Charter for Budget Responsibility — House of Commons, 2016-07-20
Topic: Macroeconomics
Rebecca Long-Bailey (Labour, Centre-left): I begin by congratulating the Chief Secretary to the Treasury, the right hon. Member for South West Hertfordshire (Mr Gauke), on his well-deserved promotion. I also welcome the Financial Secretary to the Treasury, the hon. Member for Battersea (Jane Ellison), to the Front Bench. I am looking forward to our first debate, and I hope there will be many more to come I thank all Members across the House for taking part in this important debate. My favourite quote was from the hon. Member for Dundee East (Stewart Hosie) who said that the ex-Chancellor’s long-term economic plan was like a unicorn. We also heard from the hon. Member for South Suffolk (James Cartlidge), who rightly highlighted the importance of intergenerational fairness, although I am not sure that this charter actually delivers that, by any stretch of the imagination. We also had a fantastic speech from the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), who highlighted the problems associated with neoclassical economic thought in a very articulate way As the House will be aware, the Opposition did not support the charter for budget responsibility that we are debating today. And as we have heard throughout the debate, the Government were fully aware last summer that large swathes of respected economists did not find the then Chancellor’s charter for budget responsibility economically credible—if indeed the true intention was to generate growth and prosperity for all. My hon. Friend the Member for Hayes and Harlington (John McDonnell), the shadow Chancellor, said at the time: "The charter before us today…has little basis in economics."—[Official Report, 14 October 2015; Vol. 600, c. 437.] This has proved to be the case. If, however, the charter was simply the vehicle to implement an economic ideology that was dedicated to sucking wealth up to the top 1% and that systematically undermined and dismantled public services, it was a very clever plan indeed. I do not intend to spend time in this debate arguing about the moral conundrums of Conservative party economic doctrine, however. Today, I will try to be the moral compass of the new Chancellor and his team, as we are all acutely aware that the economic future of the country is standing at a critical crossroads As the shadow Chancellor has already outlined today, the Government have missed or been forced to abandon all three pillars of the charter. The welfare cap was missed in the last financial year and is due to be missed in each year until the end of this Parliament. The debt-to-GDP target has been spectacularly missed. Not only is the ratio of debt to GDP not falling; it has risen, with public sector net debt at 83.3% in the last financial year. Finally, the budget surplus, quite impossible to achieve without finding funds to fill the black hole that opened up in the March Budget, seems to have been more or less conveniently abandoned now on the pretext of the EU referendum result I suspect that many on the Government Benches realised some time ago that the target of a £10 billion surplus by 2020 was simply unachievable without drastic cuts to public spending, resulting in a short-term budget surplus. However, the price to pay simply to save embarrassment for missing this fiscal target was long-term economic stagnation and the loss of vital public services. The Financial Secretary to the Treasury may tell the House that the current charter provides a get-out clause whereby the rules are suspended if the OBR assesses that there is a negative shock to the economy. However, the OBR said that it will not publish any revised figures until the autumn, so I urge the Chancellor and his team not to risk floating along directionless until then. Our approach would allow substantial investment in infrastructure and skills to address the underlying issue of low productivity in our economy. Unfortunately, business investment has been falling for the past two quarters, even ahead of the referendum, and early indicators of pauses in investment and threatened job losses suggest that it could fall even further. British business needs the Government to step in and invest in industry to make Britain a better and more stable place to do business. Businesses do not want cuts to the headline rate of corporation tax. They do not want a raft of foreign takeovers as a result of the fall in the pound following Brexit. British businesses and their workforces should be the kings and queens of global industry. We desperately need a Government that are genuinely committed to what I call "industrial patriotism", but we have sadly not seen that for some years Fortunately, the Chancellor and his team have an ideal opportunity to turn things around and develop their own direction for fiscal policy. The new Prime Minister said in her first speech to the nation: "When we take the big calls we will think not of the powerful, but you." We know that the new Chancellor supported further welfare cuts despite public outcry, so I must educate him as to how bad things really are. We have suffered nearly a decade of economic decline, increasing and stark regional inequality, and deep-rooted alienation and despair in communities that feel left behind, so it was no wonder that people voted in their droves during the referendum. They voted for an answer, for someone or something to blame for the dire economic situation that their communities were in Only a few weeks ago, the first Salford poverty truth commission was launched to examine the facets of poverty experienced throughout everyday life in Salford. At the launch, 15 members of the community stood up with real guts and courage in front of a packed hall to tell their individual stories. If the Chancellor and his team could hear what I heard that day, they would know that the economy in its current state is not working for the many I heard tales of people suffering horrific childhoods, turning to alcohol and drugs to numb the pain in the absence of counselling—there is no support for them, given the cuts in mental health provision. I heard from families on the breadline, unable to afford to heat their homes and forced to use food banks. I heard from those the Government would deem to have pulled themselves up by their bootstraps—people who are university educated and with well-paid jobs, but still struggling, crushed by a mountain of household debt. I heard from mothers forced to turn to prostitution just to keep a roof over their children’s heads. I heard about families hiding behind the sofa when the loan shark or bailiffs came calling, telling their children to be as quiet as mice. Mr Speaker, you may know that L. S. Lowry, the famous Salford artist, was a rent collector by day in the 1920s, knocking on doors just like today’s bailiffs. He tried to encapsulate the misery and struggle that he encountered in the pictures that he painted. What would he say if he knew that families were still going through the same agonising struggles in 2016 We have called this debate today to give the Chancellor and his team of Ministers an opportunity to set out their stall, after 10 years of failed austerity economics. It is an opportunity to turn this country around and address regional imbalances; an opportunity to provide investment support for businesses in those areas hit hardest by economic decline; and an opportunity to invest in skills and infrastructure, and to allow businesses to form the capital to invest in themselves. We can make this nation’s economy the envy of the world and we can ensure that the prosperity we generate when we do that is enjoyed by the many not the few, but the direction of fiscal policy over the next few months is critical to that. It is one of the biggest calls this Chancellor is ever going to have to make. I really hope that his team has listened today and that the Prime Minister’s gesture towards "prioritising the many", as Labour Members do, is not merely rhetoric.