Budget Resolutions

Gareth Thomas Excerpts

Wednesday 22nd November 2017 Commons Chamber

[Chris Evans]

I respect the hon. Gentleman as a parliamentarian, but he is wrong about this. He knows that that was a false statement made by the leave side to try to con people into voting leave. There is no point in standing by that claim anymore.

The thing is that we heard nothing in the Budget about Brexit; all we heard is that it will not be dominated by Brexit. Well, I am afraid the Chancellor is wrong: every Budget from here on in will be dominated by the consequence of leaving the European Union.

The Budget went on and on and on. There were terms that the Tories would love. We heard about a strong Government and that we will be resolute in our determination to bring about a strong economy. It took eight pages before we got to the real story of this Budget: quite simply, productivity growth is down and is continuing to fall. The Chancellor is the first since world war two—this is something he should be proud of —who has stood at the Dispatch Box and said that growth will be below 2%. It gets worse: the figure is 1.5% in 2017, 1.4% in 2018, and 1.3% in 2019 and 2020. It will hopefully then pick up to 1.5% and, finally, to 1.6% in 2022. At the same point, debt will be at its highest level ever—and there the Government are being over-optimistic.

If we are not going to talk about Brexit, we should at least talk about the fundamental weakness in our economy: productivity. Productivity has failed to return to pre-crash levels, and it does not look like that is going to happen any time soon. The OBR has revised its estimates of Britain’s long-term productivity gains and economic growth. It claims that this means that Britain’s economy will not bounce back from the financial crisis, and output per worker probably will not recover to its pre-crisis rate of 2.1%.

Our productivity crisis will mean larger budget deficits in future years. A downgrade in productivity, and therefore depressed earnings, will mean that future tax revenues take a serious long-term hit. The downgrade will create a £20 billion black hole in the UK’s public finances, according to the Institute for Fiscal Studies.

We cannot hide this problem anymore. The Government should not be so timid and so scared of their friends from Ireland. We need radical solutions. Things have not worked. We cannot go on all the time with this rhetoric that things are going to improve. We have to take action, and that must happen now.

For me, the most fundamental error the Government have made since they came to power in 2010 is failing to get to grips with the banking system. We need to boost business investment through a network of regional banks. Germany has thousands of banks, including vibrant state-run and co-operative sectors, many focused on lending specifically to small and medium-sized businesses. In Britain, just five banks hold 85% of all current accounts. The Chancellor could learn from the German model by enabling a new generation of mutually owned building societies and savings banks to focus on driving long-term investment, rather than short-term dividends for their shareholders.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

Might not the Chancellor also rethink the future of the Royal Bank of Scotland? At the moment, the Government are committed to privatising it at some point in the medium term. Surely taking the opportunity to set a future for RBS as a mutual—the “Royal Building Society of Scotland”, perhaps—might be a better way to encourage competition with the other big four players in the banking market.

[Chris Evans]

My hon. Friend speaks from experience as the chairman of the Co-operative party, and he is absolutely right that we need a thriving co-operative sector in this country. Again, if we want to talk about the past and the reason why we do not have a strong mutual sector in this country, it is because of the raid that the Tory Government of the 1980s allowed on many of these institutions, with the most famous example being Bradford & Bingley. We allowed people to become members, and then turned these institutions into plcs—and look where that got us. We need fundamental reform from this Government.

--- Later in debate ---

[Gareth Thomas (Harrow West) (Lab/Co-op)]

It is a pleasure to follow the right hon. Member for Witham (Priti Patel). She will not be surprised that I take a slightly different view of the decision our country made on Brexit, but nevertheless I thought she gave an interesting speech. I was also interested in the comments of the right hon. Member for Sutton Coldfield (Mr Mitchell) about the need to reform capitalism. I thought his proposals rather timid, but they were at least a start in terms of recognising how corporate culture needs to change. I gently encourage him that there are forms of public ownership that he should look at with a little more enthusiasm than his remarks suggested he did. If I have time, I hope to pick up on some of those.

The most striking features of the Budget thus far are the revelations about the cost of Brexit. The OBR’s downgrade of growth forecasts means that for the first time in modern history the official UK GDP growth forecast for every year being forecast is under 2%. The setting aside of an extra £3 billion to fund the cost of Brexit is quite extraordinary. I do not remember anyone in the leave campaign even hinting at such costs. Earlier this month, the Bank of England Governor gave his verdict on the economy, when he said that “Britain would be booming” were it not for the “Brexit effect”. Indeed, with favourable conditions and stronger growth in other parts of the world—sadly, notably in the eurozone—Britain has fallen from the top to the bottom of the league of G7 leading economies in the year since the Brexit vote. Perhaps most strikingly, foreign investment in Britain is 20% lower than the Bank of England forecast before the referendum result.

