Geraint Davies
Main Page: Geraint Davies (Independent - Swansea West)Department Debates - View all Geraint Davies's debates with the HM Treasury
(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Geraint Davies (Swansea West) (Lab/Co-op)
Does my right hon. Friend accept that one reason for the remarkable fact that the world economy is growing steadily while Britain is flatlining, is the report from UK Trade & Investment that says that although UK inward investors are coming forward to build factories and growth in Britain, they are not being drawn down as the RDAs have been abolished? The Government are destroying the engines of growth.
Ed Balls
I am sure that was one of the proposals in the so-called strategy in the Chancellor’s Budget.
As I have said, there is growing concern in the business community. There is even concern in the Conservative fraternity. As my friends on The Daily Telegraph said in a recent editorial:
“These figures should be giving George Osborne some sleepless nights.”
They should indeed be giving the Chancellor sleepless nights at No. 11.
Mr Osborne
Indeed. The share of manufacturing as a proportion of our economy halved as well. That is how unbalanced the British economy became. Financial services boomed—we all know that; manufacturing halved as a share of our economy. One of the things that we are seeking to do is rebalance our economy.
Mr Osborne
Let me make a little progress and then take some more interventions.
We are all being asked to vote tonight on the proposition put forward by the shadow Chancellor. We are all being asked to support his motion calling for a big unfunded tax cut. This is what the Financial Times commented when it heard about that. It said that the shadow Chancellor’s argument “increasingly sounds irrelevant”
and that it is
“favoured by those who are unwilling to face up to the true problems facing Britain’s economy today.”
The Economist said that the shadow Chancellor’s speech was
“steeped in cynical electoral politics, thinly disguised as an economics lecture.”
Well, there is always The Guardian, isn’t there? Not on this occasion. The Guardian said that the shadow Chancellor’s economic policy was the “wrong prescription”
and went on to say:
“The big job for Labour . . . is not to dream up a couple of policies but to work out a cogent position on the deficit”
and that there is
“No sign of that yet.”
No sign of a cogent position on the deficit—that was not a comment from the Government, the right-wing press or the IMF, but from The Guardian. That shows just how alone the shadow Chancellor is.
Geraint Davies (Swansea West) (Lab/Co-op)
I know that the parliamentary soul from Dover hoped that the Back-Bench speeches would end at half past six, and I am sorry to disappoint him. It is a great pleasure to be able to speak in such an important debate, which draws a line under the time when the Conservatives were playing their cracked record which consisted of two false messages: that the deficit had been caused by Labour, and that the only way to sort it out was to clear it all in four years and in one way, by destroying jobs and services and punishing the benefits that go to the weakest in society.
Both those messages are false. The reality is that the last Labour Government were very successful economically. We created 2 million more jobs, and the tax from those jobs has funded much bigger health and education services and more opportunity throughout Britain. The deficit was the price paid to avoid a depression sparked by the bankers. Figures from the Institute for Fiscal Studies clearly show that two thirds of the deficit was the banking crisis, while the remaining third, yes, was excess investment over income, which was investment in the future. A fiscal stimulus, generated by the previous Prime Minister and supported by Obama and the world community, was required to keep the banks going and to keep growth moving. In the latter months of the previous Administration we saw growth rising, but now we have seen it stagnating.
The choice now is whether to halve the deficit in four years, as Labour intended—the European Community agreed with that, and, as we heard, the Chancellor signed up to it, although he was embarrassed when that was pointed out earlier in the debate—or whether to go at it and get rid of it all in just four years, even though it is three times the level it was planned to be. Is that sensible for growth? No. The second choice is how we do it. Should we focus solely on cuts in benefits, jobs and services, or should we adopt a balanced approach that focuses primarily on economic growth but also ensures that the bankers pay their fair share and involves savings, yes, but shallower savings over time. For example, the 8% difference between 20% and 12% represents the difference between getting rid of front-line police and not getting rid of them.
Those are the choices that face us. What does the evidence show? It shows that a year ago the deficit was £21 billion less than had been forecast in the pre-Budget report. Why? Because economic growth was faster. Now it is £6 billion higher than forecast. Why? Because the growth is lower than forecast.
Claire Perry
The facts also show that interest rates, and particularly the spread over German interest rates—the risk in the British economy—has dropped by 80% since the election, and that the pound has risen by 9%. There is lots of confidence in the British economy that the hon. Gentleman is not referencing.
Geraint Davies
The hon. Lady will know that long-term interest rates hit an all-time low shortly after we made the Bank of England independent. We experienced the biggest period of ongoing growth ever seen under the Labour Government, despite a number of crises in the world economy. Now the world economy is growing healthily, but in Britain we are stagnating. We have seen no net growth for the last six months. The evidence shows that there was growth and deficit reduction under Labour, and that we are now at a standstill.
Geraint Davies
No, I will not.
In March, the forecasts for growth over the next five years were increased by £46 billion, nearly £1,000 per person, which is a complete disaster. Obviously Government Members have commented on the IMF, saying “The IMF really loves us,” but they should put themselves in the position of the IMF. While it is concerned about a prolonged period of growth stagnation and is suggesting that there may be a case for temporary tax cuts such as in VAT, its focus is naturally on ensuring that Ireland, Greece, Portugal and Spain implement structural changes to keep them on track. They are in danger of kicking the euro out of bed, so the last thing the IMF is going to do is get involved in a debate about the rate of change, in terms of deficit reduction, and the balance between cuts and growth, which we are here to determine. That is the debate we are having today.
Finally, let me say one thing about the future economic strategy being considered by the Tories—whether to allow private sector entrepreneurs into public sector service delivery. On that, I would say that the reason why the Germans are so successful is that the focus of their entrepreneurial activity is on export-driven growth. If we suck all our small business capability into delivering cheaper and worse public services, we will be poorer for it.
Ben Gummer
The hon. Gentleman makes an interesting point about Germany and the involvement of the private sector. How can he reconcile that with the fact that the private sector plays a larger part in the German health system than does the public sector?
Geraint Davies
The situation there is that the Germans are very focused on ensuring that their economy is focused on the growth of the developing economies of China and India. Obviously, there is a difference in the complexion of the German health service. The real focus is on generating export-driven growth, and that is what has happened.
Geraint Davies
No, I will not.
Let me give an example. Every business in Germany is tied into a chamber of commerce, and every chamber of commerce is required to provide tailor-made apprenticeships and training to focus on industrial growth. We do not have that. There is a lot to learn, and we should go out and learn it. We should focus on growth and stop making these ridiculous cuts.