Ed Balls:
I ask the hon. Lady to reflect for a moment on the logic of her position. For the past three years, she and the Chancellor have consistently said that they had to stick to the plan, even though growth was low, even
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though the deficit was not coming down and even though living standards were under pressure, because otherwise they would lose the triple A credit rating. Now they have lost the triple A rating, but they still maintain that they have to stick to the plan. That is completely illogical. The credit rating agency said in terms that it had downgraded us because there was no growth in the economy, and that that was choking off deficit reduction. Sticking with a failing plan that is not working and that has resulted in the deficit reduction being stalled is not the way to keep our credit rating—if that is the Government’s objective. The way to keep it is to get the economy moving, get people investing and get people back into long-term sustainable jobs. Until we do that, the Chancellor is going to continue to fail.
Ed Balls: If the hon. Lady would like to have another go, I am happy to give way to her.
Andrea Leadsom: I am grateful to the right hon. Gentleman for letting me have another go. I put it to him that he really does not understand the point about the credit rating agency in this context. The whole point about confidence in the British economy is that people need confidence in Britain’s ability to get out of the economic mess that his Government left us in. This is not about the absolute level; it is about market confidence. He must surely understand that keeping a very good credit rating is essential in order to have an affordable cost of borrowing.
Ed Balls: I do not want to prolong this argument, but I must explain to the hon. Lady the term structure of interest rates. The 10-year bond yields are the accumulation of market expectations of three-month interest rates added up every three months over 10 years. Why are our long-term interest rates so low? It is because people think that short-term rates are going to stay low because the economy is flat on its back. People would have to be economically illiterate to think that our long-term interest rates were driven by market confidence at a time when we are being downgraded by the agencies. Our long-term interest rates are low because our economy is not growing.
Jacob Rees-Mogg (North East Somerset) (Con) rose—
Ed Balls: I was hoping to debate the Europe issue with the hon. Gentleman in a moment, but I am happy to give way to him on this one as well.
Jacob Rees-Mogg: I look forward to debating many issues with the right hon. Gentleman. The markets show confidence in this Government’s policy by keeping interest rates low. This is not purely to do with an expectation of where short-term rates will be; it is about confidence in the creditworthiness of the British Government under this Chancellor.
Ed Balls:
I have to say that that is a deluded view of the way in which credit ratings work. Let us not forget that in 2007 these same credit rating agencies were saying, “Stick with Lehman Brothers” and giving America a triple A rating despite all the sub-prime lending. That
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is the reality. The fact is that the credit rating agencies are downgrading Britain because our economy is not growing. That is the fundamental problem.
I will give the hon. Gentleman a bit of ground, however. It is true that the Labour Government left a longer-term interest rate structure than other economies. We had far less foreign currency borrowing and more index-linked borrowing than other countries. That helped, but the fundamental thing was that we did not join the single currency. In Spain, Italy and elsewhere, we see a currency risk premium, which relates to the central bank’s ability and willingness to stand behind sovereign debt. That is not an issue here. Our interest rates are low, and they have fallen because our economy is not growing. The market is therefore reflecting expectations of continuing stagnation. I am afraid that that is the reality—aside from the political rhetoric of the Chancellor.
Jacob Rees-Mogg: In my previous intervention, I was careful to talk about the markets, not the credit rating agencies. It is the markets that count, because they reflect people investing their money. I agree with the right hon. Gentleman that the credit rating agencies got the whole of the pre-crash period wrong, but it is the markets we need to bank on.
Ed Balls: Unlike the Chancellor, the markets do not pay a huge amount of respect to the credit rating agencies. The hon. Gentleman agrees with me on that. That is why, two or three years ago, it was so ridiculous for the Chancellor to say, “Trust me. I’ll keep us as a safe haven because I’ll keep the triple A credit rating.” We told him, in 2011 and 2012, that the plan was not working, that the economy was not growing and that the deficit was not coming down, but when we told him to change course, he said, “I can’t do that because the credit rating agencies will downgrade us.” Well, they downgraded us anyway, because the economy was not growing.
Andrew Selous (South West Bedfordshire) (Con): The shadow Chancellor believes in plain speaking, so I want to give him a third—and perhaps final—opportunity to tell us the amount of extra borrowing that his policies would require. Just a number—plain and simple.
Ed Balls: I am not going to write our Budget for 2015 two years ahead. That would be the wrong thing to do. Right now, if the Chancellor had done what I recommended a year ago, borrowing would be coming down. At the moment, however, it is absolutely flat.
What have we learnt in the last seven days? What have we learnt from today’s Tory amendment about the priority of the Conservative party? What are Conservative Members demanding in their amendment? What are they rebelling on? Accelerated bank reform? Energy market reform? Housing investment? Infrastructure investment? Tough welfare reform through a compulsory jobs guarantee? If they want all that, they can vote for our amendment today. But no, according to the Tory amendment, the No. 1 priority that is so vital that Conservative Members are planning to vote against their own Government’s Queen’s Speech involves enabling legislation to allow Eurosceptic Conservative MPs to try to take Britain out of the European Union.
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The Tory amendment states that those Members
“regret that an EU referendum bill was not included in the Gracious Speech.”
Let me tell the House what they should be regretting. They should regret the fact that, after three years of pursuing a failing economic plan, the Chancellor is still ploughing on regardless, even when the IMF is telling him to change course. They should regret the fact that, when calculations based on Institute for Fiscal Studies figures show that families are, on average, £891 worse off this year, the Government have cut taxes for the highest earners, giving a £100,000 tax cut to 13,000 millionaires. They should regret the fact that the Government have refused to use the Queen’s Speech to put in place the long-term reforms necessary for our economic future—reforms that I fear will not be in the spending review, either. The Chancellor and the House should regret, too, the fact that the Conservative party seems to have been hijacked by those within its ranks, including within the Cabinet, who are determined to lead Britain out of the EU regardless of the impact on investment and jobs.
Sir Bob Russell (Colchester) (LD): Will the shadow Chancellor confirm that the number of Labour Members who have signed this Tory amendment on the EU referendum is now in double figures?
Ed Balls: I have not seen the figures, but I would be happy to study them—it is when it spreads to the Cabinet that there is a real problem. The hon. Gentleman should regret the 15% rise in long-term youth unemployment in his constituency, which was confirmed today. I have to say that this coalition was really not worth his support.
Mr Peter Bone (Wellingborough) (Con): The shadow Chancellor is generous in giving way. It is a shame he is not the leader of his party, because if he was he would make sure it was not the anti-referendum party—I think those were his very words. The message from today’s debate and tonight’s vote will be that Labour is against an EU referendum and the Conservatives are in favour of it. To put the facts straight, it is not just Conservative Members or just Labour and Democratic Unionist Members who signed the amendment—a Liberal Democrat Member signed it, too.
Ed Balls: I will read our amendment to the hon. Gentleman so that he knows exactly what we will vote for. We say
“that the priority for the Government now should be growth and jobs and that we need reform of the European Union, not four years of economic uncertainty which legislating now for an in/out referendum in 2017 would create”.
Let me quote to the hon. Gentleman the press release issued this morning by the Engineering Employers Federation, which knows about manufacturing investment in the long term. It says:
“EEF, the manufacturers’ organisation believes the current debate is ‘letting British business down’ with politicians making claims that the EU isn’t working for Britain rather than focussing on how to work to make it better”.
Let me set out further our position on this reform agenda, which has been set out in recent weeks and months by the Leader of the Opposition, the shadow Foreign Secretary, the shadow Home Secretary and me.
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Instead of four years of uncertainty, our Labour amendment says that the priority now should not be walking out of meetings or being entirely ignored but arguing with influence to get the reforms agreed. These include reform of the common agricultural policy, tough new budget discipline in the European budget with stronger independent audit—
[Interruption.]
Conservative Members should listen, as I would have thought they agreed with many of these things. The priorities include reform of family-related payments to EU migrants, greater national flexibility in transitional arrangements, a balanced growth plan and a new growth commissioner, an end to the wasteful Strasbourg Parliament and more powers for national Parliaments.
Let us reflect for a moment on what the president of the CBI said just a few weeks ago:
“UK membership of the EU encourages large company capital investments within the UK, creating jobs and wealth that trickle down to medium and small company suppliers”—
the kind of trickle down we quite like. He continued:
“Departure would be bad for employment and growth across a broad business spectrum.”
This is what Sir Richard Branson wrote in January:
“An exit would be very bad for British business and the economy as a whole...The EU is the UK’s biggest trading partner, its combined market dwarfs the US and China. For that reason alone the UK must stay in to help rebuild the EU.”
Let this sink in: Conservative Back Benchers, with the blessing of many Conservative Front Benchers, are proposing today an amendment that aims to break our ties with our main trading partner, blight inward investment into the UK and put at risk upwards of 3 million jobs. Let it sink in, too, that the leader of the Conservative party, the Prime Minister of our country is not just too weak to do anything about it—he is caving in, day by day, to their demands.
Pete Wishart (Perth and North Perthshire) (SNP): I agree with the shadow Chancellor almost entirely on Europe, but will he pledge today that he will not support an in/out referendum that might take the UK out of Europe?
Ed Balls: I want us to stay in the European Union; I am absolutely clear about that. Our amendment is absolutely clear, too, about the effect of an in/out referendum announced now. I am going to quote someone, which might go down well with the hon. Gentleman but perhaps not so well with some Conservative Members. Lord Heseltine said:
“To commit to a referendum about a negotiation that hasn’t begun, on a timescale you cannot predict, on an outcome that’s unknown, where Britain’s appeal as an inward investment market would be the centre of the debate, seems to me like an unnecessary gamble”.
My answer to the question of the hon. Member for Perth and North Perthshire (Pete Wishart) is that we will not take that unnecessary gamble now. It would be the wrong thing to do. This is exactly the same position as the one the Prime Minister and the Chancellor joined us in the Lobby to vote against in October 2011. How things change!
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Let us remind ourselves of what the Prime Minister told the Conservative party conference in 2006; it is worth reading the whole quote so we can understand its full impact:
“For too long, we were having a different conversation. Instead of talking about the things that most people care about, we talked about what we cared about most. While parents worried about childcare, getting the kids to school, balancing work and family life—we were banging on about Europe.”
His party has certainly been banging on about Europe day after day over the last week—banging the nails in the coffin of Tory modernisation and in the coffin of this Prime Minister’s prime ministership, too.
We should not forget that this is the Prime Minister who last summer rejected calls for an in/out referendum. Then, just three months ago in his much-heralded Europe speech, the Prime Minister pulled his referendum stunt—a Europe speech to wrong-foot Labour and UKIP and unite the Conservative party. This is how The Independent reported Downing street’s gleeful boasting back in January.
Mr John Baron (Basildon and Billericay) (Con): Will the right hon. Gentleman give way?
Ed Balls: Let me tell the hon. Gentleman what The Independent said about Downing street; then we can reflect on it together in a few moments. It said:
“They judged that, to calm the fractious Tory pack, they had to split off the hardliners who want to leave the EU from pragmatic Eurosceptics...They also needed to unite the Tories at the next election and reduce the threat from the UK Independence Party...The best way, they calculated, would be to promise an ‘in/out’ referendum after 2015. The trick seems to have worked”,
“at least in the short term.”
Downing street claimed the speech took six months to formulate; it has taken just three months to unravel. We have seen Tory Back Benchers last week defying the Prime Minister to vote against the Queen’s Speech; former Tory Chancellors openly calling for Britain to leave the European Union; serving Cabinet Ministers joining the chorus at the weekend, saying they would vote for Britain to leave the EU now; and the embarrassing spectacle and truly ludicrous sight of a British Prime Minister in Washington negotiating an EU-US trade deal, while back home members of his own Cabinet say they would vote to exclude Britain from its benefits.
