Budget Resolutions and Economic Situation

Richard Fuller Excerpts

Friday 23rd March 2012 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

We have heard quite a lot already about the economic situation. The context for the Budget is one of economic stagnation. The growth forecast produced last year for this year was for growth of 2.5% in 2012. The OBR’s estimate now of growth in 2012 is just 0.8%. The growth forecast for 2013 is also 0.8%. That is close to stagnation.

Unemployment is rising, the cost of living is rising, and it is particularly worrying that business investment appears to be collapsing. The OBR forecasts that business investment this year will drop 7%, from an estimate of 7.7% to 0.7%. That is connected with the OBR’s forecast for such meagre growth as there is to be, according to its estimate. A much larger share of this growth—three times larger—is to come from private consumption rather than from export-led growth. We have a demand crisis in the economy. I worry that the Chancellor is putting all his eggs in one basket, rather like Japan did in the 1990s, gambling everything on low interest rates as a way to stimulate the economy.

[Richard Fuller (Bedford) (Con)]

The hon. Gentleman talks about a demand crisis, but does he accept that some of the responsibility for that comes from the policies of the previous Government, which so substantially over-leveraged not just the Government, but the entire economy?

[Gregg McClymont]

There is no doubt, and the hon. Gentleman is right to say, that not everything in the garden was rosy by 2010. That does not take away from the current Government their responsibility to stimulate the economy. On any metric, growth of 0.8% this year and next year is only very limited growth. On current estimates we will not return to 2007 GPD levels till 2013. That slump will be the longest since the 19th century—six years to get back to a previous level of GDP. That is indeed a slump, and this is a stagnation Budget.

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

It is a great pleasure to follow the hon. Member for Sedgefield (Phil Wilson), who already outshines his predecessor in his integrity and sincerity, if not in his fame.

I apologise, Madam Deputy Speaker, to you and the House for the fact that unfortunately, owing to a constituency commitment, I will not be able to be here for the closing speeches. That is a great shame, because we have had a very stimulating debate across both sides of the House, with the opening speeches by my right hon. Friend the Secretary of State for Transport and by the shadow Minister, the hon. Member for Barrow and Furness (John Woodcock). The hon. Gentleman is standing in for the shadow Secretary of State, the hon. Member for Garston and Halewood (Maria Eagle), who became sick at a TUC conference. I think that this is the first time that a Labour Front Bencher has issued a health warning on their union paymasters. Let us hope that those health warnings will continue.

I will be going back to the great towns of Bedford and Kempston, whose people know that these are tough times but wanted to have a Budget that rewarded work, and the Chancellor of the Exchequer has delivered precisely that. The single most valuable part of this Budget for the people of my constituency is the raising of the personal allowance by over £1,000 so that the first £9,000 of a person’s income will not be liable for tax. That is a fantastic encouragement for people who are finding that their budgets are very tight.

Members on both sides of the House have expressed concerns about fuel duty, and I echo those concerns, because the duty does have a significant impact on personal budgets and on business. I would have liked the Government to do more, but I understand that they were unable to do so. I draw my hon. Friend the Economic Secretary’s attention to the campaign by my local newspaper, the Times and Citizen, which echoes what my hon. Friend the Member for Wyre Forest (Mark Garnier) said about how petrol prices can vary significantly between different regions. The Times and Citizen found that in Bedford and Kempston, our fuel prices were 4p to 5p per litre higher than in other areas. If we cannot do anything about fuel duty, will my hon. Friend consider ways in which the Government can ensure that we do not face monopolistic positions on fuel duty in very localised situations? The Times and Citizen’s campaign has shown that the people of Bedford and Kempston care very much about that, and it can, in itself, have as much impact as a cut in fuel duty overall.

I should like to spend a couple of minutes on the deficit crisis, inter-generational debt and competitiveness. On the deficit crisis, it is excellent that the Government are looking for fiscal neutrality, but that is different from considering the overall level of public expenditure and public debt. Public expenditure is still going up, in cash terms and in real terms, and tax receipts are going up—from 35.8% of GDP in 2010-11 to 36.4% of GDP in 2014-15. We continue to be a high-public-spending, high-tax economy. I hope that the Government and the Chancellor will look at ways in which the overall balance can be brought down so that resources can be moved from the Government sector to the more productive private sector.

