The Economy
Debate between Ed Davey and John Redwood(3 years, 9 months ago)
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John Redwood (Wokingham) (Con)
I have declared my business interests in the Register.
We need a job-rich recovery. I therefore strongly welcome the measures that the Chancellor has announced today. Some of those measures will save jobs. Some of those measures will create or stimulate new jobs. The Government are right to worry that we have lost too many jobs already over the closures and they are right to worry that we might lose more in the days ahead. They are right to make the changes they are making to the furlough scheme, to encourage as many of those jobs as possible to return, and they are also right to say that we cannot carry on with a furlough scheme indefinitely; there has to be a test of whether there is still a job there. If we roll it on for too long, there will be no real job left, and it becomes just a different kind of benefit, delaying the time when that person can retrain or find a better prospect for their work.
What do we need to extend this jobs recovery? First, we need plenty of money and credit around, so that it is available for the business to pick up and the incomes to rise. The new Governor is a welcome breath of fresh air. As I have mentioned before, the previous Governor went in for extreme austerity, which slowed the economy needlessly. The new Governor has corrected for that and made a very big boost at the beginning of this crisis, which has been extremely helpful. I see no need for the Bank to go to negative interest rates. I do not think the Swedish experiment with them was particularly helpful, and the Swiss experiment is specific to the pressure on the Swiss franc, which we do not have on the pound. I do not think we need to go to negative interest rates, but I would say that the Bank is in danger now of going rather slowly on the quantitative easing and loosening. We see that in some of the figures coming out.
If we compare our figures with those of the United States of America and the Fed, we see that the Fed is doing twice as much or more than the Bank of England, proportionate to the size of the economy. Some might think that perhaps the Fed is doing a little bit too much and the US might end up with some inflation, but we are in danger of not doing enough again, and I hope that progress will be made in getting the right adjustments.
Sir Edward Davey (Kingston and Surbiton) (LD)
Does the right hon. Gentleman agree that while it is right that the Bank of England is doing quantitative easing, how that money is spent ought to have more democratic input? That money could be used for the sorts of investment we need now for jobs and tackling climate change.
John Redwood
The money is used to maintain the price of Government bonds so that the Government can borrow on very low interest rates as much money as they want. Investments are therefore determined by this House and the Government, so I cannot quite understand what point the right hon. Gentleman is making.
The Government are right to borrow a lot of money for six months or so, to get us through the crisis and to speed the recovery, but it has to be a one-off. We cannot live like that. One needs to earn a living, but this is a one-off crisis. The markets are such and the Bank of England’s intervention is such that the Government can borrow a lot of money very cheaply and quite long term. That is the best we can do, and it is the right thing to do to try to save jobs and create new jobs.
This week, we have had the summer forecasts from the European Union for the economies of the European Union, and it has still done a UK forecast. It is worrying, because the forecasts say that the French, Italian and Spanish economies will lose more than 11% of their economic output and income this year. They say Britain will be in high single figures—a bit better than those three—although not as good as Germany, which has come through it the best so far. However, the figures are not acceptable, and most people feel that the United States figures will be considerably better, because the US response to this crisis has been on a far bigger scale, both fiscally and in terms of monetary policy, than the European response. The UK needs to be closer to the American example in this case, because this very severe hit to major economies requires something very big to try to carry them through and rescue those jobs.
I hope that the Government will look at the opportunities for sourcing more in the United Kingdom through its purchasing programmes as we leave the European Union. I am all in favour of strong competition, value for money and good pricing, but I think we have had examples of our not having enough national resilience. We found that we could not buy the things abroad that we needed for our health service, because we were relying on others’ goodwill and they needed it for themselves. We are finding that buying things from China comes with all kinds of difficulties. We will find, if we go down the route of importing more and more electricity, that we have strategic weakness in depending on Russian gas, which is the main source of continental energy. I urge the Government to use their purchasing intelligently to give us resilience and more British jobs. Value for money and competition are good, but let us make sure that the purchasing goes to home purposes, just as they do in other countries abroad, where they look after themselves first.
Debate on the Address
Debate between Ed Davey and John Redwood(4 years, 4 months ago)
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Sir Edward Davey (Kingston and Surbiton) (LD)
It is a great privilege to follow the right hon. Member for Wokingham (John Redwood), and it was a delight to hear that he is a convert, however late, to increased public spending. He made some interesting points about macroeconomic policy and he spoke about the new fiscal rule that the Chancellor announced just before the general election, which I hope the House will soon get to debate. He welcomed that rule, but I have some concerns about it as I think it rather old-fashioned. I would like a new fiscal rule to consider the net worth of the public sector and ensure that it is growing over time; at the moment it is in negative territory, particularly because of various pension fund liabilities. That would be a much better approach to managing fiscal policy long term, because it looks at the whole balance sheet of the public sector, which is what a normal business would do. We now have a data set for the past three years from the Office for National Statistics, and I hope we can have that debate later on, because it is important to get fiscal policy right.
The right hon. Gentleman made two other interesting points about monetary policy. He spoke about wanting to bring back quantitative easing, which is an interesting question.
Sir Edward Davey
There is always time for redemption, but if the hon. Gentleman is hoping for it in this case from this Prime Minister, I wish him well.
Some of us have led successful negotiations, pan-Europe, in Brussels—difficult negotiations that I won for Britain—on everything from economic reform of the single market to climate change. I did not succeed by adopting this Prime Minister’s tactics of bulldog bluster combined with the record of a turncoat. I do not believe that that is the right approach, and I do not believe that he will succeed without reneging on all, or most, of his previous promises to leave voters. My parliamentary interest in this is whether or not, in the dark Conservative forests of the Brexit Spartans, his erstwhile friends have yet smelt betrayal. We shall see, but as we oppose Brexit and continue to point out the extra costs, economic damage and loss of influence, we will also remind Government colleagues of the previously unthinkable concessions that now need to be made for any chance of a deal next year.
