Economic and Fiscal Outlook

Simon Hoare Excerpts

Monday 30th April 2018 Commons Chamber

[The Chief Secretary to the Treasury (Elizabeth Truss)]

I beg to move,

That this House approves, for the purposes of Section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment of the medium term economic and fiscal position as set out in the latest Budget document and the Office for Budget Responsibility’s most recent Economic and Fiscal Outlook and Fiscal Sustainability Report, which forms the basis of the United Kingdom’s Convergence Programme.

Of course, we all look forward to the day when we have left the European Union and we no longer have to file this report. But while we are in the European Union, it is a legal requirement, as part of the stability and growth pact, to present our economic and budgetary plan. Owing, to the opt-out that we negotiated in the 1990s, there are no sanctions or actions should items of the plan not be met. In fact, the only stated requirement is to endeavour to avoid excess deficit. Now, that is something of which I approve anyway and with which we are happy to comply.

I am proud to talk about the record of this Government over the last eight years. We have reduced the deficit by three quarters and have now reached the turning point of debt falling as a share of the economy, which will happen in this financial year. As the Chancellor said in the spring statement, we are now in a much healthier position, but it is very important that we do not abandon this fiscal discipline.

In 2010, the economy was on its knees. We had the highest level of deficit since the second world war, youth unemployment was rising and 1.4 million people were left on the scrap heap. Since then we have turned things around, by reforming the economy and with our fiscal plans. There is a record number of new companies; real wages are increasing; we have record levels of employment; and there are positive signs right across the country. These strong economic fundamentals are down to the decisions of this Government.

We have reformed our welfare system to ensure that it always pays to go to work. We have reformed our education system to make sure that our children and young people have the skills that they need for the modern economy. We have made it easier for companies to take on staff. We have reduced corporation tax. Recently we have seen the two strongest quarters of productivity growth since before the financial crisis. Inflation is set to fall this year and we have seen an easing of pressure on living standards. But despite all this progress, every one of these measures has been opposed by the Labour party.

The shadow Chancellor has said that he sees business as the enemy. Labour Members have opposed our efforts to make Britain open for business and want to go back to the days of punishing taxes and red tape. They have also opposed our welfare and education reforms. [Interruption.] I hear mutterings from the Opposition Front Bench.

These reforms have been accompanied by fiscal discipline. Our fiscal strategy has been vital in boosting confidence in the UK economy and enabling growth in the private sector. We have brought down the deficit by three quarters, and at the same time we have maintained high-quality public services. We spend more per student on education than Japan or Germany, and we have seen our results in reading improve against our international peers. Our health spending is higher than the EU average, and we now have record cancer survival rates. Through our fiscal prudence—that phrase used to be popular on the Labour Benches—we have been able to spend targeted amounts of money to boost our productivity. Infrastructure spending will be at a 40-year high as a proportion of GDP by the end of this period. We are tripling the number of computer science teachers and encouraging more students to take maths at a higher level.

We are now at a turning point. After the highest debt that we have seen in Britain’s peacetime history, we will see debt as a proportion of GDP falling. To people who say that now is the time to turn on the spending taps, I say that would be premature. It is very important that we bring down debt as a proportion of GDP. We know that economies with high levels of debt see a drag on their growth rates and are less resilient to external shocks. We also know that we are spending a huge amount on debt interest. With the debt interest we spend—£50 billion a year—we could completely abolish council tax, business rates or fuel duty.

[Simon Hoare (North Dorset) (Con)]

Does my right hon. Friend agree that one of the most tempting phrases that we often hear from the Opposition Benches, but the one to be resisted most strongly, is “Borrow to invest”? Irrespective of what one does with the money, one is still borrowing it and it still has to be paid back.

[Elizabeth Truss]

My hon. Friend is right. We are switching spending from current spending to investment, and that is why we have a 40-year high in our infrastructure investment. He is absolutely right that any spending increases the national debt. Because of the actions of the previous Labour Government, who spent 45% of GDP in the public sector and built up a huge debt, it is our responsibility to bring the debt down and make sure that the country gets back in balance.

--- Later in debate ---

[Peter Dowd (Bootle) (Lab)]

Meanwhile, back on planet Earth, a prerequisite of the UK’s participation in the EU has been regular submissions of the Government’s assessment of the UK’s medium-term economic and budgetary position. I think the Chief Secretary to the Treasury will appreciate that one of the advantages of leaving the EU—for once, everyone on the Conservative Benches will agree—is the humiliation, wincing and cringing that the Government will forgo when they no longer need to submit their economic record to the scrutiny of European colleagues. The Government are rudderless, collapsing in on the weight of their own contradictions and economic ineptitude.

Let us turn to the record. While countries in the eurozone post a 10-year high in terms of economic growth, the UK under the Tories is left behind. Let us look at the seven deadly sins of the Tories. No. 1 is self-delusion, which we had in spadeloads from the right hon. Lady. Last year, growth in our economy was the lowest in the G7, and growth in the first quarter was the weakest since 2012. The Office for Budget Responsibility has now revised forecast growth down in both 2021 and 2022 since the Government’s autumn Budget, and growth is lower in every year of the forecast compared with March 2017. The upbeat tone of the Chancellor at the spring statement betrays the economic reality that many have experienced over the last eight years of Conservative mismanagement, and while the Chancellor may want to blame recent poor growth on a bit of bad weather, those of us living in the real world see an economy desperate for investment.

The second sin is sloth. The Government have provided the slowest recovery since the 1920s, and productivity growth is at its worst for two centuries. On productivity, the Government’s record is one of failure. Productivity forecasts have been revised down this year and for every year of the forecast. While the Treasury celebrates a slight uptick in the productivity figures referred to by the right hon. Lady with a “thumbs up” emoji and manic optimism, the underlying figures show a fall in production and a fall in the hours worked.

[Simon Hoare]

Particularly in relation to point 2, were the hon. Gentleman to be making the report to the EU, which of the options of the shadow Education Secretary would he be reporting—would Labour’s policy be shit or bust?

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. Those are not normal terms that we would use in the House.