Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 12th October 2010 Commons Chamber

[Mr Hoban]

As my hon. Friend will be aware, the implementation of any policy on quantitative easing is the responsibility of the Bank of England, and it will take into account those factors.

[Rachel Reeves (Leeds West) (Lab)]

Does the Minister welcome the fact that the efforts of the Debt Management Office mean that the average duration of debt in the UK is around 13 years, several years longer than any other country in Europe? It is one of the many reasons why the UK is not in the position of Ireland or Greece.

[Mr Hoban]

The hon. Lady, who follows these matters quite carefully, will reflect that before the election long-term yields on Government debt in the UK were moved in line with those in countries such as Portugal, Greece and Spain. After the election, the margin between UK gilts and the German Bund has narrowed rather than widened, as has been the case with other European bond rates.

--- Later in debate ---

[Mr Osborne]

First, the fall has helped to reduce interest payments, and secondly it has helped many companies during the recovery. It is striking how our market interest rates have fallen since taking the steps that we announced in the Budget. That is not the case in some other countries in Europe that had similar market interest rates to ours at the time of the general election.

[Rachel Reeves (Leeds West) (Lab)]

Does the Chancellor agree that market interest rates were falling before the election? The fall is not due to the Government’s policies—they were falling before.

[Mr Osborne]

I advise the hon. Lady to look at the market interest rates of Spain and the United Kingdom, which were the same at the time of the general election. In Spain, they have hardly fallen at all, but they are 1% lower in the United Kingdom. That is a real boost to businesses.

Budget Resolutions and Economic Situation

Rachel Reeves Excerpts

Thursday 24th June 2010 Commons Chamber

[Chris Huhne]

If VAT is raised right across without the exemptions that we have for food, children’s clothes and books, for example, and without the lower rate on fuel, then it is a regressive tax. It is a standard feature of basic micro-economics that indirect taxes are more regressive than direct taxes, but I ask that Members please look at the IFS analysis, because it seems to me to undermine directly the case that the Opposition are attempting to make.

[Rachel Reeves (Leeds West) (Lab)]

The right hon. Gentleman talks about the IFS numbers on the distributional impact. Does he agree with the following numbers from the IFS? The impact of the measures announced on Tuesday on the incomes of the poorest—the bottom—decile will be minus 2.6%, whereas it will be minus 1.5% for the next two deciles, then minus 1.4%, minus 1.3%, minus 1.1%, minus 0.9%, minus 0.6%, minus 0.6% and minus 0.7%. So the bottom decile will see a reduction in their income of minus 2.6% and the top decile will see a reduction in their income of minus 0.7%. Is that regressive or progressive?

[Chris Huhne]

The hon. Lady clearly did not listen to my earlier answer. When looking at the distributional impact, it is very important, particularly with indirect tax measures, to look at the expenditure effects, not the income effects. The IFS report shows very clearly the enormous distinction between the conventional answer on the distributional impact on income and the answer when we look at the expenditure effects.

The choice for this Government has been clear: either we manage the transition to lower borrowing to sustain the recovery, or we will have those choices yanked from our hands by the markets and we will face force majeure. It is far better to design a fair package, as we have done, than to have an unfair package imposed on us that no one has had the time or thought or energy to design.

No fiscal package responding to a market emergency that I have ever seen has been fair, whatever Opposition Members may say. I spent five years of my pre-political life analysing sovereign risk and sovereign crisis. I was in Seoul before Christmas 1997, in Djakarta at the time of the food riots, and in Bangkok when the authorities struggled with the collapse of the Thai baht, and I never want to see a British Government have to go cap in hand to the International Monetary Fund as those countries did, as Greece is now doing and as the friends of the right hon. Member for Doncaster North had to do in 1976.

Had we run the risk of contagion—of a sharp spike in Government and probably short-term policy interest rates too—the impact on growth would have been severe. The truth is that the course of action that the right hon. Gentleman and his friends recommend—the Micawberish course of hoping that something will turn up—would have put the British economy and British jobs in the international firing line, and no responsible Government would have done that. Frankly, I have enough respect for the intelligence and judgment of the right hon. Gentleman to believe that he would not have adopted that stance if he and his friends had been re-elected.

