Oral Answers to Questions
Kwasi Kwarteng Excerpts(10 years, 8 months ago)
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Mr Osborne
I have not heard in the 54 minutes of these questions either an apology for what happened under the Labour Government or a single economic policy being advanced. If the Labour party is against our welfare cuts or spending cuts, let it have the courage to get up and say that it would reverse them. We have not heard that at all in this questions session.
Kwasi Kwarteng (Spelthorne) (Con)
T8. My right hon. Friend is well aware that 80% of the employment in my constituency comes from the private sector. Will he tell us his plans for increasing private sector involvement in the economy and for giving that vital sector some support?
Mr Osborne
Of course one of the key things as the economy recovers is not to make the mistakes of the past and not to have the unbalanced economy that we had before the financial crash, when, for example, even in the boom years, private sector employment fell in some regions such as west midlands. What we must do in my hon. Friend’s constituency and elsewhere is support small businesses that are starting up, get the capital to the small businesses that want to expand and encourage the big companies to invest. In all those areas, there is positive news, but we have to stick at it.
Living Standards
Kwasi Kwarteng Excerpts(10 years, 8 months ago)
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Greg Clark
I will make some progress, then I will give way.
We must have a serious analysis of how that can be achieved in a way that is substantial and sustained. The first requirement is to do everything that we can to ensure that people are able to earn a good living. The second is to do everything that we can to reduce the costs that people face—especially those that are imposed by the Government.
On the first requirement, if people are to earn enough to generate a good standard of living, our country needs to be competitive against its rivals. The UK is at the top of KPMG’s league of the best countries in which to do business, ahead of Switzerland, the USA and France for the first time ever.
Kwasi Kwarteng (Spelthorne) (Con)
I am grateful to the Minister for the point that he is making about international competitiveness. How did Labour’s 12 increases in fuel duty improve competitiveness and the living conditions of British families?
Greg Clark
Those increases hit people in two ways: they hit the people who paid the duty when they filled up their tanks and they hit small businesses who employed people. It was a disastrous policy, which is why we scrapped it.
We will shortly have the joint lowest corporation tax in the G20. Last year, Britain was the biggest destination in Europe for inward investment. That competitiveness is creating jobs—jobs that give people incomes. Since 2010, 1.3 million jobs have been created in the private sector. More people are working in Britain than ever before and we have the lowest proportion of workless households for 17 years. There have been more net new private sector jobs in the past three years than there were in the previous 10 years under the Labour party.
People’s living standards are higher if they are in work, but I also want people to be able to earn higher wages. The only way to achieve that is to improve the levels of education and skills in the workforce. That is why the reforms of my right hon. Friend the Secretary of State for Education are so vital. It is why we need rigour in the exam system. It is why his announcement this week that we must ensure that people leave school qualified and skilled in all ways, but especially in maths and English, is so important. It is why the 86% increase in new apprenticeship starts between 2009-10 and 2011-12 is so important.
Kwasi Kwarteng (Spelthorne) (Con)
Living standards, of course, form part of a context in which the wider economy must be considered. I notice that the shadow Chief Secretary to the Treasury is leaving the Chamber, but I wanted to address some of her remarks. She was, I felt, very ungracious in the way she took interventions from Government Members. I am pleased to see her back after her long break and I wish her all the best, but she did not do enough to observe the courtesies of the House in listening to other points of view.
The first point to remember is that the economy is recovering, despite the protestations, gloom and doom and talking down of the economy by Opposition Members. The OECD and Office for National Statistics have doubled their forecasts for 2013 growth, and the OECD is even suggesting that Britain will outstrip her competitors in economic growth. That should be welcomed on all sides of the House.
On living standards, the Labour party has engaged in a series of speeches that have shown collective amnesia, and it has been deeply hypocritical, complacent and unapologetic about the appalling record it left us in 2010. You will remember, Madam Deputy Speaker, that the Chief Secretary to the Treasury in the previous Labour Government left a note that suggested there was no money, simply because they had spent it all. They spent and spent and spent, and that is the context in which our debate about living standards in Britain must take place.
Fiona O'Donnell (East Lothian) (Lab)
Perhaps now the hon. Gentleman can prove that he does not suffer from short-term memory loss and tell us by how much wages have fallen in real terms since his Government came to power.
Kwasi Kwarteng
What I will tell the hon. Lady is that it is particularly nauseating to listen to Labour Members talk about increased living costs when under their Government fuel duty was increased 12 times. It is not right for members of the public and people listening to this debate to look on those remarks, when Labour increased fuel duty 12 times without any respite.
Gavin Barwell
The hon. Member for East Lothian (Fiona O'Donnell) makes a perfectly fair point about wages, but does my hon. Friend think there is some hypocrisy there, given that just about the only cut that those on the Opposition Front Bench have supported is the freezing of public sector pay over a number of years? It is clear that even under Labour, many people would have seen a real-terms reduction in wages.
Kwasi Kwarteng
Absolutely right. My hon. Friend mentions hypocrisy, and I think that has framed the approach of Labour Members on this issue. They have spoken really from either side of their mouths. On one hand they decry the difficult measures that we have had to implement and, on the other, they refuse to apologise or accept any responsibility for the appalling fiscal situation that they bequeathed to this Government.
Gloria De Piero (Ashfield) (Lab)
How did the hon. Gentleman feel when he learned in April that bonuses in finance and business services rose by 82.2% compared with the same month a year ago?
Kwasi Kwarteng
The hon. Lady will remember that the bonus pool under the Labour Government was far bigger. It was outrageous. Indeed, it was Lord Mandelson who suggested that he was very relaxed about people getting “filthy rich”. That was the legacy of new Labour: debt, credit, massive bonuses and a totally irresponsible way of running the economy. Such irresponsibility is largely responsible for the situation we are in. We have had to follow a deficit reduction strategy. That is working and the deficit has fallen by a third over the past three years, from £160 billion to about £115 billion. That is a signal success. We see not only deficit reduction, but—the jury is out on this, but I am confident—economic recovery. This is very successful stewardship of the economy. It is not only Government Members who agree with that assessment. Let us look at the opinion polls. Even though it is true that Labour is maintaining a slim lead, on the economic question and the question of the credibility of economic policy, Labour, and the shadow Chancellor and Leader of the Opposition as a team, consistently under-poll the Chancellor and Prime Minister as economic stewards, because the public have not forgotten the appalling mess that Labour left behind. Despite three difficult years, the public refuse to accept that Labour has any ideas or solutions to our difficult problems. They are well aware of the appalling fiscal situation that Labour Members left behind.
Let us look at some of the figures on fuel duty increases. We have suspended the fuel duty escalator and prices have not gone up. We have taken many low-paid people out of the tax system. People will recognise that the Government’s efforts have been partly successful. We have not reached the promised land and the goal that we set, but we are getting there. People realise that any return to the Labour policies of spend, borrow and spend even more will be fatal to the recovery. The hon. Member for Coventry North West (Mr Robinson) mentioned killing off the recovery. The quickest way to kill off any recovery would be a return of the Labour party to government. In my view and the view of many of my constituents, that would be a form of national economic suicide. As a nation, we must address and debate living standards, but we must also put them in the context of the appalling economic and fiscal situation that Labour Members left behind. It is hypocritical and disingenuous of them to blame the coalition Government for the mess they created and bequeathed.
Finally, I should say a few words of optimism. It is clear that there is a renewed sense of optimism in the economic community. I am not rash enough to suggest that the path ahead will be smooth. There will be checks and times when there are doubts, but the general trend and direction is clear. The latest Office for Budget Responsibility forecast, from March—it seems likely to be upgraded—predicted that average earnings in 2014 would increase faster than consumer prices index inflation. It also predicts that, by 2016, living standards will be growing twice as fast as inflation. We might well have reached an inflection point that will prove the success and wisdom of the Government’s polices.
Mr Brown
I thank my hon. Friend for visiting—I appreciate that he did not tell me that he was coming, but it was on unofficial business. He is right that, in that remote rural locality, jobs are few and far between.
My area lost 1,300 local authority jobs over nine quarters. In those same nine quarters—between June 2010 and September 2012—we lost 2,000 private sector jobs, including quality jobs. The figures are staggering. The average wage in Dumfries and Galloway is some 24% less than the national average. In May 2010, 460 people were long-term unemployed; there are now 970. Jobseeker’s allowance claimant numbers are above the UK average.
Worst of all—the House needs to take this to heart—is youth unemployment. Under the previous Conservative Government, we almost ended up with a complete lost generation. In my area, we have 8.9% youth unemployment. That is not acceptable when the Scottish average is 7.4% and the UK average is 6.2%. I will not stand by and allow the youth—those aged 18 to 25—to sit wasting. That is why, two weeks ago, I held a cross-party summit in my area to discuss the difficulties that we face.
I do not have the answers, but welfare reform has played a big part in what is happening on our high streets. We have seen the Government freeze benefits at 1% because they thought that it was the right thing to do, but all that has done is take money out of the local economy.
Mr Brown
No, because the hon. Gentleman would eat up my time, and I am not prepared to allow that to happen. I need all the time I have got.
Taking money away from the poorest, who would have spent it on the high street, is bound to have an impact on what is going on. It takes even more jobs out of the economy.
Let me put the record straight on energy and fuel costs. The hon. Gentleman made a point about fuel costs—[Interruption.] Never mind the hand signals. On 11 occasions over nine years, the Labour Government froze the planned fuel duty increase. When Labour came to government in 1997, duty and tax on fuel was 78%: when it left government, duty and tax was 66%. Let us not forget that the price of fuel sometimes increases because the price of oil increases.
I regret to say that in Dumfries and Galloway 41% of all households are in fuel poverty, with the average in Scotland being 28%. I am not boasting about those figures: I am frankly ashamed of them. We are a low-wage economy, after decades of low pay in agriculture and tourism.
I pay tribute to the hon. Member for Suffolk Coastal (Dr Coffey), who chairs the all-party group on off-gas grid. She has made a valiant effort, with support from the all-party group, to get the Minister with responsibility to make early payments of the winter heating allowance to those people who want to use it in time to buy cheaper fuel. Regrettably, her effort has failed, as the Minister has declined to make early payments.
Things may be going well in some Conservative Members’ constituencies, but the picture across the country is patchwork, and that should not be forgotten.
Lisa Nandy (Wigan) (Lab)
I do not need to tell most Opposition Members about the crisis unfolding for individuals, families and whole communities, including in my constituency of Wigan. It is not just that unemployment has hit communities like mine hard and had an impact on people’s living standards, it is that the unemployment figures mask the reality facing many families of cuts to pay and hours, which have had a devastating impact on their daily lives. Many Opposition Members are also familiar with the picture we are seeing in Wigan, where payday lenders have sprung up to fill empty shops on the high street and are charging extortionate rates of interest, and where the queues at food banks, such as the Brick in the centre of my constituency, are lengthening by the day. In the past eight weeks, the Brick has given out more than 1,000 food parcels—it is running out of food.
We are now in a situation where one in five children in Wigan arrive at school too hungry to learn. Across Greater Manchester and Greater London, that figure rises to nearly 50%, leaving teachers having to feed children out of their own fridges and their own pockets.
Lisa Nandy
I will give way to the hon. Gentleman. I would be grateful if he told me what he thinks his Government should do about it.
Kwasi Kwarteng
I am grateful to the hon. Lady for giving way. Does she not recognise that if over 10 years a Government consistently spend a lot more than they get in and leave a huge deficit, any attempt to deal with that deficit will be difficult? Does she not accept that basic point?
Lisa Nandy
I find the hon. Gentleman’s comment alarming. Perhaps it is time for Government Members to attend an economics course or, more pertinently, a history lesson. If we fail to learn what happens when considerable deregulation causes a global financial crisis—supported and egged on by Conservative Members—we will be condemned to repeat it.
I was telling the House about the indignity, anguish and anxiety that afflict many of my constituents, and that daily grind people down. There are a number of things the Government could do, and I want to address them in the short time that I have. First, the Government should and could take immediate action to create jobs by investing in infrastructure. We badly need new schools, we badly need new homes and, in some areas, we badly need new hospitals. Constituencies like Wigan, where the construction industry has always been important to the local economy, need that investment, not just because we will get the buildings we need but because it will provide jobs and apprenticeships for young people.
Construction used to be one of the key routes for young people leaving school to get into the labour market and learn skills that could take them beyond the sort of low-paid work that hon. Members have described. If the Government were to take action immediately, it would be a huge relief not just to me but to the 1 million young people who are out of work and who ought to be a national priority. We know that this should be a national priority, because we know what happens when young people are left out of work: they suffer prolonged periods of unemployment, insecure employment and wage-scarring effects well into their 40s. What we are seeing at the moment is limited action to create apprenticeships. I am seeing young people in a revolving door of apprenticeships, taking on work experience, internships and apprenticeships over and over again. These do not lead to a real, paid, lasting job. Government Members heavily criticised the future jobs fund for being expensive, but I say to Ministers: please recognise that investing money in young people up front is repaid in droves. It is the right thing to do morally; it is the right thing to do economically.
Many young people are on zero-hours contracts and I want to say something about the increasing casualisation of the work force, something that the workers in the Hovis factory in my constituency are rightly standing up against at the moment. People on zero-hours contracts tend to earn lower wages as a whole, and we have seen compelling evidence of widespread exploitation. I would be grateful if the Minister paid some attention to what I am saying, because this is something that affects people across the country, including, perhaps, in his constituency.
Chris Leslie
I said it was reshuffle season. We nearly got an apology; the hon. Gentleman does not think rich people need that tax cut, but he voted to give it to them anyway because he is that sort of generous guy. I say to him, and to other Members, that the Office for Budget Responsibility, which the Government created, predicts that by the next general election in 2015, annual incomes will be £1,520 lower than they were in 2010 in real terms. That is lower wages. Just think about that statistic for a moment. Five years of Conservative and Liberal Democrat administration will have left a legacy for working people in which they are actually worse off, and significantly so.
Chris Leslie
I will give the hon. Gentleman another little statistic. If we add up the five years of the falling wages predicted by the OBR, a typical working person will have lost an amazing £6,660. Imagine the difference that could make to ordinary working people. It is the equivalent of a year and a half’s grocery bill for the average family; they could even have bought a small car for that amount. Those diminishing wages are in addition to the tax and benefit changes since 2010, which are costing families an average of £891 this year.
Chris Leslie
Of course my hon. Friend is right, and he understands that having that level of activity in the economy would have helped us get a better growth rate than we have had under the flatlining record of Government Members. Think of the different course the Government could have chosen. They could have tackled soaring energy bills with tougher regulation to pass on wholesale price cuts to ordinary customers, as my hon. Friend the Member for East Lothian (Fiona O’Donnell) suggested. They could tackle rip-off rail fares for commuters with an enforceable cap on train fare rises, they could protect tax credits for working people by reversing the millionaires tax cut, and they could cut income taxes with a new 10p starting rate to be paid for by a mansion tax on properties worth more than £2 million. However, they will not go that extra mile. Why? Because they do not understand the pressures that household budgets are under. After all, how could they? Government Members think that everything in the garden is rosy. They are either ignorant of the pressures on most households, or in their complacency they are ignoring the issue.
After three wasted years of a flatling economy, it is about time we had some economic growth. This growth, however, comes despite the Government’s economic policies, not because of them, and as everybody knows, growth is still falling short of what we ought to be seeing by now. Deficit reduction has stalled because the Government are borrowing more to pay for the costs of economic failure.
Chris Leslie
No, I will not give way but I will ask the hon. Gentleman what sort of economic recovery this is. So far, it has all the hallmarks of a recovery for the few, not the many. It is no wonder that the Prime Minister has abandoned the fiction that we are “all in this together.” The lucky minority of the already wealthy are doing very well thank you very much, but that is not much solace for everyone else who is working harder just to stand still. The Government have failed spectacularly to put in place conditions for a balanced recovery, and instead have fuelled a lopsided escalation in the cost of living, without a simultaneous focus on capacity or affordability, as my hon. Friend the Member for Coventry North West (Mr Robinson) said.
