Finance Bill

Nadhim Zahawi Excerpts

Tuesday 20th July 2010 Commons Chamber

[Ms Angela Eagle (Wallasey) (Lab)]

We have had an interesting debate on the Third Reading of the Finance Bill, although it has gone over a lot of old ground, with no surprising new positions taken on either side. The Exchequer Secretary to the Treasury claimed again that the Budget is progressive—a claim that I shall dispute soon. The hon. Member for West Suffolk (Matthew Hancock), who is not in his place, set up a straw man to knock down and will come to realise that literature reviews do not translate into effective speeches. The hon. Member for St Ives (Andrew George) paraded his conscience around the Chamber again but told us, unsurprisingly, that he would be supporting the Budget after all, even though he admitted that it was regressive. People will note his crocodile tears. In the usual way, the speeches made by the hon. Members for Daventry (Chris Heaton-Harris) for Dover (Charlie Elphicke) and for Stourbridge (Margot James) supported their side of the House.

I commend the speech made by my hon. Friend the Member for Wakefield (Mary Creagh), who put before the House the real cost increases for women—especially those with young children—under the Finance Bill. That seemed to prompt much hilarity among Government Members, which I thought revealed more about their attitudes than about her concerns. She also mentioned the housing benefit and disability benefit changes outlined in the Red Book, and many millions of vulnerable people will be worried about those as the spending review approaches.

My hon. Friend the Member for Streatham (Mr Umunna) made an extremely good speech and put some facts about recent economic history on the record and my hon. Friend the Member for Chesterfield (Toby Perkins) pointed out the fallacy of private sector see-saws suddenly moving in to take over the spaces that the public sector has vacated. Such things are such an important part of the ideology of the Government. The hon. Member for Stourbridge at least did the decent thing by recognising that there had been a global recession, but she said that we were not prepared for it, although she knows that net Government debt before the credit crunch was the second lowest in the G7.

The Finance Bill puts into place a Budget strategy that is a huge gamble with the future prosperity of Britain. The Chancellor began by telling us that it was an emergency—that it was the “unavoidable Budget”. He has tried throughout this process to persuade the country of two things: first, that Labour somehow created the deficit all on its own; and secondly, that the only solution is to cut it further and faster than our plan to halve it over the lifetime of this Parliament would have done.

Neither of those assertions is true, and here is why. Extraordinarily, Ministers and Government Members, from the Chancellor on down, have failed to let the words “credit crunch” so much as pass their lips during the entire proceedings on the Bill. The attempt to rewrite recent economic history is one that George Orwell’s Big Brother would have recognised and admired. The fact is that the banking crisis, which started in the American sub-prime mortgage market, caused the biggest global contraction that we have experienced in the real economy since the Wall street crash in 1929 turned into the great depression and led directly to the outbreak of the second world war. Since they will never say it, let me reiterate that this crisis was not caused by the irresponsible public spending of Governments but by the greed and criminal recklessness of the banking and financial sector. Any analysis of current conditions that ignores that basic and obvious fact, even if only for the purpose of generating convenient political propaganda, risks a dangerous miscalculation of the appropriate remedy.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

rose—

[Ms Eagle]

I will not give way because the hon. Gentleman has not been here for the entire debate; if he had been, I would have done.

We see in this Finance Bill that the Tory-led Government have made precisely that error with their deliberate, ideologically driven choice to go for a much more aggressive and reckless slash-and-burn strategy for public spending than the objective economic conditions, or even the bond markets themselves, required. The decision to opt for a balanced budget in four years is driven not by the objective economic conditions but by an ideologically driven political belief in a small state, a belief which is now apparently shared by the Liberal Democrats. Similarly, the decision to cut the deficit by imposing a 77% to 23% ratio of public spending cuts to tax rises is a choice driven not by the objective economic conditions but by the same belief in a small state apparently shared by the Liberal Democrats. It is a ratio of pain never before achieved in the UK, and it was not shared with the voters before the election. No mandate for this was established in the general election. Ministers have admitted that the cuts will be painful, but they have failed to acknowledge the scale of the pain that they have chosen to inflict. The apparent relish with which they choose to announce huge and ongoing cuts does them no credit whatsoever, and it will be seared into the memories of the millions of victims of their sadistic fiscal policy for years to come.

The propaganda techniques are chilling. Carefully chosen, extreme examples of excess in public expenditure are leaked by the Government to sympathetic tabloids to be highlighted in screaming headlines and make the case for more cuts. Government websites coarsen the debate still further by parading a stream of ignorant vitriol whipped up by sensationalist reporting, so it is suggested that workhouses are to be reopened, benefit claimants sterilised, and immigrants deported. If this is the nice face of the Tory party, then God help us, and shame on the Liberal Democrats for going along with it. The apocalyptic and absurd scares that they have issued about the UK economy resembling that of Greece—we heard it again today—have been not only fundamentally wrong but deeply irresponsible, and they have risked precipitating the very loss of confidence they purport to avoid.

This Finance Bill signals the biggest and most sustained public spending cuts in UK peacetime history, coupled with increases in taxes such as VAT that will directly take demand out of the economy just when recovery is fragile and still needs nurturing. That is why it is such a gamble. Labour Members are not the only ones who are deeply worried about the choices that have been made in the Bill. Following the Chancellor’s “austerity Budget”, the International Monetary Fund has just cut its growth forecast for the UK for both this year and the next. The OECD has criticised the decision to abolish the future fobs fund and other employment support packages as short-sighted and warned that the scale of job cuts in the public sector will slow down the recovery.

As a direct result of the June Budget and this Finance Bill, the now notoriously named Office for Budget Responsibility has had to revise upwards its estimates of job losses in the public sector. At the same time, it has revised downwards its growth forecasts and hoped that no one would notice that it excluded 550,000 people who work in state-owned enterprises from being in public sector employment, even though the Office for National Statistics classifies them as such: thus public sector job losses are likely to be even higher. The OBR’s prediction that the anticipated “recovery” will generate 2 million extra jobs in the private sector in just five years has caused widespread incredulity, because that target has never been achieved in the modern era. It has certainly never been achieved at a time when huge public spending cuts are likely to dampen employment prospects in the private sector and austerity measures are being imposed simultaneously in almost every developed economy in the world.