The Economy
Kwasi Kwarteng Excerpts(12 years, 10 months ago)
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Ed Balls
No, no, no.
Three months before the general election, the polls said that the Conservatives would get a majority. As the polls narrowed, our long-term interest rates fell, entirely disproving the point that the hon. Member for South Northamptonshire (Andrea Leadsom) makes.
Kwasi Kwarteng (Spelthorne) (Con)
The right hon. Gentleman spoke about responsibility earlier, but does he take responsibility for the appalling fiscal position we were in when we had the largest debt in peacetime?
Ed Balls
It is fine for the hon. Gentleman to be thinking of his intervention rather than listening to the answers, but the fact is that we had a lower budget deficit and lower national debt than we inherited in 1997. The IFS, in its report, “The public finances: 1997 to 2010” said:
“By 2007–08, the public finances were in a stronger position than they had been when Labour came to power in 1997.”
That entirely disproves his point.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
One year on, it is now abundantly clear that last year’s emergency Budget hit women much harder than men. Some 72% of the cuts are being borne by women, whether they are cuts in the health in pregnancy grant, in tax credits, in Sure Start maternity grants or in child benefit. What is more shocking is that it did not even occur to the Chancellor at the time to consider the impact that his savage cuts would have on women and that he failed to carry out his legal duty of undertaking an equality impact assessment before his policy decisions were taken. Indeed, such was the blatant unfairness and scale of the impact on women of the Chancellor’s first Budget that the Fawcett society stated that it showed
“a whole new level of disregard for the importance of equality law and everyday women’s lives.”
The Chancellor’s first Budget also showed a whole new level of disregard for children and families, flying in the face of the Prime Minister's promise to be the “most family-friendly Government”. One year on, I am particularly concerned about the impact on child poverty—an issue that directly links to the impact of the cuts on women. Although good progress was made by the previous Government, the number of children living in poverty remains unacceptably high. Figures recently published by the End Child Poverty campaign suggest that almost one third of all children in Newcastle are living in poverty. The coalition’s policies of cutting funding to Sure Start centres, removing the health in pregnancy grant, cutting tax credits, increasing VAT, cutting housing benefit and dramatically reducing local government funding will have a serious impact on household incomes, which I fear will lead to more children growing up in poverty. My fears are backed up by the OECD, which recently reported:
“Progress in child poverty reduction in the UK has stalled, and is now predicted to increase, and so social protection spending on families...needs to be protected.”
Of course, the cuts imposed by the Chancellor’s first Budget are also hitting home at a time that is already particularly difficult for women.
Catherine McKinnell
I will give way just this once, as I know that many of my colleagues want to speak.
Kwasi Kwarteng
Can the hon. Lady tell the House what kind of savings the Labour party would have made in public spending?
Catherine McKinnell
This is not the opportunity for me to set out what the shadow Chancellor has already set out—the way in which we would tackle the deficit. I do not want to take up precious time that my colleagues want to spend giving speeches in this very important debate.
Women are particularly affected in the north-east, where about 46% of all working women are employed in the public sector. Those women face being one of the 30,000 public sector workers anticipated to lose their jobs in the region; most of those job losses will affect low-paid female workers. They also face pay freezes and the ever-increasing costs of balancing work with family life.
Kwasi Kwarteng (Spelthorne) (Con)
I was not expecting to be called so early in this debate, Mr Deputy Speaker, but I am very grateful.
It is easy in this environment and this highly partisan—[Interruption.] I know exactly what I am going to say, so please hear me out. It is easy to lose sight of the big picture in terms of where we were when we came into government in 2010, and it is easy for Labour Members to forget the huge deficit and the terrible mess they made of the country’s finances.
Kwasi Kwarteng
I will acknowledge that the budget in 1997 was balanced, in that we took in £315 billion of revenue and spent £315 billion. I also have to acknowledge—I have to be candid—that under the first Labour Administration, between 1997 and 2001, the budget remained in balance. That was the prudent Chancellor whom many in the House will remember. We did not get into fiscal trouble with an increasing deficit until the 2001 to 2005 Parliament, in which, as people will remember, we had sustained growth. However, just at the moment when we were growing sustainably, the naughty, imprudent Chancellor took over. Having been prudent in the first four years of the Labour Government, between 2001 and 2005 he turned on the taps, to speak metaphorically.
Kwasi Kwarteng
The principal point—if the hon. Gentleman will listen—is that Labour gambled with the country’s economy. It sincerely believed that it had abolished boom and bust, so it made spending commitments on the basis that the economy would grow indefinitely year after year. Unfortunately those spending commitments could not be rescinded when reality dawned—when the economy faltered and the revenues collapsed, leaving us with huge spending commitments and creating this unprecedented peacetime deficit.
It is unfair and wrong for Labour Members to say that it was a global phenomenon. Our deficit was not comparable to Germany’s. As far as I know, Germany operates in the same global space and is a competitor in many of the same markets as us, yet its deficit-to-GDP ratio was 3%. Ours, I believe, was 12.8%—the highest in the OECD and the G20. These facts are known to everybody, including all economists and many journalists—everyone knows them—yet consistently, ever since I have been a Member of Parliament, Labour Members have completely denied any responsibility and have given every reason under the sun for the appalling fiscal position we were left in. It is vital that every single Member bears in mind those big facts. Labour’s stewardship of the public finances was catastrophically negligent.
Kwasi Kwarteng
This is the third time that the hon. Gentleman has tried to intervene, and I am afraid that I must press on. I am willing to take interventions from other colleagues, but he has had his say and I would like to have mine.
We have had a difficult time over the last year, during which time my right hon. Friend the Member for Tatton (Mr Osborne) has been Chancellor of the Exchequer. No one will dispute that: the situation has been tough. However, it would have been far worse if we had followed the policies of the right hon. Member for Morley and Outwood (Ed Balls) and not tackled the deficit in the rather aggressive but timely way in which we decided to. Hon. Members referred earlier to Greece, which has indeed been a Greek tragedy. People are on the streets, the Government are practically insolvent and there is a real risk of some kind of political revolution—I am choosing my words carefully, but the situation is very unstable. The situation facing this country was, I confess, not as bad. However, if we had not been serious about tackling the deficit, there was every likelihood that the international markets would have forced our interest rates up, that our cost of borrowing would have increased and that markets would not have bought gilts in the way that, over the past year, they have. The consequent rise in interest rates would have affected every family in this country, who would have had to pay high interest rates simply because the Government did not have the courage or the conviction to deal with the deficit.
Toby Perkins
As for the comparison with Greece, does the hon. Gentleman recognise that if we had followed the advice of the Chancellor when the recession struck back in 2008, although events here might not have followed what happened in Greece, they would quite probably have followed what happened in Ireland, which saw huge public spending cuts? Ireland went into a cycle of more and more cuts, and more and more people being put out of work. The result of those cuts was not that Ireland’s deficit shrank, but that public services and poverty got worse.
Kwasi Kwarteng
I accept the hon. Gentleman’s point about Ireland, but let us look at what happened last year and the situation that we faced going into the general election in May. The shadow Chancellor quite rightly observed that the market price of gilts was rising and that interest rates on them were coming down in the period before the election. It is true that in the six weeks before the election, interest rates on gilts came down, but that was only because the market realised that there would be an end to the Labour Government. The market anticipated the result of the general election, after it became clear that, as a consequence of Labour’s total irresponsibility, the end of a Labour Government would mean a new Government who were serious about dealing with our financial position. It is true—I remember this—that the rates came down from mid-March, but that was only as a consequence of people in the markets literally rejoicing because Labour was going to leave. The shadow Chancellor was quite right to make that point; I just felt that we needed a bit more context.
Owen Smith
I cannot help but point out that if the markets had been so omniscient and all-seeing, surely they would have spotted that the Tory party was not going to win the election.
Kwasi Kwarteng
The only question that the markets were interested in at that point was whether Labour would be re-elected. When it became obvious that Labour would not secure a majority in the House, they started buying lots of British Government debt, and the interest rates in the six weeks before the general election came down quite rapidly. Those are the facts, and one could find them out from the Financial Times, Bloomberg or any other information provider in financial services.
Nigel Adams (Selby and Ainsty) (Con)
Since the last election, when we got a Conservative-led coalition, unemployment has fallen in my hon. Friend’s constituency of Spelthorne by almost 5%. Does he think that we would have achieved such a fall if we had followed the Opposition’s policies?
