Hugh Bayley
Main Page: Hugh Bayley (Labour - York Central)Department Debates - View all Hugh Bayley's debates with the Department for Work and Pensions
(12 years, 11 months ago)
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Mr Duncan Smith
The reality is that the OBR yesterday told us categorically that the position in which the Labour Government left us was significantly worse than anybody expected. It also said that unless we had taken the decisions that we took last year, we would be borrowing more than £100 billion in each year of this Parliament. On top of that, the Labour party’s measures would have resulted in even worse, but at least we had a little honesty from the shadow Chief Secretary to the Treasury, who said that borrowing would rise because she would borrow more. Given the economic situation, the Treasury estimates that such measures would cost far more—on the back of the OBR figures.
We now know what the Government at the time were doing, and what the Opposition today are about. They are determined to put hard-won interest rates, which we have held down, at risk. Last April, under Labour, our interest rates were higher than Italy’s; 18 months later, we are the only major western country to have seen its credit rating improve. Italy’s interest rates are now about three times ours, despite it having a lower deficit—actually, almost half the deficit that the previous Government left us. So, while the rest of Europe is under intense pressure, the UK remains a safe haven and the Labour Opposition are completely confused.
Yesterday the shadow Chancellor insisted that low interest rates were the sign of an economy in trouble. That is the same man who, back in 2004, described long-term interest rates as
“the simplest measure of monetary and fiscal policy credibility”.
Mr Duncan Smith
Let me lay out the facts to make things simple for the Opposition before I give way. A 1% rise in our market interest rates would add £10 billion to mortgage bills; the average family with a mortgage would have to pay £1,000 more every year; the cost of business loans would increase by £7 billion; taxpayers would be forced to find an extra £21 billion in debt interest payments—and the ex-Chief Secretary to the Treasury has the front, the absolute front, to talk about squeezing living standards. If the Opposition had their way, living standards would collapse.
Hugh Bayley
Does the Secretary of State not recall that at the time of the general election Britain’s national debt was significantly lower than that of Italy, France, Japan and the United States? The reason Italy faces its economic problems is that its national debt is much higher than that which this Government inherited from the Labour Government.
Mr Duncan Smith
It is well worth reflecting on the fact that the previous Government’s debt cannot be detached from their deficit. In case the hon. Gentleman does not understand it, I will explain that what they did was ratchet up spending before the recession began. We had the largest structural deficit of any G7 country before the recession began.
Mr Duncan Smith
No, I will not give way. The previous Government then went on a spending spree, ratcheting up the deficit, which now pumps the debt. It is no good playing silly games—
Mr Duncan Smith
No, the hon. Gentleman can sit down. It is no good. He is not going to play games over the difference between the deficit and the debt. The reality is that Labour cannot weasel out of it. It left us with a tragedy that we are having to put right, which is why we will oppose the motion.
Stephen Williams
We can trade statistics, but the right hon. Gentleman cannot deny what everyone is seeing and what all our constituents are saying to us. They are fed up that the people at the top of companies— Labour Members have referred to bankers, but it is not just the bankers; this also applies to others—seem to have got away with it, while people at the middle or bottom are being squeezed. I hope that the Government act on the High Pay Commission recommendations.
The Government are acting to safeguard the living standards of those at the bottom of the income scale.
Hugh Bayley
What would be the hon. Gentleman’s policy to reduce the incomes of those on high income, to reduce inequality?
Stephen Williams
I recommend that the hon. Gentleman looks at the High Pay Commission report, which is an excellent document containing many recommendations for controlling executive pay. I urge the Government seriously to consider many of those recommendations, including on the revolving door of non-executives on boards of companies effectively determining each other’s pay, where some of the most serious breaches occur.
