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I would not tend to use the word “socialist”, as my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) does, but in many ways the genius
of the idea from the Prime Minister’s point of view is that the room for manoeuvre will be limited for any future Conservative Government, just as, in many ways, the success of privatisation was irreversible once the Labour Government came in to play. Even railway privatisation, which happened in 1996, was not reversed in 12 months when the Labour Government came in to play. The same will happen, I fear, but in reverse, with the increase in public expenditure that is a requisite part of the PFI burden. That tax will have to be paid during the course of the next two decades and that will make the room for manoeuvre more limited.
I fear, in a way, that we might have an election in the next 18 to 24 months, because we will have to take on an economic inheritance that will lead to an appalling state of affairs.
Nigel Griffiths: Will the hon. Gentleman give way?
Mr. Field: No. The state of affairs will be far worse than it was in 1979—at least at that point we had had two and a half years of monetarism courtesy of the International Monetary Fund, after the Labour Government had to go cap in hand to the IMF. As we have already seen, there is little doubt that the Government seem set on effectively borrowing against the bank and they keep on borrowing and spending. There are only two ways in which they can possibly get out of the political hole in which they find themselves. One is to make borrowing grind to a halt and the other is to keep on spending to ensure that the cost of living problems to which we have referred will seem to be better for the purposes of an electorate who, they hope, will be grateful come election time.
This country has some severe problems ahead, I fear. The cost of living is an issue that the Government, in their arrogance and complacency, might have thought that they had put on the back burner over much of the past decade, but it will be the leading issue in relation to not only off-balance sheet financing but day-to-day costs. The real worry, which I hear when I speak to constituents who are perhaps slightly older than I am—in their late 40s and early 50s—is that they worry that the situation for their children will be a lot worse than it has been for them. They worry that they cannot pass the standard of living that they have come to take for granted for themselves on to a future generation. Outside wartime, I think that that is roughly the first time in history that that has happened. That would be the worst indictment of the Government’s complacency. The past decade was the best of times. So much should have been invested rather than frittered away. We will see, I fear, the disasters of those years in the decade or so to come.
I thank you, Mr. Deputy Speaker, for allowing me to make a brief contribution to the debate. It has been an important debate and I am sure that we will return to many of the themes, as we rightly should, in the months and years ahead.
6.34 pm
Mr. Graham Stuart (Beverley and Holderness) (Con): This has been an interesting debate, in so far as we have had sober, thoughtful speeches from MPs on the Conservative Benches, who, like me, spend every weekend on the streets talking to people in their constituencies.
Every Saturday morning, I try to run a street surgery, as I call it, on a street corner in one of the four towns in my constituency, whether on Toll Gavel in Beverley, on Newbegin in Hornsea, in Withernsea or in Hedon. Week after week, people come to speak to me, take me aside and talk about the difficulties that they are having in meeting their basic bills. I have been struck—and pleased, as someone who wants to see a Conservative Government and believes that that would be good for this country—to find that people say, “I’ve always voted Labour, but now I’m going to vote Conservative.” When we look at the context in which people say that and at the weight of their disappointment and despair, and when we consider how much they believe that they were promised and how little they believe has been delivered, we realise how serious the situation is.
Yesterday, a constituent from Withernsea wrote to me to say that their family have a modest family car, but they are selling it because they can no longer afford to run it. Withernsea is a town and has a relatively large number of services, but residents are dependent on other services elsewhere. Other constituents of mine, who do not live in a town but in one of the many villages across the constituency are in a similar position financially but cannot possibly do without a car because of the dearth of public transport and the difficulties that that causes.
When my constituents speak to me at the street surgery, they are pleased to have that opportunity because it at least allows them to feel a connection. Someone from Withernsea, on a very low income, sees certain services withdrawn and needs to feel a connection. They need to feel that there is some way in which they can influence those in power so that they can cause change. When they hear a debate such as this about the cost of living and when, as lifelong Labour supporters, they recall that the Labour party was founded and led by people such as Keir Hardie precisely in order to represent the working poor—the working class, as it traditionally was—they see, instead, a Labour party that has lost its sense of mission. Hundreds of Members—all of us here—are on very high wages compared with my constituents, with high expenses support, too. When those people discover that Labour Members no longer judge participation in such important debates as relevant, their disappointment is compounded further. When they hear speeches such as the one given by the hon. Member for Edinburgh, South (Nigel Griffiths), who we all know is extremely close to the Prime Minister, and hear his master’s voice speaking with such a level of complacency while the traditional supporters of the Labour Government are suffering and struggling, not least in rural areas, their sense of disappointment is palpable.
I wish I could feel triumph as I sense the political ground shifting as people come over to support the Conservatives, but Labour Members like to say that that shift is not so much a positive endorsement of the Conservatives, and they have a point. In fact, people are turning to us because they want to believe that there is a positive alternative and my right hon. Friend the Member for Witney (Mr. Cameron) is offering one.
