Recall of MPs Bill

Debate between Lord Beamish and Steve Baker

Monday 27th October 2014 Commons Chamber

[Mr Jones]

I agree. I would not consider myself to be in the same class as the hon. Member for Richmond Park, for example. The fact is—[Interruption.] I am not antagonising my constituents, as the hon. Member for Perth and North Perthshire (Pete Wishart) says from a sedentary position. Most Members of Parliament get elected to try to do the best for their constituencies, and it is insulting to say they do not. I may disagree politically with other Members of this House—of all shades—but the majority are in politics not only to do what they can to help their constituents, but to make the world a better place as they see it. The same was true of my time in local government; I think I met only one or two rogues—who were perhaps in politics for different reasons—when I was a councillor. It is a bit patronising for people to dismiss that point.

We must get back to recognising that standing for elected office is a noble thing that people should strive for, not just in this place but in councils and elsewhere. I respect anyone who has the guts to stand for election. Many commentators criticise what MPs do, but if they were asked if they would stand for election and be subject to such scrutiny not only at election time but throughout the life of a Parliament, not many would say yes. We must recognise the value of standing for elected office.

[Steve Baker (Wycombe) (Con)]

I am extremely grateful to the hon. Gentleman for giving way, and the whole House will appreciate the compliment he has just paid to Members. However, if he is afraid that this extension of democracy will result in the supplanting of socialist Members with libertarian ones, why does he not just propose spending limits?

[Mr Jones]

The hon. Gentleman is talking complete nonsense. The idea that the Bill is an extension of democracy to the average elector is complete rubbish. It will limit what we in this House can do, and put control of the agenda in the hands of well financed individuals. Yes, I trust my electors: that is why I keep on standing for election and do monthly constituency surgeries to listen to what they have to say. That is why I attend public meetings and speak to my electors when I go to get the Sunday newspaper, for example. We need to dispel the nonsensical idea that Members of Parliament do not speak to their electorate; these days, very few would even get elected if they took that approach.

Budget Resolutions and Economic Situation

Debate between Lord Beamish and Steve Baker

Friday 22nd March 2013 Commons Chamber

[Steve Baker (Wycombe) (Con)]

I am glad to follow the hon. Member for Glasgow North East (Mr Bain), who talked about bad economics, which will be the central theme of my speech. He also asked why there has not been growth. I refer him to the report “Thinking the Unthinkable”, which has the unfortunate subtitle “Project Armageddon—the final report” by Tullett Prebon. It explains that three of the UK’s eight largest industries—real estate, financial services and construction—accounting for 39% of the economy, are incapable of growth now that net private borrowing has evaporated.

The report goes on to say that another three of the top sectors—health, education and public administration, plus defence—account for a further 19% and cannot expand now that growth in public spending is a thing of the past. That means that 58% of the economy is ex growth, a figure that could rise to 70% if, as seems probable, growth in retailing is precluded by falling real consumer incomes. That is why there is no growth, and it is important to understand properly why we are in this mess.

The Budget was one of two halves. I certainly welcome all the tax cuts—the £10,000 personal allowance and so on. I am sure that my constituents will be glad to know that fuel duty will be 13p lower per litre than it would have been under Labour’s plans. However, I want to talk mostly about credit market interventions and monetary activism. I am particularly reminded of the curious fact that the general disinclination to explain the past boom by monetary factors has been quickly replaced by an even greater readiness to hold the current working of our monetary organisation exclusively responsible for our current plight.

The same stabilisers who believed that nothing was wrong with the boom, and that it might last indefinitely because prices did not rise, now believe that everything could be set right again if only we would use the weapons of monetary policy to prevent prices from falling. The same superficial view sees no other harmful effect of a credit expansion but the rise of a price level now has it that our only difficulty is a fall in the price level caused by credit contraction. I thoroughly recommend the preface to “Monetary Theory and the Trade Cycle”, published in 1932, since which little has changed when it comes to the error of the monetary stabilisers.

We need to ask ourselves what is holding the economy back. I refer particularly to feedback from Stewart Linford chair makers in my constituency. Stewart Linford is a great man, and chair making is what made High Wycombe a great town. As costs rose in Britain, Stewart remained competitive by increasing the quality of his product and exporting. Yesterday, he said to me:

“What’s holding me back isn’t red tape. It’s not taxation. It’s not even foreign competition. It’s HSBC bank holding our money against an interest rate swap we didn’t need.”

That swap was originally sold to him by RBS. I fully support the Government’s efforts to change the culture of banking. Previously, they have talked about the need for a responsibility revolution and it is firms such as Stewart Linford’s in my constituency that demonstrate the great David and Goliath battle that is going on.

Why is that battle going on? If we look at debt in the past 10 or 13 years, we find that the big story of banking and money is a great transformation in borrowing. In about 2002-03, under the previous Government, mortgage lending rose substantially. Eventually, the banking system blew itself up and mortgage lending collapsed and deficit spending by the Government took over.

If we look at the money supply back to 1997, we find that under the previous Government it tripled. In 1997, M4 was £693 billion; by 2010, it had risen to £2.2 trillion before stagnating. That chart, if well understood, is remarkable. It tells us that there was an accelerating rush to destruction in debt. Shortly, we will realise that while we were originally told that this was a banking crisis and then that it was a debt crisis, we will have to face up to the reality that what we use as money is debt—debt that was loaned into existence in response to incentives created by central bankers lowering interest rates.

[Mr Kevan Jones (North Durham) (Lab)]

Is it not a fact that when the Labour Government came into office in 1997, debt stood at 42% of GDP? When the banking crisis hit in 2008, it was down to 35%. The reason for its increasing was the fact that we had to bail out the banks and carry out the economic stimulus, which made the economy grow—all that, including the spending targets, was supported by the hon. Gentleman’s party when in opposition.

[Steve Baker]

I am grateful to the hon. Gentleman. I came here to speak today because I expected to have 20 to 30 minutes, and if I had, I would have given him a full explanation. In many ways, I am trying to help him. If he looked at price inflation going back to 1750, he would discover that for the whole of my lifetime, since 1971, we have been living in an inflationary era unprecedented in industrial times. That is why the banking system was broken. If money is pumped into the economy at that rate, that is bound to create asset price bubbles. An independent Bank of England therefore found itself controlling the money supply by looking at price inflation without looking at house prices, which were rushing away. That was bound to end in catastrophe.

Let me explain the problem with the Chancellor’s policy on credit market intervention. When we look across the range of things that were intended, we can see that there is a clear objective, which is to restart the process of credit expansion—credit creation—into the economy. In the short term, that is indeed bound to create an increase in trade and housing and to create a small housing boom. The problem is the damage it does to the rest of the economy. If I had more time, I would talk at some length about the problem being that for far too long people have persisted in believing that there is a simple mechanical linkage between aggregate demand and total employment, but unfortunately that is not true. What matters is the distribution of employment and the use of capital across the structure of the economy and through time.