George Osborne
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(11 years ago)
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The Chancellor of the Exchequer (Mr George Osborne)
That was certainly an odd speech from the shadow Chancellor. He called me a tactical genius, but those on his side are going around calling him a busted flush, and after the extraordinary 40 minutes of comments we have just heard from him, we can see why. The contrast is with a Government who are building an economy where those who want to work hard and get on are rewarded. The contrast is with a tax system that is being changed to support effort, with the largest ever increase in the personal allowance. The contrast is with a welfare system that is being changed so it always pays to work and benefit bills are being capped so no family gets more from being on benefits and out of work than the average family gets from being in work.
In this Queen’s Speech we have measures to help those who want to set up a small business and employ people through our employment allowance—which was not mentioned by the shadow Chancellor, but I assume the Labour party will not vote against it. We have measures to help families who dream of home ownership and to help them with their mortgage costs. We have measures for savers, with a Pensions Bill that will provide a generous single-tier pension, and we have measures to help those who want to stay in their homes and avoid the lottery of care costs, with our Care Bill. The only reason we can do all these things is because we are clearing up the mess and the things that went so badly wrong in our economy.
Clive Efford (Eltham) (Lab)
On the issue of fairness, the 13,000 people who earn more than £1 million a year share a combined income of £27.4 billion, and they are going to share in a £1.2 billion payout. How can that be justified and fair?
Mr Osborne
In every single year under this Government the rich will pay more in tax than in any single year of the Labour Government that the hon. Gentleman consistently supported, and the top rate of tax will be higher than in any single year of the Labour Government he supported. We put up capital gains tax so we avoided the scandal that they presided over—indeed, that the shadow Chancellor presided over—of cleaners paying higher rates of tax than the hedge fund managers they work for. That is what we have done to ensure fairness in our tax system, and that is what we are going to continue to do.
Anas Sarwar (Glasgow Central) (Lab)
The Chancellor said those who work hard will be rewarded. Can he explain why wages are falling, household budgets are falling and the cost of living is going up? How is that fair?
Mr Osborne
Let us look at what the Governor of the Bank of England said in his press conference this morning:
“there is a welcome change in the economic outlook…But this is no time to be complacent—we must press on to ensure a recovery”.
Yes, there was also the disappointing news that unemployment had gone up, but we also saw that the claimant count and youth unemployment had come down, and the monthly unemployment data were a lot more encouraging than the three-month survey. That is the reality of the current data.
Geraint Davies
Does the Chancellor agree that the key problem is that the debt:GDP ratio will rise from 55% in 2010 to 85% by 2015? The answer to that problem is not just to cut the debt, but to increase GDP. Under Labour, GDP went up by 40% between 1997 and 2008, and the Chancellor inherited a growing economy which is now flatlining because of his policies.
Mr Osborne
We inherited an 11.5% budget deficit that was adding to our national debt every year, and what the hon. Gentleman and the shadow Chancellor want to do is add further to borrowing. The shadow Chancellor was asked time and again what the cost of the proposals in the amendment the Opposition are asking the House to vote on tonight would be. He would not give that figure, but I will give it for him: it is a £28 billion amendment that would add to borrowing. He comes up with the ludicrous argument that by borrowing more, we can borrow less. That is why he is making so little progress with his economic argument.
Chris Williamson (Derby North) (Lab)
Will the Chancellor at least acknowledge that when he came into office he inherited a growing economy, and his policies have led to it flatlining?
Mr Osborne
This is what I have to say about the idea that this Government had some kind of golden economic inheritance from the Labour party: we inherited a situation in which Britain had had the deepest recession since the 1930s, the worst banking crisis in the entirety of British history and the highest budget deficit in the entire peacetime history of this nation. If that is a golden economic inheritance, I would hate to see what the hon. Gentleman thinks a hospital pass looks like.
The shadow Chancellor mentioned France in his remarks. Exactly a year ago the Labour leader could not contain his excitement about the economic programme being unveiled in France and about the red carpet being rolled out for him at the Elysée palace. “Chers camarades” is how he addressed the Socialist party gathering. He said, “What President Hollande is seeking to do in France, I want to do in Britain.” We do not hear much these days about Labour’s French connection. We still have liberté and egalité, but not much fraternité—although fraternity has never been a great topic for the Miliband family.