The Chancellor needs to act now to guard against escalating prices, inflation and interest rates, but he is not building broad-based growth in every region. He is not focusing on long-term, sustainable investment; he is putting short-term, debt-fuelled, business-as-usual economics first. His housing policy is all demand and no supply.
Business investment is thwarted by banks that are still not serving the real economy. How nice it is for bankers who can stave off their bonuses until the new tax year kicks in and pocket the Chancellor’s generous tax cut. No wonder there was a record-breaking bonus bonanza—bonuses soared by billions at the exact moment the Chancellor cut that 50p rate.
It is not looking like a recovery for ordinary people. It is a recovery for the rich, an unbalanced and narrow recovery, and a recovery for millionaires but not working millions. Times are tough, and, for most people, life is getting harder, with the cost of child care, the daily commute, the family shop, school uniform costs, the rent and the mortgage. People are taking on more hours if they can or, worse, joining the rise of the zero-hours economy. No wonder people are driven increasingly to payday lenders and extortionate credit. As my hon. Friends will have seen in the news yesterday, Wonga is lending as much to consumers as some of our major high street banks, such as Nationwide. Does that not say it all? It is not a recovery for those struggling to make ends meet; it is the Wonga recovery, benefiting those at the top at the expense of the majority.
Those are the consequences that flow from three years of economic stagnation. The cost-of-living crisis is felt in middle and lower-income households across the country. Enough is enough. We need action now to help ordinary taxpayers, commuters and householders to fight back against those rising prices. Ensuring that wages rise faster than prices should be a central objective for the Government. The Prime Minister and the Chancellor are out of touch. Working people up and down the country are out of pocket as a result. We cannot go on with this cost-of-living crisis year after year. Every day it becomes clearer, especially to ordinary working people in our constituencies, that we cannot afford this Government.
Finance Bill
Kwasi Kwarteng Excerpts(10 years, 10 months ago)
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Kwasi Kwarteng (Spelthorne) (Con)
How much money does the hon. Lady expect to raise through a tax on bank bonuses, and how does she think it could be spent on the projects on which she wants to spend it?
Cathy Jamieson
We have consistently said that we would seek to use the tax specifically to provide a jobs guarantee for every young person who has been out of work for a year or more. I am sure that the hon. Gentleman, and indeed most Members in all parts of the House, will have met—or received e-mails, letters or telephone calls from—young people who are absolutely desperate to be given that first start, to walk through the doorway, to show what they can do, to use their skills and to learn more. Sadly, as we have heard, the guarantees provided under the Work programme have not met expectations, so it is important for us to think about what we could do. In March this year—
Cathy Jamieson
I want to finish what I am saying. In March this year, 167,000 adults had been out of work for more than two years. The figure has increased by 97% since 2012, and by 216% since 2011. We believe that the way to get people back into work is to tax the very richest. I am sure that Members in all parts of the House would agree—
Cathy Jamieson
I want to finish what I am saying, and I want to make progress. I think that I have been reasonably generous with my time so far.
I am sure that Members in all parts of the House would agree that returning people to work is the best way of reducing the benefits bill and getting the economy moving again. However, the facts speak for themselves, showing that the Government prioritise those at the top and leave everyone else to struggle. Let me return to what my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said earlier.
Cathy Jamieson
No; I really do want to put this on the record. As my hon. Friend said, a two-earner couple with children are losing an average of £1,869 while a millionaire receives a tax cut. Would the hon. Gentleman care to explain to a two-earner couple with children in his constituency why that is fair?
Kwasi Kwarteng
I am grateful to the hon. Lady for giving way. I did not catch the answer to my earlier question. How much money in a fiscal year does the hon. Lady expect to raise from the bank bonus tax?
Cathy Jamieson
I note that the hon. Gentleman showed no inclination to explain to that two-earner couple with children in his constituency why it is right for a millionaire to receive a tax cut at a time when they are set to lose a significant amount of money.
Cathy Jamieson
No. I am going to finish what I am saying, because I want to make clear the extent to which people are losing out. The future jobs fund gave opportunities to many young people and it was short-sighted of the Government to scrap it. It seemed to me that the Government did so simply because it was brought in by the previous Government. However, following questions in the House and elsewhere, we know that the Work programme has not delivered for many young people in our constituencies.
I go back to the fact that individuals and families are losing out in our constituencies. Not only will a two-earner couple with children lose on average £1,869, while a millionaire gets a tax cut, but a single parent who works and has tried to do the right thing in getting into employment and holding down a job, as well as meeting their caring responsibilities, will lose £1,226. At the same time, the millionaire banker about whom we talked earlier will see his tax bill cut. Two earners without children who are a couple will lose £672.
Those are remarkable figures. As I said earlier, they sum up the coalition’s warped sense of priorities. They are looking after those at the top, while making everyone else pay the price for their economic failure.
Cathy Jamieson
I will in a moment.
No wonder that people think that there is one rule for the richest and another for the rest. No wonder people are questioning why the Government believe that the way to motivate people on low incomes is to pay them less, and the way to motivate people on high incomes is to pay them more. In these challenging economic times, surely we should focus on supporting those who need it most. New clause 8 asks the Government to look at the issue again. We are asking them to undertake a proper assessment of the impact of the cut, as well as an analysis of how much the Treasury would gain if the additional rate were returned to 50% in 2014-15. That is not an unreasonable request. I hope that, on this occasion, the Government will accept the new clause and report back in due course, although I suspect that that may not be the case.
I outlined earlier why the Opposition think that the Chancellor’s logic is rather odd. He claims to find tax avoidance morally repugnant and to want to crack down on it, but this tax cut simply rewards the wealthiest. He appears to justify it on the ground that the behavioural response to the 50p rate was more avoidance. There seems to be a rather strange logic here. Instead of cracking down on the avoidance, he is rewarding it. Surely those are not the values that we want in the Government: one rule for the richest and another for the rest of us.
It is not what the Government used to say, before their façade of fairness began to slip. The Prime Minister no less said:
“I have been very clear—we have all been very clear—that we have to do this in a way that is fair so that the broadest backs bear the biggest burden.
That is why we haven’t changed… the 50p tax rate.”
However, the Government are giving those with the broadest backs a tax cut, while people on lower incomes are shouldering the bigger burden. I heard Government Members supporting what the Prime Minister said. It is a pity that they now seem to have gone back on that.
Cathy Jamieson
If the hon. Gentleman can contain himself for a few more moments, I would like to quote the Chancellor. I am sure he will want to hear what his own Chancellor said. Indeed, he may even have been at his party’s conference when the Chancellor said this:
“We could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs. I think we can all agree that would be grossly unfair.”
Does the hon. Gentleman agree that would be grossly unfair?
Kwasi Kwarteng
The hon. Lady will know that I have always consistently argued for lower tax rates across the board, so that is my answer to her point. I am also perplexed as to why she will not give an answer to my earlier question about the amount of money she hoped to raise from a bankers bonus tax, given that that is such a key element of her party’s fiscal plans.
Cathy Jamieson
Once again, it is rather strange that the hon. Gentleman does not seek to give any comfort to his own constituents or give any explanation of his own policies. We have put forward the idea of the bankers bonus tax to get young people back into employment, and I also think the general public would like those bonuses to be less than they have been over the past few years.
I want to go back to the point the Chancellor made. He said at his party conference that he would not
“think of abolishing the 50p rate on the rich while at the same time…asking many of our public sector workers to accept a pay freeze”.
I do not often agree with the Chancellor, but I do think he was right then—and that he is absolutely wrong now.
In the interests of balance, however, I should also quote what is perhaps my favourite of these interventions. It was made by the Chief Secretary to the Treasury—the Lib Dem Chief Secretary. He summed things up quite neatly when he said:
“People who think that the priority for this Government should be reducing the tax burden on the very wealthiest are living in cloud cuckoo land.”
So in the words of the Government’s own Chief Secretary to the Treasury, this is a decision from cloud cuckoo land. I think that many members of the public would agree with that.
No doubt Government Members will protest and say that the higher rate was not raising any money—
Cathy Jamieson
No, I want to move on. I have been very generous in taking interventions, and it is important that I now move on to make the many points I have not yet had the opportunity to put on the record.
As I have said, no doubt Government Members will protest and say that the higher rate was not raising any money due to tax avoidance, but the Institute for Fiscal Studies has said:
“By giving out £3 billion to well-off people who pay 50p tax…the Government is banking on a very, very uncertain amount of people changing their behaviour and paying more tax as a result of the fact that you’re taxing them—”
Cathy Jamieson
I want at least to get to the end of that quote—that would be quite nice. I would like other Members to have the opportunity to contribute to the debate; indeed, I am sure the hon. Gentleman is gearing himself up for that as we speak.
Just in case anyone missed that IFS quote, let me make clear what it said:
“By giving out £3 billion to well-off people who pay 50p tax…the Government is banking on a very, very uncertain amount of people changing their behaviour and paying more tax as a result of the fact that you’re taxing them…There is a lot of uncertainty, a lot of risk on this estimate.”
I know that Government Members will from time to time quote the IFS and will, from time to time, doubt its figures. Just in case they do not accept what the IFS has said, let us look at what the Office for Budget Responsibility has said about this issue. It said that any decrease in tax avoidance from the reduced rate would be “highly uncertain”. A written answer from the Exchequer Secretary in the summer of 2012 stated that in 2010-11 70% of people earning over £250,000 were paying more than 40% in tax and 80% of people earning between £500,000 and £10 million were paying the 50p rate. Each and every one of those people is now in line for the tax cut.
Cathy Jamieson
The reality for my constituents and those of Labour Members is that they want to know why the Government made the change in the first place. They want to see action taken in the future, but there are two years until the general election—we will lay out how we intend to take things forward in good time for that—and I respectfully suggest to Government Members that we do not know exactly what sort of mess we will be left with. We see no responsibility taken by the Government for the situation that the economy is in at the moment and what has happened on their watch—
Cathy Jamieson
I hear yet again that tired mantra from Conservative Members, as if, somehow, Labour created the global financial crisis—
Chris Leslie
Yes, I agree. Governments often ask Oppositions how they will pay for tax cuts for those who need them most. We have given a clear example of one possible option. It is important to show that there is a fair way to give a tax cut to the vast majority of lower and middle-income households through the introduction of the new 10p band. The mansion tax is feasible and has cross-party support, as indeed does the 10p starting rate, and the Minister’s arguments are diminishing by the day, to the extent that we have managed to get him to lift the skirt of the data and publish more of them, which is what we want to see.
It is important to consider the arguments for fairness behind the 10p starting rate, which we think would provide a good tax incentive into work, especially for those on lower incomes. It is widely supported, especially by those Conservative Members who were champing at the bit only a matter of months ago when they tried to persuade the Chancellor and the Prime Minister to consider the proposal. Conservative Back Benchers have managed to get the Government on the run on their favoured topics, including an EU referendum and a tax break for married couples. They have the bit between their teeth, so perhaps we can persuade them to consider the 10p tax rate, too.
The principle of fair taxation is at stake in this debate. It should transcend party differences. We should be looking at funding a tax cut, not defending the wealth of the wealthiest. If the Government really mean it when they say that we are all in this together, the time has come for a mansion tax to help those most in need. The Government have a history of giving tax cuts to the wealthiest—they have already reduced the 50p rate, thereby giving millionaires a tax cut—and they have hit pensioners with what came to be known as the granny tax.
Kwasi Kwarteng
If the 10p rate is such a good idea, why did the previous Labour Government get rid of it?
Chris Leslie
I did say earlier—I do not know whether the hon. Gentleman was in the Chamber—that it was a mistake to get rid of it in 2007. There were arguments. The Institute for Fiscal Studies looked at the issues. The basic rate of income tax had been reduced and calculations had to be made about how to pay for it. I think, however, that the right thing to do is to take these steps and have progressivity in the income tax scale.
It is wrong to hurt those in society who are most in need. They are paying the price and life is getting harder for them because the Government’s economic plan has failed. We need to concentrate on the contribution that the wealthiest 1% in society should make. They should pay a fairer share and we should make sure that that money goes to the vast majority—25 million people—on lower and middle incomes.
amendment of the law
Kwasi Kwarteng Excerpts(11 years, 1 month ago)
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Anas Sarwar
That shows us the myth of the Scottish National party. The hon. Gentleman says that the only way to stop the bedroom tax is independence; the bedroom tax will be introduced on 1 April 2013, but according to the SNP timetable, independence day will be 31 March 2016. Members can work it out for themselves.
Plan A clearly is not working. For some time, the Opposition have been calling for additional infrastructure investment to boost the construction sector and we have been urging the Government to act. The Chancellor could have used the funds from the 4G auction to build 100,000 affordable homes, stimulate the economy and help tackle the housing crisis, but instead he decided that public services and public sector workers should bear the burden. Not content with imposing a 1% pay freeze until 2015, he has extended it to 2016. Given the rate of inflation, that is an effective pay cut for hundreds of thousands of people across the country.
With 80,000 construction workers out of work, construction output has fallen by 8.2%. The Government announced an extra £225 million for affordable housing, but only £125 million of that will be spent before 2015 according to the OBR, and it is dwarfed by the £4 billion cut in funding for affordable housing that the Chancellor made in his first Budget. Even after that investment the coalition Government’s record will still be a cut of around £10 billion in infrastructure projects.
It says everything about the Government’s attitude that they cut real-terms pay for millions of public sector workers, while giving the green light to slash corporation tax for big business. Research by the House of Commons Library, published today, confirms that the reductions in corporation tax will cost £29 billion in total, £10 billion over the life of the current Parliament alone. That policy enjoys the full support of the Scottish nationalists, who want to see a future independent Scotland at the front of a race to the bottom, a low tax country with an economy like Iceland—or perhaps like Ireland. I have not seen the latest Scottish Government press release, so I do not know which country they are modelling their assessment on this week.
Kwasi Kwarteng (Spelthorne) (Con)
Am I right in assuming that the hon. Gentleman favours a high-tax economy for Britain?
Anas Sarwar
No, I am suggesting that while people across the country—especially the most vulnerable—see their household income slashed and the poorest people are having to live in more difficult circumstances, the Government see their priority as giving millionaires a tax cut and cutting taxes for the biggest businesses in the country. I know whose side I am on. I am sad to say that I know whose side the hon. Gentleman is on, and I am sure people will punish him appropriately come the next general election.
Kwasi Kwarteng (Spelthorne) (Con)
I am pleased to have the opportunity to contribute to this debate.
Last week’s Budget was a successful one politically. It worked because it identified that the cost of living affects all our constituents. I particularly welcome the fact that the Chancellor, by getting rid of the beer duty escalator and checking the fuel duty escalator put in by the previous Government, for example, recognised the rising cost of living for many of our constituents.
Before proceeding, I would like to refer to some of the remarks made by the right hon. Member for Edinburgh South West (Mr Darling), who, as we all know, was a prominent member of the previous Labour Government. He mentioned the fact that the OBR had consistently failed in its forecasts over the course of this Parliament. He also mentioned the fact that we are borrowing at record levels. That is all true. But what he did not mention, or make any apology for, was the share of responsibility that he and the previous Government must admit to in the creation of our largest peacetime deficit. People will look back on the period between 2001 and 2007 in this country as one of the most, if not the most, profligate and irresponsible periods in the management of our public finances.
David Wright
If that is the case, why did the Conservative party support the Labour Government’s spending plans throughout that period? The Conservatives stopped supporting the spending plans only just before the global financial crisis. Can the hon. Gentleman explain what action he would not have taken to save the banks?
Kwasi Kwarteng
I happen to be a balanced budget Conservative. Even at the time, before I was elected to this House, I completely disavowed any move to stick to Labour’s spending. I thought that it was a big mistake at the time and I am quite happy to say that in this House. I think that it was entirely a mistake to do what the Labour Government did and run deficits at a time when the economy was growing at 3%. It was absolute madness to run deficits at 3% of GDP when the economy itself was growing at 3%. Not even the most starry-eyed Keynesian has ever suggested that we should be running deficits while the economy was expanding. As a direct consequence of this irresponsible period, in 2010 we were left with the largest peacetime deficit and the highest deficit-to-GDP ratio of any of the OECD countries. That period of stewardship marks the ultimate disgrace of the Labour party in terms of managing the national economy. We have now reached the point where we are borrowing £100 billion a year and the national debt is going up, as people have mentioned. As a consequence of this high level of deficit financing, we are going to leave a national debt in years to come that is higher than it has been for generations.
