Economic Affairs and Work and Pensions

Michael Meacher Excerpts

Tuesday 8th June 2010 Commons Chamber

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

We have heard some wonderful speeches; there have been four very good maiden speeches today from my hon. Friends the Members for Stretford and Urmston (Kate Green) and for Blaenau Gwent (Nick Smith), and from the hon. Members for Bromsgrove (Sajid Javid), and for Loughborough (Nicky Morgan). I congratulate them, and I am sure that we were all impressed by the rich quality, the powerful confidence, and the wit and humour of all their contributions. I am sure that we will hear a great deal more from all of them.

More than once in his speech, the Chancellor threw down a challenge on how the deficit issue should be handled, and in seven short minutes I want to try to take up that challenge. The Prime Minister, in a speech yesterday, said that the whole way of life of Britain’s entire population would be drastically disrupted by the most severe spending cuts for a generation, but the Government have also made it clear that they want to have a debate on how the matter should be handled. I welcome that, because I do not believe that the issue of spending cuts—or the alternatives—has yet been systematically explored.

Nobody doubts that a budget deficit of £156 billion is far too high, and of course it has to be reduced, but that still leaves open three fundamental questions: the timing, who should pay and, most importantly, the mechanisms for reducing the deficit. On timing, as has been repeatedly said, and as was said again today, making drastic cuts this year, when the economic recovery is so extremely fragile, is surely taking far too great a risk of precipitating a second collapse—a double-dip recession. Nothing that the Chancellor said today gives me much confidence that that will be avoided. That was exactly the experience of Japan in the 1990s, and of the US in the 1930s. We should learn from historical experience, not repeat it.

As for the question of who should pay, it is monstrous for any Government to shift the burden of the financial crash away from the perpetrators—the banks—on to its victims: public services and public sector jobs, perhaps 100,000, or even, as the papers have said, 300,000. It is outrageous that the banks whose greed and recklessness caused the crash—I do not think that anyone doubts that—should be let off virtually scot-free. They are not subject to a levy to pay back all the bail-out moneys, nor have they been made to restore bank lending to small businesses and homeowners to pre-2007 levels, which was the ostensible reason for the bail-outs in the first place.

The really big question is why so much emphasis has been put exclusively on public spending cuts, when there are alternative ways of cutting the deficit, which would be much fairer, as well as economically more productive. Those alternative mechanisms are economic growth and taxation. The Government’s latest growth forecast for the next year is a modest 2%, although it is expected to rise slightly in future. However, even Sir Alan Budd, the new head of the Office for Budget Responsibility, has said that he expects growth in the next year to be at least 2%. On that basis, as Britain’s gross domestic product is about £1.5 trillion, a minimum 2 per cent. growth over the next four years would increase the country’s income by about £120 billion. If, as usual, Government tax revenues take 40 per cent. of that, the Government will have available an extra £50 billion over that period, without any cuts or increases in taxation.

If the goal now, as for the previous Government, is to halve the deficit within four years, that means that there is still a gap of about £28 billion. I believe that this debate, which the Government want to encourage, should focus far more closely on how that remaining gap could be met by a mix of taxes on the banks and on the hyper-rich—a group that accounts for less than 1% of the population, and whose wealth has risen staggeringly over the past decade. While the average real incomes of the rest of the population in this country have remained flat over the past half decade, the wealth of the super-rich—and I am talking about just 1,000 multi-millionaires, who are listed in The Sunday Times rich list, issued only a few weeks ago—has almost quadrupled since 1997. In money terms, which is what matters, their wealth has apparently grown by an eye-watering £337 billion. In the last year alone, when the rest of the country has had to pull in its belt pretty tightly, their wealth grew by a cool £77 billion—a 30% increase in a single year.

Against that background, the banks, many of which are turning in record profits, and, above all, that rich elite, to whom the director general of the CBI referred as an alien class apart, because of their excessive executive pay, should certainly be expected to make a contribution proportionate to their increase in resources in the nation’s time of need, particularly as many of them were directly involved in causing the crash in the first place. The Chancellor no, less, is on record as saying at a recent party conference:

“We are all in this together.”

If that is true, and the rich are not a race apart, exempt from the privations of the rest of the population, I certainly think that they can contribute at least £7 billion a year over the next four years—a minuscule fraction of their recent increase in wealth.

I welcome this debate, but there are alternatives, which the Government need to take seriously. The question that I want to ask is: are the Government seriously listening?