The Economy

Helen Goodman Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr Osborne]

Anyone listening to Opposition Members would believe that under the mythical Labour Government that apparently existed, all that information was disclosed. But was it disclosed? There was no disclosure whatsoever. I suggest to the shadow Chancellor—the former City Minister—and others that they back the unilateral measures that we are taking, which will make the financial centre here in London the most transparent in the world.

The advice of the Financial Policy Committee is clear. Banks should consider limiting bonuses this year and using profits to strengthen their balance sheets in the face of the eurozone debt storm. Let me make this plain: stronger banks, not larger bonuses, should be the priority this winter, and money that is earned should be used to build balance sheets and not to enhance payouts. That is the advice from the Bank of England, and that is the advice that the Government now expect to be followed.

[Helen Goodman (Bishop Auckland) (Lab)]

Will the Chancellor tell us what he, as a major shareholder in some of the largest banks in the country, will do about the bank bonuses on which he can have a direct impact?

[Mr Osborne]

We restricted cash payouts in the Royal Bank of Scotland in the last bonus round to less than £2,000. That is what we did when we had the opportunity. The hon. Lady was a Minister in the last Government. Perhaps in 30 years’ time we will discover that she was sending letters to the Treasury asking “What are we doing about transparency in pay in the City? Why do we not introduce a permanent bank levy?”, and saying “I am really worried about the regulation of Britain’s financial services.” We will just have to wait for 30 years to find out whether, when she held Executive office, she once raised the concerns that she now raises in opposition.

Both the slow repair of our banking system and the crisis in the eurozone were identified by the Office for Budget Responsibility as causes of weaker economic activity. They are also a reminder of why it is so essential for Britain to maintain its fiscal credibility as we deal with a budget deficit that is higher than almost any other in the world. A month ago I was told by the OBR, as part of the formal preparation for the autumn forecast, that weaker economic activity would give Britain a less than 50% chance of meeting the fiscal mandate and the debt target that I had set out unless we took further action.

I believe that at that moment the OBR proved not just its independence, but its worth. It forced the Government to confront the issues at hand, and to use the weeks available to us before the statement to come up with a credible response. We know that under the previous forecast regime, those weeks would have been used to fiddle the forecasts, to tweak assumptions about the output gap, and to pencil in over-optimistic numbers on tax receipts: in other words, to do all the things that my predecessor, in his memoirs, says were done during his dealings with No. 10 Downing street. It would have been a case of choosing economic figures to fit the Government’s policies, rather than choosing Government policies to respond to the economic figures.

I believe that the existence of the Office for Budget Responsibility, which was consistently opposed by the shadow Chancellor in every position that he held in the last Government, has given the whole of Parliament confidence in the integrity of the forecast.

--- Later in debate ---

[Mr Osborne]

The OBR is very clear that the cause of its downgrade of the trend growth rate is the—[Interruption.] Is it any wonder that the economic credibility of the Labour party is falling week after week? The shadow Chancellor has backed it into the incredible position where only Communist parties in western Europe agree with it. The reason he has done that has nothing to do with the future political prospects of the Labour party. Rather, it has everything to do with his own personal record. He cannot be the Labour politician who admits that his party made mistakes in the run-up to the 2007 crisis, because he was the Labour Government’s chief economic adviser. That is the position the Opposition find themselves in, and Labour Members know it. They are all going around telling anyone who will listen that that is their problem. Until they face up to the reality of the economic situation confronting this country—a reality they helped to create—they will not be listened to by anyone in this country.

The choice we faced when we saw the OBR’s first-round forecast was not whether to fiddle the figures; instead, it was whether we should take action to respond to the changed economic circumstances. We could have done nothing, but given international events I thought that was not a risk worth taking. It may have seemed to be the easier option, but not when we considered the possible consequences for the credibility of our country in the credit markets and the risk of a rise in interest rates of the kind that so many of our neighbours have experienced. The other option was to take further action to ensure Britain was on course to meet the fiscal commitments we have made, and that was what we chose to do, with a package of measures designed to tighten policy in the medium term while using short-term savings in current spending to fund one-off capital investment in our country’s infrastructure.

As I explained last week, we have put the total managed expenditure totals for 2015-16 and 2016-17 on a declining path. We have made changes to the tax credit entitlements. We set pay increases in the public sector for the two years after the freeze at an average of 1%. We have recalibrated overseas aid spending so we hit 0.7% of national income in 2013. We have also increased the state pension age to 67, starting from 2026.

