heard “cuts in people’s incomes” in my announcement about universal credit. Let me explain to him how this works. When we cut the taper from 65% to 63%, we allow people to keep an extra 2% of the income they are earning. I would have thought he welcomed that.
This is all about making tough decisions, and I am very happy to debate with the right hon. Gentleman, but I just wish he would be honest enough to accept that we cannot shower money everywhere, proposing to spend money on everything, without having to raise that money, either by taxes on ordinary people or by cutting spending elsewhere. It is simply no good to keep on pretending that we can do that just by taxing the rich. The top 1% of people in this country already contribute 27% of income tax paid, and unfortunately there are just not enough of them to be able to finance all the right hon. Gentleman’s ambitions.
The right hon. Gentleman said he was disappointed by the announcement on the national living wage. I do not remember—perhaps one of my hon. Friends can remind me—the level of the national living wage during the 13 years of Labour’s Government. He might note that the level I have announced today is precisely the level recommended by the Low Pay Commission, the body set up to pronounce on these things.
I wish the right hon. Gentleman would also be honest when he talks about the work-related activity group in the employment and support arrangements. This applies to new claims only, as he very well knows, so nobody is going to have £29 a week taken away from them however many times he says it. He also knows that it is not a stand-alone measure; it is part of a package. The money saved is being reinvested in a £330 million package to get these people into work, with targeted support to help them to be ready for work.
The right hon. Gentleman talks about house building starts. House building starts were 45% down under the last Labour Government.
The right hon. Gentleman and the Leader of the Opposition have spread division and disunity through the Labour party, and that is exactly what they would spread through the country if they ever—God forbid—got into government. The right hon. Gentleman says there are no new ideas; I have to say that he needs to check the opinion polling, because that is not quite what public opinion believes. Instead of carping and opposing every measure we propose, why doesn’t he roll up his sleeves and support us in the hard work of building an economy that works for everyone?
Oral Answers to Questions
John McDonnell Excerpts(9 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Hammond
I certainly join in wishing my hon. Friend and his wife a very happy 30th anniversary. Taking my queue from last week, I probably will not suggest how Mrs Double might commemorate the event.
My hon. Friend is quite right to highlight the value of marriage in society. I hope that I can reassure him that the Government remain firmly committed to supporting this important institution through the marriage allowance. Eligible couples could benefit by up to £432 this year, and we have just passed the landmark of 1 million families who have made successful applications. I agree with my hon. Friend that take-up of the marriage allowance is not high enough, but HMRC will launch a new campaign early next month to increase awareness and take-up.
John McDonnell (Hayes and Harlington) (Lab)
Bringing the Chancellor back to Brexit and the role of his Department—happy anniversary, by the way, to the hon. Member for St Austell and Newquay (Steve Double)—before the referendum, as the hon. Member for Dundee East (Stewart Hosie) said, the Treasury published a paper warning that the impact on Government receipts of leaving the single market would be a loss of up to £66 billion. Last week, Tom Scholar, the permanent secretary to the Treasury, told the Treasury Committee that the figures were “not directly applicable”. The Chancellor then questioned his own Department’s calculations by referring to mitigating factors that were not taken into account. There is fumbling chaos about Brexit not just in the Cabinet, but in the Treasury as well. Will the Chancellor clarify his Department’s exact calculation of the outlook for public finances if access to the single market is not achieved?
Mr Hammond
The right hon. Gentleman can characterise it however he likes, but the simple fact is that all economic modelling must make assumptions. The model that the Treasury produced in April assumed no policy response by Government—we know that there has been a monetary response in the form of the monetary expansion delivered by the Bank of England on 2 August—and that an article 50 notice would be served immediately after the referendum, which we know was not the case.
As for the ongoing work, the right hon. Gentleman will have to wait until 23 November when the Office for Budget Responsibility will publish its forecast.
John McDonnell
No figure is attached to anything that the Chancellor has said, which again confirms the chaos in Cabinet and in his Department. Can I ask the Chancellor to pass on my thanks to the officials who helpfully published on the Treasury’s website a document labelled
“Public Sector Finances Briefing – Official: Sensitive for internal use only”?
The document at least gives us some reliable information in that it confirms that the Government are failing to meet predictions on tax receipts and deficit reduction. It also reveals that that data are based on
“activity from before the referendum so any post referendum downturn will exacerbate this.”
Does that not prove once and for all that far from fixing the roof while the sun shone, this country was scandalously economically ill-prepared and politically totally unprepared for the Brexit decision?
Mr Hammond
Just so that the right hon. Gentleman is absolutely clear, it is quite wrong to suggest that my Department does not have any figures—it does, but I am just not giving them to him.
As for the document that the right hon. Gentleman spent such a lot of time yesterday rather unsuccessfully trying to tout around the media, it was published by mistake, but all the figures in the document have already been published elsewhere. All of them are in the public domain.
Charter for Budget Responsibility
John McDonnell Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I beg to move,
That this House calls on the Government to withdraw the Charter for Budget Responsibility: Autumn 2015 update, which was laid before this House on 12 October 2015, and to lay before the House at the earliest opportunity an alternative update which provides the basis for stabilising the UK economy and providing long-term investment for growth.
I see that the Chancellor has not joined us today. I was hoping he was going to improve on the record of his predecessor for attendance, but it is good to see the Chief Secretary on every occasion.
What the leave vote said to many was that a new economic approach is needed. Too many of our country’s places and people feel they have been left behind, and this Government’s current fiscal rules are clearly exposed as inappropriate for an economy facing this kind of shock. So we need a new framework for fiscal policy that will support the investment this country desperately needs, yet all of us have been left without any clarity from the Government over their future direction. Business groups today report they are increasingly concerned about the Government’s current lack of direction and their lack of interaction with the Government. The lack of a clear plan is already harming investment.
The Prime Minister indicated in her initial speech that she was looking to set a new direction for Government economic policy. We agree that a change of course is needed, including more investment and an industrial strategy.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Gentleman is hinting at what we hope will be a change of direction for the Government. For far too long, the Government have concentrated more on achieving a balanced budget than on managing the economy. They have not been creating demand. They should have been listening to the likes of Paul Krugman, Joseph Stiglitz and Richard Murphy, all of whom have been giving the Government a map to follow for years. The fact that they have failed to follow it explains why we are in this situation today.
John McDonnell
I will come on to the way in which the fiscal rule implementation has harmed the economy and prevented economic growth, resulting in the slowest recovery from recession in our history, but I shall now press on. I listened—
John McDonnell
It would be helpful if I could just finish this sentence.
I listened to the Prime Minister’s answers at questions today, which unfortunately suggested that she will largely be sticking to the fiscal approach that has failed so badly. So the uncertainty continues, and until this Government make their plans clear, Britain will be on hold.
Jeremy Quin
On the speed of the recovery, we are coming out of the deepest recession that we have perhaps ever known, and I am sure that the hon. Gentleman would recognise the fact that we have recovered far faster than many of our major industrial competitors.
John McDonnell
This is the slowest recovery in our history. The last time a date was put on it was 1066. The way in which we are recovering is on the basis of increased household debt, low incomes and insecure jobs. I do not think that any Government should be proud of that record.
John McDonnell
Let me just finish another paragraph before I give way again.
A new set of rules for fiscal policy is needed. I know that some Members have questioned the need for fiscal rules at all. During the discussions on the Fiscal Responsibility Bill in early 2010, I recall the right hon. Member for Tatton (Mr Osborne), who was then shadow Chancellor, saying that the Bill was a “completely feeble stunt” and the
“biggest load of nonsense that this Government have had the audacity to bring to Parliament in this Session”.—[Official Report, 5 January 2010; Vol. 503, c. 72.]
That was the then shadow Chancellor condemning Gordon Brown for having a fiscal rule. A short while later, when he became Chancellor of the Exchequer, he produced his own fiscal rule: the fiscal responsibility charter. He missed every target in his first charter, so he brought in a second one. He was on course to miss the targets in his second one, so he brought in a third.
Chris Philp (Croydon South) (Con)
The shadow Chancellor has just questioned the performance of the economy under the fiscal rule, but is it not the case that the deficit fell from 11% to 4% of GDP, that the economy created 2.6 million jobs—more than in the rest of Europe put together—and that the employment rate increased by 4% and now stands at the highest level in our country’s history? Is not that evidence that the approach of the last Government worked and should be continued?
John McDonnell
I remind the hon. Gentleman that under his own Government’s fiscal rule, the deficit should have been completely eliminated last year, and debt should have dropped but it has increased. I will send him a reading list.
Mr Jim Cunningham (Coventry South) (Lab)
When the Prime Minister was first elected last week, she said that she would govern for the many and not for the few. However, in response to questions today about the fact that poverty is affecting many people in this country, she gave the usual answer, which was that we have to have a strong economy. That suggests that she is departing from what she said in Downing Street a few days ago. Does my hon. Friend agree that this has been the longest recession resulting from punitive measures since the second world war? The second world war lasted for six years; this has lasted longer. It is brutal and it is punishing the needy in society.
John McDonnell
I was trying to take heart from the fact that when she spoke in Downing Street, the Prime Minister recognised just how divided Britain is between the wealthy and those at the sharpest end of the austerity measures. I was hoping that that would be translated into an acknowledgement today that the fiscal rule must go.
Several hon. Members rose—
John McDonnell
Can I just press on a bit further before I give way again? I am sure there will be plenty of time, Madam Deputy Speaker.
As I was saying, the former Chancellor missed every target in his first charter, so he brought in a second. He was on course to miss the targets in that second one, so he then brought in a third. In September last year, he presented his 2015 update. The current charter for budget responsibility sets targets for an overall balance on Government spending inside five years, with debt falling in each year of the Parliament. However, the Government knew last summer that the vast majority of economists who were asked had criticised the approach, as had the Treasury Committee. Almost without exception, the Labour party agreed with the macroeconomic profession that the approach was likely to prove misguided. We were defeated in the Lobbies that day, but our warnings have been proved prescient.
Mr Stewart Jackson (Peterborough) (Con)
The shadow Chancellor will know that any critique of the Government should be accompanied by a coherent alternative strategy. On that basis, is he embarrassed that the Leader of the Opposition’s economic adviser Richard Murphy described the Labour party’s approach as having
“no policy direction, no messaging, no direction, no co-ordination, no nothing”?
John McDonnell
He is not the economic adviser and never has been, because we doubted his judgment, unfortunately. He is a tax accountant, not an adviser. He is actually excellent on tax evasion and tax avoidance, but he leaves a lot to be desired on macroeconomic policy.
Turning to the Government’s performance, their charter for budget responsibility lacked credibility from the moment it passed into law and has now lost what shreds it retained this year. Since last September’s debate, every target in the charter that could have been missed has been missed. By the time of the March Budget, the OBR announced that the Government were on track to miss their target for the welfare cap for every year of this Parliament. The charter also insisted that the debt to GDP ratio would fall in each year of this Parliament, but the OBR said in March:
“We now expect the debt-to-GDP ratio to rise between 2014-15 and 2015-16”.
