King’s Speech

Lord Hain Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Hain (Lab)]

My Lords, it is always a pleasure to follow the noble Baroness, especially on climate change and environmental issues. In October, the Institute for Fiscal Studies summed up the UK’s prospects as “darkening” and the growth outlook as “poor”. IMF data shows that in the 14 years before the 2008 global financial crisis, most of which was under Labour, UK productivity rose at an average annual rate of well over 2%. However, in the 14 years following the financial crisis—and most of that was under the Tories—productivity only improved at a measly average annual rate of less than 0.5%.

The stand-out factor for this worsening economic performance is our pathetically poor rates of investment, both public and private. According to the IMF, between 2010 and 2022, UK investment as a share of GDP was the lowest in the G7, and UK savings were far below even that, leaving the UK highly dependent on foreign capital. A Resolution Foundation study in March 2023 found that Britain’s public investment is in the weakest third of OECD countries. Had Britain matched the average OECD rate of public investment over the past 20 years, it would have been a massive £500 billion higher. This long-term failure to invest in our healthcare, housing and transport services is the reason why Britain has fewer hospital beds per person than all bar one OECD economy, and why the British spend more time commuting to work than all bar two other OECD countries. That is a pathetic record.

Andy Haldane, former chief economist at the Bank of England and now the director of the Royal Society of Arts, has noted that as well as being too low, UK public investment levels are far too volatile—witness the Government’s HS2 shambles. The planned increase in public investment announced by the Boris Johnson Government in 2020 was later cut following the Liz Truss disastrous mini-Budget. Rishi Sunak’s Administration is now planning for public investment to fall as a share of GDP in each of the next four years, reversing most of the increases announced three years ago.

Resolution Foundation economists calculate that setting public investment at a stable 3% of GDP—about £75 billion—would boost UK economic growth by nearly 1% per year over five years and stay within the debt rules accepted by both Front Benches. The Government’s present plans, however, envisage public investment dropping from £74 billion this year to only £62 billion in four years’ time.

The independent National Infrastructure Commission agrees that decades of inadequate infrastructure investment have held UK productivity back, singling out public transport, home heating and insulation, and water networks as all being in urgent need of renewal. It recommends extra public investment of £30 billion per year, plus at least £40 billion per year from the private sector. More than an extra £30 billion per year of public investment might have been recommended, but for the restrictive remit set by George Osborne when he created the commission in 2015.

I am afraid that everywhere we find evidence of Tory economic failure, we also find George Osborne’s fingerprints. His austerity policy, continued under Philip Hammond, drastically curtailed UK economic growth, triggering a severe slowdown in the rate of increase in British productivity and a standstill in real household living standards. Over 80% of the Tory spending cuts fell on public sector budgets, equivalent today to slashing public spending by a colossal £180 billion—more than the total of NHS spending in England this year.

A decade of Tory austerity has inflicted huge self-harm on Britain’s public services, with the Institute for Government finding eight of nine public services performing worse now than before Covid. Hospitals and courts stand out, with waiting lists for hospital treatment at 10 million and a backlog of nearly 90,000 court cases. The Government’s spending plans mean that however bad the plight facing Britain today, the outlook after 2025 is even worse—unless, of course, Britain is saved by a Labour Government, which we all should hope for.

Gross Domestic Product: Wales and the UK

Lord Hain Excerpts

Thursday 6th July 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I agree with the noble Lord about the importance of investing in prevention. That is why we have invested in our education system, and we have seen our educational outputs improve under this Government. It is why we are investing in prevention in our NHS. We also need to capture the importance of other aspects that contribute to our country when we look at these matters. That is why we are looking at incorporating measures when it comes to well-being, for example, and not just looking at the narrow measures of GDP.

[Lord Hain (Lab)]

My Lords, if the positive economic figures that the Minister cited for Wales are correct, is that because we have a Welsh Labour Government?

[Baroness Penn (Con)]

It is hard to tell from the other side whether there is a success story or not when it comes to Wales. I think that the best success comes when the UK and Welsh Governments work together in the interests of the people of Wales, and the record that we can see is testament to that.

Autumn Statement 2022

Lord Hain Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Hain (Lab)]

My Lords, in both cheering on Wales tonight and praising everything that my noble friend Lord Eatwell said, I remind the House of some famous first words from the Prime Minister and some lesser-spotted last words from one of his predecessors as Chancellor—words that clarify both the ruinous fiscal policy the Tories have pursued since 2010 and the dreadful prospects set out in this year’s Autumn Statement, and which expose the true source and full extent of the real, gaping hole at the heart of Britain’s public finances.

Rishi Sunak concluded his first Budget speech in March 2020 with the breathtaking claim that

“the Conservatives are the party of public services.”—[Official Report, Commons, 11/3/20; col. 292.]

Their record since 2010 and their plans in the Autumn Statement tell a totally different story. Rishi Sunak and Jeremy Hunt are said to be the “numbers men”, so let us look at the numbers, courtesy of the Office for Budget Responsibility.

Last October, the OBR confirmed that nearly a decade of Tory austerity from Chancellors George Osborne and Philip Hammond had seen cuts in public spending amounting to more than 7% of GDP—savage cuts equivalent to £180 billion in today’s terms, which is almost as much as we spend each year on health and social care in England. Those public spending cuts made up 82% of the total Tory fiscal consolidation; tax increases made up 18%. Here lies the origin of the chronic and mounting staff shortages, industrial unrest, deteriorating standards and lengthening response times that are now only too typical of Britain’s struggling public services, especially in health.

This is why even Tory councils are warning that they face possible bankruptcy after enduring funding cuts for over a decade. George Osborne, once again welcome at Downing Street in advising the Chancellor and the Prime Minister, boasted of having squeezed the UK economy tighter than any of the advanced economies. He was more reticent about the plans in his final Budget in March 2016 for a further five-year fiscal squeeze—plans that would have added another £60 billion of public spending cuts to those actually made by Philip Hammond. David Cameron has confirmed that, had he stayed in office after 2016, he would have gone for even more spending cuts. The Government have now embarked on the kinds of cuts that Cameron and Osborne were exploring when they left office. They may differ in detail but it is a familiar formula, with the biggest spending cuts put off until three to five years’ time, conveniently after the election.

We can usually sum up a year’s key events with a simple phrase. In 1992, it was “Black Wednesday”, when the Tories lost whatever reputation they had for sound economic management in one turbulent day. This year, it has been “disastrous mini-Budget”, when they lost it again. Now, they are scrambling to undo the damage, but they are swimming against the tide of events. Their long record of miserably slow growth is well entrenched; their so-called plans for growth have always lacked potency and credibility. Today, Britain is the only G7 economy whose GDP is still below its pre-Covid level, and we are fast heading into recession. Slow growth is why the Government have missed all their targets for balancing the budget and bringing down Britain’s debt-to-GDP ratio since 2010. In March 2022, the OBR projected the debt ratio to fall below 80% in 2026-27, but the mini-budget and the energy crisis blew that off course. The OBR now expects it to fall in 2027-28, but to 97% this time. The Tories are going the wrong way: from bad to worse.

It is the same old story. Beyond the blue horizon waits a beautiful day but, like the horizon, Tory success is always out of reach. Fate has cast Rishi Sunak and Jeremy Hunt as the George Osborne understudies, called upon to take centre stage and share the leading role—a double act in a Whitehall revue, but not one that will run and run. This Autumn Statement will prove to be another Tory fiscal flop at the expense of the country. It is going to bomb at the box office, mercifully opening the door to a Labour Government delivering public investment, kick-started growth, business success and sound public finances, because these all go hand in hand.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, the statistics that I gave referred to overall levels of investment, not expressed as a percentage of GDP. I stand by the figures that I gave to the House.

[Lord Hain (Lab)]

I am very grateful to the Minister, but can I ask her to correct her statement about the last Labour Government’s record? We had 10 years of consistent economic growth, never surpassed in Britain’s economic history, with low inflation, high employment and massive investment in public services, prior to the global banking crisis, for which we were culpable only to the extent that every Government in the world were culpable. Surely, she should correct what she has said in argument to me.

[Baroness Penn (Con)]

I am not sure exactly which bit of what I said the noble Lord wants me to correct. I stated the Government’s record on economic growth since 2010, and I simply referred to the comments of the noble Baroness, Lady Kramer, on the recession that was also experienced under the previous Labour Government.

I return to the subject of energy. The noble Baroness, Lady Hayman, asked about energy efficiency. Warmer homes and buildings are key to reducing bills, creating jobs along the way and meeting our targets on climate change. That is why we are committed to driving improvements in energy efficiency, with a new ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. A new ECO+ installation scheme was announced earlier this week.

I disagree with the analysis that this is jam tomorrow; we have £6 billion of new government capital funding that will be made available from 2025 to2028, but that is in addition to the £6.6 billion allocated in this Parliament. The aim of that kind of longer-term projection of funding is to create consistency and allow businesses and the supply chain to build up and plan for the future, which can be something that we struggle with in the provision of energy efficiency measures. We are also launching the energy efficiency task force and expanding our public awareness campaign to help reduce bills for households and protect vulnerable people over the winter and beyond.

