Section 5 of the European Communities (Amendment) Act 1993

Chris Leslie Excerpts

Monday 22nd April 2013 Commons Chamber

[Greg Clark]

The IMF is considering its view, and we will see what it has to say in the months ahead, when it issues its review. We have always been clear that, as we have advised all EU member states, keeping control of finances is an important precondition for growth. That is an important matter.

As I said, we have been parsimonious in not generating excess quantities of paper. Members will be aware—certainly my hon. Friend the Member for Stone (Mr Cash) will be—that we did not follow the advice that other countries followed and align our financial year to fit in with the norm in Europe. We think it right to stick with our financial year and make use of the documents presented.

With the Budget announcement having taken place on 20 March, shortly before Easter, I appreciate that the timetable was tight, but we made every effort to provide early copies of the convergence programme to the House and the other place in advance of this debate.

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

What was going on with the Order Paper before the debate? I think that the Leader of the House, or perhaps the Minister, tabled a motion not to have this debate, but to kick it up to a Delegated Legislation Committee. I understand that some hon. Members, including the hon. Member for Stone (Mr Cash), objected, and now we are not debating whether to have the debate upstairs. What was going on? Why did the Government try to shove this out of the line of sight?

[Greg Clark]

The hon. Gentleman is aware that I am always happy to debate with him, especially on the Floor of the House, which I very much prefer. He will know that at this time in the parliamentary Session, as we approach the end of the Parliament, the business managers—the Leader of the House is here—are particularly jealous of the Chamber’s time, including in respect of the sorts of debate we have had today. They had the foresight, however, to anticipate being fortunate enough to have some time today on the Floor of the House. It was right, therefore, that we agreed with the proposal, and here we are today.

As I said, we have economically re-versioned the Budget 2013 document to set out the Government’s assessment of the UK’s medium-term economic and budgetary position. As confirmed by the independent OBR, the UK economy is still recovering from the biggest financial crisis in generations, one of the deepest recessions suffered by any major economy and a decade of hollow growth built on unsustainable debt levels. In June 2010, the Government set out a comprehensive strategy to deal with the deficit, protect the economy and provide for the foundations of recovery. This economic plan combines monetary activism with fiscal responsibility and supply side reform.

The Government are making progress. We have restored fiscal credibility, thus enabling an activist monetarist policy and the automatic stabilisers to support the economy. The deficit has been cut by a third over three years and is projected to fall in every year of the forecast. The OBR has judged that the Government remain on track to meet the fiscal mandate one year early, while 1.25 million private sector jobs have been created. Employment is just below record levels and we have kept interest rates at near-record levels, helping families and businesses.

However, there is much more to do. It is important that we understand why the road to recovery has been more difficult than was first anticipated. Although Opposition Front Benchers profess an internationalist outlook, they sometimes debate economic policy as though Britain’s economy was closed off from the rest of the world and invulnerable to other countries.

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

That was a paean of praise from the Minister for the right hon. Member for Richmond (Yorks) (Mr Hague); it is a pity that there was not quite so much for the Chancellor of the Exchequer. One of the strange things about this debate is the strong sense of having been here before to debate this issue. Indeed, it was about this time last year that we did so—and, sadly for me, the year before that as well.

[Mr Cash]

Twenty times.

[Chris Leslie]

In my case, it is not 20 times. I have responded to these debates only since the general election.

The key to the debate is the Budget Red Book. I suspect that many Members are not in the Chamber this evening because they have looked at the screens advertising the debate and seen a reference to some obscure European legislation, but I draw all Members attention to page minus 2 at the very beginning of the Red Book. In tiny 9-point font, beneath the statement that the Red Book is printed on paper containing 75% recycled fibre content minimum, it states:

“The Budget Report is presented pursuant to section 2 of the Budget Responsibility and National Audit Act 2011 and…constitutes the Government’s assessment under section 5 of the European Communities (Amendment) Act 1993 that will form the basis of the Government’s submissions to the European Commission”.

If Members knew that we were debating whether the Chancellor’s assessment of the economy was a true and accurate reflection of what is going on in the UK economy, for the purposes of that Act of Parliament, they would be absolutely astonished.

We have obligations under the Maastricht treaty articles; that is essentially what we are talking about when we refer to the European Communities (Amendment) Act 1993. Article 103 states:

“For the purpose of this multilateral surveillance”—

I know that those words stick in the throats of some hon. Members—

“Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy”.

[Mrs Anne Main (St Albans) (Con)]

Is the hon. Gentleman implying that the Opposition Benches are empty because none of his right hon. or hon. Friends could be bothered to come and scrutinise this document?

