Economic and Fiscal Outlook

Peter Grant Excerpts

Monday 30th April 2018 Commons Chamber

[Huw Merriman (Bexhill and Battle) (Con)]

It is a great pleasure to speak in this debate. Section 5 of the European Communities (Amendment) Act 1993 requires Parliament to debate the content of this report on the UK’s economic and budgetary position. It is pleasing that although the UK has voted to leave the European Union, we are still complying with our obligation to submit the report.

Via the European Union (Withdrawal) Bill, we are enshrining in law the rights and obligations that emanate from our EU membership. We are building with the European Union a new relationship, which I very much hope will allow our constituents to trade with, work in, study in and visit the EU. Rather than turning our backs on the EU, we are building a new chapter of our working partnership and friendship, albeit on different terms—on our own terms—which will, I am positive, enable us to maintain our positive relationships in mainland Europe.

We are debating the Government’s assessment of the UK’s economic and budgetary position—a position that we have developed since taking office in 2010. Interestingly, while I was researching our economic position, I came across a page on the BBC website from 2010. Boxes on the right hand side of the page contained our key economic indicators, which in 2010 were as follows: UK economic growth would slow to 0.2%, UK borrowing would hit £163.4 billion, UK unemployment would increase to 2.5 million and UK inflation would rise to 3.4%. Those were the key statistics, as reported by the BBC, as the Labour Government left office.

Fast forward to 2018 and—of course, we still have more to do—growth is projected to rise by 1.5% this year, UK borrowing fell to £42.6 billion during the last financial year, UK unemployment has fallen to 1.4 million and UK inflation fell to 2.5% last month. So if Labour Front Benchers want to talk about how things look now compared with how they looked in 2010, those are the key figures that they need to consider. [Interruption.] From a sedentary position, the hon. Member for High Peak (Ruth George) mentions debt. The UK’s total debt is still too high, but we have reduced the amount being borrowed each year from 9.9% of GDP when Labour left office to 2.6% now. We still pay £50 billion a year on our overdraft, and that is far too high. It is larger than the schools budget, and it needs to come down.

[Peter Grant (Glenrothes) (SNP)]

It is vital that we do not confuse reducing the deficit with reducing the debt. Will the hon. Gentleman confirm that according to the OBR’s current forecast, the debt will not start to reduce until 2027 at the earliest? Does he think that that is good enough?

[Huw Merriman]

If we do not reduce the deficit, we will ultimately never reduce the debt. In January, we had a surplus for the first time, so we are getting there. As I say, however, the debt is far too large and needs to be reduced. I applaud the steps that the Government are taking to adopt a balanced approach, whereby we invest in our public services but get the debt down.

The debt causes me a huge amount of concern, because the interest bill will be paid not by my generation or those above me, but by the young. If Labour is serious about adding an extra £100 billion to the debt, the younger generation will be forced to pay back an extra £8 billion a year in interest.

It should not be forgotten that we have focused resources on key public spending commitments, such as health and increasing the amount we spend on the disabled. Opposition Members criticise us for the size of the debt, but when push comes to shove the austerity years, as they are often portrayed, have actually seen spending decreases at about the same rate as those advocated by Alistair Darling in the 2010 Labour party manifesto, so it is either one thing or the other.

My main point on how our economy is working is the fact that an extra 1 million people are now out of unemployment, compared with the last year of the Labour Government. That is crucial. Not only are those people paying into the economy, but they have opportunity, aspiration and hope. That was lost to many people when, yet again, the Labour Government left office with more people unemployed than when they had entered it. We have taken millions out of income tax by lifting the personal allowance from £6,500 to £11,850, reducing bills for 31 million people who still pay income tax. We have introduced the living wage, which will increase pay for 2 million people. One third of my working-age constituents are on the living wage, so it has a huge impact—they are £2,000 better off each year. All those measures make work pay, as seen by the increase in employment to 32 million people—the highest number since records began.

Finally, I would like to make a comparison with our European Union neighbours. Let us consider France. By 2015, we had created more jobs in five years in Yorkshire than have been created by France as a whole. The French are now looking to adopt our welfare reforms. They know that unless they modernise their welfare state, their unemployment rate will never be reduced from a shocking 9.7% to our rate of 4.2%. Some 1.3 million youngsters in France cannot find a job. It is our Government’s policies, in this report, that our EU counterparts are now seeking to replicate. I therefore absolutely recommend the report. I am very proud to stand on the Government Benches on behalf of the party that has delivered it.

[Peter Grant (Glenrothes) (SNP)]

I am grateful for the chance to speak in this debate, although I do so with some trepidation and a degree of puzzlement.

I speak with trepidation, because in preparing for the debate I had a look in Hansard for the equivalent debates in the previous two years and discovered that nobody who spoke for the Scottish National party came through unscathed at the general election. Looking at the empty Benches behind me, it seems the curse of Section 5 has driven others away, too. I speak with puzzlement, because for the past six months every time I have been in the Chamber and we have talked in the European context about Government economic analyses, those on the Government Front Bench have been at desperate pains to persuade us that Government economic analyses are not worth the paper they are written on and are not to be trusted.

