UK Economy

Liam Byrne Excerpts

Wednesday 29th June 2016 Commons Chamber

[Stewart Hosie]

Indeed, and I will come to the recovery in certain areas in just a moment. The hon. Gentleman is right when it comes to the FTSE 100, but let me come to all the other indices, and we will see the real damage and how it is being played out.

It was not simply stock prices that were affected. Sterling was trading at $1.45 before the referendum. The value of the pound against the dollar fell by almost 8% on Friday the 24th—almost twice the fall in 1992, when the UK was forced out of the exchange rate mechanism on Black Wednesday.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

Of course the FTSE 100 is going to rebound a bit, because the vast majority of the business of FTSE 100 stocks is outside the United Kingdom. If we look at indices such as the FTSE 250, which is much more domestically exposed, we see that the fall has been catastrophic.

[Stewart Hosie]

That is absolutely correct. The FTSE 250 is far more exposed to the domestic market. Whether the index moves up or down slightly at any given time, the key point is that the exposure to the UK market and the lack of confidence at the moment are precisely what is driving that uncertainty.

--- Later in debate ---

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I welcome today’s debate and the tone that we have heard this afternoon. After what has been all too often a foul-mouthed debate over the past couple of months, the tone of constructive engagement and working together is very important. It is down to the leaders in this House to put the decency back into our democracy and, like many others, I was shocked to hear the statements, tweets, messages and incidents that hon. Members read out during our proceedings on the statement earlier today. We just cannot have that in this country; we are not going to have that in this country. It is a responsibility on all our shoulders to ensure that in the communities we serve we stamp it out, and we stamp it out fast.

Part of a decent democracy is that people honour their promises. Let us be honest that we have already seen promises that were made in the campaign being broken into shreds, tatters and little pieces. It is a job for all of us to hold to account the leaders of the leave campaign who made promises that now appear not to be honoured. We need to hang those promises around their necks in the months ahead because, frankly, our democracy cannot withstand too many more broken promises. The guilty men and women who made those promises must be held to account in this House.

I wanted to speak in the debate because I want to say that we need to honour the people’s decision. They have given us a stark lesson. We know how to globalise, but we do not know how to make globalisation work for the majority of voters. What I think most voters told us in the referendum is that we have become a world of very rich elites and very remote elites. People have had enough of it; they want a different settlement.

We need to move with speed in this House to set out the principles for a new special relationship with our closest neighbours. The sooner we agree those principles across the House, the better. I am glad the Chancellor set out a couple of principles, but I hope that he agrees, and that when the Chief Secretary to the Treasury winds up the debate he will agree, that we ought to have been better prepared. We were told yesterday by the Prime Minister that there is a new EU unit, yet somehow the Government have forgotten to include the Home Office in it, as if somehow immigration was not an important feature of this debate. Quite frankly, that beggars belief.

We are blessed in this House with the European Scrutiny Committee, which does a good job. It is charged with scrutinising individual instruments of EU legislation that come before us. It is, of course, chaired by that neutral and commanding figure the hon. Member for Stone (Sir William Cash). However, it is not equipped to look at the big picture nor to look at the principles that we need to agree. I therefore hope the Prime Minister will take seriously the call from Opposition Members for a new Joint Committee of both Houses to try to get to the bottom of the 6,500 instruments we might need to incorporate into UK domestic law, give or take those aspects we do not like.

Parliamentary sovereignty has just been voted on, but Parliament cannot be sovereign if Parliament is blind. We need to ensure that we are equipped in this House with a method of coming to agreement and making sure that the right plan for a new relationship is on the table.

[Stephen Gethins]

On the question of democracy and sovereignty, does the right hon. Gentleman agree that the Government, in terms of setting out their timetable for Brexit, should also set out a timetable for scrapping the House of Lords so that we do not have any more unelected bureaucrats deciding day-to-day business?

[Liam Byrne]

I am grateful to the hon. Gentleman for that intervention. I am on his side when it comes to the House of Lords. This Government’s idea of democracy is to bring forward proposals to cut the number of people in this House while increasing the number in the other place, I think by more than 200 at the last count. It makes one wonder what they are scared of when it comes to democratic decisions.

