HMRC and Google (Settlement)

John McDonnell Excerpts

Monday 25th January 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer to make a statement on the settlement reached between HMRC and Google.

[The Financial Secretary to the Treasury (Mr David Gauke)]

I am proud of the work the Government have done to make our tax system internationally competitive, but also to make sure that those taxes are paid. Time and again, we have taken the lead, domestically and internationally, when it comes to getting international companies to pay their fair share of tax. This is the Government who, working through the G20 and OECD, led on the base erosion and profit shifting project—BEPS—making the international tax rules fit for the 21st century. This is the Government who introduced a diverted profits tax to address the contrived movement of profit out of the country, so that profits from UK activities are taxed in the UK. And this is the Government who have invested heavily in HMRC to strengthen its compliance activity, which has allowed HMRC to secure around £100 billion in additional compliance yield over the last Parliament, including more than £38 billion from big businesses.

We have competitive taxes—that is why we have cut our rate of corporation tax so that it is the lowest in the G7—but we are also making sure those taxes are paid, reforming the international tax rules, introducing a diverted profits tax and investing in HMRC’s capacity. That is action taken by this Government that was sadly lacking in 13 years of Labour rule.

The statement made by Google at the end of last week is solid evidence that companies are changing their models and reviewing their structures because we have strengthened the rules. The statement comes at the conclusion of a lengthy inquiry by HMRC. The tax that individuals and companies pay is collected by HMRC enforcing the law, not politicians who are, rightly, not engaged in or informed of particular cases. I am therefore unable to go into the details of the inquiry’s conclusion beyond those made public at the end of last week. I would point out, however, that the National Audit Office examined the HMRC settlement process in 2012 and examined specific settlements. In all cases, the NAO concluded that HMRC obtained a reasonable settlement for the Exchequer. It also made recommendations on the process by which HMRC should operate when reaching a settlement—recommendations that have been implemented.

It might be helpful to the House if I reiterate what the law is and how the corporation tax rate works, both in the United Kingdom and around the world. The first thing to note is that corporation tax is charged on profits, not on turnover. Equally important, corporation tax is not calculated on the basis of profits attributed to sales in the United Kingdom, but to economic activity and assets located in the United Kingdom. To illustrate my point, imagine a UK company—a car manufacturer, for instance—manufactures its vehicles in the United Kingdom, but half its profits come from sales in the United States. The law as it stands in the UK, as elsewhere, would mean that those profits would be taxed in the United Kingdom, the place of activity, and not the United States, the place of sales.

Ever since 2010, we have been engaged in reforming the tax system both domestically and internationally. Government action is levelling the playing field among businesses, giving worldwide tax authorities more effective tools to tackle aggressive tax planning and helping us to better align the location of taxable profits with the location of economic activity. We are incentivising businesses to do the right thing and come to the table early. Last week’s announcement represents an important result of those actions. I can assure hon. Members that we will continue to tackle the tax risks posed by multinational companies over the coming years, giving the Exchequer more money to fund the public services we all rely on.

[John McDonnell]

I thank the Minister for his statement. However, many will feel it is a display of disrespect to this House that the Chancellor of the Exchequer confirmed the deal with a tweet over the weekend, but has refused to come here today personally to make a statement.

I pay tribute to the former and current Chairs of the Public Accounts Committee, my right hon. Friend the Member for Barking (Dame Margaret Hodge) and my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), as well as all the campaigners for tax justice who have forced this issue on to the agenda. The Chancellor has managed to create an unlikely alliance between myself, the Sun newspaper, the Mayor of London and, according to reports, even No. 10 this morning. All of us think this deal is not the “major success” the Chancellor claimed at the weekend.

The statement offered today has left a number of questions unanswered, which I turn to now. Does the Minister not agree that it is important in our tax system that everybody is treated equally and fairly, whether they be large multibillion-pound corporations or small businesses? In that respect, independent experts have suggested that the effective tax rate faced by Google is now about 3%, despite estimated profits of £1 billion in 2014 alone. Will the Minister confirm whether this is the effective tax rate faced by Google over the past 10 years? In the interests of openness and transparency, will he now publish details of the deal and how it was reached? Will the Minister confirm that Google is not changing the company structures that enabled this avoidance to take place over the past decade? Are the Government not concerned that the agreement creates a precedent for future deals with large technology corporations, such as Facebook and Amazon? Will the Minister assure us that this deal does not undermine international co-operation on tax avoidance, such as the OECD base erosion and profit shifting scheme that the Chancellor once supported?

I also ask the Minister, once more, to halt the programme of HMRC staffing cuts, which is undermining morale and removing the very staff with the collective experience and expertise in collecting these taxes. Finally, will he address a confusion that seems to have arisen? Does he agree with the Chancellor, who thinks the deal was a major success; with the Prime Minister’s Office, which said this morning it was only a step forward; or with the Mayor of London, who described it as derisory?

[Mr Gauke]

I welcome the progress the Government have made over the past six years in ensuring that large companies pay more tax. At a time when we have been cutting the rate of corporation tax, corporation tax receipts, excluding North sea oil, have remained buoyant, partly because we have been more effective than ever at collecting tax from large companies. HMRC’s operational capability in this area has been strengthened—by the way, HMRC staff numbers are going up, not down, this year.

The shadow Chancellor mentioned the 3% figure. That is the very reason I drew attention to how corporation tax is worked out. It is worked out on the basis not of sales profits in a country, but of the economic activity and assets held in a country, and there would be severe dangers to moving in the direction of basing it on sales profits. He is right that every taxpayer should be treated fairly and has to pay the rate determined by the law; there is no lower, special rate for Google or any other taxpayer in this country.

We are collecting more tax, which is evidence of the steps we have taken, in both the BEPS process and the diverted profits tax, forcing companies to change their behaviour. That should be welcomed around the House. The real threat to collecting tax revenue from big businesses would be the anti-business policies of the Labour party.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 19th January 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

Only eight weeks ago the Chancellor promised

“an economic recovery for all, felt in all parts of our nation”—[Official Report, 25 November 2015; Vol. 602, c. 1358.]

On the day that the International Monetary Fund warned about the global economy and called on Government to increase their investment spending—something that Labour Members have consistently called for—will he now reconsider his economic plan, and particularly his investment plans?

[Mr Osborne]

The economic plan has seen employment rise and unemployment fall, and it has meant that for the IMF forecasts that the hon. Gentleman mentions, the UK’s forecast has not been changed and remains one of the strongest among all advanced economies in the world. Perhaps I may gently suggest that the hon. Gentleman might want to change his own economic policy, since in the last week he has called for the return of flying pickets, and said that he wants to ban companies from paying dividends and spend billions of pounds on nuclear submarines without any nuclear missiles. Today he said that he is going to tour the country with the former Greek Finance Minister, Mr Varoufakis, to educate us all about economics—the one thing they have in common is that they have both lost their marbles.

[John McDonnell]

If the Chancellor will not reconsider his investment plans, can he at least appreciate how angry the families of steelworkers in south Wales are this morning? They know that when the bankers’ bonuses were threatened, he immediately shot across to Brussels with an army of lawyers to defend them and that he will jump into a helicopter for a Tory fundraiser. It has taken him four months to lift a finger to save steelworkers’ jobs. Does that not prove that he is actually the bankers’ Chancellor?

[Mr Osborne]

We want a successful financial services industry, because hundreds of thousands of people across the country work in it. We also want a successful manufacturing and steel industry, which is why we have taken action to reduce energy costs—something that had not happened previously and which comes into effect today—and why we are taking action to change procurement rules so that the British Government and others are encouraged to buy British steel. Again, that never happened when the Labour party was in office. We are acting internationally to deal with the dumping of Chinese steel. That is what we are doing. Of course it is an incredibly difficult situation, but as the hon. Gentleman knows, and everyone in this House knows, steel jobs are being lost in every single country in the world at the moment. The question is: what can we do nationally to defend and protect our steel industry? We are doing everything we can. If the hon. Gentleman has constructive suggestions, he should put them to me.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

I am, of course, always happy to listen to representations from my hon. Friend and others, but we have put a substantial sum of taxpayers’ money into compensating the people who lost out through Equitable Life. We have also ensured, through our payment system, that those payments have been made. That is why the scheme is coming to a close.

[John McDonnell (Hayes and Harlington) (Lab)]

The Chancellor bowed to Labour pressure last week and made a U-turn on tax credits. Although tax credits will not be cut in the new year, as planned, the cuts to universal credit are going ahead in full, so he has not reversed his cuts to family incomes, but just delayed them. I am sure that he has looked at the impact of the changes in detail, so will he tell the House how much a single parent with one child who works part time on the so-called national living wage will lose as a result of his planned changes to universal credit?

[Mr Osborne]

First, let me say that I did not feel a huge amount of Labour pressure last week, but I am happy to see the hon. Gentleman at the Dispatch Box. With universal credit, we are introducing a fundamental improvement to our benefits system. Anyone on tax credits, including in the case that he refers to, who is moved on to universal credit by the Department for Work and Pensions from next year will have their cash awards protected.

[John McDonnell]

Let me explain to the Chancellor exactly what a single parent with one child who works part time on the national living wage will lose. They will lose an average of £2,800 a year as a result of the cuts to universal credit. This was not an autumn statement that supported families, but one that punished them because 2.6 million families will still be worse off by £1,600 on average.

Let me offer the Chancellor another way out. If he reversed the tax giveaways to the wealthy that he announced in his summer Budget, he could reverse fully these cuts to family incomes, while still achieving his fiscal mandate. Will he now address the threat to these families?

[Mr Osborne]

Universal credit is a new benefit where it will always pay to work and it will always pay to expand the number of hours that are worked. It will get rid of a complex series of benefits. That will help working families. Let me make this point, since the gang of four on the other side of the House are chuntering away. The hon. Member for Leeds East (Richard Burgon), who is a shadow Treasury Minister, has not bothered to turn up today because he is marching on the Labour party’s headquarters on a Stop the War march. The truth is that until the shadow Treasury team get their act together in this Chamber, their cases will not be listened to seriously.

