Finance Bill

Lord Darling of Roulanish Excerpts

Tuesday 13th September 2016 Lords Chamber

[Lord Darling of Roulanish (Lab)]

My Lords, it is a pleasure to follow my noble friend Lord Hollick. I am currently a member of the Economic Affairs Committee but I was not a member when the examination of the tax proposals was carried out, so I do not propose to comment on that. I thank him for his kind remarks on the reduction of the deficit, which only goes to show how difficult forecasting can be, even in the comparatively tranquil times of 2010, never mind where we are just now. Before proceeding further I refer the House to my entry in the Register of Lords’ Interests; in particular, I am a director of Morgan Stanley.

I will start where the Minister started in his speech, by pointing out the obvious—we are debating a Finance Bill which comes from a Budget that was announced six months ago; in many ways it might have been six light years away. It is a long time ago and a lot has changed. The then Chancellor has now gone, although on a personal basis I always found George Osborne to be extremely courteous and helpful, both in government and in opposition. I am sorry that he has gone, but these things happen in politics, and maybe he will return one day. Of course, the economic circumstances in which we consider this Finance Bill are completely different to the ones that prevailed in March, when I guess a majority of people did not think that we would leave the European Union. Some of us saw the warning signs throughout the beginning of this year, but it is fair to say, and blindingly obvious today, that many of the people who campaigned to come out of Europe had no idea that they would win and still less idea of what might happen if they won. That presents a major difficulty.

Every day we hear, especially from those who campaigned to leave the European Union, “Things aren’t quite as bad as everybody thought they’d be”. There is a perfectly obvious reason for that. Nobody said that the day after the referendum the world would come to an end. Now we are in a classic phoney war where nothing is happening. People are not sure about what form these negotiations will take or what position the rest of the European Union will take. Therefore people continue with business as usual; of course they need to buy houses and spend money. No one suggested that they would immediately stop all that. The time we should be apprehensive about is during the course of the next 12 months or two years, when what our options are and what is likely to happen will become clear. I understand why it happened, but there is one thing that I find increasingly frustrating. I listened to the Chancellor last week, who was very clear about where he stood on the single market and was encouraging in many respects. However, when I compare what he said to what the Secretary of State with responsibility for leaving Europe had to say two days earlier, I am none the wiser as to where the Government currently stand.

The Chancellor said something else that was interesting: that we could not be expected to have a running commentary—although we are getting something of that nature from Ministers on a daily basis. He said that the Government would work out their position, negotiate and then come back and show us what they had. But as people have pointed out, you cannot negotiate with 27 other member states and expect to have complete silence and confidentiality while these difficult matters are sorted out. We in this country need to know where the Government stand on key issues such as the single market. We need to know what they intend to do in relation to the vast bulk of European law that applies one way or another in this country, on immigration and other issues. Unless and until we have some idea of where the Government want to be, it will be very difficult for people to take long-term economic decisions.

As the House will know, tax policy has to be seen in the context of the economic and political environment against which people are expected to go about their business and businesses are expected to take decisions. We simply do not have that from the Government. I understand why, in the aftermath of the election of the new leader of the Conservative Party and the Prime Minister, it may be thought that a period of silence would be welcome. However, there will come a point this autumn when the Prime Minister will have to spell out where she stands on all these issues. People will want to know so that we can start to form a view as to what is likely to happen so far as this country is concerned.

I have heard another view expressed on the other side of the channel: all that will happen is that Europe will refuse to talk to us until after we engage Article 50, and then we will have two years, up against the clock. The default option will be that we just leave with nothing. That is not a satisfactory position for the fifth or sixth biggest economy in the world to be in. We need to see some leadership from the Government and some indication as to where and how they intend to proceed, so that we can all make up our minds as to whether we support them or want to see any changes to that. Critically, people in this country, whether in business or as individuals, will want to know where the Government stand.

That brings me to my next point. Obviously the Chancellor is now very much focusing on his Autumn Statement on 23 November. However, for the past six years, not just in this country but in Europe—and, to a certain extent, in the United States; although the US followed a policy very similar to the one that the Government of which I was a member were following up until 2010, and that is perhaps why its economy has been growing rather more strongly than the European economies—monetary policy has been expected to take the strain of our economic recovery. All central banks are either at zero, nearing zero or, in some cases, going into negative territory. On the latter, I am bound to say that I cannot understand how, if the Government are trying to encourage people to be confident and to go out and spend, they can tell them that things are so good we have negative interest rates—that does not seem to be a great way of going about it. Therefore, the Chancellor will have to consider in the Autumn Statement where fiscal policy comes in.

I was encouraged when, as my noble friend Lord Hollick said, Phillip Hammond spoke to us last week in relation to infrastructure projects. I know that that is something dear to the heart of the noble Lord who speaks for the Government today. I hope that the Government will consider some sizeable, but not vast, infrastructure projects in different parts of the country and not just in the south-east of England, that will help boost the economy.

