Jobs and Growth

Lord Mann Excerpts

Wednesday 12th October 2011 Commons Chamber

[Ed Balls]

My hon. Friend is being unfair. The hon. Member for West Suffolk campaigned to reverse the cuts in Building Schools for the Future, as we know. To be fair to the hon. Member for South West Norfolk (Elizabeth Truss), she has campaigned for fewer cuts in Norfolk. If only she did not take such a regional view.

[John Mann (Bassetlaw) (Lab)]

I congratulate the shadow Chancellor on listening to what I said in this place a year ago and on the major change in Labour’s economic policy in the last three weeks, which has gone unnoticed. Last year’s policy of a permanent reduction in VAT has changed to the far more credible policy of a temporary reduction in VAT, which is precisely what I argued for in this place a year ago. Will the shadow Chancellor listen carefully if I have the chance to make a point about national insurance in this debate?

[Ed Balls]

My hon. Friend is a leading indicator, not a lagging indicator.

The fact is that the deficit plan is going too far and too fast. As I have said, we should stop putting party political advantage before the national interest. That is why the right thing to do to help struggling families and businesses in the constituencies of Members across the House is to adopt a plan now to get our deficit down by getting our economy moving. We should repeat the bank bonus tax; build 25,000 homes; guarantee a job for 100,000 young people; genuinely bring forward long-term investment projects in schools, transport and roads; temporarily reverse the damaging rise in VAT, which would mean £450 for a couple with children; have an immediate one-year cut in VAT to 5% on home improvement, repairs and maintenance; and introduce a one-year national insurance tax break for every small firm that takes on extra workers.

The Chancellor does not have to wait 46 days. He can bring forward emergency resolutions in this House next week and we will support them. He can call the plan what he likes. If he wants to appease The Spectator, he can call it plan A-plus. That is fine by us. Britain just needs a plan that works for jobs and growth, which is why he should adopt Labour’s five-point plan for jobs and growth.

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[Mr Osborne]

In precisely the advice that the right hon. Gentleman reads out, the IMF, in its current forecasts for the UK economy, is very specific that the UK should not change its fiscal stance. It has consistently recommended that this country undertake credible deficit reduction. The Government have set out many proposals—controversial proposals—to get our budget deficit down, but in the 16 months that we have been in office we have heard not one single suggestion from the shadow Chancellor on how he would get the deficit down.

[John Mann]

Will the Chancellor give way?

[Mr Osborne]

I will take the hon. Gentleman’s intervention in a second.

Last week, the Opposition tabled an amendment to the Welfare Reform Bill that would have cost this country £11 billion. That one amendment on one day in this House of Commons shows how completely incredible they are.

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[Mr Andrew Tyrie (Chichester) (Con)]

This debate about growth contains three distinct components, although, of course, there are close connections between them: the strategy to stabilise the public finances, the strategy to secure recovery, and the strategy to raise the long-run growth rate. I want to say a little about each of those.

There has been a fair amount of partisan politics around today, and I do not intend to add to it unless severely provoked. As I have said in the House a number of times before, the right hon. Member for Edinburgh South West (Mr Darling) deserves considerable credit for his March 2010 Budget, with its plans for sharp cuts in spending and borrowing. Equally, the coalition deserves credit for its own plans. Our present low debt service costs speak for themselves. They reflect the credibility invested by markets in the deficit reduction strategy and the belief that the coalition will stick with it, and the country will be the beneficiary of that.

As for policies to secure recovery, we can all agree that, given the eurozone crisis, the international economic outlook is much worse than forecast either by the right hon. Gentleman in his Budget 18 months ago or by the Office for Budget Responsibility this spring, and I am sure more surprises will follow. However, it is not true that the Government are doing nothing in response, as the right hon. Gentleman implied. They have rightly adapted to the situation, and the recovery strategy has changed. The Bank of England has adapted by announcing the second tranche of quantitative easing, and the Chancellor will adapt by announcing credit easing in his autumn statement.

I strongly endorse the Chancellor’s decision to favour monetary policy as the short-term tool rather than tinkering with tax changes, which is what is proposed in the five-point plan. I am sure that the Treasury Committee will want to examine exactly how the Government have changed their policy on the recovery strategy and whether QE2 and credit easing are the best tools, but I think everybody can agree that it was timely to take action. We can also agree that British taxpayers should not be asked to contribute to any further eurozone bail-out.

[John Mann]

History shows that the use of monetary policy has invariably led to an increase in inflation, which has sometimes been a hidden deliberate policy aim. Regardless of whether it is a good or a bad policy, does the hon. Gentleman expect an upward drift of inflation as the conclusion to the way in which monetary policy is currently being used?

[Mr Tyrie]

I will not answer that at any length, except to say that I am of course making my points in a personal capacity, because as a Committee we may comment on growth after the autumn statement. Let me also point out that the Governor gave a comprehensive reply to the hon. Gentleman’s question when he introduced the second £75 billion tranche of measures. He pointed out that money demand was extremely low at present, and that therefore he thought that the risk of inflation over the next two to three years was extremely low.

