The Economy

Baroness Primarolo Excerpts

Tuesday 6th December 2011 Commons Chamber

[Charlie Elphicke]

As the hon. Lady well knows, she and I debated the issue at length during the Committee stage of the Welfare Reform Bill. I know that Opposition Members sneer at this, but I think it important that child tax credits are rising by £135 next year. That is a move in the right direction. It is good that the lowest paid in the public sector are being protected from the pay freeze because they are disproportionately women, just as it is good that 1 million people are being taken out of the income tax system because they are disproportionately women. We need more action of that kind. The hon. Lady’s party had 13 years in which to take such action, but, as we know, child poverty sky-rocketed during the last Parliament. At least this Government are trying to take positive action in difficult times.

Hard-working families need to see stable finances, a stable Government and a stable fiscal position, because that is the only way in which we will bring back real growth. If we had continued to pursue the policies of the past, what would have happened to our country? We would have ended up as a basket case, like Greece, Italy, Portugal and Ireland. However, we had a credible plan, and we took firm action to control the deficit and sort out our national finances. We have made tough decisions that hit the least well-off, but also the most well-off. We are all in it together. Everyone is sharing the pain, more or less equally, and I think that that is the right direction of travel for the Government.

Members on the rowdy Opposition Back Bench may not agree with what I am saying, but the figures make it clear to me that we are working to create fairness. For instance, unlike the Opposition, we want to create fairness for motorists. By the end of next year, those who experienced such difficulty as a result of Labour’s fuel duty escalator will save £144 on the cost of filling up the average car by the end of next year. That is an important example of progress. The apprenticeship scheme has also been a real help to our young people after youth unemployment rocketed, particularly under the last Labour Government. [Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Members do not have to agree with what is being said, but they do have to listen to it, and not continually interrupt.

[Charlie Elphicke]

Thank you, Madam Deputy Speaker.

In the last Parliament, youth unemployment in the shadow Chancellor’s constituency rose by approaching 150%, whereas in the current Parliament the rise has been much lower. We are having to try to turn around the supertanker to return to our young people the futures that were so disappointingly taken from them by the last Government. We need to look after the younger generation, and allow them hope for a better future.

Let me end by saying a little about what the Government are doing for east Kent. The South East England Development Agency spent £20 million on a business park project and created tarmac, but no buildings and no business park. Money was too often wasted. Now we have a local enterprise partnership that has already created an enterprise zone, which is important to a community that experienced difficulties after Pfizer decided to run down its research in the United Kingdom. That is real progress.

Our area has benefited from massive activism. The fast train service to Deal and Sandwich will help to improve the economic situation, as will the £40 million regional growth fund. I also welcome the £180 million catalyst fund that the Prime Minister announced the other day. Such things are very important. We have seen more economic activism in east Kent in the last year than we have seen in the last decade.

If we can establish the people’s port in Dover, it will give the community a sense of ownership, place and control of their destiny which will have an important impact on their confidence in us. East Kent is so often at the end of the line, a poor relation of the rest of Kent. I hope we can establish the people’s port project, and make it work so that it is a great showcase. If we make it a success, we will be able to hand back confidence and the idea of building a future, and thereby regenerate Dover, making it every bit as good as it can be so that it is once again a jewel in the crown of the nation.

Looking across the piece at what we are doing both nationally and locally in Dover and Deal, we can see that the Government have the right policies at the right time. They are making the difficult decisions that will pay off for us over the next decade or so.

--- Later in debate ---

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. There are still seven speakers who wish to contribute to the debate, so I am reducing the time limit to five minutes each. I ask each Member to pay attention to the clock, and to colleagues in the Chamber, so that they stand some chance of getting into the debate today. That is five minutes, starting with Mr Steve Baker.

--- Later in debate ---

[Chris Evans (Islwyn) (Lab/Co-op)]

We have heard the name of John Maynard Keynes again in this debate. My favourite Keynes quotation is the one in which he says that there comes a time when every Government have to indulge in “ruthless truth-telling”, and it is time that this House stopped acting like Nero when Rome was burning.

We stand on the edge of the abyss, and we have a eurozone crisis that is not being solved. Nothing seems to be happening. Greece is on the point of defaulting, it could exit the euro and it could be quickly followed by Spain, Portugal and, even, Italy. Yes, we might say, “We’re not in the euro: we’re little Britain; they can’t touch us,” but the key thing is that their bonds are held by British banks, and British banks will have to bail them out once again.

We have to ask ourselves, “Are we going to stand back and allow ourselves to sleepwalk into another financial crisis, or are we going to heed the warnings and do something about it?” Last week, when we had the autumn statement, the headlines were that the OBR had downgraded its forecasts, but what worried me more than anything, and what was not said anywhere or by anybody in the House, was that the OBR could not quantify what a crisis in the eurozone would do to the British economy. The best economists in the Bank of England could not even quantify or say what disaster might befall us if there were a euro crisis, and to me that is very concerning.

