Section 5 of the European Communities (Amendment) Act 1993

Stephen Pound Excerpts

Monday 22nd April 2013 Commons Chamber

[Jacob Rees-Mogg (North East Somerset) (Con)]

May I begin by saying how pleased I am that this debate has come to the Floor of the House and commend my right hon. Friend the Leader of the House for bringing it here? He was unduly modest to send it upstairs to Committee because this gives us an opportunity to highlight the Government’s achievement and send it to Brussels with a panache that says, “We know what we are doing and we are pleased to educate you.” Unlike the hon. Member for Nottingham East (Chris Leslie), who I think has been confused in his economics this evening, the document shows how well we are doing, compared to our continental colleagues.

Before I adumbrate our great achievements and the success of this Government since 2010 as set out in the document before us, there is one little matter that I wish to raise about the surveillance mission that the European Union is entitled under a 2011 agreement to send into a country that is not meeting the convergence criteria. Although it cannot punish us for failing to meet the convergence criteria, the European Union can, I believe, send in a surveillance mission or even a rather ominous-sounding enhanced surveillance mission.

I hope the Government will be clear, and I thought from what my right hon. Friend the Minister was saying that the Government are being clear, that they will not accept such surveillance and will use all their abilities to discourage the European Commission from sending any surveillance mission. It would be a great audacity—a great cheek—if it were to do so when 19 member states are in special measures for their economic failings for the excessive deficit procedure. We, of course, are in it too because of our deficit, but those 19 other members are in the eurozone, which is why bringing their budgets together is so important, whereas for us it is essentially a technicality from the Maastricht treaty.

It is a matter of importance that the Government have got the policy right. The key to getting it right is found on page 31 of the documentation and then on page 15. Page 31 deals with the quality of the public finances. It deals with what the Government are doing to consolidate our situation and the projection. Projections should be treated with the greatest suspicion. All forecasts are wrong, and it is merely a question of how wrong they will turn out to be. None the less—

[Stephen Pound (Ealing North) (Lab)]

Is that a forecast?

[Jacob Rees-Mogg]

That was a wonderful interjection, as always, from the hon. Member for Ealing North (Stephen Pound). I fear not. It is a statement based on a knowledge of history that forecasts invariably turn out to be inaccurate and it is merely a question of how inaccurate they turn out to be.

But if we look at what the Government are trying to do, they are getting spending down from 47.4% of GDP to about 40% of GDP. We know from our history that about 40% of GDP is a sustainable level of Government spending. It is a level that I personally would like to see reduced further, but it is none the less a level that has been consistently affordable over the long run, certainly going back to the early 1970s, based on taxation revenues going up to 38.3% of GDP. Now, 38.3% of GDP for tax revenues is very near the peak level that has ever been achieved. It is rare for tax revenues to go above 38% of GDP or to remain there for a sustained period.

So what is being done with the public finances is an extraordinarily effective consolidation on both sides, with taxes being pushed up and expenditure being cut, with most of the burden being taken by expenditure cutting and with a small amount of it on tax raising. That is setting the basis for a long-term recovery of the economy. Where I think the hon. Member for Nottingham East was perhaps unduly party political in what he said—uncharacteristically so, because he is normally a man of such consensus, support for the middle way and so on—was in ignoring the benefits of monetary activism.

I refer right hon. and hon. Members to page 15. The key difference between the UK economy and the continental economies is that we have the ability to change our monetary policy to ease the austerity—[Interruption.] Indeed, printing money. Absolutely right. It is the printing of money that is allowing the deficit to be sustainable and is allowing businesses and individuals to carry on borrowing and work through a consolidation of their finances, which is also in the document—the consolidation of individual finances—to take place in a way that is not crippling. On the continent that is not happening, which is shown up in the gilt yield figures. The latest gilt yield figure is 1.65%. That is the lowest in our history. In Italy it is at 4.05% and in Spain just under 4.5%, which shows the much tighter monetary situation in Spain and Italy as compared with the United Kingdom. That is why the austerity programmes in those countries are causing such extraordinary pain, whereas in this country it is manageable.

That is why I say the document is a model for our friends and neighbours across the channel. We ought to send it to them with a fanfare, with trumpeters, with Garter King of Arms leading the way, to say to them, “Look, this is how you do it. This is how you restore a country to fiscal sense, and you do it through monetary easing.” Although I loathe the fact that we have to report to a multinational body about matters that are our own sovereign right and should not be interfered with from abroad, on this occasion we can take real pride in what the Government are achieving and what they are working towards and the manner in which they are doing it.