The Government managed to stay on target for its 2020 surplus only through some accountancy that might best be described as imaginative. The writing was already on the wall and then in June the then Chancellor used the backdrop of his fiscal charter as the pretext for threatening British people with a further austerity Budget should they vote to leave the EU.
Alex Cunningham (Stockton North) (Lab)
This is all very technical, but politics is about people. I was told today that unemployment in my constituency is higher than it was this time last year and remains more than double the UK average. Stockton Council, the Tees Valley local enterprise partnership and local companies are doing their bit, but our people are suffering more under the Government’s austerity measures. Is it not time that the Government looked again at council and development budgets and based them on the real needs of our communities?
John McDonnell
Saying that the fiscal charter is a technical matter is a good point, but it is the foundation upon which these poor—to say the least—decisions are being made, and a lack of investment is the result.
Following the vote to leave the EU, despite the threat of a punishment Budget we have seen an entirely predictable U-turn. No punishment Budget is scheduled and we have been told by both the old and new Chancellors that one will not happen and that, on the contrary, we must be realistic and accept that the deficit will not be gone by 2020, as predicted by the charter. From the responses at Prime Minister’s questions, it seems as though the surplus target for 2019-20 has now been dropped or has at least slipped to some unknown date in the future. Let us be clear: the Conservatives claimed that their approach would eliminate the deficit in five years, but it will not have happened after 10 years. Three targets set—every target missed. The 2015 charter appears to be dead in the water.
Lucy Frazer (South East Cambridgeshire) (Con)
The hon. Gentleman is being generous with his time. Does he agree that it is appropriate to have a fiscal charter as a matter of principle? Strong economies, such as those of Germany, Austria and Switzerland, all have such a rule.
John McDonnell
Of course. That is why we support a fiscal charter approach and have produced a realistic one—fiscal charters must be realistic. If the Government set targets and then miss the three that they set themselves, that undermines the credibility of the Government’s economic policy making.
The only hope of rescuing the existing charter is by activating its knockout clause, which the Chancellor referred to in an earlier speech. To remind hon. Members, if growth has been below 1%, is below 1% or is forecast by the OBR to be below 1% on a rolling four-quarter by four-quarter basis, the charter’s targets can be suspended. The problem is that the OBR recently announced that it will not release new projections until later this year, so we remain in the dark about whether the charter targets are still in operation. In the absence of evidence to the contrary, we can only assume that the charter still holds. That means Departments and other public agencies are operating under the old rules; they are still implementing planned spending cuts and still holding back investment decisions. It is essential for the wellbeing of this country that the House repeals the updated charter, because as it stands the charter still requires achieving a surplus, which we all know is impossible to achieve, as I believe the Prime Minister admitted today.
Andrew Gwynne (Denton and Reddish) (Lab)
One flaw in the current charter is that it is all about the supply side—reducing welfare costs, reducing debt and eliminating the deficit. What this economy needs at this moment in time is investment. We need investment in infrastructure and in skills, and we need investment in the future.
John McDonnell
As always, my hon. Friend is spot on. We are on the same page as almost every organisation that has an interest in the economy in this country: the CBI; the Federation of Small Businesses; the British Chambers of Commerce; and the TUC. All of them are saying exactly as he has said.
John McDonnell
The problem with the hon. Gentleman’s contention is that we were told the way to control welfare spending was to introduce a welfare cap, and this was part of the charter. The Government have now breached that charter consistently and are forecast to breach it in every year throughout their Administration. The point I am making is that the fiscal charter is almost redundant now, because it is so ineffective. Housing benefit did rocket, but the way to control welfare is by building council homes again, so we are not pouring money into the pockets of private rented landlords.
John McDonnell
Let me just press on; I commit to coming back to the hon. Gentleman. Madam Deputy Speaker might get a bit hot if I continue to take too many interventions.
Households and businesses up and down the country need clarity and guidance, and it would be irresponsible to leave them without guidance as to the Government’s actions until the autumn. Waiting until October is a luxury this economy cannot afford, and Britain is on hold until the Chancellor makes his plans clear. Unfortunately, this is only the latest consequence of a shocking lack of planning by the Government for the eventuality of a leave vote. The then Chancellor said back in March that a credible blueprint was completely missing from the leave campaign, but a blueprint of any kind seemed to be missing from the entirety of the Government. The Chancellor must now take the necessary steps to give himself the freedom to invest in the economy, without being bound by a surplus rule he has conceded is likely to be ditched in the autumn in any case.
David Rutley
I very much hope that Madam Deputy Speaker is not too hot at this point in time. The hon. Gentleman is trying his best to put forward his arguments, but his approach completely lacks credibility—he has not even brought any Labour Members in to support him today. Is the truth not that even two Eds were better than none?
John McDonnell
I will have to watch my language, Madam Deputy Speaker. Let me say to the hon. Gentleman that when someone is going to crack a joke in this place—I know this because I have failed so often—it is best that they get the script right. As for Labour Members, the message has come across in every debate we have had, consistently since September, including today, that this is about the difference between having a fiscal charter that allows us to invest and one that does not. It is as simple as that. I respect his views and I have listened to his contributions in the past, but on this issue I believe that even those on his own side are beginning to move.
Britain is on hold until the Chancellor makes his plans, because, unfortunately, as I said, this is not the only consequence of the lack of planning. I say to Conservative Members that it is important now that we recognise the decisions that have to be made as soon as possible, particularly on the surplus rule. We already know about the black hole in March’s Budget brought about by the Government’s U-turn on personal independence payments, but following the leave vote, the former Chancellor also announced plans to reduce corporation tax to below 15%. That is a significant fiscal announcement. According to the ready reckoner of Her Majesty’s Revenue and Customs, by the time it takes full effect it could mean an enormous additional £4 billion giveaway by the Treasury. This is money that could otherwise be spent on public services. It would be useful to know today whether the successor Chancellor is planning to be similarly generous to large corporations and whether the reduction to 15% is still part of the Government’s plans.
Lucy Frazer
I thank the hon. Gentleman for giving way yet again. He has mentioned a couple of times that Britain is on hold, but just this week SoftBank bought ARM Holdings, a company in Cambridgeshire that spans my constituency, for £24 billion, which shows that Britain is still open for business. People still very much want to invest here, and there is nothing in the economy on hold.
John McDonnell
I will come on to that, but I have to say that there are some concerns about the sale of British assets, and I am simply echoing what the Prime Minister herself said only a few weeks ago.
Alex Cunningham
Energy-intensive industries are also concerned about the lack of planning in the country. They are extremely anxious about the future of emissions trading schemes inside and outside the EU, and many are desperate for British Government action to ensure that they can stay in business in the longer term. They want action on crippling carbon taxes now, and after we leave the EU. Does my hon. Friend agree that the Government must address these issues, and that it is time the Chancellor made a commitment to champion and help to finance carbon capture and storage?
John McDonnell
I am sure that those on the Treasury Bench were listening to that. The Chancellor has a long list of issues that he needs to address to give some certainty, certainly if we are to see long-term investment in such things. I share my hon. Friend’s views: there is too much uncertainty with regard to a whole range of taxation and support initiatives from the Government. To be frank, it is jeopardising jobs as well as the future of our planet.
Mr MacNeil
We have been hearing this refrain that Britain is not on hold and that things are happening, but they are not. Britain is very much on hold. It is actually worse than that, as we see if we look at our neighbours. The hon. Gentleman might remember how, a number of years ago, this House mocked both Iceland and Ireland. It does not say much about them now when Ireland has treble the growth of the United Kingdom and Iceland double the growth. On a recent visit to the Central Bank of Iceland, I was told that the economy had grown so fast that it needed to be slowed down, and that it needed migrants to fill its jobs. These are economies that were once mocked in the United Kingdom and that are now very much laughing quietly to themselves as they speed into the sunset.
John McDonnell
I think the argument is sound. Until we obtain a fiscal rule that reflects the reality of our economy and our future, we will not return to the dynamism that is needed to restore growth and to ensure that we have wages and jobs that are beneficial to the community overall rather than the low paid and insecure work that we have at the moment.
Let me press on, because I do not want to strain your patience, Madam Deputy Speaker. It is not just Members on these Benches who believe that the fiscal rules adopted by the Government are not fit for purpose. The former Secretary of State for Work and Pensions, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), called for a £100 billion infrastructure fund to invest in schools and housing. The Secretary of State for Communities and Local Government called for tax cuts across the board and spoke about a Growing Britain fund, funded by more borrowing. The new Prime Minister repeated today the need to abandon the surplus target—perhaps to let it slip. The Secretary of State for Environment, Food and Rural Affairs spoke about the need for “prosperity, not austerity”. We welcome all those conversions to our line of argument, but none of this can be achieved within the confines of the charter as it now stands until the Office for Budget Responsibility advises otherwise.
We saw the consequences of the policies based on the old fiscal framework yesterday in a report from the independent Institute for Fiscal Studies. Let me just remind Members what the report said: the incomes of young people are still 7% below where they were before the financial crisis, and the incomes of those in their 30s, 40s and 50s have remained stagnant. Andy Haldane, the chief economist at the Bank of England, has spoken about a “lost decade” for earnings. McKinsey reports that four fifths of households have seen either no improvement or falling earnings. That is what we have to show for the year of fiscal rules from the former Chancellor. There is a consensus now across the country, from the TUC to the CBI, that investment is needed. Earlier this year the IMF told the Government that it had no objections on the grounds of fiscal responsibility to the Government undertaking more investment. The OECD agrees, but until the OBR gives permission to suspend the surplus rule, the Chancellor is constrained by his own rules.
The Government’s current plans for public sector net investment for the rest of this Parliament are for it to fall in each year, from £36.4 billion this year to £32.1 billion in 2019-20. Of course, we do not expect a full Budget now, but the least we need is a commitment to recognise the changed times that we are living in. The uncertainty about public investment comes on top of uncertainty about the structural funds for regions—which are set to lose up to £10 billion if we leave the EU—and further uncertainty for those reliant on projects funded by the European Investment Bank. I repeat that it is essential that, as a minimum, there is a guarantee from the Government soon to protect these funds in some form on an equivalent level.
There is an alternative; there has always been an alternative. Members of the Government Front-Bench team now see it, in part. Opposition Members have said so for some time. There is an alternative based upon investing in the future, growing the economy and allowing fiscal policy to work hand in hand with monetary policy. Professor Mariana Mazzucato has argued for the need for long-term, patient investment. We support that. It is true that the sale of ARM Holdings to SoftBank indicates that there is potential for new industries and innovation, but that potential needs long-term financing, which includes Government investment in infrastructure and research.
After the leave vote, more forecasters have cut their growth forecast. The IMF has joined them. Yesterday it revised down its prognosis for next year from 2.1% to 0.8%. With the current account deficit having hit record highs in the past year—in the most recent figures, it stands at 6.5%—our plan for the future cannot just be to fund that indefinitely with more overseas sales, such as that of ARM. We hope that the Chancellor will heed those who are calling for a much needed and eminently affordable change of direction.