Kwasi Kwarteng
I can give my hon. Friend a very short answer: there is no way that any businessman in Spelthorne—[Interruption.] Well, the short answer is no, but the longer, slightly more involved answer is that there are lots of small businesses in my constituency, and a lot of them are related to Heathrow, and the international market and trade. As a consequence of Labour’s complete failure over the previous 13 years, no Labour councillors were returned to our borough council. In fact, Labour contested only one of the 13 wards in the borough, which is only 35 minutes on the train from Waterloo. That is indicative of Labour’s utter failure to make any headway.
Let me tell the House why Labour was completely wiped out. The people in Spelthorne realise that Labour does not understand anything about the economy. Time and again when I have knocked on doors in Ashford, Sunbury and Shepperton—and even in Stanwell, which was traditionally a Labour area—I have met people who realise what this Government have to do. They say to me, “You’ve been put into power to clear up the mess that the other lot created.” I shall not repeat the unparliamentary language, but they tell me to “something well get on with it.”
Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)
I am delighted to follow the hon. Member for Spelthorne (Kwasi Kwarteng). Reflecting on the lack of Labour representation in Spelthorne, I am reminded of the similar lack of Conservative representation in Liverpool. I am prepared to bet the hon. Gentleman that Spelthorne will get a Labour councillor before Liverpool gets a Conservative one.
We have seen some extraordinary complacency on the other side of the House today, given the economic circumstances that people are facing in communities up and down the country. Sometimes we forget the human cost of the decisions that are made in this House.
Kwasi Kwarteng
The hon. Gentleman talks about the human cost of economic mismanagement. Could he tell us more about the human cost of Labour mismanagement over the past 10 years?
Stephen Twigg
I thank the hon. Gentleman for that intervention, but it is the only one that I will take. I want to give other colleagues on both sides a chance to speak. We have heard a lot about Labour’s legacy, and about where Labour stands, and we get severely misrepresented by the Government parties opposite. We are not denying the deficit. We adopted a plan to halve it over the four years of a Parliament. We have been very clear that we would have made cuts in public spending, that we support some of the cuts that are now being made, and that certain tax increases would have happened under a Labour Government.
The real challenge in this debate is to address the questions of growth and employment. There is no value in cutting public spending as the Government are doing if it damages the prospects for growth. The impact on the economy is that tax revenues go down, unemployment goes up, benefit costs therefore rise and the deficit position gets even worse. My right hon. Friend the shadow Chancellor reminded the House earlier about what both the parties that are now in government said when they were in opposition. My hon. Friend the Member for Dudley North (Ian Austin) has pointed out that the then Leader of the Opposition, now the Prime Minister, said in July 2008 that
“we are sticking to Labour’s spending totals.”
That was the view on the Conservative Front Bench in July 2008. In fact, my hon. Friend did not quote him in full; the right hon. Gentleman went on to describe those Labour spending totals as “tight”. The views that the current Prime Minister and Chancellor of the Exchequer are now expressing are not the ones that they held at that time.
A year ago, in the emergency Budget, the Chancellor of the Exchequer said:
“In this Budget, everyone will be asked to contribute…everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]
Our motion today welcomes the recent fall in unemployment, and I have heard hon. Members on the Government Benches talk about falls in unemployment in their constituencies, but are we really all in it together? Let us look at the figures.
Ben Gummer (Ipswich) (Con)
It is a pleasure to follow the right hon. Member for Oldham West and Royton (Mr Meacher). He spoke after my maiden speech, and he is a man whom I respect greatly for his integrity, honesty and the consistency with which he has held his views over the years. However, he has also been consistent in his economic views, and over 30 years he has been consistently wrong—in his judgment of Mrs Thatcher’s economy, John Major’s economy and Tony Blair’s economy. The fact that his views now come into the same alliance as that of the shadow Chancellor of the Exchequer tells us all that we need to know about where the Opposition’s economic policy has gone.
Kwasi Kwarteng
Will my hon. Friend remind the House about the consequences of the 1981 Budget and what happened at the subsequent general election?
Ben Gummer
I do not know what position my hon. Friend took against the 1981 Budget, but all that I can say is that that Budget, which was opposed by Labour Members, started the rebuilding of the British economy, much as we are doing now.
I was not planning to speak today, but I entered the Members’ Lobby and looked at the Opposition’s motion on the Order Paper, which is entitled, “The economy one year since the Government’s first Budget”. I thought, “That’s brave of them, to pick a fight on this, but I’ll give them a chance.” I read on and thought, “This will be amusing.” The motions says:
“That this House notes that on 22 June 2010”—
there is a preamble, and we agree with that bit, because there was an excellent Budget this time last year—and it continues:
“further notes that over the last six months”.
I thought, “Hang on a minute. I thought we were talking about after a year,” but they have chosen six months for the economic growth figures. Why six months? It is because over a year the economy has grown, has it not? Already, in the terms of their own motion, the Opposition are failing, because they have to pick a six-month figure. Do hon. Members know why they pick that period?
My hon. Friend the Member for Witham (Priti Patel) talked earlier about businesses. Her parents run a business in my constituency. She understands businesses. She understands that, with a difficult start-up, some weeks are not as good as others and that things are rocky and choppy. Not many Opposition Members have ever seen a balance sheet or a profit-and-loss account in their lives, and that is why they might not understand what she explained earlier. That is why, after a year, the economy is growing—but after six months, it was flat, because we are having a choppy recovery, as the Chancellor said.
Toby Perkins
It is interesting that the hon. Gentleman assumes what I am going to say already. I am only three seconds into my speech. I will come to that point.
The hon. Member for Elmet and Rothwell said that he was proud of the Government’s record so far. I would not like to be here when he is ashamed. Government Members would like this debate to be about whether we need to reduce the deficit, but that is not what it is about at all. Everyone recognises that we need to do that, and that in 2008, prior to the onset of the biggest global economic crisis in history, we had a lower deficit as a ratio of GDP than in 1997 when we came into power. It was only the scale of the economic crisis that forced the Labour Government to spend money to stop the awful situation that ordinary people were finding themselves in, with jobs being lost and the danger of houses being repossessed. We are proud of the decisions that we made at the time, which were supported by the IMF. It said strongly that this country, under the Labour Government, showed leadership when the rest of the world did not know what to do in the face of a terrible global economic crisis.
Toby Perkins
Because the hon. Gentleman was so generous to me, I will allow him to intervene.
Kwasi Kwarteng
I believe in debate—it is good that interventions are taken. If the problem was global, why was our deficit to GDP ratio four times higher than that of the Federal Republic of Germany?
Comprehensive Spending Review
Kwasi Kwarteng Excerpts(13 years, 6 months ago)
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Ms Eagle
Perhaps the hon. Gentleman will agree that in an advanced economy with a social security system, if there is a recession, deficits will rise. That is why the deficit rose. What he suggests, if taken to its logical extreme, means that he would not be in favour of paying unemployment benefit to those made unemployed. They tried that in the 1930s and it did not work.
Kwasi Kwarteng (Spelthorne) (Con)
What does the hon. Lady think was the reason behind our deficit being worse than that of every other country in the G20?
Ms Eagle
We entered the crisis with the second-lowest deficit in the G7. We were affected by the credit crunch because we have a very large financial services sector, which is why both sides in the House are talking about how we can rebalance our economy. We are too exposed to the kind of risks that crystallised when the credit crunch struck. [Interruption.] The Chancellor, from a sedentary position, asks whose fault that was. If we are going to be sensible and have a proper, nuanced, balanced and grown-up debate on this issue, all of us—as members of political parties that are, or have been, in government and in charge of running the country over the past few years—need to take our fair share of responsibility for how the banking sector came to dominate too much. Both sides of the House have to learn those lessons. I hope that we all will.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
The headlines in the debate on the comprehensive spending review have concentrated mainly on justified concerns about cuts to family support, welfare and housing. However, in my contribution I wish to focus on some of the main questions about transport.
Transport is vital to most of what happens in this country. It is vital to economic development, to enabling people to get to work and to quality of life. It enables people to lead full lives and guards against social exclusion. I welcome the headlines in the settlement on transport, including the focus on some specific investments which is very welcome, but I wish to draw the House’s attention to some major issues that need much fuller investigation.
The first is that of fairness in investment and regeneration—with the accompanying jobs—across the country. At the moment, transport investment in London per head is three times higher than in other regions. It is unclear whether the proposals in the settlement will change that or simply exacerbate the difference. I welcome the announcement that Crossrail will go ahead. I know how important that is in London—and it has national implications—but there is an ominous silence about the go-ahead in a proper timescale for electrification of the Liverpool-Manchester-Preston-Blackpool line. I noted the strange answer from the Secretary of State for Transport this morning, which avoided the issue completely. We have had no clarity about electrification on the Great Western line or whether the northern hub will go ahead in the way envisaged. All those projects are important for economic regeneration and have implications for the release and provision of rolling stock across the north. We need much clearer and quicker answers to those questions.
