Budget Resolutions and Economic Situation

Geraint Davies Excerpts

Wednesday 20th March 2013 Commons Chamber

[Sammy Wilson]

Indeed. I am glad that the hon. Lady has raised the matter, because I want to come on to that.

The Chancellor set himself the objective of reducing debt, yet the Red Book shows—this is since the autumn forecast in 2012, so a period of six months—that by 2015, or the end of this Parliament, Government debt will increase from 80% to 85% of gross domestic product. The hon. Member for Chichester (Mr Tyrie) gave us the reason for that: the automatic stabilisers are kicking in. We are spending the money on benefits, or paying people to be on the dole, instead of spending it—this is the point I want to come on to—on the things that would stimulate growth, increase the capacity of the economy and enable us to pay our way out of our debt, while at the same time giving people the dignity of having a job and making a positive contribution to the economy.

That is why I think the Chancellor has got this wrong. There has never been a better time for him to borrow. The 10-year price of bonds is down 2%, and it is now cheaper to borrow than it has ever been. Borrowing for those things that will stimulate growth and increase infrastructure in the economy can be very useful.

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

Does the hon. Gentleman accept that the issue, as he has said, is the ratio of debt to GDP? There are two ways of confronting it: reducing debt or increasing GDP. If we had growth, that ratio would go down, but growth has been completely ignored.

[Sammy Wilson]

The hon. Gentleman is quite right. One reason why debt has increased as a percentage of GDP is that GDP has fallen while spending has had to go up to pay for a policy that has failed anyway.

If the Government wish to borrow, what kinds of things should they do? I shall give just two examples of infrastructure projects in Northern Ireland on which tens of millions of pounds have been spent, but which have already begun to have an impact on the economy. First, there has been investment in the broadband infrastructure as a result of the Chancellor’s initiatives in previous Budgets. Project Kelvin and broadband infrastructure around Belfast and Londonderry have helped us to grow the financial services industry in Northern Ireland, which employs nearly 30,000 people, and it has helped us to grow the film industry there too. Both industries need connectivity to north America, and there is faster connectivity to north America from Northern Ireland than there is from the west coast of north America to the east coast. That has stimulated a range of other investments, and it makes sense when it comes to infrastructure investment.

In our tourism industry, we spent nearly £100 million on two signature projects— the Titanic signature project and the Causeway project—which were supposed to generate over half a million visitors in one year. In the first six months, they nearly doubled that estimate, in business for hotels in Northern Ireland and business for restaurants, taxi drivers and so on. The hon. Member for Swansea West (Geraint Davies) made the point that there is good borrowing and bad borrowing. Bad borrowing is paying to keep people at home on the dole; good borrowing is paying to have infrastructure development, which helps to increase the capacity of the economy. I think the Chancellor has missed a trick. Instead of having a financially neutral Budget, he ought to look to the future and ask what we can do and how we can raise money to spend on projects that, in the long run, will generate more tax and jobs, give us growth, and bring down the deficit.

While I welcome the things that I mentioned at the outset, and I acknowledge the way in which the Chancellor and the Treasury have responded to some of the points that we have made from Northern Ireland, for the country as a whole there are things that could have been done that have not been done, which we will live to regret and which will probably result in the Chancellor standing at the Dispatch Box next year saying, “I forecast this, and unfortunately I’m downgrading those forecasts again.”

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[Adam Afriyie (Windsor) (Con)]

The economic strategy adopted by the Chancellor is the right one. On the one hand, we must deal with the massive deficit left by the Labour Government. On the other, we must kick-start the economy. With a budget deficit of £120 billion that is mounting by the day, it would be utterly reckless to borrow more. That is the road to ruin and we must avoid it at all costs.

I am optimistic about the future. I am optimistic that with sound economic policies, we can get our country back on its feet. Only British businesses have the power to lift our country out of the economic legacy left by the previous Government. I chose to come into politics from the world of business. Anyone with experience in business will say that it is tough and that it is really hard work. That work is made tougher by unnecessary regulations and the bizarre tax on jobs that is called employers’ national insurance. I therefore welcome the measures in the Budget that will tackle regulation and reduce the burden of tax.