It is a tragedy for this country that the Conservatives have only noticed that there is an alternative as a result of the leave vote, which I fear they helped to bring about. I announced on Monday that the Labour party supports a large programme of investment and will support the Government in a large programme of investment.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
It was only a year ago that the hon. Gentleman was telling the media that he supported George Osborne’s austerity charter. He has changed his mind and I welcome that U-turn, but more than 20 Labour MPs voted for the charter. Not a single SNP MP has voted for austerity. When will the people of the UK see a unified position against austerity across the Labour Benches, or can we in the SNP expect to continue ad infinitum as the only credible opposition to Tory austerity?
John McDonnell
Good try. Initially last year I thought the fiscal charter was so ludicrous that I was just going to rubbish it or ignore it. Then, as people remember, I made a U-turn because I thought we could defeat it, because we had virtually all the Labour party and others demonstrating that it was ludicrous. We predicted that every target set in the fiscal charter would be missed, and we were right. The Labour party is an anti-austerity party. We will campaign against austerity, but more importantly now, we are campaigning for a long-term future plan of investment.
I think we are winning the argument right across the piece. As I said, from partners in industry and across the political parties—even in the Conservative party now, as we saw in the leadership campaign—there are voices calling for hundreds of billions of pounds of investment. We are winning that argument. The problem is now that we need decisive change from Government with regard to the fiscal rule; otherwise Britain will remain on hold.
Mr Jim Cunningham
I am sure that one of the things that my hon. Friend learned, as I did, during the referendum was that, as I mentioned, the British people have had enough of austerity. They want politics to change. They want investment. Some of my hon. Friends have mentioned the areas of investment. It is important that we learn the lesson of the referendum—that people have had enough of austerity.
John McDonnell
Many voted to leave on the basis that they and their towns and regions felt left behind as a result of seven years of austerity, which have brought about high levels of poverty, lack of investment, and low-paid jobs and insecure jobs. As a result, I think there was an expression of anger in the referendum about a whole range of issues. People were saying to the Government, “We’re not satisfied with your performance, we’re not satisfied with the way we are being governed and we want change.”
James Cartlidge (South Suffolk) (Con)
There is something in what the hon. Gentleman says, and there are parts of the country that clearly felt angry and left out, but I found that, overwhelmingly, the reason why people were going to vote to leave was their concern about immigration. My understanding is that he supports limitless immigration—not putting controls on it—and that matters if he is going to bring the Brexit debate up in his speech.
John McDonnell
Let us be clear, because it is best not to exaggerate people’s positions. I think the response on immigration was a response to the concerns people had about the undercutting of wages, the pressure on public services and so on. That is why, on the development of the free movement of people, we have always argued—particularly from the Opposition side—that we should ensure there are sufficient controls, but also mechanisms to prevent the undermining of wages. That is why the last Labour Government—I praise them for this—set up a fund to alleviate the pressure on public services. I think a whole batch of grievances was wrapped up in the vote, and we have to learn from that.
One of the key grievances, as my hon. Friend the Member for Coventry South (Mr Cunningham) said, was the impact of austerity on people’s daily lives, which is caused by the adherence to a fiscal rule that we now know is virtually bankrupt and having counter- productive implications for our economy by holding back the investment that many people—even on the Government side—now feel is needed.
John McDonnell
Would the hon. and learned Lady allow me to finish? I have taken several interventions, and she will be able to speak. [Interruption.] Oh, go on.
Lucy Frazer
I am very grateful to the hon. Gentleman for giving way—he is being very generous. He said there are a number of alternatives to the position the Conservative Government put forward. He also said in answer to an earlier intervention that he accepts there should be some sort of fiscal rule. Will he tell the House when Labour would return our budget to a surplus?
John McDonnell
Let me outline Labour’s fiscal credibility rule, which we set out a number of months ago. We said that we would have a forward-looking target to achieve a cyclically adjusted current balance by the end of a rolling five-year forecast period. Why? Because that gives us the flexibility to adjust to shocks such as the one we have seen. Capital expenditure would be excluded from the deficit target in order that the Government can invest for higher growth. The contentious issue last September was that the then Chancellor included capital investment in the overall fiscal rule, which held back investment, and that is why we have seen the figures for Government investment falling. Debt as a proportion of potential GDP would be lower at the end of each five-year Parliament than at the start. Again, that gives an element of discipline.
However, we also make the point that when conventional monetary policy is hampered by the lower bound to interest rates, the rules will be suspended in order that fiscal policy can then work, but we have suggested that the Monetary Policy Committee should be the determinant of that. Why is that more flexible than the existing rule? It is because, as we have seen, the Office for Budget Responsibility, for example, is not going to report until the autumn, but the Monetary Policy Committee meets monthly, so that will give us more flexibility. In our credibility rule, we also said that the OBR would be responsible to Parliament, with a clear mandate to blow the whistle on any Government breaching those rules, so that gives an element of independence. It is a fiscal rule, but a credible one. If it was operating now, we would be abiding by it, and we would be investing for the future.
Let me press on to the end. We hope the Chancellor will heed those who call for a much needed and eminently affordable change in direction. It is a tragedy for this country that the Conservative party has come to notice that alternative only as a result of the leave vote. As I said, I announced on Monday that we would support a large programme of investment to help to ensure that the potential of our economy is met. We proposed a national investment bank, which would help to boost investment across the country, ensuring that no community is left behind.
In conclusion, Labour will do all it can to ensure that the price of any negative shocks from the leave vote will not be paid by working people in any part of the country. In March, we saw the fastest unravelling of a Budget almost in living history. Now, the entire fiscal approach, as underpinned by the current charter, has collapsed in almost a year. The Government’s economic credibility faces nothing less than a catastrophe unless they rise to the challenge.
We cannot wait for the OBR to report in due course that there has been a negative shock and that the targets are suspended. To be frank, the mandate as it stands is shredded and must go. There is no credible option left to the Chancellor but to undo what should never have been done, to put right his predecessor’s mistakes, to repeal the charter and to support this motion, bringing forward an alternative that provides the basis for the stabilisation of the UK economy and the provision, above all else, for long-term investment in growth.
Mr Gauke
I completely agree with my hon. Friend. Our record on corporation tax—we cut it from 28% in 2010, it is now 20%, and we have legislated to reduce it to 17%—has made the UK much more attractive. The likes of the OECD have made it clear that corporation tax is one of the most distorting and, therefore, least growth-friendly taxes. The fact that we have moved so dramatically in this era—during which we have also put the public finances on a sounder footing—to make our business taxes much stronger puts us in a much stronger position than we would otherwise be. It is striking that, in survey after survey of international businesses, the position of the UK has improved in terms of our reputation as a place to do business. In particular, our tax reforms have helped attract investment here. I know from the meetings that I have had with international businesses when they are choosing where to locate activity that the fact that our corporation tax regime is more competitive is a factor that helps to drive investment to the UK.
Alongside that, we have taken significant steps to ensure that the international tax system is such that businesses pay the taxes that are due, but it is absolutely right that the UK positions itself as a more competitive place, and that is what we have done.
John McDonnell
For clarification—I raised this in my speech—is it still Government policy and in their plans to move towards 15%?
Mr Gauke
The Chancellor has made it clear that he will look at all the options when it comes to the autumn statement. It is the case that we have legislated to move to 17%, and it continues to be the case that we want to send out a signal that the UK is open for business and that we will still have a competitive tax system. My hon. Friend the Member for Horsham (Jeremy Quin) has already raised that important point. The precise policies we will follow at the autumn statement are a matter for the Chancellor to announce then, but Government Members are united in our belief that the steps we have taken on corporation tax have made us much better prepared for the uncertainties of the future.
James Cartlidge
I agree with my hon. Friend, but I would make one point about shovel-ready projects. We have quite an advanced business plan for a Sudbury bypass. If the Government decide to go down the Keynesian route of looking for shovel-ready schemes, we are ready in South Suffolk, and we are waiting for the bypass for which we have been campaigning for many decades.
There is an aspect of the charter for budget responsibility that has not yet been mentioned during today’s timely debate. The charter states:
“The Treasury’s objectives for fiscal policy are to: ensure sustainable public finances that support confidence in the economy, promote intergenerational fairness, and ensure the effectiveness of wider Government policy”.
The phrase “promote intergenerational fairness” strikes me as incredibly important. I hope that my Whip will show me some intergenerational fairness, and allow me a couple more minutes. I will not be long.
We have had a Conservative leadership election, and we are still having a Labour leadership election, but, as far as I am aware, no one has debated the following facts. Our national debt stands at £1.65 trillion; according to the Institute of Economic Affairs, our liabilities amount to £5 trillion; and it is estimated that, by 2062, all pensioner benefits will cost £491 billion. I was going to say a lot more about that, and there is a lot more that needs to be debated, but I am getting the hint.
James Cartlidge
I will end with this point, which I think will interest the shadow Chancellor. In March 1997, two months before what was a considerable low for our party, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) came up with a policy called Basic Pension Plus, and I still believe passionately that that is the direction in which our country should go. The cost of the state pension—which, after all, is only £119 a week—is crippling, and the cost of pensioner benefits is enormous.
We need to debate those matters. I simply make this appeal: I hope that when I have a chance to speak again—when we all do—we shall be able to talk openly about the huge liabilities and costs that we face. As it is, the charter is there, we have been debating it, and, as I have said, monetary policy is at the forefront.
Oral Answers to Questions
John McDonnell Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I, too, welcome the Chancellor to his position, and I welcome his whole team. It is a deserved promotion for the Chief Secretary, whom I believe I promoted only a month ago in a speech to the House.
EU funding for the regions comes to £10 billion a year. At the recent Local Government Association conference, councillors from all parties expressed their concern over the potential loss of these structural funds. Will the Chief Secretary clarify whether he plans to make funding provision equivalent to that received through the EU structural funds in the event of the UK leaving the EU?
Mr Gauke
First, I thank the shadow Chancellor for his kind words. Yes, his description of me as Chief Secretary last month proved to be ahead of its time. That is not a phrase I often use about the shadow Chancellor, but he was right on this occasion.
On the structural funds, of course we need to make an assessment of value for money and so on. We will make announcements in due course. I recognise the case for wanting to address uncertainty, but it is right that we follow due process before we make any announcements.
John McDonnell
I am grateful for that, but may I ask the Chief Secretary that, in the interests of local government stability, that statement is made sooner rather than later?
The vote to leave also affects the UK’s access to European Investment Bank funds, which last year came to £6.5 billion across the country. With business investment falling even before the vote to leave, and with Government investment scheduled to fall until the end of this Parliament, what action is the Chancellor taking to ensure that Britain retains its stake in the European Investment Bank?
Mr Gauke
First, on the general point, I recognise what the hon. Gentleman is driving at in terms of uncertainty and the desirability to resolve the issue sooner rather than later.
It is the case that the UK did very well from the European Investment Bank in recent months in terms of attracting investment. There is no evidence as yet that the UK will be discriminated against during the period that we remain members of the EU, but the hon. Gentleman is right to raise the issue. We will continue to monitor the situation and we want to ensure that we continue to do well from the EIB.
