Budget Resolutions and Economic Situation

Angus Brendan MacNeil Excerpts

Wednesday 18th March 2015 Commons Chamber

[Alison McGovern]

I bow to no one in my applause when unemployment falls, but to say that Wirral, Merseyside and the rest of the north-west have not suffered from huge cuts to local government is to ignore the facts. I know that that is an argument that almost everyone in the north-west—perhaps with the exception of members of the Tory party—will recognise.

We need not just the right investment but the right protections. We have seen family budgets hit radically and hard, we have seen child poverty rise and, on the relative measure, we have seen people in the middle of the income distribution fall back towards the bottom. That is not offering families in our country the right protections—

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Will the hon. Lady give way?

[Alison McGovern]

I will not take any more interventions, because I might be here for a long time if I did.

We need a bank levy to fund 25 hours of free child care for working families with three and four-year-olds. That pledge alone will help 51,000 children in poverty and will be a real boost to their families’ incomes, which have been hit hard. Whatever the Chancellor says, and whatever the Tories try to convince themselves of, it is not only the London School of Economics and its analysis of the past five years that shows that the incomes of the bottom half have fallen while those of the top half have risen; the Treasury’s own figures now say that the bottom fifth has done worse. We need the right protections to ensure that when economic growth happens, it is not just for the few but real growth for the many. Rather than failed austerity, we need a truly progressive Government in favour of the many, not the few, and more than anything else we need a Labour Government.

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[Mr Hoban]

My hon. Friend is absolutely right. The problem for Labour Members is that when they are confronted with the facts, they hide. That is the problem they will all face in the course of the next 50 days. They have clearly not developed economic credibility, because their plans and message are confused. They have no idea how they would deal with the economy. All we know about Labour is that it will spend more and borrow more and tax more, the way all Labour Governments have behaved in office.

The final reason we should be moving towards a surplus and reducing the national debt is that if we continue to lock in debt at high rates, we are reducing the capacity of future Governments to withstand future economic shocks. One of the challenges we faced in this Parliament was that the high levels of debt racked up by the previous Government made it increasingly hard to put in place the measures to turn the economy around.

We cannot simply pretend to ignore, or rack up, unfunded spending cuts. We need to work hard to tackle the deficit to ensure debt falls as a proportion of national income, as it will at the end of this Parliament, to get the right messages across. Let us be responsible about how much we spend. Let us be responsible on taxation and spending. Running a surplus in the good times will help the economy when difficult times lie ahead.

[Mr MacNeil]

Does the hon. Gentleman not accept that this has been the slowest recovery from any recession just about ever? Research from the National Institute of Economic and Social Research shows that, had it not been for the austerity cult and the Government choosing austerity, GDP would be 5% higher and extra tax revenue would be about £32 billion—about a third of the current deficit. Cuts and austerity have cost not just the economy but people’s opportunities.

[Mr Hoban]

I am really not going to be lectured by a Member from the Scottish National party about economic realities. We heard in the Budget today that because the United Kingdom is together, we are able to support the North sea oil sector in a way it could not have been supported if the SNP had achieved independence, so I am not going to take any lessons on economic credibility from the SNP.

In preparing for this speech, the last I will make in this House, I looked back to my maiden speech. Unsurprisingly, it touched on the local economy. I highlighted the strength of the business community in Fareham and its low unemployment rate. I also talked about the pressures on public services and infrastructure from house building. Perhaps it is with this frame of reference that I should talk about the economic reforms the Government have introduced in the past five years.

Fareham’s economy is still strong. In 2010, unemployment was 2.2%; today it is 1%. Strong businesses have helped to contribute to that and they have benefited from the Government’s reforms. Lower employment and corporate taxes have helped businesses to recruit locally. The apprenticeship reforms introduced in the past five years have meant that Fareham businesses have taken 740 apprentices in the past year, compared with just under 600 in 2010-11. The reforms have led to a renaissance at Fareham college where, thanks in part to taxpayers’ money, it has opened a specialist advanced manufacturing centre to meet the growing needs of local business, as well as refurbishing its campus in Fareham.

In my maiden speech, I criticised the top-down housing quotas that characterised the old-fashioned approach to planning. They had failed Fareham. The Government’s planning reforms, focusing on securing consent through a bottom-up approach, have secured widespread consent for 6,500 homes to be built in the new community of Welborne. This new settlement has benefited from the local growth deal funding infrastructure improvements, such as the new all-ways junction at junction 10 of the M27. Whereas in the past infrastructure never quite met local needs, I am more confident now than ever before that new development in Welborne will not harm the quality of life of local residents.