Great concern has also been expressed about the dramatic fare increases in the settlement. The increase in train fares could see the fare from Manchester to London increase from just over £65 to £88—
Mrs Ellman
I am sorry, but I have very little time and other hon. Members wish to speak.
Bus fares often do not get sufficient attention, but many lower-income people depend on buses to get to work and local amenities. But there will be a severe cut in bus services’ operators grant, which could mean higher bus fares and fewer bus services. The cut in that grant combined with cuts in revenue support to local authorities could mean that less money is available to enable buses to be provided where services are needed for social reasons rather than to make increased profits for the bus operating companies. We have had very little clarity about what that means.
Another important matter that has not been mentioned by Government Transport Ministers concerns the implications of a settlement on the critical issue of road safety. One of the unrecognised success stories of recent years has been the big reduction in the number of fatalities and serious injuries on our roads. Every single death and serious injury is a tragedy for the individuals and their families, but it is significant that, in the past year alone, there has been a 12% reduction in the number of people killed on our roads. The reason for that reduction is that local and central Government have combined in a number of measures to make our roads safer.
It is extremely disturbing, therefore, that we now have a cut in—an elimination of, in some cases—the specific grants to local authorities that enable them to go ahead with road safety schemes, together with a change in national direction and the abolition, I understand, and the complete axing of the previous Government’s effective public education campaign on road safety. That combination of Government and local action was very important in reducing the number of road casualties. Has any thought been given to how the cuts in this spending will affect the number of deaths on our roads? That is critical.
I am also extremely concerned about the difficulties facing strategic road schemes under the new arrangements. Such schemes matter because they bring jobs and economic benefits to local areas, but the projects currently decided on through the regional allocations now have nowhere to go and, from the Transport Secretary’s written statement today, it seems clear that he too has no answers. Local economic partnerships are no substitute for proper regional thinking that cuts across local authorities and provides vital economic lifelines—by giving access to ports, for example.
Kwasi Kwarteng
I forget—how many general elections did Baroness Thatcher win? Will my hon. Friend remind the House?
Richard Harrington
Not enough.
The most important thing is that the cuts are made sensibly, and that the bloated management hierarchies of local government look at themselves and realise that this is a chance for much of the reduction in their field to come through management. Let me explain. In Hertfordshire county council—[Interruption.] Yes, Conservative, and proud to be Conservative.
In Hertfordshire county council the expected cuts, which have yet to be implemented, will be enhanced by the fact that £150 million of taxpayers’ money has been saved by sensible management changes that hardly affect the front line—£150 million—yet in my local council, Watford, a council with a turnover of £18 million, we have a chief executive who is paid roughly the same as the Prime Minister, a mayor who is paid exactly the same as Members of the House, and an entourage of management levels that defy belief compared to anything in private business life.
I was very pleased to hear what the Prime Minister said yesterday about growth being so important, but I remind Opposition Members that growth is achieved not by spending money that the Government do not have and never wonder how to repay, but by businesses, ranging from the smallest to the largest, having the confidence in the economy to decide to expand, to raise money through friends and family or the stock market, to borrow money from banks that are able to lend it to them and to use every resource that they have to employ extra people. I have every confidence in this Government, and it is most important that we reward people who create jobs. Those are the people who are at a premium, and those are the people who have been stifled in the past.
There has been lots of talk about the Government making banks lend more money, and I commend the new funds that have been discussed. The new equity scheme, which the banks are putting together to provide £1.5 billion of equity for business, is a very good idea, and some of the schemes that the previous Government started and this Government are reforming and expanding are of course commendable. However, the real point is that, unless the deficit is dealt with not just in this country but elsewhere, banks will have to keep on lending money to Governments. Government debt has stifled banks here and all over the world. In the US the argument used to be, “The deficit does not matter”, but it does, because banks start lending money to business in quantity when they have confidence in the future and do not have to lend to Governments. We should not forget that.
The greatest thing about the comprehensive spending review is that it deals with the problem on a one-off basis. It is not being shoved under the carpet, put off or held over until after a general election, and for that reason, above all others, the CSR is the most fundamental and best thing that the Government could have done. The problems need grasping. The world of delusion that we have lived in for the past few years—the world of expanding public expenditure, with managers appearing all over the place at a cost to the public purse that taxpayers cannot afford—is coming to an end, and I for one am delighted about that.
Mr Andy Slaughter (Hammersmith) (Lab)
At the beginning of this debate, my hon. Friend the Member for Wallasey (Ms Eagle) quoted an article in The Wall Street Journal today that reported
“panic stations in the Treasury”
at finding out that the reduction in child benefit for higher earners was “unenforceable”. It continued:
“At root is a problem that should have been apparent to those designing the policy, if detailed advice had been sought from civil servants before it was announced at Conservative party conference.”
My hon. Friend the Member for Streatham (Mr Umunna) referred to himself—in all humility, I am sure—asking Sir Andrew Turnbull from the Treasury Committee this morning:
“Do you think it’s accurate to describe the UK as being on the brink of bankruptcy?”
The response was: “No I don’t.” Both those bits of hot-off-the-press news—
Mr Slaughter
No, I have not got time—actually I will, because it gives me more time.
Kwasi Kwarteng
I thought I was attending one of those rallies in North Korea, so reluctant are Labour Members to engage in debate. However, I thank the hon. Gentleman for giving way. My question is very straightforward: does he acknowledge that the deficit was a problem that had to be dealt with?
Mr Slaughter
What a stupid question, although I thank the hon. Gentleman very much for the extra time that he has given me. Anybody else? No? Okay, let us move on.
What I have described shows that it is politics rather than economics that has driven the CSR. Far from fairness driving the CSR, it is a particular type of Tory ideology that has driven it. Nowhere is that more true than in housing, to which I shall confine my remarks and which some of my hon. Friends have also addressed.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) apologised to the House earlier today—and rightly so—for inappropriate remarks that he made in the debate in Westminster Hall on the CSR and housing yesterday, when he said that Opposition Members had spread “lies and deceit”. I am glad that he apologised—it was good of him to do that—but the irony is that he made those comments in the context of the most selective quoting from the National Housing Federation’s brief. He managed to find two sentences in an excoriating brief that he thought supported the Government’s case. Let me read the bits either side of the bit that he quoted:
“This is a 60% cut in cash terms in comparison with the 2008-11 programme and in real terms a 63% cut. We are extremely disappointed that the Government has chosen to impose such significant cuts in capital funding…In an attempt to fill the gap caused by these significant capital cuts the Government is proposing to allow housing associations…to set rents on new lettings at levels between the current social rent up to a maximum of 80% of market rent.”
The briefing continued:
“However, we understand that any funds generated under this new ‘intermediate rent’…will only be allowed to be used to build more homes at this new intermediate rent and…across the four year spending period no homes will be built for social rent using these funds…there will be no further construction of social homes until at least 2015.”
That is the housing situation that we face, and for hon. Members who want to know what “intermediate rent” means, I looked at my Conservative council’s planning policies, which were announced last month. I found that the term excludes anybody on under £20,000 a year, which is 40% of my constituents and most of the people in housing need, but includes those on earnings of up to £79,400 a year—people in the top 2% of earnings. It is the Government’s policy that only intermediate housing will be built over the next 10 years.
Where does that leave my constituents? Where does it leave constituents such as the one whose case I was dealing with in my office this morning? That constituent is living with three teenage children in a highly damp one-bedroom flat, but has received the usual response from the local authority, which says:
“The average expected waiting time for a three bedroomed accommodation…is projected between 8-10 years. This is however only a projection but reflects the reality of…Social Housing waiting time as dictated by demand against availability.”
What tenants such as my constituent are being told is, “Give up your secured or assured tenancy, and take an insecure tenancy in the private sector. Then you may get some more space.” Up until now, people have not been told—they are being told now—that such accommodation is likely to be outside the borough, because of the restrictions on housing benefit. The situation now is that my constituents are being told that if they want decent accommodation, they should go into the private sector and be re-housed a significant distant outside the borough.