Mr Hammond
As my hon. Friend notes, that is a CLG lead, but I am very happy to facilitate such a meeting for him.
John McDonnell (Hayes and Harlington) (Lab)
The Chancellor will, I hope, have seen the research published by the Institute for Fiscal Studies this morning. It shows that young people in work are still earning 7% less than before the crisis, while older workers have seen no improvement in their earnings for seven years. Will the Chancellor take this opportunity to put an end to what is becoming a lost decade of austerity, deliver the public investment that can provide well-paid, secure jobs across the country and scrap the anachronistic fiscal rule?
Surplus Target and Corporation Tax
John McDonnell Excerpts(9 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John McDonnell (Hayes and Harlington) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on proposals regarding the Government’s surplus target and plans to further cut corporation tax.
The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)
In the past week, I have sought to be realistic with the British people about the economic challenges we now face but to mix that realism with reassurance that we can rise to those challenges. The financial contingency plans that the Governor of the Bank of England and I put in place have proved effective to date. Financial markets have adjusted, but I can report today that, although we remain vigilant, they have shown no signs of disorder. We must now respond to developments in the real economy, which will require a supreme national effort.
First, we must look to support demand and ensure that credit flows freely in our economy. The Governor of the Bank of England said on Friday that
“some monetary policy easing will likely be required over the summer”.
Thanks to the reforms that I introduced, the independent Bank of England has the tools that it needs to act against the cycle and support lending in the economy. The Financial Policy Committee will publish its decisions tomorrow, and we stand ready in the Treasury to act in concert with the Bank of England should more need to be done to support funding for lending.
The second part of our national effort must be to maintain Britain’s fiscal credibility. Eight years ago, people questioned Britain’s ability to pay its way in the world; eight years later, British gilts are seen as a safe haven and funding costs have fallen to record lows. We should maintain the fiscal consolidation measures that we have announced. However, our rules were always explicit that, in the face of what the fiscal charter calls a “significant negative shock”, we should allow the automatic stabilisers to operate, and with the consensus of economic forecasters now lowering the forecast growth for the UK next year—from close to 2% before the referendum to 0.4% now—that is what we will do. We must be realistic that the target for a surplus is unlikely to be achieved in 2019-20. The Office for Budget Responsibility will conduct a formal assessment when it produces a new independent forecast in the autumn, and then we will have a clear idea of what additional measures are required to maintain fiscal credibility.
Thirdly, we need to broadcast loud and clear the message that Britain remains the best place in the world to do business. In the past six years, we have reduced Britain’s corporation tax rate from 28% to 20% today, and 17% in the future. I did that at the same time as taking difficult decisions elsewhere to balance the books. In my view, the strongest signal we could send to the world that Britain, after the referendum, is open to the world and ready to do business would be to cut corporation tax still further. We should aim for a rate of 15% and preferably lower, because if we are pro-business, we are pro-jobs, pro-living standards and pro-working people.
Fourthly, the referendum result revealed a deep-seated feeling of disfranchisement in too many of our communities, especially in the midlands and the north of England. As I said in Manchester on Friday, the northern powerhouse is the right response and we need to redouble our efforts with elected mayors and new transport infrastructure. In my view, once both parties have determined who their leader should be, we should then get on and build a new runway in the south-east of England, because we cannot be open to the world if we cannot fly there.
Fifthly and finally, while we must seek with our European neighbours the best possible terms of trade in goods and services, including financial services, now is the time also to redouble our efforts to promote trade with the rest of the world. I have spoken to my US counterparts. Later this month, I will be travelling to China to build on that important new partnership.
To conclude, this is a blueprint to meet our economic challenge. Nothing positive will come from looking back in anger. We must lift our eyes to the horizon ahead and make the best of what is to come.
John McDonnell
I would like to thank the Chancellor for his response. I think it is important that, as in the Opposition day debate last week, we set the tone of our response at the level of the national interest and take care to avoid making any statements that would adversely impact on fragile markets.
I have to say, however, that a lack of planning for a leave vote is becoming evident across all policy areas. Instead of a clear plan of action, we have so far had a series of ad hoc statements and announcements, including the grateful abandonment of the “Brexit Budget”, which was to increase the sharply the level of austerity being applied. The fiscal surplus target has been abandoned and today the Chancellor has announced planned reductions in the headline rate of corporation tax.
Rather than ad hoc announcements, we need a framework for economic decision making. Previously, the Government sought to do that with the fiscal charter, which was passed into law last autumn despite Labour opposition. May I ask the Chancellor now, since he is no longer pursuing the fiscal surplus target, if the charter is also to be abandoned? Will he be putting a motion to repeal the law before this House? Will he be seeking to place a new fiscal rule on a similar basis in legislation?
The Chancellor has announced today that he will redouble his efforts to invest in the northern powerhouse. Of course the details of that are to be decided, but will he tell the House when he expects to have a detailed programme of investment? What scale of investment should we expect? What areas, and how focused will that investment be? Does he now agree with Labour Members, and the Secretary of State for Work and Pensions, that a major programme of Government investment is urgently needed? Does he agree with the Home Secretary’s decision not to give a guarantee to existing EU nationals living and working in this country? What will be the economic effects of that? Will he therefore give a more detailed statement to the House on the economic consequences of this decision?
The Chancellor has promised that, while seeking to boost investment, he will be maintaining
“the consolidation that we put in place last year.”
May I ask him for some clarification on this point? Is he now ruling out any further or additional consolidation in light of the leave vote? Regarding the planned cuts to the headline rate of corporation tax, the news has not been well-received by our international partners. Pascal Lamy of the World Trade Organisation has accused the Chancellor of “tax dumping”. He also highlights the risk to future negotiations with the EU.
I want to raise three critical questions on this issue. The Chancellor’s Budget this year suggested that his one percentage point reduction in the headline corporation tax rate will reduce expected revenues by about £1 billion. Does the Chancellor still hold to that estimate? How will the Chancellor pay for any losses in tax revenues from the proposed corporation tax cuts? Who will pay? The evidence from existing cuts to corporation tax is not favourable. Despite year-on-year reductions in the headline rate to the lowest rate in the G7, business investment remains low by G7 standards and has now fallen for two consecutive quarters.
Businesses are sitting on a cash pile of at least £500 billion yet are failing to invest. What assessment has the Chancellor made that a dramatic reduction in the corporation tax rate will have the desired effect on business investment, given the absence of evidence so far?
Finally, we know that the circumstances after the leave vote will be trying and that major forecasters now anticipate the UK possibly entering a recession over the next year. The Chancellor’s fiscal approach has failed and has been steadily abandoned. In the interests of the country, will he now commit to adopting a fiscal approach that allows the flexibility to invest while maintaining fiscal discipline, as the Opposition and now some on his own side are urging?
Mr Osborne
When I became Chancellor, there was a question mark over Britain’s ability to pay its way in the world, and that was reflected in our bond yields, but because of our determined effort over the last six years, when we have hit an economic shock, as we have done in the last two weeks, the response has been a fall in bond yields—because people have confidence in the UK.
First on planning, extensive contingency plans were in place to deal with financial market disorder as a result of a leave vote, and the fact that we are not debating that today shows that those plans have been effective—we remain vigilant, but those plans were in place. Secondly, we must now decide on the new model of our relationship with the EU. That was not on the ballot paper and has to be a decision for Parliament. We set out the options for the country in advance of the referendum debate, and now we must have that discussion.
Thirdly on planning, the fiscal charter specifically provides for the impact of a negative shock, which is what we have had, and as a result the rules of the charter apply. As I say, it is unlikely that the surplus will be achieved in 2019-20—although that will be for the OBR formally to assess—and it will then be up to the Chancellor to produce new plans to restore the public finances to surplus and for Parliament to vote on them. We thought about that in advance: it is in the charter that the House voted on.
The hon. Gentleman talked about investment. On Friday, I met the Labour leader of Manchester City Council, Richard Leese. We talked about how we could redouble our efforts to invest in transport across the Pennines and about devolved powers for mayors and the like. That will be part of our response to the disfranchisement that too many of our citizens in the midlands and the north of England have clearly felt.
Finally, the hon. Gentleman also asked about business confidence and the corporation tax cuts. Not only have our corporation tax cuts given us the lowest corporation tax rate of all the advanced economies of the world, but we have seen a 20% increase in receipts from corporation tax—because businesses are coming to this country, growing their businesses in this country and employing 2 million people. The best response we can send to the world to show that we are open for business is to go on reducing business tax.
Bank Branch Closures
John McDonnell Excerpts(9 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I have taken a personal interest in the closure of banks over the years, so I thank the Backbench Business Committee for allocating time for this debate. I also congratulate my hon. Friend the Member for City of Chester (Christian Matheson) and the hon. Members for Wells (James Heappey) and for Ceredigion (Mr Williams) on securing it.
The closure of bank branches and the accessibility of banking are issues of cross-party concern, because local banks play a vital role in our communities, both in large cities and in rural areas. This is a question of access to banking and financial inclusion. Bank branch closures inevitably cut that access and cause financial exclusion. As constituency MPs, we want to know that in our local communities, individuals and businesses can access the personal finance or business banking services that they require. From today’s exceedingly interesting debate, we have discovered that people and businesses increasingly cannot access those services.
My hon. Friend the Member for City of Chester explained that banking is changing—the use of apps and so on can be more convenient—but that the closures are restricting access to banking facilities for individuals and communities. He emphasised that, as the Reuters report states, these closures are hitting hard in low-income areas, and that the cutting is going too fast and too far. I agree with him, and I welcome his creative proposal for local banking hubs. He has thrown down the gauntlet for a pilot in his constituency, as have other hon. Friends; they are clearly bidding for the process. That is a creative way forward. I agree that until banks respond in some way, they should stop advertising themselves as some sort of local friend.
The hon. Member for Wells made an interesting speech. May I ask him to pass on my congratulations to the residents of Glastonbury on their creative demonstration of the black horse funeral? I thought that it was an extremely effective way of highlighting what has happened in the area, whether it affects the sale of crystals, joss sticks or anything else.
It was very helpful that the hon. Gentleman raised the issue of the protocols not actually working or doing what they are supposed to do. It would be interesting to look at Congress’s Community Reinvestment Act because it includes the safety net that many hon. Members have suggested as a possible future solution. He emphasised the issue for small businesses, and highlighted the work done by one of the most effective lobbying organisations in this country, the Federation of Small Businesses. I have to say that I agree with him that if there is a transfer of services to the post office, banks must surrender full functionality if post offices are to be effective. As he said, it is a case of “Either stay or go, but pass on that facility.”
Understandably, my right hon. Friend the Member for Tottenham (Mr Lammy) is not in his place at the moment. I know that he is busy on other matters—as are many others. He highlighted the fact that even the bank he bought his first suit to get a job in has been closed. Interestingly, he emphasised the situation in his constituency, where the riots took place. I know the sterling work he has done to try to regenerate the high street and get businesses and shops back to the area—only to have some of that work undermined by the closure of the local bank. He also emphasised the issue of how footfall is calculated, which was highlighted by several hon. Members.
