Budget Resolutions and Economic Situation

Liam Fox Excerpts

Thursday 17th March 2016 Commons Chamber

[Dr Liam Fox (North Somerset) (Con)]

Perhaps the most important thing about the Budget is also the most understated, which is that it is occurring against a veritable job creation miracle in this country. Since world war two, jobs have never been created at the rate that they are being created now, and that is the starkest difference between the economic management of this Government, and that of Labour when it was in power in recent years.

There is much in the Budget to boost that job creation further: the increase in tax thresholds, which is a further incentive to work; the doubling of small business rate relief, which will help to generate more wealth and jobs; the lifetime ISA, which is an encouragement to saving; and the cut in corporation tax, although that will not happen for a number of years.

There was a great welcome in the west country for the measures specifically outlined by the Chancellor. It is great to see the west country getting that long-overdue recognition from the Treasury.

[Neil Parish (Tiverton and Honiton) (Con)]

My right hon. Friend rightly emphasises that the Chancellor has provided funds for the west country. Rail, road, housing and broadband are all needed there.

[Dr Fox]

That advertisement for the west country’s economic potential was nicely put, and does not really require any response from me.

I share the disappointment that the Chancellor expressed about the fact that the growth figures were downgraded and that debt was rising as a proportion of GDP. The figures make it more difficult to see how we can achieve the substantial and sustainable surplus that is needed to make a meaningful reduction on the level of debt. However, I must say to some Conservative Members and many of the commentators who call for faster fiscal consolidation that they cannot get it by wishful thinking. Their objection to every tax rise and every spending cut proposed by the Chancellor makes it all the more difficult to achieve what we all want.

The Chancellor yesterday set out his view on the European Union element and the impact on our economy. It will not surprise anyone to learn that I do not take the same view as he does, but I want to tackle one or two of the myths and the claims that are made. The first claim, which comes from the Governor of the Bank of England onwards—I almost said “downwards”, but I am sure that is not correct—is that being in the European Union is key to our economic wellbeing. Of the OECD countries, 16 of the 20 with the highest unemployment are in the European Union. Of the 10 OECD countries with the highest unemployment, only one is not in in the European Union. Unemployment averages 6.5% in the OECD; 5.5% in the G7; 8.9% in the EU; and 10.3% in the eurozone—if we extract Germany, it is something like 14% or 15%. I should therefore like to know in the response to the debate the answer to this question: if the EU is so good and so key for economic wellbeing, why is it failing almost every other country in the EU?

The second claim is that inward investment in the United Kingdom comes because of our membership of the European Union. That does not strike me as being logical. If the UK gets the lion’s share of inward investment in Europe, it cannot by definition be simply because we are a member of the EU—we would otherwise get a proportionate share of inward investment. There must be other reasons that are nothing to do with our EU membership that enable that inward investment.

[Stephen Timms]

Chinese companies looking to move into the Asian business park in my constituency want to come to the UK because it is the best place in Europe for them to be located, it is English speaking and so on. Is it not the case that they want to address the European market, and that if we have left the European market, they will not come?

[Dr Fox]

I simply do not believe that that——the idea that, if we are not in the EU, we will no longer trade—is credible. Countries do not trade with countries; companies sell to consumers. They will sell to consumers when they have products of the appropriate quality at the appropriate price. The worst case scenario is having World Trade Organisation tariffs, but sterling’s depreciation since November was a far bigger change in the financial costs to business than anything tariffs could produce.

[Mr Steve Baker (Wycombe) (Con)]

Will my right hon. Friend give way?

[Dr Fox]

I will not.

I believe we will get investment into this country because we have a skilled workforce, a good tax structure, and fiscal and political stability. I also believe that money will go to where money can be made and moved. Our commercial law is one of the main reasons why money will continue to flood into this country. Those who invest in this country know that they can take their profits out, unlike other countries where they might consider investing.

Rather than providing the great opportunity, the EU provides two major risks to our economic stability, the first of which comes from the euro. The decision not to join the euro was one of the most beneficial in recent British politics. The euro is a vanity project. It is a political project dressed up as an economic one. The wrong countries were allowed to join, and when they joined, they were allowed to follow fiscal policies that caused them to diverge from the original premise. As a consequence, millions of young Europeans face structural, high and long-term unemployment, sacrificed on the altar of the single currency.

That will have a huge cost, and it has an economic cost to the UK because of the budgetary mechanism by which we support the EU. In other words, the more our economy continues to grow in relation to the EU, the higher our contributions will be, because they are a factor of our GDP. We in this country and our taxpayers will be penalised for our economic success and for remaining outside the project that we said from the very outset was doomed to failure. The one thing that we did not hear yesterday in the Budget was how we could otherwise spend the £350 million a week we currently send to Brussels.