Then, on Monday night, we heard the Prime Minister’s panic announcement that he would, after all, publish a draft referendum Bill—not as Prime Minister, but as leader of the Tory party—only to be told by his own Back Benchers the next morning that it was not good enough because the public did not trust him, and they did not trust him either. This is really what it means for a Prime Minister to be “in office, but not in power”. It is not John Major all over again; it is much worse than that, because at least he tried to stand up to the Eurosceptics in his Cabinet.
Mr Baron:
I am afraid that the right hon. Gentleman fundamentally misrepresents the amendment. Members in all parts of the House believe that the time has come to give the British people their say on our relationship
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with the European Union. May I put this question to the right hon. Gentleman? Why does he not trust the British people on the issue?
Ed Balls: I will take a second intervention from the hon. Gentleman if he will tell me how he would vote in the referendum.
Mr Baron: No, no, no—[Interruption.] All right, I will answer. [Interruption.]
Mr Speaker: Order. Let us hear the hon. Gentleman.
Mr Baron: I will answer the right hon. Gentleman’s question most directly, provided he promises to answer my question most directly. My answer to his question is that if the referendum were held tomorrow, I would vote “out”, but I support the Prime Minister in his idea of holding a referendum in 2017. If he can successfully renegotiate and re-engineer an EU based on trade and not on politics, that will be a different kettle of fish, and we will judge it at the time.
May I now return to my question to the right hon. Gentleman? He has ducked it, and that is what gives politicians a bad name outside this place. Why will he not give the electorate their say on this issue?
Ed Balls: For precisely the reason that I gave in an earlier answer—and I have to say that I am not sure that the public like to hear us repeating ourselves.
Let me quote the words of another business organisation, London First. [Hon. Members: “Answer the question!”] I will answer the question. London First—[Interruption.] London First—
Madam Deputy Speaker (Dawn Primarolo): Order. We have a long afternoon ahead of us. It would be good to hear everyone’s views on this subject, which means not shouting over speakers.
Ed Balls: No wonder the Prime Minister has gone to America, Madam Deputy Speaker, if that is what he has to put up with.
Let me quote the words of London First—[Interruption]—which is my answer.
“The announcement that a referendum on our membership of the EU may be held in a few years’ time, dependent on the result of the next General Election, risks condemning the UK economy to several years of further uncertainty.”
London First is completely right. We can see why the Prime Minister is so worried. If that is the kind of support he has, no wonder he is in trouble.
Mr Baron: We have just had an exchange in the Chamber, Madam Deputy Speaker, in which I directly answered a question in return for the Chancellor’s directly answering mine. [Hon. Members: “Shadow Chancellor.”] I mean the shadow Chancellor. He has refused to answer my question. Let me ask it one more time. Why is he denying the British public their say on Europe?
Ed Balls: I am the shadow Chancellor, not the Chancellor—at least for now.
I have answered the question, but I will answer it again. We do not believe that a referendum now is the right priority. The hon. Gentleman asked me why, and I
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have answered the question. I have answered the question because, actually, I agree with him. This is what he said last year:
“Austerity can only do so much. Longer term, the better solution is greater competitiveness and economic growth.”
I think that the priority now, in the Queen’s Speech, should be for the Government to act on economic growth, short-term and long-term. Hanging a sign above our door saying, “For the next four years, Britain is closed for business”, would be a very, very foolish thing to do.
Ed Balls: I will give way again.
Mr Baron: I thank the shadow Chancellor for giving way. He is being gracious, if nothing else. However, he still has not answered the question. Why will he not support the concept of trusting the British people to make up their minds on this, say, in 2017? Does he support that position?
Ed Balls: I have answered the hon. Gentleman’s question. For us to join him, or the Prime Minister, in committing ourselves now to a referendum four years ahead would lead to lost investment and lost jobs, and would be the wrong priority for Britain. Our amendment makes it absolutely clear that we disagree with that strategy.
If there were a treaty change that altered the balance of powers, we would support a referendum. I think it important for us to listen to and understand people’s concerns about Europe, and show that we can reform. I must say to the hon. Gentleman, however, that we will not get the reform that we need by walking out of the room in a flounce, as our Prime Minister did in December 2011. That was one of the worst pieces of statesmanship we have seen for many years.
Andrew Gwynne (Denton and Reddish) (Lab): In order to be a member of the European economic area outside the European Union, would we not still have to pay a membership fee and accept most of the rules and regulations coming from Brussels? Would we not also lose our seat on the Commission, lose our seats in the European Parliament, and lose our voice on the Council of Ministers?
Ed Balls: My hon. Friend is entirely right. The problem is that the Prime Minister no longer knows whether to agree, disagree, or sit on the fence on that question, which is why we are in such a mess.
Mr Bernard Jenkin (Harwich and North Essex) (Con): The right hon. Gentleman has seen the Prime Minister’s draft Bill. If it became an Act of Parliament requiring a future Government to move an order to set a date for a referendum before 2017, would he do so?
Ed Balls: I have just explained that we do not support the idea of legislating now for a referendum four years ahead, for precisely the reasons that the Engineering Employers Federation, London First and Lord Heseltine have set out and I have set out in our amendment, as have my colleagues. I think that it would destabilise investment and jobs.
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Ed Balls: Normally there are plenty of interventions in debates on the economy, jobs and growth, but it seems to be Europe that really gets them going. I give way to the hon. Member for South West Bedfordshire (Andrew Selous).
Andrew Selous: The shadow Chancellor is being very generous in giving way. Will he explain very briefly what he meant when he said hat he did not want his party to be caricatured as the anti-referendum party?
Ed Balls: We are not against the idea of referendums. We proposed the first referendum, in the 1970s. If there were a change in the balance of power in the treaties, we would support a referendum, but it would be wrong to do so now.
Geraint Davies (Swansea West) (Lab/Co-op): Will my right hon. Friend give way?
Ed Balls: I will take one more intervention.
Geraint Davies: As my right hon. Friend knows, today’s figures show that unemployment has risen again. He also knows that the EU provides 50% of our trade. In the event of our securing a free trade agreement between the EU and the United States, alongside bilateral trading agreements between the EU and other countries such as China, what does he think the impact of withdrawal from the EU would be on growth, jobs and trade?
Ed Balls: In 1983, our party supported the idea of withdrawal from the European Community, as it was at the time, but the Conservative party and the Confederation of British Industry agreed that it would cost 2.5 million jobs. Our trade share with Europe has deepened since then, and our labour market is bigger. I think that upwards of 3 million to 3.5 million jobs would be lost now, because we would be turning our face away from those big markets around the world.
Ed Balls: Many other Members want to make speeches, and I have taken rather a lot of interventions already.
Let me ask a political question that brings us back to the economy. Why have things gone so badly wrong for the Prime Minister and his strategy over the past three, four, five months? I think I can help. I have discovered a column that was written in January by the Chancellor’s cheerleader, the former Member of Parliament, and now Sun columnist, Louise Mensch. Straight after the Prime Minister’s Europe speech, she wrote that
“the sound we just heard was Cameron shooting Farage’s fox...This speech saw the George Osborne/Michael Gove wing of government triumphing over the Nick Clegg one...Canny Tories will take this and run with it...George Osborne is a tactical genius.”
There we have it, from a former MP whose one political achievement was to make Corby Labour again. There it is, completely exposed: the Prime Minister is the front man, but the tactical genius—the brains behind the Europe strategy—is the Chancellor of the Exchequer.
We all remember when the Prime Minister said that his Europe speech represented
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“a tantric approach to policy-making.”
I have to say that from this side of the House it looks more like sado-masochism—and we all know that the Chancellor likes a bit of that. “'If it’s not hurting, it’s not working” has been his motto for a long time.
Helen Jones (Warrington North) (Lab): Will my right hon. Friend give way?
I have checked this, and, sadly, it is true. A rather more serious Conservative commentator, Mr Paul Goodman of ConservativeHome, confirmed on his blog back in May of last year that the Chancellor was, indeed, the brains behind the Prime Minister’s referendum stunt. That casts further doubt on the judgment of the Prime Minister. Surely by now he has worked it out. After all, his Back Benchers and the country have worked it out. This is the Chancellor who claimed bringing back Andy Coulson would be a strategic triumph. He is the one who said taking child benefit away from middle-income families would be a masterstroke. He is the one who said that gambling his credibility on our triple A rating was sound economics, and that cutting tax credits and labelling as scroungers 3 million working families—an average of 6,000 in every Tory constituency—was somehow good politics, and that cutting taxes for millionaires would wrong-foot Labour. Surely even the Prime Minister has worked it out by now. This is the man who last year gave us “Omnishambles 1” and “The Budget debacle” and who has now given us “Queen’s Speech 2”, “Omnishambles 2” and the European debacle as well. The fact is the economic plan has failed, the deficit plan has failed and the European plan is failing as well, and when this Government finally collapse in chaos, it will be this Chancellor who gets the blame.
2.11 pm
The Chancellor of the Exchequer (Mr George Osborne): That was certainly an odd speech from the shadow Chancellor. He called me a tactical genius, but those on his side are going around calling him a busted flush, and after the extraordinary 40 minutes of comments we have just heard from him, we can see why. The contrast is with a Government who are building an economy where those who want to work hard and get on are rewarded. The contrast is with a tax system that is being changed to support effort, with the largest ever increase in the personal allowance. The contrast is with a welfare system that is being changed so it always pays to work and benefit bills are being capped so no family gets more from being on benefits and out of work than the average family gets from being in work.
In this Queen’s Speech we have measures to help those who want to set up a small business and employ people through our employment allowance—which was not mentioned by the shadow Chancellor, but I assume the Labour party will not vote against it. We have measures to help families who dream of home ownership and to help them with their mortgage costs. We have measures for savers, with a Pensions Bill that will provide a generous single-tier pension, and we have measures to help those who want to stay in their homes and avoid the lottery of care costs, with our Care Bill. The only
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reason we can do all these things is because we are clearing up the mess and the things that went so badly wrong in our economy.
Clive Efford (Eltham) (Lab): On the issue of fairness, the 13,000 people who earn more than £1 million a year share a combined income of £27.4 billion, and they are going to share in a £1.2 billion payout. How can that be justified and fair?
Mr Osborne: In every single year under this Government the rich will pay more in tax than in any single year of the Labour Government that the hon. Gentleman consistently supported, and the top rate of tax will be higher than in any single year of the Labour Government he supported. We put up capital gains tax so we avoided the scandal that they presided over—indeed, that the shadow Chancellor presided over—of cleaners paying higher rates of tax than the hedge fund managers they work for. That is what we have done to ensure fairness in our tax system, and that is what we are going to continue to do.
Anas Sarwar (Glasgow Central) (Lab): The Chancellor said those who work hard will be rewarded. Can he explain why wages are falling, household budgets are falling and the cost of living is going up? How is that fair?
Mr Osborne: Let us look at what the Governor of the Bank of England said in his press conference this morning:
“there is a welcome change in the economic outlook…But this is no time to be complacent—we must press on to ensure a recovery”.
Yes, there was also the disappointing news that unemployment had gone up, but we also saw that the claimant count and youth unemployment had come down, and the monthly unemployment data were a lot more encouraging than the three-month survey. That is the reality of the current data.
Geraint Davies: Does the Chancellor agree that the key problem is that the debt:GDP ratio will rise from 55% in 2010 to 85% by 2015? The answer to that problem is not just to cut the debt, but to increase GDP. Under Labour, GDP went up by 40% between 1997 and 2008, and the Chancellor inherited a growing economy which is now flatlining because of his policies.
Mr Osborne: We inherited an 11.5% budget deficit that was adding to our national debt every year, and what the hon. Gentleman and the shadow Chancellor want to do is add further to borrowing. The shadow Chancellor was asked time and again what the cost of the proposals in the amendment the Opposition are asking the House to vote on tonight would be. He would not give that figure, but I will give it for him: it is a £28 billion amendment that would add to borrowing. He comes up with the ludicrous argument that by borrowing more, we can borrow less. That is why he is making so little progress with his economic argument.
