Budget Resolutions and Economic Situation

Austin Mitchell Excerpts

Wednesday 20th March 2013 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I was rather upset when I found that I need not have bothered coming to listen to the Chancellor’s petulant prose because I could have read it all in the Evening Standard, stayed in bed and not suffered the indignity of coming along early. I remember—few will—that the last Chancellor who spilled the entire contents of a Budget to the Evening Standard was Dr Hugh Dalton in 1947. He promptly resigned, which is an example that I commend to the Chancellor, as it deserves to be followed.

As I decided to come to the Chamber, I was rewarded by seeing the Chancellor excel himself in some ways. All the trailers and the headlines in the newspapers said that the Budget was going to be boring, mean, “bleak”—the Financial Times said that—with no change, and grim. In fact, it lived down to all those trailing adjectives: it was a no-change Budget in a declining economy. The main cause of anxiety among Labour Members is the fact that the Chancellor has obstinately adhered to a set of policies that have not worked—conspicuously so—and which have damaged the country’s prospects. It is a Budget proposed for a nation in comparative decline. We have missed out on 4% of GDP—the economy has shrunk that much since 2008—and we have missed out on all the normal growth that would have occurred since then. That is a huge loss in the economy: a smaller economy is bearing a heavier burden of debt. It is difficult, in that situation, for an economy to keep the standards, the services, the social welfare and the spending of a decent society.

Moreover, that economy cannot pay its way in the world. We have a huge and, until the current recession, escalating balance of payments deficit. In such cases, people either have to borrow overseas to finance the deficit, or they have to sell assets at home. We have been selling assets apace in this country: we have sold companies—we must be the most colonised industrial economy in the world as a result of foreign takeovers, which earn fees for the City. We have sold farms, houses and anything that moves. We have set ourselves up as “Tax Haven on Thames”, and international capital and funny money—the funny funds and their manipulators—have been encouraged to come here on the promise that they will pay low taxes. They can go in for all sorts of tax evasion schemes, such as those that the Public Accounts Committee has unearthed, with only soft-touch regulation. In fact, all that companies that come to the UK to fiddle their taxes have to fear is my right hon. Friend the Member for Barking (Margaret Hodge) and the Public Accounts Committee, which has unearthed what has been going on. That must induce terror in them, but the Government have not done anything about it.

Even today’s measures are small beer compared with the scale of the problem of tax evasion and avoidance. We are an economy hung down with debt, and that is true of the state and of companies, particularly those that have been taken over by private equity and loaded down with debt, and of individuals. People are not spending on the high street, and there is no demand so the shops are closing. Who is going to invest in an economy in that state, when there is no prospect of profit because demand is so low? Who is going to buy houses in an economy in that state, as people do not have any prospect of keeping their job for a long period? Uncertainty creates the problem.

The banks are not lending, and we have relied on the Bank of England to do the heavy lifting by effectively printing money, but that money has all gone to the banks, which stash it away in their reserves and do not loan it. The Bank of England’s monetary policy cannot replace fiscal policy: the Government must bear their share of the heavy lifting, and not leave it all to the Bank of England. I am glad to hear that the rubric of the Bank of England is going to be changed, and I hope that it includes economic growth and competitiveness. Too much has been left to the Bank, and too little has been done by the Government.

That is the economy today, and it is a disastrous situation, as confirmed by the report by the Institute for Fiscal Studies. We are bumping along the bottom, and we are heading for a triple-dip recession. That is the picture that the Chancellor should have dealt with, but he failed to do anything. The good things that he did were postponed to 2014 or 2015 in many cases. The Budget is not adequate to deal with the problem.

What we need to do is spend. That is the only way out of a recession like this. A litany of how we must not borrow more and that borrowing is evil is all very well, but borrowing for public purposes is very different from borrowing for private purposes. Borrowing to spend for public purposes creates an economic stimulus and stimulates growth, and that is what we have to do. It is the only way out of the present situation. I am sorry to go on about it, but to Government Members’ taunts about whether we would borrow more, I say yes, we must borrow more. We must borrow to spend to do things to stimulate the economy, to stimulate the animal instincts, as they are called, of the cautious capitalists in this country, to get growth going. Once we get growth going, the problem solves itself. We can only pay off debt in an economy that is growing, as Labour did in our first two or three years of office. We paid off an enormous amount of debt because the economy was growing. We can do that again, but only with growth. We cannot do it by deflation, because deflation increases debt. Deflation means we have to pay for unemployment: we receive fewer taxes and have to cover all the costs of companies going bust and all the weaknesses of the economy. There is an increase in debts from deflation, but there is an increase in the ability to pay off debt from expansion. We therefore have to borrow to expand.

I welcome the Chancellor’s measures on housing, but they are all about owner-occupiers. The big need at present is to provide houses for the two fifths of our population who cannot afford to buy them and to whom the banks will not lend. The mortgages are not forthcoming in any case, but those people are so impoverished that they need public housing to rent. That is what we need to build primarily. Why not have a massive housing programme—300,000 houses over two years? We are already building 100,000 houses fewer than this community needs, and it is those who cannot afford to buy, and who particularly need housing, who are suffering the pain of the housing crisis and the present housing shortage. Borrow, spend, build houses, invest in the future, invest in green energy, which like ICT in the ’80s is the coming future; borrow and spend, stimulate and grow—that is the only way out, but the Chancellor proposed none of that and that is why the Budget is such a failure.