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[Michael Fallon]

Employers in my constituency tell me that they will do almost anything to avoid taking on any single additional member of staff. The hon. Lady has to recognise that the number of cases jumped to a quarter of a million in 2009-10. I welcome the change.

I hope that there might be agreement across the House on my next point. The two things that seem to be missing at the moment in our quest for growth are cash and confidence. I fully support what the Government are doing to encourage bank lending. It beggars belief that there was no agreement in place with the banks to stimulate lending to small businesses before the Merlin agreement was concluded this year. I support that agreement, but I also share the scepticism of the Chancellor and the former Chancellor about the stimulus that the first round of quantitative easing may or may not have given to bank lending. The jury seems to be out on that, but what it does seem to have stimulated is inflation. The Bank now admits, I think, that it may have added between 0.75% and 1.5% to consumer price inflation. Two years ago, consumer price inflation was 1.1%, whereas today it is four times that. I hope that the Bank will be mindful, if there is an inflationary effect, that inflation is already higher than we would like. If there is a squeezed middle, inflation is doing quite a bit of the squeezing, and I hope that the Bank will not forget its core task of getting inflation back on target.

In the end, confidence is the key. I hope that the Government will do everything that they can to back the companies that are successful, and to learn from their success.

[John Mann]

Will the hon. Gentleman give way?

[Michael Fallon]

I will not, if the hon. Gentleman will excuse me.

I visited a small business in my constituency that I want to tell the House about. It is called Rotosound and—I say this for colleagues who play guitar or other stringed instruments—it is the prime maker of guitar strings. It sells them not only throughout the United Kingdom, but to 60 countries around the world, and it is one of our great success stories. It sold guitar strings that were used by Jimi Hendrix, The Who and many other bands. It sells them to China, which could quite easily make its own guitar strings, probably more cheaply. People in China choose to buy our guitar strings because they are associated with one of our most successful industries—popular music—and because they are British. We need to distil the essence of successful exporters such as that company. The Government need to find the secret of those companies and do everything possible to back more of them if we are to deliver the jobs that our young people need.

It is clear from the debate so far, and certainly from the Chancellor’s speech, that only this Government can help to deliver the growth that the economy needs by laying the proper foundations for our fiscal consolidation, so that we get the modern economy that we need growing successfully again.

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[David T. C. Davies]

My hon. Friend asks a very good question. They managed to come up with an excuse after 2008, following the collapse of the banks, but as I said earlier, I am yet to hear an answer on why they ran a deficit from 2001 to 2008. Perhaps we will get one later.

What I did hear from the shadow Chancellor was some rather mealy-mouthed insults directed towards my right hon. Friend the Chief Secretary to the Treasury, who had a proper job outside politics and Government, as I did, which the shadow Chancellor seems to think is worth mocking him for. My right hon. Friend was not the man who was responsible for the £1 trillion-worth of debt, for selling gold at a fraction of the price, or for running up deficits in boom years. [Interruption.] I will not say anything about the euro at the moment, but there are many Labour Members who were urging us to the join the euro during those times and are now trying to give us a lesson in economics. I notice that they have all now gone very quiet.

The reality is that Labour Members never, ever learn their lesson. For them, it is not a case of plan A or plan B; there is only one plan: “Let’s tax people as highly as we can, and when we’ve finished squeezing every penny out of them, we’ll borrow more money.” They do not remember the words of one Labour Chancellor of the Exchequer during a Labour conference: “Comrades, you may think that we can tax and spend our way out of a recession, but I tell you that is no longer an option.” They still have not learned the lesson.

Clement Attlee failed in the 1940s when he tried to build his welfare state on the back of American war loans. There was Harold Wilson in the 1960s telling the public that the pound in their pocket was worth the same when he was rapidly devaluing it. Then there was Jim “Crisis, what crisis?” Callaghan, who, just like his successors, brought the country to the brink of utter bankruptcy, and did not even seem to think that he had done anything wrong. It was 18 years before they got another chance, and they have done exactly the same thing again: tax and spend, borrow and spend, just keep on doing it and do not worry about it.

I am glad that we have a Government who are not going to go for the easy option, which would be to borrow a whole load more money now in the hope of winning an election, which is exactly what Labour Members were doing for a couple of years. We are going to take some tough decisions, and that means getting our books in order. Unlike the shadow Chancellor, I know, having run a small family haulage business, that one cannot carry on spending more money than one gets indefinitely. I welcome the fact that the Chancellor is going to encourage real growth by making it easier for businesses to take people on and not have to worry about employment tribunals, which anyone who has run a small business does worry about all the time because of the number of spurious claims.

[John Mann]

Rubbish!

[David T. C. Davies]

I wonder whether the hon. Gentleman has ever had any experience of running a business or dealing with spurious employment tribunals—I very much doubt it.

I am also glad that the Chancellor has recognised that reducing our carbon emissions at a time when the economy is facing problems is not necessarily the wisest thing to do, particularly when the Government are now having to accept that our winters are getting colder, that more people are dying through cold than through heat, and that the link between carbon dioxide and global warming is not quite as clear-cut as many people say.

