The Economy

Stewart Hosie Excerpts

Wednesday 18th November 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I start by agreeing with what the shadow Chancellor said in opening his remarks—that cost should be no obstacle to providing the necessary security and intelligence to protect the people from the kind of threats that we are now seeing and that we saw in Paris. I therefore say to the Economic Secretary that if the Government wish to increase spending in those areas, there will certainly be no resistance from the SNP. I agreed with her, too, when she said that we need to cut out unnecessary and wasteful spending. I think that is absolutely right, and no one with any common sense would say that we should spend money on things that we do not need. So we will offer up a starter for 10, which is £167 billion on Trident and its replacement.

We will back the Opposition motion today. There is no doubt at all that this Tory Government and their coalition predecessor have failed, and we have seen the evidence of that failure, which I shall come on to develop. We essentially have an austerity programme from an austerity Government who have failed to deliver the growth the economy needs and are instead committed to making precisely the same mistakes all over again.

When I say that this Government have failed, we should remember precisely what the Chancellor promised when he became Chancellor in 2010. He said that debt would begin to fall as a share of GDP by 2014-15; that the current account would be in balance this year; and that public sector net borrowing would be £20 billion. We know now—many of us warned of it in the last Parliament—that debt did not fall as a share of GDP as planned; that the current account will not be back in the black until 2017-18 at the earliest; and that public sector net borrowing is not the £20 billion promised, but over three times that, at £70 billion. The key point is that the Chancellor failed to meet every single one of the targets he set for himself. In the eyes of any reasonable man or woman in the street, that is failure.

[Jeremy Quin]

The man in the street and the woman in the street have already spoken; they spoke five months ago, and they want more of the same. They want the deficit to continue to be brought down. We have halved the deficit and done so while maintaining one of the best levels of growth of any country in the G7.

[Stewart Hosie]

Growth was strangled throughout the early part of the recovery in the last Parliament. If it has picked up since, that might say more about the weakness of our major competitors than any inherent goodness or sense in the Tory plan, which, as I say, has actually failed. This is an austerity programme that saw £121 billion-worth of cuts, tax rises and discretionary consolidation in the last Parliament that strangled the recovery. With an extra £37 billion to come, we are now on track for a full decade of austerity.

It is worse than that, however. With the Government changing the ratio of tax rises to cuts from 4:1 to 9:1 during the last Parliament, we have the clearest indication not simply of failure, but of failure delivered by trying to balance the books in a way that was never going to succeed and on the backs of the poor. That is a situation that will only get worse, as the motion mentions, through changes to tax credits.

[John Stevenson (Carlisle) (Con)]

Does the hon. Gentleman not think that the creation of 2 million jobs is a success?

[Stewart Hosie]

I think that the creation of every job is welcome for the person who gets it, and I think that the creation of well-paid, permanent and secure jobs is fantastic, as those provide not only the income that families need, but the security with which to build strong and stable communities. Of course I welcome jobs as they are created, but we need to look at every single part of the economy, not simply single metrics—whether they be good or bad. The Government’s record in the round is lamentable.

I mentioned the plan to cut tax credits. Of course change may be announced next week, but few believe that the stubborn Chancellor and his Government will actually stray too far from the plans originally announced. Those plans have a quite horrendous impact on households in Scotland and throughout the UK. For many real people, real families and real communities, the erosion of household income is quite extraordinary. The average figures of £1,200 a year or £100 a month is routinely used, and it is an accurate figure, but for some households the annual loss is around £4,000 a year. [Interruption.] The Tories may find this funny, but a loss of that amount of cash implies a marginal tax rate of 90% on some of the poorest working households in the country. If the Government were to propose that, the Tory Back Benchers would be up in arms, but because they are taking what they see as benefits from poor people, it is suddenly okay, because that is the way smirking Tories always think.

[Catherine West]

Does the hon. Gentleman agree that part of the problem with working tax credit cuts is that they are concentrated in certain areas, which means that there is a double effect on the local economy, where that money is no longer going into the high street or into the pockets of children and others and the poverty effect is multiplied?

[Stewart Hosie]

The scenario whereby pockets of poverty exist in communities that have been more reliant on tax credits or other benefits is well known. Of course, those communities always suffer disproportionately when this sort of cut is made, so the hon. Lady is absolutely right. That is an argument for having not simply an economic policy, but some form of regional industrial strategy that will deliver not just any old job, but good jobs in every part of the country.

The real failure of this Government’s so-called “long-term economic plan” is the absence of any real strategy to deliver inclusive growth, and that is what concerns me most. To the SNP, inclusive growth is essential if we are to narrow the inequality gap and absolutely vital to deliver the overall economic growth we need. The UK lost 9% in GDP growth between 1990 and 2010 due to rising inequality, so it is unforgivable to see the same mistake being made all over again.

Let us look at the big picture of the UK’s economic record in the Chancellor’s own words:

“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity…is concentrated…in the centre of London.”

He went on to say in his Mansion House speech:

“We will tackle each and every one of these weaknesses with the same determination we have brought to tackling the deficit—and we’ll draw the whole government effort together in a single plan for productivity”.

The problem is that, on productivity, which is an essential prerequisite, very little has been done. The UK still lags behind the US, Germany, France and even Italy in GDP per hour worked. Even on a GDP per worker basis, the UK is still not competitive. The position in Scotland is broadly similar: both Scotland and the UK sit at the top for the third quartile. We should both be doing so much better than that.

The focus should be on productivity, innovation, internationalisation, and investment in infrastructure, skills and inclusive growth, which I have mentioned. To be fair, the Minister talked about investment and infrastructure. I will come back to that, however, because I am not sure whether her version of the world really matches up either to reality or to what was announced in the summer Budget. For example, on innovation, the 2014 Budget increased the amount available for research and development tax credits—which is to be welcomed—but the UK Government simultaneously reduced the qualifying expenditure.

