Economic Growth

William Bain Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

The country is still in the midst of the longest slump for 140 years. We need to generate 2.6% of GDP and more than 900,000 jobs to match the output and employment rates we achieved before the financial crisis struck. Four years into what should have been a recovery, we have unemployment locked at an unacceptable 2.5 million, under-employment among young people at nearly one in five, construction output falling, the IMF describing Britain’s economy as severely demand-constrained, and the OECD saying that our society is increasingly unequal. Yet what has the country seen in this debate today? It has seen an out-of-touch Chancellor, an isolated and absent Prime Minister, a decaying coalition and a weak Queen’s Speech that cannot meet the aspirations of our people. A governing coalition riven with divisions over Europe, welfare and child care cannot unite the country on jobs and growth.

The Gracious Address should have contained measures to inject demand into the economy and offer hope to our struggling construction and manufacturing sectors, but instead it simply compounds the Chancellor’s obstinate refusal to use fiscal policy to ease the pressures on ordinary households. Only this morning, the Office for National Statistics revealed that in the first quarter of this year, pay excluding bonuses rose at its lowest level since 2001, at a mere 0.8%. The OBR’s March fiscal outlook reveals that the decline in real-wage forecasts since December would cost ordinary households a further £200 this year, which is more than four times what the Government are handing back through their increase in the personal tax allowance. The squeeze on incomes is tightening its grip on millions of households, and without an easing of that burden by the Government, the day of real recovery will remain far off.

A Gracious Speech that was focused on the issues of the country, rather than on managing fractures within the coalition, would have contained a jobs Bill to help 2,000 young people in Scotland who have been out of work for more than two years to get back into work.Even with a modest fall in joblessness today, more than 11% of the working-age population in my constituency is unemployed, which is utterly unacceptable. We know from our friends and neighbours the scarring effect that long-term unemployment has on people’s health and, if they can find another job after that period of unemployment, their earnings and job satisfaction. In the UK, 18 to 24-year-olds are now 10% less likely to be in work than they were in 2008. We should be following the successful example of countries such as Sweden with a jobs guarantee—initially for people out of work for two years or longer, but eventually extended to those jobless for a year or more—that would be paid for by a tax on bank bonuses and by limiting the pension tax relief that top rate taxpayers receive to 20p in the pound.

A Queen’s Speech that was focused on the issues of the country would also have contained a financial services Bill to reform our banks, creating a default power to separate investment banking from retail banking—if needed—to stabilise the economy, and new regional-based banks to boost investment and lending to our small and medium-sized enterprises.

Families in Scotland are losing £28.63 a week on average through the cumulative effects of this Government’s welfare and wages policies. That should have been addressed in this Queen’s Speech by cutting VAT, to put an average of £450 a year back into the pockets of 67,000 voters in my constituency. There should also have been a consumer rights Bill, to help nearly 6,400 over-75s in my constituency to receive an average £200 reduction in their energy bills this year.

We need a one nation Government who will build an economy for everyone in our society, not just—as is increasingly happening—for people at the top. We need that one nation Government as much in Glasgow as in every nation and region of our United Kingdom.

[Madam Deputy Speaker (Dawn Primarolo)]

I call Andy Sawford to speak. Could I ask you to resume your seat at 6.35 pm to enable the wind-ups to start?

Oral Answers to Questions

William Bain Excerpts

Tuesday 14th May 2013 Commons Chamber

[Greg Clark]

I understand that the Co-op has lent more than £3 million to the Labour party. I would assess that as not being a particularly good credit risk; the Labour party has a toxic credit rating, and the experience has been that when it starts to borrow, it never pays the money back.

[Mr William Bain (Glasgow North East) (Lab)]

The youth employment rate is lower now than in 2009, with a shortfall of nearly 400,000 jobs, so why are the Government continuing to resist a tax on bank bonuses that would help put young people back into work?

[Danny Alexander]

As I said in answer to earlier questions, the Government have taken forward a package of measures. The Youth Contract, which is helping half a million young people, the massive expansion and improvement in the quality of apprenticeships, helping young people all around the country, and the Work programme make up a proper package of measures to do what the hon. Gentleman and I agree about—try to help more young people off benefits and into work. The problem has been building up for many years, and he should be a bit more humble about it.

