The Economy

Pamela Nash Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Pamela Nash (Airdrie and Shotts) (Lab)]

It is said that there are three stages of a Government’s life. First, they blame their predecessors for all the wrongs of the world, including the decisions that they are making themselves. They then get into their stride and take responsibility for their own policies. Eventually, they make decisions that make the public unhappy, and things go downhill from there. I suspect that this Government may get through all three stages rather quickly.

As we have heard, today marks a year since the Government gave their first Budget. I hope that this anniversary marks the beginning of the Government entering the second stage and taking responsibility for the pain that they have inflicted on families in my constituency and throughout the country over the past 12 months.

We have heard repeatedly from Government Members that the previous Labour Government were wasteful with taxpayers’ money. That is simply not true. The Government should stop patronising the electorate and stop using the unhelpful credit card analogy. The national debt is in no way analogous to a credit card. The balance sheet contains both assets and liabilities. The Labour Government paid for additional infrastructure, roads, schools and hospitals. Even so, until the collapse of Northern Rock, we had a lower national debt than we had inherited from the previous Tory Government in 1997. We should ask how much our assets are worth compared with our liabilities, as one would if one inherited a home worth £200,000 with a £20,000 mortgage on it. The next generation will receive not only the debt, but the assets. One example is Building Schools for the Future.

Government borrowing was invested in production, such as the planned loan to Sheffield Forgemasters, which would have aided an export-led recovery. The country would have seen a return on that investment. Instead, this Government took yet another decision that led to the stagnation of growth and the rotting of assets, which will be passed on to the next generation. That is typical of Government policy over the past year. They have made quick, deep cuts that have saved a little money in the short term, but they have had no adequate plan for the future and blame the Labour party for the consequences.

Labour’s bail-out of the banks was universally seen as essential to combat the effect of the global financial crisis on Britain. I will concede that mistakes were made on our part in banking regulation, but the Tories in no way opposed our measures at the time. In fact, until recently deregulation has been central to Tory policy. For months after the collapse of Northern Rock, the Prime Minister continued to promote bank deregulation. He stated that plainly in a speech to the Institute of Directors in April 2008.

It is, of course, more comfortable for the Government to blame everyone else, but it is time they took stock of the effect that they are having on the people of this country. For example, since last year’s Budget consumer confidence has clearly collapsed, with the figures consistently showing consumer spending dropping. That drop in personal spending power is the first since the 1980s.

[Margot James]

Does the hon. Lady not accept that there is bound to be restraint on the part of consumers considering the enormous level of household debt? Should not the Government learn from the public? The public are holding back, and the Government need to hold back.

[Pamela Nash]

I would argue that the Government’s policies in the past year have done nothing to increase the confidence of this country’s consumers. The British Retail Consortium and KPMG’s retail sales monitor shows that the total value of retail sales last month represented

“the worst drop in total sales since we first collected these figures in 1995…high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for thirty years.”

Worse still, according to the BRC the main cause of inflation is not just wages or consumer-driven increases but external shocks such as the VAT increase.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I agree with many of the points that the hon. Lady is making in her thoughtful speech. However, my recollection of last year’s Finance Bill debate is that the House divided on a Plaid Cymru and Scottish National party motion to overturn the decision to increase VAT, and the Labour party abstained. Can she explain why?

[Pamela Nash]

I cannot explain why, but I hope that our shadow team will answer the hon. Gentleman’s query at the end of the debate.

The VAT increase has already had a considerable effect on stretched budgets in homes throughout the country. It has hit the poorest in our society hardest, as have this Government’s two Budgets as a whole. It has meant that people are living in fear for their personal domestic budgets, as they do not know what the future will hold. The decision to increase VAT, a regressive tax, illustrates the priorities of the Tory-led Government.

The Chancellor’s claim in the Chamber a year ago today that the emergency Budget was “progressive” was frankly laughable. The Institute for Fiscal Studies has confirmed that it was regressive, and that half a million more children in the UK will end up in relative poverty by 2013. That is disgraceful. The Government are feeding the cycle of poverty and repeating the mistake of Thatcher’s Government in the ’80s. The Prime Minister stood at the Dispatch Box today and claimed that his Government were helping people out of poverty, but the experts beg to differ.

Young people are particularly affected, and they have a right to feel victimised by the Government. There have been a series of failures, leading to their generation being hard done by. Thousands of young people will now be saddled with up to £40,000 of debt after completing a degree. I am glad that my constituents still benefit from Government-funded higher education in Scotland, but even they leave university with considerable debt from the living and material costs of what is usually a longer term of four years at university.

When a young person graduates from uni, they then have to find a home. Unfortunately, the average age at which a person in the UK can afford their first home has risen to 37 under this Government. The national drop in house prices has had a smaller effect in Scotland, as the prices were much less inflated originally than in the south of England. Despite that, Scots are still just as affected by the difficulties in obtaining a mortgage without the considerable deposit of about 10% that is often now required.

After leaving university with so much debt, people have to cope with low and frozen salaries, if indeed they are lucky enough to get a job. Many remain without a job, as unemployment is hitting young people and Scotland in particular. We had the lowest unemployment rate in the UK in 2007, but we are now closer to the highest after four years of the SNP’s budget mismanagement.

The scrapping of the future jobs fund was yet another massive blunder by the Government. To label it a waste of money and say that the jobs created were not real is frankly offensive. I have met numerous future jobs fund workers in Airdrie, Newarthill and Shotts who enjoyed their six months in the programme, learned essential skills, improved their self-confidence and, in many cases, ended up creating a role for themselves and being kept on. At the very least, they were helped to find a similar job once they left their placement.

Unfortunately, the new Work programme is more likely to make the poor poorer than it is to get Britain back to work. There are two major problems with it. First, the promise that it will give 2.4 million unemployed people jobs over the next five years depends entirely on economic growth, evidence of which remains to be seen. There are currently 2.43 million people unemployed and 2.4 million out of the labour force, but in the last quarter there were only 469,000 vacancies. Secondly, the Work programme operates on a payment-by-results basis. Although I welcome the fact that good results are required for taxpayers’ money to be spent, in today’s limited job market are not private companies much more likely to pick individuals who are not long-term unemployed?

The majority of unemployed people are looking for a job. Many have the wrong skills, or are in the wrong place, and unfortunately they have little hope of gaining funding for retraining at the moment. The housing market also makes it almost impossible for them to relocate. With limited means, people are supposed to pay for increased food bills and sky-high energy bills. Despite the fact that I now spend almost half my time in Westminster, away from home, I still received a letter last week, like many people in Airdrie and Shotts, telling me that my electricity and gas bill is going up by £20 a month.

Fuel bills are also rocketing, and people are rapidly finding themselves struggling to cope. At a recent meeting with my local citizens advice bureau, we discussed the fact that the people who are now coming to us for advice are not just those on benefits or very low salaries but people in a variety of salary brackets, who are seeing their wallets empty much earlier in the month. If those on half-decent salaries are struggling, how are those on benefits and the minimum wage even beginning to cope?

The Government have spent their first year in power causing successive growth forecast reductions and prolonging the effects of the recession on both families and businesses, and a generation of young people has been put on the scrap heap. When are the Government going to stop blaming everyone else and find a plan B that will get the UK working again?