That is the reality of housing policy under the CSR. It is the reality for a constituent who came to see me this week, a teaching assistant taking £900 a week net and living in a shared room in a flat in Shepherd’s Bush, for which she pays £650 a month. She gets some housing benefit, but she can hardly make ends meet. Next year, she will not be able to, because of the cuts in housing benefit, and she will have to leave her job and move out of the area. That is the reality for people in my constituency.
While we are talking about apologies, perhaps someone else ought to apologise. The first interview that the Prime Minister gave after the election was to The Daily Telegraph. The article says:
“He was still angry over ‘appalling’ Labour lies that he blamed for preventing celebrated candidates such as Shaun Bailey winning in marginal seats”,
and quotes the Prime Minister as saying:
“‘They were telling people in Hammersmith they were going to have their council house taken away by the Tories.’”
Well, they are, and I will tell the House why. That candidate is at least honest, because he said at the Tory party conference:
“Inner city seats are so hard to win because Labour has filled them with poor people who are desperate and dependant on the state, so they vote for a party that they think is of the state.”
That is why those people are being punished. They vote Labour, and they want to live and work in the inner city, but that is not good enough for the Conservatives. That is what my constituents are facing, for ideological reasons of gerrymandering and social engineering.
Kwasi Kwarteng (Spelthorne) (Con)
Like my hon. Friend the Member for Central Devon (Mel Stride), I have sat through this debate all afternoon and have listened with increasing incredulity to what Opposition Members have been saying. There is an air of unreality in some parts of the Chamber. The question is not whether we should cut or carry on spending, as the second option is not on the table. Labour Members have accepted in their more lucid moments that they, too, would have had to cut, but as they now enjoy the luxury of opposition they do not have to say what they would have cut. It is the job of the Government to be responsible and take the decisions on which our future prosperity will depend.
There has been a lot of special pleading during the debate, and that is a part of our job as constituency MPs, but we also have a wider responsibility to the country as a whole, and it is one of the wider responsibilities of the Government to try to make sure that we are on track and that at the end of this Parliament Britain is much more prosperous than it was at the beginning of it.
The contents of the comprehensive spending review delivered by my right hon. Friend the Chancellor last week can be boiled down to just a few questions. First, how did we get here? We all know how we got here. A previous Chancellor—in accordance with the custom of the House, I will not mention him by name—believed he had abolished boom and bust, and his calculations on increasing spending were therefore based on the false premise that the economy would continue to expand. It did not, however. There was a recession, and because he had so many spending commitments, we ended up with a huge deficit.
No one is denying the scale of the deficit. It is the worst deficit of all the G20 countries; every international organisation has pointed out that the British deficit is far worse than those of our peers. The coalition Government had to deal with that, and I believe they have done so very well and effectively. The process has been a painful one, as many Members on both sides of the House have said, but it was the responsible course of action, to which the Conservative party was committed in the run-up to the general election and to which both coalition parties are signed up. We have been facing difficult choices, and as the Chancellor outlined last week, government is about choice. The cuts are necessary. After all, £1 in every £4 we spent was borrowed, which was unsustainable. No one in their right mind would lead their private life on that basis. We cannot keep on borrowing and spending. These are obvious truths which we have recognised and addressed.
The next question is an entirely legitimate one: are these cuts and restraints in spending fair? There is a big dispute about that between Members on the Opposition and Government Benches, but I want to remind the House of certain facts. The current benefits system simply is not working. It cannot be right that people are getting more than £20,000 a year on benefits and are therefore completely disincentivised from working. Many hard-working people in my constituency find it absurd and very frustrating that, as they feel, they are subsidising those who, as a lifestyle choice, have decided not to work. That cannot be right. Hon. Friends have alluded to a change in philosophy in this respect, and it is long overdue. In the long run, people will acknowledge that we did the right thing. It was a tough thing to do, but it was also a courageous thing to do, and it was the right thing for Britain as we look forward to the next few years.
The coalition Government have been utterly responsible and fearless in their determination to tackle our problems. That is what responsible government is about, and I am pleased to be supporting a Government who are responsible and determined enough to deal with our problems and to set our country on the right track.
Mr Hanson
I have five minutes or so to wind up the debate. I will not give way at present.
The spending review will hit jobs, children and families. It will gamble with jobs. It will gamble with the growth of the British economy and, as my hon. Friend the Member for South Down (Ms Ritchie) said, that of Northern Ireland as well. The spending review will hit the most vulnerable in our society the hardest.
Kwasi Kwarteng
I am obliged to the right hon. Gentleman. He acknowledges that there is a deficit and his party acknowledges that it would have made cuts, so will he please tell the House where those cuts would have fallen?
Mr Hanson
I know the hon. Gentleman was not a Member at the time, but I wish he had been here for the Budget proposals in March, when we set out clearly our deficit reduction plan.
The hon. Member for Colchester (Bob Russell) quoted the Bible at us. May I refer him to “Matthew”, chapter 7, verse 16, and the notion, “By their deeds shall ye know them”? The spending review cuts too fast and too deep, and it rejects the sensible, balanced approach put forward by my right hon. Friends the Members for Edinburgh South West (Mr Darling) and for Kingston upon Hull West and Hessle (Alan Johnson).
The Government plan to take out of our economy and our spending £40 billion more than Labour thought sensible, so I was surprised to hear the hon. Member for Thurrock (Jackie Doyle-Price) call for more expenditure. Even the Office for Budget Responsibility thinks that the Government’s measures will downgrade next year’s growth forecast from 2.6 to 2.3%.
The Budget and the comprehensive spending review will hit jobs, essential services and, crucially, take public investment out of the private sector at a time when the Government want the private sector to grow. My hon. Friends the Members for Liverpool, Riverside (Mrs Ellman) and for Ochil and South Perthshire (Gordon Banks) and, indeed, the hon. Member for Macclesfield (David Rutley) recognised the importance of the public sector in helping to support future private sector investment.
We know, because the Chancellor admitted it last week, that 490,000 jobs will be lost in the public sector. The hon. Member for Dundee East (Stewart Hosie) mentioned the impact on the defence sector, PricewaterhouseCoopers estimates that another 500,000 jobs will be lost in the private sector as a result, and my hon. Friend the Member for Nottingham South (Lilian Greenwood) described the impact of those losses. So let us not kid ourselves: the economy is still fragile. This week’s announcement on growth over the last quarter still demonstrates that point and, put simply, throwing 1 million people out of work—out of the economy—will cost us more jobs than that and impact on the private sector in the long run.
The Government’s measures will hit the private sector hardest. The hon. Member for Watford (Richard Harrington) talked about confidence, but confidence will fall if 1 million people are out of work. It will mean more people claiming benefits. As my hon. Friend the Member for Nottingham South said: fewer people in jobs, fewer people helping to grow the economy and higher welfare bills.
Government Members have been asking for it: there is an alternative to the Government’s proposals. We clearly said in the Budget presented by my right hon. Friend the Member for Edinburgh South West in March that we would take steps to halve the deficit over four years.
Draft EU Budget 2011
Kwasi Kwarteng Excerpts(13 years, 6 months ago)
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Mr Cash
That has to be a judgment for Members in deciding which way they will vote on these amendments. In my view, because of the complexity of this problem and the uncertainties about whether we will be able to achieve a blocking minority in the Council of Ministers—I shall explain the procedure in a minute—we must do nothing that would play into the hands of the Eurofanatics in some of the other member states who want to go down the same route as the European Parliament by endorsing this increase and increasing the budget resources, which is what they are intent on doing in the wake of the Lisbon treaty. That is the problem. It is a matter of judgment, but it is also one of analysis, which is why I take the position that I do.
I may say that I had no discussions whatever with the Government on this issue. I simply tabled my amendment last night because it struck me that in the light of the discussions in the European Parliament—and not in light of the amendment tabled by my hon. Friend the Member for Clacton, which I had not seen—the European Parliament was being thoroughly irresponsible, or at any rate the Budgets Committee was. We have yet to discover whether the European Parliament will persist in the same view.
On top of the proposal for the European budget, there is one to extend maternity rights. It is now clear that it is intended to have a £3 billion increase in the European budget for that reason. The 27 member states will be snubbed if the European Parliament votes in line with the European Commission’s proposal. Recent increases do not include the already agreed, and grossly extravagant, €1 billion increase in the European budget for 2010, which was caused largely by the Lisbon treaty.
On the subject of austerity and responsible measures, according to Government figures the collective budget deficit of the EU’s 27 member states will reach the staggering sum of €868 billion this year, which is more than 7% of the bloc’s gross domestic product. That, of course, is because the European financial crisis is real. One need only look at the countries otherwise known as PIGS—Portugal, Italy, Greece and Spain—not to mention France, which must be included in a lot of the analysis, to see the real implications of that for the individual lives of voters in this country. The governing economic and financial framework established by the EU must be not only revised but radically curtailed.
