The Economy

David Anderson Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr David Anderson (Blaydon) (Lab)]

The shadow Chancellor makes the point that the Government are trying to borrow their way out of a crisis. I suggest that we are actually borrowing our way into a bigger crisis. [Laughter.]

[Ed Balls]

Government Members may laugh at an 80% rise in youth unemployment, but that is not a laughing matter for the young people concerned, or for our economy. [Interruption.] I am going to make this point because it is very important. It goes to the heart of the argument.

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[Sammy Wilson (East Antrim) (DUP)]

First, I welcome a number of things set out in the autumn statement, such as the increased money for infrastructure that will come to Northern Ireland. It will not make up for the 40% cut in capital spending announced in the Budget, but it will fill some of the gaps. Secondly, I wish the Chancellor well in his battle with the Secretary of State for Energy and Climate Change, and perhaps the Prime Minister, as he takes on the green lobby and seeks to strike a balance in the economy and redress the damage that many green policies are doing to industry.

I will focus on some of the points that have been made on the need for growth. All the problems that have been identified as impeding growth in the UK economy overall are magnified in Northern Ireland. First, there is the heavy dependence on the public sector, which means that public sector spending cuts have a greater impact. Secondly, there is the difficulty businesses have in obtaining finance from banks in an economy that is heavily dependent upon failed Irish banks and where penetration by UK mainland banks is not great. Of course, the problems in the eurozone have been magnified because we live next door to, and are heavily dependent upon, an economy that has been greatly affected by what has happened in the eurozone and the austerity measures that the Irish Government have had to take. Indeed, many more such measures were announced yesterday in the Irish budget.

One of the things the Chancellor has focused on, and rightly so, is the importance of keeping interest rates low, and I do not think that any Member disagrees with that. It has an impact on businesses and mortgages and on those who have taken out loans, so it is correct that we should be following policies that keep interest rates low. However, I do not accept that they have been kept low in the UK only because of his plan A and his austerity measures. Looking at the reasons, one sees that of course economic management and confidence in it is important, but so too is the fact that the Bank of England has been buying up £220 billion-worth of Government bonds as a result of quantitative easing. That has injected confidence that other European countries that have been mentioned today would perhaps not have had because the European Central Bank has not done the same.

Secondly, we also have the flexibility to adjust our exchange rate and so have a way of stimulating some growth, whereas many European countries that are tied to the euro do not have that. Thirdly, even though the Government have admitted that their plan for getting rid of the deficit will not be fulfilled in the set period and that they will have to borrow more than expected, the financial markets have not deserted the UK. In fact, they have remained solid. I believe that one of the reasons for that is that we are not regarded in the way that some of the other European countries are, for the very reasons I have given. If anything, the Government ought to capitalise on that. If the markets are prepared to lend to pay for unemployment, would they not be even more willing to lend to pay for investment in infrastructure that could give growth which, in turn, could provide the ability to pay back the debt we already have? Rather than walking away from borrowing, and from borrowing—perhaps only modestly—to do the things that Members have mentioned today, the Government should capitalise on the reputation that their management and our flexibility outside the eurozone gives the Chancellor when it comes to borrowing money.

There are already signs that the Government know their plan is wrong: they are engaged in quantitative easing, which is a way of stimulating the economy by monetary means; and in the autumn statement they indicated that they were prepared to spend more money on infrastructure. They ought then to look at what they can do and at what borrowing they can undertake not to pay to leave people sitting at home, but to pay to get them into work, growing the economy and generating tax revenues.

The hon. Member for Gainsborough (Mr Leigh) said that he did not want to see the public sector increase, but such borrowing would not have to be for the public sector. Indeed, the hon. Member for Ochil and South Perthshire (Gordon Banks) mentioned VAT cuts for the building industry. That would not increase the size of the public sector; it would stimulate the private sector and grow the economy.

[Mr Anderson]

In reality, can the two sectors not work together? My hon. Friend the Member for Bishop Auckland (Helen Goodman) mentioned a classic example, Building Schools for the Future, for which we had money earmarked in our constituencies. In my constituency, there was £80 million, and it would have gone not to the public sector but to Gateshead council, which would have passed it straight on to private sector builders to build the schools that we need. Is that not the way we should be working our way out of this crisis?

[Sammy Wilson]

That is exactly the point that I am trying to make. Borrowing does not necessarily have to mean a bigger, bloated public sector; it can be directed in many other ways that would meet the demands of even some Government Members. In Northern Ireland, tourism is a huge industry, and selective cuts in VAT could stimulate spending there and help the Finance Minister to realise the potential to increase tourist numbers by 3.5 million over the next two years, thereby generating private sector growth and helping us to rebalance the economy.

Things can be done and there is potential. The Government have more flexibility than they accept, and if we are to deal with the social strain, the economic hardship and the impact on businesses we need to see examples of that flexibility in order to get back on to a path to growth and back into a position where we can repay our debts.

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[Mr David Anderson (Blaydon) (Lab)]

Last week was the week when the bubble burst and the Conservatives had to accept what everybody else knew: that the Chancellor had got it wrong on growth, this year and next; on unemployment, up by half a million next year; on borrowing, going up to £158 billion; on children in poverty, again set to rise; and on hitting women the hardest. The House of Commons Library says that the effect of cuts to tax credits and attacking public sector pay will impact on 73% of the women involved. There is complete humiliation for the Chancellor and even more damage to our economy, but who carries the can for the failure of the system? The old, the young, the jobless, the disabled and the women of this country.

As always, when capitalism fails, it is the most vulnerable who suffer. We should look back to the 1930s. Only a few weeks ago, young people marched to London in a sad echo of the crusades of those who left Jarrow 75 years ago. Those brave souls in 1936 did not march to London for the exercise—they did it because they were starving, jobless, and desperate. Just like today, they were turned away empty-handed and made to carry the can for a mess they did not create.

