Leaving the EU: Economic Analysis

Rachel Reeves Excerpts

Wednesday 28th November 2018 Commons Chamber

[Mel Stride]

My hon. Friend has invited me to go into some of the technical detail of what has been put before the House this afternoon. Let me direct him to my earlier remarks about the work that Stephen Nickell will be doing. It will be very detailed and very forensic, and will deal with all the assumptions, including the trading assumptions to which my hon. Friend has referred. Of course, that information will in time—in a short time—be available to the House.

[Rachel Reeves (Leeds West) (Lab)]

However people vote, they expect the Government to put our national interest first. The deal on which we will vote in 13 days’ time clearly does not do that, and we are now confronted with circumstances in which the Prime Minister and the Chancellor are expecting us to vote for a deal that they know—and we all know—means that our economy will grow more slowly, and we will have a smaller economy with fewer jobs and less investment. No one voted for that in the referendum in June 2016, so can the Minister understand why so few MPs are going to vote for this deal in 13 days’ time?

[Mel Stride]

What the British people voted for in 2016 was this. They voted for a responsible Government to enter into robust negotiations with the European Union on behalf of the British people and secure a deal which safeguards our economy, the jobs and the economic future of all our constituents, but which also—critically— delivers on several other issues including an end to free movement, an end to the common fisheries policy and the common agricultural policy, control of our borders, not sending vast sums of money to the European Union, maintaining the integrity of the United Kingdom, and ensuring that we are able to go out and strike trade deals around the world as a global country. That is what we are delivering on.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 3rd July 2018 Commons Chamber

[Mr Hammond]

Yes. Female employment is indeed vitally important, and it has grown to a record high of 71.3%. As the labour market tightens, it is not just fair for us to make it possible and attractive for women to take part in the workforce; it is absolutely essential from an economic point of view. Dealing with any concealed discrimination is key to making it possible for women not only to enter the workforce, but to progress within the workforce to highly paid and rewarding jobs.

[Rachel Reeves (Leeds West) (Lab)]

One way to reduce unemployment is to encourage self-employment, and 4.8 million people are now self-employed. While that is welcome, there is a real problem of bogus self-employment, which is costing workers their rights and depriving the Treasury of tax revenue. Next week it will be a whole year since Matthew Taylor published his review “Good work” for the Government. When will they finally implement his recommendations and crack down on bogus self-employment?

[Mr Hammond]

The hon. Lady is right on both counts. Self-employment is an important contributor to our economy and genuine self-employment is very much to be encouraged, but there is a problem of bogus self-employment. People who are essentially employed are not paying the proper taxes and operating according to the proper rules for people who are employed, and in some cases employers are concealing the employment of people for their own selfish reasons. We need to deal with both those counts.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 22nd May 2018 Commons Chamber

[Mr Philip Hammond]

Yes.

[Rachel Reeves (Leeds West) (Lab)]

The cap on charges on payday loans legislated for by Parliament has made a huge difference in bringing down the costs, but it is now more expensive for a person to go into an unarranged overdraft at their own bank. Will the Government look to extend that legislation to cap also the rip-off fees and charges put on customers by our banks?

Customs and Borders

Rachel Reeves Excerpts

Thursday 26th April 2018 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I will focus my remarks on the work of the Business, Energy and Industrial Strategy Committee regarding our relationship with the European Union and the customs union, and on the impact that leaving them will have on British businesses.

A couple of weeks ago the Select Committee visited Norway, where we were looking at electric vehicles. Of course, while we were there, we discussed with the people we met the border between Norway and Sweden. Norway is not in the customs union, but Sweden is in the European Union and therefore part of the customs union. Trade is not frictionless along that border. There is physical infrastructure and there are sometimes queues. The goods trade between Norway and Sweden is worth £13 billion a year. Goods going through the port of Dover alone are worth about £120 billion a year, and trade between Northern Ireland and the Republic of Ireland is worth more than £5 billion a year. This is not straightforward. There are huge risks and costs of us coming out of the customs union.

My Committee has produced five specific reports about the effects of leaving the European Union, on the civil nuclear sector, aerospace, the automotive industry, pharmaceuticals, and the food and drink sector. We received almost 100 pieces of written evidence during our inquiry and took oral evidence from more than 30 witnesses. Pretty much every witness, apart from the chief executive of JD Wetherspoon, spoke of their fears and worries about leaving the European Union and specifically about leaving the customs union, which is why I am so pleased that we are having this debate.

