amendment of the law

Robert Flello Excerpts

Monday 24th March 2014 Commons Chamber

[Robert Flello (Stoke-on-Trent South) (Lab)]

I am grateful to the right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) for his comments on fuel, to which I, too, shall refer.

What we have seen is a Budget from a failed Chancellor reaping a growing economic reward that he did not sow—an economy that is improving despite what the Chancellor has done over the past four years. The Chancellor said that the deficit would be gone by the next general election, but there has been a reduction of only a third so far, with a year left. There was talk about pulling rabbits out of a hat, but that is quite a rabbit to pull out, with one year to go and two thirds of the deficit still to reduce. Debt has risen, and the growth that there is in the economy is based on delicate consumer spending—consumers spending their savings or money that they might have saved. Growth was stronger back in May 2010.

In the time available to me, I turn to some of the things that should have been in the Budget. As the right hon. Member for Ross, Skye and Lochaber said, what was needed was a fuel cut. FairFuelUK is one of many organisations suggesting that a 3p cut in fuel duty would kick-start businesses. Hauliers and others throughout the country were relying on some sort of cut because for them that is the difference between making a profit or a loss.

Four years on, we have heard many times, and will no doubt continue to hear, Members on the Government Benches referring to what the position would have been if Labour were still in government. What nonsense! What about the fuel duty escalator introduced by the present Minister without Portfolio, the right hon. and learned Member for Rushcliffe (Mr Clarke)? What would it have been if we had kept that going?

My right hon. Friend the Member for Leeds Central (Hilary Benn) referred to councils’ ability to assemble land. That should indeed have been possible. In my constituency, in the rest of Stoke-on-Trent and in the rest of north Staffordshire I frequently see pieces of land that have been held by one developer sold to another developer, then sold to a third and to a fourth. I think of one piece of land in particular where basic infrastructure—drainage and cabling—was put in, but that was it. Nothing moved after the economic tsunami hit, and the land has been changing hands ever since at higher and higher prices. Now the economy would have to be racing away for there to be any possibility of that land being developed. I can think of example after example where a small number of wealthy developers are sitting on land until they get their own way.

Other points should have been dealt with in the Budget. Businesses, especially in the haulage sector, have been calling for a stable view, six or seven years out, of the duty on biofuel, and ideally a reduction in that duty, so that they can make the investment and put the infrastructure in place for heavy goods vehicles that run far more efficiently on our roads.

Energy-intensive manufacturers such as the ceramic industry in Stoke-on-Trent are losing out as a result of energy speculators trading on the price of gas and speculating that what is happening in Crimea might have a negative impact on prices. Who pays? It is the manufacturers who have to buy their energy, not the speculators buying and selling.

Another of the things not in the Budget was the massive cuts to the finances of Stoke-on-Trent city council, which has been the third hardest hit for three years running. That is likely to continue for a fourth year because of the hit to our local authority, which means that services for real people are being taken away.

Of the things that were in the Budget, I shall concentrate on pensions and the removal of the annuity obligation. Giving people more choice in respect of the money they have worked hard to put aside for their pension is, on the face of it, a good thing, but around 80% of people who already do not shop around for the best annuity are losing out. People who need to buy annuities will find them far more expensive. As for the free and impartial guidance, it is advice that is needed, and who will pay for that advice or guidance? It is another mis-selling scandal being lined up to hit in a few years’ time, and, mark my words, it will come back and hit whichever Government happen to be in office at the time.

Who wins? The financial advisers might win, the Treasury will certainly win in the first few years, and insurance companies will bring out complex new products. Or, as the Pensions Minister suggested, is it Lamborghini salesmen who will benefit from the changes?

Let me end by referring to the economic hit on places such as Stoke-on-Trent from HS2. KPMG accountants identified an £80 million potential loss for Stoke-on-Trent as a result of HS2 if it happens as predicted. No Budget could make up for such massive damage to our economy.

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[Mr Campbell]

No, we did not. When Members talk about the last Labour Government bringing down the economy, they are wrong. Let us have some truth and honesty about what happened to the economy at that time.

[Robert Flello]

My hon. Friend will remember as well as I do that when we were on the Government Benches, Conservative Members used to stand up and say, “Can we have a new this? Can we have a new that? Spend, spend, spend.”

[Mr Campbell]

According to the Conservatives, we should have wrapped the banks in red tape and nailed them to the floor. Would they have done that? Of course not. They would have done exactly what we did.

I want to get to the meat of the problem, so I will start with pensions. I am not a believer in a nanny state and never have been. If Members look at my record, they will see that I have voted against many such proposals. I looked at the pensions proposal carefully. I know a lot of pensioners who are not getting what they should be getting out of their pensions after they have bought an annuity.

The proposal reminds me of when I was a coal miner. When all the coal mines were closing, the Government decided that the miners could pull their pension out of the National Union of Mineworkers pension fund and put it into something else if they got a better deal. Of course, all the Scrooges came around, knocking at the doors of the miners. They said, “Will you organise a meeting?” Would I hell! They were there to grab the miners’ money. I am pleased that the Secretary of State for Transport is here, because he knows what I am talking about.

A lot of the men were bought. They pulled their money out of the miners’ pension scheme and put it into all sorts of finance companies that offered them a better deal. That did not last two years. Before long, they were all trying to get back into the scheme. The other schemes were a disaster. There was mis-selling on a big scale. The miners’ pension scheme had to be opened again so that the men could put their pensions back into it. They were given two years to do it. If they did not do it in that time, they were left with the company that they had gone with.