I have said on many occasions that I have never been convinced of the case for HS2. If nothing else, it is likely to absorb resources that need to be spent on other parts of the railway network. I spent some four years in the Department for Transport, so I am aware of what can happen if you start running down the basic lines on which you depend, day to day. Equally, there is the case of Hinkley Point. Look at the costs that will be imposed on consumers. How on earth can that be justified given that, in building a nuclear power station, the risk will never, ever go wholly to the private sector? I have never understood why it makes sense to ask the French Government, which is what EDF is, or the Chinese Government, who are involved in the lending arrangements, to take this on when we could actually do it ourselves. Who knows? We may be able to benefit British industry in the course of doing that.

As we have a new Prime Minister who has indicated that she is willing to junk an awful lot—she does not now have the embarrassment of her predecessor sitting behind her on the Benches in the House of Commons—perhaps the Government will take a sensible look at how investment in infrastructure could do more to ensure that fiscal policy is supporting monetary policy. I do not think that monetary policy can do this on its own, here or in continental Europe any more than it can in the United States or anywhere else. We need only to look at Japan to see what happens when you give up on fiscal policy. Everything that they seem to try seems to struggle somewhat.

There are many measures in this Bill that are welcome and will benefit people in this country, but we have to accept that the world has moved on and we are kidding ourselves. It may be sunny outside today and the economic conditions may be better than some people thought, but we are about to go into a period where some very difficult decisions will have to be taken. This could be something that we are in for the long haul, at the very time we are still living in the backwash, both political and economic, of the banking crash of 2008. I always thought that it would take a long time to recover from that and unfortunately so it has proved. We are now going into an extremely tricky period and I hope that when the Chancellor comes to his Autumn Statement, his Budget next year and we debate next year’s Finance Bill, we will have a clearer view of where we stand. We are certainly entitled to that and we expect no less of the Government.

Budget Statement

Lord Darling of Roulanish Excerpts

Wednesday 23rd March 2016 Grand Committee

[Lord Darling of Roulanish (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Price. We last met a few weeks ago sitting together at a dinner and I do not suppose for one moment that either of us expected to see each other again in this place, but that is life for you. I know, as do other noble Lords, that he was a very successful leader of an extremely successful British business. Perhaps I should declare an interest: there is a Waitrose just round the corner from us in Edinburgh and we have a loyalty card that we keep next to our Labour Party cards. I leave it to others to imagine which one has more use at the present time. I am not planning on giving up any of them.

I wish the noble Lord success in his job. I know, having met several trade Ministers, that the task is difficult, but I am sure that he will throw his wholehearted enthusiasm into the task and I wish him well on that. I particularly look forward to hearing what he might have to say over the next few weeks in relation to what is the biggest political event in this country, which is not the Budget but the referendum on our future membership of the European Union. I am sure that, as a Trade Minister, he will have plenty to say.

Perhaps I should draw attention to my entry in the Register of Lords’ Interests before proceeding further.

I want to talk today about two aspects of the Budget: the Chancellor’s deficit reduction target and infrastructure, which the Minister said so much about. In relation to the forecasts, we are in the interesting position that we are here discussing the Budget a week after its presentation to the House of Commons, but it is not quite the same Budget that the Chancellor presented—it changed quite dramatically over the weekend. I have to say that it has never been clear to me why the Chancellor has impaled himself on a target to break even in 2019-20 when there is no economic need to do so. I understand the politics behind it, but there is no economic need to do so—all the more given that the target that he set himself in 2010, when the coalition Government was formed, of eliminating the deficit by 2015 was missed by a mile.

As it so happened, what the Chancellor managed to achieve then was exactly what I set out in my last Budget—namely, to halve the budget deficit in a five-year period. I did that because I thought that was realistic, so I was not surprised that that was where the Chancellor ended up. You might have thought that, having got that one wrong, he would have given careful consideration as to whether he wanted to impale himself on a target that the OBR said he has a 50:50 chance of hitting—and that was before the political difficulties that have emerged within the Conservative Party over the past week.

Everybody knows that the figures presented in a Budget in the last three years of a forecast are never going to be the figures that are actually presented when those years come to pass, because so much changes even in stable times. We have seen—as the OBR said apropos the Chancellor’s spending predictions just before the general election last year—a rollercoaster as far as these figures are concerned. When you look at how the Chancellor hits his target in 2019-20, he does so by simply shifting about £10 billion of corporation tax receipts forward a couple of years in order to have a surplus. There is about £8 billion of unspecified public spending cuts in an election year. Is it really credible to believe that any Government will go into a general election saying that they will cut public spending by £8 billion? Governments of whichever political colour do not do that.

All this is being done simply to make the sums add up on this particular presentation. One has to contrast what the Chancellor had to say last week with what he was saying in the autumn, when the sun seemed to be shining with a vengeance, he had money to give away and he was able to buy off the tax credits revolt—which, by the way, has not gone away; it has simply been postponed and we will have to deal with it when it comes back in the future.

It is now becoming clear that we are in a position where we have numbers that we cannot rely on. I know something about fiscal targets, having had to deal with a situation where they could not be met, and I would say that what matters is whether Governments and outsiders believe that the targets are credible and will be met. Over the past couple of years or so, we have seen that these targets are a moveable feast. They are moving around so much that people will begin to doubt whether they can be relied upon in any meaningful way—and that is before we deal with the personal independence payment issue of £4 billion, which will have to be accounted for somewhere else.