--- Later in debate ---

[Edward Miliband]

I have enormous respect for the hon. Gentleman, but he will have to do better than that.

[Rachel Reeves]

Can my right hon. Friend confirm that, in addition to what I said earlier about this Budget affecting the top decile by just 0.7% and the bottom decile by 2.6%, Labour’s March Budget had an impact on the top decile of 7% and absolutely no impact at all on the income of the poorest decile? There is a different way of doing a Budget, and that was a progressive Budget.

[Edward Miliband]

My hon. Friend is right, of course. That is the difference between a Labour Budget and a Conservative Budget—

--- Later in debate ---

[Mr Clarke]

I had assumed that the hon. Gentleman had a better sense of humour. It was clear to the whole country that it was a joke, so I do not regard that as being a serious point.

The Government blame the public sector for the recession, but what about the banks? [Interruption.] We must ask that question. My right hon. Friend the Member for Doncaster North (Edward Miliband) dealt at some length with how we have approached that important matter. While the Government have been hammering away at the poorest people in the poorest parts of our country, they have treated the banks with a feather duster. They have hardly responded to the problems that the banks themselves created, and no Member on their Benches can defend that.

[Rachel Reeves]

Does my right hon. Friend agree that it does not seem fair that the welfare bill will be cut by £11 billion, but we are asking the banks to contribute only an extra £2.4 billion?

[Mr Clarke]

Absolutely—that is an excellent point. Indeed, I wish now to compare the Budget’s response to local government, and to people applying for disability living allowance, with the way in which the Government have treated the banks. They have certainly not done so in a way of which my constituents, or the disability and local government organisations that I know of, would approve.

What the Government have done to local government is to cut, cut and cut again. They have offered the public a freeze in council tax but failed to explain that the services that they and the House have imposed upon local authorities cannot possibly be carried out without other services being slashed, including social services and social work for the most needy. That is clearly missing from the thoughts of coalition Members. I invite them to compare that with their approach to the banks, which I was heckled for mentioning.

What about those who seek to live on DLA? We are told that one by one, they are going to be recalled and re-examined. I was a Member of the House in the early 1980s when we had that version of Thatcherism, and I want never again to see men who have worked in the mining industry, and who have to be helped into my surgeries because they can hardly breathe, being cut off from benefit because they are told that they can walk 50 yards. If that is the type of policy that the so-called coalition Government are planning, which I believe it is, they can expect the utmost opposition.

At a time when there is a clear demand for housing, what the Government have done to housing support is simply disgraceful. I say that as somebody who was in local government before coming to the House. Even the Evening Standard had to point out last night that because of the Government’s approach to housing benefit, more poor people would be made homeless. I predict that local councils faced with the financial challenges that that represents will build fewer and fewer social houses, which the Liberal Democrats told us before the election were one of the important issues for them.

Budget Resolutions and Economic Situation

Rachel Reeves Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I have great concerns about what the Government have outlined today. First, international evidence shows that hasty cuts will derail growth. Secondly, by failing to set out a vision for the future, the coalition destroys our chances of rebuilding a balanced economy. Thirdly, the Budget’s measures will hit the poorest in society—those who can least afford the pain—hardest. I fear for my constituents in Leeds West and am worried about how they will fare in the months and years ahead.

On growth, it is clear from the Chancellor’s speech that he has chosen to ignore the harsh lessons of history—from Japan in the 1990s and the USA in the 1930s. Despite his talk of a plan for growth, as a result of today, we face the real prospect of a double-dip recession.

I wholeheartedly agree that the deficit needs to be cut, but the issue is whether it should be cut this year or next year, and the method of making those cuts. The surest way to bring down the deficit is to embed strong and sustainable growth, but we heard nothing about that from the Chancellor today. The Office for Budget Responsibility’s forecasts have revised growth downwards—after those presented only a week ago—by 0.1% this year and 0.3% next year, and an additional 100,000 people are due to go on the dole.

