Ed Balls
Main Page: Ed Balls (Labour (Co-op) - Morley and Outwood)Department Debates - View all Ed Balls's debates with the HM Treasury
(11 years, 11 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
I beg to move an amendment, at the end of the Question to add:
‘but regrets that whilst the UK economy is in recession, long-term unemployment is at its highest level since 1996 and one million young people are out of work the Gracious Speech contains no measures to address this crisis; notes that Britain will pay a long-term price for a prolonged period of slow growth and high unemployment; further notes that France, Germany and the Eurozone as a whole are not in recession while in the USA, where the Government has to date taken a more balanced approach to support economic recovery, the economy is now one per cent bigger than before the global financial crisis, while the UK economy is now 4.3 per cent smaller; recognises the criticism expressed by business leaders that your Government has not come forward with an adequate plan to boost economic growth; believes that cutting spending and raising taxes too far and too fast is self-defeating as slow growth and higher unemployment means that your Government is now set to borrow £150 billion more than planned; and calls on your Government to introduce a fair and balanced deficit plan, with measures to stimulate economic growth and job creation which are essential to get the deficit down, including a tax on bank bonuses to fund a guaranteed job for every young person out of work for more than a year, a temporary cut in VAT, a national insurance holiday for small firms taking on extra workers, and bringing forward infrastructure investment to strengthen the economy for the long-term.’.
It is a great honour to open the final day of this Queen’s Speech debate, and to do so in this very special diamond jubilee year. But I have to say how disappointing it is, with our economy now pushed into recession, the eurozone crisis deepening, and businesses and families up and down the country crying out for a plan for jobs and growth, that we are today debating what is widely regarded to be a disappointing and directionless Queen’s Speech programme from a Tory-led coalition that has, frankly, lost its way.
What a change this is from two years ago. When the Chancellor of the Exchequer spoke in the debate on the Government’s first Queen’s Speech, four weeks after the general election and two weeks before his first Budget, he was bursting with hubris. He was so sure of himself that, when the then shadow Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), and many other hon. Members on this side of the House asked whether the Chancellor planned to bring forward immediate and deep tax rises and said that spending cuts might choke off the recovery, the Chancellor dismissed those concerns out of hand. He was confident that his plan would
“deal with our debts, set our country on a brighter economic course and show that we are all in this together.”—[Official Report, 8 June 2010; Vol. 511, c. 206.]
What a difference two years makes.
“We are all in this together”: we do not hear that line any more—not from a Chancellor whose Budget decisions have hit middle and lower-income families harder than those on the highest incomes. His Budget decisions have hit women harder than men and families with children harder still. The Institute for Fiscal Studies confirms that his Budgets have been regressive and will see child poverty rise. Last month’s omnishambles of a Budget included decisions to raise taxes on caravans, charity donations, church repairs, pensioners, pasties and petrol, but to have a top-rate tax cut only for the richest—a £3 billion tax cut, which will give 14,000 of the richest people in our society earning over £1 million an average tax cut of £40,000 a year. Millions are paying more in tax to pay for a tax cut for millionaires. No wonder the Chancellor and the Prime Minister can no longer bring themselves to say that “We are all in this together”.
Let me remind the Chancellor of what the chair of the Conservative Association in Harlow said last week:
“The voters are disillusioned with Cameron himself. They don’t like the fact that he did not keep the 50p tax. People feel he is not working for them.”
Apparently, the Chancellor was advised precisely not to cut the top rate by his own Downing street pollster, Mr Andrew Cooper. Let me say to the Chancellor that, in my experience, disregarding the wise advice of someone called Cooper can be a very dangerous course to take.
Mark Pritchard (The Wrekin) (Con)
Given the right hon. Gentleman’s closeness to the new French President Mr Hollande and given that the shadow Chancellor mentioned the top rate of tax, does he think that the dash for growth will be enhanced or hindered by the introduction of a 75p top rate?
