Jobs and Growth
Debbie Abrahams Excerpts(14Â years, 11Â months ago)
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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 ÂŁ350 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 ÂŁ629 billion and the Government, during the boom times, had run a deficit of around ÂŁ30 billion a year. I am yet to hear any Opposition Member explain why, when the country was booming, they spent ÂŁ30 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 ÂŁ1 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 ÂŁ1 trillion and the deficit of ÂŁ160 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
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.
Oral Answers to Questions
Debbie Abrahams Excerpts(15Â years, 3Â months ago)
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Huw Irranca-Davies (Ogmore) (Lab)
2. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
13. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010.
The Chancellor of the Exchequer (Mr George Osborne)
The Office for Budget Responsibility’s latest economic forecasts were published in March. The whole purpose of creating the OBR was to have forecasts that were independent of the Chancellor, so for me to give a running forecast would completely undermine the institution. To strengthen its independence, I am today announcing the appointment of Lord Burns and Kate Barker as the new non-executive members of the OBR. They were posts that the Treasury Select Committee recommended that we create. I am also announcing today the new appointment of Michael Cohrs as a non-executive director of the Court of the Bank of England, along with the re-appointment of Sir Roger Carr, Lady Susan Rice and Harrison Young—
Mr Osborne
The OBR is a new institution that I think we all agreed should be established and put on a statutory footing. It is independent, and it makes independent forecasts. If the Chancellor of the day started giving a running commentary on those forecasts or making his own forecasts, that would completely undermine the OBR. The institution was introduced in order to give more credible independent information to Parliament. It is interesting that, in the acceptance speech that the former Foreign Secretary would have given if he had become the Labour leader, one of his central points was that Labour should embrace the OBR as an idea that it should have had while in office and that it should support in opposition.
Debbie Abrahams
Over the past six months, we have seen the economy flatlining, whereas in the previous six months we saw growth of 1.8%. Can the Chancellor explain to the House exactly what has changed?
Amendment of the Law
Debbie Abrahams Excerpts(15Â years, 5Â months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
It probably comes as no surprise that I was deeply disappointed by the announcements in last week’s Budget. The Chancellor was strong on rhetoric but short on action that will deliver a sustainable economy, quality jobs, and a fairer society. Despite the Budget’s being hailed as a Budget for growth, the OBR growth forecasts were revised down for last year, this year and next year and although the OBR has revised medium-term growth prospects slightly upwards, it is entirely unclear why less growth now should somehow automatically lead to higher growth later.
The OBR concluded that the effects of the Budget’s so-called growth measures—the cut in corporation tax, the relaxation of planning laws and the creation of 1980s-style enterprise zones—would be minimal and unlikely to raise the trend growth rate of the UK economy. We already know from evaluations of similar and comparable enterprise zones, not just in this country but in Europe, that there has been a zero net increase in growth. There tends to be a relocation effect, but that is about it. I am glad that many of our colleagues have had positive experiences, but the overall evaluation shows quite the opposite.
Once again, the Government are ignoring evidence and pushing ahead with ideologically driven policy. Not only is the Chancellor ignoring evidence, but he is failing to listen to the British people. The Chancellor made little reference to public spending plans—his Budget stuck rigidly to the public spending plans set out in last October’s spending review. It was as though he thought if he did not mention the cuts, nobody would notice them. Well, the people have noticed and in addition to sending clear messages to the Government in the recent by-elections, mine included, on Saturday more than 250,000 people also voiced their objections to these disastrous cuts to vital services—the police, social care, education, and our NHS.
Despite what the Government say, such cuts are affecting our NHS. One of my constituents, Peter Thornborrow, was diagnosed with cataracts last year. He is a 50-year-old precision engineer and he has had his cataracts operation refused. Cuts are going on and are affecting his ability to work. That is obviously not what we need. My surgeries are full of the tragic consequences of the Government’s policies as services are cut or rationed.
In addition to the human tragedy resulting from the disastrous cuts to public spending, the spending plans will also continue to crimp UK economic performance. The irony is that the deficit will increase as a result of what the Government are doing, but they say the cuts are needed to reduce the deficit. The Government are now expected to increase the amount of borrowing—the amount of debt—by an additional £45 billion over the coming years. Last week, as we have already heard, the credit ratings agency, Moody’s, warned that slower growth combined with
“weaker-than-expected fiscal consolidation”
could put the UK’s triple A credit rating at risk. In other words, the Chancellor might be stumbling into exactly the situation he says he is trying to avoid.
Alongside the downgrading of growth and the cuts in services and jobs, prices have and will continue to rise faster than expected and wages slower, dampening the recovery even further and adding to the deficit, not to mention the spectre appearing to home owners of an increase in their mortgage interest rates. The rise in inflation to 4.4% announced last week—that is the consumer prices index, which is much higher than the EU average of 2.8%—and the revised upward projections, coupled with average earnings going down, mean that the squeeze in living standards is set to intensify this year and next.
Most alarmingly, forecasts for unemployment have been revised up and it is now expected to reach more than 8% this year. In my constituency, we have seen unemployment nearly double over the past few years, with one in five young people affected. That is simply unacceptable—we cannot have another generation of young people consigned to the scrap heap as we saw in the 1980s and 1990s. I was a community worker in the 1980s and I can remember how the young people I worked with felt abandoned and written off. The Chancellor is proposing more work experience opportunities for our young people, but will that help young people like those with whom I used to work? I remember one young woman whom I took to job interviews for work experience and she rocked backwards and forwards in her first interview. It was tragic and it took five interviews before an employer was willing to take her on and months of hand-holding before she increased her confidence and self-esteem so that she could go on to secure permanent employment.
On the surface, the proposals to increase work placements and apprenticeships seem positive but those must be high-quality programmes that cater for young people’s range of needs, including the needs of people like the young woman I have spoken about. However, the most important way to reduce unemployment, including youth unemployment, is to get the economy going again.
The Chancellor has claimed that the Budget is fair. I do not know what definition or test of fairness he is using, but the Institute for Fiscal Studies analysis shows it is not fair. I think that most people will consider that the Budget means, for example, that disproportionately more young women and young people will lose their jobs and that pensioners will be affected.
Oral Answers to Questions
Debbie Abrahams Excerpts(15Â years, 6Â months ago)
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Mr Osborne
Of course we want to ensure that we prolong the life of the North sea fields. One area on which we can work with the industry is ensuring greater certainty about decommissioning costs and about the tax regime that was operated under previous Governments and how that will apply over the next 10 years. I hope to work with the industry on that.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
9. If he will review the pace of proposed reductions in public expenditure to take into account GDP figures for the fourth quarter of 2010.
The Chief Secretary to the Treasury (Danny Alexander)
I welcome the hon. Lady to the House. The short answer to her question is no. Of course, growth in the final quarter of last year was disappointing, but, as we always said, the recovery in the early stages would be choppy. Deficit reduction is the essential precondition for growth, and the OBR’s November forecast stated that we would see growth in every year of the forecast.
Debbie Abrahams
Will the Chief Secretary explain to my constituents who are either unemployed or facing redundancy how his Government’s catastrophic economic policy is in the interests of the country? Clearly, we are not all in this together.
Danny Alexander
I hope the hon. Lady will take the opportunity to explain to her constituents that it is the legacy of the previous Labour Government that has caused the enormous mess and all the problems in our economy. They left us with the largest Budget deficit in Europe, and one of the largest in the world. Countries in our position have to take the sort of action we have taken, or risk being in a much deeper mess. If that is what she is advocating, I suggest she tells her constituents.