That money saved in the short term has been used to fund the youth contract, new nursery provision to two-year-olds, new free schools and school places, and a major programme of road and rail building, and to help with the costs of living by extending the small business rate relief, keeping rail fare increases low, and freezing petrol duty next month, but the permanent savings—

[Helen Goodman]

Will the Chancellor give way?

[Angela Smith]

Will the Chancellor give way?

--- Later in debate ---

[Helen Goodman (Bishop Auckland) (Lab)]

I am pleased to follow the hon. Member for Montgomeryshire (Glyn Davies). I do not agree with what he said about wind farms, but he made a thoughtful and interesting speech, and I hope that when he listens to what I say about the north-east, he may feel that things in Wales are not quite so bad.

At the weekend I received an e-mail from a constituent which said:

“I wanted to apply for a crisis loan for my heating oil but when I rang up I was told this was not possible … and I would have to apply for a budgeting loan which has a three-week wait … My problem is I am unable to pay by direct debit … I have been unable to save the money from my employment and support allowance as I have been trying to pay my other important bills . . . My dilemma is that my oil will not last much longer and as I suffer from diabetes and had a heart procedure in September my health will suffer as a result of no heating.

What can I do to sort this out?”

The e-mail is interesting not because of what it says about the benefits system, but because of what it reveals about the level of poverty being faced at present in some households, as well as the consequences of the failure to tackle the energy giants adequately.

There are two major themes that I want to pull out of what the Chancellor of the Exchequer announced in his autumn statement—the unfairness and the unintelligence of the proposals that he put to the House. In many cases they are unintelligent because they are unfair. Let us look first at who is bearing the burden of the measures that he announced. We can see from the analysis published by the Institute for Fiscal Studies that it is the poorest who are paying the most. The IFS analysis makes it clear that the measures that the Chancellor of the Exchequer announced will make the bottom 30% worse off and the top 60% better off.

[Mr McFadden]

My hon. Friend is right in what she says about the Institute for Fiscal Studies estimates. She will also know that the IFS says that by household types, it is families with children who are worst hit. What does she think the Government and the Chancellor have got against families with children?

[Helen Goodman]

I cannot imagine what the Chancellor has against families with children, but it is obviously a matter of extreme concern not just that the number of children who live in poverty will go up, but that to tackle the problem, the Government are going to redefine poverty. They will find that that is a massive mistake. If they go to an absolute measure, they will not look good against the Labour Government, who reduced the number of children in absolute poverty by 2 million.

Those on £14,500 will lose eight times the share of their income that those on £32,000 will lose. The poorest 10% will lose four times the share of their income that the richest 10% lose. In other words, it is a cynical way of focusing money on so-called marginal voters. The proposals are unfair. They are unintelligent to the point of stupidity, because the propensity to consume is highest among the poorest. Maintaining the incomes of people on low incomes will have the fastest and greatest impact on demand, so even with the same level of borrowing as they propose and the same fiscal stance, the Government could have a bigger bang for their buck. They could have a greater impact on demand and on the growth of the economy, simply by redistributing.

The second dimension on which the autumn statement is both unfair and unintelligent is the regional distribution. The Government are switching £4 billion from current to capital, of which only £4 million—that is, 0.1%—is earmarked for the north-east. That is 25 times less than the £100 million that was lost from my constituency alone when the Building Schools for the Future programme was cut. For example, improvements to the A1, the A19, the A66 and the Tyne tunnel are not going ahead.

The North East chamber of commerce has described this as “hugely disappointing”. The extension of 100% capital allowances till 2017, the new enterprise zone in the port of Blyth and the increase in the regional growth fund are all minuscule in comparison with the impact of the abolition of the regional development agency.

Furthermore, the infrastructure plan is old-fashioned. Only £100 million of the new money is in the communications strategy and that is all concentrated in the cities, whereas the lack of access is in rural areas. Today the Federation of Small Businesses and the National Farmers Union came together to point out that hundreds of thousands of people will be left behind, so where it is most useful and most needed, it will be least available.

In announcing his weakening of the habitats directive, the Chancellor seemed to be scornful of green considerations. After the excuses of snow and royal weddings, it seems to be the butterflies that are the problem, or perhaps it was the seaweed that he was complaining about.

My hon. Friend the Member for Sedgefield (Phil Wilson) pointed out the detrimental impact of regional pay on our regional economy. Lower pay in the north-east is a symptom of our problems. Reducing the pay further will take yet more money out of the demand in the regional economy. To set this in context, my hon. Friend the Member for Easington (Grahame M. Morris) made an excellent speech in Westminster Hall, pointing out that the cuts in incapacity benefit are already taking £170 million out of the regional economy. What may look like a sneeze in the south can cause pneumonia in the north-east.

