Balancing the Public Finances

Jeremy Quin Excerpts

Tuesday 11th July 2017 Westminster Hall

[Jeremy Quin (Horsham) (Con)]

I congratulate my right hon. Friend the Member for Forest of Dean (Mr Harper) on securing this debate. I just wish it was much longer, as do we all.

As my right hon. Friend knows, every morning we are admonished about having a desire to please, but it is a salutary warning. It is too easy to spend other people’s money, particularly when it is future generations’ money we are getting through. I have to take issue with the hon. Member for Islwyn (Chris Evans). He referred to the financial crisis and the stewardship of the economy under Lord Darling. It was a privilege to serve in the Treasury in that period. I have to tell the hon. Gentleman that no one was under any illusions that, no matter how tough the decisions to be made in 2008 and 2009, the real tough decisions and the real grinding work would happen in the 10 years that followed as we sorted out the fundamental problems left to us by the Labour Government.

A lot of good things have been said today, and I intend to speak briefly so that other good things can be said. My hon. Friend the Member for Witney (Robert Courts) referred to the level of debt interest payments and the cost of servicing that debt. We have done an extraordinary job as a Government of reducing the share of our deficit from 10% to 3% of GDP. That has still left us with a monumental debt pile, which we all recognise. My hon. Friend the Member for Witney referred to the cost of servicing that debt pile in terms of transport, but I think of it in terms of policing and schools—just to service that debt is equivalent to the amount of money we are spending on both.

We have to consider what would happen if in some ghastly, dreadful other world this country chose to elect a Government that had less of a reputation for fiscal competence and in international markets. Where would our blended interest rate go from then? If it was to the rates currently endured by Spain, Italy or Australia, we would be looking at an increase in our debt service level of 40%, 80% or 120%.

It does not end there. It does not end on the immediate fiscal impact, with the money having to be raised in tax or added to our debt pile. It would also come in the dynamic effects that would flow—it would come in lower levels of confidence and investment and fewer jobs, meaning lower tax receipts, more borrowing, higher inflation and lower confidence. The cycle goes on.

The Labour manifesto was stuffed full of examples of desiring to please, and the impact on our economy would have been disastrous. Every pound that we borrow now and every pound added to the debt pile is a pound for future generations to pay off with interest. Every pound added to our already high levels of national debt reduces our ability to take sensible measures and make sensible fiscal interventions when the next cyclical downturn happens, as assuredly one day it will. Were we to fail in our generation to rebalance our books, it is the next generation that we would be failing.

[Several hon. Members rose—]

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to be in Westminster Hall with you in the Chair, Ms Ryan. I thank the right hon. Member for Forest of Dean (Mr Harper) for bringing this debate to the House. It is an important debate to have. It highlights the fact that a huge number of Conservative Members live on a different planet from the rest of us. In particular, the speech of the hon. Member for Redditch (Rachel Maclean) did not seem to have any link with reality as I and my constituents know it.

Conservative Members are putting out economic soundbites that could easily have been lifted from the Conservative party’s manifesto, but that is not the lived experience of real people. That is not what is happening or what the just-about-managings are facing. They do not feel like their wages have gone up; they do not feel like the reduction in tax credits is at all helpful. I get that the personal allowance has been raised; that is brilliant and I am pleased that it has happened. I also get that the minimum wage has been raised, but it is not to a level that people can live on. That is the problem. It is still a minimum wage and it is not applicable to younger people in the job market. They may have families and housing costs—the same costs that those of us who are over 25 have—yet they are not worth the same wage as others. I am frustrated by the debate because I cannot believe that Members can spill this nonsense.

When the Chancellor gave the spring Budget statement, he reckoned that inflation would be 2.4% in 2017. Actually, in the 12 months to May, it was sitting at 2.9%. The forecast by the Office for Budget Responsibility for earnings growth in 2017 was 2.6%. If inflation continues to grow at 2.9% and wages continue to grow at 2.6%, there will soon be a serious problem, particularly for households that are struggling with increasing levels of household debt. The Bank of England is concerned about the increase in household debt, which is at its highest since 2008. This is a real problem for families, especially when they will see their real wages eroded.

[Jeremy Quin]

Is the hon. Lady proposing higher Government spending, higher inflation and higher interest rates?

[Kirsty Blackman]

I was literally about to come to that. There are three ways for the Government to increase spending on public services: higher taxes, higher borrowing or higher growth. Those are not my words but those of the Chancellor, yet whenever an Opposition hon. Member suggests increasing public spending or simply not reducing it, Conservative Members say, “Oh, you will have to put up taxes.” As the Chancellor said, there are three ways to increase public spending.

Some of the things that Conservative Members said are a concern. My hon. Friend the Member for Glasgow East (David Linden) said that, according to the Resolution Foundation, 2011-21 will be the worst decade for pay growth for 210 years. That is quite some statistic.

It is interesting that the Government talk about how wonderfully they are doing for young people. The Institute for Fiscal Studies said that those born in the 1980s have by their early 30s accumulated half as much wealth as those who were born in the 1970s. The right hon. Member for Forest of Dean mentioned the IFS as a respected think-tank, and it won an award last night. If we are talking about mortgaging our future and concerns for the future, the lack of wealth accumulation compared with previous generations is a real problem, including for millennials. The way the Government are dealing with it is not working.