The Economy

Part of Council Tax Rebate – in the House of Commons at 9:31 pm on 31st March 2009.

Alert me about debates like this

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 9:31 pm, 31st March 2009

I think the right hon. Gentleman will find that the record will show that he gave responsibility in equal measure to greedy bankers, speculators and tax havens, but perhaps we can have a discussion tomorrow when the Official Report is published.

Those were imbalances that the Prime Minister not only allowed to occur but, as my hon. Friend Mr. Fallon reminded us, actively encouraged to generate the illusion of a sustained boom, an illusion that has turned to the reality of a bust, with all the pain and hardship of unemployment, business failure and repossession, which we have heard about this evening. The Prime Minister's posturing on the international stage is designed to reinforce the official message that this is not a British problem, to try to underscore his pointing of the finger at everybody but himself.

Let me remind the House that this is the man who controlled single-handedly the management of British economic policy for the past 12 years, not an idle bystander, not even really able to hide behind collective responsibility—plenty of his colleagues are only too willing to tell us in private conversations that he does not do collective—but an active micro-manager of the British economy and happy enough, as I recall it, to take credit for just that role when things were going well.

It was the Prime Minister who stripped the Bank of England of its responsibility for levels of debt in the economy as a whole. It was he who implemented the disastrous tripartite regime that failed so spectacularly to spot the absurd risks that British banks were taking. It was he who abandoned genuine fiscal prudence—Conservative fiscal prudence—at the turn of the millennium and replaced it with a bogus set of fiscal rules that have proved utterly worthless, because they did not stop him running up the huge and unsustainable pro-cyclical deficits that my hon. Friend the Member for Chichester referred to.

It was the Prime Minister who presided over an economy running on empty, living on tick, with both Government and households supporting their spending habit with cheap, easy credit, the whole precarious edifice balanced on the myth of inflated asset values, the origins of which my hon. Friend Mr. Spring touched on in his contribution. As my right hon. Friend the Member for Hitchin and Harpenden reminded us, it was also the Prime Minister who secured the knighting of Fred Goodwin for services to banking and of Alan Greenspan for services to financial stability.

When the crunch came, and the inevitable reassessment of risk occurred across the world while lending criteria suddenly tightened sharply, the Prime Minister's model fell apart. The emperor, whose claim to the throne was exclusively to have managed the British economy competently and successfully for a decade, was naked. Every action that he has taken since—every initiative, every announcement—has been designed to cover that nakedness and conceal the truth.

But the British people have seen through the Prime Minister; they know that Britain is not, as he claims, best positioned to weather the storm of recession. On the contrary, report after report shows that Britain's economy is facing a longer recession than any other major economy, and that our recession will be deeper than most. The people also know, ahead of the G20, that whatever else stronger global institutions might do, they would not have prevented the policy mistakes that the Prime Minister made here in Britain. There is no point in his calling for a stronger IMF to act as global policeman when he consistently ignored the IMF's warnings about Britain's fiscal position and housing market bubble—in 2003, 2005, twice in 2006 and again in early 2007.

The people are now seeing the downside of the chronic imbalance in the structure of the UK economy as a result of years of uncritical Government focus on financial services to the exclusion of almost every other sector, including tourism, as my hon. Friend Mr. Ellwood reminded us. That has left the UK economy desperately exposed to the icy winds of this global slowdown.

What the country needs, as the traumatic effects of deleveraging work their way through the economy, is leadership. I am thinking of leadership with a focus on the medium and long-term solutions that will sustain Britain's recovery and leadership with the strength of character to refrain from short-term posturing that denies the reality of the situation. The country needs a clear framework for the introduction of proper fiscal discipline in the upturn and a vision for a more resilient, more diversified economy that will be less vulnerable in future. It needs a plan for financial stability that will recognise and reverse the disastrous mistakes of the 1997 tripartite settlement and recession-fighting strategies that will enhance rather than undermine the economic recovery when it comes. Above all, the country needs a willingness to recognise the mistakes that have been made and to abandon the policies that have failed. In short, it needs a readiness to apologise and move on.

However, we have a Prime Minister resolutely focused neither on the long-term economic interests of the nation nor even on the short-term political interests of the Labour party—which would almost certainly imply his immediate resignation from office—but on his own short-term political interests. His response to the economic crisis has been to focus on creating the illusion of an activist Government. There has been a whirl of summits, appointments—some of which have been more successful than others, it appears—foreign trips and half-baked schemes. Every other day of the week there are yet more announcements of brilliant initiatives to resolve the crisis and bring relief to the nation. However, as my hon. Friend the shadow Chancellor spelled out, half the time they do not deliver the help that the attendant press releases promised.

The end result of all that frenetic activity is the exact opposite of what is required. It has not delivered the reassurance that restores consumer and business confidence, but it has given a credible impression of a headless chicken. The stamp duty holiday was followed by an acceleration in the fall of house prices. Last October's bank bail-out was supposed to get lending moving to businesses and households, but, as the right hon. Member for Oldham, West and Royton told us, it is not delivering. At a time of massive discounting, the VAT fiscal stimulus cut prices by 2.5 per cent. to little effect across the retail sector. That fiscal stimulus stimulated no one and has been universally derided at home and abroad; tonight, Mr. Hoyle demanded its abolition. That stimulus has added £2.5 billion to our ballooning national debt: a burden on future generations as a result of this Government's policy failures.

The Prime Minister must shoulder his share of the blame for the global crisis and take responsibility for the failure to prepare Britain for the recession that it is now enduring and for his recklessness with the public finances. He must be accountable for the ineffectiveness of the responses to the recession, which have failed to address the real challenge of getting credit flowing in the economy again and reconnecting real interest rates to official rates, which my hon. Friend Mr. Maples identified as being at the root of the problem. Crucially, the Prime Minister must be held to account for his failure to recognise his own failure. He still will not acknowledge the fatal flaws in his tripartite regulatory system; the weakness of his fiscal rules; the recklessness of his public borrowing; the terrible error of his claim to have abolished boom and bust, which has led to so much reckless behaviour both public and private; or the mistaken focus on fiscal stimulus when the problems lie in the supply of credit.

The Prime Minister has built his reputation on a model of economic growth based on unsustainable external deficits, unsustainable fiscal deficits and unsustainable household debt, which has brought us to the catastrophe we face today. That reputation is now destroyed, at home and abroad. Yet he tells us, in his own words, that he has "nothing to apologise for". This country remains a democracy, so if that is his position, let him put it to the test of public opinion. Let him fight a general election under the slogan, "Nothing to apologise for". Let the people speak, and "Nothing to apologise for" will become his political epitaph.

Embed this video

Copy and paste this code on your website