Jobs and Growth

Lord Watts Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ed Balls]

I will make some progress before giving way again. A year ago we warned that a global hurricane was brewing and that it was exactly the wrong time to rip out the foundations of the house here in Britain.

[Mr Dave Watts (St Helens North) (Lab)]

Will the shadow Chancellor name one country that has managed to get out of recession without growth?

[Ed Balls]

By definition, it is impossible to get out of recession without growth, which is why in the past nine months we have seen no growth at all. We were told we were out of the danger zone, but we do not hear that very often now.

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[The Chancellor of the Exchequer (Mr George Osborne)]

I welcome this opportunity to discuss the very difficult economic situation that this country and the rest of the western world face at the moment. After that vaudeville act, I am trying to remember whether the shadow Chancellor actually set out the five-point plan. He did not actually go through it, so we will go through it for him.

Of course, the concern of everyone here is to see growth, support jobs and get Britain through this debt storm; that is what we are talking about and working on. As this is an Opposition day, however, before I turn to what the Government are doing it is worth considering what the Opposition propose, and what the shadow Chancellor did and did not say. We should consider what his political friends, as well as his political opponents, are saying about him.

The right hon. Gentleman dismissed the intervention by one of my hon. Friends about Charles Clarke—[Interruption.] Well, there you go. It was not picked up by the microphones, but the shadow Chancellor just dismissively said, “Charles Clarke!” The Opposition dismiss everyone with whom they served in government. They boo their ex-Prime Ministers, they dismiss their ex-Ministers. Here is what the man who was the Labour Home Secretary said, not weeks ago but yesterday:

“I think the Labour conference failed to come across strongly with an alternative to what the Government is doing. I think the economic proposition that Labour puts at the moment is unconvincing…we are simply dismissed by most people thinking about the most central question facing the country today, which is the economy.”

That is the verdict not of the Conservative party, the Liberal Democrats or anyone else but of former members of the Labour Cabinet.

If we want to know why the shadow Chancellor is failing to convince the country, let alone his own party, of why he has not come forward with a convincing alternative, I suggest that we focus on three things that were not in his speech. I will cover each in turn. First, there was absolutely no plan to deal with the deficit. There was a not a single suggestion of how public expenditure could be saved. Let us remember what he said—

[Mr Dave Watts (St Helens North) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will in a moment, because perhaps the hon. Gentleman can respond to this point.

The shadow Chancellor said, when we debated the matter in August, that he would set out

“a tough, medium-term plan to get our deficit down”.—[Official Report, 11 August 2011; Vol. 531, c. 1110.]

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[Mr Osborne]

I will take the hon. Gentleman’s intervention in a second.

Last week, the Opposition tabled an amendment to the Welfare Reform Bill that would have cost this country £11 billion. That one amendment on one day in this House of Commons shows how completely incredible they are.

[Mr Watts]

The IMF is changing its policy and calling for a plan B, as is business, the general public and everybody else. When will the Chancellor introduce a policy that will deliver growth?

[Mr Osborne]

The policies that we have set out deliver the low interest rates that are essential for economic growth.

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[Mr Osborne]

My hon. Friend is absolutely right. The previous Chancellor’s memoirs reveal the very divisive role that the shadow Chancellor played in stopping the previous Labour Government coming up with a coherent economic policy and a credible economic plan, and even in stopping Nos. 10 and 11 talking to each other.

[Mr Watts]

Will the Chancellor tell the House what level of growth he inherited and what it is now?

[Mr Osborne]

I shall tell the hon. Gentleman what I inherited as Chancellor and what this country inherited from the previous Government: we inherited the second deepest recession in the entire world. The hon. Gentleman talks about GDP, but we had the biggest fall in GDP of any country in the world with the sole exception of Japan.

Amendment of the Law

Lord Watts Excerpts

Thursday 24th March 2011 Commons Chamber

[Ed Balls]

I accept my hon. Friend’s point. I was tempted earlier to go down that road, because the fact is that in 2006, 2007 and 2008, the credit rating agencies entirely failed to spot the financial crisis in the first place. The Conservative party and the Liberal Democrats are keen to quote credit agencies when they support their case, but not when they do not support their case. The truth is that the credit agencies failed in the crisis, and quoting them at all is very risky indeed.