My second point, lest anyone misunderstand me, is that I am very clear that it was necessary to bring down the deficit, but I am also clear why it happened in the first place. I understand the rhetoric of the Tory party; the noble Lord, Lord Borwick, who spoke previously and is no longer in his place appeared to be reading a Treasury hand-out on the subject. It has to be remembered, however, that the banking crash that our country and every other developed country in the world had to deal with was more profound and more lasting than anybody thought it would be. I remember saying that at the time—not that I got much gratitude for it. We are now living with the consequences.

I know that, if we had not taken the action that we did in 2008, there was every chance that we could have slipped into a catastrophic depression. It was not just us; the same action was taken by the Americans, by the Chinese and right across the world. Incidentally, it was supported by all parties in the House at the time, though they sometimes forget about that now. It was necessary to get the deficit down, but we had to do it in a way that was consistent with maintaining economic growth and was fair across the whole population. Others have said, and no doubt further contributors will make the point, that that is not happening in the way that it should.

On the question of welfare cuts, as the Committee may recall, I was Secretary of State for what was the Department of Social Security and then the Department for Work and Pensions for some four years, so I know something about how that department operates. There is a long history of Governments coming up with a new plan that is going to be much better and much fairer and save us money, but there is an equally long history of none of that happening. These plans are difficult to implement, and often they end up costing far more than was ever intended. Personal independence payments are an example of that. Clearly, the Treasury had an undertaking from the Secretary of State that he could deliver on these things, but he simply has not done so. It was not surprising that the Treasury was going to come back and ask for more.

Similarly, with the work on universal credit, I looked at this in 1998 when I first became Secretary of State for that department because, like everybody else, I thought, “Surely there must be a better, simpler way of dealing with all these things”. The answer is, “Yes, there is”, provided that two things happen. First, the Treasury must give you enough money to buy out all the losers. If the Treasury does not do that, there will be losers, and we all know that you will hear an awful lot more from the losers, who in many cases will be losing quite substantial sums of money, than those who actually gain. The only time that you can do that is on a rising economic tide, and that is why I was able to consider that in 1998.

Secondly—this is, actually, in some ways equally difficult—you need an IT system that can deliver the universal credit. As everyone who has looked at the IT systems in the DWP will know, there are at least four different systems, which were designed at different times for different reasons and are not very good at talking to each other. You cannot run a single benefit that needs to draw information from sources that are not compatible. Again, that needs not just money but know-how, and no British Government have a good record on that. I fear that universal credit will be years behind schedule, will not be delivered in anything like the way that the Government intended and will be another thing that will come back and bite this Government. I suspect that, unfortunately, there will be others who will suffer as well, if this is not looked at. You need a grasp of detail in that department, and I just wonder who was attempting to grasp the detail at the time—it is very curious.

I also wonder how it was possible to score the savings from PIP, because you can only do that if it is government policy, whereas over the weekend it was not clear at all whether it was the policy—you cannot have it both ways. That is very odd indeed, but perhaps we will hear what happened, if not immediately, in someone’s memoirs in years to come.

On the question of infrastructure, let me say right at the start that I very much welcome all the announcements that the Chancellor has made on the expansion of roads and railways over the last six years—not least because I announced many of them myself when I was Secretary of State for Transport. That perhaps illustrates the problem, because announcing these things is very easy. Indeed, if we could add to GDP for every announcement made, our economy would be motoring at the moment. We are overflowing with announcements, but we are not overflowing with actual spades in the ground and progress.

However—I point this out, because I was a member of the Government at the time—we can actually do it: Crossrail is nearing completion. We signed that off, and it is now being delivered. It took 20 years and was put forward in the teeth of Treasury opposition, until one day the ex-Secretary of State for Transport arrived in the Treasury and said that, no, he would not overturn the decision previously made by the Secretary of State. That is being delivered. The west coast main line has also been delivered, and has made huge differences.

However, if you look at what has been announced over the past few years, road after road has been announced and has not been built; the Midland main line out of St Pancras has been announced, but it is now on hold. So I look at all these northern powerhouse announcements with a degree of scepticism, especially when a lot of the announcements are about money for a feasibility study. Feasibility studies are very easy to announce, but they do not always—actually, in some cases, seldom—result in a tunnel or road being built.

I publicly said a number of years ago that I think HS2 is misguided, and I wholeheartedly endorse the conclusions of the Economic Affairs Committee of this House that the case has simply not been made. What we desperately need instead is to be spending money on what is wrongly described as HS3—the roads and rail links from the north of England to the east of England. That was identified in 2005, but it has not been acted upon. If the Government are going to do it, we need to do it now. The noble Lord, Lord Adonis, is doing a very good job bringing forward these proposals, but we need a delivery mechanism to make sure that they actually happen. Otherwise, when we are debating a Budget in 10 years’ time, we will simply be saying the same things.

