Investing in Britain’s Future
Ed Balls Excerpts(11 years, 4 months ago)
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Danny Alexander
Thank you, Mr Speaker.
This Government remain committed to ensuring that the UK remains at the forefront of decarbonising road transport and investing in electric vehicles. In the 21st century, good communications are not just about faster roads and high-speed railways, however; they are also about high-speed internet access. The Government have already committed £1.2 billion of public investment to fixed superfast broadband. I saw at first hand the impact that that investment is having on smaller communities when I visited Rothbury in Northumberland. It is crucial, if we want to rebalance our economy, that it is not just the biggest cities that have access to the fastest broadband.
The UK already has better broadband coverage, usage and choice than Germany, Italy, France and Spain, but we want to go further. I can announce today that we are providing a further £250 million to ensure that fixed superfast broadband reaches 95% of the population by 2017. We will work closely with industry to ensure that at least 99% of the UK population have access to superfast broadband—whether fixed, wireless or 4G— by 2018.
Let me now turn to how we support the private sector to deliver our energy needs. Some Members will know that I was privileged to spend my early years on the Hebridean island of Colonsay. Then, the island had no mains electricity. Unreliable diesel generators powered the island, and regularly broke down. Until mains electricity arrived, we never quite knew when the lights would go out. We do not want any community in our country to face that problem in the future. Our existing power stations are closing, as they are too old or too dirty to continue. They must be replaced and added to as our need for electricity grows. Thanks to the hard work of the Secretary of State for Energy and Climate Change—
Danny Alexander
He is the best ever.
Thanks to my right hon. Friend’s hard work, we are ready to unleash the energy revolution that our country needs. Today’s news from the British Geological Survey of 1,300 trillion cubic feet of shale gas—double the previous estimate—confirms its huge potential for the UK. That is almost as much hot air as the shadow Chancellor produces in a year—[Interruption.] And if they would stop fracking around on the Opposition Front Bench, they might learn something. The plans that we are setting out today provide the framework to kick-start this industry in a way that protects the environment and supports local communities.
As well as revolutionising the way in which we get our energy, we are transforming how we generate and supply it. As we face the challenge of climate change, we need to bring forward investment in low-carbon technologies. This country has massive potential in wind, wave and tidal. We need to harness it. We are putting in place a comprehensive energy policy through the Energy Bill that is in front of this House. This is an approach that we know will work for consumers and investors alike. Last year we made the unprecedented decision to set out funding plans for low-carbon generation all the way to 2020, providing up to £7.6 billion in real terms.
Now we can set out what this means for investors. We do this through setting strike prices. If future prices are below this level, we will guarantee a price to the generator, giving them the confidence to invest now. But if they rise above it, we will claw back money for consumers. We were planning to set strike prices next month, but we have been able to make faster progress so, today, I can announce that we are publishing the prices for renewable generation ahead of schedule. Prices have been set for key renewable technologies, including onshore and offshore wind, tidal, wave biomass and solar. The prices are broadly similar to those we would have to pay under the renewables obligation. We will set the price at the level we need to bring forward sufficient investment, but not a penny higher. As these technologies develop, costs will fall, so we will reduce the price too. For instance, next year we will guarantee generators £155 per megawatt hour of offshore wind. By 2018 this will fall to £135. We expect our reforms to bring forward 8GW to 16 GW of offshore wind capacity. Industry asked for certainty; we have given it. Now industry needs to get on with it.
Yes, this approach has costs now but, in the long term for consumers, they will be more stable than they would otherwise have been. In fact, when this investment goes alongside our plans for energy efficiency, overall our policies could save an average of £166 per household by 2020. We are taking the right decisions now for the good of our country.
In addition, we need to guarantee that capacity will be available at short notice to meet spikes in demand, for instance through gas-fired stations. Today we can provide details on a new regime that will achieve this. The first auction for this new capacity market will run next year to provide certainty for the winter of 2018. But there is financial risk for construction, too. That is why we have set up a Green Investment Bank to back green energy projects. It has committed over £600 million already; for instance, it has invested in the Walney wind farms off the north-west coast of England, which are expected to provide energy to the equivalent to 300,000 households. We have already pledged to provide £3 billion for the bank and, today, I can announce that we will provide an additional £800 million so that it can expand further. Crucially this will include, for the first time, the power to borrow half a billion pounds in 2015-16 from Government. This is a real milestone in green investment, delivering a key promise we made in our election manifesto, unlocking over £100 billion of private investment into our energy networks, and supporting jobs, growth and prosperity for years to come. Our energy policy is a win for consumers, a win for investment and jobs and a win for our climate; the greenest Government ever.
In the last three years we have re-secured for this country a very precious commodity: credibility. No one doubts that the coalition is serious about sorting out the economic mess that we have inherited. People have the right to know that we will continue to work hard to repair the economy, that interest rates will stay low and that we will get our country back on an even keel. But repair is not all we do, because people also have the right to expect that Britain stays one step ahead in the world, that we ease congestion on our roads and deliver faster broadband to make sure businesses in every corner of this country can serve their customers—[Interruption.]
Spending Review
Ed Balls Excerpts(11 years, 4 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor spoke for more than 50 minutes, but not once did he mention the real reason for today’s spending review: his comprehensive failure on living standards, growth and the deficit. We have seen prices rising faster than wages, families worse off, long-term unemployment up, welfare spending soaring, a flatlining economy, and the slowest recovery for more than 100 years. As a result of that failure, for all the Budget boasts, borrowing last year was not down but up. The Chancellor has not balanced the books, as he promised to do, and in 2015 we will see a deficit of £96 billion. There has been more borrowing to pay for the Chancellor’s economic failure, which is why he has been forced to come to the House today to make more cuts in our public services.
Does the Chancellor recall what he said to the House two years ago? He said:
“we have already asked the British people for what is needed, and…we do not need to ask for more.”—[Official Report, 23 March 2011; Vol. 525, c. 951.]
We do not need to ask for more! Is not the Chancellor’s economic failure the reason why he is back here today asking for more? More cuts in the police, more cuts in our defence budgets, more cuts in our local services: this out-of-touch Chancellor has failed on living standards, growth and the deficit, and families and businesses are paying the price for his failure.
Of course, it was not supposed to turn out like this. Does the Chancellor remember what he told the House three years ago, in his first Budget and spending review? He said that the economy would grow by 6%, but it has grown by just 1%. He pledged to get the banks lending, but bank lending is down month on month on month. He made the number one test of his economic credibility keeping the triple A credit rating, but on his watch we have been downgraded not once but twice. He promised that living standards would rise, but they are falling year on year on year. He said “We’re all in this together”, but then he gave a huge tax cut to millionaires. He promised to balance the books, and that promise is in tatters.
We see failed tests and broken promises. The Chancellor’s friends call him George, the US President calls him Jeffrey, but to everyone else he is just Bungle—and I see that even Zippy on the Front Bench cannot stop smiling. Calm down, Zippy, calm down.
Did we get an admission from the Chancellor that his plan has not worked, and that Britain needs to change course? Did we get the plan B for growth and jobs that we and the International Monetary Fund have called for? It does not have to be this way. Surely, rather than planning for cuts in 2015, two years ahead, the Chancellor should be taking bold action now to boost growth this year and next. Investment would get our economy growing and bring in the additional tax revenues that would mean that our police, armed forces and public services would not face such deep cuts in 2015. Why did the Chancellor not listen to the IMF, and provide £10 billion in infrastructure investment this year? Given that house building is at its lowest level since the 1920s, why is he not building 400,000 more affordable homes this year and next? If the Chancellor continues with his failing economic plan, it will be for the next Labour Government to turn the economy around and make the tough decisions that will get the deficit down in a fair way.
I have to say to the Chancellor that there is no point in boasting about infrastructure investment in five or seven years’ time; we need action now. I must also say to him that he ought to brief the Prime Minister better for Prime Minister’s questions, because three years after the infrastructure plan was launched, just seven of the 576 projects that were announced have been completed. More than 80% have not even been started, just one school has been provided, and in the first three months of this year, infrastructure investment fell by 50%. On infrastructure, we need bold action now, not just more empty promises for the future.
As for the idea that this spending review will strengthen our economy for the long term, let me ask the Chancellor some questions. Where is the proper British investment bank that business wants? Where is the 2030 decarbonisation target that the energy companies say that they need if they are to be able to invest for the future? Where is the backstop power to break up the banks if there is no reform, which the Parliamentary Commission on Banking Standards called for? And whatever happened to the Heseltine plan’s much-heralded £49 billion single pot growth fund for the regions? A mere £2 billion is pathetic.
Is this not the truth? Instead of action to boost growth and long-term investment, all we got today was more of the same from a failing Chancellor, and we got more of the same on social security and welfare spending too.
We have had plenty of tough talk and divisive rhetoric from the Chancellor and the Prime Minister, but on their watch the benefits bill is soaring. Social security spending is up £21 billion compared with their plans. We have called for a cap on social security, and we fully support the triple lock on the pension—something not even mentioned in the Chancellor’s statement—but the fact is that in 2010 the Chancellor tried to set a cap on social security spending and he has overspent his cap by £21 billion.
If the Chancellor really wants to get social security bills down, why not get young people and the unemployed back to work with a compulsory jobs guarantee paid for by a tax on bank bonuses? Why not get our housing benefit bill down by tackling high rents and the shortage of affordable homes? Why not stop paying the winter fuel allowance to the richest 5% of pensioners? And why not make work pay with a 10p tax band paid for by a mansion tax, instead of huge tax cuts for millionaires?
The Chancellor is making the wrong choices on growth and social security spending, and he is making the wrong choices on departmental spending as well. Let me ask him: when thousands of front-line police officers are being cut, why is he spending more on police commissioners than the old police authorities? Why is he wasting £3 billion on a reckless reorganisation of the NHS that the public do not support? Why is he funding new free schools in areas with enough school places, while parents in other areas cannot get their children into a local school?
We will study the Chancellor’s departmental spending plans for 2015-16. There is a lot of detail that he did not provide for the House. We look forward to seeing whether he will confirm the continuation of free national museum entry—maybe he can tell us in his response—but I have to say to the Chancellor that the country needs to know the detail, so let me ask him: will this spending review mean fewer police officers in 2015-16, on top of the 15,000 we will lose in this Parliament? Will it mean fewer nurses in 2015, on top of the 4,000 we have lost so far? Will it mean fewer Sure Start children’s centres, on top of the 500 that have already closed? And will he continue to impose deeper cuts on local authorities in areas with the greatest need, when already in this Parliament the 10 most deprived local authorities are losing six times the spending per head of the 10 least deprived areas? People up and down the country want to know the answers to these questions, and they should be in no doubt that the scale of the extra cuts the Chancellor has announced today to our police, defence and local services are the direct result of his abject failure to get the economy to grow.
