Achieving Economic Growth

Geraint Davies Excerpts

Wednesday 18th May 2022 Commons Chamber

[Rachel Reeves]

The sad truth is that the Government used to agree. Introducing an employment Bill was in their manifesto; in fact, they have been promising it for five or six years. Let us have that employment Bill to protect people at work, so that working people do not have to resort to food banks, and so that they have the security and dignity that work should provide.

April’s International Monetary Fund data show that families in Britain are more exposed to the cost of living crisis than countries such as Germany, France and the US because of depleted savings. Savings are declining and household debt is on the rise, not because millions of people can no longer manage a budget, but because millions of people cannot afford a Conservative Government. Working families are increasingly struggling with their budgets because the Chancellor has failed to act in his Budgets. The Food Foundation believes that since January, 2 million people have not eaten food for at least a whole day, because they could not afford to.

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

rose—

[Kevin Hollinrake]

rose—

[Rachel Reeves]

I give way to my hon. Friend the Member for Swansea West (Geraint Davies).

[Geraint Davies]

My hon. Friend knows that food banks were used by something like 26,000 people in 2010 and are now used by 2.6 million people—100 times as many. Does she agree that the economy’s growth now contrasts dismally with its 40% growth in the 10 years to 2008 under Labour? The Institute for Fiscal Studies has said that if we were on the same growth trend, the average person would be £11,000 better off and could therefore weather the storms that we are suffering because of the Tory Government.

[Rachel Reeves]

My hon. Friend is absolutely right. That is the Tory growth penalty—the effect of the lack of growth in the economy. Average earnings are £11,000 less than if growth had stayed at the same rate as under the last Labour Government.

My hon. Friend mentioned a hundredfold increase in food bank use. This is not normal; it is the consequence of Conservative Governments’ choices. Meanwhile, what have we heard in recent weeks? We have heard suggestions from Ministers about what people can do in their own lives to deal with the cost of living crisis. The Prime Minister thinks that a 77-year-old pensioner who rides on the bus all day to keep warm should be grateful for her discounted fares; the Environment Secretary has lectured people struggling with the cost of food, telling them to “buy own brands”; and the Secretary of State for Levelling Up, Housing and Communities has treated the need for an emergency Budget as if it were an audition for a comedy club. Another out-of-touch Minister has told people, just this week, that if they are struggling financially they should simply work more hours or get another job—as if it were as easy as that. The Chancellor continues to insult the public’s intelligence by suggesting that a compulsory £200 loan—a loan that must be repaid—is somehow not a loan, and now blames a computer system for his decision not to help the least well-off. What planet are they on?

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[Mr Clarke]

Some of it falls due as cash payments and some of it is rolled over. The reality is that, when we are running an £83 billion interest payment on an annualised basis, we will not be in a position to maintain market confidence unless we set out a sustainable trajectory to address it. A sustainable solution cannot be to borrow our way out of the situation; it must be to grow our economy and to create high-skilled, high-waged jobs, and we have a comprehensive plan to do so. That is the choice we have made as a Government and it is absolutely the right one.

[Geraint Davies]

The Chief Secretary to the Treasury mentioned that there are 500,000 more people on payrolls, but he neglected to say that that does not include self-employed people. Will he confirm that, according to the Office for National Statistics, there are, in fact, 444,000 fewer people in work than before the pandemic, not, as he implied, half a million more?

[Mr Clarke]

There are half a million more people on payrolls, and I was very clear about that. The headline unemployment rate is 3.7%, which we should celebrate. It is a genuine public policy success and contrasts starkly with the situation we inherited in 2010. I, certainly, am determined to continue supporting it by making sure our economic policy is the right one.

The Labour party has only one answer to every problem: spending more. It has made, by our calculations, £418 billion-worth of spending commitments, while setting out precisely how £8 billion would be funded. The scale of spending that Labour would undertake is vast, but what concerns me, and should concern us all, is the lack of seriousness with which Labour considers how to fund its commitments. That is the luxury of being in opposition, whereas in government there is no ducking away from the big challenges with which we are grappling.

Achieving economic growth is not as simple as putting one’s foot down on the accelerator. It is a far subtler and more balanced enterprise that includes multiple carefully weighed decisions that are designed to mutually reinforce each other over time.

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[Sir Bernard Jenkin]

I am most grateful to my hon. Friend for that intervention, but we should recognise that these issues of conversion therapy and transsexuality are very important to certain sections of society. They need to be addressed, but we need to be sure that we address them in the right way.

[Geraint Davies]

Will the hon. Gentleman give way?

[Sir Bernard Jenkin]

I will, but I do not want to give way too often because we are not time-limited.