Richard Harrington (Watford) (Con)
I am listening with some perplexity to how the shadow Chancellor referred to the Budget as one for rich people, because I have calculated that in my Watford constituency, nearly 4,000 people have been taken completely out of tax by the increase in the personal allowance. I am sure that the right hon. Gentleman will join me in congratulating the Chancellor on such an excellent measure.
Ed Balls
The hon. Gentleman might need to go back to the drawing board because the Institute for Fiscal Studies has shown that last month’s measures will, as a result of cuts to tax credits, mean tax rises for the average family with children in his constituency—and that is even before taking the rise in VAT into account and it does take the personal allowance rises into account. The fact is that taxes have gone up for low-income families, they are going up for the middle classes, and it is only the highest earners in the hon. Gentleman’s constituency that are getting the tax cuts.
Mr Brian Binley (Northampton South) (Con)
Is it not true—the shadow Chancellor is a straightforward man—that the previous Government set out a trap for this Government, not really wishing for a rise to 50%, but carrying it out just before the last election in a crude attempt to catch this Government out?
Ed Balls
I am always a close student of the hon. Gentleman, and I noted that he did not advocate the reversal of the 50p rate as the right thing to do, so I am not sure what his constituents thought about that. I recently read some of his other remarks. In March, for example, the hon. Gentleman said:
“The Chancellor has been consistently advised of the importance of macro-measures to stimulate growth in the private sector. So why are these not being implemented?”
Why, indeed? He continued by saying that the Prime Minister
“needs to wake up and smell the coffee. This is a major setback for the Conservative party.”
That is quite right.
Ed Balls
The right thing to do after the financial crisis was to do things in a fair way. That is why the 50p tax rate was right at the time. The reason why the Budget has gone down so badly is that lowering the 50p rate was seen as so unfair. The hon. Gentleman was right just a few days ago when he said in his blog that the Government have a communication problem and are over-confident. He said:
“The manner in which Downing Street fires out policies and expects us to agree and applaud without question certainly smacks of a sense of superiority.”
Quite right again—a very interesting remark.
Ed Balls
Let me make some more progress; I will allow more interventions in a few moments.
As for the Chancellor’s promise of “a brighter economic future”, it is not just that his economic plan has been so unfair, but that it has failed completely. On the recovery being secured, our economy has not only flatlined for 18 months, but has contracted. As to a private sector-led recovery, confidence is down, business investment has been revised down and since June last year, we have lost more than 100,000 public sector jobs, but the private sector has created only half that number of private sector jobs. As for the Chancellor’s absurd claim that Britain is a safe haven, we are in recession. What kind of safe haven is that?
The Chancellor will try to claim today that it is the eurozone crisis that has blown him so badly off course. I will return to the eurozone crisis in a moment, but trying to blame that crisis for the UK recession flies in the face of the facts. This is what the Chancellor said in his autumn statement:
“if the rest of Europe heads into recession, it may prove hard to avoid one here in the UK.”—[Official Report, 29 November 2011; Vol. 536, c. 799.]
But it is the eurozone that has avoided recession and the UK that has plunged back into it. [Interruption.] Even The Sun—not known as a big supporter of Labour, but a big supporter of the Chancellor over the last few years—wrote only yesterday—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Government Front-Bench Members can do a little better by listening to what is being said. I am sure that they will want to listen to the shadow Chancellor in the same way that they will want Members to listen to the Chancellor later.
Brandon Lewis (Great Yarmouth) (Con)
While the shadow Chancellor is busy doing down the British economy, will he not equally recognise the fact that in areas like Great Yarmouth, which Labour left as one of the most deprived in the country, we are seeing hundreds of millions of pounds of investment from and in local companies, put in by organisations and countries like Japan, so that the jobs are growing in the enterprise zones?
Ed Balls
In the hon. Gentleman’s constituency, youth long-term unemployment is rising, long-term unemployment generally is rising, families’ taxes are rising and only the top-rate taxpayers are seeing a tax cut. Investment was revised down last year and the year before that, and our economy is in recession because of the policies that the hon. Gentleman continues to support. I think he owes his constituents an apology.
