Cost of Living

Debate between Simon Hart and Geraint Davies

Wednesday 27th November 2013 Commons Chamber

[Geraint Davies (Swansea West) (Lab/Co-op)]

Today at Prime Minister’s Question Time, I accused the Prime Minister, in essence, of knowingly moving the economy forward in a way that means that real wages continually fall and house prices go up. He knows as well as all of us that we are moving towards the rocks of rising interest rates and a sub-prime debt crisis. He is a man looking to the future, walking backwards.

There is a question over whether the Prime Minister is doing that completely unwittingly—is he sleepwalking towards disaster or knowingly walking towards it? I put it to the House that he is knowingly doing so. He is inflating the housing market when he knows that people cannot afford higher interest rates. He is willing to take those risks in the knowledge that, if and when the Labour party takes office, there will be a sub-prime debt disaster, and he will be able to say, “It is old Labour messing things up.” He is willing to pay that price, because he believes that the feel-good factor from inflated house prices in London and the south-east—his core area—where he is investing 80% of Britain’s new infrastructure to buoy his vote, will be enough, alongside the media spin, to get him back into power. I put it to the House that it will not be enough, and that we should be alerting the British public to it and to what we should do about it.

The Minister loosely referred to the funding for lending scheme used by our banks, but he would not take an intervention from me. The scheme provides easy lending, underpinned by the Bank of England. Lending to households for mortgages is now at the 2008 level, but lending to business is 32% lower than it was in 2008. What does that mean? It means that British money is not investing in productivity and growth for jobs, which means that wages are not growing and will not be strong enough to sustain the cost of higher house prices when interest rates go up.

Interest rates will go up. Mark Carney, the Governor of the Bank of England, has clearly said that, when unemployment goes down to 7%, interest rates can be let free. That is great, is it not? Obviously, unemployment going down must be good—I can see Government Members nodding their heads—but, if overall production has not grown, average productivity will have gone down. Since 2010, productivity, in the main, has been flatlining and there is no growth in the economy. There is growth in the number of people in work because we are sharing the production around, which is why real wages are falling. We do not have the investment in training and in research and development. On investment as a proportion of GDP, we are 159th in the world. On R and D investment, we are at the bottom of the developed world. We are a basket case and it is no surprise that our triple A rating was taken away.

We hear the same old Tory story that we always hear: “Labour messed it up and we have made the recovery.” The reality is that GDP grew by 40% between 1997 and 2008. We then had the international financial disaster. My right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) and President Obama stepped in with a fiscal stimulus to get us back to growth by 2010. Hey presto, the Tories arrived and announced that half a million people were going to be sacked, and people in the public sector stopped spending because they did not know when they were going to be sacked. So the Tories deflated consumer demand and growth has been flatlining ever since.

What has happened to our debt-to-GDP ratio? It has gone up from 55% to 75%, and will go up to 85% by 2015, because GDP has been flatlining. Debt to GDP has gone up, because debt has gone up as well. This Government have borrowed more in three and a half years than the Labour Government borrowed in 13 years. The clowns spin the story again and again in this Chamber and in the media, and the marketing campaign is working well. The Prime Minister and the Chancellor are knowingly sending us down the track towards more sub-prime debt. They hope the propaganda war will be won if Labour gets in and it blows up in its face.

This Government, and any future Labour Government, should, through the Bank of England, change the funding for lending scheme so that it focuses on business investment, not mortgage investment. Prior to the onset of the funding for lending scheme in July 2012, the mortgage market had already recovered, so we do not need the money that is going in. The scheme means that if you, Madam Deputy Speaker, were a bank, for every pound you lent to SMEs, you would have another £10 to lend elsewhere. At the moment that is going to mortgages, not SMEs. That will be changed to a ratio of 5:1. If that were to be rebalanced, the Bank of England and the Government could finance business loans—existing loans, as well as future loans—and give more money to SMEs. The financial markets are already servicing the rest of it. In addition, we have the Help to Buy scheme. All the money is therefore being channelled into a fixed stock of houses and prices will go through the roof. Would it not be better to invest in business and construction? That would increase the number of houses, reduce prices and create work.