Chris Williamson (Derby North) (Lab): Will the Chancellor at least acknowledge that when he came into office he inherited a growing economy, and his policies have led to it flatlining?
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Mr Osborne: This is what I have to say about the idea that this Government had some kind of golden economic inheritance from the Labour party: we inherited a situation in which Britain had had the deepest recession since the 1930s, the worst banking crisis in the entirety of British history and the highest budget deficit in the entire peacetime history of this nation. If that is a golden economic inheritance, I would hate to see what the hon. Gentleman thinks a hospital pass looks like.
The shadow Chancellor mentioned France in his remarks. Exactly a year ago the Labour leader could not contain his excitement about the economic programme being unveiled in France and about the red carpet being rolled out for him at the Elysée palace. “Chers camarades” is how he addressed the Socialist party gathering. He said, “What President Hollande is seeking to do in France, I want to do in Britain.” We do not hear much these days about Labour’s French connection. We still have liberté and egalité, but not much fraternité—although fraternity has never been a great topic for the Miliband family.
What we did not hear from the shadow Chancellor was his response to the fact that 1.2 million jobs have been created in the private sector, and that although, yes, our deficit is still too high, it has fallen by a third. He says we are borrowing more. We were borrowing £158 billion a year as a country in 2009-10, and this year it is forecast that we will be borrowing £114 billion. That is a £45 billion reduction in borrowing. None of that has been easy to achieve, and every single measure has been opposed by Labour. Not a single measure in its amendment today would help deal with that deficit, but our plan of monetary activism, fiscal responsibility and supply-side reform is delivering progress.
Andrew Selous: On employment, is the Chancellor aware that the United Kingdom’s overall employment rate is growing at almost double that of the United States and is rising faster than that of any other G7 country?
Mr Osborne: My hon. Friend is absolutely right. Last year, employment in the UK grew faster than in the US, France, Germany, Japan and the eurozone as a whole. Employment in the UK is now above its pre-recession level. Of course we must go on taking the difficult measures necessary to get our deficit under control, and make sure we support businesses that want to hire people to support the private sector recovery. The path being offered by the Opposition, however, would lead to complete disaster.
Mr Jim Cunningham (Coventry South) (Lab): When the Chancellor’s party was in opposition, the right hon. and learned Member for Rushcliffe (Mr Clarke) took the credit, before the banks collapsed, for the economic prosperity, claiming he had created it when he was Chancellor. How does the current Chancellor answer that point?
Mr Osborne:
The hon. Gentleman is saying that somehow we have a responsibility for the financial crash or for the problems in the banking industry, but he neatly skips the fact that not only was Labour in office for 13 years, but the shadow Chancellor was the City Minister. He did not have any old job in Government
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—he was the City Minister when Northern Rock was selling those 120% mortgages and the Royal Bank of Scotland was thinking of taking over ABN AMRO. He is the architect of the tripartite regulation, which failed so catastrophically. He is, literally, the last person to have any credibility on this subject.
Nadhim Zahawi: The shadow Chancellor also claimed victory in keeping this country out of the euro. Will the Chancellor remind the House of the cost of the euro preparation unit, and when that unit was closed down?
Mr Osborne: The euro preparation unit was shut down by this Government in 2010, but the shadow Chancellor does not seem to know what Labour policy is. The Labour party is committed in principle to joining the euro. [Interruption.] The shadow Treasury team do not know what the monetary and currency policy of their own party is—that is absolutely ridiculous.
Charlie Elphicke: The Government have set out a clear and costed economic policy, which they are pursuing. Does the Chancellor share my concern that the Opposition cannot set out their costings, cannot say how much they would borrow and cannot even say whether they would back a referendum? The shadow Chancellor has been completely unable to answer any questions put to him in any straight way whatever.
Mr Osborne: The shadow Chancellor could not answer the simple question of how much the amendment he is asking us all to vote on this evening would cost. Surely he must reflect a little and realise that each year his appearance in these debates is a source of consolation and comfort to the Government. He must wonder why each year he makes the same arguments for borrowing but there is no improvement in Labour’s economic credibility. He does not seem to understand that the public think that Labour spent too much, wasted their hard-earned money and would do it all again. Does he not feel that he owes it to the British people to apologise for the mistakes he has made and the damage he has inflicted on their living standards? Should he not stand up and say, “I’m sorry, we got it wrong and we won’t do it again”?
Sammy Wilson (East Antrim) (DUP): The Chancellor’s point, “You can’t borrow more to borrow less”, is a good soundbite, but he does himself a disservice, because some of the borrowing undertaken by this Government has been very effective in reducing the deficit. Only yesterday, we saw 850 new jobs in Allstate in Belfast as a result of investment in the broadband network—that is 850 new taxpayers. Does he not accept that we can borrow, and that by borrowing and putting the money into the right things we can bring the deficit down?
Mr Osborne: I am all for spending money on vital economic infrastructure, including broadband, and all for trying to switch the budget more from current spending to capital spending. That is precisely what we are engaged in as part of this spending round, but we have to take the hard decisions on where we are going to get our revenue from or take the hard decisions on what we will cut instead. We are making a sensible switch towards capital spending.
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Mr George Howarth (Knowsley) (Lab): Can the Chancellor name a single occasion before the banking problems in 2008 when he and his party argued for tighter regulation of the City?
Mr Osborne: My party voted against the tripartite arrangement. I do not have the quote with me today—I will send it to the right hon. Gentleman or ensure that my right hon. Friend the Chief Secretary has it for the wind-up—but the shadow Chancellor at the time, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), warned in this House that taking prudential regulation away from the Bank of England was a massive mistake and that the Bank of England would not be able to spot the growth of debt bubbles in the economy. Tragically, that is precisely what happened a decade later, and in part the responsibility lies with the people who set up the regulatory system. Is it not extraordinary that Labour Members get up and say that the Conservatives said this or that, yet we are looking at the City Minister at the time? We are looking at the person who, before that, was the chief economic adviser who devised the system and who used to take pleasure in telling everyone that he turned up in government and gave Eddie George a letter saying that he was no longer in charge of banking regulation—that used to be the shadow Chancellor’s story, but he never talks about it now.
Simon Hughes (Bermondsey and Old Southwark) (LD): I think the country understands that we could not go on as we did, with a completely unregulated City, with bonuses out of control and with unjustifiable profits. The Government’s policy on taxation is fairer now than it ever was under the previous Government. May I ask the Chancellor, however, to address the matter of the housing market, to which he partly referred? In addition to the welcome measures in the Queen’s Speech, will he look into how we can increase the supply of social rented housing and deal with the fact that many non-domiciled people are buying property in this country, not to live in or to rent out, but to keep empty, forcing up prices for everyone, beyond what people can afford?
Mr Osborne: We are putting in place, right now, new guarantees—the first time that the Treasury has done this—for social housing associations to enable them to build more social homes; in the Budget, we also confirmed support for an additional 30,000 social homes, so we are taking action to help on that front. With our Help to Buy scheme we are also helping those who want to buy their own home in the private market. My right hon. Friend is absolutely right that we should do both, which is precisely what we are doing.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op): As we learned with great interest, there was much in the Queen’s Speech that will affect employment, skills and manufacturing in our country. This is an important part of our country’s future. Can the Chancellor assure me that there is a unit in the Treasury—or a plan for the Treasury—to carry out an independent evaluation of how skills, jobs and manufacturing would be affected if this country left the European Union?
Mr Osborne: I will come on to talk briefly about reform in the European Union, but I am clear that an unreformed European Union is also doing damage to British competitiveness and British jobs.
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Margot James (Stourbridge) (Con): The estimated cost of the Labour party’s plans is £28 billion. Labour opposes every one of our spending cuts, so does that not imply that it would fund the whole lot by pushing this country’s borrowing back towards £150 billion? Is that why the shadow Chancellor is so reluctant to say what more borrowing he could commit to?
Mr Osborne: My hon. Friend is right to say that that is the approach of the shadow Chancellor. The right hon. Member for Neath (Mr Hain), who is sadly not in his place, gave the shadow Chancellor some unsolicited advice last week—I think it was unsolicited. He said:
“Labour’s Treasury team need to get out on the stump now and work even harder. It shouldn’t just be left to Ed and Harriet”—
“to carry the heavy load”
on shows such as the “World at One”. We could not agree more, because it is fair to say that when the Labour leader appears on the radio—I am not sure how to put this delicately—there is a little confusion about what Labour’s economic policy might be. Ten times he was asked whether borrowing would go up or what his party’s policy was, and he did not reveal it. I will be fair to the shadow Chancellor and say that he is much more straightforward. He has a much clearer message than his leader: “Vote Labour and borrowing will go up. Vote Labour and welfare bills will rise.” Vote Labour and he will do it all again. It is not just the right hon. Member for Neath who wants to see the shadow Chancellor on the media more—we want to see him on the media much more.
Helen Goodman (Bishop Auckland) (Lab): Yesterday, I met the chairman of Fujitsu, which has just put £800 million into the British economy. He told me that his company had done so only because this country is in the European Union. He was, however, rather disappointed not to have had a reply from the Prime Minister after writing to him with that news. Does the Chancellor of the Exchequer not understand that his Government should be more interested in providing stability for business than in pleasing their own Back Benchers?
Mr Osborne: It is very good news that Fujitsu is choosing to employ in the United Kingdom. I do not see the hon. Lady’s intervention as a hostile one that has put me on the back foot; what am I supposed to do about the fact that international companies are choosing the United Kingdom as the place to invest and create jobs? That is a tough one!
I have to admit that the hon. Lady has a point, but let me come on to say something about the change that is required, including the change in the European Union, which of course is a subject of debate today.
It is true that for much of my political life and, I suspect, the political life of many in the House, the concerns about Europe have primarily been ones of sovereignty and constitutional power—not exclusively, but those have been the most dominant. Those concerns have not disappeared, but they have been complemented by economic concerns, and those economic concerns have grown. There is concern that the European prescription of high taxes, expensive social costs and unaffordable welfare is slowly strangling the European economy. There are concerns from business that directive after
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directive, regulation after regulation load costs on European companies, especially small firms, and cripple their ability to compete against new challengers around the world.
The crisis in the eurozone has created an immediate institutional challenge for the UK: as 17 member states attempt to take steps to save their monetary union, how can we change the EU to protect our interests and make it work for us? But the crisis has only accelerated an economic argument that was coming anyway: is Britain’s membership of the European Union right for Britain’s economic future? My answer, like the Prime Minister’s, is that if we can achieve real change in Europe and our relationship with the EU, then yes, it is. That is the renegotiation that my right hon. Friend the Prime Minister seeks—a Europe that is more globally competitive and more flexible, a Europe that creates jobs and offers its people prosperity and accountability.
Mr Bone: Is not the Chancellor exactly right? Is not his view shared by those on the Conservative Benches? I am sure the Chancellor is forced by coalition politics not to be able to vote for the amendment, but if he were free from that restraint, would he back the Prime Minister’s policy by voting for the amendment tabled by my hon. Friend the Member for Basildon and Billericay (Mr Baron)?
Mr Osborne: This is a coalition Government with a coalition Queen’s Speech, which contains things such as the single-tier pension, the Care Bill and the help for small employers, which will make a real difference to people across the country. Our view is that the best route to achieving what I know my hon. Friend wants to achieve is by legislating in this House. As the Prime Minister said in his January speech, we now have draft legislation for an in/out referendum on the EU. We have done it in good time for this Session’s ballot for private Members’ Bills. It is now open to any hon. Members who do well in that ballot to adopt the draft Bill that we published yesterday and take it forward as the basis for legislation. As the Prime Minister said yesterday, we will do everything we can to make it law.