What should we make of setting our economy on a brighter economic course and the observation that “We are all in this together.” Even on his claim that he would “deal with our debts”, the Chancellor is failing that test, too. No growth since the spending review and rising long-term unemployment mean that he is now borrowing £150 billion more than he planned. This is more borrowing than in the plans he inherited, and his pledge to balance the books by 2015 is in tatters. At the end of this Parliament, our national debt will not be lower than the level he inherited, but higher than the level he inherited.
Andrew Bridgen (North West Leicestershire) (Con)
The shadow Chancellor has used many quotes in his opening speech, so let us see whether he agrees with this one from Mervyn King, the Governor of the Bank of England, whom Labour appointed. He said that this Government demonstrated a
“textbook response to the situation”—
the economic mess we inherited from the previous Government.
Ed Balls
The Governor of the Bank of England was confident two years ago that the Chancellor was making the right calls on the pace of deficit reduction. Unfortunately, it has turned out that the Governor of the Bank of England and the Chancellor of the Exchequer have both got that wrong. We had gone back into recession even before the eurozone crisis. Let us consider recent entries from the website of the hon. Member for North West Leicestershire (Andrew Bridgen). They show him “criticising cuts” to “local health centres”, and reveal his wish to “Save Moira Fire Station” and for the “replacement” of local bus services. I am not sure that all that is entirely on message. Yet the Chancellor and the Prime Minister are still clinging to the view that they are right and everyone else is wrong. In his speech today, the Prime Minister seemed to be trying to claim that the choice between austerity and growth was a myth. [Interruption.] I think that the Chancellor should listen to this, because I am about to explain why he has got it so badly wrong. He should listen and learn, Mr Deputy Speaker, listen and learn.
If the Prime Minister meant that we should not choose between policies for growth and policies for deficit reduction, he was right. I agree. In fact, that is exactly what Lord Mandelson and I argued in our joint article in Monday’s Guardian. We argued for action now to boost jobs and growth, alongside tough medium-term deficit reduction plans. But that is not what the Prime Minister was saying today. He and his Chancellor are still clinging to the mistaken and, now, increasingly discredited view that cutting spending and raising taxes faster to cut the deficit is the route to economic growth, when all the evidence is to the contrary. Trying to cut the deficit faster has not boosted growth in recession; it has choked off confidence, unemployment is up, and we are borrowing more than he planned, not less. If the Prime Minister is really claiming that he is on the right course, he is even more complacent and out of touch than I thought.
James Morris (Halesowen and Rowley Regis) (Con)
Does the right hon. Gentleman not agree that economic policy is about credibility? Would he not have more credibility if he told us how he would cost his so-called plan for jobs and growth?
Ed Balls
Credibility is about getting things right, not about getting them wrong. We were told that we were out of the danger zone and that the recovery had been secured, but what has happened? Plan A failed in Britain and in the eurozone too, and it is the very plan that the Chancellor has been urging on us. What did he say to The Daily Telegraph in August last year? He said:
“Britain is leading the way out of this crisis”,
and
“The eurozone must follow our lead and act decisively”.
The Prime Minister is off to the G8 summit this weekend. The only countries in recession that will be represented there are Italy and Britain. How are we leading the way? The fact is that the austerity policies that are failing in Europe are the very same policies that have failed in Britain, and which the British Government have been urging the German Government to urge the eurozone to stick with. That is the reality.
Opposition Members have consistently argued that it will not work for all countries to try to reduce their deficits at the same time, that tough medium-term plans to cut the deficit will work only if Governments also put in place a plan for jobs and growth, and that a time when a global hurricane is brewing is precisely not the time at which to rip out the foundations of the house here in Britain.
Richard Fuller
I appreciate the compliment from the right hon. Gentleman, who has often demonstrated that he does not have a sound grip on economics. He is continuing to say something that I do not think is correct: he is continuing to compare austerity policies with growth policies. Does he not accept that growth is an outcome, which all policies are intended to achieve, and will he have the honesty to answer the question put to him by my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) and cost his plans?