Two big infrastructure projects perhaps illustrate the difficulties we have. The first is Heathrow. In 2003, the then Government published a White Paper which said that we should build a third runway at Heathrow. That was 13 years ago, the project is on hold, nothing will be said before the referendum, and by that time we will no doubt be into a leadership contest and we know what the stakes are there—I am not optimistic. However, in the mean time, this country’s future depends upon us having good air links to other parts of the world, and I still believe that Heathrow is the right solution. I know that it is controversial, but we need to act on it.

The other example is nuclear power. Again, in 2006 the Government published a White Paper that advocated a mix of energy sources, and that has been endorsed by successive Governments. The nearest we have got to building a new nuclear power station is Hinkley B. This may run counter to my whole argument so far in relation to delivery, but we seem to have entered into a deal with the French and Chinese Governments, because EDF is the French Government and the Chinese company we are dealing with is the Chinese Government. We will be paying two to three times more for the electricity this thing will produce than what we currently pay, and we are using a design which, once again in the great annals of nuclear history, appears to be breaking new ground rather than using existing technology. Perhaps as a country we need to ask ourselves, “Aren’t there cases where the Government, which is underwriting this risk anyway, might as well do these things itself and take on that risk rather than trying to price a risk which is pretty difficult to price and passing it on to consumers in the future?”. I say that having been a member of a Government who endorsed PFI and who were very happy to do deals with the private sector. However, no one can possibly say that a nuclear power station is an economic proposition—it is not. If we want it, we will have to ask ourselves whether it might be better, cheaper and quicker to do it ourselves.

I will leave it to others to deal with a broader critique of this Budget. I will say only that growth in our economy is welcome; I still think it is fragile but as I said at the very start, the biggest threat to our recovery is the prospect of us leaving the European Union. However, that is for another day.

Autumn Statement

Lord Darling of Roulanish Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

My right hon. and learned Friend makes a good observation about the shadow Chancellor’s career. I should pay tribute—probably for the first time—to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who this week announced his retirement: first, for his commitment to advancing international development and to British aid, which I fully support; and secondly, because when he was shadow Chancellor, as we all remember, he built up a really compelling case for fiscal discipline. That, in part, is why the Labour party won the 1997 general election. That stands in such marked contrast to the shambles we see from the pair sitting opposite me now, who subsequently advised him.

On my right hon. and learned Friend the former Chancellor’s good point about devolution, of course both local government and the different nations of the United Kingdom—the devolution arrangements apply to both—will have in place robust arrangements that protect taxpayers across the United Kingdom. That is certainly an important part of the Smith commission report and how we must take it forward. It is also at the heart of the devolution settlements that we have discussed with English local authorities.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am sure that the House will want to return to that last point on the UK Government’s ability to control their finances. Did I hear the Chancellor correctly when he was claiming credit for having halved the deficit over the course of this Parliament, because his view used to be that that would not be a terribly good thing? We are still borrowing £90 billion this year, and the reduced growth forecasts for the next five years, which we see in the OBR report, show that it will slow down, so can he tell us what impact that will have on the likely tax revenues, which of course have a bearing on our ability to pay down the deficit?

Autumn Statement

Lord Darling of Roulanish Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for his support and his observation about what is happening in the economy. I complete agree with him. One of the things I said in the speech was that of course risks remain, the job is not done, productivity remains too low and we want it to grow. That requires economic reform and reducing taxes on business, which is what we have done again today.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I notice that the Chancellor’s growth forecasts follow a very familiar pattern of being fairly flat and then rising to, I think, 3.7% in four years’ time. That, of course, drives his assumptions in relation to borrowing and debt. Does he agree that risks remain not just in the eurozone, but here at home? In connection with that, could he tell me what the Office for Budget Responsibility is forecasting in relation to North sea oil revenues over the next few years, because there are some people who believe that that is a limitless source of funding for whatever they happen to be promising in the coming referendum? Finally, could he also tell me the source of the funding for the very welcome centre at Edinburgh university?

[Mr Osborne]

The right hon. Gentleman and I are both looking forward to the Higgs centre at Edinburgh university, which is a reminder of the scientific collaboration that can happen across the entire United Kingdom. We are, of course, incredibly proud of Professor Higgs.

The right hon. Gentleman makes a very good point about oil and gas receipts in the forecast from the entirely independent Office for Budget Responsibility. Its forecast today for the whole of the UK is that oil and gas receipts will be £3.5 billion in 2016. That compares with the £6.8 billion on which the SNP Scottish Government have based their premises and their claims for independence. It is twice as much as the OBR has independently assessed, and that is another example of how they are not being straight with people about the facts in relation to independence. It would of course mean that there was a black hole in an independent Scotland’s public finances that would cost the Scottish people £1,000 each. It is yet another example of how they are not being straight; the independent facts refute their case.