Finance (No. 2) Bill

William Bain Excerpts

Monday 15th April 2013 Commons Chamber

[Mr Gauke]

That is not actually what the OBR numbers at the last Budget showed, but clearly we are faced with difficult economic conditions. It is striking, however, that whereas, when the previous Government faced difficult economic conditions, the deficit ballooned, we have taken tough action to ensure that we continue to reduce it. Would we like to be reducing it more? Of course we would. Why is that not happening? The difficult economic conditions clearly apply. But is the right approach to these difficult economic conditions to go on a borrowing splurge, as the Labour party consistently advocates? The answer is clearly no.

[Mr William Bain (Glasgow North East) (Lab)]

If the Finance Bill is such a success in stimulating additional growth, will the Exchequer Secretary explain the statistics on page 103 of the OBR’s fiscal outlook, which reveals that since its December forecasts, forecast income tax revenues are £6.5 billion lower for 2014-15, £6.9 billion lower for 2013-14 and £7.1 billion for 2015-16? Not much of a success, is it?

[Mr Gauke]

If the hon. Gentleman looks through the OBR’s analysis, he will see its explanation for growth being lower than it had anticipated, which has an impact on the fiscal numbers. It is more than explained by the disappointing performance of our export markets and the fact that we have not been able to export as much as the OBR had anticipated. The question is: how do we respond to that? Do we try to put in place a competitive tax system that makes businesses and industries want to locate and invest in the UK? We have heard nothing from Labour on that front, whereas this Government’s record is very strong.

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

The Bill is a weak Finance Bill that matches the current depressed state of the UK economy. It fails the test of promoting increased demand now for cash-strapped households. It does not promote additional demand for Britain’s retail and services sectors, comprising three-quarters of our economic output, and neither does it sufficiently boost output in construction by adopting more immediate measures to increase the supply of housing—or any new infrastructure investment—now, rather than having to wait until 2015.

The Bill fails to reverse the impact of previous Finance Acts from this Parliament on the incomes of ordinary people, with the cumulative impact in Scotland of the Government’s prior measures on pay, tax and benefits being the removal of £1,488 a year by 2015 in the spending power of the average household. That is at a time when the Office for Budget Responsibility is expecting private and Government consumption to make up a larger share of GDP than it forecast in December. The pound is a fifth lower in value than in 2008, and exports are down by 7%. That is the scale of the failure over which this Government have presided .

The Government have not only presided over that failure, but the Bill fails the even greater test of rebalancing the economy more in favour of skilled service and manufacturing output. It also fails to recast the welfare state around pro-employment and growth-friendly policies such as extending child care provision or a jobs guarantee for the long-term jobless. That is badly needed in Scotland, where the employment rate is 3.2% below its pre-crisis peak of 2007, and 1.6% below the rate between October 2008 and September 2009. It is estimated that a further 850,000 jobs need to be created in the UK to match the employment rate of 2008.

The Bill does little to address the growing crisis of falling living standards, which are faced by millions of people across the country. The median wage is some £3,200 a year lower than it was in 2009. Real wages will fall more quickly this year than the OBR predicted just five months ago and will be stagnant next year. Business investment is forecast to be 1.5% lower on average than the December 2012 OBR forecast, despite the Exchequer Secretary lauding the effect of the corporation tax proposals earlier in the debate.

The truth is that the Bill is less than the sum of its parts, and even the OBR does not believe that its overall impact will be an increase in UK growth this year, next year or any year to the end of its current forecast period. The new US Treasury Secretary last week recommended that eurozone countries should ease fiscal policy to boost demand if they can. That call should resound in the UK Treasury too. The Obama Administration tackle wage stagnation and declining living standards, so we should not put up with the defeatism we have heard from the Government and, this morning, from the Secretary of State for Business, Innovation and Skills.

Before developing those points, let me address the individual clauses and schedules that deserve some degree of welcome—overall, the Bill is a deep disappointment to Scotland and the UK. I welcome the fact that the Treasury has listened to the strong campaign launched by the city of Glasgow council, Members of the House representing Glasgow constituencies, and the organisers of the 2014 Commonwealth games. Clause 9 provides that Glasgow’s Commonwealth games will have the same taxation treatment as the Olympic games in London and other major sporting occasions held in the UK. That concession will mean that the organisers can attract the very best athletes from the Commonwealth to participate, and make the games the sporting and economic success for Scotland and the UK that they will undoubtedly be. Procurement contracts already decided and in the process of being awarded are likely to benefit the economy in Scotland to the tune of £350 million.