The Committee heard time and again that any border delays would undermine just-in-time delivery systems; force companies to expand warehousing facilities massively, at a significant cost, as the right hon. Member for Broxtowe (Anna Soubry) said so eloquently; and put at risk time-sensitive imports and exports, particularly of food, medical radioisotopes and many pharmaceutical products.

[Catherine West (Hornsey and Wood Green) (Lab)]

Is my hon. Friend aware that the members of the International Trade Committee made a similar finding when we visited the border between Canada and the United States? We saw very long delays there, and that was between friendly countries. Transposing such a situation to Northern Ireland would be a nightmare, especially with all the rifles on the shoulders of border guards and so on.

[Rachel Reeves]

Yes. Of course, this is most keenly felt and apparent along the border between Northern Ireland and the Republic of Ireland, as other Members have pointed out. But this is an issue not just in Northern Ireland, but at every port in the country. As an island and a trading nation, leaving the customs union will have a huge and devastating impact on us.

[Robert Neill]

To reinforce the hon. Lady’s point that her findings apply everywhere, is she aware that the report of the Select Committee on Justice about the Crown dependencies identified precisely the same issues? For example, avionics parts—a key part of the Isle of Man’s economy—are in international supply chains. Specsavers exports internationally from Guernsey into the EU, and fishermen in Jersey and Alderney need to land their fish in France because that is the way that it fits in with the real-time supply chain. All that is assisted only by being in the customs union.

[Rachel Reeves]

The hon. Gentleman and I have a long history, as we fought the Bromley and Chislehurst by-election against each other in 2006. Today, however, I cannot find a word on which I disagree with him; he is absolutely right. The work of his Select Committee and so many others mean that we can bring this evidence to the fore, and raise the concerns of businesses, the people who work in them and the trade unions in all our constituencies. That is why the work of Select Committees is so important, and it is also why this debate, which was called by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), is so important.

I will now touch on a few pieces of evidence given to the Business, Energy and Industrial Strategy Committee that really bring home what we are talking about, especially regarding the effects of which we are fearful. Honda, which produces cars in Swindon, said that just a 15-minute delay at the border would cost it £850,000 a year. If hon. Members multiply that by the number of minutes or hours for which goods and components might be delayed, and multiply that across the number of car and component manufacturers in the country, they will get a feel for the sort of impact that we are talking about. It is estimated that Ford would have to fill in 115,000 import declarations at a cost of £35 per declaration for imports from the European Union, resulting in a total cost of £4 million, as well as the additional administrative costs.

[Helen Goodman]

Will my hon. Friend give way?

[Rachel Reeves]

I will just make a little bit of progress.

Diageo uses 11% of Ireland’s cream output every year in the production of Baileys. That is quite a staggering statistic. Some 18,000 trucks cross the border between the Republic of Ireland and Northern Ireland every year in the production of Baileys. Diageo estimates that delays at the border would cost it £1.3 million a year, and even greater costs in the supporting supply chains. It went on to say that even small hold-ups to the process would be a huge problem.

Both Nestlé and Honda said in evidence to us that companies produce for the market that they are supplying to. Therefore, even if we did secure free trade agreements with Asian and American countries, and others, we would not see a huge increase in jobs and investment here, at least in the sectors that we looked at. Ferrero Rocher told us that 5,000 trucks a year go between the UK and the rest of the European Union. It talked about costly delays and the effect on the freshness of its goods. Businesses said that border delays would be very expensive. Leaving the customs union, they told us, was about damage limitation rather than seeing and forging new opportunities ahead.

My own view is based on the evidence that the Committee has taken, which leads me to a very simple conclusion: we need to remain in a customs union to retain the benefits of frictionless trade that we enjoy today for the good of jobs and investment in our country.

Spring Statement

Rachel Reeves Excerpts

Tuesday 13th March 2018 Commons Chamber

[Mr Hammond]

It is always a pleasure to hear from my right hon. Friend. We are absolutely not complacent, because there are many challenges as well as opportunities ahead of us, but we have a plan to embrace the opportunities and rise to the challenges. This country has many advantages that our neighbours would give their right arm to enjoy. We must go forward robustly and in good heart to seize those opportunities and make the best of them for the future. On his specific point, of course in the forthcoming Budget we will look at taxation and spending over the future period. The OBR, of course, will decide what to present in its report to the House. He will have an opportunity to question OBR officials about their approach when they appear before the House shortly after the Budget statement.