In response to my noble friend Lord Leigh of Hurley, on other tax measures and the taxation of US groups trading in the UK, the UK has long been committed to tackling base erosion and profit-shifting, which is why we introduced the diverted profits tax in 2015 and the corporation interest restriction rules in 2017. I am glad that he welcomed progress on Pillar 2, which we will legislate for in the spring 2023 Finance Bill, but I agree with him that we need to make further progress on Pillar 1. That is why we continue to work internationally on finalising Pillar 1, so that the corresponding multilateral convention can be ready for signature in the first half of 2023, allowing for implementation in 2024.

Other noble Lords noted some strange political alliances that seemingly might have formed in the course of this debate. The noble Lords, Lord Sikka and Lord Howarth of Newport, but also my noble friends Lord Bridges and Lady Noakes raised concerns around the Government’s decision to freeze the personal allowance and other tax thresholds. I say to noble Lords that despite the need to increase taxes—I fully acknowledge that freezing thresholds is a tax increase, I am not trying to hide it in any way—given that the personal allowance nearly doubled across the last decade, it will still be £2,150 higher by April 2028 than it would have been had it been uprated by inflation each year since 2010. The noble Lord, Lord Sikka, also asked about the distributional impacts of tax. I cannot answer his specific point, but on average it is households in the poorest income deciles that are gaining the most next year as a result of decisions taken in the Autumn Statement.

I take seriously the concerns expressed by my noble friends Lady Noakes and Lord Bridges. The Government have had to take difficult decisions and we are being honest about that. We want a low-tax economy, but first must come economic stability, and we need everyone to contribute a little towards sustainable public finances. I know it will be little comfort to them to be reminded that the UK tax system remains competitive, with the tax-to-GDP ratio meaning that we are still in the middle of the pack within the G7 and lower than such countries as France, Germany and Italy. As I say, the Government take their challenge on growth seriously and we have taken some tax decisions to prioritise this; for example, keeping the annual investment allowance level that was set in the growth plan permanently at £1 million, rather than reverting to £200,000 from 1 April 2023.

My noble friend Lord Bridges rightly identified a greater range of actions that we must take to set the conditions of growth beyond tax policy. A key area and opportunity post Brexit is regulation, and I hope he will welcome the action on Solvency II that we have announced and the measures in the forthcoming Financial Services Bill, which we will seek to replicate across other growth sectors across the UK economy, such as life sciences, as spoken about passionately by my noble friend Lady Blackwood. Many noble Lords, including the noble Lord, Lord Shipley, and my noble friend Lord Tugendhat, raised the issue of housing. The noble Lord, Lord Shipley, spoke about the need to build more houses for social rent: that is exactly what the Government are doing, through such measures as removing the cap on councils borrowing against their housing revenue account. I reassure him also that we are still committed to ending no-fault evictions.

My noble friend Lady Cumberlege asked about our commitment to community pharmacists and the issue of funding there. The plan for patients set out the further expanded role of pharmacies agreed in the community pharmacy contractual framework for the next two years, as well as an additional £100 million investment to recognise the pressures facing the sector. The Government have also committed to look further by enabling pharmacists with more prescribing powers and making more simple diagnostic tests available in community pharmacies.

In response to the noble Lord, Lord Rogan, I welcome the 25th anniversary of the Belfast agreement and I am extremely pleased that we confirmed in the Autumn Statement that we are funding the planned trade and investment event in Northern Ireland. DIT will work with local partners as this is taken forward, including with Invest NI.

The noble Lord, Lord Bilimoria, asked about defence spending. As I said in my opening speech, we recognise the need to increase defence spending, but before we make announcements on that, we need to refresh the integrated review, which was drafted before Russia’s invasion of Ukraine.

The right reverend Prelate the Bishop of Gloucester referred to the benefit of women’s programmes for preventing female offending and the savings to the Ministry of Justice as a result. In September, the Ministry of Justice announced that almost £21 million will be invested in women’s services to tackle the causes of female offending and cut crime.

The noble Lord, Lord Livingston of Parkhead, asked an interesting question about the difference between the Bank of England and OBR forecasts. Given the number of recent changes in fiscal policy and the volatility in financial and energy markets, the range of external forecasts is wide. Differences will partly reflect when each forecast was produced and the differences in assumptions about government policy, interest rates and energy prices, but I take his wider point.

I congratulate my noble friend Lady Lea on her excellent maiden speech. I know she brings a wealth of economic experience, not least from her own time working in the Treasury. I look forward to working with her in the future.

We have faced two enormous shocks in the last three years. The pandemic has caused supply chain disruption, slowed growth and increased debt levels, and Putin’s war in Ukraine has caused energy prices to spike. This has added up to inflation at levels not seen in a generation, hitting the pockets of families across the country. That is why tackling inflation is our priority. It makes everyone worse off, especially the most vulnerable, so we have taken difficult decisions that will mean taxes go up and spending will not rise by as much as previously planned. When we take into account the need to invest more in areas such as our NHS, it means hard choices to be made elsewhere.

However, I remind noble Lords that we fight these economic challenges from a position of relative strength. Unemployment is close to the lowest level it has been in nearly 50 years, and the UK is forecast to have had the fastest growth in the G7 in 2022. We also have incredible strengths within our country that aid our mission: our teachers, our NHS workforce, our armed services, and everyone who works in our public sector—day in, day out—to deliver the services upon which we rely.

We are inventive and resourceful, and the innovative, intuitive and ambitious people who make up our private sector will drive our growth. Combine this with the decisions taken over the last 12 years and the results are clear to see: employment is up by millions compared to 2010; we have had the third highest real GDP growth rate in the G7 since 2010; renewable energy production is growing faster than in any other large country in Europe since 2010; thousands more children are in good and outstanding schools compared to 2010; and we have record numbers of doctors in the NHS. Now, because of the difficult decisions we take in our plan, we are strengthening our public finances, bearing down on inflation and supporting jobs—all while protecting public services.

The Autumn Statement is a plan that provides stability. It is a plan for growth and a plan for public services. I beg to move.

Budget Statement

Lord Hain Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Hain (Lab)]

My Lords, it is no slight on the Chancellor to say that the web of deception that he tried to weave in his Budget Statement fell short of the standard set by Britain’s foremost author of spy thrillers, John le Carré. He contrived to create the impression of an economy that is coming in from the cold, one that is enjoying robust growth.

Robust is hardly the word that I would choose to describe economic growth in 2016 that was slower than that expected 12 months ago: a miserly 1.8% compared with the 2% forecast by the Office for Budget Responsibility last March. It is surely misleading for the Chancellor to claim that the economy is expanding at a brisk pace when, as my noble friend Lord Livermore pointed out in his excellent speech, the OBR has downgraded its forecasts for growth in each of the next four years compared to what it expected one year ago. Growth will be slower next year than it was last year, or the year before, or the year before that. The OBR expects unemployment will be higher in each of the next four years than it is today. In the next couple of years it expects pay to go up more slowly and, thanks to Brexit, prices to rise more quickly than it thought last year. If this is the Chancellor’s idea of economic vigour, what on earth is his idea of economic sclerosis? Real recovery and rapid economic growth seem as far off as ever.

UK GDP grew more slowly in 2015 than in 2014, and more slowly still in 2016. The OBR expects it to grow no faster in each of the next four years than this year. These are all signs of an economy that is losing momentum, not gaining it; an economy that is stuck in the slow lane, not one that is picking up speed; an economy still mired in austerity. The Institute for Fiscal Studies expects the marginal improvement in the public finances that has emerged over the past few months to be short-lived and to make no difference to the prospects for public borrowing three years down the road. The OBR also expects the economy to be in the same sad place in 2020 that it thought in its November report.

The Chancellor announced a string of minor measures, which have been referred to already, such as rate relief for pubs and free season tickets for some kids at selective schools. He tweaked a few schemes such as technical training and gratuitously hit the self-employed. However, he did not cancel any spending cuts that were already in the pipeline; nor did he explain why he plans to spend only a fraction of the proceeds from the new apprenticeship levy on extra training. He left investment in public infrastructure stuck below 2% of GDP, miserably less than half the share it was between 1948 and 1983. Does he really think we have enough social housing, care homes, hospital beds and classrooms? Are there enough Sure Start children’s centres? What he did do is quietly tighten still more the fiscal squeeze that he has planned for 2017-19, as the figures for cyclically adjusted public borrowing show.

It will mean austerity, still more austerity, and more failure. Not only are local government services being decimated; not only is the NHS tottering underneath the strain; not only are head teachers at their wits’ end; not only is social care almost collapsing, with the Chancellor’s extra funding risibly and insultingly inadequate, as the noble Baroness, Lady Altmann, an expert on elderly policy, has pointed out. Not only is there all this colossal social failure, but there is massive economic failure created by the Tories’ own self-imposed obsessions, with their borrowing and debt targets still wildly out. Having missed them by a mile in the last Parliament, they will miss them again in this Parliament, he now admits, so he has shifted their achievement to the next Parliament. It is austerity for ever, and that is without the crushing self-inflicted economic damage of Brexit.

