Kwasi Kwarteng
Main Page: Kwasi Kwarteng (Conservative - Spelthorne)Department Debates - View all Kwasi Kwarteng's debates with the HM Treasury
Comprehensive Spending Review
Kwasi Kwarteng Excerpts(13 years, 6 months ago)
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Ms Eagle
Perhaps the hon. Gentleman will agree that in an advanced economy with a social security system, if there is a recession, deficits will rise. That is why the deficit rose. What he suggests, if taken to its logical extreme, means that he would not be in favour of paying unemployment benefit to those made unemployed. They tried that in the 1930s and it did not work.
Kwasi Kwarteng (Spelthorne) (Con)
What does the hon. Lady think was the reason behind our deficit being worse than that of every other country in the G20?
Ms Eagle
We entered the crisis with the second-lowest deficit in the G7. We were affected by the credit crunch because we have a very large financial services sector, which is why both sides in the House are talking about how we can rebalance our economy. We are too exposed to the kind of risks that crystallised when the credit crunch struck. [Interruption.] The Chancellor, from a sedentary position, asks whose fault that was. If we are going to be sensible and have a proper, nuanced, balanced and grown-up debate on this issue, all of us—as members of political parties that are, or have been, in government and in charge of running the country over the past few years—need to take our fair share of responsibility for how the banking sector came to dominate too much. Both sides of the House have to learn those lessons. I hope that we all will.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
The headlines in the debate on the comprehensive spending review have concentrated mainly on justified concerns about cuts to family support, welfare and housing. However, in my contribution I wish to focus on some of the main questions about transport.
Transport is vital to most of what happens in this country. It is vital to economic development, to enabling people to get to work and to quality of life. It enables people to lead full lives and guards against social exclusion. I welcome the headlines in the settlement on transport, including the focus on some specific investments which is very welcome, but I wish to draw the House’s attention to some major issues that need much fuller investigation.
The first is that of fairness in investment and regeneration—with the accompanying jobs—across the country. At the moment, transport investment in London per head is three times higher than in other regions. It is unclear whether the proposals in the settlement will change that or simply exacerbate the difference. I welcome the announcement that Crossrail will go ahead. I know how important that is in London—and it has national implications—but there is an ominous silence about the go-ahead in a proper timescale for electrification of the Liverpool-Manchester-Preston-Blackpool line. I noted the strange answer from the Secretary of State for Transport this morning, which avoided the issue completely. We have had no clarity about electrification on the Great Western line or whether the northern hub will go ahead in the way envisaged. All those projects are important for economic regeneration and have implications for the release and provision of rolling stock across the north. We need much clearer and quicker answers to those questions.
Great concern has also been expressed about the dramatic fare increases in the settlement. The increase in train fares could see the fare from Manchester to London increase from just over £65 to £88—
Mrs Ellman
I am sorry, but I have very little time and other hon. Members wish to speak.
Bus fares often do not get sufficient attention, but many lower-income people depend on buses to get to work and local amenities. But there will be a severe cut in bus services’ operators grant, which could mean higher bus fares and fewer bus services. The cut in that grant combined with cuts in revenue support to local authorities could mean that less money is available to enable buses to be provided where services are needed for social reasons rather than to make increased profits for the bus operating companies. We have had very little clarity about what that means.
Another important matter that has not been mentioned by Government Transport Ministers concerns the implications of a settlement on the critical issue of road safety. One of the unrecognised success stories of recent years has been the big reduction in the number of fatalities and serious injuries on our roads. Every single death and serious injury is a tragedy for the individuals and their families, but it is significant that, in the past year alone, there has been a 12% reduction in the number of people killed on our roads. The reason for that reduction is that local and central Government have combined in a number of measures to make our roads safer.
It is extremely disturbing, therefore, that we now have a cut in—an elimination of, in some cases—the specific grants to local authorities that enable them to go ahead with road safety schemes, together with a change in national direction and the abolition, I understand, and the complete axing of the previous Government’s effective public education campaign on road safety. That combination of Government and local action was very important in reducing the number of road casualties. Has any thought been given to how the cuts in this spending will affect the number of deaths on our roads? That is critical.
I am also extremely concerned about the difficulties facing strategic road schemes under the new arrangements. Such schemes matter because they bring jobs and economic benefits to local areas, but the projects currently decided on through the regional allocations now have nowhere to go and, from the Transport Secretary’s written statement today, it seems clear that he too has no answers. Local economic partnerships are no substitute for proper regional thinking that cuts across local authorities and provides vital economic lifelines—by giving access to ports, for example.