[Rachel Reeves (Leeds West) (Lab)]

Consumer credit has risen by 9% over the past year, and the ratio of household debt to income, at 138%, is rapidly approaching a level not seen since before the financial crisis. With interest rates now forecast by the OBR to rise faster than we previously envisaged, are we not asking consumers to keep the wheels on the road for the economic recovery? Is that sustainable, and is that the right thing to do?

[Mr Hammond]

The hon. Lady is right to raise this issue. It is something we keep under constant review, and I talk regularly with the Governor of the Bank of England about personal debt. She will probably know that personal household debt rose in all but one of the 13 years of the Labour Government, and it is now lower than it was before the financial crisis. The judgment of the authorities at the moment is that household debt levels are sustainable, but she is right to draw attention to it. It is something we keep under close review.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 27th February 2018 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

It is now two years and two months since the Boxing day floods hit much of Yorkshire, including my constituency. Kirkstall in Leeds is no better protected from floods than it was on Boxing day 2015, and the Government still have not signed off money for the phase 2 Leeds flood alleviation scheme. When will that happen? The scheme is urgently needed to protect my constituents and local businesses from devastating floods such as those that we have already experienced.

[Mr Hammond]

My constituency has also been affected by flooding, and some of the responses are major engineering projects that take time to develop. The Department for Environment, Food and Rural Affairs and the Environment Agency have funding for flood relief projects, but those developments have to be prioritised and worked up into proper business cases. I will look at the specific case the hon. Lady raises and, if I may, I will write to her and place a copy of my letter in the Library of the House.

Budget Resolutions

Rachel Reeves Excerpts

Wednesday 22nd November 2017 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to follow the hon. Member for Mid Bedfordshire (Ms Dorries).

I fear that today’s Budget delivers more of the same. It does very little to help people in the everyday economy who are struggling to get by—struggling to get a foot on the housing ladder, to grow their business, or to gain security in work. I shall focus on two aspects of the Budget. I shall deal first with GDP and productivity, and secondly, like the hon. Lady, with housing supply and house prices.

The biggest influence on our standard of living—on whether we can afford to pay the bills, on how we are doing, and on whether our families can get on and do better than the previous generation—is how fast the economy is growing, and in the context of that most important metric, I think we can regard the Budget only as a failure of Government economic policy. For every single year of the forecast period, economic growth has been revised downwards, and that is not from particularly high levels in the first place. There has been a further downward revision since March this year, which is very worrying for many families in all our constituencies. I believe that, by 2022, GDP will be 2.7% lower than was predicted in March, and about 80% of the downgrade is due to lower productivity during that period. Productivity is now expected to be 27% lower than it would have been if it had continued to grow at its pre-crisis levels.

That is incredibly worrying. If we are to compete with countries throughout the world in the years to come, and to do so outside the European Union, we desperately need to boost our productivity, our research and development, our business investment and our investment in infrastructure. However, all the data and all the numbers published today by the Office for Budget Responsibility suggest that we are doing exactly the opposite. We are going in the wrong direction with those most important economic numbers relating to GDP and productivity. Our productivity is already 20% behind that of the United States, Japan and Germany, and we simply cannot afford to have further productivity downgrades.

Of course, downgrades in our GDP and productivity also have a real effect on Government borrowing and debt. Over the forecast period—the next five years—the productivity downgrade adds a staggering £90 billion to our borrowing trajectory. That is incredibly worrying, given its effect on not only living standards, but the public finances. We are simply not able to invest the money that we need to invest in universal credit, infrastructure, our national health service and our schools, because we are not delivering on the requirement for productive, well-paid jobs. The Government must take responsibility for that.

I look forward to the industrial strategy White Paper, which will, I hope, be published next week, but I must tell the Government that it will have to be a lot better than the Green Paper that we saw earlier in the year, which was incredibly disappointing and simply will not deliver the productivity performance that we need. It is 18 months since the Government’s productivity strategy, and since then every single estimate of productivity has been downward, not upward. What a missed opportunity, and what a failed strategy.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

The hon. Lady is making an extremely powerful speech. Does she agree that productivity will never increase while we continue to exclude important parts of society? The industrial strategy does not mention disabled people, and neither did the Chancellor today. The Budget simply is not inclusive.

[Rachel Reeves]

That is a very good point. If we are to ensure that everyone benefits from a growing economy—we just about have growth, but not very much of it—we must have an inclusive economy and an inclusive economic strategy that works for every member of all our communities.

The Government might respond by saying, “It’s okay Labour Members. There is a productivity investment fund worth £7 billion.” “Hurray,” we all say, but the money will not start until 2022-23. Why on earth do we have to wait five years for a productivity investment fund? We all recognise the desperate need to improve our productivity, so why wait five years before putting money and support into doing that? I should have thought that it would be an urgent priority for the Budget, not something that could be kicked down the road for five years.

