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We now need further exemplary steps. For a start, we must get away from this mad idea which dominates the news media, and dominated the Tory party conference, that the primary function of the Government after the forthcoming general election will be to reduce the deficit.
Some even seem to believe that the only function of the Government will be to reduce the deficit. The deficit is large and it will need to be reduced. But the function of the Government is to run the country; to provide safety and security for our people at home and abroad; to provide jobs; to encourage investment; to continue improving schools; further to enhance the care and treatment of NHS patients; to promote research and innovation; to develop a sustainable economy that reduces our contribution to global warming; and generally to promote peace abroad and prosperity at home. Against those functions of the Government, the need to reduce the deficit admittedly represents a problem and a constraint, but it is not by any stretch of the imagination the primary objective of the Government. That is why it is necessary to spell out further what would be different under Labour.
The answer must begin from a recognition that despite such Labour efforts as the minimum wage and tax credits-opposed by the Tories and the Liberal Democrats-and other initiatives such as Sure Start and nursery places for all, we still live in a society that is scarred by inequality. As Richard Wilkinson and Kate Pickett have demonstrated in their seminal work "The Spirit Level", inequality is a major cause of practically every ill that afflicts our society. These range from reduced life expectation through ill health, crime, violence, teenage pregnancies and reduced social mobility to general distrust and dissatisfaction, and they harm almost everybody, not just the people at the bottom of the pile.
Indeed, we must go further and take this opportunity to try to make our society fairer and more equal. The present situation presents us with a golden opportunity, because the overpaid bankers, currency speculators and tax-haven beneficiaries have never been as unpopular as they are now. Nearly everybody in the country knows that the City slickers have been paying themselves too much and that this should not be allowed to continue. Most believe that we should block the tax loopholes of the rich, and that everyone should pay their fair share. So tackling these inequalities, and the way in which the rich manage to fiddle their way out of paying their fair share of tax, would be swimming with the tide. When the Tory party opposes the necessary changes, as it inevitably would, it would simply confirm what we have always known-that the Tory party is not the party of the poor. It is not even the party of small businesses and real entrepreneurs. In reality, the Tories are, and will remain, the political wing of the finance industries. We should press for a worldwide levy on financial transactions, a Tobin tax, and devise ways to raise-
We should devise ways to raise the present negligible taxes paid by hedge funds and private equity outfits. I will give way to any Tory who can tell me the name of
any hedge fund that pays tax to the British Exchequer. No one stands up, because there is none- [ Interruption. ] No, if they cannot name a hedge fund that pays tax, they have no right to be here, unless they acknowledge that what I am saying is absolutely right.
In the meantime, a windfall tax on the financial profiteers is the least we must do to satisfy the people of this country- [ Interruption. ] There may be mocking laughter from those on the Tory Benches, but I am willing to go to any of their constituencies and advocate what I have just advocated. It would go down a lot better than any defence they could put forward on behalf of the people whom they really support. But we cannot stop there. We have to pluck up the courage to reject the neo-classical economic mindset of the financial establishment-the people who believed that markets always work, who rejected restraints and regulation and who said bankers could do no wrong. Those are the people who said that the state could do no right-as the Tory leader said in his speech to conference. What did those financial geniuses do when things went wrong? They immediately started sponging off ordinary taxpayers the world over to rescue them from the consequences of their own greed and stupidity. Besides grabbing too much for themselves, the finance bosses diverted, and continue to divert, capital from useful investment in the production of goods and services into speculation in worthless derivatives. They ended up destroying wealth, not creating it. Governments have to start representing the views and interests of the people who earn their living by providing useful goods and services, instead of acting like subsidiaries of the finance industries.
The credit crunch and consequent recession were not caused by the pay of dinner ladies, shop assistants, car workers, nurses, street cleaners or social workers. They were not caused by the pension entitlements of teachers or-dare I mention them?-postal workers. So it simply will not be acceptable to make them, and people like them, pay the price of the recession while those in the finance industries-the ones who did cause the recession-continue to coin it. We will all have to take some of the pain, but that will be tolerable only if the pay of the fat cats in the finance industries is substantially reduced, not just now but permanently. The people who caused the rest of us all this trouble should pay the price-the full price-of their failure. We must step up regulation nationally and internationally to ensure that the bankers, the auditors, the ratings agencies and the regulators never get us into such a mess again.
Peter Luff (Mid-Worcestershire) (Con): I am now very glad that I came to this debate. Hearing the speech by the right hon. Member for Holborn and St. Pancras (Frank Dobson) has certainly taken me back a few years, that is for sure. How reassuring it was to hear an old voice reasserting itself in the Chamber. I have one simple question to ask him: who has been in power for the past 12 and a half years? Some elements of his analysis were right-for example, the ratings agencies have much to answer for-but who could have put that right over the past 12 and a half years? It was not us on the Opposition Benches; it was him, when he was in the Government, and his colleagues on the Government Benches.