What serious proposals have Labour Members come up with during this four-day debate? Their answer is simply to borrow more money and to spend more money. They would accelerate our downward path and we would end up, as one economic commentator has said, with Club Med levels of debt similar to those of Portugal and Greece—without, unfortunately, the good weather. That is what Labour Members are leading this country towards. Members of the public will be absolutely astounded that Labour Members have expressed not one shred of remorse, regret or acknowledgement. They live in a world in which they did nothing wrong. Everything has been blamed on the coalition Government, who have tried to clear up the appalling mess—[Interruption.] Labour Members are chuntering from sedentary positions. They do not like to hear the facts.
People up and down the country realise and acknowledge that the Labour Government were entirely irresponsible. What solutions have the Labour Members come up with? Absolutely none. It is embarrassing to listen to some of their speeches. They talk about more growth despite the fact that the eurozone is flat on its back. They talk about more investment despite the fact that we are borrowing more money than we ever have before. When one asks them where this money is going to come from, they repeat, “The bankers’ bonus tax”, as though that would pay for absolutely everything they wish for, although it has already been spent about 100 times. It is depressing to see Labour Members, who fancy themselves as the next Government—they are very confident, I notice—offering such poor, ill-thought-through and pathetic solutions to a grave national crisis. People watching this debate at home will be appalled, frankly, by the level of argument, contribution and solutions that Labour Members have contributed.
I welcome this Budget. In very difficult times, the Chancellor has identified weaknesses and has managed to alleviate some of the distress that we suffer.
Fiona O’Donnell (East Lothian) (Lab)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
It is a pleasure to follow the hon. Member for Spelthorne (Kwasi Kwarteng), who is now, we hear, a self-declared fan of a balanced Budget. No doubt his disappointment in his own Government has kept him out of the Chamber for the vast majority of today’s debate.
I do not know if you noticed, Mr Deputy Speaker, but on the day of the Budget this Chamber was colder than I have ever felt it before. It was as though a cold, chilly winter breeze was rolling through the Chamber as an ailing, failing, flailing Chancellor came to the Dispatch Box—but it was all too little, too late. I am so pleased to see the Business Secretary in his seat, because he will agree with me—or I will agree with him, most humbly—that the mistake that this Government made was to choke off the recovery. Just as the snow across this country is choking off the green shoots of spring, so this Government, by cutting too quickly and too deeply, have choked off the recovery.
What really chilled me to the bone was when the Chancellor spoke about an aspirational Britain, because I am old enough to remember aspirational Britain the first time around. It was aspiration for some, but not for others.
This Government are out of touch. I apologise for being late for today’s opening speech, Mr Deputy Speaker, but as a trustee of my local food bank my time was being taken up by people who are aspiring to put food on their table, aspiring to heat their homes and aspiring to stay in their homes.
Fiona O'Donnell
No, thank you.
When people look back on this Government, they will see five wasted years. The two greatest evils that they have committed are the bedroom tax and the cut for millionaires. They still have time to make more mistakes, but this country will never forgive them for those measures because they go to the heart of this Government.
I want to make some pleas on behalf of my constituency.
Paul Blomfield (Sheffield Central) (Lab)
It was good to see the Chancellor pop into the Chamber a few moments ago, although I wish he had been here a few moments before that to hear the hon. Member for Spelthorne (Kwasi Kwarteng) accuse him of “absolute madness” for saying in opposition that he would back Labour’s spending plans, right up to the world financial crisis in 2008. That was the case, however, and the truth is that it was not Labour’s spending, which repaired the damage of the Thatcher years, that caused sub-prime lending, the collapse of Lehman brothers or the world financial crisis.
Paul Blomfield
No, I will not, simply because of time; I would love to otherwise.
That crisis created choices, and the Conservative-led Government have consistently made the wrong choices. The Liberal Democrats also have something to answer for because during the election they argued—rightly, and alongside Labour—that the post-2008 Tory austerity plans were wrong: wrong because they caused pain and wrong because they would damage the economy. They were elected on that basis; they have no mandate for this ideological assault on public spending and the welfare state.
The Secretary of State opened the debate by talking about housing. That is a good topic because it says a lot about this Government’s wider economic policy: wrong choices and missed opportunities, epitomised by the lack of investment in housing. The Government have cut direct support for affordable housing by 60%. The stagnating economy has limited private sector investment, and as my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) said, there was an 11% fall in housing starts last year.
The Secretary of State, who is currently checking his BlackBerry, attacked Labour’s record on housing. The Labour Government did not do enough, but let us set the record straight—[Interruption.] He should keep checking his BlackBerry. It is worth remembering that housing starts have been lower in every quarter since April to June 2010, the last quarter that Labour was in power.
The Chancellor claims he will solve the housing crisis with his latest right to buy scheme, but we have heard that before. Back in November 2011, we heard that the NewBuy scheme would help 100,000 people to buy their own homes. How many did it help? Only 1,500 people, just 1.5% of the target.
For many young families, the alternative would be social housing, but it is not. With nearly 5 million people on local authority waiting lists, the Homes and Communities Agency has reported that affordable housing starts collapsed in the last financial year by 68%. It has been estimated that as many as 60,000 extra homes would have been built had the Chancellor used the Budget to lift borrowing restrictions on councils and arm’s length management organisations. He could have done that, but he failed to do so.
Ideology and not practical policies drive the Government, so instead of helping with social housing, the Chancellor extended the right to buy, which is at the root of much of the problem of social housing supply. As private landlords win out, we lose vital social assets. When the Government extended the right-to-buy scheme in April 2012, the Secretary of State—he does well to smile—promised one-for-one replacement. How many have we seen? Three hundred and eighty-four new homes have been built to replace 3,495 sold, which is a 90% loss of socially rented stock.
Finally, the new homes bonus has an unfair impact. It is designed to incentivise local authorities to approve new housing development but is calculated on the value of property, which means that areas with low property values lose out. In my case, resources moved away from Yorkshire to wealthier areas, and from Labour councils to Conservative and Liberal Democrat councils. For example, it is estimated that Sheffield council lost more than £3.5 million as a consequence of the scheme. The Secretary of State might well smile, but people in Sheffield are not smiling.
As with the economy overall, so with housing: we need a plan B, and we need it now.
The Economy
Kwasi Kwarteng Excerpts(11 years, 5 months ago)
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Rachel Reeves (Leeds West) (Lab)
The Opposition welcome this opportunity to debate the state of the economy, the Chancellor’s record over the past two and a half years and the measures he has introduced in the autumn statement. Last Wednesday he came to the House and admitted that he had failed—failed to get the economy moving, failed to meet his borrowing targets and failed to listen to our advice and change course.
First, though, let us go back to the heady first months of this coalition Government—when they were still getting on, when they were fraternising in the rose garden. In the 2010 spending review, the Chancellor decided to implement a programme of unprecedented fiscal contraction. We said it was not the right time to cut demand, given that the economy was only just recovering from the global financial crisis, and that the cuts went too far and were being implemented too fast.
Kwasi Kwarteng (Spelthorne) (Con)
Is it not true that we are actually spending more than we were two years ago and that no real cuts have been made? What would the hon. Lady like to say about that?
Rachel Reeves
There is one particular area where the Government are spending more money, and that is welfare, on which they are spending £13.6 billion more during this Parliament, because more people are out of work or in part-time work and so receiving more tax credits. That is a sign of the Government’s failure, not of their success.
In the 24 months since the spending review, where have we got to? How much progress has been made? Is the Chancellor’s plan working? The verdict is in. We now know that borrowing and debt figures have been revised up for this year, for next year and for every year of this Parliament. The Government are borrowing £212 billion more than they planned. They said that five years of austerity would be difficult, but that it was necessary to support our economy, and they said that it might hurt, but that it would work. Well, it has not worked, but it has hurt, and we are no closer to clearing our deficit than we were two years ago. [Interruption.]
Kwasi Kwarteng (Spelthorne) (Con)
Thank you, Mr Deputy Speaker. You have not been in the Chair for the whole of the afternoon, but I am pleased to see you there now.
Clearly, we have stated our positions at the beginning of this debate. The Labour Opposition have spoken eloquently about the need for growth and Government Members have commented on the mess in our public finances that we inherited in 2010. The gravity of the situation in 2010 should not be underestimated: our deficit to GDP ratio in 2010 was higher than it had ever been in peacetime conditions. That was a function of probably the worst management of public finances that this country ever had the misfortunate to live under.
I am very pleased to follow the right hon. Member for Edinburgh South West (Mr Darling), who served at the tail end of that Administration as Chancellor of the Exchequer. To use a cricketing metaphor, he was very much like the night-watchman who is sent in when the team has collapsed to 70-8 and the light is pretty dim. He did well in trying to steady the ship, but we have to look at the damage that had been caused in the public finances before he took over his post and at what the Labour Administration did not only from 1997, but in particular from 2001 to 2007, during which time they ran a deficit in each consecutive year for seven or eight years before the crisis happened. No academic textbook and no economic school of thought thinks that it is a good idea to run a deficit when the economy is growing. In 2004, the economy was growing at 3%; it was going at full rate, jobs were being created and investment was taking place. What was the deficit then? It was 3%; even under the Maastricht criteria, the previous Government would have failed. No Keynesian in his right mind, and certainly not John Maynard Keynes himself, would have ever contemplated running a deficit of more than 3% when the economy was growing at 3%.
David Rutley
Will my hon. Friend confirm that even former Prime Minister Tony Blair felt, on reflection, that Labour was spending too much when it was in office?
Kwasi Kwarteng
Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.
That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.
Mr MacNeil
Can the hon. Gentleman tell us for how many years since 2001 the UK has been able to pay its way?
Kwasi Kwarteng
I can answer the hon. Gentleman very directly. With reference to our public finances, we have been borrowing money every year—every single year. It is likely that even if we are able to eliminate the structural deficit by 2018, this country will have seen nearly 20 years of continual deficits. This is an appalling legacy that Labour has left the country. Since the end of the second world war, we have never run 20 years of continual deficits, which we will do as a consequence of Labour mismanagement and old-fashioned incompetence.
Charlie Elphicke
In his praise for the former Chancellor, has my hon. Friend noticed that the right hon. Gentleman said in his memoirs not only that the Labour Government overspent, but that they ran a parallel Treasury operation while he was Chancellor trying to sort it all out as a night-watchman, undermining his work while he was trying to stabilise the ship?
Kwasi Kwarteng
That is right. Many historians will be needed fully to plumb the depths of the goings-on of that Administration—the level of incompetence, the level of secrecy, the high spending, the culture of fear that prevailed in the Treasury for much of that time. It will need many people to investigate that.
It was always the function of the British Treasury, as my hon. Friend well knows, to have a very conservative approach to public finances. It was always the tradition that we in the British Treasury tried to match expenditure to income.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I am listening carefully to the hon. Gentleman, but I think his historical facts are a little distorted. There has been some sort of deficit in nearly every year that we have had a Conservative Government since the end of the second world war. If he looks at the period 10 years on from 1996-97, he will see that both the debt and the deficit were lower after 10 years of Labour government. What he is saying is simply not correct.
Kwasi Kwarteng
I appreciate the hon. Gentleman’s intervention, but if he looks at the deficit and the direction of travel and what happened in the 1980s, he will see that the deficit came down, again after a period of Labour mismanagement, every single year from 1979 to 1989, and that the budget was balanced in 1989. It was only as a consequence of the recession that we went back into deficit, as a Keynesian economist would tell him.
Let us look at what has happened over the past three years. The Government came into office when the eurozone was in crisis and there was a massive run on Greek sovereign bonds. The Chancellor’s approach, quite rightly, was to make the deficit our No. 1 priority. That, in effect, calmed the markets. Opposition Members might scoff at the bond markets, but they are very powerful. It was particularly interesting to note that in the six weeks before the general election British gilts were actually rising in value and yields were falling, because the markets rightly believed that Labour would be turfed out of office. In anticipation of that happy event, and before the quantitative easing, people started buying British gilts.
The Chancellor’s approach to dealing with the deficit is exactly the right one, because it followed the insight that we have to deal with spending. All countries in the western world have to do that. That is what the fiscal cliff debate in America is about, because it understands that spending has to be on the table; the issue is the degree to which revenue should be on the table. It has a mature approach to public spending. It is only the Labour party that lives in this Shangri-La world in which we can carry on spending and borrowing money with abandon and making the crisis even worse.
Mr Michael Meacher (Oldham West and Royton) (Lab)
I think this is the most extraordinary rewriting of economic history I have ever heard in the Chamber. The hon. Gentleman has not once mentioned the banks and the financial crash. Does he not realise that the public sector deficit in 2007, just before the crash, was about 3%? It only rose—
Kwasi Kwarteng
The right hon. Gentleman has talked me out and I must end my speech, but I am happy to discuss the banks with him at any time. My point today is looking at—
Frank Dobson (Holborn and St Pancras) (Lab)
As one of the ancients, I must say that I was heartened by the maiden speeches of my hon. Friends the Members for Middlesbrough (Andy McDonald), for Croydon North (Steve Reed) and for Rotherham (Sarah Champion), who brought a great deal of cogency and compassion to the debate. I look forward to their participating yet more.
I have been struck, yet again, by the extent to which the thinking of Conservative Members is utterly dominated by the myth of the Thatcher legacy: that she transformed the British economy and that it was saved from ruin through competition, deregulation and privatisation. One can expect Tories to think that, but a lot of commentators in the newspapers and on television and radio clearly take the same view. It is entirely erroneous. The annual economic growth under Mrs Thatcher was exactly the same as that under the Governments of Jim Callaghan and Harold Wilson who preceded her.
But Mrs Thatcher had no excuse. The windfall takings from privatisation and North sea oil amounted to £155 billion. Practically every other country in the world that had such a windfall established a sovereign wealth fund to be invested over a long period. Instead, these Tories who claim to be careful with money blew the lot.
Frank Dobson
No, I shall not give way for the time being because I cannot make up my mind whether the hon. Gentleman is here or not.
The hon. Member for Burnley (Gordon Birtwistle) ought to remember that Mrs Thatcher abolished apprenticeships. She did not invest in research, improving engineering, infrastructure or retooling British industry. Her real legacy was to introduce the almost total dominance of banking and finance into our economy. What a decade and a decade and a decade we got out of that!
The bankers’ bonus has become one of the greatest scandals of all time. The British Bankers Association, the trade group of these respectable bankers, actually ran the LIBOR rate rigging so that people could make money. The payment protection insurance scams were intended to make money—they were not a charitable effort. Barclays was involved in the LIBOR scandal, in the PPI scandal and in sanctions busting, and it managed to lose £7 billion in the crash. Its auditors, PricewaterhouseCoopers, apparently did not notice any of that. It should have noticed, because the bank was not involved in those things as a charity; it was getting a percentage of every transaction and one would have thought its auditors might have spotted that.
The magnificent HSBC was involved in the LIBOR and PPI scandals, and we now know it was involved in sanctions busting in Iran, Burma and North Korea. It has been involved in the financing of gunrunners and in money laundering from drug barons in Mexico. To facilitate the Mexican drug barons it opened not six, 60, 600 or 6,000 but 60,000 secret accounts for Mexicans in the Cayman Islands, and it received a percentage from each. HSBC was not in it as a charity; it was in it to get money.
Presumably, some of the bankers were paid bonuses for the profits they made from sanctions busting, gunrunning and money laundering, yet HSBC, the former masters of the universe, lost £27 billion in the crash and its auditors, KPMG, did not get a sniff of it—not a thing. That is a disgrace and is damaging our economy and the reputation of British businesses trying to get work abroad. People say, “Have you got one of these dodgy auditors? Have you got a dodgy banker on your team? It’s not very helpful if you have.” That is a real problem.
