The Economy and Living Standards

Ian C. Lucas Excerpts

Thursday 12th June 2014 Commons Chamber

[Ed Balls]

My hon. Friend’s description of the historical record since 2010 is correct. However, the real issue is why we still have such low investment and why living standards are still falling. The jobs that we are creating are not delivering rising living standards for working people. We have only to look at the election results from a few weeks ago to see the potential challenge to Britain’s place in the world if we do not understand those forces.

[Ian Lucas (Wrexham) (Lab)]

Will my right hon. Friend give way?

[Ed Balls]

In a second.

As I said, the first mistake is to bury our heads in the sand. The second mistake is to attempt to appease those who say that the problem is rapid globalisation and technological change and that therefore the simplest thing to do is to put up trade barriers, stop all migration to Britain and leave the European Union. That is the wrong approach as well.

We all know the depth of concern about immigration in our country, but when the Prime Minister claimed, foolishly, that he would reduce net migration to the tens of thousands, “no ifs, no buts”, he did the cause of sensible and progressive immigration reform no good at all, because he has failed. Net migration has not come down to the tens of thousands; it has stuck stubbornly above 200,000 a year. Even the Chancellor has admitted that the Government will not meet their immigration target. Sending ad vans around the country urging immigrants to go home has only undermined their credibility. That is not the right approach on this issue.

We need clear reform on this matter. We need tough new laws to stop agencies and employers exploiting cheap migrant labour to undercut wages and jobs. We need to strengthen our border controls, not weaken them. We need to ensure that people who come to this country can learn English, and we must provide the support to make that happen. We need fairer rules to make sure that people who come here contribute, cannot claim benefits when they arrive and can more easily be deported if they commit a crime. We need to reform the free movement of labour in Europe through longer transitional controls, stronger employment protection and restrictions on benefits. Those are the things that we have to do. We need reform, not posturing and pandering.

--- Later in debate ---

[Mr Osborne]

Funding for lending is now, of course, skewed away from mortgages—a decision taken by the Governor of the Bank of England and me before Christmas—precisely to start to apply some macro-prudential controls to the housing market. It is heavily skewed towards small business lending in order to address the issue of an impaired banking system, still deeply damaged by what went on six or seven years ago. The good news is that a huge amount of progress has been made since this debate last year and since last year’s Mansion House speech; we are undertaking a major restructuring of the Royal Bank of Scotland and, of course, starting to return Lloyds to the private sector. All of that will help make sure that our financial system is functioning properly and supporting businesses that want to grow and expand.

[Ian Lucas]

Will the Chancellor give way?

[Mr Osborne]

Let me make this final point before taking another intervention.

I want to conclude by mentioning a measure that the shadow Chancellor—or, indeed, the Leader of the Opposition, which is pretty revealing—did not mention at all. I refer to the pensions tax Bill, which will give people real choices about what they do with their defined contribution pension pots, and ensure that they get free and impartial guidance on those choices. We have spent the last three months in consultation, and I have met pension providers and many consumer groups. The consultation closed yesterday, and I will announce next month the details of how the freedoms and the guidance will work. We will set out the implications for defined benefit pensions, too.

We want an economy in which effort is rewarded and those who save are trusted with their pension savings in retirement. We will enshrine all this in law; it heralds a revolution in pensions based on this simple principle: “you earned it; you saved it; now you have control over your own money”. Because it is such a simple principle, because it involves trusting people and because that is popular with people, the Labour Opposition have not got a clue about how to respond to it. From the moment that the Leader of the Opposition rose to give his dismal, pre-scripted reply to the Budget, they have been completely pole-axed by it.

[Ian Lucas]

rose—

[Mr Osborne]

Perhaps the hon. Gentleman will tell me whether he will support this Bill in the Division Lobbies.

[Ian Lucas]

Unlike the right hon. Gentleman, I ran my own business in the 1980s, and I remember the pension mis-selling and how many people lost their life savings as a result of reckless Conservative legislation and a lack of proper advice. This is a very serious matter, so rather than taking cheap political pot shots, will the right hon. Gentleman tell me what exactly will be the nature of the advice given to people about their life savings before he asks them to spend it?

--- Later in debate ---

[Ian Lucas (Wrexham) (Lab)]

In his 2010 Budget, the Chancellor said that he would eliminate the budget deficit by the next general election in 2015. On his own terms, he has failed. In the 2010 Budget, the Chancellor said that net borrowing this year would be £37 billion. The latest forecasts from the Office for Budget Responsibility put the figure at close to £100 billion. That is not the Chancellor’s only failure. In 2010, the Chancellor said that he wanted to create

“a new, balanced economy where we save, invest and export”.—[Official Report, 22 June 2010; Vol. 512, c. 167.]

I have already said how catastrophic the Chancellor’s failure has been for the deficit. However, adjusted for dilapidation and depreciation, non-financial private sector investment has fallen from £43 billion in 2008 to £14 billion in 2013. Less investment means less competitiveness and poorer productivity.

To address the desperate politics of their situation, the Tories and the Liberals have sought to revive the economy through various short-term measures. The funding for lending scheme gave incentives to banks to lend to the mortgage market but did little to help small businesses. The Help to Buy scheme was introduced in the 2013 Budget and has helped to fuel the property market in the south-east in particular.

Short-termism is the byword for this exhausted Government. Far from having a long-term economic plan, they are staggering through to the next general election and thereafter the inevitable rate rise will happen. Their re-election would be catastrophic for home owners who are already suffering a cost of living crisis, even with record low interest rates, and for business, which will have to cope with increased costs.

This Government have not addressed the fundamental weaknesses of this country’s economy since the 1980s: over-reliance on the financial sector and over-concentration of wealth and investment in London and the south-east. When the UK economy was at its strongest, it relied on economic growth right across the UK. We had superb regional institutions, such as Halifax building society, Leeds Permanent and Northern Rock, which were destroyed because of Thatcherite dogma. That helped to create the global financial crisis that has beset this country and caused the problems that we have.

As people from right across the political spectrum, but not this Government, are seeing, we need to develop a system of regional finance to support local business and to invest in local economies. We cannot rely on the white-tied individuals in the City of London to support the industry and the businesses that we need. It is time for regional banks. The Government do not even recognise the problem, so they will never provide the solution. Thank goodness this is their last Queen’s Speech.