[Damian Collins (Folkestone and Hythe) (Con)]

Throughout the debate this afternoon we have been asked to consider that the debt situation that we are in is not as bad as it seems and that we can spend money that we do not have to try and get out of it. That argument lacks any credibility with the money markets.

[Helen Goodman]

That is not what I said.

[Damian Collins]

The hon. Member for Bishop Auckland (Helen Goodman) is speaking from a sedentary position. I shall come to her remarks, which are pertinent to my constituency, particularly her comments on the habitats regulations and how they impact on the local economy.

Opposition Members have put to one side the seriousness of the debt situation. The other issue that has not been spoken about at all—certainly not by the right hon. Member for Edinburgh South West (Mr Darling) or by the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls)—is the underlying competitiveness of the economy. When we look at the debt situation and the world economic crisis, which are grave and severe, we should also consider that our economy may not be as fit and competitive and as able to grow the sort of jobs that we will need in the future as we thought it was.

Statistics showing how this country has fallen behind in the competitiveness league tables published by the World Economic Forum are often brushed aside. From being seventh in 1997 when the Conservative party left office, we fell to 13th last year and are 10th now. That means that in 1997 we had the most competitive economy in the European Union. We find ourselves today behind Sweden, Finland, Germany, the Netherlands and Denmark on competitiveness.

On the broader question of infrastructure, which is so important to the competitiveness of our economy, we find that Britain lies in 28th position, according to the latest figures, not rubbing shoulders with France, which is third, or Germany, which is 10th, but instead between Saudi Arabia and the Czech Republic.

--- Later in debate ---

[Damian Collins]

I am not sure what the hon. Gentleman’s critique is of the party that was in power for 13 years and delivered these statistics. The point I made at the beginning of my speech is that after 18 years of Conservative Government Britain’s competitiveness in Europe was much higher than it is now. I do not know what sort of indictment he finds after 13 years of Labour Government, but it sounds pretty damning to me. The hon. Member for Bishop Auckland talked about the habitats regulations, which I will move on to because it is an important point. She was slightly dismissive, but I do not think that she meant to be.

[Helen Goodman]

No, you are dismissive.

[Damian Collins]

She was very dismissive of the significance of the review the Chancellor announced last week on whether the habitats regulations are being used to hamper growth and business development and whether they are being unfairly and unreasonably applied. A particularly pertinent case in my constituency is whether Dungeness nuclear power station in Kent should be allowed on the list of new nuclear power sites, and I have written to the Chancellor to ask him to give it special consideration in the review. There is a huge amount of local support and there are two nuclear power stations there already.

Land was set aside for the creation of a third power station in the 1960s, most of which was disturbed during the building of the first two. The land is within a special protected area next to a Ramsar site that gives special protection not to butterflies, but to vegetation that grows on the shingle banks and to birds. The bird sanctuary was created largely after the building of the existing power stations. The area of development for the new nuclear power station is less than 1% of the protected area, so it would be difficult to claim that building it would damage the integrity of the whole site or destroy the habitats totally. They remain within a large, protected and conserved area and will be protected.

Nevertheless, based on Natural England’s interpretation of the habitats regulations, it was recommended to the Government that a third power station should not be built on the site, and that is the only reason why it cannot be built. It would create thousands of jobs during the construction phase and 500 permanent jobs for its operation. It would be an incredibly important investment, and that is an example of how the interpretation of some of these regulations is impeding growth and investment in our economy. The power station would be built not on a greenfield site in a protected area, but next door to two existing power stations and on land that was set aside for the purpose. I obviously feel strongly about this example because the new power station would help my constituency directly, but it would also be a new energy source in an area of high demand in the south-east of England, close to south-east London.

Another local example is Lydd airport. Extending or building new regional airports is a controversial issue. In my constituency the local council decided some time ago to approve a planning application to expand the airport. There had been a previous public inquiry on that in the 1990s, which had lapsed, so the process has to be gone through again. A private developer who is willing to invest money with the support of the local council, which approved the planning decision, is being put through a costly and lengthy process, wasting hundreds of thousands of pounds, with the prospect of possible judicial review at the end. That is also because of the way the habitats regulations have been interpreted, and during the course of the most recent planning inspector’s inquiry many of the objections were set aside. It is frustrating that these rules and regulations are hampering investment and growth.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson). Having recently joined the Northern Ireland Committee, I am becoming more familiar with the issues that he raises and, in particular, with Northern Ireland’s attempts to show that one can compete on tax rates to grow one’s economy. It has the right idea in wanting to match Ireland’s lower corporation tax rate in order to grow the Northern Ireland economy, but I sense that it will not want to match Ireland’s new higher VAT rate in an attempt to grow the economy over there. That is aiming for the best of both worlds.

