The Economy

Andrew Turner Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr Edward Leigh (Gainsborough) (Con)]

The hon. Member for Birmingham, Hall Green (Mr Godsiff) suggests that RBS should be made into a national investment bank and that it would then be our saviour. I wonder whether he watched a programme on BBC2 yesterday, which relayed the entire history of how it cost the nation £20 billion. I am not sure it is an entirely good model, therefore.

First, I want to say a few words about what is happening in Europe this week. An express train is coming in our direction in the shape of the putative agreement between the Chancellor of Germany and the President of France. The shadow Chancellor said we should learn the lessons of history. Well, I have been reading about the congress of Vienna, and it is extraordinary how history repeats itself. Our whole national policy in those days—and for 300 years—was to prevent an agglomeration of power on the continent. Indeed, Napoleon created the continental system precisely to exclude us from the continent. That is why we fought so many wars over the centuries.

We are now faced with a worrying situation. If the eurozone creates fiscal and monetary union, we will, of course, voluntarily exclude ourselves from that. However, although we may exclude ourselves from the euro, because of qualified majority voting the eurozone countries will have not just influence but enormous power over our financial institutions. We should be extremely worried about that. Over the next few days the Prime Minister must ensure that we have real protection from what will be going on.

There has been much comment about the EU financial transaction tax. We may be able to refuse to implement it, or be given an opt-out. I certainly hope that that is the case, because the City of London is the global derivatives trading centre. Astonishingly, it accounts for 45% of all global trades in interest-rate derivatives, and this tax could cost us £26 billion. Vague reassurances are not enough.

The ex-head of the Financial Services Authority has recently said that between 80% and 90% of our prudential rule book originates from Europe. In 2010-11, the FSA has listed 29 financial regulations that come from Europe. All this is coming in our direction because the eurozone countries can muster 230 votes, and we will have no way of stopping it. We should be prepared to say no or to demand a treaty reassurance, and if necessary put any proposal to the British people in a referendum.

Turning away from Europe, I want now to talk about our woeful economic situation. It is in the interests of both parties to claim that the deficit reduction programme is tough and is hurting. It is in the interests of the Government because it shows that they are being prudent and implementing austerity measures, and it is in the interests of the Labour party because it is arguing that we are deepening the recession. In fact, however, we are not doing nearly enough to address the problems we face. Some 38% of all our output goes to Government. That is a higher proportion than in the USA, Canada or Australia. Contrary to what we have heard, many EU countries have a lower tax burden than ours.

[Mr Andrew Turner (Isle of Wight) (Con)]

My hon. Friend has alluded to the situation in Greece. Does he agree that much is borrowed but not accounted for?

[Mr Leigh]

That is absolutely right. We do not know what is going on in a lot of areas. Many EU countries, including Greece and Spain, tax their economies less than might be thought.

I apologise to Opposition Members for having to say this, but much of the blame lies with the previous Government. They increased Government spending by more than 55% in real terms and, contrary to all the political argument here today, we are cutting that by just 3%. The Government must decide whether they want to be liked or to deliver long-term prosperity and growth. As we have also heard today, we are still borrowing £141 billion every year. The cost of servicing that debt is £43 billion every year, more than we spend on defence. This is a staggering burden. I want to hear more of an intellectual case for smaller government. Big government leads to big waste. Sir Philip Green calculated in his study that £700 million could be saved on the Government telephone bill alone.

People are hit with a double whammy by all this Government spending. Like a black hole, it sucks in enterprise, and it inflates prices and taxes people of all their spare income so they have less to spend on their families and themselves. As a result, the economy deflates.

Governments say in such circumstances that more must be done and propose a fiscal stimulus, usually through public works, but those works are often driven by politics not the marketplace. A better way to deliver stimulus is to cut taxes.