Finance Bill

Richard Graham Excerpts

Tuesday 6th July 2010 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

I pay tribute to the three maiden speakers whom we have just listened to: the hon. Members for Ipswich (Ben Gummer) and for North East Cambridgeshire (Stephen Barclay) and my hon. Friend the Member for Scunthorpe (Nic Dakin). I am always struck by how confident, forthright, quite often amusing and, on occasion, even inspiring maiden speakers are. I am sure that we shall hear a great deal more from them all. I also noticed that they all touched on issues of policy. When I first came to the House, it was a custom that maiden speakers talked about their constituencies and their predecessors, but skirted round any question of policy. I am pleased that that rule is obviously now more honoured in the breach, and I hope that we shall hear much more about policy from all the maiden speakers whom we have heard this evening.

On the Finance Bill, let me start by agreeing with what I can—this part of my speech will be very short. I agree that the deficit is too large and that it needs to be reduced. On every other issue—the size of the cuts, their composition, their impact on growth, the balance between tax increases and spending cuts, and the whole question of fairness—I think that the Budget judgment, as expressed in the Finance Bill, is fundamentally and manifestly wrong.

First of all, as some of my hon. Friends have also said, the Chancellor made great play of the idea that his Budget to eliminate the structural deficit within five years was unavoidable. That is absurd. Balanced budgets are the primitive 1920s economics of Montagu Norman in this country and Herbert Hoover in the United States, and in both countries they led directly to the great depression. Capitalism is driven by cyclical forces that need constant regulation, not balanced budgets irrespective of the economic cycle. The truth is that the Chancellor has gone overboard on austerity. The cuts are as tough as those that the IMF is imposing on Greece, which is on the verge of bankruptcy, which we certainly are not. They are also twice as tough as the Canadian measures that the Chancellor has repeatedly prayed in aid to justify what he is doing, three times as tough as Sweden’s measures in the mid-1990s and much tougher even than the IMF measures in 1976.

Then there is the question of how the deficit should be reduced—as I have said, no one disagrees that it needs to be. There are three ways of reducing the deficit: not only through tax increases or spending cuts, but through economic growth as well. Before the Budget, the OBR estimated that UK growth this year and over the succeeding four years would be slightly less than 2.5% on average. As each 1% of growth adds an annual £15 billion to UK income, the OBR forward projections of economic growth imply an increase in UK income over the next five-year period—the perspective of the Bill—of between £150 billion and £180 billion.

Because all Governments take roughly 40% of any increase in UK income, those figures imply an increase of revenues to the Government of around £70 billion to £75 billion over this five-year period. That would be enough virtually to halve the current budget deficit over that period, which hugely reduces the need for spending cuts. I do not say that I am against spending cuts totally. Indeed, when it comes to Trident, ID cards and some of the extraordinarily wasteful Government IT databases, there is plenty of room for cuts. However, the figures that I have quoted raise starkly the question of whether the Chancellor’s enormous spending cuts will squash out the growth-generating potential of the economy—something that, frankly, would make the cuts simply counter-productive.

Indeed, those figures also raise the central issue, which had something of an airing between those on the Front Benches in the earlier debate, of where the Chancellor expects the growth to come from over the next few years. Household consumption, which accounts for two thirds of national output, is now almost certain to fall, particularly with the increase in VAT. Any growth in wages after inflation is already weak and is likely to weaken further as unemployment rises, which it will. According to all surveys, consumer confidence is fading, while some 60% of UK exports go to the eurozone, which as we all know is in considerable disarray. So where exactly is the growth going to come from?

I give the right hon. Member for Wokingham (Mr Redwood) credit for being the one Government Back Bencher who tries to make a case for the Budget, but he seems to have forgotten the prime rule of computer projections, which is: garbage in, garbage out. If we feed in dodgy premises, we get out dodgy conclusions. Government Members keep quoting the OBR as though it is independent—I do not think that Sir Alan Budd is actually independent, and the OBR is next to the Treasury, so it is not exactly independent—but that is not the point. The key point is that the OBR projections are based on certain premises that are––I say this without exaggeration—fantasy.

