Amendment of the Law

Lord Darling of Roulanish Excerpts

Monday 23rd March 2015 Commons Chamber

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I continue to admire the humour and chutzpah of the right hon. and learned Member for Rushcliffe (Mr Clarke) in delivering that speech.

Thank you, Mr Deputy Speaker, for allowing me to make what I am pretty certain will be my last speech in this House; I am very grateful to you for that. I will not follow on from the comments of the right hon. and learned Gentleman, although I will return to some of the points he made, and nor will I follow on from what the Secretary of State for Work and Pensions said, except by saying this: I agree very much with what my hon. Friend the Member for Leeds West (Rachel Reeves) said in relation to annuities. Here we are, days away from people being able to choose what they do with their annuities, yet we hear that we are still to recruit the people who are going to be giving the advice—let alone training them and let alone members of the public being able to access that advice. The only thing the Secretary of State did was lay off some of the blame on to his Liberal Democrat colleague—so when the inevitable inquiry starts as to why these things were mis-sold, we know where the blame will be apportioned.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests, but I want to focus on the Budget as a whole. The most notable thing in the report by the OBR—it has done a very good job over the last five years—is in the second paragraph, where it says that the Budget is not expected to have any material impact on the economy. Call me old-fashioned, but I thought that was what Budgets were for.

The economy was growing in 2010—and it was growing in 2010—because of the measures we put in place in 2008 and 2009 to stop a recession becoming a depression. The Chancellor last week and the Secretary of State today implied that nothing particular had happened at that time, but we came within hours of the banking system collapsing. That is why we were facing such a difficult set of economic circumstances by 2008-09, and it took a Government committed to doing something about it—our Government—to make sure our economy was growing again in 2010. Sadly, what happened after that was that the economy slowed down, to a large extent because of the rhetoric and the fact that the current Government chose to trash what was happening and mendaciously claim we were like Greece, and as a result the Chancellor’s public spending figures are now way off what he planned in 2010.

[Mr Straw]

Does my right hon. Friend agree that, contrary to the myths peddled on the Government Benches, up until the financial collapse the Conservatives backed our spending plan and our debt levels were significantly lower than those of most other countries, including the US?

[Mr Darling]

My right hon. Friend is right. Our debt levels were the second highest of the G7 group of economies in 1997, but 10 years later they were the second lowest. On public spending, last week the Chancellor blamed all our woes on our alleged overspending. How was it that the Conservatives were supporting our public spending plans right up until December 2008? As for the Liberal Democrats, they were in a different stratosphere from the rest of us when it came to calling for more public spending.

At the last election five years ago the essential argument between us was whether we could halve the deficit in a five-year period, which was my judgment of what we could safely and realistically do. The Chancellor—the shadow Chancellor at that time—said that that was woefully inadequate. But what was woefully inadequate five years ago was announced as a personal triumph last week. He has managed to do what I said we could do, but he somehow says it is a great triumph on his part and something we should be grateful to him for.

Let us look at what the Chancellor has actually done in relation to borrowing. He announced last week that at long last borrowing was on a downward curve. Every Budget he has ever presented shows borrowing on a downward curve. The difference between this Budget in 2015 and the Budget in 2010 is that it is on a downward curve all right, but he is borrowing three times more than he expected to borrow in 2010 because the economy slowed down so badly in 2011-12.

As for debt, we all expected that it would be shown that we were not going to hit the Chancellor’s original target of debt reducing as a share of national income by 2015, and that was what was expected from his autumn statement in December, yet, lo and behold, last week suddenly he was meeting his target, by a minuscule amount—coming from 80.4% to 80.2% of GDP. Why was that? It was not because of some economic miracle. It was because he looked around the Treasury cellars and found assets he could sell, one of them being a thing called Granite, which is an absolute monster of financial alchemy. Northern Rock produced it, into which it fed sub-prime mortgages, and the more sub-prime they became, the more mortgages had to be fed into this thing to keep it going. After five years it is, of course, possible to manage these things and get them to come right, and that is why the debt is coming down—because he is selling off this asset—yet even the OBR says it is highly uncertain whether or not this target will actually be met. So when we look at what the Chancellor said on the causes of where we are now and what he has done over the last five years, I have to say his credibility and track record are not as great as he would have us believe.

On the public expenditure figures of last week, the OBR has described the Chancellor’s spending profile as a rollercoaster. If we want to go on a rollercoaster, we go to Disneyland, not the British economy. Anybody else whose plans had been described as a rollercoaster would have hung their head in shame. What sort of planning can people put in place when they have no idea what is going to be spent? We have the absurd situation where the Ministry of Defence may have to lay off armed services personnel in 2016-17 because of the steep decline in public spending, only to say, “It’s all right. We’ll be able to re-engage you in two years’ time.” How can universities plan for research and development when we have such a steep decrease in public spending now, with the promise of perhaps something in the next few years?

The former Chancellor the right hon. and learned Member for Rushcliffe knows as well as I do that when we look at spending profiles for four or five years, the last two years are pretty doubtful.