The second instability that affects our economy is free movement. According to the Government’s figures, 1.162 million have settled from the European Union in the past decade. That puts pressure, including economic pressure, on the number of school places and the number of houses we require before we see any benefit to the UK population. It also puts pressure on health services. It might well be that those who fund the remain campaign, such as Morgan Stanley and the big oil companies, are not particularly worried about the lack of school places in this country—they will probably not use those places—but free movement has a huge impact in large parts of this country and applies financial pressure on the Government if they are to provide those things. That is even before we take into account the mass migration coming across Europe, which is leading to political and social instability, which will have an economic cost in the longer term.

I want briefly to deal with a completely separate issue that the Chancellor raised yesterday. In his Budget statement, he said:

“We have also agreed a new West of England mayoral authority”.—[Official Report, 17 March 2016; Vol. 607, c. 960.]

That is not true. We have not reached such an agreement. A draft agreement will be put to some of our councils in the coming weeks, but we have not agreed to the authority. Let me make it clear that the Members of Parliament—the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Weston-super-Mare (John Penrose), my hon. Friend the Member for North East Somerset (Mr Rees-Mogg), my hon. Friend the Member for Bath (Ben Howlett) and I—fundamentally and totally oppose the concept of a mayor being applied to the west of England.

We had the experience of Avon, when the outlying areas became nothing much more than an automated teller machine for Bristol’s spending plans. We have no wish to see it re-imposed on us by stealth. I am completely opposed to it and urge my colleagues in North Somerset to reject the proposal when it is put in front of them. If we want devolution, let us devolve down to existing democratic local government structures. We do not need another layer imposed on top of us—a metro mayor. That it works in the north of England is not a reason for it to be applied to the south of England. I have always believed it is a great Conservative policy to have whatever works in place, and not to apply a one-size-fits-all policy from Whitehall.

As I have said, the Budget comes against an extraordinarily good economic backdrop. Britain is outperforming almost all other EU countries, and almost all other developed countries. We have sound finance, free markets, low taxes, deregulation and political stability. The Government have presided over a veritable job creation miracle in this country while the European Union stagnates. We have a chance in the referendum on 23 June not only to reboot Britain, but to deliver much needed electric shock therapy to a sclerotic, failing and stagnating EU. I hope we take the economic opportunities available to us.

--- Later in debate ---

[Mr Sheerman]

My hon. Friend makes a very good point and I absolutely agree with him. I spoke to the chief executive of my local trust the other day—I would like the right hon. Member for North Somerset to listen to this—and he said that if it was not for the Spanish nurses we have been able to recruit from Spain, we could not provide a service in the hospital.

[Dr Fox]

I regard that as an entirely irrelevant argument. We would be able to employ whoever we wanted outside the European Union. The difference is that we would be making that choice, rather than having the numbers imposed on us by free movement.

[Mr Sheerman]

Moving on—the House would expect me, after 10 years as Chair of the Education Committee, to say something about education today. I am very concerned about the proposal for the academisation of all our schools. I spent a lot of time with the former Prime Minister, Tony Blair, talking about academies. The previous Labour Government created academies because none of us in this House should put up with the underachievement of young people. If we know that there are towns, cities and coastal communities where kids are not getting the opportunity to find that spark to realise their potential and get good qualifications, and, through those qualifications, gain entry into a good life, we should all be ashamed of ourselves—on all Benches in this House. That is the fact of the matter.

Too often, however, Governments look for a holy grail or silver bullet to produce good standards across the country in a hurry. I do not believe that such a holy grail or silver bullet exists. My experience as an amateur historian looking at the history of education policy leads me to believe something quite revolutionary: we do better on education policy when we co-operate across these Benches, rather than when we are ideological and fight over education policy. Forced academisation and the finishing of local education authorities as a real power in the land are deeply damaging to the future of education, deeply damaging to local government and deeply damaging to our local democracy.

The Government say they are in favour of giving power to the people. If we keep taking resources and functions away from local government, what will be the point of local government? Local government must have local roots. The right hon. Member for North Somerset said the same thing just now, in relation to his opposition to the big elected mayors. I have an open mind on that, but if we take away functions from local authorities, we have no trust in them. Good local authorities have been brilliant at education. They have produced some of the greatest educators and experts on education that this country has ever known. If we get rid of that wonderful core of people and cease to have them coming into the system, we will do great damage to the future of education. Many of those people have been very fine chief inspectors, including two of the recent ones. We need to fight for a real, accountable education system. There was even a high degree of co-operation and agreement across the House on the need for comprehensive education. Indeed, Mrs Thatcher, as Secretary of State for Education, made more schools comprehensive than any other Secretary of State.

The way things are going under this Government, we will have a top-down, tiny Education Department in London with 20,000 schools and just the inspectorate. Time and time again, we will have crises in our schools, as we had in Birmingham. We will then have to have a firefighting exercise. We will have to find a former chief inspector of schools to sort it out. I believe the Budget should not have been about education. That is the job of the Secretary of State for Education. It is not up to the Chancellor to make these decisions; these decisions should have been made independently. If we make a highly ideological divide between those people in favour of academies and those against them, it will damage not only our education system but our young people who deserve the very finest education for their lives.