The above-the-line R and D tax credits are strengthened by clause 34 and schedule 14, which is welcome, but it is revealing that UK R and D expenditure rates are still way below those of our international trading partners. According to the World Bank, the UK’s 2011 R and D expenditure, at 1.79% of GDP, and Scotland’s, at 1.56% of GDP, are way below the most recent OECD average of 2.44% and the 2011 EU average of 2.03%. We spend less than half the share of GDP that Finland or Sweden spend on R and D. That is a particular problem in Scotland, where business R and D spending is only 0.56% of national income, which is half that of the pathetic UK total. The Scottish Parliament could use powers in that area of policy for the benefit of Scottish business and the Scottish people. I also give a guarded welcome to the provisions on tax relief for television production and video games development in clause 35 and schedules 15 and 16, which will provide some boost to these industries in Glasgow, Dundee, and other parts of Scotland.

On living standards, the Bill will do nothing to counter the regressive effects of the Welfare Benefits Up-rating Act 2013 or previous Finance Acts, which have devastated household incomes among the working poor, who receive nearly 21% of the entire welfare budget. The poorest four deciles of the population in Scotland were hit three and a half times harder than the wealthiest two deciles by the introduction of the 1% benefit and tax credits cap last Monday. This measure alone will take £47 million out of the Glasgow economy every year, and will cost working-age adults in the city an average of £114 a year. Overall, 55,700 working-age households in Glasgow will lose on average £109 a year through the cumulative cuts to tax credits made during this Parliament, and nearly 16,000 Glaswegians will lose on average £24 a week because of the Government’s wicked and iniquitous bedroom tax.

By cutting tax credits, which sustained family living standards through financial crisis—with the UK spending the joint third highest share of GDP on family benefits in 2009—the Government will further reduce economic demand. The effects on the Glasgow economy alone will be to take away £269 million in demand a year, or £647 from the average household in the city. In terms of clause 1, four times as much will be taken away by higher VAT during this Parliament from the poorest people than will be handed back through raising the personal tax allowance, three quarters of the benefit of which will go to people in the upper half of the income scale. With the introduction of universal credit, two thirds of any benefit from a higher personal tax allowance will be lost through deductions in credit, which will be assessed on the basis of net income, not gross. The further squeeze on real wages in 2013, down by a further £200 on average over the course of the year, will cost ordinary families on average four times as much as the Government will hand back through the increase in personal allowance to £10,000 from next year.

The Government have been guilty of another offence in the preparation of the Bill. They have attempted to conduct a debate on welfare by arguing that a majority of benefit recipients are scroungers or layabouts, in a way that is deeply irresponsible, divisive, and corrosive of the social solidarity that exists in Glasgow, Scotland and communities the length and breadth of the United Kingdom. Some psychologists, such as Cass Sunstein, have referred to this phenomenon as an availability cascade, whereby a simple idea takes root and goes viral, quickly becoming the new received wisdom. One wonders whether the Chancellor had that at the heart of his thinking when he began his campaign against the poor. Others may be reminded of the work of George Lakoff when he said that framing an argument in the lived experiences of others is critical. One part of the coalition seemingly wants to turn neighbour against neighbour, and shift their focus away from the skyrocketing wealth of the super-rich, or from the role that the Government should legitimately fulfil in ensuring the conditions for greater equality in society, which is now seen in studies by the IMF as critical to lasting economic growth in any democracy. But the recent study by YouGov and Cambridge university shows that this campaign of vilification of welfare recipients is not having the desired outcome for the Chancellor, because it found that people in the UK were more likely to empathise with the suffering being inflicted on the poorest by these most regressive welfare cuts than voters in Germany, France or the US. We need facts to drive this debate, not simply assertion from the Treasury Bench or the peddling of prejudice. The constituents I meet, who struggle with low paid, part-time work in a weak jobs market, are being forced on to housing benefit because of high rental costs and declining real wages. That, and the fact that we have 2.5 million people officially unemployed but more than 6 million people desperately seeking full-time work, are the reasons why the benefits bill remains stubbornly high.

According to the OECD only last week, the UK is spending 5.9% of GDP on cash benefits, but we spent more in 1980—6.4% of GDP. In comparison with other major countries, the UK is neither a particularly large nor low spender on welfare. Only three of 19 major OECD states spent less than the UK on cash benefits in 2009 in the depths of the downturn.