[Richard Graham (Gloucester) (Con)]

Given the strength of the right hon. Gentleman’s views on the neo-Keynesian economics that effectively advocate keeping on spending because that is the only way to grow the economy, what does he think of the performance of the Irish economy? In 2009, Ireland managed to reduce state spending by 7% as a result of stringent measures involving public spending and public sector salaries, yet, in the first three months of this year, its economy grew by almost 3%. Does that not demonstrate to him and to other Labour Members that it is a false assumption to say that reducing public sector pay will shrink the economy, and that cutting back can in fact provide an opportunity for the private sector to grow again?

[Mr Meacher]

The opposite conclusion should be drawn from the Irish economy. The Irish Government made huge, swingeing cuts of 12% to 15%, which absolutely decimated that economy. Sooner or later, of course there will be a revival in all economies, but at a fearful cost. We shall very much be going down the route of the Irish economy if this Budget goes through. If the hon. Gentleman were to go to the Republic of Ireland and ask people’s view of the finance budget of three or four years ago, I think that he would get a very different impression.

--- Later in debate ---

[Mr David Lammy (Tottenham) (Lab)]

Let me begin by congratulating the new hon. Member for Weaver Vale (Graham Evans) and expressing some solidarity with him, given what he said about his background and experience of growing up on a council estate. I am sure that his constituents will be very well served by the effective way in which he makes his remarks.

In a few days it will be my birthday, and as I inch towards the fourth decade of my life, it occurs to me that the economic downturn that we are experiencing now is also my fourth. The truth is that I do not remember the first recessionary period in the early 1970s, but I have strong memories of the recessions of the early 1980s and early 1990s. I think back to what it was like growing up poor and black in my present constituency in Tottenham, and the hardship experienced by my family and many others at the time. I remember my father losing his business in the early 1980s, and the depression and the booze that followed.

Children do not always quite understand these things as they are growing up, but I remember, in about 1982 or 1983, coming to understand that there was far less money in the home. The fridge seemed much less full, and—although I do not want to suggest that my parents were not generous—the presents at Christmas were not what we might have seen in the commercials on television, and not what we might have liked. I think that the VAT rise had something to do with it. Although Margaret Thatcher had said that she would not change the rate before the election, she raised it from 8% to 15%. I also vividly recall the freezing of child benefit for successive years, and how hard that was for my mother. More than anything, however, I remember the restlessness, the fecklessness and the worklessness of the broader community and the explosion of violence that we experienced in my community as a direct result of that, leading to some of the worst images that this country has ever seen or experienced.

[Richard Graham]

Does the right hon. Gentleman agree that, in that context, it is particularly regrettable that the Government of the last 13 years left us with more than 1 million unemployed young people—an absolute record?

[Mr Lammy]

Unemployment at that time in my constituency was running at 20%, and in some communities, particularly the black community, the rate was double that. It is because of the situation then that young people like me, growing up in constituencies like Tottenham, forged such a huge solidarity with colleagues and friends in different parts of the country. Although those areas seemed very different from Tottenham, the assault on manufacturing industry and the attitude to former mining and steelworking towns led us to forge a solidarity that remains on these Benches today.

In the 1990s I qualified as a young lawyer, but I did not go straight into employment because, yet again, the country was in recession and the employment was not there. I went to the local unemployment benefit office hoping that I might become a barrister, but not sure whether that would actually happen. My mother was now struggling on her own with a 15% interest rate, and the shops up and down Tottenham high road were boarded up because of bankruptcy. That was the backdrop in the 1990s. We experienced two recessions that had huge social consequences—social consequences that I deeply fear could be repeated as a result of this Finance Bill.

[Richard Graham]

The right hon. Gentleman is very generous in giving way. Given his experience in the early 1990s, is it not an absolute tragedy that he was part of a Government who, having promised to abolish boom and bust, landed us with the largest recession not just in his lifetime, but in the lifetimes of three generations?

[Mr Lammy]

The hon. Gentleman paints a fantasy picture of history, and takes the banks out of context. I will return to that in a few moments.