The budget increase also relates to the extensive bureaucracy that we are having to pay for, such as the European External Action Service, as my right hon. Friend the Member for Wokingham (Mr Redwood) rightly pointed out. Members, including me, raised the gravest objections to the proposals for that body that were made a few weeks ago.
While Westminster and Whitehall, and the country at large, are quite rightly being asked to make savings, what is happening in Brussels? The European Parliament adopted a resolution on 18 May proposing a budget of €1.707 billion, which is a 5.5% increase on the amended 2010 budget and represents 20.28% of the EU’s administration budget.
Kwasi Kwarteng (Spelthorne) (Con)
Many Conservative Members would broadly agree with my hon. Friend’s sentiments; I do not believe there is much division among us on the matter. What practical steps does he think Her Majesty’s Government can take to stop the grotesque expansion in the budget?
Mr Cash
The budget is part and parcel of the issue of parliamentary sovereignty, which I shall come on to in a moment. If we are to act properly and responsibly in our own Parliament, we shall have to deal with this Parliament’s relationship with the EU as a whole. If we get that right, we can proceed in an orderly manner to the questions that we must ask in the political environment that we now experience. That will ensure that we are not subject to further increases in European functions or to the assertions of the European Court and other European institutions on the sovereignty of this House.
Finance Bill
Kwasi Kwarteng Excerpts(13 years, 9 months ago)
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Matthew Hancock
Of course, the bond market could see a Conservative—or coalition—Government coming, and that is exactly what happened. I will say this to the right hon. Gentleman: when there is a flight to safety, I would rather it was to British bonds, not to bonds overseas, which is what could easily happen if we did not have a credible policy.
Kwasi Kwarteng (Spelthorne) (Con)
Those of us who have looked at bond yields will have noticed that the tightening—as it called—of British bonds actually happened in April. That happened as a consequence of the markets being sure that the Labour Government would be voted out, as everyone in the City has mentioned.
Matthew Hancock
I am always delighted to talk about when the previous Labour Government lost office, so I thank my hon. Friend for that intervention. Let me go through a few more elements of the economic evidence. I have here an extremely good literature review, by Policy Exchange, the think-tank, which lists—
Mary Creagh
I know that there is to be an increase of £150. I will come to that if the hon. Gentleman will show a little patience and allow me to make progress with my speech. He spoke for 13 minutes, and I hope to take less time than that.
As I was saying, the toddler tax credit would have provided an extra £208 a year for families with children aged one or two. Moreover, child benefit has been frozen for three years, which means a real-terms cut.
Mary Creagh
I have already said that I am not going to give way to Opposition Members. It is true that child tax credit will rise by £150 above inflation for one year—
Finance Bill
Kwasi Kwarteng Excerpts(13 years, 10 months ago)
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Clive Efford
I pay tribute to the hon. Member for Lincoln (Karl MᶜCartney), who made his maiden speech. Many of us remember his predecessor with great fondness, and we certainly notice the difference in appearance to which he referred. She was a popular Member here, as I suspect that she was in her constituency. I am sure that the hon. Gentleman will do an able job in his time as Member of Parliament for Lincoln.
The thrust of the argument of my hon. Friend the Member for Hayes and Harlington (John McDonnell) is that the House should be able to scrutinise the Government’s actions on enforcement of corporation tax to avert some of the severe and harsh cuts elsewhere in public expenditure. The Red Book refers to the need to reduce all sorts of evasion. Indeed, paragraph 1.96 mentions the Government’s measures on corporation tax, which a later group of amendments tackles, and states the need to alter the rate of corporation tax to reduce the avoidance of payment. A practice has been created of people avoiding other forms of tax and paying capital gains tax at a lower rate to minimise the amount that they pay in tax. I therefore agree with the thrust of the point that the right hon. Member for Wokingham (Mr Redwood) made that there are times when we need to tweak the tax system to close down loopholes. In that sense, the tax system has historically been like turning a thermostat up and down. We introduce one set of regulations, that area overheats, the thermostat is turned down, another section of the tax system responds and people move in that direction to avoid paying tax.
With amendment 11, my hon. Friend is trying to ensure that the House can hold the Government to account for what they do to fulfil what they say in the Red Book, and thereby ensure that the Government maximise the amount of corporation tax that is paid.
Kwasi Kwarteng (Spelthorne) (Con)
Will the hon. Gentleman clarify his basic position? Does he believe that in principle corporations ought to pay more tax than they are paying already?
Clive Efford
The point, on which I believe we are all in agreement, is that everyone should pay the tax that they are due to pay. Amendment 11 proposes not that corporation tax should be raised or reduced, but that it should be paid, that the Government ought to take action to ensure that companies that are liable to pay it do so, and that the House should have the role of providing a check and balance to ensure that the Government are carrying out that function.
Stephen Timms
The right hon. Gentleman is absolutely right about that. I entirely accept that that often happens, but I hope that he will accept that there are also people who commission very highly paid accountants to find ways of getting round the law. Everyone involved in that practice knows perfectly well that they are going against the spirit of what Parliament intended, and that is the kind of damaging avoidance that we need to bear down on.
Kwasi Kwarteng
Clearly, we have laws, but people are also going to try to pay the minimum amount of tax that they can. That is an entirely rational thing for them to do. It is our job to frame the laws as simply as possible, so that there are no loopholes. As my hon. Friend the Member for South Staffordshire (Gavin Williamson) pointed out, because there is so much more complication in our tax system, there are far more opportunities for loopholes. Surely the way to tackle the problem is to simplify the tax code, rather than pursuing people through the law courts or making the code even more complicated.
Stephen Timms
I am happy to subscribe to the view that the tax code should be as simple as possible, and I look forward to the new Government introducing measures along those lines. Simplicity is certainly a virtue, but, as I have said, those who are pressing for such measures might find that they have a rather longer wait than they would have liked. Let me also make it clear, in agreeing with my hon. Friend the Member for Hayes and Harlington, that there is absolutely nothing wrong with tax planning or with people ordering their affairs in a sensible way from a tax point of view.
John McDonnell
I think that the debate has been helpful to Members on both sides of the Committee. An attempt has been made to get out of the trenches, and to engage in a wide-ranging discussion of how we can proceed in a pragmatic way. I believe that this will become one of the key issues that people will expect us to address as the economic crisis continues. If they see public expenditure cut so that their local schools are not refurbished, and if they see a tax on welfare benefits, they will expect us at least to maximise the revenue from the tax that people and organisations should be paying. Justice and fairness in the taxation system will become critically important to more and more people.
Some of the arguments that we have heard today have been very helpful, and at times they have been entertaining. I am fascinated by the concept that reducing taxation reduces evasion and avoidance: that is almost an argument for no taxation at all, although it may not gain much purchase in the House. We all accept the arguments about simplicity, but the problem with simplicity is that it makes loopholes possible, and we then need complexity to tackle the loopholes. It is a circular problem. However, it is a joint venture for us to try to ensure that the legislation that we draft is appropriately simple.
Kwasi Kwarteng
What was said was that simplicity aided the avoidance of loopholes, and that complexity led to more loopholes. The hon. Gentleman has just contradicted that.
Budget Resolutions and Economic Situation
Kwasi Kwarteng Excerpts(13 years, 10 months ago)
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Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I have seldom been so disappointed with a speech by the hon. Member for Bermondsey and Old Southwark (Simon Hughes) as with the one that we have just heard. I suspect that he will find life even more uncomfortable as time goes on. Having listened to the speech by the Secretary of State, and then heard the support offered by the hon. Gentleman, it seemed to me that many Liberal Democrat supporters will be thinking that this must be the biggest conversion since the Chinese general baptised a whole army with a hosepipe. We have had a whole election campaign in which many of the things commended today by Government Members were not only blatantly opposed by Liberal Democrats, but disowned.
I have had the privilege of serving for many years in the constituency in Lanarkshire that I represent, where my next-door neighbour was the late John Smith. More than once, he said to me, “You know, I judge a Budget on the impact I think it has on ordinary young men and young women, with all their aspirations, living in a council house in Lanarkshire.” It is on that test that I make my views clear.
