Financial Implications for the Next Generation

Part of the debate – in Westminster Hall at 4:59 pm on 4th December 2018.

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Photo of Richard Drax Richard Drax Conservative, South Dorset 4:59 pm, 4th December 2018

I beg to move,

That this House
has considered the financial implications for the next generation.

It is a pleasure to see you in the Chair, Mr Hollobone, and to give this speech. It is also a pleasure to see my friend and colleague the Minister in his place. I have huge respect for him and I know that he has gone to considerable length to help with this debate.

As the Member of Parliament for South Dorset, over the past eight and a half years I have had the great pleasure of getting to know many of my constituents. I have always undertaken to represent them without fear or favour, whatever their political beliefs, which is why I have called this debate to discuss the appraisal of our nation’s finances by Mervyn Stewkesbury. He is a well-respected and successful businessman from Weymouth, in my constituency. Mr Stewkesbury owns and runs his property company Betterment Homes and he is in the Public Gallery to listen to this debate.

From the very outset some years ago, Mr Stewkesbury has had an agenda. His concern, which he has expressed repeatedly to me, Ministers and various party leaders since 2010, is the economy. In particular, he believes that our national debt and deficit are too high. He has been an assiduous correspondent since my election in 2010, and indeed briefly ran against me in his genuine desire to make these facts known. His manifesto, as a matter of interest, was based entirely on his financial predicament. He had no other agenda, so keen was he to make his point. I am delighted to say that I won and he did not, despite a very honourable attempt to do so.

Put simply, Mr Stewkesbury believes that we are going to hell in a handbasket, and that he has the figures to prove it. He does not think that any of the responses he has received since 2010 have been adequate. I have therefore taken the opportunity to bring this matter before the Minister and my fellow MPs, in the hope that Mr Stewkesbury may receive a satisfactory answer. If that is not achieved, I hope that this debate will at least serve our country by airing a subject that should be aired repeatedly.

Of course we should live within our means, and Mr Stewkesbury is not alone in suffering sleepless nights over the size of our national debt. The most recent quarterly report from the Office for National Statistics confirms that our national debt at the end of March 2018 stood at around £1.8 trillion. This is equivalent to nearly 86% of our GDP, reaching the reference value of 60% set out in the Maastricht treaty excessive deficit procedure.

However, let me be clear that there is no solace here for the Opposition. It is worth noting that we first exceeded the 60% limit in March 2010, at the end of Labour’s 13-year rule, when debt was just shy of 70% of GDP. On the plus side, our deficit or net borrowing in the financial year to March 2018 has dropped by £5.9 billion for the second consecutive year, indicating that the tide has—we hope—begun to turn. Also, although the debt has increased by nearly £44 billion, as a percentage of GDP it has fallen by 0.9 percentage points, from 86.5% to 85.6%. This fall in the ratio of debt to GDP implies that GDP is currently growing at a greater rate than Government debt—again, movement in the right direction. However, as I am sure you understand, Mr Hollobone, this remains a mighty tanker to turn.

A most informative letter from the former Economic Secretary to the Treasury, my right hon. Friend Stephen Barclay, in August 2017 confirmed that when we inherited the largest budget deficit since the second world war in 2010, we were borrowing £1 in every £5 that we spent. Now we borrow £1 in every £16 we spend, as a result of reducing the deficit. The Minister also confirmed that over the same period debt rose as a share of GDP, although by less than it would have risen had the deficit not been reduced. In the same letter the Minister accepted that Mr Stewkesbury was correct in pointing out that the overall public sector net debt had risen. That, of course, is Mr Stewkesbury’s main concern, and one that we cannot afford to brush under the carpet.

I personally believe that, in view of the recent Budget spending increases, claims that austerity is over and the promise of billions more pounds for the NHS—which I do not think we have—it is time to bring this private citizen’s concerns into the public domain. I cannot vouch for all of Mr Stewkesbury’s points, nor his figures, but they form part of his profoundly and sincerely held belief that our country is heading to financial ruin. I am told that Mr Stewkesbury’s figures are all taken from Government and Treasury publications, which are publicly available.

I would like to point out that Mr Stewkesbury’s ire is not exclusively reserved for the current Government. His research dates back many years. His graph, interestingly, shows how national debt began to soar just as we joined the EU in 1973. He says that for 25 years before we joined the EU our debt increased on average by 1.4% year on year, but from the moment we joined, and for the next 45 years, it increased on average by 9% every year. He claims that had we not joined and maintained that 25-year borrowing record, our debt would now be £66 billion instead of £1.8 trillion.

As I have said, Labour receives equal scrutiny. Mr Stewkesbury was amazed to hear the shadow Chancellor, John McDonnell, tell the BBC on 18 March:

“Austerity is a political choice, not an economic necessity.”

Mr Stewkesbury asks:

“How can he possibly say this, when we are overspending and borrowing around £300 million every day?”

He is not enamoured with the economics of the Leader of the Opposition either, adding that his pledge to

“spend our way out of debt” is nothing short of ridiculous.

