The Economy and Living Standards

Ann McKechin Excerpts

Thursday 12th June 2014 Commons Chamber

[Stewart Hosie]

That is because we would be. Although I welcome the limited growth that we have had, the actions taken by this Government since the last election stifled and strangled the recovery for some years, and that is the underlying problem with their plan.

Let me take Scotland as an example. What the Government are proposing—this was before the Budget—is an 11% fiscal expenditure cut, a 27% cut in capital and a real terms 9.9% cut in the overall budget. This year’s Budget made that position worse, and that applies to spending Departments throughout the UK. Nothing in the Queen’s Speech changes that. Nor does it change the fact that the Chancellor told us that for 2013-14, the current account deficit would be down to 2.3% of GDP, borrowing would be reduced to £60 billion and the net debt would be at 70% of GDP. He was forced to tell us this year that the current account deficit was higher, borrowing was actually £95.5 billion and the net debt was 75% of GDP. The short-term metrics were wrong.

What about the big targets the Chancellor set for himself? They were that the debt would begin to fall as a share of GDP by this year, that the current account would be in balance next year and that the same year borrowing would be down to £20 billion. Presumably, that is what the Prime Minister meant by financial security. Of course, as we know—nothing in the Queen’s Speech changes this—the debt will not fall until 2016-17, two years late. The current account will not be back in the black until 2017-18, two years late. Public sector net borrowing in 2015-16 will not be £20 billion but £68 billion, three and a half times higher.

Although the limited recovery we have seen in the past year is of course to be welcomed—this directly answers the question asked by the hon. Member for Suffolk Coastal (Dr Coffey)—not a single one of the Chancellor’s key targets has been met and his actions, as this is an austerity Government, stifled growth and delayed recovery year on year. No amount of convoluted formulations or warm words about long-term economic plans can change that.

What are the Government planning? It is there in black and white in the Red Book, on page 20 for anybody who wants to have a look. There will be a discretionary consolidation—that is cuts, and tax rises—next year to the tune of £126 billion. That is £2,000 per person in tax rises and cuts. That is what they are planning and that is what they have signed up to.

[Ann McKechin (Glasgow North) (Lab)]

I am interested in the hon. Gentleman’s comments on achieving growth. Presumably the skill base would need to be increased, so I take it that he agrees that cutting the college budget by £50 million would not be the way to achieve sustainable growth.

[Stewart Hosie]

When it comes to improving education, having a record number of Scots in full-time college places is excellent; having 25,000 to 26,000 Scots starting apprenticeships every year is first class; having 32,000 Scots start university this year is the way to proceed; and having all the school exam results improve in the way they have is probably a really good start. If the hon. Lady is saying that we can do more and can do better, of course we can—any Government can—but let us not talk down success, particularly when we are trying to hold this Government to account.

The point that I was making is that what we have is not a long-term economic plan. It is certainly not sustainable and it is certainly not a recipe for the growth the economy needs. It is just more Liberal and Tory austerity. It is the same plan that has seen this Government fail on their short-term and long-term targets so far and that will fail again. If it is about financial security, there is no evidence that it will succeed. If it is about growth, the Government are not even talking about that. If it is about delivering on the needs and ambitions of the people, it is woefully inadequate. As the discretionary consolidation laid out in black and white in the Red Book is predicated on a ratio of cuts to tax rises of 4:1, we do not have a long-term economic plan but a Tory Government who seem determined once again to try to balance the books on the backs of the poor. That is not a long-term economic plan; that is a disgrace.

--- Later in debate ---

[Ann McKechin (Glasgow North) (Lab)]

As predicted, the Chancellor’s remarks this afternoon made much of his “long-term economic plan”, but the original 2010 version of an export-led recovery, of increased business investment and of a shift to a new kind of economy has simply not happened. To compensate, the Government have fallen back on a good, old-fashioned, British housing bubble and consumer spend splurge as a recipe to see them through to the general election—pumping up the feel-good factor and praying that nobody notices that living standards are still sliding for huge swathes of our constituencies across the United Kingdom. This form of growth is not sustainable; it is a high-risk strategy.

The Chancellor was prodded into talking about productivity, and the hon. Member for Stroud (Neil Carmichael) was quite right to emphasise that should be a priority. The problem is that our productivity gap is now wider than it has been over the last 20 years, following the flatlining of the economy over the last seven years. It is not just the recession that has caused the decline. According to the Office for National Statistics, by comparison with our international competitors, output per hour worked in the UK is 21% lower than the average for the other six members of the G7. This is the biggest productivity shortfall since 1992, and according to an alternative measure, the gap in output per worker is now a horrifying 25%. Although we expect output to pick up this year, poor productivity has stifled earnings growth and squeezed real incomes. That shows what should be the priority in the ever-more competitive world that we face.

UK companies are sitting on some of the largest cash reserves of any western economy, but at the same time, according to a report from the Department for Business, Innovation and Skills, we have a

“sustained, long-term pattern of under-investment in public and private research and development…and publicly funded innovation.”

The UK’s total investment in R and D has been relatively static at 1.8% of GDP. In America, it is 4%, while in France and Germany, it is well over 2% and they are aiming to get to 3%. This is a new world in the 21st century. If we do not innovate and do not develop products, we are going to fall behind and our tax base will go along with it.

The Government will point out that they created a number of industrial forums for debate and decision making, and a series of industrial papers came out last year. The sector councils for the automotive and aerospace industries have been formed for many years and are industry-led, but the other councils have met on only a handful of occasions, do not have public-facing websites and are basically turning into glorified talking-shops. That needs to stop soon.

It is not surprising that the Chancellor refused to give way to me when he began to talk about the housing market, because I might have pointed out to him that the average—mean—annual salaries of those who have been able to take advantage of his second version of the Help to Buy scheme are £80,000 in London and £49,000 nationally. In other words, we are using taxpayers’ money to help those in the top income decile to buy houses that are already overpriced, while pricing more people out of the market. There is no solution for those on the lowest incomes, and no solution for those who are renting; they are still left behind.

We need to hear about a programme that meets the key priorities of the majority, but that has certainly not happened today.