One of the challenges we face in Fareham is getting young people on the housing ladder. The Help to Buy ISA announced today by the Chancellor in the Budget will help to make it easier for many young people in my constituency to get a home of their own.

The economy of south-east Hampshire is dependent on good infrastructure, which is why I am pleased that the M27 is scheduled to be upgraded to a smart motorway in the next Parliament. I encourage my hon. Friends on the Treasury Bench to ensure that that is delivered in the first half of the next Parliament, not in the second half. Poor road and rail infrastructure makes it harder for those out of work in the older urban areas of south-east Hampshire to access employment opportunities in Fareham.

In taking forward the economy in south-east Hampshire, we have benefited from the abolition of regional development agencies and the introduction of local enterprise partnerships. I always felt that the South East England Development Agency neglected south-east Hampshire and focused its money and efforts elsewhere. The Solent LEP has had a relentless focus on economic growth in our community, playing an outstanding role in delivering all aspects of economic infrastructure in our community. I believe that our economic reforms and long-term economic plan have benefited Fareham and its residents and provided a route for further prosperity and security for local families. It has been an honour to serve those families over the last 14 years as their Member of Parliament, and I am grateful to them for the trust they have shown in me.

Through you, Madam Deputy Speaker, I would like to thank the staff of this House for the support they provide to Members of Parliament. Their work over the past 14 years has been invaluable and has supported me in becoming a more effective Member. It is ironic that I am making my last speech in front of you, Madam Deputy Speaker, as we sparred many times on Finance Bills under the last Government. One of the most important roles of any Government is economic stewardship. We need to provide jobs and growth for families and economic stability, which is vital to people’s confidence and well-being. I leave Parliament at the next election knowing that the economic future of my constituency is much more secure than it was five years ago. We should not squander those hard-won gains by losing the next general election.

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[Mr MacNeil]

The right hon. Gentleman is giving an impression of a growing state, when what is happening in real terms is clear from page 112 of the Red Book—that, as a percentage of GDP, this Chancellor and his party are cutting the state by 13%, which will affect the poorest in society most. That is the legacy of a Tory Government.

[Mr Redwood]

I am giving the cash numbers, which are clearly set out on page 111. If the hon. Gentleman is patient, I will come on to deal with the argument about real terms and the percentage of the economy.

Let us start with cash. The £60 billion increase in the annual spend at the end of the period is a big increase, and if we can keep inflation of costs down, it could provide a real increase. We had these arguments at the beginning of the last Parliament. When I quoted the cash figures, people said it would amount to a real decline, yet we have had a real increase, with the last two years seeing real increases in total general public spending, as I indicated in a recent intervention and as this Red Book makes very clear. If the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) reads it he will see the real increases in general Government current spending over the last couple of years. Those have been affordable and the lower rate of inflation is helping.

If we look at public spending as a percentage of GDP, we see that, yes, it will fall, but that is extremely good news, because it means people will be able to keep more of the money they earn from their productive activities and as the economy is growing we can have better public services.

One of the cruellest myths being put around by the Opposition at the moment is that if we took public spending to 35% of GDP, we would be cutting it to 1930s levels. That is complete nonsense: for most of the 1930s, public spending as a percentage of GDP was well below 35% in any case, but I recently looked at the numbers and found that, in real terms, public spending this year is nine times the level of real public spending in the early 1930s—nine times in real terms.

[Mr Redwood]

To make the point, the Chancellor has said that he will spend a little bit more in the last year of the period so that we reach exactly the percentage of GDP that Labour thought appropriate in 2000. We cannot say that because we are spending the same percentage of GDP we have cut spending or that it is down in real terms. If we have a healthy, growing economy, public spending is well up in real terms, as is the general size of the economy. We should welcome that. What we want is growth in the economy, so that we can have affordable growth in the range and quality of public services. That is exactly what this illustrates. I hope that Labour Members will stop trying to con people into believing that if we ended up with 35% of GDP—1% lower than the Chancellor intends—we would somehow have 1930s levels of public services. It is so absurd that I cannot believe that they even dare to repeat such nonsense day by day.

What we want from this Budget, and what I think it helps to deliver, is more growth. It is great news that we now have such good employment figures, which show record highs. It is good news that unemployment is reducing and good news that youth unemployment in particular is reducing.

