UK Economy

Ian Blackford Excerpts

Wednesday 29th June 2016 Commons Chamber

[Mr Osborne]

I fought passionately to remain in the European Union, not because I was a massive fan of the EU with all its problems but because I thought it was better for Britain to be in the EU than outside it, but I absolutely accept the result of the referendum. I do not think it is credible, in the days after the result, to say, “The people got it wrong. We need to elect a new people.” In our democracy, we need to respect the result that the British people have given us and, as representatives of the population in this Parliament, our obligation is now to get on and deliver what they have asked us to deliver, to the best of our ability.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

The Chancellor is being very candid in his remarks this afternoon. He has referred to the situation with the banks, and I have noticed that Goldman Sachs has downgraded its profit forecast for the UK banking sector by €10 billion over the next two years. Will he reflect on what that means for the UK economy and for tax receipts? Will he also reflect on the importance that is placed on getting out of our banking holdings over time? Does he not think that this is a self-induced problem that has been created by the Conservative Government’s manifesto commitments? Does he not regret the fact that it is the Conservative party, through its internal dispute, that has got us into this terrible mess in the first place?

[Mr Osborne]

The short answer to that is: no I do not. I do not think that it is wrong, in a democracy, to ask the people about very big constitutional issues. In all the years that I have been a Member of Parliament—and, indeed, before that—the question of our relationship with the EU has hung over our political system and our body politic. I am surprised to hear a Scottish nationalist raise doubts about the effectiveness of referendums, but there we are.

We have well thought-through contingency plans and they remain in place in case financial conditions should deteriorate. The market should not doubt our resolve. We are absolutely determined that, unlike eight years ago, Britain’s financial system will help our country to deal with any shocks and dampen them, rather than contributing to those shocks or making them worse. As the shadow Chancellor requested earlier, I shall of course keep the House informed. However, we have to accept that some investment and hiring decisions will continue to be paused as firms adjust to the uncertainty caused by the referendum. There is already survey evidence and anecdotal evidence of this. So the second part of our plan—the first part involves financial stability—has to be to resolve that uncertainty as quickly as is practical in a democratic system.

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[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to follow my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin). It is always a fantastic honour to listen to the eloquence of one of my oldest friends in politics.

We have a responsibility to act in a way that does not talk down the economy, and collectively to support measures to create financial stability leading to sustainable economic growth. I commend the Bank of England for seeking to reassure the financial markets that it will, among other things, take the necessary measures to sustain liquidity. However, when the Prime Minister says in this House, as he did on Monday, that there has been an “adjustment” in the financial markets, his comments fly in the face of reality.

Over the past week, the pound has fallen by more than 10% against the US dollar. The FTSE 250, which is more representative of the UK economy than the FTSE 100, is down by 12% in a week. When we look behind these indices, we see the severity of the declines in a number of economically sensitive sectors. Look at the banks: RBS is down by 28%; Barclays is down by 27%; and Lloyds is down by 22% over the past week. The house builder Barratt Developments is down by 32% over the past week.

Those astonishing falls clearly represent a crisis of investor confidence in our economy and indicate that investors anticipate a significant shift on growth in the UK economy. Indeed, I note this afternoon that consensus expectations for GDP growth in the UK next year have fallen from 2.1% to 0.4%. This is no “adjustment”, as the Prime Minister called it; it is a significant shift in investor perception of UK plc, and it is driven by a failure of leadership by the Prime Minister and his Government.

Let us make no mistake: this is a crisis made in Westminster by Westminster, and it needs our full attention if we are to respond appropriately to the challenges we face. The challenge is brought home to us when we see that Moody’s has today changed its outlook on 12 UK banks and building societies, and downgraded its outlook on 52 UK sub-sovereigns from stable to negative.

The Chancellor talked of an emergency budget and additional austerity measures as a result of Brexit. It is the Government’s responsibility to deliver financial stability, not to kick the legs from under that stability and threaten the jobs and livelihoods of our citizens, but that is precisely what this Government have done. These are no abstract matters—[Interruption.] It might be better if the Front-Bench team paid some attention rather than talking to each other, because we are discussing the livelihoods of people in this country and it would be respectful to the House if Front Benchers listened to the debate.

