Finance (No. 3) Bill

Debate between Alison McGovern and Stephen Williams

Tuesday 5th July 2011 Commons Chamber

[Stephen Williams]

I am quite proud to call myself a free-market liberal, but just to make it clear and to differentiate myself from the right hon. Member for Haltemprice and Howden (Mr Davis), who was mentioned earlier, I am also a social liberal. I wonder what label the hon. Lady would apply to herself. Is she a socialist, a democratic socialist or perhaps a social democrat?

[Alison McGovern]

That is probably the easiest intervention that I will ever get. In so far as I believe in the needs of society above the needs of capital, I am a socialist. However, as a socialist, I think that it is important to consider how the economy actually works, because unless we understand the functioning of the economy and what makes our society work well, we will not be able to live up to the needs of society or the demands of our fellow people. As my hon. Friend the Member for Coventry North West (Mr Robinson) mentioned earlier, something has gone wrong when we see such large bonuses and when a small group of people in the City of London can arrange extremely high salaries for themselves.

However, this is not just a market imbalance; it is a power imbalance too. Something is going on that enables a small group of people to argue for a much higher salary than anyone else in society. As someone who cares about how the economy works, I call that market failure. Something is going on, and the situation needs to be questioned, thought through and rebalanced. That needs Government intervention. There could be an insider-outsider problem, in which some people are outside the small group who are able to arrange bonuses for themselves in this way and use their position as insiders to argue powerfully for the maintenance of their position, while others remain unable to enter the market. That is what makes me think that Government action is important in this regard.

My hon. Friend the Member for Nottingham East (Chris Leslie) said that there was also a failure of transparency. Markets work well only in conditions of perfect information, but we do not have perfect information, and we have seen the lengths to which some people have gone in order to prevent transparency over pay and bonuses. The case for Government action on bonuses has been well made today by other hon. Members. I would argue that that, too, is politically uncontroversial. In fact, the Secretary of State for Business, Innovation and Skills told the BBC earlier this year that the coalition Government were “fully signed up” to “robust action” on curbing bonuses. Well, that is great. Our amendment should therefore be pretty uncontroversial, and I hope that hon. Members on both sides of the House will support the principle of what we are trying to do.

My worry is that the Government have just not done enough. They have straightforwardly not lived up to the public’s expectations on bankers’ bonuses. I am also worried that the corporation tax cut that they have introduced will effectively hand money back to the profitable banks, and that not enough action is being taken to rebalance our economy. I could talk for many hours about manufacturing and the fact that the financial service sector should serve the productive economy, rather than the other way round, but my hon. Friends have already done that subject justice, so I will not detain the House further on that.

Budget Responsibility and National Audit Bill [Lords]

Debate between Alison McGovern and Stephen Williams

Monday 14th February 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I guess that you, Mr Deputy Speaker, and many hon. Members have a collection of fridge magnets. I have one back home in Bristol that I acquired on a visit last summer to Hughenden manor. Of course, Disraeli, who lived there, is a rich vein of quotes, and perhaps one of his most famous is that there are “lies, damned lies and statistics”, which is what this debate is all about. Statistics are never more controversial than in economics. There was quite a controversy surrounding the last quarterly growth figures—I will make no jokes about snow—but in forecasts and retrospective reporting, there are random factors, and such reports are often revised.

Forecasting, of course, is even more contentious than retrospective reporting on economic events. I am sure that all Chancellors have at least been tempted to inject political factors into what the hon. Member for Wirral South (Alison McGovern) called the “dismal science” of economics. Whether economics is a science at all is debatable, but it is certainly inexact as a social science, and very heavily influenced by politics. In fact, it was traditionally known as “political economy”.

In all Budgets and autumn statements, Chancellors forecast tax yields and outlined the effect of their policies on employment and unemployment. They said who would benefit and described the impact of their policies on the fiscal balance and debt. As a chartered tax consultant and in the last six years as an MP, I watched a decade of Budgets by the former Prime Minister and Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), whose first act as Chancellor was to set up the independence of the Bank of England, to which many hon. Members have referred. The implementation of a Liberal Democrat manifesto commitment 13 years before we got around to joining the Government was welcome, but after 1997, the former Chancellor made up his own rules as he went along on everything other than monetary policy. The golden rule has been mentioned several times, but his best friend, Prudence, has understandably not been mentioned by Opposition Members, because as we all remember, in all his Budgets and forecasts, everything was rosy. The Chancellor always confounded his critics and said, “Everyone else is wrong. Lo and behold—what a surprise! —I have a marvellous thing to announce.” What happened? The 2008 crash happened.

[Alison McGovern]

On that very note, which was the more prudent: putting the country into a situation in which people could not withdraw cash from the banks or recapitalising the banks, as happened?

[Stephen Williams]

I was talking about events prior to the crash, rather than the policy response to the crash itself, which was in any case initially rather timid and slow. My right hon. Friend the Member for Twickenham (Vince Cable) repeatedly urged the Chancellor to nationalise Northern Rock, which was the first symptom of the crisis, but those urges were resisted for quite some time.