The Chancellor is failing on living standards; they are falling. He is failing on growth; it is flatlining. He is failing on the deficit, and all we got was more of the same: no plan to turn our economy around, no hope for the future, and Britain’s families and our public services are paying the price for this Chancellor’s failure.
Mr Osborne
One thing is for certain after that performance: the right hon. Gentleman is the worst shadow Chancellor for a generation, and we want to keep him right where he is. What is amazing is that he spoke for 11 minutes and never said Labour wants to borrow more. Did anyone hear that in his comments? That is his argument: he wants to borrow more. Why does he not have the courage to get up and make his economic argument at the Dispatch Box? He finds himself in a situation where the entire argument he has been advancing for the last three years has completely collapsed. Where was the reference to the temporary VAT cut? Abandoned. Where was the reference to the five-point plan? Abandoned. He complains about all the cuts; here is a very simple question. We shall spend £745 billion in 2015; what will he spend? Does he match those plans or not? Hands up on the Labour Benches from those who want to match our spending plans. On Saturday, the Labour leader—
Mr Osborne
I fear that it would be jeopardised and this country would be back in intensive care. It is remarkable that the shadow Chancellor did not have the courage at that Dispatch Box to say that Labour would borrow more. Labour did say that for three years and now it has completely gone silent.
Mr Osborne
What I am talking about is that the Labour leader said on Saturday that Labour would not borrow more and the shadow Chancellor said on Sunday that it would. Because there are two alternative Labour economic policies out there, I would quite like to know which one is which.
Oral Answers to Questions
Ed Balls Excerpts(11 years, 5 months ago)
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Mr Osborne
In case the hon. Lady had not noticed, stock markets around the world are down. Bank stocks are down—
Mr Osborne
RBS: the world’s largest bail-out, under a Government who completely failed to regulate it. How dare the right hon. Gentleman have the audacity to come here and complain about the Royal Bank of Scotland? We are fixing the problems in the Royal Bank of Scotland. We are looking at the case for establishing a “bad bank”, which, as I said at the Mansion House, should have been done in 2008. We are going to fix the mess in the banking system that Labour left behind.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The whole House will have heard the Chancellor not answer the topical question asked by my hon. Friend the Member for Rochdale (Simon Danczuk). The reason is that, despite all the Budget speech bluster, borrowing last year went not down, but up.
Let me ask the Chancellor another question. The bonuses paid in the financial services sector this April, the first month of the new tax year, were 65% higher than in the same month last year—up by a total of £1.3 billion. Can the Chancellor tell the House why bank bonuses rose by £1.3 billion this April?
Mr Osborne
First, on borrowing, the Labour Government were borrowing £157 billion a year. This Government borrowed £118 billion last year, which represents a fall in borrowing. The deficit is down by a third because we are taking the tough decisions to ensure that Britain lives within its means. On bonuses, they are 85% lower than when the right hon. Gentleman was City Minister.
Ed Balls
The fact is that the Chancellor promised to get the deficit down, but it is rising, and that month-on-month rise in bonuses is the highest since records began in 2000. There is a simple reason why that happened: thousands of very highly paid people deferred their bonuses into the new tax year to take advantage of the Chancellor’s top rate tax cut, which has cost the Exchequer millions of pounds in lost tax revenue. How can the Chancellor still say, “We’re all in this together,” when living standards are falling for everyone else and the economy has flatlined for three years? Is not this economic failure the reason why the Chancellor will not balance the books in 2015 and why he will be coming back to the House tomorrow to ask for more cuts to public services? He is unfair and out of touch, and he is now revealed as totally incompetent.
Mr Osborne
Getting a lesson from the shadow Chancellor on how to balance the books is like getting a lesson from Dracula on how to look after a blood bank. He finds himself in a most extraordinary situation. On Saturday, the Labour leader said that Labour was going to rule out borrowing more. On Sunday, when the shadow Chancellor was asked whether Labour could borrow more, he said, “Yes, yes, of course,” and then, on Monday, the Labour party committed itself to higher welfare spending—it is a complete shambles. On the eve of the spending review, Labour finds itself in the extraordinary situation in which it has completely abandoned the economic argument that it has been making for the past three years, but kept the disastrous economic policy. That is a hopeless position. The shadow Chancellor has led Labour Members up a cul-de-sac and they have to find their way out of it.
Economic Growth
Ed Balls Excerpts(11 years, 6 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
I beg to move amendment (g), at the end of the Question to add:
‘but regret that the Gracious Speech has no answer to a flatlining economy, the rising cost of living and a deficit reduction plan that has stalled, nor does it address the long-term economic challenges Britain faces; believe that the priority for the Government now should be growth and jobs and that we need reform of the European Union, not four years of economic uncertainty which legislating now for an in/out referendum in 2017 would create; call on your Government to take action now to kickstart the economy, help families with the rising cost of living, and make long-term economic reforms for the future; and call on your Government to implement the five point plan for jobs and growth, including bringing forward long-term infrastructure investment, building 100,000 affordable homes and introducing a compulsory jobs guarantee for the long-term unemployed in order to create jobs and help to get the benefits bill and deficit down, legislate now for a decarbonisation target for 2030 in order to give business the certainty it needs to invest, implement the recommendations of the Parliamentary Commission on Banking Standards and establish a proper British Investment Bank.’.
Thank you for your ruling, Mr Speaker. It is certainly in line with my understanding of the particular interpretation of that Standing Order, and I hope that it satisfies the Leader of the House as well.
It is an honour to open the final debate on the Queen’s Speech today, and to move the amendment, which you have selected on behalf of Her Majesty’s Opposition. It is a Labour amendment that calls for decisive action and a stimulus now to kick-start the recovery, boost living standards and get the deficit down, including 100,000 affordable homes, urgent action to accelerate infrastructure investment and reforms to get young people and the long-term unemployed back to work, with a compulsory jobs guarantee.
The amendment also proposes radical long-term reforms to promote economic growth and investment in manufacturing, services and our creative industries by implementing the recommendations of the Parliamentary Commission on Banking Standards, legislating now for a 2030 decarbonisation target to give businesses the certainty they need to invest here in Britain and setting up a proper British investment bank. It is a one nation Labour amendment, which stands in marked contrast to the complete and utter shambles we have seen from the Government over the past seven days since the Gracious Address—a divided coalition, out of ideas and running out of road, and a weak Prime Minister, out of touch and fast losing control of his party and his own Cabinet.
Nadhim Zahawi (Stratford-on-Avon) (Con)
How much more money would the shadow Chancellor need to borrow to deliver on his alternative Queen’s Speech?
Ed Balls
As I said in my opening remarks and as our amendment says, we need a stimulus now. We, the International Monetary Fund, the Business Secretary and The Economist all agree that taking action now to kick-start our recovery is the right thing to do. We should borrow now to get growth moving, so that we get our deficit down.
I have to say to the hon. Gentleman that that very question was asked of the Business Secretary on the “Today” programme just a few weeks ago. He was asked by John Humphries, “So, should you borrow more?” Guess what the Business Secretary said? He said:
“Well we are already borrowing more”.
That is the truth—£245 billion more. I will tell you what I want to do—[Interruption.] I will answer the hon. Gentleman’s question. I want to get the borrowing down. Under this Chancellor, the borrowing has flatlined—the same last year, this year and the year after. That is the reality.
Charlie Elphicke (Dover) (Con)
Will the right hon. Gentleman come clean with the House: how much more would he borrow?
Ed Balls
As I said, I want to see the borrowing coming down, and it is not coming down because this Chancellor has flatlined the economy. We have had almost no growth since 2010 and the result is that he is borrowing £245 billion more.
I have made speeches in the last two Queen’s Speech debates: I have said that there should be a temporary VAT cut, which would cost £12 billion. I have called for a national insurance cut, VAT at 5% and for infrastructure investment to be brought forward. If those things had been done, borrowing would be coming down now; under this Chancellor, it is not. The economy has flatlined and the deficit reduction plan has flatlined as well.
With the IMF here in town, what the Government should do is listen to the IMF chief economist, who says they are “playing with fire”. The IMF has said they should slow the pace of deficit reduction, stimulate the economy and get growth moving to get the deficit down. That is what the Government should do.
Christopher Pincher (Tamworth) (Con)
Is that the “borrow, borrow, borrow” advice that the shadow Chancellor gave to the President of France, whose deficit is well above the EU average and whose economy has shrunk by 0.2%? Is that the kind of advice he is giving to his fraternal friend?
Ed Balls
The EU produced the latest growth figures today. The figures for France are disappointing. France has gone into recession. It is in the eurozone, trapped in austerity, and its economy is not growing. I looked at the figures today to see what French growth had been since the Chancellor’s spending review compared with the UK. Since the spending review in 2010, growth in France has been 1.1% and growth in the UK has been 1.1% as well, compared with Germany, which has had three times more growth, and America, which has had four times more growth. The eurozone is locked into austerity by virtue of those countries’ membership of the single currency. Our Chancellor imposed on our economy austerity that went too far, too fast, and what has happened? He has delivered the same growth performance over the last two years as that of the French economy, well behind that of Germany and America, where, as we now know, the deficit is coming down.
David Rutley (Macclesfield) (Con)
With the IMF in town, will the shadow Chancellor confirm that the IMF has forecast that the UK will be growing faster than France over the next two years?
Ed Balls
The hon. Gentleman should be congratulating me and the Labour Government on not taking us into the single currency in 2003. That is what he should be doing, but if he wants to have a debate about the IMF, this is what the IMF said in September 2011:
“If activity were to undershoot current expectations, countries that face historically low yields”—
such as Germany and the United Kingdom—
“should also consider delaying some of their planned adjustment”.
In April—just a month ago—it said:
“In the UK, where recovery is weak owing to lacklustre demand, consideration should be given to greater near-term flexibility in the fiscal adjustment path.”
That is technical language that means the Chancellor should slow the pace of deficit reduction, provide a stimulus and get the economy moving to get the deficit down. What do we hear from the Treasury? Treasury advisers, who a year ago were saying the IMF was on their side, now say that the Chancellor will ignore the IMF and plough on regardless with a failing plan.
Guy Opperman (Hexham) (Con)
I am glad to see that the shadow Chancellor is beginning to agree with our plans for regional banking reform with local banks. However, he would improve his banking credibility if he were to repay the £3 million owed by the Labour party to the Co-operative bank. Does he agree with that?
Mr Speaker
Order. Mr Zahawi, you have already intervened with some gusto, but I would ask you to behave in a seemly manner, as the people of Stratford-on-Avon would expect and are themselves wont to do.
