Oral Answers to Questions
Debate between Lee Rowley and Peter Dowd(7 months, 1 week ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lee Rowley
The hon. Gentleman should look at the Conservative party’s record on education in over 40 years in government. There have been substantial improvements in education and teaching, and our children are better readied for the challenges ahead as a result.
Peter Dowd (Bootle) (Lab)
Balanced Budget Rule
Debate between Lee Rowley and Peter Dowd(5 years, 7 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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Peter Dowd
The hon. Gentleman is spot on. I do not want to misquote the Secretary of State for Transport, but when East Coast went bottoms up he said that that just proved that the market works. That is the sort of economic approach that the Tories take to our country.
Let me go through the three criteria one by one. We are a party that, first, takes seriously the mantle of being guardians of a sustainable economy. We fully costed our election promises in our grey book, “Funding Britain’s Future”. The Conservative party, by contrast, gave no costings whatever in its manifesto. As the shadow Chancellor said, the only numbers in the Conservative party manifesto were the page numbers.
Meanwhile, Carl Emmerson of the Institute for Fiscal Studies said in his election briefing that Labour’s
“forward-looking target for current budget has much to commend it”.
The IFS also estimated that we would have met our deficit target with £21 billion to spare, and that we would meet our debt target.
Secondly, we recognise that Government spending is not something to be scared of, or to have a phobia about, and that some economic metrics do not fully capture the benefits of the gradual build-up of public assets, as the hon. Member for Dundee East mentioned. That is why we distinguish between day-to-day spend and investment in our fiscal credibility rule, because investment is a different kind of Government activity that contributes to a stock of public assets, providing benefits over time. A country is not a house, or an individual who has a lifetime; it goes on, as we know, for a long time. Comparing us to a household might be a soundbite, but it is economic fantasy.
Lee Rowley
Given the hon. Gentleman’s point about us binding our hands, can he explain why, in 2006, I think, his sister party in Chile not only determined that it was going to adopt the kind of policies that he just described, but codified them into law?
Peter Dowd
I am not here to explain what sister parties anywhere do. I could quote sister parties for the Tories all over the place. The hon. Gentleman should be careful what he is wishing for when he starts to make those sorts of comparisons.
The Conservatives have been unable to appreciate this point in their words and in their actions: the Government’s fiscal target of cutting borrowing to less than 2% of GDP by 2021 does not exclude investment, or distinguish between spending and investment. In so doing, the Government overlook, and undervalue, the special character of investment. They do that time after time.
Their austerity programme, the mythical end date of which was in 2018—previously, it was before that—was more a signal of the Government’s failure than of any actual shift in approach. It has done lasting damage to our economy and society, and has left us with rough sleeping up by 169% since 2010, stagnant wage growth—the worst since Napoleonic times—and few examples of public infrastructure being patiently built up and supported.
The third aspect is flexibility when thinking about sound economic policy. The Tories’ austerity programme arises from, as the hon. Member for North East Derbyshire has reaffirmed today, a rigid ideological belief—not always reflected in practice, I have to say—that a smaller state is always better, notwithstanding good evidence of the state’s entrepreneurial capacity and the human costs of austerity. Such rigidity in approach is something that we have avoided in our fiscal credibility rule.
The zero bound knockout that we proposed, which would allow the Bank of England to change course in times of impending crisis when interest rates can do only so much, shows our willingness to adjust economic policy frameworks in the light of circumstances. Any sensible Government would do that—not bind themselves into a failed ideology and process. That knockout is informed by lessons learned after the global financial crisis—lessons that the Conservative party seems incapable of learning—when it became clear that continual cutting of interest rates was having little impact on spending habits and aggregate demand.
More was needed from fiscal policy, and that zero bound knockout—the fourth element of the fiscal credibility rule—acknowledges that that will sometimes be the case. Professor Simon Wren-Lewis writes that if that part of the rule
“had been in operation in 2010, we would have seen further stimulus in this and perhaps subsequent years, leading to a much quicker recovery from the GFC.”
Wren-Lewis describes that part of the rule—the part that allows a reversion to expansionary fiscal policy in times of crisis—as the part that makes the rule
“unique, and brings it up to date with current macroeconomic thinking.”