The Economy

Michael Meacher Excerpts

Tuesday 6th December 2011 Commons Chamber

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

There is a paradox at the centre of the autumn statement that makes it self-defeating. The statement was widely touted as a growth Budget, but it is the opposite. The infrastructure plans relate to the medium-term future, on a three to 10-year time scale, but even if they materialise they are not the stimulus that is urgently needed now. Pension funds will certainly not invest in infrastructure unless the Government fully underwrite the risk, in which case it will be registered in the national accounts as a potential increase in expenditure and thus a rise in indebtedness. The paradox is that even to achieve that “smoke and mirrors” impression of growth the Chancellor is such a deficit fetishist that he has been obliged to tell the markets that there is no increase in spending at all, and everything has been funded by cutting spending elsewhere.

Significantly, the Chancellor has chosen to make those cuts by hitting the poorest hardest. Of the £1.2 billion child tax credit and working tax credit savings over the next year, 32%—nearly a third—will come from the poorest fifth but only 6% from the richest fifth, yet the poorest are precisely the segment of our population that is by far the most likely to spend and thus to stimulate growth. Reducing that source of growth in favour of will-o’-the-wisp infrastructure plans in the medium-term future is a pretty silly policy. It is certainly perverse and anti-growth.

The biggest problem facing Britain is not indebtedness, but the lack of aggregate demand. Everyone recognises that except our myopic Chancellor. In the 1930s, John Maynard Keynes said that if we look after unemployment, the budget will look after itself. Exactly the same thing applies today. Christine Lagarde, the head of the International Monetary Fund, warns that if all countries deleverage at the same time, it will be economic suicide. It is absurd to imagine that the markets would not accept some modest loosening of the monetary targets if it was likely to produce a serious prospect of growth; indeed, they would welcome that.

Of course we have constantly heard the Chancellor’s refrain against this argument, his canard that any increase in public expenditure will push up interest rates, threaten the precious triple A rating and cost Britain more, but he does not have to increase public borrowing to kick-start growth. There are two sources of funding that he could draw on at no risk from the markets whatsoever. One is to require the super-rich to make a fair contribution to the Exchequer at a time of crisis for the country. At present they are contributing next to nothing.

In the past year, according to the IFS, the income of the bottom 10th of the population rose by 0.1%. The income of the directors of the top FTSE 100 companies rose by 49%. That is just about 500 times as much. It is time those latter people and the financial and corporate elite of which they are such a part made a fair contribution.

[Jim Shannon (Strangford) (DUP)]

The right hon. Gentleman has clearly identified those at the top of the earnings scale, but at the bottom of the earnings scale are the long-term unemployed. Does he accept the concern of many in the House that the long-term unemployed are not looked after, and that there seems to be little regard for them?

--- Later in debate ---

[Mr Meacher]

Indeed. I very much support that point, and I shall come on to it later, if the hon. Gentleman allows me to make my argument.

I draw the attention of the House to the point that I was making. The latest version of The Sunday Times rich list, published in May, shows that in the 1990s the 1,000 richest people in this country—0.003% of the population, a tiny number of people—had assets of £99 billion, which by 2010 had more than tripled to £335 billion. That is truly staggering. It means that those 1,000 persons alone could pay off the entire budget deficit with just half of the gains that they have made over that period. So not to make the ultra-rich pay down a significant part of the deficit, which they themselves have largely created, is perverse, unjust and wilfully prejudiced.

There is a second source of funding that the Chancellor could and should, with no net increase in expenditure, use in order to resuscitate growth. Here I come to the point to which the hon. Member for Strangford (Jim Shannon) drew attention. It costs £8 billion to £10 billion every year to keep a million people on the dole. Instead of letting them rot on the dole, the Chancellor could create, with the same amount of money and no net increase in borrowing at all, up to 500,000 jobs to begin the house building, the energy and transport infrastructure improvement, and the development of the new green digital economy—all the things that the country so desperately needs.

The Chancellor would then have a triple whammy. He would reduce joblessness by a fifth, he would get income tax and national insurance contributions and he would get VAT, all by having people working rather than drawing benefits. He could well get Britain moving again. That is what the Labour party stands for, and it is about time the Chancellor, who has wreaked such devastation, caught on to a plan that will reduce the deficit fairly and sustainably and finally produce some growth in this country.

[Several hon. Members]

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