It is easy, therefore, to be even more concerned than we might have been about the cost of Brexit. The evidence that businesses are now beginning to produce to explain why they are falling back on investment decisions is perhaps not surprising, given that the Cabinet themselves cannot decide what kind of trading relationship they want with our European partners, and the truth is that ordinary households are paying the price. According to a report published this month by the Centre for Economic Performance, the impact of inflation and a weaker pound since the referendum means that the average worker has experienced a real-terms cut of nearly £450 in annual pay, the equivalent of a week’s salary. But, sadly, the Government march on, insisting that we will leave the customs union and the single market, and that no deal may well be an acceptable outcome.

Just recently, we have heard striking evidence from car manufacturers such as Honda about the potential cost of leaving the customs union. For some manufacturers, it will be up to £850,000 a year. Honda estimates that it would take 18 months for it to set up the warehouses and the procedures that it would need if Britain left the customs union, which the Government insist will happen in 17 months’ time. That is genuinely worrying for the future of jobs in this country.

The general election confirmed that there is no mandate for a hard Brexit, so even at this late stage I urge Ministers—and, if I may do so gently, those on my own Front Bench—to explore again soft Brexit options such as membership of the European economic area. Not only would that potentially allow new arrangements in respect of issues of concern to the British people such as judicial authority and freedom of movement, but it would, crucially, provide significant economic certainty for the future.

The second aspect of the Budget that I want to deal with is its failure to tackle the crisis in funding for public services. I found it striking, given the terrorist attacks that our country has experienced this year, that the Chancellor made absolutely no mention of additional funds for the police or, indeed, additional investment in tackling the ongoing threat of terrorism. Harrow has lost 173 police officers since 2010. Violent crime has risen, and knife crime in particular is up by 60%. There have been stabbings in both south Harrow and Harrow town centre, which is something that my constituency has not experienced for a considerable time. The fear of crime is therefore substantially on the increase.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend has mentioned police numbers and the rise in knife crime. The West Midlands has lost more than 2,000 policemen. How can knife crime, and other crimes for that matter, be tackled when a police force is being reduced? A more important point can be made about public services. Instead of telling the police, the fire brigades and the nursing and medical profession what they are doing, why do the Government not pay them a decent wage? Is that not the best way of thanking them for the services that they give?

[Gareth Thomas]

I strongly agree with my hon. Friend. It worries me that the Government have chosen to do nothing about the real threat of a further loss of 3,000 to 4,000 police officers, which the Metropolitan Police Commissioner, Cressida Dick, has said will happen if there is no increase in the Met police budget. As a consequence of the lack of funding, Harrow will be merged with Barnet and Brent. Barnet’s burglary rates have increased substantially of late, and Brent has a significant gang problem. Many of my constituents understandably fear that police will be taken out of our borough to deal with problems in the two other boroughs, and that crime in Harrow will not be tackled in the way that they might have hoped.

In the national health service, I think it significant that the extra resources that both the King’s Fund and the head of the NHS said were necessary have not been provided. There has been some uplift, and I obviously welcome that, but it is striking that just last year, 2.5 million people waited for more than four hours in accident and emergency departments, compared with the 350,000 when Labour left office, and 4 million people are currently on the waiting list for treatment in an English hospital.

Northwick Park Hospital, which serves my constituency, is the second-busiest trust in London, following the Government’s decision to close the A&E departments at Hammersmith Hospital and Central Middlesex Hospital. In my constituency, we worry that Ealing Hospital’s A&E is also due to close. Our trust ended the last financial year some £60 million in deficit with an underlying deficit of almost £100 million, and it is expected to make savings of £50 million in the current financial year, which the leadership of the trust says is an unprecedented challenge, so hon. Members can understand why my constituents will be deeply worried about the implications of this Budget for their hospital.

Similarly, many schools in my constituency are under considerable financial pressure, having to not fill teaching assistant vacancies and replacing experienced staff who leave with newly qualified teachers. The Budget does nothing to address those problems, and there is nothing on the financial crisis in adult social care or on the increasing crisis facing children’s services.

Lack of time prevents me from picking up the challenge that the right hon. Member for Sutton Coldfield laid down—a debate on how one reforms capitalism—but there might be potential in a series of co-operative and mutual solutions. We particularly need an increase in co-operative housing, and I think that the Royal Bank of Scotland should be converted into a building society. Far more also needs to be done to encourage an increase in energy co-operatives to challenge the dominance of the big six players.