Budget Resolutions and Economic Situation

Kelvin Hopkins Excerpts

Friday 22nd March 2013 Commons Chamber

[Jeremy Corbyn (Islington North) (Lab)]

I am pleased to be able to take part in this debate. My speech will relate largely to my constituency and my city, but overall the Budget will increase inequality in this country, rather than reduce it. It also contains many inconsistencies, such as spending on a carbon capture scheme while at the same time reducing restrictions on emissions and environmental costs in other industries. We need to be careful about that. If we are serious about protecting the environment, it needs to be an international initiative rather than what I suspect the Chancellor is trying to do, which is to reduce restrictions and conditions in this country, as he is doing with corporation tax. That will lead to a race to the bottom with very damaging consequences for our social infrastructure.

According to the latest unemployment count, 3,700 people in my constituency are on jobseeker’s allowance, 1,000 of whom have been on it for more than a year. Nearly 1,000 young people are also looking for work. At the same time there are enormous problems of inequality throughout London and, indeed, society. If Members look at the tax tables helpfully produced by a number of newspapers, they will see that there is no benefit whatsoever in this Budget or the planned tax changes over the next three years for most people on below average, average or even above-average incomes, and that those who earn more than £500,000 a year will gain at least £2,000 a month in most cases, while some will gain considerably more depending on their own personal circumstances.

There is no question but that this Budget will lead to greater inequality in our society, not less. At the bottom end, a lot of people are trying to survive on frozen or reduced wages in part-time work or on zero-hours contracts. At the other end of the scale, those on very high salaries or with large levels of unearned income will do extremely well out of the Budget and they are able to place their money somewhere where they pay much less tax on the savings that they manage to muster. We have to do better than that. I look to a future Labour Government to commit themselves to the principle of reducing inequality in our society, partly through taxation and partly through investment and expenditure that will help the poorest people through social spending.

My main concern—I think this is true of all other London Members—is the housing problems and the housing crisis in London. My borough of Islington is one of the smaller London boroughs, but it has at least 13,000 families on the priority needs list. The council, to its absolute credit, is doing a great deal to build new council housing, which is of high quality, innovative, energy efficient and imaginatively designed, often in restricted and small spaces. However, it is nowhere near meeting the demands and needs of large numbers of people in priority need. Therefore, my borough, like every other borough, puts people into the private sector, where rents are not restricted. The benefit cap will make it impossible for tenants to pay those rents and they will be asked to make a contribution themselves.

A local authority report notes that a large number of our schoolchildren—1,000 of them—are affected by the benefit cap and that, in the worst-case scenarios, some families are being asked to find £200 a week to contribute to their private sector rent. If they are on benefits, it is obviously impossible for them to find that money—it is £10,000 a year. The only way they can be accommodated is to move them out of the borough. Those in my borough are always offered a place in Greater London. Nevertheless, that means disruption for children in schools, and the break-up of family and community networks, which is damaging and corrosive to the whole of our society.

Other boroughs far less concerned about human needs than Islington dump people outside London. A good friend of mine who lives in north Kent tells me of the misery and poverty of large numbers of people who have been dumped in seaside towns such as Margate, in very poor quality, private rented accommodation, far away from their communities, and with obvious damaging effects to children and families as a whole.

How do we deal with the housing crisis in London? One way not to deal with it is what the Chancellor suggested this week: a charter for those with great money and resources to be subsidised into yet more purchasing of private sector homes. It is yet another escalator on the house price index, using housing as a form of investment and return on capital, rather than meeting the social needs of people in constituencies such as mine. I ask the Government to think seriously about how the housing benefit cap is being introduced and operated, and about how it acts as an agent for the social cleansing of poor and vulnerable people throughout central London to the London suburbs and further afield. It will not be long before the same process starts to happen in every other constituency in the country. This will not start and end in London; the whole process will go elsewhere.

The Government say, quite rightly, that the housing benefit bill is too big: I agree. The previous Government said it was too big: I agree. Why is it too big? Is it because council rents are so high? No, it is because of the high level of private rents in this country, and the lack of any control or real conditions on the private rented sector. We need legislation to control rents and ensure a fair rent strategy, security of tenure and decent housing for people who desperately need it.

[Kelvin Hopkins (Luton North) (Lab)]

I agree with everything my hon. Friend is saying, but does he agree that a significant proportion of the private rented sector should be municipalised so that it can be improved and proper rents charged?

[Jeremy Corbyn]

My hon. Friend is right. We need controls on the private rented sector and on the levels of rent charged, but to deal with this housing crisis—and it is a crisis—we must empower local authorities to take over private rented accommodation that is badly run or ludicrously expensive, and also give them enhanced powers to take over the large numbers of empty properties that are part of land banking throughout London. We have the insulting aspect of people in desperate need living in overcrowded accommodation while nearby properties are often deliberately kept vacant by wealthy, often foreign, investors, who see it as land banking for some speculative gain in the future. What is going on is simply wrong. Housing must be a priority and a right for everyone. If every child had somewhere decent, safe and secure to live, that would be a real legacy, not this gift to those who wish to make a great deal of money out of housing speculation, which is what the Budget offers.

--- Later in debate ---

[Kelvin Hopkins (Luton North) (Lab)]

I watched the Chancellor carefully during his speech and he looked to be a very worried man, as if his whole political life was flashing before him because it was not going to last much longer. He was particularly worried when he had to say that the Budget was “fiscally neutral”, when what we need is an expansion for growth and employment.

Labour Front Benchers kindly describe our current situation as the economy “flatlining”. Actually, we are in an ongoing recession. Some 2.5 million people are unemployed. I am considerably older than everybody else in the Chamber and remember the days of full employment. In my youth, unemployment of 2.5 million would have been seen as a catastrophe. At times, unemployment fell to a tenth of its present level. Let us not be too kind to the Government. The economy is not flatlining; we are in an ongoing recession.

