UK Economy

Danny Kinahan Excerpts

Wednesday 29th June 2016 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to follow my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin). It is always a fantastic honour to listen to the eloquence of one of my oldest friends in politics.

We have a responsibility to act in a way that does not talk down the economy, and collectively to support measures to create financial stability leading to sustainable economic growth. I commend the Bank of England for seeking to reassure the financial markets that it will, among other things, take the necessary measures to sustain liquidity. However, when the Prime Minister says in this House, as he did on Monday, that there has been an “adjustment” in the financial markets, his comments fly in the face of reality.

Over the past week, the pound has fallen by more than 10% against the US dollar. The FTSE 250, which is more representative of the UK economy than the FTSE 100, is down by 12% in a week. When we look behind these indices, we see the severity of the declines in a number of economically sensitive sectors. Look at the banks: RBS is down by 28%; Barclays is down by 27%; and Lloyds is down by 22% over the past week. The house builder Barratt Developments is down by 32% over the past week.

Those astonishing falls clearly represent a crisis of investor confidence in our economy and indicate that investors anticipate a significant shift on growth in the UK economy. Indeed, I note this afternoon that consensus expectations for GDP growth in the UK next year have fallen from 2.1% to 0.4%. This is no “adjustment”, as the Prime Minister called it; it is a significant shift in investor perception of UK plc, and it is driven by a failure of leadership by the Prime Minister and his Government.

Let us make no mistake: this is a crisis made in Westminster by Westminster, and it needs our full attention if we are to respond appropriately to the challenges we face. The challenge is brought home to us when we see that Moody’s has today changed its outlook on 12 UK banks and building societies, and downgraded its outlook on 52 UK sub-sovereigns from stable to negative.

The Chancellor talked of an emergency budget and additional austerity measures as a result of Brexit. It is the Government’s responsibility to deliver financial stability, not to kick the legs from under that stability and threaten the jobs and livelihoods of our citizens, but that is precisely what this Government have done. These are no abstract matters—[Interruption.] It might be better if the Front-Bench team paid some attention rather than talking to each other, because we are discussing the livelihoods of people in this country and it would be respectful to the House if Front Benchers listened to the debate.

The fall in the financial markets affects the pension funds of everyone investing in this country. The stock market adjusts to future expectations of profits and dividend growth, and that is what should concern us. Goldman Sachs has downgraded UK banks and cut its profit forecast for the sector by a whopping €10 billion. Just think about that—a Tory row over Europe leads to banking profits in the UK being decimated. Have the Prime Minister and his Government no shame about what they have caused? It is, as someone might say, another fine mess they have got us into.

When the Government come to this House and call for support to change the future payout to pensioners of the British Steel pension scheme, it is, in part, through a consideration of future prospects for asset growth in that pension scheme. Thousands of British Steel workers and pensioners face a very real threat to the value of their pensions, and the events of the last few days can only exacerbate it. The threat to the British Steel pension scheme is newsworthy and current.

As the consultation response from the Institute and Faculty of Actuaries suggests, there is a much wider threat to pension schemes, but this self-induced run on the markets has made that threat greater. We need to put it in the context of the economic circumstances that we face. The fallout from the financial crisis of 2007-08 is still with us. We are burdened with eye-watering levels of debt. Wages have barely risen in real terms since the financial crisis. Productivity has flatlined and prospects for economic growth had already been cut before we ran into the backwash of the referendum. What was required was a focus on driving investment into our economy through innovation and by driving up productivity growth, as a result delivering higher living standards.

The UK Government have engineered, at the very least, an economic setback of their own making. Why? A fallout over Europe within the Tory party has caused domestic and foreign investors to take fright, and not just at prospects for growth and stability in the UK because this will have a knock-on effect on our neighbours in Europe and elsewhere. The Chancellor has talked about further austerity, so yet again the poorest and weakest in our society will be asked to pay the price for a lack of leadership from the UK Tory Government.

When we look back over the last few years, we see rising inequality, which has been driven by the Government’s fiscal and monetary policy decisions. There has been a lack of appropriate measures to deliver sustainable economic growth, with too narrow a focus on quantitative easing, rather than considering measures that could have led to better outcomes. Where is the Government analysis of the quantitative easing programme? As of today, £375 billion has been invested in an asset purchase scheme. Where are the additional measures to stimulate growth and investment?

We know that the Government and those on the Brexit side had no plan for a leave vote. The Chancellor went into hiding. Well, let us hear it now. The financial markets have given their judgment on the referendum decision. Where is the Government’s response, beyond the Prime Minister calling the market declines an “adjustment”? We need to build confidence and stability, so where is the Government plan to do that? Let the country hear it. I will happily give way to any of the Government Front-Bench team if they want to intervene. So far, we have heard absolutely nothing that would deliver confidence to the financial markets.