[Kwasi Kwarteng (Spelthorne) (Con)]

What does the hon. Lady think about the sovereign debt crisis in Greece, to which my right hon. Friend the Chancellor referred in his Budget statement?

[Rachel Reeves]

I thank the hon. Gentleman for giving me the opportunity to address that issue. The debt-GDP ratio in Greece is two and half times that of the UK, and the maturity on UK debt is, on average, 13 years, compared with an OECD average of two to three years. In addition, the Greek economy remains in recession, while the UK is beginning to recover from a recession. We cannot take that recovery for granted, but our economy grew by 0.3% in the first quarter of this year, and we are beginning to emerge from recession.

The downgrades from the OBR reflect the fact that the cuts will stall the recovery and throw more people into unemployment. There are two ways to reduce the deficit: strong growth, or wielding the axe. The Chancellor has today chosen the latter, and the result will be, as we have seen from those forecasts, weaker growth, higher unemployment, more business failures, more home repossessions and a less competitive British economy. Instead of a strategy for growth, we have been given a strategy for austerity, cuts and pain for working people—the people whom I have been sent to Parliament to represent.

[Christopher Pincher]

When the Governor of the Bank of England, who was of course Governor when Labour was in power, said that the deficit reduction plan is strong and powerful; when José Manuel Barroso says that fiscal consolidation is necessary; and when Lord Myners, who has made an astonishing but none the less welcome conversion to sanity, says that Governments should spend less than they earn, does the hon. Lady agree with them?

[Rachel Reeves]

I will give way less often if interventions last that long. The hon. Gentleman made a long intervention, but missed a couple of points on which I should like to fill him in. In its statement from South Korea a couple of the weeks ago, the G20, as well as calling for countries to address budget deficits, argued for growth-friendly deficit reduction strategies. Today we did not get that. Another of the hon. Gentleman’s omissions is President Barack Obama’s warning. In a letter ahead of the G20 meeting this weekend, he said that we should

“learn from the consequential mistakes of the past, when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession”.

The hon. Gentleman failed to mention those points, but they are extremely relevant to the debate.

[Stewart Hosie]

The hon. Lady is absolutely right on the early withdrawal of the fiscal stimulus—so does she regret the fact that her Government were one of only two Governments fully to withdraw the fiscal stimulus package in 2010?

[Rachel Reeves]

What I regret is that the current Government withdrew the future jobs fund and the extra 20,000 places that Labour introduced to universities, and cut the regional development agencies, which were doing fantastic work in my region of Yorkshire and Humberside. Those are my regrets.

Frankly, there is no vision from the Chancellor and the Government of the sort of economy they want to emerge from the recession. What sort of society and economy do they want when they have reduced the budget deficit? Labour wants a sectorally and regionally diverse economy that is robust enough to face future shocks. None of that is on the Chancellor’s or the Government’s radar—let alone within their grasp—because they are cutting the very measures that would ensure not only growth in the short term but future economic security.

The new Government are portraying their cuts as eliminating waste, when in fact they are risking our future economic prosperity. Eliminating the future jobs fund, which has got almost 200,000 people back to work through the recession, axing the loan to Sheffield Forgemasters—an absolute disgrace that has cost jobs and economic growth in my region—cutting funding to universities, and cutting hospitals, transport and school building programmes across the country, including in my city of Leeds, is certainly not my idea of eliminating waste. Rather, it is cutting the front-line services on which my constituents rely.

[Jim McGovern]

My hon. Friend mentioned her regrets and went on to describe some of the things that are happening in her constituency, but does she agree that the Government’s refusal in today’s Budget to honour the commitment to tax breaks for the computer games industry will have a detrimental effect in my constituency?

[Rachel Reeves]

My hon. Friend is absolutely right, and we could think of countless examples of things that the Government have done today that will risk the future economic prosperity of this country.

