Section 5 of the European Communities (Amendment) Act 1993

Debate between Ian Swales and Jacob Rees-Mogg

Wednesday 30th April 2014 Commons Chamber

[Jacob Rees-Mogg]

I think that it is an unfortunate concurrence of atoms. If we had not had a statement earlier, it would have been possible to fit in both, and that is how things go at the end of a Session. I am not so cynical as to think that this could possibly have been planned.

I want to answer immediately the point about savings made by the hon. Member for Birmingham, Ladywood (Shabana Mahmood). In all that she said on savings, she missed the reclassification of savings that the Office for National Statistics has just introduced. It has roughly doubled our savings rate, because it has reclassified the amounts that private companies put into pension funds as saving rather than as expenditure. That has transformed our savings rate, and therefore the UK economy has had a much higher savings rate than the figures have captured for many years. We should be rather pleased with the savings rate that we have and that we continue to have. Her point on savings, therefore, is, regrettably, fundamentally misfounded.

I want to come on to what underlies this whole debate. People with long memories will be aware that the Government—the British nation—had an opt-out of only stage 3 of monetary union. They did not have an opt-out from the earlier stages, and that included the convergence criteria to be ready to join the euro should that be the wish of the British people at any stage. These documents are part of the convergence criteria to show that we are making headway towards the requirements set out by the European Union under a number of agreements, the latest of which was in 2011, which basically ask for a deficit to be no more than 3% and for the national debt to be no more than 60%. It is about meeting those convergence criteria so that we could if we wished join the euro. It is important to bear that in mind. I am glad about the way the Government have approached this. Had they decided to prepare a whole new set of papers, devoting a great deal of energy and resources on the matter, as the previous Government did with their eurozone entry team, which cost millions of pounds and went on running for years, they would be buying into stages 1 and 2 of convergence for entering the euro. By simply sending the rather splendidly recycled—not just 75% but 100% of the fibre in this document has been recycled—to the European Union, it shows our deep suspicion of the whole process. In the reading of the documents, I could find only two references to performance against EU targets and convergence: on page 22, which runs to a mere three lines, and in the chapter headed “Excessive deficit procedure” on page 53.

I am pleased that the Government are taking an approach of saying, “This is what we understand is happening with the British economy. You, the European Commission, can have it, look at it and chew it over, but we are not running our economic policy in accordance with the convergence criteria.” I was reassured by the Minister’s comments that our policy is not determined by the requirements of convergence, and thank heavens for that. The convergence criteria have been at the heart of the ruination of European economies. There has been one crucial thing that the Government have been able to do since 2010, which the previous Government started, and that is to run a loose monetary policy with a tight fiscal policy. That has ensured that we have been able to get the deficit down without crunching the economy to pieces and without running the risk of a deflationary and elongated depression. That is possible only because we have not been aiming to meet the convergence criteria in the midst of a credit crunch/ depression. We have been able to set our own policy because we have had our own currency and therefore have not been trying to maintain the exchange rate at any particular level. It is notable that, throughout this process, the exchange rate has acted as one of the crucial automatic stabilisers for the economy. In 2009, the sterling-dollar rate bottomed at $1.35 and is now above $1.65, and that has acted as an automatic stabiliser on monetary policy during the process of this downturn—all of which has been dependent on our having our own currency, and has allowed both this Government and the previous one to be tighter on the fiscal side than would otherwise have been possible. It has avoided the absolute disaster affecting the eurozone countries, of having a tight monetary policy and a tight fiscal policy at the same point, which has led, in some countries, to riots.

I am broadly reassured, but there are inevitably some concerns. As I have mentioned, this is about meeting the convergence criteria that allow us to enter the euro. The European Union has no specific enforcement powers, but there are certain commitments that we have made. We are obliged, as are other EU member states not in the euro, to submit a convergence programme focused on the national fiscal policy. From 2011, EU legislation on economic governance introduced a new obligation on member states, including the United Kingdom, to take due account of EU guidance issued to them in the development of their economic, employment and budgetary policies before taking key decisions on their national budgets for the succeeding years, and progress will be monitored by the Commission.