Spending Review and Autumn Statement

John McDonnell Excerpts

Wednesday 25th November 2015 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

Mr Speaker, like me, you have witnessed many autumn statements and other statements by the Chancellor of the Exchequer. You will know that there is the iron law of Chancellor’s statements: the louder the cheers for the statement on the day, the greater the disappointment by the weekend when the analysis has been done. From what we have heard today, we do not need to wait until the weekend for the statement to fall apart. Over the past five years, the Chancellor has barely set a target that he has not missed or ignored.

Five years ago, the newly elected Chancellor and Prime Minister came to the House and warned us that the dire economic situation that our country faced meant that a five-year programme of austerity measures was needed: job cuts, wage freezes and cuts in public services. But we were promised, specifically by this Chancellor, that by today the deficit would be eliminated and debt would be under control and falling dramatically. People put their trust in that commitment. [Interruption.]

[Mr Speaker]

Order. I said earlier that the Prime Minister would be heard; the shadow Chancellor will be heard too. If people think that they are being clever when they are shouting their heads off, they need not bother to try to ask a question, but they should at least try to have the sense to realise the conflict between the two.

[John McDonnell]

The Prime Minister also assured us that although it was going to be hard and sacrifices had to be made, we were all in it together. Today, five years on, the Chancellor must have some front to come to the House and lecture us about deficit reduction. Today is the day when he was supposed to announce that austerity was over and the deficit was under control. Given what people have heard today, I think that they will feel absolutely betrayed. The reality is that, after five years, the deficit has not been eliminated, and this year it is predicted to be over £70 billion. Instead of taking five years to eliminate the deficit as the Chancellor promised, it is going to take 10. Furthermore, debt-to-GDP will not be the 69% that he promised five years ago. As he said today, it will be 82.5%.

We are now potentially to bequeath to our children a debt of £1.5 trillion. That will be their debt. The Chancellor —[Interruption.] The Chancellor—[Interruption.] The Chancellor continues to miss—

[Mr Speaker]

Order. Both sides are still shouting their heads off. It is very downmarket, it is very low grade, and it is very widely deprecated by the public. How people can think it is legitimate to behave in that way while trying to reconnect with an electorate who are disillusioned with politics is just bizarre. If some people are so unintelligent that they still cannot grasp the point, I pity them.

[John McDonnell]

After five years as Chancellor, with that level of debt, there is no one else for him to blame. Past Governments can be blamed for only so long; there are no more excuses for this Chancellor after five years.

We were also promised that if sacrifices had to be made to tackle the deficit, we were not to worry, because we were all in this together. No, we are not. Eight-five per cent. of the money saved from tax and benefit cuts in the last Parliament came directly out of women’s pockets. Disabled people were hit 18 times harder than anyone else. Moreover, 4.1 million children now live in absolute poverty, an increase of 500,000 since 2009-10. The fiasco over tax credits demonstrated once and for all that we were not in this together. At the same time as the Chancellor was planning to cut tax credits for working families, he cut inheritance taxes for some of the wealthiest families in the country.

When the Chancellor and the Prime Minister were first elected to their current positions, they were attacked for being “posh boys”. I disagreed with that strongly. People do not choose the class that they are born into, or the wealth that they inherit. Nevertheless, if people are fortunate enough to have wealth or good incomes, like all Members of Parliament, the onus is on them—on us—to take particular care when making decisions about the lives of those who are less fortunate than themselves.

What shocked and, indeed, angered many, not just in the House but throughout the country, was the fact that the Chancellor made no attempt to understand the effects of the decision to cut tax credits. For many families, it would have meant a choice between the children being able to go on that school trip like the other children, and having a decent Christmas or a winter coat. Today the Chancellor has been forced into a U-turn on his tax credit cuts, and I congratulate the Members on both sides of the House who have made that happen. I congratulate the Members in the other House as well. I am glad that the Chancellor has listened to Labour, and has seen sense.

As ever with this Chancellor, however, we await further clarification of the details, particularly if the limit to two children remains, and we are aware of the impact on universal credit. It appears that the 14,000 families who are already on universal credit will still suffer the full cut, and that all families who would newly qualify for tax credits in 2018 will suffer the full cut under universal credit; so this is not the full and fair reversal that we pleaded for. Moreover, the Chancellor remains committed to £12 billion of welfare cuts over the course of this Parliament. We know that they will fall on the most vulnerable, the poorest, and those who are just struggling to survive.

Some believe that the Chancellor is using the deficit and austerity to reshape the role of the British state, and that this is some well-thought-through Machiavellian scheme. Well, I do not think that any more. I am convinced that it is sheer economic illiteracy, built on incompetence and poor judgment. Only four weeks ago, the Chancellor brought his charter for fiscal responsibility to the House. An essential part of it was adherence to his welfare cap, which we supported. Today he has broken his own welfare cap, although he said himself when he introduced it last year that breaking it would be a

“failure of public expenditure control”.—[Official Report, 26 March 2014; Vol. 578, c. 380.]

He is condemned on his own terms, in his own language.

The Government are cutting today, and not investing in the future. The Chancellor is putting us all at future risk. I congratulate my right hon. Friend the Member for Leigh (Andy Burnham) on his campaign against policing cuts, which has forced a U-turn, but we do not forget that we face the highest level of risk from terrorist attack in a generation. We have already lost 17,000 police officers as a result of the cuts that have been made under this Government. We know that the first line of intelligence collection, prevention and response consists of the local police officers in the community, so we claim today another Labour gain and victory. However, there are now concerns about the impact of the local council cuts and freezes in expenditure on other emergency services. We fear for the people’s safety as more firefighters’ jobs are cut and fire stations close as a result of today’s settlement.

The Chancellor has announced that he is front-loading part of the additional £8 billion of funding for health. In reality, that will plug only some of the gap in the huge deficits that health trusts are reporting, but the Government are also relying on the finding of £22 billion of unrealistic savings. The extra money seems to be coming from nurses’ training, the public health budget, and other aspects of local authority support for care. That will be a false economy, which will simply cause more burdens to fall on the NHS. All the signs are that we are facing a massive winter crisis in our NHS, and that, yet again, we will have to rely on the professional dedication of its staff. The Health Secretary’s refusal to go to ACAS to settle the junior doctors’ dispute is no way to maintain morale among our NHS professionals.

One of the greatest scandals under this Chancellor has been the attack on social care. Three thousand beds have been lost already and according to the Association of Directors of Adult Social Services, the 2% care precept announced by the Chancellor is not nearly enough to fill the funding gap this Government have created. The result is that some of the most vulnerable people in our society will be at risk and more people will be forced to resort to their local hospital for their care.

We also know much more about the scale of people suffering from mental health problems. We welcome the additional funding today devoted to mental health, but it is no use funding mental health support through the health service when local authority support is being cut as a result of this settlement. More people will be left vulnerable.

In education, the Government claim that schools budgets will be protected, but we fear that the Government will use the new funding formula to take funding away from the pupils who need it most—the most deprived. We will monitor the funding formula carefully to ensure equity.

In today’s statement, the Chancellor has announced that for further education there will be a settlement that restricts it to cash protection. In effect, that means that around the country sixth forms and FE colleges will be under threat and at risk of closure. At a time when the economy is crying out for a skilled, educated workforce, the Government are denying young people access to the local courses they need. On today’s announcements on childcare, we note there is a delay yet again—for another two years. That is another delay following a commitment given.

The Chancellor’s much vaunted pledge on house building is cobbled together from reheated promises from the past. The vast majority have already been announced. The Tories should be judged by their actions, not their words.

The Chancellor’s first act in office was to slash housing investment by 60%. His plans today could still mean 40% less to build the homes we need, compared with the investment programme he inherited from Labour. As a result, house building remains at its lowest peacetime level since the 1920s. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) said this morning,

“if hot air built homes, then conservative ministers would have our housing crisis sorted.”

I worry that the vast majority of young people hoping for a new home will be disappointed by the Chancellor’s failure to deliver. His record on building anything so far does not inspire confidence at all. Over the past year, he has forced himself on to building sites throughout the country to secure a photo with a high-vis jacket. When he did his Bob the Builder speech at the Tory party conference, what he did not tell delegates was that his investment record is abysmal. Only 9% of the projects have started under his infrastructure pipeline in two years. In 2012, he announced a £40 billion guarantees scheme. Three years on, only 9% of that sum has been signed up. In 2011, he announced a £20 billion pensions infrastructure platform but four years on only £1 billion of commitments have been secured. The construction industry is actually shrinking this year and going into recession.

The Chancellor has also failed to invest in skills. The Royal Institution of Chartered Surveyors has said that the UK’s biggest infrastructure programmes could grind to a halt unless the Government adopt new measures to tackle the skills and funding issues. The most ironic cut of all must be the virtual closure of large sections of the Department for Business, Innovation and Skills. There are 146,000 unfilled vacancies due to the lack of skilled workers, so naturally the Government’s solution is to move to effectively close the very Department tasked with improving skill levels.

On the environment, the Government have announced today various measures but let us be clear. Ministers can go to the Paris summit on climate change with the proud record of nearly killing off the UK’s once flourishing solar renewable energy sector. On international aid, let me caution that the international aid budget was supposedly protected, but now it is to be raided for defence spending.

On defence, the Government commissioned an aircraft carrier last year. A few years ago, they at least woke up to the fact that it needed aircraft as well. But the funding for the defence review is to come from £1l billion-worth of cuts, with the inevitable loss of thousands of defence workers’ jobs, whose specialist skills will be lost forever.

Alongside those cuts and many more to help dig himself out of the financial hole he has got himself into, the Chancellor is selling off whatever public assets he can. It is no longer the family silver up for sale—the furniture, fixtures and fittings are now being sold. We know who is the first in line to buy. I never envisaged that when it came to nationalising I would be outdone by a Conservative Chancellor. The only difference between us is that I would like to bring services such as rail back into the ownership of the British people. The Chancellor wants to sell them to the People’s Republic of China. Nationalisation is okay for him as long as it is by any state but ours.