What we did not hear from the shadow Chancellor was his response to the fact that 1.2 million jobs have been created in the private sector, and that although, yes, our deficit is still too high, it has fallen by a third. He says we are borrowing more. We were borrowing £158 billion a year as a country in 2009-10, and this year it is forecast that we will be borrowing £114 billion. That is a £45 billion reduction in borrowing. None of that has been easy to achieve, and every single measure has been opposed by Labour. Not a single measure in its amendment today would help deal with that deficit, but our plan of monetary activism, fiscal responsibility and supply-side reform is delivering progress.
Andrew Selous
On employment, is the Chancellor aware that the United Kingdom’s overall employment rate is growing at almost double that of the United States and is rising faster than that of any other G7 country?
Mr Osborne
My hon. Friend is absolutely right. Last year, employment in the UK grew faster than in the US, France, Germany, Japan and the eurozone as a whole. Employment in the UK is now above its pre-recession level. Of course we must go on taking the difficult measures necessary to get our deficit under control, and make sure we support businesses that want to hire people to support the private sector recovery. The path being offered by the Opposition, however, would lead to complete disaster.
Mr Jim Cunningham (Coventry South) (Lab)
When the Chancellor’s party was in opposition, the right hon. and learned Member for Rushcliffe (Mr Clarke) took the credit, before the banks collapsed, for the economic prosperity, claiming he had created it when he was Chancellor. How does the current Chancellor answer that point?
Mr Osborne
The hon. Gentleman is saying that somehow we have a responsibility for the financial crash or for the problems in the banking industry, but he neatly skips the fact that not only was Labour in office for 13 years, but the shadow Chancellor was the City Minister. He did not have any old job in Government —he was the City Minister when Northern Rock was selling those 120% mortgages and the Royal Bank of Scotland was thinking of taking over ABN AMRO. He is the architect of the tripartite regulation, which failed so catastrophically. He is, literally, the last person to have any credibility on this subject.
Nadhim Zahawi
The shadow Chancellor also claimed victory in keeping this country out of the euro. Will the Chancellor remind the House of the cost of the euro preparation unit, and when that unit was closed down?
Mr Osborne
The euro preparation unit was shut down by this Government in 2010, but the shadow Chancellor does not seem to know what Labour policy is. The Labour party is committed in principle to joining the euro. [Interruption.] The shadow Treasury team do not know what the monetary and currency policy of their own party is—that is absolutely ridiculous.
Charlie Elphicke
The Government have set out a clear and costed economic policy, which they are pursuing. Does the Chancellor share my concern that the Opposition cannot set out their costings, cannot say how much they would borrow and cannot even say whether they would back a referendum? The shadow Chancellor has been completely unable to answer any questions put to him in any straight way whatever.
Mr Osborne
The shadow Chancellor could not answer the simple question of how much the amendment he is asking us all to vote on this evening would cost. Surely he must reflect a little and realise that each year his appearance in these debates is a source of consolation and comfort to the Government. He must wonder why each year he makes the same arguments for borrowing but there is no improvement in Labour’s economic credibility. He does not seem to understand that the public think that Labour spent too much, wasted their hard-earned money and would do it all again. Does he not feel that he owes it to the British people to apologise for the mistakes he has made and the damage he has inflicted on their living standards? Should he not stand up and say, “I’m sorry, we got it wrong and we won’t do it again”?
Sammy Wilson (East Antrim) (DUP)
The Chancellor’s point, “You can’t borrow more to borrow less”, is a good soundbite, but he does himself a disservice, because some of the borrowing undertaken by this Government has been very effective in reducing the deficit. Only yesterday, we saw 850 new jobs in Allstate in Belfast as a result of investment in the broadband network—that is 850 new taxpayers. Does he not accept that we can borrow, and that by borrowing and putting the money into the right things we can bring the deficit down?
Mr Osborne
I am all for spending money on vital economic infrastructure, including broadband, and all for trying to switch the budget more from current spending to capital spending. That is precisely what we are engaged in as part of this spending round, but we have to take the hard decisions on where we are going to get our revenue from or take the hard decisions on what we will cut instead. We are making a sensible switch towards capital spending.
Mr George Howarth (Knowsley) (Lab)
Can the Chancellor name a single occasion before the banking problems in 2008 when he and his party argued for tighter regulation of the City?