We need to recast the debate on the welfare state, a debate that should have been recast in the Bill, in three main areas: full employment, higher pay and stronger family services. Simply to restore the employment rate to its pre-crisis levels, we need to create 850,000 additional jobs now. To reduce structural unemployment to 3%, we need active labour market policies, such as the jobs guarantee policy being promoted by Opposition Members, to help the long-term jobless—a plan that put Sweden back to work in the 1990s, at the same time as cutting its deficit too. A jobs guarantee, paid for by restricting pensions tax relief for higher rate taxpayers, would help 600 long-term jobless people in my constituency who have been out of work for two years or more to get the right to employment now. It would also begin to boost tax receipts, which are forecast by the OBR to be £55.2 billion lower between now and the end of its forecast period since its December projections, with £2.8 billion of that shortfall directly attributable to the Budget that the Bill seeks to enact. It is only by increasing the levels of participation in the jobs market that we will be able to generate the growth and the tax revenues required to restore our public finances.

The key to achieving that is to raise the number of women in employment. The biggest barrier to becoming economically active that as many as 1 million women face is the poor availability of affordable child care. Shifting resources into providing households with more extensive child care or early years education at an affordable cost should be a priority for a pro-growth and pro-equality welfare reform and finance Bill. We know that child care costs take up as much as a third of families’ after-tax income in the UK, compared with just 9% in Denmark. In 2009, the UK, under the previous Government, was spending the joint third highest amounts in the OECD as a share of GDP in terms of cash benefits to families, but the Nordic countries were spending much more on supporting child care. That is where policy on welfare will need to change.

On pay, nearly a third of my constituents earn less than the level for a living wage, leading nearly 10,000 households to need subsidies through the tax credit and housing benefit systems to reach any kind of an acceptable standard of living. The median wage is £3,200 lower in real terms now than it was in 2009. Welcome though the announcement today on the increase of the national minimum wage in October by 12p to £6.31 an hour is, that will represent the fourth successive year of a real-terms fall in the level of the national minimum wage. It will be returning to levels it was last at in real terms in 2004, and comes at a time when the coalition appears severely divided in its commitment to the national minimum wage. According to a study published by the Resolution Foundation this morning, the top 1% in our society are earning on average £60 a hour, taking home at least £123,000 a year on a 40-hour working week. Someone on the minimum wage would need to work 24 hours a day for 830 days in order to match the annual earnings of a person in the wealthiest 1% of our society. The failure to deal with that surging inequality under this Government means that the Finance Bill has to be opposed tonight.

In response to this growing crisis of low pay, the Bill could have considered giving the Low Pay Commission a wider remit to consider an affordable wage, sector by sector, bringing the living wage into those parts of the economy where it will work. The benefit would have been a boost to demand and reduced staff turnover. Our focus has to be on welfare and fiscal policies that reduce joblessness and inequality, not a politics of division peddled by the Chancellor and pitched at the very worst sentiments of human nature. As the Social Market Foundation reported just last week, cutting in-work benefits again and again impedes the operation of the automatic stabilisers, which is something the Chancellor promised he would not do in his early months in office.

This should have been a Finance Bill that properly taxed the bonuses and profits of the banks, instead of perpetuating the nearly £2 billion windfall they have received under this Government through corporation tax cuts. It should have been the Finance Bill that reversed the millionaires’ tax cut, which is handing 643 bank employees a tax cut of £54,000 a year, while 5.1 million working-age people are struggling with a 1% cap on in-work social security. It should have kick-started growth and increased demand, but it has instead cemented the reputation of this Government as the no-growth Government, setting a course for a lost decade in the British economy. There is another way, and Opposition Members will not rest until we have put it with conviction to the British people at the general election that this country so badly needs.

Cyprus

William Bain Excerpts

Monday 18th March 2013 Commons Chamber

[Greg Clark]

I know that many of my hon. Friend’s constituents will be in that situation and will have bank accounts in Cyprus. We have made a commitment, but these are very early days—we learned only over the weekend that these matters are being discussed. I think it is appropriate for the Government to make an immediate commitment of reassurance to those members of the armed forces. They have no choice about being sent to Cyprus, and when they go on this country’s business it seems to me to be reasonable to make that commitment.

[Mr William Bain (Glasgow North East) (Lab)]

Does the Financial Secretary have a view on how it looks to the world that ordinary savers are losing proportionately more of their deposits than institutional investors are? Is there not a strong case for the eurozone to get on and complete arrangements to create a single resolution mechanism so that banks can be resolved in an orderly way?