Mr Pat McFadden (Wolverhampton South East) (Lab): A moment or two ago the Chancellor said that if the renegotiation that the Prime Minister has set out on produced fundamental change, he would vote to stay in the EU. What will his position be if the renegotiation does not produce much change? That is what happened the last time this was tried in the 1970s. Not much change is not exactly an unlikely prospect, given the attitude of other European member states so far to the Government’s stance.
Mr Osborne: I do not think the Prime Minister will fail in his negotiating effort. I do not think the Conservative party will fail in its negotiating effort with the European Union. Do Members know why I do not think we will fail in that effort? The Prime Minister pulled us out of the eurozone bail-outs when everyone said that was impossible. The Prime Minister delivered a cut in the European budget when everyone said that was unachievable. The Prime Minister vetoed a bad treaty when people said that was unprecedented. I am confident we can achieve that new settlement.
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There is another reason why I am confident we can achieve that settlement. I see around the table in Europe—around the ECOFIN table, where I was yesterday— many countries as concerned as we are about the future of jobs and investment on the European continent, people who know that the EU is not working as currently arranged.
Mr Osborne: I will give way to the Scottish nationalists in a moment.
It was not this Chancellor but the German Chancellor who said the other day:
“If Europe today accounts for just over 7% of the world’s population, produces around 25% of global GDP and has to finance 50% of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life.”
That was the leader of Germany speaking. I believe that there are out there other people who also seek change, but above all, for the United Kingdom, because of the changes happening in the eurozone, we need a new settlement and I am confident that the Prime Minister will deliver it.
Pete Wishart: The Chancellor of the Exchequer and I know that the UK is halfway out of the European Union. Does he agree that the best way for the Scottish people to remain within the European Union is to vote yes in the referendum next year?
Mr Osborne: As our Scotland analysis papers show, Scotland would have to apply to join the European Union as it became a new state. I am glad the Scottish National party is taking part in this debate on economic policy. Perhaps we will get a clearer view from SNP Members, after the shambles of the past three weeks, of what their policy is on the currency that Scotland would use, should Scotland vote to leave the Union. We have not had a clear answer. Some members of the SNP have said that Scotland should have its own currency, others have said that Scotland should join the euro, and still others have said that they would negotiate a monetary union with all of us in order to keep the pound. There is complete confusion in the SNP ranks and until they have a clear answer to that, they will not be listened to on much else.
Mr Jenkin: Does my right hon. Friend agree that the Government are committed to what one might call a policy of negotiate and decide, although that has a familiar ring to it? Would it not help the clarity of this debate if the Government set out exactly what they intend to negotiate on? That has not been clear from anything they have so far said.
Mr Osborne: As my hon. Friend knows, and he takes a close interest in these matters, this is the beginning of a process of setting out what we want to achieve in a renegotiation, and in a conversation about that. Of course, we will then seek to achieve that renegotiation, achieve that new settlement—I am confident that after the election the Prime Minister and a Conservative Government will be able to achieve that—and put it to the British people in a referendum.
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Charlie Elphicke: One of the things my right hon. Friend drew attention to was the problems facing our European neighbours and the challenges posed by their welfare states. Our action in getting on top of the problems of welfare, reforming welfare and making sure that work pays is key to dealing with our place in the world and making this country competitive. I draw a distinction between that and the attitude of the Labour party, which has opposed every welfare reform proposed by this Government.
Mr Osborne: My hon. Friend is right. There was a ludicrous remark—I do not know whether anyone noticed it—from the shadow Chancellor when he said that Labour supports tough welfare reform. Labour Members have voted against every single welfare proposal put to the House. The shadow Chancellor thinks the benefits cap is “too low” and that it is not set at the right level at £26,000. That is the problem. Any view of Britain, and any view of western nations, is that they need to do more to constrain the growth of entitlement spending and more to make sure that welfare pays, and to spend the money that they save on things such as infrastructure in Northern Ireland, broadband, high-speed trains and the Crossrail project under London—the vital economic infrastructure that our country needs.
Mr Osborne: I will give way to Labour Members in a moment if they can help me answer this question. What on earth is the policy of the Labour party towards an in/out referendum on Europe? The shadow Chancellor was asked that again and again. The question is this: do the Opposition rule out offering an in/out referendum at the next general election—yes or no? What is the answer?
Chris Williamson: Perhaps the Chancellor can answer this question. Toyota, just down the road from my constituency and the biggest inward investment in western Europe, came to Derbyshire because it gave access to the European market. Does the Chancellor think that, if an in/out referendum was hanging over this country and Toyota was thinking about investing now, it would take that decision to invest in Derbyshire, or would it take its investment somewhere else inside the EU?
Mr Osborne: A lot of those big Japanese car plants came to Britain under a Conservative Government who were offering them a competitive place to do business in the world. I am pleased to say that under this coalition Government we now export more cars than we import for the first time since the mid-1970s, and we will go on having a successful car industry because we have specific policies to back the car sector, but above all because we have cut corporation tax and made this a competitive place in which to do business.
Mr Osborne: I will give way to whichever Labour MP can answer this question: do the Labour party rule out an in/out referendum on Europe?
Andy Sawford (Corby) (Lab/Co-op):
It is six months to the day since the voters of Corby in east Northamptonshire delivered a damning verdict on the Government. The key issues in that by-election were not the preoccupations of the right wingers in the Chancellor’s
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Tory party, but jobs and health care in this country. But since the Chancellor is so keen to ask us questions, will he answer the question that the hon. Member for Basildon and Billericay (Mr Baron) answered very clearly, which is: if there were an in/out referendum tomorrow, how would the Chancellor vote?
Mr Osborne: The policy is this: change the European Union, seek a new settlement, then put that to the British people in a referendum. This debate has revealed that Labour cannot answer the simple question: does it rule out offering an in/out referendum before the next general election? If it cannot answer that question, it will not be listened to on this subject any more, and people will be very, very clear that the only way to get an in/out referendum on Europe is to have a Conservative Government after the next election, so people should vote Conservative in that election and make sure that they have their say.
Nadhim Zahawi: Does the Chancellor not agree that the double-speak we heard from the shadow Chancellor and his reluctance to trust the British people feed the people’s mistrust in politics?
Madam Deputy Speaker (Dawn Primarolo): Order. I listened very carefully to the hon. Gentleman’s intervention and I am sure that we are not implying any misleading in this Chamber by any hon. Member.
Nadhim Zahawi: Double-speak is not misleading.
Madam Deputy Speaker: I think it implies something. [Interruption.] I would be grateful if the hon. Gentleman did not argue with me, particularly if he wants to be called in this debate. That is a very dangerous route to take. All hon. Members would do well to moderate their language and participation in the debate to a more reasonable level.
Mr Osborne: Let me conclude, because I am conscious—
Ed Balls: Will the Chancellor give way?
Mr Osborne: Of course I will give way.
Mr Osborne: Hold on. I have not given way yet. I will give way to any Labour Member who can answer the question: do they rule out an in/out referendum before the next general election? Yes or no?
Ed Balls: To avoid any risk of double-speak, Madam Deputy Speaker, in order to make sure that we have the full facts before us, the Chancellor claimed that he was tackling the welfare bill—[Interruption.] No, no double-speak. Let us be absolutely clear that between 2010-11 and 2012-13, expenditure on benefits has gone up, because of higher unemployment, inflation and other things, by £8.1 billion. To avoid double-speak, will the Chancellor confirm that welfare spending is up by £8 billion in the last two years?
Mr Osborne:
We have spent more on pensions, and we are proud that we have done so, and we have a triple lock on pensions and pensioners last year got the biggest
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ever increase in the state pension. As for other areas of the welfare state, we have cut welfare entitlements by £19 billion a year.
Let me conclude, because there is a five-minute limit on Back-Benchers’ contributions. We have spoken about Europe, but many of the economic challenges that we face remain at home. We spoke about banking regulation, and an important part of the legislative programme this year is the Financial Services (Banking Reform) Bill, which is a carry-over Bill. We are making the changes necessary to fix our banking system, ring-fence our retail banks and make sure that we deal with the too-big-to-fail problem. We also have legislation to support small businesses. It will not be the most controversial Bill, because I suspect that the Labour party will not dare to oppose it, but it will be of enormous help to our constituents and to many businesses throughout the country. Our new employment allowance will cut the tax on jobs—
Chris Leslie (Nottingham East) (Lab/Co-op): Not for another year.
Mr Osborne: We have to get the legislation because we need a national insurance Bill, which is what—[Interruption.] The hon. Gentleman had 13 years to do something for small businesses, and the only idea he came up with was to put up the small companies’ tax rate.
From next April, every business and every charity will have their employer national insurance contributions bill cut by £2,000 a year. It means that a business will be able to employ four adults on the minimum wage without paying any employer NICs at all. I know that the shadow Chancellor does not want to hear it, because his policy was to put taxes up on jobs. That is what he fought the general election on, and that is what he still talks about when people listen to him in his interviews. That is the point. The Opposition offer more borrowing; we are reducing the deficit. They want to increase the size of government; we want it reduced. They penalise enterprise and wealth creation; we support it. They would put a tax on jobs; we are abolishing it. While they would repeat all the mistakes of the past, we are engaging in the great economic challenges of the future. We are building an economy that will enable Britain to compete and succeed in the world. We are building an economy that helps people who want to work hard and get on. I commend the Queen’s Speech to the House.
Madam Deputy Speaker (Dawn Primarolo): Order. I remind hon. Members that there is now a five-minute limit on contributions from Back Benchers. I ask that interventions are brief and relevant, and those waiting to speak might wish to be a little conservative, or however one might like to put it, and not make interventions that would reduce the time available to them later in the debate.
2.47 pm
Margaret Beckett (Derby South) (Lab):
The best that can be said about this Queen’s Speech is that it is inadequate on the economy. A pattern is emerging in the way the Government weigh the national interests on
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the one hand against the interests of the Conservative party on the other. From the outset, the Chancellor claimed that we had to cut faster and deeper than Labour had proposed, because only that level of austerity would reduce the deficit. It was clear then that the speed and depth of the proposed cuts were dictated by a political goal—a massive early deficit reduction speedily followed by economic success well before the next election.
The Chancellor was warned then that the scale and pace of that austerity risked the fragile growth re-established before the election, but for potential political gain he was ready to take a huge gamble with our economy. To that gamble he added self-inflicted wounds. He constantly told the British people, again for political reasons, that we were on the brink of bankruptcy, and so almost destroyed confidence. He made a fetish of our triple A credit rating, and then he lost it. He has hit our economy with a double whammy—greater austerity and, as a direct result, higher, not lower, borrowing.
There are three ways to cut the deficit: growth, taxation and spending cuts. The Chancellor made it clear from the beginning that he preferred spending cuts to tax increases, though his VAT increase hit everyone. Now he talks only about either tax or spending; he never mentions growth, because he does not have any. Meanwhile, other developed countries that have not followed his lead are growing while we are not.
The Chancellor is neglecting the opportunity of green growth. Potential first-mover advantages in green technologies are, just, still to be had, and with them new high-skill, high-value-added jobs, but unless the Treasury allows more ambition, those jobs will be elsewhere, not in this country. Meanwhile, his cuts increasingly come at the expense of the most vulnerable, justified by the rhetoric of scroungers and strivers. He justifies the bedroom tax as encouraging people to downsize, but the Government must have known that for many people there is nowhere to downsize to, so it is just a cut. If we cannot afford not to cut that benefit, as he alleges, we cannot afford to cut taxes for millionaires in the same week.
