The Economy

Stephen Williams Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

The hon. Member for Hartlepool (Mr Wright) rightly set much of his speech in the international context. I want to start by doing much the same, by comparing the UK’s record with that of our fellow EU member states, particularly the unfortunately named PIGS—Portugal, Italy, Greece and Spain—around the Mediterranean periphery. We have all seen or read about the extraordinary scenes in Greece in recent weeks and hours. The Greek Government debt currently has a triple C rating from Standard and Poor’s, which is as low as it can go without it effectively being a recommendation that no one should buy, whereas the UK has a triple A rating. That might surprise hon. Members given the underlying economic data on our budget deficit. Even after the difficult decisions that the coalition Government took in their first year in office, our budget deficit is currently 9% of GDP for 2011, as compared with the eurozone, where the figure is 4.3%, and Greece, whose budget deficit is lower than the United Kingdom’s, at 8.4% this year. That surprising difference in bond ratings is accounted for by the fact that people who want to lend to countries are just the same as those who want to lend to companies and individuals. They are looking for the confidence and certainty that comes when an institution that is in trouble realises that it is in trouble and takes the necessary measures to get to grips with it. That is what this coalition Government are doing.

[Sheila Gilmore (Edinburgh East) (Lab)]

Is the hon. Gentleman concerned that Ireland and Greece, the two countries with the greatest difficulties, have both gone through austerity programmes that were not enough, both had to have further bail-outs and implement more austerity programmes, and both still have difficulties? Does that not give him pause for thought about whether austerity programmes will lead to recovery?

[Stephen Williams]

I specifically mentioned Greece, and those who have been following events in Greece from afar will know that the reason why the international community is so concerned about Greece is that it has felt until recently that the Greek Government have simply not got to grips with the plan, or have announced a plan but not adhered to it. That is the key difference. This Government have announced plans—difficult plans—to deal with deficit reduction and we are sticking with them, no matter how painful they might be.

[Margot James]

My hon. Friend mentions the views of the bond market, and the previous speaker talked about what PIMCO thinks. Is he aware that PIMCO said just days ago,

“we think the U.K. is implementing what is probably the best combination of fiscal and monetary policies”?

[Stephen Williams]

I thank my hon. coalition colleague for her intervention, which reinforces my points.

The Government response to the stark situation that we inherited in May 2010 has been to tackle the deficit—the yawning gap—in our public finances, but also to build a business climate that is conducive to growth, because as several hon. Members have said, it is through growth that the economy will provide the resources to get our finances back on track.

[Clive Efford (Eltham) (Lab)]

Will the hon. Gentleman give way?

[Stephen Williams]

I have taken two interventions, so I will take no more until near the end, perhaps.

This Government do have a growth strategy: we want to rebalance growth, including rebalancing it geographically. We have just heard about the plight of the north-east. Perhaps it was a failure of the last Labour Government not to rebalance the economy sufficiently, away from the south-east of England and towards other regions and nations of the United Kingdom. Perhaps the hon. Member for Hartlepool (Mr Wright) ought to have a stiff word with some of his colleagues. After 13 years, the economies of some of our regions were still very fragile and unable to withstand external shocks. We also wish to rebalance the different sectors of the economy, away from over-dependence on the City of London, important as it is, and the resources that it generates towards more sustainable parts of the economy, in particular growth from digital media. The Government have announced the establishment of a network of enterprise zones around the country. My local enterprise partnership—the West of England Local Enterprise Partnership—has just announced that it will be based around Temple Meads station in my constituency, where we want to build the country’s leading media hub and business growth area, with a particular focus on digital media.

We also want future growth to be sustainable in a green way. This country has a huge economic opportunity to grow a low-carbon economy. In the Energy Bill, which is just completing its passage through the House, we have something quite revolutionary: the green deal, which gives every household in the country a fantastic opportunity to retrofit their houses to reduce energy bills and help us cope with meeting the demanding climate change targets that we have set, on which there is cross-party consensus and agreement. There is also a fantastic opportunity for British business, and for people to be trained in the skills needed to retrofit our housing stock. On a rather larger scale, the Government have also announced—the Chancellor confirmed this in the Budget—the creation of the green investment bank, in order to provide finance for schemes that might otherwise find it difficult to secure funds in the market. As the country’s green capital, the city of Bristol has a good case for being made the future home of the green investment bank.

A further way in which the coalition Government are going to make a fundamental difference in turning the economy around and reducing unemployment is by making work pay. My hon. Friend the Member for Thurrock (Jackie Doyle-Price) mentioned that the coalition agreement would deliver the Liberal Democrat policy of reducing income tax and taking out of income tax completely those people who are earning up to £10,000 a year. That will be achieved before the end of this Parliament. Our programme of welfare reform and the introduction of universal credit was mentioned earlier by the Chancellor in his confrontation with the shadow Chancellor. The Opposition rather recklessly voted against the entire Welfare Reform Bill.

Reform is also needed in the banks. The Opposition motion calls for a reintroduction of the tax on bankers’ bonuses. It is worth pointing out, however, that the people receiving large bonuses will now pay 50% income tax, rather than 40%, that national insurance has doubled for those on the higher rate of tax, and that employers will pay more national insurance on those bonuses as well. The taxation on those bonuses will certainly increase.

[Alec Shelbrooke]

If a banker pays 50% income tax on his bonus, does not that represent a greater tax take than if the money were left in the bank, where it would be liable to only 28% corporation tax?

[Stephen Williams]

My hon. Friend makes a good point.

What should we do with RBS and the Lloyd’s banking group, which were bailed out in 2008 adding £67 billion to our national debt? Earlier this year, I wrote a pamphlet on what the Government should do with their holdings in the banks. It was called “Getting your share of the banks: giving the banks back to the people” and it was published by the think-tank CentreForum in March. My proposal was to give those shares to every citizen in our country and, when they sold them in the future, the Government would get back the cost of their investment in 2008 while the citizens would keep the result of any growth. That would mean that we would reduce our national debt by £67 billion over time, and that every citizen in the country—each of us who has felt the pain of bailing out the banks—would see some benefit from this upside to the situation. I am pleased that my right hon. Friend the Deputy Prime Minister has been endorsing that proposal today on his trade mission in Latin America.

What have we heard from the official Opposition today? What is their grand idea for turning round the country’s finances and getting our economy back on track? They have opposed all the cuts that we have debated in the Chamber. I have never heard a Labour Member of Parliament stand up and say that they are in favour of any of the measures in our Bills, whether in this Chamber or in the Bill Committees on which we serve. Today, the Opposition have come up with a completely reckless proposal for an unfunded cut in VAT. It has no economic justification and there is no evidence that it would make any difference to the economy. Let us contrast that with the record of the coalition Government. We are determined to have a fair tax burden, and we have plans for sustainable growth and deficit reduction. Both plans have international credibility. That is what this country needs right now: credibility at home and abroad, rather than the reckless opportunism that we have seen from the Opposition today.