I welcome the chance to contribute to this important debate on what is the central issue for my constituents. I am sure that every Member who has spoken to constituents and businesses cannot have failed to notice how difficult economic conditions have become, and that is why I welcome in particular the fact that the Chancellor, in his autumn statement last week, did not try to hide the full extent of the difficulty, but set out exactly how difficult things are now and will be for the next few years.

The response was robust, and it should see us maintain the market’s confidence, which is the key to our recovery. I am not aware of any serious commentator who suggests that we should change our plan, and borrow more and spend more than we plan to, when we are running a deficit of more than £120 billion this year already. The shadow Chancellor chose earlier to quote Voltaire, and I have found a second quotation for him:

“Common sense is not so common.”

Some of his speech showed eminently that that is true.

I shall touch on the measures in the autumn statement that are relevant to my constituents and work through those issues that are raised most frequently. People—especially first-time buyers—complain that they cannot get mortgages or, if they can, that the deposit requirements are too high or the cost is too high, so last week we announced measures to make it easier for first-time buyers to get mortgages and thus get the building industry started again. I can think of some building sites where a couple of houses were started on the edge but the rest of the estate was mothballed for a few years, and getting those finished has to be a good thing.

Small businesses have for a long time complained that they cannot get funds out of the banks, and, although all our measures may have helped a little, they certainly have not solved the problem, so the loan guarantee scheme will I hope be a real step forward. Many businesses are struggling to decide whether investment is a great idea in the current climate, but as things start to improve the scheme will be in place and enable them to secure the finance that they need. In the meantime, every small business will welcome the extension of the business rate holiday for a few more months, but it keeps being extended, and at some stage it might be nice to extend it to a distant horizon so that we know where we are.

The worst impact of any economic downturn is on unemployment, and especially on youth unemployment, and the £1 billion of funding that we announced to tackle that will be hugely welcome. As I visit businesses throughout my constituency, I see that some are taking real steps, at their own cost, to employ local young people. I pay tribute especially to David Nieper in Alfreton, a fashion business that has started its own fashion academy, taking students from nearby universities and showing them the entire industry—from designing clothes all the way through to marketing them, selling them and producing brochures—in order to give them that whole-industry experience so that they really are job-ready.

[Helen Goodman]

I am pleased that the hon. Gentleman congratulates David Nieper, because my sister works in that factory.

[Nigel Mills]

Well, I am sure that she recognises how great an employer it is—and it is very kind of the hon. Lady to give me an extra minute!

Many other businesses in my constituency have expressed their concern about the impact of rising energy bills, especially given the Government’s climate change policies, which increase those costs. In my constituency, I have another great business, Denby Pottery. I do not know whether the hon. Lady has family working there, too, but it has expressed a real concern that even the welcome help that we announced for energy-intensive industries last week will not assist the ceramics sector, so I urge the Government to keep working on those measures to protect such valuable and historic industries.

Another particularly welcome announcement for me was the announcement of expenditure on infrastructure and road building. New road construction in Amber Valley has been a little neglected, so I urge the Government to look favourably on the bid that I and Amber Valley borough council have championed for the new Ripley-Codnor bypass, which would link the A38 and M1. We are not asking for the full funding, because the council is busy arranging it through developers that can pay for up to half the bypass, but if the whole road were completed it would present a real chance for regeneration and a real chance to attract new business to the area, which is exactly what the Government’s infrastructure funding is trying to do.

I am happy with what the Government have announced. In a difficult situation, they have announced some short-term measures to tackle the worst impacts of economic downturn. Now, we need to look at the long-term strategy and at the measures we need in place to make our economy as competitive as it can be in five or 10 years’ time.

In the final minute of my speech, I shall turn to the reform that we need in our tax system. As my hon. Friend the Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee suggested, many tax regimes that affect our businesses are unduly complex and out of date, discouraging investment while encouraging strange and perverse behaviour, which is why we have to introduce a huge number of more complex anti-avoidance rules, such as those announced today.

Wholesale simplification would ensure that we had a system which encourages what we do want and make it easier to stop the avoidance behaviour that we rightly wish to tackle—and I think the Government are coming round to that. Last week, they announced that 100% capital allowances will be made available to enterprise zones, and, to all those businesses in my constituency which would like to invest in new machinery and need to do so to remain competitive, we should send the message that we want to provide tax incentives for people to invest in capital equipment at this time. If we need 100% capital allowances for enterprise zones, can we not find a way of being more generous with capital investment throughout the whole country, not just in those zones?