The hon. Member for Brecon and Radnorshire (Chris Davies) emphasised this issue with regard to rural services, and identified the fact that mobile services can prove effective as a solution in some areas. He also drew attention to what happens, as many of us have experienced, when a bank pulls out—the empty shopfronts and the degeneration of the high street overall. As he said, the post office is an alternative, but interestingly enough, the post office has also closed in his area, as it has in many others.
My hon. Friend the Member for Clwyd South (Susan Elan Jones) proposed the introduction of a novel piece of legislation. I found that fascinating, and we must come back to it another time. She, too, made a bid for a community banking hub. She spoke about the role of mobile banks, but emphasised that they are effective only if they visit frequently and are open for long enough.
My hon. Friend the Member for Harrow West (Mr Thomas) has done sterling work over the years in arguing for the development of co-operative banking and credit unions. He drew attention to the lack of affordable credit overall and to the role of the responsible finance movement, which has done excellent work. Credit unions are critical to our society now, particularly in areas that are experiencing deprivation. He also argued for co-operation, and gave the example of how back-room facilities could be co-ordinated to support the development of credit unions. He commended the 2015 Demos report—I urge hon. Members to read it—which looked at the case for a network of local independent banks across the UK, particularly in relation to their role in lending to SMEs.
The hon. Member for Inverclyde (Ronnie Cowan) drew attention to the issue of mobile banks, but also to their drawbacks: they are not very accessible for some people, and are not the ideal solution. He emphasised the impact that the withdrawal of local bank services can have on the local economy.
In his usual eloquent way, my hon. Friend the Member for Ynys Môn (Albert Owen) demonstrated the unfairness of the situation. The national banks have received significant sums of taxpayers’ money to support them, but by carrying out such closures, they are not acting responsibly.
The hon. Member for Ceredigion drew attention to what it is like to live in a rural area when a bank closes, given the impact that that can have, and to the issue of physical access. As he said, there are cashpoints, but what happens when they dry up and what impact does that have on the local economy? He also gave the example of New Quay to show how local businesses can be hampered. Like many hon. Members, he called for fair play in this matter.
The hon. Member for East Lothian (George Kerevan) demonstrated that, as several hon. Members have said, there is a lack of consultation when there is a closure. He emphasised the RBS case, and described the “arrogance” of the banks. I agree with that description, which many of us have experienced. It looks as though RBS is funding its £1.2 billion computer system by closing local banks. I agree that we now need to explore the idea of a universal banking obligation, so that we can address those issues. I am sure that Mr Ross McEwan has heard about the need for an urgent meeting.
My hon. Friend the Member for Islwyn (Chris Evans) comes from the banking industry himself and knows what it is like. He emphasised a key issue that we are all experiencing now, which is just how vulnerable people are to loan sharks and doorstep lenders when a local bank closes, and the danger that poses. He quite passionately described his campaign on HSBC, the petition he launched and the bungled way in which banks handle closures, by not listening to people. He also called for the next step to be taken for credit unions. I agree with his call for Government assistance to help credit unions take that step up to become local community banks; they have great potential for that.
The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) again described his local campaign and how it was ignored by the bank. The hon. Member for East Renfrewshire (Kirsten Oswald) gave examples of the wave of closures that are taking place. As she said, the challenger banks have been identified as a solution, but are no real solution, with few results in many areas. Her example of the Airdrie Savings bank shows us how banks can be stable and provide a service over generations.
We have heard a lot today about the protocol designed to protect local banking provision. It clearly is not working effectively. Advocates from Move Your Money have urged improvements to the protocol, including forcing banks to have transparent data on branch closure locations and dates, to allow greater scrutiny of their impact. Move Your Money also wants rigorous public interest assessments before the closure of a branch, so that closure decisions are genuinely influenced by community need and likely impact, and a requirement for banks meaningfully to consult local communities in advance of closures rather than simply informing them of the decision after it has been taken. I would welcome the Minister’s views on those ideas, as I know she has taken a personal interest in the matter for some time.
What role is the Competition and Markets Authority playing in addressing the lack of competition as bank branches close? The retail banking review is meant to be addressing that issue. The Federation of Small Businesses has said that it expects
“the publication of the CMA’s final report to include specific remedies for the problems caused by bank branch closures.”
I welcome that intervention by the FSB and hope the Minister will say something about the role of the CMA’s review in addressing the issue.
I thank all Members for their contributions. This is an urgent matter that needs addressing in many of our constituencies. I look forward to the publication of the review and hope to hear the Government commit to taking serious steps to address the decline in bank branch numbers and in access to banking overall.
UK Economy
John McDonnell Excerpts(9 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I—[Interruption.] Scottish National party Members should calm down.
I beg to move,
That this House recognises the risks posed to the UK economy following the decision to leave the European Union; notes with concern the loss of the UK’s triple A credit rating, the potential output cut, potential job losses, risks to investment and the volatility in the equity and currency markets; and calls on the Government to bring forward measures to protect jobs and support businesses in the nations and regions in relation to the short, medium and long-term potential consequences of the referendum decision, and to address the current threats to community cohesion.
Let me welcome the Chancellor’s presence in the Chamber. I have been critical of his non-attendance of recent debates. I have to say that this was one day on which I thought he might be too busy elsewhere, but I welcome him to the debate. I also commend his Financial Secretary who, in excruciating pain from a bad back, has dealt competently and courteously with the Finance Bill over the last few days. In our roles, sometimes we all have to watch our backs.
Although this is an Opposition day debate, this is, frankly, no time for partisanship and party political game playing when the country faces such serious challenges. I suggest that the tone of this debate should be one of honest critique, but constructive engagement. Yes, we have to be honest about our assessment of the economy, but we also have to be constructive in our questioning and our proposals for the future. The country will expect us all to work together—not uncritically but co-operatively in times of unprecedented political and economic turmoil.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Gentleman talks about doing things critically and uncritically. One criticism I have—it seems to me to be a fact—is that before the referendum, the Chancellor promised an emergency Budget, but he seems to have been bluffing on that, because there is not going to be an emergency Budget. He had already bluffed once, because I think he bluffed about the pound in Scotland. How would the hon. Gentleman respond to that?
John McDonnell
To be frank, we need to move on now. I expressed my concerns about some of the over-exaggerated claims at the beginning of the campaign that turned people off. We now know, however, that many of the claims made on both sides are unfortunately coming true.
The leave vote in last week’s referendum has left us all with an immense series of tasks, and the economic situation is a major challenge for us all. Let me run through some of the headline items that we know about over these last few days: the UK’s triple A credit rating has been lost; the pound fell to a 31-year low; sterling markets have been in turmoil, as have stock markets here and abroad; the FTSE 100 index registered the biggest single-day fall since the bankruptcy of Lehman Brothers in 2008; employers, most notably in the financial services, are already looking to relocate jobs, with a quarter of all those employers saying that they have introduced a hiring freeze; and shares in UK banks have fallen dramatically. These are not comments, but realities, and this is just an outline of the situation that now obtains.
John Redwood (Wokingham) (Con)
Will the hon. Gentleman welcome the fact that the bond markets did the opposite of what the ratings agencies suggested? They said that the price of bonds should go down and the cost of state borrowing should go up, but I am very pleased to tell him that the opposite happened: bonds are at a new all-time high and, according to the market, we have record lows of borrowing costs. Does this not prove that the markets actually had a huge vote of confidence in respect of state debt and state creditworthiness?
John McDonnell
It proves the chaotic nature of the market at the moment.
Let me look ahead. Most major forecasters have revised their expectations of future growth sharply downwards. There is a major loss of capacity and the potential for permanent damage to the UK’s growth prospects cannot be ruled out. We await an official assessment from the Office for Budget Responsibility, as the Chancellor announced in his statement on Monday morning. I think that an initial assessment should be given sooner rather than later, but ongoing close monitoring would be welcome, with regular reports to Parliament to ensure that that is happening. There is a prospect that the OBR will report at least a serious worsening in the public finances.
Mr Jim Cunningham (Coventry South) (Lab)
What assessment has my hon. Friend made of the Chancellor’s statement a couple of days ago that taxes might have to go up and be followed by further cuts? Is not this a further infliction of austerity on the British people?
John McDonnell
I shall come on to that later in my speech. I want to deal with the implications of the Chancellor’s statement on Monday for future Budgets, if I may. In a situation like this, it is essential to introduce some clarity. There is great uncertainty, both for those fearing for their jobs and those worried about the volatility of the financial markets over the last few days. It is up to us—I mean the whole House—to secure some clarity and a clear sense of direction in our debate.
Let me clarify why the referendum result has led to this situation. There were warnings that a vote to leave would produce this shock. Economic forecasting is, as we know, not an exact science, even at best, but every forecaster with any credibility pointed towards a significant negative shock from a leave vote. The main disagreements were about the size of that shock, and I have to say that the warnings should have been heeded. It was irresponsible of those campaigning for leave not just to gloss over them, but to make the claim that a leave vote would lead only to warm sunny uplands. The truth is that the shock is already significant and could rapidly worsen if action is not taken.
We welcome the Governor of the Bank of England’s commitment to take steps to extend liquidity provision to banks if necessary, and to stand ready with further measures. We welcome the fact that the Chancellor has been in urgent consultation during the weekend with those in the financial services industry and our international partners. We will support measures to stabilise the markets and dampen volatility, but with the firm caveat that these measures—this was the point made by my hon. Friend the Member for Coventry South (Mr Cunningham)—should not impose costs on households or small businesses. Despite his earlier statements, the Chancellor has ruled out his previous contractionary emergency Budget until the fiscal position is made clear, and this is to be strongly welcomed.
To move forward, we have to be honest in our assessment of the current situation if we are to ensure that the correct remedies are agreed for the future. We do not share the Chancellor’s assessment, as he knows, of the broader economic picture. His claim that the roof was fixed while the sun was shining belies the reality. The leave vote is having a greater impact because the roof has not been fixed, as we saw in the Office for Budget Responsibility’s assessment of the UK’s fiscal position that was published alongside this year’s Budget.
Steve Brine (Winchester) (Con)
I agree with the hon. Gentleman’s approach to the debate. Employment rates in our country are now at a record high—in my constituency it is up 60% since 2010. Capital requirements for the banks are some 10 times what they were in the past six years and the budget deficit is down from 11% to 3% this year. I think that that was what the Chancellor was talking about when he referred to fixing the roof. What position does the hon. Gentleman think the UK economy would have been in now, after last week’s vote, if we had not taken those measures?
John McDonnell
I remember the Chancellor promising that the deficit would have been eradicated last year. Although we welcome the jobs that the hon. Gentleman mentions, many of them are, unfortunately, insecure and poorly paid. However, we welcomed and supported the capital requirements relating to banks. I hope that the Conservatives can accept that balanced assessment.