On exports—I am glad this is back on the political agenda—the deficit in trading goods for 2014 was £124 billion. The deficit on the current account was £93 billion, up from £77 billion the year before. These numbers are all going in the wrong direction. In the Red Book, the contribution to GDP from net trade is negative for the entire forecast period. For the entire period of this Parliament, the contribution to GDP from net trade is negative in every single year. Where is the plan to actually encourage innovation and to support more companies to export and to drive up productivity?

We know that productivity requires investment. The Economic Secretary mentioned that and I said I would come back to it. In particular, we need investment in infrastructure. That is vital for the future. The Economic Secretary is right that the Chancellor and the Government have announced yet another review, but in terms of cold hard cash, capital expenditure forecasts were down for every single year in the Parliament between the spring budget and the summer Budget. That is not the way, if any Government are serious about infrastructure.

When we talk about investment to grow the economy, it is also vital to include investment in education. That will, of course, be the subject of the second debate today, but may I put on record, because it is important to this debate, our view that the Tory approach to education in England runs contrary to the investment approach needed? May I also put on record, because it is in context, my pride at what the Scottish Government have achieved: better school results, a record 119,000 full-time college places, a record 33,000 young Scots going to university, a move towards 30,000 apprenticeships every year and more children than ever from poorer backgrounds going on to further and higher education? This is the investment in education that will deliver the economic growth of the future. [Interruption.] If the Minister wants to chunter or defend the position of the Government in England, I will happily take an intervention.

Today’s motion talks about green jobs. There is much to commend an approach that supports the green economy and investment in it, because of the export potential that goes with those jobs. Like so much else, however, the Tory failure on the economy has been replicated in its approach to the green economy. We saw that with decisions on onshore wind farms, the calculation of the renewable strike price compared to nuclear, and the shorter contract length, all of which sucked investment from that important industry. We have seen it with the failure of successive UK Governments to address the inequity of connectivity charges to the grid over many years.

Any real economic plan should correct the imbalance of a £25 kW charge to connect to the grid in the north of Scotland, against a £5.20 subsidy in London to allow maximising the opportunity of investment. Indeed, the International Energy Agency has suggested that the stop-go political support for renewables is detrimental to establishing a more secure energy system, and that Governments

“must remove the question marks over renewables.”

Even the UN’s chief environment scientist highlighted the damage the UK Government’s “reckless, regressive and irrational” cuts are doing to the support that is necessary to the renewables sector.

[Catherine West]

Does the hon. Gentleman agree with the CBI, which said in a recent all-party meeting that the Government’s policy on the solar industry has severely affected investor confidence?

[Stewart Hosie]

I do agree. I thought it was telling that when the announcement in relation to onshore wind farms was made in this place to remove any support for those that had not passed every single hurdle, Tory Back Benchers were on their feet making the first attack on the solar sector as well. I agree with the hon. Lady entirely.

[Sammy Wilson]

Does the hon. Gentleman not see the contradiction, however, between some of the comments made by his own party colleagues last week when we were discussing the decline in the steel industry and the high energy prices and his support for renewables? Does he not accept that in Spain, for every one job created in the renewables industry, 2.2 jobs are lost in traditional industries?

[Stewart Hosie]

I have heard that argument before. I am not sure about its efficacy and I am not going to comment on it. On the substantive point, however, there is absolutely no contradiction at all between a general attempt to decarbonise, which is the right thing to do, and a clear recognition of the costs of high energy-using industries that are of strategic importance. There is no contradiction there whatsoever.

There is one final point of failure in the UK Government’s mismanagement of the economy: last week’s announcement of HMRC closures. If the UK Government are serious about clamping down on avoidance, evasion, fraud and even error, if they are serious about reducing the £16.5 billion tax gap from small and medium-sized enterprises, if they are serious about reducing the £14 billion tax gap from income tax, national insurance and capital gains tax, and if they are serious about maximising tax yield for investment, then closing 137 HMRC offices, including almost every single one in Scotland, is a catastrophic mistake.

[Chris Evans (Islwyn) (Lab/Co-op)]

I draw the hon. Gentleman’s attention to the Public Accounts Committee report, which said that HMRC is answering less than 50% of the calls put through to it. He, like me, is a constituency MP, so he will know that the biggest frustration for businesses is that they cannot get through to HMRC on the phone. This is a real problem for small, medium and large-sized businesses. Does he condemn the cuts to HMRC as much as I do?

[Stewart Hosie]

I absolutely condemn them. That point is extremely well made. Most individuals and businesses want to be honest. They want to pay their tax. They want to go to a counter, face to face, to make sure everything is absolutely as it should be and then pay the bill. If less than half the calls are being answered now, it will only get worse. Given that in Scotland there will be no face-to-face point of contact north of Edinburgh and Glasgow—Dundee, Aberdeen, Inverness and the whole of the highlands—or south of Edinburgh and Glasgow, including the whole of the borders, this is an idiotic and counterproductive thing to do.

What are the Tories’ plans all about? As the shadow Chancellor hinted, it is ideological to insist, as the Chancellor has done, that the economy not simply breaks even but runs a current surplus hitting £40 billion by 2019-20. It is economically foolish. To do that by delivering additional welfare cuts totalling £33 billion in this Parliament, alongside £5 billion of cuts to essential capital investment—announced in the summer Budget—is, frankly, vindictive, nasty and counterproductive. In short, to cut £40 billion more than is necessary to run a balanced current budget, with almost all of it paid for by punishing the poorest and stripping the capital budget by another £5 billion, is a policy we reject. It is a policy we have already seen fail. It is most certainly a policy the people of Scotland did not vote for.

[Several hon. Members rose—]