May I also urge caution on Ministers in the use of quantitative easing? Quantitative easing is a policy to overcome a credit-driven recession. It should not be a policy to support excessive public expenditure or the long-term erosion of the value of savings. It is pertinent to look at the “Debt and reserves management report 2011-12”, which shows that the Bank of England’s asset purchase facility holds more than 18% of Government gilts. That holding has, at some point, to be unwound, which will have inflationary consequences.

[Mike Gapes]

Can I take it that the hon. Gentleman is calling for an increase in interest rates?

[Richard Fuller]

No, I am not calling for an increase in interest rates. I am calling for the Government to be clear, which I think they are, about the use of the quantitative easing policy. The results of that policy will, in a few years, have to be unwound. The level of their own gilts that the Government hold will have to be reduced. When that happens, interest rates will go up. We need to caution the Government to be aware, in setting the level of public expenditure, of what that level will mean. People will need an increase in pay owing to the increase in the Government’s cost of borrowing. Foreign holdings have also increased, and are now at 31%. We now have the highest spread between five-year and 30-year gilts in terms of the risk premium. All those points should caution us about our deficit.

Those facts come on the back of a significant level of debt in our economy. Opposition Members fail to realise that ours is the most indebted major economy in the world. That is the legacy of the previous Government and the previous Chancellor. Those who were here yesterday would have seen the shadow Chancellor give an uncharacteristically short speech. He sat down and people were surprised, because there was more that he could have said. However, I think that his speech could have been shorter. It could have gone thus: “I am sorry. I am really sorry. I am sorry for my hubris in thinking that I could end boom and bust. I know now that that was achievable only by leveraging up the entire British economy and dumping the debts on our children and grandchildren.” That is the speech that the shadow Chancellor could have given yesterday. He could then have sat down, because that sums up what he left us to sort out.

The shadow Chancellor did not give that speech yesterday, so perhaps I can give him some advice. The next time he goes to a school, instead of looking for a photo opportunity of him playing football, he could go up to one of the schoolchildren and say, “Hey, I’m sorry. I’m sorry that I shackled your potential with the debts that my monumentally short-sighted economic strategy created.” That is the truth of what he left behind.

[Gregg McClymont]

Does the hon. Gentleman accept that that is rather a caricature of what happened during the global financial crisis? It was a global crisis. Surely the financial sector, and the banks in particular, have to take some responsibility for the debt that we face.

[Richard Fuller]

As always, I have a lot in common with the hon. Gentleman, but that is not the point. The point is that the damage was already being done in our national economy. It was the strategy of the previous Government not to be content with leveraging up their own debt; they required the leveraging up of household debt and corporate debt, as well as financial sector debt and Government debt. Debt was the answer in the period when they came up with the statement that they had ended boom and bust. That debt has to be paid for. It is two years since the Labour Government left office and there is not enough time to pay for the 10 years of the growth of debt in our economy. It will take a significant amount of time for us to de-leverage the economy in every sector. This Budget is part of that process.

[Phil Wilson]

If that is true, why did the Tory Opposition go along with our spending plans right up until 2008?

[Richard Fuller]

That is a good question, which the hon. Gentleman should address to the Chancellor. I was not in Parliament at that time and I am not sure that that is what I would have said.

Much has been said about the granny tax. The one thing that grandparents want is what is best for their grandchildren. They understand that in tough times—this is because many of them have been through tough times—they have to give something to ensure that we will be stronger in future. That is what this Budget will deliver, and it is part of getting our economy balanced and back on the right track.

[Gavin Shuker]

The hon. Gentleman mentioned personal debt, about which I share a great deal of concern. Is he aware that under the Government’s plans personal debt will rise, not fall, over the coming period?

[Richard Fuller]

I think the hon. Gentleman is referring to unsecured personal debt rather than overall levels of personal and household debt. There is much for the Government to do, such as examining excessive rises in credit card terms and penalties for people who have to take on unsecured debt, and I believe they intend to do it.

We need to do more about our deficit, and I suggest again that one thing we can do for the sake of general fairness is consider creating a future fund that takes the pension obligations of our public sector workers and puts them into a fully funded scheme. It would take 20 to 25 years to accomplish that, but Australia, New Zealand, France and Norway are doing it, and it would show that this generation in Parliament understands its responsibility to the next generation of Britons. If we added that to our fiscal responsibility, we would be doing the next generation a great favour.