To assist Comrade Osborne in his dealings with his new found comrades, I have brought along Mao’s little red book. Let me quote—[Interruption.]

[Mr Speaker]

Order. I want to hear about the contents of the book.

[John McDonnell]

I think the Chancellor will find this invaluable. [Interruption.]

[Mr Speaker]

Order. The hon. Member for Kingswood (Chris Skidmore) is a historian, if a rather excitable one.

[John McDonnell]

I thought this would help the Chancellor. Mao is rarely quoted in this Chamber. The quote is this—[Interruption.] Behave.

“We must learn to do economic work from all who know how, no matter who they are. We must esteem them as teachers, learning from them respectfully and conscientiously. We must not pretend to know when we do not know.”

I thought it would come in handy for the Chancellor in his new relationship.

I am sure that Tory Back Benchers will be under instruction to shoehorn into their speeches at every opportunity references to the mythical long-term economic plan. What we have been presented with today is not an economic plan but a political fix. It is not a plan when you ridiculously commit yourself to unachievable policies and leave yourself no room for manoeuvre. It is not a plan when you sell off every long-term asset you have for short-term gain. It is not a plan when you leave important industries to go to the wall—as we have seen with steel—and it is not a plan when you cut the support for those in work, leaving working families to rely on food banks. It is not a plan when you force councils up and down the land to close the very services that people depend upon, and it is not a plan when you invest so little in skills and infrastructure that our future is put at risk.

Instead what we have seen today is the launch of a manifesto for the Conservative leadership election. Our long-term economic security is being sacrificed for the benefit of one man’s career. I want to tell both the Home Secretary and the hon. Member for Uxbridge and South Ruislip (Boris Johnson), my neighbour, who has now left the Chamber, not to worry. The economic reality that is emerging in our economy will mean that this will be seen as the apex of the Chancellor’s career.

The hon. Member for Uxbridge and South Ruislip exudes classical references in his speeches. He will recognise in the Chancellor Icarus the boy who flew too close to the sun and burned and crashed. I fear that for the Chancellor it is all downhill from here. Labour Members will do all we can to ensure that he does not take this economy and our country down with him.

In the end this debate is about what sort of society we want to live in. The Government are systematically dismantling all those aspects of our society that make our community worth living in and celebrating. The Chancellor is not just cutting our services today—he is selling off our future.

But there is an alternative. Our alternative is that we will eliminate the deficit but we will do it fairly and effectively. We will do it by ensuring that we end the tax cuts to the rich, that we tackle tax evasion and avoidance, and that we invest to grow. We will grow our economy on the basis of investment in skills and infrastructure. In addition to becoming the financial centre of Europe, under a Labour Government research in science and technology will enable us to become the technology centre of Europe. That means high skills, high investment and high wages. That is what Labour Members are committed to, and that is what we will secure when we return to office.

[Mr Osborne]

So the shadow Chancellor literally stood at the Dispatch Box and read out from Mao’s little red book. And look—it’s his own personal signed copy. The problem is that half the shadow Cabinet have been sent off for re-education. People treat this Labour leadership as a joke, but they are actually a deadly threat to the economic and national security of this country.

The hon. Gentleman comes here to complain that the deficit and the debt are too high, yet he wants to increase the deficit and the debt and to borrow forever. The problem is that he would borrow in the good times, because he says the country can afford it, and borrow in the bad times because the country could not afford not to. He would always be borrowing money. And how would he be able to afford it? He could afford it because, as he says, his policy

“can readily be funded...through printing money”.

He has said that he would end the Bank of England’s control over interest rates, and he calls it the “people’s quantitative easing”. That is called deficit financing, and it has only been tried in Weimar Germany and Zimbabwe. It would lead to the economic ruin of this country. The Labour leadership’s chief adviser on the economy has said that it would cause a sterling crisis, but that the

“sterling crisis would pass very quickly”.

The shadow Chancellor talks about our support for business and defence industries, but he is a threat to the free market of this country. He wants literally to take control of the commanding heights of the economy. His manifesto is all about nationalising industries. He wants to nationalise the whole banking system of this country—as if the last Labour Government did not do a good enough job by nationalising half of it.

The hon. Gentleman gave a speech at the weekend in which he described his policies as “socialism with an iPad”. The problem is that if the socialists built an iPad, it would weigh a ton, it would be impossible to use and no one would design any programmes for it. It would literally be app-less. And then he has the temerity to get up and talk about defence industry jobs and the police. He has spent his entire career attacking the police forces of this country and calling for them to be disarmed. He has sent me a letter saying that I should fund the Security Service, but it turns out that he has been campaigning to disband MI5. He says he is on the side of the British Army, but he has been sharing platforms with the Irish Republican Army. That is the truth.

Let me end by asking this question. Where is the shadow Chancellor going this evening? He is travelling to Waltham Forest to support the new hard-left members of the constituency Labour party there who are trying to deselect the hon. Member for Walthamstow (Stella Creasy). He is addressing a rally called “Keep up the momentum”—[Interruption.] Well, if he was actually in charge of this country, we know where the momentum would be. It would be in one direction: growth down, jobs down, the security of the country destroyed. In the last three months, he and his friends have taken control of one of the great institutions of our political democracy, the Labour party, and they have brought it to its knees. That is their business, frankly, but Conservative Members are going to make sure that they never get their hands on any of the other institutions of this country, so that we can keep our country safe.

The Economy

John McDonnell Excerpts

Wednesday 18th November 2015 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House believes that the Government has failed to deliver on its commitment to stand up for working people; notes that the Government’s existing plans to cut tax credits will cost more than three million working families an average of £1,300 a year from next April; further notes that 4.1 million children now live in absolute poverty, an increase of 500,000 since 2009-10; notes that in 2014 the UK’s current account deficit reached the highest level ever recorded, at 5.1 per cent; notes that 85 per cent of the money saved from tax and benefit changes in the last Parliament came from women; further believes that the Government has failed to deliver the more sustainable economy the country needs; notes that, rather than investing in building new homes to cut housing benefit costs, housing investment has been slashed and housing benefit has risen by over £2 billion a year in real terms; notes that the gap between UK productivity per hour worked and the rest of the G7 grew to 20 percentage points in 2014, the widest productivity gap since 1991; believes that further deep cuts to the budget of the Department for Business, Innovation and Skills could damage the Government’s ability to boost innovation and productivity and could restrict opportunities for British businesses and workers to succeed in the global economy; calls on the Government to reverse fully and fairly its plans to cut tax credits from next April; and further calls for the Government to invest in growing a more productive economy with a focus on science, technology and green jobs to equip Britain for the future and share more fairly the proceeds of growth.

We have chosen to devote a section of today’s Opposition day to set the scene for next week’s autumn statement and comprehensive spending review. This will be the last chance many MPs from across the House will have to put their case to the Chancellor before he comes to his final conclusions on his spending plans and economic strategy for the coming period.

The Chancellor is not in the Chamber today. Naturally, we are disappointed, but I spoke to him before this debate. He is working hard on the comprehensive spending review, so I think we will forgive him if he gets his sums right and comes to the right conclusions.

The Chancellor’s decisions next week will have serious consequences for every constituency in the country. What we all need from the Chancellor is wise judgment and fairness. Our country faces serious challenges and risks ahead, which we should not underestimate.

Let me first deal with one issue that overrides all others. It has been heart breaking to watch the tragic events in Paris at the weekend unfold into the suffering of families coming to the realisation of their loss. I sent a message of condolence and solidarity to our counterpart Michel Sapin, the French Finance Minister, at the weekend. It is true that the first duty of a state is to protect its citizens, so may I therefore assure the Chancellor that he and the Prime Minister have our full support for the enhanced expenditure to strengthen our security services that they have announced this week?

May I also say that we share the view of the Metropolitan police commissioner and other police chiefs that the first line of gaining intelligence on potential hazards and threats to our safety, preventing terrorist attacks and responding to them is often the police officer in the community and on the street? There has been a great deal of speculation in the media about the scale of potential cuts to the policing service, prompting severe warnings from police authorities—on a cross-party basis—about the consequences for the safety of the public if this scale of cuts goes ahead. May I therefore assure the Chancellor that we would also support an urgent review of the policing budget proposals to avert this risk to the service, and that we would support any enhanced expenditure plans being placed outside the parameters of the fiscal constraints of the charter for budget responsibility?

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does my hon. Friend agree that the fact that the tragic atrocities in Paris were focused on young people in social environments suggests that such attacks could occur anywhere in Britain at virtually any time?

[John McDonnell]

We are all fearful of the risk that exists, but we place our confidence in our intelligence and policing services. To be frank, when our community is under such a heightened physical threat, now is not the time to be dogmatic. When it comes to national security and keeping the public safe, I say to the Chancellor and the Government that they will always have the support of the Labour party.

Let me turn to an issue of fairness—tax credits—which I hope Ministers can reassure us today that the Chancellor has now sorted out once and for all. It came as a shock to Members on both sides of the House when he brought forward the proposals to cut tax credits without fully understanding, or calculating the consequences of, his actions. Plainly, it was an error of judgment. I want to thank all the Members of this House from all parties and our colleagues in the other place who found that they could not support the Chancellor’s proposals and hence forced him to think again. What convinced many people was exactly what Gordon Brown, our former Prime Minister, summed up so eloquently last week—that this is an attack on children. The prospect of 200,000 more children being pushed into poverty pushed many MPs and Members of the other place over the edge to oppose the proposals.

There has been a lot of speculation in the press about how the Chancellor has been trying to resolve the tax credits question, with much talk of cuts to universal credit and threatened Cabinet resignations, but I am pleased that the quiet man may have had to raise his voice and has won the day. However, the threat seems to have moved on to housing support and other matters. I do not expect Ministers to reveal to us today the detail of the Chancellor’s proposals to resolve this matter, but for the 3 million families who face a cut of £1,300 a year, may I ask them at least to assure us and those families that they will withdraw the tax credits cuts in full and that no existing or new claimant will lose out?

