Policy for Growth
Debate between Andrew Bridgen and Kelvin Hopkins
Kelvin Hopkins (Luton North) (Lab)
It is a pleasure to follow the hon. Member for North West Leicestershire (Andrew Bridgen), although I think we have very little in common politically. My politics are almost identical to those of his predecessor, the great David Taylor, a fine parliamentarian and a true socialist.
This debate is essentially about growth, but the Government cuts strategy will have the opposite effect. It is acknowledged that the cuts will drive up unemployment by something like 1 million, but there is speculation that that could go up to 1.5 million, which would mean a total unemployment level of something like 4 million. That will mean a massive loss of confidence for consumers, lenders and corporations as we plunge into depression, and years—possibly decades—of deflation. That has been described as the Japanisation of the economy, which is defined as the
“deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash.”
That is what we face.
My views are perhaps best expressed by Paul Krugman, the Nobel prize-winning economist, who said that the Government’s plan for the economy
“boldly goes in exactly the wrong direction”
and that it
“appears to come straight from the desk of Andrew Mellon, the US Treasury secretary who told President Hoover to fight the Great Depression by liquidating the farmers, liquidating the workers, and driving down wages.”
Krugman further observes that
“the Government is using the financial crisis of 2008 as cover for advancing an ideological programme for downsizing the welfare state and that its plan has been sold to the public with an unprecedented and unwarranted degree of fear-mongering”.
I absolutely agree with that. He might not be to the taste of Government Members, but a Conservative Member of the upper House, Lord Skidelsky, says that the Chancellor of the Exchequer’s fiscal contraction will lead to a fall in growth. I will leave that with them.
There are historical precedents. In the 1920s, we had the Geddes axe, a massive programme of cuts that saw the economy shrink in 1920-21 and slow growth throughout the 1920s. Government debt actually increased during that time from 135% of GDP in 1919 to 180% of GDP in 1923. By 1929, Government debt was still higher than in 1919, immediately after the first world war.
Subsequently in 1931, we had the Snowden cuts, a shameful period when our former Labour leaders brought about a split in the party. I am pleased to say that today’s Labour party grew out of the opposition to those cuts. The national Government—a coalition Government that was essentially Tory—took us off the gold standard. Snowden said afterwards said that no one told us we could do that. They recovered only by devaluing, which has happened time and again. Even then, there was relatively feeble growth through the 1930s. Not until the massive expansion in public expenditure during the war did the economy begin to recover. After 1945, there was a period of full employment for at least 25 years—unemployment was half a million or less—and Government debt fell from about 250% of GDP to 50% of GDP. That was a period of high Government spending, and it saw the development of the welfare state and the national health service, among other things.
I commend the hon. Member for Brighton, Pavilion (Caroline Lucas), who is no longer in the Chamber, for what she said about growth. There are enormous areas in which we could invest additional spending now to reduce unemployment and, in effect, the deficit. I suggest that we have an enormous programme of green growth and targeted investment in construction. We could build energy-efficient buildings, insulate every building in the land, and put local energy generation into every site. We could have heavy investment in infrastructure, especially railways and rail freight, and in areas that are labour intensive. Of course, one of the most labour-intensive areas is the public services, which the Government propose to cut. I suggest that we should invest more in the public services and soak up unemployment, which would have beneficial effects in every way, including bringing down the deficit. The environment needs enormous amounts of investment to improve it, and we could also invest in energy—solar, geothermal, wind, wave and tidal.
Andrew Bridgen
Where would the money come from? Which bit of “There’s no money left” is the hon. Gentleman failing to understand?