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Over the past 18 months we have lived through a financial and economic crisis of international capitalism that is unprecedented since the great depression of the '30s. Historically unmatched levels of state intervention have been required to stabilise the western economy, which at many times has stood on the verge of collapse. How ironic it is that the agency of government has done the rescuing-an idea that is anathema to all those neo-liberal free-marketeers who took as their guiding mantra Ronald Reagan's comment that government is not the solution, but the problem.
The Government's intervention has crossed the political divide. George Bush's right-wing Government nationalised the two giant US mortgage market companies and in Britain the Labour Government have made bank interventions that have so far cost us about £140 billion, which is equivalent to more than 10 per cent. of our GDP and more than will be spent on the national health service this year.
The state interventions have ended any supremacy claimed by those ideological fanatics who previously argued that unrestrained free markets were the answer to all economic problems. They have spent the past 30 years seeking to extend the market into more and more areas of our life and have also promoted the domination of finance over all other sectors of our economy. Yet just one year later, the same free market zealots in the world of politics and their friends in their media now want to take the axe to the public sector, allegedly to address the problems faced by the economy.
At this point we should ask ourselves three questions. First, how did a financial collapse that brought such damage to the wider economy suddenly become the fault of such people as nurses, teachers, carers and other working people? Secondly, why should the majority of the population suffer, as they will if public services are severely cut? Thirdly, and perhaps most importantly, will severe cuts help solve the economic problems that we face?
I want to state that the debate on economic recovery has wrongly and harmfully become dominated by those who argue that only by cutting public services can the issue of growth and the national debt be addressed. That has now become accepted wisdom; it is the received orthodoxy. However, it was once the received medical orthodoxy that the bleeding of patients was a necessary step to recovery. Thankfully, that orthodoxy was overthrown due to the experience of its deadly effects. It therefore needs to be said somewhere, loud and clear, that national debt is the symptom, not the cause, of the recession. To seek to address the debt by attacking Government expenditure fails to tackle the real causes of the economic crisis that have created a deficit.
By engaging in the cuts agenda, either now or in the next few years, we will cause long-term damage or risk a Japanese-style lost decade-or, as some economists are calling it, a zombie economy. Such an economic situation would hit the public finances even more dramatically, leaving us with even larger debts. Instead of the obsession with cuts we need a growth agenda that will allow Government revenues to rise and unemployment to fall and that will, in turn, reduce the debt.
As such an approach breaks with the consensus that has emerged on cutting public services, it may be helpful to put the current levels of national debt into an historical and international context. Government debt, which is at 55 per cent. of GDP in this financial year, is estimated to peak at 78 per cent. in 2014. Although that figure is high, it is far from unprecedented historically. According to the recent House of Commons paper "Background to the 2009 Pre-Budget Report", Government debt was more than 100 per cent. of GDP every year from 1945 until 1963. The same paper adds:
"UK debt would still be below that of Italy, Japan and the US, and broadly similar to that of France and Germany"
Of course, the national debt should be reduced in the future, not least as interest repayments soak up vital resources that could be better spent on schools, hospitals and elsewhere, but contrary to the claim of those on the right, increasing the deficit has been necessary during the worldwide recession-especially as it was so deep. I noticed that William Keegan explained it in The Observer in the following way:
"the large deficit...is not the problem: it is an integral part of the solution. It is the reason why we have not experienced the kind of full-scale 1930s-style depression which would have been on the cards without drastic fiscal action."
Furthermore, anyone seriously wishing to address the debt rather than to pursue outdated and ineffective ideological goals might first want to look at how the debt has come about. Were they to do that, they would find that it is the consequence of three things: declining Government revenues; the large bank bail-outs, which amount to more than 10 per cent. of GDP; and, to a much lesser degree, an increase in Government expenditure. Treasury figures estimate an increase in public sector net debt of 18.9 per cent. of GDP between April 2008 and April 2010, excluding the bank bail-outs.
The majority of the increase in the debt has been caused by a fall in Government receipts. As the House of Commons paper "The outlook for the public finances" explains, it is normal during a recession for revenues to fall. Similarly, Government expenditure has also risen, as expected in a recession. That inevitable rise in Government expenditures is due to the so-called "automatic" processes that take place in a recession, such as, for example, the fact that we see more benefits paid out. However, only a minority of the deficit has been caused by the increase in Government expenditure, so I would argue that the calls to cut the public sector display economic incoherence. As Professor David Blanchflower, former member of the Bank of England's monetary policy committee, told the Opposition:
"Cutting public spending in a recession is a really bad idea."
