Foreign Affairs and International Development

Debate between Denis MacShane and Angela Smith

Tuesday 15th May 2012 Commons Chamber

[Angela Smith (Penistone and Stocksbridge) (Lab)]

There has been a consensus across the House tonight, so it is odd that I should follow my hon. Friend the Member for Vauxhall (Kate Hoey) in commenting on the European Union. It is at this point, perhaps, that the House may diverge from the consensus.

I want to concentrate on economic policy in the context of the economic crisis affecting the eurozone. This Queen’s Speech—this legislative programme—says more about the state of a crumbling coalition than anything else. We are facing a growth and jobs crisis, yet there is not one proposal in the speech that will tackle the problems that we face. Of course we know why the legislative programme is so thin. It is because, as we know, on many fundamental points the two parties in the coalition do not agree. For example, they have major disagreements on Europe, civil liberties and constitutional reform. Let us be clear. This is a Government who, after only two years, have pinned their colours—both of them—to the mast of austerity and have run out of ideas.

There is no doubt that we are in difficult times, probably the most difficult that the country has faced for many decades, but there is no doubt in my mind who are to blame: this Government. When they came to power in 2010, growth was evident in the economy, unemployment was stable, and the economy, although fragile, was recovering from the massive shock of the world economic crisis of 2008. Since then we have seen growth all but vanish, choked off by a Government who cut too far and too fast.

To make matters worse, the eurozone seems determined to follow the same path, the path of austerity, the path that refuses to recognise that there is a huge problem with demand in the economies of Europe. The attitude of taking the medicine, taking the pain, no matter what, is the prevalent attitude, and Europe seems intent on executing a dance of death, with austerity piled on austerity. Europe’s leaders have told us that the only way out of the current crisis is through massive spending cuts and tax rises, and when that does not work, more cuts and more tax rises—more cuts in pensions, with punishing measures being imposed on countries in desperate straits, such as Greece and Portugal.

[Mr MacShane]

Will my hon. Friend accept a very minor correction? There is one exception to this general rule. In our country, we have decided to cut taxes, but only for the super rich and the millionaires. This Government of millionaires, two of whom have spoken to us tonight—or one has and one will—are helping their own and leaving the rest of the country to rot in misery.

[Angela Smith]

I completely agree with my right hon. Friend. We are clearly not all in it together. Rather than cutting VAT, which would help the economy, we have tax cuts for the very rich.

Yes, I have to acknowledge that the latest growth figures indicate that the eurozone has avoided a technical recession, but let us not get carried away with one set of figures. Let us note that it is higher than expected growth in the German economy that has kept the eurozone out of recession, with many other members of the eurozone still in recession. In fact, most of the other members of the eurozone are still in recession. Let us remember that this is a Germany that, as one of the most productive countries in the world, has been able to take advantage of the eurozone to boost exports, but which has pursued a policy of not expanding its domestic economy, and even now, it is not moving on that front, even when it is now clear to everybody that demand in Europe is a key problem. If anything, these latest figures amplify the unbalanced nature of the eurozone, with a strong country such as Germany forcing unbearable austerity and massive debt on the weaker southern countries, in an attempt to make them as competitive as the north—a difficult task even in good times and, I fear, an impossible one in a weak global economy with rising unemployment across the eurozone and the Greek economy 20% smaller than it was at the start of the crisis.

This Queen’s Speech is woefully inadequate in the context of what is happening to our country and across Europe. The medicine is not working, yet all we get from our Chancellor is the accusation that it is all the fault of the eurozone and that Chancellor Merkel should stop speculating on what will happen to the euro. No, the problem is not the musings of Chancellor Merkel; the problem is the damage her policies are inflicting on the eurozone, and, equally, the damage our Chancellor’s policies are inflicting here at home. So much for an export-led recovery. The Chancellor must rue the fact that his own prescriptions for economic health are backfiring at home and abroad.

Clearly, we need to identify an alternative approach, and the Queen’s Speech should have built on the experience of Obama’s stimulus legislation in the United States. That package of tax cuts, infrastructure investment and job creation has worked. The US is growing economically and unemployment is falling, from 10% in 2009 to 8.2% in 2011, with independent forecasts in the US showing that the ongoing impact of the stimulus package will be positive. I was in the US recently and it was clear, talking to independent forecasters, think tank personnel, pollsters and commentators across the board, that the stimulus package has worked. The figures prove it; they are undeniable. It is astounding that Europe is making the same mistakes that it made in the 1930s. If America can learn from that, why cannot we?

We needed to see in the Queen’s Speech an acknowledgement that austerity is not working and a commitment therefore to measures designed to stimulate the economy. Labour’s fair deal on tax and its fair deal on jobs would have been a good start. We needed to see a focus on demand rather than supply, and we needed to see that commitment accompanied by an acknowledgement that it is no good standing on the sidelines, sniping at our key economic partners in the eurozone, blaming them for all Britain’s woes. In the end, the problems that we all face are being worsened by the same paltry remedies, which destroy growth and jobs. We needed to see the Prime Minister commit himself to a change of course, and to working within the EU, with figures such as new French President Hollande, to encourage that change of course with the eurozone itself. Only then will there be any hope of growth, any hope of the kind of recovery that will allow trade to flourish, and, yes, any hope for Britain’s exports to flourish as part of that growth. There is no point having a Prime Minister who stands on the sidelines having walked away from the table. We are part of Europe and need to play our part within Europe.

Finally, we needed the Queen’s Speech to acknowledge that the economic crisis is beginning to polarise Europe politically and socially. Across Europe, we see the rise of political parties outside what is usually understood as the mainstream and away from the pragmatic centre, particularly in relation to the debate on EU policy and the eurozone. In Greece, one of those parties holds the balance of power. In Holland, opinion polls show a huge rise in support for the anti-European Socialist party. In France, one in five voters in the presidential election voted for the Front National. In Britain, the vote for the UK Independence party in the local elections grew: in Sheffield it got 12,000 votes, only 10,000 behind the Liberal Democrats.

That is worrying on one level, because it demonstrates that we are not immune from this worrying polarisation away from mainstream politics in Europe, a trend that reflects social unrest and the deep concerns felt by voters everywhere about their future. We must listen to voters—I agree with my hon. Friend the Member for Vauxhall on this—and to what people are saying in Europe. They are beginning to tire of austerity, which they no longer believe is working. They are saying the same in Germany, and they are saying it in Greece, France and here, too.

The future does not look bright. Who knows what will happen politically and socially in Europe, including the UK, if Governments do not recognise the need to change course? The Queen’s Speech should have charted a new economic course and recognised that job creation, decent housing and decent public services for all are essential if we are to avoid a worsening of our economic and political situation. The fact that it did not bodes ill for us all, and I for one fear for the future.