|Previous Section||Index||Home Page|
Mr. Andrew Tyrie (Chichester) (Con): I shall be brief. I do not know how long the winding-up speeches are going to be, but I am sure that someone will signal to me when they want me to sit down. I will do my best to make a few comments until then.
I would like to clear up a point that was made as a result of an intervention by the Exchequer Secretary. I think that she said something to the effect that we did not have any monetary policy tools left to deal with the crisis now that interest rates were so low.
Angela Eagle: I was asking the hon. Member for South-West Hertfordshire (Mr. Gauke) a question about monetary policy, should we get to the stage where interest rates in this country are as low as they have been in Japan and the USA. I was talking about a hypothetical situation, not one that is in existence, because, as the hon. Member for Chichester (Mr. Tyrie) knows, interest rates are currently 1.5 per cent.
Mr. Tyrie: I think that the hon. Lady is labouring under a massive misapprehension about monetary policy and the main tools available to the authorities. I hope that that misapprehension is not informing the higher reaches of policy making in the Labour Government, because if it is, it must be partly responsible for the talk about using all sorts of other tools, which in my view is probably premature.
At least three monetary tools are still available. The first, as the hon. Lady correctly implies, is 1.5 percentage points of interest rate cuts. Secondly, there is the use of funding policy. I find it quite baffling that the Government should be allowing the Debt Management Office to issue so much long-dated stock, when they should be asking it to fund at least part of the deficit at the short end, thereby generating some further monetary easing. The third tool is the exchange rate, which she has ignored completely. The dramatic fall in the exchange rate is by far the biggest event to have taken place in monetary policybigger even than the fall in interest rates that we have seenand it will have considerable effects. However, those effects will take some months to come through. Until they do, monetary policy needs to be given a chance to work.
Fiscal policy is broadly workingthat is, the fiscal stabilisers are already operating as they should. It is monetary policy, and in particular that part which pertains to banks and the credit system, that needs a good deal of Government attention. However, they have been remiss in not acting on that earlier, first, by not underwriting the banks with recapitalisation, and then, when they did, by recapitalising the banks in a way that encouraged them to strengthen their balance sheets at almost any cost, thereby negating part of the purpose of the recapitalisation in the first place.
Given that so little time is available and given the fact that we are going to hear a couple of Front-Bench speeches in a moment, let me quickly make one or two further points. [ Interruption. ] I am getting a signal that
it might be helpful if I make only one further point, so I will do that, and in only one minute, too. It might be misrepresented as being party political, but the point that I am going to make, which is almost universally accepted by all dispassionate observers of economic policy, is that there is absolutely nothing left of Labours economic policy at all.
The policy that was put together a decade ago has been completely dismantled. The ideathe rhetoric or the mantraof so-called spending to invest was long ago replaced by spending to consume. Indeed, the use of the word investment for current spending in the public sector has devalued the term, which has been damaging. The fiscal rules were consigned to the dustbin at the time of the Northern Rock episodeit was the first time that they were seriously tested, and they collapsed. Then there was the Chancellors autumn statement, which tore up all the Labour Governments remaining pledges on taxationthe pledges that they used to try to persuade middle Britain that the economy was safe with them.
It is against that backdrop that in just over a year we will hold an election. The conduct of economic policy will be central to that election. I leave the House with one thought. When they go to the polls, the electorate will have in their mind a simple question. When looking at the Prime Minister and the running of the economy over the previous decade or so, will they be able to say well done?
Sarah Teather (Brent, East) (LD): This has been an interesting, albeit short debate. I am aware that I have very little time to wind up, as we would like to finish by half-past 6 to ensure that House staff can go home.
My hon. Friend the Member for Twickenham (Dr. Cable) opened this debate by making a case for sensible public investment that would create jobs today and build assets for tomorrow. However, in the interventions that we have heard today, many of my hon. Friends, as well as colleagues in other parts of the House, have pointed out examples of programmes that have stalled. In particular, my hon. Friend the Member for Mid-Dorset and North Poole (Annette Brooke) mentioned building projects for colleges in her constituency. I was surprised by the response from the Minister, who said that those projects were steaming ahead, because it is self-evident that they are not.
The right hon. Member for Makerfield (Mr. McCartney) said in his contribution that the Government would be judged on how they make a difference to peoples lives on the ground. Unfortunately, that was not the tone of the Ministers response. He agreed with almost everything that my hon. Friend the Member for Twickenham said about the need for a fiscal stimulus, the need to invest in social housing and the need to invest in insulation, but he made no new announcements. We are talking about an issue of scale. Ticking a box and saying that the Government have a programme is not going to help us out of recession.
The Conservative spokesperson, the hon. Member for South-West Hertfordshire (Mr. Gauke), rightly pointed out the inconsistencies in the Governments position. However, he said nothing about how the Conservatives would lead us out of the current recession and seemed
to misunderstand the point that my hon. Friend the Member for Twickenham was making. He has consistently argued for borrowing to invest in capital projects, not borrowing to fund tax cuts or current expenditure. Those things are different, and the hon. Gentleman should be aware of that.