Mr Osborne
My party voted against the tripartite arrangement. I do not have the quote with me today—I will send it to the right hon. Gentleman or ensure that my right hon. Friend the Chief Secretary has it for the wind-up—but the shadow Chancellor at the time, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), warned in this House that taking prudential regulation away from the Bank of England was a massive mistake and that the Bank of England would not be able to spot the growth of debt bubbles in the economy. Tragically, that is precisely what happened a decade later, and in part the responsibility lies with the people who set up the regulatory system. Is it not extraordinary that Labour Members get up and say that the Conservatives said this or that, yet we are looking at the City Minister at the time? We are looking at the person who, before that, was the chief economic adviser who devised the system and who used to take pleasure in telling everyone that he turned up in government and gave Eddie George a letter saying that he was no longer in charge of banking regulation—that used to be the shadow Chancellor’s story, but he never talks about it now.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I think the country understands that we could not go on as we did, with a completely unregulated City, with bonuses out of control and with unjustifiable profits. The Government’s policy on taxation is fairer now than it ever was under the previous Government. May I ask the Chancellor, however, to address the matter of the housing market, to which he partly referred? In addition to the welcome measures in the Queen’s Speech, will he look into how we can increase the supply of social rented housing and deal with the fact that many non-domiciled people are buying property in this country, not to live in or to rent out, but to keep empty, forcing up prices for everyone, beyond what people can afford?
Mr Osborne
We are putting in place, right now, new guarantees—the first time that the Treasury has done this—for social housing associations to enable them to build more social homes; in the Budget, we also confirmed support for an additional 30,000 social homes, so we are taking action to help on that front. With our Help to Buy scheme we are also helping those who want to buy their own home in the private market. My right hon. Friend is absolutely right that we should do both, which is precisely what we are doing.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
As we learned with great interest, there was much in the Queen’s Speech that will affect employment, skills and manufacturing in our country. This is an important part of our country’s future. Can the Chancellor assure me that there is a unit in the Treasury—or a plan for the Treasury—to carry out an independent evaluation of how skills, jobs and manufacturing would be affected if this country left the European Union?
Mr Osborne
I will come on to talk briefly about reform in the European Union, but I am clear that an unreformed European Union is also doing damage to British competitiveness and British jobs.
Margot James (Stourbridge) (Con)
The estimated cost of the Labour party’s plans is £28 billion. Labour opposes every one of our spending cuts, so does that not imply that it would fund the whole lot by pushing this country’s borrowing back towards £150 billion? Is that why the shadow Chancellor is so reluctant to say what more borrowing he could commit to?
Mr Osborne
My hon. Friend is right to say that that is the approach of the shadow Chancellor. The right hon. Member for Neath (Mr Hain), who is sadly not in his place, gave the shadow Chancellor some unsolicited advice last week—I think it was unsolicited. He said:
“Labour’s Treasury team need to get out on the stump now and work even harder. It shouldn’t just be left to Ed and Harriet”—
Miliband and Harman—
“to carry the heavy load”
on shows such as the “World at One”. We could not agree more, because it is fair to say that when the Labour leader appears on the radio—I am not sure how to put this delicately—there is a little confusion about what Labour’s economic policy might be. Ten times he was asked whether borrowing would go up or what his party’s policy was, and he did not reveal it. I will be fair to the shadow Chancellor and say that he is much more straightforward. He has a much clearer message than his leader: “Vote Labour and borrowing will go up. Vote Labour and welfare bills will rise.” Vote Labour and he will do it all again. It is not just the right hon. Member for Neath who wants to see the shadow Chancellor on the media more—we want to see him on the media much more.
Helen Goodman (Bishop Auckland) (Lab)
Yesterday, I met the chairman of Fujitsu, which has just put £800 million into the British economy. He told me that his company had done so only because this country is in the European Union. He was, however, rather disappointed not to have had a reply from the Prime Minister after writing to him with that news. Does the Chancellor of the Exchequer not understand that his Government should be more interested in providing stability for business than in pleasing their own Back Benchers?
Mr Osborne
It is very good news that Fujitsu is choosing to employ in the United Kingdom. I do not see the hon. Lady’s intervention as a hostile one that has put me on the back foot; what am I supposed to do about the fact that international companies are choosing the United Kingdom as the place to invest and create jobs? That is a tough one!
I have to admit that the hon. Lady has a point, but let me come on to say something about the change that is required, including the change in the European Union, which of course is a subject of debate today.
It is true that for much of my political life and, I suspect, the political life of many in the House, the concerns about Europe have primarily been ones of sovereignty and constitutional power—not exclusively, but those have been the most dominant. Those concerns have not disappeared, but they have been complemented by economic concerns, and those economic concerns have grown. There is concern that the European prescription of high taxes, expensive social costs and unaffordable welfare is slowly strangling the European economy. There are concerns from business that directive after directive, regulation after regulation load costs on European companies, especially small firms, and cripple their ability to compete against new challengers around the world.
