Economic Growth

Stewart Hosie Excerpts

Wednesday 15th May 2013 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to take part in the debate. This Queen’s Speech is important, sandwiched as it is between the Budget and Red Book, which we already have, and the forthcoming spending review, the details of which we do not have but which still casts a shadow over the potential for growth and recovery in the UK. The Prime Minister mentioned growth in his speech on the opening day of the debate, stating that the measures in the Gracious Speech would “grow the economy”. He also said that they would

“deliver a better future for our children…win the global race”—[Official Report, 8 May 2013; Vol. 563, c. 28.]

and “cut the deficit”. Given the austerity programme so far, it looks like it will lead to 300,000 more children being in poverty by the end of next year, and the forecasts are that there will be up to 4 million children in poverty in a few years’ time. It is difficult to see how any of the measures in the Queen’s Speech can possibly live up to the billing that the Prime Minister gave them.

Given that the balance of trade has been in deficit to the tune of more than £100 billion for the past two years, and that the gap in the total balance of trade has risen by more than £10 billion in the past year, it is difficult to see how anything in the Queen’s Speech can live up to the Prime Minister’s description and do anything to allow us to “win the global race”, whatever that means.

Bringing the deficit down was another of the Prime Minister’s claims, but as the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke) said, net borrowing was forecast at £92 billion but ended up being £121 billion. The cumulative deficit—the net debt—was forecast to rise to about 92% of GDP in a couple of years, but it is now forecast to hit more than 100% of GDP and about £1.6 trillion. There is a great deal of Government rhetoric about what the measures in the Queen’s Speech are supposed to do, but very little real evidence.

However, it is not as though the Queen’s Speech contained no growth measures. There was one potentially significant one—the national insurance employment allowance—but that was not altogether new. It was in the Red Book and budgeted to cost the Government £1.3 billion next year. It is welcome, but because the impact of the Budget policy decisions is to be fiscally neutral over the five years from 2013-14, the overall impact on economic growth of that one meaningful measure will be muted to say the least. It is worse than that, because any beneficial effect on growth of that sensible policy will be wiped out entirely by the additional cuts to expenditure that are anticipated in the forthcoming spending review.

[Charlie Elphicke]

If Scotland became independent, which currency would it use?

[Stewart Hosie]

It would use sterling. We have answered that question many times. We are speaking about the UK Government’s Queen’s Speech and how their programme for the Session will fail to deliver growth not just for Scotland but for everybody throughout the UK.

Let us be clear that the impact of the one good thing in the Queen’s Speech, the employment allowance, will be wiped out entirely if the economy is supposed to absorb the anticipated £11.5 billion of new cuts. That is the figure most commonly used for what is likely to be in the spending review. That will take the UK to discretionary consolidation—tax rises and cuts—somewhere in excess of £155 billion a year, every year, from 2015-16 onwards. Indeed, the Institute for Fiscal Studies has helpfully provided some information stating that it believes the real level of discretionary consolidation could reach £172 billion a year by 2017-18.

The Government plan to cut £11.5 billion, in addition to the cuts so far. To return to the point made by the hon. Member for Dover (Charlie Elphicke), that will be added to the 8.7% real-terms departmental expenditure limit cuts and 25% capital DEL cuts in Scotland. It seems extraordinary that when we are looking for real growth, the Government seriously propose stripping consumption out of the economy to the extent of about 8% of GDP and putting an additional £11.5 billion on top of the £140 billion or so of discretionary consolidation that is already planned, and replacing it with only a single sensible measure, the employment allowance.

What the Government are trying to do is not doable. They are trying to cut their way to growth, which cannot be done. They are ignoring all the evidence that austerity is hurting across the board, and I urge them even at this late stage to think again about their plan. They should rethink not just the contents of the Queen’s Speech or what we are likely to see in the spending review in June but the measures that we have already had in this and previous Budgets. Those measures will lead, as Olivier Blanchard from the International Monetary Fund has said, to the Government “playing with fire” if they allow the economic stagnation to continue.