[Mr David Hanson (Delyn) (Lab)]

May I give my hon. Friend another reason for tackling this issue head-on? In the 10 constituencies across north Wales, £58 million will be taken out of the local economy next year if the proposals go ahead. That money would be spent in local shops, local businesses and local communities. If that is taken out, not only will families and children suffer, but local business will suffer.

[John McDonnell]

At a time when we are seeking to grow the economy, it seems bizarre to do so by reducing aggregate demand within a local area, which could in many respects bring about a localised recession.

[Jeremy Quin (Horsham) (Con)]

The hon. Gentleman has just agreed with the argument made by the right hon. Member for Delyn (Mr Hanson), so does he not accept that the same argument could be deployed for never cutting the deficit under any circumstances ever?

[John McDonnell]

The whole point of this debate is about political choices. To be frank, we have said to the Chancellor on a cross-party basis in debate after debate that this was the wrong political choice and that he should therefore look elsewhere. I am not asking for the detail of how he is resolving it—we will wait to hear that next week—but I am urging Ministers at least to give us the assurance that nobody will lose out. Families want that assurance now, because of the insecurity that they face.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

With my constituency of Selly Oak now in the top 13% in the country for unemployment, with more than 20% of those in work not earning the living wage and more than 60% of families dependent on tax credits, is it not clear that five years of the long-term economic plan has not worked for Selly Oak? What we need next week is not a rethink, but a step change in the approach to working families.

[John McDonnell]

I hope that that is what the Chancellor is working on at the moment and that that is why he cannot be with us.

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Gentleman has mentioned children twice so far. The Greek Government overspent, leaving tens of thousands of children unschooled in Greece in September. Does he not accept that a country that does not look after its finances does not look after its children?

[John McDonnell]

Of course that is true, but there are false economies. On a cross-party basis, we came to the conclusion that cutting tax credits to working families would be a false economy because it would remove an incentive to work—one of the principles on which many of our budgetary proposals are founded.

[Maria Caulfield (Lewes) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will press on with my speech, because Mr Speaker has warned me that a large number of Members want to speak. I will come back to the hon. Lady.

It would be helpful to have an assurance today that no one will lose out. I have said repeatedly that if the Chancellor withdraws the tax credit cuts in full and fairly, he will have our support. On fairness, will Ministers also assure us that if the Chancellor does scrap his tax credit cuts, it will not be paid for by cutting the benefits and support for families elsewhere? I seek that assurance because, unfortunately, the Chancellor has a bit of a reputation for giving with one hand and taking with the other.

[Maria Caulfield]

I appreciate the hon. Gentleman’s wish for cross-party support in reducing the deficit. I take it from his stance that his party wants to control the deficit, so where does he suggest the cuts should be made? Should they be made in the health service, schools, local government or defence? Will he give some suggestions as to how he would reduce the deficit?

[John McDonnell]

We have raised this matter time and again. I think that Members on both sides of the House found it incongruous that, at the same time as the Chancellor was seeking to cut working families’ tax credits, he was reducing inheritance tax for the wealthiest families in our country. People saw that as being basically unfair.

There is much that we hope the Chancellor will address in next week’s statement. We agree that we must continuously bear down on the deficit and debt, but that has to be done with realistic good judgment and fairness. I say that the judgment must be realistic because it will undermine confidence in government if we go through another comprehensive spending review like the one in 2010, when the Chancellor announced that he would eliminate the cyclically adjusted current deficit in the five-year period—that is, by this year—whereas he has cleared only half of it. In the last financial year, the current budget deficit stood at a massive £44 billion. I also remember the Chancellor saying in 2010 that he would reduce the debt to 69% of GDP. It now stands at over 80%.

The mistakes of the last CSR should not be repeated in this one. Our fiscal rules must be realistic, achievable and fair. The Chancellor’s rules, for all the revisions in recent weeks, have been none of those things.

[David T. C. Davies (Monmouth) (Con)]

The hon. Gentleman and his colleagues have criticised the Government on many occasions for cutting too fast. Is he now suggesting that we should have cut faster? If so, we will be more than happy to co-operate with him.

[John McDonnell]

I would be happy to have that co-operation at any stage. What we said to the Chancellor five years ago was that he was going too fast and that he should have been investing in growth, which would have enabled us to reduce the deficit. He promised to reduce the deficit and debt in five years, but he is going to do it in 10. That is a doubling of the target.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will my hon. Friend remind the House at what rate the Chancellor has accrued debt over the past five years? Has he not accrued approximately the same amount of debt over the past five years as the last Labour Government accrued in 13 years?

[John McDonnell]

The debt has increased by 55% in five years. That is a helpful record.

[Tom Blenkinsop]

So he has doubled the debt.

--- Later in debate ---

[John McDonnell]

Yes. Let me press on because time is limited in this debate.

We need to be realistic in recognising that our economy faces severe challenges. I warned in September that many of the factors that contributed to the last economic crisis are re-emerging. This is the slowest recovery in living memory. It is based on rising house prices and unsecured consumer lending rising at record rates. The Government’s own forecasters expect household debt shortly to surpass even the level reached before the crash. We have an increasingly unbalanced economy, based more than ever on insecure jobs in the service sector and an over-reliance on the finance sector.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will press on because time is limited. I will come back to the hon. Gentleman if I have time.

Regrettably, all the predictions are that manufacturing is likely to go into recession next month. The UK’s current account deficit on the balance of payments was at an all-time high last year. That deficit is driven by a slump in British investors earning abroad, while those in the rest of the world continue to profit from the assets that we sell and the loans that we take out.

There are warning signs in the rest of the world, yet the Chancellor is bequeathing us an economy even more poorly prepared than it was on entering the storm in 2008. Back then, we had room to manoeuvre. The Bank of England was able to cut interest rates to rock bottom, sustaining the economy as the global recession hit. It hit us hardest of all because our financial system was appallingly over-exposed to risks that it did not or, in some instances, would not understand. At least at that time, the Government could take action. They slashed interest rates and introduced quantitative easing. Seven years on, the Bank of England base rate remains jammed at the lowest level in history. The room for manoeuvre in conventional monetary policy is essentially zero.

[Michael Tomlinson]

Does the hon. Gentleman welcome the jobs figures in my constituency for the past year, which show that the number of people claiming jobseeker’s allowance is down 30%, showing that Government Members are on the side of working people?

[John McDonnell]

Of course we welcome any increase in employment or reduction in unemployment. The problem is that the economy is unsustainable because it is based on rising house prices, borrowing and debt. My fear is that the jobs that have been gained in the past year may be lost in the forthcoming crisis, if we do not take avoidance action.

Andrew Haldane, the chief economist at the Bank of England, has warned that the third wave of the financial crisis, which is breaking out in the emerging markets, centred on China, could have an impact on Britain. Why? Because Britain is the country with the largest exposure to Chinese debt, at $500 billion. Any upset in the rest of the world will, thanks to our extraordinarily large financial system, rapidly make its way here. That is exactly how the last crisis happened, when failures to repay mis-sold mortgages by some people in American society turned into the failure of the entire banking system in this country.

We cannot know what will happen over the next few years. The Chancellor has warned repeatedly of trouble ahead, but surely these challenges are better faced if we have a more balanced and resilient economy that provides real security for all of us. Instead, we have a single-minded fixation on a single target: the 2020 surplus, which no credible economist supports. By clinging on to that so tenaciously, it appears that the Chancellor is putting the needs of his political career ahead of the prosperity of the country.

[Jeremy Quin]

The hon. Gentleman refers to the balance of trade. Part of the impact of that is that our country has been growing. Dividends have gone up 30%. Those who are investing in the UK are taking more money out of the UK because it is growing. We could be investing in places such as China, which are growing faster. Would he ban investment in China? Is that what he is saying? Should that be the result of his concerns?

[John McDonnell]

Part of the problem is that growth has not been high enough. In addition, we have sold off so many of our assets that money is pumping out of this country, rather than being invested in it. We are not making home-grown investments in our own economy, so the money is flowing abroad. That is causing our balance of payments deficit. In addition, our trade, particularly in manufacturing, has unfortunately not picked up on the scale it should have done.

Let me press on, because a large number of Members want to speak. We know, from the drip-feed of announcements, that the Chancellor intends to make swingeing and potentially devastating cuts to Government Departments and welfare spending. Let me make it clear that austerity is a political choice, not an economic necessity. The record of this Government shows that the Chancellor’s political choices are having a devastating impact on people across the United Kingdom. In many cases, his cuts are falling on the heads of those who are least able to afford them. [Interruption.] The Exchequer Secretary is asking for examples, so let us look at local government.

Since 2010, councils have dealt with a 40% real-terms cut in their core Government grant. In adult social care alone, funding reductions and demographic pressures have resulted in a £5 billion funding gap. Where are the cuts falling? According to the Institute for Fiscal Studies, the 10 most deprived local authority areas have lost £782 per household, while the 10 wealthiest areas have lost just £48 per household. Choices have consequences for people’s incomes and lives and the services upon which they rely. As a consequence of the Chancellor’s choices, ordinary people are being left worse off. He has made those choices and still failed to meet his self-imposed fiscal targets, so I pose this question: are the choices that are being made right, moral and fair? If the answer to any of these questions is no, it is self-evident he needs to rethink, and rethink fast.

[Suella Fernandes (Fareham) (Con)]

Is the hon. Gentleman seriously preaching about making the right choices, given that his party was responsible for the highest level of public sector borrowing? Is that the choice he is recommending—more borrowing and a greater burden on British men and women, just to feed the coffers of Government?

--- Later in debate ---

[John McDonnell]

We have to explain again: the deficit did not cause the crisis; the crisis caused the deficit. When Gordon Brown was Chancellor of the Exchequer and intervened with quantitative easing and by reducing interest rates, he was supported across the House, because that was the way to save what was left of the financial system in this country.