Kwasi Kwarteng
I forget—how many general elections did Baroness Thatcher win? Will my hon. Friend remind the House?
Richard Harrington
Not enough.
The most important thing is that the cuts are made sensibly, and that the bloated management hierarchies of local government look at themselves and realise that this is a chance for much of the reduction in their field to come through management. Let me explain. In Hertfordshire county council—[Interruption.] Yes, Conservative, and proud to be Conservative.
In Hertfordshire county council the expected cuts, which have yet to be implemented, will be enhanced by the fact that £150 million of taxpayers’ money has been saved by sensible management changes that hardly affect the front line—£150 million—yet in my local council, Watford, a council with a turnover of £18 million, we have a chief executive who is paid roughly the same as the Prime Minister, a mayor who is paid exactly the same as Members of the House, and an entourage of management levels that defy belief compared to anything in private business life.
I was very pleased to hear what the Prime Minister said yesterday about growth being so important, but I remind Opposition Members that growth is achieved not by spending money that the Government do not have and never wonder how to repay, but by businesses, ranging from the smallest to the largest, having the confidence in the economy to decide to expand, to raise money through friends and family or the stock market, to borrow money from banks that are able to lend it to them and to use every resource that they have to employ extra people. I have every confidence in this Government, and it is most important that we reward people who create jobs. Those are the people who are at a premium, and those are the people who have been stifled in the past.
There has been lots of talk about the Government making banks lend more money, and I commend the new funds that have been discussed. The new equity scheme, which the banks are putting together to provide £1.5 billion of equity for business, is a very good idea, and some of the schemes that the previous Government started and this Government are reforming and expanding are of course commendable. However, the real point is that, unless the deficit is dealt with not just in this country but elsewhere, banks will have to keep on lending money to Governments. Government debt has stifled banks here and all over the world. In the US the argument used to be, “The deficit does not matter”, but it does, because banks start lending money to business in quantity when they have confidence in the future and do not have to lend to Governments. We should not forget that.
The greatest thing about the comprehensive spending review is that it deals with the problem on a one-off basis. It is not being shoved under the carpet, put off or held over until after a general election, and for that reason, above all others, the CSR is the most fundamental and best thing that the Government could have done. The problems need grasping. The world of delusion that we have lived in for the past few years—the world of expanding public expenditure, with managers appearing all over the place at a cost to the public purse that taxpayers cannot afford—is coming to an end, and I for one am delighted about that.
Mr Andy Slaughter (Hammersmith) (Lab)
At the beginning of this debate, my hon. Friend the Member for Wallasey (Ms Eagle) quoted an article in The Wall Street Journal today that reported
“panic stations in the Treasury”
at finding out that the reduction in child benefit for higher earners was “unenforceable”. It continued:
“At root is a problem that should have been apparent to those designing the policy, if detailed advice had been sought from civil servants before it was announced at Conservative party conference.”
My hon. Friend the Member for Streatham (Mr Umunna) referred to himself—in all humility, I am sure—asking Sir Andrew Turnbull from the Treasury Committee this morning:
“Do you think it’s accurate to describe the UK as being on the brink of bankruptcy?”
The response was: “No I don’t.” Both those bits of hot-off-the-press news—
Mr Slaughter
No, I have not got time—actually I will, because it gives me more time.
Kwasi Kwarteng
I thought I was attending one of those rallies in North Korea, so reluctant are Labour Members to engage in debate. However, I thank the hon. Gentleman for giving way. My question is very straightforward: does he acknowledge that the deficit was a problem that had to be dealt with?
Mr Slaughter
What a stupid question, although I thank the hon. Gentleman very much for the extra time that he has given me. Anybody else? No? Okay, let us move on.
What I have described shows that it is politics rather than economics that has driven the CSR. Far from fairness driving the CSR, it is a particular type of Tory ideology that has driven it. Nowhere is that more true than in housing, to which I shall confine my remarks and which some of my hon. Friends have also addressed.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) apologised to the House earlier today—and rightly so—for inappropriate remarks that he made in the debate in Westminster Hall on the CSR and housing yesterday, when he said that Opposition Members had spread “lies and deceit”. I am glad that he apologised—it was good of him to do that—but the irony is that he made those comments in the context of the most selective quoting from the National Housing Federation’s brief. He managed to find two sentences in an excoriating brief that he thought supported the Government’s case. Let me read the bits either side of the bit that he quoted:
“This is a 60% cut in cash terms in comparison with the 2008-11 programme and in real terms a 63% cut. We are extremely disappointed that the Government has chosen to impose such significant cuts in capital funding…In an attempt to fill the gap caused by these significant capital cuts the Government is proposing to allow housing associations…to set rents on new lettings at levels between the current social rent up to a maximum of 80% of market rent.”