Ed Balls
The hon. Member for Hexham (Guy Opperman) has made some wise interventions in these debates. He said just last year that
“too often we are talking about the 50p tax, a tax which affects those on six times the average salary, rather than the taxes on the lowest paid.”
It is a pity his Front-Bench team did not listen to his views in this year’s Budget.
Ed Balls
I want to make some progress, then I will take some more interventions.
This is not simply the Queen’s Speech of a coalition Government who have ground to a halt; it is much worse than that. At a time when living standards are falling; when child poverty is rising; when more than 950,000 young people are out of work; when, as we learned today, unemployment is rising again and is now higher than at the general election; when, as we also learned today, prices are rising four times faster than wages in our economy; when our economy has flatlined for three years; when overall business investment has stalled and actually fallen in the past two years; when, as a result, our triple A credit rating has been downgraded; when the Office for Budget Responsibility says that the deficit reduction plan has completely stalled; and when the International Monetary Fund is now in town saying that the Chancellor is “playing with fire” by sticking to his failing plan, you would think that the priority for the Prime Minister, the Chancellor, the Cabinet and the Conservative party would be to see what they could do to boost economic growth and long-term investment in our country. But no, it seems that that is not their priority.
Andrea Leadsom (South Northamptonshire) (Con)
We have already had a credit downgrade from one of the agencies, and the agency made it clear that that was a result of the problems that our economy has had in recovering. Is the right hon. Gentleman not concerned that if we were to abandon our plans, there could be a further downgrade? If we simply did as he suggests and opened the floodgates to more debt and borrowing, we would put our economy into severe crisis as a result of rising interest rates and a lack of credibility in international markets.
Ed Balls
I ask the hon. Lady to reflect for a moment on the logic of her position. For the past three years, she and the Chancellor have consistently said that they had to stick to the plan, even though growth was low, even though the deficit was not coming down and even though living standards were under pressure, because otherwise they would lose the triple A credit rating. Now they have lost the triple A rating, but they still maintain that they have to stick to the plan. That is completely illogical. The credit rating agency said in terms that it had downgraded us because there was no growth in the economy, and that that was choking off deficit reduction. Sticking with a failing plan that is not working and that has resulted in the deficit reduction being stalled is not the way to keep our credit rating—if that is the Government’s objective. The way to keep it is to get the economy moving, get people investing and get people back into long-term sustainable jobs. Until we do that, the Chancellor is going to continue to fail.
Andrea Leadsom
I am grateful to the right hon. Gentleman for letting me have another go. I put it to him that he really does not understand the point about the credit rating agency in this context. The whole point about confidence in the British economy is that people need confidence in Britain’s ability to get out of the economic mess that his Government left us in. This is not about the absolute level; it is about market confidence. He must surely understand that keeping a very good credit rating is essential in order to have an affordable cost of borrowing.
Ed Balls
I do not want to prolong this argument, but I must explain to the hon. Lady the term structure of interest rates. The 10-year bond yields are the accumulation of market expectations of three-month interest rates added up every three months over 10 years. Why are our long-term interest rates so low? It is because people think that short-term rates are going to stay low because the economy is flat on its back. People would have to be economically illiterate to think that our long-term interest rates were driven by market confidence at a time when we are being downgraded by the agencies. Our long-term interest rates are low because our economy is not growing.
Jacob Rees-Mogg
I look forward to debating many issues with the right hon. Gentleman. The markets show confidence in this Government’s policy by keeping interest rates low. This is not purely to do with an expectation of where short-term rates will be; it is about confidence in the creditworthiness of the British Government under this Chancellor.
Ed Balls
I have to say that that is a deluded view of the way in which credit ratings work. Let us not forget that in 2007 these same credit rating agencies were saying, “Stick with Lehman Brothers” and giving America a triple A rating despite all the sub-prime lending. That is the reality. The fact is that the credit rating agencies are downgrading Britain because our economy is not growing. That is the fundamental problem.
I will give the hon. Gentleman a bit of ground, however. It is true that the Labour Government left a longer-term interest rate structure than other economies. We had far less foreign currency borrowing and more index-linked borrowing than other countries. That helped, but the fundamental thing was that we did not join the single currency. In Spain, Italy and elsewhere, we see a currency risk premium, which relates to the central bank’s ability and willingness to stand behind sovereign debt. That is not an issue here. Our interest rates are low, and they have fallen because our economy is not growing. The market is therefore reflecting expectations of continuing stagnation. I am afraid that that is the reality—aside from the political rhetoric of the Chancellor.
Jacob Rees-Mogg
In my previous intervention, I was careful to talk about the markets, not the credit rating agencies. It is the markets that count, because they reflect people investing their money. I agree with the right hon. Gentleman that the credit rating agencies got the whole of the pre-crash period wrong, but it is the markets we need to bank on.
Ed Balls
Unlike the Chancellor, the markets do not pay a huge amount of respect to the credit rating agencies. The hon. Gentleman agrees with me on that. That is why, two or three years ago, it was so ridiculous for the Chancellor to say, “Trust me. I’ll keep us as a safe haven because I’ll keep the triple A credit rating.” We told him, in 2011 and 2012, that the plan was not working, that the economy was not growing and that the deficit was not coming down, but when we told him to change course, he said, “I can’t do that because the credit rating agencies will downgrade us.” Well, they downgraded us anyway, because the economy was not growing.
Andrew Selous (South West Bedfordshire) (Con)
The shadow Chancellor believes in plain speaking, so I want to give him a third—and perhaps final—opportunity to tell us the amount of extra borrowing that his policies would require. Just a number—plain and simple.
Ed Balls
I am not going to write our Budget for 2015 two years ahead. That would be the wrong thing to do. Right now, if the Chancellor had done what I recommended a year ago, borrowing would be coming down. At the moment, however, it is absolutely flat.
What have we learnt in the last seven days? What have we learnt from today’s Tory amendment about the priority of the Conservative party? What are Conservative Members demanding in their amendment? What are they rebelling on? Accelerated bank reform? Energy market reform? Housing investment? Infrastructure investment? Tough welfare reform through a compulsory jobs guarantee? If they want all that, they can vote for our amendment today. But no, according to the Tory amendment, the No. 1 priority that is so vital that Conservative Members are planning to vote against their own Government’s Queen’s Speech involves enabling legislation to allow Eurosceptic Conservative MPs to try to take Britain out of the European Union.
The Tory amendment states that those Members
“regret that an EU referendum bill was not included in the Gracious Speech.”
Let me tell the House what they should be regretting. They should regret the fact that, after three years of pursuing a failing economic plan, the Chancellor is still ploughing on regardless, even when the IMF is telling him to change course. They should regret the fact that, when calculations based on Institute for Fiscal Studies figures show that families are, on average, £891 worse off this year, the Government have cut taxes for the highest earners, giving a £100,000 tax cut to 13,000 millionaires. They should regret the fact that the Government have refused to use the Queen’s Speech to put in place the long-term reforms necessary for our economic future—reforms that I fear will not be in the spending review, either. The Chancellor and the House should regret, too, the fact that the Conservative party seems to have been hijacked by those within its ranks, including within the Cabinet, who are determined to lead Britain out of the EU regardless of the impact on investment and jobs.
Sir Bob Russell (Colchester) (LD)
Will the shadow Chancellor confirm that the number of Labour Members who have signed this Tory amendment on the EU referendum is now in double figures?
Ed Balls
I have not seen the figures, but I would be happy to study them—it is when it spreads to the Cabinet that there is a real problem. The hon. Gentleman should regret the 15% rise in long-term youth unemployment in his constituency, which was confirmed today. I have to say that this coalition was really not worth his support.
Mr Peter Bone (Wellingborough) (Con)
The shadow Chancellor is generous in giving way. It is a shame he is not the leader of his party, because if he was he would make sure it was not the anti-referendum party—I think those were his very words. The message from today’s debate and tonight’s vote will be that Labour is against an EU referendum and the Conservatives are in favour of it. To put the facts straight, it is not just Conservative Members or just Labour and Democratic Unionist Members who signed the amendment—a Liberal Democrat Member signed it, too.
Ed Balls
I will read our amendment to the hon. Gentleman so that he knows exactly what we will vote for. We say
“that the priority for the Government now should be growth and jobs and that we need reform of the European Union, not four years of economic uncertainty which legislating now for an in/out referendum in 2017 would create”.
Let me quote to the hon. Gentleman the press release issued this morning by the Engineering Employers Federation, which knows about manufacturing investment in the long term. It says:
“EEF, the manufacturers’ organisation believes the current debate is ‘letting British business down’ with politicians making claims that the EU isn’t working for Britain rather than focussing on how to work to make it better”.
Let me set out further our position on this reform agenda, which has been set out in recent weeks and months by the Leader of the Opposition, the shadow Foreign Secretary, the shadow Home Secretary and me. Instead of four years of uncertainty, our Labour amendment says that the priority now should not be walking out of meetings or being entirely ignored but arguing with influence to get the reforms agreed. These include reform of the common agricultural policy, tough new budget discipline in the European budget with stronger independent audit—[Interruption.] Conservative Members should listen, as I would have thought they agreed with many of these things. The priorities include reform of family-related payments to EU migrants, greater national flexibility in transitional arrangements, a balanced growth plan and a new growth commissioner, an end to the wasteful Strasbourg Parliament and more powers for national Parliaments.
Let us reflect for a moment on what the president of the CBI said just a few weeks ago:
“UK membership of the EU encourages large company capital investments within the UK, creating jobs and wealth that trickle down to medium and small company suppliers”—
the kind of trickle down we quite like. He continued:
“Departure would be bad for employment and growth across a broad business spectrum.”
This is what Sir Richard Branson wrote in January:
“An exit would be very bad for British business and the economy as a whole...The EU is the UK’s biggest trading partner, its combined market dwarfs the US and China. For that reason alone the UK must stay in to help rebuild the EU.”
He was right.
Let this sink in: Conservative Back Benchers, with the blessing of many Conservative Front Benchers, are proposing today an amendment that aims to break our ties with our main trading partner, blight inward investment into the UK and put at risk upwards of 3 million jobs. Let it sink in, too, that the leader of the Conservative party, the Prime Minister of our country is not just too weak to do anything about it—he is caving in, day by day, to their demands.
Pete Wishart (Perth and North Perthshire) (SNP)
I agree with the shadow Chancellor almost entirely on Europe, but will he pledge today that he will not support an in/out referendum that might take the UK out of Europe?
