Budget Resolutions and Economic Situation

Mike Gapes Excerpts

Friday 23rd March 2012 Commons Chamber

[Richard Fuller (Bedford) (Con)]

It is a great pleasure to follow the hon. Member for Sedgefield (Phil Wilson), who already outshines his predecessor in his integrity and sincerity, if not in his fame.

I apologise, Madam Deputy Speaker, to you and the House for the fact that unfortunately, owing to a constituency commitment, I will not be able to be here for the closing speeches. That is a great shame, because we have had a very stimulating debate across both sides of the House, with the opening speeches by my right hon. Friend the Secretary of State for Transport and by the shadow Minister, the hon. Member for Barrow and Furness (John Woodcock). The hon. Gentleman is standing in for the shadow Secretary of State, the hon. Member for Garston and Halewood (Maria Eagle), who became sick at a TUC conference. I think that this is the first time that a Labour Front Bencher has issued a health warning on their union paymasters. Let us hope that those health warnings will continue.

I will be going back to the great towns of Bedford and Kempston, whose people know that these are tough times but wanted to have a Budget that rewarded work, and the Chancellor of the Exchequer has delivered precisely that. The single most valuable part of this Budget for the people of my constituency is the raising of the personal allowance by over £1,000 so that the first £9,000 of a person’s income will not be liable for tax. That is a fantastic encouragement for people who are finding that their budgets are very tight.

Members on both sides of the House have expressed concerns about fuel duty, and I echo those concerns, because the duty does have a significant impact on personal budgets and on business. I would have liked the Government to do more, but I understand that they were unable to do so. I draw my hon. Friend the Economic Secretary’s attention to the campaign by my local newspaper, the Times and Citizen, which echoes what my hon. Friend the Member for Wyre Forest (Mark Garnier) said about how petrol prices can vary significantly between different regions. The Times and Citizen found that in Bedford and Kempston, our fuel prices were 4p to 5p per litre higher than in other areas. If we cannot do anything about fuel duty, will my hon. Friend consider ways in which the Government can ensure that we do not face monopolistic positions on fuel duty in very localised situations? The Times and Citizen’s campaign has shown that the people of Bedford and Kempston care very much about that, and it can, in itself, have as much impact as a cut in fuel duty overall.

I should like to spend a couple of minutes on the deficit crisis, inter-generational debt and competitiveness. On the deficit crisis, it is excellent that the Government are looking for fiscal neutrality, but that is different from considering the overall level of public expenditure and public debt. Public expenditure is still going up, in cash terms and in real terms, and tax receipts are going up—from 35.8% of GDP in 2010-11 to 36.4% of GDP in 2014-15. We continue to be a high-public-spending, high-tax economy. I hope that the Government and the Chancellor will look at ways in which the overall balance can be brought down so that resources can be moved from the Government sector to the more productive private sector.

May I also urge caution on Ministers in the use of quantitative easing? Quantitative easing is a policy to overcome a credit-driven recession. It should not be a policy to support excessive public expenditure or the long-term erosion of the value of savings. It is pertinent to look at the “Debt and reserves management report 2011-12”, which shows that the Bank of England’s asset purchase facility holds more than 18% of Government gilts. That holding has, at some point, to be unwound, which will have inflationary consequences.

[Mike Gapes]

Can I take it that the hon. Gentleman is calling for an increase in interest rates?

[Richard Fuller]

No, I am not calling for an increase in interest rates. I am calling for the Government to be clear, which I think they are, about the use of the quantitative easing policy. The results of that policy will, in a few years, have to be unwound. The level of their own gilts that the Government hold will have to be reduced. When that happens, interest rates will go up. We need to caution the Government to be aware, in setting the level of public expenditure, of what that level will mean. People will need an increase in pay owing to the increase in the Government’s cost of borrowing. Foreign holdings have also increased, and are now at 31%. We now have the highest spread between five-year and 30-year gilts in terms of the risk premium. All those points should caution us about our deficit.

Those facts come on the back of a significant level of debt in our economy. Opposition Members fail to realise that ours is the most indebted major economy in the world. That is the legacy of the previous Government and the previous Chancellor. Those who were here yesterday would have seen the shadow Chancellor give an uncharacteristically short speech. He sat down and people were surprised, because there was more that he could have said. However, I think that his speech could have been shorter. It could have gone thus: “I am sorry. I am really sorry. I am sorry for my hubris in thinking that I could end boom and bust. I know now that that was achievable only by leveraging up the entire British economy and dumping the debts on our children and grandchildren.” That is the speech that the shadow Chancellor could have given yesterday. He could then have sat down, because that sums up what he left us to sort out.