Will the Tories never learn that it is growth, not austerity, that brings borrowing and debt down? After the sky-high debt and borrowing bequeathed by the Second World War, both Labour and Tory Governments invested, not cut—achieving much higher growth than the pitiful levels achieved under Tory Chancellors since 2010—and simultaneously cut borrowing and debt. British productivity is pathetically pitiful; our skills are painfully poor; our trade deficit is historically huge; our infrastructure is embarrassingly inadequate. We have mammoth personal debt, a sinking savings ratio, and in real terms pay is about to plummet: real average earnings will be stagnant for 15 years, no higher in 2022 than they were in 2007—the longest squeeze on real wages since the Battle of Trafalgar.

All this and Brexit broods ominously ahead, with this Government having not the slightest notion of where they are taking the country or the economic damage that will result. Yet the Chancellor tinkers here and there. The story of this budget is simple, and le Carré provides the clue: tinker tailor wonder why.

Finance Bill

Lord Hain Excerpts

Tuesday 13th September 2016 Lords Chamber

[Lord Hain (Lab)]

My Lords, I continue with the theme excellently elaborated by my noble friend. Treasury Ministers are often said to be like drivers who have to steer the economy by looking in the rear-view mirror, reacting after the event to data that are slow to emerge, to developments that take time to assess and signals that are difficult to distinguish. Those data are contradictory, developments are inconsistent and signals blend in with the background, like closet speed cameras set up to catch unwary motorists. Some say that the situation today is made doubly difficult by the fog of uncertainty in which we are shrouded by the result of the European Union referendum. They say that Britain’s new Prime Minister is not only First Lord of the Treasury, she is also a lady in waiting—waiting for the smoke to clear from the Brexit battlefield. Only then, they argue, will the Government be able to judge just how much damage the referendum result has done to Britain’s economic prospects and how Ministers should respond.

Yes, we face unusual uncertainty today because of Brexit, and many people warned about that; but we are far from flying blind. After all, it was the Prime Minister who was the first to acknowledge that the economy was in trouble and way off the course charted for it by the outgoing Chancellor. Even before taking over at No. 10, she declared that the Government’s target of a budget surplus in 2020 was a dead duck. When talking about the Cameron Government’s budget strategy, she sounded like Cinderella’s stepmother contemplating a child to whom she feels no commitment and for whom she feels no affection. She was clearly fed up with failure.

The reason why the Government have had to abandon their 2020 budget surplus is obvious. It is the same thing that has made them miss every such target since 2010—poor economic growth brought on by the tightest fiscal squeeze among the advanced economies. It is a budget squeeze that the former Chancellor used to boast about and that he planned to continue for the next four years. That was in the days before he swapped the hard hat and high-visibility jacket for a Harry Potter invisibility cloak—presumably it was either that or “Strictly” for him. His squeeze is one that means you fall short of your growth targets causing tax revenue to drop and your debt and deficit targets to go for a burton. Then you demand more spending cuts to reduce the role of the state and bring down government borrowing, so the downward spiral continues on and on. Surely, it was completely clear well before the referendum result that the UK economy was running out of steam. It grew slower last year in 2015 than the year before. It is growing slower still this year and the referendum result means even slower growth next year. The economy has become like the farmer who is always doing worse than last year but better than next year.

Last November, the Bank of England expected the economy to grow by 2.6% in 2017. In February, it cut that forecast to 2.3% and in August, it was cut again to only 0.8%. Independent economists agree that the Treasury’s most recent survey of independent forecasts for GDP growth showed an average forecast for 2017 of only 0.7%. Most of those forecasts were made after the EU referendum. The National Institute for Economic and Social Research reckons there is a 50:50 chance of recession and that Britain is,

“in the midst of a slowdown”.

The Bank of England Monetary Policy Committee was admirably quick to take action to forestall such a slowdown from turning into a slump, but as my noble friend Lord Darling said, there are limits to the effectiveness of monetary action alone when interest rates are already so close to zero. What is needed is complementary action on the fiscal front to give the economy a sharp boost, ratchet up Britain’s growth rate, and bring the public finances back into balance by doing so.

The IMF is calling on Governments to use fiscal policy to stimulate their economies and not rely on monetary measures alone, and so is the US Treasury. Japan has shown the way. The Japanese Government have launched a £33 billion fiscal boost that includes extra infrastructure investment, help for small and medium-sized businesses hit by uncertainty due to Brexit, and higher welfare spending, notably childcare subsidies and cash payments to 22 million low-income households. That is the kind of action that this Government need to take for Britain too. The need is pressing, yet we are not even half way from the EU referendum in June to the new Chancellor’s Autumn Statement when he says he may reset fiscal policy. His decision to delay that Statement until 23 November shows what I think is a reckless lack of urgency in tackling the slowdown.

Abandoning the budget surplus target for 2020 says nothing about easing the squeeze between 2017 and 2019. Paul Johnson of the Institute for Fiscal Studies has pointed out that simply dropping the 2020 surplus target will not mean the end of austerity. It just means that it will go on for longer, potentially until well into the 2020s. The economy is running out of momentum now. Productivity gains have come close to a dead stop. The longer the Chancellor waits, the harder it will become to break out of the vicious circle and breathe fresh life back into an economy that is in dire need of the help that only he can provide.

Britain urgently needs a public investment boost from the Government, otherwise the UK economy will remain trapped in a slow growth/no growth equilibrium that could last for years. The truth is that far from being a successful Chancellor, George Osborne fell behind schedule on his debt targets and went significantly over budget on borrowing, where he became a serial offender. In this past financial year, 2015-16, he delivered a £76 billion borrowing figure, exceeding the figure forecast by my noble friend Lord Darling in his final Labour Budget in March 2010 when he planned to bring down Britain’s budget deficit over the following Parliament to £74 billion in 2014-15.

Yet it was precisely Labour’s £74 billion level of planned borrowing that the new Tory Chancellor condemned when he took over at the Treasury. It would take Britain close to “the brink of bankruptcy”, he fulminated, insisting that Labour could not be trusted. Instead he replaced it in June 2010 with new, tougher targets, halving Labour’s planned borrowing in 2014-15 from £74 billion to £37 billion and setting himself a tight borrowing target of £20 billion for 2015-16. Both of those targets were missed by a mile. By March 2016, debt was £275 billion above George Osborne’s target and the 2015-16 budget deficit was £56 billion higher than he had planned in 2010. So much for the credibility of his “long-term economic plan”.

All his scaremongering about Britain becoming another Greece also proved to be nonsense. Just like under the last Labour Chancellor, my noble friend Lord Darling, even during the banking crisis Britain had no problem financing its budget deficit and the yield on UK government debt dropped to an all-time low of 1.22% in February this year. The Chancellor kept crying wolf while the bond market kept behaving more like Britain’s best friend.

The rate of deficit reduction should be linked to the pace of economic recovery and the Government need to take vigorous fiscal action to promote faster growth with an immediate boost to public investment aimed at housebuilding, infrastructure, education and skills, and low-carbon investment. Looking further ahead, longer life expectancy and increasing demand for what the American management writer Peter Drucker termed “knowledge workers” mean an expanding role for the state in education, pensions and health services, especially elderly care. The Government’s determination to shrink the role of the state is taking our society in entirely the wrong direction. We need to renew the case for a balance between private enterprise and public provision. Jacob Hacker and Paul Pierson say in their 2016 study of the part played by government in helping advanced societies to flourish that:

“The mixed economy remains a spectacular achievement … By combining the power of markets with a strong dose of public authority, we achieved unprecedented prosperity”.

Growing inequality must also be reversed because the real incomes of not only working-class but also middle-class Britons have fallen badly behind, with only the top 10% benefiting from the neoliberal economic era.

Centrist US economic commentator Rana Foroohar’s 2016 book, Makers and Takers, argued that Adam Smith’s vision of market capitalism had broken. Markets, she showed, no longer supported the economy and had delivered only divisive and slower than normal growth, where the very rich got richer and the rest trailed behind. She said:

“Market capitalism was set up to funnel worker savings into new businesses via the financial system. But only 15 per cent of the capital in financial institutions today goes toward that goal—the rest exists in a closed loop of trading and speculation … In the US, finance doubled in size since the 1970s, and now makes up 7 per cent of the economy and takes a quarter of all corporate profits, more than double what it did back then. Yet it creates only 4 per cent of all jobs. Similar figures hold true for the UK”.

Where both a fast-ageing society and a chronic housing shortage demand more not less government, the British state continues to be shrunk by this dogmatic Government’s policy. Our public services are being cut and outsourced. Job insecurity, zero-hours contracts and low pay are rife. Occupational pensions are expiring. Skills lag abysmally. Productivity is embarrassingly low and the trade deficit both embarrassingly and historically high. Frankly, this Finance Bill is at best irrelevant and at worst totally counterproductive to addressing Britain’s deep-seated problems. The Government must radically change course and offer an alternative to such systemic failure.

