Stewart Hosie
Main Page: Stewart Hosie (Scottish National Party - Dundee East)Department Debates - View all Stewart Hosie's debates with the HM Treasury
(10 years, 5 months ago)
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Sajid Javid
My hon. Friend makes an excellent point. What goes on in Wales is an excellent example of what a Labour Government would do, if they had the chance, in the United Kingdom. As well as increases in council tax, there has been a 10% cut in the NHS budget in Wales. That tells us exactly what Labour’s priorities are.
Stewart Hosie (Dundee East) (SNP)
On exports, in 2011 the deficit for trading goods was £100 billion. In 2012, that rose to £110 billion in the red, and has been running at about £20 billion in the red every quarter this year. I am not sure if I am seeing the green shoots of export recovery that the Minister is seeing.
Sajid Javid
I will speak on exports in more detail shortly. I am not sure that Scottish independence would help the record on exports.
Under this Government, Labour’s record budget deficit is down by a third, confidence and investment is on the rise, and the economy has turned a corner. The UK is growing faster than any other developed economy, including the US, Germany and Japan. Just last week, while downgrading global growth the OECD revised up UK growth by more than any other developed country. That growth is spread broadly across all sectors of the economy. Recent survey data show that construction is at its strongest level in six years and that activity in the services sector has not been this strong since 1997. New orders in manufacturing have risen to their highest level since 1995, according to the CBI.
Stewart Hosie (Dundee East) (SNP)
I wish to say a little about the motion before I start my speech proper. The motion is in two parts, the first of which describes the failure of the Conservative Government—I intend to say most about that—and the second calls for action to mitigate the cost of living crisis. Although the Scottish National party does not agree with the Labour party on the precise mechanism of its fuel price freeze—we would prefer to see a cut—the principle of taking action on fuel is important in tackling the cost of living, so we will certainly be able to support this tonight.
I wish to start by discussing tax, because that clearly has as much of a bearing on people’s ability to cope with rising prices as do earnings or the prices themselves. The Government are right to try to take as many people on low and modest wages out of tax as possible. The saving of £595 a year for basic rate taxpayers through the change in the basic allowance from £6,500 in 2010 to £9,440 this year makes sense. However, a saving of £595 for basic rate taxpayers makes rather less sense when the same Government are embarked on a £40,000 tax give-away for millionaires.
The people I really want to talk about are those in the middle, who are paying some of the heaviest price for the mistakes this Government have made. These people have seen the tax relief before they pay the 40% band fall from £37,500 in 2010 to £34,700 last year and to £32,000 this year. So for every £595 saved as a result of changes to the basic rate, they have had to shell out an extra £2,000 at 40p in the pound. That does not make people better off; it exacerbates the crisis faced by people, particularly hard-working people on middle incomes. I am not talking about the very poorest and I am certainly not talking about the very wealthy; I am discussing those on genuinely middle incomes. It means that this Government have taken the number of people paying 40% tax to a whopping 4.3 million; whereas barely 5% of taxpayers did so 25 years ago, the figure has rocketed and 16% of all taxpayers now pay a 40% tax rate—even a quarter of a century ago this was a band only for the rich. They are not paying that because they are wealthier or even because the economy has come out of the austerity period. Indeed, people feel poorer because they are poorer.
Last year, the Office for Budget Responsibility changed its forecast—I think this contradicts what the Minister said—by reducing household disposable income every year from 2013 onwards in the forecast period. In the March economic and fiscal outlook, it marked down real disposable income again to be negative or zero every year until 2017. People will not simply be not wealthier but will feel the burden of higher costs and stagnating real disposable income year after year after year of this Government.
It is no surprise that households should feel poorer given that since the Government came to power inflation has constantly exceeded targets, pay has been frozen and benefits have been cut. Even the calculation of pensions, notwithstanding the much-vaunted triple lock, has changed from the retail prices index to the consumer prices index. People need to understand that the actions of this Chancellor have caused untold damage to, and put pressure on, families throughout the UK, and much of that is because, as the motion says, he has failed to meet any of the economic targets that he set himself.
