The Economy

Ed Davey Excerpts

Wednesday 8th July 2020 Commons Chamber

[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register.

We need a job-rich recovery. I therefore strongly welcome the measures that the Chancellor has announced today. Some of those measures will save jobs. Some of those measures will create or stimulate new jobs. The Government are right to worry that we have lost too many jobs already over the closures and they are right to worry that we might lose more in the days ahead. They are right to make the changes they are making to the furlough scheme, to encourage as many of those jobs as possible to return, and they are also right to say that we cannot carry on with a furlough scheme indefinitely; there has to be a test of whether there is still a job there. If we roll it on for too long, there will be no real job left, and it becomes just a different kind of benefit, delaying the time when that person can retrain or find a better prospect for their work.

What do we need to extend this jobs recovery? First, we need plenty of money and credit around, so that it is available for the business to pick up and the incomes to rise. The new Governor is a welcome breath of fresh air. As I have mentioned before, the previous Governor went in for extreme austerity, which slowed the economy needlessly. The new Governor has corrected for that and made a very big boost at the beginning of this crisis, which has been extremely helpful. I see no need for the Bank to go to negative interest rates. I do not think the Swedish experiment with them was particularly helpful, and the Swiss experiment is specific to the pressure on the Swiss franc, which we do not have on the pound. I do not think we need to go to negative interest rates, but I would say that the Bank is in danger now of going rather slowly on the quantitative easing and loosening. We see that in some of the figures coming out.

If we compare our figures with those of the United States of America and the Fed, we see that the Fed is doing twice as much or more than the Bank of England, proportionate to the size of the economy. Some might think that perhaps the Fed is doing a little bit too much and the US might end up with some inflation, but we are in danger of not doing enough again, and I hope that progress will be made in getting the right adjustments.

[Sir Edward Davey (Kingston and Surbiton) (LD)]

Does the right hon. Gentleman agree that while it is right that the Bank of England is doing quantitative easing, how that money is spent ought to have more democratic input? That money could be used for the sorts of investment we need now for jobs and tackling climate change.

[John Redwood]

The money is used to maintain the price of Government bonds so that the Government can borrow on very low interest rates as much money as they want. Investments are therefore determined by this House and the Government, so I cannot quite understand what point the right hon. Gentleman is making.

The Government are right to borrow a lot of money for six months or so, to get us through the crisis and to speed the recovery, but it has to be a one-off. We cannot live like that. One needs to earn a living, but this is a one-off crisis. The markets are such and the Bank of England’s intervention is such that the Government can borrow a lot of money very cheaply and quite long term. That is the best we can do, and it is the right thing to do to try to save jobs and create new jobs.

This week, we have had the summer forecasts from the European Union for the economies of the European Union, and it has still done a UK forecast. It is worrying, because the forecasts say that the French, Italian and Spanish economies will lose more than 11% of their economic output and income this year. They say Britain will be in high single figures—a bit better than those three—although not as good as Germany, which has come through it the best so far. However, the figures are not acceptable, and most people feel that the United States figures will be considerably better, because the US response to this crisis has been on a far bigger scale, both fiscally and in terms of monetary policy, than the European response. The UK needs to be closer to the American example in this case, because this very severe hit to major economies requires something very big to try to carry them through and rescue those jobs.

I hope that the Government will look at the opportunities for sourcing more in the United Kingdom through its purchasing programmes as we leave the European Union. I am all in favour of strong competition, value for money and good pricing, but I think we have had examples of our not having enough national resilience. We found that we could not buy the things abroad that we needed for our health service, because we were relying on others’ goodwill and they needed it for themselves. We are finding that buying things from China comes with all kinds of difficulties. We will find, if we go down the route of importing more and more electricity, that we have strategic weakness in depending on Russian gas, which is the main source of continental energy. I urge the Government to use their purchasing intelligently to give us resilience and more British jobs. Value for money and competition are good, but let us make sure that the purchasing goes to home purposes, just as they do in other countries abroad, where they look after themselves first.