There is an alternative to the cuts. The Chancellor could, within the five-year timeframe of the spending review, lay out a long-term vision for the economy and how the Government can help to deliver it. He says he wants a high-wage, low-tax and low-welfare economy. We all want people in secure high-paid work, because it is the surest way to bring down the deficit—that is what we have been arguing all these months—but the Chancellor has no proposals on where the high-wage jobs are to come from. All he has had to offer in recent months is the national living wage, but it is set below the official living wage, so it is a national living wage that no one can live on, and it is nowhere near high enough to compensate for the proposed cuts to tax credits.

The Chancellor cannot deliver high wages unless he delivers investment. Investment is the fuel of future growth. Spending today on new equipment, new technology and infrastructure will deliver well-paid, secure jobs in the future. Yet investment in the UK is still below its pre-crash level as a share of GDP, and that level of investment is itself far below that in France, Germany and the US. Failure to invest has a dramatic impact. Every hour worked in Germany is, on average, a third more productive than every hour worked here. Productivity has flatlined for years in this country. Instead of investing in capital, too many businesses have relied on cheap labour. Our flexible labour market has made it too easy for employers to rely on low pay, and the Chancellor’s response has been woeful.

[Mrs Anne Main (St Albans) (Con)]

I am listening carefully to the hon. Gentleman’s speech. If he is so set against any form of welfare reform, why did he and his party not vote against the Second Reading of the Welfare Reform and Work Bill? Why the road to Damascus now?

[John McDonnell]

Some of us did vote against it. As we argued in that debate, there is a way to reform welfare while making sure people do not lose out. For example, we have proposed reducing housing benefit by building the homes people need to make sure they have roofs over their heads. In that way, we reduce rent levels as well.

Instead of investing in the future, using the Government’s powers to borrow carefully and invest wisely, the Chancellor has allowed Government spending on our vital infrastructure to fall from 3.3% of GDP in the last year of the last Labour Government to just 1.6% today. It is set to fall further to 1.4% over the next few years—less than half what the OECD thinks is necessary in a developed economy to sustain a decent standard of living. A lack of investment is why National Grid is warning of electricity shortages this winter and why too many businesses suffer from poor broadband connections and transport delays. His response to growing calls from business has been to run to the Chinese Government and hope they will get him out of this mess. We have been presented with the extraordinary sight of a British Chancellor refusing to use his own Government’s powers of investment but more than happy to exploit those of the Chinese.

While every other major developed country is pushing up its research and development spending, recognising the future value of science and technology, our Government have cut spending by £l billion in real terms.

[Lucy Frazer]

The coalition Government set up a £160 million fund for agri-tech investment, and that investment has continued under this Government through the regional growth funds. It is really helping the east of the country, particularly my constituency. What ideas does the hon. Gentleman have for investment in agri-tech?

[John McDonnell]

We should increase the amount invested. So far, so little has been invested, it is not having the impact it should have.

On investment in training, research from the House of Commons Library has shown that the budget for sixth-form and further education colleges could fall by at least £1.6 billion under the Government’s spending plans. This is the equivalent of four in 10 sixth-form and further education colleges being closed. Local councils, often the engines for investment-led growth in their communities, are having their budgets cut to ribbons, and even statutory services are now at risk. All this confirms that there is no long-term economic plan. It is a short-term quick fix from a Chancellor who cannot think beyond the Conservative leadership election.

[Mr Graham Allen (Nottingham North) (Lab)]

This is the first occasion on which I need to disagree with my hon. Friend. I think there is a long-term economic plan: to drive down the amount of money spent by Government as a share of GDP to 1920s levels. Is that not the real agenda, and a not very hidden one at that?

[John McDonnell]

The Chancellor’s agenda is to shrink the state and privatise most of what is left.

Instead, Labour would seek to use Government powers to invest to deliver world-class infrastructure across the whole country. The northern powerhouse will only become a reality when it is matched by real spending commitments. We would build on our country’s history of science, technology and innovation to deliver real increases in funding for research and development, seeking to match the commitments made by our neighbours; and we would work alongside the private sector to ensure that our businesses, rather than hoarding cash to the tune of at least £400 billion, would be seeking out opportunities to invest in the future. That is the role of a strategic state.

[Margaret Greenwood (Wirral West) (Lab)]

The Green Investment Bank has been a real success, generating investment in renewable energy projects. In just three years it has invested in 58 projects, committing £2.3 billion of its own money and leveraging more than £10 billion in additional private capital. It has done this despite Government policies working against investor confidence in the renewables energy sector. What are my hon. Friend’s thoughts on the Government’s plan to privatise the bank?

--- Later in debate ---

[John McDonnell]

Just as we are about to take off with regard to renewables, the Government are impeding and undermining their future. My hon. Friend, like me, will have spoken to some of the companies. Some have gone to the wall and others are struggling. It is a devastating blow.

Labour would also tackle the large-scale tax evasion and avoidance that the Chancellor is so reluctant to address. Let me say what many working in our economy want to hear from the Chancellor next week. First and most importantly, he must reverse, fairly and in full, his cuts to tax credits. That should be his absolute priority. Secondly, there should be a plan to support investment to well beyond the minimum 3.5% of GDP recommended by the OECD, in terms of both infrastructure and training investment. Thirdly, we need a plan to address the balance of payments crisis, so that we can pay our way in the world once more. The Government are focusing on one deficit while ignoring another possibly more serious one. Fourthly, we want a realistic plan to tackle the deficit, based on sustainable economic growth and fair and wise judgments. Finally, we want an end to the self-defeating cuts and a serious programme to address tax evasion and avoidance and improve the overall efficacy of our tax system. If the Chancellor fails to take these steps, he places in jeopardy the long-term health of our economy. The choice next week is his to make.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

My hon. Friend speaks for her Lincolnshire constituents and for the whole United Kingdom in saying that we want to move to a lower tax, lower welfare, higher wage society. We took such a step in the Budget by increasing the personal allowance to £11,000. We also cut taxes for business, reducing corporation tax and expanding the employment allowance so that smaller businesses could take on more people. It is all about continuing to deliver the record levels of employment we see in our country, and indeed the growing economy that today’s GDP figures confirm.

[John McDonnell (Hayes and Harlington) (Lab)]

May I remind the House that for 3 million people out there who have done everything asked of them and have been bringing up their children and going to work, this is not a constitutional matter? Those people will lose £1,300 a year. Given what happened in the other place last night, may I reassure the Chancellor that if he brings forward proposals to reverse the cuts to tax credits, fairly and in full, he will not be attacked by Opposition Members; indeed, he will be applauded? Can he assure us that whatever proposals he brings forward, he will not support any that an independent assessment demonstrates will cause any child to be forced to live below the poverty line?

[Mr Osborne]

I am, of course, happy to accept any proposals that the hon. Gentleman puts forward—[Interruption.] I am happy to listen to those proposals, but there is a difference between those who say, “We want to make no savings to welfare at all; we want to abolish things like the benefit cap; we are not prepared to make any savings at all to the tax credit system”, and those who say, “Yes, we want to move to a lower welfare society, but we want help in the transition.” If the hon. Member for Hayes and Harlington (John McDonnell) has proposals to help with the transition, of course I will listen to them, but if he is again promoting uncapped welfare and unlimited borrowing, I do not think that the British people will listen to him.

[John McDonnell]

The Chancellor has a choice before him: he can push on with tax giveaways to multinational corporations, and press on with cuts to inheritance tax for the wealthiest few that he announced in the summer Budget, or he can reverse those tax breaks for the few, and instead go for a less excessive surplus target in 2019-20. He can avoid penalising 3 million working families with cuts to tax credits, and stick to his self-imposed charter. Is he prepared to listen to reason on this matter? Is he, or any Government Member, prepared to step up and show some leadership on this issue?

[Mr Osborne]

Let us remember that we inherited a tax system where City bankers were paying lower tax rates than the people who cleaned for them, and multinationals were paying no tax at all. We have introduced a new tax to ensure that multinationals do not divert their profits, and we increased capital gains tax precisely to avoid that abuse of tax rates. We will not take lectures from the Labour party about a fair tax system.

In a way, the hon. Gentleman reveals what he believes, which of course I completely respect. He says that we should abandon our surplus rule and run a deficit forever, but I profoundly disagree with that central judgment. If we borrow forever and are not prepared to make difficult decisions on welfare, we will condemn this country to decline. As a result, people will become unemployed and living standards will fall. That is not the Britain I want to see. We will go on taking difficult decisions to deliver that lower welfare, lower tax, higher wage economy, and this elected House of Commons will continue promoting the economic plan that delivers that.

Finance Bill

John McDonnell Excerpts

Monday 26th October 2015 Commons Chamber

‘( ) Regulations under this section may, so long as they do not increase any person’s liability to any tax, be made to have retrospective effect in relation to any time in the tax year in which they are made or the previous tax year.”—(Mr Gauke.)

[John McDonnell (Hayes and Harlington) (Lab)]

On a point of order, Mr Speaker. In the light of the votes in the other place this evening, the Chancellor has, I believe, informed the media that he will bring forward measures to respond to the Government’s defeats. It is the responsibility of Ministers, as you know and as you have ruled, to make this sort of announcement to this House first. While there are indeed Treasury questions tomorrow, given the level of interest from Members in all parts of the House and the significance of this matter, I am asking that the Chancellor make an oral statement to this House tomorrow, promptly.

[Mr Speaker]

I am grateful to the shadow Chancellor for his point of order. Those on the Treasury Bench will have heard what he has said. It is open to a Minister to do that tomorrow. Given that a Treasury Minister is present on the Treasury Bench, he is welcome to rise to his feet if he wishes.

Charter for Budget Responsibility

John McDonnell Excerpts

Wednesday 14th October 2015 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I suppose I should deal straightforwardly with the U-turn. Yes, two weeks ago, I recommended that Labour MPs vote for the charter, and today I shall urge them to vote against it. Is that embarrassing? Yes, of course, but a bit of humility among politicians never goes amiss. When circumstances and judgments change, it is best to admit to it and change as well, so I would like to take this opportunity to welcome the Prime Minister’s change of heart on the bid for the Saudi prisons contract.