[Greg Clark]

Yes.

Financial Services (Banking Reform) Bill

William Bain Excerpts

Monday 11th March 2013 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

The Bill matters greatly to my constituents in Glasgow because the financial services sector north of the border contributes nearly 8% towards Scotland’s GDP, which is the second highest in the UK after London, and 8.6% of jobs in Scotland are in the financial services sector. The Bill will affect a large number of savers, businesses and employees in Scotland.

I have to say, with regret more than anything else, that the Bill is desperately weak and disappointing and it will need substantial amendment in Committee if it is to provide the radical surgery that the banking and economic system needs. The truth is that our banking system is badly broken. It is failing to supply or boost demand for lending to businesses in key parts of the economy. As the Institute for Public Policy Research found in December, the remuneration packages within the industry have been responsible for a huge rise in inequality across our country.

It is disappointing that we have not had a commitment from the Government to introduce a proper financial transactions tax and that they have not shown leadership by pressing for that to be introduced at G20 level, given that we already have such a tax in this country in the form of the stamp duty that is paid on share transactions.

[Steve Baker]

Between 1997 and 2010, the broad measure of the money supply, M4, tripled. That new money had to go to somebody first. That meant that it widened wealth inequality. The hon. Gentleman is arguing that because the state encouraged this enormously elastic money supply and created wealth inequality, we now need more state intervention to try to fix it. That would be a disaster.

[Mr Bain]

I know that the Prime Minister has been very much a fan of a magic money tree. The Chancellor, by refusing to change course on fiscal policy and putting everything on to monetary policy, shows that the policy of the Government is to treat the Bank of England almost as if it were a magic money tree, so I am not sure of the point that the hon. Gentleman is making.

There is very little in the Bill on competition. There is nothing that would impose a fiduciary duty on the banks in relation to their clients’ money in the same way that company directors have in relation to company funds or lawyers in relation to clients’ funds, so there are huge deficiencies. There is also the great suspicion that the Bill waters down some of the key recommendations of the Vickers report. The maximum leverage that the Chancellor is prepared to accept is way beyond the Vickers recommendation. The Chancellor appears to be prepared to allow a leverage of 33 times, whereas Vickers’ recommendation was for only 25 times. That is because instead of adopting the Vickers report on the level of equity capital at 4% of assets, the Chancellor is going for the Basel III recommendations.

As I said, the IPPR, in a report published in December, examined the culture of greed and how the remuneration system got out of control in the banking system. For example, the top 0.5%, or even the top 0.1%, enormously enriched themselves because of the practices in the industry. That is one reason why it is regrettable that the Bill does not contain provisions for a banking code of conduct or to put ordinary employees of the banks on remuneration committees to ensure that there are annual binding shareholder votes on executive pay. Neither does it propose properly to enforce the legislation passed by the last Government to reveal how many people in the banking system earn more than £1 million a year. There are great areas where the Bill is enormously disappointing.

In terms of the overall reforms, we have three major issues of contention with the Bill as framed. First, too much of the detail of the Government’s policy is to be dealt with by delegated or secondary legislation and is not present in the Bill. Secondly, the Government are prepared to allow too much flexibility within the ring fence, and do not give consumers and taxpayers the assurances they deserve that the principle of too big to fail will not still exist within a regulatory system. Thirdly, the culture of the banking system is not changed enough by the Bill. There are insufficient steps to ensure the proper degree of lending to households and SMEs that is required.

To take that final point first, the figures we have seen on the national loan guarantee system, Project Merlin and funding for lending have one thing in common: the Government are not matching up to their promise and the banking system is inadequate to meet the needs of households and businesses. After a net growth in lending of just £0.9 billion in the third quarter of last year, net lending through funding for lending participating banks contracted by £2.4 billion in the fourth quarter of last year. Whereas Lloyds was drawing £3 billion through funding for lending, lending by Lloyds shrank by the same amount in the final quarter of the year. Whereas RBS has drawn £750 million, it decreased its lending by £1.7 billion in the same quarter. It is clear that funding for lending, as it has been conceived and is operating, is simply not providing the lending to small and medium-sized businesses. There is a missed opportunity in the Bill to change course and ensure that the system provides the support to businesses that is necessary if we are to have the growth that is the only means of cutting the deficit.

