The Economy and Work

Part of Debate on the Address – in the House of Commons at 1:01 pm on 26th May 2016.

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Photo of John Martin McDonnell John Martin McDonnell Shadow Chancellor of the Exchequer 1:01 pm, 26th May 2016

I do not want to be discourteous to any Members, but as you suggest, Mr Deputy Speaker, I will take only a limited number of interventions.

On the crash, let us be clear—[Interruption.] Well, let us talk about the crash. The policy of deregulating the banking system, turning the City of London into a casino, was the policy pursued by the Conservative Government for the previous 30 years.

Let us move on to the criterion of growth. Growth has been revised downwards for every year for the rest of this decade, and when the OBR revised its forecasts downwards, the Chancellor’s entire Budget plan was shot to pieces. He has been left with a £4.8 billion black hole of committed spending, but there is no committed funding. It is nonsensical to claim, as the Government’s Queen’s Speech did, that the public finances are being placed on a “secure footing” when there are gaping holes in the Budget and the Institute for Fiscal Studies thinks there is only a 50:50 chance of meeting the Government’s own fiscal surplus target. This is betting the nation’s finances on the equivalent of tossing a coin. There is nothing responsible and there is nothing “secure” in setting unrealistic and politically motivated targets for public spending cuts.

It is useless to preach to us about the need for a “stronger economy” when, by his actions in office for six years, the Chancellor has methodically undermined the economy. This was his choice. Austerity was a political choice, not an economic necessity. We all now live and are still living with its consequences. Because it was the wrong choice to make, the Chancellor has failed, and it is the British people who are bearing the cost.

The Chancellor has piled failure upon failure, but at the centre of it all is the failure to sustain productivity. Productivity is the key to growth in any modern economy, and the surest way to achieve increased productivity is through increased investment. Increased investment means installing new equipment and replacing old infrastructure, yet business investment remains weak. When business investment is weak, the Government should step up to make sure vital, world-class infrastructure is provided—from high-speed rail to high-speed broadband. There is now consensus from the International Monetary Fund to the OECD, and from the CBI to the TUC, in urging Governments—not just in this country but across the world—about the need to invest in the future, but this Government are clinging to their fiscal surplus target, which is set actually to cut real-terms Government investment over the course of this Parliament. Mr Deputy Speaker, you could not imagine a more perverse and inadequate economic policy.

Behind the failure to invest lies the failure of our economic institutions. Too many of them have been captured by special interests or place short-term gain ahead of long-term growth. We have major corporations, which are sitting on a cash pile of up to £700 billion, paying out high salaries to senior executives while failing to invest. It is no wonder that in the past month we have seen a series of shareholders revolts against the remuneration packages of some chief executives.

We have a Business Department that does not actually believe in supporting business and refuses even to mention the words “industrial strategy”. In Her Majesty’s Revenue and Customs, we have a department for tax collection that does not believe in collecting taxes—not, at least, from major corporations. That was demonstrated by the fact that when it struck a deal with Google that reflected an effective tax rate in single digits, the Chancellor calls it a “major success”. I have written to the Chancellor to make sure he urgently contacts the French authorities, so that any information they find during their investigation into Google’s Paris headquarters is shared with us to give us a better understanding of Google’s operations in the UK.