Ed Balls
I want us to stay in the European Union; I am absolutely clear about that. Our amendment is absolutely clear, too, about the effect of an in/out referendum announced now. I am going to quote someone, which might go down well with the hon. Gentleman but perhaps not so well with some Conservative Members. Lord Heseltine said:
“To commit to a referendum about a negotiation that hasn’t begun, on a timescale you cannot predict, on an outcome that’s unknown, where Britain’s appeal as an inward investment market would be the centre of the debate, seems to me like an unnecessary gamble”.
My answer to the question of the hon. Member for Perth and North Perthshire (Pete Wishart) is that we will not take that unnecessary gamble now. It would be the wrong thing to do. This is exactly the same position as the one the Prime Minister and the Chancellor joined us in the Lobby to vote against in October 2011. How things change!
Let us remind ourselves of what the Prime Minister told the Conservative party conference in 2006; it is worth reading the whole quote so we can understand its full impact:
“For too long, we were having a different conversation. Instead of talking about the things that most people care about, we talked about what we cared about most. While parents worried about childcare, getting the kids to school, balancing work and family life—we were banging on about Europe.”
His party has certainly been banging on about Europe day after day over the last week—banging the nails in the coffin of Tory modernisation and in the coffin of this Prime Minister’s prime ministership, too.
We should not forget that this is the Prime Minister who last summer rejected calls for an in/out referendum. Then, just three months ago in his much-heralded Europe speech, the Prime Minister pulled his referendum stunt—a Europe speech to wrong-foot Labour and UKIP and unite the Conservative party. This is how The Independent reported Downing street’s gleeful boasting back in January.
Mr John Baron (Basildon and Billericay) (Con)
Will the right hon. Gentleman give way?
Ed Balls
Let me tell the hon. Gentleman what The Independent said about Downing street; then we can reflect on it together in a few moments. It said:
“They judged that, to calm the fractious Tory pack, they had to split off the hardliners who want to leave the EU from pragmatic Eurosceptics...They also needed to unite the Tories at the next election and reduce the threat from the UK Independence Party...The best way, they calculated, would be to promise an ‘in/out’ referendum after 2015. The trick seems to have worked”,
the article concluded,
“at least in the short term.”
Downing street claimed the speech took six months to formulate; it has taken just three months to unravel. We have seen Tory Back Benchers last week defying the Prime Minister to vote against the Queen’s Speech; former Tory Chancellors openly calling for Britain to leave the European Union; serving Cabinet Ministers joining the chorus at the weekend, saying they would vote for Britain to leave the EU now; and the embarrassing spectacle and truly ludicrous sight of a British Prime Minister in Washington negotiating an EU-US trade deal, while back home members of his own Cabinet say they would vote to exclude Britain from its benefits.
Then, on Monday night, we heard the Prime Minister’s panic announcement that he would, after all, publish a draft referendum Bill—not as Prime Minister, but as leader of the Tory party—only to be told by his own Back Benchers the next morning that it was not good enough because the public did not trust him, and they did not trust him either. This is really what it means for a Prime Minister to be “in office, but not in power”. It is not John Major all over again; it is much worse than that, because at least he tried to stand up to the Eurosceptics in his Cabinet.
Mr Baron
I am afraid that the right hon. Gentleman fundamentally misrepresents the amendment. Members in all parts of the House believe that the time has come to give the British people their say on our relationship with the European Union. May I put this question to the right hon. Gentleman? Why does he not trust the British people on the issue?
Mr Baron
I will answer the right hon. Gentleman’s question most directly, provided he promises to answer my question most directly. My answer to his question is that if the referendum were held tomorrow, I would vote “out”, but I support the Prime Minister in his idea of holding a referendum in 2017. If he can successfully renegotiate and re-engineer an EU based on trade and not on politics, that will be a different kettle of fish, and we will judge it at the time.
May I now return to my question to the right hon. Gentleman? He has ducked it, and that is what gives politicians a bad name outside this place. Why will he not give the electorate their say on this issue?
Ed Balls
For precisely the reason that I gave in an earlier answer—and I have to say that I am not sure that the public like to hear us repeating ourselves.
Let me quote the words of another business organisation, London First. [Hon. Members: “Answer the question!”] I will answer the question. London First—[Interruption.] London First—
Madam Deputy Speaker (Dawn Primarolo)
Order. We have a long afternoon ahead of us. It would be good to hear everyone’s views on this subject, which means not shouting over speakers.
Ed Balls
No wonder the Prime Minister has gone to America, Madam Deputy Speaker, if that is what he has to put up with.
Let me quote the words of London First—[Interruption]—which is my answer.
“The announcement that a referendum on our membership of the EU may be held in a few years’ time, dependent on the result of the next General Election, risks condemning the UK economy to several years of further uncertainty.”
London First is completely right. We can see why the Prime Minister is so worried. If that is the kind of support he has, no wonder he is in trouble.
Mr Baron
We have just had an exchange in the Chamber, Madam Deputy Speaker, in which I directly answered a question in return for the Chancellor’s directly answering mine. [Hon. Members: “Shadow Chancellor.”] I mean the shadow Chancellor. He has refused to answer my question. Let me ask it one more time. Why is he denying the British public their say on Europe?
Ed Balls
I am the shadow Chancellor, not the Chancellor—at least for now.
I have answered the question, but I will answer it again. We do not believe that a referendum now is the right priority. The hon. Gentleman asked me why, and I have answered the question. I have answered the question because, actually, I agree with him. This is what he said last year:
“Austerity can only do so much. Longer term, the better solution is greater competitiveness and economic growth.”
I think that the priority now, in the Queen’s Speech, should be for the Government to act on economic growth, short-term and long-term. Hanging a sign above our door saying, “For the next four years, Britain is closed for business”, would be a very, very foolish thing to do.
Mr Baron
I thank the shadow Chancellor for giving way. He is being gracious, if nothing else. However, he still has not answered the question. Why will he not support the concept of trusting the British people to make up their minds on this, say, in 2017? Does he support that position?
Ed Balls
I have answered the hon. Gentleman’s question. For us to join him, or the Prime Minister, in committing ourselves now to a referendum four years ahead would lead to lost investment and lost jobs, and would be the wrong priority for Britain. Our amendment makes it absolutely clear that we disagree with that strategy.
If there were a treaty change that altered the balance of powers, we would support a referendum. I think it important for us to listen to and understand people’s concerns about Europe, and show that we can reform. I must say to the hon. Gentleman, however, that we will not get the reform that we need by walking out of the room in a flounce, as our Prime Minister did in December 2011. That was one of the worst pieces of statesmanship we have seen for many years.
Andrew Gwynne (Denton and Reddish) (Lab)
In order to be a member of the European economic area outside the European Union, would we not still have to pay a membership fee and accept most of the rules and regulations coming from Brussels? Would we not also lose our seat on the Commission, lose our seats in the European Parliament, and lose our voice on the Council of Ministers?
Mr Bernard Jenkin (Harwich and North Essex) (Con)
The right hon. Gentleman has seen the Prime Minister’s draft Bill. If it became an Act of Parliament requiring a future Government to move an order to set a date for a referendum before 2017, would he do so?
Ed Balls
I have just explained that we do not support the idea of legislating now for a referendum four years ahead, for precisely the reasons that the Engineering Employers Federation, London First and Lord Heseltine have set out and I have set out in our amendment, as have my colleagues. I think that it would destabilise investment and jobs.
Andrew Selous
The shadow Chancellor is being very generous in giving way. Will he explain very briefly what he meant when he said hat he did not want his party to be caricatured as the anti-referendum party?
Geraint Davies (Swansea West) (Lab/Co-op)
Will my right hon. Friend give way?
Geraint Davies
As my right hon. Friend knows, today’s figures show that unemployment has risen again. He also knows that the EU provides 50% of our trade. In the event of our securing a free trade agreement between the EU and the United States, alongside bilateral trading agreements between the EU and other countries such as China, what does he think the impact of withdrawal from the EU would be on growth, jobs and trade?
Ed Balls
In 1983, our party supported the idea of withdrawal from the European Community, as it was at the time, but the Conservative party and the Confederation of British Industry agreed that it would cost 2.5 million jobs. Our trade share with Europe has deepened since then, and our labour market is bigger. I think that upwards of 3 million to 3.5 million jobs would be lost now, because we would be turning our face away from those big markets around the world.
Ed Balls
Many other Members want to make speeches, and I have taken rather a lot of interventions already.
Let me ask a political question that brings us back to the economy. Why have things gone so badly wrong for the Prime Minister and his strategy over the past three, four, five months? I think I can help. I have discovered a column that was written in January by the Chancellor’s cheerleader, the former Member of Parliament, and now Sun columnist, Louise Mensch. Straight after the Prime Minister’s Europe speech, she wrote that
“the sound we just heard was Cameron shooting Farage’s fox...This speech saw the George Osborne/Michael Gove wing of government triumphing over the Nick Clegg one...Canny Tories will take this and run with it...George Osborne is a tactical genius.”
There we have it, from a former MP whose one political achievement was to make Corby Labour again. There it is, completely exposed: the Prime Minister is the front man, but the tactical genius—the brains behind the Europe strategy—is the Chancellor of the Exchequer.
We all remember when the Prime Minister said that his Europe speech represented
“a tantric approach to policy-making.”
I have to say that from this side of the House it looks more like sado-masochism—and we all know that the Chancellor likes a bit of that. “'If it’s not hurting, it’s not working” has been his motto for a long time.
Ed Balls
Not now.
I have checked this, and, sadly, it is true. A rather more serious Conservative commentator, Mr Paul Goodman of ConservativeHome, confirmed on his blog back in May of last year that the Chancellor was, indeed, the brains behind the Prime Minister’s referendum stunt. That casts further doubt on the judgment of the Prime Minister. Surely by now he has worked it out. After all, his Back Benchers and the country have worked it out. This is the Chancellor who claimed bringing back Andy Coulson would be a strategic triumph. He is the one who said taking child benefit away from middle-income families would be a masterstroke. He is the one who said that gambling his credibility on our triple A rating was sound economics, and that cutting tax credits and labelling as scroungers 3 million working families—an average of 6,000 in every Tory constituency—was somehow good politics, and that cutting taxes for millionaires would wrong-foot Labour. Surely even the Prime Minister has worked it out by now. This is the man who last year gave us “Omnishambles 1” and “The Budget debacle” and who has now given us “Queen’s Speech 2”, “Omnishambles 2” and the European debacle as well. The fact is the economic plan has failed, the deficit plan has failed and the European plan is failing as well, and when this Government finally collapse in chaos, it will be this Chancellor who gets the blame.
Mr Osborne
Hold on. I have not given way yet. I will give way to any Labour Member who can answer the question: do they rule out an in/out referendum before the next general election? Yes or no?