Most of all, it is the failure of the Labour party and its representatives to stay connected with its original core support that is the problem. A former Labour leader and Prime Minister said, I think, that “the party
is a mission or it is nothing”—I might be misquoting him, but that was certainly his point. Where is the sense of mission on the Government Benches? Where is the commitment to do something about those with least in our society?
What has happened to the poverty rate over the past three years? It has increased each year for three years. What has happened to child poverty for the past three years? It has increased. What has happened to fuel poverty? It has increased. Where are the Labour voices speaking up on behalf of the people who they were traditionally here to represent? I could not believe that a spokesman for this failing Government could mention Nye Bevan—he would be spinning in his grave to think that a Labour Government could so let down those with least in our society.
I shall not be able to match the eloquence and power of the speech from my hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox). His was one of the best speeches that I have heard in this House for some time. He has some rhetorical gifts—perhaps that is a professional requirement—but his speech’s power mostly stems from the fact that, like me, he speaks to people who are living the reality of this Government’s policies. He is reflecting their passion when he stands up and demands a response or some sense of feeling from Ministers.
I apologise, Mr. Deputy Speaker, for the word that I am about to use, but the Minister in question used it in his blog. He asked, “Why is everyone so bloody miserable?” That from a Minister who is driven around in a chauffeur-driven Prius—
Mr. Jeremy Browne: It does not get any better than that!
Mr. Graham Stuart: The hon. Gentleman may think that a laughing matter, but my constituents can no longer afford cars. They see their bus fares going up and their services being cut.
6.40 pm
Mr. Mark Hoban (Fareham) (Con): The argument at the centre of the debate is that we are about to face a period of prolonged inflation above the 3 per cent. target, as the Governor of the Bank of England made clear last week. As a consequence, families will find it increasingly difficult to make ends meet.
However, at the very time when families are under such pressure, the Government, because of their mismanagement of public finances, can do little to lift the burden. That is why people are not turning to the Government for a solution to their problems, but are asking how they can get higher pay increases. The pressure for higher pay would be less if the Government were in a position to help.
Before I elaborate on that, I shall comment on some of the speeches in the debate. The Chief Secretary to the Treasury offered a prime example of the Government’s approach to the economy. They want to take the credit in the good times and blame someone else in the bad—an approach evident time and again in her speech. She talked about global pressures, but did not mention the deterioration in the exchange rate over the course of the past year, or the impact that that has had on inflation.
In his letter to the Chancellor last week, the Governor of the Bank of England said:
“Price inflation of imported goods rose to its highest since 1995, in part reflecting the substantial depreciation of sterling...A key factor...has been sterling’s 12 per cent. depreciation since July 2007.”
The markets have spoken on this Government’s economic policies and found them wanting.
The hon. Member for Twickenham (Dr. Cable) tried to make a point by misreading our motion. When they came to office in 1997, the Government were prudent in their management of the public finances and followed our spending plans, and we have made it clear that they would be in a much better position to help families in difficult times now if they had continued to do so.
Only two Labour Back Benchers spoke in the debate, and the first, the hon. Member for Edinburgh, South (Nigel Griffiths), made a remarkably arrogant speech. He gave the game away when he responded to an intervention by saying that people will realise how marvellous this Government are when the scales fall from their eyes. There we have it—it is the people’s fault that the Government have their lowest poll ratings in 11 years, and their fault that they cannot understand what the Government are doing. But I credit the people with more sense than that: they have seen through the Government, and they have worked out that the Government have failed the people of this country.
My right hon. Friend the Member for Wokingham (Mr. Redwood) identified opportunities that the Government had had to make decisions in the long-term interests of the country. He said that they could have made some significant choices that would have reduced our dependence on oil. When the Economic Secretary responds to the debate, I hope that she will admit that the Government’s policy for tackling inflation over the next couple of years is to cause a real decline in people’s living standards. The Governor of the Bank of England was brave enough to admit that, although no one on the Treasury Benches, including the Chief Secretary, has been able to accept it. Perhaps the Economic Secretary will be refreshingly candid when she concludes the debate.
The hon. Member for Northampton, North (Ms Keeble) asked the Government to take more action to tackle problems of fuel poverty and the cost of fuel. When she tries to explain the Government’s actions to the electorate, her problem will be that the mismanagement of the public finances over the past 11 years has left little money in the coffers that could be used to help her constituents and to lift the burden from them.
My hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox), and my hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Beverley and Holderness (Mr. Stuart) spoke eloquently about the problems for people in rural communities who face an increased cost of living. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) highlighted the impact that income tax rates will have on people on low pay. The reality is that it was the protest against the scrapping of the 10p rate that led to the Government having to increase personal allowances for one year only. However, even that will not compensate the lowest paid for the losses that they have suffered as a result of the abolition of the 10p rate.