My hon. Friend made the point, which others made too, that unemployment involves a large cost. Doing nothing is not a cheaper option, and I wish that the Conservatives would be aware of that. As for railway redevelopment, the hon. Member for South-West Hertfordshire perhaps gives us credit for having more cunning than my colleagues are capable of. However, now that he has acknowledged on the Floor of the House that Liberal Democrat projects will make an immense difference to many of my hon. Friends constituents, I am sure that his words will be quoted in Liberal Democrat Focus leaflets in no time at all.
Nowhere is there a more urgent need to invest than in housing. There are 1.77 million households on the housing waiting list in England. Far from the need declining, more and more families are struggling to afford private rents or mortgages. The Council of Mortgage Lenders has estimated that 75,000 families will have their homes repossessed this year. Many will arrive at their councils door with their belongings in one hand and their children on their other arm. Councils will have nowhere to house those people, because housing projects have been drying up.
Demand for housing does not dry up because house prices are falling or because banks have stopped lending. As soon as lending recovers, the real and present danger will be that we might end up with hyper-inflation in the market, because we will have failed to keep pace with true demand in the meantime. As my hon. Friend the Member for Twickenham said, the truth is that house building in both the public and private sectors has stalled. Figures from the National House-Building Council suggest that the industry started fewer than 30 per cent. as many homes in the last quarter of 2008 as it did in the last quarter of 2007.
In an intervention, my hon. Friend the Member for Eastleigh (Chris Huhne) mentioned developments in his constituency. Many such developments are now being mothballed, which is why my hon. Friend the Member for Twickenham has been arguing for a dramatic increase in the amount of funding available for councils and housing associations to buy up such properties. The Minister said that that money had been made available, but only £200 million has been made available through the national clearing house scheme, most of which has been spent. Surely that demonstrates the need for more money to be made available.
The problem with housing associations being able to build is partly to do with lending and partly to do with the model of cross-subsidy that has been used for a decade to fund social house building. That model will simply not work in the current climate. Private sales have dried up. Housing associations that previously relied on being able to sell homes off plan cannot even sell them when they are fully built. Furthermore, low-cost home ownership lending products are no longer being
offered by banks, so all the options for housing associations to cross-subsidise their social housing, affordable housing and housing for rent are just not available.
As a consequence, many housing associations have stopped buildingthey have certainly stopped building shared ownership homesbecause they know that mortgages are not available. The consequence for them, as for the construction industry, is that they are making many staff redundant. The Government will have to accept that Treasury subsidy-per-unit targets will not work at the moment. The Homes and Communities Agency says that it will make more flexible funding available, but we need that funding to get to housing associations quickly, so that they can take advantage of it. Delay is costly for those people waiting for social housing.
I said that a consequence of the fact that building has stalled is that construction workers are being laid off in their thousands. The Federation of Master Builders predicts that job losses in the construction industry could reach 90,000 this year. The consequence is not just short-term, and it is not just misery for families whose major breadwinner has lost their job. The costs will be felt in the British economy for at least a decade, because even when the money to build again becomes available, the country will have lost vital construction skills, and it will take a decade, or possibly even a generation, for us to recover. Families, certainly in my constituency, cannot wait that long for house building to begin again.
In the face of that, the Government have been tinkering at the edges. They are bringing forward £400 million in the next 18 months for social housing providers to deliver just 5,000 homes, but 1.7 million households are on the housing waiting list. A further £150 million was announced in the pre-Budget report, but reports from the Department for Communities and Local Government suggest that it has not yet even worked out how to allocate that. It is a drop in the ocean given the fiscal stimulus that is needed for the recession, and given the number of families desperate for housing.
Some £12 billion was frittered away on a VAT tax cut that made little or no difference to most families; that money would have been better used in putting unemployed people back into work, and in leaving a lasting legacy that would save energy, reduce bills and fight climate change. With the money used to make a tiny VAT cut, we could have insulated every school and hospital in the country, funded insulation for a million people languishing in fuel poverty, and have built 40,000 extra zero-carbon social homes. The Conservative spokesperson said that that was not a response to the recession; well, it is certainly a response to need, and he has come up with no response to the recession whatever.
If the Government really wanted to cut VAT, how much more useful would it have been to cut the rate of VAT for rebuilding and renovation? My hon. Friend the Member for Colchester (Bob Russell) made a point about the number of empty homes that are left derelict, not just in the private sector, but often in the public sector. There are more than 700,000 empty properties in Englandenough to make a sizeable dent in the amount of housing needed in this countryyet the Government are not prepared to take the action necessary to bring those homes back into use. What is needed from the Government is a dramatic building programme that
focuses attention across all Departments. They need to get the public sector to release land now. They need to bring forward substantial amounts of new money, and money in the existing comprehensive spending review, to make sure that housing associations and councils can buy up land and property while prices are cheaper.