I want to touch very briefly on some of the principles that have to define the new special relationship with Europe, and we have to start with national security. Since we put in place co-operation on justice and home affairs, we have made important progress. We have good ideas, such as the European arrest warrant, and we have concerted action on sharing information relating to crime, terrorism and watch lists. Terrorists do not respect international borders and nor must the fight against terrorism. It is therefore essential that we agree to collaborate and co-operate to the maximum possible extent with our neighbours when it comes to the fight against crime and the fight against terror.

Secondly, it is clear from this vote—the hon. Member for South Suffolk (James Cartlidge) made this point well—that we will have to update the principle of free movement and replace it with a new principle of fair movement. I was the Minister for Borders and Immigration who introduced the points system for non-EU immigration into this country. During the French presidency, it became clear to me that there was an appetite across Europe for reforming the free movement directive. I said at the time that it would be a long struggle to get such reform, but the sooner we started, the sooner we would finish. Surely we now have to take that lesson and begin putting on the table serious proposals for the reform of free movement.

There are a million and one choices to make. We have to start by honouring the rights of those who are already here. We cannot retrospectively tamper with the rights of people who have already made the life-changing decision to move home. There are then questions about restrictions on low skill or high skill, how long visas should last, whether visa rights should lead to rights of settlement and citizenship, and what access to benefits should be enjoyed for taxes paid in. Of course, there is the huge question of how, as part of a new agreement on fair movement, this country steps up to its international obligations to help refugees struggling due to war in the middle east. We should be doing far more to help Europe with the burden of giving safe haven to refugees fleeing war zones and make that part and parcel of our proposals for fair movement.

Within all that, we have to be careful that we do not damage the free movement of ideas, which is why I always argue that students and scientists should be exempt. Alongside that, we must ensure that co-operation on ideas, intellectual capital and intellectual property protection are part of the new arrangements.

Thirdly, we must ensure that there is no race to the bottom on workers’ rights and human rights. It was this country, and one of our greatest Prime Ministers, that helped to found the Council of Europe. Over the decades that followed, we were among the most important authors of the European convention on human rights, and we are the proud co-authors of the European Court of Human Rights. We must ensure that there is no race to the bottom on workers’ rights, and that we do not enjoy second-class human rights in this country.

Fourthly, we obviously have to try to maximise free trade, free movement of goods and free movement of capital throughout the single market. We will need to be honest that we will pay a price for introducing restrictions on migration. We need to think carefully about what price we are prepared to pay. That is why I believe we need to introduce the minimal possible restrictions on free movement and the fewest fetters possible.

When it comes to the free movement of trade and of capital, we must ensure that our rights to tax revenue are protected. We have made progress over the past few years in ensuring that multinationals pay their fair share of tax, but heaven knows we have an awful long way to go. We know that hundreds of billions are sheltered by European companies in tax havens. We have to deepen collaboration and co-operation with Europe to ensure that people pay their fair share.

Finally, we need a big debate about sharing the burdens of our neighbourhood. Good neighbours do not shirk their duties, whether on climate change or common border protection. There will be countless other burdens regarding which Britain has to step up and say, “Yes. We are going to take on the obligations that come with sharing this part of the world.” The Prime Minister was right to say that we will not turn our back on Europe. We have to send a very clear signal that we will be not just good neighbours, but the best of neighbours.

In the debates that come, there will be an iron relationship between reform of free movement, access to the single market and the integrity of the United Kingdom. If we are to maximise the integrity of the UK and to keep our trade balance good, we have to keep changes to free movement to an absolute minimum. It would be an error to slam the door to this country closed and lose our place in the world as a great trading nation, which would inevitably lead to the unravelling of the United Kingdom.

We need great British moderation now more than ever. We must have no more pie in the sky from politicians with no intention of honouring their promises, which is why I hope this place continues to lead such debates.

--- Later in debate ---

[Greg Hands]

No, I will carry on.