In his Mansion house speech last week, the Governor of the Bank of England was frank in his assessment of the times that we are in when he said:
“This year our real take-home pay will rise at a slower pace than national productivity. Rising fuel, gas, electricity and food prices mean that average real take-home pay will stagnate this year. It will not be an easy time, and I know that some families will find it particularly difficult.”
He is right: families will find it particularly difficult. In difficult times, families instinctively turn to the Government for help and support but we know that, because this Government failed to prepare for economic uncertainty, they have little to offer. As the OECD pointed out, the Government’s loose fiscal policy during the good times means that they have little room for manoeuvre in the bad times. International league tables show that this country has one of the largest budget deficits among all the industrialised nations. Other Governments’ more prudent management of public finances means that they are able to cut taxes on families and businesses, but what have this Government done? They have put up taxes on cars, small businesses and successful entrepreneurs.
It is a sign that the Government have run out of road at home that they are forced to place their trust in global initiatives and summits in the hope that there might be some relief. The Government’s amendment reflects that, and shows that they hope that OPEC and the Doha trade round will come to their rescue.
Only in their second terms do Prime Ministers usually find international gatherings more attractive than domestic politics. However, this Prime Minister has not reached even his first anniversary of coming to office before deciding that he will receive a warmer welcome in Brussels and Jeddah than at home.
We believe that the long-term solution to the Government’s mismanagement of the public finances is to share the proceeds of growth. In that way, although public spending increases in real terms, its growth will be less than the rate of growth for the economy as a whole. That will create the resources to reduce borrowing and help support families and businesses.
That was the approach that the Prime Minister rejected when he was Chancellor, but he has been forced through necessity to adopt it in the current spending round. His problems with managing the public finances mean that families facing a squeeze on their living standards also know that they cannot expect the Government to help them because the Government failed to prepare for difficult times.
The Government did not fix the roof when the sun was shining, and families are now faced with a challenge. The Government are saying, “We can’t help you because we can’t afford to help you”, so do people sit tight and wait for things to get better or do they push for higher wages?
People are economising and finding it difficult to make ends meet, and we have heard examples of that in the debate. I think that there will be pressure for higher wages, and the risk is always that higher wage rates will entrench inflation in the economy. That would put further pressure on the Bank of England to respond with higher interest rates.
The Government call for wage restraint for the public and private sectors, but their biggest challenge lies with the heavily unionised public sector. The Government are in hock to their paymasters, and how they handle
the public sector trade unions will be their big test. Yesterday, local government workers rejected a 2.45 per cent. pay increase. The general secretary of their union, Dave Prentis, said his members were
“fed up and angry that they are expected to accept pay cut after pay cut while bread and butter prices go through the roof...Most of them are low-paid workers, who are hit hardest by food and fuel price hikes”.
Over the coming months, the Government will come under increasing pressure from their union paymasters to soften their position on pay—but will they be tough enough to withstand the pressure from the unions, when they know that Labour Party funding depends upon trade union contributions?
There can be no guarantee that this Prime Minister will stand firm. Anatole Kaletsky said recently that the
“biggest worry has been Mr. Brown’s surprising combination of weakness and short-termism since he became Prime Minister. If he responds to minor hiccups such as the 10p tax row by giving away £2.7 billion, one wonders how he would react to a genuine challenge to his authority on the scale of the Winter of Discontent?”
Will the Prime Minister find the courage to stand up and face down the trade union bosses, or will he yet again show how weak he is by caving in to their pressure?
The Government have failed to provide for a rainy day, and that is why they now have to increase taxes on families and businesses rather than help them by reducing the burden of taxes. Because of that pressure, families will look for greater pay increases, and that is where the danger lies for the economy. That danger could have been avoided if the Government had prepared the economy and public finances for the challenging times, rather than mismanaged the public finances, putting the future of the economy and of families at risk.
6.50 pm
The Economic Secretary to the Treasury (Kitty Ussher): This debate is about an important subject and I have enjoyed listening to the speeches of the hon. Members who have contributed. As we have heard, people across the country are concerned about the cost of living. They feel the effects of rising food and fuel prices across the world. The doubling of world oil prices has led to rising bills at the petrol pumps as well as to increases in gas and electricity bills. At the same time, the price of basic foods has gone up.
However, as we look at that combination of facts, it is important for us to remember that since 1997 Britain has benefited from relatively low inflation, which has been on average half what it was in the previous 20 years. Even now, inflation is far lower than in the past. It rose above 20 per cent. in the 1980s and above 10 per cent. in the 1990s. Families are rightly— [Interruption.]
Mr. Deputy Speaker: Order. The House must allow the Minister to respond to the points that have been made.
Kitty Ussher: They obviously do not want to hear the facts of the matter.
Mr. Philip Hammond: Will the hon. Lady give way?
Kitty Ussher: I shall give way in due course, but in the time available I wish to answer the specific points that have been raised.
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