Worse than that, ordinary people—those least responsible for the recession—will be hardest hit. In Leeds West, average earnings are £16,000 and unemployment stands at 8.7%. Increasing VAT, reducing access to free school meals, abolishing the health in pregnancy grant, freezing child benefit and cutting tax credits will hurt my constituents. The people who bear no responsibility for the financial crisis and recession will be hardest hit. An extra £13 billion is to be paid in VAT, but there will be only £2 billion extra from the bankers. Is that fair? Is that the way to bring down a budget if we are “all in this together”? I think not. Asking those who already struggle to make ends meet, such as those in Leeds West, to make the same sacrifices as, or more than, those at the top is plain unfair and socially divisive.

I began by urging the Government not to forget the lessons from Japan in the 1990s and the United States in the 1930s. However, I am filled with fear that they want to learn a lesson from Canada, because we are in a totally different position from that of Canada when it approached its fiscal consolidation. At that time, Canada was a partner in the newly formed North American Free Trade Agreement, and was experiencing strong demand for its exports. It was also able to loosen monetary policy, which was integral to getting its economy back on track. Given that UK interest rates are at 0.5%, that rates will be low in the long term, and that quantitative easing has already been undertaken, it is pretty much impossible to see how we can loosen monetary policy further—that is simply not at our discretion. I urge the Government not to manipulate the Canadian experience to justify today’s deep cuts.

I do not dispute that we need a realistic and credible plan for reducing the deficit—[Hon. Members: “Hear, Hear!”] In response to those heckles, as far as I am aware, it is the Government’s responsibility to come up with the plans, but without a credible plan for growth, we risk a double-dip recession, or a British economy that splutters along in the slow lane of the global economic recovery.

The Government are trying to convince the public that there is only one way that Britain will bring down the deficit—pursuing hasty and unjust spending cuts—but that is simply not true. They are using the budget deficit as a cloak for fulfilling their overriding ideological desire for a smaller state. They are set on achieving that by doing the economy down—as the hon. Member for Spelthorne (Kwasi Kwarteng) did when he made the comparison with Greece, which was the most misleading comparison he could have made—and by panicking the public into thinking that there is no other option.

However, there is another option. The surest way to reduce the budget deficit is to ensure strong and sustainable growth and a rebalanced economy. Yes, taxes need to increase and spending to decrease, but not at the expense of the economic future of this country or of a diverse, strong regional and national economy; and not in a way that will plunge more families and children, who played absolutely no role in causing this recession, into poverty, unemployment and despair.

Financial Services Regulation

Rachel Reeves Excerpts

Wednesday 16th June 2010 Commons Chamber

[Mr Osborne]

To be fair to the FSA, it has been rather candid about the mistakes that were made when the shadow Chancellor was the Chancellor and when the former Prime Minister was the Chancellor. We have to learn from those mistakes. As I have told the House, we will set out the details of the institutional arrangements in a parliamentary statement tomorrow.

[Rachel Reeves (Leeds West) (Lab)]

The Chancellor talks about breaking up the retail and investment banks, but the immediate challenge for the Government is the future of the nationalised banks. Will he consider turning the failed banks into mutuals that focus on long-term returns and not on short-term profits?

[Mr Osborne]

We need to take some time before coming to decisions on how to dispose of the bank shares that we own in the Royal Bank of Scotland and Lloyds, and the banks we own, such as Northern Rock, not least because at the moment the British taxpayer would make a substantial loss on many of those share purchases. However, we are prepared to consider lots of options. Sir John Vickers’ commission is going to look at competition in the banking industry. It has become incredibly consolidated in the past couple of years and that is not necessarily the best thing for bank customers, as many of us will know from representing businesses that cannot get access to credit. It is sensible to look at what Sir John Vickers and his commission have to say about this.

Office for Budget Responsibility

Rachel Reeves Excerpts

Monday 14th June 2010 Commons Chamber

[Mr Osborne]

To be frank, my hon. Friend’s question is one that he needs to address to the shadow Chancellor when there is an opportunity.