To make up for the mess that the bankers caused—and continue to cause—ordinary people in this country are expected to skimp and save. My hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) shares the problem I have in my constituency of housing benefit. She will, therefore, be familiar with stories such as that of the woman who came to my advice service on Friday and lives in a council flat that was sold under the right to buy. She is expected to pay £485 rent to the private landlord who now owns that flat, but has been told that her benefit will come down by £160 a week, meaning she can no longer live there. Perhaps more importantly—even to decent, what used to be one-nation Tories—her nine-year-old daughter who is doing well at primary school will not be able to live in that flat any more, and neither will her 19-year-old son who is doing an apprenticeship. They will be driven out under what I first described—I know the Deputy Prime Minister does not like this description—as a policy of social cleansing.
The chair of the Tory party—when he isn’t Mr Green—says that people should not be able to live in places they cannot afford, but what about the people in my constituency who sweep the streets, keep the hospitals clean, work as nurses, drive buses and make the city work and a civilised place? They are exactly the people who are being driven out by the benefit changes, and I hope to God my party will vote against them.
Mr Meacher
I obviously made a mistake in giving way to the hon. Gentleman.
As the Chancellor acknowledged, he had two main objectives in his autumn statement/mini-Budget. One was to generate the growth that has certainly eluded him for the past two and a half years; the other was to rebalance the economy and lay the foundations for genuine, sustainable, long-term growth. He failed miserably on both counts. On the first test, the International Monetary Fund, the OECD, the Federation of European Employers, the CBI, the British Chambers of Commerce and the Federation of Small Businesses have all been telling him that he simply must inject growth into the economy and stop endlessly hacking away at public expenditure. Just how desperately such actions are needed is shown by the fact that the Chancellor’s own forecast in his 2010 Budget that cumulative public sector net borrowing over the next four years would be £322 billion has now been increased to a staggering £539 billion. That is an increase of £217 billion. The key point is that that increase is almost wholly attributable to the failure of the economy to grow. That is the significant point behind this debate.
Mr Meacher
I will give way to the hon. Gentleman, because he was kind enough to give way to me at the end of his speech.
Kwasi Kwarteng
I am glad to see that some courtesies are still observed in the House. Does the right hon. Gentleman accept that this country and this Government have a problem with current spending levels, or does he believe that we can carry on increasing spending indefinitely?
Mr Meacher
Of course I believe that there is a problem with the level of debt and the level of the public sector deficit; everyone accepts that. The issue is how it should be dealt with. I believe that the way this Government are dealing with it is profoundly self-defeating.
The Chancellor has failed in the sense that, according to the OBR, despite an output gap that remains incredibly high at 3.7%, the net effect of all his measures in the autumn statement will be to raise the general growth rate by a footling 0.1%. That is an extraordinary judgment on the Chancellor.
The Chancellor also failed his second test, which was to shift the economy on to a more sustainable long-term footing, moving away from his over-dependence on finance—a move we all agree with—and towards a much stronger industrial and manufacturing base. Eighteen months ago, he announced with great fanfare the march of the makers. That never happened, however. He has now promised a £40 billion guarantee for private infrastructure investment, but the problem is not one of too little credit; it is one of too little demand for credit. The latest figures show construction plummeting ominously, largely because of its great dependence on the public sector, which the Chancellor is shrinking. Moreover, UK manufacturing will this year suffer the biggest deficit in traded goods in its entire history—a deficit of roughly £110 billion, or 7.5% of gross domestic product. That is utterly unsustainable, and if that trend is not reversed, it will inevitably lead to an almighty crash in British living standards before long.
George Freeman
I am grateful for that intervention. If the previous Labour Government paid down the debt, why have we inherited this historic debt legacy—a legacy, it is worth reminding the House, that sees us paying debt interest payments that are set to rise to £76 billion a year, which is more than the amount spent on more than three Departments? This is a historic legacy, for which the Labour party should be ashamed.
Kwasi Kwarteng
I was wondering what my hon. Friend thought about the fact that the previous Labour Government ran consistent deficits from 2001 to 2007—even while the economy was growing.
George Freeman
My hon. Friend makes an excellent point, principally about the structural deficit. The public are not daft: they know the difference between a Government who spend more each year than they receive and one who wilfully disregard the underlying causes of the deficit, which were and still remain for us to tackle—the problem of an ageing society for the NHS, the public sector pensions bill and the out-of-control welfare state. I shall say something shortly about the Government’s important reforms in that regard.
I welcome this autumn statement, which begins the process of tackling once again the toxic debt legacy left to us by the Labour party. I welcome the fact that a Conservative Chancellor in a coalition Government has been able to deliver substantial savings—£33 billion in the welfare budget, £60 billion savings in interest repayments and £70 billion savings on the cost of government in Whitehall—allowing us to create the incentives for work, taking a million of the lowest-paid employees out of tax altogether, raising the tax threshold and abolishing Labour’s planned fuel duty rise, with the net result that over the last two years we have seen the creation of more than 1.2 million net new jobs in the private sector.
The Exchequer Secretary to the Treasury (Mr David Gauke)
This has been a passionate and thoughtful debate. I begin by congratulating the three hon. Members who made their maiden speeches this afternoon—all three were of the highest standards. The hon. Member for Rotherham (Sarah Champion) spoke with great pride and passion for her constituency. The hon. Member for Croydon North (Steve Reed) brought his local government expertise to the debate, and his understanding of the area he represents was most impressive. He also spoke movingly about his predecessor, Malcolm Wicks. The hon. Member for Middlesbrough (Andy McDonald), who is the first Middlesbrough-born Labour MP, spoke with great pride about his constituency. I imagine that being the MP for one’s home town must bring a particular pleasure to delivering a maiden speech and representing one’s constituency. He also spoke warmly of his predecessor, Sir Stuart Bell. I congratulate them all and wish them well in the House of Commons. I am sure they will make many further eloquent and passionate speeches from the Opposition Benches over the years ahead.
I also thank a number of my hon. Friends for their contributions. My hon. Friend the Member for Macclesfield (David Rutley) spoke about how it is necessary to get growth in the economy and discussed ways of achieving that. My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) made a strong and persuasive critique of the previous Government’s record and, indeed, of the level of borrowing under them.
My hon. Friend the Member for Dudley South (Chris Kelly) set out some of the benefits for businesses in the autumn statement, highlighting in particular the corporation tax cuts and the annual investment allowance, which will benefit many west midlands businesses. My hon. Friend the Member for Bristol West (Stephen Williams) made the point that it is right to reduce the deficit, even though it is taking longer than we had envisaged.
My hon. Friend the Member for North Swindon (Justin Tomlinson) welcomed the cancellation of the fuel duty rise, which was due in January, and set out the case for greater tax transparency. He was absolutely right to raise that and this Government are taking steps to ensure that people understand the tax they pay.
My hon. Friend the Member for Burnley (Gordon Birtwistle) spoke about apprenticeships, of which there are 1 million more as a consequence of the Government’s actions. He talked about help for businesses in the north-west, including in the aerospace industry. He also spoke about the annual investment allowance.
My hon. Friend the Member for South Dorset (Richard Drax) made a strong and passionate speech calling for lower taxes. My hon. Friend the Member for Mid Norfolk (George Freeman) set out the steps that the Government are taking to turn around the economy, and drew a parallel with the steps taken by Margaret Thatcher’s Government in the 1970s and 1980s.
I will not go through the list of all the right hon. and hon. Members who contributed to the debate, but I thank them all. In particular, I acknowledge the speech by the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling). As ever, he brought great expertise to these matters. I did not agree with everything he said, but I thought that his was a far better response to the autumn statement than some that we have heard from Opposition Members, not least the shadow Chancellor.
The right hon. Member for Edinburgh South West said that we live in difficult times. When there is clearly major disagreement between the parties in government and the Opposition about the correct response to the difficulties, we should all acknowledge that growth is lower than we would like it to be and lower than the independent Office for Budget Responsibility anticipated, but we should also acknowledge that there are encouraging factors in the economy. We should all welcome the fact that private sector employment has grown significantly in recent months. The fact that the deficit is falling in every year of this Parliament is to be welcomed. It would be regrettable if the Labour party sought to undermine the Office for Budget Responsibility in making its independent assessment of the public finances.
These are clearly difficult times, not just for the UK economy, but elsewhere. Growth in the UK economy next year has been revised down from where we had hoped it would be, but it is still likely to be greater than the growth in Germany, France and the eurozone. The key question is why growth is lower. The analysis of the Office for Budget Responsibility is very clear: it is because of the uncertainties created by the crisis in the eurozone, because commodity prices are rising more than we would have liked and because the damage done to the economy by the crash of 2007-08 was greater than had been realised.
The answer from the Labour party, essentially, is that we could solve all those problems simply by borrowing more. Very few Labour Members say that explicitly, although the hon. Member for Great Grimsby (Austin Mitchell) was happy to say that that is the right approach. The Labour party says that borrowing is higher than we would like, which it is, but its solution is to borrow more. That makes no sense at all.
It is also not the case that the high level of borrowing that we inherited—a record amount outside wartime—was purely to do with bailing out the banking sector. The shadow Chancellor may not accept this, but the International Monetary Fund tells us that the structural deficit before the crash was 5.2% of GDP—a hugely dangerous level. Any Government who ignored that and failed to address it would be taking the most enormous risk with the country. It is vital that we have fiscal credibility. We could not have gone on as we were. Had we not taken action and gone further than was set out in the plans of the right hon. Member for Edinburgh South West, we would have faced great difficulties. We could not dismiss the risk of the UK being sucked into a sovereign debt crisis, and it would have been complacent of us if we had done so.
The Government have acted to bring the deficit down, but at every step we have been opposed by the Labour party. Most of us did not come into politics to raise VAT, but it was necessary to do that and we also had to take steps to reduce departmental spending—again, that was opposed by the Labour party. We had to reform the welfare system and find £18 billion of cuts, including the introduction of a welfare cap, and we had to make changes to the child benefit system that hit the top 10% or 15% of households. The Labour party opposed all that and, as far as we can see, will not touch a penny of the welfare budget. That is not a great surprise given its record in office. In real terms, the welfare bill increased by 40% in 13 years. Before Labour Members say that that was a response to the crash in 2007-08, half of that increase—20%—occurred before the crash. In the good times the welfare bill was rising out of control.
Kwasi Kwarteng
What does my hon. Friend think about the fact that spending between 1997 and 2007 doubled in nominal terms—it went up more than 50% in real terms—and that the welfare bill more than doubled in that time?
Mr Gauke
My point is that we could not continue in that way. The difficulty with the Labour party’s record is that it believes most problems can be solved by throwing money at them. We have run out of money and cannot afford to do that. That is why we are taking difficult decisions and the welfare uprating will be 1%—we now know that the Labour party will oppose that. We must get welfare spending under control. That measure will save £2 billion, and if one looks at other measures introduced in the autumn statement, one sees that working households—including those in the lowest decile—will gain in 2013.
Bank of England (Appointment of Governor) Bill
Kwasi Kwarteng Excerpts(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen Hammond
The chairman of the 1922 committee is right on one thing and wrong on the other. It is very rare that I get to speak without a time limit, so I was not necessarily intending to conclude now—although I will, of course, do so very soon. As my hon. Friend will have noted from my argument, I was not trying to impugn the Treasury Committee or its candidate. I was merely pointing out that sometimes the outside observers of this House do not share the same faith in our institutions and decisions as we do. I was raising the possibility that a newspaper might impugn the reputation of a candidate by saying he is the only available candidate because he was the only one passed by the Treasury Committee. That would create a credibility gap in respect of that candidate, not only in the operation of financial regulation, but, more importantly, in the crucial international negotiations he will have to conduct on behalf of our country.
Kwasi Kwarteng (Spelthorne) (Con)
Is there not a danger that this whole process will create a media circus of the kind we see in the United States, and undermine the man or woman appointed as Governor before they even take up their position?
Stephen Hammond
My hon. Friend is absolutely right, and that is one of my concerns. I have tried to lay out some arguments suggesting that giving a veto to the Treasury Committee does not necessarily enhance the independence of the position of Governor.
Moving on now to my concluding remarks—my hon. Friend the Member for Altrincham and Sale West (Mr Brady), the chairman of the 1922 committee, will be pleased to hear that—I just want to bring the hon. Member for Hayes and Harlington back to his contention that this would not be a major change to our constitution. The Bill would put in place a legislative requirement for the Treasury Committee to have a veto over this appointment. The hon. Gentleman talked about the evolution of this role, but if he truly believed that, why does the Bill not seek to give Select Committees the power to veto all appointments—for there might be a number of Members of this House who would like to have parliamentary control of the appointment of the governor of the BBC, or the chief executive of Network Rail, or, closer to our hearts, the chief executive of the Independent Parliamentary Standards Authority? The hon. Gentleman said that private Members’ Bills give Members an opportunity to suggest changes to the Government. He might have had even wider support than he already has if he had introduced a Bill giving Select Committees the power of veto over appointments, so we could have had that more general discussion. To give that power of veto over this one appointment gives rise to considerable concerns, however, and it would create a major change in the constitutional position.
Chris Leslie
I am glad I was not there.
The Bank of England was established in about 1694, and we obviously must not rush these reforms. I commend my hon. Friend the Member for Hayes and Harlington (John McDonnell) for introducing this sensible proposition. If, as I hope, the Bill moves into Committee, we can refine some of the details of the accountability mechanisms. The Opposition are of the opinion that there is a need for stronger parliamentary accountability in respect of the appointment of the Governor. That ought to be done by the House of Commons as a whole, on the recommendation and advice of the Treasury Committee, rather than simply be delegated to the Treasury Committee to decide.
The arguments have already been enunciated. It is important that pre-confirmation hearings take place, that recommendations can be made by the Treasury Committee, and that then Parliament as a whole can decide. That would be the best way to proceed.
I do not want to speak for long because I want my hon. Friend to have the chance to secure his Bill’s Second Reading and to pass it on to Committee, where we can talk about these details. The Government’s proposals will vest the Bank of England with significant and radical new powers, particularly over what is known as macro-prudential policy making, through the new Financial Policy Committee and the Prudential Regulatory Authority. The Minister rather coyly suggests that the Financial Conduct Authority does not have a dotted line to the accountability process within the Bank. We all know that this is not just about a powerful bank, but about the immensely powerful Governor of the Bank of England. Some have described that person as a superhuman individual and the appointment will clearly be of major national significance to our economy and to the finances of our constituents and businesses up and down the country.
We debated the question of improving internal checks and balances for the Governor of the Bank of England when we considered the Financial Services Bill. The Opposition said at the time that the court of the Bank of England needed radical improvement and that its role should be more supervisory. That recommendation came from the Treasury Committee, yet there was resistance from the Government. It is now not unreasonable to want to improve and enhance the external checks and balances on the Bank of England and I do not think that would in any way compromise the independence of the operational monetary policy decisions over interest rates. I do not think that those things are at all incompatible.
It would have been nice if the Financial Services Bill could have been amended in the Lords in such a way, but the Government resisted that. We need to ask why they are so frightened of giving Parliament—in which, by the way, they have a majority—the opportunity to have that debate on pre-confirmation hearings and given to give the Treasury Committee the power to make a recommendation that the House of Commons could make on its own.
It is important to note that other central banks in other jurisdictions have similar arrangements. In the United States, for example, Congress has oversight over the appointments.
Kwasi Kwarteng
The contrast with the United States of America is very interesting, but surely the point is that Congress in America has jurisdictional right of veto over a whole range of appointments. That does not apply to this House, so to focus simply on the appointment of the Governor of the Bank of England without considering other appointments seems to be slightly bizarre, if that is the development the Opposition want to see.
Chris Leslie
It is strange to hear ambitious and thrusting Government Back-Benchers seeking to continue to be neutered, saying, “No, please don’t give us any more of a say or any more powers. We don’t need any and it would be wrong for us to have any involvement whatsoever, even if that simply meant rubber-stamping the recommendations made by the Treasury Committee.” I am baffled that hon. Members should want to continue to hobble their role in such a way.
Brandon Lewis
The hon. Gentleman makes a very strong point. I do not entirely agree because there is a clear difference between the type of appointments we are talking about and the role that those appointees take on and the powers that they have. However, a good argument can be made for the House to consider the role of Select Committees in public appointments, the associated power and at what level it sits. Perhaps he would like to come to business questions one week and make the case to the Leader of the House for time for such a debate, or make a case for it to the Backbench Business Committee.