At the centre of the OBR’s pessimistic assessment was the stagnation of UK productivity. According to the latest available data, between 2007 and 2014—Members on both sides of the House have raised this point—productivity did not grow. That is the worst performance by any G7 economy, and it means that today, on average, every hour worked in the UK is a third less productive than in the United States, Germany or France. This productivity stagnation has happened on the present Chancellor’s watch. It is clear that his long-term economic strategy has failed, as he has not secured the basis for long-term growth. Can we at least agree that from now on that we need a comprehensive strategy to deal with the productivity crisis?
Over the past few years, growth has relied too much on two things. First, although the economy has produced a large number of jobs, they have been poorly paid and insecure. Secondly, growth is unfortunately becoming more and more dependent on a return to household borrowing. We have not yet hit the level of 2008, but the OBR forecasts an unprecedented five years of continual household deficits.
Alongside our deficit with the rest of the world, our current account deficit has widened to its highest level since the 18th century. At 7% of gross domestic product, it is the largest current account deficit in any major developed economy. To finance the gap, borrowing from the rest of the world and the sale of UK assets have reached record levels, alongside assets sales to the rest of the world involving a range of facilities, to some of which there have been significant objections in the House. Relative to GDP, the UK now has a larger overseas debt than any other major developed country. We have been able to finance the current account deficit, despite weak productivity growth, because of what Mark Carney described, in a recent lecture, as “the kindness of strangers”.
George Kerevan (East Lothian) (SNP)
Does the shadow Chancellor agree that the current account deficit is essentially being funded by foreign direct investment, which includes the purchase of assets in this country by Chinese organisations? How does that relate to Britain taking back control?
John McDonnell
Labour has consistently presented arguments in the House about the asset sales that have taken place. In the past, they have been described as selling the family silver, but in recent years we have been selling the floorboards and the fabric of the building itself.
Investors in the rest of the world have been willing to overlook some of the fundamentals of our economy in the belief that the country is politically stable, and has secure banks and a booming property market. Overseas investors have been willing to buy assets and lend money on a grand scale as a result. Owing to the leave vote, however, that “kindness of strangers” is now in short supply. Given the uncertainty over the UK’s relationship with the rest of the world, the confidence of international investors in its position has been undermined.
James Cartlidge (South Suffolk) (Con)
I welcome the hon. Gentleman’s focus on this point. My biggest worry is that we are dependent on inward investment which, according to Fitch, may fall by 5% this year. Does he agree that whatever happens in the negotiation, the single most important message that must come out of it is that we are still an open economy, and will not resort to protectionism?
John McDonnell
I fully agree. I echo the Chancellor’s statement on Monday that this country is open for business, and Members of all political parties must repeat it time and again to ensure that we retain the confidence of overseas investors as best we can.
We have to recognise that the confidence of international investors has been undermined by uncertainty over the UK’s relationship with the rest of the world. It is regrettable that the current account deficit has not been addressed so far. To address it would have required a restructuring of our economy. We would have needed an industrial strategy to develop and support our key industries. The Government must now produce a comprehensive industrial strategy to support those industries and lay a path to future growth.
Bob Blackman (Harrow East) (Con)
Given that uncertainty, does the hon. Gentleman welcome the fact that the Speaker of the House of Representatives has today called for immediate talks between the United States and the UK about setting up a trade deal that will be in place for the US when we leave the EU? Does he also welcome the statements from the Indian Government, who want a trade deal between the UK and India to be arranged immediately so that we can ensure that there is no interruption to the UK economy?
John McDonnell
It must be recognised that the trading relationship with India, although growing, is still relatively small. I welcome the negotiations that are taking place, but we know from our experience of the timescale in which trade agreements have been secured over much of the past decade that the process is lengthy, and that when individual states negotiate on their own, they do not necessarily achieve the benefits that they would have secured within a trading bloc.
The simplest explanation for these decisive economic weaknesses is the poor state of investment in the UK. Admittedly, business investment was already in decline before the referendum, but it is undoubtedly falling still further, and, as the press has reported, the ongoing uncertainty alone is enough to deter investment. That fall in business investment is being worsened by the Government’s plans to cut their own investment which, according to current projections, is set to fall by the end of the decade. Without sustained investment—private and Government investment—we shall not be able to address the economic decline that has blighted too much of our country.
David Rutley (Macclesfield) (Con)
The hon. Gentleman talks about the need for an industrial strategy. The Government have set out important strategies for key industries such as life sciences, and, of course, for a northern powerhouse to help to rebalance the economy. Given the challenges that we face and the continuing need to rebalance the economy, will the Opposition now get behind the Government’s plans and, in particular, support the northern powerhouse, about which they have been equivocal?
John McDonnell
We have welcomed initiatives to try to rebalance the economy; the problem has been the success rate. The investment pipeline that the Chancellor announced several years ago has been less than 20% successful. Five years on, we have seen only £1 billion of the £20 billion that was meant to come from pension funds. The Government announce well, but they do not implement very well. There is too much government by press release rather than by implementation.
Kit Malthouse (North West Hampshire) (Con)
Will the hon. Gentleman give way?
John McDonnell
I will come back to the hon. Gentleman, but I must press on for a while.
It is important to recognise that economic decline and regional inequality, and the deep-rooted alienation and despair that they have produced, contributed to the fact that so many people voted to leave the EU. Some fear that a shock to business investment spending would help to push the entire economy into another recession. Again, I call for a fresh programme of Government investment to produce shovel-ready projects, especially in the areas that have been hardest hit by long-term economic decline.
Alec Shelbrooke (Elmet and Rothwell) (Con)
May I point out to the hon. Gentleman, in the spirit of the conversation that is taking place this afternoon, that there has been considerable investment in some northern cities, such as my city of Leeds? In the last month, Kirkstall Forge railway station opened in the constituency of his hon. Friend the Member for Leeds West (Rachel Reeves), and half a billion has been spent on other projects in the city. It is not all talk—I understand the politics of it—but I want the hon. Gentleman to understand that some of our great northern cities have benefited from real investment.
John McDonnell
We must not talk down some of the success that has been achieved so far, but, although it has dealt with regional economic problems, it has not been on a sufficient scale to rebalance the economy in the way that was promised. As a result, a disillusioned section of the electorate were willing to blame anyone, including migrants and including the EU, and accordingly voted to leave. People felt that communities had been left behind, and I believe that that is a consequence of the lack of investment in recent years.
Wayne David (Caerphilly) (Lab)
Does my hon. Friend agree that it would be a huge boost to the British economy if the £16 billion initiative for the expansion of Heathrow went ahead, and will he support my call for a free vote on the issue before the recess?
John McDonnell
I have to give my hon. Friend his due; he chances his arm. I am sure that there is a need for investment—selective investment—in aviation.
John McDonnell
We are short of time and a lot of Members wish to speak.
Whenever aviation expansion takes place, it will be judged on the criteria that the Labour party has set, which include the environmental impact and the impact on the wider economy. We await the proposals from the Government and we will then take our decision.
The referendum vote has forced a debate on the best course for our economy and for economic policy. It is unlikely that a simple return to business as usual will be possible or even desirable, but there are immediate steps that can be taken to calm market volatility and to limit the shock to demand. It is incumbent on the Government to take those necessary measures and Labour, in the national interest, will support measures intended to stabilise the economy when they protect households and businesses.
On monetary policy, of course authority rests with the Bank of England to intervene to preserve the stability of banks and the wider economy. Governor Mark Carney’s Friday morning statement was important in helping to stabilise the immediate situation. However, some interventions by the Bank will require authorisation from the Government. To ensure the success of those interventions, it will be helpful if the House is kept as fully informed as practicable of those authorisations, with regular updates.
On fiscal policy, with the expected slump in demand, the Government’s present fiscal charter is, to say the least, increasingly anachronistic. With the Chancellor having missed two of his three targets—on debt and on the welfare cap—he will now have to suspend the deficit target. The charter’s restriction on investment spending in particular is impossible to defend. For the regions, a squeeze on Government investment could be especially damaging.
Last year—this was raised earlier at Question Time— over £10 billion was provided in regional development funding by the EU. That was concentrated on our most deprived regions and places that needed it the most. What steps are the Government taking to ensure that that essential funding will now be made good? What structures are being put in place to liaise with elected mayors, local government leaders and regional bodies to address the loss of EU funds?
The UK currently holds a 16% stake in the European Investment Bank, which last year disbursed a record £6 billion in investment for the UK. That includes £l billion for social housing. What steps are the Government taking to maintain current programme funding? What plans do the Government have for the UK’s stake in the European Investment Bank?
John McDonnell
May I press on? I have taken a significant number of interventions and I am worried about time.
Significant uncertainties have been created for those trading with Europe, including manufacturers that are reliant on extended supply chains across the EU. What measures are the Government putting in place to support supply chains that are threatened by the severance of those ties and the falling value of the pound?
Exit from the EU threatens the UK’s continued status as a global financial centre. A number of major banks have already put in place plans to move jobs from the UK. They are fearful of the loss of their European Union passport that allows them to win business across the EU. We need to know soon from the Government how they will ensure that those passport rights are retained. I hear that one French negotiating position is to offer EEA status with some controls on freedom of movement, but the loss of bank passporting rights. Clearly that is a move to encourage bank migration from London and it is unacceptable. The resignation of Lord Hill as Finance Commissioner means that the UK currently has no voice at Commission level to argue the case for UK finance. What steps will the Government take to ensure that the voice of UK finance continues to be heard in Europe? May we propose to Government that, as a matter of urgency, they establish a working group to monitor the ongoing threat to the UK’s financial stability, working with representatives from across the financial services industry?
It would be wrong not to mention the threats that have been made to community cohesion following the vote to leave. I was very concerned to hear about the attacks on the Polish community. Any such attacks must be condemned outright by the whole House. I have a Polish community in my constituency. The Polish War Memorial nearby at Northolt stands testimony to the sacrifices of Polish pilots during the second world war. I have attended many meetings at the Polish centre in Hammersmith, which was disgracefully attacked. I send my message of solidarity to that community and to anyone else suffering from the rise in racism. What mechanisms will the Government put in place with local government leaders and city mayors to protect these communities, to help to overcome these divisive actions and to resource the programmes that will be brought forward?
We will get through this period of uncertainty, as Britain has done many times in the past. There are real strengths in our economy, not least our talented and dedicated workforce. None the less, volatility continues and grave uncertainties remain about the UK’s future relationship with our European partners and the wider world. The future direction of Government strategy is not yet determined, but Labour is prepared, in the national interest, to work with the Government and our parliamentary colleagues on both sides of the House to ensure that the best interests of the British people are secured. I commend the motion to the House.
Oral Answers to Questions
John McDonnell Excerpts(9 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
Thank you, Mr Speaker. What I say to my hon. Friend the Member for Amber Valley (Nigel Mills) is that, some years ago, HMRC brought in an assurance procedure to ensure that all such settlements are properly scrutinised. HMRC is very confident that it has reached a fair and proper settlement with Google. It is worth pointing out that, in recent years, we have seen increases in revenue collected by HMRC and increases in yield from its compliance activities including from large businesses.