The briefing continued:
“However, we understand that any funds generated under this new ‘intermediate rent’…will only be allowed to be used to build more homes at this new intermediate rent and…across the four year spending period no homes will be built for social rent using these funds…there will be no further construction of social homes until at least 2015.”
That is the housing situation that we face, and for hon. Members who want to know what “intermediate rent” means, I looked at my Conservative council’s planning policies, which were announced last month. I found that the term excludes anybody on under £20,000 a year, which is 40% of my constituents and most of the people in housing need, but includes those on earnings of up to £79,400 a year—people in the top 2% of earnings. It is the Government’s policy that only intermediate housing will be built over the next 10 years.
Where does that leave my constituents? Where does it leave constituents such as the one whose case I was dealing with in my office this morning? That constituent is living with three teenage children in a highly damp one-bedroom flat, but has received the usual response from the local authority, which says:
“The average expected waiting time for a three bedroomed accommodation…is projected between 8-10 years. This is however only a projection but reflects the reality of…Social Housing waiting time as dictated by demand against availability.”
What tenants such as my constituent are being told is, “Give up your secured or assured tenancy, and take an insecure tenancy in the private sector. Then you may get some more space.” Up until now, people have not been told—they are being told now—that such accommodation is likely to be outside the borough, because of the restrictions on housing benefit. The situation now is that my constituents are being told that if they want decent accommodation, they should go into the private sector and be re-housed a significant distant outside the borough.
That is the reality of housing policy under the CSR. It is the reality for a constituent who came to see me this week, a teaching assistant taking £900 a week net and living in a shared room in a flat in Shepherd’s Bush, for which she pays £650 a month. She gets some housing benefit, but she can hardly make ends meet. Next year, she will not be able to, because of the cuts in housing benefit, and she will have to leave her job and move out of the area. That is the reality for people in my constituency.
While we are talking about apologies, perhaps someone else ought to apologise. The first interview that the Prime Minister gave after the election was to The Daily Telegraph. The article says:
“He was still angry over ‘appalling’ Labour lies that he blamed for preventing celebrated candidates such as Shaun Bailey winning in marginal seats”,
and quotes the Prime Minister as saying:
“‘They were telling people in Hammersmith they were going to have their council house taken away by the Tories.’”
Well, they are, and I will tell the House why. That candidate is at least honest, because he said at the Tory party conference:
“Inner city seats are so hard to win because Labour has filled them with poor people who are desperate and dependant on the state, so they vote for a party that they think is of the state.”
That is why those people are being punished. They vote Labour, and they want to live and work in the inner city, but that is not good enough for the Conservatives. That is what my constituents are facing, for ideological reasons of gerrymandering and social engineering.
Kwasi Kwarteng (Spelthorne) (Con)
Like my hon. Friend the Member for Central Devon (Mel Stride), I have sat through this debate all afternoon and have listened with increasing incredulity to what Opposition Members have been saying. There is an air of unreality in some parts of the Chamber. The question is not whether we should cut or carry on spending, as the second option is not on the table. Labour Members have accepted in their more lucid moments that they, too, would have had to cut, but as they now enjoy the luxury of opposition they do not have to say what they would have cut. It is the job of the Government to be responsible and take the decisions on which our future prosperity will depend.
There has been a lot of special pleading during the debate, and that is a part of our job as constituency MPs, but we also have a wider responsibility to the country as a whole, and it is one of the wider responsibilities of the Government to try to make sure that we are on track and that at the end of this Parliament Britain is much more prosperous than it was at the beginning of it.
The contents of the comprehensive spending review delivered by my right hon. Friend the Chancellor last week can be boiled down to just a few questions. First, how did we get here? We all know how we got here. A previous Chancellor—in accordance with the custom of the House, I will not mention him by name—believed he had abolished boom and bust, and his calculations on increasing spending were therefore based on the false premise that the economy would continue to expand. It did not, however. There was a recession, and because he had so many spending commitments, we ended up with a huge deficit.
