The Economy and Living Standards

Michael Meacher Excerpts

Thursday 12th June 2014 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Listening to the Chancellor, I think the Tory attack lines for the next election are pretty clear. They go like this: “Labour left a dreadful economic mess, which we had to clear up the way we did. It’s been painful, but we were all in it together. We always had a long-term economic plan, and now it’s come good and we have a strong economic recovery.” What unites all of those claims is that every one of them is utterly false.

Labour did not leave an economic mess—the bankers did. In the Labour pre-crash years, the biggest deficit was 3.3% of GDP, whereas the Thatcher and Major Governments ratcheted up bigger deficits in 10 out of their 18 years. Although Thatcher-Major achieved a surplus in two years, Blair-Brown achieved a surplus in four years.

We were not all in it together. Average wages have fallen 7% since the crash, while, according to The Sunday Times rich list published a month ago, the richest thousand persons in the population have increased their wealth in this short period—they have actually doubled it—to just over half a trillion pounds.

In so far as the Chancellor had any long-term plan at all, it was to shrink the public sector in order to enable the private sector to expand into it, but, of course, that did not happen. Of the 1 million jobs that have allegedly been created, two thirds are self-employed on a pittance and almost all the rest are insecure, low paid and on zero-hours contracts. The fact is that virtually none of them are full-time jobs on or near the median income.

As for the present recovery, it is far too dependent on consumer debt to last and it cannot be sustainable. If we look at all the sources of demand—wage levels, productivity, business investment and exports net of imports—we see that they are all dramatically negative.

The biggest fib in the Tory lexicon is that the Tories had to clear the huge deficit by prolonged austerity. They did not. The then Labour Chancellor’s two stimulatory Budgets in 2009 and 2010 brought the deficit down sharply from £157 billion in 2009 to £118 billion in 2011—a reduction of nearly £40 billion in just two years. The present Chancellor’s austerity Budgets have slowed the reduction to a trickle and it has reached £108 billion this year—a reduction of £10 billion over three years. There is not much doubt there about the quickest and best way to cut the deficit.

What should be done? Initially, with private investment flat on its back, we need public investment to promote growth, directed in consultation with industrial leaders at energy, transport and IT infrastructure and at house building and laying the foundations for a low-carbon economy.

How will it be paid for? With interest rates at 0.5%, a hefty investment package of £30 billion could be purchased from the markets at the bargain-basement rate of £150 million a year, which would be enough to generate more than 1 million jobs—proper jobs—within two years.

It could, however, be done without any increase at all in public borrowing. A further £25 billion to £30 billion tranche of quantitative easing could be directed not at the banks, as it has been before, but at agreed industrial projects; or the publicly owned banks, RBS and Lloyds, could be instructed to prioritise their lending to industry, rather than speculation abroad or on property; or the very rich, who have monopolised 90% of the gains since the crash, could be subject to a special super tax to help contribute to tackling the nation’s debt, which some of them helped to create and from which they have benefited the most.