We all know that history repeated itself in the 1980s, when the country was led in a series of recessions by a neo-liberal Government who saw the deindustrialisation of this nation as a price worth paying. They destroyed not only the coal mining and shipbuilding industries of this country but the manufacturing industry that those industries helped to create and that was making leading, cutting-edge technology for the coal-mining industry. Why did we do that? Because the market demanded that we did it. It said that British coal was too expensive and that we needed cheaper coal to deliver cheap power. The Government’s response was, “That’s okay. It’s a price worth paying.” They were not paying it and their constituents were not paying it; the people in my part of the world were paying it. The outcome was that hundreds and thousands of lives were decimated, local communities withered and died, and support industries died off.

The truth remains that it is the less well-off, the poor, the frail, the poorly educated who lose the most, while those in charge—the ones to blame—get off scot-free. What else can we say when we face a situation where a quarter of our children will be living in poverty, record numbers of people are out of work, and those lucky enough to retain a job face pay freezes, an unprecedented drop in living standards, and a real lack of security, while at the same time Barclays makes a £11.6 billion profit and pays only £113 million in corporation tax, and its poor chief executive is paid only a measly quarter of a million pound salary but, luckily for him, it is topped up with a bonus of £6.5 million?

[Mr Bain]

My hon. Friend is making a passionate argument, as ever. The Chancellor said earlier that the only people who were calling for an alternative were, in effect, communists. Does my hon. Friend share my sense of disgust at the Chancellor’s slurring the democratically elected Government of Denmark, who are engaged in a stimulus programme and have seen their bond yields fall?

[Mr Anderson]

I am very clear that the Chancellor is trying to pretend that nobody else in the world wants what we want. The whole world is crying out for a change to a system that has let it down.

The people of this country—the nurses, the doctors, the care workers—are carrying the can for the failure of global capitalism. We now know that 98 of the top 100 FTSE-listed companies are avoiding £20 billion-plus of tax by putting their money into offshore tax havens.

[Lorely Burt (Solihull) (LD)]

I am very sympathetic to what the hon. Gentleman is saying about high pay and tax evasion; we are trying to do all we can about that. As regards stimulating the economy, what would he say about the situation in America, where that stimulus has been tried and it is now £15 trillion in debt?

[Mr Anderson]

I will come to what the hon. Lady’s party has had to say and pick up her point then.

It is little wonder that we are in a mess. We are told that even in the City of London—the heart of capitalism—job vacancies have fallen by 16% in a single month. In the past month alone, retail sales have dropped by 1.7% despite huge pre-Christmas discounts. The Engineering Employers Federation says that it expects a drop in its production from 2.2% to 0.9% next year. But do not worry—the Deputy Prime Minister, the leader of the hon. Lady’s party, tells us that he is going to crack down on top corporate pay. Does that mean that he will do what he and his friends in the Conservative party are doing to public sector workers—to nurses, doctors, firefighters and policemen—by putting a two-year pay freeze and a 1% cap on to private sector pay and the fat cats? Of course not. The Deputy Prime Minister tells us:

“I don’t mean the government starts going around setting pay rates in the private sector...I believe that people should be well paid if they succeed.”

Can he tell me where the nurses, the doctors, the firefighters, the police, the home care workers, the child care workers, and millions of others are failing?

[Jim McGovern (Dundee West) (Lab)]

As everyone is aware, the Prime Minister referred to last week’s day of action as a “damp squib”. I think that it was anything but a damp squib. Does my hon. Friend agree that if the coalition Government stay on the course they are on at the moment, there will be many more squibs and none of them will be damp?

[Mr Anderson]

I certainly hope that there is no need for any more squibs, damp or otherwise. It was absolutely wrong that people felt forced to go on strike last week, but they felt that they had no option because the Government were clearly not listening; I hope that they are now.

All in this together? What a laugh! Has Bob Diamond really become 5,000% more successful than his predecessor was 30 years ago? Of course not, but his salary is 5,000% more than his predecessor’s was in the early 1980s. The people who are running our public services are asking, “Where is the fairness?” At a time when other people are wandering around with massive pay packets, they are losing their jobs by the bucketful. Last week, in a throwaway line, the Chancellor dropped in the horribly disrespectful term, “headcount”, when he said that the headcount of job losses in the public sector would rise from 400,000 to 710,000. The headcount! These are men and women, flesh and blood—people with kids, with mortgages, with debt, and with holidays, cars and Christmas to pay for, and they face a future with no hope because this Government put the interests of the market before the interests of the people. It is economic madness driven by an ideology that does not care about the impact on real people.

Of course, the Conservatives will argue that this is all necessary. Perhaps we could accept that if it was actually working, but we see now that it is not. This year, in the north-east alone, 32,000 public sector jobs have gone, 1,080 of them at Gateshead council, with another £38 million cuts to come next year. We will have more people on the dole, poorer service delivery and more hardship all round. It is the classic Tory remedy, and we have seen it all before. Mervyn King may well be right—this might be the worst crisis in our history—but, sadly, the Tories are using exactly the same old methods to get out of it.

As my hon. Friend the Member for Birmingham, Hall Green (Mr Godsiff) said, we need a real dialogue that puts the needs of ordinary people first, and not the demands of the market. We need to move away from the appalling situation that we are in yet again, where bankers and people in the money markets are acting like the arsonist who burns your house down and then comes back next week and offers to rebuild it for you and charges you twice the price for doing it. This is a challenge to all parties in this country, including mine. We need to go beyond the narrowness of the past 30 years and look to develop an economic system that ignores the markets and does right for the people of this country.