Section 5 of the European Communities (Amendment) Act 1993

Chris Leslie Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Hoban]

As I said, all the information in the convergence programme is already in the public domain. It was published at the time of the Budget by both the Treasury and the OBR, in accordance with our commitments.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

rose—

[Mr Hoban]

No, I will allow the hon. Gentleman to make his own contribution in his distinctive style, and doubtless I will have a chance to wind up and respond to the points made. However, I have gone on for nearly 30 minutes, and other hon. Members want to take part. I will now allow him to do so.

[Chris Leslie]

(Nottingham East): My hon. Friend the Member for Vauxhall (Kate Hoey) asked an extremely pertinent question, and I want to come back to it later. First, however, I commend hon. Members from both sides and all parties for spotting that this debate was so relevant. The motion, as framed, does not leap out from the Order Paper, and when hon. Members go to the Vote Office to find these convergence documents, they are met with a little mystification. Let us turn to page minus-2, so to speak, of the Budget Red Book.

[Mr David Nuttall (Bury North) (Con)]

This is last year’s speech.

[Chris Leslie]

Indeed, I was here this time last year making a very similar, uncannily parallel speech, but I will point it out again. Underneath where it talks about Crown copyright, the ISBN number and where it says:

“Printed on paper containing 75% recycled fibre”,

it reads:

“The Budget report, combined with the Office for Budget Responsibility’s…fiscal outlook, constitutes the Government’s assessment under section 5 of the European Communities (Amendment) Act 1993”.

That is relevant to today’s debate. It is written in very small font for those who might have difficulty reading it. It mentions the European Communities (Amendment) Act, which sounds like a very British piece of legislation, but, being eagle-eyed, hon. Members will have spotted that all that Act does is refer to the Maastricht treaty, article 2 of which states:

“The Community shall have as its task…a harmonious and balanced development of economic activities, sustainable and non-inflationary growth”.

Of course, it also relates to article 103, which talks about economic policies being a “matter of common concern” that should be co-ordinated within the Council. These are the sorts of words that some find difficult to stomach, but the article continues:

“For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy”.

In a sense, the right hon. Member for Wokingham (Mr Redwood) was right to say that this is the homework that has been set by the European Commission, and we are completing our homework today.

[Mark Hendrick]

We will oppose the Government tonight, but we will do so not because we disagree with the European Union having a look at our Budget—these multilateral surveillance procedures have been going on for the best part of 20 years—but because we disagree with the measures in the Budget.

[Chris Leslie]

People will have their different reasons for opposing the motion, and my hon. Friend is right to state his reason for opposing it. My reason for opposing it is that, essentially, it asks the House to approve the Government’s assessment of the economy. That is the nub of the question. We are being asked to approve the Budget Red Book as their assessment of the economy. Sadly, we know that the Government are out of touch not only with the public but with economic reality. Their grip on what one might call the actuality of the real economy leaves a great deal to be desired.

This is an opportunity not only to take stock of the Government’s approach to the economy as a whole but to look at their analysis of what is happening. We know that they are pursuing failing policies on jobs, economic growth and deficit reduction. The Minister proudly defended the cut in the 50p top rate of income tax for the wealthiest 1% in society. The Government are giving a tax cut of about £40,000 to millionaires at the expense of pensioners and working people. Is it any wonder that their popularity is falling precipitously as a result? I am glad to have an opportunity, every time the Minister speaks at the Dispatch Box, to remind those watching these proceedings of the Government’s priorities. Living standards are being squeezed, and the VAT rise is hitting people hard, as are the cuts to tax credits and the cost of living generally. Independent experts say that a typical family will be worse off by £511 this year, but that is the Government’s choice; they want to give millionaires that advantage.

The motion relates to the Government’s assessment of the economy. Such a poor analysis as that presented in their Budget Red Book betrays either extreme wishful thinking on the part of the Treasury or, more likely, a dangerous detachment from the key decisions that Ministers need to confront. Their understanding of what is happening to business, employment and the cost of living is far removed from the experience of the vast majority of the public.

I urge all hon. Members to look at the facts and to examine the way in which the Budget Red Book is so detached from reality. On page 11, the Government claim that growth is

“strengthening over the forecast horizon”.

Growth was minus 0.2% in the last quarter for which we have figures, and the economy has been flatlining for a long time. It has performed very poorly since the spending review, while that of the United States has grown by more than 2%. The Office for Budget Responsibility is predicting growth of just 0.8% in 2012. Last year, in this very debate, we heard that the OBR was forecasting growth of 1.7% in 2012, and that was after several downgrades. There is clear evidence that the Government’s assessment of the economy is entirely out of touch with reality. The OECD is predicting good things for the United States, Germany and Japan, which are all predicted to grow faster than the United Kingdom this year.

What is worse is that on page 15, the Red Book states that we will experience

“positive growth, consistent with experience from past financial crises”.

Last year’s Treasury Red Book said that we were expecting a recovery that was

“in line with previous recoveries”.