[Geraint Davies]

Some years ago, I brought forward a Bill on the regulation of psychotherapists, which recommended banning conversion therapy. There was a conference that 100 conversion therapists attended, so this is a widespread and abhorrent practice. Does the hon. Gentleman agree that those who say that transsexuality should not be included seem to be those who think that people would go through the process of becoming a transwoman in order to rape another woman? There are a lot of male rapists out there. It seems to be a lot of effort for someone to have their head kicked in by other men. Transgender people should be included in the Bill.

[Sir Bernard Jenkin]

I had not intended to make a great speech about this subject. I note the point that the hon. Gentleman has made and I wish to move on.

I welcome the forthcoming legislation to protect the Belfast/Good Friday agreement. I say to the right hon. Member for Leeds Central (Hilary Benn), who spoke a few moments ago, that perhaps we agree a great deal about the future of the Northern Ireland protocol. The question is whether we can make it happen unless we have some legislation coming down the track as well, because the EU has not changed its mandate.

I want to concentrate today on much more immediate challenges. Covid supply chain disruption persists in many parts of the world, notably China, and now we have Russia’s dreadful war against Ukraine, which frankly has shattered the geopolitical order that we have become used to for decades. We all used to believe in what the Germans called, “Wandel durch Handel”—the mistaken faith that nations that trade together would never go to war with each other. President Putin has smashed that confidence.

Business and Governments are reducing their exposure to dependency on all autocratic regimes. That is throwing globalisation into reverse, creating massive price increases and shortages. Poorer nations are acting to keep their food affordable for their own people. For example, India has just banned wheat exports, following Indonesia, which banned palm oil exports. We have an acute, growing and potentially far greater energy supply crisis in Europe. Europe cannot continue to rely on supply from Russia. This crisis requires a vast reorganisation of Europe’s energy supply and trading arrangements, and this massive adjustment will take years and is unprecedented. Only major food and energy producers in the world, such as Canada and the US, will avoid the worst kind of recession.

At least the United Kingdom can produce some of our own gas and oil and can continue to expand renewables, but why are we pumping our surplus gas out to Europe this warm spring to fill EU storage capacity, when we should be filling our own? The Government shut it down, and we need to reopen our gas storage capacity as quickly as possible. I fervently hope that we can achieve net zero by 2050 without excessive cost. The Government are right to see gas as the essential transition fuel, but why import gas when we can produce our own more cheaply?

Meanwhile, we must all recognise the cost of living crisis—yes, crisis. Even before today’s shock rise in CPI to 9%, the Commons Library had given me striking projections for the effect of this crisis on households. The full-year cost of just energy and food prices will rise by well over £1,000 a year for the lowest 20% of households by income and by £1,500 a year for pensioner households. A summer package to rescue the most vulnerable households is needed to avoid real financial distress and personal anguish and to support the economic demand of the most vulnerable households, or we will be creating possibly a worse recession than is already expected.

I welcome the suggestion in The Times today that the Government are considering a package. The spring statement represented peacetime thinking. Like after the unforeseen covid crisis, the Treasury must adapt to this unexpected war in Europe and accept that this new global energy and economic crisis also requires a very substantial policy response. I have to say that is far greater than the £3 billion package that the Labour party has offered us, though I do not subscribe to the rest of its fiscal profligacy.

I suggest that the £20 uplift in universal credit should immediately be restored. The abolition of VAT on domestic fuel would abolish a regressive tax that hurts the poorest households the most. We can do that now we are outside the EU. The Government should abolish the green levies on energy bills and fund them from the Exchequer, as recommended by Professor Dieter Helm. The Government should provide pensioners and poorer families with the confidence they can afford to stay warm. We should double the warm home discount and treble the winter fuel payment.

This package would cost not £3 billion, but £13.5 billion from July in this current tax year, but that is still less than the recent tax increases we have seen, and it is about 0.6% of GDP and affordable. Now or later, we should also consider relief for middle-income households. The lower 40% of households will feel severe stress from energy and food costs alone. We could start reindexing tax thresholds, or more, and that would have the advantage of incentivising work and productivity.

I have watched Governments—and Oppositions, I think we saw it today—blindsided by their own commitment to outdated thinking and policies of the past. There is no excuse for another such episode. My right hon. Friend the Chief Secretary is right to sound cautious, but we can see what is coming, and I am confident that this Government will act as they must.

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

It is a pleasure to follow the hon. Member for Hertford and Stortford (Julie Marson). Today, we listened again to the Prime Minister telling us that we had a strong economy, yet when Labour left office only 26,000 people a year were going to food banks and now there are 2.6 million—100 times as many. We heard that 500,000 more people are in work than before the covid pandemic, but according to the ONS there are 444,000 fewer people in work—the Prime Minister conveniently missed out the self-employed. He said, “We are the low-tax party,” but taxes are now at a 50-year high and the Chancellor increased taxes by £40 billion last year. The tax share of GDP is at a level not seen since Attlee, when we were coming out of the second world war and we needed to charge such taxes.

