Jobs and Growth

Michael Meacher Excerpts

Thursday 17th May 2012 Commons Chamber

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

The Government now appear to have two central objectives only. The first, as stated at the start of the Queen’s Speech, is to achieve economic stability, and the other, of course, is their own survival. It is all the more astonishing, therefore, that they seem fixated on pursuing a path that is wholly opposed to both those objectives. Virtually no one among UK economic commentators or in the EU, IMF or US Administration believes that the Chancellor’s oxymoronic expansionary fiscal contraction will work or that prolonged austerity will lead to growth. Exactly these policies have been tried twice in the past 100 years in this country—with the Geddes axe in the 1920s and the May committee of businessmen in the 1930s. And what happened? Exactly what is happening today: a decade of anaemic growth and a rather little cut to the overall level of national debt.

The Chancellor has only three defences of his policy. The first is that, even at this stage, he can still use fiscal manipulation. Of course, that is what he said in last year’s growth Budget, and it led straight to this double-dip recession. In this Budget, the only growth provision was his cutting of workers’ protection against unfair dismissal—as though making it easier for employers to sack their workers will somehow stimulate growth. Now we see, from the press, that he is surrounded by the Tory think-tanks, all of which are telling him to cut taxes as a way to growth. Well, the fact is, as I have said already, that the big corporations are sitting on a mountain of cash. They already have the cash; they do not need cuts in taxation to produce more funding. The problem is the lack of aggregate demand.

The Chancellor’s second defence is quantitative easing, which he seems still to think will keep the funds going to business and produce the pick-up that the country needs. It has not. We have already put £325 billion into QE, but industry is still not stimulated. Indeed, the M4 money supply to business is still obdurately negative, because the banks have overwhelmingly used it to consolidate their own balance sheets, rather than to lend and get the economy going. The primary purpose of QE is to assist Governments with low long-term interest rates—that is very sensible—and debt repayment pressures, but it has no direct stimulus on the level of demand. That is why it will not work.

The Chancellor’s third and rather plaintive defence of his policy in the House has always been that were he to borrow to invest, he would be punished in the bond markets. I think that if he came to the House with a serious, plausible growth plan, the markets would be deeply relieved and very supportive.

Even if we leave that aside, as I would, there is one other source of funding that has not been tapped and that does not involve any increase in public borrowing. That is the taxation of the seriously rich. According to the latest edition of The Sunday Times rich list, which was published three weeks ago, the gains of the wealthiest 1,000 persons—who represent 0.003% of the population; an absolutely tiny proportion—amounted to no less than £155 billion over the past three years. That is actually rather bigger than the entire UK budget deficit. If that were taxed at the capital gains tax rate of 28%—I am not suggesting that it should be done just like that—it would raise more than £40 billion. That would be enough to create 1.5 million jobs through public investment in house building and national infrastructure. So why will the Government not do that? It is because the Chancellor and his Government have a deep ideological prejudice against any role for the public sector in driving the economy. This is a Government who believe—if they believe in anything at all—in the privatisation of anything that moves. That is a deeply reactionary idea, however, because when the private sector is flat on its back, as it is at present, there is no other way to provide an effective stimulus to the economy than through public investment.