I know that my hon. Friends who are students of these matters will be familiar with the charts and analysis produced by the National Institute of Economic and Social Research and others that compare the progress of recessions and recoveries across the decades, from the great depression to the recessions in the 1970s, 1980s and 1990s. When we consider our present position, we see that we are still 4% off the pre-recession peak. We have not yet clambered out of the hole. This is proving to be one of the longest and deepest financial crises, and the Government have failed to make any headway in ensuring our recovery. Their claims that we are in a parallel situation to previous recessions and financial crises prove that they are not in touch with reality.

[Mrs Main]

I note that the shadow Minister is making a principled argument and that he disagrees with the figures. If he did agree with the Budget figures, would he still feel that we had to submit them for scrutiny? We are a sovereign country. Do we really need our homework to be checked by Europe?

[Chris Leslie]

That is an interesting question. Obviously, I believe in the rule of law, and there is a legal obligation on Her Majesty’s Government to abide by the treaties. This is where we come back to the question that my hon. Friend the Member for Vauxhall asked earlier. She asked the Minister what the consequences would be if the motion were not passed by the House today. That is the key question that all hon. Members should be pressing the Minister on when he winds up the debate. I will give way to him now if he can answer it. What would be the consequences for us if we did not vote in favour of the motion today? I am happy to give way to him. For the reasons that I have suggested, the Government’s poor assessment of the economy does not inspire me to vote for the motion. I do not see why we would want to support their woeful assessment. The Minister is not giving us a reason for voting for it.

[Kelvin Hopkins]

rose—

[Chris Leslie]

Perhaps my hon. Friend can help.

[Kelvin Hopkins]

I entirely agree with not submitting the report to the European Union, but is not the growth situation even worse than my hon. Friend suggests? Even as we speak, the eurozone is plunging into a deeper crisis. Because of the weakness of the euro, the pound is unfortunately strengthening against the euro, which is going to make it harder for our manufacturers to export. The Chief Secretary to the Treasury said yesterday that we needed to make even more cuts than those already planned. So far, we have experienced only about a quarter of the planned public expenditure cuts. Is not the situation far worse than my hon. Friend suggests?

[Chris Leslie]

We have a blinkered and, in many ways, deluded approach to austerity—or über-austerity, as some might characterise it—which is hurting not only in the eurozone but here as well. What angers many people is that the Government’s approach to helping the eurozone out of its difficulties is to throw money at it. Technically, that money is going to the International Monetary Fund, but everyone knows that it is all about eurozone bail-out funds. We are giving a further £10 billion loan, even though the Americans and the Canadians are all saying that we should stand firm and negotiate with the wealthy eurozone countries, including Germany, and make them dip deeper into their own pockets. If they do not do that, and if Britain, China, America and others provide the money, those eurozone countries will not do the deep, serious thinking that they need to do, and they will not take the consequences of their situation within the single currency. They will not put up a proper firewall, as they ought to do; they will not build what has been characterised as the “big bazooka”.

That is why we have consistently expressed our scepticism about the Chancellor’s decision to cave in and give extra resources—British taxpayers’ money—to the IMF, which we all know is going to be used for that particular purpose. We like the IMF for its work with other countries in the developing world, and of course we want a strong IMF, but we should not be letting those wealthy eurozone countries off the hook. They need to confront those issues.

[Mr William Cash (Stone) (Con)]

I apologise for coming in late, but I have just got off the plane from Denmark where I was meeting the chairmen of the scrutiny committees of all the other national Parliaments of the European Union. We have recently witnessed the resignation of the Dutch Government and the consequences of the French elections. Would the House be interested to know that there is deep disquiet behind the scenes throughout the whole of Europe, as I discovered through speaking to those chairmen in the last couple of days?

[Chris Leslie]

I am afraid that I am not surprised to hear that that is the case. The hon. Gentleman spends a great deal of time and effort monitoring how these issues progress. Personally, I feel we need to find ways of supporting and stabilising the situation in the eurozone, but I do not think that the Government’s strategy is the right way to do that. However, I digress.

[Mr Stewart Jackson]

I feel it appropriate to give the shadow Minister some friendly advice. One reason why my party was not credible on the economy until quite a few years after we lost the election was that in many respects we did not face up to the fact of the legacy we left. I remind him that he really should be looking at the wider picture of Europe rather than focusing on the national situation here. The fact is that real-terms public expenditure rose by 53% from £450 billion to £700 billion between 2000 and 2010. His party ran a structural deficit in times of economic growth. That is the situation in which we find ourselves now.

[Chris Leslie]

I obviously disagree with the hon. Gentleman’s assessment, but he made an important point earlier about the plight of those who are suffering as a result of the austerity approach being applied in southern European countries in particular. I worry greatly about that; it is a matter of concern. It is also a concern, however, for our constituents here in the UK. We take a different approach on principle about the right ways to repair our economy. We believe that a stronger emphasis on growth is necessary to generate revenues; it is not just about public expenditure cuts, which do not provide the way out of the situation. I also disagree that the motion is a general debate about the state of the European economies. We are debating whether the Red Book provides a right, accurate, fair and good assessment of the state of the British economy such that we can submit it, as we are required to do by the treaties, to the European Commission. I am simply following the strictures placed on us by the Maastricht treaty.