The shadow Chancellor did not give that speech yesterday, so perhaps I can give him some advice. The next time he goes to a school, instead of looking for a photo opportunity of him playing football, he could go up to one of the schoolchildren and say, “Hey, I’m sorry. I’m sorry that I shackled your potential with the debts that my monumentally short-sighted economic strategy created.” That is the truth of what he left behind.

--- Later in debate ---

[Mike Gapes (Ilford South) (Lab/Co-op)]

It is a pleasure to follow the hon. Member for Truro and Falmouth (Sarah Newton). She said that the Government are “single-minded”, but it is difficult to judge whether that is the case. I have been looking around and listening for contributions from the Liberal Democrats, but clearly they would rather not be here to explain to the ghosts of Beveridge and Keynes the reactionary, failing austerity policies that they are signed up to.

In my constituency, we have had a very significant increase in unemployment in the past year. The number of jobseeker’s allowance claimants went up to 4,119 in February; that is 297 more than a year ago and a 7.8% increase in one year. According to the House of Commons Library, 7.6% of my constituents are unemployed, and the number of those claiming JSA for more than 12 months is up by 395, from 480 to 875—a huge increase. That is not unique in this country, but it is important that people understand the situation. I represent a London—an outer-London—constituency where 11.6 people are chasing every single job. Many of my constituents commute into central London to work, as they always have done, but the number of jobs available to them there is going down, whether they are public sector jobs or jobs in the financial services industry in sectors such as banking and insurance, which have not been taking people on.

We have particular problems that affect constituencies in London, and those problems should not be ignored by those who are suffering in a similar way in other parts of the country. Yes, there are a lot of millionaires in London. There are lots of people with £2 million, £3 million or £5 million houses, but there are also many poor people living in bed and breakfast accommodation or short-term rented accommodation. One of the real tragedies in London is that tens of thousands of people are in housing need. There was nothing in this Budget about helping to get people into work so as to get the economy moving again and deal with the chronic homelessness and housing problems that we experience in London and in other cities.

Only 56.3% of my constituents are in employment. That reflects demographic and other issues; for example, a large number of people are in education. Nevertheless, the figure is very low compared with other areas that have 70% or 75% employment. We need targeted measures to deal with those whose first language is not English, or women who have not previously been in the work force, in order to try to change the situation. Nothing in this Budget will deal with those problems; all we have instead is a policy of imposed austerity.

I came to the House today, as I always do, by public transport. I travelled from Ilford to Stratford on a very overcrowded train, on which it was impossible to get a seat. That is the normal routine for tens of thousands of my constituents every morning. When we get Crossrail in five, six or seven years’ time, it will make a huge difference. I welcome this Government’s commitment to carry on with the Crossrail project, which was started by the previous Government. As the chairman of the all-party Crossrail group, I have been involved in the campaign for many years. I believe that Crossrail is vital for the future not just of London, but of the whole country. I hope that the Government will take action to ensure that the Crossrail trains are built in this country, unlike the recent disaster over the Thameslink trains. I also support High Speed 2, which is vital for the prosperity of the whole country.

It is time for the Government to get off the fence— I made an intervention about this—on extra airport capacity for our capital city; otherwise we will lose out to other countries in Europe on the transit opportunities of people flying across the Atlantic or flying in from Asia or the southern hemisphere. We need that capacity soon, and not through some fantasy island that will lead to the destruction of habitats and the killing of bird life. In my opinion, the additional capacity needs to be at Heathrow and possibly at other existing airports, rather than at the Mayor of London’s fantasy island.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

I am grateful that I was able to catch your eye, Mr Deputy Speaker, in this Hopperesque corner of the Chamber. It is a pleasure to speak in this debate on the Budget and the economy.

During the general election, I made a speech on the economy in which I said that if three MPs were asked the same question on the economy, they would give three different answers. I should confess that I added that if one of the three was a Lib Dem, there might be four different answers. Of course, we are now in coalition, so that joke is probably politically incorrect.