Let me clear: I have changed my mind not on the principles of the need to tackle the deficit, but on the parliamentary tactics for dealing with this charter. Labour will tackle the deficit. [Interruption.] The Chancellor has a record of ignoring the targets he sets in these charters and mandates, treating his own charter with contempt, so I recommended two weeks ago that we should do the same. It is difficult to take seriously the charters and mandates when time after time the Chancellor has come to Parliament to revise his own charter. It is difficult to take it seriously when he has consistently failed to meet his own targets.

I remember the promises; I was here. The Chancellor promised to wipe out the deficit in one Parliament, but he did not get through half. In 2010, he promised to reduce borrowing to £37 billion by 2014-15. Last year, it was £87 billion—135% more than forecast. He promised public sector net debt would fall to 69% of gross domestic product in 2014-15. Today, it stands at 80% and above. It is no wonder that the charter has been seen as one of the puerile political traps the Chancellor likes to set.

[Several hon. Members rose—]

[John McDonnell]

Let me make some room; I will give way in due course.

Voting against the charter makes someone a deficit denier; voting for it would lead to the Chancellor claiming for the next five years that we had signed up to support every one of his cuts in public services and benefits.

I regret that the procedure followed today is an unamendable order—a take-it-or-leave-it order. My initial view was to use today’s debate for a bit of traditional parliamentary knockabout to ridicule the Chancellor’s performance against his own charter. I admit it: I was trying to out-Osborne Osborne.

Apart from the economic analysis and professional advice I have received, what really changed my mind was a trip to Redcar last week, where I met steelworkers and their families in tears at losing their jobs, their livelihoods, their futures. The Government’s failure to invest in our manufacturing industry, even if only to mothball the plant until better times arrive, has meant the end of steelmaking in Teesside and immense distress to families. The Government’s refusal to invest will be embedded in this charter as it now moves on to limit all public sector borrowing.

[Gareth Johnson (Dartford) (Con)]

I am grateful to the shadow Chancellor for giving way. According to Hansard, during the last Parliament there were more than 100 occasions on which the hon. Gentleman criticised the Government and other organisations for failing to consult sufficiently. Does he now understand the irony, given his complete failure to consult his own colleagues over his position?

[John McDonnell]

In the Labour party, we have a democratic process involving the shadow Cabinet and the parliamentary Labour party. In fact, it is so democratic that it is reported in the press virtually daily.

This charter will be used time and again as an excuse for the Government’s refusal to intervene and invest, but the more we know about its potential use, the more my view is strengthened—it has to be vigorously opposed. It will be used to justify cutting services and support to families across the UK, including the cuts to tax credits, which are the working families’ penalty. I cannot support the cuts to tax credits for working families. These are people who have done everything asked of them: they have gone to work and looked after their children, yet because of the policy direction in this charter they are going to be hit with a £1,300 cut. Neither can I support the continuing attack on disabled people, which is inherent in this fiscal mandate.

[James Cleverly (Braintree) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will in a minute.

Disabled people are already harassed—some to death—by the brutal work capability assessment and often by benefit sanctions, yet they are to lose over £30 a week. Disabled people under this Government and under the coalition have been hit 18 times harder than other citizens by the impact of cuts. I do not want the Labour party to be associated in any way with these policies, and to dissociate ourselves clearly we need to vote against them tonight.

[Sir Edward Leigh (Gainsborough) (Con)]

Everyone understands the hon. Gentleman’s views, but he has to explain to the House what circumstances have changed in the last two weeks. There has to be some element of consistency, and of trust in the Opposition: trust that, in future, he will not be blown off course so easily.

[John McDonnell]

The hon. Gentleman has clearly not been listening. It was professional advice. It was watching the economic headwinds grow. But, in addition to that, it was meeting families who had lost their futures in Redcar that made me decide that we need a Government who would invest and would not leave them adrift.

[James Cleverly]

Will the hon. Gentleman give way?

[Oliver Dowden (Hertsmere) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will in due course.

It is increasingly clear that the charter and the fiscal mandate are not economic instruments, but political weapons. This is not an economic debate. It is about the politics of dismantling the welfare state, the closing down of the role of the state, and the redistribution of wealth from the majority to the minority. Austerity is not an economic necessity; it is a political choice.

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

The hon. Gentleman said at the beginning of his speech that he wanted to reduce the deficit, but whenever any cut is proposed, he is against it. What would he cut? What would he do to balance the books?

[John McDonnell]

If the hon. Gentleman bears with me, he will discover the answer. He is renowned for his patience.

[James Cleverly]

Will the hon. Gentleman give way?

--- Later in debate ---

[John McDonnell]

No. This is a limited debate, so I need to press on.

Over the last five years, the focus of the economic debate on the deficit has reflected the capture of the economic narrative by the right since the crisis in 2008. Over six years, the Conservatives have managed to convince many people that the economic crisis and the deficit were caused by Labour Government spending. It has been one of the most successful exercises in mass public persuasion and the rewriting of history in recent times. Today I am going to correct the record.

The facts speak for themselves. The Conservatives backed every single penny of Labour’s spending until Northern Rock crashed. The average level of spending under Labour was less than it was under Mrs Thatcher. It was not the teachers, the nurses, the doctors and the police officers whom Labour recruited who caused the economic crisis; it was the recklessness of the bankers speculating in the City, and the failure of successive Governments to ensure effective regulation. In opposition, this Chancellor and his colleagues wanted even less regulation of the banking sector that crashed our economy. The deficit was not the cause of the economic crisis, but the result of the economic crisis.

[Chris Philp (Croydon South) (Con)]

Will the hon. Gentleman give way?

[Simon Hoare (North Dorset) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I need to—

[Mr Kenneth Clarke (Rushcliffe) (Con)]

rose—

[John McDonnell]

I will give way.

[Hon. Members]

Hear, hear!

[Mr Clarke]

What happened under the last Labour Government was that the Chancellor and his regulatory authorities allowed first the dotcom bubble and then the crazy credit boom. Tax revenues temporarily soared to astonishing levels. The Labour Government carried on running a deficit on top of those tax revenues, and then the revenues collapsed, leaving us with the worst annual deficit in the G20. The last Government were complicit in the consequences of 2008.

[John McDonnell]

And when that expenditure was being determined in the House, the Opposition supported it, and never objected. The right hon. and learned Gentleman may well have rejected it, but I remember his Budgets. His Budgets balanced, but when they balanced, there were 40,000 homeless families in London. People were dying on waiting lists before they got their operations. Those were the consequences of his economic policies.

Focusing on the deficit continues to mask the underlying weaknesses and failures of our unreformed economic system. We are witnessing a recovery based on rising house prices, growing consumer credit, a ballooning current account deficit and still inadequate reform of the finance sector. I worry that some of the warning signs are reappearing. But the Conservatives have adhered to their dictum: never let a crisis go to waste. They have skilfully used their narrative of the deficit to enable them to cut public services, slash benefits, and give tax cuts to the rich and corporations. Successive charters and fiscal mandates brought before this House have been cynically used as a weapon in that cause.

The purpose of the original Fiscal Responsibility Act 2010, brought in by Labour, was to bolster the then Government’s economic credibility. I recall what the current Chancellor said. He described it as little more than a political stunt. But he soon learned what a useful tool charters and mandates can be, and immediately upon the coalition’s election, he introduced his own. The fact that he missed most of his targets was irrelevant to him; what was more valuable was that charters could be picked up whenever needed and prayed in aid to excuse any attack on the welfare state and any cut in benefits, and provide a means to redistribute wealth upwards.

The charter before us today also has little basis in economics. Let me quote Dr Ha-Joon Chang, Professor Thomas Piketty, Professor David Blanchflower, Mariana Mazzucato and Simon Wren-Lewis. Those eminent economists in our society said that it has

“no basis in economics. Osborne’s proposals are not fit for the complexity of a modern 21st-century economy and, as such, they risk a liquidity crisis that could also trigger banking problems, a fall in GDP, a crash, or all three.”

They go on to say that if the Government

“chooses to try to inflexibly run surpluses…Households, consumers and businesses may have to borrow more overall, and the risk of a personal debt crisis to rival 2008 could be very real indeed.”

[James Cleverly]

The wording of this charter has not changed in the past two weeks, and I am therefore curious: what happened two weeks ago? Did the hon. Gentleman read the charter and not understand it, or had he not read the charter when he advised his colleagues to vote on it?

[John McDonnell]

May I just say to the hon. Gentleman that it is always best before making an intervention to have listened to the debate so far and it is always best to make a calculation as to whether he is going to add to the sum of human knowledge by the intervention? [Hon. Members: “Ooh!”] All right, I was a bit harsh. Sorry about that. Mr Speaker, I am not usually so undiplomatic, am I? May I press on? The Chancellor may not appreciate the economic points that have been made, but—

[Lucy Frazer (South East Cambridgeshire) (Con)]

I would like to make the point that my learned Friend—my hon. Friend the Member for Braintree (James Cleverly)—was making: if there is no basis for this measure, why did the hon. Gentleman agree to it two weeks ago?

[John McDonnell]

May I apologise to the hon. Gentleman, as I was too harsh? I certainly do not want to be with the hon. and learned Lady, but if she could just keep up it would be really helpful. I have tried to reiterate three times—I have said it three times. [Interruption.]

[Mr Speaker]

Order. Let us have a bit of order, on both sides. The nature of such a debate is the existence of strong and contrary opinions. If people insist on shouting from a sedentary position as part of a sort of group therapy, thinking they are being clever, they should just think of what the electorate want, which is a civilised debate, not the most juvenile badinage.

[John McDonnell]

I am sorry for being so ungallant to the hon. and learned Lady and I apologise to her for that, but I have explained three times already.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

We are getting to the crux of this debate, which is that this fiscal charter is intellectually moronic. It essentially commits this House to never borrowing to invest, even when the cost-benefit analysis of that investment is such that the country would benefit greatly. That is why it has not one serious economist backing it, other than the self-styled experts on the Government Benches.