We have heard today a defence of a Budget that is thoroughly unfair and absolutely vindictive towards a large number of people in this country, region by region, not least those in my own constituency. I am not at all surprised that the Conservatives have supported what is a Tory Budget; it is the kind of Budget that they have always wanted to introduce, with or without a global crisis. However, I have to say that the apologies from the Liberal Democrats are profoundly unconvincing, as they have shown again today. As Jeremy Thorpe might have said, “Greater love than this no man has—that he laid down his principles to save his Mondeo and his red box.”
I have to tell Government Members frankly that their claims for this already discredited Budget stand in stark contrast to the consequences for my constituents in Coatbridge, Chryston and Bellshill. For several years before the election, and then again during it, the Conservatives talked about “a broken Britain”, but no Budget has done more to introduce a broken Britain than this one. The most vulnerable have been attacked, with housing benefit cut, child benefit frozen, the health in pregnancy grant scrapped, and the maternity grant slashed—and we are told that this is a fair Budget.
Then we come to what I would regard as perhaps the most appalling aspect of this Budget—the increases in VAT, hugely painful because they are clearly regressive. A 2008 report by the Institute for Fiscal Studies demonstrated that cuts in VAT benefit the poorest 10% most, while increases hit them hardest. That is why during the election the Tories were particularly ambiguous on this specific issue, although I have no doubt that they had this policy in mind all the time. To be fair to the Liberal Democrats, they did warn us—for example, by unveiling a poster showing a “VAT bombshell”, with their leader standing beside it. What we got on Tuesday was a Trojan horse with their leader and his friends standing inside it.
We are told that we are all in this together—that this Budget is indeed fair. I invite the House, then, to contemplate for a few moments what it means for a constituency like mine. In Coatbridge, Chryston and Bellshill, the average wage of those in work is £18,000. Unemployment stands at 7.4%—lower than in 1997, but clearly unacceptable. Let us look at Tatton, the Chancellor’s constituency. The average wage is over £25,000, and unemployment stands at 2.9%. In Twickenham, the Business Secretary’s constituency, the average wage is over £33,000, and unemployment stands at 2.5%. Yet this Budget is being applied to the whole nation.
Of course there is a crisis, as recognised most recently in the letter that President Obama sent to those involved in the G20. However, the words that he repeatedly used about investment, about real fairness—and, above all, about growth—were hardly reflected in the Budget that we are asked to approve. More sustainable ways to reduce the deficit clearly apply to the growth that President Obama has promoted and that, along with progressive taxation, Labour Members strongly support.
I can see that for the Tories this is a matter of ideology. They do not like the public sector: they have made no bones about that. The public sector provides education, excellent services from the police, and infrastructure for providing new jobs—and, my heavens, we will need them after this Budget. How can they possibly argue that this Budget will not lead to unemployment? We need to build more schools. We need to make more industrial parks available, hoping to invite inward investment, via the regional authorities, and making more money available so that the Government are creating the environment by which jobs can be provided.
Kwasi Kwarteng (Spelthorne) (Con)
What does the right hon. Gentleman think about the remarks written down by his party’s former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who said, I believe, “There is no more money”?
Mr Clarke
I had assumed that the hon. Gentleman had a better sense of humour. It was clear to the whole country that it was a joke, so I do not regard that as being a serious point.
The Government blame the public sector for the recession, but what about the banks? [Interruption.] We must ask that question. My right hon. Friend the Member for Doncaster North (Edward Miliband) dealt at some length with how we have approached that important matter. While the Government have been hammering away at the poorest people in the poorest parts of our country, they have treated the banks with a feather duster. They have hardly responded to the problems that the banks themselves created, and no Member on their Benches can defend that.
Clive Efford (Eltham) (Lab)
This is my first speech in the new Parliament, so let me take this opportunity to say what a pleasure it is to see you in your position, Mr Deputy Speaker.
One of the first things that we need to say about the Budget is that it is quite clear that the underlying narrative is an assault on the size of the state. It is not merely an attempt to deal with the deficit following what has been described as a profligate former Labour Government. It is an ideological assault on the state based on the belief that reducing the size of the public sector will create space and that the private sector will inevitably grow and fill the vacuum. Without question, this Budget is—apart, perhaps from the absence of the NHS from the cuts—the Budget that Margaret Thatcher always wanted to introduce. But who would have thought it would be the Liberal Democrats who would give the Conservatives the power to wield the axe?
The Deputy Prime Minister sat through the Budget nodding in support of every swing. We all remember the warnings that he gave during the election about what the Conservatives would do if they got into power—the VAT bombshell—but what changed? I think he is suffering from Stockholm syndrome, which is what happens when a hostage becomes emotionally attached to the people who are holding him captive. It is quite clear from his response to the Budget that there is something going on. He has now collaborated in the biggest robbery since Patty Hearst just went to the bank.
Perhaps I am being unfair. It could be that the Liberal Democrats just cannot help themselves. I am reminded of an experiment at Stanford university—the Stanford prison experiment—in which students were given the roles of prisoners and jailers. Very quickly, two thirds of the jailers became very sadistic, but the peculiar thing was that the prisoners, although they were free to leave at any time, decided to stay and take the sadistic treatment being dished out. I think that something is going on here. The Liberal Democrats who have taken the thirty pieces of silver and the Toyota Prius cars are clearly taking on the role of the sadistic jailers who have adopted the policies in the Budget. The Liberal Democrats who are left—I do not know what the collective term for them should be, but perhaps it could be dupes, as that is a term that someone has used recently—are unable to free themselves. They have internalised their grief and they are going along for the rollercoaster ride on the track that has been laid by the Conservatives in this Budget; they are hanging on for a white-knuckle ride.
There are endless quotes from the general election in which Liberals warned us about the Conservatives and what they would do in government, so there is no mandate for the Liberal Democrats to support the Budget. The majority of people who voted at the last general election voted for the parties that opposed the sort of cuts that are in the Budget.
The fact that we need to address the deficit is without doubt. If Labour were in government we would be cutting public services, and people would feel the consequences of those cuts; there is no doubt about that. However, the size and scale of what we have got from the coalition Government is beyond anything that anyone has attempted in the UK before. In one Budget, they are cutting back the size of the state, over six years, beyond what it was when Labour came into power 13 years ago. Under the guise of reducing the deficit they have set about reducing the size of the state, with an enthusiasm that Margaret Thatcher could only look on in wonder.
Kwasi Kwarteng
The hon. Gentleman mentions the deficit; who does he think was responsible for it?
Clive Efford
The hon. Gentleman will probably know the history of this matter. Until November 2008 there was an agreement in this House about how to deal with the deficit. The Conservatives supported what the Government of the time were doing, so I suggest that he go back and look at the facts of what was going on.
The Liberal Democrats conveniently forget the statements that they made expressing their fear of what the Tories would do. I remind the House of one that was made at the start of the general election campaign. In an interview with The Observer, the leader of the Liberal Democrats, the right hon. Member for Sheffield, Hallam (Mr Clegg), said this about a new Conservative Government:
“They then turn around in the next week or two and say we’re going to chuck up VAT to 20%, we’re going to start cutting teachers, cutting police and the wage bill in the public sector. I think if you’re not careful in that situation…you’d get Greek-style unrest…be careful for what you wish for.”
I think that those are very wise words.
The Government have also prayed in aid what has gone on in Greece, Sweden and Canada, but my right hon. Friend the Member for Doncaster North (Edward Miliband) pointed out at the Dispatch Box that comparisons with Greece are utterly ridiculous. In Sweden they cut back public expenditure by 20% over 15 years, an approach that bears no comparison with the scale of what is being attempted here. It is true that the Canadian Government carried out a consultation exercise, but that was confined to short-term measures to deal with the deficit, and the intention was always that there would be a return to expenditure.
What we are seeing is a permanent cut-back of the state, and a withdrawal from expenditure for ever. That is what the people of this country are being asked to participate in through this consultation.
The hon. Member for St Ives (Andrew George) is the only Liberal Democrat in the Chamber. I am not surprised that there no others participating in this Budget debate. I have quoted the party leader as saying
“be careful what you wish for”,
and I hope that the hon. Gentleman will remind his friends of that, especially the ones who cheered this Thatcherite Budget. Supporting this Budget is a proclamation of an intent to reduce the size of the public sector in perpetuity. Liberal Democrat Members cannot support reducing the size of the state and say with any credibility that the axe will not swing against the NHS in the long term. This is an ideological change, and they cannot escape that fact.
Mr Chuka Umunna (Streatham) (Lab)
I have listened with interest to the various speeches made today and I do not think anybody denies the need to reduce the deficit. Neither do I think that my fellow Labour Members think that the answers all lie with government, but the big decisions that we are taking at the moment are about judgment and the direction in which we think economic strategy should go.
