Budget Resolutions

Roger Mullin Excerpts

Thursday 9th March 2017 Commons Chamber

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

During the heated interchanges that took place a short time ago, I was wondering whether this was merely a private fight or if anybody could join in—I will take this opportunity to join in. Let me declare first of all that my approach to understanding economics is different from that of the Front-Bench spokesmen, so if the House will forgive me, I will take a couple of minutes to set out why I see things slightly differently so that Members can better understand my critique of particular aspects of this Budget.

I am highly critical of an approach to economics that seeks to mimic the physical sciences and imagines that it can predict the future through statistical means. Great economists of the past of different traditions, ranging from Adam Smith to Karl Marx, would have rightly scoffed at that notion. When I picked up the Office for Budget Responsibility’s “Economic and fiscal outlook” yesterday, it fell open at page 45, which Members will recall contains chart 3.8, on effective exchange rate assumptions. If we look at that chart—some hon. Members are doing so—we can see that the OBR is able to accurately plot the past, which contains wild variations in the exchange rate, and that the biggest variations are often due to not economic decisions, but political ones, such as the EU referendum. The OBR’s prediction for the future, however, is a perfect straight line parallel to the horizontal. The only thing we know is that that is the least likely thing to happen to the exchange rate but, owing to that approach, built-in assumptions make us highly vulnerable to misreading the actions that need to be taken. Straight lines rarely predict human activity.

It was therefore with genuine concern that I heard the Chancellor deem it important in the opening section of yesterday’s statement to read out spreadsheets and forecasts as though they were going out of fashion while entirely failing to mention in any depth the key issues challenging the future economics of this country. As has been said, he failed adequately to address the challenges of Brexit, for example, but I will come to that in a moment.

Allow me to reflect a little on different ways of looking at the economy and to make three key observations. First, an economy is not a machine but a network of relationships among human beings. What do these networks do? They are built upon myriad individual and collective decisions that are affected by an almost infinite array of influences. Not only do we not know the future with any degree of precision, but we cannot know the future with any degree of precision, yet that is what such detailed forecasts pretend, and they are provided without even any margins of error.

We know that decisions are critical, so I thought about how I could highlight the importance of that and some of the things that the Government could do. The best example came to me yesterday when, along with many Members, I attended the WASPI women demonstration. Those people face having to make key decisions about their future, but this Government utterly disrupted the way in which they were able to make rational decisions, because they were given no proper notice about the huge changes being made to their pensions. Rather than helping to give some coherence to the economy to enable people to make as rational a decision as possible, the Government’s actions have caused disruption. The effective operation of the marketplace is being disrupted, not helped.

Secondly, we cannot ignore the influence of politics on economic activity and vice versa. By entirely ignoring the effect of Brexit in his speech, the Chancellor ignored the influence of such a political decision, but some of the effects of Brexit should have been tackled. The failure to guarantee the rights of EU citizens in this country will lead to disruption in the labour market. I am sure that I am not alone in knowing constituents who either have already left or are preparing to leave the country, including people who run small businesses, a German couple, someone in the creative sector, and one or two university researchers.

[Keith Vaz]

The hon. Gentleman and the SNP should be commended for raising this issue on so many occasions. It is the practicalities that worry me. EU citizens are extremely worried and distressed about their current position, so they need their applications to be processed, but there is no provision in the Budget to allow for those applications to be processed efficiently. Millions of people will have to go through the system.

[Roger Mullin]

I entirely agree with the right hon. Gentleman. Indeed, that is a great worry to me, as it is to him and to many others. It is about not only the system’s efficiency, but its effectiveness and ability to make the right kinds of decisions in complex individual cases. I have constituents who have been here for many years but are finding it difficult to get various applications through.

[Mike Weir (Angus) (SNP)]

My hon. Friend is making a good point, as did the right hon. Member for Leicester East (Keith Vaz). This is not just about individuals. There will be an impact on the local economy of areas such as mine that rely on migrant labour for fruit picking and will face great difficulties if that labour is not available. There are huge economic consequences in addition to the personal consequences.