Peter Luff: With pleasure, but by the way, the reason why I did not intervene when the right hon. Gentleman asked his question about hedge funds was that I cannot name a single hedge fund. It was a pass, not a negative.
Peter Luff: I will happily send the right hon. Gentleman some of the excellent speeches by my hon. Friend the shadow Chancellor of the Exchequer, who calls for better and more effective regulation of the banking system all the time. Indeed, to jump ahead in my remarks, it was the incompetent reordering of the financial services system by the right hon. Gentleman's Government that contributed to the mess in the international economy, for which he has dared to have the cheek to criticise us.
Mr. Redwood: My hon. Friend might like to remember that in our economic policy review in 2007, we called for stronger cash and capital regulation of the banks and said that a massive credit excess was very evident.
Peter Luff: It seems that some of us were more prescient than members of the Government. That report was produced at the request of those on our Front Bench and they paid great attention to it. I am afraid that the right hon. Gentleman is wrong. However, I am glad that he took us back. I do not know how far-probably to the heady days of nationalisation in the post-war period.
Peter Luff: It was to the 1930s, 1940s. I am glad that the right hon. Gentleman took us back, because in his opening remarks the Minister sought to take us back to the 1980s. I am an old man, it seems, in parliamentary terms. I was brought up not in the '80s, but in the 1970s-a book published today by my good friend Lionel Zetter implicitly describes me as a grizzled veteran of the Major years. My formative experience was of the 1970s. I remember why the 1980s were so painful: it was the result of the mess that that lot on the Labour Benches made of the economy in the 1970s.
I remember being at university in Cambridge in the 1970s and being told that there was no future left for this country. There were too few producers and no manufacturing industry-the nation had gone to rack and ruin. It was the Thatcher years, painful as they were and mistakes made as they were, that saved the country. It is about time that the Government stopped criticising those years and instead gave thanks to a Government who saved this country from economic damnation.
I am probably being a little partisan for a Select Committee Chairman, but it is objectively true that, economically speaking, we face two huge crises in our society. First, unemployment is catastrophically high, as it always is towards the end of a Labour Government. Indeed, it has doubled in my constituency in the past year. Unemployment was not something that we had to worry about in Mid-Worcestershire, but now we do, thanks to the Government's incompetent management of our economy in recent years.
Secondly, the scale of the debt burden facing our children is truly horrifying. Indeed, it is a problem that will hang over the House of Commons for years to come. However, it is not down to the reasons that the right hon. Gentleman gave, but down to structural problems-that is, the constant seeking to spend and spend on things that people wanted over many years. That is the underlying problem. What Tony Blair's Government used to call the bills of economic failure-the bills for unemployment, debt interest and so on-will be massively higher in the next Parliament than those that he had the cheek to criticise us for back then. Therefore, I will take no lectures on debt either.
One of the two great deceptions practised by this Government has been to say that this recession has its roots entirely in the United States of America. It is true that the American economy is five times bigger than ours, so any problem on that side of the pond will necessarily have an impact five times bigger on the world economy. However, it is also true that all the mistakes made in the United States of America were made here as well. An excessive reliance on debt, sub-prime lending, poor regulation-all those mistakes were made here as well. This is a recession made in the UK and the USA. I therefore regret very much that the Government still seek to hide behind that pathetic excuse.
What is more, and what is so tragic, is that the Government pretended that they had ended boom and bust. That lured many innocent folk into making decisions about their investments that they would not otherwise have made-bankers tell me this endlessly. If there is one phrase that should act as the sad epitaph of this Government, it is "an end to boom and bust." Those of us who are students of economics know that that is absolutely impossible. That is the nature of the way the world works-it has been for centuries and it always will be. "An end to boom and bust" was an impossible claim, but it lured people into making very bad decisions.
Let me say in brackets that one thing that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said in his opening remarks puzzled me. He said that this was not an economic debate. However, I see it very much as an economic debate. Indeed, it is a great shame that we have so few economic debates in this place. I do not yet know whether the Government have announced a date for the pre-Budget report, which will presumably come after the Queen's Speech. I appreciate that announcing dates in the next Session poses challenges, but I hope that there will be a debate this year on the pre-Budget report, which there has not been for many years. The Government are committed to such debates and it is important that they should be held, because scrutinising the economy is one of the two most important challenges facing our society-the other, in our view, is addressing our broken society. I therefore urge the Government to keep to their previously declared pledge to have debates on the pre-Budget report.