I turn to the NHS, which the Prime Minister has made so much of. Every Member of the House was elected on a manifesto committed to increasing spending on the NHS in real terms—maybe there is a little political consensus there. I, for one, am relaxed about putting a spending commitment for the health service into law, but that prompts one question: is the spending enough? I do not want to repeat the election debate, where the Labour party and the Liberal Democrats were arguing for higher health spending than the Government. Instead, let me approach it in a rather different way, in terms of what our medium-term NHS spending target should be.
Most health analysts tend to talk, not as the Prime Minister does, in the abstract—in total spending, which is bound to go up with an ageing population and economic growth—but in comparisons between similar countries: on spending per person, on the percentage of the national income. If we compare the UK’s health spending in these ways—even with the Prime Minister’s rises—against the world’s other largest developed countries, the UK fares badly. In the G7, our health spending per person is the second lowest—lower than Germany and France. As a share of national income, in the G7, the UK again performs badly, with Italy the only country that is spending less.
I readily admit that the NHS is far more efficient as a health service than, say, the health system of the United States, but surely we should be really ambitious for the NHS, and the factual evidence shows that this Government and this Queen’s Speech are not. As we legislate for future NHS spending targets, why do we not take the opportunity to be really ambitious? Why do we not aim to spend 10% of our national income on the NHS, as a minimum? That would bring us up to G7 comparators, and I think that the British people would back a policy where £1 in every £10 of the national cake was spent on the nation’s health. I accept that the Government may be nervous about spending targets based on national income because their economic policies look set to fail so badly and national income will grow very slowly.
John Redwood
Does the right hon. Gentleman accept that comparing a health service that is completely free to the user with one where there are payments through insurance schemes and collections of money is not a fair comparison? He should add in all the costs of the Inland Revenue in the UK, because that is the way we collect the revenue. And in relation to a previous point that he made, I think Brexit is good for the economy, not bad—I have always said that.
Sir Edward Davey
I will come to that last point in a second, but the right hon. Gentleman’s point about health systems is an interesting point for debate. I point to countries such as Denmark, which have a taxpayer-funded system and spend a significantly higher share of their national income on health. I am afraid that his point is not valid.
Energy Price Freeze
Debate between Ed Davey and John Redwood
Mr Davey
That is simply not true. We were reforming the markets from day one because we had inherited the big six from the Labour party.
Let us return to the small independent competitors. In its response to Labour’s Green Paper, Good Energy said:
“The proposed price freeze poses a disproportionate impact for smaller companies such as ourselves as we do not have the same level of vertical integration as the big 6 which allows us to control our costs.”
If raw energy costs rise during a freeze, vertically integrated firms with deep pockets can withstand a profits squeeze, but smaller, retail-only firms would go bankrupt. Result: reduced competitive pressure on the big six and higher overall prices when the freeze comes to an end.
Mr John Redwood (Wokingham) (Con)
Given the very high cost of wind energy, does the Secretary of State think there should now be some limit on the subsidy going to that sector to try and keep bills down?
Mr Davey
There is a limit, of course. The right hon. Gentleman ought to follow this debate more closely. Indeed, we have reduced subsidies and our policy is to reduce them still further.
The truth is that, rather than helping consumers, Labour’s price freeze is a pro-big six policy. For all the bluster about taking on the big six, the right hon. Member for Don Valley is just playing into their hands. If Labour makes the smaller competitors go bankrupt, the people who will enjoy that are the big six, and the right hon. Lady knows that.
UK Nuclear Energy Programme
Debate between Ed Davey and John Redwood(10 years, 6 months ago)
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Mr John Redwood (Wokingham) (Con)
I welcome the decision to have more power capacity, which we greatly need. However, given the generous financial terms to the investors, did the Secretary of State consider the possibility of reserving some part of the financial investment and provision of capital for British interests? I am sure that many of them would like those sorts of returns.
Mr Davey
First, 57% of the value of this project will go to UK firms, and I hope that the right hon. Gentleman welcomes that. I do not believe that these terms are generous at all. We have had hard negotiations to get them down, and EDF realises that. Some of the benefits of the deal we have negotiated need to be held up in the headlights. There is the construction gain share, so that if the construction costs are lower, the consumer gains. If there is a refinancing by the investors in 10 years’ time from which they make a lot of money, the consumer will gain from that refinancing. That never happened with private finance initiative deals when Labour was in power; rather, the taxpayer lost out. We have the refinancing gain share for the consumer, and I doubt that would have happened if that lot had been in power.
Jobs and Growth in a Low-carbon Economy
Debate between Ed Davey and John Redwood
Mr Davey
I certainly can give my right hon. Friend that commitment. I have already met many non-governmental organisations and have spoken to the devolved Administrations. It was my pleasure and privilege to work on this agenda with him over a number years. He showed fantastic leadership when this was not a popular issue. He did more than almost any other hon. Member to put this issue on to the political agenda, and I pay complete tribute to him.
Mr Redwood
Does the Secretary of State agree that if Britain’s energy is a lot dearer than that of her competitors, we will drive a lot of industry to a lot of other countries? There will be as much CO2 in the world, but we will be short of jobs.
Mr Davey
We need to look carefully at our energy-intensive industries, which is probably what is behind my right hon. Friend’s question. However, there is a danger in the debate that some of the economic analysis is too static. As the world moves to its climate change targets, industries across the world must be more energy-efficient. Industries in countries such as ours that can steal a march and become first movers will prosper by becoming more energy-efficient. Some of the market signals that are needed are rightly happening, but I accept that we need packages for energy-intensive industries.