Budget Resolutions and Economic Situation

Geraint Davies Excerpts

Wednesday 18th March 2015 Commons Chamber

[Mr Hoban]

That demonstrates the challenges we face to get the pace right. One thing we should be absolutely clear about is the importance of sticking to the course. There are three reasons why it is important to stick to the course of reducing the deficit and reducing debt. It is inherently unfair for future generations to bear the cost of debt we have built up.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the hon. Gentleman give way?

[Mr Hoban]

Let the hon. Gentleman answer this question: is it really fair for our children and grandchildren to pay the cost of debts we have built up? Let him answer that question.

[Geraint Davies]

Does the hon. Gentleman agree that since 2010 debt as a share of GDP has grown from 55% to 80%, and that the Tories have borrowed more in five years than we did in 13 years even though we had to bail out the banks? Is that not a complete failure of economic management?

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a pleasure to follow my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty), who sits on the European Scrutiny Committee with me.

First of all, I should welcome a couple of things in the Budget. One, of course, is the Swansea Bay lagoon. If that is going ahead—I assume that the Planning Inspectorate has suggested it supports it—it will be more than a small step for green energy and a giant leap for the Swansea economy. Secondly, I welcome the VAT withdrawal from tolls on the Severn bridge, which will loosen the noose around the neck of the south Wales economy, although I think the toll should be reduced down to the maintenance and operations level—about £1.50 a car—to encourage inward investment, tourism and trade, particularly with the south-west.

In general, however, I think this is a candy-floss Budget—it looks bigger than it is and seems to taste nice, but afterwards we are left feeling hungry, and it is not particularly good for us. Prior to the Budget, we heard from the OBR that the previous plan was to reduce spending to 1930s levels. It is as if the Chancellor is operating a time machine. He has moved the switches, and he can move around the numbers, because the oil prices are down, so now apparently we are only going back to the year 2000. However, the executive summary from the OBR mentions that the cuts, increased for 2016-17 and 2017-18, are much harsher and sharper than in the previous five years, but then he plans the biggest increase in real spending for a decade in 2019-20, which of course is election year. In other words, this is cynical electioneering, rather than a long-term economic plan.

On the long-term plan, the two variables people talk about are the deficit and jobs. It is hardly a success to see debt as a share of GDP move from 55%, where Labour left it, to where it is now, hovering around 80%. It is hardly a success that the Conservatives and the coalition Government have borrowed more in five years than Labour did in 13 years, during which time we bailed out the banks. The reason for that is the failure to generate growth. It is claimed that there is lots of growth, because there is 2.6% growth at last, but annualised growth over the past five years has been about 1.7%. Under Labour, growth was 40% over the 10 years prior to the banking crisis in 2008. Again, this is not a great success. We have lost our triple A rating.

There is talk about jobs. There are more jobs, but productivity is down and overall production is being spread among more people. There are 800,000 fewer people in jobs earning more than £20,000, and more people than that are earning less than £20,000. Through the economics of austerity and low wages, we are generating less tax revenue, we cannot balance the books and debt is going up. That is hardly great news. Meanwhile, there is talk of people literally dying on sanctions. In Swansea, 65% of people on jobseeker’s allowance, surviving on £72 a week, have been put on sanctions. Why are the Government not focusing on the 10% of wealth held in offshore accounts where it is evading or avoiding tax? We have heard something about that, but it is more talk than action and recovery.

The big choice is not about how much we spend versus tax and comparing the different numbers; it is about how growth can help to generate revenue and get the deficit and debt down. Anyone who, like me, has run a business knows that if they make a loss there are two ways forward: one is to make savings and the other is to grow the business. How are we going to do that? In fact, we are doing the opposite. We have the austerity of cuts. With the police, we have seen 26% cuts and another 20% of cuts are still to come through. The president of the Association of Chief Police Officers, Sir Hugh Orde, has said that we are at a tipping point and there might be greater risks from disorganised terrorism. It is the same with defence, with massive cuts to the budget, while Russia is spending £50 billion or 3.3 trillion roubles on defence. There are threats out there in the world; are we rising to them? No, we are not. Why not? Because we are not generating growth.

Growth incorporates the three elements of consumption, investment and net exports. Consumption confidence was dashed in 2010 when the Chancellor said he would sack half a million people and people stopped spending money. Investment was undermined when the funding for lending scheme of the Bank of England was focused on mortgages, not businesses, so that lending to business went down by 40%. There was no growth in net exports in 2013 in terms of the balance of trade, with no net contribution. Last year was even worse, as we lost £8 billion. Firing up exports has been a complete failure.

