The Economy

Jim Shannon Excerpts

Tuesday 6th December 2011 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

There is a paradox at the centre of the autumn statement that makes it self-defeating. The statement was widely touted as a growth Budget, but it is the opposite. The infrastructure plans relate to the medium-term future, on a three to 10-year time scale, but even if they materialise they are not the stimulus that is urgently needed now. Pension funds will certainly not invest in infrastructure unless the Government fully underwrite the risk, in which case it will be registered in the national accounts as a potential increase in expenditure and thus a rise in indebtedness. The paradox is that even to achieve that “smoke and mirrors” impression of growth the Chancellor is such a deficit fetishist that he has been obliged to tell the markets that there is no increase in spending at all, and everything has been funded by cutting spending elsewhere.

Significantly, the Chancellor has chosen to make those cuts by hitting the poorest hardest. Of the £1.2 billion child tax credit and working tax credit savings over the next year, 32%—nearly a third—will come from the poorest fifth but only 6% from the richest fifth, yet the poorest are precisely the segment of our population that is by far the most likely to spend and thus to stimulate growth. Reducing that source of growth in favour of will-o’-the-wisp infrastructure plans in the medium-term future is a pretty silly policy. It is certainly perverse and anti-growth.

The biggest problem facing Britain is not indebtedness, but the lack of aggregate demand. Everyone recognises that except our myopic Chancellor. In the 1930s, John Maynard Keynes said that if we look after unemployment, the budget will look after itself. Exactly the same thing applies today. Christine Lagarde, the head of the International Monetary Fund, warns that if all countries deleverage at the same time, it will be economic suicide. It is absurd to imagine that the markets would not accept some modest loosening of the monetary targets if it was likely to produce a serious prospect of growth; indeed, they would welcome that.

Of course we have constantly heard the Chancellor’s refrain against this argument, his canard that any increase in public expenditure will push up interest rates, threaten the precious triple A rating and cost Britain more, but he does not have to increase public borrowing to kick-start growth. There are two sources of funding that he could draw on at no risk from the markets whatsoever. One is to require the super-rich to make a fair contribution to the Exchequer at a time of crisis for the country. At present they are contributing next to nothing.

In the past year, according to the IFS, the income of the bottom 10th of the population rose by 0.1%. The income of the directors of the top FTSE 100 companies rose by 49%. That is just about 500 times as much. It is time those latter people and the financial and corporate elite of which they are such a part made a fair contribution.

[Jim Shannon (Strangford) (DUP)]

The right hon. Gentleman has clearly identified those at the top of the earnings scale, but at the bottom of the earnings scale are the long-term unemployed. Does he accept the concern of many in the House that the long-term unemployed are not looked after, and that there seems to be little regard for them?