[Rachel Reeves (Leeds West) (Lab)]

I welcome the establishment of the Office for Budget Responsibility and the increased transparency that it brings. However, the point that today’s document makes most clearly is that the economic recovery is still fragile. The Chancellor makes interesting points about the structural deficit, but does he agree that the structural deficit depends also on the level of economic growth? What are he and his Government doing to lift the economic growth rate, when there is so little about, given that the future jobs fund, the regional development agencies, and support for industry and universities are all being scrapped?

[Mr Osborne]

We are providing support to the economy, first, by providing a transparent account that commands international confidence, and secondly, by committing to a clear plan to reduce the budget deficit and taking in-year measures that have commanded international confidence. That has led to a reduction in market interest rates for this country and given enormous support to the economy.

The final point that I would make to the hon. Lady is this. Let us not forget the situation that we inherited: the largest budget deficit in the developed world; rising unemployment; industry that had been brought to its knees; business investment that had collapsed. That is the situation that we are trying to recover from.

Economic Affairs and Work and Pensions

Rachel Reeves Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Darling]

No, I do not agree with that. I think the hon. Gentleman will find that an awful lot of things that went wrong in 2007 were a result of what went wrong in the banking system, not just here but in other parts of the world as well.

[Rachel Reeves (Leeds West) (Lab)]

Does the shadow Chancellor agree with this statement by the Governor of the Bank of England:

“I don’t think you can compare the UK with Greece. There are big differences”?

I suggest that not the least of the differences between our countries is that our debt-to-GDP ratio is about half that of Greece.

[Mr Darling]

The Governor was making a very fair point, as he does on many occasions. It is interesting that even in the past couple of days Government members—the Prime Minister yesterday, and one or two of his ministerial colleagues—are rowing back from direct comparisons with Greece because that may have been very convenient to them in opposition, but it might not be such a good idea now that they hold office.

Our economy is experiencing growth at present, and that is because of the action we took over the past couple of years. I do not intend, as the Chancellor said, to fight the last general election again or to go through everything that happened over the last two or three years—that is, perhaps, for another occasion—but I do say this about the action we took. The fiscal stimulus we put in place—the VAT reduction; the decision to bring forward capital spending; the measures we took to protect people’s jobs and ensure that if people were out of work for a short period we could get them back into work as quickly as possible; the time to pay scheme, which is still helping hundreds of thousands of businesses throughout the country; the car scrappage scheme; and the action we took internationally—have all come together to make sure we came through this recession. Interestingly, although the predominant position of the financial services industry in this country meant that it took us longer to come through into recovery than it took some other countries, Britain has had two quarters of growth whereas other countries, particularly those in continental Europe, have seen their growth slip back and, in some cases, they have slipped into recession. What that tells me is that had the previous Government not taken the action that they did over the past couple of years we would not now be in a position to say, “Yes, our economy is growing.” Equally, our action has meant that although our borrowing is still very high and needs to come down, it is coming down faster than many people believed, even a few months ago.

--- Later in debate ---

[Rachel Reeves (Leeds West) (Lab)]

I would like to thank you, Mr Deputy Speaker, for giving me this opportunity to make my maiden speech. It is a pleasure to follow the hon. Member for Rugby (Mark Pawsey) and other new Members of this House, who have done their constituencies proud today.

It is a huge privilege to have been elected as the Member of Parliament for Leeds West and to succeed John Battle, who represented us here for 23 years. John’s work for Leeds West touched the lives of so many people: fighting for, and getting, compensation for the victims of asbestos poisoning in Armley; supporting the Kirkstall festival in the grounds of our beautiful 12th-century abbey; and working with West Leeds debt forum and Bramley Credit Union to drive loan sharks out of our community. It is those, and John’s many other achievements—I have mentioned only a handful—that are his legacy.

At a constituency surgery recently, a lady took my hand and said that as long as I was half as good as John Battle, she would be happy. I later received a letter from a constituent who asked that I only be a quarter as good. I hope to exceed both their expectations, but I know that in John Battle I have a fantastic role model and a very tough act to follow. I will fight tirelessly for my constituents to be the champion for local people that John was before me.