[Ian Swales]

I thank the hon. Gentleman for giving way, and he is making a characteristically interesting speech. Presumably one of the enforcement options open to the EU if we do not meet the criteria is not to allow us to join the euro. Will he enlighten us on whether, through his studies, he has come across any other enforcement procedures that might be brought into play if we do not meet the convergence criteria?

[Jacob Rees-Mogg]

It is always difficult to know what action can be taken until action has been taken and until the European Court of Justice has adjudicated on whether that action is legitimate. Obviously, the hon. Gentleman’s point that we could be prevented from joining the euro is brilliant and I am impressed that the Liberal Democrats are so keen to prevent us from joining the euro that they would like legal action to be brought by the European Union to prevent that.

My warning is not so much that I can see a specific threat coming down the track, as the hon. Member for Birmingham, Ladywood said. There were a lot of tracks in the hon. Lady’s speech, and I wondered whether she was confused with Monday’s debate about the Government’s production of a lot of extra track in one direction or another. There is always a problem if Governments commit themselves to things that they have no intention of doing. At some later date a body comes back and says, “Actually, you agreed in 2011 that the European Commission would have the right to challenge you on how you were developing your fiscal and employment policies. That is not being done, so we want you to put your house in order.” Then we reach the question of what action can be taken to enforce that.

It is worth concluding on the glorious issue of convergence simply by saying that we are so lucky that we are not converging and that the Government have managed to make policy in this country so much more successfully than our continental friends. For example, the EUROSTAT figures—I shall cite a European body, not because I want to but for the sake of consistency, as similar figures are used across the areas covered—show that in 2013 the UK economy grew by 1.7% against 0.1% growth in the EU as a whole and 0.4% contraction in the eurozone. According to our own figures from the Office for National Statistics, we are now, according to the quarterly figures, growing almost as fast as China at an annualised rate, which is very encouraging. I never thought, even with my confidence in the Chancellor and his team in the Treasury, that we would manage to achieve near-Chinese rates of growth under this Government—emerging-market levels. We also have much lower unemployment than our continental cousins, and that applies not just to adult unemployment but, most importantly, to youth unemployment.

Let us hope that we do not converge but continue to diverge from the failures that the eurozone has inflicted on itself, to maintain our independent economic policy, to have an economic policy that thrives and succeeds because Her Majesty’s Government know what they are doing, unlike their predecessor, and can therefore boldly and with confidence send these statements to the European Commission and say to Señor Barroso and all the rest of them, “If only you had the sense to do what my right hon. Friend the Chancellor of the Exchequer is doing, you, too, might grow as well.”

Finance (No. 2) Bill

Debate between Ian Swales and Jacob Rees-Mogg

Tuesday 1st April 2014 Commons Chamber

[Jacob Rees-Mogg]

The calculation from the removal of exchange controls is not one that I know or would be able to make. The effect of their removal has been to create a much larger economy for the United Kingdom, so we are talking about 37% of a larger pie rather than getting a higher rate in a closed economy. However, it is worth bearing in mind that in the years before exchange controls were lifted in 1979 we still were not getting a tax take of more than 38% of the economy. The series goes back longer than the abolition of exchange controls.

I part company from the Government to some degree on the question of tax avoidance and tax evasion. It is measurably important not to elide the two. Tax avoidance is perfectly legal—indeed, the Government come up with schemes in every Budget to encourage it. One example is saving for pensions—that is tax avoidance on people’s income. ISAs are a form of tax avoidance, as is duty free. In the Budget and the Finance Bill there are schemes for investing in films and television programmes that actively encourage tax avoidance. Such schemes become part of Government policy for growing the economy.

Governments then get very upset when people use the tax avoidance schemes, which the Government themselves have put into legislation, for purposes that the Government had not thought of. That strikes me as a fault of the legislative process and an incompetence of the legislators—I am sorry to say, Mr Deputy Speaker, that it is our fault—for allowing such loopholes. It is not the fault of the taxpayer for using them. Any sensible, intelligent taxpayer will pay the minimum amount of tax that is legally required. To elide avoidance and evasion is, I think, against the rule of law: it undermines the rule of law by pretending that something that is innocent is nefarious.

