Budget Resolutions and Economic Situation

Debate between John Healey and Brooks Newmark

Wednesday 18th March 2015 Commons Chamber

[John Healey (Wentworth and Dearne) (Lab)]

It is a pleasure to follow the hon. Member for Fareham (Mr Hoban) in his last speech to the House. Like you, Madam Deputy Speaker, I faced him through the long hours of many long Finance Bills when he was on the shadow Treasury Front Bench. His reflective and loyal speech this afternoon was characteristic of the way he has served his party and Government. It is a shame he is not on the Front Bench this afternoon, because perhaps then he would not be leaving the House come Dissolution.

However, the hon. Gentleman has a problem, because, as the Leader of the Opposition said, this is a Budget that cannot be believed. I shall pick just two things that the Chancellor said during his Budget statement. He said that living standards were higher than when they entered office and that our economy was fundamentally stronger than it was five years ago. The gap has never been greater between their rhetoric and the everyday reality of people’s lives. I want to pursue two arguments that expose some of the rhetoric we heard from the Chancellor and some of the reasons why their long-term economic plan is failing and why the structural and cyclical weakness of our economy remains five years after they entered office.

There are two principal arguments. First, the Government’s economic policy directly choked off the recovery under way at the last election in May 2010, leading to the slowest economic recovery from recession in this country for 100 years. Secondly, the economic recovery is unbalanced, unequal and unsustainable. The structural weaknesses are still there, despite the rhetoric from the Chancellor—the rabbits coming out of the hat—and the underlying failures of the long-term economic plan are unchanged by this Budget.

[Mr Brooks Newmark (Braintree) (Con)]

I am listening carefully to the right hon. Gentleman, as are many Members opposite. Would he at least acknowledge that running a deficit of more than 10% was unsustainable? It might have fuelled some growth in the short term, but in the long term running a deficit in excess of 10% was not sustainable, and something had to be done about it.

[John Healey]

There are not many Members opposite, as the hon. Gentleman says. [Interruption.] He will remember, however, that after 10 years of the last Labour Government, before the global financial crisis and recession hit, borrowing and debt were lower than when we entered office. We have a deficit to deal with because of how the Government intervened to pull the country through that deep recession, to keep people in their homes and jobs and to keep firms in business. Of course there is a deficit, and of course it needs to be dealt with. The difference between the parties is that we will deal with it in a more balanced way. There is a choice. We can do it with tax rises that are fair, spending cuts and efficiencies. We will do what we need to do in a more balanced way.

--- Later in debate ---

[Mr Newmark]

The hon. Gentleman makes a good point. In introducing things such as the increased investment allowance—it was £25,000 and went up to £250,000—the Government have done a lot to help to turbo-charge investment. I shall come to the rate of investment and investment growth a little later in my speech.

The important thing was that we dealt with the deficit up front and brought it down by more than 50%. It is now trailing at around 5%. Do we have further to go? Absolutely, but bringing it down from 10.2% was very important.

The important thing about bringing down the deficit and dealing with the structural deficit was bringing back market confidence. Doing so allowed us to maintain low interest rates. Confidence means low interest rates. It is not just a matter of the Bank of England’s confidence in setting them—there is a worldwide market out there. Low interest rates mean low mortgage rates and low business rates for small businesses. All those things were important in helping to create growth in the UK.

[John Healey]

When the hon. Gentleman intervened during my speech, I made it clear that the deficit was caused after the global financial crisis by the Government stepping in to help the country through. That is what Governments can do. I said clearly that that caused the deficit and we had to deal with it. Any Government would have done so. What counts is how they deal with it. Will he remind us what Labour’s plan in the 2010 election was, as set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling), the Chancellor at the time? Our plan would have reduced the deficit faster and further than the Chancellor has managed in the past five years.

[Mr Newmark]

I do not want to use the expression ceteris paribus—all things being equal—but the Chancellor at that time was probably right. Unfortunately, he too would have faced a euro crisis, and things would have been very different from what he originally projected, just as things were different for my right hon. Friend the Chancellor when he made his original prediction.