Amendment of the Law

Steve McCabe Excerpts

Thursday 19th March 2015 Commons Chamber

[Vince Cable]

We will come in a moment to my own and my party’s distinctive approach to spending and taxation, which offers a very sensible middle way between the two extremes on offer.

Let me deal with the shadow Chancellor’s various critiques of Government policy, including whether we have made the numbers add up, inequality and living standards, and the balanced recovery. I will start with his accusation that we have failed to balance the books. The shadow Chancellor is a very clever man, but there is a great deal of intellectual confusion about what Labour is accusing us of. The Government started with the objective of trying to deal with the structural deficit—in jargon, the cyclically adjusted current deficit—within four to five years. We are now spanning that over seven years.

What is the problem? If the Government had pressed ahead dogmatically with the timetable, we would have been accused of being inflexible and causing undue economic harm, and there would have been righteous indignation from Labour. In the event, however, the Chancellor was flexible and responded to changing circumstances, not least the effect on the UK economy of rising world commodity prices and the slowdown in Europe.

The Chancellor is a learned man. He is familiar with Keynes’s “General Theory”—I am sure he had read it several times from cover to cover—and he understands that, in periods of economic slowdown, counter-cyclical stabilisers should be used, which is what we did, alongside the use of monetary policy, to stabilise the economy. It is greatly to his credit that he did that, and that accounts for the fact that we are taking longer than was planned to deal with the deficit. None the less, having done that, the deficit is clearly now being reduced. We have got to the single point that debt as a share of the economy is starting to decline. There is a strong recovery—the strongest in the G7—and we have extraordinary employment figures, with the largest number of people in employment in history.

On the shadow Chancellor’s reference to the balanced recovery, I want to focus on one important development, namely what is happening with business investment, which is what drives sustainable recovery. Let me cite for the shadow Chancellor an interesting contrast. Between 2000 and 2007, 3% of the contribution to British growth came from business investment. That was a period when the British economy was being driven by consumption, household borrowing and a boom in house prices. There was very little business investment. Since the crisis—since this Government have been in office—30% of growth has been driven by business investment.

It is possible to break that figure down even further as to where that investment came from. In the period of Labour Government running up to the financial crisis, the contribution made to investment by property—overwhelmingly commercial property speculation—was 80%, and 4% of that investment was in the form of plant and equipment, which is why we had rapid de-industrialisation of the kind referred to by the hon. Member for Luton North (Kelvin Hopkins). Under this Government, the share of property investment has fallen to 30%, and 50% of all business investment is now plant and equipment—real factories making things and a revival of manufacturing industry.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Is it not the truth that the deficit today is where it would have been under the plans of my right hon. Friend the Member for Edinburgh South West (Mr Darling), and that until this moment not a single Government Member has admitted that the Chancellor was talking nonsense in 2010 when he claimed that he would wipe it out by the end of this Parliament?

[Vince Cable]

The Chancellor was not talking nonsense. It was perfectly sensible to aim to remove the structural deficit as quickly as possible. The fact that we have taken longer over it is a reflection of common sense.

--- Later in debate ---

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I have been in this place 18 years and I can think of few events that make it clearer why people have lost faith in our politics than yesterday’s Budget—little effort to address the main issues, just shameless grandstanding by a man more concerned with fitting his policies to scriptwriters’ gags than addressing the needs of our communities. Just days before the end of this Parliament he delivered a Budget which he knows cannot get proper parliamentary scrutiny and where the measures actually implemented will be largely dependent on the support and agreement of the Opposition. It is a political ploy and people can see straight through it. It may have improved on the chaos of the man who gave us the pasty tax, the granny tax and the omnishambles, but I doubt whether history will judge yesterday’s little show as a particularly competent moment.

There are measures that deserve support. Who could object to a penny off a pint? That is not exactly original, like much else to do with this Chancellor, although I believe there is currently a vacancy for a baron of Bexley. Anything that helps jobs in the whisky industry is welcome. If there was ever any likelihood of an increase in petrol duty, thank goodness somebody has persuaded him to drop it. However, yesterday’s Budget certainly will not go into the history books as a great radical or reforming Budget.

I welcome the decision to allow Greater Manchester and Cambridgeshire to retain their business rates. I welcome it because it is Labour policy, but of course I would like to see the same opportunity given to Birmingham. Voters in Birmingham must be asking what the Government have against them. Why is our police service subject to the largest cuts in the country? Why are our council services being decimated? Why is there no extra support for our small businesses? Just what has this Chancellor got against our city?

I support the plan to raise the starting point at which people pay higher-rate tax, but I wonder why the Chancellor did that and left the cut-off for losing child benefit unchanged. That is not a very family-friendly policy, because under his plans the number of households losing child benefit is now set to double. While the increase in the personal allowance is welcome, it does nothing for the 4.6 million people who do not earn enough to pay tax in the first place, and, as we have heard, any gains will be wiped out overnight if he makes it back to the Treasury and promptly raises VAT, just like he did last time.

I was bothered by the fact that the Chancellor completely ignored the NHS. In my constituency, a walk-in centre at Katie road has been under threat ever since this Government came to power, and nothing he did yesterday makes it any more secure. The Bournbrook Varsity practice, which caters for a large number of our student population, is set to lose substantial funds through the abolition of the minimum practice guarantee and other cuts that will lead to redundancies and a loss of services. Our wonderful Queen Elizabeth hospital is set to lose about 11% of its budget as a result of punitive measures that attack its success as a regional specialist centre. Labour has a plan to grow the NHS. Under this Chancellor, we are already experiencing NHS cuts, and most people feel that there is more to come. Yesterday’s Budget largely confirmed these fears.

My constituency has an unemployment rate of 4.4%. It is now in the top 17% of constituencies for unemployment —110th out of 650. Try telling my constituents that the sun is shining. What they experience is insecure employment, zero-hours contracts, and people working all hours to make ends meet and still having to resort to food banks to feed their kids. Try telling them about the Chancellor’s economic plan. What we need is action to support start-ups, with Government money to match initiatives like Entrepreneurial Spark, a cut in business rates and taxes for small and micro businesses, an improvement in the minimum wage that amounts to more than 70p over a Parliament, and action to enforce the minimum wage so that unscrupulous employers cannot exploit those desperate for work.

As the hon. Member for Stone (Sir William Cash) said, instead of a headlong rush to offload Lloyds bank, perhaps the Chancellor should encourage it to show a greater sense of social responsibility and more respect for local business people in places like Bournville, where its high-handed closure programme shows contempt for the local community and taxpayers. It is a joke for the Business Secretary to come here and say that he will protect the last bank in the village. It is the last bank in the village, there is a massive public stake in it, and he cannot lift a hand to do anything about it.

Where are the measures in this Budget that people in my constituency really care about? They are absent. The Chancellor says that the sun is shining as he strives to paint a rosy picture in the face of the misery endured by so many. It is a Budget where he simply ignored his broken promises and inaccurate predictions—a Budget where the threat of more suffering is ever present. It is less “Here Comes the Sun” and more like here comes the “Sun King”: a man who has lost touch with reality, with vanity crowding out the ability to speak or hear the truth; who is not interested in the lives of real people; and who is armed with an economic soundbite rather than a plan. His assurances are as reliable as those of the party chairman, and his integrity is as intact as that of the former party treasurer. We deserve better, and the country needs a lot, lot more.

[Several hon. Members]

rose—