The hon. Member for Hayes and Harlington argued that part of the aim of a private Member’s Bill such as this is to get the Government to listen, to hear a message, to take a view. The Minister will hear the points made in the debate. He will hear various arguments from various Members about the role of a Select Committee, its power or lack of power to appoint or veto an appointment, and will take that into account as part of the Government’s plans for the future. That is quite different from whether the Bill should have a Second Reading, when it is fundamentally flawed by giving priority and special treatment to one Select Committee over and above others. As much as I respect the Treasury Committee and all its members, I, as a member of the Work and Pensions Committee, do not think it fair that the Treasury Committee should be seen in a premier league, above the other Select Committees.
The Treasury Committee has argued for a role in appointing the Governor of the Bank of England by using as a precedent, as the hon. Gentleman did, the establishment of the OBR and the Budget Responsibility and National Audit Act 2011. The provisions of that Act give a statutory role, I agree, to the Committee in the appointment of the chairman of the Office for Budget Responsibility. Additionally, they give a statutory role to the Public Accounts Committee when a new Comptroller and Auditor General is appointed. However, that argument ignores a fundamental and crucial difference between the roles undertaken by those organisations and the role of the Governor of the Bank of England.
The Bank of England sets policy. Although the Office for Budget Responsibility is important, it primarily has an analytical or forecasting role, not an Executive ability to set monetary policy. It provides independent information to Government. That information is a powerful tool for Parliament to use in its scrutiny role and it is right, therefore, for Parliament to protect that role from political interference.
The Government’s position on the issue has been sensibly pragmatic. They have encouraged the involvement of the Treasury Committee in the appointment of the Governor. It has been interesting to hear from two speakers the private views of the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), in his comment that what he thinks the Treasury Committee is looking for is the ability to have a clear and open influence on the role, which indicates that there is not necessarily a strong view from the Chair—it is a shame that he is not in his place, but he made a comment earlier—about having the power of veto or appointment. That is an important distinction from such an eminent Member of the House, who would be the Chairman who benefited from any change.
The Government made a commitment in the coalition agreement to
“strengthen the powers of Select Committees to scrutinise major public appointments”.
The key word is “scrutinise”. That emphasises a right to examine, challenge, query or inspect closely and thoroughly appointments to major public bodies. My Select Committee has done that as well. However, it rightly makes no mention of a right to appoint or veto. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, that would be a substantial constitutional change to the way in which Select Committees work.
It is worth exploring what would happen if there were a right of veto and the Government and the Treasury Committee reached a stalemate in the appointment of a new Governor. If the Government—the Treasury—were unwilling to back down, and the Treasury Committee were determined to uphold its right to veto, given to it by this Bill, that could lead to uncertainty, creating turmoil in the markets, and at the moment we do not need any more of that. We can certainly see what such turmoil means for international relationships as much as internal markets. It could lead to a loss in international confidence in the Bank of England and the United Kingdom, which we benefit from at the moment. The result would be untold economic chaos and damage.
Kwasi Kwarteng
What does my hon. Friend think about the lengthy process for Supreme Court appointments in America, where people very often wait for months before an appointment is made? What might be the repercussions for our financial position in such an instance?
Brandon Lewis
My hon. Friend makes a good point. The way in which the American system can create turmoil is the very point I am making. As my hon. Friend the Member for Wimbledon said, we in this House know that the Treasury Committee would deal with the issue properly. The problem is the perception outside of such turmoil. We have seen in the press how such matters have been dealt with in the United States, which shows that what matters is what the public and the markets would think of such an impasse, particularly if there is a lengthy process.
Brandon Lewis
I thank the hon. Gentleman for further enhancing my point about where Executive power actually sits, in contrast to the scrutiny and forecasting role, as important as it is, which is very different from the Executive power wielded by the Government and some of the Executive bodies we are talking about.
If we are to extend the right to veto the appointment of one public official to any given Select Committee, the natural extension is to do so for other public appointments. In doing so, we would turn our Select Committee system and this House into a new form of Executive recruitment agency. Our Select Committees were established to scrutinise, investigate, consider, report and recommend. Principally, our Select Committee system is there to hold the Executive and other public officials and bodies to account. It was not created to veto the Executive, and it was not envisaged that the Committees would be used as quasi-recruitment advisers.
We should be striving to make the Bank of England more accountable to Parliament—I have no disagreement with that—but we should be looking to do so without shackling its sovereignty with more direct control over certain aspects by Parliament. Current concerns from constituents about the Bank of England do not focus on how the Governor is appointed. I certainly have not had in my postbag any letters, let alone a deluge of letters, on that.
Kwasi Kwarteng
I want to hear my hon. Friend’s view on my suspicion that constituents simply want the Bank of England to do its job and do not want the process to be politicised any more than it needs to be. A move towards a Treasury Committee veto would make it more political and less appealing to the very constituents to whom he has referred.
Brandon Lewis
I agree wholeheartedly with my hon. Friend. I attended a business forum meeting only 10 days ago and talked with businesses about the financial situation in our country. They were very optimistic and upbeat, but they were talking about what more we can do to make it easier for them to grow their businesses and create more jobs. Residents want to know what the Government are doing to allow more jobs to be created and to match the skills with the jobs that are available. They are not talking to me about how we choose the Governor of the Bank of England. They see a very clear difference—this relates to the interventions I have been enjoying from the hon. Member for Edmonton—between the Executive powers and the scrutiny powers and see that it is the Government’s job to set policy that will allow our economy to grow and, therefore, do not necessarily see, understand or have an interest in how the Governor of the Bank of England is appointed. They want to see that job being done properly and the Government setting out the economic policy correctly.
Mark Durkan
The hon. Gentleman made a long contribution, and I am sure that that top-up will add value to it.
At the start of this debate and in a number of interventions, reference was made to yesterday’s motions and debate, and a challenge was laid down: “How could anybody support this Bill if they didn’t vote for the parliamentary inquiry yesterday?”. The argument was that the Bill seeks to give an enhanced role to the Treasury Committee and that we cannot support it if we did not support yesterday’s motion for a parliamentary inquiry.
I did not support the vote for the parliamentary inquiry yesterday; my name was on the other motion, precisely because I really value the role of the Treasury Committee and the service it provides to the House. People have talked about the dangers to the Committee if its gets the powers in the Bill, and that it will fall apart and start to divide along party political lines, but there is more danger to the Treasury Committee from the decision that the House took yesterday, because its Chairman will find himself committed to a significant inquiry, which we are told will be time-intensive and extensive.
The Chairman said yesterday that he wanted the membership of the inquiry Committee to be heavily drawn from the Treasury Committee, so a select number of the Select Committee will also be absorbed by the inquiry throughout the autumn when what the Treasury Committee needs to do is concentrate on many other things, not least following up what emerges from the Wheatley review, which the Chancellor has announced. That review will recommend amendments to the Financial Services Bill, so the Government have recognised that in the light of what has happened with Barclays and the whole LIBOR issue, significant amendments to that Bill will need to be considered.
In essence, the Bill that my hon. Friend the Member for Hayes and Harlington (John McDonnell) has tabled today is a prompt, which canvasses for a fairly modest amendment to the Financial Services Bill—a modest amendment that might have its case reinforced by whatever recommendations emerge from the Wheatley review and the amendments we make to that Bill. As hon. Members on both sides have said, it already creates significant added powers, responsibilities and potential difficulties for the Governor of the Bank of England, the Bank and the whole hinterland of authorities and agencies around it.
Parliament has devolved more responsibility to the Bank and the Governor, and the appointment of the Governor will remain an appointment of government, although, as the Minister in the Financial Services Bill Committee, when correcting me and others, insisted on saying, “It is not appointment by the Government or the Treasury, but by the Crown.” I understand the distinction; I do not believe the fiction; and it is quite clear from his hon. Friends’ contributions today that they do not, either. They are ruthlessly defending the appointment as an Executive—ministerial—appointment.
Kwasi Kwarteng
The hon. Gentleman talks about modest amendments, but what is his view of the Bill before us and the large constitutional change that it embodies?
Mark Durkan
The hon. Gentleman tries to take up a point that the hon. Member for Wimbledon (Stephen Hammond) made earlier, when he talked about the Bill representing “a major constitutional departure”, a phrase that he used, I think, three times. But he ended up criticising the Bill for not going far enough or ranging wide enough. He wanted a Bill to give all Select Committees responsibilities and powers of appointment in relation to all sorts of other things. Hon. Members can have it both ways in their own contributions, but they are not going to have it both ways in mine.
Mark Durkan
I do not think that it is a major constitutional departure; I think that it would be a significant step and gain for Parliament. I do not go as far as my hon. Friend the Member for Nottingham East (Chris Leslie) in saying that the appointment of the Governor of the Bank of England should be subject to a full debate and vote in this Chamber, however, because that would cause all sorts of difficulties. Many of the difficulties that people allege could occur if the Treasury Committee had the role given to it by the Bill would certainly become risks in a highly charged debate and Division in this Chamber on the appointment of the Governor of the Bank of England. The issue would become highly political and potentially partisan, and it would cause market shakes and do nothing for the reputation of this House.
This Bill, which would give a parliamentary stamp of approval to the appointment, is a modest measure, because it would involve the relatively contained, constrained and considered forum of the Treasury Committee. In yesterday’s debate many hon. Members told us how special the Treasury Committee is. They said that it was a partisan-free zone where people are wise and worthy and do not go into it with any ulterior agendas. Then suddenly we are told today that if it were given the extra role that it seeks for itself in the context of the Financial Services Bill, all that would change. I do not believe that it would. This is not the power of appointment that Conservative Members are describing; it is a power of consent and confirmation. The Treasury Committee would not be doing the interviews, drawing up the shortlists, and so on.
Mark Durkan
No. I have already been generous enough, and some Members were too greedy in terms of the length of their speeches.
The Treasury Committee would have a power of confirmation. Some hon. Members are saying that it would have a power of veto, but what appear to be powers on paper would not be exercised in that way.
Earlier we heard reference to appointments to the National Audit Office. Some appointments are notionally appointments by Parliament because they are subject to votes in this House—for example, appointments to bodies such as the National Audit Office and the Electoral Commission—and my hon. Friend the Member for Nottingham East would say that there could similarly be a vote on the appointment of the Governor of the Bank of England. However, I do not believe that that is a comparable situation. Given the significant extra powers and functions that the Governor will have, particularly after our experiences over the past few years and the allegations that we heard yesterday about the whole murky interface between the Government, the Bank of England and the City, it would be remiss of Parliament to say “We’re quite happy to leave this in that odd black box that exists somewhere between Whitehall and the City. We as Parliament do not want to step up to the plate and say, yes, when this appointment is made in future there will be a parliamentary stamp on it.” That is all that the Bill is asking for, and it would entrust and delegate that parliamentary stamp to the Treasury Committee.
Mark Durkan
I am not ignoring anything that the Treasury Committee does, but nor am I here to filibuster and rehearse everything that it does. The hon. Gentleman needs to recognise that the Committee itself has unanimously recommended this change.
We heard in yesterday’s debate, and we heard from the Chancellor on Monday, about the importance of a parliamentary Committee of inquiry being able to produce a unanimous report and about its being worth nothing if it is not unanimous. Here we have a unanimous recommendation from the Treasury Committee, and the very people who have been telling us about the power and significance of parliamentary Committees and the compelling power of unanimity are saying, “We don’t care about it, we don’t want to know.”
Mark Durkan
No. The hon. Gentleman will have plenty of time to come back to this or any other point.
It has been argued that the Bill could be dangerous because it might enable the Treasury Committee or other Committees to go on shopping sprees for all sorts of other powers or abilities. I do not believe that this is a vanity trip on the part of the Committee. Most people would think it odd if the parliamentary Committee that was considering a change of the scale and importance of the new architecture in the Financial Services Bill did not say that Parliament wanted to have at least a bit more of a role regarding the key appointment to this fixed eight-year term. I will not get into the arguments that we had in the Bill Committee about the Putin clause whereby a Governor might be reappointed as a deputy governor for certain reasons.
In yesterday’s debate we heard people who supported the call for a parliamentary inquiry say that it was about Parliament stepping up to the plate. In many ways, the Treasury Committee seeking this role is about Parliament stepping up to the plate. If there is another financial crisis or banking scandal in a few years’ time and the new regulatory regime is seen as confused and difficult to understand—as we heard earlier, even hon. Members who support the Financial Services Bill do not understand what it means and are confused about its architecture—people will turn round and ask, “Who’s to blame this time?” Of course, the current Government will simply blame the previous Government for the way in which legislation has come about. In my view, yes, legislation can be blamed on the Government who sponsored it, but when it is wrong and flawed, that is also the fault of Parliament. Parliament, as well as the Government, should take its fair share of the blame when we get legislation wrong. We will be to blame, as a Parliament, if there are mistakes in the current Government’s legislation such as those that I hope they will remedy when they make further changes to the Financial Services Bill after the Wheatley review in the autumn.
We cannot turn round in future and say “It was all the fault of the Government—it was their legislation. The Bank of England got it wrong and the regulatory regime did not work. It is the Governor’s fault and the Bank appointed him.” The public are fed up with politicians washing their hands of responsibility—with all of us being in the business, as we saw in yesterday’s debate, of trying to fix the blame rather than trying to fix the problem and taking responsibility. If hon. Members trust the new arrangements in their Financial Services Bill, they should be prepared to trust Parliament to take its stake in the key decisions that will be made. We are told that Governor of the Bank of England is a key appointment, but it is odd that it should not receive a parliamentary stamp of involvement and approval despite the fact that people want that parliamentary stamp on many other appointments.
That is why I support the Bill. It is not a starter for 10 whereby we then go on to say that we will appoint the deputy governors and others. It is modest even on its own terms. It does not even say that the Treasury Committee should have the power of consent over the appointment of the deputy governors. Those are also key appointments given the distinct roles that they will play. Conservative Members need to stop exaggerating in their arguments against the Bill. They need to listen to the compelling case for it and to remember that this would be a much more modest amendment than the significant changes that we will probably have to make to the Financial Services Bill in the autumn.
Mike Freer
That is one argument, but the contrary argument is that if the chosen candidate fails to carry the support of a substantial number of Members—there could be a majority of just one—there would be a credibility gap and the candidate would be damaged. What if the Chancellor were forced to withdraw a candidate or if the candidate chose to withdraw and we ended up with a second candidate or a third, eventually getting to the least worst candidate? That is not good governance; it is certainly not good for the credibility of the institution and cannot be good for the policy of the Bank of England.
People say, “Well, if there is a delay, it does not matter too much; it is more important to get the right person for the job.” Members will recall that when the former chairman—if that is the correct term—of the International Monetary Fund, Mr Strauss-Kahn, was forced to resign, the gap between his departure and the appointment of Mrs Lagarde caused a huge sense of drift in the international markets. That should cause the House to think twice about creating a scenario that could cause the same sense of drift here.
I have another objection to the Bill. We have already agreed to a fixed eight-year term for the Governor’s appointment. That is a difficulty in itself, because the eight-year period will not be coterminous with the fixed parliamentary terms, but if we continue to delay an appointment, a huge problem may be caused. Governors could be appointed mid-Parliament, which could lead to a politicisation of the appointment.
Kwasi Kwarteng
Does my hon. Friend not agree that the plan for an eight-year fixed term is a much better safeguard for independence, and for the ability of the Governor to do his or her will and act according to his or her abilities, than the Bill’s proposal to make the appointment contingent on the will of the Treasury Committee?
Mike Freer
I certainly agree that the fixed-term appointment is a huge step towards independent stability. As I was trying to explain, what concerns me is that if the vacancy arose after a change of Government, the new governing party could seek to ensure that the new Governor was much more in tune with its own political views. I fear that both the appointment and the removal are much more likely to be politicised if the Select Committee gets its way.
Joseph Johnson
Thank you, Madam Deputy Speaker. I will follow that guidance.