The result may not have been what some of us wanted, hoped for or even expected, but that does not mean that the Government were unprepared for it. In the past six years, we have been working hard to bring our economy back from the brink and get our public finances back under control. We said we needed to fix the roof for any economic storms ahead, and that is what we have done. We have brought down the deficit, and we have steady growth, record employment and a resilient financial system, which we spent the past six years strengthening.

We have done the analysis on what leaving the EU might mean, and considered the potential impacts on our economy in both the short and the long term. There was general consensus in the House a fortnight ago on the risks we might face, so hon. Members recognise that it will not be plain sailing and that there are challenges ahead, but thanks to the measures we have taken over the past six years our economy is as well prepared as it could be to face whatever comes our way.

We anticipated that there would be an immediate impact on the value of our currency and the stability of the financial markets. The Treasury, the Bank of England and the Financial Conduct Authority have extensive contingency plans in place and we are watching the markets closely. Although we have seen volatility, the markets nevertheless continue to function effectively.

The Prudential Regulation Authority has worked closely with major financial institutions to prepare extensively for the consequences of a vote to leave. The Bank of England stress tests show that UK banks have enough capital and liquidity reserves to withstand a scenario more severe than the country currently faces. Thanks to our work to strengthen our financial stability, banks in the UK have raised more than £130 billion of additional capital in the past six years, and have more than £600 billion in liquid assets to ensure that they can keep lending to UK businesses and households during challenging times. The Bank of England can provide more than £250 billion of additional funds to support the banks and the smooth functioning of the markets. It can also provide liquidity in foreign currency if required. The authorities have all the necessary tools in place to protect financial stability. They are monitoring developments closely and will not hesitate to take further measures as required.

As we embark upon the renegotiation of our relationship with the EU, I reiterate the reassurances of the Prime Minister that the result does not mean that everything changes overnight. For British subjects living in the EU and EU citizens living in this country, there will be no immediate changes. People can still travel across the EU, businesses can trade as they did and our services can be sold as before.

The Prime Minister has been clear that there will be no immediate triggering of article 50, the procedure by which a member state can leave the EU. That gives us time to plan the new arrangements we are seeking with our European friends and neighbours. It also gives the Prime Minister’s successor the opportunity to make any adjustments to economic policy and our public spending, informed by an assessment of our economic situation from the independent Office for Budget Responsibility this autumn. In the meantime, we will continue to work hard to maintain the fiscal stability we have always worked so hard to deliver. A new unit will be set up in Whitehall bringing together experts from across the civil service, and in answer to the right hon. Member for Birmingham, Hodge Hill I can say that it will extend right across Whitehall, including all Departments likely to be affected, and that it will be given the resources it needs.

[Liam Byrne]

The Home Office?

[Greg Hands]

Yes, it will include the Home Office, and it will advise on the many options we face as we determine our future relationship with the EU. As Chief Secretary to the Treasury, I expect to play my own part in that task over the coming months.

Budget Resolutions and Economic Situation

Liam Byrne Excerpts

Monday 21st March 2016 Commons Chamber

[Jon Trickett]

I believe the hon. Gentleman said North Yorkshire. If I remember correctly, North Yorkshire got £10 million in transitional funds. West Yorkshire and south Yorkshire got not a single penny. Not a single council in the whole of west and south Yorkshire got a single penny, yet the cuts that west Yorkshire councils faced were much more acute than those that North Yorkshire had faced.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

My hon. Friend is making his case well. Is there not worse to come? We heard last week that another £3.5 billion worth of efficiency savings are to be made in the final year of the forecast, yet this Secretary of State is asking many councils to agree four-year funding deals. Has my hon. Friend heard whether those that agree four-year funding deals will be spared that £3.5 billion extra efficiency savings, or will they just have the money taken off them?

[Jon Trickett]

Not a peep from the Secretary of State so far. Unfairness and inequality run through the DNA of this Government in every Department. Local government provides services that make the lives of the most vulnerable in our society bearable, yet it is suffering the most draconian cuts.

--- Later in debate ---

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I do not want to speak at length this evening, but I do wish to add my voice to the chorus of congratulations that has greeted this Budget from all parts of the House. Certainly, in the 12 years that I have been in this House, I cannot remember a Budget in which so big a hole has opened so fast, which is why it is perfectly natural for it to have provoked such a hymn of praise.