National Infrastructure Plan

Lord Darling of Roulanish Excerpts

Wednesday 4th December 2013 Commons Chamber

[Danny Alexander]

On HS2, I would say that far from cutting corners we are making every effort to ensure that the programme is delivered as quickly as possible. That is what I think the country needs. I welcome the right hon. Lady’s comments on Wylfa nuclear power station and I was pleased to sign the agreement with Hitachi and Horizon this morning. On onshore wind, I feel that I might have to disappoint the right hon. Lady. We have reduced the prices we will pay in recognition that the costs are coming down, which will make that market more competitive. It should not necessarily be seen as a reduction in the delivery of onshore wind at all.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I am sure that I was not the only Member of the House who had a sense of déjà vu when listening to what the Chief Secretary had to say. Indeed, I seem to remember announcing a number of those projects myself 10 years ago. Perhaps that demonstrates the problem we face, because successive Governments have found it very difficult to deliver on those large-scale projects, whether for housing, transport or energy, which we desperately need. I know that central Government planning went out of fashion about 40 or 50 years ago, but is there not a case for seeing whether central Government could take a grip of those projects and match them up with the funds, including insurance funds, which is a good thing, to ensure that they actually happen? They are too important to the country to be left to chance. I am sure that he does not want to join the long list of Ministers who have announced these projects, only to find a few years later that they are filled with disappointment because they simply are not there.

[Danny Alexander]

I am grateful to the right hon. Gentleman for his comments—as usual, he makes a much more cogent and compelling argument on these matters than his Front Benchers. In all seriousness, the document, “The National Infrastructure Plan 2013”, is intended to do precisely that—to set out a clear pipeline. The changes we are making—I pay tribute to my noble friend Lord Deighton, who has joined the Government as the Minister with responsibility for infrastructure—are intended to ensure that Departments are better equipped with the commercial capability to deliver projects, to ensure that central Government are better able to track in real time what is happening with the projects, and to ensure that we have the mechanisms to deal with problems and blockages that central Government might put in the way. For example, I chair the Cabinet Committee on Infrastructure, which exists precisely to crack some of those policy problems and ensure that I do not suffer the disappointment that the right hon. Gentleman is so clearly filled with.

Spending Review

Lord Darling of Roulanish Excerpts

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for his support for the difficult steps we needed to take. Our trying to set out these spending plans further in advance, so that Departments have time to make the necessary adjustments, is a good innovation in fiscal policy. The certainty we now have for 2015 will, I think, mean better public policy.

We have set out some of the details of the welfare cap in my speech today, but in the document we publish, we have set its parameters, how it will be set in cash terms, the period over which it will be set and when it will be set—at the Budget. However, it is absolutely my intention to listen to the Treasury Committee, which I hope will take an interest in this issue, and to examine best practice and make sure we get the final details absolutely right. If we want to change the Office for Budget Responsibility charter, we will have to legislate, but that is something we need to examine. We absolutely should work on the details, but the principles and the principal components of the cap have been established.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I was interested in the Chancellor’s claim to have rescued the economy. I think I am right in saying that in 2010, the economy was actually growing, whereas unfortunately, in 2011 it stopped growing. That is why he is borrowing more than he intended and why his target to reduce national debt has been moved well into the next Parliament.

On the new growth items the Chancellor announced today, particularly those relating to transport, how much of that is public money and how much is expected to be raised from the private sector? Can he also give us some idea of how much additional growth he expects to see in the economy as a result of the measures he has announced, most of which, I think I am right in saying, will not take effect until the next Parliament? Given the delay in delivery of these projects—a problem that has dogged successive Governments—it may be some considerable time before we actually see their economic benefit.

[Mr Osborne]

The right hon. Gentleman and I have, I hope, a cordial relationship, but I will just disagree on one point. The idea that he handed me a golden economic legacy and an easy set of books, and that somehow it was all fantastically booming after a 6% contraction in the economy, is something that will turn out, if I check his memoirs, not to have been the case.

To answer the right hon. Gentleman’s specific points, the transport money we set out is public investment; of course, there are opportunities to lever in additional private investment. He was gracious enough to acknowledge that all Governments have had the challenge of how to deliver infrastructure projects, given the planning system we have and so forth. We are reforming planning and will set out this week changes to infrastructure delivery in Whitehall to try to accelerate the delivery of projects—something that has bedevilled the British Government for decades, and we shall do our best to put it right.

amendment of the law

Lord Darling of Roulanish Excerpts

Monday 25th March 2013 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I shall follow up shortly the points made by the hon. Member for Bury St Edmunds (Mr Ruffley) on the Bank of England, but first I draw the attention of the House to my entry in the Register of Members’ Financial Interests.

The big problem we face at the moment is lack of growth. Here we are, five years since the crisis hit most western developed economies, yet contrary to what has happened in the past, there is absolutely no sign that growth will return to this country.

[Richard Drax (South Dorset) (Con)]

One of the many reasons we do not have growth is that the Opposition made the country such a client state that we are indebted up to our eyeballs and there is no room for growth.

[Mr Darling]

With due respect to the hon. Gentleman, I anticipated that predictable nonsense. I am grateful to him for intervening, however, not least because he has given me another minute in which to make my case.

As the Office for Budget Responsibility points out, the recession is taking far longer to come out of than any we have seen previously. The principal factor is that in 2007-08 we had a complete collapse of our GDP and that situation has not been recovered in the past five years. Frankly, on the evidence presented by the Chancellor last week, I see little evidence that it is going to happen. As a result, we are borrowing very large sums of money: £120 billion last year, this year and next year.

