Budget Resolutions and Economic Situation

Roger Mullin Excerpts

Tuesday 14th July 2015 Commons Chamber

[Sajid Javid]

Perhaps the hon. Gentleman missed last week’s Budget and what the Chancellor said. The Chancellor did introduce the national living wage. Of course it will be phased in over five years, but by 2020 it will be equal to at least 60% of median earnings. It is the national living wage.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

Will the right hon. Gentleman confirm the situation in Scotland for UK Government employees? Will they get his Government’s low national living wage or will they get the living wage that applies in Scotland, which is considerably higher?

[Sajid Javid]

People will be receiving the new national living wage, as set out by the Chancellor in his Budget. That is a huge step forward, raising the incomes of millions of people throughout Britain. At least 2.6 million people will benefit directly, and a further 6 million will also benefit. I am sure that the hon. Gentleman will join me in welcoming that.

--- Later in debate ---

[Michelle Thomson (Edinburgh West) (SNP)]

I beg to move an amendment, after “importation”, insert

“other than in relation to Police Scotland and the Scottish Fire and Rescue Service”.

The amendment stands in the name of my hon. Friend the Member for Dundee East (Stewart Hosie).

On this final day of the Budget debate, we have heard a great deal about debt and deficit, the Budget itself, and the recently released productivity plan. All the Scottish National party Members have listened with sadness to the planned cuts, which strike fear into our hearts and those of our constituents. I have found myself reflecting a great deal on it—both the conflict of moral principles and the economic madness I believe is contained therein. Called out by the Institute for Fiscal Studies, this Budget is described as having

“benefit cuts at the centre”;

and as a “tax-raising budget”, the IFS gives the stark warning that,

“unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average”,

and that ultimately it is a “regressive” budget.

We are supposed to believe that the smart economic choice is for the UK to eliminate any deficit, pay down all debt, and run—and then sustain—a surplus. We are fed the yarn that an economy must be in surplus; that the gain is worthy of the pain. Despite the concerns of Robert Chote of the Office for Budget Responsibility, who described the plan—somewhat euphemistically—as “ambitious”, and the concerns of 77 leading economic academics, the Chancellor has ploughed on regardless. Now, I know that a degree in history—or, for that matter, one in music—does not equip one with an instinctive understanding of cause and effect, supply and demand or even so-called Micawber economics for that matter, but history does teach us about previous economic choices, and that ability to look back provides real accuracy. We know how the Chancellor’s previous predictions failed to meet actuality, and we know that the much vaunted current growth has taken place only over the past few years.

A number of issues concern me today, one of which is levels of personal debt. The OBR predicts household debt going above the levels of 2008 and reaching an incredible 173% of GDP by 2019. That household debt figure excludes mortgages but is based on unsecured lending such as credit cards and store cards and, with increasing frequency, payday loans. Fundamentally, it contributes to a very real risk of a repeated debt crisis as a direct result of the cuts. We have seen a consumption-led crisis before, yet here it is planned again. I quote the Chancellor, who said:

“This growth is driven by stronger private consumption”.—[Official Report, 8 July 2015; Vol. 598, c. 322.]

There is a small mention in the productivity plan about championing enterprise by stimulating finance for small and medium-sized enterprises—but what and how specifically? Simply privatising RBS with the mantra “private equals good” is frankly not good enough. A lack of access to liquidity remains the biggest single issue for small business, while at the other end of the spectrum large businesses stockpile their cash. It has been asked before but is worth reiterating: where is the support for the challenger banks? The cut in corporation tax has been trailed as encouragement for businesses to invest, but there is no clear link or evidence to suggest that will happen. I would have thought that I would have been intervened on by now to ask what within the Budget I agree with, and I confirm that, although I am disappointed with the cut in the annual investment allowance from £500,000 to £200,000, it is better than what was proposed, which was taking it down to £25,000.

The continued focus on financial services, in which I must declare a previous interest, without rebalancing to improve our exports or manufacturing is a worry, particularly where we continue with the models we have adopted. The New Economics Foundation has expressed the view that the

“United Kingdom has the least resilient financial system among leading industrial (G7) nations. It is unusually large and homogenous, highly interconnected . . . highly complex and highly reliant on funding from the wholesale financial markets”.

I recommend to all Members that they read the foundation’s recent report; its concerns concur with those of many other economists.

The SNP is urging action so that we can end the unfair anomaly whereby Scottish police and fire and rescue services alone are liable for payment of VAT. The proposed change to the Budget resolutions would enable us to introduce the necessary changes to the Finance Bill. Were this unfair and discriminatory situation to be corrected, we could free up an additional £23 million of resource for the Scottish Police Authority and £10 million for the Scottish Fire and Rescue Service—money which, I trust, all hon. Members would agree could provide welcome funds to support the fantastic work that our emergency services do.

Our calls for an end to this anomaly have gained cross-party support in the Scottish Parliament, and I am disappointed that the Government have so far refused to address the disparity in their treatment of emergency services north and south of the border. I hope that Members will take the opportunity today to take action and put this situation right.

We all agree that this is about choices, and the choice is how we grow the economy. This must fundamentally be by investment. Despite the productivity plan and various Ministers suggesting an increase in capital expenditure, a comparison between the Red Book of July and that of March 2015 shows total capital spend going down through the lifetime of this Parliament. If the Chancellor is unwilling to invest in the UK economy, give us the powers in Scotland and we will get on with the job.

When talk turns to economic and productivity comparisons, we hear a lot about the G7, the group of the world’s largest western economies, with which the UK likes to compare itself.

[Roger Mullin]

On productivity in the economy, my hon. Friend may be aware that since 2008 and until about 2014, it is fair to say that in terms of productivity per capita the UK has effectively been flatlining, while many other countries, including smaller countries such as Ireland, have seen their productivity rise significantly. There is much to learn from others, is there not?

[Michelle Thomson]

I thank my hon. Friend for his intervention, and I thank the House of Commons Library for some excellent work on GDP per capita and GDP per hours worked, including in relation to Ireland. I shall come on to that.

Where the UK stands in relation to Germany, France, Italy, the USA, Canada and so on provides some useful benchmarks for relative economic performance. The fact that the UK lags behind its peers on so many key indicators is another, all too sad, story. Last out of the recession, lowest productivity, and lowest GDP per capita growth rates—a record that does not tally with the UK Government’s “back in business” narrative.

Although the G7 provides a useful comparison for the UK, its relevance to Scotland is less apparent. We do not aspire to be one of the largest economies in the world, to strut faded imperial grandeur on the world stage or to maintain the pretence of exerting some kind of global influence, 100 years after the height of the British empire. Our ambitions are different—more modest, some would say; more enlightened, others would call it. In business there is a saying, “Turnover is vanity, profit is sanity.” To be big is not always to be beautiful. Scotland seeks fairness and prosperity for those who live there.