The Exchequer Secretary to the Treasury (Angela Eagle): We have had a short but interesting debate this evening, and I would like to deal with some of the issues raised. Interestingly, the hon. Member for Twickenham (Dr. Cable) said that capital expenditure simply is not taking place at the moment. I am glad to say that that is not true; I am sorry to disappoint him, but there is a great deal of work going on, and a great deal of extra capital expenditure coming through. I hope that he is reassured by that.
The Government will continue to show the commitment to investing in public services that we have demonstrated since 1997. That commitment is in contrast to years of neglect under the previous Conservative Government. Our investment has meant the building of 1,100 new schools, and more than £20 billion of improvements to social housing. The 100th new NHS hospital was recently successfully completed, and more are in the pipeline. When we came to government in 1997, 50 per cent. of the NHS estate dated from before 1948. Today that figure is down to just 20 per cent. We are proud of that record and are determined to continue investing in UK infrastructure to ensure world-class public services in buildings fit for the 21st century.
Bob Russell: To mention just one of the many examples that have been given on the Floor of the House in this debate, the builders are to leave the Colchester institute site in the next few weeks. Many other colleges are in exactly the same position; building work is grinding to a halt. What is happening?
Angela Eagle: There is no freeze to the capital programme for further education expenditure, and there is no question but that the £110 million that was brought forward in the pre-Budget report this year will be spent. There are signs that the ability of some colleges to raise their own funds for proposed projects is being affected by the downturn, and it is right that the Learning and Skills Council should take a look at the proposals for capital schemes in the pipeline to assess the likely impact on funding support for individual projects. I understand the concerns that have been raised, but hon. Members who are anxious about projects in their constituency should recognise and accept that the 253 projects to which my right hon. Friend the Financial Secretary referred have been given the go-ahead, and that more than 150 of them are due to be completed this year, so there is a substantial programme of capital works in the pipeline£2.3 billion over the next three years. I point out that the figure was zero in 1997.
We know that we can sensibly combine our commitment to investment in our infrastructure and our public services with a real boost to the economy to help us through this very difficult global downturn. That is why we are bringing forward capital expenditurenot only because it is the right thing to do if we are to support jobs and
stimulate economic activity, but because it will modernise Britains infrastructure and ensure that we are in the best possible position to take advantage of the upturn when it comes. That is why we are using the fiscal stimulus to invest in our competitiveness for generations to come.
I agree with the hon. Member for Brent, East (Sarah Teather) that it is far more costly to do nothing than to invest in increased public expenditure as part of a co-ordinated fiscal stimulus to deal with the unprecedented global situation in which we find ourselves. That is why the pre-Budget report in November set out a fiscal stimulus, including £3 billion of capital expenditure on schools, transport and homes, which is to be brought forward from 2010-11 to the next financial year. That is real help now, and it is in contrast to the attitude of the do nothing Tories. This Government have taken concrete action to give a timely boost to prevent job losses and stimulate economic activity, and we are on track to deliver that spending.
There are reports that the difficult economic climate will adversely affect the private finance initiatives that are a common feature of the Governments public investment programmes. Some of those worries have been expressed this evening. There is no doubt that the market is challenging. The credit crunch has reduced liquidity in the financial markets, and that has affected all debt-raising. Understandably, there is a concern that that could result in new PFI deals struggling to find finance, or increase costs for those that do obtain finance. Obviously, we are watching the situation extremely closely.
Projects continue to reach financial closure. As my right hon. Friend the Financial Secretary said, in January, two projectsthe M80 highway project and the Forest Gate housing projectclosed successfully. That involved £370 million of public investment, which had been committed and which is now being put to effect. We are working to push forward all the projects currently in the pipeline. In recognition of the potential difficulties facing such initiatives, Treasury officials are working with other Departments and Partnerships UK to help ensure that projects are able to obtain finance in a timely fashion. In addition, the measures to unfreeze credit announced last month by my right hon. Friend the Chancellor are intended to help remove barriers to lending.
My right hon. Friend the Member for Makerfield (Mr. McCartney) made an impassioned speech, as usual, about the importance of protecting communities during such downturns. I agree with him about the policy of the Conservative party, which is to cut public expenditure now, right in the middle of a recession. That is the opposite of a fiscal stimulus. The Conservatives would not do nothingthey would take action that would make matters worse. By cutting public expenditure, the Conservatives are once more falling into the trap of laying waste to entire communities and huge areas of the country. This Government will not fall into that trap. We are committed to ensuring that public expenditure remains higher, even after the fiscal consolidation that we have planned. Public capital expenditure will be 1.8 per cent. of gross domestic product in 2013-14, which is three times more than the paltry 0.6 per cent. that we inherited from the Opposition. The Government have addressed the huge backlog
|Next Section||Index||Home Page|