I am equally concerned that giving the Treasury Committee a veto over the dismissal of a Governor could, in certain circumstances, create an unacceptable situation in which the Governor has lost the confidence of the Government but hangs on as a lame duck. That would clearly be unacceptable given the Executive powers he would be discharging on behalf of the state. That is exactly why the Government have historically attempted to address those issues by limiting the Treasury Committee’s role to non-statutory pre-commencement hearings with members of the Bank’s policy committees, which of course already include the Governor and deputy governors.
Let us not forget that the Treasury Committee already has a huge impact through its oversight, as Lord Burns noted in another place,
“simply by the way it brings people in, talks to them, summarises its opinions and then leaves it in the hands of Ministers to decide how far they wish to take account of those views”.—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. 163.]
Kwasi Kwarteng
Does my hon. Friend think that the Bill would give the Select Committee enormous powers that are totally incommensurate with its constitutional functions in this House?
Joseph Johnson
Yes, I could not agree more with my hon. Friend. Like other Members who I will not mention again, I think that it would be far preferable for the Treasury Committee, if it is to have a formal role in any appointment of the Governor of the Bank of England, to be a statutory consultee. I do not believe that it would be remotely appropriate, however, for it to be given powers of decision over any such appointments.
In my view, moving towards the system of making the Select Committee a consultee, perhaps through a tweak to the Financial Services Bill as it goes through the other place, would be a more sensible system that would not cloud lines of accountability and would, in my view, avoid putting the Treasury Committee in the position in effect of having to mark its own homework. That would inevitably be the case if it were given veto rights over a candidate that it had itself jointly chosen in a binding pre-appointment hearing. From Parliament’s perspective, I believe that it would be better and preferable to stick with the status quo, whereby the appointment of the Governor is a matter for the Crown on the advice of the Chancellor and the Prime Minister. That enables the Treasury Committee to do its job of holding the Bank to account regularly and effectively in hearings with policy committee members.
In support of calls for a parliamentary veto of the appointment of the next Governor of the Bank of England, much has been made of the supposed precedents set by the Treasury Committee’s veto in the appointment of the head of the Office for Budget Responsibility. Reference has also been made to the rather more long-standing role of the Chairman of the Public Accounts Committee in the appointment of the Comptroller and Auditor General. The CAG is an officer of Parliament but until 1983 was appointed by the Executive. Since the passage of the National Audit Act 1983, the CAG has been appointed following a vote in the Commons on a motion proposed by the Prime Minister with the agreement of the Chair of the PAC. The selection process preceding that is run by an unusual partnership between Parliament and the Government, with the Chair of the PAC sitting on the selection panel with representatives of the Executive.
I happen to think that the comparisons are rather misleading and unhelpful. The role and responsibilities of the Governor in economic and financial policy making are completely different from the role of the Chair and members of the OBR, who are responsible collectively for producing forecasts and other analyses twice a year. In the case of the OBR, a parliamentary veto of the appointment can make sense in terms of providing assurance about the independence of the role of the OBR. The role and responsibility of the Governor are completely different. Whereas the OBR performs an important function in providing an independent and unbiased forecast on which Government policy can be based, the Governor carries out Executive functions on behalf of the state and has responsibilities delegated to him for key areas of economic policy.
A further important difference already touched on by my hon. Friend the Member for Great Yarmouth is that the appointment of a prospective Governor is clearly market-sensitive in a way that appointments to the OBR or National Audit Office in the case of the Comptroller and Auditor General clearly are not. Once an appointment is announced, his or her perceived policy leanings—whether or not, for example, the next Governor is perceived to be a hawk or a dove—can be duly factored into asset prices in an orderly way. Pre-appointment hearings of a sort that give MPs on the Treasury Committee a potential veto could quite easily cause anxiety and costly volatility in financial markets, for little obvious benefit—a point also made by my hon. Friend the Member for Spelthorne (Kwasi Kwarteng).
To reiterate the central point, rather than giving the Treasury Committee a veto, a better option would be to upgrade and modernise consultation arrangements, potentially to include not just the Chair of the Treasury Committee—a point that I made earlier—but the chairman of the court of the Bank of England. It is important that we upgrade and modernise the court of the Bank of England so that it can perform its oversight function more effectively than it traditionally has done and so that it feels properly empowered to use the rights that it already has under the Bank of England Act 1998, which are to manage the Bank’s affairs, other than the formulation of monetary policy. That means much more than simply addressing what many have described as an excessively deferential culture at the “court of King Mervyn”, as the Financial Times cheekily described it some time ago. It means more than changing the court’s somewhat archaic name, or removing a little of the flummery—the men in pink coats deferentially bearing silver platters around the Bank, and so on.
Matthew Hancock
Indeed. The English-speaking world and countries more widely have been wise to mirror that structure because it leads to strong Executive Governments who can deliver for the people in good times and bad. The Bill would have us rend asunder the gossamer fabric of the British constitution. I note that the hon. Member for Foyle (Mark Durkan), who is no longer in his place, supported the Bill, but described it as a significant constitutional departure. However, he also said that it was not a major constitutional departure. I will not go into an analysis of the difference between a significant departure and a major one, but I think that the Bill would wrest a key instrument of Executive power—the power of appointment—away from Her Majesty’s Government and confer it instead on a single Committee of this House.
Kwasi Kwarteng
Other Members have made the point that if we are to go down this route, we should perhaps seek to extend the powers of this House and its Select Committees, whereas the Bill relates to only one appointment. We should really be looking either at the mass or not considering the Bill at all.
Matthew Hancock
Like my hon. Friend, I find it odd that some Members have concentrated on the implications of the Bill, rather than on the Bill itself, and others have made the point he raises clearly. Because that discussion has already been aired quite a lot and I want to keep my comments relatively concise, I will leave it where it is, other than to say that I agree with the broad thrust of his point.
Another implication was raised by my hon. Friend the Member for South Derbyshire (Heather Wheeler) in her short speech. She pointed out that the decisions of the Treasury Committee, and indeed those of all Select Committees, are technically referred to the Floor of the House for what is in almost all circumstances a rubber-stamping exercise. I am a member of the Standards and Privileges Committee, which does in fact have some executive powers, but they are over the running of this House, not the Executive functions of the UK Government under the Crown. That distinction is as vital as the distinction between oversight and scrutiny on the one hand and Executive power and veto on the other—voice not veto, as it has been eloquently put. The constitutional implications are not inconsiderable. Given that the Government have already proposed to spend 10 days in Committee of the whole House discussing a constitutional change of a broadly similar size, the idea that we should pass this Bill—
Matthew Hancock
The argument appears to be that we should give the Treasury Committee a power of veto, unless the whole House disagrees with that veto. However, the majority in the House support the Government and it is the Government who initially propose who should be Governor, so the Government could never be overruled in extremis. To support a Bill in which the ultimate safeguard is the abolition of the Select Committee system is a little extreme.
Kwasi Kwarteng
Does my hon. Friend not think that this knotted discussion about the relative powers of the Select Committee and the Government demonstrates the quagmire of indecision and delay that the route proposed by the Bill would lead us into?
Matthew Hancock
I do not think that the principles in the Bill have been well thought through. That is why I started by arguing that the constitutional implications of the Bill are profound and underestimated by its proponents. Many of the questions that are being raised in interventions on me are ones that I had not even thought of while I was wondering what view to take on the Bill.
Matthew Hancock
I have no doubt that the appointment of a Governor of the Bank of England should be above politics. We should appoint somebody for their economic, financial and policy-making experience. They should be somebody of weight from that world. The position has rarely been filled by somebody from the world of politics, and for good reason. As well as having to engage in the political world of the country, the Governor has great duties in putting the economic and financial interests of the nation to the fore. I would therefore be concerned if a potential Governor chose not to put their name forward because they did want to get involved in the quagmire of party politics during their appointment. The point that my hon. Friend the Member for Great Yarmouth (Brandon Lewis) makes is an important one, and it anticipates a point that I have on page 36 of my speech. Since I am only on page 4, perhaps I should make some progress.
I will not dwell on the argument that the constitutional precedent would be much wider than simply the implications for the Treasury Committee. My hon. Friend the Member for Great Yarmouth made the point that the Chief of the Defence Staff might have to be confirmed by the Defence Committee, so I shall cross that line out of my speech. A potential head of MI6 might have to be scrutinised by and avoid a potential veto from the Intelligence and Security Committee before being given the job. There are more extreme and absurd examples showing that we should not take this lightly and push a new principle through the House on a Friday afternoon.
My point about Parliament and our system of government is only one consideration, but it is the reason why the principle of the Bill deserves serious and profound reflection. Its ramifications could outlive the Government of the day and last many Sessions of Parliament, because once such changes are made they tend to take hold. The appointment of the judiciary is a long-standing and slowly evolving matter, and very few Members would support the idea that the Justice Committee should have a veto over the appointment of High Court judges, but that is analogous to the proposition in the Bill.
I will go through some of the lessons from history and some of the international lessons that are pertinent to the Bill. Central banks are unique financial institutions and have a delicate balancing act to perform. As has been pointed out, the Bank of England was set up in 1694 to finance the nine years war against France. We won that war largely because Britain had the ability to finance a standing Army effectively, through the Bank of England. Instead of borrowing directly from the market, Britain established the Bank of England to issue debt on behalf of the Government. From then on, the strength of the institution was watched and repeated in countries around the world. In 1844, the United Kingdom broke new ground by issuing to the Bank of England a monopoly on the supply of money, so that competing banks could no longer issue banknotes of their own.
Kwasi Kwarteng
Was not one of the principal features of the Bank until its nationalisation that it was entirely independent of the Government? Does my hon. Friend think that was important in any way?
Matthew Hancock
It was, but I would not wish to return to private subscription for the ownership and governance of the Bank of England, because of its role in our political economy. My hon. Friend the Member for North East Somerset might wish to push for that, but I believe that the settlement reached after nationalisation in 1946, whereby the Bank of England has its own capital base but is effectively part of the national political economy and one of the national institutions of economic governance, is the right one, rather than having private shareholders.
Since the Bank Charter Act 1844, other banks have been able to issue notes in sterling, and I believe that nine other banks do so in Scotland and Northern Ireland, but they have to be 100% backed by Bank of England banknotes held in the vaults of either the Bank of England or the issuing bank. That ensures that control of the money supply is within the grasp of the Bank of England rather than any other bank. I know that there are some Members who would prefer to return to the system from before 1844, not least my hon. Friend the Member for Wycombe (Steve Baker), with whom I regularly debate the point. I did so yesterday. However, the broad and settled view of the House is that we should retain the current situation.
Because the central bank is the monopoly provider of money and the lender of last resort, it must share a common strategy with the Government even though it is vital that its operational decisions on interest rates and financial stability are independent. The current appointment process fulfils well the twin objectives of operational independence and broad agreement on strategy. It also means that the Government can appoint a Governor who broadly shares their philosophy of economic management, even if the Governor is kept at arm’s length from party political machinations, the 24-hour news cycle, headline grabbing, tweeting and retweeting, and the Westminster bubble culture, which is the special discourse of the modern political set-up.
Economic history shows us the importance of the broad strategic agreement between the Governor and the Government of the day.
Kwasi Kwarteng (Spelthorne) (Con)
I was particularly interested to hear the contribution of my hon. Friend the Member for West Suffolk (Matthew Hancock), who added an international and historical dimension to the debate, which I think should be broadly appreciated. I congratulate the hon. Member for Hayes and Harlington (John McDonnell), my near neighbour, on bringing the debate to the House. I think that his measure would contribute in some way to scrutiny, but I am afraid that the Bill raises important constitutional considerations and, on those grounds, I am reluctant to support its Second Reading.
Another feature of the debate has been the frequent comments, often from a sedentary position, about the length of the speeches. I have been a Member for two years and know that the constant refrain is that proceedings are guillotined, debates are not fully developed, ideas are not fully expressed and that there is far too little consideration or earnest debate on important matters on the Floor of the House. Today, by contrast, we have had a very full debate, yet some Members are complaining about that. They cannot have it both ways. They cannot complain about the truncated nature of many of our debates and then complain about the full and thoughtful speeches that have been made today. Those are inconsistent principles.
Brandon Lewis
Does my hon. Friend agree that it seems particularly odd to hear those comments from some Members, as we have had to sit in the Chamber at 1 o’clock, 2 o’clock and even 3 o’clock in the morning listening to long speeches from Opposition Members?
Mr Deputy Speaker
Order. Let us not have a debate about the debate. Let us please just move on to the Bill.
Kwasi Kwarteng
I want to make a remark about the Bill, and not of a partisan nature. I am very grateful to be able to speak fully, and I will not be intimidated or bullied into truncating my remarks to make them shorter than I had anticipated—
Mr Deputy Speaker
Order. May I now gently bully the hon. Gentleman into moving on to the Bill?
Kwasi Kwarteng
Thank you, Mr Deputy Speaker. I am suitably bullied and shall proceed as I intended.
The Bill raises important constitutional issues. We have a Parliament, we have the honour of sitting in the House of Commons, and we all know the struggles the House had in order to assert its primary function and its principal character as the legislature and main law-making organ of government. I am afraid that the Bill represents a further encroachment of the powers of the House of Commons. I am a Conservative. I happen to think that there should be a balance and distinction between the Executive and the legislature. As someone who has read a little of the history of this place, I also recognise that the position of the House of Commons in the constitution should be guarded, but this new development—this assertion that the Treasury Committee should have a power of veto or even a power of appointment over the Governor of the Bank of England— represents an unprecedented extension of the powers of this House.
Jeremy Corbyn
The hon. Gentleman makes an interesting point, but will he not care to look at the matter slightly differently? Yes, the Bill extends greater powers to the House of Commons, but in reality these are currently powers of patronage over which the House has no control. The Bill represents a very small encroachment on those powers of patronage, which are the Achilles heel and bedevilment of the British parliamentary system.
Kwasi Kwarteng
The hon. Gentleman makes a very good point, and he talks about patronage, which is a feature of our system, but if we are to talk about patronage, we should do what other Members in the debate have suggested and talk generally about the powers of the Select Committee system. It seems rather bizarre that in the Bill we should debate the appointment of a single public official, because we should debate—if that is what we want to do—the powers of Select Committees over other appointments.
Jeremy Corbyn
I agree that we should debate and, indeed, extend the powers of Select Committees, because I do not see any reason why, if a Select Committee is so minded, it should not be allowed to introduce legislation as well as to supervise appropriate appointments within its purview. That after all is one reason why we are elected to Parliament—in order to have some democratic influence over what in our society are largely undemocratic institutions.
Kwasi Kwarteng
I appreciate the hon. Gentleman’s remarks, but Mr Deputy Speaker, with your forbearance, I suggest that this debate is about the appointment of the Governor of the Bank of England. We can have more extensive and general debates about the appointment of other officials, but I think that our current system works well. I would not want to see, for example, the Archbishop of Canterbury hauled up in front of a religious affairs Committee for “ratification”.
Jeremy Corbyn
We can leave that very difficult problem of the Archbishop of Canterbury to one side by simply disestablishing the Church of England.
Brandon Lewis
The points that Opposition Members have made go to the heart of the problem with this Bill, because it would be stage one of—to quote what an hon. Member said earlier—a drip-feed effect that changed the very way in which Select Committees worked by changing their power from one of scrutiny to one that is linked to the Executive.
Kwasi Kwarteng
Absolutely. If the hon. Member for Islington North (Jeremy Corbyn) wants to debate that point, he should include it in his own private Member’s Bill, if he is fortunate enough to introduce one. He should introduce a Bill, and then we might have a lengthy debate.
The specific proposal before us is not appropriate, however, and I shall say why. The historical examples, which have been too little regarded, are very important. We have to look at the development of Parliament, to understand its powers and to understand the evolution of the Bank of England and its unique role in the historical and current governance of political economy. We have to understand a range of things.
As my hon. Friend the Member for West Suffolk said, we have to look also at international examples from recent history and throughout the world, and it is quite wrong for Opposition Members to try to curtail or to truncate debate. As I said at the beginning of my speech, I do not think it wrong for the House of Commons to debate things fully, and, on that basis, I turn to what Parliament does and what we are trying to do.