What has happened over these five years is quite remarkable if we consider two important background points. The first is the state of the banks inherited in 2010. This House has never really understood or grappled with the magnitude of what happened to the banking system under Labour, or the magnitude of the changes between 2008 and today, particularly with respect to RBS and HBOS. If we had asked most economic forecasters what would happen to the UK economy if we took about £1 trillion of assets off the balance sheets of two leading banks, they would probably have forecast that the economy would crash in a remarkable way. What is fantastic for our country is that after the initial crash over which Labour presided in 2008-09, we have managed to get the economy back to growth while mending the banks and going through the extraordinary shrinking on the banking balance sheets. [Interruption.]

I find it remarkable that Labour Members will not listen to what I am saying. They lived through this dreadful experience and their regulators allowed the banks to over-expand their balance sheets, when many of us were saying that it was going too far. [Interruption.] Indeed, we did. We constantly said that regulation was too lax. I remember writing in the report of the economic policy review undertaken by the Conservative Opposition that, while in some areas there was far too much regulation, the regulation of the things that really mattered—cash and capital—was far too lax, and needed to be tightened. However, the Labour Government and their regulators then made the worse mistake of over-tightening in a hurry, and precipitated a major crash. Labour needs to learn from that. Indeed, we all need to learn from it, because we do not want it to happen again. We need to understand why there was such a big crash in output and in people’s living standards and real incomes, and why it took time, between 2008 and 2013, for growth to resume. The reason was that the banking system was so badly damaged that, obviously, it took time to get it back into shape.

As the Chancellor said himself, there was another reason for our problems. In 2011 there was an extremely unpleasant euro crisis, which had an impact on Britain because we live by foreign trade as well as by our domestic activities. We had to shelter ourselves from the worst of that. We are now in the process of orientating our trade much more strongly towards Asia and the Americas, the growing parts of the world, and away from the European area, which is mired in recession and is still experiencing enormous difficulties. It decided to create a single currency without creating a single country to back it and love it, and is having to live with awful strains and stresses as a result.

As we meet today, this Budget is an important event. It is certainly a very important event politically in the United Kingdom. However, a far more important set of events is taking place on the continent, where hectic negotiations are taking place between Greece, Germany and the rest over whether Greece can stay in the euro. It is not easy to see a happy outcome in either direction from those very pained discussions, but are we not glad that we are not having to live with that awful experience in this country, thanks to some of us who urged very strongly that we should stay out of the euro? [Interruption.]

The hon. Member for Bishop Auckland (Helen Goodman) thinks it is funny that Greece has a youth unemployment rate of 50%, but I do not. I think it is a disgrace. I also do not think it is funny that several countries on the continent have a general unemployment rate of 25%. That is quite unacceptable, and the Labour party would rightly condemn it every day of the week if it were happening here, but it is not happening here because we ran our own economic policy, and we have done a much better job that they did on the continent.

[Mr MacNeil]

Does the right hon. Gentleman accept that most of the problems of the European Central Bank are to do with a fixation on inflation—a fixation that he shares?

[Mr Redwood]

I have no fixation on inflation, but neither do I think that runaway inflation creates prosperity. It is necessary to manage inflation, and to manage growth, and to have an economy that can expand. I am very pleased that this Budget helps to create and preserve the expansion that is now under way in the United Kingdom. I think it is good news that it contains measures to promote more home ownership and saving, and I think it is good news that it contains measures that will help enterprise and business to promote more jobs, because what we want are more jobs and better-paid jobs.

I was pleased to hear the Chancellor say that most jobs now are full time, and that many are highly skilled. That is what the country needs: more skills, more opportunity, and the chance for individuals to train, work and educate themselves well so that they can get better-paid jobs. That is what we all want in the House. It is sometimes suggested that the Conservatives do not want it, and I find that regrettable. We want it as much as anyone else. We want more jobs, better-paid jobs, and more skilled jobs. We know that we have to earn our money, and we want to create opportunities for people to earn theirs.

The Budget contains some sensible judgments on how much the country can afford in increased public spending. I think that £60 billion is a perfectly good judgment of the amount of extra public spending that will be possible by the end of the next Parliament. It also contains a judgment on how we can finally get rid of the deficit and start to cut the debt. I find it a bit odd that Labour has been telling us that too much was cut in this Parliament, and is now saying that the deficit is too high. I have news for Labour. You have to cut if you want to lower a deficit; it does not just magic away. The question is, how do you get that judgment right?