We also see from the bank data published last week insufficient detail on the breakdown of lending to households and businesses. However, we know that business investment fell by 1.2% in the last quarter of 2012, and it is clear that confidence in the economy is stubbornly low. There are still high levels of corporate surpluses, but the banking system is failing to deliver money to those businesses to start increasing orders, to deal with our low productivity and to restore confidence where it is most needed now.

It is also clear that there are unfortunately no provisions to establish immediately a British investment bank that would break the logjam of getting money out of corporate surpluses and flowing into the real economy and promoting orders and demand. Why have the Government persisted with this argument, even in the light of the proposal in the second report from the parliamentary commission for a secondary reserve power to ensure that where there are examples, or even the possibility, of the primary reserve power being circumvented by the banks, there is a reserve back-up power to break up the entire system if that is necessary in the national interests and to prevent financial collapse?

The commission’s report argued that the banking industry could indeed dilute the impact of the ring fence, and that not just the primary but the secondary reserve power was necessary in order to ensure that that did not occur and that we had proper enforcement of the ring fence. The Bill also introduces a requirement for directors of ring-fenced entities to be approved by the regulator, with such persons being subject to disciplinary action by the regulator if they have been involved in any contravention of the ring-fencing rules. It is clear that those powers should also be increased.

The problem with the Bill is that the devil is in the detail, but a huge amount of the detail is not apparent. One reason why the Chancellor said that he could not accept the secondary reserve power is that he claimed it would be anti-democratic. He said that it would not be present on the face of the Bill and it would not be fair to introduce that by delegated legislation. The question remains for the Minister: if that is the objection, why not put more of the detail into the Bill? Why not ensure that we can then have that secondary reserve power, which the hon. Member for Chichester (Mr Tyrie) and the other members of the parliamentary commission deemed to be absolutely necessary to have confidence in our banking system? Then we would be able to move on in a spirit of consensus, instead of, with regret, having to point out the Bill’s great deficiencies.

The other shortcoming of the Bill is the inconsistent treatment of derivatives. Those were described by the US investment guru, if we can call him that, Warren Buffett as financial weapons of mass destruction, but sadly the Government have yielded to some of the more regressive parts of the financial lobby and will permit banks to locate simple derivative products—whatever simple means—within their retail banking operations. They should look at that again.

The Bill is weak and does not learn the real lessons from the financial crisis. It does not learn the lesson that we have a very small number of very large banks, whereas other countries, such as Germany, France, Canada and United States, have a more diverse range of successful financial institutions, including co-operatives, credit unions and Government savings banks. There is little in the Bill that would help to expand the thriving credit union movement. I recently visited credit unions in my constituency and others in Glasgow city centre that are providing mortgages and expanding the range of financial services in a responsible way given the scale of financial exclusion that many of our constituents face. Having different types of banks in an economy introduces different incentives and gives the public real choice. The point is not to have more banks competing on the same business model of short-term speculative profit, but to have competition across different business models with diversity of form and diversity of function.

Unfortunately, the Government refuse to listen to those points and have taken insufficient steps to make the reforms that our country needs. I hope that in Committee they will listen to the arguments again, because our constituents, businesses and the people who save and invest in our financial system deserve no less.

Economic Policy

William Bain Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

If that were the case, why would German rates be lower than ours?

[Mr William Bain (Glasgow North East) (Lab)]

On 2 February 2010, the Chancellor said

“we will protect Britain’s credit rating and international reputation.”

Having delivered the third-lowest growth in the G20 since 2010, with real wages having fallen every month that he has been in office, the cost of living staying higher for longer, according to the Bank of England, and our nation’s productivity slumping, it is his reputation that lies in ruins in the eyes of the British people today.

[Mr Osborne]

I cannot believe that the hon. Gentleman waited an hour and four minutes to read us the Whips’ handout again. As I have said, perhaps the Labour party will circulate its alternative economic policy, so that we can have a real debate about it in the House.

Financial Services

William Bain Excerpts

Wednesday 6th February 2013 Commons Chamber

[Greg Clark]

I completely agree with my hon. Friend. The commission led by my hon. Friend the Member for Chichester (Mr Tyrie) is looking at how such professionalism, which can be found in financial services, can be bolstered and further recognised.