--- Later in debate ---

[Sir Edward Davey (Kingston and Surbiton) (LD)]

I give almost two cheers for the short-term measures announced today, but less than one for the medium and long-term measures. The Chancellor will have to produce a much more coherent economic strategy if we are to deal with unemployment in the medium term and with inequality and climate change, which are still massive challenges for our country.

In the short term, the job retention bonus looks good, particularly on the back of the furlough scheme. The VAT cut for the hospitality and leisure sector is also good, but there was nothing for the self-employed; they have been left behind—they have been excluded—and that is just not good enough. The kick-start programme for young people looks good, but why only six months of training? If we are really going to help young people come back and retrain, we have to give them far more than that. And I do not think that the stamp duty measure is going to be a huge boost to people. For a start, the housing market is already picking up now that people are able to buy again, as demand was already there. Secondly, this tax cut will get capitalised in the price; house prices will just go up, not serving anyone, and that will mainly go to the better-off. I would rather have seen help for renters, help for homeless people, and building homes—that is the way to tackle the housing problem in our country.

When it comes to the medium-term, this package is just not up to the moment. We have a serious economic crisis, the like we have never seen, and it comes on the back of the threats that will be posed to parts of our economy from Brexit. We also have the climate change challenge and the global issues caused by the tensions in trade between China and the US. All these things will dampen the global economy and our economy, and I just do not think that the package we have heard today really amounts to anywhere near enough if we are serious about protecting jobs and getting that green transition.

It is difficult to look at the figures and do a proper analysis, given that there is so little data in this plan for jobs, but it looks like this may be the smallest fiscal stimulus in the whole of the G7. So to put this into context, this is not the massive boost that people are saying.

If we really want a fiscal stimulus, we should be talking about the longer term and about the new industries. I was very proud when I was Secretary of State for Energy and Climate Change that we really boosted renewables. We nearly quadrupled renewable power. We became the world leader in offshore wind. We saw jobs created in declining economies such as those in Hull, Grimsby and Lowestoft, thanks to the policies we put in place on the basis of green jobs. Where is that ambition here? I do not see it. There is nothing on hydrogen, as has been said, and no real push for renewables, no real push to make sure that we bring in investment in nature and environmental improvements as part of the climate change challenge, and very little more on green transport.

I say to the Ministers on the Treasury Bench that what we wanted above all, for short-term jobs and long-term benefits for the climate and the economy, was a home insulation package that was much bolder. There is a former Prime Minister who used to say, “Education, education, education,” and I say, “Insulation, insulation, insulation.” I want jobs in every village, town and city across our country. That will be the way to really make sure we do not have a blight on our economy and a blight on young people, and really get a grip.

[Caroline Lucas]

The right hon. Gentleman is making a powerful case. As well as insulation, does he agree that we need to make sure we have zero-carbon homes going forward? Some 2 million homes have been built since the Climate Change Act 2008 came into being that now need to be retrofitted. Does he agree that the Government must bring forward the future homes standard, and that they were wrong to scrap the zero-carbon homes standard?

[Sir Edward Davey]

The hon. Lady, whom I call my hon. Friend, is absolutely right. I was part of the team that brought in the zero-carbon homes regulation, and two months after we left office the Conservative party got rid of it. It was an outrageous act of climate change vandalism, and nothing has happened on that, so the hon. Lady is absolutely right.

The idea that the Conservatives have a good record on climate change is for the birds. All the advantages actually came from things that the Labour Government did before 2010 and things that the Liberal Democrats did when we were in charge of the Department of Energy and Climate Change, and they tried to undo almost everything when they had the chance. I saw them trying to undo all the great things—not just zero-carbon homes, but they cancelled the carbon capture and storage plans, which they are now trying to put back with the timidity of a mouse. They do not understand how big the challenge is. This is an historic challenge; we have to move our economy from a fossil-fuel based economy to a net zero carbon economy, and we cannot wait for 2050. We now have an opportunity to retrain our young people, and our whole workforce, so that we can deliver this, creating a green industrial base and a regional strategy that brings everybody up. However, I fear that this Prime Minister, this Chancellor and this Government are just not up to the job.