It is day three of the Budget debate and we are beginning to understand the detail of the statement and the impact that the component policy changes will have. Labour is starting to cherry-pick aspects of the Budget, probably to create a distraction from its contribution to the state of the nation’s economy and the inheritance that we received. I can retort by praising the tax breaks for the digital economy, which will help Bournemouth especially because it is thriving in that area; the funds for the Dorset local enterprise partnership; and the raising of the personal tax allowance, which will remove many low-paid workers in Bournemouth from the tax system altogether.

As important as those points are, we should not lose sight of the implication in the Office for Budget Responsibility report that the shadow of the recession that Labour took us into still looms. The eurozone crisis is not over. Oil prices remain high, and could climb higher. Although it has been about four years since the collapse of Lehman Brothers and the run on Northern Rock, we are certainly not out of the woods. We must not forget the scale of the financial mess that we inherited.

Labour’s approach for a decade was to borrow money that the Government did not have. It allowed the banks to do the same by over-leveraging and lending to people who could not afford it. It is all very well for Labour to blame the rest of the world and the state of the global economy, citing Fannie Mae and Freddie Mac, but there were issues here in the UK for which the Labour Government were responsible. Bradford and Bingley was offering 150% mortgages. That was a UK responsibility. It was happening over here. We cannot blame that on the Americans or on the state of the global economy. Even with the knowledge that the recession was under way and was likely to get worse, Labour kept on spending.

[Mike Gapes]

Is it not the case that, in opposition, the Chancellor of the Exchequer said that there was too much regulation by the last Labour Government?

[Mr Ellwood]

I do not agree with that statement at all. It happened under the Labour Government’s watch, and they were responsible. Their Chancellor, who later became the Prime Minister, inherited a stable economy. Indeed, in the first three years of the Labour Government, they actually balanced the books. Then in 2002, they overspent by £19 billion. By 2008 they had overspent by £68 billion, and by the following year they had ratcheted up a £152 billion deficit. That was after Lehman Brothers and Northern Rock. In their final year, they were still spending like there was no tomorrow, ratcheting up a decifit of £145 billion, taking us to an overall debt of close to £1 trillion. That is not good Government responsibility for the economy.

Not until we had a general election and an emergency Budget from our Chancellor, back in June 2010, was there some slowing down in Government spending. He introduced measures to protect the economy and set out a comprehensive strategy, including measures to control public finances and stimulate growth and tax reforms to increase our global competitiveness. Those measures were lacking under Labour, and the hon. Member for Ilford South (Mike Gapes) should ponder them.

I do not have time to go into the detail, but it would be helpful to break the Budget measures down into fiscal and monetary policy. Fiscal policy means the Government expenditure and taxation measures that have a direct effect on the distribution of income, demand and the level of economic activity. Two prime examples are the corporation tax cut, which will make us far more competitive, and the reduction in the top rate of tax to 45p so that Britain no longer has the highest rate in the G20.

By contrast, Labour introduced the 50p rate just before it left office, and it failed to raise the predicted revenues and undermined our competitiveness. Looking back in history, Labour seems to have had a love affair with high income tax rates over the past four decades. It was Wilson who put the top rate up to 83%, and Margaret Thatcher then reduced it to 60% in 1979 and 40% in 1989. What did Labour do when it came into office? It did not put the rate back up again; it kept it as it was. It recognised—certainly Tony Blair recognised—that to remain competitive, we had to have sensible tax rates.

I do not have time to dwell on monetary policy—the supply of money, the cost of money, the rate at which it is controlled, the price that the Government pay to borrow it and the total supply of money into the economy—but it has an impact on matters such as controlling our triple A rating and the price of borrowing. The Government have kept interest rates low and used selective quantitative easing, and that sound monetary policy is moving Britain forward.

This is a radical and reforming Budget that will help Britain earn its way in the world in continuing difficult times. Labour gave us a disastrous economic legacy, for which it is only now, sheepishly, apologising. It led to record debts and a halving of our manufacturing base, resulting in our coming within a whisker of losing our important triple A rating. The Government are at last balancing the books, reforming our tax system, supporting British business and staying on a course towards economic recovery. The OBR has revised upwards its growth forecast for this year. It is low, but nevertheless improving, and the OBR predicts that it will reach 2% in 2013. Labour has proved that we cannot borrow our way out of trouble. This Government are proving that we have to earn our way out.