Economy and Jobs

Mark Pawsey Excerpts

Thursday 29th June 2017 Commons Chamber

[Mr Hammond]

Let me make a little more progress.

All that is before we even get to the £500 billion borrowing splurge that Labour has promised us over the next 10 years—£250 billion over the course of a Parliament.

[Mark Pawsey (Rugby) (Con)]

Will my right hon. Friend give way?

[Mr Hammond]

I will in just a moment.

Then there is the nationalisation programme. Let me explain these plans, Madam Deputy Speaker, because they are important. The Labour party wants to nationalise gas and electricity, water and Royal Mail. They would borrow a fortune to do it, and it would deliver no economic benefit whatsoever.

First, a Labour Government would have to buy up the shares of publicly listed companies on the stock exchange. Taking over just the single largest company in each sector would cost close to £44 billion, and the Government would have to pay a market premium on top, because a programme to buy the shares would drive up the price. Moreover, the taxpayer would take on those companies’ debts; that is another £26 billion. So that is £70 billion of public debt. When the Labour Government were done with the publicly listed companies, they would have to strike deals with scores of private investors and funds to buy the rest. All told, we are looking at more than £120 billion. [Interruption.]

The right hon. Member for Hayes and Harlington says from a sedentary position, “You do not understand. It is a financial transaction, so it does not need any money, and it does not require us to go out and borrow any.” He is simply wrong. Financial transactions add to public debt—[Interruption]—and that is before we even get to the railways, which he has been chuntering about. I have deliberately left the railways out of my equation, because his proposals for those are more complex.

--- Later in debate ---

[Mr Hammond]

I want to make a little progress, but I will give way in a moment.

I have set out our record, but the British people did not get where they are today by admiring their achievements. We have work to do: we have to negotiate our future relationship with the EU; we have to enhance our global competitiveness through raising our productivity; we have to rise to the challenge of sustaining our public services in the face of demographic pressure; we have to address the needs of our population for affordable routes into home ownership; and we have to show the courage and vision to grasp the opportunities ahead. We will meet those challenges head on, as we have always done, with a plan that builds on the strengths of our economy, not one that denigrates them.

Let me say something about our public services and their funding. We all value our public services and the people who provide them to us. Health and social care, education, roads, local authority services, police, fire and rescue, defence and the many, many other services we enjoy all form part of the vital fabric of our society and contribute to the vibrancy of our communities. The challenge of funding those public services is accentuated by the changing age profile of the population, which necessitates a proper debate about how to make the funding of public services sustainable not just next year, but over the decades of demographic change to come. We have to be clear about the choices and what they mean because there are no free lunches or money trees in the real world, and all decisions have consequences.

There are three ways for the Government to increase spending on public services: higher taxes, higher borrowing or higher growth. Higher taxes have a cost in terms of business investment, economic growth and take-home pay. Conservatives are instinctively in favour of keeping taxes as low as possible so that business can continue to create high-quality jobs and hard-working people can keep more of the money that they earn. That is why we reject Labour’s manifesto plan, which would, according to the IFS, take taxation to its highest ever peacetime level. The right hon. Member for Hayes and Harlington is not listening, but—[Interruption.] Pay attention. If he wants to make the case for higher taxation to fund public services, will he at least make this a grown-up debate? Will he at least ask voters whether they want to pay higher taxes to fund public services, not whether they would like someone else to pay higher taxes? As Ed Balls reminds us, in the real world, it is ordinary people who pay.

When we already have an eye-watering amount of debt, higher borrowing makes our economy vulnerable to future shocks. With £1.7 trillion of national debt outstanding and an annual interest bill of £50 billion, even at the current low rates, we should be reducing debt, not increasing it. However, borrowing means something else, too. It means that we are asking the next generations—our children and our grandchildren—to consume less in their lifetimes to pay for our consumption today. That is simply not fair; it is the opposite of sustainable.

[Mark Pawsey]

The Chancellor rightly mentions the interest bill. Will he tell us what would happen to interest rates if the Opposition’s policies were introduced? What would be the impact on the average family’s income?

[Mr Hammond]

As I have already said, if it were ever to look like the shadow Chancellor was anywhere near having his hand on the lever of power, I suspect that his programme, given what we know about his values and principles around the management of the economy, would lead to a pretty sharp rise in interest rates.

We must continue the job of getting our public finances back in order, over a sensible period of time, so that we are living within our means. The shadow Chancellor referred to the decision in my first autumn statement to push back the date on which we will reach fiscal balance. I made that decision to protect our economy during a period of uncertainty due to our exit negotiations from the European Union, therefore giving ourselves a little more headroom to respond should the economy need support. I would have thought that the right hon. Gentleman welcomed that measure.

The only fair and sustainable way to fund better public services, higher real wages, and increased living standards—[Interruption.] I say to the Opposition Front-Bench team that that is absolutely not the way to do it. The only fair and sustainable approach is to increase economic growth through higher productivity. Our plan will support our public services and living standards.