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Finally, I want to draw attention to the proposals on council tax, because they are fair. The Conservatives rightly point out that the doubling of council tax since the Government came in has been a major contributory factor to the pressures of the cost of living on low-income families and pensioners. It is a regressive tax that bears very little relation to current property values, and the Conservatives should know that because they introduced it. What I am puzzled about is why they have ignored some perfectly sensible reforms. We have argued that council tax should be abolished, but it does not have to be. The Lyons report contains some perfectly sensible reforms for increasing the take-up of council tax benefit, but they are not even mentioned by the Conservatives. Instead, they suggest that there should be a referendum to deal with excessive increases in council tax, and on page 18 of their document they list five councils that have imposed such increases.
The unfortunate problem is that four of those councils are Conservative ledindeed, two of them, Birmingham and Leeds, have benefited from a joint administration with the Liberal Democrats. They are clearly not bad councils, therefore, but they appear to have been singled out for a referendum on the council tax.
I am genuinely puzzled about how the referendum would work in helping people with the cost of living. What question would be asked? If people vote no to a proposed council tax increase, does that mean that councils would have carte blanche to cut their education budgets? Would they be free to use their reserves without being subject to the present constraints? The policy is extremely badly thought out, yet it is at the centre of the Conservatives proposals for dealing with the cost of living.
In the few minutes that remain to me, I want to concentrate on what I think are the two key elements in the increased cost of living that, in reality, we face. On the front of their report, the Conservatives have helpfully included a summary of the main contributory factors to what they describe as Gordon Browns Disaster. Those factors are nine price increasesseven of them in food, and the other two in fuel.
What is the Conservatives proposal for dealing with those nine price increases? Indeed, what can anyone do about them? Three of the price rises relate to dairy productsbutter, milk and cheese. What is the failing in Government policy in respect of the dairy industry? How could the Government be expected to mitigate the problem? I have sat through years of painful Department for Environment, Food and Rural Affairs questions, in which the main challenge from both Conservative and Liberal Democrat Members has related to the poverty and poor returns of dairy farmers.
That problem has been rectified through the market, so are the Conservatives suggesting that dairy farmers are now being paid too much, or that the market should not be allowed to work? I do not know, but we are talking about part of Gordon Browns Disaster, so I presume that the Conservatives have some idea of how the problem should be rectified.
A much bigger problem exists, of course, and I agree with the Government motion in that much of it has to do with world trade in food. I should be intrigued to know how the Government have responded to last weekends insane rant from President Sarkozy criticising Mr. Mandelson. I think that he suggested that
Mr. Mandelson was responsible for millions of children dying of starvation because he was failing to support French protectionist food policy. That is completely idiotic, and I hope that the Government will make it absolutely and publicly clear that they do not subscribe to that sort of nonsense.
The main contributor to inflation in the short run has been the price of energy. It is worth devoting some time to looking at how that problem has arisen. We might also consider some possible solutions to it, and whether any party has any answers.
The rise in energy prices is partly a function of world prices but, as the right hon. Member for Wokingham (Mr. Redwood) correctly noted in an intervention, another factor is the way that the economic rent from oil is divided between Governments, consumers and producers. For the moment, though, I want to focus on the problem with world prices. It is clear that the Prime Minister thinks that he has a role to play, as he went to the middle east in an attempt to influence the producers.
It is important to say that some foolish myths are circulating. The Governmentand the Prime Minister personallyhave been responsible for the first of them, as they have argued that the price of oil in world markets is being forced up by members of the OPEC deliberately withholding supply. That is complete nonsense: there is less than 2 per cent. spare capacity, and there are serious production problems in countries such as Nigeria andbecause of the warIraq. The price rises are not due to the malicious withholding of supplies, and the Prime Minister is totally wrong to have created that impression.
The other myth in circulation is that the price rises are something to do with wicked speculators. It may seem odd, coming from a Liberal Democrat, but I disparage that argument. It has become a fashionable argument; indeed, the leader of the Conservative party was advancing it yesterday. However, there is not a shred of evidence that there are accumulated oil stocks or that futures markets have systematically pushed prices in their current direction. Those markets affect the level of volatility, but not long-term trends.
Speculators are clearly not the issue. There is a policy problem, on which the Prime Minister reported yesterday: there is a shortage of investment in the oil industry. I would like to have raised two issues with him at the time, and I will communicate them to the Minister. If the oil producers are so negligent in failing to attract foreign investment in the oil industry, why was the one OPEC country that has welcomed foreign oil companiesIranthreatened with sanctions the moment it did so? Foreign oil companies were only too happy to invest in Iran, but they have been told that they will be penalised if they go there.
I am sure that the Saudis and others have made another point to the Government, who should reflect on it. The Saudis and others would ask, Why are you criticising us for not investing, given that you have increased additional corporation tax and petroleum tax levies on the North sea oil industry, making the west of Shetland fields completely financially unsustainable? Through its own policies, Britain has as much responsibility as the oil producers for failing to produce a supply.