I want our nation to be back on top. I want it to be on top of the world competitiveness tables, on top of the productivity tables and on top of the world trade tables, but at the bottom of the world taxation tables.

[Geraint Davies]

The hon. Gentleman mentioned being at the top of the productivity tables. Does he accept that as an extra 1 million people are in jobs and we are producing no more, productivity has gone down? That is a complete disaster.

[Adam Afriyie]

Opposition Members have a real cheek in raising cheap points like that. This Government are doing everything they can to dig this country out of a hole of Labour’s creating. Labour Members should remember that and should be ashamed of such comments.

My hope for our nation is that we will feel proud and self-confident; that it will be a nation where enterprise, employment and economic growth are highly valued. Why? Because that is the only way to afford the well-funded public services and caring society that we all want. It is the only way to have a decent health service that takes care of us. It is the only way to fund a world-class education system that is open to everyone. It is the only way to pay for strong defence through our armed services. It is the only way to generate wealth to help others. Above all, it is the only way to secure social mobility.

I come from a pretty tough background, as do many people. It was not easy growing up in a single-parent household in social housing as a mixed-race kid in the 1960s and 1970s. But I was one of the fortunate few. I was born in Britain at a time when it was possible to make it in a lifetime. I want the opportunities that I enjoyed to be available to every single British citizen. It seems to me that it has become even more difficult for people to forge their way in life. My heart is with the least well-off in our society and with all those people, especially our young people, who want to make something of their lives. That is why we must back British enterprise. We must give British businesses the support they desperately need. We must help them to regain their confidence and competitiveness, because this country needs a thriving, dynamic and competitive business environment. In a competitive business environment, there will be failures, there will be successes, but, above all, there will be opportunities for everyone to work hard and to achieve the type of life that they would wish to achieve.

I made my way by working hard at school and eventually starting a business. I remember being exhausted in the early hours of the morning, filling in Government forms and tax returns, and the stress of trying to meet the payroll—yes, and sometimes failing—and the agonising over whether to take on new employees. I can remember the fear of never being quite sure whether the businesses would make it. It is the same today for millions of small business owners around the country.

I was one of the fortunate ones; the risks and the hard work paid off. For many, they do not. It seems to me that our political elite are nervous about talking about success. There is a tendency to view wealth creation as somehow distasteful or a bit dirty. We love it when young people set up businesses, but we become suspicious if our businesses become too successful.

My message today is this: get over it. Backing British businesses is not only the way to escape our dire economic situation but the way of securing social mobility. We must trade our way to a balanced budget and we must trade our way to a trade surplus. Business is the engine of our economy; it generates the jobs, the livelihoods and, yes, the taxes that make for a good society. Only by embracing enterprise with every ounce of our being can we secure economic growth.

Economic growth can come from nowhere else. Governments cannot do it, but our tradesman, entrepreneurs, business owners and hard-working employees can. They are the lifeblood of our economy and it should be obvious to us all that enterprise is the only route to success. In business, people must get results. If they do not, they are out of business. That is the harsh reality that businesses face every single day and it is about time that our political class adopted those real-world principles. We must learn to like business—to love business—and to take a more business-like approach in government. We must learn to love the process of wealth creation. Government must make life easier for businesses to invest and hire new staff.

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

This is very much more a fudge-it than a Budget. It is a fiscally neutral programme that just takes money from the poorest and gives it to the squeezed middle in a somewhat cynical way. It is part of the Tory journey to a weak and divided Britain. This Budget does contain a few good things, such as the mortgage deposits idea. I would probably support that, although we need to build more houses as well as helping people to get mortgages. I would also support an employment allowance. Apart from that, this Budget falls within the general envelope of economic failure. The debt to GDP ratio is set to rise from 55% in 2010 to 85% in 2015, and that is why we have lost our triple A rating. The way to get rid of such a debt to GDP ratio is to reduce the debt, which is what is happening, with the poor being hit hardest, and/or to increase the GDP—the growth. There has been a marked failure by this Tory Government to generate any growth at all.