Ed Balls
To avoid any risk of double-speak, Madam Deputy Speaker, in order to make sure that we have the full facts before us, the Chancellor claimed that he was tackling the welfare bill—[Interruption.] No, no double-speak. Let us be absolutely clear that between 2010-11 and 2012-13, expenditure on benefits has gone up, because of higher unemployment, inflation and other things, by £8.1 billion. To avoid double-speak, will the Chancellor confirm that welfare spending is up by £8 billion in the last two years?
Mr Osborne
We have spent more on pensions, and we are proud that we have done so, and we have a triple lock on pensions and pensioners last year got the biggest ever increase in the state pension. As for other areas of the welfare state, we have cut welfare entitlements by £19 billion a year.
Let me conclude, because there is a five-minute limit on Back-Benchers’ contributions. We have spoken about Europe, but many of the economic challenges that we face remain at home. We spoke about banking regulation, and an important part of the legislative programme this year is the Financial Services (Banking Reform) Bill, which is a carry-over Bill. We are making the changes necessary to fix our banking system, ring-fence our retail banks and make sure that we deal with the too-big-to-fail problem. We also have legislation to support small businesses. It will not be the most controversial Bill, because I suspect that the Labour party will not dare to oppose it, but it will be of enormous help to our constituents and to many businesses throughout the country. Our new employment allowance will cut the tax on jobs—
Oral Answers to Questions
Ed Balls Excerpts(11 years, 6 months ago)
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Danny Alexander
The employment allowance will reduce the cost of employment and will therefore support small businesses aspiring to grow by hiring their first employee or expanding the work force. In total, up to 1.25 million employers will benefit from the allowance, with over 90% of that benefit going to small firms with fewer than 50 employees.
Ed Balls (Morley and Outwood) (Lab/Co-op)
This is now the slowest economic recovery for 100 years, and the International Monetary Fund is in town and openly questioning the Treasury’s economic plan. May I remind the Chief Secretary of what he said in October 2009? He does not need to worry, as this is not the one where he reconfirmed the Liberal Democrat commitment to an EU referendum; it is a different article. He said:
“Cutting spending now would plunge us back into recession…The Tories claim…they can fix the country’s finances, but their plans are economically illiterate.”
He was right then, was he not?
Danny Alexander
The right hon. Gentleman mentions the fact that the IMF is in town; there are, of course, discussions going on, and we look forward to seeing the outcome of the proposals. I have to tell him, however, that given the situation that this coalition Government inherited in May 2010—the catastrophic mess that he and his colleagues made of the British economy—the measures we are taking are absolutely right. If we compare the progress this country has made with the forecast for our major European competitors, we see that on employment, for example, this Government are delivering the right policies for this country.
Ed Balls
The right hon. Gentleman also said in that article that
“at a time of crisis”,
the Tories
“have the wrong solutions and the wrong priorities…They claim to care about the poorest, but will only slash taxes for millionaires.”
He was right about that as well. Is it not the truth that the economy has flatlined, deficit reduction has stalled, living standards are falling and the IMF is saying that the Treasury is playing with fire? In January, the Prime Minister said that we should listen to the IMF, so why is the Treasury telling newspapers that if the IMF tells him to act to kick-start the recovery, the Chancellor intends to ignore it and plough on regardless with a failing plan?
Danny Alexander
The right hon. Gentleman talks of having the wrong solutions and the wrong priorities. That appears to be the verdict of many of his colleagues on his own approach as shadow Chancellor. I note that the former science Minister Lord Sainsbury has said:
“In retrospect the Labour government should have used the opportunity of a strongly growing economy to reduce the deficit.”
That would have reduced pressure on the Labour Government, but we are reducing the deficit now. I also note that The Sun quotes an anonymous shadow Cabinet Member as saying:
“Balls is a busted flush when it comes to economic competence because of his legacy with Gordon.”
I could not have put it better myself.
Budget Resolutions and Economic Situation
Ed Balls Excerpts(11 years, 8 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
It is the morning after—the cold light of day—and the full reality of this Chancellor of the Exchequer’s fourth Budget is starting to sink in. What a huge disappointment it was; what another wasted opportunity. On growth, on borrowing and on living standards, this Chancellor’s plan has completely failed.
Families, pensioners and businesses are paying the price, but what did we get yesterday? A change of direction? Action to kick-start our flatlining economy? Real help now for families on middle and low incomes? Any recognition from the Chancellor that things have not worked out as he planned? No. All we got was more of the same failing policies. Tweeting, tinkering, but no change, of course. The Chancellor confirmed that he will still go ahead in two weeks’ time with a tax cut for millionaires. We had more of the same failing policies and a long hard road to nowhere from a downgraded Chancellor who looks out of touch and increasingly out of his depth. Surely Britain deserves better than that. What do we have to look forward to this morning?
Mr Alan Reid (Argyll and Bute) (LD)
What my constituents on the islands can look forward to next month is fuel duty at 18p a litre less than it would have been if the right hon. Gentleman’s Government had still been in power. Is he not delighted that this Government have reversed his party’s policy and reduced fuel duty by 18p a litre for my island constituents?
Ed Balls
Unfortunately, the hon. Gentleman fought the last election by saying that his constituents should vote Liberal Democrat to stop the Tory VAT bombshell. VAT has gone up, petrol is up as a result and his constituents will make their choice in two years’ time.
What do we have to look forward to this morning? Another painful, contorted and pathos-bathed Budget debate speech from the Business Secretary. I look across at him sitting on the Front Bench and cannot bear to read out once again all those pre-election quotes. You know the ones I mean, Mr Deputy Speaker—[Hon. Members: “Go on!”] No, I just cannot bear it. They were the ones in which he warned that the Chancellor’s austerity plan, his VAT rise and his rapid spending cuts would choke off the recovery and make the deficit worse. The Business Secretary knew that this plan would fail and he now knows that he is deeply implicated in its catastrophic economic failure, yet he still does not have the courage to stand up and speak out about it. Long, contorted and fudged essays in the New Statesman just will not do. No wonder he was completely ignored in yesterday’s Budget. It is a personal tragedy as well as a national tragedy, but we will hear from the Business Secretary shortly.
Mr Tobias Ellwood (Bournemouth East) (Con)
The right hon. Gentleman talks about economic failure. I have the UK annual debt figures going back a few years. When the right hon. Gentleman was in office, the UK debt was £347 billion. Before the crisis struck, it rose to £624 billion. After the crisis it ratcheted up another £200 billion. With this track record, why should the nation trust Labour with Britain’s finances ever again?
Ed Balls
This is the Conservative Member who stated just two months ago that
“the past 2 and a half years have set Britain on the right track.”
The economy flatlined, borrowing stalled and the national debt is rising year by year by year on his Chancellor’s watch. The right track? I can scarcely think what the wrong track would be.
This morning we heard the Deputy Prime Minister on “Call Clegg” attacking the Leader of the Opposition for repeating the same attacks in this year’s Budget response as he used last year. I went back to my opening speech of a year ago, the one following the Chancellor’s third Budget, the omnishambles Budget. We all remember that one, don’t we? This is what I said a year ago:
“The British economy is stagnating, unemployment is rising…the Government’s deficit reduction plans have gone wildly off track, middle and lower-income families and pensioners are facing rising…prices, rising energy bills and falling living standards—and what did the Chancellor do in his Budget yesterday? Did he admit that his economic plan has failed? Did he act to kick-start the stalled recovery?...No.”—[Official Report, 22 March 2012; Vol. 542, c. 957.]
That was a year ago, and the tragedy is that 12 months on the position is even worse. In the words of the great Yogi Berra, it really is déjà vu all over again. It is a groundhog day Budget from a failing and out-of-touch Chancellor.
Twelve months on, living standards are still falling. The Office for Budget Responsibility says that real wages adjusted for inflation will be a full 2.4% lower in 2015 than in 2010—worse off under the Tories. It is groundhog day too because 12 months on, the economy is still flatlining. As recently as the autumn statement, the Chancellor was expecting growth of 1.2% this year, but the OBR has now halved that forecast to just 0.6%—not the right track; the wrong track. At the time of the spending review in autumn 2010 the Chancellor was expecting growth by now of 5.3%. So far it has been just 0.7%, and the stagnation and flatlining continue.
Penny Mordaunt (Portsmouth North) (Con)
I would be interested in the right hon. Gentleman’s explanation of why the OBR is forecasting 600,000 more jobs in 2013 than there were a year ago.
Ed Balls
Perhaps the hon. Lady should also study the book. The interesting thing is that the OBR is also forecasting that unemployment will rise, not fall. More jobs, unemployment rising—maybe there are more people in the country. Does she know what the OBR forecasts net migration to be in the next few years? Tens of thousands? No. Net migration of 140,000 every year. That is what is going on.
It is groundhog day too because, as a result of the present stagnation, the Chancellor’s fiscal plans are even more wildly out of control than they were a year ago. No wonder his fiscal credibility is in tatters. The Chancellor used to claim that the national debt would start to fall in 2015 from a peak of 69.7% of GDP. He now expects it to rise in 2015, to rise in 2016, to rise in 2017 and to hit a staggering not 69.7%, but 85.6% of GDP. And the reason the national debt is rising is that, as the OBR said yesterday, the Chancellor’s deficit reduction plan has stalled. The deficit is now expected to be the same next year as it is this year and as it was last year. It is not a deficit reduction plan anymore. That is why the Chancellor is now set to borrow—[Interruption.] The Chancellor should listen to this. He is now set to borrow £245 billion more than he planned, vastly more than the borrowing he inherited from the Labour Government.
Richard Fuller (Bedford) (Con)
While the vast army of PAs behind the shadow Chancellor search for a bullet point on Bedford, let me say that his criticisms are not falling very strongly, in part because his hands are dipped in red—the red ink of years of borrowing and debt. Does he not think that the arguments would be stronger if he moved to one side and gave his seat to the fresh-faced young man sitting next to him, the shadow Secretary of State for Business, Innovation and Skills?
Ed Balls
The voters of Bedford might be disappointed to find out the truth: compared with a year ago, the Chancellor will borrow £29 billion more than he planned this year, £59 billion more next year, £73 billion more the year after and £77 billion more the year after that. Mr Deputy Speaker, if you want to know who the borrowing Chancellor is, it is him. Do you know what he managed to do yesterday in his Budget documentation? He fiddled around and managed to say that borrowing this year is lower than it was last year by £0.1 billion. We know why: as the OBR confirms, the Chancellor and the Chief Secretary to the Treasury, when one would think they would be working on a plan for jobs and growth or reform of the banking system, have been scrabbling around and hacking away at spending in this year in a desperate attempt to try to get the borrowing down.