John McDonnell (Hayes and Harlington) (Lab)
If we are to tackle tax evasion and avoidance effectively we need to remain within the EU. Will the Chancellor and the Minister join me in calling on all MEPs to support the new anti-tax avoidance directive being voted on in the European Parliament tomorrow? Conservative MEPs abstained at the Committee stage, and this morning there are worrying noises that they may be thinking of abstaining once again. Will the Minister make it clear now that Conservative MEPs will be voting for the directive?
Mr Gauke
The anti-tax avoidance directive was discussed a couple of weeks ago at the ECOFIN meeting, which I attended. The UK made the case for us taking strong action and working through an anti-avoidance tax directive. What we suggested and proposed was taken on board. The matter will also be addressed at the ECOFIN meeting next week. The UK is pushing for progress and it is working co-operatively with other member states to ensure that we do make progress.
John McDonnell
I am mystified as to whether Conservative MEPs will be voting for the directive tomorrow. I just live in hope that they will. The European directive did show the value of European Union co-operation in tackling tax avoidance and evasion. As part of that co-operation, following the raids on Google’s Paris offices, will the Chancellor inform the House what arrangements are in place with the French authorities for sharing information from the raid? If new evidence comes to light, will the Chancellor stand ready to reopen his deal with Google?
Mr Gauke
The first point of which I must remind the shadow Chancellor is that all settlements are reached by HMRC. Operational matters are rightly for HMRC, and not for Treasury Ministers. Of course if there is new evidence, HMRC will take it into account. The position is that HMRC has made it very clear that, under the law that existed between 2005 and 2015, it believes that it has reached a settlement that ensures that the right amount of tax has been collected—and that is what its job is. Our job is to ensure that it has the tools and the rules, and that is what we are delivering.
The Economy and Work
John McDonnell Excerpts(9 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I beg to move amendment (e), at the end of the Question to add:
“but respectfully regret that the Gracious Speech fails to deliver for working people, to protect public services and to address the black hole in the public finances; further regret that the Government’s economic policy has unfairness at its core and includes tax cuts for the wealthy while failing to deal with inequality; regret the refusal of the Scottish Government to use its new tax powers to put an end to austerity in Scotland; regret that the Government is presiding over the worst decade for pay growth in nearly a century; call on the Government to adopt Labour’s Fiscal Credibility Rule to invest in a sustainable economy for the future and to adopt Labour’s Tax Transparency Enforcement Programme to tackle tax avoidance; regret that the Government has failed to defend the UK steel industry, believe the Government should reform the lesser duty rule and call on the Government to give Parliament a vote on giving China market economy status and to adopt Labour’s 4 Point Plan to save the steel industry as a part of a long-term industrial strategy; further call on the Government to reverse the cuts to Universal Credit work allowances; and call on the Government to abandon its misguided proposals to repeal the Human Rights Act 1998.”.
I rise to speak to the amendment in the name of the Leader of the Opposition, myself and several colleagues.
Last week was the first time I had actually visited the other place to listen to Her Majesty read the Queen’s Speech. Usually, I avoid the crush and stay here to have a chat with my hon. Friend the Member for Bolsover (Mr Skinner). I have to say that my admiration for the Queen was immensely increased by her ability to keep a straight face while reading the fictional drivel that is called the Queen’s Speech.
The Queen’s Speech before us demonstrates conclusively the massive distance between the Chancellor and the real world. It opened with an extraordinary piece of doublespeak. The Government apparently think we live in a “strengthening economy”. They are seemingly not paying attention to their own statistics and their own forecasts. After precipitating the slowest recovery in modern British history, the Chancellor is now presiding over a recovery built on sand. Business investment has slumped again—by 0.5% in the first quarter, according to this morning’s figures—and the Office for Budget Responsibility’s most recent forecasts are for downward revisions in business investment across the life of this Parliament. Consumer debt is rising at record rates, and is forecast to remain at unprecedented levels. The current account deficit has reached record highs. We are borrowing more than ever before from the rest of the world as a result. We are not, as the Queen’s Speech claimed “living within our means”—far from it, on the Government’s own figures.
Productivity has slumped under this Government. The gap between what the average hour worked in Britain produces and what the average hour worked in the US, France or Germany produces is bigger than it has been for a generation. Every hour worked in Germany produces one third more, on average, than it does here. Low productivity is the sign of a weakened, damaged economy. It means lower wages and more insecurity. The slump that has occurred in productivity has been far worse in this country under this Chancellor than in any comparable G7 economy. It is what has caused the Office for Budget Responsibility to revise its future forecasts downwards.
Geraint Davies (Swansea West) (Lab/Co-op)
Does my hon. Friend accept that in the 10 years of the Labour Government to 2008—pre-crash—the economy grew by 40% and that, after the banking crash, we left debt at 55% of the economy in 2010, a figure that is now 83%? Does that not show a failure to grow the economy effectively or to manage productivity?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I just say to the hon. Gentleman that he has already tested the patience of the House and should not continue to do so? I care about colleagues on both sides of this House and will make sure that everybody gets in, so—unfortunately—interventions must be very short. The list of speakers is very long, and I do not want any Members to miss out.
John McDonnell
I do not want to be discourteous to any Members, but as you suggest, Mr Deputy Speaker, I will take only a limited number of interventions.
On the crash, let us be clear—[Interruption.] Well, let us talk about the crash. The policy of deregulating the banking system, turning the City of London into a casino, was the policy pursued by the Conservative Government for the previous 30 years.
Let us move on to the criterion of growth. Growth has been revised downwards for every year for the rest of this decade, and when the OBR revised its forecasts downwards, the Chancellor’s entire Budget plan was shot to pieces. He has been left with a £4.8 billion black hole of committed spending, but there is no committed funding. It is nonsensical to claim, as the Government’s Queen’s Speech did, that the public finances are being placed on a “secure footing” when there are gaping holes in the Budget and the Institute for Fiscal Studies thinks there is only a 50:50 chance of meeting the Government’s own fiscal surplus target. This is betting the nation’s finances on the equivalent of tossing a coin. There is nothing responsible and there is nothing “secure” in setting unrealistic and politically motivated targets for public spending cuts.
It is useless to preach to us about the need for a “stronger economy” when, by his actions in office for six years, the Chancellor has methodically undermined the economy. This was his choice. Austerity was a political choice, not an economic necessity. We all now live and are still living with its consequences. Because it was the wrong choice to make, the Chancellor has failed, and it is the British people who are bearing the cost.
The Chancellor has piled failure upon failure, but at the centre of it all is the failure to sustain productivity. Productivity is the key to growth in any modern economy, and the surest way to achieve increased productivity is through increased investment. Increased investment means installing new equipment and replacing old infrastructure, yet business investment remains weak. When business investment is weak, the Government should step up to make sure vital, world-class infrastructure is provided—from high-speed rail to high-speed broadband. There is now consensus from the International Monetary Fund to the OECD, and from the CBI to the TUC, in urging Governments—not just in this country but across the world—about the need to invest in the future, but this Government are clinging to their fiscal surplus target, which is set actually to cut real-terms Government investment over the course of this Parliament. Mr Deputy Speaker, you could not imagine a more perverse and inadequate economic policy.
Behind the failure to invest lies the failure of our economic institutions. Too many of them have been captured by special interests or place short-term gain ahead of long-term growth. We have major corporations, which are sitting on a cash pile of up to £700 billion, paying out high salaries to senior executives while failing to invest. It is no wonder that in the past month we have seen a series of shareholders revolts against the remuneration packages of some chief executives.
We have a Business Department that does not actually believe in supporting business and refuses even to mention the words “industrial strategy”. In Her Majesty’s Revenue and Customs, we have a department for tax collection that does not believe in collecting taxes—not, at least, from major corporations. That was demonstrated by the fact that when it struck a deal with Google that reflected an effective tax rate in single digits, the Chancellor calls it a “major success”. I have written to the Chancellor to make sure he urgently contacts the French authorities, so that any information they find during their investigation into Google’s Paris headquarters is shared with us to give us a better understanding of Google’s operations in the UK.
Oliver Dowden (Hertsmere) (Con)
Will the hon. Gentleman tell us exactly how much money was raised from Google when Labour was last in power?
John McDonnell
It is interesting to note that the inquiry into Google was started under the Labour Government. It is also interesting that the last assessment that was made, not by us but by the Financial Times—an independent organisation—said that the measures introduced by that Labour Government would reap tax rewards 10 times greater than anything introduced by this Government. After six years, the Chancellor has no one to blame but himself.
The Queen’s Speech furnished us with plenty more unreal promises. The Government say that they
“will support aspiration and promote home ownership”.
Tell that to the hundreds of thousands of our young people who now have no serious chance of ever owning a home of their own. Home ownership has fallen to its lowest level in decades on this Chancellor’s watch. Rough sleeping has risen in London by 30% in the past year, the biggest rise since the current reporting procedures were introduced. Nearly 70,000 families are now living in temporary accommodation, including bed and breakfast accommodation. Nine in 10 under-35s on modest incomes could be frozen out of home ownership by 2025 according to independent analysis.
Andrew Gwynne (Denton and Reddish) (Lab)
That phenomenon is not just happening in London; we now have tents in the streets of Manchester. Is that not a shocking indictment of this Government’s housing policy?
Jake Berry (Rossendale and Darwen) (Con)
It is a shocking indictment of a Labour council.
John McDonnell
I have a Conservative council. In my constituency tonight I will have possibly 200 families living in bed and breakfasts. There are individuals sleeping in our parks and along the canals. In my constituency, we have reinvented the back-to-back, where one family rents the front of a house and another rents the back. We have beds in sheds rented to families. It is a disgrace. This Government have been in power for six years and homelessness has escalated.
According to the Queen’s Speech, the Government will “spread economic prosperity”. Tell that to the steelworkers I met in Redcar, where the Government failed even to mothball the plant to save their local futures. Tell that to the British Home Stores workers facing redundancy as their boss, Sir Philip Green—a Government adviser—stripped their business clean.
In the Queen’s Speech the Government said they will
“continue to support the…Northern Powerhouse.”
That will be why they are closing its Sheffield office and threatening another six offices across the north with closure. That will be why, of the top 15 infrastructure projects with the most public funding, one is in the north.
In the Queen’s Speech, the Government say not that they will tackle poverty and deprivation, but that they will redefine them. The Chancellor’s shameful response to the 1 million people using our food banks every year is to
“introduce new indicators for measuring life chances”.
His failed austerity programme has a human cost, with 500,000 more children in this country forced into poverty and nearly 13 million people now living in poverty. More than half of those people are in work. This Queen’s Speech offers no solutions to those who have barely enough to feed their families and cannot pay to heat their houses. Instead, the Government will simply make sure that they are counting those people’s misery properly.
Huw Merriman (Bexhill and Battle) (Con)
Will the shadow Chancellor consider celebrating the fact that one third of the working constituents in Bexhill and Battle are receiving a pay rise because of the national living wage, taking those people off the breadline and further up the pay scale?
John McDonnell
I would celebrate it if it was a real living wage and if many of those people were not also suffering from cuts to universal credit.
