The Economy

Debate between Geraint Davies and James Cartlidge

Wednesday 18th November 2015 Commons Chamber

[Geraint Davies]

The fact that I do recognise is that, when we left office in 2010, debt as a percentage of GDP was 55%, and now it is 80%. The Labour party borrowed less in 13 years than the Conservatives have in five years. There has been a complete failure to invest in strategic growth, productivity, and wealth creation. Instead, debt has been used as a cover to attack the welfare state and public services, which are part of the public-private partnership on which Britain relies.

[James Cartlidge (South Suffolk) (Con)]

I do not know what planet the hon. Gentleman is on. I was a mortgage broker who was running a business leading up to the crunch. I can safely say that the Financial Services Authority, which was created by Gordon Brown in May 1997, completely and utterly failed to regulate the banks. He cannot just walk away from responsibility. Labour has massive culpability for the unsustainable nature of the boom that led up to the massive crash in 2008.

[Geraint Davies]

The Labour party’s spending plans were all agreed to by the Conservatives. We introduced regulation through the FSA and greater freedom for the Bank of England. The Conservatives opposed greater regulation, yet the lack of regulation led to the awful situation we are in now.

Returning to the current, ridiculous attempt to reduce the deficit and the debt by cutting tax credits, the fact is that, in simple terms, poor people spend all their money in the economy, whereas rich people tend to save it, often offshore. Robbing 3 million people of £1,300 to try to balance the books will therefore massively undermine regional economies, when we already have regional imbalances. Taking money from people who would spend it and giving it to those who will not, through changes to inheritance tax, is economically loopy and, in my view, quite wrong morally. Rather than lifting millions of people out of poverty, we are thrusting millions into poverty, in particular the extra 400,000 children who will be put into poverty.

Tax credits are an American instrument to encourage people to work. They are targeted at working families, so that people with children, who have greater needs, can afford to work. If you ran a business, Madam Deputy Speaker, and you could only afford to pay £10,000 to employ someone and make it viable, and if they needed £15,000 and the difference was made up by the Government, we would end up with a job and a viable business. If we withdraw tax credits, we destroy small businesses, destroy incomes, impoverish families and generate inter-generational poverty. It is disgraceful and quite wrong.

The situation with housing benefit is also ridiculous. Seventy per cent of the growth in housing benefit has been paid into private sector rents. Why? It is because the Government have not built enough social housing. Instead of building more social housing, they are basically selling it off to give the right to buy in housing associations. That is not the way forward.

As for procurement, with HS2 construction we are giving something like a £50 billion contract to the Chinese. If a British consortium had, for example, a £55 billion contract, it would pay corporation tax, income tax and national insurance and would have local supply chains and build capacity in Britain—our steel would be going into the construction, rather than Chinese steel. Why have the Government failed to demand carbon tariffs on the cheap steel coming from China, which is produced more cheaply because China does not have the environmental controls that we demand in Britain?

We need more investment in city regions such as Swansea Bay city region, where the local authorities, industry and universities are working together. If we are going to have a national tax hub for Wales, which I am against, why is it being put in Cardiff, which can look after itself? It should be in Swansea Bay city region, a more deprived area. In terms of the trade deficit—[Interruption.] The point is that, as with the Driver and Vehicle Licensing Agency put in Swansea, if the Government can use the investment as an instrument of economic power, they should do so to help relatively deprived areas, not just London and the south-east.

The trade deficit is a massive 5%. We need to think more about emerging massive markets, such as China and India, whose middle classes are approaching 20%. Why are we not actively engaging to unite the creative and manufacturing industries to provide high-value products that we can sell in those markets, rather than moaning that we cannot produce spoons any more?

We also need to have an eye towards the Transatlantic Trade and Investment Partnership—obviously people will have heard of the free trade agreement with America—as well as the Comprehensive Economic and Trade Agreement with Canada, CETA, which is coming immediately. People are barricading the front door because of TTIP, while CETA is going through the back door—and will give companies powers to fine democratically elected Governments if we pass laws that impact on their future profits. We need to sort that out, but we also need to ensure that TTIP works towards a sustainable future for the world. My hon. Friend the Member for Islwyn (Chris Evans) mentioned global warming, and unless we embrace the need to ensure human rights, workers’ rights and sustainable development within the constraints of TTIP, which will be the blueprint for global trading, we will not have a sustainable world or a sustainable economy.

We need to think more clearly about growth in a focused way, rather than always looking to cut things. As a constituent in Swansea said to me, if a company is making a loss, it has two options: sack the workers and sell the tools, or invest in growth, productivity and products. That is the focus of the Labour party.