The Economy

Lord Hain Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Hain (Lab)]

My Lords, I endorse the Minister’s fitting recognition of Lord Peston, who was my professor of economics at Queen Mary College, University of London, and whose brilliance, along with that of the noble Lord, Lord Smith of Clifton, enabled me to get a first-class honours degree—something which produced a barrage of letters in the Daily Telegraph denouncing university standards at the time.

I was struck by last week’s figure for government borrowing in the financial year just ended, 2015-16. What caught my notice was not that the Chancellor had exceeded his borrowing target again—we are used to that now, he is a serial offender. What stood out for me was the £74 billion borrowing figure itself, as £74 billion was exactly the borrowing figure forecast by my noble friend Lord Darling in his final Labour Budget, in March 2010. He planned to bring down Britain’s budget deficit to £74 billion in 2014-15—the limit of his five-year forecasting horizon. It was precisely this level of planned borrowing, £74 billion, that the new Tory Chancellor condemned when he took over at the Treasury. It would take Britain too close to the “brink of bankruptcy”, he fulminated, insisting Labour could never be trusted.

Instead, he replaced it in June 2010 with new, tougher targets, halving Labour’s planned borrowing in 2014-15 from £74 billion to £37 billion and setting himself a tight borrowing target of £20 billion for 2015-16. Both those targets were missed by a mile. All the Chancellor’s scaremongering about Britain becoming another Greece proved to be nonsense. Just like under Labour Chancellor Darling, even during the banking crisis, Britain has had no problem financing our budget deficit: the yield on UK government debt dropped to an all-time low of 1.22% in February. The Chancellor keeps crying wolf but the bond market is behaving more like Britain’s best friend, just as it did under Labour.

Labour argued six years ago, and has continued to do so since, that the Chancellor’s austerity strategy was the wrong way to tackle Britain’s debt and deficit problems. We said that pursuing such deep cuts so quickly risked curtailing growth, thereby making his borrowing targets unattainable, because it is on the growth rate of the economy, not just prudent public finance housekeeping, that budget deficits and the debt burden ultimately depend. Slow growth puts a brake on consumer spending and business investment, which causes tax revenues to tail off, pushing up government borrowing and adding to debt. Sadly, our fears were fulfilled as the Chancellor’s austerity first completely halted Labour’s carefully nurtured growth following the global banking crisis and the ensuing recession, and then caused the recovery we had generated to stall for three years.

Few Finance Ministers have pursued austerity with more vigour than Britain’s Chancellor. In 2013, he boasted that he had squeezed the UK economy more tightly than any of the other advanced economies. At least that claim was valid: Britain’s fiscal squeeze was twice as tight as in the USA or the eurozone. But it cost the country dear. When recovery finally came, it did so at a much slower pace than recoveries from earlier recessions: much more slowly than recovery from the recessions of 1973 to 1976, 1979 to 1983 or 1990 to 1993; more slowly even than recovery from the great depression of 1930 to 1934. It took the UK economy three years longer than America or Germany to get back to pre-crisis levels of GDP. This explains the assessment of the former chief of the Federal Reserve, Ben Bernanke, last October that austerity went too far in Britain after 2010.

Today the Chancellor remains behind schedule on debt and over budget on borrowing. He will continue to miss his targets, because his fiscal strategy for this Parliament is a carbon copy of the failed austerity policy he pursued in the last one. The Institute for Fiscal Studies expects growth between now and 2020 to be held back by the drag of “fiscal consolidation”—the technical term, as your Lordships will know, for cuts—which is greater in the UK than among any of the other OECD developed countries. As the Chancellor’s March Budget made clear, not only is austerity set to drive UK economic policy for the next four years but the fiscal squeeze will be tighter than before, and once again much tighter than anything envisaged by the world’s other advanced economies.

Missed debt and deficit targets are only the obvious indicators of failure. The real cause for concern is that economic growth is slowing down. The economy is running out of steam and losing momentum. Everywhere you look, growth forecasts are being downgraded. The CBI and the Bank of England downgraded theirs in February. In March, the Chancellor’s own financial housekeeper, the Office for Budget Responsibility, judged that growth was slower last year than the year before, and will be even slower this year. Last week, the IMF cut its forecast for UK growth in 2016 to less than 2%. Everyone is on the alert for further signs of a slowdown.

What is driving the Chancellor’s disastrous austerity strategy is his commitment to the neoliberal aim of shrinking the size of the state. His idea for constant budget surpluses except during a recession amounts to a 1920s-style pre-Keynesian recipe for a permanent squeeze on public spending after tax cuts that deliberately put a budget surplus beyond reach. It is the Osborne equivalent to the Tea Party’s “starve the beast” strategy in the US, which aims to cut back the role of the state. It is totally unnecessary if the aim is to cut the debt-to-GDP ratio, as the whole of our history for the last 200 years testifies, but it serves his ideological aim of small government.

There is an alternative which is economically credible and authoritative, a Keynesian policy to replace a failing neoliberal one. Our priority today should be faster, fairer, greener growth. We need growth because only an expanding economy can provide the resources needed to tackle the problems that confront society, such as chronic housing shortage, a decaying social infrastructure, inadequate educational opportunities, especially for the disadvantaged, combined with high student debt, a shortage of vocational skills, a mismatch between health and social care, lack of childcare and an accelerating crisis in elderly provision.

We need faster growth because that holds the key to bringing the public finances back into balance, to generating the work that 900,000 unemployed young people want and millions more unemployed, insecure or underemployed people need, and to raising real incomes. We need fairer growth because unequal societies are unhealthy societies in which everyone loses out as all forms of social ills rise and economic growth rates slow.

We need greener growth because without vigorous action to meet the threat posed by climate change, such as by backing a low-carbon economy and actively promoting renewable energy schemes, such as the entirely privately funded Severn Barrage, environmental disasters can only become more frequent and intense.

Contrary to the stifling grip of neoliberal orthodoxy within the Westminster bubble, faster, fairer, greener growth is eminently feasible. The scope for fiscal action to boost public investment in housing, in the social infrastructure, in training and skills and in green growth is substantial. It would mean the Government borrowing more today, yes, but in order to borrow less tomorrow by giving the economy a fiscal stimulus and raising Britain’s economic growth rate above the pedestrian 2.1% per year expected by the OBR for the next five years.

Would such a stimulus increase government borrowing? In the short term, as I say, yes, but in the medium to longer term, no. Boosting economic recovery may well require more public borrowing in the short term. It is the right thing to do to get the economy growing faster, to maintain the momentum of growth and reduce borrowing over the medium term. Higher public spending and borrowing today can mean lower borrowing tomorrow if it achieves faster growth, with tax revenues rising as total spending in the economy increases, and welfare bills falling as unemployment comes down.

It has been tried before and it has worked. President Obama’s 2009 stimulus package after the banking crisis added to the US federal deficit at the time, but US interest rates fell, spending and output rose and dole queues shortened. As a proportion of its expanding GDP, America’s overall deficit has shrunk every year since 2009.

A £30 billion per year increase in annual public investment for two years as part of a 10-year programme to renew Britain’s failing social infrastructure would give a boost to growth at a time when the OBR expects the economy to slow down. By contributing to a higher plateau of ongoing public infrastructure investment, it would also provide a spur to industrial innovation and faster future growth, as well as full employment. Higher current public spending paid for by a mix of higher, fairer taxation, extra charges and greater efficiency would allow us to protect public services from the worst of this Government’s planned spending cuts.

What makes faster growth feasible in the short term is the margin of spare capacity in the UK economy that could be brought back into operation, yielding extra, catch-up growth for several years, just as it did as Britain recovered from the depression between 1933 and 1936, when growth exceeded 4% per year, fuelled by a housebuilding boom—and do we not desperately need such a housebuilding boom now? The belated, slow, faltering economic growth under the Chancellor has delayed deficit reduction. Instead, scrapping austerity could have taken up—and could still take up—the slack in the economy, such as the millions of people who are underemployed and working fewer hours than they would prefer.

A stimulus of £30 billion per year for two years of extra capital investment in infrastructure, housebuilding, education, skills and a low-carbon industry would rapidly expand the economy and cut the budget deficit by boosting tax revenues as people earned and spent more, working hours rose and fewer families needed to look to the state for benefit support. Such a modest and, with historically low interest rates, eminently affordable £30 billion budget boost remains the only way to begin creating a fairer, more sustainable economy at the same time as bringing the public finances into balance.

The scope for doing so is much greater than the Government or the OBR will concede; for example, Oxford Economics noted in 2014 that if its estimate of the amount of slack in the economy, and thus the scope for faster growth, was correct,

“none of the spending cuts planned beyond 2014-15 would be needed to return the deficit to pre-crisis levels”.

