Budget Resolutions and Economic Situation

John Denham Excerpts

Wednesday 20th March 2013 Commons Chamber

[Mr John Denham (Southampton, Itchen) (Lab)]

It is a great pleasure to follow the Chair of the Treasury Committee.

There must have been at least some Government Members who, however much they wanted to cheer publicly, were wondering privately why no progress has been made in the past three years, and why so much of the promise, as set out by the coalition Government, has failed to achieve what they thought it was going to achieve. I have no doubt that three years ago the Chancellor, the Prime Minister and other members of the Cabinet believed that the measures they were planning were going to work. If we are to understand why we have made no progress, despite the fall in the living standards of an average family of £1,200 a year and the loss of public services, we must look not only at the statistics, but understand why things have gone so badly wrong.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Does my right hon. Friend agree that the Chancellor is becoming the Baldrick of British politics? He thinks he has got a cunning plan, but everybody else can see that it is doomed to failure.

[Mr Denham]

There were certainly points in the Chancellor’s speech when he seemed to be living in a completely different world from the one in which I am living. For example, he made a throwaway remark that reforms to the planning system mean that houses are being built, yet there were fewer housing starts last year than at any time over the past few years. It is nonsense to claim something that is patently untrue, which brings me to my central point about the danger in politics and government of believing one’s own rhetoric.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

Will my right hon. Friend give way?

[Mr Denham]

No, because I need to make some progress. In 2010 when the Conservative and Liberal Democrats got together, they agreed on a political strategy that was to blame everything on the previous Labour Government—it was to be their profligacy, their debt and their fault. Never mind that all parties had agreed on Labour’s spending plans right up to the banking crisis; never mind that the banking crisis was global and not national; and never mind that, although the failure of the banks owed a lot to failures in regulation, the Conservative party had consistently called for less regulation. Those facts were not going to get in the way of a clear political strategy of blaming it all on Labour. The political strategy has had some effect—the polls, which people such as Lord Ashcroft tell us are the only glimmer of hope the Conservatives have, tell us that—but the disastrous mistake for Britain is that the Government believe their own rhetoric. They believe that, because the strategy seems to be effective politically, it means it is true and that they should act as though it is true. That is what lies behind the disaster facing the British people.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will my right hon. Friend give way?

[Mr Denham]

No—I would like to make progress.

If the rhetoric were true, the policies pursued by the Government would have worked. If it had been true that all that needed to be done was to get the deficit down as quickly as possible because the problems were simply a matter of overspending, the strategy would have worked. The strategy did not work, because the analysis of what was wrong was fundamentally flawed.

In the first year of the Government, the rhetoric of doom and gloom shattered business and consumer confidence before the first tax increase or the first cut began to bite. It was so important to the Government politically to tell everybody how bad things were going to be that people behaved accordingly. The VAT increase and the cuts then began to bite in the real world. The pessimism deliberately spread by the Government for political reasons began to bite and have an effect—a real reduction in demand.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

The House has great respect for the right hon. Gentleman, but he must remember the situation Europe was in on the date the coalition was formed, the crisis in Greece, and the fears that we would not be in a good position. Some of us have always made it clear that a combination of the outgoing Government, the banks and the international financial situation was the cause of the crisis and warned against it for many years.

[Mr Denham]

I am tempted merely to say, “I rest my case.” Throughout the 2010 election campaign, the right hon. Gentleman and all members of the Liberal Democrats said how disastrous it would be to adopt the policies that they later supported. He makes precisely my point. He adopted a position that was absolutely factually wrong and damaging to the country for the political convenience and advantage of the Liberal Democrats—he sanctioned with his own words what happened later.

The Government’s strategy on cutting too far and too fast was bad enough—it shattered confidence and took demand out of the economy—but it was compounded by catastrophic failures in policy. Because the Government convinced themselves that the only thing that needed to be done was cutting the deficit fast, they abandoned many of the tools available to them to stimulate growth. It was interesting today to hear of a single pot for cities to bid for from the Government who, within two months of coming to office, abolished the regional development agencies and the whole development infrastructure. They recognise, three years later, that that was a disastrous mistake, as Lord Heseltine has told them, but at the time, they did not believe that getting rid of those strategies mattered.

The Government also created massive uncertainty in the wider economy. The truth is that there is no absolute shortage of money that could be used to rebuild the British economy. The cash balances of giant companies are huge, but they will not invest, because there is so little business confidence in Britain as a place for investment.

The responsibility for that goes much wider than the Government, because Conservative and Liberal Democrat Back Benchers have spent three years creating uncertainty about wind power, nuclear power, HS2 and the future of airports policy. For everywhere that business might look to invest in this country, Conservative and Liberal Democrat MPs have, for the narrowest of marginal constituency political interests, conspired to create the maximum business uncertainty. It is therefore unfair to blame all the uncertainty on the Chancellor’s misguided policies. Much of it comes from a misunderstanding by Conservatives and Liberal Democrats of what needs to be done—long-term investment and long-term certainty in Government policy to create investment.

For example, such uncertainty is why investment in renewable energy—the Chancellor mentioned green investment—halved between 2009 and 2011. That is a conscious, clear effect of chaos in Government policy and the narrow interests of Conservatives and Liberal Democrat Back Benchers. For all those reasons, unnecessary damage has been done to investment in our economy.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Will the right hon. Gentleman give way?

[Mr Denham]

I will not give way because my speech is time limited—I would give way if I had more time.

The Chancellor did not mention a number of things in his speech. For example, he did not mention the march of the makers. Whatever happened to that and our desire to build up an advanced manufacturing industry to lead the way in exports? Perhaps the march of the makers was in an early draft of the Budget speech, but last month’s worst industrial output figures for 20 years probably put paid to the idea of mentioning it today.

There are areas of success—the Government have wisely continued the Labour Government’s policies for the motor industry and reaped the rewards for the country as a whole—but, in too many areas, there has been no coherent policy. In my part of the country, the leisure boat industry, including well known global companies such as Sunseeker and Oyster Yachts and many smaller manufacturers, is a small but world-leading industry. To foster such an industry, we need coherence in Government policy, but what do we find? We find that the banks are not lending coherently as they once did to businesses in the luxury yacht and leisure boat industry; that it is hard for dealers to get finance to trade up and down in the second-hand vessels that need to be sold; and that the Home Office makes it impossible for wealthy buyers from Russia, China or elsewhere to get into the country to see the boats on sale at our boat shows. There is a complete lack of interest in vast parts of the Government in successful strategies to promote successful parts of the economy.

My final point is to agree broadly with the Chancellor on one point. He said that

“unless we fire up the aspirations of the British people…we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are.”

I agree with him in this sense: a country in a disastrous economic position such as ours will recover only if there is a shared patriotic commitment to rebuilding our country, and a shared case in which everybody in the country feels that they have a stake and a role, and that they will benefit from success. That is why the millionaires’ tax cut and other divisive policies that have been pursued against the poorest in our country are so damaging. Those policies are not only socially unfair and morally reprehensible, but because they divide our country and make it clear that there is no common cause and nothing to be gained from pulling together, they undermine the effort needed to build a one nation economy that genuinely works for all people in this country.

That is the problem once again. The political rhetoric cannot be faulted, but the policies needed are entirely missing.