Baroness Clark of Kilwinning
Main Page: Baroness Clark of Kilwinning (Labour - Life peer)
Jacob Rees-Mogg
I entirely accept the evidence that people with low incomes are more likely to spend the money that they receive. However, money flows within the economy are not limited to expenditure. The saving of money increases deposits at banks and eases their loan-to-deposit ratios. It therefore ensures that the banks can lend more money both to prospective home owners and to businesses.
There is a view among Labour Members, which was also expressed during the Budget debates, of a very closed financial system, but that is quite wrong. There are flows within the financial system. There is a rule of money, that money must find a home. [Interruption.] It is very welcome to come to my home. If hon. Members would like to send it in that direction, I shall not say no. That is the sort of tax I could do with. However, money does find a home, and that is in generating economic activity.
Katy Clark (North Ayrshire and Arran) (Lab)
Does the hon. Gentleman believe it is right that the rich are getting richer while the living standards of the vast majority of the people in this country are going down?
Jacob Rees-Mogg
The important thing for the Government to do is to lift the living standards of everybody, but we do not improve the standard of living of the poor by impoverishing the rich. That is what Labour tried when in government before and it singularly failed. If everybody gets richer, the whole standard of living of this country improves, and Government revenues increase when rates of taxation are reduced. It is thought that the ideal rate to maximise the amount of revenue for the Treasury would be 37%, so I would be keen for the Government to do this. It is a great error, for those on all sides, to put short-term political advantage or debating points above the economic benefit of this country. Therefore, we should be bold about rates to make sure that we get the revenue we need for the Government to be able to afford to do what they want to do, to keep taxation overall as low as possible, to pay down the deficit and, ultimately, to reduce the national debt. So on the fiscal side, the Government have got it right.
The other aspect of prices is the monetary side, primarily handed over to the Bank of England, but none the less with a Government target set in relation to inflation. If the monetary side were to get out of control, as we have seen historically that it can, the cost of living increases because of the monetary effect on prices. So there is a careful balance for the Government to have. This Government, unlike our continental partners, have got it right by having a tight fiscal policy and a loose monetary policy, so that liquidity is available within the economic system, but the Government part of it is bearing down on the Government’s deficit and, ultimately, on the debt. That is the right balance, and it will encourage price stability. If we did things the other way around—with tight fiscal and monetary policies—we would have a degree of austerity that is unsustainable, as our continental friends have. If we have both loose money and loose fiscal policy, we will end up with inflation that has pretty much disastrous consequences for the cost of living.
Katy Clark (North Ayrshire and Arran) (Lab)
It is a pleasure to follow my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). Oppositions often say that the Queen’s Speech is a missed opportunity. As has been said many times in the debate, there is not a huge amount, or a huge amount of legislation, in the Queen’s Speech. My view is that there is a huge need for Government action, whether by legislation or other means.
Many Government Members are resistant to the state having a role in solving the challenges we face. They often say that they wish to roll back the state, but the challenges that we face are so massive that only state intervention can get us out of our economic predicament. Anyone listening to speeches by Government Members would think that we do not have many problems, but the Office for Budget Responsibility has downgraded the growth figures in every Budget that the Chancellor has given, and we have appalling growth figures—if we have any growth at all. We are seeing real cuts in living standards, with real wages down £1,700 since the election. We are living through the longest lasting slump since the 19th century. The economy is flatlining and we have a real problem, particularly in constituencies such as the one I represent, with youth unemployment and long-term unemployment.
In the past year, pay has gone up by 1.2% while prices have increased by 2.8%. I am pleased that so many speeches by my hon. Friends have focused on the real challenges that ordinary people face. For example, over the past five years the cost of food has increased by 30%. Energy bills have increased by more than £300 since the Government came to power—and I use the words “came to power” rather than elected, because neither coalition party was elected with a mandate to do what the coalition Government have been doing over the past three years. Bus fares have gone up by 32% in the past five years, while the operating profits of bus companies have increased by more than 7% each year. I wish the Queen’s Speech had contained legislation to address some of those issues. We should regulate bus services and bring them back under public ownership, because the current model simply is not working. Train fares have also risen nearly three times faster than wages since the recession. All those factors are having a major effect on the economy.
Britain has the second largest share of low-paid workers in the developed world. Only the United States is ahead of us. The Resolution Foundation estimates that if employers paid their work force the living wage, the Government would save £3.6 billion a year. The number of people sleeping rough has gone up by more than 30% in the past two years and 75,000 children were homeless last Christmas. The Queen’s Speech addresses none of those issues.
I am on the Business, Innovation and Skills Committee, and there is a cross-party consensus that we want to see our banks lending to business, but we all know that local businesses in our communities cannot get loans. Lending to business is still falling, when we all know that unless we invest, we will not get growth. The Financial Services (Banking Reform) Bill will do nothing to address those issues. Companies in Ayrshire, of all places, are now going abroad to bank, because our banks will not respond to the need.
The Queen’s Speech should have been about jobs and growth. Instead, the political debate is dominated by an internal political squabble in the Tory party about a referendum on Europe, and no doubt we will hear more about that tomorrow. Many of us will remember stock markets tumbling and the near collapse of the banking system in 2008. Few in this country would have thought at that time that the response to that challenge, and the real predicament we face now, would be to make the rich richer and to attack the living standards of the poorest in the country. These policies of austerity are not restricted to the UK, but wherever they are being implemented they are not working. We are seeing real cuts in the living standards of ordinary people in this country.
There has been much discussion in this Chamber about public sector cuts and the Government’s so-called welfare reforms. There is no doubt that those policies are having a big effect on the unemployed and those who stay at home, but they are also having a massive effect on those who work, and living standards are plummeting. Government Members say that they want to see people stand on their own two feet, but to do that people have to have jobs to go to, with pay that they can live on. If we pursue the policies outlined in the Queen’s Speech, that will not happen; the rich will continue to get richer and the poor will get poorer.