Budget Resolutions and Economic Situation — House of Commons, 2015-07-08
Topic: Macroeconomics
John Healey (Labour, Centre-left): My hon. Friend is right. If the Chancellor had not choked off Labour’s recovery, and the economy had carried on growing for five years at the rate at which it was growing under the last six months of the Labour Government, we would have had £100 billion of extra national income. That is a chunk of the national economy the size of Yorkshire taken out of what we produce as a country, with all the good jobs that go with it. Weak growth means a double blow for the debt and deficit, with lower tax receipts and higher borrowing, which is why the Chancellor failed to deal with the deficit during the last Parliament. This year, we learn from the Red Book, in the year he promised to have removed the deficit, it stands at £69.5 billion, with borrowing revised up over the Parliament ahead We know from the last Parliament that growth weakened as the coalition halved public investment in infrastructure, reduced Government investment in R and D, slashed vital capital investment in affordable homes and cut further education. What we have heard today risks reinforcing, not rectifying, those failings. Nothing that we have heard today will deal with the central growth challenge. Investment spending brings more benefit than just short-term economic stimulus. It is vital in the long run as a sure-fire way to lock in higher productivity and growth, which is imperative for good jobs for the future. Without investment in roads, in rail, in research, in science, in skills, in energy and in communications, we simply will not create and keep the well-paying jobs we need in Britain. Those are vital for the opportunities that our children will have tomorrow. When the Chancellor fails on public investment, he is failing our children’s future. Just as his overall surplus rule would not work for a family looking for a mortgage to buy a home, a teenager looking to borrow to go to university or a business aiming to expand, it is counterproductive too for a country that needs to invest in its future The Chancellor is no fool. The problem is not his intellect; it is his ideology. In this open, global, competitive economy, to get strong, broad-based growth the state needs to play its part. Government can be a force for good, not just in distributing national income, but in creating it too. Public investment in the UK is lower than in the large majority of advanced economies—well below the OECD average and lower even than countries such as Estonia, Latvia and even Greece. At the same time, the cost of borrowing to invest is at a near-historic low, with the Government paying a yield of less than 2% on benchmark, or 10-year, gilts Business gets it. Business organisations are crying out for the Government to lead an investment and infrastructure revolution. But just as the Chancellor halved infrastructure investment over the last Parliament, we learned today that public sector net investment this year will be lower than last year, and it will be lower at the end of this Parliament than it was at the end of the last Parliament. Yet there are choices for the Chancellor; there are choices for the country. He could set strong but more balanced fiscal rules to govern the public finances, both to stamp out any deficit on current spending and to recognise that job-creating, growth-generating investment is vital Figures from the Institute for Fiscal Studies show that over the next five years the Government could double investment spending while freezing rather than cutting departmental spending in real terms, making no further cuts to tax credits or social security payments, and raising no taxes, yet still eliminate the current budget deficit and have debt falling by the end of the Parliament. We should be debating that sort of reasonable settlement today, but this Budget, this Chancellor and this Government are denying the public that debate and those alternatives.