I want to pose some questions on those issues, because it is clear, on any analysis, that this Budget is going to hit everybody. My own view, which is obviously not shared on the other side of the House, is that it will hit the poorest and most vulnerable people in society hardest. How can it not, given the figures that we are looking at? The IFS data for 2012-13 leave no doubt of the Budget’s regressive nature. They make it clear for all to see: indeed, the Financial Times said yesterday that
“the result of cuts in government services will be felt more on Nottingham's estates than by the Notting Hill set.”
There has been a lot of talk in the Chamber today about comparisons with the situations in Greece and Canada, but in my view they are false. I think that the most appropriate comparison in many respects is a domestic one, and it was touched on by the hon. Member for Cities of London and Westminster (Mr Field). He is no longer in his place but he made a very interesting speech, in which he compared the present situation with the approach adopted by Geoffrey Howe and Margaret Thatcher. In fact, the Culture Secretary has been talking up the appropriateness of making comparisons with the Thatcher Budget of 1981 and the general economic strategy of that Conservative Government.
There are differences—we are in a different time, and the economic circumstances are not the same—but what is being done with this Budget has strong parallels with what was done in the early 1980s. Geoffrey Howe raised VAT from 8% to 15% in 1979, following an election campaign in which he said that his party had absolutely no intention of hiking up the tax. Today, of course, the Chancellor has raised VAT from 17.5% to 20%, following an election campaign in which he—and his coalition partners in particular—said that they had no plans to increase VAT.
Geoffrey Howe slashed benefits in the 1980s: the 1981 Budget made sickness benefits and unemployment benefits taxable, and unemployment benefit for the over-60s was reduced. The Chancellor today has done similar things today: among many other things, he has cut child benefit and disability living allowance, and reduced tax credits for young parents earning just £15,000 each.
The reactions from the national commentariat are similar too. In 1981, 364 economists signed a letter to The Times warning that the Thatcher Government’s policies would deepen recession and threaten social and political stability. In April this year, 80 economists signed a letter to The Times warning that the current Tory Government’s approach would lead to job losses that would affect spending and confidence and tip us back into recession.
Surprisingly, Washington in some respects took a more cautious approach, then as now. In 1981, just after Geoffrey Howe’s Budget, President Reagan signed the Economic Recovery Tax Act to stimulate US consumption. This month, President Obama wrote to the Prime Minister and other G20 leaders to remind them of the dangers of withdrawing stimulus and engaging in fiscal consolidation too quickly.
What were the effects of the approach adopted by Geoffrey Howe in the 1980s? I can describe what they were in my constituency, in which I am proud to say that I have lived all my life. In April 1981 my mother was out shopping with my sister and me in the middle of Brixton when the riots broke out. I was too young—just two and half—to be able to remember what happened, but my mother remembers it well, and it was terrifying.
Soon after those riots, Lord Scarman was appointed to hold an inquiry into what caused them. It is well known that racism in the police at the time was a major factor, and the rioting was attributed to a loss of confidence in the police among significant sections of the population in my constituency and the other two constituencies in the Brixton area. However, although the report said that
“the social conditions in Brixton do not provide an excuse for disorder”
it added that
“the disorders cannot be fully understood unless they are seen in the context of complex political, social and economic factors”.
The report continued:
“There can be no doubt that”
unemployment
“was a major factor in the complex pattern of conditions which lies at the root of the disorders in Brixton and elsewhere. In a materialistic society, the relative deprivation it entails is keenly felt, and idleness gives time for resentment and envy to grow.”
With regard to the Tulse Hill estate—I have just come from that estate to the House today—it was pointed out that high unemployment, coupled with society’s emphasis on material acquisition, led to both material deprivation and a sense of hopelessness, particularly among the youth. Of course we know what happened after that: unemployment rocketed beyond the 3 million barrier and stayed there until 1987.
Kwasi Kwarteng
Is the hon. Gentleman seriously suggesting that riots on the scale witnessed in Brixton in 1981 will come as a result of the Budget?
Toby Perkins
I was certainly bewildered by the Secretary of State for Energy and Climate Change’s contribution in opening this debate, and by the idea that when the Liberal Democrats talked about the tax bombshell, what they meant was that VAT was regressive only if it was levied on food, a suggestion that nobody had made and which was never part of the debate. His speech was one of the most bizarre contributions that we have heard over the past three days. I look forward to watching it on iPlayer tonight and reliving the moment, because it is something that will live long in the memory.
I want to talk about the choice that the Labour party made. What we enjoyed under the previous Labour Government was 11 years of stable economic growth. That was the longest period of stable economic growth in this country’s history, yet unlike the Conservatives, we went into recession only when the entire world went into recession. The Conservatives did it differently: they could go into recession when the rest of Europe was in a strong position. It was only the global economic crisis that threw the economy off course under a Labour Government.
Kwasi Kwarteng
Will the hon. Gentleman enlighten me on one thing? What does he think the former Prime Minister and then Chancellor meant when he suggested that there would be no more boom and bust?
Toby Perkins
What he was probably referring to was 11 years of stable economic growth. What he did not foresee was that we would be hit by the biggest global economic crisis for more than 80 years. Of course, nobody foresaw that. There were no Conservative Members suggesting that the ways in which our banks were regulated would lead to the economic crisis. To pretend that you knew that that was coming or that the deficit that has been built up is somehow irrelevant to that is just ludicrous, and no one believes you, so you really must stop trying to treat people like fools when you say that the deficit that has been created was something that happened just because we had a Labour Government—
Kwasi Kwarteng (Spelthorne) (Con)
I am very grateful to you for calling me to speak in the debate, Mr Deputy Speaker, and I feel privileged to follow my hon. Friends the Members for West Suffolk (Matthew Hancock) and for Bromsgrove (Sajid Javid), who outlined in their compelling speeches why the Budget is incredibly important. The issue that we have not really focused on enough is the context of the Budget. We all—even Opposition Members—accept that the deficit is too large and that at some point in this Parliament we have to deal with it. The big point of contention between the coalition Government and the Opposition is how soon we should grapple with the deficit.
We forget the fair hopes that we had in 1997 when the then Chancellor of the Exchequer produced his first Budget, entitled “Equipping Britain for our long-term future”. That was the message that he wanted to send. That financial statement and Budget report came out in July 1997, and it was in that report that he famously stated his golden rule:
“The golden rule means that over the economic cycle the Government will borrow only to finance public investment and not to fund current expenditure.”
So far so good. The second rule was that he would maintain stable public finances—a requirement for our long-term economic stability.
Toby Perkins
The hon. Gentleman will be aware that those rules were changed only in the face of huge, global economic crisis. His party supported the change when the economic crisis struck, so was it incorrect to do that?
Kwasi Kwarteng
The hon. Gentleman will remember that the second rule was that
“public debt as a proportion of national income will be held over the economic cycle at a stable and prudent level.”
The then Chancellor concluded the 1997 report by stating:
“These rules will ensure that borrowing will be kept under firm control.”
Everyone applauded him. He was talking about prudence; he was the Iron Chancellor and very much the hero of the hour. In the same report, he referred to the recession of the early 1990s. His conclusion was that the public sector borrowing requirement rose to a peak at 7% of GDP and he said:
“The Government regards it as important that no similar risks should be taken with fiscal policy again.”
That was the position of the Labour party in 1997, and in 2006 Labour was repeating the same mantra and the same pie in the sky ideas. It was saying that
“public sector net debt is projected to remain low and stable over the forecast period”.
In 2007, it said:
“The Budget 2007 projections for the public finances are broadly in line with the 2006 Pre Budget Report”,
and so on.
David Wright
Will the hon. Gentleman outline what spending he would have cut between 1997 and 2007?
Kwasi Kwarteng
I am merely stating the very prudent rules that the former Chancellor and Prime Minister outlined. All the rules that he set in place in 1997—[Interruption.] The hon. Gentleman asked a question and I want to answer it. All those rules were ripped apart. The PSBR figure of 7% of GDP, which the then Chancellor had thought was a scandal, went up to 12%. According to the very rules that he set, we have failed and been found wanting. It is in that context that my right hon. Friend the Chancellor of the Exchequer introduced his bold and comprehensive Budget on Monday. It was only because we had to do this that the Budget was introduced to this House. It was not part of any ideology or master plan; it was an act of dire necessity.