[John McDonnell]

I could not have said it better myself. Can we move on?

The Chancellor may not appreciate these economic points, but I believe many of his advisers do. That is why there is a sizeable get-out clause for the charter rules not to apply outside normal times when there is a significant negative shock to the UK economy. Not only are the social consequences of this programme devastating, but the scale of the cuts we are witnessing represents a false economy. They jeopardise the long-term economic prosperity of our country. It is a false economy to cut adult social care when the burden is shifted on to hospitals and accident and emergency departments. It is a false economy to pursue an ideological sell-off of council housing eventually to put up the rents and eventually increase housing benefit. It is a false economy, ironically, that when this Government came to office there were 70,000 people at HMRC and within the next year that is planned to fall to 52,000—a cut of more than 25% in the number of tax-collecting staff, when HMRC says that tax evasion is as high as £10 billion a year. But the worst—

[Maria Caulfield (Lewes) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

If the hon. Lady does not mind, I have taken a large number of interventions. The debate is time-limited. If she has any points that she would like to raise with me, I am happy to meet her separately or write to her. [Interruption.] I am doing my best to be nice. It is the new politics of the Labour party.

The worst false economy is the failure to invest. This will be a direct result of Government policy embedded in this charter, with its limits on all public sector borrowing. Economists from across the spectrum have written and commented on the need for investment for the future. The World Economic Forum ranks the UK 10th for the quality of our infrastructure, behind Germany, France, the Netherlands and Spain. This Chancellor’s strategy has given us investment as a share of GDP lower than all the other G7 countries, falling even further behind the G7 average in recent years.

That is why business leaders, trade unions and a host of others are calling for investment. It is incomprehensible for the Chancellor to rule out the Government playing a role in building our future. For him to constrain himself from doing so in the future, no matter what the business case for a project, has no basis in economic theory or experience.

We also face an uncertain medium-term future for the global economy. In recent weeks there has been mounting evidence of a decline in global demand, particularly in the emerging markets.

[Several hon. Members rose—]

[John McDonnell]

I will press on, if hon. Members do not mind, as time is short.

Economists have warned of the potential for a future slowdown in western economies as a result. Former chief economist at the World Bank, Larry Summers, wrote last week that the dangers facing the global economy are more severe than at any time since the height of the crisis. Faced with these potential challenges, it makes no sense to close down the fiscal options available, especially when there is a possibility that monetary policy options may also be constrained.

I want to break the stranglehold that the focus on deficits has had on the economic debate in this country in recent years. Yes, the deficit is vitally important, but we need a paradigm shift to open up the wider debate on what makes a healthy economy, a prosperous economy, in which everybody shares in that prosperity and in which everybody is secure, not just the wealthy few, where everybody has a decent home in a sustainable environment, is able to develop their talents to the full, has secure, stable, well-paid and rewarding employment, and support when they fall on hard times. We will tackle the deficit, yes, but we will not tackle—[Interruption.] Hon. Members should listen and they will hear.

We will not tackle the deficit on the backs of middle and low earners, and especially not on the backs of the poorest in our society. We will tackle the deficit, but we will do it fairly and to a timescale that does not jeopardise sustainable growth in our economy. We will balance day-to-day spending and invest for future growth, so that the debt to GDP ratio falls, paying down our debts. We will do this, first, by ending this Government’s programme of tax cuts to the wealthiest in our society. This winter, when the letters go through the letterboxes telling working families how much they will lose in tax credits, we will be reminding them that their tax credit cut has paid for a cut of billions of pounds in the inheritance taxes of the richest families in this country.

Secondly, we will give HMRC the resources and powers to tackle tax evasion and avoidance—no more Facebooks paying less than £5,000 in tax despite £35 million in bonuses and total global profits of £1.9 billion—but above all else we will grow our economy. We will use smart Government institutions to strategically invest in the key areas that increase GDP in the future: education, health, research, technology, human capital formation and training—a progressive economic agenda that recognises that wealth creation is a collective process, working in partnership with businesses, workers, public institutions, and civil society organisations that create wealth in this country.

[Rebecca Pow (Taunton Deane) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I have given way a number of times and this is a time-limited debate; I apologise.

That is why we will establish a national investment bank to invest in innovation across the entire supply chain, from the infrastructure we need to the applied research and early stage financing of companies. To tackle the growing skills shortages we will prioritise education in schools and universities along with a clear strategy for construction, manufacturing, and engineering skills to build and maintain sustainable economic growth. The proceeds of that growth will reach all sections of our society.

So we are launching the debate on the economy we need and the economic instruments and policies needed to achieve that prosperous and sustainable growth. That is why we are reviewing every aspect of economic policy and systematically assessing our economic institutions, the Bank of England, HMRC and the Treasury.

Today I can announce that I have appointed a former member of the Monetary Policy Committee, Professor David Blanchflower, to lead a review into whether the Monetary Policy Committee should be given a broader mandate. He is joined by Lord McFall, the former Chair of the Treasury Committee.

This is Labour’s radical project. It is based upon the sound advice of some of the best economic brains in the country. We will be testing our policies and economic instruments and we will be asking the Chancellor to give us access to the resources of the Office for Budget Responsibility to model our proposals. I am asking the same of the Governor of the Bank of England.

We are seeking the widest public engagement in our economic policy discussions. The dividing lines between us and the Government are not just on how to tackle the deficit and who pays for the crisis. They are more fundamental. It is about for whom the economy works and the role of the strategic state in this process. So today we will oppose this charter as an instrument for imposing austerity on our community unnecessarily. We are bringing to an end the petty game playing and moving on to a more serious debate of how the economy can work for everybody.

--- Later in debate ---

[Stewart Hosie (Dundee East) (SNP)]

Thank you, Mr Speaker. I shall be as concise as I can be, within reason.

The Chancellor was right to talk about the ups and downs in the economy, and he is right to be cognisant of the risks involved, but to set out a charter with a fixed target with a fixed timescale—namely, to run a fiscal surplus by 2019-20—is precisely to remove any flexibility that might be required in the meantime. No one could have been in any doubt about the Government’s intention when the charter for budget responsibility summer update—the most recent update—was published in July. It was to target a fiscal surplus by 2019-20 and continue to run a surplus thereafter.

The problem for us is what that means in the real world, for ordinary people in the real economy. We kind of know what it means because many have told us—not least the Institute for Fiscal Studies, an organisation often prayed in aid by the Chancellor. We have had our disagreements with the IFS, but for the purposes of tonight’s debate I have to say that it is doing a sterling job. It has published an updated analysis on the scale and distribution of the public sector spending cuts expected in the November spending review. Those cuts underpin the charter’s objectives and the Government’s austerity policies, but the IFS says that those policies put a disproportionate burden on the most disadvantaged families.

The IFS also talks about the higher minimum wage, but says that it will not be enough to compensate lower income households for the welfare cuts. That is a particularly important point, given how many of the welfare cuts are now being directed at tax credits. We all believed that tax credits were an essential tool to “make work pay”, but they are now to be removed to the extent that perhaps 3 million households will be worse off. Also, the scale of cuts to public services envisaged by this trajectory in the public finances will be substantial, with non-ring-fenced Whitehall Departments being asked to find real-terms cuts of between 25% and 40% over the next four years. In short, the austerity measures announced in July will disproportionately harm the poorest and most vulnerable households and non-ring-fenced Departments while of course giving tax breaks to the better off, thus increasing inequality.

Indeed, the IFS and others have repeatedly warned that the planned changes to the tax and benefit system are regressive. They have said that, given the array of benefit cuts, it is no surprise that the changes overall are regressive, taking much more from poorer households than richer ones. The September analysis of the IFS said that the poorest two income deciles will each lose on average about £1,000 a year as a result of the tax and benefit changes announced for implementation during this Parliament. Of course the richest two deciles will be largely unaffected.

According to research by the House of Commons Library—this is the most commonly accepted figure—we are now looking at some 3 million households losing somewhere in the order of £1,300 a year. Importantly, notwithstanding the rhetoric we sometimes hear from the Government Benches, it is the case that the increase in the minimum wage for people aged 25 and over—wrongly branded a living wage—is nowhere near enough to offset the cuts in tax credits.

If we go back to what the IFS said, the national living wage is not a substitute for targeted benefits and tax credits when it comes to helping poorer households and tackling poverty, which runs rather contrary to the assertions made in answers by the Prime Minister at Prime Minister’s questions today. The irony is that the largest part of the gains from the new minimum wage will not go to the poorest households. Indeed, 55% will go to households with higher than average median earnings. The Chancellor’s national living wage is no such thing. In the context of the charter it is important to remember that the real living wage reflects the minimum income necessary to achieve an acceptable standard of living and accounts for existing in-work support. As tax credits are cut, the current living wage, which is already higher than the proposed national minimum wage, will have to be increased further. On top of that, the UK Government are set to continue with their cuts to day-to-day public services. That is the implication of the fiscal charter. Those day-to-day cuts to public services in unprotected Departments will be around £24 billion—19% in real terms over the rest of this Parliament. Scotland, Wales and Northern Ireland will see something in the order of a 5.2% real terms cut to their budgets over the same time frame.

Let us put that in context for the people who may be watching this debate. This will be 10 years of discretionary consolidation—a decade of austerity for real people and the real economy. Austerity strangled the recovery early in the previous Parliament and it will increase inequality in this one. All of that is driven by the fiscal charter. [Interruption.] I think I will leave our friends in the Labour party to their own mourning over the shambles of the position changes over the past 24 hours.

[John McDonnell]

rose—

[Stewart Hosie]

Before I move on to the fiscal charter, I will happily give way to the shadow Chancellor.

[John McDonnell]

Is it not true that the proposals that the Scottish National party have now brought forward are actually Labour’s proposals from six months ago?

[Stewart Hosie]

May I say gently to the hon. Gentleman, whom I genuinely like, that we voted against the fiscal charter on 13 January? Whether he liked it or not, it was his party that voted with the Tories. I am pleased that it has changed its position, but I think on balance it might be better to focus on this matter, where the Chancellor and his party are on rather weak ground, rather than on some internecine struggle.