We know that there is no plan. The Prime Minister and the Chancellor are like a pair of rabbits caught in the headlights, transfixed and clueless. The Prime Minister was sent packing from the meeting of the Council of Ministers—he is yesterday’s man in Europe and yesterday’s man at home. The Prime Minister has got us into this mess, but he has no plan to get us out. Someone else is going to have to pick up the pieces and deal with the economic uncertainty. Thank goodness that we in Scotland have Nicola Sturgeon and the Scottish Government, who are showing effective leadership. We are optimistic for our country. At the 2015 general election campaign, and in every Budget since, the SNP has set out a credible alternative to austerity that would see us invest in public services and kick-start growth throughout the UK.

People in this country and elsewhere have reflected on the leadership that Nicola Sturgeon has shown over the last few days. We need the European Union to recognise the voice of Scotland and the fact that Scotland voted to remain in the European Union. Scotland is an internationalist country that is open for business. The vote in the Scottish Parliament yesterday showed a unity of purpose, giving the Scottish Government a mandate to negotiate with the European Union to protect the interests of the Scottish people and to make sure we retain access to the single market, which is so important to the security of jobs, investment and growth.

Let me say to the people of Scotland and to those in this Chamber that Scotland in Europe will be a beacon of hope, bringing jobs and investment to this country. People in London who are concerned about operating in financial services can come to Scotland—to a country that sees itself as part of a European destiny, that will be very much focused on jobs and growth, and that will deliver for the people of Scotland.

[Danny Kinahan (South Antrim) (UUP)]

Given all the hon. Gentleman’s passion for staying in Europe, and for all of us in the Union working with each other and with Ireland, does he agree that we need to find a way of establishing how Scotland fits into the Union and how all the parts of the United Kingdom can work together so that we can move forward?

[Ian Blackford]

Of course, those of us on the Opposition Benches will work to ensure that we can rescue something out of the carnage of the vote that took place throughout the UK.

The people of Scotland and Northern Ireland voted to remain in the European Union. Of course we want to do our best for all the people of the UK, but our primary responsibility is to protect the people of Scotland. That is why we need to extend the hand of friendship to the people of the European Union and to say to them, “Please stand by us. We have stood by you.” Let us make sure that Scotland remains in the European Union so that we can deliver hope, prosperity and jobs for our people.

--- Later in debate ---

[Greg Hands]

Yes, it will include the Home Office, and it will advise on the many options we face as we determine our future relationship with the EU. As Chief Secretary to the Treasury, I expect to play my own part in that task over the coming months.

[Danny Kinahan]

Does the Minister agree that the unit needs to consider how we hold the Union together and build the relationships between Scotland, England, Wales and Northern Ireland, given the direction in which Scotland seems to want to move and the need to maintain our relationship and trade with Ireland?

[Greg Hands]

I thank the hon. Gentleman for his intervention. Of course, we have to keep on board all the devolved Administrations and make sure we get the right deal for all the nations of this country and, indeed, for Gibraltar. I know that different parts of the UK voted different ways—my constituency voted 70% to remain—but we must come together and ask for, and get, the best possible deal for the UK as a whole in the negotiations. That is absolutely the key point. This is not a time for division between our nations and communities.

Now is also the time to heal divisions in the country and in our communities. I was one of the first to condemn the disgraceful attack this weekend on the Polski Osrodek Spoleczno-Kulturalny—POSK—which is in what used to be my constituency in Hammersmith. I was delighted that—people have commented on this—perhaps for the first time in 20 years the hon. Member for Hammersmith (Andy Slaughter) and I have found something to agree on. We were retweeting each other in condemnation of the attack. It was an absolutely disgraceful attack on the Polish community in particular and on EU nationals and foreigners in general.

There was some irony there. I am not sure that the people responsible had any sense of what POSK did. POSK was set up in the 1960s. It had nothing to do with EU freedom of movement and labour or our joining the EU in 1973—even if it did, of course, the attack would still not have been correct. POSK was founded back in the 1960s, as a focal centre for the local Polish community, many of whom fought shoulder to shoulder with British servicemen in the second world war, fighting for our values and protecting our way of life. Never has the word “solidarity” felt more appropriate in how we reach out to the Polish community and other EU communities in this country. Sadly, that attack was not the only incident of xenophobia across the country, but every right-thinking person, on both sides of the House and the referendum debate will see them for what they are: ignorant and unwelcome displays of hatred, which have no part to play in the future of this country.

Both professionally, as the representative of a constituency where about 17% of local people are EU nationals and which benefits from their contribution, and personally, as the husband of a German wife and father of half-German children—they were in tears on Friday morning after hearing the referendum result—I want to send the message loud and clear from this Chamber that our fellow Europeans are still welcome in the UK, as are those from beyond the continent.