With the EU referendum omnishambles, what began as a gamble with our economy in the interests of the Conservative party has become the disregard of our economic interests. The Conservative party claims to be the party of business, but a key hate of business is prolonged economic uncertainty. Now we are telling inward investors, “We might leave the EU, but we’ll let you know in four years’ time.” Japanese, American and European inward investors all make it clear that they are in the UK because the UK is in the EU. Millions of jobs are at stake. A semi-detached status, such as that of Switzerland and Norway, means being bound by EU decisions without having a voice. The voice we have now is continually being weakened by the continued uncertainty about our membership and whether the Government even support it.
It is crystal clear to everyone, in this country and outside, that that disregard of our national interest has nothing to do with cool calculation of how that interest is to be served and everything to do with the interests of the Conservative party. The Prime Minister and the Chancellor are running scared—scared of the UK Independence party and scared of their own Back Benchers. As has been said already today, they are in office but not in power.
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2.51 pm
Mr John Baron (Basildon and Billericay) (Con): I would like to thank you, Madam Deputy Speaker, for selecting the amendment standing in my name and those of other hon. Members, and I would like to thank those Members who have signed it for their unwavering support. There can be no doubt that the nature of our relationship with the EU is of fundamental importance to this country, but the EU has changed since we first joined, and it is still changing. “More Europe” is the cry, and “More political and economic harmonisation” is the shout, but that is not why we joined.
Mr James Clappison (Hertsmere) (Con): Does it not follow that the time for the British people to be given their say is long overdue and that we should give them every assurance that they should have that say?
Mr Baron: I completely agree. I think that the political system has denied the electorate their say for far too long and that Parliament needs to understand that. That is why some of us on the Conservative Benches have been campaigning for some time for a referendum in the next Parliament. I am pleased to say that the Prime Minister deserved credit for listening. In January he became the first major party leader to offer the country a referendum in 2017. But we, as a group on these Benches, have also long argued that our commitment must be both credible and believable. It is credible because the referendum in 2017 has an “out” option, but it is not yet believable.
The British electorate, quite understandably, are deeply sceptical of any politicians making promises about matters European, particularly EU referendums. Too many promises have been broken in the past. They remember Tony Blair’s broken promises about a referendum on the EU constitution, which never materialised. They are constantly reminded about Liberal literature promising an in/out referendum, which never materialised, even when they came to power. That is why we on these Benches have also campaigned for legislation in this Parliament for a referendum in the next, not because we do not trust the Prime Minister, but because the electorate do not trust politicians generally. I would argue that we as a party are more united on this issue than we have been for a generation. We have all signed up to the referendum in 2017; what we disagree on is the best way of convincing the electorate of the seriousness of our intent.
Mr Bone: Will my hon. Friend make it clear that 2017 is the back-stop, the latest date for the in/out referendum, and that it might in fact be earlier?
Mr Baron: It could well be earlier, but I am very content having a referendum in the next Parliament, because that will give time to renegotiate. However, that option does exist.
That is why legislation is more believable than election manifesto promises, too many of which have been broken in the past. That is why I very much welcome the party’s promise to support a private Member’s Bill, something that was not on offer when I asked a week ago. I also support the publication of the draft Bill yesterday. It just goes to show that a week can indeed be a long time in politics. However, the problem with a private Member’s
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Bill is that it is the second best option. We all know that a determined minority can block it by letting it run out of time. The Bill will fail, as so many others do, on a soggy Friday afternoon when no one notices.
That is why I urge the Prime Minister—I am pleased to see that the Chancellor is still in his place—to support the amendment. It provides him with a golden opportunity. If we were to win, that would provide him with the mandate to try to introduce legislation through the normal channels, which would stand a far better chance of succeeding. He should seize the moment. He could claim, quite rightly, that the situation was not of his making and blame me or us as a group. It would therefore be outside the confines of the coalition agreement. I must say to my right hon. Friend the Chancellor that the Liberals would be very hard pressed indeed to refuse to give time, given that Parliament would have expressed its view and that of the electorate. Let the media then knock at the Liberals’ door to ask questions.
The argument that there is no certainty that we would win such legislation is weak. There is no downside in trying. We may well win. Some MPs on other Benches—honourable and principled Members—support the concept. Even if we fail, we will have tried. On a matter of this importance, political transparency is paramount, and the electorate could then take note.
As a group on these Benches, I hope that we have helped in a small way to move the party closer to the electorate on this issue, but it is more important than party politics. I encourage other Members to do likewise within their own parties. Were the amendment to pass tonight, we as a Parliament would be opening the door to the possibility of introducing legislation that would stand a far better chance of succeeding. It would take a majority to defeat that legislation, rather than the determined minority it takes to defeat a private Member’s Bill. I therefore urge Members across the House to support it. I urge my own Front Benchers to support it. I urge the doubters to put aside their doubts and support it.
For too long the electorate have been unable to express their opinion on the changing nature of our relationship with the EU. The political establishment have essentially closed ranks over the past 30 years and denied the electorate a choice. We now have a golden opportunity to right that wrong. We should be bold of heart, seize the moment and do what is right by the electorate, and indeed by the country. I therefore intend to move the amendment.
2.58 pm
Mr George Howarth (Knowsley) (Lab): I will first say a few words about employment, particularly in the light of statistics released today, and then a few words about Europe. The employment situation in the UK and in my constituency is frankly depressing, and the figures released today by the Office for National Statistics emphasise that. Nationally, 3.8% of those aged 16 to 64 are on jobseeker’s allowance. Today in Knowsley the number of JSA claimants is 4,245, which equates to 6.3% of Knowsley residents, well above the national rate. Similarly, the JSA count for those aged 18 to 24 is 7.2%, whereas in Knowsley it is 13.2%. In my view, therefore, there is no room for complacency.
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To be frank, many of the existing opportunities do not reflect the expectations of an ambitious country. Practices such as zero-hour contracts and the use by many high-profile companies of unpaid internships and agency work amount in many cases to systematic exploitation, particularly of young people.
There is growing concern about what is often referred to as the race to the bottom. In The Times a few days ago, the noble Lord Sainsbury of Turville was reported as arguing for a more progressive form of capitalism that recognises social justice and discussing the role that institutions could play in bringing it about. He also rejected the neo-liberal consensus of the past several decades.
Frances O’Grady, the recently appointed general secretary of the TUC, has mentioned the Prime Minister’s ambitions to erode workers’ rights. She said:
“'The Prime Minister wants to ‘repatriate’ those rights, and not because he thinks he can improve them”,
“wants to make it easier for bad employers to undercut good ones”.
Moreover, on the question of employment rights, Jon Cridland, the director general of the CBI, has said that the Prime Minister’s proposals would not be his starting point in any negotiation. It is clear that there is an emerging consensus that we should be discussing the quality of employment and the opportunities for people, rather than taking away the rights and privileges they already enjoy.
I am a Eurosceptic compared with many on the Labour Benches. I voted against the Maastricht treaty, because it removed the social contract. I am in favour of renegotiating the terms of our EU membership and think there should be a referendum at some point. It is not healthy for our democracy that the relationship between the political classes and the country has eroded to the extent that it has.
Where I part company with the Prime Minister, however, is on the sort of Europe that he wants to renegotiate, which is entirely different from the sort of Europe that I want to be a part of. I believe firmly that there is a case for renegotiation and that it should be followed by a referendum, but I certainly do not agree with the sort of Europe that the Prime Minister wants to bring about.
Mr Bone: The right hon. Gentleman is making a thoughtful speech and I understand entirely his position, but will he consider voting for amendment (b)? It does not specify a particular Bill; it just regrets that there is no EU referendum Bill in the Queen’s Speech.
Mr Howarth: No, and the reason why I am not prepared to do that is because the hon. Gentleman and the amendment anticipate a different kind of renegotiation from one that I would support. I have given serious thought to supporting the amendment, but it is possible on occasion to agree with the words of an amendment while not necessarily agreeing with the sentiment behind it. I do not want to be associated with a proposal to renegotiate Britain’s involvement in Europe that differs from how I would want it to be conducted. The difference between me and the hon. Gentleman and others who support the amendment is not necessarily over its wording, but over the intention behind it, which I do not want to be associated with.
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I hope that in the coming years we will see a different arrangement between Europe and the United Kingdom. I also hope that we can improve people’s working lives and make work pay for a lot more people, particularly young people. I do not believe that that is the direction that this Government want to take, and I hope that when there is a change of Government we will be able to make the changes that I want to see.
3.4 pm
Sir Bob Russell (Colchester) (LD): Successive Governments have spoken of localism and sustainable communities, but the reality has not matched the rhetoric in many respects. That is particularly true with regard to the loss of post offices and neighbourhood and village shops, whereby Government policies over the past 30 years have hastened their decline, rather than helped sustain them to the overall benefit of society and the communities that lose them.
Nowhere is Government failure more obvious than in the closure of thousands of neighbourhood and village public houses—the traditional English “local”—and the rise of mega-drinking establishments with wall-to-wall boozing and round-the-clock easy availability of alcohol, aligned with below-cost-price special offers in supermarkets, which has fuelled an explosion in alcohol-related incidents in town and city centres, making many people wary of going to them in the evenings and putting serious extra pressure on our emergency services, including clogging hospital accident and emergency departments.
There is also worrying evidence from health professionals of an increase in drink-related conditions and that this self-inflicted rise in alcohol-induced illnesses is occurring in increasing numbers of young people. All this adds yet further burdens on the national health service and it also, of course, leads to devastation for the individuals concerned and their families. It is therefore a huge disappointment that we have not been presented with a Bill to address the failure of the past 30 years.
Early-day motion 57 supports a campaign group—a coalition of organisations—known as Fair Deal for Your Local, which is calling, as its name suggests, for a fair deal for local public houses. The group comprises the Federation of Small Businesses, the Forum of Private Business, the Campaign for Real Ale, Fair Pint, Licensees Supporting Licensees, Justice for Licensees, Licensees Unite, the Guild of Master Victuallers and the Pubs Advisory Service. That is a worthy list of organisations whose views both the coalition and the Opposition should listen to.
The campaign’s emphasis is on a much-needed reform of the tied model operated by large public owning companies, or pubcos as they are commonly called. Pubcos take more than is fair or sustainable from the sales of drinks, which makes it difficult or impossible for many licensees to make a living. This results in the failure, on a huge scale, of pubs up and down the country, with a closure rate of 20 or more a week and the pubcos selling them as though they were asset-stripping property developers rather than custodians of our nation’s rich social heritage.
The following statement could easily be adapted as a Bill:
“The Fair Deal for Your Local campaign believes that the way to ensure a fair deal for pubs—and to deliver the Government’s clear commitment—is to include in the statutory code an option
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for tied publicans to only pay a fair, independently assessed market rent to the pub owning company—a ‘market rent only’ option.”
It is estimated that this would bring down the cost of a pint in pubco-owned pubs—around a third of all British public houses—allowing many pubs to survive and thrive. It would also lead to fairer access to public houses for small brewers, which would boost their businesses and increase choice at the bar. I would have thought that the coalition welcomed such measures. It must be stressed that all family brewers would be excluded, because the code would apply only to companies that own more than 500 pubs. This relates to pubco public houses, but legislative help would also benefit other neighbourhood public houses.
In commending the Fair Deal for Your Local campaign, I congratulate the excellent work of my hon. Friend the Member for Leeds North West (Greg Mulholland), who tabled early-day motion 57. I also remind the House of what I have said on this subject in previous debates. In November I said:
“We need to amend the tax levy on beer sold in our traditional public houses. We should have a tax-neutral approach to keep the Treasury happy and bring huge social benefits, including job retention and creation, rather than there being the loss of jobs that we continue to witness in the sector.
Most publicans of neighbourhood and village public houses run responsible establishments. Their customers should be rewarded, not financially penalised because of the irresponsible marketing carried out by supermarkets and mega-drinking establishments.”—[Official Report, 1 November 2012; Vol. 552, c. 429.]