As I was saying before the hon. Gentleman interrupted, in the Chancellor’s forecasts, yet again in the back three years of the forecast period we see an expectation that growth will go from 2.7% to 2.8% in 2017. That is exactly the same profile that we have seen in each of the Chancellor’s Budgets and autumn statements. The problem is that these sunny uplands are moving to the right each time he stands up. I cannot for the life of me see why anything will be any different in 2017 from the bleak outlook we see today. The problem is that as long as we have low growth we will have high levels of borrowing, and debt is now expected to peak at 85% of our GDP. When we advocate a different approach, the Conservatives and the Liberals say that we are talking about borrowing more, but this Government are borrowing more than they ever imagined they would in 2010, and they are doing so not to invest in things such as infrastructure, but because of the price of their economic failure. That is what many of us have a problem with.

[Mr MacNeil]

Surely by boasting that he would cut harder and deeper than Thatcher, the right hon. Gentleman set the tone for the cult of austerity that we are now living through.

[Mr Darling]

I am grateful to the hon. Gentleman for his intervention, but not in the way he intended, because that is nonsense too. Incidentally, in the leaked document from John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, the Scottish Government too faced up to some difficult decisions. The difference is that I and—to give them credit—the coalition Government were open about the difficulties we faced, whereas the Scottish National party wanted to keep them secret from the Scottish people.

It seems that the Chancellor has given up on doing anything. As I said last week, we are in the middle of a lost decade—it happened to Japan and it is happening to us now—and there is no sign that the Government have any idea how to get out of it. The Government’s Budget response on infrastructure is fine, but it does not come along for two or three years. On housing, I agreed with everything that my right hon. Friend the Member for Leeds Central (Hilary Benn), the shadow Secretary of State, said. The problem is that last week’s announcement is more likely to create yet another housing bubble by driving up asset prices. Indeed, some of it might even sow the seeds that gave rise to the sub-prime mortgage problem we saw in the United States, because we are suffering from an acute lack of housing in just about every town and city in the country.

I was encouraged by what the planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), said over the summer. Unless we break through this logjam and get more housing built, prices will go up and up and people will face the same difficulties they did in the past. The irony is that we are not prepared to build houses, but we are prepared, it seems, to finance the inflation of a bubble in housing prices. That is absolutely the wrong thing to do. The bedroom tax illustrates the problem; there simply are not the houses for people whose income is being cut to move to. That illustrates the need to improve our housing infrastructure, although the problem applies to transport and energy as well. I do not object to some measures in the Budget, but nothing in it is likely to get our economy going.

The hon. Member for Bury St Edmunds referred to the Bank of England and said that the Chancellor of the Exchequer had effectively said, “I can’t do anything further in fiscal terms. It’s all up to the Bank of England now.” Most Members have warmly welcomed the appointment of Mark Carney. I think he will be a very good Governor, but with the best will in the world we cannot expect him to do everything the Government are supposed to be doing. It is useful that we can tell the markets what we think will happen to interest rates. I suspect that most people do not expect them to rise for the next two or three years, although they might rise in the United States, given that the US Government are following a different policy from that being followed here and in Europe.

I do not think, however, that the sort of measures the Chancellor has in mind and which the new Governor might announce in relation to forward guidance will do the trick and get our economy going. I have said before that quantitative easing has played its role and stabilised the banking system—I have supported what has been done so far—but there is little evidence of what additional QE would do for our economy. The risk is that the money simply goes into the bank vaults, not into the wider economy. The Bank will play its part, but monetary policy and fiscal policy have to be complementary, otherwise they simply will not work.

Time does not allow me to mention the eurozone, other than to say that the last week has confirmed my suspicion that the eurozone is almost psychologically incapable of sorting out its problems. Unless it does so, it will hold back growth not only in this country, but elsewhere. At the same time, I am committed to this country remaining part of the European Union—that is very important—although we need to use our influence. Governments can make a difference. In 2008-09, through the G20, Governments from across the world, from communist China to the Republican-led United States, came together and we did what was necessary to support our economies. And guess what? Our economy was growing in 2010. Look at it now.

The Economy

Lord Darling of Roulanish Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I hope that the hon. Member for Macclesfield (David Rutley) will forgive me if, in the time available to me, I do not follow him down the road of bulldozers or anything else. I should begin by drawing the House’s attention to my entry in the Register of Members’ Financial Interests.

I am sorry that the Chancellor is not present, partly because he used to kick up a real fuss whenever I did not appear in the House or was slightly delayed. It would have been nice if he had been here: I am sure that plenty of us would have liked to press him on the question of how on earth he can claim abject failure as success, which is what he was trying to do last week.

Two years ago, it was not meant to be like this. Two years ago, the new Government said that they would be able to balance the books by the end of the current Parliament, and that debt would be falling as a proportion of national income. In 2010, they said that all the problems we faced were entirely home-grown. They compared this country mendaciously with Greece, and said that we would lose our credit rating, which they may yet regret. In other words, they set about trashing confidence and blaming the last Government for everything. That is despite the fact that the Conservatives supported every single penny of our spending until December 2008, and the Liberals were doing exactly the same until the evening of 10 May 2010, when they changed their minds.