I thought that the most interesting contribution in the debate was that of my right hon. Friend the Business Secretary, who recalled with a lot of emotion and understanding the experience of 1976. It was exactly that experience, when another Labour Government had bankrupted the country and had to go to the International Monetary Fund, that he was so anxious to avoid. It is in that spirit that the Budget has been introduced to the House and that is why I am very happy to commend this Budget and to go through the Aye Lobby to vote for it on Monday.
Budget Resolutions and Economic Situation
Kwasi Kwarteng Excerpts(13 years, 10 months ago)
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Rachel Reeves (Leeds West) (Lab)
I have great concerns about what the Government have outlined today. First, international evidence shows that hasty cuts will derail growth. Secondly, by failing to set out a vision for the future, the coalition destroys our chances of rebuilding a balanced economy. Thirdly, the Budget’s measures will hit the poorest in society—those who can least afford the pain—hardest. I fear for my constituents in Leeds West and am worried about how they will fare in the months and years ahead.
On growth, it is clear from the Chancellor’s speech that he has chosen to ignore the harsh lessons of history—from Japan in the 1990s and the USA in the 1930s. Despite his talk of a plan for growth, as a result of today, we face the real prospect of a double-dip recession.
I wholeheartedly agree that the deficit needs to be cut, but the issue is whether it should be cut this year or next year, and the method of making those cuts. The surest way to bring down the deficit is to embed strong and sustainable growth, but we heard nothing about that from the Chancellor today. The Office for Budget Responsibility’s forecasts have revised growth downwards—after those presented only a week ago—by 0.1% this year and 0.3% next year, and an additional 100,000 people are due to go on the dole.
Kwasi Kwarteng (Spelthorne) (Con)
What does the hon. Lady think about the sovereign debt crisis in Greece, to which my right hon. Friend the Chancellor referred in his Budget statement?
Rachel Reeves
I thank the hon. Gentleman for giving me the opportunity to address that issue. The debt-GDP ratio in Greece is two and half times that of the UK, and the maturity on UK debt is, on average, 13 years, compared with an OECD average of two to three years. In addition, the Greek economy remains in recession, while the UK is beginning to recover from a recession. We cannot take that recovery for granted, but our economy grew by 0.3% in the first quarter of this year, and we are beginning to emerge from recession.
The downgrades from the OBR reflect the fact that the cuts will stall the recovery and throw more people into unemployment. There are two ways to reduce the deficit: strong growth, or wielding the axe. The Chancellor has today chosen the latter, and the result will be, as we have seen from those forecasts, weaker growth, higher unemployment, more business failures, more home repossessions and a less competitive British economy. Instead of a strategy for growth, we have been given a strategy for austerity, cuts and pain for working people—the people whom I have been sent to Parliament to represent.
Economic Affairs and Work and Pensions
Kwasi Kwarteng Excerpts(13 years, 11 months ago)
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Kwasi Kwarteng (Spelthorne) (Con)
It is a great honour to be called to deliver my maiden speech. First of all, I want to give hearty thanks to David Wilshire who, amidst difficulties and press distortions, managed to keep up his work as a fine constituency MP. Very often, people would open the door to me and say, “Ah, so you’re the new David Wilshire,” and I would reply, “Well, sort of, but I want to continue his traditions of service and commitment to the constituency.”
People always ask me, “Where is Spelthorne?” A friend of mine said he did not realise it was a constituency; instead he thought someone called David Spelthorne was the MP for Wilshire. It is, however, a well-known constituency, and Spelthorne is a very old name, too. It comes from an old English word of which we have a remnant in the word “spelling”. It means speaking, and the “thorne” part of the word “Spelthorne’” referred to a thorn tree on Ashford common where people used to gather and speak. That is where the name comes from, and it also appears in the Domesday Book as the southern hundred of the old county of Middlesex.
Middlesex had a long and illustrious history, which my predecessor was very keen to stress—much to the annoyance of my Surrey colleagues. Middlesex did have an existence, however, and it had a reputation in this House, because in the old days it had proper elections. Charles James Fox was elected, and thousands of people were involved, whereas in nearby rotten boroughs there might be only half a dozen people. Famously, John Wilkes was elected in Middlesex, and was a distinguished Member of this House. He was described as the “ugliest man in England” but, like many politicians, he was not afraid of boasting and celebrating his own talents and he said that he had such charm that he could “talk away his face” in “half an hour”. Hon. Members can imagine my surprise at the fact that we were given only seven minutes to speak in the House today.
In the limited time available to me, I wish to make some points about the subject of today’s debate. Spelthorne is a seat in the south-east that relies almost exclusively on infrastructure and economic expansion, and in that context self-starting business men are very important. A gentleman from Shepperton, in my constituency, who has been in the breakage business for 30 years said to me, “Kwasi, it is very difficult. I am getting strangled by red tape and bureaucracy.” A Government quango, whose name I shall not mention, had been bombarding him with forms that he had to fill in, so he had been spending all his time filling in forms and none of his time attending to the business. My thought was that it was precisely those small business people who will drive us out of recession and into recovery.
I have to say—even though this is a maiden speech, I will be controversial—that to hear Labour Members in many of these debates is to be in never-never land; they have not once accepted any blame for what happened and they seem to think that we can just sail on as before. In many of their eloquent speeches it appears that they have forgotten that wealth creation is the most important element in getting us out of this recession. I heard the right hon. Member for Oldham West and Royton (Mr Meacher), who I believe has been in the House for 40 years, say that he was going to tax those in The Sunday Times rich list. Of course, one of the results of their being rich is that they can leave the country in about half an hour, so if he were to go down that route, a lot of them would leave and he would not bring in any more money to the Exchequer.
One of the right hon. Gentleman’s remarks reminded me of the story of the man who, when leaving a gentlemen’s club—it might have been the Carlton Club—in 1970 gave the footman sixpence. The footman looked at him and said, “That is only sixpence,” to which he replied, “Ah, it is sixpence to you, but it is a pound to me.” That was because income tax was at 95% or 97%. We cannot go down the road that the right hon. Gentleman suggests, and the Conservatives have stressed again and again that the only way to get out of this difficulty is to try to let business grow.
I was surprised to hear the hon. Member for Edinburgh South (Ian Murray) refer to the Scottish enlightenment. He will recall that one of its most prominent figures was Adam Smith, rather than the previous Prime Minister, who did not take an enlightened Scottish approach. Adam Smith made it very clear in “The Wealth of Nations”, a book that many hon. Members will know, how societies grow rich and how they can become very poor. I am sorry to say that the past 13 years have been an exercise that Adam Smith and the university of Edinburgh would probably have awarded a flat D grade for performance—although perhaps he would have awarded a B grade for effort, who knows?
I am pleased at this juncture to refer to the compelling speech made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), in which she mentioned George Stephenson. There was some controversy as to whether he came from Newcastle upon Tyne Central or from Chesterfield, but I shall not comment on that as that is a matter for Labour Members. What she did say was that he made a fortune through industry, enterprise and innovation, and those are exactly the kind of things that this coalition Government will look to promote in the months and years ahead.
To sum up, I should say that the truest words said in this debate were uttered by someone making a maiden speech, my hon. Friend the Member for Loughborough (Nicky Morgan), who said that the private sector is the “backbone of our economy”. In my few weeks in the House, I have not heard any truer words uttered in it. That is something that we have to be absolutely focused on, in terms of getting out of the recession. I hate to say this, but I find it staggering that Labour Members have not had the good grace to come to the House to apologise and to show some recognition of the very real problems that we face and the solutions that we need to get out of this situation. I thank the House for giving me such a good and warm reception for my maiden speech.
Oral Answers to Questions
Kwasi Kwarteng Excerpts(13 years, 11 months ago)
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Karen Lumley (Redditch) (Con)
12. What steps his Department is taking to reduce the level of the budget deficit.
Mr Kwasi Kwarteng (Spelthorne) (Con)
13. What steps his Department is taking to reduce the level of the budget deficit.
Chris Skidmore (Kingswood) (Con)
14. What steps his Department is taking to reduce the level of the budget deficit.
Mr Osborne
No, but we did receive a letter from the former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), apologising for the fact that there was no money left. We will discuss this issue in the debate on the Queen’s Speech. I note that the Labour party has tabled a motion, which it is asking us all to vote for, noting
“the need for a clear plan to bring down the deficit”.
I look forward to hearing that clear plan in the shadow Chancellor’s speech.
Mr Kwarteng
Has the Chancellor received any more correspondence from the former Chief Secretary?
Mr Osborne
No, sadly I have not, but I discovered that he had a large bust of Oliver Cromwell sitting behind his desk, and that when the Irish peace negotiations were being conducted they had to be held in another room.