Jobs and Growth

David T C Davies Excerpts

Wednesday 12th October 2011 Commons Chamber

[David T. C. Davies (Monmouth) (Con)]

I confess that as I listened to the shadow Chancellor this afternoon, I almost felt a growing sense of admiration for the sheer effrontery of the man. This man who came to deliver a lesson to the Chancellor was personally responsible for much of the economic mess that the country now finds itself in. He, of course, is no longer in his place, but I wonder whether I might give a quick economic history lesson to those Members on the Opposition Front Bench who have hung around to listen to the debate.

In 1997 this country had a national debt of £350 billion and was basically spending what it earned. By May 2008, well before the collapse of Lehman Brothers and the banking problems, the national debt had already increased to £629 billion and the Government, during the boom times, had run a deficit of around £30 billion a year. I am yet to hear any Opposition Member explain why, when the country was booming, they spent £30 billion a year more than the country was taking in taxes. Once we hit the banking problems, which the previous Government successfully blamed all the economic problems on, the debt skyrocketed to £1 trillion.

Of course, even that is not the full story, because many sensible economists claim that the national debt is at least twice as large, as the figures used do not take into account the PFI contracts used for all the schools and hospitals that the previous Government built but never paid for. It does not take account of the liabilities for organisations such as Railtrack and Metronet, and of course it takes no account of public sector pensions. The reality is that we must now deal with a debt of at least £1 trillion and the deficit of £160 billion that we inherited.

Opposition Members like to blame it all on the banks. “It was all the fault of the wicked bankers”, they say. I have done a little checking with the House of Commons Library, and as far as I can ascertain the banks received £100 billion. That money was given out not simply in cash, but in shares and the rest of it, so a lot of it might come back to us. If we take the best-case scenario for the national debt, which is £1 trillion, rather than the £2 trillion suggested by many economists, and the worst-case scenario for the £100 billion that was given to the banks, which is that nothing will come back, even then that money accounts for only 10% of the national debt. What about the other £900 billion? When will the Opposition start accounting for that?

One trillion pounds is a lot of money. I was thinking about it earlier and trying to put it in perspective. If we were to create a graph and used 1 cm to show £1 million, it would have to stretch all the way from here to Highgate cemetery to show the scale of the wanton spending for which Opposition Members are responsible—I do not know whether it is relevant, but that is the burial place of Karl Marx.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I wonder whether the hon. Gentleman knows what the public sector debt was in 1997 and in 2007 before the recession.

[David T. C. Davies]

Yes, in 1997—

[Debbie Abrahams]

Does he know what it was as a percentage of GDP?

[David T. C. Davies]

Has the hon. Lady finished now, and may I continue? I am always fascinated by the fact that comparisons are made between levels of debt as a percentage of GDP. I will certainly give way again if someone can explain why we compare national debt with GDP. Why do we not do what any company would do and compare it with revenue? If we look at a comparison with 2010, when this Government took over and when the national debt was £1 trillion, we will see that the revenue coming in was £520 billion. The country had a national debt that was almost twice the revenue it was taking. Anyone who has run a company—most Opposition Members have not, but I have—will know that any company that found itself in such a situation would be declared bankrupt immediately.

[Kwasi Kwarteng]

Will my hon. Friend remind the House why the previous Labour Government ran a deficit for nine consecutive years from 2001 to 2010, despite having a boom?

[David T. C. Davies]

My hon. Friend asks a very good question. They managed to come up with an excuse after 2008, following the collapse of the banks, but as I said earlier, I am yet to hear an answer on why they ran a deficit from 2001 to 2008. Perhaps we will get one later.

What I did hear from the shadow Chancellor was some rather mealy-mouthed insults directed towards my right hon. Friend the Chief Secretary to the Treasury, who had a proper job outside politics and Government, as I did, which the shadow Chancellor seems to think is worth mocking him for. My right hon. Friend was not the man who was responsible for the £1 trillion-worth of debt, for selling gold at a fraction of the price, or for running up deficits in boom years. [Interruption.] I will not say anything about the euro at the moment, but there are many Labour Members who were urging us to the join the euro during those times and are now trying to give us a lesson in economics. I notice that they have all now gone very quiet.

The reality is that Labour Members never, ever learn their lesson. For them, it is not a case of plan A or plan B; there is only one plan: “Let’s tax people as highly as we can, and when we’ve finished squeezing every penny out of them, we’ll borrow more money.” They do not remember the words of one Labour Chancellor of the Exchequer during a Labour conference: “Comrades, you may think that we can tax and spend our way out of a recession, but I tell you that is no longer an option.” They still have not learned the lesson.

Clement Attlee failed in the 1940s when he tried to build his welfare state on the back of American war loans. There was Harold Wilson in the 1960s telling the public that the pound in their pocket was worth the same when he was rapidly devaluing it. Then there was Jim “Crisis, what crisis?” Callaghan, who, just like his successors, brought the country to the brink of utter bankruptcy, and did not even seem to think that he had done anything wrong. It was 18 years before they got another chance, and they have done exactly the same thing again: tax and spend, borrow and spend, just keep on doing it and do not worry about it.