Budget Resolutions and Economic Situation

Richard Graham Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Austin Mitchell]

No, it is of great benefit. I congratulated the Chancellor on it, and I am glad the Liberals won it. However, it is still not sufficient to compensate those 1 million people for the increase in VAT, which is a regressive tax, and for the general depressing effects on the economy and employment of the other measures in the package of cuts in the Budget. That policy on income tax is a gain for the Liberals—and, indeed, the country—and it was right. I congratulated the Liberals at the time on including it in their manifesto.

The transformation of the Liberals is like that of the pigs in “Nineteen Eighty-Four”—I am not calling the Liberals pigs, but they were pigs in “Nineteen Eighty-Four”—into human beings, if not Tories. The Liberals have been transmuted not into Tories, but into European liberals—I am thinking, in particular, of the Free Democratic party, which is an economic liberal party that, I am pleased to note, is now disrupting the coalition in Germany by demanding stringent cuts from Angela Merkel and the Christian Democrats. I am sorry to see my friends in that situation. There are difficulties in the coalition between the Liberals and the Conservatives, because it is like merging a Brownie pack with the Brigade of Guards. I feel sorry for Liberal Ministers who have to sit there and join in the chorus of nodding dogs on the Front Bench at every Tory policy announcement. I am sorry to see that habit spreading to the Liberals.

[Richard Graham (Gloucester) (Con)]

Will the hon. Gentleman give way?

[Austin Mitchell]

In a minute, when I have finished the joke!

It is sad to see the Liberals justifying Tory policies, while their Ministers in the Cabinet are being picked off one by one by the Tory press, which is maligning them and doing them down. That is a pathetic spectacle.

[Richard Graham]

Does the hon. Gentleman agree with Oona King’s remarks to The Guardian last week that the tragedy of new Labour is that, while many signed up to the concept of social justice and economic growth, too many Labour Members concentrated on social justice and forgot about economic growth? The reality can be seen in my constituency of Gloucester, where 4,600 jobs have been lost in the private sector over 10 years, 7,600 have been created in the public sector and there is record youth unemployment. Economic growth has completely disappeared, so it is the Government’s job to restore the economic growth in order to provide the social justice we all want.

[Austin Mitchell]

I am surprised that the hon. Gentleman has not heard of the economic recession and its effect on our economy. Before now, we have enjoyed 10 years of steady, substantial economic growth that has improved everything—it has put more people in work, improved people’s quality of life and made them better off. Does he deny that reality? I do not want to get into an argument about history, but he is blaming the recession and putting the blame for that on the Labour Government.

I want to move on to the substance of the Budget. The package of cuts in the Budget represents a gigantic confidence trick bigger than the Zinoviev letter, which the Tory party was seen to be responsible for as well. We have to accept that recession brings a need for social democratic, governmental state solutions. Recession brings a need for regulation and fairness, and for public spending to counter the curtailment of private spending and to protect the community. The Conservative party has reacted to that by creating panic about debt, borrowing and the possible foreclosure of our credit cards in Europe. Conservative Members warn about us becoming another Greek economy and, through their tirade of anti-British complaint, they consistently knock Britain.

The clamour about debt is designed to frighten people into accepting measures, cuts in public spending and the roll-back of the state that the Conservative party certainly wanted to put in place anyway.

[Richard Graham]

rose—

[Austin Mitchell]

There is no need to defend the Conservative party at every juncture in my speech. The hon. Gentleman might concentrate on defending his own party for its part in the process—[Hon. Members: “He’s a Conservative.”] In that case, I apologise and give way.

[Richard Graham]

I am very grateful to the hon. Gentleman for giving way again. Has he looked at the other role model example, which is that of Spain? Currently, it has 20% unemployment, and 40% youth unemployment, having followed precisely the policies that he and so many of his colleagues appear to be advocating—that is, to carry on spending regardless. That leads not to economic growth but to economic disaster. If it were to happen in my constituency, there would be riots on the streets.

--- Later in debate ---

[Austin Mitchell]

I think, retrospectively, that we expanded public spending without increasing taxation enough to pay for it. The result was a series of subterfuges, such as the public finance initiative and the public-private partnership. It would be interesting to know what the Government are going to do about them in order to get borrowing off the books.

It was right for us to expand public spending. Society has improved enormously. Public spending improves the lot and the lives of the people, and it is our job to improve those things. I would certainly have spent more, but I would probably have taxed more to pay for that spending. I do not see why the people who benefited so substantially and did so well during the period of growth that we experienced under a Labour Government should not pay more in taxes now in order to counteract the recession with which we are currently trying to deal.