According to the right hon. Member for Haltemprice and Howden (Mr Davis), when one starts picking the details apart, the whole thing falls apart. The hon. Member for South Cambridgeshire (Heidi Allen) said that the Government had made some poor decisions. Over the weekend, the hon. Member for Brigg and Goole (Andrew Percy) said that this was a Budget that hit exactly the wrong people. According to The Times, Members of Parliament, who were presumably once supportive of the Chancellor, now say that he is a “busted flush” and “damaged goods”. Let me associate myself with this new consensus breaking out right across the House.

I also congratulate the Chancellor on going to such lengths to, in his words,

“put the next generation first.”—[Official Report, 16 March 2016; Vol. 607, c. 951.]

That was a pithy message, and he has presided over an economy where that is exactly what has happened. This is now the first generation to be worse off than the generation that came before them. This is now the first generation to be more likely to live in poverty than pensioners. Today’s young generation are the first generation to have to work years longer in order to earn their pension. Young people today are the first generation to graduate from university with over £50,000 of debt. This was indeed a Budget for the next generation, but not quite in the way the Chancellor presented it. In fact, it was just the latest from a failed generation of Conservative politicians.

For me, the final proof was this: if the Chancellor wanted to do something for the next generation—if he truly wanted to put the next generation first—he would surely have done something significant, perhaps even magnificent, for Britain’s youngest city, which is of course my home city of Birmingham. Instead, we have a Conservative Birmingham bombshell of over £100 million of tax rises and spending cuts. That is the how the Chancellor has put Britain’s youngest city first. The Government now admit—this is the irony—that the great city of Birmingham needs a fair funding formula. In fact, they are so convinced of the need for this new funding formula that they are determined not to introduce it now but in a couple of years’ time. This short-changing is costing our city some £98 million in lost grants. Indeed, there would be almost no need to introduce cuts in this year’s council budget were it not for that short-changing.

[Jack Dromey]

I am grateful to my fellow Birmingham MP for giving way. The great city of Birmingham has been hit by the biggest cuts in local government history—three quarters of a billion pounds. Had it been treated fairly this year, it would have been £98 million better off. Does my right hon. Friend share my concern, and that of the people of Birmingham, that although we put a powerful case to the Government for support out of the transitional fund, 95p in every 100p goes to Conservative councils, but not one single penny to hard-hit Birmingham?

[Liam Byrne]

My hon. Friend is absolutely right. It takes some doing to sit in Whitehall and write a formula that means that pretty much only Conservative councils get the money, but I take my hat off to the Secretary of State and the Chancellor for somehow finding a way of doing it.

The problem is not just that £98 million was short-changed from the budget for Birmingham this year, but that because we have a weaker tax base in our city, we have to raise significant extra resources from the social care levy, costing us another £5.5 million, and that despite the fact that our police service is on one of the most dangerous frontlines, we have had £10 million of cuts to its budget this year. Altogether, the total is £113 million. This is a bombshell that the people of Birmingham will not forget.

Whoever is winding up this debate should recognise that there are some significant questions that we from our home city need answers to. We would like to know why we have not got any of the transitional funding that went to others. We want to know whether, if we agree a four-year funding settlement, our budget will be put into play in 2019-20 as part of the £3.5 billion of efficiency savings earmarked by the Chancellor last week. This is a significant issue for councils up and down the country. If they agree four-year funding settlements with this Government, will they be protected from the new £3.5 billion efficiency drive that the Government announced last week? Yes or no is the simple answer. Birmingham is up for the challenge of business rate retention, but we need much clearer answers than we got earlier about whether the gaps will be made good. Will Ministers confirm whether the OBR’s assumptions that there will be a 14% increase in council tax over the next four years are true? Do they share those assumptions?

The Labour party in Birmingham is rebuilding our city and getting it back to work, delivering record numbers of new businesses, record amounts of new investment, and record new infrastructure. We have built more council homes than any other council in the country, we have got over 3,000 young people into work, and we promised and delivered the living wage on day one of the new Labour council. Give us the tools and we will do the job!