Most of all, I will fight for jobs, growth and prosperity—the subject of our debate today. Leeds has a proud economic heritage. Leeds West was built on engineering and on textiles. From my home in Hawksworth Wood, people used to be able to hear the hum of the Kirkstall Forge Engineering plant at work. The forge, originally set up by the monks of Kirkstall abbey, continued in operation until 2002. The industrial revolution transformed Leeds, as well. The Leeds-Liverpool canal brought to our city wool spun at the mills that still stand tall in Kirkstall, Armley, Bramley and Rodley. Of course, Leeds was the birthplace of Montague Burton and of Marks and Spencer—a proud industrial, and retail, heritage. The economy was transformed once again under the previous Labour Government. The city centre is now packed with new businesses, shops, museums and galleries.

More than all that, however, under Labour every single person—most of all, every young person—has been given opportunities to recognise and fulfil their potential. It was my own experience of education under the Conservative Governments of the 1980s and 1990s that motivated me to get involved in politics. When I was at school, there were never enough textbooks to go round. There was no money for new school buildings, so our sixth form was a prefab hut in the playground and our library was turned into a classroom. It is therefore with immense pride that I tell the House that my old secondary school is now a specialist college with two new, modern buildings.

Such investment has been seen up and down the country, in all our constituencies. In Leeds West, every single primary school has been rebuilt or refurbished since 1997. In September last year, the new Leeds West academy and Swallow Hill community college opened their doors—proud achievements, transforming lives and communities.

In his maiden speech in 1987, John Battle spoke of his visit to the Bramley jobcentre. Back then, there were just six jobs on offer in the window, with wages ranging from £2 to £2.28 an hour. No parents can bring up a family on £2—not in 1987 and not on today’s equivalent—and no one should be made to work all hours of the day and night and yet remain in poverty. It was that belief and sense of justice and fairness that brought the national minimum wage—one of Labour’s proudest achievements—to the statute book.

Throughout the recession, Labour has not abandoned its commitment to social justice. The future jobs fund helped more than 8,000 young people in Yorkshire to get back to work during these challenging economic times and, under Labour, a generation of young people were not condemned to the scrapheap as happened in the recessions of the 1980s and 1990s. However, the economic recovery is fragile and cannot be taken for granted. We need the passion, enterprise and determination that built the Leeds economy of the past to build the economy of the future. For that to happen, the people of Leeds will look to the Government to be on their side and build a future for Leeds based on high skills, new technologies and new industries, with better transport links—including high-speed rail—and a banking sector that supports industry and small businesses, rather than just being out to make a quick profit. The new Government are right to make the budget deficit a priority, but that must not be at the expense of the recovery that Labour has secured.

I started my career as an economist at the Bank of England and focused on Japan at a time when its economy had been in and out of recession for a decade. Today, debt in Japan is 190% of gross domestic product, which is 2.5 times the level in the UK. Japan’s debt is so high precisely because its Government did not take swift action to ensure that its economy emerged from recession with strong growth. I urge this Government to learn those lessons from history, because the very worst thing for Leeds West and for Britain would be another recession caused by hasty and unfair spending cuts. I fear that the Government are making those mistakes and putting the recovery at risk. The Chancellor of the Exchequer is reducing industrial support for businesses and universities, watering down the regional development agencies and abolishing the support that Labour introduced to get young people back to work. If the Government really are serious about ensuring the recovery, they must put in place policies for jobs and growth.

We know that the causes of this crisis are global, but the pathways out must be local and regional, so I will fight for Leeds West with determination, and I will do so in a responsible way. It would not be responsible or sensible to oppose every spending cut or tax increase. I will encourage this Government when they get it right and acknowledge that, but when they get it wrong and put the economic future of my constituents and the country at risk, I will hold them to account. John Battle showed us that politics can make a difference and that the right values and policies can transform people’s lives. Today more than ever, we need the ambition for justice, equality and fairness that drove John. It is a real honour to serve as the Member of Parliament for Leeds West and, in doing my duty to my constituents, I will act with the hopes, dreams and aspirations of Leeds West as my guide.