Infrastructure (Financial Assistance) Bill

Rachel Reeves Excerpts

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

The hon. Gentleman will know that the headline plan set out by the previous Chancellor and Government included cuts to capital spending that were substantially greater than those being implemented by this Government.

[Rachel Reeves (Leeds West) (Lab)]

Will the Chief Secretary give way?

[Danny Alexander]

I will gladly take another intervention after responding to the hon. Member for Luton North (Kelvin Hopkins). He will know that the low interest rates to which he has referred are in part a consequence of the fiscal credibility that this Government have established. It is precisely because we wish to use the strength of this country’s balance sheet which comes from that credibility that we are able to announce this guarantee scheme, which I will go on to describe in a moment. However, I shall take an intervention from the shadow Chief Secretary first.

[Rachel Reeves]

The right hon. Gentleman will be aware that the Office for Budget Responsibility has forecast that the previous Labour Government’s plans would have led to £6.6 billion more investment in infrastructure than that planned by this Government over the next three years. Will he confirm those numbers?

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[Rachel Reeves (Leeds West) (Lab)]

We will not oppose the Bill on Second Reading, but we do not think it remotely adequate to meet the scale of the challenge we now face: the longest double-dip recession since the war, record levels of youth and long-term unemployment, dangerously low levels of business investment, and as a result, deficit reduction way off track, with borrowing up by a quarter this year. The longer this situation continues, the higher the price for businesses, taxpayers and working families in the future: permanent damage to our long-term productivity and competitiveness, and billions of pounds in additional unplanned Government borrowing.

The Opposition have been urging the Government to act and we have repeatedly identified infrastructure investment as an urgent priority. However, this is not the plan it purports to be. The Prime Minister said that he would “cut through the dither”, but he has simply created another distraction—a fig leaf for their own inaction; a peashooter where we needed a big bazooka. At a time when we need to be bold if we are to boost business confidence, to come out with something half-hearted and hesitant risks making things worse.

Before proceeding, I would like to apologise for that fact that, as Mr Speaker and the Chief Secretary to the Treasury are already aware, I cannot be present for the winding up of this debate.

Let us remind ourselves of the background to the Bill. Over the summer, we learned that the UK economy had entered its third quarter of negative growth—the longest double-dip recession in British post-war history. Unemployment remains unacceptably high; youth and long-term unemployment is a national disgrace; and headline employment figures conceal endemic under-employment. Record numbers are working fewer hours than they want to, and record numbers are trapped in temporary work. The Chancellor’s promise of expansionary fiscal contraction has come to nothing.

A Government who proudly proclaimed on page 1, paragraph 1 of their coalition agreement that eradicating the deficit and securing the recovery were their No. 1 priority are now midway through their term of office. What do they have to show for themselves? They have an economy that is smaller than when the Government’s measures began to take effect and, at the last count, £150 billion in additional debt—a figure that is likely to rise further, with borrowing up by a quarter this year. As the former US Treasury Secretary writes in this morning’s Financial Times,

“the reality is that the primary determinant of fiscal health in both the US and UK over the medium term will be the rate of growth. An extra percentage point of growth maintained for five years would reduce Britain’s debt-to-GDP ratio by close to 10 percentage points whereas austerity policies that slowed growth could even backfire in the narrow sense of raising debt-to-GDP ratios and turning debt unsustainability into a self-fulfilling prophecy.”

[Hazel Blears]

Would my hon. Friend describe this as plan A, plan A-plus, or plan B? [Interruption.]

[Rachel Reeves]

From a sedentary position, my hon. Friend the Member for Nottingham East (Chris Leslie) suggests “plan F for fail”, and I could not agree more. I wish this was a plan B, but I do not think it is. It is more words, when what we require is action. Yet the Government do not listen to the evidence—they just plough on with a plan that everybody else knows has failed.