Before I move on to the fiscal charter, I want briefly to ask the Chancellor about the consequences for Scotland. He knows that under the Scotland Act 2012 Scottish Ministers now have limited borrowing powers, so can he confirm that there is nothing in the charter that will limit the exercise of those statutory powers and that, irrespective of whether or not the UK is borrowing, Scottish Ministers will remain free to borrow up to the agreed limits?

What the Chancellor has done, of course, is insist that the economy not only breaks even, but runs a current account surplus that will hit £40 billion by 2019-20. He announced in July that, in order to do that, additional welfare cuts would total £33 billion in this Parliament. Cuts to essential capital expenditure would total another £5 billion in this Parliament. Essentially, he is cutting £40 billion more than is necessary to run a balanced current budget, and almost all of it will be paid for by punishing the poor and stripping the capital budget of another £5 billion.

Greece

John McDonnell Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Osborne]

I will tell my hon. Friend what I have to say about that: we are not going to sign up to some European corporation tax rate.

[John McDonnell (Hayes and Harlington) (Lab)]

Is it not ironic that the institutions that turned a blind eye to Greece’s economic situation when it joined the euro and then did nothing about profiteering through speculative lending to the Greeks throughout the period afterwards are the same organisations that are now withdrawing liquidity before the result of the referendum and therefore before the Greek people have made their decision? We are not members of the eurozone, but we are supporters of the International Monetary Fund. Therefore, was the Chancellor consulted about the timing of the withdrawal of liquidity in advance of the referendum and, if so, what view did he express?

[Mr Osborne]

The decision to which the hon. Gentleman refers was taken yesterday by the European Central Bank, and it was a decision not to expand the amount of liquidity assistance provided; it did not cancel the existing liquidity assistance. We are not in the eurozone, of course, so we are not part of the European Central Bank, but there have been close discussions and the European Central Bank is keeping the Bank of England directly informed about the decisions it is making.

European Union Referendum Bill

John McDonnell Excerpts

Tuesday 16th June 2015 Commons Chamber

[Mr Jenkin]

I am grateful to my hon. Friend for drawing the Committee’s attention to that point. We should all be grateful for the fact that the Government have listened, but they are still requesting that we withdraw the amendment. To do so would be to concede the principle that purdah might not exist in statutory form. The Labour party’s amendment on purdah would not actually create purdah; it would require the Government to produce a list of things. What we want in the Bill is purdah. If the Government are not prepared to accept that principle now, on the Floor of the House, I fear that we will have to force the amendment to a vote, because it is a matter of principle.

[John McDonnell (Hayes and Harlington) (Lab)]

He is not in his usual place, but may I commend the hon. Member for Stone (Sir William Cash), whose health is fragile today but who has still turned up to fulfil his parliamentary duties? I apologise for the fact that I had to leave the debate for 20 minutes to chair a meeting.

I want to speak about amendments 46 and 47, but before I do so, I will say a few words about purdah. I remember the original legislation going through the House. It came about as a result of concerns expressed about what had happened prior to other elections and referendums. At the time, I thought that a number of lessons had been learned about the need to ensure that purdah existed, so that confidence could be expressed in the outcome of a referendum. For the life of me, I cannot understand why the Government are varying the procedure this time. They have not advanced any consistent argument in which I can have any confidence. When we are dealing with such a controversial matter, why stir up such controversy over such a relatively minor point? I do not understand the Government’s motives.

I am minded to support amendment 11. Although the Government have assured us that we will return to the matter on Report, I would like some certainty at this stage, which we might vary on Report. I am quite attracted to the idea of a fairness commission, as proposed in new clause 4. I was a bit anxious when I learned who might be a member of such a commission, but I agree that there needs to be a mechanism for dealing with any unfairness.

I will be brief, because we are running out of time. I have tabled two amendments concerning the Transatlantic Trade and Investment Partnership. Several hon. Members have campaigned doggedly for openness and transparency regarding the negotiations on that proposed partnership between the EU and the US. I accept that it would be out of order for me to go into any detail about that, but the principle is this. For two days in the Chamber, we have debated sovereignty and democratic rights in relation to Scotland and the EU. TTIP may result in Parliament handing over sovereignty and democratic decision making not only to the EU but to transnational corporations and an investor dispute panel of corporate lawyers, meeting in secret. Their decisions could affect regulations governing health and safety, food safety, labour rights and even our recent attempts to achieve some sort of regulation of our finance sector, but we have not had any debate that resulted in a democratic decision of the House. We have had Adjournment debate after Adjournment debate, but there has been no report from Government on the progress of the negotiations. Why? Because the negotiations are held in secret. There was a debate in the European Parliament only last week. When a report was eventually produced, 200 amendments were tabled, and the EU Commission has backed off and delayed the matter.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is making an excellent speech and bringing TTIP into the argument. Does he agree that if the EU is seen as a vehicle for imposing TTIP on us, that would have a significant bearing on the outcome of the vote? Millions of trade unionists will be fearful of voting in favour of the EU because they may get TTIP with it.

[John McDonnell]

I thank my hon. Friend for bringing me back into order. That is exactly my point. If we are to have any chance to shape the Prime Minister’s negotiations with other European leaders, this is our opportunity. I want to place on the agenda what is happening with TTIP. I want the Prime Minister to address that in his discussions, and when he reports back to the House and the country about the way forward, I want him to detail the achievements he has made, to open up the transparency and openness of those negotiations.

[Mr Jim Cunningham (Coventry South) (Lab)]

My hon. Friend makes an interesting point. In the discussions in Europe in relation to some of the subjects that he has just mentioned, there is also the issue that the Government will negotiate about matters such as wages and terms and conditions, which affect people in this country. We have not had a lot of debate about that, either.

[John McDonnell]

This debate has allowed us to place some of those issues on the agenda. The major issue with TTIP is that the Prime Minister, until now, has not seen it as particularly relevant or important to give us a direct report on those negotiations, so those negotiations have remained secret. Therefore, the purpose of my amendment, which I will not press to a vote, is to identify it as an issue on which we need a report. That will help to ensure, to echo the point made by my hon. Friend the Member for Luton North (Kelvin Hopkins), that in the referendum, people can make a decision based on the consequences of further European membership for the concrete aspects of the treaty that will affect their lives. My hon. Friend the Member for Coventry South (Mr Cunningham) made exactly that point. This will affect labour rights, including working conditions, health and safety, and wage levels.

In addition, TTIP could affect the ability of a sovereign Government of this country to make a decision on policy. I give just one example that we have debated in the past. I want to ensure that there is no further privatisation and that some services that have been privatised are brought back into public ownership—for example, the railways. If TTIP goes through, a sovereign Government could be prevented from implementing those policies. I want the Prime Minister to go to Europe and say, with regard to TTIP, “On the issue of the referendum I want to ensure that we maintain the sovereign right of this Chamber to take a decision that its Government can then implement without undue interference from transnational corporations who can then head off to arbitration panels meeting in secret.”

[James Cartlidge (South Suffolk) (Con)]

I accept the hon. Gentleman’s point about sovereignty—many hon. Members are concerned about that—but surely one of the biggest challenges facing Europe at the moment is youth unemployment, which in Spain has only just gone below 50%, and which would be reduced if transatlantic trade volumes increased.

--- Later in debate ---

[John McDonnell]

I do not want to take up any further time, but that is an excellent point. That is why, in most of the assessments undertaken to date, we have looked at job losses rather than job increases.

Amendments 46 and 47 simply say that before we come to the decision on the European referendum the Government must publish a report on TTIP and its processes. The OBR should look at the economic aspects, but Government overall should consider all other aspects of policy. We need to receive information about the implications of this treaty and the European role in it, and whether, therefore, we would want to remain within the European Union as a result.

I do not wish to press the amendments, but I do think we need a serious debate about the agenda that the Prime Minister is to construct for the negotiations prior to the referendum.

[Mr Grieve]

It is a pleasure to participate briefly in this debate. I want to direct my remarks towards amendment 11, tabled by my hon. Friend the Member for Stone (Sir William Cash).

My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) and I probably agree on two main points: first, that neither of us has yet seen a convincing case made for pulling out of the EU; and secondly, our shared and gentle cynicism about the amount of froth and hyperbole that is generated in this Chamber. That said, I must politely disagree with his approach to what this Bill does with regard to section 125 of the Political Parties, Elections and Referendums Act 2000. I served on the Committee that considered the Bill that became that Act, and there was a lot of anxiety about the capacity for referendums to be manipulated. Doubtless there was quite a lot of hyperbole in the Committee as well. We argued for a 10-week period of purdah, as opposed to 28 days, because that was what the Electoral Commission was suggesting and what the Neill committee had proposed. Nevertheless, we ended up with 28 days, and I have seen nothing in the period since to make me think that the system does not work, broadly speaking, perfectly well. I am sure there will sometimes be complaints that the rules are being infringed and we ought to try to improve on that, but when all is said and done, the system seems to have worked remarkably well.

I confess that I was therefore rather surprised, when I looked at the Bill we have before us, to find that section 125 had been arbitrarily deleted without any real explanation being provided whatsoever. A justification for that deletion has not been made. I anticipate that my right hon. Friend the Minister will shortly tell us that the Government will go away and review the matter, and I will be very pleased to hear that. I have to say, however—I hope he will forgive me for doing so—that that is a reflection of the rather strange and cack-handed way in which, from time to time, the Government seem to behave when approaching legislation. Either they think that all my right hon. and hon. Friends who feel very exercised about this are going to miss this deletion, or it is an open invitation for discord that takes up quite a lot of the time of this House.

In my view, section 125 could properly have been left in, and the better course of action would have been for my right hon. Friends on the Front Bench to come up with an amendment of some kind if they really thought there was going to be a major problem during the purdah period in the run-up to the referendum. It is very important that when this referendum is over, the people who participated in it are able to say that it was fairly conducted, provided that reassurance does not come at great cost.