The new Government’s position was that it was all the fault of the previous Government. How much has that changed? Last week, they began saying that this was an international crisis. They said that it had been caused by the eurozone; by the United States fiscal cliff; by inflation. However, all three of those things were around in 2010, and were known about. The problem that we have at present is that we simply do not have the growth that we were expecting, with the result that the Government have missed their debt reduction target and are experiencing serious difficulties in relation to borrowing. I shall say more about that shortly.

The Chancellor’s problem is that the growth profile that is presented in the report from the Office for Budget Responsibility, which was published last week, is remarkably similar to the profile that was published two years ago, but it is now running at least between two and four years late. If we do not achieve the growth profile that is set out in the report, both our borrowing and our debt will be higher, because the two are completely interlinked. I see no evidence for believing that the figures will be any more right this time than they were two years ago.

It is interesting to note that the OBR assumes, just as the Treasury modelling used to assume, that somehow we will always return to a 2.5% trend rate of growth. That theology was being questioned when I was in the Treasury, and I think that we will have to look at it again now. The Japanese are apparently contemplating what would be the fifth recession in 15 years. I honestly do not think that those of us in the western world—and Japan is, economically, in the same position—can assume that everything will bounce back as if nothing had happened. This will have a profound implication for all the political parties in the House, as well as further afield.

However, it is in relation to borrowing that I would have taken the Chancellor to task had he been here. During his speech last week, he made great play of how transparent he was being in taking into account the money that he had managed to find as a result of quantitative easing at the Bank of England and from the Royal Mail’s pension funds. What he did not say was that he could claim that borrowing was falling this year only because he had banked the sale of the 4G auction, which will bring in a very handy £3.5 billion—and, furthermore, will have to bring it in before the end of March if it is to score properly. That is the only reason why he could claim that, because the figures show that although borrowing has a downward profile, we are in fact borrowing £212 billion more than the Chancellor intended to borrow. We are borrowing much more, therefore.

The OBR report contains a number of findings that ought to worry those on the Treasury Bench as well as the rest of us. For example, over the next few years a very handy cumulative total of £73 billion will come in from the asset purchase facility—quantitative easing by the Bank of England. That money is not being created because of increased revenues or increased economic activity, however. It is basically a financial transaction that the OBR has said is okay to put in the books in this way, as opposed to scoring things differently which would have left a large hole in the economic figures.

[Charlie Elphicke]

The right hon. Gentleman is making a typically thoughtful speech. If he were the Chancellor, would he pursue the five-point plan the shadow Chancellor has proposed, given that it would cost £20 billion? Does he think there is the capacity to do that, and does he think it would be a sensible policy to pursue?

[Mr Darling]

I will address that point later. It is an important point, and I do not believe we should just sit back and hope that growth returns. The shadow Chancellor and many others both inside and outside the House also do not believe that the Government’s approach is right.

We are heavily dependent on money that is coming in from a financial transaction. In addition, the OBR has now found that by 2016-17 our revenues will be £30 billion less than it forecast in March. That is a huge gap, which will have to be filled.

What should we do? Whenever the Opposition suggest that perhaps the Government could do a little more, the Government parties—the Conservatives and Liberal Democrats—always say, “That’s all about borrowing more.” This Government are borrowing £212 billion more than they said they would not because we are spending money on projects and so forth, but because of failure—because our revenues are down. That is why we have got this gap.

When we eventually have a recovery, this country will need infrastructure. Over many years, we spent a lot of money on transport and energy. That was the sort of spending the Government say should not have been made, but we now know it was desperately needed, and we need to invest more in infrastructure, as well as get debt and borrowing down. We must invest in education, too.

On energy, the Government’s policy is completely contradictory. We are getting different signals every day of the week. On transport, I say again that it is not good enough to have no airport policy until halfway through the next Parliament, when we will not be able to do anything as another election will be coming up. That is not the right signal to send to our country, let alone the outside world.

Investing more in infrastructure projects would be one way to get confidence back. Confidence was trashed two years ago. If anyone were running a business now, would they hire more people or open a new production facility? No, they would not, because it appears that the economy will be bumping along the ground for another five years or so. I again remind Members of what has happened to Japan. People say, “We would never be like that,” but Japan has had non-existent growth for 15 years.

[Mr MacNeil]

Some commentators—at one time Ben Bernanke, and lately notably Paul Krugman—have talked about higher inflation targets for Japan, and also for the UK and other countries that are suffering a downturn. What is the right hon. Gentleman’s opinion on that? Does he, too, support higher inflation targets as a way of stimulating recovery?

[Mr Darling]

There is a lot of debate about that issue. I do not have the time to address it in detail, but I have said—including in a programme that will be broadcast tonight—that I think the Bank of England needs to examine its role, because for a long time we have said its job is purely to target inflation, yet central banks across the world are now also targeting growth, and perhaps we should consider whether we should formalise that role. Mark Carney was an excellent choice as the next Governor, and I hope he will think about that.