[Charlie Elphicke]

Can the hon. Lady clear up a bit of confusion? Today, she wrote in The Guardian that the Labour party would fix all this with a bankers bonus tax to build new affordable homes. However, it seems that this tax has been spent a number of times. Back in March, the Leader of the Opposition said it was going to be used to fund the young unemployed. Which is it?

[Rachel Reeves]

The bank bonus tax is being used to do two things: first, to create 100,000 jobs for young people; and secondly, for the construction of 25,000 new affordable homes. The Opposition believe that the priority right now is construction and getting young people back to work. The Government believe that the priority is a tax cut for the bonuses. That just shows how out of touch this coalition Government are.

Nothing better illustrates the long-term costs of this Government’s short-sighted complacency than the shocking shortfall in infrastructure investment. If we want to build a productive, competitive economy for the future, we need to invest in the road and rail systems that keep this country moving; in the energy supplies that power our industries; in the information and communication networks that turn ideas into real innovations. With study after study confirming Keynes’s original insight—that construction projects can maximise the multiplier effects of new investment, creating skilled jobs in the construction sector as well as in engineering and design—there is no better time than now.

Instead, we have had from this Government countless speeches, statements and strategy documents. People are asking, “Where is the delivery?” As the CBI is asking, where are the diggers on the ground? When are we going to start turning blueprints into bricks and mortar? It was the Prime Minister who said,

“This autumn, the government is on an all-out mission to unblock the system and get projects underway”.

That sounds promising—until we realise that he said this a year ago. Since then, what have we seen? None of the road building projects in the autumn statement package have begun construction. The number of housing starts is down on 2011. Planning applications are taking longer to approve. I agreed with the Prime Minister when he said:

“In terms of job creation today, getting construction projects off the ground is critical.”

But in the year since he told us that barely one in 10 of the projects listed in the Government’s construction pipeline have moved forward to procurement or construction, and almost as many of them have moved backwards. Total UK construction output is down by more than 10% and last week’s jobs figures showed that the number of jobs in the construction sector has fallen by 89,000, bringing the total number of construction jobs lost since this Government came to power to 120,000.

The Deputy Prime Minister has promised that support for infrastructure and other private sector projects from the regional growth fund would offer a

“boost to business, which will jump start growth and create jobs that last in the places that really need it.”

That sounds like just what we need, but that was said a year ago. We know that since then just £60 million of the promised £1.4 billion has been released to businesses, creating barely 5% of the 37,000 jobs promised.

The Chancellor of the Exchequer announced £20 billion in new infrastructure investment to be funded by the pension funds—that was a year ago. We now know that this scheme will be launched next year, with funds amounting to only a tenth of what was promised back then. As the failure of this Government’s promises increases, their rhetorical displays have become ever more strident. Two weeks ago, in response to questions from my right hon. Friend the Leader of the Opposition, the Prime Minister said:

“If we look at what is planned by this Government, we see that between 2010 and 2015 we will be investing £250 billion in infrastructure.”—[Official Report, 5 September 2012; Vol. 549, c. 230.]

It is true that the national infrastructure plan sets out £250 billion-worth of projects— would government not be easy if you were judged only on what you had planned? If we look instead at what has been delivered, we see that the picture is rather different. The Office for National Statistics shows that new infrastructure orders since the second quarter of 2010 average less than £2 billion a quarter. At this rate, it will take not five years but more than 30 years for the Government’s grand plan to be delivered. The latest construction output figures released last week show that progress is slowing, not accelerating. It is no wonder that the director general of the British Chambers of Commerce has described the national infrastructure plan as

“hot air, a complete fiction”.

[Geraint Davies]

My hon. Friend will know that the Prime Minister boasts of an extra 1 million jobs in the private sector. Does she agree that many of those jobs are where people are moving into part-time work having lost full-time work? It is wrong that the Government penalise people who are now working less than 24 hours but used to do more, by cutting their working tax credits by £3,750. The Government are saying, “Get some more work” but these people have just come down from full-time employment.