Mr. Siôn Simon (Birmingham, Erdington) (Lab):
Will the hon. Gentleman say a few more words about the speculation question? Is he saying that there has not
been a big shift of capital from a weak dollar into oilperhaps perfectly legitimately, and not necessarily in an abusive or speculative way? Is he saying that there has not been such a shift of capital, or simply that the shift has been legitimate rather than abusively speculative?
Dr. Cable: There is a complicated argument, and we could spend the day on it. I am trying to understand other peoples arguments. When people complain about speculative pressures, I think that they are saying two different things. One is that futures markets do not function properly, although I do not think that there is any evidence for thatthose markets may be volatile in the short run, but they do not cause enormous shifts over periods of years.
The other thing that such people are saying is that a lot of people who are nervous about investing their savings are putting them into commodity-based securities. That is the argument that the Conservative leader advanced yesterday. However, the actual magnitudes of money involved in those commodity securities is trivially small in relation to the turnover of oil markets. It is difficult to explain what has happened in any way other than through the fact that world oil demand has been rising unsustainably and that supply is fixed in the short run. That is the problem.
Rob Marris: In that context, will the hon. Gentleman reflect on his partys policy of an 80 per cent. cut in CO2 emissions in the United Kingdom by 2050? World demand for oil is increasing, and the suggestions that he seems to put forward in respect of bottlenecks because of lack of investment are a policy for increasing oil output. The rest of the world continues to use oil. The macho gesture politics of 80 per cent. cuts in the United Kingdomprobably in isolation from almost all the rest of the worldare ridiculous, given that demand for oil is increasing and will continue to increase. I urge the hon. Gentlemans party to reflect on that; otherwise, it will go on asking UK residents to undergo a painful transition, which will not prevent climate change.
Dr. Cable: This is a complicated argument, and we are getting a bit off the cost of living. However, I refer back to the excellent report produced by the Cabinet Office in 2003, under the original editorship of the then Prime Minister Tony Blair. It suggested that a very large shift to renewable power could be achieved without nuclear power and at reasonable cost within the time arrangements that we are talking about.
The challenge to all parties is to face a few home truths about oil and energy prices. The first is that oil prices, and energy prices generally, are likely to remain high. It is important that they should, for conservation and environmental reasons and because of the need for long-term security of supply. There is no argument for pandering to populist demands to cut oil prices to the final user; that would make very little sense. Although there are real problems for people in remote rural communities, which is why we have argued for a derogation for them, motorists costs have risen less rapidly than costs for public transport users, and that remains a basic feature of transport policy. Moreover, although British diesel prices are exceptionally high because of diesel taxation, which is one of the truckers grievances, and a reasonable one, British petrol prices are not out of line with western Europethey are pretty comparable
with those in France and Germany and lower than those in Holland, Belgium and the Nordic countries. The one European country that could, if it wished, offer its residents low petrol prices is Norwaya major oil producer that has much higher taxes and prices than the United Kingdom. Perhaps those are the truths that should be spelled out when we are talking about the high cost of motoring and the high cost of petrol.
The one area where the Government could sensibly intervene to reduce the cost of living in relation to energy prices is gas. The Conservative document has some sensible comments to make about the wholesale market in gas, although it does not go nearly far enough. There is a lot of evidence that there is a case for a Competition Commission reference as regards the gas and electricity producers. Social tariffs are far too ungenerous in relation to the prices that companies offer to their direct debit users. As my party leader has been arguing over a period of weeks and months, there is a case for using the windfalls that producers are earning as a result of the non-auctioning of licences under the European trading scheme to ameliorate the problems faced by poor gas users, particularly pensioners. The Government could do something constructive and useful about that in the short run.
The Government have been staggeringly complacent about the growing problems facing the economy. The Conservative alternative, at least as it has been set out today, is either feeble, in many respects, or dishonest in others. Perhaps they owe us a little more explanation of what they would do faced with this very difficult situation.
Nigel Griffiths (Edinburgh, South) (Lab): It is a pleasure to speak after my right hon. Friend the Chief Secretary to the Treasury. I should like to express some interest and concern about, and to give a view on, why the Opposition have initiated this debate. I am reminded of what Nye Bevan said when he was Housing Minister after the war and the Conservatives proposed a vote of no confidence. He congratulated the Opposition on their concern for the public weal in introducing a motion on a subject so embarrassing to themand todays subject is certainly embarrassing for the Conservatives.
The favoured cliché among the Conservatives at the moment is that not enough was done to fix the roof while the sun was shining. It certainly was not shining during the Conservative years, nor was it shining for the other G7 economies after 2001. As they went into recession and negative growth, wemonth after month, quarter after quarter, and year after yearexperienced continuous economic growth because of the sound policies adopted by this Labour Government. It is one of those metaphors that repays close study, because in fact we did fix the roof. There were a lot of roofs to fixin our hospitals, in our schools, in our police stations and elsewhere. The legacy of leaking roofs in our hospitals was such that we had to provide 100 new hospital schemes, as well as 2,850 new or improved GP surgeries. The hospital buildings were needed to cater for the investment in training that Labour put into the 83,000 extra nurses, 35,000 extra GPs and 33,000 extra consultants. That is why we are achieving 600,000 more operations a year. Far from whistling while the sun was
shining, we were doubling investment in our national health service to a total of £90 billion. We were fixing the leaking roofs in our schools, with 800 new or rebuilt schools to house the 35,000 extra teachers.