[Chris Leslie]

These Benches are not massively more empty than those on the Government side of the House. She will have to accept that this can, at face value, appear to be quite an obscure issue. [Interruption.] There are not many people on her side of the House, but I do not want to get into a contest on that matter.

[Kelvin Hopkins]

I want to pay my hon. Friend a compliment by saying that Labour Members do not need to turn up because they have such confidence in our shadow Minister and they know that he will speak for us.

[Chris Leslie]

That is one way of looking at it.

The point that concerns me is that the Government have in recent days tried to shove this issue off the Floor of the House and sweep it upstairs to a Delegated Legislation Committee. The Minister has said that this is a busy time of year and that the Government do not want to waste the House’s time with these questions, but we are already faced with an opaque description of the legislation, so it is no wonder that they are trying to push it out of parliamentary time. It is, in fact, the kind of legislation that ought to be advertised more to hon. Members.

[Mr Cash]

I would no doubt have a lot in common with some of the remarks made by those who were critical of the Maastricht treaty. Will the hon. Gentleman be good enough to tell me whether he would like to leave the existing treaties, and to describe the basis on which this nonsense, this farrago, is now being conducted?

[Chris Leslie]

Well, this does feel like rather an anachronism, but we have legal obligations under those treaties. No doubt there will be revisions, and some of the reporting requirements ought to be considered afresh, but my principal concern is whether it is right for the House to endorse the Red Book as a true and accurate reflection of what is happening in the UK economy. In my view, the Government must be kidding if they are saying that the Red Book reflects the facts. It is more like a work of fiction. They have been spinning furiously as the key indicators have taken a turn for the worse, as my hon. Friend the Member for Luton North (Kelvin Hopkins) said. In fact, the Red Book is little more than a vanity exercise cloaked in an official publication. It revolves entirely around the Chancellor’s need to retro-justify his failing economic ideology.

I invite hon. Members to look seriously—and without cracking up—at page 1 of the Red Book, and to ask themselves genuinely and dispassionately whether it is a true reflection of what is happening in the UK economy. The first line states:

“The Government’s objective is to…build…a fairer society”.

Well, tell that to those who are struggling with the new bedroom tax while they watch the great and good millionaires of this country rake in a typical £100,000 tax cut, thanks to the reduction in the 50p rate of income tax for those earning more than £150,000. So much for a fairer society!

Here is another one:

“The Government’s plan…is based on…fiscal responsibility to deal with our debts with a credible debt reduction plan”.

That is in total contradiction with the first page of the Office for Budget Responsibility report, which states plainly that the deficit reduction plan has “stalled”. That is the word that the OBR uses. No one would think from reading the Budget Red Book that the Government had presided over an increase in the national debt of 38% during their three years in office.

[Mark Reckless]

Does the hon. Gentleman believe that the solution is to borrow more?

[Chris Leslie]

I am sorry to have to tell the hon. Gentleman that the Government are already borrowing more. We shall see the borrowing figures tomorrow, and we shall see what happens to their strategy. The deficit reduction plan has gone. It has vanished. It has totally disappeared. It is a dead plan. It is no more. It is deceased. It is incumbent on Government Members to realise that they need a different strategy for deficit reduction; they need one that will succeed.

I want to return to the first page of the Red Book, which we are asked to approve as a true reflection of the state of our economy. It states that

“the Government is committed to keeping costs down for families to help with the cost of living”.

Tell that to the typical household now being asked to pay an extra £891. People are worse off because of the measures taken since 2010—not to mention the shrinking real wages relative to rapid price rises. How about the following quote for masterly understatement? It states at the foot of the page that we are experiencing

“a more subdued and uneven recovery than expected”.

Our economy shrank in the last three months of 2012, and we will see whether we are recovering when we see the growth figures for the current quarter on Thursday. How on earth could that be viewed as a recovery? This is an exceptionally disingenuous document. Reading page 1 of the Red Book is enough to make any dispassionate observer double-take their grip on the tough realities of the world around them.

We should therefore dwell for a moment on the real-world evidence. A week is certainly a long time in the Chancellor’s political lifetime—what a week has just passed. The unemployment figures were exceptionally grim. The Bank of England’s latest release on trends in lending showed that, measured annually, the amount of lending to UK businesses from banks and building societies fell in the three months to February. The Bank of England said that lending to businesses fell by £5 billion during those three months and that the decline was broad based across all sectors. So much for funding for lending.