The crisis in the eurozone has created an immediate institutional challenge for the UK: as 17 member states attempt to take steps to save their monetary union, how can we change the EU to protect our interests and make it work for us? But the crisis has only accelerated an economic argument that was coming anyway: is Britain’s membership of the European Union right for Britain’s economic future? My answer, like the Prime Minister’s, is that if we can achieve real change in Europe and our relationship with the EU, then yes, it is. That is the renegotiation that my right hon. Friend the Prime Minister seeks—a Europe that is more globally competitive and more flexible, a Europe that creates jobs and offers its people prosperity and accountability.
Mr Bone
Is not the Chancellor exactly right? Is not his view shared by those on the Conservative Benches? I am sure the Chancellor is forced by coalition politics not to be able to vote for the amendment, but if he were free from that restraint, would he back the Prime Minister’s policy by voting for the amendment tabled by my hon. Friend the Member for Basildon and Billericay (Mr Baron)?
Mr Osborne
This is a coalition Government with a coalition Queen’s Speech, which contains things such as the single-tier pension, the Care Bill and the help for small employers, which will make a real difference to people across the country. Our view is that the best route to achieving what I know my hon. Friend wants to achieve is by legislating in this House. As the Prime Minister said in his January speech, we now have draft legislation for an in/out referendum on the EU. We have done it in good time for this Session’s ballot for private Members’ Bills. It is now open to any hon. Members who do well in that ballot to adopt the draft Bill that we published yesterday and take it forward as the basis for legislation. As the Prime Minister said yesterday, we will do everything we can to make it law.
Mr Pat McFadden (Wolverhampton South East) (Lab)
A moment or two ago the Chancellor said that if the renegotiation that the Prime Minister has set out on produced fundamental change, he would vote to stay in the EU. What will his position be if the renegotiation does not produce much change? That is what happened the last time this was tried in the 1970s. Not much change is not exactly an unlikely prospect, given the attitude of other European member states so far to the Government’s stance.
Mr Osborne
I do not think the Prime Minister will fail in his negotiating effort. I do not think the Conservative party will fail in its negotiating effort with the European Union. Do Members know why I do not think we will fail in that effort? The Prime Minister pulled us out of the eurozone bail-outs when everyone said that was impossible. The Prime Minister delivered a cut in the European budget when everyone said that was unachievable. The Prime Minister vetoed a bad treaty when people said that was unprecedented. I am confident we can achieve that new settlement.
There is another reason why I am confident we can achieve that settlement. I see around the table in Europe—around the ECOFIN table, where I was yesterday— many countries as concerned as we are about the future of jobs and investment on the European continent, people who know that the EU is not working as currently arranged.
Mr Osborne
I will give way to the Scottish nationalists in a moment.
It was not this Chancellor but the German Chancellor who said the other day:
“If Europe today accounts for just over 7% of the world’s population, produces around 25% of global GDP and has to finance 50% of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life.”
That was the leader of Germany speaking. I believe that there are out there other people who also seek change, but above all, for the United Kingdom, because of the changes happening in the eurozone, we need a new settlement and I am confident that the Prime Minister will deliver it.
Pete Wishart
The Chancellor of the Exchequer and I know that the UK is halfway out of the European Union. Does he agree that the best way for the Scottish people to remain within the European Union is to vote yes in the referendum next year?
Mr Osborne
As our Scotland analysis papers show, Scotland would have to apply to join the European Union as it became a new state. I am glad the Scottish National party is taking part in this debate on economic policy. Perhaps we will get a clearer view from SNP Members, after the shambles of the past three weeks, of what their policy is on the currency that Scotland would use, should Scotland vote to leave the Union. We have not had a clear answer. Some members of the SNP have said that Scotland should have its own currency, others have said that Scotland should join the euro, and still others have said that they would negotiate a monetary union with all of us in order to keep the pound. There is complete confusion in the SNP ranks and until they have a clear answer to that, they will not be listened to on much else.
Mr Jenkin
Does my right hon. Friend agree that the Government are committed to what one might call a policy of negotiate and decide, although that has a familiar ring to it? Would it not help the clarity of this debate if the Government set out exactly what they intend to negotiate on? That has not been clear from anything they have so far said.
Mr Osborne
As my hon. Friend knows, and he takes a close interest in these matters, this is the beginning of a process of setting out what we want to achieve in a renegotiation, and in a conversation about that. Of course, we will then seek to achieve that renegotiation, achieve that new settlement—I am confident that after the election the Prime Minister and a Conservative Government will be able to achieve that—and put it to the British people in a referendum.