By the time of the March 2015 Budget, the Oxford Economics team reckoned that Britain’s output gap was six times bigger than the OBR did, leaving plenty of room for fast, catch-up growth prompted by such a stimulus package.

Much the same argument, along with the case for growth, has convincingly been made by other eminent economists, such as Paul Krugman, Jonathan Portes, Simon Wren-Lewis, Martin Wolf, Bill Martin and Bob Rowthorn. We were reminded a few months ago by the Institute for Fiscal Studies that over the Labour decade up to the start of the financial crisis in 2007-08, the UK experienced an unprecedented period of sustained economic growth. GDP growth averaged 3% a year. That is the least we should be aiming for now.

By the way, to correct another myth, before the global financial crisis crashed all the economies of the world, the previous Labour Government ran a prudent, extremely successful economy, with record growth and employment, low interest rates, low inflation, low national debt and low borrowing—lower, indeed, than we had inherited from the Tories in 1997. Britain’s 2007 budget deficit was £39 billion, or 2.7% of GDP, before the banking crisis. It was dwarfed by the colossal cost of state support to Britain’s failing banks, which was equivalent to some 90% of GDP. Something a bit lower on the budget deficit scale in 2007 would therefore have been irrelevant to the stratospheric impact of the banking crisis or how the Government were able to manage it.

For 30 years after the Second World War, progressive Keynesian full employment policies combined with welfare state policies delivered economic and social stability right across Europe, promoting the necessary investment and faster economic growth, as well as more just, more equal societies and fewer class differences. For nearly four decades now, we have suffered from neoliberalism—that is to say, a small government ideology favouring market forces wherever possible and tolerating state regulation only where absolutely necessary. Economic and social inequality has widened massively. Not just the poor but the middle classes have experienced a relative decline in living standards while the rich have become super-rich. Meanwhile, Britain has a record trade deficit, dreadfully low productivity, manufacturing decline, ballooning private debt, yet another housing asset bubble, growing inequality, job insecurity and sluggish private investment. Some basis indeed for the Government’s claim that their economic plan is working.

Today, the stakes could not be higher: whether Britain can become a compassionate, much more equal society founded on a strong, productive technology sector; or whether we are to be condemned to have an economy plagued by financial short-termism, servicing the interests of only a rich elite. The alternative agenda, however, is emphatically not some wild, irresponsible, unelectable platform of tax and spend, as critics will doubtless complain of my prospectus. Instead, it invites a resurrection of Britain’s post-Second World War mission, based on hard-headed economics and evidence —a modernised Keynesianism, some might say. That, not the Government’s fetish for neoliberalism, should remain both the source of our inspiration and the vision for our age.

Wales Bill

Lord Hain Excerpts

Tuesday 24th June 2014 Commons Chamber

[Nia Griffith]

I am not casting aspersions on any individual list candidates. We have two excellent Labour list Assembly Members in west Wales—Rebecca Evans, who champions disability issues, and Joyce Watson, who champions human trafficking issues. They are doing an excellent job, because they are focusing on topics, not sitting like some great cuckoo on one constituency out of eight and making that their sole focus of attention, ignoring what is happening in important aspects of the other seven constituencies that they represent.

We have seen such abuse in Wales before. I am sure my right hon. Friend the Member for Neath (Mr Hain) will remind us again, as he has done many times, of the blatant abuse of the list system. He has quoted frequently from the leaked memorandum from Leanne Wood, the leader of Plaid Cymru, in which she gives explicit instructions to her party’s list Assembly Members to direct their time and resources, paid for by the taxpayer, to Plaid Cymru’s target seats.

Some people say that putting into the 2006 Act the clause that prevents an individual from standing for both the constituency and the list was a partisan move by the Labour Government, but we knew full well that it would also prevent our candidates from standing for both. We had at least four sitting constituency AMs who we knew were likely to be vulnerable to electoral change in the 2007 Assembly election and who could have hedged their bets by standing for both. That might have been very cosy for them, but as a matter of principle we knew how much the electorate hated it. On the doorsteps we heard people ask, “What difference will it make if we go out and vote?” It was extremely difficult to convince people after the Clwyd West scenario, because whoever the constituents voted for, all four parties were elected.

It was extremely important to us to stand by our principle, rather than making some sort of cosy situation for our AMs. In fact, I would go so far as to say that in some circumstances, depending on the specific arithmetic for the region, a candidate who could stand for both the constituency and the list could be pretty much guaranteed to be elected on one or other of them. That could breed a certain complacency, which would not serve the electorate well at all. We take issue with the accusation that this is a partisan point, because it is a point of principle. We strongly oppose clause 2, which seeks to turn the clocks back and allow dual candidacy. Our amendment therefore seeks to remove that clause from the Bill.

Our view is that the Assembly’s electoral arrangements should be decided in Wales, so we have also tabled an amendment proposing that an order should be laid in the Assembly by the Welsh Government before any change on dual candidacy can be implemented. I hope that Members will vote for our amendments.

[Mr Peter Hain (Neath) (Lab)]

I, too, wish to speak in favour of amendment 13 and against clause 2 remaining in the Bill. The Secretary of State and other Members who have taken part in our proceedings on the Bill might recognise some of my comments from my single transferable vote speech on dual candidature, because I remain firmly opposed to that abuse of democracy. However, I will be brief, because my favourite premiership player, Frank Lampard, is captaining England at 5 o’clock, and I know that even Members from Welsh constituencies, with the possible exception of our Plaid Cymru friends, will want to cheer them on in their final game.

I repeat my basic argument, which I have expressed throughout the Bill’s proceedings, and the rationale for my ban on dual candidature in the 2006 Act: it cannot be right for losers to become winners through the back door, despite having been rejected by the voters. That is an abuse of democracy. People who stand for a single-Member seat and then lose can end up being elected anyway, in defiance of the electorate’s wishes, because at the same time they are in a list category, and that is an abuse of democracy. There is no real argument against losers becoming winners in that way.

There was a widespread abuse practised by 15 of the 20 list AMs prior to the 2006 ban. They used taxpayers’ money to open constituency offices in the very single-Member seats in which they were defeated. They then targeted those seats at the following election by cherry-picking local issues against the constituency AMs who had beaten them. Why are they so afraid of taking their choice to the people, and why are the Government so afraid of democracy? Why are they so afraid of losing constituency elections that they need the lifebelt of standing for the lists as well? That is what the leader of Plaid Cymru, Leanne Wood, for whom I have considerable admiration despite all that, is doing in Rhondda. In a leaked memorandum written in August 2003, she was refreshingly honest about promoting abuse of the dual candidature system by list Members using taxpayers’ money.

--- Later in debate ---

[Pete Wishart]

I am genuinely interested in the right hon. Gentleman’s view on this issue. What advice does he have for Scottish Labour, which has just done a total U-turn on dual candidacy and is now allowing the practice to go on? Will he disparage Scottish Labour as much as he seems to be disparaging Plaid Cymru for carrying out this appalling act?

[Mr Hain]

rose—

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Before you answer, Mr Hain, let me make it absolutely clear that we are talking about dual candidacy in Wales, as I think you probably appreciate. This is a tightly drawn debate and that is the subject of the amendment.

[Mr Hain]

I am grateful for your guidance, Madam Deputy Speaker, which directly answers the hon. Gentleman’s point. I am speaking about Wales. I am not aware of serial abuses of the kind practised in Wales prior to the 2006 ban occurring in Scotland. Indeed, I think that the codes that apply in Scotland may be different. I note that the then Presiding Officer of the Scottish Parliament, Lord Steel, attacked dual candidature in terms very similar to mine.

Leanne Wood’s bible for dual candidature went on:

“We need to be thinking much more creatively as to how we better use staff budgets for furthering the aims of the party.”

She finished with a refreshing burst of honesty that, in an era of political spin, can only be commended:

“Regional AMs are in a unique position. They are paid to work full-time in politics and have considerable budgets at their disposal. They need not be constrained by constituency casework and events, and can be more choosy about their engagements, only attending events which further the party’s cause. This can be achieved by following one simple golden rule: On receipt of every invitation, ask ‘How can my attendance at this event further the aims of Plaid Cymru?’ If the answer is ‘very little’ or ‘not at all’, then a pro forma letter of decline should be in order.”

All the arguments and evidence I have cited in the past few minutes, in Committee and on Second Reading, demonstrate that the 2006 ban was not partisan but instead enhanced the democratic standards of all Welsh Assembly Members.

Indeed, I reminded the House at the time of the ban that six Labour Assembly Members, including three Ministers, would be defeated in the 2007 Assembly elections by a very small swing of 3% against them. They would not have the lifebelt of dual candidature, which I had removed; they would no longer enjoy the safety net of the regional list. Two of them subsequently did lose, as I said could happen. The reform affected Labour candidates and candidates of other parties alike, a point that my hon. Friend the Member for Llanelli (Nia Griffith) made so eloquently.