I am glad that we have a Government who are not going to go for the easy option, which would be to borrow a whole load more money now in the hope of winning an election, which is exactly what Labour Members were doing for a couple of years. We are going to take some tough decisions, and that means getting our books in order. Unlike the shadow Chancellor, I know, having run a small family haulage business, that one cannot carry on spending more money than one gets indefinitely. I welcome the fact that the Chancellor is going to encourage real growth by making it easier for businesses to take people on and not have to worry about employment tribunals, which anyone who has run a small business does worry about all the time because of the number of spurious claims.

[John Mann]

Rubbish!

[David T. C. Davies]

I wonder whether the hon. Gentleman has ever had any experience of running a business or dealing with spurious employment tribunals—I very much doubt it.

I am also glad that the Chancellor has recognised that reducing our carbon emissions at a time when the economy is facing problems is not necessarily the wisest thing to do, particularly when the Government are now having to accept that our winters are getting colder, that more people are dying through cold than through heat, and that the link between carbon dioxide and global warming is not quite as clear-cut as many people say.

[John Mann]

rose—

[David T. C. Davies]

I will not give way again, because I have done so twice and I do not want to cut myself off.

I congratulate the Chancellor and all his colleagues in the Conservative and Liberal Democrat parties and urge them to stay the course, to ensure that we spend what we earn, and not to listen to Labour Members or take any notice of people such as the former Prime Minister. Even he did not seem to know the difference between debt and deficit, because anyone who looks at the YouTube video of him abusing Mrs Duffy and calling her a bigot will notice that halfway through he said, “We will cut the debt in half.” Did he not know the difference between debt and deficit, or was he planning much deeper cuts than the coalition Government? Perhaps someone will answer that question.

All Back Benchers on this side of the House are supportive of the Government because we recognise, as we always have, that it is not possible to carry on spending money that one does not have because that merely creates a bigger problem further down the line for our children. That is why I urge my colleagues to stay the course.

--- Later in debate ---

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

It is a pleasure to be called to speak in the debate, and a pleasure to follow the hon. Member for Wycombe (Steve Baker). As a history graduate, I have enjoyed the history lessons during this afternoon’s debate. I enjoyed the intervention from the hon. Member for Monmouth (David T. C. Davies), telling me all about the ’40s, ’60s and ’70s. I have heard many Members tell me what happened under a Labour Government long before I was born, but it seems to me that we have always bounced back to the same point: those on the Tory Benches say that it is all Labour’s fault, while we say that it is all the Tories’ fault. The truth is, where is that getting us?

In my constituency, 2,000 people are claiming jobseeker’s allowance. Some 40% of those are under the age of 24. Behind those figures, there are real human tragedies: kids leaving school believing that there is no hope for the future other than being driven—let us hope not—into the hands of drug dealers or becoming involved in crime; the hard-working father who comes home one night and says to his family, “I’ve been made redundant after 20 years,” and his wife who worries; the single parent who is bringing up children on her own and who has just lost her job. What does she do? It is all very well quoting statistics and figures, but what can we do for those people?

Unemployment is not a price worth paying. For me, anybody losing their job is a total tragedy. That is why the motion is so important: we should use bankers’ bonuses to create youth jobs and do something to help people, not after being out of work for six months, as the Prime Minister said in his speech, but from day one. I remember when I was a trade union official and jobs were going as, unfortunately, they were being offshored. A scheme was created so that when people were made redundant the company matched half their redundancy to be used for training. Some people decided to become driving instructors, whereas others in the Solent decided to become ship builders, and so on. It interested them and that was what they wanted to do. I want some incentive in the tax system for companies that make people redundant to use similar ideas.

[David T. C. Davies]

Will the hon. Gentleman give way?

[Chris Evans]

I am sorry, I cannot take an intervention because other people want to speak, although I would love to give way to the hon. Gentleman.

As I was saying, when a person is unemployed—I do not know how many people in the Chamber have been unemployed—it is soul destroying. It reduces confidence and, in the worst cases, it brings about depression. If anybody wants to see a microcosm of the economy, they should walk down the local high street. There is nothing more sad and depressing than seeing the butcher, the baker and even the candlestick maker all boarded up. Nothing says more clearly that the economy is not working.

So what can we do? We could reduce VAT on a temporary basis to encourage people to come back to the high street, but we could do more than that. We could encourage local authorities to reduce their business rates so that people can stay in their businesses and we could encourage communities to come in so that these places are not boarded up. Above all, we could ask authorities to start providing free car parking. That might be a bit more simplistic than the credit swaps we have heard about, but I am concerned.

I am going to say something quite shocking which is not in vogue at the moment. This afternoon, I spoke to Lloyds TSB and I thought, “It's all very well to bash the banks”—and we should bash those who have been responsible—"but we have to make an assertion and realise that only one part of the banking industry failed." It was not the retail banker or the cashier in Blackwood High street or Newbridge, who serves their community; it was the bankers in the City, and that part should be reformed. However, we have to be very careful when we talk about reform. We cannot introduce regulation that hinders financial innovation. That would be impossible, and I am very concerned about that.

We have to ask ourselves how we are going to encourage manufacturing when we do not encourage banks. I will be honest: I have been one of the banks’ biggest critics, but at the moment we are asking them to do something that is almost impossible—we are asking them to save money and lend at the same time. How will they do that? I do not know, but tonight I will walk through the Lobby and support the motion, because I genuinely believe that we need to do something to promote growth.