Section 5 of the European Communities (Amendment) Act 1993

William Cash Excerpts

Wednesday 23rd March 2016 Commons Chamber

[Sir William Cash (Stone) (Con)]

I know my hon. Friend listened to what I said in my point of order, so I would like to address the point to him personally. Section 5 states:

“Her Majesty’s Government shall report to Parliament for its approval”—

on the basis that it is accurate—

“an assessment of the medium-term economic and budgetary position”.

It is absolutely clear, unless he can tell me that this document was prepared since the controversy of the past few days, that this cannot be accurate and nor can it be a proper assessment. To report to Parliament something that is not accurate is quite an important and rather difficult problem for the Minister, is it not? What measures will he take to correct the position, so that Parliament can approve it on the basis of an accurate assessment?

[Mr Gauke]

I will return to that point later, but let me address it in short now. The information provided to the Commission under this process is and has always been based on information already published. It is not a new exercise. We do not ask the OBR to go through the process once again. It is required to produce its documentation and make its assessments at the times of Budgets and autumn statements, and we do not think that our requirement under European legislation is such that we should require the OBR to go through that process again.

The essential position of the public finances remains the same. Notwithstanding the announcement on personal independence payments, it remains the case that from next year debt will be falling every year, that the deficit will be falling each and every year of this Parliament and that we will be in surplus in 2019-20. I suspect that my hon. Friend the Member for Stone (Sir William Cash) would not be keen for us, as a consequence of this requirement—I suspect he is no enthusiast for our going through this process in the first place, but the fact is we have to go through it—

[Mr Gauke]

Because that is what the law requires us to do.

It would not seem proportionate, in these circumstances, to do anything other than submit documentation previously prepared by the OBR.

[Sir William Cash]

I just want to put this to bed. I have made the point that the documentation cannot be accurate—unless my hon. Friend is going to tell me the Government have changed the figures since publication—but there is a second point. It appears from the figures, which can be a bit confusing for some people, that there is a black hole. Some people allege it is as much as £4 billion and others say it is only £1.3 billion—it relates specifically to PIP—but he will appreciate that it is not possible for the documentation to be accurate. This has nothing to do with the OBR as such—it is not the OBR report being submitted—but concerns the Government’s own assessment. Will he be kind enough to get that right? It is important that we are accurate.

[Mr Gauke]

Our principled approach over several years has been that the documentation provided to the Commission is based on the most recent publications. I do not think it would be sensible or proportionate to rerun elements of a Budget process purely for an EU audience. That would not be the right thing to do.

--- Later in debate ---

[Rob Marris (Wolverhampton South West) (Lab)]

I have to say that I have some sympathy with the hon. Member for Stone (Sir William Cash) and the right hon. Member for Wokingham (John Redwood). I draw the House’s attention to the wording of the motion, which states:

“That this House approves…the Government’s assessment as set out in the Budget Report and Autumn Statement”.

Even the Chancellor of the Exchequer does not accept the assessments made in the autumn statement, yet we are now going off to Brussels and—if the motion is passed; I hope it is not—saying that we accept them.

I hope you will give me a little latitude, Mr Speaker, because I would like to start by setting the scene of where we are with our economy and looking at some of the history behind it. We must look at credibility. In the 2015 general election, Labour lacked economic credibility and people voted accordingly. It is true that most of the economic meltdown in the UK in 2008 was due to world factors such as the Lehman Brothers collapse and so forth. Let me try, however, to dispose of the myth to which some in Labour still cling—namely, that there were no real problems with the UK economy when the world economic meltdown occurred in 2008 and that all Labour’s economic problems thereafter were due solely to world factors.

That analysis is just plain wrong, and most people know it. Most voters know that the Labour Government did great things to improve our society and our economy, but voters also know that Mr Gordon Brown made some fundamental economic mistakes—for example, the nonsense of his slogan “an end to boom and bust”, his light-touch regulation of the financial services sector, the disaster of the private finance initiative, and large deficits in the good times. Just before the world meltdown, the UK annual deficit was 3.1% of GDP.

As I have said in the House before, Mr Brown arrogantly ignored the warnings that some of us gave him well before the crash. I am angry and sorry that he made those mistakes, because they meant that the UK economy was not as well placed as it should have been before the world crash. Even without them, the UK’s defences would have been overtopped when the financial tsunami came across the Atlantic, but not by so much. Today, our economy faces what the current Chancellor has described as world headwinds, and because of the current Chancellor’s own mistakes the UK is far worse placed to withstand those headwinds than it was in 2008, when the world tsunami hit. The national debt expressed as a percentage of GDP, for example, is far higher than it was in 2008, and it is now rising.

[Sir William Cash]

In the light of the strictures that the hon. Gentleman has imposed on his former Prime Minister, may I just mention that the national debt, which is currently regarded as being about £1.5 trillion, rises to between £3 trillion and £4 trillion if, for instance, Network Rail and the pension liabilities are taken into account? Does the hon. Gentleman accept that that is the real position?