In conclusion, the Government have now officially blessed this practice—presumably, they will marshal the votes shortly to try to defeat our amendment—and it appears that they are, sadly, doing so with the blessing of the Electoral Commission. I therefore look forward to Labour being welcomed into the fold of running dual candidates again. After all, why should we lose out while everybody else takes advantage? Never mind the voters, let us put our own self-interest as political parties first. I trust that the Government will be proud of bringing politicians in Wales into even greater disrepute than the political class right across the United Kingdom. Tellingly, the Electoral Commission is endorsing that disrepute and the Secretary of State is now smiling in anticipation of that happening. That is the consequence of his reversal of this ban; he is opening the door again to the serial abuses which have been documented and proved beyond doubt. He is going to invite that very abuse of democracy in Wales by removing the ban and installing clause 2, which is the reason for supporting amendment 13.

[Mrs Siân C. James (Swansea East) (Lab)]

I wish to speak briefly in support of amendment 13 and against the removal of clause 2. I oppose dual candidacy simply because if a candidate is not elected by a constituency under the first-past-the-post system, it cannot be right for them to be elected under the list system. If the electorate have rejected someone once as their first-choice candidate, it is not acceptable for them to have the opportunity to re-enter the game through the back door. In mainstream society people get one chance at a job; if they are not successful at an interview, they have to accept the decision and they do not go back squealing to the prospective employers saying, “Can we change the rules now? Can I possibly be appointed under different criteria or under a different set of interview processes?” Things should be no different for politicians. There should be no swapping or alternatives; it should be the same for everybody.

Let us examine the attitudes towards dual candidacy. We have heard a lot of pooh-poohing of the Bevan Foundation’s inquiry and report, but my constituency took part in that inquiry and I did not see any party members participating; those who participated all came from local community groups and pensioners groups, were not affiliated to any particular party and were not aligned to any political point of view. Some of them were sceptical about devolution and the political process, whereas others were very supportive of it. Those who participated sent a clear message saying, “We are really concerned about the way politicians are behaving on the dual list system and about what is happening.”

The report found that more respondents said that

“dual candidacy was unfair compared with those who felt candidates should be free to stand in both.”

Someone who was interviewed said:

“I think it is unfair…It’s like people can sneak in the back door.”

Another said:

“It seems unfair in a way, surely if they weren’t popular enough they shouldn’t be able to get in.”

There has also been international criticism of the dual candidacy idea. Moves have been made to improve things in New Zealand and in Canada, and Canadian research states:

“Voters are displeased with the case where a candidate is not successful in a single member constituency, but is elected anyway by virtue of being placed on the top of a party’s list.”

In further support of my argument, I give the example of the unfairness—this has already been mentioned by colleagues—in the Clwyd West constituency. It puzzles most people in Wales that it was possible for all four candidates on the first-past-the post list to end up being elected. When I got into politics, a very wise old bird told me, “Siân, don’t get into politics if you’re not prepared to lose, because there’s only one winner.” We have totally turned that on its head with devolution and now anyone can be a winner, as long as they are at the top of their party’s list. I think the public find that difficult to understand and they are puzzled by it.

--- Later in debate ---

To repeat—this is very much a repetition, because it has previously been aired at great length—Wales is the only country in the world where dual candidacy is banned under this type of electoral system. As was discussed at great length in debates on Second Reading and in Committee, when the Labour party introduced the ban in 2006, it did not make the same provisions for elections to the Scottish Parliament or the London Assembly.

[Mr Hain]

Is the Secretary of State aware of the evidence that Professor Roger Scully has brought forward? A number of Asian countries have a similar ban, including Taiwan and South Korea, in similar circumstances. Does the Secretary of State think that he should withdraw the statement that he has just made?

[Mr Jones]

I clearly referred to a particular type of system, which is the majoritarian type. That is where the votes in the constituencies count towards the list elections. In Asia and Ukraine, there is something similar, but not under that type of system. I am pleased that the right hon. Gentleman refers to Professor Scully. In his evidence to the Welsh Affairs Committee during pre-legislative scrutiny of the draft Bill, he clearly said:

“If parties that are defeated at constituency level can still win representation through the list, then it is difficult to see why that should not also apply to individuals.”

In other words, what is the difference for this purpose between a party and an individual? That is Professor Scully’s view. To pray him in aid goes against the advice that he gave during pre-legislative scrutiny of the draft Bill.

[Mr Hain]

Notwithstanding that advice, Professor Scully was simply correcting the Secretary of State on his basic proposition. The point is this, and no one has disputed it: neither the Secretary of State nor the Minister have challenged one bit of evidence that we have brought forward, and which I have repeatedly cited, about the serial abuses in Wales under the dual candidacy system, which the Secretary of State is about to reintroduce. He offers no protection or guarantee that that serial abuse will not happen; it went on prior to the ban in 2006. In fact, his Bill is a charter for reopening that abuse.

Wales Bill

Lord Hain Excerpts

Wednesday 30th April 2014 Commons Chamber

[Owen Smith]

I am tempted to say that very few of my constituents—or, I suspect, those from any constituency in Wales—ever want to talk to me about the constitution, which seems to exercise Plaid Cymru all the time. Most people in Wales do not want to talk about the constitution: they want to talk about the cost of living crisis and the other problems that we have in Britain.

In conclusion, the evidence of the recent past in Wales suggests that the previous system was being abused. We have made a clear, principled non-partisan argument that the current system should be retained as it is. In so doing, we are striking a chord with the views of the Welsh Affairs Committee, which did not come to a final conclusion but did say, as a point of principle:

“we consider it unadvisable for electoral systems to be changed frequently. Successive changes to electoral systems risk being perceived as partisan by the public.”

This is clearly a partisan change. The public will see it for what it is and I am sure they would support us when, later this evening, we vote against clause 2 standing part of the Bill.

[Mr Peter Hain (Neath) (Lab)]

I welcome your Celtic insight into this debate affecting a Celtic neighbour, Dr McCrea. I apologise to you, and to those on both Front Benches, if I have to be out of the Chamber for the winding-up speeches.

I wish to speak on clause 2 stand part, a clause that reverses the ban on dual candidature, which this House legislated for in 2006. On Second Reading I provided detailed evidence about the widespread abuses of the dual candidacy system in Wales that led to it being banned under the Government of Wales Act 2006, which I introduced. None of that evidence was disputed or rebutted by the Government or any of the parties. I readily confess to being one of the Wales Ministers who, prior to devolution, took the original 1998 Government of Wales Bill through Parliament that permitted dual candidature, but I never for one moment imagined the abuses that it would produce and the antipathy it would create. Voters never understood that it was widespread practice, from when the Assembly was established in 1999 up until 2007 when it was banned, for candidates rejected by a particular constituency to secure back-door election as Assembly Members through the regional list. They were then even able to claim to represent the very constituency that had rejected them.

After reading the Government’s proposals for repealing the ban on dual candidacy, I have searched in vain for substantial arguments beyond cries of political partisanship. The truth is that the ban has affected all candidates of all parties by preventing each one from having a two-way bet with voters. The ban simply puts the voters in charge by ensuring that, if a candidate is defeated in the constituency vote, that candidate does not get elected in defiance of the popular will. At a time when the political class—all of us—are held in lower repute than at any time in the history of British democracy, the very idea that the Government are proceeding to ensure election losers become winners is absolutely extraordinary. It holds the electorate in utter contempt.

Let us examine the case advanced by Ministers. First, the Government have used evidence borrowed heavily from the Scottish elections, which are similar to ours in Wales, and manipulated evidence from the Arbuthnott report to support their case. Ministers claimed in the Green Paper that the Arbuthnott report on the situation in Scotland found no justification for the argument that public dissatisfaction with dual candidacy had a negative impact on voter turnout. They also used evidence from the Electoral Commission’s 2006 “Poll Position” report, which focused on voting in the National Assembly elections. Clearly, however, the Government chose only to reflect the contents of those reports selectively.

In fact, the Arbuthnott report quoted the Scottish social attitudes survey 2003, which found a high degree of opposition to party control of candidates on their regional election lists. Moreover, opposition to party control of the lists was particularly acute—this is the important point—because of public confusion with the system, exacerbated when regional Members of the Scottish Parliament appeared to get in through the back door having been defeated as constituency candidates. In the 2003 Scottish election Arbuthnott report, the public was indeed concerned that 88% of regional MSPs elected had fought and lost in constituencies. The closed list system was seen to have undermined the election result in these scenarios, as it raised questions of legitimacy for regional MSPs in voters’ minds. The Electoral Commission’s 2006 “Poll Position” report on voting in Wales clearly demonstrated that more than half the Welsh population—56.7%, to be exact—opposed the closed list system, which is still in place, and that more than 60% of the electorate preferred to be represented by just one Assembly Member.

--- Later in debate ---

[Mr Harper]

Will the right hon. Gentleman give way?

[Mr Hain]

I would like to make a bit more progress, because although the hon. Gentleman was generous in taking interventions, his contribution lasted 40 minutes. I would prefer to be a bit briefer, and I normally am very generous.