We have to be careful that that sort of mis-selling does not happen. I understand the problem. It is good that people can have control of their own money. I have no problem with that, but we might be stirring up a hornets’ nest. I do not trust the institutions one little bit.

On wages, we all know—it is a fact that is on record—that people who are working have lost out by £1,600 a year. People in two or three industries—especially those who work in local government, which we are talking about tonight—have not had a rise for three or four years. According to the latest figures that I have, £39 billion has been taken out of the economy since the austerity programme started because people have not got wage rises. It is no wonder that the economy is sluggish. If money is taken out of the economy, it will be sluggish. All that some workers have to look forward to is zero-hours contracts and food banks.

People do not realise what the welfare cap means or what it includes. Child benefit is capped. Incapacity benefit is capped. Winter fuel allowance is capped. Income support is capped. People do not realise what the cap means. There is a big figure, but people do not realise what is under it and what it means for them.

--- Later in debate ---

[Mr Peter Hain (Neath) (Lab)]

I agree with the hon. Member for Cardiff North (Jonathan Evans) over Tata, but the one thing that cannot be said about the economy under this Chancellor is that it has recovered quickly from the shock of the global financial crisis. Total output still has not reached pre-crisis 2008 levels, quite unlike in the USA and Germany, both of which passed their 2008 peak back in 2011. What took them three years to achieve is taking the British economy under this Chancellor six years, and the reason is the savage cuts since 2010, a far tighter squeeze than in the USA or the eurozone. Under Labour, recovery was already well under way in the first half of 2010 when the Chancellor came into office. It was his policies that choked it off and the British people have been paying a heavy price ever since.

Today we have an unsustainable, out-of-balance recovery. The Chancellor acknowledged that neither investment nor exports are high enough. We already knew that higher consumer spending has come out of reduced savings, not out of higher incomes, because real incomes have been stagnating for years. It is a short-term recovery that cannot last. The ex-chair of the Financial Services Authority and ex-director general of the CBI, Adair Turner, said so in January at Davos when he warned:

“We have spent the last few years talking about the need to rebalance the economy away from a focus on property and financial services and towards investment and exports. We are now back to growth without any rebalancing at all…If you chuck enough monetary stimulus at an economy something happens. It is as if we have had a cracking great hangover, had a stiff drink and off we go again.”

A second factor making the situation unsustainable is that UK productivity has been flat for years. This pushes up unit costs and keeps our export prices higher. Our export predicament is dire. On top of that, we are witnessing a housing bubble again, with property prices rocketing in London in particular. In short, nothing fundamental has changed to avoid a rerun of a financial crisis brought on by a debt-financed consumer boom and a Government-backed housing bubble that sooner or later will burst, because bubbles always do burst.

Yes, the economy is recovering faster than forecast last year, but growth is forecast to be slower next year than this. The Chancellor expects the economy to run out of steam almost as soon as it starts to grow again, yet there is plenty of scope for much faster growth, and faster growth would mean less need for spending cuts and a quicker reduction in the Budget deficit.

The austerity programme, which this Budget continues to drive forward is based upon what I call the big deceit of British politics: that Labour “overspending” left the country with the mountainous levels of debt and borrowing which the Tory-Lib Dem Government inherited after the 2010 election. [Interruption.] The idea that the global credit crunch was caused by Labour’s public investment in Britain is risible. [Interruption.] The proposition that by building new hospitals and new schools, and by recruiting tens of thousands of extra nurses, doctors, teachers and police officers in Britain, Labour caused the sub-prime mortgage defaults in the US that ricocheted throughout the world’s financial institutions is preposterous. [Interruption.]

[Robert Flello]

It is amazing to hear the laughter from the Government Benches. Does my right hon. Friend recall, as I do, Conservatives standing up time and again saying there was far too much regulation of the banks and that they needed to reduce it?

[Mr Hain]

Absolutely.

It was not Labour’s public spending that triggered Britain’s or the world’s economic crisis; it was the global inter-dependency of reckless banking that the Conservatives wanted to be less regulated that in 2008 triggered an economic meltdown in Britain and right across the globe. [Interruption.] Labour responded by boosting public spending and borrowing to offset the catastrophic collapse in private sector spending, and the £90 billion spent on bank bail-outs plunged the public sector into record annual deficits, but these were deficits that stopped a shocking slide into a fatal slump and laid the basis for recovery from the biggest shock to hit the world economy in peacetime since the 1930s great depression. [Hon. Members: “Give way.”] If I have time at the end, I will.

Contrary to right-wing free market mantras and Tory-Lib Dem history rewrites, it was the banking crisis that caused debt to rocket, the deficit to rise and borrowing to rise as well. The low yields on UK Government bonds before, during and after the credit crunch under Labour bore eloquent testimony to the fact that the international markets had full confidence in its policies, and that they were not clamouring for the right-wing dogma subsequently visited upon Britain. Indeed, so desperate was the right hon. Member for Witney (Mr Cameron) to identify with Labour’s success on spending, investment, jobs and growth that he pledged to match Labour’s spending plans for three further years in September 2007 up to 2010. [Interruption.] Members on the Government Benches shake their heads, but that is what he did. If we had spent too much—if all the charges made by the Conservatives were true—why on earth would the current Prime Minister have backed our spending plans for three years ahead? It would help the quality of this debate and the quality of assessment of the Chancellor’s Budget if the Conservatives and the Liberal Democrats had the decency to acknowledge that essential fact, including this Prime Minister’s support for our spending programmes, instead of ploughing on regardless, with no end to austerity in sight.