[Rob Marris]

Network Rail should be included; future pension liabilities should not.

The Chancellor is fond of saying that the current Government and the last coalition Government have fixed the roof while the sun was shining, and that Labour failed to do so. Well, only 20% of infrastructure projects have been started over the last six years. Under Labour Governments we had many more hospitals and schools, and we also had the £12 billion decent home programmes for doing up social housing. As a result, there was a great deal more social housing, including housing association and council properties, than there has been under the current Conservative Government and the coalition.

I welcome the creation of 2 million more jobs since 2010—that is the jewel in the Chancellor’s crown—but it has been bought with a sea of debt, a point to which I shall return. The proportion of part-time workers in the work force has remained broadly the same for the last 10 years, but there is concern about the growth of zero-hours contracts, although I must say that that concern is sometimes overblown. There is also concern about regional imbalances between London and the rest of the country, although I am pleased to say, as a west midlands Member, that they have lessened somewhat in the last two years. However, according to the Office for National Statistics, median gross weekly earnings in the United Kingdom fell by about 4.5% in real terms under the coalition Government.

A theme of the Chancellor’s Budget statement was

“We choose to put the next generation first.”—[Official Report, 16 March 2016; Vol. 607, c. 951.]

What happened about student fees and loans in England? What happened about the abolition of the education maintenance allowance in England? What happened about the spiralling cost of housing in the last six years because the Government singularly failed to address that issue, thereby increasing intergenerational imbalance? What happened about this Government’s selling of a record amount of state assets this year? Those assets could have gone to the next generation. What happened about this Government’s carrying on with the disastrous policy of PFI? And what happened about the deficit and the national debt?

We were told that the deficit was not going to be eliminated by 2015. Well, these things happen. Is it going to be eliminated by 2020? Barely any commentators besides the Chancellor of the Exchequer himself believe that. The Financial Secretary to the Treasury says this evening that we are doing better than other member states. I have to tell him that that is not true. In the G7, for example, our deficit compared with those of the other seven states is the sixth worst; only that of Japan is worse. In 2014, the deficit in Greece—poor old meltdown Greece—was less as a proportion of GDP than the deficit in the United Kingdom. In 2015, according to the International Monetary Fund, they will be the same. That is not a great example to set.

The changes, positive as they may be, with some anaemic growth and considerable growth in employment, have been bought on a sea of debt. Government spending is out of control. Let us look at the national debt. I am grateful to the economist Richard Murphy for providing me with these historical figures. In 2014 prices, the average borrowing by Labour Governments for each year in office since the war was £26.8 billion. The figure for Conservative Governments was £33.5 billion. The average borrowing, in 2014 prices, for each year in office excluding the period since the world crash in 2008—it could be argued to be unfair to the last Labour Government and the Conservative-led Governments to include that period—was £17.8 billion for Labour Governments and £20.6 billion for Conservative Governments.

Let us look at the percentage of years in which debt was repaid by Governments since the war. Part of the national debt was repaid in a quarter of post-war Labour Government years; the same happened in 10% of Tory Government years since the war. Let us now look at the total repayments of the national debt made by respective Governments, in 2014 prices. Conservative Governments have managed to pay off £19.9 billion of the national debt. Labour Governments, who have far more economic credibility, have paid off £108.8 billion. This Government’s spending is out of control. The national debt is up two thirds in six years, and this year it is forecast to increase slightly as a percentage of GDP.

It is a good thing that Mr Brown kept the United Kingdom out of the euro. Had he not done so, we would be in special measures big time under the terms of the growth and stability pact. The treaty defines excessive budget deficits as those that are greater than 3% of GDP. The current Chancellor has failed that test six years running, and on current forecasts—they could of course change next week—he is set to scrape in under the wire at 2.9% this year. The other element of the definition of excessive budget deficits under the growth and stability pact is that public debt is considered excessive if it is greater than 60% of GDP. It should also be falling by 5% per year on average over a three-year rolling period. The current Chancellor is on track to fail that test 10 years running.

The Chancellor is borrowing on the credit card to pay the day-to-day bills. He is also borrowing on a mortgage to buy bricks and mortar. That is fine for infrastructure— that is what Labour would do and it is what many families do. We borrow on a mortgage to pay for the bricks and mortar, but we should not borrow on the credit card to pay the day-to-day bills.

This Chancellor has been in office for six years and it is time that he took some responsibility. Frankly, it is wearisome, juvenile and harmful to our economy to keep blaming the previous Labour Government. I urge all Members of the House to vote against the motion tonight.