Inflation is at a 40-year high. There is a departmental freeze on spending, so there are savage cuts across the board. [Interruption.] I see the right hon. Member for North East Somerset (Mr Rees-Mogg)—the Minister for Brexit opportunities and Government inefficiency—chattering away, living up to his title in the delivery of inefficiency. The truth is that inflation, ironically, is helping the Government’s revenues. They have a four-year freeze on personal allowances and tax thresholds, which means a creeping increase in tax as people sink into tax thresholds and allowances go down in real terms. They are planning a cynical attempt to drop tax before the next election in 2024 or 2025. That will be gobbled up by that inflationary clawback. People will think that they are getting a tax cut, but will lose twice the amount.

Is there an alternative? The answer, of course, is yes, and the evidence is that in the 10 years to 2008, when Labour was in power, the economy grew by 40%. We did not just give the proceeds away; we used them to double investment in the health service, double investment in education and bring millions of young people and pensioners out of poverty. We bequeathed a debt-to-GDP ratio of 45%; it is now 90%, so the share of debt has doubled. The Institute for Fiscal Studies has said that, if our trend of growth had continued, people would be £11,000 better off than they are today. They would be much more resilient to the global shocks that we have all seen, including Ukraine and covid.

There has been catastrophic mismanagement since 2010. It started with Osborne’s austerity, which simply did not work: it just drove down growth, because people were expecting that they might be one of the 400,000 people he said he was going to sack. We then had the stupidity of hard Brexit, when we decided that we would all be outside the single market. There is no move now for product realignment or a minimum amount of worker movement to allow lower-cost market access, which is what businesses want, so a third of businesses that have been exporting to the EU now say that they will not do it at all.

We have a low-growth, high-cuts, high-tax, wage-cutting Government—a complete failure. I appreciate that a windfall tax is not the complete answer, but let us understand what a windfall tax is. The oil companies worked on a marginal profit that was quite healthy; then, all of a sudden, Putin invaded and there was an escalation in the price and a massive profit over the cost of production that the companies did not do anything to deserve. That is Putin’s profit, and people here deserve it to help them through the hard times that we are going through because we are imposing sanctions. Sanctions, of course, take time; the IMF says that sanctions will cut the Russian economy by 8.5%, but they will not stop a Russian tank. The war needs to be won to sort the situation out, but that is another story.

We certainly need to increase productivity, but the reality is that the Chancellor’s ambition is to bring investment per child in education by 2024 up to Labour’s 2010 levels. Our young people need to be invested in now.

There is talk of everyone having to go back to the office. Indeed, the Minister—that man sitting on the Front Bench—has said, “We have all got to go back to work in the traditional way.” However, a study by the Office for National Statistics shows that there would be a considerable increase in productivity and a delay in retirements if people were allowed to work from home. In particular, women, carers and people looking after families could work flexibly. Furthermore, people being at home for one day in five would take 20% of the traffic and 80% of the congestion off the roads, so we would spend less on roads and it would be carbon-friendly.

This whole approach to productivity, green investment, and cognisance of those matters, is completely ridiculous. Macron, along with Italy and Germany, has asked why we cannot take a more collaborative approach to trade with Britain—and, indeed, bring in Ukraine, because it shares the same values. All we are doing is starting a trade war on the back of the very sensible arrangement that Ireland should be in the single market to protect it. That is what the Government agreed and that is what should continue to operate.

Apart from the economic catastrophe, to which there is a clear solution, I fear that there are attacks on the fundamental rights of democracy. The Queen’s Speech contains all this stuff about reducing the power of an independent judiciary. Obviously the Government are very angry with Miller because the judiciary in that case gave us a vote on the Brexit deal, and they are very angry with the judiciary for allowing democracy to be reconvened after the Prime Minister had tried to abandon it for a long period. The composition of the Supreme Court has been changed and seven of its key decisions have been reversed. It has been intimidated by the media, and by Ministers sitting there slagging it off—particularly, the Lord Chancellor who is supposed to defend it. The average tenure of a Lord Chancellor is now one and a half years; it used to be four years. The Lord Chancellor used to be a senior judge, or a member of the judiciary who was respected, rather than someone who just wants to proceed to the next ministerial position. Our independent judiciary is under attack, our rights are under attack, and our democracy is under attack.