We want a rational and sustainable economic strategy. Instead, we have a political trick that is sending us towards the abyss and the Government do not seem to care. They say that everything is recovering, but the essence of the debate is that everybody out there looks in their pockets and in their cupboards and knows that they are worse off. That will continue unless something is done to invest in business, productivity and growth.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

If the Help to Buy scheme is such an unattractive prospect, why are the Labour Administration in Cardiff adopting it?

[Geraint Davies]

I am not quite with the hon. Gentleman. I do not know if my analysis is lost on Conservative Members who are just repeating things without understanding the economic debate, but I am saying that we should work with Mark Carney to rebalance the funding for lending scheme in favour of business, instead of supporting the mortgage market which is already on track. That would take some of the heat out of the housing market, and help to build more houses, grow productivity, increase wages and create sustainable growth. That has nothing to do with what is happening in Cardiff.

A few references have been made to Wales, and I might as well respond to them, now that we have heard another Tory intervention. The reality is that 80% of all infrastructure investment in the UK goes to London and the south-east. Wales is one of the poorest areas of the United Kingdom; a quarter of the people live in poverty, the majority of them in work. The hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) will know, because he is a member of the Welsh Affairs Committee, that what is being put in place in Wales, the future jobs fund and so on, works much more effectively than the UK Government’s Work programme. Wales is doing its best in difficult times, but the Government will not even reduce the tolls on the Severn bridge to provide further stimulus, because they do not care. All they care about is sustaining their own backyard. We have this weakened economy when there are enormous opportunities to make us strong. It is a disgrace.

I will continue to make those points about the Government, because it is becoming ever clearer that they are knowingly heading towards a sub-prime debt crisis. They should be ashamed.

Defence Spending (Wales)

Debate between Simon Hart and Geraint Davies

Wednesday 8th December 2010 Westminster Hall

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

It is depressing for the second time in a fortnight to listen to one or two Opposition hon. Members talking down the Welsh economy in this context. I listened with interest in the Welsh Grand Committee the other day, and nothing much has changed. Let us look at the context, and the Opposition may take some credit for this: 180 companies currently dependent on the MOD in Wales, 25,000 jobs, £220 million of expenditure and £250 million put into the local economy.

I am a beneficiary of that expenditure in Carmarthen West and South Pembrokeshire; we have a great but small MOD establishment at Castlemartin camp. I am hoping for some good news, as the closure of certain tank training ranges in Germany might bring some positive benefits to the area. We have a small MOD establishment at Penally, upon which the local community heavily depends. We have an independent weapons training centre at Pendine, which is crucial to MOD development, not only in Wales but across the UK, and we have at least one very decent Territorial Army unit based in Carmarthen.

I should declare a slight interest in that I served in the Territorial Army for a number of years, and very good years they were too. I acknowledge the comments made by the hon. Member for Swansea East (Mrs James) about the colleagues I used to deal with back in those days. What a different place it was then—the most dangerous place I ever went to in the TA was Warminster. Now the regiment with which I served goes to a lot more dangerous places than that. Not only do the local soldiers contribute to the Territorial Army in west Wales, but so, too, do their employers, which let them off work without concern for what effect it might have on their businesses, day after day, week after week, and weekend after weekend. In the interests of the nation, they gladly let these guys go off to train. Those are all positive things, which the MOD and wider armed service community bring to our local area.

[Geraint Davies]

I am bemused. Surely the hon. Gentleman should be calling for greater investment on behalf of his constituents to bring jobs and prosperity to his constituency rather than supporting cuts. I cannot understand this.

[Simon Hart]

I thank the hon. Gentleman for his intervention. He troubles me, because, surely, defence of the realm is the most important thing on which to base our decisions in this context. Delightful though it is, this is not a job creation scheme. This is about defending the nation in the context of an extremely complicated and rather depressing financial background and the £38-billion black hole in defence procurement spending, with which we were left.

[Chris Bryant]

rose—

[Geraint Davies]

Is it important today to back the deficit and cuts generally, ignoring the difference between investing in our strategic interests for the future to defend our country and spending? Clearly, this is all about cuts and not the interests of the hon. Gentleman’s constituents.

[Simon Hart]

I could not disagree more: the point I made about Castlemartin is valid in this context. Of course I have been in touch with the Secretary of State for Defence and the Minister about the future of that depot and others.