Members will recall that those analyses indicated that leaving the EU could take about 9% off economic growth compared with staying in the EU. That was one of the “benefits” of leaving the EU that the Government tried to hide and still do not want to talk about. The Government’s own analysis indicated that even the much hyped opportunities for striking new trade deals are likely to restore only about 1% of the 9% of the economic growth we will lose. It must therefore strike our European neighbours as somewhat ironic—it certainly strikes me as ironic—that the Government need a parliamentary vote to give them permission to send some numbers to the EU to prove how badly they are running the economy, at the same time as they are doing everything possible to avoid giving a meaningful parliamentary vote on the hard Brexit that threatens to blow even their own projections to smithereens. Perhaps that is what the Office for Budget Responsibility was talking about when it said:

“The probability of a cyclical shock occurring sometime over our forecast horizon is fairly high”.

Despite the brave words from the Chief Secretary this evening, the fact is that Brexit is already hurting the economy and the Government’s incompetent, ideologically obsessed drive towards a hard Brexit is making the damage even worse. The London School of Economics estimates that the average household is already £404 a week worse off thanks to the EU referendum result. The Financial Times puts the figure at 0.9% of GDP. That sounds like an innocuously low percentage, but it translates into £18 billion a year out of the economy. That is about £350 million a week. I have heard that £350 million a week somewhere before. It seems that the big white number on the side of the big red bus, telling us how much difference Brexit would make to our ability to spend on the NHS, was almost exactly correct—they just forgot to put the minus sign in front of it.

It would be bad enough if the pain of this economic failure was fairly shared. In fact, it would be nice if those who were ultimately responsible had to take any share of the pain, let alone a fair share of it, but of course, all those who are responsible seem to be doing very nicely indeed, thank you very much, because the costs of a failed and discredited austerity programme are being piled on to the shoulders of those who are least able to bear them—the very people any civilised Government would see as a priority to protect and look after.

Last week, it was confirmed that food bank use continues to increase. Why did the Chief Secretary not mention that in her overview of the economy? This week, my local authority, Fife Council—the third biggest in Scotland—reported a big increase in rent arrears owed by council tenants. Oddly enough, I predicted that increase last year, as did every MP in Fife and MPs from a number of other constituencies, including, in particular, my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). Why did he predict it? Because his constituency got hit by the roll-out of universal credit a couple of years ago. He saw what that did to his constituents’ ability to pay their council house rent. He warned that the same thing would happen in my constituency and elsewhere, and it still is happening. It is another symptom of a failed Government austerity obsession that counts cutting the welfare bill as being more important than improving the welfare of the population.

Last week, we saw a signal moment in the history of Scotland’s relationship with welfare benefits, when our Parliament voted unanimously to support the Social Security (Scotland) Bill on its final reading. It is all very well for Westminster to give powers and for Holyrood to use them to try to bring in a modern, caring social security system, but when a major part of the Government’s fiscal success is down to slashing welfare benefits for those who most need them, when Scotland’s resource block grant is being cut in real terms by £213 million this year and by £531 million over the next two years, and when UK Government will have cut nearly £4,000 million out of the availability of social security payments in Scotland over a 10-year period, it is clear that the powers that Holyrood should be using to create a fair society are instead having to be used to mitigate the brutal unfairness that this Government are imposing on citizens across the United Kingdom.

Some might argue that this short-term pain can be justified if it leads to longer-term economic stability, but the longer term seems to get longer and longer every year that we have this debate. The OBR’s briefing indicates that even by 2022-23, we will still have a budget deficit of around £20 billion a year. The debt will be growing by £20 billion a year—it will not be coming down—and despite the modest improvement in some aspects of the outlook over the last few months, the Government’s promise to

“return the public finances to balance at the earliest possible date in the next Parliament”

is not going to be delivered. It will be 10 years before the budget deficit goes away—10 years before we even start to pay off the astronomical levels of debt that we are all having to fund.

Despite the shambolic mismanagement of the business of the House over the last few weeks, the Government will get the motion through tonight, with or without a vote. No doubt the carrier pigeon is standing ready and waiting, because they have just over two and a half hours to get the results of the vote to Brussels if they do not want to miss the deadline. However, there is, of course, a much bigger and much more worrying European deadline that is approaching very quickly. That deadline was arbitrarily and completely irrationally set by the House when it voted to trigger article 50, with no idea of what that would do to the economy. I, and I suspect many MPs on both sides of the House, have a sinking feeling that when we find ourselves a few hours from that deadline, the uncertainties that characterise the OBR report that we are debating tonight and the uncertainties that, as the Opposition Front Bencher, the hon. Member for Bootle (Peter Dowd) pointed out are driving investment away instead of attracting it to us—those financial uncertainties—will be even bigger on 29 March next year than they are today.

Question put and agreed to.