[Stewart Hosie]

That is the key point. The hon. Gentleman quoted from the 1993 Act—a Tory Act, of course—about the need to submit information to the European Commission, including information on industrial investment. We have seen forecasts of 6.7% business investment growth ending up being a negative 0.8% out-turn. He is thus absolutely right that the Red Book is not credible in terms of the objective set out in the 1993 Act.

[Chris Leslie]

It is that lack of credibility that makes me want to oppose the motion. The hon. Gentleman picked up on the point about business investment. I encourage hon. Members to turn to page 16 of the Red Book, which says:

“business investment will pick up and make an increasingly strong contribution to growth in each year of the forecast as confidence builds and credit conditions ease”.

Just yesterday, the trends in lending data came out from the Bank of England. Year on year, net lending to all businesses—small and medium-sized enterprises in particular—has fallen in every single month since the Government took office. That is despite Project Merlin and all the attempts at credit easing, which have still not come into effect and will do nothing to help credit availability. Last year, they said in their document that

“Credit conditions have shown signs of stabilisation.”

That has not come to pass, so I have no confidence that their current propositions will come to pass either.

On borrowing, page 12 of the Red Book claims that we are heading for

“£11 billion lower over the forecast period than was projected at Autumn Statement 2011”,

which is sophistry because we know that in the spending review figures from October 2010, the Government projected a set of borrowing statistics that have had to be ripped up, because we are on a trend that takes us into £150 billion of further borrowing over the lifetime of this Parliament. The new borrowing figures out this morning confirm that particular trend. That is where things are going.

The Chancellor keeps restating that the UK is “a safe haven”, although he slipped a little bit today in saying that it was “a safer haven”. There he was in Washington this weekend, saying that the UK has “solved our problems”. That is our Chancellor’s assessment of our economy. Such dangerous complacency beggars belief, and I think that it is a sign of arrogance.

[Stewart Hosie]

The hon. Gentleman picks up on our Chancellor’s reference to “a safer haven”. Does he think that could be because the debt figures on the treaty calculation are no longer expected to peak at 87% of gross domestic product as was forecast a year ago, but at 93% of GDP—a catastrophically high figure?

[Chris Leslie]

Of course, that is because of the Government’s record of high unemployment, with statistics showing not much improvement, an increase in welfare costs and so forth. All those things are a drag on public expenditure; they are making things no better. That is the result of the Government’s misguided strategy. On the wider issue of employment and unemployment, I challenge hon. Members to find much in the Red Book that provides an assessment of what is going to happen to them. We know that we have the highest unemployment in 17 years, with 2.67 million people on the dole. We know the story that long-term unemployment doubled in the last year and that youth unemployment is at a record high. My hon. Friends do not need me to repeat these figures.

On inflation, the Red Book says that

“inflationary pressures, which the OBR considers to have been the main drag on UK growth over the past 18 months, have started to abate, easing the pressures on household incomes and improving the outlook for consumers.”

Well, consumer prices index inflation rose, I think, in the last month. We are at around 3.25%. We should not forget that the Chancellor’s target for the Governor of the Bank of England is 2% inflation. Indeed, Paul Tucker, the deputy governor of the Bank of England, warned this week that inflation is likely to stay above 3% for much of 2012. Again, even on inflation, the Government’s assessment of the economy is just not correct. There is no mention of consumer confidence in the analysis. Although there is a section on “Investment and confidence” on page 14, it does not mention consumer confidence at all. The consumer confidence indices have been down and are worsening at minus 31%.

[Gavin Shuker (Luton South) (Lab/Co-op)]

My hon. Friend talks about confidence. Did he see the comments of Barney Frank, a leading US congressman, when he talked yesterday about this Government’s obsession with austerity measures, which went right to the heart of the credibility of whether or not they could reduce the deficit? Coming from Washington as he did, he was clear that this Government’s key measure for reducing the deficit in their period of office was counter-productive.

[Chris Leslie]

Indeed. All across the globe, developed countries are realising that a strategy focused singularly on austerity alone will not be the solution. We must have a greater focus on growth and job creation as a way of generating revenues.

I have spoken for too long. Labour Members believe that this motion is flawed because the Government’s assessment of the economy is poor. Others will have their own reasons for voting against it. I want to hear the Minister’s justification for the motion and to find out why it would be cataclysmic if it did not go through. The consequences of that are a key point. As I see it, the Government misunderstand the economy, they are misreading the growth prospects of the UK and they are misconstruing what is happening in the employment markets and business investment. I therefore urge the House to reject this mistaken assessment of the prospects for our economy.