Finance (No. 2) Bill

John Redwood Excerpts

Monday 11th October 2010 Commons Chamber

[John Mann (Bassetlaw) (Lab)]

I know that the Leader of the Opposition is otherwise detained with an important speech at the moment, but I am sure that the newly appointed shadow Minister, my hon. Friend the Member for Nottingham East (Chris Leslie)—I congratulate him on his appointment—will want to convey the sentiment and details of the advice that I will outline in the next few minutes, not only to the rest of the shadow Treasury team but to the new leader.

I want to start by congratulating the hon. Member for Boston and Skegness (Mark Simmonds). It must be irritating—it seems so even from the Opposition Benches—for him to be sitting on the Back Benches with a Liberal having nicked his job, but such are the dilemmas of coalition. He is a great expert on real estate. I congratulate him on his speech, although it showed that he was not too well schooled in economics even though he went to school in my constituency. I may need to have a word with his former head teacher about the economics curriculum at that school, because the hon. Gentleman’s analysis of borrowing, like the document that he has read, shows a fatal flaw in economic logic and understanding.

The primary reason for the deficit—and more so in the current year than our competitors—is our over-reliance on the economic activity of, and consequently our tax take from, the financial institutions of the City of London. Over-reliance on the City, leading to the drying up of that tax take as its economic activity dived, was the classic error made by the previous Government and the two Governments before them—by Prime Ministers ever since the big bang. All failed to see that an economy that is unduly weighted towards its financial institutions and the City will succumb at any time in a financial downturn. That is precisely what has happened in the United Kingdom. However, underlying that, our actual debt, built recurrently, is not only no worse but better than that of most of our competitors, not least because of the former Chancellor’s pay-back and buy-back of debt between 1998 and 2000.

Of course, a Government must get on top of the current year’s situation, because if that features a recurrent build-up of debt, the situation over a period of years will deteriorate. In the league table of debt, we do not sit at the top, as the Chancellor and others on the Government Front Bench try to suggest. We sit in the middle—below France, alongside Germany and below Italy, and well below Japan and the United States of America. That is critically important, because they are servicing those debts recurrently as well as having a build-up.

The question that those on both Front Benches shy away from is what I call the China syndrome. That is the big issue of the imbalances in the world economy that no one is daring to address, and it has been accentuated by the financial crisis. It is rather ironic that capitalist economies are managing to ignore a state-controlled, Communist party run, non-democratic, non-central bank democratic, non-financial institution democratic state that owns more of the world’s dollar debt than anybody else, on the basis of which we are all buying huge amounts of goods with an artificially rigged currency against the rest of the world. That is at the heart of the ongoing problems and the potential for double-dip recession, which, if Government policy in this country is poor, will affect us more adversely than our competitors, but will happen on a worldwide basis. The China syndrome lies behind that; when the Nobel peace prize, or another Nobel prize, is awarded to a Chinese dissident, the Government do not even have the courage to stand alongside others such as President Obama in congratulating those dissidents. How the world of politics has gone in a circle when the Tory party is kowtowing to the Chinese Communist party, hoping that that will somehow assist our economic growth.

Protectionism has been mentioned. Anyone who analyses the economics of the 1930s will understand one particular factor that makes the current situation different: all the growth in the ’30s was protectionist growth. The United States has understood that in the longer term. Its growth was built on military expansion, rearmament and road building and, as much as possible, on the non-importation of labour and materials. It therefore allowed regeneration and created jobs.

[Mr John Redwood (Wokingham) (Con)]

Could the hon. Gentleman explain how the British Government could make the Chinese revalue their currency?