As I said, the Chancellor should have adopted our plan for deficit reduction, growth and jobs. He also ought to have adopted our plan to repeat the bank bonus tax for a second year, and used it to give immediate help to young people and jobs, rather than cancelling—in fact abolishing—the future jobs fund. As I have also argued, he should have cut VAT on fuel. That would have been a fairer and more substantial approach. However, the fact is that this year, as a result of the Chancellor’s tax decisions in the Budget, fuel tax will not fall; it will rise by 2p per litre. That is the reality.

The Chancellor should have reversed the VAT rise. That was a big mistake. Two years ago, when we proposed a cut in VAT, which got growth moving and unemployment down, he said, “People won’t notice the VAT cuts.” I am sure that he did not notice them himself, and he probably thinks that people will not notice the VAT rise either. The fact is, however, that with consumer confidence and growth down, and unemployment up, people are noticing what is happening and what he is doing. That is why they are so worried.

[Mr Dave Watts (St Helens North) (Lab)]

Does my right hon. Friend agree that the Government are yet to spell out how they will ensure that the increases for fuel companies are not passed on to motorists?

[Ed Balls]

There has been some confusion on this over the past 24 hours. We know from the OBR that it was told of the 1p cut in fuel duty so late that it could not even get it into its economic forecast. The Chancellor realised at the weekend that he was behind the curve, that he was not setting the agenda, that living standards were a rising issue and that Labour was making the case for fuel tax cuts, so he jumped in late with his 1p cut, but he did not have the courage to reverse his 3p rise. That is the reality. Had the Chancellor done things properly—I can give him some advice on this, because I know how to do things properly on North sea oil tax—he would have consulted the oil companies in plenty of time, explained what was happening, made the case, got their agreement, and then announced the policy in the Budget. I think that many of the oil companies did not find out about it until it was announced in the Budget. That was the problem.

Yesterday afternoon the Chief Secretary to the Treasury—as always, he is not here—was on a television programme about the Budget. He was asked, “How will you stop the oil companies simply passing on the cost in consumer prices?” He said that he did not know, but that he would monitor the oil companies closely. That was the problem. The Government did not do the work, and this was cobbled together at the last minute. That is why it has caused so much confusion and consternation in the past 24 hours. He needed a headline and a flourish to his speech, but he did not want to announce that they were cutting the winter fuel allowance—an announcement we would never have had at the end of a Labour Budget—so instead he announced a cobbled-together, last-minute 1p cut in petrol tax.

The Chancellor is not listening.

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[Vince Cable]

For six of those 10 years, we were dealing with an artificial boom based on a property bubble, an overweight banking system and, as the shadow Chancellor has acknowledged, gross levels of personal debt. That was why there was rapid growth in the early part of that period. However, if we look at that period as a whole, including the last period of Labour Government, we see a decline in per capita income that was unprecedented even in 20th-century history. That is the record that we are dealing with.

Let me deal with the shadow Chancellor’s pessimism about employment. We are all rightly concerned about unemployment—we have to be—but let us remember that last year growth was 1.3%, which is lower than the projected growth for the coming year. In that time, there were 428,000 new private sector jobs—300,000 were in the second half of last year—which by a long way more than offset the 132,000 job losses in the public sector, many of which, incidentally, were a result of the cuts that the last Government were starting to introduce. Our responsibility—this was the purpose of the Budget—was to ensure that we have sufficient private sector confidence so that companies hire people and invest.

[Mr Watts]

If the economy delivers lower growth, as is likely, and if unemployment continues to increase, does the right hon. Gentleman believe that the Government need to adopt a plan B?

[Vince Cable]

We are sticking very firmly with plan A, because plan A is right. The hon. Gentleman will know that flexibility is built into economic management, primarily through monetary policy, and that is the mix that we will continue.

The shadow Chancellor is right. There is of course concern about a squeeze on people’s living standards, and we are concerned about that no less than he is. The Chancellor has tried to alleviate the problem through action on fuel duty and by lifting the income tax threshold. I would like to spend a few moments looking at the two proposals that the shadow Chancellor has made—he has repeated them today—to deal with the problem. The first proposal turned out to be illegal under European Union law. Like me, he is a good European—we would both like to observe European Union law—and to change that law would have taken roughly five years, which will not provide much relief.