[Mr William Bain (Glasgow North East) (Lab)]

The public, who after all own more than four fifths of that bank, will be appalled at the duration and extent of the greed and corruption that has been exposed by the FSA today. Does the Financial Secretary agree that that strengthens the argument made by the Financial Services Consumer Panel that the banks ought to be subject to a fiduciary duty to their customers, as lawyers and company directors are, so that savers and investors have maximum protection?

[Greg Clark]

The hon. Gentleman makes an important point that will be considered by the commission, which is looking into the culture. It is important that banks recognise that they exist to serve their customers—that is their purpose and the reason why they operate. My recent experience of speaking to some bank boards leads me to believe that they recognise the commercial imperative for that, but he makes a suggestion that I am sure our colleagues will consider.

Banking Reform

William Bain Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

I thank my hon. Friend for the effort that she has devoted to promoting this agenda. It seems to me that if there is to be genuine competition, people should have a choice of banks, and it should be easy, not difficult, for them to make changes. I hope that the work that my hon. Friend is doing will be reflected in the policies that we are enshrining in the Bill, and I look forward to detailed discussions with her about how that may be possible.

[Mr William Bain (Glasgow North East) (Lab)]

If the public are to have confidence in the new system, they need to know that lawyers or bankers will not be able to circumvent the ring-fencing regime. Can the Minister come up with a better justification for the Government’s not taking a full reserve power for full separation, in order to protect the public, than those that he has produced so far?

[Greg Clark]

The hon. Gentleman is right: we need to protect the ring fence from the ingenuity of the lawyers who are sometimes in the vicinity. The history of financial regulation shows that banks have been able to discover ways of circumventing the rules, which is why we have given the regulator robust powers to insist on the full separation into retail and investment of any bank that makes any attempt to breach those rules.

The Economy

William Bain Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

Regrettably, the economy is on course for a lost decade under this most paradoxical of Chancellors: reckless on one hand, but complacent on the other; a historian, but with precious little grasp of learning its most obvious lessons; and a tactician, but now pursuing the basest strategy of all in politics—attempting to divide and rule by separating those on middle incomes from low-wage Britain, and the poorly paid from the unemployed. His Conservative predecessors, people such as Winston Churchill, Harold Macmillan and Iain Macleod, would surely recoil in horror if they could they see what this Chancellor is doing to the reputation of the party that once proudly stood for the principle of one nation, but does no longer.

There is no social group that this Chancellor will not exploit for perceived political gain, but he stands exposed in this debate: he has no idea of how to regenerate the missing growth in the UK economy; he has no clue on how to undo the damage he is doing to ordinary families’ living standards and slumping real wages; and he has no concept that his policies on welfare represent no more than a throwback to the worst excesses of harsh Victorian Toryism.

[Mr Jim Cunningham (Coventry South) (Lab)]

Does my hon. Friend not recall that when Government Members were in opposition, in the good years, as we might call them, they took the credit, but they will not take the credit for getting us into this mess in the bad years?

[Mr Bain]

I thank my hon. Friend for that. What I do remember is that when the right hon. Gentleman was shadow Chancellor he backed every single penny of the public spending plans of the Labour Government until the financial crisis hit. Indeed, he had the sauce to call them “eye-wateringly tight” on occasion in this House.

What we see is a Chancellor with a plan aimed at winning marginal seats at the next general election at any cost, but bringing in the cruellest sequence of benefit cuts since those of the national Government in 1931 and aiming his harshest measures at the most vulnerable in our society.

Our economy is suffering from the slowest journey out of recession since the 1870s. As a result of the extreme austerity measures that the Chancellor has introduced, it will now take nearly seven years to repair the lost output from this recession, compared with just four years during the great depression in the 1930s. We were told two and a half years ago that a policy of expansionary fiscal contraction would restore confidence, but instead nearly 4% of output has gone, the Chancellor’s supplementary target on debt falling as a share of GDP by the end of this Parliament has gone, and many economists, including at Citigroup, expect the loss of Britain’s triple A credit rating within the next 18 months, the retention of which the Chancellor made his principal criterion of credibility.

No wonder that on The New Yorker website last week, the Chancellor’s policies were dismissed as an example of what the US should avoid—a commitment to the deflationary economics of the 1930s, with the Reaganite trickle-down economics of the 1980s and the even harsher Benthamite economics of the 1830s. Instead of uniting this country in a crusade against long-term and youth unemployment and what Beveridge called the social evil of idleness, this Chancellor wants to divide society by demonising the unemployed in a way that no Government have done since the time of the Poor Law in 1834.