We scrutinise the Executive. Our job is not to make Executive appointments, to opine upon or to veto people appointed by the Crown; it is simply to scrutinise the Executive. The appointment of a Bank of England Governor is a matter for the Executive, and has been ever since the Bank’s nationalisation in 1946. One of the more interesting speeches today related to the origins of the Bank, because we have to understand where it has come from, and I repudiate any attempt to curtail Members’ right of speech when they are describing the history of the Bank. Everything is contingent: one has to understand the history of institutions to understand better how we can develop them.
The Bank of England was for almost 270 years an independent institution. It was a private bank, and its governor would spend two years in the role on a rotating basis. That broke down after the first world war, in 1920, when Montagu Norman was appointed Governor of the Bank of England. The hon. Member for Hayes and Harlington suggested that the new Governor—this superman or superwoman—would have such enormous powers and influence that no Governor has ever equalled them. That is completely unhistorical and false. Montagu Norman was Governor of the Bank from 1920 to 1944. He was Governor in 1925 when we went back on the gold standard and in 1931 when we came off the gold standard. He was Governor in 1939, just before the second world war, when exchange controls were imposed. He only left, dragged kicking and screaming from his post, after 24 years. He was a man of enormous power and influence, and it is very unlikely that any subsequent Governor will exercise the same kind of power. The simple reason is that under the current proposals we suggest that a Governor should have a single term of eight years, so there is no question of a man or woman being Governor for the same length of time as Montagu Norman or, similarly, Kim Cobbold, who was Governor for 12 years.
Members who are trying to make the case for supervision are utterly exaggerating the nature of this man or woman’s power once he or she is appointed to this important role. That is obviously due to their desire to exaggerate the power of the Governor to try to justify the appropriation of power on the part of the Treasury Committee. Under the Bill, that Committee, which is made up of 13 Members of this House, would have inordinate powers unequalled by that of any other Select Committee. That would distort the relationship of the Treasury Committee to this House and give it a preponderant influence in relation not only to scrutiny but to the Executive branch through its power of veto.
The proposal imports an alien structure from the United States, and that frustrates and disappoints me. The American constitution is a very different beast with a very different history from ours. As my hon. Friend the Member for East Surrey (Mr Gyimah), who is no longer in his place, pointed out, it has a strict division of powers. In America, no members of the Executive sit in the legislature. It is therefore right and proper that the legislature, as embodied in Congress, should have the power of scrutiny over an Executive who have no role in the legislature.
Heather Wheeler
We are getting to the heart of the issue. Surely this debate is about the fact that Governments govern and Select Committees scrutinise—full stop.
Kwasi Kwarteng
Absolutely. In her very direct way, my hon. Friend hits the nail on the head.
Stephen Pound (Ealing North) (Lab)
As it is fairly obvious that we are running into the sands of procrastination and filibustering—
Stephen Pound
I profoundly apologise, Mr Deputy Speaker; I abase myself before you.
I put it to the hon. Gentleman that he might just as logically say that dictators dictate. Surely there can be no greater or more magnificent ornament of the constitution than the Chair of the Home Affairs Committee, to whom I listened last week as he interviewed a preferred nominee for the post of Her Majesty’s chief inspector of constabulary. A little bit of democracy is not that painful; it is rather a healthy thing.
Kwasi Kwarteng
The right of veto proposed in the Bill, which apes the structures in the United States of America, is totally inappropriate and would take the constitution down a road that we have not travelled down before. My hon. Friend the Member for West Suffolk talked at length—but to the point, I must say—about the structures in the United States. It is important that we understand what goes on in the United States in order to understand what might happen here if the Bill becomes law.
We well understand the recent financial history of the world. I was working in the City in 2000—[Interruption.] I am not ashamed that I had a job outside this House. I do not think that it is something I should apologise for. I worked on a dealing room floor in 2000 at the time of the election in the United States. The financial uncertainty that prevailed in the markets as a consequence of the indecisive nature of that election, with the fight between Bush and Gore being taken up to the Supreme Court, was debilitating. I have first-hand experience of that.
I would not want to see a situation in this country in which a candidate to be the Governor of the Bank of England was scrutinised by the Treasury Committee and an impasse reached, resulting in days or even weeks without an appointment being secured. I know from first-hand experience that that is the worst message that could be sent to the financial markets in what are perilous and uncertain times. It would be irresponsible of us to delay or complicate the process in that way.
Jeremy Corbyn
Does the hon. Gentleman not feel that in his opposition to the Bill, he is in danger of treading down the rather dodgy road of saying that he supports some kind of technocratic Government, with democratically elected politicians becoming observers, rather than the participants and the controllers? Surely the whole point of the US constitution was that democratically elected politicians were trying to assert their power over the structures of society. I realise that there is much corruption in the US financial system, but surely the principles of the US constitution are not entirely wrong.
Kwasi Kwarteng
I agree with the hon. Gentleman. All I am suggesting is that the balance of powers is about right. We know that the House of Commons had a long struggle against King Charles I and the Executive. However, I think that the current constitutional balance is about right.
I do not think, as I suggested earlier, that the Archbishop of Canterbury, the Chief of the Defence Staff or the chairman of the BBC should be scrutinised by Select Committees, but that is a debate for another time. I cannot support this Bill because it would add an element of uncertainty to the financial markets, which is the last thing that we need at this time. I thank Members of the House for indulging me in my brief remarks.
Oral Answers to Questions
Kwasi Kwarteng Excerpts(12 years ago)
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Kwasi Kwarteng (Spelthorne) (Con)
To what extent does the Minister believe that having the top rate of tax in the G20 helps British competitiveness?
Finance (No. 4) Bill
Kwasi Kwarteng Excerpts(12 years ago)
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Owen Smith
We do not know—[Laughter.] Conservative Members might laugh, but I would like to see them present some evidence on this, instead of the flannel and rhetoric that we are hearing—[Interruption.] The Minister is waving the HMRC report. Will he point to the part of it that gives definitive data on the impact on competitiveness of any rate of tax? There is nothing about that in the report, which is why he is not getting up to point it out. Come on! Let him show me the part of the report that substantiates the point made by the hon. Member for South West Norfolk (Elizabeth Truss).
Owen Smith
No, there is more from the Chancellor. Conservative Members ought to listen to this, because it is their very competent Chancellor speaking. A year later, in October 2010, he said:
“The public must know that the burden is being fairly shared. That’s why I said last year: we are all in this together. And I am clear…that those with the most”—
like those on the Treasury Bench—
“need to pay more. That is why… I have stuck with the 50p tax”.
Have I missed something over the past 18 months since this Chancellor has been in trouble? As far as I have seen, the economy has flatlined, growth is at absolutely zero, business investment is going nowhere and inflation is rising. The only thing that has fallen recently is unemployment. Thanks be to goodness that it has dipped today, but it is still at 2.6 million, and as I pointed out to the Minister on Monday night, 2,500 people were queuing for 200 jobs at a supermarket in my constituency last week. That is the reality of the economy under this Government, unfortunately.
Kwasi Kwarteng
Will my hon. Friend outline just how uncompetitive the 50p rate was compared with the rates of other G20 countries?
Elizabeth Truss
It was the highest income tax rate in the G20. We heard earlier from the Opposition spokesman that Labour did not understand the effect that that would have on our international competitiveness, which shows why it is not fit for office.
Amendment of the Law
Kwasi Kwarteng Excerpts(12 years, 1 month ago)
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Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The Chancellor’s Budget speech painted a positive picture, in some ways, of what his policies are doing for the UK economy. However, although some businesses in my constituency are doing well, at the grass roots, among small businesses, I find a lot of people who are very worried about the future of their businesses, and that many of those who have been struggling to survive over the past year are now on the brink. I am sure that my constituency experience is typical of that of many Members in constituencies up and down the country.
That is why the Chancellor has made a dramatic mistake by rejecting Labour Members’ call for a temporary cut in VAT, which could have provided an immediate boost to businesses, created jobs and provided real relief for those on the lowest incomes. On the main street in my constituency, there are all sorts of shops, offices and other types of businesses, and I am genuinely worried that many of them are in great danger of going over the cliff edge if there is not an immediate boost to the economy such as a reduction in VAT. The temporary VAT reduction that Labour introduced at the end of its period in government certainly had that effect, and another temporary reduction would be an important boost for all types of businesses, but particularly small businesses, in my constituency and up and down the country.
Kwasi Kwarteng (Spelthorne) (Con)
The hon. Gentleman talks enthusiastically about businesses. Do not the measures in the Budget to cut corporation tax support business?
Mark Lazarowicz
The measures on corporation tax will have a beneficial effect on some businesses, but not so much for the smallest businesses. I am particularly concerned about the small businesses in a fragile situation in many parts of my constituency, which does not, relatively speaking, have very high unemployment overall, although some areas do have high unemployment.
First, we need a general 2.5% reduction in VAT that would benefit all types of businesses, as well as relieving people on low incomes, in particular, from the difficulties in which they find themselves as a result of the general economic situation and the policies of this Government. We also need targeted cuts in VAT. It is extremely disappointing that yet again the Government have rejected the call, not only from Labour Members but from organisations such as the Cut the VAT Coalition, which has called for VAT on home maintenance, repair and improvement work to be cut to 5%. That would not only be a boost for the depressed construction sector but would create work for joiners, plumbers, electricians and painters, and opportunities for young unemployed people looking for their first job.
Of course, one has ask how one would pay for a temporary cut in VAT. If the argument is that the top rate of tax is being cut because it will bring in more income by encouraging economic activity—a fairly dubious argument in my view—surely temporary cuts in VAT of the kind that I and my party have argued for are much more likely to lead to an immediate increase in economic activity than the cut to the top rate that is proposed in the Budget.
Kwasi Kwarteng (Spelthorne) (Con)
I am pleased to have the opportunity to speak in the Budget debate, because we had a significant Budget yesterday.
We have to consider what the Chancellor said in the Budget in the context of 10 years of Labour profligacy in public spending and in the context of the international economy. The Office for Budget Responsibility has been clear about the problems that face the British economy. There are structural problems caused by too much debt, which in turn was caused by too much spending. It is clear to everyone that spending more money or running a greater deficit would not help to get us out of this situation. The Government are doing what they set out to do and they are reducing the deficit. The Budget yesterday was a step in the right direction. We are trying to cut regulation and to encourage enterprise and aspiration. All that was clear in the Budget.
I would like to talk about tax cuts. The most significant tax cuts in yesterday’s Budget were not at the top end of the income scale, but at the lower end. It was an historic step to take hundreds of thousands of people out of taxation. It is striking that in this debate, the Labour party has made no comment about that. It has not given us the courtesy of saying that it agrees with the proposal, nor has it opposed it, yet it was the most significant move in the Budget.
There were other, perhaps more controversial moves, such as cutting taxes for wealthier citizens and subjects, which have created some debate. It is received wisdom, I think, that high taxes did not stimulate economic growth. Some Members will remember that there was a 98% super-tax in the 1970s, and we were a very highly taxed nation. Other Members were here when Nigel Lawson cut the top rate of tax from 60% to 40%. That was so successful that in 12 years, Labour did not touch it. It always accepted that 40% was a reasonable and good tax rate, not because it was friendly to the rich but because Labour’s leadership realised that there needed to be incentives to make the economy grow.
Mr Speaker
Order. I think the hon. Gentleman was referring to his noble Friend the Lord Lawson of Blaby. It would be good to preserve some of the courtesies of the House.
Kwasi Kwarteng
Indeed. I am very grateful to you, Mr Speaker, for putting me in my place. I will refer to him with proper courtesy with his title. The Budget in which he cut the top rate—the 1987 one, I believe—was the most significant in recent years, and only latterly have a series of political games been played and has the top rate been increased. Other Members have referred to that, and it is an elephant trap that the Government have mercifully dodged.
We have to consider the Budget in its national context, but also in an international context. It is no good our having worthy debates here without referring to what is going on in the rest of the world. I was very pleased to see that the Chancellor had finally realised that aviation capacity in the south-east is a massively important issue. The fastest-growing cities in the world need to have more connections. We will not be able to make money or trade with them without connections, and the Chancellor’s step of recognising the problem is mature and bold.
While we are focusing on spending and regulation, we have to realise that other parts of the world such as China, India, Brazil and places in the middle east such as Dubai have favourable regimes for business. If we are to compete seriously with those countries and their regimes, we will have to do an awful lot more even than we are doing to make ourselves competitive.
The Budget was excellent and a step in the right direction, although we need to do more to meet the targets that we have set ourselves. The Office for Budget Responsibility has said that it is looking for 3% growth in 2015 and, to meet that, we will have work an awful lot harder.
Jobs and Growth
Kwasi Kwarteng Excerpts(12 years, 7 months ago)
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Mr Darling
As we have heard today, the shadow Chancellor and the Labour party are still adopting my policy on the deficit. It was a sensible policy when I first announced it in 2008, and it is still a sensible policy today. The heart of my present argument is that while no one doubts that the deficit has to come down, the judgment to be made is about how fast we bring it down and the risks involved in doing so too fast and ending up crashing the economy. That is the position we have reached today.
It is interesting that the International Monetary Fund has been much discussed this afternoon. It is worth reading what the IMF and Christine Lagarde, who talks a lot of sense on these issues, have been saying. Of course the IMF is always going to be wary of taking on one of its principal shareholders, but we do not have to read too far between the lines to see what the IMF is saying. It is saying quite clearly that there is now a serious risk of a slow-down in major economies, including our own, which will result in not less but more borrowing, and economies stagnating.
It is also interesting that when the Bank of England announced last week further measures of quantitative easing, which I support, it did so against a completely different background from its first announcement in 2009. The Bank is now worried about what is happening in Europe, which means that the economy is slowing down. The Bank is seriously worried about the lack of growth. The QE announcement last week is just the beginning of what might be called plan B or even plan 1A, because the Bank is worried. That is why it is changing direction.
I was pleased to hear the Chancellor talking about credit easing for businesses on top of the £75 billion. Surely that is at least some recognition of the fact that the plan he announced with so much confidence last summer, which was going to do so much to reduce our borrowing, is not working. He has to adapt it and my bet is that—whether it be in the autumn statement in a month’s time or in next year’s Budget—we will see more measures that acknowledge that the policy pursued by this Government is simply not working. If we do not change it, we will pay a very heavy price.
Mr Darling
I will gain another minute by giving way to the hon. Gentleman, so I will do so.
Kwasi Kwarteng
I am grateful. Will the right hon. Gentleman tell us how he voted in the IMF subscription vote?
Mr Darling
I have always made my position clear. One of the big achievements of April’s G20 meeting, led by the then Prime Minister my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), was to get countries to sign up to an increase in IMF funding. That has always been my position, and I am not going to depart from it because I believe that the IMF has a central role to play. With respect to the hon. Gentleman, his intervention does not get him off the central point of this debate, which is what is different now from the position when we left office. My deficit reduction plan was on the back of an economy that had started to grow, so my right hon. Friend the shadow Chancellor is quite right to ask himself what we need to do now, 16 months later, when economic growth has stalled, and what other measures are necessary to get the economy going.
My right hon. Friend is also quite right to say that, although a few months ago very few people were talking about the need to reduce taxes, bring forward capital spending or take measures to help businesses, that has now become common currency among many commentators. It is only the present Government who simply do not accept that the plan they announced 16 months ago is not working. As my right hon. Friend said, the Chancellor has had to downgrade his growth forecast four times. I remember his having great fun at my expense when saying that my growth forecasts were wrong. Actually, mine lasted a lot longer than his. He should reflect on that and on the fact that he is having to borrow more.
I raised another point about quantitative easing with the Chancellor on Monday and I hope we will hear more about it. If that money does not leave the vaults of the banks and get out on to the high streets, it will have failed. I know that the Chancellor has had exactly the same trouble with the Bank of England as I had. I could not persuade it to buy corporate assets; he has obviously failed as well, which is why he has had to think up his own scheme. We really need to get that money out on to the high streets; if it is not manifested in the form of loans to businesses, it will simply not work.
I note that the hon. Member for West Suffolk (Matthew Hancock) is no longer in his place. He said that quantitative easing works only when there is a credible policy. Given that the Bank of England has said that it worked, we must have had a credible policy at the time. I am sorry that the hon. Gentleman is not here to hear that; he might want to ponder it when he reads Hansard tomorrow morning, as I am sure he will. The Chancellor needs to ensure that the money gets out on to the high street; otherwise, it will fail. It is remarkable that the Bank of England is almost now doing what the Government should be doing. It recognises that the policy is not working, which is why it has embarked on another round of quantitative easing.