I respect what the hon. Member for Paisley and Renfrewshire South (Mhairi Black) said about the rolling authoritarianism that we see in the contexts of poverty, the economy, and the democracy that we fundamentally are. We are better than this. We deserve better than this. We do not want low growth, large cuts and low wages; we want high growth, and a fairer and stronger economy in the future. Let us roll forward and deliver that—with a Labour Government.

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[Mr Rees-Mogg]

Unfortunately, as so often, the hon. Gentleman has not been paying proper attention to the day’s debate. If he had, he might have heard an authority greater than I am answering half a dozen questions on that very issue from the Leader of the Opposition slightly earlier. The authority in Her Majesty’s Government is obviously the Prime Minister, of whom I am a humble servant.

My hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) raised the issue of disruption in supply chains. This is a fundamental problem, and until supply chains are restored, inflation is likely to be difficult. The contributions have ranged widely. We heard from my hon. Friends the Members for West Worcestershire (Harriett Baldwin) and for Rugby (Mark Pawsey), as well as from my hon. Friend the Member for Burton (Kate Griffiths), whom I was pleased to visit last week. We had the pleasure of going to the Elkes Biscuits factory. If you want a better biscuit, buy Elkes biscuits. They are absolutely delicious. I helped—I was not very good at helping, but I did help—and they sent me home with a packet of Bourbon creams, which have never been devoured faster than they were by my children. I thank my hon. Friend for having me on that visit.

We heard from my hon. Friends the Members for South West Bedfordshire (Andrew Selous) and for Reigate (Crispin Blunt), and from my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), who insisted that we stick to the title of the debate, which is “Achieving economic growth”. He is almost always absolutely right, but on this occasion he was particularly absolutely right. We want to stick to the issue of economic growth. We also heard from my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake).

I do not know whether to be delighted or somewhat miffed at my hon. Friend the Member for Hertford and Stortford (Julie Marson), because in one short speech she made a point that I have been trying to make for about 20 years and she made it more pithily and better than I have ever done. She used a cricketing metaphor, which is that the Government are the groundsmen, and the most they can do is to prepare the pitch for the bowlers and batsmen—the businesses across the country who provide the economic activity. We are not the players in the game; we are the groundsmen. As I say, that is a point that I have been trying to make for a long time, and I am going to steal my hon. Friend’s pithy aphorism shamelessly. I hope that I have her permission to do so.

We heard from my hon. Friend the Member for Bolsover (Mark Fletcher), and also from my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who said that growth was everything, agreeing with my right hon. Friend the Member for Gainsborough. I think that my hon. Friend the Member for Milton Keynes North (Ben Everitt) might need to contact the Boundary Commission, because during his speech he decided to rename his constituency the “Silicon Valley of Europe”. For that to be officially approved, I think it would have to go through the proper processes, but it seems to me a jolly good idea that we should have the Silicon Valley of Europe in Milton Keynes, with robots going around showing how modern and technologically sophisticated they are.

I was also delighted by the contribution from my hon. Friend the Member for West Dorset (Chris Loder). I visited his constituency recently, and he generously provided me with the most excellent cake. Hon. and right hon. Members will think that wherever I go I am provided with confections of the most delicious kind, but that is not compulsory, and I would happily go without the cake to visit Poundbury, which is the most amazing success of planning in providing the things that people want. It is beautiful and elegant, and it achieves a density that other places do not achieve.

I also listened to my hon. Friend the Member for North Norfolk (Duncan Baker) with pleasure.

[Geraint Davies]

Will he give way?

[Mr Rees-Mogg]

How could I refuse such an eloquently phrased request?

[Geraint Davies]

I am listening to this very amusing after-dinner speech, but does the right hon. Gentleman agree that the serious issue here is that, had we continued on the growth trend of the last Labour Government, people would have an extra £11,000 to work with? We have the highest tax rate since world war two, the highest inflation rate for 40 years and 2.6 million people going to food banks. Does he agree that is a complete catastrophe? He is making a big joke out of it, which shows he should not be in office.

[Mr Rees-Mogg]

The hon. Gentleman must think there has been a collective outbreak of amnesia not just in the House but across the nation. He seems to forget that the country was bankrupt when the coalition came to office in 2010, and it had been bankrupted by the “spend now, find the money later” approach of the socialists. Was it not Margaret Thatcher who so rightly said that, ultimately, they run out of other people’s money? They ran out of other people’s money.

Growth has been lower because of the utter irresponsibility of the socialists prior to 2010, and the then Chief Secretary to the Treasury left a little billet-doux, did he not, saying:

“I’m afraid there is no money.”

[Hon. Members: “It was 12 years ago.”] Yes, it was more than 12 years ago, but we will not let them forget because socialism always leads to economic failure. Every socialist Government there has ever been has led to economic failure, devaluation, high taxes and low economic growth, and then the Conservatives come in to clear things up.