Amendment of the Law

Part of the debate – in the House of Commons at 8:08 pm on 29 March 2011.

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Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member) 8:08, 29 March 2011

I am pleased to say that this morning we had a coalition ground force moving into Swansea in a dawn raid at 8.30 am, with the Business Secretary alongside the Secretary of State for Wales talking in the chamber of commerce, and they had a great deal of local resistance from people with placards and the like. In Swansea, 40% of people in public services are facing cuts and unemployment, and we have been denied electrification by the Government, which would have meant inward investment in Swansea. In addition, Tata Steel has just had a bomb dropped on it about the new carbon tax, which will focus only on its facility in the UK and not on those in any of the other 20 countries in which it makes quality steel. Obviously, it is a very valuable employer in the area.

The people resisting the Secretaries of State this morning were similar to the hundreds of thousands who marched in London on Saturday. Who were those people? They were nurses, doctors and teachers—people who keep our work force healthy and educated. They were tax collectors who face losing their jobs—people who are supposed to be collecting tax more efficiently. They were police officers, who are meant to patrol and police, as well as look after the riots and protests being incited by the cuts. They were small business people who are clearly concerned that the Government’s attitude to small business is, “If you make a loss, sell your tools,” as opposed to achieving growth through increased sales. They were service users—people who face cuts in libraries, leisure centres, pools, centres for the elderly, Sure Start and so on. The people on the march had one common cause—that there should be an alternative mix of growth, tax, cuts and timing that is optimal to confront the deficit before us.

It is worth reminding ourselves that the deficit did not come out of some sort of Labour inadequacy. It was the price paid to avoid a depression caused by the banks. Two thirds of the deficit—£84 billion—has been evaluated by the Institute for Fiscal Studies and others as being the impact of the financial disaster that we imported from sub-prime debt. The fiscal squeeze on which the Government have embarked is about £98 billion, more than the overall financial crisis. That is to take place over four years. The question is whether, if there is a massive outside impact on the country’s financial deficit, we can hope to get rid of that and more within four years without disrupting our economic capacity and social fabric. Should it be the case that three quarters of that is cuts and only one quarter is tax?

The OBR has reached its verdict. It has had to change the growth forecast from 2.6% to 1.7%, which shows that less revenue will come in from people working, and the Government will have to rely more and more on savage cuts. There is an alternative, the Labour alternative—to halve the deficit in four years rather than get rid of it completely, and to use three methods instead of just one, cuts. The three methods are to focus on growth, make the bankers pay their fair share and make savings over time. Germany, for example, is clearing its deficit through export-driven growth, rather than focusing on cuts.

I was over in Germany. I went to UK Trade & Investment, which markets Britain for inward investment. There are lots of German companies queuing up to invest in Britain. Those offers were put on a computer platform for regional development agencies to draw down, but because the RDAs have been abolished, those inward investments are not being taken up and are going to other countries. German regions, let alone the whole country, have offices in Seoul and other emerging markets and are trading and getting inward investment there, and we are not. We are undermining our ability to grow. Instead of a budget for growth, we have cuts.

Growth went negative in the last quarter of last year. Why? Because consumer confidence, the inclination to spend, and investment confidence were washed away by the talk of austerity and the reckless, breakneck speed at which the cuts were made. In addition to the 300,000 people who are to be sacked from public services, PricewaterhouseCoopers says that another million jobs will be lost in the private sector, costing around £7 billion in lost tax and benefit costs per year. Add to that the £4 billion that we have to spend on restructuring the NHS to help privatise it, and the other costs of unnecessary structural change at a time of shrinking budgets, and we can see that this is economic incompetence at its worst. It is not necessary in its current contortion, it is not fair and it is not sensible.

The key issue on banks is that they need to provide liquidity to small business as the engine for growth. We all heard about Merlin, but the question is whether that will be delivered. Sadly, a person in my constituency is on hunger strike over the issue. Finally, people may not have noticed the 3p reduction in inheritance tax given to bankers, who are now paying a smaller proportion. If they give money, for example through works of art, we can see from the fine detail—