Mr. Graham Stuart: The hon. Gentleman mentioned Nye Bevan, who said sarcastically that what the Labour party needed as a leader was a desiccated calculator. Do Labour Members, such as the hon. Gentleman, who thought that they would get such a desiccated calculator, realise that they now have a leader who is desiccated but cannot count?
Nigel Griffiths: I am sorry, Mr. Deputy Speaker, but I am being drawn into a debate here. We have a leader about whom only the most narrow-minded apologist of a woeful Conservative record would dredge up such a question. Our leader is responsible for all of the achievements that I have spelled out, along with our previous Prime Minister and colleagues in my party, but with no thanks at all to the hon. Gentleman, who voted against some the key policies involved.
Mr. Jim Cunningham: My hon. Friend was in his place when I intervened on the Opposition spokesman, who seemed to suggest that he did not grasp my point. My point, with which I am sure my hon. Friend will agree, was that one of the first things we did when we got into power in 1997 was prepare for a rainy day by cutting the debt repayments. If we were not preparing for a rainy day by doing that, what were we preparing for?
Nigel Griffiths: My hon. Friend could not be more right. National debt is now far lower than it was under the Conservatives. The Tory debt was 41.1 per cent. of GDP at the start of the 1997 economic cycle. Labour has cut that to 37 per cent., which is a lower level of national debt than in the United States, the euro area or Japan. Debt levels in every year to 2013 will be lower than the Tory debt we inherited in 1997.
Mr. Jeremy Browne: Will the hon. Gentleman touch further on the argument made by the Conservatives, which, as I understand it, is that the Government are spending too much, taxing too much and borrowing too much? However, the Conservative shadow Chancellor, speaking on the BBCs Breakfast on 3 Septemberless than a year agosaid:
The Conservatives will spend the same as Labourif there is a Conservative Government there will be real increases in spending.
Nigel Griffiths: They mention desiccation, but these are the coconuts. That is a mad policy that has absolutely no credibility. I make this prediction to the hon. Gentleman and the House: when the scales come off the eyes of the press and media about Conservative party policies, they will see, as clearly as even the Liberal Democrats can, the shallowness and superficiality of those policies. But I want to return to the leaking roofs that are part and parcel of what was done and not done when the sun was shining.
Rob Marris: On the leaking roof analogy, does my hon. Friend agree that it was a pity that Thatcher did not thatch, and that the previous Conservative Government sent the national debt through the roof?
Nigel Griffiths: Absolutely right. My hon. Friend puts it as eloquently and wittily as ever. It is the roofs of council houses that I want to talk about next. The investment made by the Government in those, when the sun was shining, was considerablea 66 per cent. increase in real terms. There were leaking roofs in stations as well; we have had 39 new or replaced railway stations. We have tripled spending on our railway system, with 1 billion journeys being made, which is the highest number of journeys since 1961. We have had 1,900 more buses a year, and the biggest replacement of rolling stock in history40 per cent. of rolling stock has been replaced in the past seven years.
Nigel Griffiths: I am delighted to give way to the hon. Member because he will want to tell us about the budget of Edinburghs Liberal Democrat council and justify its closing schools, cutting £2 million from organisations that cater for disabled people and its priority of enabling Liberal councillors to buy ermine robes
John Barrett: I will take your advice Mr. Deputy Speaker. Will the hon. Gentleman comment on a serious matter that is happening in our city and relates to the cost of living and the housing marketimpending redundancies in the house building industry? Will he revert to the substance of todays debate and get away from the knockabout?
Nigel Griffiths: I understand why the hon. Member does not want to respond to my points. Of course, people are having to examine their individual budgets and I am sympathetic about that. However, without the economic stability and considerable growth that we have enjoyed, which no other G7 or advanced industrial country has experienced, people would not today enjoy a standard of living unparalleled in historywe all want to co-operate to protect that. Of course, I want young couples to access the housing market. I realise that people have suffered problems and I am therefore delighted by the two thirds increase in real terms investment in local authority housing. That has been paralleled by more people than ever owning their own homes.
John Hemming (Birmingham, Yardley) (LD): Does the hon. Gentleman share my concern about the Governments calculations? When the Government examine the cost of living in their statisticsthe consumer prices indexthey conclude that average families spend more on hotels and restaurants than on their homes in the cost of housing, water, electricity, gas and other fuels. Families on lower incomes therefore face a much higher increase in their cost of living than the official statistics recognise.
Nigel Griffiths: I do not accept that. [Hon. Members: Why not?] I will explain in a moment. I am about to read from the letter of the Governor of the Bank of England, which explains the precise reason. I would have expected all hon. Members to read it before the debate. The letter, which directly covers the point, states that
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