[Mr Kenneth Clarke]

indicated assent.

[Mr Darling]

The right hon. and learned Gentleman nods. They are pretty doubtful for one of two reasons: one is that a lot can change in that time, and the other is that the person presenting them has every intention of changing them as and when we get to that time. I do not believe for one moment that the Chancellor has changed his philosophy or beliefs from when he told the House last year that he wanted to reduce public spending to the lowest share in modern times—certainly since the welfare state and the national health service were introduced. All that has changed is that that was a political embarrassment last year, so he has simply shoved up the numbers at the end of the spending profile to be able to say, “Look, I’m not going to cause you any difficulties; public spending is going to rise, not decrease.” That is nonsense; the Tory view of public spending has not changed one jot.

Where I part company with many Government Members is that I do not think public spending is almost de facto a bad thing. It is extremely helpful to an economy in education and research and development, never mind the things an advanced economy demands in relation to the welfare state and pensions. So when we look at that profile, it is not credible, and I think it also conceals what the Conservatives would really like to do.

I want to say one thing about oil. I welcome what has been proposed. It is very sensible, because the oil taxation regime had to change, but I just remark in passing—and I am sorry only one nationalist has turned up to the debate—that the OBR forecasts are 47% below what it proposed just a year ago. North sea oil revenues are a 10th of what the nationalists told us they would have if they had an independent Scotland. This is another example of where pooling and sharing resources across the United Kingdom makes a massive difference. If Scotland had been independent today, it would have been faced with cuts that would make the austerity that is now being visited on the economy look like a Sunday afternoon tea party. They would have been substantial and damaging to the people of Scotland. That is why the nationalists have nothing to say about this; they have no one to blame for this problem but themselves.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Will the right hon. Gentleman give way?

[Mr Darling]

I have never actually met the hon. Lady, but I will certainly give way to her.

[Dr Whiteford]

I am grateful to the right hon. Gentleman for giving way. Would he accept that, over the past 30 years, oil revenues have contributed billions of pounds that have consistently bailed out Westminster’s bad economic management? Would he also accept that oil prices go up as well as down, and that the long-term trajectory of oil revenues is an upward one?

[Mr Darling]

I agree that oil prices go up and down, but when I said that last year during the referendum campaign, I was told that I was scaremongering, that I was talking Scotland down and that that could not possibly happen. The hon. Lady should listen to her former leader. He told us that the oil price would never drop below $113 a barrel, but look what happened a few months later.

In relation to the oil price, I would like to say in passing that whoever is Chancellor in the future will increasingly face a structural problem in the economy. North sea oil revenues are not going to return to where they have been for the past 30 years, income tax revenues are decreasing, corporation tax is proving more and more difficult to get, and the Government’s ability to collect money through fuel duties is steadily diminishing. This is all going to put more pressure on measures such as VAT. All Governments are going to have to face these facts, and the fall in oil prices brings them into sharp focus.

The current low levels of productivity are a matter of great concern. The Chancellor had a lot of fun comparing Yorkshire and France, but French workers are in fact more productive. That is not because our workers are lazy, or anything like that; it is simply because French firms have invested more. That is why certainty in public spending is important. It is also important that the Government should do those things that the private sector is not going to do. For example, I have increasing doubts about the ability of the private sector to provide us single handed with the energy generation that we are going to need. I am in favour of replacing our nuclear power plants, but the proposals for the next nuclear power station are heavily dependent on the French and Chinese Governments, and I worry about that. I speak as an advocate of the mixed economy, but I believe that we now need to ask ourselves whether we have reached a stage at which it might be cheaper and more effective for the Government to be doing more in that regard, rather than leaving it to the private sector.

On transport infrastructure, it will, I hope, be for the next Government finally to make a decision on additional expansion, whether at Heathrow or elsewhere in the south-east. Actually, none of those arguments has changed in the 10 years since the last White Paper was published on the subject. I also hope that the next Government will take advantage of the present ability to borrow very cheaply by borrowing to invest. I personally would spend more time on HS3 than on HS2, but I recognise that I might be in a minority in holding that view, on my own side and in the House as a whole. To be honest, there would be much more benefit, particularly to the northern part of England, in spending more money on the transport links there than in building a fast link between Birmingham and London. However, that is something that the next Government are going to have to deal with. I speak as a former Secretary of State for Transport. The Department for Transport’s record on announcing such plans is pretty good, but it is not quite so good when it comes to delivering. Indeed, many announcements were made last week, but I distinctly remember announcing the same things myself 10 years ago. Perhaps that illustrates the problem that all Governments face.

One of the profound issues that needs to be discussed as we go into the next election is what people expect the Government to do in regard to the provision of services such as education, health and pensions and what sort of society we want to live in. However, this Budget does not begin to address those questions, which is why I shall have no hesitation in supporting my hon. and right hon. Friends in the Division Lobby tonight.

[Several hon. Members]

rose—