Way before we got to the Budget, we suggested that the Chancellor should take steps to reform the funding for lending programme, but he did not do so in the Budget. It should not take an intervention from the International Monetary Fund to prick up the Chancellor’s ears and make him realise that he needs to do something about funding for lending. Ministers will have to be far more adept and fleet of foot than that.

The Treasury Select Committee said last week that it was by no means clear that the cornerstone of the Budget—the Help to Buy housing scheme—would benefit first-time buyers and, as my hon. Friend the Member for Luton North alluded to earlier, the academic methodology underpinning the key paper written by the Chancellor’s favourite economic theorists—Carmen Reinhart and Kenneth Rogoff—was discredited when a graduate student found a fatal flaw in their excel spreadsheets that supposedly underpinned the whole extreme austerity course advocated by the Treasury.

Despite the usual diplomatic finesse employed by the IMF towards its affiliating member states, its chief economist Olivier Blanchard said that the Chancellor was “playing with fire”. A year ago, the IMF was forecasting growth of 2% this year, but it is now expecting growth of just 0.7%. It was a serious mistake for the Chancellor to ignore the IMF’s calls for a reassessment of fiscal policy in the Budget, and it is right to repeat its warnings. Even Christine Lagarde, not known for departing from the Chancellor’s opinions on these matters, said that the pace of fiscal consolidation

“has to be adjusted depending on the circumstances and given the weak growth that we have observed lately because of reduced demand addressed to the economy”

and that

“now might be the time to consider”

doing so.

[Mr Nuttall]

We are not talking about whether this document should be submitted to the IMF; we are talking about submitting it to the EU. If we compare our growth with that of the eurozone, the EU’s own body, EUROSTAT, is forecasting that growth in the eurozone will go down by 0.3% and that ours will go up by 0.9%.

[Chris Leslie]

To whomever we are asked to submit this document—to the IMF, the EU, the hon. Gentleman’s constituents or his mother-in-law—I would be embarrassed, if I were the hon. Gentleman, to stand behind it as a true reflection of the state of the UK economy. To cap it all, last week, we saw another humiliating blow to a Prime Minister and Chancellor who kept saying that our triple A credit rating was the No. 1 test of their economic and political credibility.

[Mr John Redwood (Wokingham) (Con)]

Given that the latest Government plans envisage borrowing £60 billion more in 2014-15 than in the original summer 2010 plan, how much more than that extra £60 billion borrowing would the hon. Gentleman recommend?

[Chris Leslie]

Unfortunately, we are not likely to have a general election until 2015. I would be grateful if hon. Members did whatever they could to bring that forward a little, but heaven knows what state the economy will be in—even by the time we get to 26 June, which I believe encompasses the spending review period. I am sure that yet further revisions of these figures, which keep changing like shifting sands before us, will be made. We simply do not know what a future Labour Government will inherit—hopefully in 2015. I will get back to the right hon. Gentleman nearer the time. One thing seems clear to me: we have to take some bold action to stimulate the economy, rather than adopt this laissez-faire, arms-folded, non-interventionist approach. Even the Financial Secretary used to disparage that, but he has now signed up wholly to it.

[Greg Clark]

Does the hon. Gentleman agree with the right hon. Member for Morley and Outwood (Ed Balls), who said:

“Long-term interest rates are the simplest measure of monetary and fiscal…credibility”?

[Chris Leslie]

Long-term interest rates reflect a number of factors. Government Members would like to think that low bond yields were a reflection of fiscal policy measures alone—[Interruption.] The Minister should hear me out. He likes to think that that is the one test. As I say, it used to be retention of the triple A credit rating, but that has gone, so something else has had to be found. Long-term bond yields, however, are also a reflection of who is purchasing them. I do not know whether the Minister can help us out by elaborating on who exactly is purchasing the Government bond yields, because the Bank of England seems to be doing an awful lot. One branch of the UK Government institutions is helping out the other branch of Government institutions—depressing, of course, that yield. The Minister should not be too proud of market expectations that things are going to be so bad for so long that our interest rates are at the ultra-low level. It is not a reflection of fiscal policy; it is a reflection of expectations of future economic performance and of the interventions in monetary policy by the Bank of England.

[Kelvin Hopkins]

Is it not simply the case that bond markets can get things terribly wrong as well? We know of the 1929 crash and the 2008 crash, for example. I have no doubt that some have great optimism about the future of the world and national economies, but they can get it wrong, too.