In sharp contrast, the Labour party had a great 10 years of unprecedented growth between 1998 and 2008—GDP grew by 37%. It is no wonder the debt to GDP ratio was falling. That was a fantastic economic record of growth, but we then hit the 2008 financial sub-prime debt tsunami from the United States. We ended up with a deficit, moving into 2010, two thirds of which was from the bankers and a third of which was from our pump-priming—investing more than we were earning. Obama and the previous Labour Prime Minister provided the fiscal stimulus, which avoided a world depression. We had a shallow recession which was moving into fragile growth, but then the new Chancellor came along and announced half a million job cuts, consumer demand fell through the floor and we have had zero growth since. It has been a complete catastrophe.

The Government say, “Oh, we have an extra million jobs”, yet there is no overall production growth. That implies that productivity per person has fallen. That is the great economic failure. Why is it falling? It is because we are not investing sufficiently in skills and productive capacity. If we ask any sensible business person, he or she will tell us that to grow we have to invest—in skills, in capacity, in products and in sales—rather than cutting everything all the time. There is a difference between borrowing to invest in productive capability and capacity, and borrowing simply to fund more and more people on the dole, which is the old Tory story. Debt is going up and it is the cost of failure, not the cost of success. What we need is investment in skills, infrastructure and housing—the Mayor of London mentioned that.

If we look abroad at the great emerging economies that are hurtling forward as we are bobbling along at the bottom, we see that Brazil is investing $5.3 billion in biotech and renewable energy. We see a much bigger amount coming from China’s development bank. That is because China is bigger, but again this is patient money being rewarded in economic growth and economic success. The case is the same for public sector research and development in the United States. When we do the analysis of where the global players will come, we find that they will come to clusters of research and development and skills. I am glad that the European Investment Bank is investing in a second campus in Swansea to bring investment there. I hope that the Government will invest in super-connectivity for Swansea, and a lot of businesses have written to the Chancellor about that.

What certainly will not make a difference is changing the rate of corporation tax from 21% to 20%. That simply takes out 5% of the income from corporation tax. If, as has been said, the United States has a 40% rate, Germany’s is 29% and France’s is 33%, we already have a competitive advantage. This move is just giving away money when it should be invested in focused research and development capacity that might get international capital and jobs to migrate here. This approach is completely farcical. That deals with the economy.

As regards society and fairness, we are just punishing the poor for the bankers’ errors. As a result, cuts are hitting the poorest hardest. There is a welfare freeze; council tax rebates have been cut; and the bedroom tax has been introduced, as well as universal credit and the Work programme: 890,000 people have been forced to pretend to work, and if they do not turn up because their child is ill they are sanctioned, they do not receive any income for weeks on end, and they end up at a food bank. That is the direction of travel: punishing the poor hardest for being poor.

The bedroom tax is not going to work. In Swansea, they are already thinking about knocking down walls so that people are not decanted into the private sector, which costs more, leaving empty public sector houses. It makes no moral or economic sense. We do not seem to care about the poorest, given the situation regarding child poverty and the knock-on effect in schools, crime and so on. The Government are going to pay tenants who must pay their housing benefit directly to landlords. There is little money so it will mean arrears. We are asking people to access universal credit online, when a quarter of people are functionally illiterate. They cannot even follow the “Yellow Pages”, so they will not be able to get their money. Two thirds of people subject to the bedroom tax are disabled, so the measure is cruel, callous and unthinking.

We know that the poorest spend most and are more likely to create growth, so that leads to a difficult situation. We all welcome the fact that the tax threshold has been increased to £10,000, which will give people £13.70 a week, which is about the same as the £14 that people subject to the bedroom tax will lose as a result of that tax. One measure costs £12 billion; the other will allegedly save half a billion pounds, so it will not really save anything.

We are moving money to the squeezed middle, but meanwhile millionaires are getting away with it. They will move their money into the next tax year, which is why the Prime Minister gets up on his hind legs and tells us, “A 50p tax would raise less”, as he knows that his millionaire mates will move their income into the next tax year. What is most despicable is the fact that this cynical divide and rule between workers and shirkers, between strivers and skivers—the undeserving poor, Victorian values, the workhouse—is the new Tory party in action, not delivering a future that works and cares but a future that does not work and does not care: a divided and weak Britain, rather than a united, strong Britain with one nation in mind, which is what we need in future.