When the Government came to power in 2010, they told us that the current account deficit for this year would be a mere £40 billion. This year, in the Budget, the Chancellor told that it would be £84 billion, which is more than double the original figure. In 2010, the Chancellor told us that public sector net borrowing for this year would be barely £60 billion. This year, he told us that it was £108 billion, but when we add on the fiddled stuff with the pension funds, we find that it was actually £120 billion—again, more than double the figure.
Kwasi Kwarteng
Is the hon. Gentleman suggesting that it would have been a better plan to borrow more money to reduce those deficits?
Stewart Hosie
I am suggesting that to try to remove the structural deficit and fail over a fixed time scale, taking no cognisance of external shocks, was a stupid thing to do and a daft economic and political decision, which the Government were warned about in advance. The warnings failed precisely because this Chancellor promised that national debt would peak at 85% of GDP on the treaty calculation, or at £1.162 trillion on the normal calculation. However, we were then told this year that it would not peak until 2015-16 at over 100% of GDP on the treaty calculation, or at more than £1.5 trillion on the normal calculation.
Mr Ellwood
There is a comparison here with what those on the Labour Front Bench are saying. The hon. Gentleman said his speech was in two halves, but his argument is in two halves. He has just said that he is upset that the Government are taxing people too much, and now he is complaining that targets have not been met. Will he at least join me in welcoming the IMF’s upgraded forecast, which suggests that for this year growth will move from 0.9% to 1.4%, and next year from 1.5% to 1.9%? That must be welcome news.
Stewart Hosie
I always welcome growth in the economy, but the error that the hon. Gentleman and his Government have made is that by increasing tax and cutting to the extent that they have—the ratio of cuts to tax increases is four to one—they will have sucked out of the economy by 2016-17 roughly £155 billion a year. That is the equivalent of sucking 7.5% of GDP in terms of consumption out of the economy.
Stewart Hosie
I will not give way, because we only get two minutes’ stoppage time, and I have had my two minutes.
This Government are also borrowing more and we are all paying the cost of failure. The Government’s main failure is on the fiscal rules they set themselves: that the structural current account deficit should be in balance in the final year of a future five-year programme—it will not be; and that debt should be falling as a share of GDP by the end of that period—it is not. Both objectives, were, and remain, highly dependent on GDP growth, which, as we have noted in previous Budgets, is massively dependent, at least according to the OBR, on extraordinary unmet and unmeetable levels of business investment. Let us remember that in 2010 the Government suggested, with a straight face, that business investment would have to grow between 8% and 11% a year between 2011 and 2015. By the time of the OBR fiscal outlook in November 2011, growth in business investment had turned negative again and the forecast had to be changed to show future projections of growth of up to 12%.
The Chancellor was at it again this year. Having failed to get the growth in business investment we needed, he is now suggesting growth in business investment of 8.6% in three out of the next four years. I hope that that happens, but based on the evidence we have seen so far and the inability of the banks to take their share in providing credit and liquidity to businesses, I fear that is a forlorn hope.
We have also been told—this point was mentioned earlier—that we will see the benefits to GDP growth of exports from the UK. In 2011, however, we had a deficit in trade in goods of £100 billion, which rose to £110 billion the following year. The deficit in trade in goods has been sitting at about £20 billion for every quarter of this year. The balance of goods and services was £23 billion in the red in 2011, and that figure worsened to £35 billion last year after four and a half years of depreciation in sterling. I would hope that at the very least the Government recognised that that part of the plan simply has not worked.
I hope that the Government will be less stubborn about recognising where they have failed and that their optimistic Budgets have simply collapsed into dust when faced with the stark reality of austerity economics, which strips consumption out of the economy in the way I have described.
Stewart Hosie
I will not.