After the fiasco of the shadow Chancellor’s “VAT relief on petrol” idea, his other big idea, which he elaborated on today, was to finance jobs through the tax on bank bonuses. I remind him that he and I have some form on this issue. When the last Government were in power, I was critical of the idea of taxing bank bonuses as I did not think it would work. It is to the credit of the former Chancellor that, through his ingenuity, he made it work. In the year in which the measure operated, he raised £2.5 billion—not the £3.5 billion that is often cited, because that takes no account of the offset in corporation tax. Because of his skill in making the bonus tax work, we have to listen to his advice when he says:

“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and…find all sorts of imaginative ways of avoiding it in…future”.

He has counselled very strongly against a repeat of the bonus tax. He was—to use the word—wise.

There is another reason why I am surprised that the shadow Chancellor has returned to the bonus tax issue. He may remember that back in 2006, when he was the City Minister, a big debate opened in the Labour party when Bob Diamond was having one of his early years of extremely generous bonuses. The deputy leader of the Labour party declared “war” on “fat City bonuses”. She was promptly slapped down by the then City Minister, who reminded us that such pay-outs were good for tax revenues and for job creation. In that particular Labour party debate, I was very much on the side of the deputy leader.

If the previous Government are serious about taxing banks, why did they allow a situation to arise in which only two of the 15 major banks had in place an agreement to stop large-scale tax avoidance? We have now stopped it. Every single bank is now covered by the HMRC code on tax avoidance. Additionally, we have put in place the levy on banks’ balance sheets, raising £10 billion, which is four times as much as the one-off bonus tax would have raised.

Autumn Forecast

Lord Watts Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

My hon. Friend makes an extremely good point. What is happening here is a rebalancing of the economy. I hear the shadow Chancellor muttering away about what he calls slow growth, but according to the European Commission forecasts today our growth is more rapid than that of Germany, France, the United States of America or Japan, as well as than the EU average and the eurozone average. I am not sure what his proposals are to increase that growth rate but if he has some, now is the time to produce them.

[Mr Dave Watts (St Helens North) (Lab)]

Is it not the case that most of the public sector cuts will take place in the north and that any jobs that are created—there are not likely to be many—will be in the south? Is not the policy unbalanced?

[Mr Osborne]

In the last decade, under the Government of which the hon. Gentleman was a member, for every 10 jobs created in the south-east only one was created in the midlands and the north. That is the situation that we have inherited and the economic model that we have to change. It is precisely because we want to see exports and investment increase that we are aiming for a more geographically balanced model of economic growth. Announcements such as the one we have made today on the investments by Glaxo will help that, as will the first-time-ever tax cut for new employees that is specifically directed at regions outside the south-east.

Equitable Life (Payments) Bill

Lord Watts Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

My right hon. Friend makes an important point. There are two decisions to be taken. One is on the loss figure and the other is on the amount of compensation that the taxpayer can afford to pay. It is right that those decisions are made in the context of the spending review. That decision will be announced on 20 October.

[Mr Dave Watts (St Helens North) (Lab)]

Is not the point made by his right hon. and hon. Friends this: when on the Government Benches we accepted the recommendations in principle—[Laughter.] Both the Liberals and the Tories in opposition gave policyholders the impression that they would be far more generous. Are they not now going back on their word which they gave before the general election?

[Mr Hoban]

I should not have given way to the hon. Gentleman. He has identified the problem. The previous Government could have dealt with the matter, but it is left to the present Government. We have to sort out not just this mess, but the mess that Labour left behind in the state of the public finances. That is the problem that we have to face in dealing with the Equitable Life issue.

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[Stephen Timms]

I think I am right in saying that the hon. Gentleman was one of those who signed the pledge. He will now need to work extremely hard to persuade his hon. Friends on the Front Bench to deliver what he and so many of his hon. Friends have signed up to.

[Mr Watts]

Does my right hon. Friend agree that the Bill is a smokescreen designed to hide a U-turn, and that every Tory and Liberal MP pledged before the election to do something that they are obviously not going to do?

[Stephen Timms]

I am afraid that my hon. Friend is absolutely right. We got some process today, and that is it.