The fact that, nevertheless, Scotland has retained dual candidature, in defiance of Lord Steel’s advice, is no reason for Wales to do the same. The Government simply will not acknowledge the fundamental democratic abuse of dual candidacy, which is that losers become winners, and that voters are second-guessed and contradicted by the system, their choices denied. The second significant measure the Scottish Parliament adopted after Arbuthnott tried to increase the accountability of regional MSPs to the electorate by changing the voting system and introducing an open list for regional candidates—not something this Bill provides—to give some measure of control for Scottish voters. That was done because the Scottish social attitudes survey 2003 found a high degree of opposition to the party control inherent in the list system. Voters in Wales enjoy no such privilege and the Government are not proposing to give it to us.

On the issue of dual candidacy, two different paths were followed: in Scotland it was through greater clarification of the roles of Members and by turning to open lists; and in Wales we felt that the ban was the right solution to dual candidacy abuse. Nearly a decade on from the Government of Wales Act 2006 I feel that we made the right choice, but much more must be done to give regional Assembly Members more accountability to the electorate. On candidacy, this Bill does nothing to further the evolution of Welsh democracy—indeed it puts it into reverse.

Over the past 15 years, the Scottish Parliament and Welsh Assembly have both evolved in different ways to better suit the needs of their individual electorates. As the Government’s proposal stands, we will return to some of the absurd anomalies we saw in 1999 and 2003. As has been mentioned, in Clwyd West in 2003 every one of the three losing party candidates nevertheless won. Let us also consider the following cases from the 1999 elections, when 17 out of the 20 regional Assembly Members elected lost constituency elections. Thus, more than three quarters of the regional AMs did not have a democratic mandate to represent people—voters had not voted for them—and 15 of these 20 had offices in the constituencies they failed to be elected in.

In the Conwy constituency the Lib Dem AM Christine Humphreys came fourth in the popular vote—she had less than 10% of the vote in Conwy—yet still became an AM for the North Wales region. In Wrexham the Plaid Cymru AM Janet Ryder came last in the constituency, with 2,659 votes—the constituency AM had 9,239 votes—and yet still became an AM through the back door. In Ynys Môn the Tory AM Peter Rogers won 6,031 votes, which put him third on the constituency list—the Plaid Cymru AM who won a majority had more than 16,000 votes—yet he still became an AM for the North Wales region. It is not a partisan argument but simply a truth to state that those results are fundamentally undemocratic.

In the 1999 election more than 215,000 Welsh men and women voted in the North Wales region. Were we to look at every individual who ran as a constituency candidate in that election and collate their votes, we would find that Christine Humphreys, Janet Ryder and Peter Rogers polled less than 6% of the total regional vote and yet still became AMs for that very same region. After two Assembly elections where this was a regular occurrence, and with almost half the population saying in 2006 that they did not understand how their electoral system worked, we sought to remedy confusion over how AMs could still get in through the back door. The ban on dual candidature was the right choice then and remains so now. We introduced the ban in 2006 to stop these anomalies and the confusion they produced in voters’ minds, but now the Government are proposing to start this all over again.

In 2006, Victoria Winckler, director of the Bevan Foundation, conducted a survey, which found broad support for the ban on dual candidacy. Her report also highlighted the need for greater education and understanding among the general public. This report qualified the findings of previous research into dual candidacy. It said that none of it had been sufficient to make a substantial case on whether or not the public were for or against it in elections, but that it did discover considerable public disquiet on the issue with broad support in favour of the ban.

[Jonathan Edwards]

If dual candidacy is so objectionable to the right hon. Gentleman’s party, will he explain why, when it was in power in Westminster in 2010, it did not ban it in Scotland or for the Assembly in London?

[Mr Hain]

I have already dealt with that matter, but I will, if I may, correct the hon. Gentleman. It is not objectionable to my party; it is objectionable to voters. That is the point about this, and we are representing the voters’ will.

Perhaps the great irony of the Government’s proposals is that when they released their Green Paper in 2011, they found what was described as a

“small majority of people opposed to the Government’s proposal to lift the ban”,

and yet they still carried on. The Government, who themselves have a small majority, now seek to overturn a small majority. A former Liberal Democrat leader and a Conservative Secretary of State backed my 2006 ban, as did the chairman of the Richard commission. The commission reported in 2004, recommending extra powers for the Assembly, which my 2006 Act delivered. Lord Richard told the Welsh Affairs Committee:

“There is something wrong in a situation in which five people can stand in Clwyd, none of them can be elected, and then they all get into the Assembly. On the face of it that does not make sense. I think a lot of people in Wales find that it does not.”

The eminent Welsh academic, Dr Denis Balsom, said in his evidence to the Richard commission:

“Candidates use the list as an insurance against failing to win a constituency contest. This dual candidacy can also confuse the electorate, who may wish to consciously reject a particular candidate only to find them elected via the list. It should remain a basic democratic right not to elect a particular candidate or to be able to vote a Member out.”

[Ian Lucas (Wrexham) (Lab)]

Does my right hon. Friend agree that the real objection to dual candidacy is that those individuals who are rejected are then let in by the parties through the back door, and not by the electorate?

[Mr Hain]

My hon. Friend expresses my argument well—indeed better in some respects. One motivation for reversing the 2006 ban expressed by Plaid Cymru was the loss of its unquestionably talented Assembly Member, Helen Mary Jones. On 9 January 2006, when I was Secretary of State for Wales and dual candidature was still permitted, Helen Mary Jones put out a press release in which she described herself as the “Llanelli-based Assembly Member”. In it, she complained about money spent on a hospital in Carmarthen instead of one in Llanelli. However, she should really have been supporting both hospitals. As a list Assembly Member for Mid and West Wales, she represented both towns. If she had really been discharging her list Member duties properly, she would not have discriminated between those two towns or their hospitals. Yet of all the parts of the list area which she represented, she targeted the one place where she had been narrowly defeated in 2003, invariably describing herself as the “Llanelli-based Assembly Member”. The 2006 Act stopped her describing herself as that, although in the meantime she had campaigned hard as the list Member and had won the seat back in 2007, only to lose it again in 2011. As the ban had kicked in by then, she no longer remained the list Member. That has made it much harder for her to win the seat back for the next elections in 2016.

Now I come to the pièce de résistance. If this Bill gets enacted unamended, the Plaid Cymru party leader, Leanne Wood, will be able to implement—indeed quite possibly is already implementing—the comprehensive strategy she laid out in a remarkably candid memorandum in August 2003 when she was a list Assembly Member. My hon. Friend the Member for Pontypridd (Owen Smith) has quoted from that document, so I will not do so—[Interruption.] I can if Members are disappointed.

--- Later in debate ---

[Mr Hain]

No wonder Plaid Cymru is such an enthusiastic little helper to the Government on this clause. We should rename the Bill “Leanne’s lifeline”. I will give way.

[Mr Harper]

I have been listening carefully to the right hon. Gentleman’s argument and I do not understand this concept of the “back door”. I might be wrong— I am sure that Opposition Members will tell me if I am—but surely if party candidates are listed on the ballot paper and electors cast a vote in a regional ballot, which is a separate vote, they know the consequences of that vote. If someone on that list is elected based on the second vote that somebody casts, the voter will have known that that could happen. I do not know how the right hon. Gentleman can describe that as someone being elected by the back door.

[Mr Hain]

I realise that the hon. Gentleman is not a member for a Welsh seat, but the truth is that people in Wales feel that people are being elected by the back door when they turn down a particular individual as their constituency Member only to find that they are elected anyway. This description of such an election as “by the back door” seems to me to be valid.

[Mr David Hanson (Delyn) (Lab)]

Will my right hon. Friend give way?

[Mr Hain]

I want to make a little progress, if my right hon. Friend does not mind. I have a series of points to make in conclusion.

A Mrs Jones or Mr Davies living in Porth or Treherbert in the Rhondda constituency should be forewarned by Leanne Wood’s memorandum, which amounted to a charter for abusing their money as taxpayers. I would advise them not to bother to approach for help and to check first whether they fit into her game plan. That plan is not about helping either of them, but about helping her and her political party. She is extremely—some might say recklessly—honest about her real intentions.

In the memorandum, Leanne Wood urged Plaid Cymru Assembly list Members such as herself only to do casework not where it is needed—not where it might help Mrs Jones or Mr Davies—but where it might benefit Plaid Cymru in its target seats, now including the Rhondda. She advised her colleagues to attend civic and other events in the constituency only if they thought there were votes in it. I would say, “Those are your votes, Mrs Jones and Mr Davies. I would check it out first if I were you.” She urged Plaid Cymru Assembly list Members to concentrate tens of thousands of pounds on their local Assembly office budgets in their party’s target seats, such as Rhondda. Leanne Wood’s memorandum of August 2003 was entitled, “What should be the role of a Regional AM?” It made a perfect case for the ban on dual candidature in Wales, as my hon. Friend the Member for Pontypridd made clear by quoting in detail from it.