Ed Balls
The right course is to take a balanced approach that combines medium-term deficit reduction with getting jobs and growth moving. The problem with austerity is that it chokes off jobs and growth and ends up costing more in spending, more in unemployment and more in borrowing. We have set out a clear alternative. We have said “Repeat the bank bonus tax, and use the money to create jobs.” We have said “Rip up the failed national insurance cut introduced by the Chancellor, and use the money for a tax cut for small businesses.” We have said “Yes, cut VAT by £12 billion for a year to get the economy moving.” We have not said how many shovel-ready infrastructure projects can be launched, because we do not have the details.
The Prime Minister says that you cannot borrow your way out of a debt crisis, but unless you grow, your debts get bigger and your deficits get worse. That is what the Chancellor has proved over the last two years. It is not only the Labour party that is advancing that argument. Only last week, the managing director of the International Monetary Fund said:
“We know that fiscal austerity holds back growth and the effects are worse in downturns... so the right pace is essential”.
Even the head of the European Central Bank is now pressing for a jobs and growth plan.
The Prime Minister and the Chancellor must wake up to the fact that our economy has not grown on their watch for a year and a half. Instead of trying to divert the blame for their failure and using the eurozone as an excuse for Britain's problems, they must admit that they got it wrong—that they gave the eurozone the wrong advice—and start pushing for the right solution to the eurozone crisis. I agree that there should be a proper role for the European Central Bank and a greater emphasis on fiscal burden-sharing, but there should also be a change of course on austerity, because only a balanced plan that puts jobs and growth first will succeed in getting the deficit down. When the International Monetary Fund, the OECD, the European Commission, the European Central Bank and even the United States are urging policies for jobs and growth, this Chancellor and this Prime Minister are looking increasingly isolated and out on a limb.
Penny Mordaunt
Since April 2010, in my constituency the number of job vacancies has risen by 316%, the number of apprenticeships has doubled, the number of jobseeker’s allowance claimants has fallen by 12%, and the number of claimants aged between 18 and 24 has fallen by 15%. Those are the facts. I understand why the right hon. Gentleman does not want to give Ministers any credit for that, but will he stop talking down the businesses and entrepreneurs in Portsmouth who have made it possible?
Ed Balls
I am sure that the hon. Lady and I can agree on one thing. There has been a 130% rise in long-term youth unemployment—unemployment lasting more than six months—in her constituency over the last year. [Interruption.] It is up by 129% in her constituency, and that is really worrying. Constituencies of Members on both sides of the House saw the damage done by long-term youth unemployment in the 1980s, and we should act to prevent a repeat of that rather than being complacent.
Stephen Hammond (Wimbledon) (Con)
Twice so far in his speech, the right hon. Gentleman has said that the problems in the UK are nothing to do with the eurozone. Will he therefore disown the remarks of the shadow Chief Secretary, the hon. Member for Leeds West (Rachel Reeves), who said last week that the eurozone was having a major impact on British businesses and British families?
Ed Balls
Calm down. Calm down, or we will start a debate about Remploy.
Of course the eurozone crisis is very serious and very dangerous for our economy and for all economies. That is why our Prime Minister and Chancellor should be at the table leading debates about the solution rather than carping on the sidelines, sitting like a teenager in the front of the car with headphones on while the crisis happens around them.
These are the facts. Last year, eurozone growth was faster than British growth and was revised up. Our growth was slower and was revised down. Last year, it was only the eurozone that prevented the British economy from going into recession earlier. Our domestic economy, excluding exports, was actually in recession for pretty much all of last year. The eurozone economy was growing when the British economy went into recession. Even today, the eurozone is not in recession and the British economy is. [Interruption.] The welfare Secretary has made a career of blaming Europe for everything that goes wrong in Britain, but I am afraid that this is a recession made in Downing street.