On hard-working families, to which the motion refers, the Liberal Democrats’ No. 1 policy commitment at the last general election was that, in order to make work pay, we would raise out of income tax those on low earnings and those working part time by increasing the income tax threshold to £10,000 over the lifetime of the Parliament. Progress towards giving effect to that aspiration is being made throughout this Parliament. Let us contrast that with the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in 2007, when, just before becoming Prime Minister, he financed an income tax cut through a tax rise for the poorest in society. I remember watching Labour Members waving their Order Papers and cheering that income tax cut—
Mr Robert Syms (Poole) (Con)
At the end of the Labour period in office, when the first financial storms hit us in 2007, it was clear that the country was, at that point, living beyond its means. It had a deficit of about 3% of GDP, while at the same time the Germans had a surplus. Then we hit all the problems of the banking collapse. The hon. Member for York Central (Hugh Bayley) was right: thank God Britain had a low debt level of gross domestic product because that allowed the Government—
Mr Syms
Yes, partly because of that. Traditionally in Britain it has been about 40%, so that gave the Government some room for manoeuvre. Any Government in office would have had a large increase in its deficit given what hit them in 2007 and 2008. There is no great argument about that and, as someone sitting on the other side of the Chamber, I think that many of the things that the right hon. Member for Edinburgh South West (Mr Darling) did were beneficial in trying to maintain a fragile economic situation.
Having said that, we cannot continue to increase debt year on year at the rate we were in 2009, 2010 and 2011 or we will overwhelm the British economy. The worst thing for our constituents is not paying tax; it is paying tax to pay interest on money being borrowed from someone else. The Government had to make a judgment, and their judgment was to set out an economic policy gradually to reduce our debt over five to seven years to a level that, once it tops off in 2016-17, can then start to be brought back to the level of more normal years, which is about 40% of GDP. In an environment in which the world was growing rapidly, that would be easier. In an environment in which the eurozone is blowing up, and there are high fuel and food prices, it becomes much more difficult. That is part of the problem for the Government in the short term. It is events—it is what is happening around the world.
There is nothing surprising about where the Government are. Sticking with the policy is perfectly sensible, but things do not go in a straight line in economics, and there will be OBR forecasts and Budgets where the figures for debt increase, and some where they decrease. It will depend to some extent on world events.
Charlie Elphicke
I absolutely agree. The saviour has been the low interest rates, which have meant that they are less squeezed than they would have been had Labour been in power.
Charlie Elphicke
No, because I have taken three interventions, which is more than generous.
Finally, it is not the job of Government to create jobs. Jobs, wealth and prosperity are created by business. A Government who want higher living standards and economic growth are a Government who will back business to the hilt and ensure that it has a stable environment in which jobs can be created. I welcome the enterprise zones that have been created, the incentives for business to grow and create job opportunities and the measures to help business announced by the Chancellor in the autumn statement. I welcome all the reductions in corporation tax, the cut in the small companies rate, the extension of loan guarantees, the simplification of health and safety laws, the investment in science and apprenticeships and the promotion of exports through major trade missions. That is what we should be doing. We need an activist Government who are concerned with active growth and making this country this great again after 13 years in which Labour took us back to the edge of bankruptcy, just as it did in the 1970s. We want to take this country forward to better growth and living standards and better prosperity and business success across the world.
Hugh Bayley (York Central) (Lab)
I am somewhat surprised by how few Members on the Government Benches seem to have realised that the Government’s policy has changed. They have spent 18 months reading out the brief from their Whips Office—or wherever it comes from—and complaining about the legacy of high debt which they inherited when they came to power. However, I say to the hon. Member for Broxtowe (Anna Soubry) that the national debt at the time of the general election was £760 billion. In the first year of the coalition Government, it rose to £905 billion. In the middle of a financial crisis, the coalition Government are doing what the Labour Government did in the middle of a financial crisis. When in opposition, they argued against the private finance initiative.
Hugh Bayley
No; I will make my case, if I may.
In opposition, the Government argued against the PFI, but their investment stimulus, which was announced yesterday—I was one of those who applauded it—is going to be paid for by the same sort of off-balance-sheet private finance as financed the PFI.