The pain of all that, as always, is felt by ordinary people, because, as I said earlier, we know this much from the Red Book: the Government intend to take £155 billion a year out of the economy in discretionary consolidation by 2016-17. They will do that for that year and every year, the equivalent of stripping consumption worth about 7.5% of GDP from the economy. Given that they have increased the ratio of discretionary consolidation to four to one—four cuts for every one tax rise—we can see where the Government’s priorities lie: not with jobs, not with growth, not with recovery and not with lifting the burden of the cost of living crisis off the backs of ordinary people, but with balancing the books on the backs of ordinary people in this country. If nothing else, they should recognise that it is not working. The pain is intense for communities throughout the UK and they should think again when we get to the autumn statement.
The Leader of the House of Commons (Mr Andrew Lansley)
On a point of order, Madam Deputy Speaker. I am sorry to interrupt the debate, but have you have had any indication from Mr Speaker whether he intends to make any statement to the House about his speech to the Hansard Society this evening, in which he proposes to announce the establishment of a Speaker’s commission on digital democracy? Furthermore, briefing of the media on the speech and the announcement within it has been taking place for some four hours already without any announcement being made to the House.
Kwasi Kwarteng
People in this country understand that any Government who came in after the 2010 election, amid the appalling wreckage of the economy bequeathed to us by the previous Government, would face a difficult proposition and have a difficult time. In fact, the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), outlined a plan—the newspapers dubbed it the Darling plan—that advocated spending cuts and a 22% rate of VAT. As Members will know, I advocated a much lower rate. The Darling plan was an adult, mature recognition of the appalling legacies that his Government had given us. It recognised that we needed to reduce spending and that what was then dubbed austerity was absolutely necessary for this country’s financial future.
Despite Labour’s worst predictions, the Government’s plan is now beginning to work. We have not heard anything about plan B for several months. We have not heard anyone say, “Too far, too fast.” One esteemed Labour economist said that unemployment would hit 5 million, but none of those dire predictions actually happened. Labour persists, however, in peddling the socialist, never-never land idea that borrowing more money will somehow reduce the deficit. That is absolutely insane. I understand why the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is banging her head as a symbol of her frustration, because some of her colleagues’ ideas are remarkably foolish.
Kwasi Kwarteng
No, I will not. I tried to intervene on the hon. Gentleman, but he quite rightly wanted to use his full allocation of time.
What do the Opposition actually propose? They have no plans on the economy. Their economic credibility is severely questioned by the British public. All their prophecies and predictions have proved to be completely false. They are now left with the notion that the Government have somehow failed and that the very difficult time through which we have passed is a direct consequence of Government policies, when it has in fact been the direct consequence of the Government trying to get us out of the mess bequeathed by the Opposition.
Let us look at the Darling plan. When the Labour Chancellor was in government, he said that spending would have to be reduced, which is exactly what this Government have done and achieved. As I have mentioned, under the Darling plan the VAT rate would have been 22%. It is lower than that, so we have managed to achieve a degree of fiscal consolidation without some of the punitive tax rates suggested by the right hon. Member for Edinburgh South West.
All of this debate has a direct bearing on living standards and the difficulties that people are facing. Once again, under difficult fiscal constraints, this Government have managed to lift hundreds of thousands of people out of tax altogether. They have raised the personal allowance, which is a significant achievement in a time of relative austerity when we have not had the largesse that the previous Government enjoyed and abused. It is absolutely to the Government’s credit that we have managed to raise the personal allowance—taking people out of tax—which has alleviated living conditions and made them slightly easier for many of the poorest in this country.
Before I finish, I want to mention some of the gimmicks and wheezes that the Labour party has offered as serious policies. Government give-aways will still have to be paid for by the taxpayer. It is madness to try to freeze energy prices. Anyone who has looked at the economic history of this country knows that the price and wage controls of the 1960s and 1970s completely failed. We have abandoned such policies. Opposition Members will remember that beer duty was frozen in the 1960s for two years, and in the third year the price of beer went up by 41%. That is no way to conduct an economic policy.