The Chancellor will also try to claim today—[Interruption.] Calm down. The Chancellor will also try to claim today that all this pain will be worth it in the end. However, we are paying a long-term price for the failures that we now see around us—the national debt higher; living standards down; long-term youth unemployment becoming entrenched; more than 24,000 companies out of business since he became Chancellor; investment plans cancelled or diverted overseas; our economy weaker; and capacity lost. I very much fear that when the economy finally recovers, as it eventually will, it will be more prone to inflationary pressures than otherwise, because of the failures of this Chancellor.
Mr Marcus Jones (Nuneaton) (Con)
The right hon. Gentleman has mentioned exports. Does he not welcome the growth in exports and the new jobs being created at Jaguar Land Rover, Vauxhall, Nissan and Toyota, to mention but a few? Is he not sorry, and should he not say sorry to the British public, that 1.7 million manufacturing jobs were lost in this country on his party’s watch? Companies such as LDV, Peugeot and Rover closed down manufacturing while he was in government.
Ed Balls
Of course I welcome the improvements that we have seen in manufacturing, and I think we could have a cross-party consensus that the previous Government’s decision to set up the Automotive Council and provide long-term strategic leadership has made a huge difference to the prospects for car investment in our country. Nissan; Rover—we made great progress. That progress is being continued, and we should all welcome that. However, I have to say, for all the complacency that we just heard in that intervention, is it any wonder that business organisations—[Interruption.] Government Members should listen.
Graham Jones (Hyndburn) (Lab)
Would my right hon. Friend include the car scrappage scheme as well?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. You have done very well so far, Mr Jones. Don’t overstep it.
Ed Balls
The economy is in recession and they hate it, and so do business organisations up and down the country. Is it any wonder that businesses have been so disappointed and upset by the Queen’s Speech of just two weeks ago? Let me quote the director general of the British Chambers of Commerce:
“There is a big black hole when it comes to aiding business to create enterprise, generate wealth and grow.”
Quite right, Mr Deputy Speaker.
There will be some parts of the Queen’s Speech dealing with Treasury matters which we will support. On banking reform, we will look forward to supporting legislation to strengthen capital ratios and promote competition, although it is now nine months since the final report of the Vickers commission, and we are still waiting for a response from the Chancellor of the Exchequer. However, after 18 months of flatlining, with our economy now in recession and business investment depressed, the question I ask—it is the question British business is asking too—is this. Where is the plan in the Queen’s Speech to restore confidence and promote business investment and jobs in Britain?
With net lending falling month on month—according to the Bank of England it has been down every month for over two years now—where is the action in the Queen’s Speech to promote small business lending? With youth unemployment now at a record high, and with yesterday’s figures confirming that long-term unemployment among young people is still rising, where is the legislation in the Queen’s Speech to get our young people back to work? Where is the legislation to repeat the bank bonus tax to fund a jobs guarantee for young people—or, for that matter, to cut taxes for small businesses hiring new workers, or to help the construction sector with a temporary cut in VAT? Our economy has ground to a halt and our construction sector is in great distress. Where is the plan to support jobs and growth by bringing forward new infrastructure projects? Where is the legislation to make our economy stronger and fairer for the future? Stronger corporate governance; a business investment bank; progress on high-speed rail; reforms in our universities to promote innovation—all are completely absent from this Queen’s Speech.
Fiona O'Donnell (East Lothian) (Lab)
Does my right hon. Friend agree that young people in Scotland are facing the double whammy of a coalition Government who are complacent and a Scottish National party Government who are cutting further education funding?
Ed Balls
I understand my hon. Friend’s concerns at the lack of a youth jobs plan in Scotland. We can understand that from the Conservatives, because they abolished the future jobs fund, but people will find it hard to understand why the Scottish National party Administration in Scotland have failed so woefully to do anything to tackle the challenge of youth unemployment.
Graham Evans (Weaver Vale) (Con)
The right hon. Gentleman referred to investment in this country in manufacturing. Does he agree with General Motors, which has specifically thanked the Government for making the UK a great place to invest in manufacturing and business? Indeed, General Motors has announced today that it will be manufacturing the new Vauxhall Astra at Ellesmere Port, very close to my constituency, providing 700 new jobs and securing thousands of jobs in the supply line. Does he welcome that?