The Chancellor is fond of saying that all our problems are on account of the eurozone. That, too, is remarkable. When he came into office, the Tory story, backed by the Liberal Democrats, was that it was all the fault of the last Labour Government. All was fine with the rest of the world, so it was just Labour’s overspending that was responsible. Incidentally, the Chancellor supported it right up to the end of 2008 and the Liberal Democrats supported it until the day after the general election, so it could not have all have been wrong at that stage. Now they are saying that the problem is not domestic at all; that it is all to do with what is happening in the eurozone.
Of course the eurozone is a major problem and it is becoming a bigger one by the day. I hope the Chancellor was right when he said at the beginning of the week that wiser counsels are prevailing in Europe, but I am not so sure. We should remember this: although people talk about the fact that the German Parliament ratified the deal a couple of weeks ago—and Slovakia will probably put it through later this week—it was in fact agreed in July, and it is blindingly obvious that it is now out of date. At that time no one would talk about Greek default, whereas now everyone knows that Greece will default, and the only question is whether it will be done in a managed way or become a disorderly breakdown.
Another thing that is obvious—the Chancellor acknowledged this on Monday—is that the austerity measures being imposed on Greece simply are not working. Greece is reaching a point at which it is unlikely to be able to repay the interest on its borrowing, let alone reduce its borrowing and debt. The policy of austerity endorsed by far too many European countries over the last 16 months or so worked at first, but it is not working now, and Greece is living proof of that.
I hope that something compelling and convincing will be agreed at the G20 in a couple of weeks’ time, but I have my doubts. The trouble with the eurozone countries is that they are still fighting as though nothing has changed since the early summer, which has been their position since the early part of 2009. If we have any influence I hope that we will bring it to bear. If we do not, there is a risk, as the Chancellor himself recognises, that if things go wrong in the eurozone they will affect this country. While I agree with the Chancellor that we should certainly should not contribute to the bailing out of the eurozone, he is also right to say that a break-up of the euro at the present time is the last thing that the world economy needs, ourselves included.
That brings me to our policies back at home. I have always believed that reducing public expenditure at such a rate, in a climate in which the private sector is not taking its place, risks crashing the economy. I reached that view when my party was in office, and I still hold it today. The evidence seems to suggest that that is precisely what is happening now, and that is why it is so damaging.
David T. C. Davies
Has the hon. Lady finished now, and may I continue? I am always fascinated by the fact that comparisons are made between levels of debt as a percentage of GDP. I will certainly give way again if someone can explain why we compare national debt with GDP. Why do we not do what any company would do and compare it with revenue? If we look at a comparison with 2010, when this Government took over and when the national debt was £1 trillion, we will see that the revenue coming in was £520 billion. The country had a national debt that was almost twice the revenue it was taking. Anyone who has run a company—most Opposition Members have not, but I have—will know that any company that found itself in such a situation would be declared bankrupt immediately.
Kwasi Kwarteng
Will my hon. Friend remind the House why the previous Labour Government ran a deficit for nine consecutive years from 2001 to 2010, despite having a boom?
David T. C. Davies
My hon. Friend asks a very good question. They managed to come up with an excuse after 2008, following the collapse of the banks, but as I said earlier, I am yet to hear an answer on why they ran a deficit from 2001 to 2008. Perhaps we will get one later.
What I did hear from the shadow Chancellor was some rather mealy-mouthed insults directed towards my right hon. Friend the Chief Secretary to the Treasury, who had a proper job outside politics and Government, as I did, which the shadow Chancellor seems to think is worth mocking him for. My right hon. Friend was not the man who was responsible for the £1 trillion-worth of debt, for selling gold at a fraction of the price, or for running up deficits in boom years. [Interruption.] I will not say anything about the euro at the moment, but there are many Labour Members who were urging us to the join the euro during those times and are now trying to give us a lesson in economics. I notice that they have all now gone very quiet.
The reality is that Labour Members never, ever learn their lesson. For them, it is not a case of plan A or plan B; there is only one plan: “Let’s tax people as highly as we can, and when we’ve finished squeezing every penny out of them, we’ll borrow more money.” They do not remember the words of one Labour Chancellor of the Exchequer during a Labour conference: “Comrades, you may think that we can tax and spend our way out of a recession, but I tell you that is no longer an option.” They still have not learned the lesson.
Clement Attlee failed in the 1940s when he tried to build his welfare state on the back of American war loans. There was Harold Wilson in the 1960s telling the public that the pound in their pocket was worth the same when he was rapidly devaluing it. Then there was Jim “Crisis, what crisis?” Callaghan, who, just like his successors, brought the country to the brink of utter bankruptcy, and did not even seem to think that he had done anything wrong. It was 18 years before they got another chance, and they have done exactly the same thing again: tax and spend, borrow and spend, just keep on doing it and do not worry about it.
I am glad that we have a Government who are not going to go for the easy option, which would be to borrow a whole load more money now in the hope of winning an election, which is exactly what Labour Members were doing for a couple of years. We are going to take some tough decisions, and that means getting our books in order. Unlike the shadow Chancellor, I know, having run a small family haulage business, that one cannot carry on spending more money than one gets indefinitely. I welcome the fact that the Chancellor is going to encourage real growth by making it easier for businesses to take people on and not have to worry about employment tribunals, which anyone who has run a small business does worry about all the time because of the number of spurious claims.
Meg Hillier
I am afraid that I will not.
That woman told me that she uses the prepay meter key because of her fear of a large quarterly bill at the end of the autumn, even though she knows that it costs more. She is doing what the Government tell her to do. She is a single parent with four children who is working to support her family, but she lives in fear of the bills every day. There is the man who came to my surgery on Monday. He has a job offer, but he faces the choice between a job and a home because of the Government’s short-sighted approach to housing benefit.
Where are the private sector jobs? In my constituency and that of my hon. Friend the Member for Hackney North and Stoke Newington, most small businesses employ fewer than six people and they are struggling. I have been up and down my high street many times since the events of 8 August, but it is not just those events that have caused problems. Businesses are struggling with footfall and because people do not have disposable income to spend. They are worried about what will be down the road.
The Federation of Small Businesses has been very critical of the Government’s approach, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) indicated. Businesses on the high street need quantitative easing, including those that are being incubated by entrepreneurs in my constituency. The Prime Minister is very fond of talking about creating a silicon valley when it suits him, but those high-street businesses are exactly the sort that could be creating jobs for young and older people in my constituency. However, they risk being throttled at birth, or if they do survive—I wish them well and hope they do—they risk not growing at the rate that they could with the right support from Government.
Kwasi Kwarteng (Spelthorne) (Con)
I am grateful for the opportunity to speak in the debate.
I am pleased and interested to learn that the shadow Chancellor recognises that the problem we face is an international problem. He spoke eloquently about the deepening eurozone crisis, and also about the prospects for Greece and Portugal, which frankly are not too good. I am also pleased to speak having heard the speech of the hon. Member for Hackney South and Shoreditch (Meg Hillier), who gave a graphic account of the difficulties that we face from the point of view of her constituents. What we have not heard from the Opposition is an admission that they were in any way responsible for the difficulties that we face today. What we have heard, from Members on both sides of the House, is the expression of a desire for a bipartisan approach and a civilised debate, and I am all for that. However, if we are to understand the challenges that we face today, we must understand how we got into this mess in the first place.
It is true that every country in the OECD and in the economically developed world faces similar challenges, but it is not true that those countries managed their public finances as badly as we did in the years between 1997 and 2010. Let us rehearse some of the facts. We entered this period of our national life with a higher deficit-to-GDP ratio than any other OECD country: 12%, when the German ratio was 3.3%. That was a direct consequence of decisions made by those on the Treasury Bench between 1997 and 2010. As my hon. Friend the Member for Sevenoaks (Michael Fallon) pointed out, the then Government ran a deficit in every year between 2001 and 2010—for nine straight years. Even when the economy was booming, we ran deficits of £30 billion a year in 2002, 2003 and 2004. The shadow Chancellor referred to Lord Keynes—
Emma Reynolds
I should prefer the hon. Gentleman to speak about debt-to-GDP ratios. Does he accept that on the eve of the world recession we had the second lowest ratio in the G7, second only to Canada’s?
Kwasi Kwarteng
What the markets were looking at was the deficit. The hon. Lady may remember what happened to the gilt market as her party’s Government were being shunted out. The price of British Government debt rose and yields fell in direct anticipation of Labour leaving power. The markets made their own decision. In the last 18 months, the price of British Government debt—that is, the interest rates that we pay—has fallen. It has managed to remain at the same level, precisely because markets realise that the Chancellor and his team are doing the right thing in tackling the deficit. We have been told repeatedly that if we were to show any relaxation of our deficit reduction programme, the markets would dump our bonds and interest rates would rise, which would cause immense damage to the hon. Lady’s constituents as well as mine.
Rachel Reeves
Does the hon. Gentleman accept that before the last general election—between January and May 2010—yields on Government bonds were falling and they have stayed at low rates since the general election? The markets did not know which party would win the election because the campaign was so close. Therefore, the hon. Gentleman cannot argue that those yields were falling in anticipation of an incoming Conservative Government, because nobody knew that.
Kwasi Kwarteng
The yields were not falling in anticipation of a Conservative Government, but they were certainly falling in anticipation of the then Labour Government going out. Markets anticipate events—that is how people make money—and the markets had, in their wisdom, decided that Labour would not be re-elected. I assure the House that if Labour had been re-elected, the markets would have dumped British debt and we would be facing a much tougher interest rate environment than we currently face.
I always enjoy listening to the shadow Chancellor’s speeches, as they are very entertaining, and I enjoyed his speech today—I think one Member even mentioned vaudeville, which I think does vaudeville discredit. However, I was staggered by the shadow Chancellor’s assertion that the fact that we have low interest rates is somehow a reflection of our having a weak economy. That was an extraordinary claim. People in my constituency are very grateful indeed that we have low interest rates, because that enables them to pay their mortgage liabilities. It seemed extremely arrogant for a supposedly responsible politician to say on the Floor of the House that low interest rates were a bad thing, which was essentially what the shadow Chancellor was arguing. [Interruption.] He was suggesting that they were a symptom of a weak economy, which is a bad thing.
On the contrary, however, our low interest rates are a signal that the markets have confidence in this Government. They have absolute belief that the current Government are going to deal with the deficit that was created, almost deliberately, by the Labour Government. We in the House of Commons have to understand why this deficit arose, so we can explain that to the country. It was not just handed down to us by some Moses figure—although the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) probably thinks of himself in that way. It was not handed down from on high; rather, it was created by Governments and by the Members who then sat on the Treasury Bench, and it was created for the simple reason that they, in their arrogance, honestly believed that they had abolished boom and bust. We all remember those statements, and it is an arrogant misrepresentation of the past to suggest that they did not think that. The last Prime Minister believed that he had solved the key economic question of our time, but he was wrong, and it is as a direct consequence of his mistake that our Government have had to introduce the policies we are pursuing.
Many people will ask why we do not have a different plan. They will ask: “Why don’t you suddenly borrow and spend more money in the time-honoured Labour fashion?” That would be a road to disaster, however. It would create a massive lack of confidence and lack of credibility in the British Government’s programme, leading to the markets dumping our Government debt and our interest rates rising. It would lead to people in our constituencies having to face higher payments every month. They would be squeezed even more if we were not as focused and committed as we are to reducing the deficit.
I have tried to inject some reality into this debate. We have heard consistent denials from Labour Members, and we have heard no admission of guilt or wrongdoing and no ideas as to how we might get out of the situation we are in. We have also heard no real arguments to attempt to explain why what the last Labour Government did was right. Interestingly, no Labour Member has said in this debate, “We did a marvellous job; we gave you a golden inheritance.” I would grant them more credit if any of them would be bold enough to stand up and say that, but they will not do so. That is because, as everyone in this country knows, Labour is bereft of ideas, and it would be a disaster if we were ever to leave our future in its hands again.
Sir Stuart Bell (Middlesbrough) (Lab)
I am grateful for the opportunity to follow the hon. Member for Bromsgrove (Sajid Javid), who has real knowledge and experience of the bond markets, as he has revealed today. He obviously knows a lot about the ratings agencies and he has a Bill before the House on debt ceilings. He is also an expert on credit default swaps. I share his great enthusiasm for that, but he will have to explain, on the basis of what he has said and what the Government’s policy is, why, if this is about deficit reduction and debt reduction, £46 billion more is going to have to be borrowed and spent in the next few years to cover their policies.
I want to mention Teesside because we have had the good news in the past few days that the insurance company, AXA, proposes to create 450 jobs in Middlesbrough, adding to the 300 staff it employs at Teesdale in Stockton. A great deal of comment—indeed, criticism, I would say—has come from my hon. Friends the Members for Leeds East (Mr Mudie) and for Gateshead (Ian Mearns) about the creation of enterprise zones and about the regional growth fund. In all my years in the House of Commons, I have had to deal with the Government of the day and although we might have liked to keep the regional development agencies, the reality is that we now have enterprise zones and the regional growth fund. We on Teesside have benefited from the regional growth fund and we also have an enterprise zone that we worked very hard to achieve—and now we will work very hard with the Government. There is also the good news that 1,000 staff are being taken on at the former Teesside Cast Products plant, with 100 already beginning the induction programme.
The Prime Minister, in Question Time today, ventured to say, in his feisty exchange with the Leader of the Opposition, that 300,000 new apprenticeships had been created in our country. I visited Carillion in my constituency last week to see the sterling work that it does in training apprentices in the real-life work of bricklaying, concrete mixing, pneumatic drilling, and other such skilled tasks. That is the kind of work that we see being done across the land on rainy and windy days—precisely the conditions under which those young men were working. Those young apprentices are a credit to themselves and to their future. I welcome the Prime Minister’s comments on the apprenticeship scheme.
If we take an overall look at what the Government are doing, we find the law of unforeseen consequences. There is a lack of compatibility in their objectives. Unemployment rises, so benefits have to rise. Benefits have gone up by £12 billion. We have heard a lot about the Welfare Reform Bill; the Prime Minister referred at Question Time to universal credit, and the Chancellor referred to the Bill today; he said that our amendments to it would add to the deficit. Of course, amendments can be reasoned, substantive or probing. Until we see them when they come before the House and know how we will vote, they have no great significance.
We see in our country, and we saw in Greece, that a too-rapid deficit reduction will lead to reduced growth. The classic example of Greece, to which my right hon. Friend the Member for Edinburgh South West (Mr Darling) referred, shows that if deficit reduction is too steep, there will be zero growth. That is the situation in our country: we have been reducing far too quickly. We talk as though my right hon. Friend never had a deficit reduction programme. We had one: we would have reduced the deficit by half over four years—a policy that even Mervyn King supported before the Government changed; then he changed to a different policy.
We were compared with Greece, which I always find very offensive to the Greeks, never mind to ourselves. The fifth largest economy in the world was being compared with a nation state of 12 million people in the Mediterranean—a state that cheated on its accounts with the European Union. Not only was that comparison offensive, but it distorted our country’s entire policy on deficit reduction.
Sir Stuart Bell
I am not giving way; it is too late in the day. The unforeseen consequence of a too-rapid reduction in the deficit and no growth is that confidence has gone from our system. The hon. Member for Sevenoaks (Michael Fallon) referred to that. We have lost confidence. We say that we have the confidence of the markets, and of course we do; why would we not? We do not have the confidence of the people—of those trying to find jobs, of the young who have lost their jobs, and of other unemployed people. We do not have the confidence of the ordinary person in the street, who looks at the Government and sees the failure of their policies, so I would be cautious if I were a Government Member.
I come back to a statement made by my right hon. Friend the Member for Edinburgh South West, and I invite the House to remember it. There will be a change in policy. It will not be plan B or plan C. It will come in the autumn statement or the next Budget. The policy needs to change if we are to get growth. There is no future in a steep deficit reduction that will never lead to growth—not now, and not in the future.