The Government often hide behind headlines, one of which is Britain's relatively high standing in the World Bank's "Ease of business" table. It is true that we have risen a place in 2009-10, from sixth to fifth, which superficially looks like a cause for cheer. However, the detailed breakdown of the figures that underpin that result show that a lot of the things that are done better are things for which the Government can take little short-term responsibility. However, where we have got
worse is, for example, on employing workers. We are now the 35th easiest country in the world for employing workers. That is a terrifying statistic. We are slowly but surely crawling down the league tables-on starting a business, for example, we were ninth last year, but now we are 16th. On the measures that are under the Government's control, therefore, we are getting worse in that ranking table.
What is more, we are being caught up by some worrying countries that understand exactly what is necessary to do business effectively. I went to Saudi Arabia with my hon. Friend the Member for Northampton, South (Mr. Binley) earlier this year, where we heard about the phenomenal attempts being made by the Saudis to move up those business tables. We need to watch out, because some unlikely countries are snapping at our heels. In 2004, Saudi Arabia was the 67th easiest country in the world to do business; in 2009, it had become the 15th. Now it is the 13th and it expects to be in the top 10 next year.
The world is changing fast. We have to move fast to adapt to it. Many of the old platitudes offered for years in this Chamber-about the need to deregulate, for example-can no longer be treated as platitudes. They have to be acted on with the utmost urgency.
Having said all that-and perhaps reverting more to the role of a Select Committee Chairman-I am also anxious that we should not talk down the success of what has been achieved. We still have a successful manufacturing sector in the United Kingdom. I would argue that it could have done better under different policies. Indeed, our manufacturing sector would be stronger if the Government had not fallen so in love with the financial services sector, but there we are: we are where we are. However, the manufacturing sector has grown consistently in most years. We produce more as a nation than we have ever produced, notwithstanding the current recession.
"the world's sixth largest manufacturing nation...the eighth largest exporter of manufactured goods,"
"25 per cent. of those goods were high-tech".
Indeed, we have the highest proportion of high-tech exports of any of our major competitors. In many ways we are doing extremely well. However, we need to criticise the Government objectively and fairly when we think that their policies fall short.
It is always disappointing when the Government react in a knee-jerk way to a Select Committee report. For example, the Secretary of State for Children, Schools and Families owes us more explanation of his reasons for rejecting the recommendation of the Select Committee on Children, Schools and Families than he gave in answer to today's urgent question.
Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): My hon. Friend makes a powerful point about the need not to talk down the success of British manufacturing and about whether the UK manufacturing base would be doing better under different policy conditions. He will be aware that the manufacturing sector has been haemorrhaging jobs, with almost 2 million lost over the lifetime of this Labour Government.
Peter Luff: I want to caution my hon. Friend about this jobs argument, which is a double-edged sword. Sometimes those jobs are lost because of improvements in productivity. We are still producing more. That kind of talk risks a self-fulfilling circle of decline, which I am rather nervous about-indeed, that is one of the major themes of our report, which I shall come to in a minute. There are huge and exciting opportunities for young people in manufacturing, if they had them explained to them properly, but if we talk it down too much, our young men and women will not choose careers in those industries. I am therefore nervous about the jobs argument. It is not quite as strong as Opposition politicians have sometimes thought it was, when the main parties were on other sides of the Chamber, or as some think it is now.
On dismissing Select Committee reports, my Select Committee on Business and Enterprise produced quite a constructive a report about the automotive assistance programme. Strangely, that is not part of the Government's amendment, and I will explain why that might be if I have time. However, it was a constructive report, although one has, of necessity, if one is to get coverage these days in our rather simplistic media, to emphasise the negative, and we perhaps did that in our press release. The result was that Lord Mandelson told BBC News 24 on the day of publication:
"I am afraid the Committee don't know what they're talking about...Well, I'm equally astounded these MPs don't have a clearer idea of what's going on on the ground."
"The Government welcomes the Business and Enterprise Select Committee's report-The Automotive Industry in the UK...This is a valuable contribution to the discussions now taking place about the best way to support this critical part of the UK's manufacturing sector now and in the future...The Government thanks the Committee for their positive comments about this work and the commitment of Ministers".
That shows the danger of knee-jerk reactions, and I hope that the Minister will take back to Lord Mandelson, who I wish could be more accountable to this House, my slight warning that he should read things a little more often before he comments on them.
"Over the last year, the Government has produced a succession of strategy and policy papers related to innovation and industry. Their proposals cannot be implemented by the Government alone. All those involved now need to ensure that the emphasis is on the actual delivery of policies designed to support innovation, rather than producing further policy documents."
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