As I have mentioned, when David Cameron’s Conservative Government were elected in 2010, the financial black hole in which we found ourselves was bequeathed to us by the departing Labour Government. Who can forget the note left by the departing Chief Secretary to the Treasury, Liam Byrne, which read, “I’m afraid there’s no money left”? Perhaps it would have been funny, had it not been true. Certainly, that is Mr Stewkesbury’s view. He says that over the past seven years he has spent more than 5,000 hours studying Government finance and that we are “on course to bankruptcy”. He says that it is an indisputable fact that Government cannot go on overspending and borrowing forever without ending in bankruptcy, but that, according to him, is precisely what we are doing. In a letter to me earlier this year, he explained that it had taken 100 years to rack up a debt of nearly £450 billion by 2005, when the debt was £446 billion, and that is taking into account two world wars. Then, Mr Stewkesbury says, over the following years of Labour, coalition and Conservative rule that figure has more than quadrupled to £1.8 trillion. Sobering figures; sobering stuff.

Mr Stewkesbury adds that many of our assets, not least our gold—thanks to Labour—have been sold and an additional £375 billion has been printed. He claims that one asset sold, for £757 million, was the UK’s stake in the channel tunnel. He believes that allowed us to go for three days, five hours and 36 minutes without having to borrow any money. I would be grateful if the Minister could help on that point.

Mr Stewkesbury’s graphs show that in the seven years from 2010 our debt increased by £719 billion. He then explains the consequences. He says that in 2010 the debt for each living person was £16,231, with interest at £9 per person per week. By April 2017 those figures had risen to £26,526 and £14 respectively. He goes on to say:

“For 40 years our debt on average doubled every five years. Do the same again and by 2026 our debt will be more than £50,000 per person, with interest in the region of £30 per week per person. This is not sustainable.”

Neither is the fact, he says, that the Government, on average, overspent and borrowed £338 million every single day during 2016-17. Last year, he adds, the Government increased the debt by £123 billion. Government spending now equates to £231 per week for every living person, at a time when two in five work in the private sector, which, in the main, pays for our public services, including pensions, through tax.

Mr Stewkesbury believes that our children’s future is at risk, and he claims that party politics—of all parties—has played a significant role. For more than 40 years, he says, parties of all colours have attempted to buy voters with unaffordable promises. Here I will add my own two pennies’ worth. I absolutely agree that too often Governments of all colours have promised things that we simply cannot afford and have attempted to buy the voters. I hope that disingenuous habit will not continue in future. I most humbly suggest that what voters actually need is the truth, and if that is financially unpalatable, they need to hear it.

Last month, in his most recent communication with me, Mr Stewkesbury wrote that our debt interest payment alone is circa £50 billion. People outside this place, whether they are in the private or public sector, ask, “Richard, why aren’t you doing this? Why aren’t you doing that?”—always about money, of course—or say, “Spend this, spend that; do this, do that,” but when I tell them the rather sobering fact that before we do anything we have a massive debt interest to pay, a remarkable quiet comes over them when that sinks in. Before we progress anywhere, we have to pay £50 billion—every year. It is a terrifying sum of money, which we have to reduce. I hear cries of austerity, but I am not sure that austerity is working in that sense, because we still have a vast debt interest.

Mr Stewkesbury thinks it is totally irresponsible to claim that austerity is over when we are still borrowing £155 million every single day. Furthermore, he opines, it is irresponsible of the Government to claim that austerity is over until we are living within our means and repaying our debt. He is concerned that, according to Government figures, they expect to borrow a further £52 billion this year and £44.1 billion in 2019-20, so our debt will exceed £1.8 trillion by 2020. That equates to £28,371 for every living person.

Mr Stewkesbury has consistently sought clarification on one particular piece of historical accounting, but has never had a satisfactory answer. Labour’s actual debt in 2010 was reported as £759 billion. Later that figure was increased to just over £1 trillion. Mr Stewkesbury would be most grateful if the Minister could explain why those figures seem so different.

Finally, on Brexit—I thought I might get through one contribution without mentioning that word, but unfortunately Mr Stewkesbury has not allowed me to do that—he quotes an interview I gave, in which I said:

“We want to be in control of our destiny and I am baffled by anyone who cannot understand why.”

He, too, wants us to be in control of our destiny, but feels that that is impossible if we go on overspending and borrowing about £300 million every day.

Despite the many letters Mr Stewkesbury has received from the Treasury, he believes that the truth—or perhaps the facts—has yet to be explained to him. He dismisses the many letters he has received as pages and pages of waffle. He particularly resents being told that we are in a stronger financial position than in 2010, and believes that the figures prove otherwise. He says that one Minister wrote to say that Government debt is expressed as a share of GDP and that, in reducing the deficit, the Government have made significant progress in improving the health of the public finances. With the current debt at 85.6% of GDP compared with 69.6% in 2010, his concern is understandable. He and I very much look forward to hearing the Minister’s response, when he can hopefully allay Mr Stewkesbury’s concerns.