[Chris Leslie]

That is why some in the bond markets in the City and even the IMF and other economic commentators and business leaders are increasingly saying—as PIMCO did today in its intervention on these issues—that we have to do something about this. Demand in the economy is cripplingly bad; we have to do something to take a different course. The Chancellor’s plan is not just failing; it is adding to our problems with the public finances. We will see the state of the deficit reduction plan and what is happening with this trajectory when we see the figures tomorrow. We hear of blaming the snow, blaming the royal wedding, blaming all sorts of other players including the European Union; it is amazing how we never hear that it is the fault of those who currently occupy the Treasury.

[Greg Clark]

I have a genuine question for the hon. Gentleman again. Was the shadow Chancellor wrong when he said:

“Long-term interests are the simplest measure of monetary and fiscal policy credibility”?

When he said that, interest rates were at 4.75%. Was he wrong?

[Chris Leslie]

The Minister can ask me the same question as many times as he likes, but I will give him exactly the same answer. There are a number of reflections and metrics for judging economic performance, but in these particularly stagnant economic circumstances, I do not think that he should wear as a badge of honour those ultra-low bond yields because they actually reflect low and depressed expectations about the future performance of the economy. He knows that that is true. It is also a reason why not just Moody’s but Fitch have taken out the legs from beneath the UK’s triple A credit rating after three years of stagnation, rising unemployment and billions more borrowing to pay for economic failure. It is time that the Treasury woke up and realised that its plan is causing long-term damage not just to the public finances, but to British families and businesses as they pay the price. When even their biggest allies—the IMF and the credit rating agencies—abandon the Government, it is time to put political pride aside and finally act to kick-start the economy.

Most independent forecasts suggest that on Thursday the GDP figures will show small positive growth, but growth of just 0.3% would simply mean that the economy was back to where it was six months ago. After three years of stagnation, we need to see decisive evidence this week that a strong and sustained recovery is finally under way—otherwise the Chancellor will definitely be in real trouble. We cannot seriously be expected to ratify this Budget Red Book as our representation to the European Union, or anyone else, of how our economy is performing.

Are we supposed to ignore the double downgrading of the UK’s credit rating, first by Moody’s and then by Fitch? Are we supposed to skim over the new figures from the Office for National Statistics, which show that the average weekly pay packet was £464 in February and £480 in the same month last year? That is the worst set of data since the ONS started recording such facts. Are we supposed to turn a blind eye to the fact that youth unemployment rose by more than 20,000 last month? The total figure is now just under 1 million. Should we just forget about the risks of that lost generation?

The Red Book is a staggering work of deception wrapped in the heroic conceit of a Government who are trying to fool people into thinking that they are on track. They are losing control of the public finances because they have lost the plot when it comes to the relationship between economic growth, jobs, the economy, and the revenues that we need in order to get the deficit down. It would be far simpler for the House to reject the motion and return the Government to the drawing board to get their act together and work on an alternative plan that might actually give us the bold action that we need, rather than the stagnation that we are suffering.

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[Mr Cash]

I agree with my hon. Friend. We must be realists. T. S. Eliot once said,

“human kind

Cannot bear very much reality”,

but Britain has got to wake up. It is crucial at this stage that we understand—in a constructive, not a negative, sense—that we have both a problem and an opportunity, but that opportunity will not last much longer, and we must not simply repeat the recitations and mantras about section 5 while not tackling the intrinsic problems.

These papers were, no doubt, prepared by worthy civil servants, but they may well not reflect the real situation. Let us look at the question of the level of debt, for instance. I mentioned that in an intervention on my right hon. Friend the Financial Secretary, and I gave him the percentage figures. However, under the previous Government—I now turn my attention to those on the Opposition Benches—I repeatedly said, along with my right hon. Friend the Member for Wokingham (Mr Redwood) and one or two other Members, that the debt that was accumulating under them was causing so much damage to our economy. Furthermore, as I said at the time of the last election in my manifesto—or, rather, in my personal message to my constituents—the stated debt levels, which is the key issue, were based on what could only be described as a lie.

[Chris Leslie]

What does the hon. Gentleman think about the fact that the national debt has risen by 38%—by over a third—in the past three years, while the current Front-Bench team has been in charge?

[Mr Cash]

Not only am I appalled by that, but I also recognise that the genesis of much of this can be traced back to the time of the previous Government. Furthermore, we now understand from the official figures published by the UK Statistics Authority that the level of debt—which at one time was, astonishingly, described as being “merely” £1 trillion—will go up to £1.5 trillion. However, under the previous Government the real level of debt—taking into account public pensions, Network Rail, nuclear decommissioning and several other factors, which we cannot ignore—was actually up at about £3.25 trillion, as I argued at the time, and if we include those factors it is now likely to be about £4 trillion.