--- Later in debate ---

[Sir William Cash (Stone) (Con)]

I have already made my point about the inaccuracy embedded in the report and need not repeat any of that; I am sure that the Minister heard what I said. In a way, it is an impossible situation for him, but that does not remedy the inaccuracy, and I need to hear what the Government propose to do. It may be inconvenient or fortuitous, but the reality is that it is there. The approval by Parliament of these documents for the purposes of onward submission to the European Commission simply cannot be conducted on the basis of the documents under consideration. I will now park the issue, but I am inclined to vote against the Government this evening on account of the inaccuracy, because it just does not make sense. I will be glad if the Minister tries to put things right in some manner, even if only orally, but he may be unable to do so. It is perhaps just as well if I leave things as I have just stated.

What I really want to refer to is the question of national debt, which I mentioned in an intervention. The problem is that the stability and growth pact, the convergence criteria and the 3% are important because they are the basis upon which countries decide whether to run their economies in line with European law or to be cavalier, and there are massive problems in the European Union relating to all that. My right hon. Friend the Member for Wokingham (John Redwood) mentioned that we are just about on the cusp of 3% at the moment, but that is simply not the case in other countries, which raises an important question. For example, the Italians are in dire trouble and are in an enormous battle to try to get some wiggle room into the stability and growth pact, which has led to extremely bad relations with Germany.

In 2003-04, however, nobody blinked an eye when it suited Germany to play around with the pact and not comply with its provisions. Italy is in difficulties and Greece remains in monumental difficulties, infringing the rule of law in Europe as expressed in the stability and growth pact and the convergence criteria, but Germany insists that everybody else obeys the rules until it does not suit it to do so. I find that difficult to accept. In fact, I do not accept it; I reject it. Either there is a rule of law or there is not. The bottom line is that there is a great deal of talk in the European Union about the rule of law, but unfortunately Germany does pretty much what it wants

[John Redwood]

I remind my hon. Friend that, even today, when Germany would say that she is very virtuous in having no budget deficit, she still has a much bigger proportion of debt to GDP than the 60% criterion and no obvious means of getting back down there.

[Sir William Cash]

My right hon. Friend is, of course, right about that, as he really understands all these things. There are massive problems with the whole of this European project, not only because of the inconsistencies but because of the laying down of requirements and obligations that are, in effect, disregarded when it suits certain countries but not when it suits others. The performance required under section 5 relates not only to the accuracy of the figures, to which I have already referred, but to social, economic and environmental goals, as set out in article 2 of the treaty, and a range of submissions in respect of article 103, which deals with economic growth, industrial investment, employment and the balance of trade.

I am happy to agree that the Conservative Government have managed to retrieve the appalling situation that faced us before 2010, but that does not alter the fact that we are talking about a debt level of £1.5 trillion when it is actually very much more than that. I have suggested that if we include the pension liabilities, it could be as much as £3 trillion to £4 trillion. One really has to take that on board, because if someone running a company conveniently parked an element of required debt, the auditors would never give them a clean bill of health. I do not see how pension liabilities can legitimately be off balance sheet, given the scale of this debt and the fact that all those public pensions have to be paid.

I want to move away from that issue, and I would be interested if the Minister would be good enough to refer to one these points in his reply, if he has time. I want to refer now to another aspect of this paper being presented to Parliament for its approval. Page 19 is headed: “Economic opportunities and risks linked to the UK’s membership of the European Union”. What follows on the whole of the page is a litany of reasons why we should stay in the EU. All the arguments of those who say, as I do, that we should leave are dismissed, and I find it tendentious. I have already criticised the three White Papers on the grounds that they lack accuracy and impartiality, which I was promised by the Minister for Europe when I put the point to him during a ping-pong between the Lords and the Commons on the duty to provide information under sections 6 and 7 of the European Referendum Act 2015. Yet, here we are, confronted with exactly the same problem. It is not just that there is inaccuracy embedded in this document, which I am bound to say I do not think the Government can get out of, but there is inaccuracy that conflicts with the provisions of those sections. There is a real list of problems here.

I should also mention the reference on page 19 to the virtues of the single market. I voted for the Single European Act in 1986 but I did table an amendment to say, in effect, that nothing in the Act shall derogate from the sovereignty of the United Kingdom Parliament. Things have moved on enormously since those difficult days, because if I table an amendment now to preserve the sovereignty of the UK Parliament, you, Mr Speaker, will allow it to be debated, and the Clerks of the House of Commons will not raise the difficulties that I was faced with then. In a nutshell, I was told by the then Speaker, and indeed by the Clerk of Public Bills, that I was not allowed to move such an amendment—it was as bad as that. Mr Enoch Powell came up to me in the Lobby and said, “I see that you have put down this amendment, and I agree with you.” As in so many other matters relating to economics, he was not exactly wrong.

The reference to the single market has to be weighed against whether it has achieved its objectives. Page 19 says that the single market is full of virtue and is entirely necessary for the United Kingdom.