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I shall be sorry to see Chris Kelly leave us. I have greatly enjoyed his company as a fellow member of the European Scrutiny Committee. Although we disagree about politics and I want Dudley South to become a Labour seat, I shall miss him.
The Budget statement was a process of glib window-dressing for election purposes: let us not kid ourselves about that. It was full of holes, and it failed to mention the harsh realities of the ongoing cuts agenda—an agenda that is really about reducing the role of the state on a road to the Hayekian nightmare of a world governed by private markets rather than democratic government.
My right hon. Friend the Leader of the Opposition spoke trenchantly and, I think, very intelligently yesterday in criticising the Chancellor, and my right hon. Friend the shadow Chancellor did the same today. My hon. Friend Derek Twigg spoke very well about the effects of the cuts agenda on local government, and on child protection and adult and elderly care. We are already seeing vulnerable people being left at risk. There are crises of child abuse and insufficient child protection, and more elderly people are suffering from dementia. All those people depend on local government, which is being cut. We need more resources for local government, not less, and quality care for those who need it.
Millions of people are also in need of decent homes, as my hon. Friend the Member for Halton mentioned. In Luton, we have 8,000 on the waiting list. The only real solution is to recreate and restore the council housing sector. It was first attacked in 1972 with the then Housing Finance Act, which I well remember as a councillor at that time. Subsequently, we have had forced council house sales, which have left millions on waiting lists unable to get into a decent home, and a high proportion of those council homes sold did not end up in owner-occupation; they are now being let out as private rents.
The NHS is also threatened with deep cuts and creeping privatisation, inexorably driven by Government policies. It is substantially under-resourced now. Germany and France spend about 2% more of their GDP on health than we do, and that would amount to about £60 million per constituency per year. I would like my £60 million for Luton North now. It would make a tremendous difference.
The police have had savage cuts already, with more to follow, yet at the same time they are being asked to deal with terrorism threats and child abuse, looking at historical as well as current cases. They cannot do that unless they have the resources to do it, and they need more, not less.
On the subject of the deficit, the Government have refused to take the tax gap seriously, which is in reality £120 billion a year, not the £30 billion or so that they claim. What have the Government done? The Chancellor has decided to let another several million people not fill in tax returns, which is inevitably going to reduce the income to the Exchequer and make the tax gap, and the deficit, worse. Thousands of Her Majesty’s Revenue and Customs staff have been sacked already or lost their jobs, with more to follow, yet it is estimated that senior HMRC staff collect 20 times their own salary and junior staff 10 times their own salary, so more staff means getting in many more times the cost of those staff and helps to bring income to the Treasury. It is income that is the problem, not expenditure. The Chancellor’s biggest mistake, however, which I think he may come to regret, is abolishing tax returns for many people.
Today’s debate is really about business, however. I and many others are concerned about manufacturing. What the Chancellor has failed to recognise, despite pressure from me and others, is the crucial role of the exchange rate. After 1931, we had recovery after a big devaluation; after 1992 and the collapse of the exchange rate mechanism, we had a devaluation that drove recovery; after the 2008 crisis, we had a very substantial depreciation against both the euro and the dollar. We depreciated sterling by 27% against the euro and 31% against the dollar, which saved Britain from becoming another Greece, but writ large. We have survived simply because of the ability to devalue and the Government should thank my right hon. Friend Mr Brown for keeping us out of the euro, which will be the case indefinitely now. That devaluation has saved us from a worse fate. It has still been difficult, but not anything like as bad as it would have been if we had not been able to devalue.
However, despite that depreciation we are still overvalued. We still have a massive trade deficit, with the EU in particular, amounting to about £1 billion a week, which is about 1 million jobs that we have exported to the continent of Europe. We must get an appropriate exchange rate for our economy that is considerably lower than it is now. Because the euro is depreciating, the pound is appreciating, which is going to make things worse. We therefore have what is called the J-curve effect: things seem to get better initially, but will get much worse later on when our competitiveness is seriously damaged by a depreciating euro. We therefore ought to be addressing the exchange rate, seeking to manage it down to an appropriate value, which will give us long-term protection for our manufacturing. As a result of consistent over-valuation over decades, manufacturing has fallen to half the size of that of Germany. Germany manages its exchange rate; it cemented it against all its competitor countries in the EU, which has protected it. We must do something similar, not by joining a fixed currency, but by managing our exchange rate. Our balance of trade is a serious problem that has to be addressed.
If competiveness is damaged by a poor exchange rate, investment is less likely. We still have a low level of investment compared with the average for the rest of the world, and it is a tiny fraction of China’s investment. We therefore still have low productivity. We have the second lowest productivity in the G7, above only Japan. All these factors are affected by the exchange rate. I hope the next Government—it should be a Labour Government—will address the exchange rate and ensure that we have a long-term appropriate exchange rate to make sure our industries survive and prosper.