The detail is set out on page 13 of the OBR document. It shows that, compared even with the autumn statement, tax revenues are down this year by £5 billion but that since December the Chancellor has found a further so-called underspend of £3.4 billion, which he says is not like normal underspends. What does the OBR tell us about that so-called underspend. It states:
“It is very rare for the government to under-spend the departmental plans it has set out less than a year ago by such a wide margin...Our overall forecast of under-spending has a number of elements: money that the Treasury has agreed to allow departments to move into future years;…money that departments thought they would spend this year, but which they do not now expect to spend either this year or in the future; and payments (for example to some international institutions) that were due to be made late in the current financial year, but which are being delayed into 2013-14.”
The cheque is in the post, but it will not arrive until after 1 April in order to massage the figures. Who does the OBR say has been hardest hit? The answer is the national health service, which has been cut by over £2 billion this year. At the same time the NHS is losing more than 5,000 nurses, the Treasury scrabbles around to try to save the Chancellor’s face.
Richard Graham (Gloucester) (Con)
Yesterday I brought the CEO of a significant medium-sized manufacturer in Gloucester to listen to the Budget statement and the Opposition’s response. He commented afterwards:
“I thought the Government’s commitment to helping business was exactly what is needed for growth and jobs, and I continue to be dismayed that the Opposition remains so theatrical, playing for headlines only, which cannot help any of us.”
Is not it time the shadow Chancellor gave us less theatre and more substance on what he would do to help businesses and growth?
Ed Balls
Falling living standards for families in the hon. Gentleman’s constituency, rising child poverty and families in work seeing their tax credits cut—that is not theatre; that is the real world. As for the national insurance cut for small businesses, that is point 5 of Labour’s five-point plan for jobs and growth. That is the reality.
David Wright (Telford) (Lab)
Talking about theatre and the movement of money between financial years, is it not interesting that hospitals in Shropshire have been cancelling operations? One of the chief nurses says that is because of funding cuts in the NHS. I wonder whether it is because of the Chancellor’s fiddle.
Ed Balls
The OBR document is very interesting. It sets out the unusual underspend Department by Department. I do not think that we have yet heard the full truth about what has been going on in the Treasury: the pressure applied in one year to cut spending or to move it to the next year just to fiddle the borrowing figures. I think that we will discover the truth in the coming weeks. For a Government who attack businesses and make late payments to small business, they are the late payment Government.
Has the Chancellor learned nothing over the past 12 months? He used to say that he was sticking to his plan in order to secure the recovery, but then we had the double-dip recession. He used to say that he was sticking to his plan to get the deficit down, but his spending cuts and tax rises have choked off the recovery. As the OBR revealed yesterday, the deficit was basically unchanged last year and will remain unchanged this year and next. Then all he could say was that he had to stick to his plan in order to keep his treasured triple A credit rating, but he has even lost that. The only reason he will not now change course is to avoid his own political humiliation, and that is no reason to stick to a failing plan.
George Freeman (Mid Norfolk) (Con)
The right hon. Gentleman alleges that the Government have increased the deficit. I have checked the figures from the Institute for Fiscal Studies and the OBR. Will he confirm that when the Government came to power the deficit was 11.2% of GDP and that it is now 7.4%? Is that a rise?
Ed Balls
The Government inherited a deficit reduction plan from the previous Government, but the Chancellor is wildly off track from our plan, which he used to call irresponsible. He is borrowing pretty much a quarter of a trillion pounds more. He said that he would get the deficit down, but the deficit reduction plan has stalled.
I have urged the Chancellor to change course, as in recent months have the International Monetary Fund, The Economist, the Mayor of London, the Business Secretary and the Home Secretary. They have all cast doubt on his plan. But yesterday we got more of the same. How did he describe the Budget? He described it as a “steady-as-she-goes Budget.” Steady as she goes? What kind of ship does he think he is on: the Titanic; the Mary Celeste?
There were some welcome measures. We have consistently called for a tax break for small firms taking on extra workers. The Government are now set to introduce a similar scheme, three years after the shadow Business Secretary and I urged them to. That is a welcome step forward. The Chancellor has finally joined Twitter, five years after I did. Maybe he will find out that his plan is going to fail five years after I worked it out, although by then he will be on the Opposition side of the House.
Yesterday there was no proper plan to kick-start our economy, no bank bonus tax to fund a youth jobs guarantee, no real action to get lending going to small firms, no proper investment in affordable homes and no return of the 10p starting rate to help millions of people, paid for by a mansions tax. Despite the welcome small change of 1p off a pint of beer—buy 320 pints and get one free, which might even be too much for the Foreign Secretary—and even after the increase in the personal allowance, an important point for the Liberal Democrats, families will still be worse off next year compared with this year because of the Chancellor’s tax and benefit changes.
Paul Flynn (Newport West) (Lab)
With all the voodoo economics and fiddles that have now been exposed, is not the Treasury exposed as the most disreputable massage parlour in Britain?
Ed Balls
I think it is a little unfair to tease this Chancellor about what goes on late at night in massage parlours. Perhaps he will correct me and tell me that it was not a massage parlour. I will take an intervention if he would like to clarify it; I cannot remember that chapter in the biography.
According to House of Commons Library figures, a one-earner family—[Interruption.] The Chancellor should listen to the reality of his plans and their impact on hard-working families in our country. According to the Library, a one-earner family on £20,000 a year with two children will be £381 a year worse off in 2013 compared with 2010, even with the personal allowance, because that is outweighed by the hit to tax credits for a working family. This is without taking into account the rise in VAT. By 2015, that family on £20,000 will be £600 a year worse off.
It is not just a case of being worse off under the Tories, but worse off under the Liberal Democrats too. In 16 days’ time, as the Chancellor, with the support of the Business Secretary, rams through the granny tax, the strivers tax and the bedroom tax, he is pressing ahead with a £3 billion tax cut for the very richest people in our country. In two weeks’ time, 13,000 millionaires will get an average tax cut of £100,000 each. Millions are paying more while millionaires get a tax cut.
Damian Collins (Folkestone and Hythe) (Con)
The shadow Chancellor is on record as saying that his solution is that we should be borrowing more now. How much more would he borrow on top of what the Chancellor is already borrowing?
Ed Balls
I will quote the Business Secretary. Asked on the “Today” programme, “Won’t that mean more borrowing?”, he replied, “But we are borrowing more.” The Government are borrowing more—it is all here in the OBR document. If they had listened to our plan two years ago, the borrowing would be coming down, and it is not.
Mr Ellwood
I am grateful to the right hon. Gentleman. He spoke about a deficit reduction plan. What year was he referring to? Was it 2001-02, when the deficit was £0.8 billion, or was it any one of the years leading up to the last year that Labour was in government, when it was a staggering £158 billion? Under the previous Government, the deficit increased in every single year after 2001. Will he tell me in which year his deficit was supposed to kick in?
Ed Balls
I do not want to have to give the hon. Gentleman an economics lesson, although given that he thinks we are on the right track, perhaps he needs one. The Chancellor’s fiscal rule is to balance the current structural budget, excluding investment—[Interruption.] Don’t be so silly. [Interruption.]
Mr Deputy Speaker (Mr Nigel Evans)
Order. Can we calm down? Shouting from sedentary positions does not help the debate.
Ed Balls
The economy has flatlined and the national debt is rising year on year, and the hon. Gentleman does not want to know the truth.
Not only is the Chancellor pressing ahead with a tax cut for millionaires; it now seems that his mortgage scheme announced yesterday will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000. From what I have seen so far, the Government are basically saying, “If you’ve got a spare room in a social home you’ll pay the bedroom tax, but if you want a spare home and you can afford it, we’ll help you to buy one.” Are the Government really going to allow millionaires, who will get a tax cut averaging £100,000 in two weeks’ time, to get a taxpayer guarantee if they use that money as a deposit on a house, a second home, or even a buy-to-let house? That is not just tax cuts for millionaires; it is subsidised mortgages for millionaires—or should I say a spare homes subsidy? I will take an intervention if the Chancellor wants to clear up the absolute confusion and chaos over this policy. Surely people struggling to get a mortgage—those who want to get their first home—should be the priority for help, not the small number who can potentially afford to buy a second home or a buy-to-let home. We will solve the housing crisis and help first-time buyers only if we finally build the new affordable homes that we said should be built but which he ignored in this Budget.
This is more of the same from a Chancellor who does not even understand the Budget he has announced, as we saw a year ago. I ask him again—is the taxpayer subsidy available for second homes to people with incomes over £100,000 or for buy-to-let properties? Yes or no? If he does not clear it up, the confusion and chaos will continue. Does he want clarify it? Pasties, caravans, churches, skips—and now subsidised second homes for millionaires. It is not “Who Wants To Be A Millionaire?”; it is “Who Wants To Help A Millionaire?” It is not “phone a friend”; it is “cut taxes for your friends.” As for “ask the audience”, he must be hoping that he does not have to ask the electorate any time soon—certainly not after the past 12 months.
What a 12 months it has been for this Chancellor! The omnishambles Budget, the double-dip recession, booed at the Paralympics, forced to upgrade on the train, downgraded by Moody’s, his fascinating biography—and now his colleagues are even speculating that he might have to be replaced by the Foreign Secretary, the Defence Secretary, or even the right hon. Member for Wokingham (Mr Redwood). A year ago they feted him as the next leader of the Tory party; now, according to the Tories, they are touting him as our next man in Brussels. It used to be Calamity Clegg they were sending off to the Commission; now it is Calamity George. Well, we do know he likes a bit of “Whip crack-away, whip crack-away, whip crack-away.” [Interruption.] Are you suggesting that I do not sing it, Mr Deputy Speaker?
A few weeks ago, the Chancellor reportedly told his colleagues at a Cabinet meeting that if they did not make a decision that day they would have to do so after 2015, sitting round the shadow Cabinet table. That is going to be the one forecast that he actually gets right.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
This is all very amusing, but not very serious. Is the right hon. Gentleman aware that in his own constituency over the past 12 months unemployment has fallen by 2.5% and youth unemployment has fallen by 12.5%? Why is he complaining about higher borrowing and at the same time advocating higher borrowing? Is it not right that the Chancellor is letting the automatic stabilisers kick in?
Ed Balls
The problem with what the Chancellor is doing this year—cutting in-year spending—is that it is the opposite of the automatic stabilisers. He is cutting spending and the OBR says that it is having a direct impact on economic growth. I sympathise with everybody who loses their job, including the hon. Member for Bognor Regis and Littlehampton (Mr Gibb). In my constituency unemployment has come down, but working families are worse off because of cuts to tax credits, the bedroom tax and cuts to child care. The £700 million-a-year tax break for new child care is no compensation for the £7 billion a year cut in support for families.