Despite the Bank of England running the loosest monetary policy in several generations and owning three tenths of our national debt through the use of its asset purchase facility, the OBR predicts that joblessness will rise by as much as 340,000 over its forecast period. So we can see that the US economy, having adopted a different policy from the austerity of this Government, yet described by the Nobel laureate Paul Krugman in The New York Times yesterday as

“still, by most measures, deeply depressed”,

has grown nearly three times as fast as the UK, and according to the Congressional Budget Office, will have a deficit next year of 4%, compared with a deficit of 6.1% in this country, and UK debt will be nearly 18% higher in 2015-16 as a share of GDP than that forecast by the OBR in 2010 on the EUROSTAT measure.

Make no mistake, this Chancellor’s policies on taxation, benefits and spending are cutting the incomes of the poorest tenth of households by 2.7%, at a time when the OECD forecasts that we will see barely half the rise in economic demand that will be seen in America next year, and barely a third of that the year after, despite the looming fiscal cliff. Despite the stream of measures unveiled in the autumn statement, the OBR’s verdict on their usefulness was as unerring as it was deadly for the Chancellor’s reputation—just a 0.1% rise in GDP over the next two years, at the same time as the OBR downgraded growth by 1.7% over the same period.

Increasingly, we see that this Chancellor’s legacy will be to turn the long-term prospects of the UK economy into those of a low-wage, low-skill, low-investment and low-productivity economy. On wages, this Government cannot answer positively the question posed by millions of ordinary people across the country: am I better off now than I was four years ago? The Government cannot answer positively the question: am I better off now than I was eight years ago? The reality is that with the median wage across the UK having fallen by a shocking 7.9% in real terms in this Chancellor’s first two years in office, and by 7.4% in Scotland, people are worse off now than they were 10 years ago. The Resolution Foundation, in evaluating the effects of the autumn statement, predicted that real wages in 2017 will be no higher than they were in 1999. This Government have made the wrong choices on who to help at a time of poor consumer confidence and weak demand. When they could have helped households with the cost of child care, which is rising in Scotland by 6% a year, boosted female employment and cut inequality, they decided to hurt the poorest 40% of the public harder, as a share of their income, than they will hurt the richest 10%. Lone parents who are in work and on tax credits, of whom there are 115,000 in Scotland, will be worse off by an average of £300 a year by 2015, according to the Resolution Foundation. Three quarters of the cuts in tax credits will hurt precisely the strivers the Chancellor purports to back.

The Chancellor’s legacy on investment is equally dire. Business investment is now lower than the Office for Budget Responsibility forecast a year ago, with manufacturing investment having dropped by 6.7% in the last quarter compared with a year ago. Despite funding for lending, there is precious little evidence that demand for lending in the economy is rising. Net lending by the banks to small and medium-sized businesses fell by a further £2.4 billion in the three months to August this year, according to the Bank of England.

The Government could have changed course in the autumn statement and acted to stem the £20 billion rise in the benefits bill during this Parliament by getting more of the 1,320 long-term jobless in my constituency back to work by cutting VAT and adopting more active labour market policies than their failing Work programme. They could have bolstered construction and housing by building as many as 100,000 homes across the UK by allocating the 4G proceeds to productive use rather than simply trying to cook the books with them. They could have done that, but they did not. They have let the country down, and that is the legacy not only of the Chancellor, but, sadly, of the entire Government.

Oral Answers to Questions

William Bain Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

Like my hon. Friend, I want to build a strong economy and a fair society where everyone has a chance to get on in life. The commitment to raise the income tax threshold was a commitment that he and I and all our colleagues made at the general election, and we are delivering on it in Government. There is a tax cut for working people cumulatively over this Parliament, and next year it will be worth £50 a month to people on low and middle incomes. That is real help for hard-working families at what is a difficult time.

[Mr William Bain (Glasgow North East) (Lab)]

Average wages in Scotland have fallen by 7.4% under this Chief Secretary, and from next year 182,000 couple-families in work with children will stand to lose money through tax credits. Why are this Government always standing up for millionaires while hammering the strivers?

[Danny Alexander]

I will not take any lectures on millionaires from the Labour party, which thought it appropriate that a millionaire private equity fund manager should pay less on his income than the person who cleans his office. Labour’s record on taxing the wealthy, dealing with tax avoidance and closing tax loopholes is nothing to be proud of, and the hon. Gentleman should stop raising that point.