Ed Balls
I will make some progress.
Is it not the reality that we have an economy in recession and a Queen’s Speech that entirely failed to deliver on growth, jobs and investment? The Chancellor’s economic strategy is now in tatters, but have we had any admission in recent weeks that he got it wrong? We have had none. The Foreign Secretary says that British business needs to work harder, but it is this Chancellor who needs to work harder to get things right.
Ed Balls
I will not give way.
Let me say this to the Chancellor. We all know why he has wanted to be a part-time Chancellor: in order to make room for his other role as the Conservative party’s part-time political strategist. But with the Budget botched, the Queen’s Speech a flop, the local elections a disaster for his party, and the economy back in recession, it is now dawning on all of us—I think it is dawning on many Conservative Members too—that he is not a very good Chancellor and not a very good political strategist either. Although should we really be surprised? This is the Chancellor who claimed to his colleagues that hiring Andy Coulson would be a triumph; that taking away child benefit from middle-incomes families would be a masterstroke; that saying that the economy was “out of the danger zone” was smart forecasting; and that cutting the top rate of tax in this Budget would wrong-foot Labour, and outfox his leadership rival Boris Johnson too. With judgment like that, perhaps the Conservative party does not need just a new political strategist; perhaps it needs a new Chancellor too.
Ed Balls
No, I will not.
What an eight weeks it has been! The transformation has been startling, with the Chancellor’s long-held dreams turning to dust. He dreamed that his brilliant economic plan would bring unprecedented growth and finally deliver a Tory majority in 2015, and that a grateful Prime Minister would then stand aside, as he was finally cheered into 10 Downing street. How far away those dreams seem now!
Ed Balls
I will not.
Last month YouGov asked 1,800 people whether they thought the Chancellor was very well suited to the job of Prime Minister. How many said yes? Just 1% did—18 people only. The question we must ask is this: who on earth were those 18 people? After that Budget, they must be vegan, health freak, cyclist millionaires who passionately hate cars, pasties and caravan holidays, and think that pensioners get a cushy deal. So, other than Steve Hilton, who are the other 17? Is this not the truth: that the Chancellor’s plan has failed, and he has been exposed not simply as unfair and out of touch, but as incompetent? This part-time Chancellor needs a new economic plan for jobs and growth. This part-time political strategist urgently needs a relaunch for him and for the Prime Minister. This Queen’s Speech delivers neither a new economic plan, nor an urgent relaunch. He and the Prime Minister should go back to the drawing board and think again.
Mr Osborne
Of course we want to help people who are working part time to work full time, if that is what they wish, but four fifths of the people who have taken part-time jobs wanted to work part time. We absolutely must help the fifth who want to turn them into full-time jobs, but I would hope that the hon. Lady, too, welcomes the good news that unemployment has fallen.
Mr Osborne
As I was explaining, four fifths of those who work part-time are getting the part-time work they want. The right hon. Gentleman should celebrate the fact that 400,000 more people are employed than was the case two years ago. Why not get up and welcome that?
If the Opposition’s argument is that we need to do even more, I agree. In the past six weeks alone, we have opened 24 enterprise zones around the country, cut businesses tax to one of the lowest rates in the world, increased support for small business research and development, reformed employment law in the teeth of Labour opposition to double the period before unfair dismissal claims can be made, reinvigorated the right to buy, launched NewBuy mortgage schemes, awarded ultra-fast broadband grants to 10 of our largest cities, frozen council tax across England, launched a £20 billion national loan guarantee scheme that is already delivering cheaper loans to hundreds and thousands of businesses, and increased the personal allowance to cut tax for 20 million working people and lift 1 million of the lowest paid out of tax altogether, with another 1 million to come. That is just in the past six weeks.
Yes, the Government must work harder and do more. The world does not owe this country a living. We will do that, but we have done a great deal already.