The Government are shamelessly proceeding to enshrine again in statute, in clause 2, the very practice that this Parliament banned eight years ago to prevent such abuses, of which there had been very many over the years.

[Jessica Morden (Newport East) (Lab)]

My right hon. Friend is making a brilliant and convincing argument against dual candidacy, as always, but does he agree that, as the Electoral Reform Society has said, at the very least changing the system back and forth risks undermining the stability of the electoral system? Should we not just stick with the system that we have?

[Mr Hain]

I completely agree. The change was made after evidence had been assembled for Parliament, and Parliament was convinced by that evidence.

There is a simple question that both supporters of the Bill and critics of this Parliament’s 2006 ban cannot answer. It is this: if candidates cannot persuade voters to vote for them, why should they nevertheless be forced on voters through the back door? The people of Wales are entitled to an answer, even if this Government cannot give it to them by ramming through this highly contentious, undemocratic and thoroughly objectionable clause in a Bill that otherwise, in its broad features, enjoys a fair degree of cross-party consensus.

The fundamental point is that the Government of Wales Act 2006, by introducing the ban, put the voters back in charge. If voters did not want to elect somebody, they did not have to do so. If they reject a candidate, that candidate should not end up representing them. We should keep the voters in charge by rejecting clause 2.

[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Chope. I will not go over many of the issues that my right hon. Friend the Member for Neath (Mr Hain) raised, but he is absolutely right and I shall vote against clause 2 stand part because I believe that the restriction is right. The hon. Member for Forest of Dean (Mr Harper) has been trying to intervene repeatedly to say that people have a choice—they could vote for an individual on the constituency basis but then have some other choice on the list. That is not quite the case. The names are listed in order and the voter might like candidate No. 3 on the list, but they do not have the choice to vote for that person—they vote for a political party, and it is the political party that selects the people at the top of the list. Usually that is either to boost its vote in an area or to get a person in by the back door who has already failed. That is the simple fact of the process before the current restriction came in; it is a back-door one.

amendment of the law

Lord Hain Excerpts

Monday 24th March 2014 Commons Chamber

[Mr Peter Hain (Neath) (Lab)]

I agree with the hon. Member for Cardiff North (Jonathan Evans) over Tata, but the one thing that cannot be said about the economy under this Chancellor is that it has recovered quickly from the shock of the global financial crisis. Total output still has not reached pre-crisis 2008 levels, quite unlike in the USA and Germany, both of which passed their 2008 peak back in 2011. What took them three years to achieve is taking the British economy under this Chancellor six years, and the reason is the savage cuts since 2010, a far tighter squeeze than in the USA or the eurozone. Under Labour, recovery was already well under way in the first half of 2010 when the Chancellor came into office. It was his policies that choked it off and the British people have been paying a heavy price ever since.

Today we have an unsustainable, out-of-balance recovery. The Chancellor acknowledged that neither investment nor exports are high enough. We already knew that higher consumer spending has come out of reduced savings, not out of higher incomes, because real incomes have been stagnating for years. It is a short-term recovery that cannot last. The ex-chair of the Financial Services Authority and ex-director general of the CBI, Adair Turner, said so in January at Davos when he warned:

“We have spent the last few years talking about the need to rebalance the economy away from a focus on property and financial services and towards investment and exports. We are now back to growth without any rebalancing at all…If you chuck enough monetary stimulus at an economy something happens. It is as if we have had a cracking great hangover, had a stiff drink and off we go again.”

A second factor making the situation unsustainable is that UK productivity has been flat for years. This pushes up unit costs and keeps our export prices higher. Our export predicament is dire. On top of that, we are witnessing a housing bubble again, with property prices rocketing in London in particular. In short, nothing fundamental has changed to avoid a rerun of a financial crisis brought on by a debt-financed consumer boom and a Government-backed housing bubble that sooner or later will burst, because bubbles always do burst.

Yes, the economy is recovering faster than forecast last year, but growth is forecast to be slower next year than this. The Chancellor expects the economy to run out of steam almost as soon as it starts to grow again, yet there is plenty of scope for much faster growth, and faster growth would mean less need for spending cuts and a quicker reduction in the Budget deficit.

The austerity programme, which this Budget continues to drive forward is based upon what I call the big deceit of British politics: that Labour “overspending” left the country with the mountainous levels of debt and borrowing which the Tory-Lib Dem Government inherited after the 2010 election. [Interruption.] The idea that the global credit crunch was caused by Labour’s public investment in Britain is risible. [Interruption.] The proposition that by building new hospitals and new schools, and by recruiting tens of thousands of extra nurses, doctors, teachers and police officers in Britain, Labour caused the sub-prime mortgage defaults in the US that ricocheted throughout the world’s financial institutions is preposterous. [Interruption.]

[Robert Flello]

It is amazing to hear the laughter from the Government Benches. Does my right hon. Friend recall, as I do, Conservatives standing up time and again saying there was far too much regulation of the banks and that they needed to reduce it?

[Mr Hain]

Absolutely.

It was not Labour’s public spending that triggered Britain’s or the world’s economic crisis; it was the global inter-dependency of reckless banking that the Conservatives wanted to be less regulated that in 2008 triggered an economic meltdown in Britain and right across the globe. [Interruption.] Labour responded by boosting public spending and borrowing to offset the catastrophic collapse in private sector spending, and the £90 billion spent on bank bail-outs plunged the public sector into record annual deficits, but these were deficits that stopped a shocking slide into a fatal slump and laid the basis for recovery from the biggest shock to hit the world economy in peacetime since the 1930s great depression. [Hon. Members: “Give way.”] If I have time at the end, I will.

Contrary to right-wing free market mantras and Tory-Lib Dem history rewrites, it was the banking crisis that caused debt to rocket, the deficit to rise and borrowing to rise as well. The low yields on UK Government bonds before, during and after the credit crunch under Labour bore eloquent testimony to the fact that the international markets had full confidence in its policies, and that they were not clamouring for the right-wing dogma subsequently visited upon Britain. Indeed, so desperate was the right hon. Member for Witney (Mr Cameron) to identify with Labour’s success on spending, investment, jobs and growth that he pledged to match Labour’s spending plans for three further years in September 2007 up to 2010. [Interruption.] Members on the Government Benches shake their heads, but that is what he did. If we had spent too much—if all the charges made by the Conservatives were true—why on earth would the current Prime Minister have backed our spending plans for three years ahead? It would help the quality of this debate and the quality of assessment of the Chancellor’s Budget if the Conservatives and the Liberal Democrats had the decency to acknowledge that essential fact, including this Prime Minister’s support for our spending programmes, instead of ploughing on regardless, with no end to austerity in sight.

[Mr Redwood]

Why did the new and very expensive and complicated regulators the Labour Government introduced fail to control the banks when people like me were telling them they did not have enough cash for capital?

[Mr Hain]

I agree with the right hon. Gentleman to this extent: we did not regulate the banks well enough or carefully enough, but his party—not necessarily he, but his leadership—was saying that there should be less regulation of the banks at that time, yet now they have the temerity to attack our spending plans when we brought borrowing down. [Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. All other speakers have been heard in silence. The right hon. Gentleman has livened up the debate, but he also ought to be heard.

[Mr Hain]

It is interesting how those on the Government Benches do not like to hear the truth, Madam Deputy Speaker. The level of debt under the Labour Government before the banking crisis was lower than we inherited from the Conservatives in 1997. We brought borrowing down and we brought the deficit down compared with what we inherited, and yes we invested in repairing the desperate state of our public services—people dying on trolleys in hospitals, schools crumbling, the railways decaying. We repaired all of that and then the banking crisis came along and blew it out of the water. There was a failure by every Government right across the world to recognise the seeds of that banking crisis, but it was not caused by Labour overspending, and not caused by Labour high borrowing or high debt, because none of those things was going on prior to the banking crisis. If we had not dealt with the banking crisis in the way that we did, the whole of the economic and banking system in Britain would have collapsed. We need decency and honesty from Government Members and acknowledgement of that central fact.

Spending Review

Lord Hain Excerpts

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

My hon. Friend is right, and in the end this is about choices. I say to all the Labour Members getting ready to ask questions that, given that the Labour leader says that he will take these resource plans as a starting point, if they complain about any cut, they have to suggest what else they would cut. We have made choices as a Government. We have committed to protecting the NHS, committed to schools, committed to the pupil premium—we have done these things because we want a fairer society, and we also believe that investing in infrastructure and growth enhances our country’s economic performance. Those are our choices: if people have an alternative plan, we have not heard of it.

[Mr Peter Hain (Neath) (Lab)]

Why does the Chancellor think he is so right, and Keynes wrong?

[Mr Osborne]

We have drawn on the best economic evidence that the recovery from a banking crisis of the severity that we went through is long and protracted, but we have to de-lever as an economy and try to fix our banking system. That is what I set out at the Mansion House. We also have to have a credible fiscal policy in order to allow monetary policy to be loose. I think that is the best economic approach.