Let me now deal with the issue of housing. I am afraid that I am much less optimistic about the Government’s plans than the hon. Member for Mid Bedfordshire, because over the last hour or so, I have been looking at the Office for Budget Responsibility’s “Economic and fiscal outlook”. I know that not everyone likes to listen to experts, but I am one of those people who still think that they are worth listening to. If we believe what the experts at the OBR are saying, all the housing measures—not just the stamp duty measure—in the Budget will increase house prices by 0.3%, and there will be no change in the supply of housing compared with that set out at the March Budget. Notwithstanding all today’s fanfare, the OBR’s verdict, which is on page 53 of its document, is that there will be no change in supply, just an increase in house prices, which is the exact opposite of what we need if we are to ensure that more young people and families can get on to the housing ladder. Although I think we all share that objective, it is not met by the measures that have been announced today.

[Mrs Anne Main (St Albans) (Con)]

I understand the hon. Lady’s interpretation of the report and her concern about it, but in areas such as St Albans where the average house price is more than £500,000, young people were helped on to the housing ladder by the previous Chancellor, and the present Chancellor will be helping young people to save some more of their money and put it towards buying their homes. That will be welcomed by many areas with high house prices. Surely the hon. Lady accepts that the stamp duty measure is welcome.

[Rachel Reeves]

I am not making my own forecasts; I am taking those of the Office for Budget Responsibility. What people in St Albans, Mid Bedfordshire and Leeds West want is affordable housing and the ability to get on to the housing ladder, and that requires stable house prices and an increase in housing supply. According to the OBR, however, there will be no improvement in supply on the basis of the measures announced today, and house prices will be 0.3% higher than they would otherwise have been, so the measures will not have the desired effect. I understand that the hon. Lady wants her constituents to have those opportunities, but it does not sound as though her Chancellor’s Budget will enable them to do so. In fact, I think it will have the opposite effect.

[Helen Goodman (Bishop Auckland) (Lab)]

Will my hon. Friend give way?

[Rachel Reeves]

I will make a little more progress, if that is okay.

On page 128 of its document, the OBR says that after the stamp duty changes, on the basis of its analysis, prices paid by first-time buyers will be higher with the relief than without it. Thus, it argues, the main gainers from the policy will be people who already own their properties, not first-time buyers. That is a terrible indictment of these housing policies. If that was supposed to be the Budget’s fanfare announcement, I am afraid that it has ended up being a bit of a damp squib.

[Helen Goodman]

Does my hon. Friend agree that it is absurd to have a stamp duty limit for first-time buyers of £500,000, which implies they have an income of £150,000?

[Rachel Reeves]

Yes. The OBR’s earnings forecast shows that that is another impediment to many people getting on the housing ladder. Incomes need to keep pace with the rising cost of living, especially house prices, but the average earnings forecast suggests that it will be harder still for many people to get on the housing ladder.

[Ms Dorries]

Does the hon. Lady accept, however, that an injection of 300,000 homes per year—if that target is reached—will stabilise the price of homes at the very least, because supply will be increased in a way that has not happened since the 1970s?

[Rachel Reeves]

The hon. Lady’s argument is not with me, but with the OBR. It forecasts no increase in housing supply and says that these measures will benefit existing house owners, rather than those trying to get on the housing ladder. That is disappointing.

The plan for an additional 300,000 homes a year is a bit like the national productivity investment fund because the homes are not set to be delivered until the mid-2020s. However, all hon. Members will recognise that we need to build the houses now. We do not have seven or eight years to wait; families and first-time buyers need these homes today.

I will finish with a couple of remarks about Europe because the truth is that the biggest economic announcements for the rest of the year will really be the decision made in the middle of December about whether to move the talks between the European Commission and the UK Government on to trade, and the final agreement between the UK and the EU on future trading relationships. Despite the Government’s announcements today, the most important announcements for all our constituents will be made just a few weeks from now.

I urge the Government, in that time, to reflect on some of the evidence heard in the past couple of weeks by the Business, Energy and Industrial Strategy Committee, which I chair. Honda told us that the cost of exporting a car would be about £1,800 more after we leave the EU than it is today, and that that amount far outweighs its profit margins, meaning that investment and jobs in this country are at risk. We also heard evidence from Aston Martin, which said that if it cannot get its vehicles certificated by the Vehicle Certification Agency in this country, it will have to stop production while it seeks such authorisation from the European Union. We took evidence yesterday from the aerospace sector, including Airbus, which said that countries are knocking on its doors and asking it to build aeroplane wings there, and that the risks of friction in trade will have real implications for its businesses and many others.