So, what is the way forward? What practical polices do we need to address the vital issues of investment and growth? First, we need the Government to use their majority holdings in a number of banks to force the banks to increase investment and lending levels to businesses and to families to revive the economy and housing market. I am one of those who think that there is an element of gutlessness in the way that our Government have dealt with the banks, but we may come on to that later.
Secondly, in those areas where market failure is greatest and private investment has collapsed the most, the Government need to step in and invest directly themselves. Large-scale state investment in transport and housing in such areas would be economically as well as socially useful.
Thirdly, in the really long term, we desperately need to rebalance the economy away from its reliance on finance and develop the industries of the future. The UK has the potential to generate something like 400,000 jobs in green industries, but to fulfil that potential we need state-led investment on a green new deal that would be of tremendous immediate economic benefit and of long-term environmental benefit.
Fourthly, we can help reflate the economy through increasing levels of consumption by putting money into the pockets of those most likely to spend it. The last 30 years of neo-liberalism have witnessed a smaller and smaller proportion of the economy going to wages. If the Government were to reverse that by raising taxation on the super-rich and then handing over exactly the same amount of money to ordinary families, overall consumer spending would rise, helping the economy to move out of recession.
Finally, for those who advocate cuts, there are areas of public spending that can be cut. We do not need to renew Trident and, although I used to support them, I no longer think that we need ID cards. By cutting those projects, tens of billions of pounds could be saved at a stroke.
The package that I have outlined is only a small example of what could be done. It would be a popular message-I know that sometimes Governments do not like to be "populist", but never mind-and it would deal with the debt and the much larger issue of restoring economic growth.
The alternative to going for growth is a cuts agenda, but cuts are not savings. They would remove demand from the economy and the recession would worsen as the negative multiplier effect kicked in. On this, we need to learn the lessons of history. Roosevelt announced his new deal in 1933, and things went well for three years after the banks were regulated and there was a big increase in public spending. Then, afraid of public debt and under pressure from the right, he began to cut, sending the economy back into a recession from which it did not recover until just before the second world war.
We can also learn from countries that are a bit closer to Britain than America. If we look just across the Irish sea, we can see the slash-and-burn tactics being employed by the Irish Government. The Fianna Fáil Government have overseen savage cuts to the public sector and a real fiscal tightening-something so beloved of the right wing in this country. That has been to the detriment to the wider economy in Ireland, which has continued to worsen. So the debt continues to rise while the Government have become more unpopular as the majority have suffered. Colleague and comrades on the Labour Benches should learn the economic and political lessons from Ireland.
I mentioned Roosevelt in a slightly pejorative way earlier so, in an attempt to balance that, I want to say that I believe that we are in a period of great ideological debate-and that is as it should be in a period of great economic crisis. Basically, the debate boils down to these questions: has the neo-liberal consensus of the past 30 years been correct, and what is the role of Government?
"What is the State? It is the duly constituted representative of an organized society of human beings, created by them for their mutual protection and well-being. 'The state' or 'The Government' is but the machinery through which such mutual aid and protection are achieved."
On that positive note, Madam Deputy Speaker, may I wish you all the best at Christmas? I also wish all the best at Christmas to all hon. Members, and especially to all the staff who work so hard for us here.
Bob Russell (Colchester) (LD): If modern buildings and state-of-the-art facilities are the ingredients to make a school successful, then Bishops Park college at Clacton would have been the jewel in the crown of Essex county council. However, it lasted little more than five years before it was judged to be a failure, with some of the poorest examination results in Essex.
Projected figures for pupil admissions did not materialise. Who is now paying for this colossal miscalculation? The college was a costly private finance initiative project; I understand the cost totalled £30 million, a debt which, no doubt, the public purse continues to pay excessively to service.
Bishops Park has now merged with another secondary school in Clacton, and has become an academy. It is one of five secondary schools in Essex transferred to the Academies Enterprise Trust-whose patron at the time of the transfers was, by an extraordinary coincidence, the Conservative leader of Essex county council.
I think that the Department for Children, Schools and Families should hold an investigation into that trust, which has also taken over other secondary schools in different parts of the country. It looks more like a business operation using state funds and state-funded buildings. It is based on an industrial estate next to Hockley railway station.
