Charter for Budget Responsibility

Debate between John McDonnell and Kit Malthouse

Tuesday 24th January 2017 Commons Chamber

[John McDonnell]

That is interesting; I am pleased the Chancellor has raised that point. We have seen £700 billion borrowed over the last seven years as a result of economic failure. The Labour party’s policy, based on the recommendations of the CBI and others, is to spend £500 billion on investment over a decade. There would be £200 billion of mainstream direct funding and £100 billion would go to a national investment bank, which would prise from the private sector and elsewhere, on European Investment Bank rates, £250 billion. Such long-term investment in our economy has been recommended. Infrastructure investment is required to tackle the productivity crisis that has been caused by his Government.

[Kit Malthouse (North West Hampshire) (Con)]

I am a little confused and wonder whether the right hon. Gentleman can clarify things. He has just decried the fact that our national debt has increased by £700 billion. Is he saying that he would not have spent that £700 billion? Would he maintain the current deficit and spend £500 billion on top of that? I am not quite sure of his maths.

[John McDonnell]

We would have invested from the beginning in our infrastructure and skills, so we would have grown the economy and would not have had to borrow £700 billion for failure, rather than for growth success. Because the focus of the Government was on chasing an unachievable surplus target, they did not use the borrowing wisely. The sound policy, as recommended by international organisations such as the International Monetary Fund and the OECD, and by the CBI and the TUC here in Britain, is to put the Government to work in supporting investment. Instead, over nearly seven wasted years, the Government have cut investment to the lowest level in a decade.

UK Economy

Debate between John McDonnell and Kit Malthouse

Wednesday 29th June 2016 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will come back to the hon. Gentleman, but I must press on for a while.

It is important to recognise that economic decline and regional inequality, and the deep-rooted alienation and despair that they have produced, contributed to the fact that so many people voted to leave the EU. Some fear that a shock to business investment spending would help to push the entire economy into another recession. Again, I call for a fresh programme of Government investment to produce shovel-ready projects, especially in the areas that have been hardest hit by long-term economic decline.

--- Later in debate ---

[John McDonnell]

I have to give my hon. Friend his due; he chances his arm. I am sure that there is a need for investment—selective investment—in aviation.

[Kit Malthouse]

Will the hon. Gentleman give way?

[John McDonnell]

We are short of time and a lot of Members wish to speak.

Whenever aviation expansion takes place, it will be judged on the criteria that the Labour party has set, which include the environmental impact and the impact on the wider economy. We await the proposals from the Government and we will then take our decision.

The referendum vote has forced a debate on the best course for our economy and for economic policy. It is unlikely that a simple return to business as usual will be possible or even desirable, but there are immediate steps that can be taken to calm market volatility and to limit the shock to demand. It is incumbent on the Government to take those necessary measures and Labour, in the national interest, will support measures intended to stabilise the economy when they protect households and businesses.

On monetary policy, of course authority rests with the Bank of England to intervene to preserve the stability of banks and the wider economy. Governor Mark Carney’s Friday morning statement was important in helping to stabilise the immediate situation. However, some interventions by the Bank will require authorisation from the Government. To ensure the success of those interventions, it will be helpful if the House is kept as fully informed as practicable of those authorisations, with regular updates.

On fiscal policy, with the expected slump in demand, the Government’s present fiscal charter is, to say the least, increasingly anachronistic. With the Chancellor having missed two of his three targets—on debt and on the welfare cap—he will now have to suspend the deficit target. The charter’s restriction on investment spending in particular is impossible to defend. For the regions, a squeeze on Government investment could be especially damaging.

Last year—this was raised earlier at Question Time— over £10 billion was provided in regional development funding by the EU. That was concentrated on our most deprived regions and places that needed it the most. What steps are the Government taking to ensure that that essential funding will now be made good? What structures are being put in place to liaise with elected mayors, local government leaders and regional bodies to address the loss of EU funds?

The UK currently holds a 16% stake in the European Investment Bank, which last year disbursed a record £6 billion in investment for the UK. That includes £l billion for social housing. What steps are the Government taking to maintain current programme funding? What plans do the Government have for the UK’s stake in the European Investment Bank?