Charlie Elphicke
One of the things my right hon. Friend drew attention to was the problems facing our European neighbours and the challenges posed by their welfare states. Our action in getting on top of the problems of welfare, reforming welfare and making sure that work pays is key to dealing with our place in the world and making this country competitive. I draw a distinction between that and the attitude of the Labour party, which has opposed every welfare reform proposed by this Government.
Mr Osborne
My hon. Friend is right. There was a ludicrous remark—I do not know whether anyone noticed it—from the shadow Chancellor when he said that Labour supports tough welfare reform. Labour Members have voted against every single welfare proposal put to the House. The shadow Chancellor thinks the benefits cap is “too low” and that it is not set at the right level at £26,000. That is the problem. Any view of Britain, and any view of western nations, is that they need to do more to constrain the growth of entitlement spending and more to make sure that welfare pays, and to spend the money that they save on things such as infrastructure in Northern Ireland, broadband, high-speed trains and the Crossrail project under London—the vital economic infrastructure that our country needs.
Mr Osborne
I will give way to Labour Members in a moment if they can help me answer this question. What on earth is the policy of the Labour party towards an in/out referendum on Europe? The shadow Chancellor was asked that again and again. The question is this: do the Opposition rule out offering an in/out referendum at the next general election—yes or no? What is the answer?
Chris Williamson
Perhaps the Chancellor can answer this question. Toyota, just down the road from my constituency and the biggest inward investment in western Europe, came to Derbyshire because it gave access to the European market. Does the Chancellor think that, if an in/out referendum was hanging over this country and Toyota was thinking about investing now, it would take that decision to invest in Derbyshire, or would it take its investment somewhere else inside the EU?
Mr Osborne
A lot of those big Japanese car plants came to Britain under a Conservative Government who were offering them a competitive place to do business in the world. I am pleased to say that under this coalition Government we now export more cars than we import for the first time since the mid-1970s, and we will go on having a successful car industry because we have specific policies to back the car sector, but above all because we have cut corporation tax and made this a competitive place in which to do business.
Mr Osborne
I will give way to whichever Labour MP can answer this question: do the Labour party rule out an in/out referendum on Europe?
Andy Sawford (Corby) (Lab/Co-op)
It is six months to the day since the voters of Corby in east Northamptonshire delivered a damning verdict on the Government. The key issues in that by-election were not the preoccupations of the right wingers in the Chancellor’s Tory party, but jobs and health care in this country. But since the Chancellor is so keen to ask us questions, will he answer the question that the hon. Member for Basildon and Billericay (Mr Baron) answered very clearly, which is: if there were an in/out referendum tomorrow, how would the Chancellor vote?
Mr Osborne
The policy is this: change the European Union, seek a new settlement, then put that to the British people in a referendum. This debate has revealed that Labour cannot answer the simple question: does it rule out offering an in/out referendum before the next general election? If it cannot answer that question, it will not be listened to on this subject any more, and people will be very, very clear that the only way to get an in/out referendum on Europe is to have a Conservative Government after the next election, so people should vote Conservative in that election and make sure that they have their say.
Nadhim Zahawi
Does the Chancellor not agree that the double-speak we heard from the shadow Chancellor and his reluctance to trust the British people feed the people’s mistrust in politics?
Madam Deputy Speaker
I think it implies something. [Interruption.] I would be grateful if the hon. Gentleman did not argue with me, particularly if he wants to be called in this debate. That is a very dangerous route to take. All hon. Members would do well to moderate their language and participation in the debate to a more reasonable level.
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—
Mr Osborne
We have to get the legislation because we need a national insurance Bill, which is what—[Interruption.] The hon. Gentleman had 13 years to do something for small businesses, and the only idea he came up with was to put up the small companies’ tax rate.
From next April, every business and every charity will have their employer national insurance contributions bill cut by £2,000 a year. It means that a business will be able to employ four adults on the minimum wage without paying any employer NICs at all. I know that the shadow Chancellor does not want to hear it, because his policy was to put taxes up on jobs. That is what he fought the general election on, and that is what he still talks about when people listen to him in his interviews. That is the point. The Opposition offer more borrowing; we are reducing the deficit. They want to increase the size of government; we want it reduced. They penalise enterprise and wealth creation; we support it. They would put a tax on jobs; we are abolishing it. While they would repeat all the mistakes of the past, we are engaging in the great economic challenges of the future. We are building an economy that will enable Britain to compete and succeed in the world. We are building an economy that helps people who want to work hard and get on. I commend the Queen’s Speech to the House.