Andrea Leadsom (South Northamptonshire) (Con)
Is the right hon. Gentleman aware that inequality in income has dropped significantly since May 2010?
Ed Balls
I think the hon. Lady may find that that is before the millionaires’ tax cut kicks in in 14 days’ time.
The hon. Member for Bognor Regis and Littlehampton asked whether I am being serious. I am being deadly serious about the failure of this Government’s economic plan. They are failing on growth and on borrowing, and living standards are falling as families and businesses pay the price. I warned the Chancellor two and a half years ago that his plan could not work and that, given that a global hurricane was brewing, it was the wrong time to rip out the foundations of our own house. I told him that monetary policy in a situation akin to that of Japan in the 1990s or of the world in the 1930s could not do the trick to restore growth. I warned him that attempting to have the biggest tax rises and fastest spending cuts in our post-war history, and probably beyond, would backfire and choke off recovery rather than support it.
The Under-Secretary of State for Skills, the hon. Member for West Suffolk (Matthew Hancock) is the Chancellor’s former adviser and he is now a member of the Business Secretary’s ministerial team. He wrote an article in The Times in the autumn of 2010 in which he said—this is the Chancellor’s former adviser—that faster deficit reduction would lead to stronger growth. He said, as the Chancellor has also argued, that this was an example of expansionary fiscal contraction, but fiscal contraction has not been expansionary—it choked off the recovery. If the Chancellor was relying on advisers like the hon. Gentleman, it is no wonder that he got into such trouble.
Bob Blackman (Harrow East) (Con)
The shadow Chancellor has made great fun of tax changes and other issues relating to growth. Does he welcome the Government measure that means that next month 36,270 working people in his own constituency will get a tax cut?
Ed Balls
The hon. Gentleman needs to look at the figures and understand the impact on working families in his constituency. The problem with his Chancellor is that he gives with one hand and takes a lot more with the other. A one-earner family on £20,000 and with two children are worse off, even with the personal allowance, by £380 a year because of the cuts to tax credits. Working families are losing out. The Chancellor tried to divide the country into strivers versus shirkers, but we do not hear that any more because it turned out that his shirkers were the working people of this country.
The real tragedy for this Chancellor is that he is set to join a long line of past Chancellors. Philip Snowden, Norman Lamont and now George Osborne—
Ed Balls
I apologise, Mr Deputy Speaker.
Philip Snowden, Lord Lamont and now Chancellor Osborne—[Interruption.] It was not the Lamont name that I got wrong, was it, Mr Deputy Speaker? Philip Snowden, Lord Lamont and now this Chancellor have said, “I will stick to the plan.” Those past Chancellors ignored all the warnings from those who said that the plan would not work. They boasted, “If the medicine’s not hurting, it’s not working,” and ploughed on and on as things got worse and worse, and their careers ended in disaster as their failed policy finally consumed them.
Is that not the truth? This Chancellor is an historian who does not know his history and he does not know his economics, either. He is completely out of his depth—business, the country, his Back Benchers and Cabinet colleagues and the Business Secretary all know it and, in his heart of hearts, I think the Chancellor knows it, too. He was the wrong man for the job at this vital time. He is running out of excuses, he has run out of answers and he is running out of road.
We needed a Budget for growth, jobs and fairness, but we got more of the same. There is no plan for growth, just tax cuts for the rich while everyone else pays the price. This is more of the same failing plan from a downgraded Chancellor—not steady as she goes, but sinking like a stone.
Vince Cable
As I said a few moments ago, there are two schemes. The first, which is the development of a scheme that is already operating, most emphatically does not apply to second homes. The major mortgage guarantee scheme is complex and the Chancellor will consult on how to draw the boundaries around eligible mortgages.
Vince Cable
I will in a moment. Let me just deal with the question of the millionaires who benefit. I remember the 13 years that I spent on the Opposition Benches, asking about taxes. Let us remember the situation. We had a 40p top tax rate, we had an 18% capital gains tax, which was widely used for tax avoidance in the private equity industry and elsewhere, and non-dom tax reliefs were completely uncapped. When we challenged that situation, we were told repeatedly by this shadow Chancellor and others, “No, you can’t do that. You’ll frighten away all the bankers who are generating wealth in the City of London.”
Of course we need a more equitable tax system. That is why the Liberal Democrats continue to argue for a mansion tax. But we have a higher rate of income tax at the top than prevailed in any year of the Labour Government.
Ed Balls
The Business Secretary is a member of the Cabinet and a student of these matters, and he cares a lot about how the economy works. Can he tell us, because he will have been part of the discussions, whether the new mortgage scheme applies to second homes and buy-to-let. Yes or no? He is the Business Secretary; can he answer the question?
Vince Cable
The scheme has not yet been designed in detail. It was typical of the Labour party that it frequently launched into half-baked schemes without thinking about the detail. This is a major change and it will be planned carefully.
Ed Balls
To be absolutely clear, in two weeks’ time millionaires are getting an income tax cut and the new scheme that was introduced yesterday could allow them to use that tax cut to get a taxpayer subsidy for a second home or a buy-to-let, but the Business Secretary cannot tell us—yes or no—whether that will be the case. Is that not an absolute shambles? Is it not set to be totally unfair? It is a spare home subsidy.
Vince Cable
The right hon. Gentleman does not know, and I do not yet know, what the final outcome of this massive scheme will be. To be lectured with righteous indignation by the people who created a massive property bubble that destroyed this country’s economy and wiped out enormous gains in people’s living standards is the most gross hypocrisy.
Let me turn to some of the other issues that the shadow Chancellor raised.
Vince Cable
I do not understand why the Opposition should be hostile to work experience. All our evidence suggests that people who enjoy work experience go on to stable employment. It is an extraordinary state of denial when we have a successful process of job creation that the Opposition do not want to acknowledge exists.
Ed Balls
To clear up the Business Secretary’s confusion a few moments ago—I am not sure whether he or the Chancellor have seen this document, but it might be helpful to them—the Treasury has published a document, “Help to Buy: mortgage guarantee”, which makes it clear that the scheme does not apply to buy-to-let properties. A person cannot take out a mortgage for a buy-to-let property; it must be residential. As far as we can see from the document, however, the scheme absolutely does allow second homes. It is a spare homes subsidy. I do not know whether the Business Secretary has seen the document, but perhaps he would like to comment.
Vince Cable
I am glad the right hon. Gentleman felt able to withdraw his earlier allegation that this was about buy-to-let mortgages.
Ed Balls
For absolute clarity, I asked the Chancellor and the Business Secretary whether the scheme applied to buy-to-let properties, and whether it would allow second homes. Neither of them knew. The Business Secretary said that it had not been decided, but in fact the document has been published and states that the scheme does not apply to buy-to-let properties, but it does allow second homes. The accusation stands. Is that true? It is not in the document; are they going to amend it?
The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)
Is it in the document or not?
Mr Deputy Speaker (Mr Nigel Evans)
Order. Please make the intervention briefly.
Vince Cable
I think the shadow Chancellor is digging himself into a certain amount of trouble. He refers to a document as fact, but it is actually a consultation document. Rather more sensibly, the shadow Business Secretary yesterday applauded the new housing initiatives. We will proceed with the consultation, and if the shadow Chancellor has any technical criticisms of the tenure arrangements, he can make them in the consultation process and we will listen constructively.
Oral Answers to Questions
Ed Balls Excerpts(11 years, 8 months ago)
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Mr Osborne
My Parliamentary Private Secretary, my hon. Friend the Member for Hastings and Rye (Amber Rudd), has just said in my ear that her constituency is also bidding. I will not take sides, but I know that Southend will put in a very strong bid, as will Hastings. The decision will be announced shortly.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The Chancellor has had plenty of advice over the weekend on how to change his failing economic plan, and it has not all come from me. The former Defence Secretary says that he should cut capital gains tax, the Business Secretary wants a £15 billion housing boost, and even the Home Secretary is making speeches calling for a new growth plan. What is going on? Do Cabinet Ministers not realise that the Budget is in just eight days’ time, or have they lost confidence in the Chancellor of the Exchequer?
Mr Osborne
What people realise is that the right hon. Gentleman’s prescription of borrowing more as a solution to Britain’s borrowing problems is exactly the same prescription that got the country into this mess in the first place. He is like the snake oil salesman selling his miracle cures when people remember that his medicine almost killed the patient. We are not going to listen to him again.
Ed Balls
But it is the Chancellor’s plan that is failing. The Business Secretary said on Monday:
“Well we are already borrowing more”—
[Interruption.] Government Members may cheer behind the Chancellor in public, but they are not cheering in private. An e-mail from the right hon. Member for Wokingham (Mr Redwood) has fallen into my hands. It was sent around within half an hour of the Prime Minister’s speech last Thursday to set out alternative ideas for the Budget from Back Benchers, such as income tax cuts and capital gains tax cuts. He says that “one colleague” says that we should do
“more to help people with childcare costs.”
Just one colleague! It concludes that the Chancellor needs
“to stimulate greater confidence, more enterprise, and to relieve some of the squeeze on the private sector.”
Businesses and families are feeling the squeeze, so why will the Chancellor not act to stimulate the economy and why is it only millionaires who are getting a £3 billion tax cut from him? Is not the truth that his plan is failing? That is why all the Government Members are losing confidence.
Mr Osborne
I am tempted to say, “Look behind you.” With a week to go until the Budget, is that the best that the shadow Chancellor can do? He has produced an e-mail from Conservative Back Benchers who are perfectly entitled to ask for things in the Budget. In this party, we are perfectly prepared for people to express an opinion and to listen to the views of our colleagues, unlike him and the operation that he runs. He is the face of Labour’s economic failure. As long as he remains as shadow Chancellor, it is a great thing for my party.
Financial Services (Banking Reform) Bill
Ed Balls Excerpts(11 years, 8 months ago)
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Greg Clark
The right hon. Gentleman will find that he is satisfied with the scrutiny that is available. It is a question of chickens and eggs. We have not yet had the recommendations of the commission, on which he serves. When it makes its recommendations, if we think that they require more time then we will certainly make sure that there is plenty of opportunity for the House to scrutinise these matters.
Ed Balls
I remind the Minister that, around the time of the LIBOR scandal a year ago, a serious proposal by the Opposition for a full, open public inquiry into these issues was rejected by the Chancellor in favour of a parliamentary commission. The commission’s recommendations on process as well as substance and the House of Commons’ scrutiny of its recommendations —which will not even have been made by the time the Committee stage is complete—are being treated in a way that is very much against the spirit of the Chancellor’s announcement last summer, when he rejected a full public inquiry. If the Minister can get hold of the Chancellor before the vote at 10 pm, he should tell him that the Government should reconsider the contemptuous way in which they are treating the House of Commons and the all-party parliamentary commission of both Houses. It is not in line with the spirit of the discussions that the Chancellor had last summer with the chair of the commission, the hon. Member for Chichester (Mr Tyrie).
