The Economy

Tom Blenkinsop Excerpts

Tuesday 11th December 2012 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I congratulate my hon. Friends the Members for Middlesbrough (Andy McDonald), for Croydon North (Steve Reed) and for Rotherham (Sarah Champion), who gave three excellent speeches and demonstrated the great capabilities and talent coming into the parliamentary Labour party and which we hope to see more of in 2015.

The economy has been weakened by poor decisions by the Chancellor leading to declining growth, so borrowing is higher, which means that the public debt is worse. While public spending totals are similar to those in the March Budget, tax revenue forecasts are far more pessimistic. The Office for Budget Responsibility suggests that by 2015-16 tax receipts will be £662 billion instead of £692 billion. That is a 4% overestimation, as corporation tax, income tax and VAT at 20% have not brought in and will not bring in the tax take expected. That £30 billion shortfall translates into a £30 billion rise in public sector net borrowing.

In every year except 2012-13 borrowing is higher, and the gap grows over time. This year’s figures are flattered by the £3.5 billion sale of the spectrum for 4G, which is yet to occur, and by the £5 billion tax deal with Switzerland. Let us look at the Chancellor’s much lauded

“largest tax evasion settlement in UK history”.

It is anticipated by the Chancellor to bring in more than £5 billion over the next six years, although the OBR described that clearly as “highly uncertain” because of the lack of information about the value of the assets held by UK citizens in Switzerland. Indeed, the Treasury has stated:

“The final stage of the ratification process is expected to be concluded shortly, but there remains a possibility that the Swiss government will have to hold a referendum on the agreement… This is therefore a significant fiscal risk to the forecast.”

The Treasury added:

“The estimated revenue raised by this measure is also highly uncertain as there is little hard information about the value of UK individuals’ financial assets in Switzerland, and how these individuals will respond to the policy.”

Apart from those settlements, by 2015-16 three years of higher borrowing will push up public sector net debt by £67 billion, or 4%. The Chancellor’s own rules state that public debt as a share of national income must fall by 2015-16. To pass that test, the growth in public debt must be lower than growth in cash or nominal GDP.

In March, the OBR massaged its nominal GDP growth forecast up to 5.7% in 2015-16 alone, in order just to exceed the 5.3% rise forecast in public sector net debt. Now the OBR has slashed its GDP growth forecast for that year to 4.6%. No matter how much the Chancellor likes to fudge and fiddle the figures, he cannot massage down the 5.9% hike in debt forecast by the OBR for 2015-16. The chances of his meeting the terms of his own debt rule have taken only two and a half years to be completely destroyed by the growth-strangling policies he now wishes desperately to reverse, as we saw with the U-turn on capital allowances. The Chancellor says he has missed his debt rule by a fraction and that he will retain the 2015-16 debt target, even though it will now be impossible to hit.

The public finances are now difficult to compare with those under previous Budgets because the statistics are affected by large transfers of cash or classification changes. In fact, the Chancellor’s raid on surplus funds sitting in the Bank of England originates from his quantitative easing programme. The OBR says the surpluses are temporary, so although the Chancellor’s cash grab flatters headline public borrowing figures by some £12.3 billion in 2013-14, future Governments will have to repay the Bank of England an estimated £6 billion to £7 billion in 2021-22 for this Chancellor’s record purchasing of our own bonds. Without that cash grab, the Chancellor would have broken not just his fiscal rule—which he clearly has—but his debt target for 2016-17 and his deficit promises.

Here we are, going into 2013, and all the Chancellor can say is that we need another five years to deal with the deficit problem. That is exactly the same statement he made in June 2010—a stagnant sentence for a stagnated economy, stifled by a part-time Chancellor. This is an autumn statement following autumn statements and Budgets for the last two and a half years, all of which have failed to meet any of the stated aims of the Chancellor’s original objective. Two and a half years later, we are still five years away from the total eradication of the deficit. This Government will have accrued more debt in five years than in the entire 13 years of Labour’s rule. Under this Chancellor’s watch, in 2015 the UK will unfortunately hold the worst public sector net deficit in the west, according to OBR and IMF figures.

Was the autumn statement a growth strategy? No. Is this a deficit and debt-reducing strategy? No. Is this a strategy for borrowing? Yes it is, and on the backs of the low and middle-income workers—borrowing for failure, not for investment.

[Richard Drax]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, I will not.

Can the Chancellor guarantee that we will borrow at a low interest rate because we will still have a triple A rating? No. The very cornerstone on which this coalition is premised has been utterly flawed. As a result, a recovering economy in May 2010 has been so damaged that we have witnessed a double-dip recession, with the strong likelihood that it will become a triple-dip recession—something that the Secretary of State for Business, Innovation and Skills had to admit only this Sunday was a distinct possibility. In essence, the Chancellor is on the brink of exchanging the triple A credit rating he inherited from Labour—and which he prized most of all—for a potential triple dip of his own making.