Mr Osborne
This is what we have done for small businesses: we have cut the small companies tax rate, which was going to go up under the plans that we inherited and which the Labour party voted for in the previous Parliament; we have got rid of Labour’s jobs tax; and we have frozen the business rates. We will check the record carefully, of course, but I think that in his speech the shadow Chancellor was advocating an increase in national insurance.
Mr Osborne
When my hon. Friends pressed him to explain how he would pay for his package, he said, “We wanted to see national insurance go up.” If he wants to correct the record, he can tell us whether he wants national insurance to go up to pay for his package.
Ed Balls
The Chancellor allocated £500 million for a national insurance tax cut for new firms that were taking on new workers. It has totally flopped and failed, with very little take-up. I said that we should use that £500 million to help existing small firms to take on new employees—a plan that would work, rather than a plan from this Chancellor that is failing. That says it all.
Mr Osborne
So the short answer is yes, he wants higher national insurance for businesses. How on earth will that help companies in the current economic environment? As I have said, we need to do more. We need to help to get more credit to businesses and to housing and infrastructure. We are going to use Britain’s low interest rates to work for us all and we are going to do more to reform our banking system—the epicentre of what went wrong when he was the City Minister.
Mr Osborne
I can tell the right hon. Gentleman that 15,000 businesses have been helped by that scheme. The economic policies that he has drawn up would hurt millions of businesses. What the Labour party wanted and what he campaigned for was an increase in national insurance for all firms and we stopped that.
Mr Osborne
As the right hon. Gentleman well knows, there is already VAT on caravans towed by cars, but there is a consultation on the change. It finishes tomorrow. It is partly due to the good work of my hon. Friends the Members for Beverley and Holderness (Mr Stuart) and for Boston and Skegness (Mark Simmonds), who urged longer consultation, that the period was extended. I propose to allow it to finish and then we will set out our response.
Mr Osborne
I will give way once more, but then I want to say something about the eurozone.
Mr Osborne
I have spent the last 35 minutes explaining how I am digging the country out of the hole that the right hon. Gentleman put us into.
Let me say something about the eurozone crisis. When eurozone central bank governors and Finance Ministers openly speculate on the possibility of Greek exit, the genie is out of the bottle. That and the Greek elections make this a perilous time. We are clear about the three steps the eurozone needs to take if its currency is to function properly.
First, countries in the periphery with high deficits and uncompetitive economies need to confront their problems head-on, as Governments in Ireland, Spain and Italy are. We are doing it in Britain too, but the adjustment our country must go through is made easier by loose monetary policy and a flexible exchange rate. The countries of the eurozone do not have that to help them, so the core of the eurozone, and the European Central Bank, need to do more to support demand and share the burden of adjustment.
Of course, ideas such as the project bonds put forward by the new French Government are worthy of serious consideration, but, fundamentally, the German Finance Minister is right when he says that rising wages in his country and increased domestic demand there can play a substantial role.
Secondly, the eurozone needs to follow what I described a year ago as “the remorseless logic” of monetary union that leads to greater fiscal union. As I said in the same interview, forms of collective support and responsibility must be developed. I echoed the view in many eurozone countries when I spoke of the possibility of eurobonds.
Thirdly, all of us in Europe, including the United Kingdom, need to address our continent’s lack of competitiveness. That involves structural reform to welfare, pensions and labour laws, and completing single markets in services and digital. It means all Europeans, including Britons, rediscovering the ambition and the ethic that made our continent the dynamo of the world economy for so many centuries. It is not that dynamo today. As the Prime Minister says in his speech today:
“The eurozone is at a cross-roads. It either has to make up or it is looking at potential break up.”
No one should underestimate the huge risks of the latter, but Britain will be prepared for whatever comes. We are making the necessary contingency plans. We will take the steps needed to secure our economic stability and protect our financial system. Above all, we will go on with the progress we have made in the last two years on reducing the structural deficit, keeping our credibility in the bond markets and keeping our interest rates low.
Mr Osborne
It is over the last two years. But this points to a greater truth: the right hon. Gentleman had 13 years to prove to the country that he had the right policies to run the British economy, and he delivered the greatest economic disaster in this country’s modern history.