Infrastructure (Financial Assistance) Bill
William Bain (Glasgow North East, Labour)
The Chief Secretary today attempted to portray this Bill as a sign of the country’s economic strength, but instead these very limited and serially re-announced proposals are the strongest indicator yet of this Government’s weakness on jobs and growth. We should have had a Bill that put to work for productive investment the under-used corporate surpluses in this country and that brought forward more of the capital spending which has been back-loaded for later in this Parliament, but we have a damp squib set of proposals instead.
After two infrastructure plans have failed to deliver programmes on the ground, and after two failed attempts on bank lending—Project Merlin and the credit easing scheme—which have resulted simply in decline after decline in the pitiful rates of bank lending to small and medium-sized businesses over the past six quarters, the proposed plans could scarcely be more ineffective. The Government must know from the fact that two thirds of British businesses now believe that UK infrastructure will become weaker in the next five years that they must do substantially more to tackle the underlying issues that have diminished demand for bank lending, as well as its supply.
The Government pledged to grow the economy and cut national debt, yet in two years they have achieved the very opposite. Last week, Citigroup predicted that the Government’s borrowing will balloon by an additional £48 billion in 2015-16, a year in which the Chancellor is banking on 3% growth to come anywhere near his supplementary rule on debt falling as a percentage of national income. Citigroup also said that public borrowing may reach 90% of gross domestic product in the same fiscal year, as unemployment is much higher and growth is massively reduced from the original Office for Budget Responsibility predictions on which the Chancellor has staked so much of his fiscal credibility since June 2010.
Just a year ago, the Chancellor said that Opposition Members were joined only by the Hungarian communist party in believing that easing fiscal policy was necessary to create more output and more jobs in the economy, yet now the IMF, the OECD, the CBI and the British Chambers of Commerce all say that in the absence of growth the Government should change course on fiscal policy, and that in particular they should invest more in infrastructure. Even among the 20 leading economists who backed the Chancellor’s fiscal consolidation plan ahead of the 2010 general election, the New Statesman found only one who is now willing to support the Chancellor’s plans, and nine have urged him to change course and boost spending through increased infrastructure investment. As Roger Bootle said recently in his response:
“The key thing is to try and get the private sector to spend its money and that may require a bit of government spending to prime the pump.”
Oh that the Chancellor would listen.
We see from the latest British social attitudes survey, published today, that two years of the Chancellor’s reckless and self-defeating austerity has done more than anything else in the last decade to promote public support for additional public investment to boost the growth rate. As the chair of the Federal Reserve, Ben Bernanke, said on Friday:
“Monetary policy, particularly in the current circumstances, cannot cure all economic ills.”
Only this morning, Larry Summers, the former US Treasury Secretary, who knows a great deal about how to grow an economy while balancing a budget, called for slackening in the pace of fiscal consolidation in this country, saying that
“output lost from this British downturn in its first five years exceeds even that experienced during the 1930s.”
With evidence as powerful as that, what will it take for the Government to change course and boost infrastructure investment in a way that the Bill fails to do on the public side?
As the TUC has shown, for every £2 of cuts and tax rises imposed by the Chancellor, the deficit fell by only £1. His policy has failed even on its own limited and blinkered terms. We see 3.3 million people in our country in involuntary self-employment or part-time work because our economy is too weak to generate good numbers of effective full-time jobs. The TUC has also shown that with growth anaemic and consumer and private sector confidence at rock-bottom, by 2015-16 the Government could end up borrowing £175 billion more than predicted by the OBR in June 2010. It is the Chancellor who is now on the wrong side of the argument, and in failing to temper his austerity policies amid the continuation of weak demand with falling real wages and mass under-employment, he is now on the wrong side of history too.
Let me turn to the situation in Scotland. Tomorrow morning I will take part in a construction industry conference at North Glasgow college, which is opposite my constituency office in Springburn. There will be strong support for Government at all levels taking urgent action to support the construction sector. We face a social housing slump in Scotland, with a shortfall of 156,000 homes and according to Shelter Scotland a seven-year waiting lists for a social rented property. In the second quarter of this year construction work fell in the rest of the UK by 6.14%, but in Scotland there was a drop of 8.91%. There was a 7% drop in Scottish output on repairs and maintenance, compared with the same time last year. Surely that provides the clearest support for the argument that the Opposition’s policy of cutting VAT to boost demand is the right one for jobs and growth at this time.
Ahead of their budget on Thursday, the Scottish Government, too, must bear their share of responsibility for a substantially weaker construction performance in Scotland than in the rest of the UK. In the 12 months to June this year the number of construction jobs in Scotland fell by 6,000, or 3.5%, compared with an overall UK average drop of 1.2%. Construction is doing worse under the policies that the Scottish Government are following. I must say that I am somewhat surprised; the Scottish National party is always very keen to show its support for shovel-ready policies, yet no SNP Members are in the Chamber today—perhaps an absence of shovel-ready speeches is the deficit they are struggling with today.
The SNP must also recognise that in following its plan to decouple fiscal policy from monetary policy it would be doing the very opposite of what Keynes said was necessary to counter a slump of such length and severity. With its potential plans to separate fiscal policy from monetary policy, emphasising short-term profit taking rather than long-term investment, through corporate tax cuts, it jeopardises long-term investment in infrastructure in Scotland.
The Government should change course now before they do permanent damage to the economy, to the living standards of ordinary people under the most unprecedented threat for 90 years and to the employment prospects of the long-term jobless and young people. The evidence is clear and the case for decisive steps now is overwhelming. If they do not act, they will be a Government who will be out of time, out of excuses and, at the next general election, will deserve to be out of office.