I returned to this theme in the Budget debate in March, when I observed that
“there are mixed messages on alcohol tax and the coalition Government’s desire to tackle binge drinking and improve the health of the nation.”
I described the confusion caused by having a debate on whether there should be minimum unit pricing alcohol when the Chancellor was knocking 1p off the price of a pint of beer, and added:
“We need a variable price structure to help traditional, community and village public houses, which would fit well with the coalition Government’s localism agenda and the last Government’s sustainable communities legislation.”—[Official Report, 25 March 2013; Vol. 560, c. 1362.]
Time prevents me from mentioning other Bills that I would have liked to be included, such as one on building council houses. The lack of council house building over the past 30 years under the policies of the Tory Governments led by Thatcher, Major and Blair has led to a housing crisis.
Unlike some, I will loyally support the Queen’s Speech this evening.
3.9 pm
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): As always, I listened carefully to the Queen’s Speech with the intention of examining how the new measures would affect my constituents. I was also looking for measures that would ease the strain on the families in my constituency who are worried about unemployment and the rising cost of living. I was sadly and expectedly disappointed.
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Before listing my concerns, I will place on the record a couple of observations on how we got into the deep economic difficulty that is causing desperate hardship for many families in my constituency. The fundamental error of this stagnant coalition Government was to assume that they could clear the deficit in four years. Their plan was to use the final year in office to hand out sweeteners to the electorate, who would be so overwhelmingly grateful that they would elect a Conservative majority.
Dealing with the deficit is the defining issue facing this country. However, that should never have been conditional on or linked to the outcome of the next election. That was a political fix that was destined to fail. Everybody could see that it was politically too far-fetched, except for the opportunistic Liberal Democrats who disregarded their electoral mandate and traded their principles for government office.
The UK economy is 9% smaller today than was expected when this stagnant Government took over. In 2009-10, the deficit was £159 billion. It is now forecast to be down to £121 billion. However, the public debt overall is rising from £795.5 billion to a predicted £1.1 trillion.
On any reasonable analysis of our economic situation, two significant themes scream out loud and clear. The first is the continual anaemic economic performance and the second is our ability to pay off the debt, which is becoming increasingly strained as a consequence of the first point. While those two heads travel in opposite directions, our economy will never recover. The policies simply have to change. It is time that this stagnant Government chose to put the national interest first and their party political interests second.
Ordinary hard-working people and their families are struggling. Rents and mortgages have to be paid, as do ever-increasing energy and water bills. Families who spent £600 a month to cover those costs in 2005 now spend more than £800 a month. We have record fuel prices and record amounts of people in fuel poverty. We have 1 million young people out of work and left behind. Lending to businesses is continuing to fall. We have soaring unemployment. We have a Chancellor who has to borrow £245 billion more than he planned, who has failed his own economic test of retaining our triple A credit rating and who, over the course of this Parliament, will have delivered growth of a mere 1.7%. Ordinary working people are paying the price of this out-of-touch Government’s economic stagnation.
Mr Jim Cunningham: Does my right hon. Friend agree that one of the methods that the Government are using to make ordinary people pay for their incompetence is the bedroom tax?
Mr Clarke: My hon. Friend raises a very important point. While we witness the introduction of the second home subsidy, the effects of the bedroom tax are being seen in my constituency, where an estimated 2,128 individuals will be affected, two-thirds of whom are believed to have disabilities. Citizens Advice Scotland has revealed that nearly 800 victims of the welfare axe are desperately seeking its support. Welfare recipients are an easy target, but we should not point the finger too quickly because no job is safe in this economy.
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To get our economy moving again, we need investment—investment for jobs, investment for the future and investment in the ordinary hard-working people of our country. We have been treated to a more-of-the-same economic plan, with no change on anything of importance. The Government are cutting taxes for millionaires while cutting support for our economy. Led by the Prime Minister and the Chancellor, this stagnant Cabinet of out-of-touch, upper-class millionaires has run out of ideas and run out of steam, while our country is running out of time. What a way to run Britain.
3.15 pm
Richard Ottaway (Croydon South) (Con): As a secondary modern schoolboy, I am always pleased to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke).
In the regrettable absence of a debate on foreign affairs, I will use today’s theme to focus on the EU’s rule in economic growth. The British economy is not an isolated beast. It is part of a global economy and, in particular, a European economy focused on the EU. That European economy needs reform, but we need to be part of it.
Global economic success is to be found in single markets around the world. We should look at the economic growth in Brazil, Russia, India, China and the USA. What do those countries have in common? They are all single markets. The EU single market, an invention of Margaret Thatcher, which stretches from Athens to Oslo, is the largest single market in the world. We in the UK are 60 million in a world of more than 7 billion—less than 1%. Do we want to face the global markets alone or as a member of a trading bloc that represents 500 million people?
What is the alternative? Perhaps we could be outside the EU, negotiating our own terms of trade. Perhaps we could be an independent sovereign state, calling the shots on our own terms like Norway and Switzerland. Those propositions may sound attractive, but I disagree with the Secretary of State for Education, who says that life outside the EU would be “perfectly tolerable”. Norway and Switzerland do not call the shots. They pay billions every year for access to the single market and Switzerland has been forced into renegotiation.
We would have to renegotiate our own free trade agreements. The holy grail of trade agreements is an EU-US deal. We would look pretty dumb if we were leaving the EU just as it was signing up to such a trade agreement. Imagine the impact on our car industry, which exports five out of every six cars made in the UK, if it had to pay the EU import tariff on cars of 9.6%. Where would a foreign car manufacturer invest, faced with that situation?
Mr Jenkin:
The United Kingdom has a trade deficit with the other 26 EU member states of £70 billion. I cannot imagine that the EU would want to cut itself off from the British market by getting into a trade war with the United Kingdom. May I also point out that we export more to the rest of the world than to the EU? The EU is declining in relative terms, whereas markets in the rest of the world are expanding. Surely we are a
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global trading nation, not just a regional trading nation, and that does not require us to be a member of the single market.
Richard Ottaway: We can all trade statistics on who trades what with whom, but about 50% of our exports are to the European Union. We export four times as much to the EU as to the United States.
Mr Jenkin: Will my hon. Friend give way?
Richard Ottaway: I will not give way.
We sell more to Sweden, which has a population of 9 million, than to India, which has a population of 1.1 billion. That is the truth of the matter.
Mr Jenkin: Will my hon. Friend give way?
Richard Ottaway: I am not giving way.
The EU is not going to let us set up an offshore free trade island like Hong Kong, undercutting its industries. We will have to pay for access to the single market. The EU will dictate the terms of trade, and we will still be under the thumb of Brussels. I say to my hon. Friend that that is not gaining sovereignty, it is losing it. The plan to impose an EU-wide financial transaction tax is just a warning shot. As a member of the EU, we can go to the European Court of Justice and challenge it. Outside the EU, it would simply be imposed and we would just pay the tax.
I say to the Economic Secretary that his policy on the eurozone is spot-on. Supporting policies that will stabilise the single currency area and encouraging growth through integration is exactly the right approach. At the same time, we expect the Treasury to keep a watchful eye on the national interest in the single market. A good example of that is the agreement on the single supervisory mechanism in the banking union, which shows the clout that we still carry in the EU and how we protect our position inside the single market but outside the eurozone. He should continue with that approach. That example also illustrates how far we have come in building alliances inside the European Union since the veto in December 2011. Inside, we simply have more strength.
No one denies that the EU needs reform, and I am no great Europhile on this. [Interruption.] May I say to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) that that sort of contemptuous laugh does no good to the debate whatever? No one denies that the EU needs reform. Primarily, it has to choose between being a social market economy and being something tougher. In his Bloomberg speech, the Prime Minister set out a course of action that recognises British Euroscepticism but keeps us at the table, using our influence. Within the EU, the UK will continue to thrive as a major player on the world stage and our economy will be stronger, but outside, I believe that the future will be bleak.
3.21 pm
Stewart Hosie (Dundee East) (SNP):
It is a pleasure to take part in the debate. This Queen’s Speech is important, sandwiched as it is between the Budget and Red Book, which we already have, and the forthcoming spending review, the details of which we do not have but
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which still casts a shadow over the potential for growth and recovery in the UK. The Prime Minister mentioned growth in his speech on the opening day of the debate, stating that the measures in the Gracious Speech would “grow the economy”. He also said that they would
“deliver a better future for our children…win the global race”—[Official Report, 8 May 2013; Vol. 563, c. 28.]
and “cut the deficit”. Given the austerity programme so far, it looks like it will lead to 300,000 more children being in poverty by the end of next year, and the forecasts are that there will be up to 4 million children in poverty in a few years’ time. It is difficult to see how any of the measures in the Queen’s Speech can possibly live up to the billing that the Prime Minister gave them.
Given that the balance of trade has been in deficit to the tune of more than £100 billion for the past two years, and that the gap in the total balance of trade has risen by more than £10 billion in the past year, it is difficult to see how anything in the Queen’s Speech can live up to the Prime Minister’s description and do anything to allow us to “win the global race”, whatever that means.
Bringing the deficit down was another of the Prime Minister’s claims, but as the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke) said, net borrowing was forecast at £92 billion but ended up being £121 billion. The cumulative deficit—the net debt—was forecast to rise to about 92% of GDP in a couple of years, but it is now forecast to hit more than 100% of GDP and about £1.6 trillion. There is a great deal of Government rhetoric about what the measures in the Queen’s Speech are supposed to do, but very little real evidence.
However, it is not as though the Queen’s Speech contained no growth measures. There was one potentially significant one—the national insurance employment allowance—but that was not altogether new. It was in the Red Book and budgeted to cost the Government £1.3 billion next year. It is welcome, but because the impact of the Budget policy decisions is to be fiscally neutral over the five years from 2013-14, the overall impact on economic growth of that one meaningful measure will be muted to say the least. It is worse than that, because any beneficial effect on growth of that sensible policy will be wiped out entirely by the additional cuts to expenditure that are anticipated in the forthcoming spending review.
Charlie Elphicke: If Scotland became independent, which currency would it use?
Stewart Hosie: It would use sterling. We have answered that question many times. We are speaking about the UK Government’s Queen’s Speech and how their programme for the Session will fail to deliver growth not just for Scotland but for everybody throughout the UK.
Let us be clear that the impact of the one good thing in the Queen’s Speech, the employment allowance, will be wiped out entirely if the economy is supposed to absorb the anticipated £11.5 billion of new cuts. That is the figure most commonly used for what is likely to be in the spending review. That will take the UK to discretionary consolidation—tax rises and cuts—somewhere
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in excess of £155 billion a year, every year, from 2015-16 onwards. Indeed, the Institute for Fiscal Studies has helpfully provided some information stating that it believes the real level of discretionary consolidation could reach £172 billion a year by 2017-18.
The Government plan to cut £11.5 billion, in addition to the cuts so far. To return to the point made by the hon. Member for Dover (Charlie Elphicke), that will be added to the 8.7% real-terms departmental expenditure limit cuts and 25% capital DEL cuts in Scotland. It seems extraordinary that when we are looking for real growth, the Government seriously propose stripping consumption out of the economy to the extent of about 8% of GDP and putting an additional £11.5 billion on top of the £140 billion or so of discretionary consolidation that is already planned, and replacing it with only a single sensible measure, the employment allowance.
What the Government are trying to do is not doable. They are trying to cut their way to growth, which cannot be done. They are ignoring all the evidence that austerity is hurting across the board, and I urge them even at this late stage to think again about their plan. They should rethink not just the contents of the Queen’s Speech or what we are likely to see in the spending review in June but the measures that we have already had in this and previous Budgets. Those measures will lead, as Olivier Blanchard from the International Monetary Fund has said, to the Government “playing with fire” if they allow the economic stagnation to continue.