Bishops Park is not in my constituency, but the relevance to Colchester is this: the same idiotic forward planning by Essex county council threatens future secondary school provision in Colchester, which is the fastest growing borough in the country. Whereas at Clacton the county council hopelessly overestimated the number of pupils, leaving it with the white elephant of the most modern secondary school buildings in Essex, at Colchester, the incompetence is in the opposite direction-a woeful underestimate of pupil numbers, which is being used to justify the closure of two secondary schools in south Colchester in what is, I repeat, the fastest-growing borough in the country.
The latest figure that I have, provided by Colchester borough council's strategic policy unit, shows that there were 1,932 live births in Colchester in 2006, an increase of 276 a year since 2001. The population of Colchester is expected to grow by 30.9 per cent. to 223,500 people by 2021, a population increase of more than 3,000 people every year. Despite that, Essex county council claims that the number of children of secondary school age will fall. The truth is the opposite.
In the "south growth area"-that is, the CO2 postcode area, where the two threatened schools are located-the number of new dwellings totals 3,000, to be built in the period 2001 to 2021. How does that square with the county's contention that there are not enough children in south Colchester to justify the continuation of the two secondary schools?
The consequence of the county's idiotic strategy is that two communities will each lose their community school, in direct contravention of the Government's declared policies, such as the sustainable communities
and safe routes to school initiatives. Hopefully, the Government will find the determination to intervene and prevent the closures when they know that the county council's case is based on false statistics.
The closures will create a postcode lottery of secondary school provision in Colchester, with no secondary schools in postcode CO2, but six in CO3 and two in CO4, with the forward planning people of Essex county council-yes, there are some sensible officers at county hall-already intimating that there will be a need for a third secondary school in CO4 to cater for the huge housing developments planned in north Colchester.
As I stated, however, there is also massive new development in south Colchester, principally at the former Colchester garrison. A quick look at the map shows the stupidity of closing two schools in this part of Colchester and consequently hugely expanding Philip Morant school, possibly to as many as 2,500 pupils, and Stanway school, with some 500-plus children being bussed across town during the busiest times of the day when, like most other towns, there is already huge traffic congestion.
Does it make financial sense at any time, but particularly when there are huge pressures on public expenditure, to spend millions on expanding schools while closing others? As we saw with Bishops Park, it is not new buildings which make a good school. It is the quality of the leadership, the teachers and other staff, and the ethos. This may appear to be purely a local matter, but it has national significance because it highlights-
Bob Spink (Castle Point) (Ind): I am grateful to the hon. Gentleman for giving way. It is not just in Colchester that Essex education authority is making one unholy mess. The authority is closing a secondary school on Canvey Island, where the borough council is planning to build hundreds more houses. It is selling off the school playing fields to build the houses on that land. It is moving the most delinquent youth from all over Essex to a special school on Canvey Island, which has opened, without residents being consulted, in the middle of a residential-
The issue is of national significance because it highlights how a deceitful local authority can ride roughshod over the views of the overwhelming majority-96 per cent. of respondents to the county's own consultation were against the proposals, which the county Tories dismissed as being irrelevant. President Mugabe would love to have had 96 per cent.
With such arrogance, it is perhaps not surprising that the Conservatives have a minimal electoral mandate in Colchester. With the school closures a major issue, the Tories lost five seats-and control of the borough council-in May last year; and in this year's county elections they managed to hold only one seat in my constituency, seeing a majority of more than 1,000 slashed to just 19 votes.
Colchester is not only the fastest-growing borough in the country, but the second largest shire district in England. Many smaller places have a unitary council, and if Colchester were a unitary authority, neither of the two threatened schools, Thomas Lord Audley at Monkwick, and Alderman Blaxill at Shrub End, would close.
There is growing support in Colchester for the unitary status that Southend already has. A survey that is currently under way reveals that 80 per cent. of the population want to get away from the control of Essex county council. Such a high figure for county council distrust comes as no surprise-a report this week, to be debated by the council on Monday next week, shows that Colchester is less satisfied with the county council than any other part of Essex, except Harlow.
The so-called "Overall Satisfaction with Essex County Council" survey shows that in Colchester, only 39.5 per cent. of people said that they were satisfied-and that comes from the county council's own survey. Colchester borough council wants both schools to be kept open. Tory-run Essex county council has ignored the borough council, and the huge opposition from residents within the borough, and proceeded with the closure process, but it is not too late for the Government to intervene.
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