There comes a time with every Government when they have to put ideology aside. When Labour nationalised the banks, it did not do so because of ideology; nationalisation was 30 years ago and belonged to the past. It did so because nationalisation was a necessity and a practicality, so now, as we face the crisis in the eurozone, we have to put ideology aside, see what the practicalities are and put them into practice. It calls for the type of bravery that is rarely seen in this House, but, if we had to nationalise the Bank of England and bail out the high street banks again, we would be saying to our constituents, “If you have the dream and the hope of setting up a business, it ain’t gonna happen, because the banks are going to be even more cautious about lending to you,” and, “If you have a mortgage, you’re not going to be able to move it on to a lower interest rate, because the banks are not going to take that risk again.”

The problem is that, with every crisis, every politician will stand up and say, “Oh, it’s never gonna happen again. It won’t happen on my watch.” Even the Chancellor has said, “It won’t happen again. No, not while I’m Chancellor—no it can’t,” but the truth is that it can, because we have not learned the lessons of the previous financial crisis.

In my speech, I wanted to analyse the legislation that affects banking, so I looked, researched and went to the Library, but I could not find any. There was none at all, so we are facing another crisis with the same banking practices and with a Government unwilling to do anything.

One thing on which I agree with Keynes is that, “During a recession you do not raise taxes.” But what have the Government gone and done? They have put VAT up. It is all very well saying, “We’re going to create jobs,” but, if someone needs to drive to work and they are paying £1.33 for petrol and £1.41 for diesel, they might find it difficult to do so. If they are shopping and find that the price of their shopping basket has increased by 5% in the past year, they might not be able to afford food. Those are the decisions that people face.

I wish I had more time, but I will say this: the Government have an opportunity to do something. We need to look at skills and education, and to have a grown-up, adult conversation, asking, “Why are our young people leaving school not equipped to go into work?” I talk to people in my constituency with apprenticeship schemes, and they say that the kids are not prepared, so let us have an adult conversation and ask, “Why are they not prepared? What is wrong with the education system?”

The final point that we need to look at is tax reform. It is all very well the Government giving people a 1p cut in corporation tax, but when I speak to the small business man I find the thing that concerns him more is red tape. He asks me, “When I have a micro-business, why do I have to employ an accountant? Why can’t I have a simplistic tax form to fill in?” I wish I had more time to develop those arguments, Madam Deputy Speaker, but I will sit down now.

[Madam Deputy Speaker (Dawn Primarolo)]

Good!

[Harriett Baldwin (West Worcestershire) (Con)]

How can I follow the wonderful, lilting oratory from the hon. Member for Islwyn (Chris Evans)?

It is very difficult to turn round a supertanker. The supertanker that my right hon. Friend the Chancellor inherited was weighed down by the lead weight of having to pay out £120 million a day in interest and artificially inflated by a Government who were spending more than they were taking in, so that, in effect, £1 out of every £4 spent was borrowed. There was a very challenging situation when the Chancellor took the steering wheel of the supertanker, and we need a significant process of change to alter its direction towards one where we have a much healthier public sector financial position and where the private sector is able to continue its process of growth. [Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am sorry to interrupt the hon. Lady. If Members want to have private conversations, they should leave the Chamber. If they are in the Chamber, they are taking part in the debate and they will listen to the person who is speaking.

[Harriett Baldwin]

Thank you, Madam Deputy Speaker.

I want to feed back to those on the Treasury Bench some of my constituents’ reactions to the decisions that the Chancellor announced last week in his autumn statement as regards the process of steering the supertanker. Those decisions were taken very much with a view to his understanding their impact on household budgets. Businesses and drivers in my constituency have welcomed the fact that the increase in fuel duty promised for January is not going to happen. Following the victory in Libya and acknowledged slower economic growth, they were expecting the price of oil to fall and the price of petrol and diesel at the pump to decline, but it has not. The increase in January would be extremely unwelcome for them.

My constituency has a very high percentage of people over pension age, who, needless to say, welcome the fact that they are to receive the largest cash increase in the state pension in history. They also welcome the Chancellor’s decision to allow councils to freeze the council tax for a further year, because for those who are on fixed incomes or receiving modest pay increases, not having to suffer that increase in their council tax is another significant help to their household budgets.

For the many small businesses in my constituency, the fact that the small business rate relief is to be extended until April 2013 is very welcome. The new initiative whereby larger businesses can defer some of the rate increase by 60% for two years will also greatly help businesses with their cashflows.

On the credit easing measures, I would like to draw the Chamber’s attention to an innovative idea in my constituency called ThinCats.com—presumably the opposite of FatCats.com. People can put their savings to work with ThinCats.com and it will lend the money out for them. It is one of the credit circles that are becoming increasingly popular. Credit easing is another way in which we will be able to get the benefit of lower interest rates into our business sector to allow businesses to receive help with their cashflow.

Finally, let me mention my concerns about the whirlpool that is offshore of the supertanker in the eurozone. The three possible outcomes that could occur are an underwriting of eurobonds, a break-up of the entire currency union, or the current uncertainty as we jolt from summit to summit with great promises and then huge disappointment. Of those, the current situation causes the worst damage to business confidence in my constituency. I therefore urge Ministers, as they go into these negotiations, to try to steer them towards one of those two alternative outcomes, which would provide some of the monetary stimulus that the eurozone needs and thereby a resolution of the current situation, which is the worst of all possible worlds.