3.28 pm
Mr Bernard Jenkin (Harwich and North Essex) (Con): When I received, somewhat to my surprise, a telephone call from my hon. Friend the Member for Basildon and Billericay (Mr Baron), inviting me to add my name to an amendment that regretted the absence of an item in the Queen’s Speech, I confess I was somewhat astonished. I think it a mark of the enormous shift in opinion that is taking place on what has for decades been a matter of fundamental consensus in British politics that we find ourselves straining the conventions and normal behaviour, and even the Standing Orders of the House, to accommodate this debate. I say to my hon. Friend the Member for Croydon South (Richard Ottaway) that I utterly respect the sincerity of his views, and I was expressing no more than frustration that he would not allow me a spare minute of his time to explain the statistics on which I think this fundamental debate should be based.
I agree with the terms of the amendment and will support it, although I might not have tabled it myself. I doubt that some of the noise and discord around this issue has impressed those who failed to support us in the elections two weeks ago, reflecting a certain and widespread despair about the ability of all three main parties to keep their promises on referendums, which has become an emblem of the distrust in which so many of our voters hold the British political establishment.
Mrs Anne Main (St Albans) (Con):
Many members of the British public, whether they hold the views of my hon. Friend the Member for Croydon South (Richard Ottaway) or those of my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) and indeed myself, would like to have the discussion. We went into a referendum on the alternative vote with a discussion
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led by the Prime Minister, who was not in favour of it, and other Members held honourable positions on the issue. This is about giving the discussion to the British public, however they would like to view it.
Mr Jenkin: I am grateful to my hon. Friend for that intervention. I will not debate at length the quality or timing of an EU referendum, although I think that those who voted for UKIP and are likely to do so in next year’s European elections will not be impressed unless we make every effort to hold a referendum as soon as possible, rather than when it suits the three main political parties for whatever reasons we have to continue putting it off.
I wanted to say to my hon. Friend the Member for Croydon South that I have the figures from the House of Commons Library, and our total earnings from abroad constitute 44% of our GDP. We are a global trading nation and trade a higher proportion of our GDP than any other major European state. Trade with the EU comprises 19% of GDP, and 25% with the rest of the world. The rest of the world is the growing proportion; the EU is the declining proportion. Manufacturing is the only part that would be excluded, by virtue of the tariffs that were mentioned earlier by my hon. Friend, and manufacturing exports to the EU comprise 10% of GDP, and 10% to the rest of the world—a substantial and important part of our economic activity.
The point is that there is no evidence that we would not continue to trade that proportion of our manufactures with the European Union—incidentally, the figures are inflated by what we know as the Rotterdam-Antwerp effect because a lot of what we export to the EU is instantly exported to the rest of the world. We are regulating our entire economy and burdening our taxpayers with the costs of the contribution—rising to £19 billion gross—with our membership of the European Union. One hundred per cent. of our economic activity is burdened with those regulatory costs for the sake of less than 10% of our overall GDP.
Sir Bob Russell: May I ask my neighbour and parliamentary colleague whether anything he has just said could not have been said by a member of UKIP?
Mr Jenkin: I totally agree. The irony of this debate is that a lot of people in UKIP are saying things that are similar to what is felt by a lot of people who would like to vote Conservative at the next election. There is a majority in this country, and I think the Prime Minister was right to say that he wants a different relationship—a new relationship with our European partners.
This entire debate is conducted on the premise that membership of the single market is indispensable to our national interest, is it not? Those who say we must remain in the EU come what may believe that the single market is indispensable to our national interest, but here are the facts. I have already mentioned how little of our GDP that we export in goods would be subject to tariffs were we not to have a free trade arrangement with the EU—probably around 8.7% of GDP. The idea that 3 million jobs are dependent on exports to the EU and that we would lose them if we left is a myth. There is no substantial evidence that we would lose any jobs.
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On the contrary, if we had a freer and less regulated economy, we would probably create more jobs by trading more easily with the rest of the world.
The EU is in long-term structural decline and our non-EU markets are expanding. The UK enjoys a trading surplus with the rest of the world—with which we trade much more effectively—and we have a £70 billion trade deficit with the EU. The rest of the EU would therefore not want a trade war with the UK; it would not be in its interest. The idea that Ireland, or even Germany, would enter a trade war with the UK is absolutely ridiculous.
By the Commission’s own admission, EU red tape costs 4% of the EU’s GDP. The single market does not reduce the costs of doing business in the EU; it is a regulatory burden on trading in the EU.
Debbie Abrahams (Oldham East and Saddleworth) (Lab): Will the hon. Gentleman give way?
Mr Jenkin: I am not going to give way.
The EU internal market has become an end in itself—it is a means of promoting political integration. We must accept that, in the minds of our European partners, the single market is indivisible from the treaties. Even if the UK were to leave the EU altogether and apply for article 50, the EU would be legally required to negotiate free and fair trade with non-EU countries, so we would continue to have access to EU markets. That different perspective, which voters and large parts of business are beginning to appreciate, is shifting the burden of the debate.
Are we doing the right thing in creating such long uncertainty by putting off a referendum until 2017? Should we not have the referendum much sooner to bring the debate to a head? Are we too scared of our own voters to face the truth?
3.35 pm
Mr Jim Hood (Lanark and Hamilton East) (Lab): I am delighted to have caught your eye, Mr Deputy Speaker, and to speak in the debate on the Gracious Speech. I made my maiden speech in a debate on the Gracious Speech on 8 July 1987, following Mrs Thatcher’s third victory. I remember using an analogy. I said that the Government and the Gracious Speech were more of the same poison in a different bottle. I thought of that comment when I looked at the Conservative Back-Bench amendment. It is déjà vu, or Maastricht, all over again. If historians check the speeches on the Maastricht debate in Hansard against what we have heard in the past hour or so, I am sure they will understand what I am saying.
Mr William Cash (Stone) (Con): As one who led the Maastricht rebellion, I should say that, at the time, we made predictions. Exactly what we said would happen has happened—that is the difference.
Mr Hood:
The hon. Gentleman has been saying exactly what he said in the Maastricht debate ever since, at every opportunity. It will surprise no one, including me, if he continues to say those things, but I am speaking to the reality. Some say that the Conservative amendment is a UKIP amendment. In fact, the hon. Member for Harwich and North Essex (Mr Jenkin) accepted that he agrees with a lot of what UKIP says.
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I remind the House of something the Prime Minister said in his Conservative party leadership campaign. He promised the country and his party that he would make the Conservatives electable again, and get rid of the “nasty Tory” image. He travelled to the Arctic to embrace huskies, and came back here and cuddled hoodies. These are changed days. Where is he now? This week, with conspiracies going on behind his back in his own party in Parliament, he is away negotiating an EU trade deal. You could not make it up! As my grandmother used to say, when the cat’s away, the mice will play. That is what is happening to him.
The debate and the run-up to it are more like Shakespeare’s assassination plot in “Julius Caesar”. The big question is who will be Brutus. Margaret Thatcher’s political assassination in 1990 had nothing, or nothing much, to do with Europe, but we have the same modus operandi. As my hon. Friend the Member for Bolsover (Mr Skinner) pointed out in a speech two weeks ago, the Conservatives kicked Mrs Thatcher out on the street like a dog.
Michael Connarty (Linlithgow and East Falkirk) (Lab): My hon. Friend is asking questions, but not pointing fingers. Does he think it was significant that the Chancellor made a very anti-European statement today? He made it clear that he is in line with the people who are calling for the referendum, and demanding we join them, while the Prime Minister is away. He may not be the great wizard, but he is certainly the great Machiavellian.
Mr Hood: I do not disagree with that. The Chancellor is supposed to be the campaign manager for the Conservative party and he could well fit the title of Brutus. I do not want to accuse him of being a Brutus, because there are so many of them about. It will be interesting to see who is the first to stick the dagger in. I should thank the hon. Member for Croydon South (Richard Ottaway) for having the temerity to speak up from the Government Benches in a pragmatic and sensible way on our membership of the European Union.
One of the many questions thrown at our Front-Bench team is whether they support a referendum. Hon. Members should not bother to ask me. I do not support a referendum on staying in the United Nations, I do not support a referendum on staying in NATO and I do not support a referendum on staying in the European Union. Yes, the EU needs reforming, but it can only be reformed from within. We cannot reform it and influence it from outside, and I hope that can be taken as read.
It is my judgment, supported by a considerable weight of evidence, that today’s Conservative party is so far to the right that it refuses to select candidates that are moderate, pragmatic or pro-Europe. There lies the difficulty. I started my younger political life being anti-Europe, but I accepted that the world moves on and I moved on with it. In the Labour party in the late ’70s and ’80s, it was difficult to be a candidate for a European seat without being anti-Europe. That is exactly where the Conservative party is now. The selection process is causing all the difficulties for its leader today in Parliament.
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Mrs Main: The hon. Gentleman is making an interesting speech. Does he not see that there is a slight bit of humble pie he should eat when he has a leader who is selected and guided by the unions?
Mr Hood: The hon. Lady will know that I always try to be respectful, but that is a foolish comment to make on such a serious subject. If she wants me to give my comments on the leader of the Labour party, I am absolutely delighted. I supported the leader of the Labour party, and I might point out that he is not doing badly, because we are considerably further ahead in the opinion polls than the Conservative Government.
It looks like I am running out of time. The Queen’s Speech should have been about stability, growth and employment.
3.43 pm
Mr William Cash (Stone) (Con): Basically, I regard the whole question of having a referendum as fundamental. I led the Maastricht referendum campaign, and the question now is about the same fundamental questions we were addressing then. This is the problem: nothing has changed, but much has got worse. The real problem is one of urgency. This is not just about an abstract theory of sovereignty; it is about the economy, who governs Britain and whether we can achieve economic growth, which is what the debate is actually about. We cannot achieve economic growth in the circumstances I shall now describe. In my judgment, it would be wrong to wait until 2017, given that the situation is so urgent, as hon. Members will hear in a moment. The British Chambers of Commerce, which represents 104,000 businesses and 5 million employees, is concerned about the delay and the uncertainty that goes with it and about over-regulation.
It is generally acknowledged by all parts of the House that our relationship with the EU has to change, but the trouble is with the institutional treaty changes, on which I have had meetings in Brussels. I saw Mr Van Rompuy only 48 hours ago and also Mr Olli Rehn, and the fact is that they are on a railway line, and are continuing along it. They talk about destiny, contracts with other countries—unenforceable as they might be—and more centralisation. The European Scrutiny Committee had an interesting meeting on that.
Mr Jenkin: In his travels around Europe, has my hon. Friend gained the impression that there is any appetite in the Commission or among our European partners for substantial treaty change that would allow the United Kingdom to have a different relationship with the EU while remaining signed up to the existing treaties?
Mr Cash: It is my opinion, based on extensive discussions yesterday and over several months, that there is absolutely no prospect of any changes that would even begin to alter the circumstances we are now in and which are pivoted on the existing treaties.
The problem is one of debt and deficit. We cannot pay for the public services needed in the country, whether health, education or whatever. I hear the point from Opposition Members and I agree with some of their arguments—it is not right that people should be deprived of services—and I do not believe that the entire answer depends on cuts. It depends on the subject of this debate,
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which is economic growth. We can grow with the rest of the world. We are running a trade surplus of about £13 billion with the rest of the world, other than the EU, with enormous potential in south-east Asia, India and Africa, which is where the emerging markets are. This is where we have to concentrate our efforts.
On our trade relations with the other 26 member states, I ask hon. Members to take account of the following very alarming figures. Two weeks ago, during a debate on the Maastricht treaty and the convergence criteria, I gave what was then the latest figure, which was that we were running a trade deficit with the other 26 of £47 billion. Now, some might think a deficit of that scale is an awfully big loss, but the following Monday the new figure came out. In one year, the deficit had risen from £47 billion to £70 billion. Furthermore, the German surplus, which was running at £30 billion, rose to £70 billion between 2011 and 2012. It is essential that we take note and hold this referendum—and hold it urgently—because we have to deal with fundamental changes in the relationship that will enable us to disentangle ourselves from the spider’s web that we have got caught up in and which we have not asked the British people about since 1975. It is a vital question of national interest, and I beg hon. Members to listen.