So we need a plan for growth, which includes things such as tuition fee reductions. What that does is increase productivity and the size of the cake. Whatever the Business Secretary says, the reality is that people are being deterred because of the prospect of having these massive debts. People’s credit ratings are being reduced; people cannot buy a house. At some point, if their incomes go up, they hit higher payback thresholds, and they want to avoid paying it all. It does not make sense; we need to invest in productivity. Tuition fees are relevant.

We need to say clearly that we want to be part of the EU because we need inward investment from China or India, platforming into the biggest economy in the world—it is the EU economy—from an English-speaking place, namely Britain. Those thinking of making such investment do not want to worry about a referendum and the possibility of our coming out of the EU. We want city regions and we want them supported by money from regional banks. We want a house building programme and we want a procurement strategy through which small businesses, which pay British tax, are encouraged and not discouraged by the bigger players.

We also want fairer taxes, whether it be a 50p top rate or getting rid of the bedroom tax. The reality is that poor people spend all their money, and rich people hide it away. If we want growth through consumption, we need a better way forward with a fairer balance of incomes. The truth is that we have a Chancellor who is looking to the future walking backwards. He is taking us back to an age in which the poor get poorer and the rich get richer. We all want a fair share, and we all want to be productive to help make Britain succeed together. That will only occur with a Labour Government.

--- Later in debate ---

[Sheila Gilmore]

We have heard the argument that if we reduce taxes, we get more revenue in. Of course, it is usually heard in relation to the 50p rate of tax, but that was a very poor example. It hardly had any effect, and so many people made their own arrangements before and after the announcement was made on reducing the rate again that we cannot tell what really happened.

It is important that we should have a discussion about the kind of values we want and the kind of society we want to live in. There has been a similar debate north of the border, where we have a Government who are trying to suggest that, although they do not necessarily want to cut taxes, it is possible to have fantastic services without ever putting up taxes. That will also leave the public confused about what can really be achieved.

[Geraint Davies]

Does my hon. Friend accept that if the Government consistently put up tax allowances while putting wages down, tax revenues are going to fall? Does she agree that that is why we are nearly bankrupt?

[Sheila Gilmore]

Tax revenues have been falling, and the whole issue about low wages is extremely important.

We have had discussions in the House about zero-hours contracts. I think it was the hon. Member for Dover (Charlie Elphicke) who said today that Labour had done nothing about them for 13 years. I was not a Member of this House at that time, but I was a local councillor for much of that period and I met people constantly in that role. In all honesty, I do not recall people raising the issue in the way that they have been doing more recently.

Zero-hours contracts are a growing phenomenon, and they are still under-reported. I mention them on some of the literature that I give out when I am door-knocking, and a couple of the people I have spoken to in the past few days have looked at that literature and said, “What are zero-hours contracts?” When I explained, they said, “Oh yes, that’s what my son had when he was working for a pizza house.” Another man said, “Oh yes, that’s what happened to my son. The other day, he called and asked me to pick him up from work because he had gone in, only to be told to go home again because there was not enough work for him. They could do that under the terms of his contract.” Those people might not have known the term “zero-hours contract”, but they certainly recognised the conditions involved.

These issues are a matter of concern for young people. Unemployment is not falling as it should be. It is still, in the words of most commentators, “stubbornly high”, and we need to do something to address the problem. Also, earnings for younger people have not risen. The Government are proud of saying that average household incomes are beginning to rise again. Those in the oldest age group have done the best, and people in the middle are beginning to do a bit better, but young people are still doing significantly less well. That is a serious matter and we should be giving it greater consideration.

Many young people have a string of temporary jobs. They are in and out of jobs even when there is work available, which is very frustrating. One constituent told me that her son had worked for Royal Mail for three months at Christmas. He knew that it was a temporary job and he was told that there was no further work afterwards. He signed up with an agency that handled temping work, and he was phoned up a few weeks after Christmas and asked whether he was interested in a “call-on job”—a zero-hours contract, effectively—with Royal Mail, no less. So apparently there was no proper job on offer, but Royal Mail had none the less asked the agency to take on someone on those terms. How much better would it be for that young man if he could get a proper job that paid him a proper wage and in which he could learn a skill? We must do something for our young people. We must not sit back in apparent complacency and say that there is not a problem.