Alec Shelbrooke
I could not agree more. What I am saying is that we need to grow an economy to ensure that we can get to a living wage, and that at the same time we should be looking at how we reduce the cost of living.
Why is the cost of living so high today? That is the fundamental question. Fundamentally, the cost of living comes down to one very important point—energy. We have had a lot of debate in the House this afternoon about whether to have an energy freeze, but if we freeze energy prices for a fixed period, prices will get ramped up before and after the freeze, as happened with the beer price freeze in the 1960s. We must take a more long-term view.
How did we end up where we are? It is my personal view—I support what was in our manifesto, and I wish we had moved further on it—that we need to start replacing our power stations, and at the moment nuclear power stations are by far the best way forward. It has taken a lot of effort and lengthy negotiations to get to one nuclear power station; we should be building five or six. But at the same time the world oil price is rising, and will not go down despite what anyone thinks. To put it in context, in 1998 a barrel of oil was $5 a barrel, and yesterday Brent crude was $100 a barrel—I am sure the hon. Member for Dundee East (Stewart Hosie) will correct me if I am wrong. I believe that if oil reaches $140 a barrel, there is more economically recoverable oil in the North sea than has already been extracted. That is the reality of the situation.
Energy prices will not come down, so it is no good having a freeze for a period, because energy prices permeate every aspect of the cost of living—the price of food in the shops, the price of getting to work. We always talk about the petrol price, which has a big impact on getting to work, but we must do everything that we can to reduce the cost of getting goods to the shops, because that hits people’s wages. Since the start of this recession we have been on a wage freeze, if not a wage reduction, to prevent the runaway unemployment that we saw in the past.
What frustrates me in debates such as the one we are having today is not just the barrage of criticism from the Opposition of the way in which the Government have implemented their policies. That is fine; that is what we are in the House for. We are here to say that we have a route, we are sticking to it, and we think that it is working, and the Opposition are here to say, “We don’t agree.” But I have not heard any real alternative in the Chamber today. The closest we got—one of the more sensible speeches today—was the contribution by the right hon. Member for Oldham West and Royton (Mr Meacher), who is no longer in his seat. He actually came up with some suggestions. I did not agree with them—I thought they were pie-in-the-sky thinking—but at least he stood there and put forward some policies.
Sadly, proposals were completely lacking in the shadow Chief Secretary’s speech. There was a constant barrage on what the Government had, he thought, got wrong, but no recognition of the fact that if we are going to tackle the cost of living crisis, we must tackle its root causes. The cost of living is going up because energy prices are high, and that has nothing to do with the six energy companies—there were 14 when the Leader of the Opposition was Secretary of State for Energy and Climate Change, but there were only six by the time he left that office, so it is a bit rich of him to come across saying that it is terrible. The inescapable truth is that the price of oil is not going to come down.
Stewart Hosie
The hon. Gentleman is making an interesting speech. He talks about having more oil and it being economically extractable, but he will accept that part of the equation is tax? Does he not regret the massive hike in the North sea supplementary charge that resulted in project after project being cancelled, and made certain fields less viable?
Alec Shelbrooke
The hon. Gentleman will agree that the hundreds of millions of pounds of tax credits that the Government have made available to the oil and gas industry will help make that resource more exploitable in future and keep the supplies on. It comes down to a fundamental issue: what do we need to do to tackle the cost of living crisis? What we do not need, and what my constituents do not want to hear, is “It’s your fault for going down the austerity route” or “The collapse of the banks is your fault.” They want to say, “Look, we know all that—we know what’s going on.” That is why in most opinion polls, a majority of people still blame the Labour Government for the economic mess we are in. [Interruption.] It is all very well the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) shaking his head—that is what my constituents tell me, and I am out on the doorstep all the time.