Yesterday, I ran the risk of incurring anger from my colleagues by welcoming the Chancellor’s plan B. It is a small plan B, but it is £5 billion of Government money backed up by further off-balance-sheet money from the private sector to stimulate the economy. The Chancellor does not call it a plan B. That would be embarrassing, as he has spent 18 months telling us that there is no alternative to plan A: savage cuts in public investment and infrastructure. But now it is plain for all to see that there has been a U-turn.
I congratulate the Chancellor on having the courage to start to do what is right and necessary for the economy. We heard about the U-turn in relation to a road in Nottinghamshire that was cancelled by the coalition Government and has now been reinstated. The Access York scheme—a £22 million improvement to the city’s park-and-ride system—is another good illustration. It was approved by the previous Labour Government, stopped by the coalition one month after the general election, and has now been reinstated, and I thank the coalition Government for that. In the short term, that green transport system will create construction jobs in my constituency, and in the longer term it will attract more visitors to York who will spend money in the shops and the visitor economy.
Nobody so far has mentioned the situation of the NHS. The Government promised that they would not cut NHS spending in real terms. I asked the Library to look at the figures for my PCT area, where many services are being cut. Gastric band surgery for the obese is not available on the same terms in North Yorkshire and York as in neighbouring areas. Facet joint injections for back pain are available elsewhere but not in York. Assisted fertility is available in neighbouring health authority areas, but not in York.
In the last year of the Labour Government, the increase to the PCT budget was 5.8%, which, with inflation running at 3.7%, was a net increase of 2.1%. In the first year of the coalition Government, the local PCT budget was increased by 2.2% but, with RPI running at 4%, that was a 1.8% cut in real terms. Nationally, the figures tell a similar story. In 2011-12, the real-terms cut in NHS funding is 0.56% on the previous year, and in 2012-13 it is predicted to be 0.33%. The Government gave a pledge not to cut NHS funding, and with inflation running at higher levels than they were anticipating, it is necessary for the Treasury to increase NHS funding to meet that pledge. I ask the Minister to respond to that point particularly.
Toby Perkins
What my hon. Friend says about the NHS is absolutely right, but there was also a pledge not to have any major reorganisations of the NHS. In Chesterfield, alongside the financial pressures that the NHS would have been under anyway, additional resources are being spent on reorganisation rather than on patient care. That is the other major problem that the NHS is facing.
Hugh Bayley
My hon. Friend is absolutely right. The reason why, under a Labour Government, there was a 2% real-terms increase in the NHS budget is that the cost of an ageing population and the new medical technologies introduced to the NHS is roughly 2% a year. A 2% real-terms increase, therefore, is a standstill in the ability to treat patients, but adding in a costly health service reorganisation and a real-terms cut in the budget means a savage cut in the availability of care for NHS patients.
Damian Hinds (East Hampshire) (Con)
At what point was the £20 billion shortfall in NHS financing spotted?
Hugh Bayley
The hon. Gentleman should simply look at the record of the 13 years when Labour was in power. The real budget of the NHS almost doubled, but now we are seeing its real spending power being reduced, which his party promised that it would not cut.
I want to speak briefly about help for small and medium-sized enterprises. Autohorn, a successful York business, runs the Europcar franchise and other car leasing and care hire businesses in my constituency, employing 60 staff. A couple of months ago, one of the high street banks withdrew a credit line worth £750,000, which financed roughly a sixth of the company’s fleet. I wrote to the Minister with responsibility for small businesses and asked what he could do to help. He was sympathetic, but offered no practical help. I went to the bank, and I am pleased to say that it has renegotiated with the company and reinstated the credit line. The jobs in that business are now safe, and I hope that it will expand and take on more people. None the less, I say to the Government, “The rhetoric is right, but please, you must do more to back up your rhetoric.” They should make the banks do what they say they are doing and extend credit to successful businesses.
There is no time for me to say what I intended to say about the debt, but let me just say this: there is no argument between our parties about the need to reduce the deficit, but there is a sharp difference about how to do it. The Government’s plan A has made a difficult situation worse over the past 18 months. By cutting growth they have cut tax revenues, and by driving up unemployment they have increased spending. It is time for them to change their policy.