[Rachel Reeves]

I thank my hon. Friend for that intervention. He will know that there are 1.42 million people working part time who wish that they were working full time. As of April, about 200,000 families lost support through working tax credits because they could not find the additional hours that they need to still be eligible for that extra support to help them when they are in work; that support helps them to avoid poverty.

It is no wonder that people are asking whether they can have faith in anything the Government are saying, given that in every area we see dither and delay. In communications, the Government have put back the 2012 broadband target to 2015 and may not meet that new deadline. In house building, recent statistics show that new housing starts are down by 24% on a year ago. In waste management, the plan promised for spring this year will now not be delivered until the end of 2013. In energy, the CBI has warned that policy changes such as the cuts to feed-in tariffs have been

“damaging to business confidence, with implications not just for immediate investment decisions but for longer-term trust in government policy”.

In transport, we still await the long-promised national policy statement on transport networks and aviation, and tough decisions on airport capacity have been kicked into the long grass. Instead of the drive, decisiveness and clarity of vision that businesses are crying out for, what do we get in sector after sector? We get dither and delay; we get initiatives and announcements driven by the desire to hit headlines rather than to deliver results.

The Bill—the Government’s latest scheme—is a strange piece of legislation. It is being fast-tracked through Parliament, with the justification that the situation is immediate and urgent. However, given this need for speed, we are bound to ask whether legislation is necessary, particularly given that, as the House of Commons Library note explains, such commitments

“do not typically require…legislation”.

The UK guarantee scheme at the centre of the Bill was first announced by the Prime Minister in a speech in May. It was re-announced by the Chancellor in a speech in June. The press release came from the Treasury in July. It is therefore hard to resist the conclusion that the Bill is designed more to create the impression of activity and delivery than to get real results in the quickest way possible.

However, the Opposition’s biggest concern with the Bill is that it is simply inadequate to meet the challenge we face. Many in industry are sceptical that it will make any difference. Even where it is taken up, the tight criteria of economic and commercial viability may mean that it amounts to only a deadweight subsidy, aiding projects that would have gone ahead in any case. The best anyone has been able to say for it is that it might help some schemes at the margin, but that is hardly commensurate with the challenge we face.

The schemes that have been most frequently mentioned as strong candidates for assistance are those the Government have announced are going ahead several times already. Let me cite one example, which the Chief Secretary mentioned in his speech. Earlier this month, he said:

“Detailed discussions are already taking place with the Mersey Bridge Gateway project”.

We certainly welcome progress, but many may experience a strange sense of déjà vu, given that a year ago the same project was announced by the then Transport Secretary, who noted that although some transport plans are long term, this one could be

“implemented more quickly…creating jobs when they are needed most.”

What happened in the past year? It is no wonder the Government are gaining a reputation for more talk than action. As the director general of the CBI said today,

“firms fear initiative overload and are becoming impatient with delivery, leaving many companies still sceptical about the overall impact on investment.”

[Mr William Cash (Stone) (Con)]

Does the hon. Lady accept that this Bill is, in effect, pure Keynesianism? If she had the opportunity to read Nicholas Wapshott’s recently published and excellent book on the arguments between Keynes and Hayek, she might conclude that elements in this hoped-for infrastructure programme carry with them the germs of really serious difficulties if we pursue a policy of pure Keynesianism and do not take into account the arguments of Friedrich Hayek.

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[Rachel Reeves]

I look forward to reading the book that the hon. Gentleman mentions, but I do not think that the Bill is pure Keynesianism—that would be doing things that Labour Front Benchers are recommending, such as introducing a temporary reduction in VAT, a tax on bank bonuses, genuinely bringing forward infrastructure investment and a national insurance holiday for small businesses. Those are the things that would kick-start the economy, get people back to work and get the deficit down in a sustainable way, because there would be more people in work and more businesses succeeding, unlike what we have from this Government, which is £150 billion of additional borrowing because more people are on welfare and fewer businesses are succeeding.