The fall in the financial markets affects the pension funds of everyone investing in this country. The stock market adjusts to future expectations of profits and dividend growth, and that is what should concern us. Goldman Sachs has downgraded UK banks and cut its profit forecast for the sector by a whopping €10 billion. Just think about that—a Tory row over Europe leads to banking profits in the UK being decimated. Have the Prime Minister and his Government no shame about what they have caused? It is, as someone might say, another fine mess they have got us into.

When the Government come to this House and call for support to change the future payout to pensioners of the British Steel pension scheme, it is, in part, through a consideration of future prospects for asset growth in that pension scheme. Thousands of British Steel workers and pensioners face a very real threat to the value of their pensions, and the events of the last few days can only exacerbate it. The threat to the British Steel pension scheme is newsworthy and current.

As the consultation response from the Institute and Faculty of Actuaries suggests, there is a much wider threat to pension schemes, but this self-induced run on the markets has made that threat greater. We need to put it in the context of the economic circumstances that we face. The fallout from the financial crisis of 2007-08 is still with us. We are burdened with eye-watering levels of debt. Wages have barely risen in real terms since the financial crisis. Productivity has flatlined and prospects for economic growth had already been cut before we ran into the backwash of the referendum. What was required was a focus on driving investment into our economy through innovation and by driving up productivity growth, as a result delivering higher living standards.

The UK Government have engineered, at the very least, an economic setback of their own making. Why? A fallout over Europe within the Tory party has caused domestic and foreign investors to take fright, and not just at prospects for growth and stability in the UK because this will have a knock-on effect on our neighbours in Europe and elsewhere. The Chancellor has talked about further austerity, so yet again the poorest and weakest in our society will be asked to pay the price for a lack of leadership from the UK Tory Government.

When we look back over the last few years, we see rising inequality, which has been driven by the Government’s fiscal and monetary policy decisions. There has been a lack of appropriate measures to deliver sustainable economic growth, with too narrow a focus on quantitative easing, rather than considering measures that could have led to better outcomes. Where is the Government analysis of the quantitative easing programme? As of today, £375 billion has been invested in an asset purchase scheme. Where are the additional measures to stimulate growth and investment?

We know that the Government and those on the Brexit side had no plan for a leave vote. The Chancellor went into hiding. Well, let us hear it now. The financial markets have given their judgment on the referendum decision. Where is the Government’s response, beyond the Prime Minister calling the market declines an “adjustment”? We need to build confidence and stability, so where is the Government plan to do that? Let the country hear it. I will happily give way to any of the Government Front-Bench team if they want to intervene. So far, we have heard absolutely nothing that would deliver confidence to the financial markets.

We know that there is no plan. The Prime Minister and the Chancellor are like a pair of rabbits caught in the headlights, transfixed and clueless. The Prime Minister was sent packing from the meeting of the Council of Ministers—he is yesterday’s man in Europe and yesterday’s man at home. The Prime Minister has got us into this mess, but he has no plan to get us out. Someone else is going to have to pick up the pieces and deal with the economic uncertainty. Thank goodness that we in Scotland have Nicola Sturgeon and the Scottish Government, who are showing effective leadership. We are optimistic for our country. At the 2015 general election campaign, and in every Budget since, the SNP has set out a credible alternative to austerity that would see us invest in public services and kick-start growth throughout the UK.

People in this country and elsewhere have reflected on the leadership that Nicola Sturgeon has shown over the last few days. We need the European Union to recognise the voice of Scotland and the fact that Scotland voted to remain in the European Union. Scotland is an internationalist country that is open for business. The vote in the Scottish Parliament yesterday showed a unity of purpose, giving the Scottish Government a mandate to negotiate with the European Union to protect the interests of the Scottish people and to make sure we retain access to the single market, which is so important to the security of jobs, investment and growth.

Let me say to the people of Scotland and to those in this Chamber that Scotland in Europe will be a beacon of hope, bringing jobs and investment to this country. People in London who are concerned about operating in financial services can come to Scotland—to a country that sees itself as part of a European destiny, that will be very much focused on jobs and growth, and that will deliver for the people of Scotland.

[Danny Kinahan (South Antrim) (UUP)]

Given all the hon. Gentleman’s passion for staying in Europe, and for all of us in the Union working with each other and with Ireland, does he agree that we need to find a way of establishing how Scotland fits into the Union and how all the parts of the United Kingdom can work together so that we can move forward?

[Ian Blackford]

Of course, those of us on the Opposition Benches will work to ensure that we can rescue something out of the carnage of the vote that took place throughout the UK.