We must focus on the continuing economic illiteracy of the Treasury. Its consistent mistakes over decades have put us in this situation. Two years ago, I made a speech in this Chamber in which I referred to the view of Paul Krugman, among others, that the Government were going in precisely the wrong direction. I agreed with him then and I keep repeating that because in politics, one has to repeat things to ensure that they register.

It is instructive to look at the history. There was a similar situation in the 1920s. After the first world war there was big government debt, and the Government introduced what became known as the Geddes axe—pubic expenditure cuts—which drove up unemployment and poverty, and resulted in low growth. At the end of the 1920s—surprise, surprise—deficits were bigger, not smaller. In the 1930s, we had a period, similar to now, when the Conservatives and their friends were in charge. In Prime Minister’s questions, I asked the Prime Minister whether he wanted to be remembered as the President Hoover of our times, whose draconian cuts drove the world, not just America, into the great depression. He made a sarcastic reply—I suppose that was understandable; I was being slightly humorous with him—that I understood later to be a reference to Benny Hill. I would rather refer to John Maynard Keynes and to Paul Krugman, but obviously the Prime Minister is more inspired by the wisdom of Benny Hill.

By contrast, in 1945, government debt was three times what we have now, but we had a sensible Labour Government who ran a full-employment economy. The debt at that time fell dramatically because we had full employment. I have to give credit to the Conservatives, because in the 1950s they carried on with the same sorts of policies. In the 1940s, 1950s and 1960s, we saw full employment most of the time. We had the occasional hiccup, but essentially it was a full-employment era. We saw living standards rise and poverty fall, and a much better world than we had ever had before. Indeed, the world was being run so well, I thought we should carry on like that. Instead, somebody reinvented the 19th century, and went back to the kind of neo-liberal policies that were pursued at that time.

Extraordinarily, at that time of full employment, Labour and Conservative Governments competed to build hundreds of thousands, if not millions, of council houses. That all seems to have disappeared now, but it was a very fine and productive competition.

[Grahame M. Morris]

Would my hon. Friend care to comment on the impact of a house building programme on growth and jobs?

[Kelvin Hopkins]

A house building programme is exactly what we need. We do not want to increase demand for houses, but supply. If we increase demand without supply, we get house price inflation.

[Michael Ellis]

Does the hon. Gentleman not accept that, under 13 years of the Labour Government, less social housing was built than at any time since the early 1920s? We are now having to catch up.

[Kelvin Hopkins]

Throughout that time I was a member of a group called Defend Council Housing, and time and again I urged my hon. Friends on the Front Bench, as indeed did a number of my hon. Friends, to build more council houses, so in a sense I accept that point.

We have seen the policy on the deficit not working—indeed, it will get worse—but we have seen only about a quarter of the promised cuts so far. What will happen in the next three, four or five years—let us say two years, because the Conservatives will only last that long—will make matters worse. The forecasts for the deficit have been out by many billions. The deficit will be £120 billion in each of the next three years, give or take the odd billion. That compares almost exactly with the tax gap, calculated by Richard Murphy, of £120 billion a year. I am not suggesting that we could overcome the tax gap in one year, but we should start to make the billionaires and fat cats pay their taxes properly. We could make a real dent in the deficit and have money to spend to generate the economy.

[Jeremy Corbyn]

Would my hon. Friend care to comment on the question of tax avoidance and places such as the Channel Islands and other British overseas territories? Is he convinced that what the Chancellor has said will mean that those places will be properly taxed, or will they continue to be places where the wealthy can get away with not paying tax?

[Kelvin Hopkins]

I remain to be convinced that the Government are serious about dealing with tax avoidance and evasion. We have a revenue problem, not an expenditure problem. We are failing to collect taxes, and what are the Government doing? Successive Governments have cut the number of staff at HMRC. We should be increasing their number, because every additional tax collector collects many times their own salary. We should increase staffing levels at HMRC and start to collect those taxes. That would make a real difference.

The superficial analogy with personal household incomes has been drawn time and again—“You can’t spend what you don’t earn” and all that. If a person’s or family’s expenditure is greater than their income, we get the Micawber effect, because people finish up in penury, but Governments and economies are not like that. One person’s spending becomes another person’s income, and so on, and we get this circular flow of income, which generates jobs, wealth and tax revenues. Economies do not work like family incomes, as Keynes explained many times in very simple terms. I used to try and explain it to my students as well. Economies are not like households, so I hope that we can dismiss this simplistic analogy with personal incomes.

We have to invest, to start building again and to reflate the economy. We will do that by driving up employment in labour intensive areas, and the most labour intensive sectors are those such as construction and public services. We get much more bang for our buck from investing in those areas than from cutting taxes. The money saved by doing the latter leaks away to the better-off and frequently into tax havens, which brings no benefit to the economy, whereas direct spending on building more houses, for example, has beneficial and rapid effects on the economy. The other great advantage of construction and public services is that they have a low import content, which means that we do not get leakages into imports—not in the first round at least. It is a very sensible way of trying to regenerate the economy.

We also need the right parity for our currency. Successive Governments have been obsessed with keeping the pound “strong”, as they call it—in other words, overvalued—which means that we become uncompetitive. The strongest evidence that we are uncompetitive is our a £1 billion-a-week deficit with the rest of the EU. We should use our advantage in having our own currency to find an appropriate—in other words, lower—parity for sterling, so that we can regain our competitive advantage.

There is much more I wish to say, Mr Deputy Speaker, but I fear I have had my time. Thank you.