The reality is that after six years of desperate efforts to impose cuts on our economy, against the best available advice from the economics profession itself, the Chancellor is staring an entirely predictable failure in the face. He started out with such high-flown promises. There was going to be a “march of the makers”, yet today, manufacturing is still smaller than in 2008. There was going to be a rebalancing of the economy, yet today for every three jobs created in London just one is created in the rest of the country. There was going to be a modernised tax service, but, as the National Audit Office pointed out in a damning report earlier this week, the quality of service at Her Majesty’s Revenue and Customs has collapsed in the past year as a result of staffing cuts. He promised increased investment, but he cut Government investment spending and now plans to cut it further. In 2010 he forecast the fastest recovery in living memory, but he has delivered the slowest recovery in modern British history.
Let us talk about job creation. The Chancellor and his Government have, perhaps understandably, clung to the job creation figures. Every month they are greeted with rare enthusiasm by Ministers. The reality is that two thirds of those in poverty—nearly 9 million people—are in work. [Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The Treasury Bench does not need to be echoing all the way along. Can we give it a break? The Chancellor will be speaking soon and you will expect me to treat people in the same way. I expect the shadow Chancellor to be heard, not shouted down. [Interruption.] Now, I have been very good so far, but I do not want to hear any more. I am sure that the Whips Office could do with someone to go and make a cup of tea. If they do not want one, I might later.
John McDonnell
Mr Deputy Speaker, you are a class act. The shout was, “Do we welcome the jobs?” Of course we do, but let us be clear: too many of the jobs created since 2010 have been poorly paid and insecure. Some 800,000 people are now on zero-hours contracts. Insecurity at work has been made worse by the undermining of employment rights by the Government. There is no need for that.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Does my hon. Friend share my concern that the Trussell Trust, which provides the food bank in Southwark, is providing food bank support to hundreds of people in work? It estimates that 10% of the people it serves in central London are in work.
John McDonnell
We welcome new jobs, but insecurity and poor pay mean that the numbers in work who are going along to get support from food banks is growing rather than reducing.
Several hon. Members rose—
John McDonnell
I will press on, Mr Deputy Speaker, as I know we are under time pressure.
All this is the direct result of a failure to invest. Too many businesses have substituted cheap labour for expensive investment. To be frank, they cannot be blamed for that, as the Government have set the lead, cutting their own investment spending. Low investment and weak productivity have real-world consequences. They mean talent wasted and opportunities lost. Some people are stretched to breaking point, working long hours just to make ends meet. Others are left to languish, desperately searching for extra hours. Even the Government’s own forecasters do not expect wages to recover before 2020.
John McDonnell
I will in a second. Millions of people are now self-employed, but their average earnings have fallen by 22% since the right hon. Member for Tatton (Mr Osborne) became Chancellor. The Queen’s Speech tells us that the Government plan to create an economy
“where work is rewarded.”
Nothing could be further from the truth. Those who work hardest are being punished with cuts to tax credits, but tax dodgers and the super-rich are rewarded with tax cuts.
Steve Brine (Winchester) (Con)
On the subject of jobs, the former Leader of the Opposition—he is a proven winner who the shadow Chancellor and the current Leader of the Opposition want back on the Front Bench—said that the Government’s policy would cost 1.2 million jobs. Does the shadow Chancellor concede that that was plain wrong?
John McDonnell
As I said earlier, rather than invest, employers have tried to use cheap labour, and that has had an impact on wages and living conditions, which is unacceptable.
This Government have failed and will continue to fail on every measure they set themselves. They have failed in their target to reduce the debt, on their welfare cap target, and on their target to close the deficit. The Government have lost their way. Gone is the pretence of being the new “workers party”, as was trumpeted so loudly last summer. That disappeared when they started cutting in-work benefits. The Government wander around from crisis to crisis, looking for another U-turn to make. Cuts to personal independence payments were scrapped, as was forced academisation. Measures to address the tampon tax and cuts to renewables subsidies were abandoned. Only one policy directive seems to hold this sorry excuse for a Government together, and that is the policy—in defiance of all sound economic advice—to impose spending cuts of a viciousness not seen in this country for generations.
There is consensus across this House that a strong economy is the foundation on which all else can be built. This Government have not created a strong economy—strong on rhetoric perhaps, and strong on creative accountancy, as the last Budget revealed, but the Chancellor’s economy is a jerry-built structure that rests on a recovery built on sand. The Chancellor has had plenty of opportunities to “fix the roof when the sun was shining” —as he so memorably put it in happier times—but he has simply failed. That would have meant taking a different approach, and we all hope that once the referendum is out of the way, the economy will pick up. Without change, however, the trajectory for our economy is clear.
We are trapped in a low-wage, low-skill, low-investment and low-productivity economy. We need a Government who adopt a sensible and credible fiscal rule, enabling long-term and patient investment in our economy, and we need a Government who use record low interest rates to invest in the future. As a minimum, the Government should now invest in the infrastructure, skills and technology that can help to transform how this economy operates. We need a Government who clamp down on tax avoidance. They could go further and overhaul a tax system that is manifestly failing to levy fair rates on those who can pay the most.
We need a Government with an industrial policy who back the steel industry, and who work with our European partners to clamp down on the flooding of our markets with cheap subsidised Chinese steel. The Government could also seek to transform the institutions that govern our economy, from the Treasury to the great corporations, unlocking potential that is otherwise wasted when vested interests dominate decision-making. The Queen’s Speech was an opportunity for the Government to accept that austerity has failed and to change course, but it was not taken. If the Government cannot write a speech for Her Majesty to undo the damage they have inflicted and set out a confident course for this country’s economy, it is clearly time for Labour to lead the way.
Let us be explicit: Labour rejects the failed and cruel austerity programme adopted by this Government. Instead, working in partnership with business, entrepreneurs and workers, Labour would create an entrepreneurial state to support innovation, create wealth, and drive growth, and we would share the proceeds of that growth fairly. By investing in our economy, Labour would lay the foundations of a new society that is radically fairer, more equal, and more democratic—an alternative based on a prosperous economy that is economically sound, environmentally sustainable, and where such prosperity is shared by all.
Mr Osborne
My hon. Friend is absolutely right. If the verdict of this report is that Labour is on life support, the policies of the shadow Chancellor are “do not resuscitate”. That is what he is condemning the Labour party to.
John McDonnell
The right hon. Gentleman is more interested in talking about Labour’s policies than his own. May I remind him that the Tory party just lost every mayoral election in the recent elections?
Mr Osborne
Labour had the worst results for an Opposition party in more than 30 years and were reduced to third place in Scotland. And Labour Members think that that is a good set of results! As far as we are concerned, if they want to carry on in this parallel universe that suits us just fine. Meanwhile, we are going to get on with governing the country, improving the economy and reforming our society.
The Government have made huge progress in the past six years. We inherited one of the weakest economies in the advanced world, which had had one of the biggest crashes. It is now one of the fastest-growing economies in the advanced world. We inherited an economy in which millions of people risked losing their job, and hundreds of thousands had. We now have a record number of people in work. We reduced the budget deficit. Our commitment to the northern powerhouse has seen investment projects in the region increase by 120% in the past two years. The verdict of the IMF in its recent examination of the British economy is clear:
“The UK’s recent economic performance has been strong, and considerable progress has been achieved in addressing underlying vulnerabilities.”
It said growth was robust and that
“the unemployment rate has fallen substantially, employment has reached an historic high, the fiscal deficit has been reduced, and financial sector resilience has increased.”
That is the independent verdict of the IMF. In the past, article IVs have been critical of the British economy; now they celebrate what we have achieved.
Many challenges remain, of course, and that is what the economic reforms in the Queen’s Speech will address. There is the immediate crisis in the global steel industry. My right hon. Friend the Business Secretary has just outlined to the House all our efforts to secure jobs here at home. There is a long-term challenge facing western societies of how we increase productivity growth. Improvements in productivity drive lasting improvements in living standards. That is a challenge for all countries. Indeed, the latest figures today from the United States show that productivity is set to fall this year for the first time in 30 years.
Oral Answers to Questions
John McDonnell Excerpts(9 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My hon. Friend, who is an excellent Member of Parliament in the west of England, is right. We get lots of suggestions from the Labour party about what we should do about tax. Labour was in office for 13 years and had Treasury Ministers answering questions for 13 years. Not a single one of these things happened when they were in charge, and no one believes that if Labour were ever back in charge, it would be tough and take action.
John McDonnell (Hayes and Harlington) (Lab)
Shall we bring the discussion back to today? In the Panama revelations about the behaviour of offshore companies, the Chancellor could not fail to notice the key role played in many of those deals by UK-headquartered banks and UK-based intermediaries. For example, HSBC and its affiliates created more offshore companies through Mossack Fonseca than any other bank. In view of the significant role played by UK banks, will the Chancellor support the new clause tabled by Labour to today’s Bank of England and Financial Services Bill, requiring British financial institutions to record the true owners of any companies or trusts that they work for? Will he also, like me, welcome the proposal from my right hon. Friend the Member for Birkenhead (Frank Field) for a register of the beneficial owners of property in the UK to tackle money laundering, often linked to tax evasion?
Mr Osborne
First, we are introducing a register of the beneficial ownership of companies and trusts that need to pay tax, and of course banks must therefore comply with it. Secondly, we are introducing—this will be in the Queen’s Speech—a new criminal offence of facilitating tax evasion, which will apply to the corporate sector in Britain as well. That is in addition to the criminal offence we have introduced that says ignorance is no defence when someone comes before the courts if it is found that they have been evading taxes.
Mr Osborne
Let me join my hon. Friend in congratulating the Claims Consortium Group on its award. I am glad that it has been recognised for its hard work. She is absolutely right that Taunton, and indeed the whole of the south-west, is a great place to do business. We are now investing huge sums in the roads and railways, broadband and housing. Of course, without her I do not think we would be having the A358 upgrade. There is a general lesson, which is that when the south-west votes blue, the voice of the south-west is heard in Parliament.
John McDonnell (Hayes and Harlington) (Lab)
It is not just on tax that people are concerned about the behaviour of the super-rich and its impact on the economy. I hope that the Chancellor will join me in welcoming the action taken by shareholders at BP’s annual general meeting against the excessive pay awards recommended by the company’s remuneration committee. The chief executive’s pay in FTSE 100 companies has risen from 50 times the average employee’s in the 1990s to 150 times today. Will he support measures to tackle the remuneration racket? To many, an old boys’ network appears to operate to set each other’s pay. In particular, will he support the widening of shareholder representation and employee representation on remuneration committees?
Mr Osborne
It is absolutely right that companies and the shareholders who own those companies think about their pay policy, act responsibly and do not pay excessive amounts to chief executives who do not deserve them. It is this Government who introduced those shareholder votes—they did not exist under previous Labour Governments—and I am glad that shareholders are using the opportunity we have given them. I do not think, if this is what the hon. Gentleman is hinting at, that we should be putting trade unions on company boards, but I do agree that we should make sure that shareholders use all the tools available to them.