The people of Scotland and Northern Ireland voted to remain in the European Union. Of course we want to do our best for all the people of the UK, but our primary responsibility is to protect the people of Scotland. That is why we need to extend the hand of friendship to the people of the European Union and to say to them, “Please stand by us. We have stood by you.” Let us make sure that Scotland remains in the European Union so that we can deliver hope, prosperity and jobs for our people.

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[Greg Hands]

I am going to talk a little more about the debate.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a very powerful speech, referring to his very strong business background. Like me, he strongly supported the remain campaign. He made strong points about business and the importance of making sure we secure business and trade in our new arrangements.

The hon. Member for Ilford North (Wes Streeting) said he is one of the youngest Members of this House and that he had not been alive when the country had been outside the European Union, which is food for thought. All the years he has been alive, the country has been in the European Union. He was right to say that if an economy goes wrong, it is very likely to be the poor who suffer most. That would also apply in London, which we both represent. He issued a warning to the skeleton Front Bench of his own party. It is not appropriate for me to reflect too much on that, but I am sure his points landed with those he wished to make them to.

My hon. Friend the Member for Bexhill and Battle (Huw Merriman) made a strong contribution. He made an interesting observation at the beginning of it, when he said he hosted debates with high-quality speakers in his constituency and came away thinking that they did not seem to sway voters either way. He also said that the economy will bounce back if we act with resolve, which was an important point.

We then heard three speeches from Scottish National party Members—the hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin), for Ross, Skye and Lochaber (Ian Blackford) and for North East Fife (Stephen Gethins)—and I have taken a couple of interventions from them. They made impassioned speeches and some pretty familiar points.

[Ian Blackford]

Will the Minister give way?

[Greg Hands]

No, I will carry on.

The result may not have been what some of us wanted, hoped for or even expected, but that does not mean that the Government were unprepared for it. In the past six years, we have been working hard to bring our economy back from the brink and get our public finances back under control. We said we needed to fix the roof for any economic storms ahead, and that is what we have done. We have brought down the deficit, and we have steady growth, record employment and a resilient financial system, which we spent the past six years strengthening.

We have done the analysis on what leaving the EU might mean, and considered the potential impacts on our economy in both the short and the long term. There was general consensus in the House a fortnight ago on the risks we might face, so hon. Members recognise that it will not be plain sailing and that there are challenges ahead, but thanks to the measures we have taken over the past six years our economy is as well prepared as it could be to face whatever comes our way.

We anticipated that there would be an immediate impact on the value of our currency and the stability of the financial markets. The Treasury, the Bank of England and the Financial Conduct Authority have extensive contingency plans in place and we are watching the markets closely. Although we have seen volatility, the markets nevertheless continue to function effectively.

The Prudential Regulation Authority has worked closely with major financial institutions to prepare extensively for the consequences of a vote to leave. The Bank of England stress tests show that UK banks have enough capital and liquidity reserves to withstand a scenario more severe than the country currently faces. Thanks to our work to strengthen our financial stability, banks in the UK have raised more than £130 billion of additional capital in the past six years, and have more than £600 billion in liquid assets to ensure that they can keep lending to UK businesses and households during challenging times. The Bank of England can provide more than £250 billion of additional funds to support the banks and the smooth functioning of the markets. It can also provide liquidity in foreign currency if required. The authorities have all the necessary tools in place to protect financial stability. They are monitoring developments closely and will not hesitate to take further measures as required.

As we embark upon the renegotiation of our relationship with the EU, I reiterate the reassurances of the Prime Minister that the result does not mean that everything changes overnight. For British subjects living in the EU and EU citizens living in this country, there will be no immediate changes. People can still travel across the EU, businesses can trade as they did and our services can be sold as before.

The Prime Minister has been clear that there will be no immediate triggering of article 50, the procedure by which a member state can leave the EU. That gives us time to plan the new arrangements we are seeking with our European friends and neighbours. It also gives the Prime Minister’s successor the opportunity to make any adjustments to economic policy and our public spending, informed by an assessment of our economic situation from the independent Office for Budget Responsibility this autumn. In the meantime, we will continue to work hard to maintain the fiscal stability we have always worked so hard to deliver. A new unit will be set up in Whitehall bringing together experts from across the civil service, and in answer to the right hon. Member for Birmingham, Hodge Hill I can say that it will extend right across Whitehall, including all Departments likely to be affected, and that it will be given the resources it needs.