That is the inheritance of the young people of this country. They have got to be brought into work as a result of growth, but the prescription from the Opposition Benches is more debt, not less, and more Europe, not less.

Regardless of how I vote this evening, I pay tribute to the fact that at least the coalition Government have begun to look at these questions. My complaint is that they have not done enough and they are going too slowly. If they do not get on with it, there will be a catastrophe. In fact, we are already living through the beginnings of a catastrophe.

There is another question to be asked about growth. We can only grow our economy by growing from the other countries with whom we trade. In a nutshell, we must engage in cuts, but we need the taxation from the growth of small and medium-sized businesses in order to provide the public services those on the Opposition Benches say we need to provide. All they do is call for ever more cuts, but they talk about growth but do not actually do anything about it.

The European approach of large, and greater, Government spending tends both to increase the rate of Government debt and to lower the GDP growth rate. As a result, growth in most European countries, and the possibility of getting Government debt under control, recedes. The rigidities imposed by a single currency—the euro—and the burden of EU regulation on EU economies are continuing to cause frictions and difficulties and will destroy the countries in the European monetary union.

If only people would listen at the time, when it matters, rather than afterwards and then try to cover things up. Only a few weeks ago, Moody’s downgraded our economic performance, and Fitch did so in the last couple of days. Portugal, Ireland, Greece, Spain, France and Italy are now all countries of perpetual economic concern. There is a black hole, but the call is for more and more Europe.

I referred to the remarks of Angela Merkel today. It is regrettable and unfortunate that she was quoted as saying that countries in the eurozone must accept that Europe “has the last word,” and need to work more closely together if the continent is to avoid going into decline. I am sorry to have to say this so specifically, but that is precisely because there is a centralised approach, which is driven by German requirements and goes back to Chancellor Kohl.

In the 1990s, I wrote a pamphlet called “British and German National Interest”, and we are seeing a repetition of that time. Chancellor Merkel said:

“We need to be prepared to break with the past in order to leap forward. I’m ready to do this.”

In fact, she is going back to the past—not the dark past we all witnessed so vividly, but the kind of past that assumes it is not actually a European Union, but in practice, a German Europe. We should ask people in Cyprus and Greece what the position is. She said:

“Germany will only act together with the others—hegemony is totally foreign to me.”

It may be foreign to what she wants, but the practical reality is that it is happening.

We are now being lectured by Madame Lagarde, who was a French economic Minister and is now head of the International Monetary Fund. She said:

“We violated all the rules because we wanted to close ranks and really rescue the euro zone.”

Those are the rules we are discussing. On top of the theft in Cyprus, everyone knows that those of us who argued the case have been proved right.

I am sorry to hear that Madame Lagarde appears to have criticised our Chancellor. It is some gratitude for all the work he did urging her to accept the presidency of the IMF, and leading the charge to make sure she got it.

Everyone wrings their hands, but what are the Government doing? We are being locked into the question of whether the debt is being sufficiently reduced, but the debt is escalating and the deficit remains unacceptably high. Problems in the eurozone have a real effect on the UK economy. I repeat that it is not just about the eurozone, or just about the European Union; it is about Britain, which is why we have to get our act together. I notice that the Chief Whip has just come into the Chamber, so I hope he will listen with care, because these debates will unravel.

Real GDP fell in every quarter of 2012 in the eurozone, and by 0.6% over the year as a whole. The IMF forecasts a further fall of 0.3% this year. What is happening is completely unacceptable. No wonder the UK Independence party is making such headway; it will continue to do so until there is real growth.

We have the opportunity. We can deliver. No doubt the commentariat will fail to report this debate, as it fails to report other debates when we deal with facts and not mere speculation, but that will not prevent us from continuing the fight. We have the means to achieve the results. Some of them will come from a change of position by the Government, going for more and more growth based on real policies for growth and disentangling ourselves from the shackles of the regulatory arrangements of the European Union, making sure that the EU does not dominate the free trade agreements that are being determined. We have to be able to trade on our own terms, just as we in this Westminster Parliament have to decide the future of British policy.

As the Prime Minister said in his five Bloomberg principles, our national democracy depends on our national Parliaments. European democracy depends on their national Parliaments. He was right about that. Let us do something about it. Let us make sure that we run our own economy based on our own assessment and that we do not remain shackled to the existing treaties. It is time to put an end to them.