Talking about Governors, the current Governor, Sir Mervyn King, made an important point in New York last night when he talked about the G20, which had done so much at the height of the crisis in 2009, showing the determination that people expected in order to prevent the entire world economy from going over a precipice, and said that that spirit was now dead. He is absolutely right about that. It is important that we in this country, along with President Obama, now that he has been re-elected, look again at what we can do collectively as part of the global community to try to get the world economy not only to resolve some of the problems we face, but get growth going again.

That inevitably takes me on to Europe and the eurozone, because it is a tragedy that a legal structure and an economic structure that could do something about getting growth going again is simply failing to do so. Greece is not sorted out yet; another attempt was made a couple of weeks ago, but as far as I can see it leaves Greece with even more debt than it had. Until the Spanish banks are bailed out, they will simply hold back the whole of the eurozone, and the sooner Spain goes to get the bail-out it needs, the better it will be. Then we need to deal with the question of austerity. Austerity on its own does not work. Those who are interested may wish to know that there is an interesting article by Olli Rehn, the economic Commissioner, in today’s Financial Times, in which he just asserts that it is going to work, in the same way as this Government assert that austerity is going to work—frankly, I do not see it. We need to use our engagement in relation to the eurozone and to the European Union to try to persuade countries that unless they act together, in the same way as we did three or four years ago, although in a slightly different context, we and the eurozone countries are simply going to bump along on the bottom for years. If that is the case, the human cost is that we are condemning tens of thousands, if not hundreds of thousands, of people in this country, and perhaps millions of people in the European Union, to unemployment and low standards of living. If we do that, future generations will never forgive us.

[Several hon. Members]

rose—

Autumn Statement

Lord Darling of Roulanish Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I very much respect my right hon. Friend’s observations on the problems in our banking system. There is an aggressive plan to reduce the bad bank elements of RBS, and that plan is on track, but, as I said earlier, I want more to be done. RBS is reducing the size of its investment bank quite considerably. It also recently received advice from the Financial Policy Committee, and I hope it takes that advice into account.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

If I understood the Chancellor correctly, the profile of rising growth that he announced today looks remarkably similar to the profile that he announced in 2010, but which singularly failed to materialise. That, of course, is one reason why he has missed his debt target. Will he tell us why we should have any more confidence in the next set of figures, which show recovery, albeit postponed for several years? Of all the capital projects that he announced today—which I think many of us would support—how many will start this year?

[Mr Osborne]

The first thing I would say to the right hon. Gentleman is that the forecasts we produce are independent—they are produced by the Office for Budget Responsibility. This is the OBR’s best estimate of what will happen to GDP over the next few years. As the OBR says, its forecast two years ago was wrong because of three things, which it talks about. One is that the impact of the financial crisis was greater than it had assessed. Secondly, there was an oil price shock in 2011, which hit all oil-consuming economies. Thirdly, there was the impact of the eurozone, which the right hon. Gentleman has spoken about at length. All those things have had an impact, not just on the GDP of this country but on every western democracy in the world. Indeed, they have also had an impact on some of the emerging economies.

The right hon. Gentleman makes a good point about capital investment. He speaks with experience: it is often difficult to get these projects out the door. We are speeding up the delivery of these projects—the road schemes are under way. The capital we have allocated is for the next two years. The road schemes and the like that I announced are due to start—because they have got planning permission—in the next two years.

LIBOR (FSA Investigation)

Lord Darling of Roulanish Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

My right hon. Friend reminds us that he was absolutely right about the problems that would emerge with the creation of the tripartite regime, and, sadly, his predictions have been borne out by events. He also makes a specific proposal about legal changes and the introduction of the directing mind. We are aware of that idea, and we will look into it. The House can look at it, too, in the inquiry over the next few months.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

The Chancellor referred to my quote in a newspaper yesterday. I should just tell him that I was asked specifically about the investigation of individuals, and I made the point that there are authorities, such as the Serious Fraud Office and the Financial Services Authority, who are supposed to be doing that.

On the Chancellor’s broader point, let me say that this inquiry will work only if it is a genuine examination of what went wrong. As I have said before, it went wrong under successive Governments over quite a long period, as well as in the City itself. If the inquiry looks like a partisan exercise in settling scores between the political parties, it will not work. The public may not like bankers, but they do not care much for politicians either. I therefore hope the Chancellor can give us an assurance that this inquiry will not be that sort of exercise, and that it will instead be a genuine inquiry into what went wrong and what needs to be put right.

[Mr Osborne]

First, the inquiry should be genuinely cross-party and it will, of course, be up to the Labour party to choose whom it would wish to be on the Committee, both in the Commons and in the Lords. So there will be a choice for the Labour leadership in that respect. Of course, I hope that they would consult my hon. Friend the Chair of the Treasury Committee, but it is ultimately their choice.

Secondly, the Treasury Committee, under its previous Chair, Lord McFall, did some very good work on investigating what went wrong. So the idea that the Select Committee or a Joint Committee is unable to do this work is nonsense. “The run on the Rock” was a very good report, as I think the right hon. Gentleman would concede, and it provided the basis for some of the changes in the Financial Services Bill. I think we can draw also on the expertise in the House of Lords in this area and have a Joint Committee. As I say, I hope that once tempers have cooled today, we will be able to reflect on that and have a joint-party consensus on it.