Greg Clark
The right hon. Gentleman will find that he will be perfectly satisfied with the degree of scrutiny that the recommendations, which have not yet been made, will receive. I have made that commitment and he will see it in time, even if he is not very trusting at this stage. I hope he will change his view.
One of the parliamentary commission’s policy recommendations was for a general reserve power to split up the entire banking system if it were considered to be appropriate in future. The Chancellor, the chairman of the commission—my hon. Friend the Member for Chichester—and, indeed, the Archbishop of Canterbury had a learned and erudite discussion about the origin of the sword of Damocles metaphor. The Government’s view is that such a power would, in effect, introduce a different policy—one that was considered and rejected by the Independent Commission on Banking, which concluded that full separation would have higher costs for a gain
“that might not even be positive”—
without anything like the three-year period of scrutiny and analysis that this policy has enjoyed.
The proposal would, in effect, legislate for two policies at the same time—ring-fencing and full separation. We must legislate for the policy that the Vickers commission proposed. If a future Government were to consider that ring-fencing was no longer the right solution—which they would be perfectly entitled to do—they should conduct a full analysis of the case for alternative reforms and, in the light of that analysis, introduce new legislation to Parliament.
In addition, the parliamentary commission has proposed that the exercise of the reverse power by the Prudential Regulation Authority should include safeguards, including a Treasury veto, to ensure that the regulator behaves in a non-discriminatory way. The Government agree that there should be such a veto and will table an amendment to provide for a firm-specific power to require separation while the Bill is before the House. In addition, a further safeguard is available for any bank that believes it has been treated unfairly—namely, recourse to the courts.
One very important point that both the Vickers commission and the parliamentary commission agreed is that, in addition to the enhanced capital requirements on ring-fenced banks, there should be a minimum leverage ratio and that it should apply to unweighted assets of 4.06%, rather than the Basel III standard of 3%.
Let me be clear: this Government support the introduction of a minimum leverage ratio. It provides a simpler measure than risk-weighted assets, the calculation of which can be complex and disputed. Furthermore, it has been established empirically that a rise in the leverage ratio often preceded credit booms in this country and overseas.
The question remaining is about the precise level of the leverage ratio. I referred earlier to the British dilemma of how to maintain an internationally competitive financial sector without imposing risks on domestic taxpayers. This is a case in which that dilemma is, to be frank, most acute. When it comes to capital requirements, international agreements have already established that different countries will have different requirements. The European Union capital requirements directive, CRD4, provides for member states to have discretion to go beyond agreed capital requirements.
In the case of the leverage ratio, the 3% Basel III recommendation was for the requirement to be binding only from 2018, and it is not clear yet whether there will be the flexibility in European law to increase it as Vickers and the parliamentary commission recommend. The Vickers commission did not recommend that the higher leverage ratio should apply before 2019, in order, for reasons that I think we all understand, to minimise the impact on lending in the short term while the economy is still recovering.
Furthermore, during our repeated consultations, concerns have been raised by institutions such as building societies that they could be caught by a 4% leverage ratio despite having a relatively low-risk portfolio of assets, thereby restricting lending to home owners. Moreover, it would lead to assets in Spanish property, for example, being viewed as equal to US Government bonds for the purposes of the calculation. Our view, therefore, is that at this time we should follow the international approach and press for countries to have power to set a higher ratio from 2018, following a review in 2017.
Having said that, in the interests of transparency, we agree with the recommendation of the Financial Policy Committee that banks should disclose their leverage ratios from 2013. I confirm that they will do so from this year.
Economic Policy
Ed Balls Excerpts(11 years, 9 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Ed Balls (Morley and Outwood) (Lab/Co-op)
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK Government’s economic policy following the loss of Britain’s triple A credit rating.
The Chancellor of the Exchequer (Mr George Osborne)
This rating decision is a stark reminder of the debt problems built up in Britain over the last decade, and a warning to anyone who thinks we can run away from dealing with those problems. We on the Government side of the House will not do that.
I can report that we have not seen excessive volatility in the markets today. Ten-year Government gilts are broadly flat—trading at 2.1%—within the trading range of the last week, and near the very lowest rates of borrowing in our history. The FTSE 100 is currently up.
The credit rating is an important benchmark for any country, but this Government’s economic policy is tested day in, day out in the markets, and it has not been found wanting today. Families and businesses see the benefit of that in these very low interest rates.
If we accept the outcome of the rating agency’s decision, we must accept the reasons given for that decision. Moody’s points to the combined impact of what it describes as
“slow growth of the global economy”
and the necessary
“domestic public- and private-sector deleveraging process”—
in other words, the process of winding down the huge debts that built up in our society over the last decade. That is the environment that we are operating in. We are dealing with the very high deficit and debt trajectory that this country had, coming out of the financial crisis, and that was made more difficult by the economic environment abroad.
On the same day as the rating decision, the latest European forecasts showed the eurozone deep in recession, and weaker growth than ours in key economies such as France and Germany. Crucially, Moody’s says that the UK’s creditworthiness remains extremely high because of our
“highly competitive, well-diversified economy”
and a
“strong track record of fiscal consolidation”—
what it calls the “political will” to “reverse the…debt trajectory.” Its message to this Government and this Parliament is explicit: the UK’s rating could be downgraded further if there is a
“reduced political commitment to fiscal consolidation.”
Hon. Members will not get that reduced commitment from this Government. We will go on delivering on the economic plan that has brought the deficit down by a quarter, that has helped to secure 1 million private sector jobs, and that continues to secure very low interest rates, not just for the Government, but for families and businesses in this country.
Ultimately, that is the choice for Britain. We can either abandon our efforts to deal with our debt problems, and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure that this country can earn its way in the world, and provide for our children a very much brighter economic situation than the one we inherited from our predecessors. That is what I will do, and what this Government will do.
Ed Balls
The downgrading of Britain’s credit rating is, in the Chancellor’s own words, a “humiliation” for this Government. Let me remind the House what he promised at the general election. He said:
“the British people will have eight clear and transparent benchmarks against which they can judge the economic success or failure of the next government”.
Point 1 says:
“We will safeguard Britain’s credit rating”.
The first economic test he set himself has been failed by this downgraded Chancellor. Yet as we have seen today, he remains in complete denial, offering more of the same failing medicine, even though Moody’s now agrees that “sluggish” growth is the main problem. Does he not now regret using the rating agencies as cover for his accelerated tax rises and spending cuts—an economic course he was warned was bound to fail?
The plan has failed. Businesses, families and pensioners are struggling. Our economy has flatlined, and as a result, Government borrowing is set to be £212 billion higher than the Chancellor planned, but despite all that, he spent the last year saying, “I must stick to my plan to keep the triple A rating.” Now that it is clear that his warnings of disaster—of rising mortgage rates and market mayhem—if we downgraded have not come true, what other excuse does he have for sticking to the plan? Over a weekend, he went from saying that he must stick to his plan to avoid a downgrade to saying that the downgrade is the reason why he must stick to the plan. He used to say that a downgrade would be a disaster; today he says it does not matter, but he still warns that a downgrade in future might be a problem—until it comes along; then he will have the same excuses. It is utterly baffling and completely illogical. He is just making it up as he goes along.
No wonder the Chancellor is now besieged by calls from right, left and centre to kick-start the recovery with infrastructure investment and tax cuts. Even the economic adviser to his great political rival, the Mayor of London, has today called for
“more spending by the Government on infrastructure and construction.”
In conclusion, the Chancellor needs to get out of his denial and get a new plan on growth, jobs and the deficit that will work, or else the Prime Minister will need to get a new Chancellor. Does the Chancellor not see that it is his first duty not to put his own political pride first, but to put the national economic interest and families and businesses in this country first?
Mr Osborne
The shadow Chancellor finds himself in the contradictory position of seeking an urgent question on a rating decision which he says we should ignore, about a debt burden that he admits he would add to, in order to attack a Government who are sorting out the mess that he created. What exactly is his policy? Six times on the radio he was asked this weekend whether the answer to too much borrowing is to borrow even more, and he would not answer the question. It is an economic policy that dare not speak its name, from a shadow Chancellor who refuses to be straight with the British people. Finally, he was confronted on the radio by the simple statement:
“I, Ed Balls…would borrow more”
and he admitted,
“Yes, that is what I would do.”
Does not that admission completely undermine his entire argument today? A deliberate decision to borrow more—[Interruption.]
Oral Answers to Questions
Ed Balls Excerpts(11 years, 9 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
May I start by welcoming the Chancellor back from his winter mini-break in Davos? I do not know whether he got any skiing in, although he and his chums certainly went out on the piste.
Back to Britain: in August 2010, the Chancellor also made a speech at Bloomberg, in which he claimed that his economic plan would secure the recovery. A few weeks later, his spending review said that by now we would see growth of 5.2%. Let me ask him: since his spending review, how much growth have we actually had?
Mr Osborne
I am glad the right hon. Gentleman noticed that I went to Davos, where I met the last two Labour Prime Ministers as well—and I could not help but notice that both of them were talking about the global economic problems. Of course we have to sort out those problems abroad, but we also have to deal with our problems at home, and of all the people now in Parliament, the right hon. Gentleman bears primary responsibility for putting Britain into this mess. The reason his economic argument is not making more traction is because no one believes that the problems that got us into this mess are the things that will get us out of it.
Ed Balls
How complacent is that? The economy is flatlining and borrowing is rising on the right hon. Gentleman’s watch. Let me tell him the facts. Since the spending review, growth has been just 0.4%, which is 13 times lower than he forecast. Our growth is slower than that of America, France, Germany, Australia, Canada, Mexico, Turkey—the list goes on and on. Let me ask him this: now that the chief economist at the International Monetary Fund, the Deputy Prime Minister and even his dining chum the Mayor of London are losing faith in his plan, when will he listen, stop being so complacent and finally act to kick-start this flatlining economy?
Mr Osborne
There is no complacency about dealing with the mess that the right hon. Gentleman left behind. He talks about the economy over the last couple of years. Let me tell him what has happened in the Morley and Outwood constituency. In his area, the unemployment claimant count went up 190% under the last Government; it has fallen by 7% under this Government. The youth claimant count was 161% up under his Government; it has come down by 10% under this Government. We are fixing the problems that he created. The only job that he is interested in saving is his own. The truth is that while he remains in the post that he is in, he is a reminder to everyone of all the mistakes that Labour made when it managed the economy.