Mr Jenkin: Is not the corollary of what my hon. Friend is saying that if we follow the programme of the Labour party and continue to pursue a policy of closer integration and more burdens on our economy, it will mean more cuts, more borrowing, slower growth and more unemployment than if we sort out this relationship?
Mr Cash: My hon. Friend is completely right. Labour caused the debt and the deficit; now Labour Members want to engage in more borrowing without the growth that would come from expanding our trade with the rest of the world.
Mr Cash: I will give way to the former Chairman of the European Scrutiny Committee.
Mr Hood: I am listening with interest, as I always do, to the hon. Gentleman’ s speech, and I have heard it a few times—a lot of times, in fact. If he gets his referendum and the vote is overwhelmingly, or marginally, in favour of staying in the EU, will he then embrace the EU and work from the positive side, in the same way as everybody else?
Mr Cash: I have come to the conclusion that we have to leave the existing treaties, but I will say one last thing. The UK Independence party argument is self-defeating, for a simple reason. If UKIP were to take a number of marginal seats on the scale that seems likely and we were to lose the next general election, UKIP will not get the referendum or make the changes it wants, because we would be faced with a Lib-Lab, pro-integrationist, anti-referendum situation, which would be a complete disaster. UKIP, with which I am quite obviously much in agreement, will not produce the answers, because it is not possible to repeal the European Communities Act 1972 or have a referendum without a majority of MPs. It does not have a majority and it will not get one.
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3.51 pm
Mr Michael Meacher (Oldham West and Royton) (Lab): The Tory party is obviously going through one of its regular hissy fits over the EU. My experience is that it is best not to intrude in toxic family feuds, so I will confine my remarks to the economy.
Support for the Chancellor’s policy has totally evaporated. His intellectual ballast, provided by Reinhart and Rogoff—namely, that growth rapidly declined once a threshold of debt of 90% had been reached—has been blown out of the water. The International Monetary Fund, the citadel of neo-liberal capitalism, has deserted the Chancellor. The British Chambers of Commerce, the Federation of Small Businesses and even the CBI are now openly criticising from the sidelines. The only austerians who are still full square behind the Chancellor are those in the eurozone. I hope he takes comfort from the fact that that paragon of economic virtue is now his last remaining ally. Contractionary fiscal expansion—his policy—is, to use the words he used today, a totally busted flush. It is an absurd oxymoron, as it always was. Once the rate of growth has slowed below the expansion of debt, the policy is doomed, and that is exactly where we are. Given that, it is so counter-productive now to continue with a policy of semi-permanent stagnation that one has to wonder what the Chancellor’s real motives are—apart, of course, from his own personal survival.
The US has put in place demand-creating measures and is steadily coming out of recession. The UK and the eurozone have not put such measures in place and they are slowly sinking deeper into recession. So why is the Chancellor so obstinately refusing to accept what the evidence is telling him? Why is he refusing to accept what even the IMF is telling him to do? The only plausible explanation is that this is not, in the last analysis, a deficit reduction policy at all; it is ultimately driven by the obsession to shrink the state and squeeze the public sector into the farthest recesses of a fully privatised regime. If that is so, crucifying the UK economy on a cross of ideology is hardly a proper way to proceed.
Of course, the Chancellor likes to defend himself, as he did again today, by saying that any stimulus to the economy will only increase the debt and thus make matters worse, but that is simply not true. First, instead of being kitted out for privatisation, the Royal Bank of Scotland and Lloyds—which taxpayers and the Government own 82% and 39% of respectively—could be instructed to prioritise lending for industry, infrastructure, low-carbon technology and key manufacturing niches in which the UK has a natural advantage.
A second option is the taxation of the hyper-rich, who have so far contributed almost nothing to tackling the recession that they largely caused. The latest rich list published in The Sunday Times a month ago showed that the richest 1,000 people—that is, 0.003% of the adult population—have increased their wealth over the past four years since the crash by a staggering £190 billion. That is considerably more than the total budget deficit, and if it were taxed at the current capital gains tax rate of 28%, it could theoretically raise £53 billion.
Stephen Williams (Bristol West) (LD): I note that the right hon. Gentleman talks about the “current” capital gains tax rate of 28%. Would he like to remind us what the rate was for the last five years of the Government in whom he served?
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Mr Meacher: As the hon. Gentleman and everyone else knows, it was 10% less. I strongly opposed that; I think that it was wrong. I do not think that 28% is right either. The rate should be where Nigel Lawson left it—namely, at 40%. But let us stick with 28%. That would easily raise enough money to create between 1 million and 1.5 million jobs in two years, which would kick-start a virtuous spiral of growth.
The third option is another tranche of quantitative easing. The gigantic sum of £375 billion of quantitative easing has already been printed, and it has disappeared into consolidating bank balance sheets. A further, much more modest, tranche of £25 billion, invested directly into the economy, bypassing the banks, could once again kick-start the economy without any increase in borrowing at all.
It is also highly relevant to point out, which the Chancellor never does, that the balance of payments on our traded goods, which has been going up for a long time, reached the staggering level of £106 billion in this last year. That is 7% of gross domestic product. Worse news can be seen when we consider the growth that we like to think occurred in the UK during the best years up to 2007. The National Statistics register shows growth of £300 billion, but that is slightly less than the total for equity withdrawal from housing for the same period. In other words, the inflation of property assets largely accounts for the apparent growth. So, rebalancing the economy, which is now vital, is not going to occur simply with a flourish of the Chancellor’s wand. It will need a hard-won, relentless programme of manufacturing revival, and the restructuring of the banks to ensure that they look after the national interest and not their own.
3.57 pm
Mr Ben Wallace (Wyre and Preston North) (Con): People used to say that England’s bread hung by Lancashire’s thread. In this debate, I want to focus on some of the good news on the rebalancing of the economy. The news has not been all bad, and, despite the economic circumstances, my constituents and the people of Lancashire have a good track record of rebuilding and moving forward and of expanding exports and manufacturing.
Manufacturing output rose last month. Today’s figures show that, in my constituency, unemployment dropped again. It dropped compared with last month and with last year. We now have 81,000 more people working in manufacturing than we did in 2011. Despite all the economic troubles, the people of Lancashire live in the real world. They know how the welfare changes have helped to encourage people to get back into work, and they know that the Government’s policy is trying to help businesses large and small to export and grow.
Despite our domestic difficulties on the European Union at the moment, that “real-worldness” of my Lancashire constituents has been demonstrated in the recent local elections. The real story in Lancashire was not the United Kingdom Independence party; it was that the Labour party failed to take back the county that it had run for 26 years. Funnily enough, people are not convinced by the Ed and Ed show, or by Labour’s economic credibility. But let us move away from the European thing. I know that the Opposition would like
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to focus on it, but I think that it will pass—
[
Laughter.
]
Opposition Members might laugh, but there are nine marginal seats in Lancashire, and if Labour cannot win Lancashire county council, it is not going to win a general election fast. Labour knows that.
BAE is one of our local employers, and 19,000 people work in the aerospace industry. Profits are up, orders are up, and it has recently landed a £2.5 billion order from Oman to build Hawks and Typhoons. The Typhoon Eurofighter is made in Samlesbury and Warton. That did not happen by accident, but because of the investment in skills that successive Governments and this Government have put into my constituency. Recently, the Government announced extra funding for Preston further education college, and more is on the way for Myerscough. Building up the skills base is one reason why BAE remains one of the most competitive and leading exporters in the country, training thousands of apprentices every year—some Government funded, some not.
As we speak, the Prime Minister is abroad yet again, trying to make sure that we negotiate a free trade treaty to allow British business to prosper in the American market. Only recently, we had a state visit from the President of United Arab Emirates, which was partly about trying to sell more British and Lancashire-made manufacturing to the middle east. The Prime Minister has taken rebalancing the economy and moving forward on growth seriously.
We have seen investment through the Department for Business, Innovation and Skills, under its Secretary of State—the Liberal Democrat part of our coalition—that has helped to support the Lancashire local enterprise zone in Samlesbury, where we hope to get skills academies and more investment in our young people.
Then, beyond that, are the changes the Chancellor has produced in the Budget—an increase in the use of the R and D tax credit that rewards our investment, for example, and the rolling out of the patent box, which means people who exploit their intellectual property in this country will pay some of the lowest corporation tax in Europe. That is why this country has a future in growing its manufacturing base and is on the right path to rebalancing.
In future, I want the Government to continue to invest in the F-35 joint strike fighter and the new generation of unmanned aerial vehicles. I also look to a city deal for Preston, hopefully worth £300 million—if we can get the Treasury to move along a bit quicker.
Something that is important for the future of the whole country is shale gas, and it is under my feet, in my constituency, that the Bowland shale exists. It is currently valued at 35 billion barrels of oil equivalent of gas—a $200 billion revenue stream, should it be extracted. We need it in Lancashire and in the country more widely for security of supply; we need it as alternative energy; and we need it to make sure that this country benefits from its assets and its mineral wealth.
We in Lancashire have a story to tell. Lancashire’s history is about reinventing itself and building for the future. It is not for nothing that Preston is one of the northern cities that bucked the trend since 1908 and has been one of the most progressive cities. Let us remember for the future that—
Mr Deputy Speaker (Mr Lindsay Hoyle): Order.
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4.2 pm
Hazel Blears (Salford and Eccles) (Lab): I am pleased to follow the hon. Member for Wyre and Preston North (Mr Wallace), but I can assure him that it is not our party that is obsessed with Europe. I think he needs to get his own house in order.
The last few years have been enormously difficult for families trying to make ends meet, working really hard and trying to give their young people a decent start in life. Arguments will rage about austerity cuts and the lack of investment—there are as many opinions as there are economists. I do not want to rehearse those arguments today, but to talk about something practical that I believe can help to address our economy’s problems that are causing such misery to thousands of families across the land.
There is sometimes a moment—in business, in politics and in communities—when an idea begins to take root, to gather support and to gain traction and momentum. I believe that the emergence of social value is one such moment. If it is pursued with energy and integrity, it could make a reality of the so far rather nebulous concept of responsible capitalism.
Eighteen months ago, I worked with the hon. Member for Warwick and Leamington (Chris White) to take the Public Services (Social Value) Act 2012 through this House, and I was delighted to do so. The duty to put social value at the heart of public procurement came in at the end of January. If implemented across government, across local government and in private sector supply chains, I believe it could make a huge difference to the number of apprenticeships, the amount of local labour, the building of small and medium-sized enterprises and the encouragement of innovation.
Over the last year, I brought some big companies together with social enterprises to see how they could collaborate to renew our economy. I have been heartened by the commitment from the private sector. Good companies know that this is not about philanthropy or altruism, because doing good is good business. Moving from traditional corporate social responsibility into a place where businesses are using their mainstream models to make a social impact in procurement, human relations, marketing and product development is helping to get social value into companies’ DNA. That is the way to get our economy moving.
Let me give a couple of examples. Sodexo, whose headquarters are in Salford, is working with one of my local social enterprises to take on ex-offenders to carry out grounds maintenance and facilities management. That is a fantastic partnership. Deloitte is helping 30 social enterprises to grow to scale under its social investment pioneers programme. CH2M HILL, which built the Olympics stadium and is working on High Speed 2, has values that extend to every level of the company when it comes to apprenticeships, training and social mobility. Trading for Good is a brand-new website where people can ask questions such as “Which is the company that takes apprentices? I want that company to redo my roof. Which is the company that is building local supply chains? I want to spend my money there.” It is a fantastic resource.