It is important to crack down on tax evasion, which is rank criminality, but the Government should not take excessive measures against that which is legal. Instead, they should write simple tax law because, to go back to the point I was making, Governments manage regularly to raise 37% of GDP in taxation almost regardless of the taxes they levy—they change a tax here and a tax there, but still get roughly 37% of GDP. Simple tax laws can probably get us to that level without the need for complex anti-avoidance legislation that undermines the rule of law. That is the one part of the Bill about which I have my doubts.

[Ian Swales]

The hon. Gentleman is making a characteristically fascinating speech. Does he agree that the difference between tax evasion and tax avoidance needs to be made very clear? For example, those who pretend to be second-hand car dealers in order to avoid tax are actually evading tax.

Regional Pay

Debate between Ian Swales and Jacob Rees-Mogg

Wednesday 20th June 2012 Commons Chamber

[Jacob Rees-Mogg (North East Somerset) (Con)]

Thank you, Mr Deputy Speaker. I am sorry that you reduced the time limit just before I got up to speak; I will not take it personally.

We have heard that there is no evidence of crowding out, so I thought that I would provide some from Brian Groom’s column in the Financial Times this week. To be fair, I will give both sides of the evidence that he cites, which comes from a man called Henry Overman of the London School of Economics, who found that

“in 2003-07, each extra 100 jobs in the local authority spurred the creation of 50 additional jobs in private sector services, but destroyed 40 jobs in manufacturing.”

Over the longer period of 1999-2007, however, he found that the 100 extra jobs in the local authority destroyed 80 jobs in manufacturing and did not produce any net increase overall through jobs and services. The focus on public service jobs is destroying private sector jobs. I urge Her Majesty’s Government to go much further and to abolish national pay bargaining altogether.

[Ian Swales]

I thank the hon. Gentleman for giving way and I am glad to be giving him an extra minute to speak. We are all familiar with the phenomenon of people connecting two disparate sets of statistics. Can he think of a mechanism by which adding 100 local authority jobs would destroy 80 jobs in manufacturing?

[Jacob Rees-Mogg]

The reason increased employment in the public sector destroys jobs in the private sector is that every public sector job has to be paid for by the private sector. The public sector creates no wealth. It spends wealth that is taxed from the private sector. If it does not come from tax immediately, it comes from delayed taxation through borrowing. That is the connection. Increasing employment in the public sector increases the burden on the private sector and destroys the ability of the private sector to compete globally.

National Referendum on the European Union

Debate between Ian Swales and Jacob Rees-Mogg

Monday 24th October 2011 Commons Chamber

[Jacob Rees-Mogg]

I am grateful to the hon. Gentleman for giving me an extra minute—it is kind of Gloucestershire to give something to Somerset for once. That issue can be dealt with in the legislation. Indeed, we could have two referendums. As it happens, it might make more sense to have the second referendum after the renegotiation is completed.

The fourth point that did not work was that the EU was all or nothing. However, it is already not all or nothing: we already have opt-outs and so forth. There are therefore two remaining points—as those who are good mathematicians will have worked out—that we need to look at. One was that we are dealing with this issue in a crisis and this is therefore the wrong time: “When a man’s house is burning down, you send in the fire brigade.” Quite right. But then, when he wants to hire someone else’s house nearby to find fresh accommodation, they can set the terms of the tenancy. That is the position that we are in with the European Union—a very strong negotiating position, which we should maximise.

We should also note that we cannot solve our financial crisis until we have freed ourselves from the yoke of European regulation. Only this weekend, we have seen that Tesco is going to take on fewer part-time people because of a directive from Brussels. Are we really going to deny our citizens growth because Brussels wants to put a further yoke on them?

[Ian Swales (Redcar) (LD)]

Is my hon. Friend aware that one of Tesco’s most profitable areas is the part of eastern Europe that is in the European Union?