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[John Mann]

rose—

[David T. C. Davies]

I will not give way again, because I have done so twice and I do not want to cut myself off.

I congratulate the Chancellor and all his colleagues in the Conservative and Liberal Democrat parties and urge them to stay the course, to ensure that we spend what we earn, and not to listen to Labour Members or take any notice of people such as the former Prime Minister. Even he did not seem to know the difference between debt and deficit, because anyone who looks at the YouTube video of him abusing Mrs Duffy and calling her a bigot will notice that halfway through he said, “We will cut the debt in half.” Did he not know the difference between debt and deficit, or was he planning much deeper cuts than the coalition Government? Perhaps someone will answer that question.

All Back Benchers on this side of the House are supportive of the Government because we recognise, as we always have, that it is not possible to carry on spending money that one does not have because that merely creates a bigger problem further down the line for our children. That is why I urge my colleagues to stay the course.

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[John Mann (Bassetlaw) (Lab)]

Having listened for an hour and a half to the two Front Benchers, I suggest that we put them in a ring in Westminster Hall the next time we debate the economy—we could charge the public a little fee, which would be a modest contribution to deficit reduction—and allow the rest of us a little more time to discuss the economy.

First, I want to make some points that might be of particular interest to Labour Front Benchers—I trust that they will be noted in detail. I congratulate Labour Front Benchers on two major changes in the past three weeks. I mentioned the first change earlier—the change of policy on VAT. The previous policy, which I disagreed with in the Chamber, was that the Labour party was in favour of a permanent VAT reduction. Now, the policy is for a temporary reduction—from what the shadow Chancellor said, it appears that there would be a 12-month temporary reduction.

The figures are huge. Just in the next Parliament, that change in policy will mean that £50 billion will be available to a new Labour Government from revenues to the Exchequer. In the context of a snap election, potentially £20 billion extra would go into the Exchequer in the next three years. Those are major sums, and I therefore congratulate Labour Front Benchers on that huge change in policy.

That is not the only change in policy—I would recommend the second policy change to the Government, and I should like to hear in the winding-up speeches whether they are prepared to adopt it. Labour’s policy now is that all moneys from the privatisation of the more recently part-nationalised banks will go 100% to offset the debt. That ought explicitly to be the policy of the Government. I trust that they are not thinking of creating youth unemployment now to delay for give-away Budgets just before the election. The electorate, as well as business, will not forgive them for that.

This Government have adopted an economic policy of Japanisation. They are adopting the Japan Government’s approach, and anyone who wants to see precisely where they are going needs to look at the economic history of Japan over the past 20 years.

[Jacob Rees-Mogg]

It is not the Japanese approach. The Japanese Government have enormously increased their national debt, while we are going to reduce it.

[John Mann]

On inflation and monetary policy, this is precisely the Japanese model, but it does not work, which is why there is already £46 billion in additional debt. The lesson from Japan is that we cannot deal with the debt without growth. That is the lesson that the Government are not listening to. I recommend that Members on both sides of the House read up on the economic history of Japan.

I say to the Labour Front-Bench team that we need to be more specific about the cuts that we would make. I realise that on welfare, for example, we cannot be specific. Like the Government, we are in favour of major change, but we do not know whether that will be successful. The fact is that the state will shrink over the next few Parliaments—there is no other way to pay for our deficit reduction plans or the Government’s less coherent plans. We have to pay back the debt. The Government want to pay it all back now, while we are saying, in essence, “No, we wouldn’t pay back as much now, but it would be paid back in future years.” That is the key difference. Either way, it means that the state will have to shrink in future years, and I can suggest some things that we should be stating.

What about Government Departments? Housing costs nine times as much in London as in Bassetlaw. I am not suggesting that a major Department should move to Bassetlaw—although we have the land—but there are Sheffield, Leeds, Nottingham and many other places. Let us see the Department for Culture, Media and Sport shifted to Manchester with the BBC. Let us see the Department for Business, Innovation and Skills shifted. Let us see the Department for Environment, Food and Rural Affairs shifted. Let us see huge Departments, in their entirety, shifted out to the regions of England. That would give a boost to economic growth and bring permanent savings to the Exchequer. That ought to be part of our policy.

There are other smaller things that we could do. What about the British Council? What a nonsense of an organisation to sustain! We could take some of that money and give it to British universities to do English-language training abroad and build their business base in emerging markets. At the same time, that would reduce costs. What about unitary authorities? Of course, many Members, being ex-councillors, do not want to get rid of unitary authorities. What nonsense! There are 27 press officers in Nottinghamshire and 10 chief executives, with head offices all over the place. Scrap them! Scrap large numbers of councils! What about the police? We cannot merge the police, but we can merge their headquarters. We could rationalise NHS buildings across the county. There is a vast array of things that we could do. There are the British Army bases in Germany. We could reduce the size of the base in Cyprus. We should be levying at least 5% on the UK Crown dependencies to which we provide security. We should offer a permanent reduction in national insurance for small businesses to get young people into apprenticeships and back into work.