No one is denying the scale of the deficit. It is the worst deficit of all the G20 countries; every international organisation has pointed out that the British deficit is far worse than those of our peers. The coalition Government had to deal with that, and I believe they have done so very well and effectively. The process has been a painful one, as many Members on both sides of the House have said, but it was the responsible course of action, to which the Conservative party was committed in the run-up to the general election and to which both coalition parties are signed up. We have been facing difficult choices, and as the Chancellor outlined last week, government is about choice. The cuts are necessary. After all, £1 in every £4 we spent was borrowed, which was unsustainable. No one in their right mind would lead their private life on that basis. We cannot keep on borrowing and spending. These are obvious truths which we have recognised and addressed.
The next question is an entirely legitimate one: are these cuts and restraints in spending fair? There is a big dispute about that between Members on the Opposition and Government Benches, but I want to remind the House of certain facts. The current benefits system simply is not working. It cannot be right that people are getting more than £20,000 a year on benefits and are therefore completely disincentivised from working. Many hard-working people in my constituency find it absurd and very frustrating that, as they feel, they are subsidising those who, as a lifestyle choice, have decided not to work. That cannot be right. Hon. Friends have alluded to a change in philosophy in this respect, and it is long overdue. In the long run, people will acknowledge that we did the right thing. It was a tough thing to do, but it was also a courageous thing to do, and it was the right thing for Britain as we look forward to the next few years.
The coalition Government have been utterly responsible and fearless in their determination to tackle our problems. That is what responsible government is about, and I am pleased to be supporting a Government who are responsible and determined enough to deal with our problems and to set our country on the right track.
Mr Hanson
I have five minutes or so to wind up the debate. I will not give way at present.
The spending review will hit jobs, children and families. It will gamble with jobs. It will gamble with the growth of the British economy and, as my hon. Friend the Member for South Down (Ms Ritchie) said, that of Northern Ireland as well. The spending review will hit the most vulnerable in our society the hardest.
Kwasi Kwarteng
I am obliged to the right hon. Gentleman. He acknowledges that there is a deficit and his party acknowledges that it would have made cuts, so will he please tell the House where those cuts would have fallen?
Mr Hanson
I know the hon. Gentleman was not a Member at the time, but I wish he had been here for the Budget proposals in March, when we set out clearly our deficit reduction plan.
The hon. Member for Colchester (Bob Russell) quoted the Bible at us. May I refer him to “Matthew”, chapter 7, verse 16, and the notion, “By their deeds shall ye know them”? The spending review cuts too fast and too deep, and it rejects the sensible, balanced approach put forward by my right hon. Friends the Members for Edinburgh South West (Mr Darling) and for Kingston upon Hull West and Hessle (Alan Johnson).
The Government plan to take out of our economy and our spending £40 billion more than Labour thought sensible, so I was surprised to hear the hon. Member for Thurrock (Jackie Doyle-Price) call for more expenditure. Even the Office for Budget Responsibility thinks that the Government’s measures will downgrade next year’s growth forecast from 2.6 to 2.3%.
The Budget and the comprehensive spending review will hit jobs, essential services and, crucially, take public investment out of the private sector at a time when the Government want the private sector to grow. My hon. Friends the Members for Liverpool, Riverside (Mrs Ellman) and for Ochil and South Perthshire (Gordon Banks) and, indeed, the hon. Member for Macclesfield (David Rutley) recognised the importance of the public sector in helping to support future private sector investment.
We know, because the Chancellor admitted it last week, that 490,000 jobs will be lost in the public sector. The hon. Member for Dundee East (Stewart Hosie) mentioned the impact on the defence sector, PricewaterhouseCoopers estimates that another 500,000 jobs will be lost in the private sector as a result, and my hon. Friend the Member for Nottingham South (Lilian Greenwood) described the impact of those losses. So let us not kid ourselves: the economy is still fragile. This week’s announcement on growth over the last quarter still demonstrates that point and, put simply, throwing 1 million people out of work—out of the economy—will cost us more jobs than that and impact on the private sector in the long run.
The Government’s measures will hit the private sector hardest. The hon. Member for Watford (Richard Harrington) talked about confidence, but confidence will fall if 1 million people are out of work. It will mean more people claiming benefits. As my hon. Friend the Member for Nottingham South said: fewer people in jobs, fewer people helping to grow the economy and higher welfare bills.
Government Members have been asking for it: there is an alternative to the Government’s proposals. We clearly said in the Budget presented by my right hon. Friend the Member for Edinburgh South West in March that we would take steps to halve the deficit over four years.