[Roger Mullin]

That is precisely my point. What was seen as a political decision to exit the EU immediately has consequences for individuals whom we value in our communities. That has implications for the labour market, and the disruption of the labour market has economic consequences. We cannot get away from the fact that an array of influences are coming to bear due to Brexit, but the Chancellor thought that the sensible approach was to utterly ignore them. We also need to pay attention to other matters connected to Brexit. As far as I am aware, the Chancellor said absolutely nothing about how he was going to fill the funding gaps for rural communities, the agricultural sector or university research. Everybody is uncertain about those gaps. How will the Government address them in general? They have already said that they will fill the gap in one or two small instances, but there is no general response. That is another disruption that the Government are not addressing.

Thirdly, whereas the Treasury and the OBR can offer only snapshots of the economy at different times, people who may call themselves part of the classical economic tradition would say that an important feature of the real world is how the market economy operates, which is based on a process of incessant change and growth. Although the Government talk about some aspects of that, such as the importance of research and development and of stimulating innovation, not nearly enough regard has been paid to the importance of how we are to stimulate innovation and, through that process, stimulate growth in the economy.

There are practical implications of that view of looking at things. Policies in recent years—near-zero interest rates from central banks and austerity from Governments—have specifically protected one group of people while harming everyone else. They have boosted the asset prices of the wealthy while destroying the savings pool of those with modest amounts in the bank. The policies harm pensions and penalise savers. They represent everything that classical economists have opposed. Paradoxically, they are the antithesis of the free market and a further illustration of what David Stockman calls “crony capitalism”. It is not hard to find the human embodiment of crony capitalism in this House.

I will now comment on some of the measures. I read an article in the Financial Times by Sir Nicholas Macpherson a few days ago—[Interruption.] He is a friend of the hon. Member for Bootle (Peter Dowd). Sir Nicholas said that Budgets were supposed to be about tax. For perfectly reasonable historical reasons, the United Kingdom has developed an enormously complicated tax system over hundreds of years. When I talked to a Treasury official some weeks ago, he told me that, so far, he had found more than 1,100 tax reliefs in the system. Every tax relief provides an opportunity for a loophole, so it is perhaps not surprising that estimates of the tax gap vary between £36 billion and £70 billion.

Given the changing nature of society, should our tax system and some of our approaches to tax rely on what happened 150 years ago or more? Surely the time will soon come when we have to look systematically at the entire tax system with a view of not just simplifying it, but making it fit for purpose for the type of economy and labour market that we have today. I am therefore disappointed that there was no reference to that in the Budget.

We have already heard excellent points about the problem facing the self-employed, so I will not dwell too long on that, but there is one area in which the Government could help. For 30-odd years before I entered Parliament, I ran small research companies and the like. In the last few years before I entered Parliament, I decided that I was going to take life a bit easier—some chance—so I stopped running a limited company and simply proceeded, with associates and individuals, by picking the jobs that I found interesting and wanted to do. I applied for a job with the Government, but they said that I could not be considered for it unless I became a limited company. The UK Government’s procurement processes therefore encourage people to do what the Budget says the Government do not want them to do. If we are to move down the route of sorting out this part of the economy, as the Government would see it, might it be a good idea for them to practise what they preach by sorting out their own procurement policy?

Too often in this House we hear the Government making policy changes and announcements in which they almost assume that every labour market is like an inner city. When I heard what the Government were doing on self-employment, my thoughts did not immediately go to how labour markets operate in Glasgow or the City of London; I thought about my friend in Skye and some of my friends in the highlands who have no choice but to rely on self-employment. They cannot choose to work for corporations that do not exist. They are what might be called “necessity entrepreneurs”, and they do not work in just one sector. They have to job around and they undertake lengthy travel. They also have absolutely none of the security that people in employment have. The Government think it is a good idea to burden those people all of a sudden, but I cannot see how on earth their chosen proposal will give any support to local economies the length and breadth of this country. We need much more effective analysis of those matters.

Of course, being a Scot, I am particularly concerned about the duty on whisky. Given the state that the Government are in, and given what we face in the future, if there was ever a bad time to make it more expensive to buy whisky, this is it. Surely we do not want to start by penalising one of the most effective products produced in this land that is not only essential to the Scottish economy, but makes a massive contribution to the economy of the whole United Kingdom.

Many Members want to take part in this debate, so I will finish by returning to a group I mentioned earlier. At its heart, the economy is a collective human endeavour. We cannot understand economics abstractly; we have to understand it in terms of its effect on individuals, families and communities. If ever there was an example of how the Government have departed from the genuine concern for humanity that should be at the centre of our concerns about the economy, it is surely their malicious treatment of the WASPI women. We have a long way to go.