This is a circular argument, but, as I have said, the only answer to the borrowing problem and the deficit problem is economic growth to close the deficit and ease the borrowing, and to make it easier—as we did between 1997 and 2000—to reduce borrowing substantially. When we have growth, that is an easy process. It is silly to worry about it, become obsessed with it and create an atmosphere of fear, but that is what the Government are doing.

The leader of the Liberal Democrats, the Deputy Prime Minister, told us that this was a Free Democratic party moment, and that these would be progressive cuts, the poor and the north would be protected, and the cuts would deliver fairness. That is totally wishful thinking. Cuts always, and must necessarily, hit the poor and the vulnerable hardest. They have less with which to protect themselves. They are more dependent on public spending. Grimsby is more dependent on public spending than, say, Weybridge, or some of the other more prosperous southern areas. Any group or area that is heavily dependent on public spending will be hit by cuts, and that means Grimsby. I am now trying to protect Grimsby from those consequences.

An article in yesterday’s Financial Times provided us with an interesting map. Members should read the article, headed “Poorer areas are to be hardest hit”, and stating that the cuts would be

“striking twice as deeply in parts of the Labour-dominated north of England as in the Conservative-dominated home counties.”

That is the effect of cuts on the people and the spending in my area.

[Richard Graham]

Does the hon. Gentleman agree with Lord Myners, whose speech in the House of Lords last week reflected his deep frustration following conversations with Ministers in the previous Government who constantly expressed the belief that Government created jobs? His core point was that Government create the environment—the framework—in which jobs will be created by business. The problem with constituencies such as the hon. Gentleman’s, and to some extent mine, is that over the years Government have been led into the belief that they can create jobs themselves. In fact, what has happened is that more people have gone on to benefits, and our cities have stopped being working cities and have increasingly become benefit cities that need to be rescued today.

[Austin Mitchell]

The short answer is that I do not agree with Lord Myners in any respect at all.

I have just been passed a note from the Hansard reporters, which must imply that I have finished speaking, but in fact I have not.

I must point out to Members, particularly those on the Government Benches, that public money follows need. We are spending at a higher level because need is greater because of the recession. If we cut public spending, as the Government intend to do, we punish need. We do not punish the greed that brought the banks and the economy into recession, nor do we punish the people who have done well out of the economic growth. We punish the needy people and the needy regions. As I represent one of those needy areas—Grimsby—I object strongly to the £6 billion of cuts now being carried out, which the Liberals joined in with, as well as the cuts to come and the cuts foreshadowed in this Budget.

I cannot welcome this Budget, therefore. I think it will be disastrous for the Liberal Democrats. It will also be bad for the poor and the vulnerable. It will be bad because it will hit the recovery that is now taking place, and which is all too slow. It will be bad because it will increase unemployment. It will be bad because it will increase the deficit, and it will be a disaster for our nation, which will be locked into deflation; it will be pushed into it longer than need be.

I give the Chancellor a message from Grimsby, therefore: we who are about to suffer, certainly do not salute you.

Government Spending Cuts

Richard Graham Excerpts

Wednesday 26th May 2010 Commons Chamber

[Mr Laws]

The only people who have expressed regret are Labour MPs.

[Richard Graham (Gloucester) (Con)]

I congratulate the Chief Secretary on his announcement of 50,000 additional apprenticeships. Will he confirm that this will help, first, constituencies such as mine, where we face, like the rest of the country, record youth unemployment and, secondly, productivity and improvements in our manufacturing sectors, which suffered record drops under the previous Government, and the recovery of which is so important to our business-led economic recovery?

[Mr Laws]

My hon. Friend is absolutely right, first about the importance of supporting manufacturing, which has had a particularly tough time during the recession, and, secondly, about supporting young people, because we must be conscious that young people so far have borne the brunt of the recession in terms of unemployment. We are all aware of the consequences if young people stay out of work for a long time and of the scarring effect that it can have on their opportunities. That is why we were so determined to introduce these additional 50,000 apprenticeships, which will make a real difference.