[Kelvin Hopkins]

I compliment my hon. Friend on her excellent speech and may I say that Friedrich von Hayek has caused more damage in this century and the last than any other economist in the history of the world? Nevertheless, she is absolutely right; this is about a supply-side measure which is not Keynesianism. Assisting and providing a little bit of investment with a little bit of Government subsidy is not Keynesianism. Keynesianism is direct spending to create demand in the economy. The private sector will not create demand. Only government can restore the demand where there is the vacuum at the moment.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Of course he is agreeing with something that the Business Secretary said, which is that the real problem in the economy is a lack of demand. Supply-side measures will not do very much to help with that. When the Chief Secretary was asked in intervention what projects would be supported by this Bill he could name not one. That is the problem; this is a guarantee scheme, but we do not know what it guarantees. This is a project to help infrastructure investment, but we hear no announcement about which infrastructure investments will go ahead that would not have done previously. No wonder businesses and Members are sceptical and no wonder we are still in recession, if this is as good as the Government can get.

We will not oppose the Bill, but nor will we allow the Government to use the scheme as a substitute for the real plan that the economy and businesses so desperately need. Instead of devoting themselves to the task of getting our economy moving again, the Government have put before us an infrastructure investment guarantee that guarantees no infrastructure investment—fast-track legislation that has had the effect of getting the scheme stuck in the slow lane. The Government are preoccupied with distracting us from their fundamental failure and inaction, but people’s patience is wearing thin. We have had enough of initiatives and announcements: no more excuses, no more evasions—the Government need to get serious.

Two years ago, we warned that the Government’s economic plan would choke off recovery, shatter business confidence and add to borrowing, and that it would make it harder, not easier, to balance our books and pay our way in the world. A year ago, we called on the Government to bring forward infrastructure investment; we called for a bank bonus tax to fund the construction of 25,000 new affordable homes and to deliver a programme of youth jobs. If the Government had taken our advice then, just think how much progress we could have made by now.

[Jane Ellison (Battersea) (Con)]

Before the hon. Lady reaches the end of her speech, perhaps she will comment on this point. If all the things that have not been done are so bad, why did Madame Christine Lagarde say that she shivered to think what would have happened had the Government not taken the action they did?

[Rachel Reeves]

Olivier Blanchard and the International Monetary Fund have been saying for a year that if growth does not materialise the Government should think again. How much longer do we need to be in recession? How much longer must we have rising youth unemployment and rising long-term unemployment before the Government act? The IMF now forecasts that the economy will shrink this year and will barely grow at all next year. That is evidence that the Government need to rethink their strategy, and it is a shame that they have not heeded the advice of the IMF.

[Geraint Davies]

Does my hon. Friend agree that the reason consumer demand is so awful is that the Chancellor announced that 700,000 people in the public sector would lose their jobs? People in the public sector do not know whether it will be them or their neighbour, or whether it will be this year or next year, so they are saving not spending. That is why there is no growth.

[Rachel Reeves]

I thank my hon. Friend for that intervention. It is not just people in the public sector; people in the private sector, particularly in construction, which has shed 120,000 jobs since the Government came to power, are also worried about their jobs and futures and about how they will get the money to feed and house their families. There is real concern and a real lack of confidence among households and businesses.

This summer showed that things could be done differently. The Olympics showed what can be achieved with an inspiring vision—the right combination of public, private and social enterprise, with the nation united behind it. We delivered on time and on budget, and it was a perfect platform for Britain at its best. Let us hope that the Olympics provided a much-needed boost for our economy, but the lesson to learn is not that we can now rest; if we really want to seize the economic opportunities before us and build a better future, we need to repeat that effort on a much bigger scale, with a nationwide plan for jobs and growth. Let that be the lesson for today and let us get to work on laying the foundations of the economy we need to build for the next generation. Let us have a Government who follow up their rhetoric with real action.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Before I call the next speaker, I inform the House that the limit on Back-Bench speeches will be nine minutes.