I urge the Government to do everything they can in the next few weeks to move the talks in Europe to the next level. If they do not, I am afraid that the issues of productivity, house building, earnings and all the other things we have been talking about will be pretty meaningless, because jobs could move overseas and we will not be able to have that free and frictionless trade from which we benefit so much today.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 18th July 2017 Commons Chamber

[Mr Philip Hammond]

I agree with my hon. Friend. The UK will have increased the tax-free personal allowance by over 90% compared with 2010, completing a decade of sustained tax cuts for working people. Over 31 million taxpayers will pay less tax in 2017-18, including 3 million taxpayers in the north-west. Since 2010, more than 4 million taxpayers have been taken out of income tax altogether.

[Rachel Reeves (Leeds West) (Lab)]

Personal contract purchase plans for financing cars have gone up by 394% in the past five years, and the Governor of the Bank of England has said that we are failing to learn the lessons of the past when it comes to easy credit. What action is the Chancellor taking to ensure that lending is affordable and does not pose a risk to the wider economy?

[The Economic Secretary to the Treasury (Stephen Barclay)]

May I first congratulate the hon. Lady on her appointment as Chair of the Business, Energy and Industrial Strategy Committee? As she will be aware from her Bank of England days, this is a matter for the Financial Policy Committee. Indeed, the FPC noted in its recent report that consumer credit is growing at a lower rate than it was under the previous Labour Government, but loss rates on lending remain low, as they are at present.

Economy and Jobs

Rachel Reeves Excerpts

Thursday 29th June 2017 Commons Chamber

[John McDonnell]

I will come back to the hon. Gentleman.

It is not only the Labour party that highlighted the consequence of the Tories’ failed economic approach. Last week the Governor of the Bank of England warned of “weaker real income growth”. He spoke about “markedly weak investment” and “rapid consumer credit growth”. Worryingly, he warned that the extent to which the UK’s current account deficit has moved closer to sustainability “remains open to question”, as we continue to rely on what he describes as the “kindness of strangers” to fund us.

[Rachel Reeves (Leeds West) (Lab)]

The shadow Chancellor mentions comments by the Governor of the Bank of England. Like the shadow Chancellor, the Bank is concerned about the rise in household debt, which is now 142% of GDP, with unsecured borrowing rising 10% just last year. Does the shadow Chancellor share my concerns that household debt reflects the falling real wages that we have seen under this Government, and that it spells problems for the future and households being able to sustain current levels of spending?

[John McDonnell]

I will come on to that. Household debt is at a record level. Why? Because wages are so low, yet housing costs, and other costs with inflation rising, are biting hard for working families. It is no wonder that they have to resort to increased levels of debt just to get by. Those are the JAMs—the “just about managing”, who were supposed to be protected in the last Budget.

--- Later in debate ---

[Rachel Reeves]

The Chancellor seems to be more interested in talking about what is in the Labour manifesto than about what is in his own Government’s Queen’s Speech. Is that because there is so little about the economy in the Queen’s Speech, or is it because he does not believe in it?

[Mr Hammond]

No; it is because I am about to come to it. The shadow Chancellor talked about his programme, and I wanted to make the simple point that, for all the rhetoric about somebody else paying, it is always the same with a Labour Government: it is always ordinary working people who pay, through higher taxes, higher prices and fewer jobs.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 18th April 2017 Commons Chamber

[Mr Hammond]

My hon. Friend has made the case for free ports, and the Government have heard that case very clearly. We will consider all options that have the potential to support our ambition to see Britain as a great global trading nation, but before making any decisions we shall need to consider carefully not only the advantages that free ports can deliver, but the costs and potential risks associated with them.

[Rachel Reeves (Leeds West) (Lab)]

If towns and cities in our economy—including those in the north of England —are to flourish, we need banks and building societies that support them. Does the Chancellor agree that those banks and building societies should keep their branches open? Leeds Building Society has just announced that it will close its branch in Armley Town Street, which is in my constituency, following the closure of branches of HSBC and Yorkshire Bank in the last two years.

[Mr Hammond]

Of course we want there to be a viable branch banking network across the country, but we must recognise that the nature of banking is changing. More and more of us are using online digital banking, and that is bound to be reflected in the configuration of the branch networks that the banks operate.