December 4, 2008
Mr. Mark Field (Cities of London and Westminster) (Con): For what I fear will be the first of many years to come, the Queen’s Speech unashamedly focuses first and foremost on economic issues. Long before the nation was firmly awoken from its slumber to the magnitude of our collective debt crisis by the frightening figures contained in the Chancellor’s pre-Budget report last week, some of us had repeatedly warned in the House that, instead of building a secure future, we have been borrowing from it. In truth, the state of the public finances has been a national disgrace for some time. Now, already unsustainable debt levels look set to soar for years to come.
I make few apologies, as the Member for Cities of London and Westminster, for focusing on economic matters, but they will inevitably have an impact on home affairs and justice going forward. Over 11 years of Labour administration, too much Government borrowing has been funding current consumption. Now, in this time of economic crisis, we seem intent on continuing that approach; but as a strategy, it is neither prudent nor sustainable.
Our nation stands at a crossroads. I fear that by blindly following the Government’s path, with the many bits of legislation that have been announced in the Gracious Speech and in the past 24 hours, we are condemning future generations of Britons, including those still to be born, to pick up the bill for current welfare, health care and pensions provision, as well as for all the other expenditure on various Home Office experiments in the past decade or so and in years to come. In that way, we risk our nation’s permanent demotion from being a global economic player as the financial crisis allows commercial and financial power to move firmly eastwards, particularly to the emerging economic superpowers of India and China.
Far from encouraging the unchecked growth of the state in these times of trouble, for the electorate, we must tell it as it is: the apparently limitless era of cheap and easy money is firmly behind us. An increase in state intervention, as we have seen in recent weeks, may soften the financial blow in the immediate term, but the looming level of interest payments alone on our rising debt risks lowering living standards for decades to come. That will have quite an impact on a range of social issues and social divisions within our society.
Last week, the Chancellor of the Exchequer confirmed what many of us have long suspected: this year’s overspend will far exceed the £43 billion that was predicted as recently as the March Budget, and will rise to £78 billion. It will then reach a colossal £118 billion in 2009-10, always assuming that the Government can, for the first time this century, not overshoot their projected public sector deficit. By 2012-13, the nation will be battling with a net debt that will account for 57 per cent. of gross domestic product, with £350 million being spent in excess of tax receipts every day of the year. That prediction is based on the Government’s own figures, which have been shown to be selective and perhaps hopelessly optimistic in the past. It takes no account of expenditure on Network Rail, the cost of bailing out Northern Rock, Bradford & Bingley, Halifax Bank of Scotland and the Royal Bank of Scotland, or of the off-balance sheet financing of public infrastructure projects.
The figures are now so unfeasibly vast that I fear the general public remain blissfully unaware of the seismic implications of the unprecedented level of Government debt that is now locked into the system. The recent banking bail-out, following the credit crisis, has provided the Government with an alibi for the exorbitant levels of public debt, which were already spiralling dangerously out of control. We must ring-fence the billions accrued for the bail-out and the Government’s recently announced £20 billion fiscal stimulus plan from the enormous sums that were already on and, indeed, off the public balance sheet.
If this Queen’s Speech is to mark a departure from the past, the new spirit of the age should be for value for money out of the public purse. I fear instead, however, that the idea of big Government as an ever-benevolent cash cow is entrenching even further. The notion that however bad things get financially for the individual, the state will move to soften the blow, has only been increased by the Government’s intervention to protect depositors in Northern Rock, Icesave and others, as well as by the Prime Minister’s latest announcement, only yesterday, of a two-year benefit, in relation to mortgage payments, to families with children and to pensioners. The Government are returning to their comfort zone, with an economic narrative of interference in the name of protecting the public through continued high spending.
For sure, no Government can sit idly by; I accept that current events are epoch-changing, and that in decades to come people will look back on these months when they consider economic history and important decisions that have to be made. We should not be immune to the pleadings of those who bear the economic brunt of these hard times. In many ways, those pleadings will become ever stronger in the next year, as we all know, as the apparent economic crisis becomes much more evident to many of our electors. Equally, however, it is important that any action that is taken to soothe our financial troubles is taken responsibly—I might even say prudently—and with a firm eye on our long-term economic future.
It is imperative that the public are given a reality check. The servicing of the colossal debt that we have already racked up, let alone the somewhat irresponsible spending that is still to come, risks lowering living standards for many years to come. Above all, it will soon dawn on a new generation of younger voters that the unspoken message of the political class, across political parties, to anyone under 30 is that their generation will need not only to fund the cost of pensions for those who are older now, but to lower significantly their own financial expectations when the time comes for them to retire.
The availability of cheap goods such as clothes, technology and alcohol has created a false sense of material wealth in the young. The longer-term prospect of paying off huge student debts is something that, I am thankful to say, my generation—I am only 20 years out of university—has never had to be concerned about. The rosy future that is envisaged of enjoying a standard of living as good as one’s parents, experiencing a decent pension in a retirement that is likely to last for decades and expecting the generous range of state benefits that those in retirement currently take for granted will be unsustainable for the younger generation that is growing up.
Any failure by the Government rapidly to grasp that nettle risks bringing about serious social unrest in the years ahead. Our society will become economically divided as never before between old and young, as I have pointed out, between those who work in the comparatively secure and well-pensioned public sector and those in the private sector who are reliant on private wealth creation, and between those with globally transferable opportunities and skills, such as Members of the House, and those in an increasingly large tail of low-skilled, chaotic lifestyles.
I have seen such divides even in my constituency. Labour Members are often sceptical about what life must be like in Westminster, but the community is very polarised. Of course, there are tremendous pockets of wealth in places such as Belgravia, Knightsbridge, Mayfair and Marylebone, but in parts of my constituency, in Pimlico and Bayswater, many people live chaotic lifestyles. They live the sort of lifestyles that probably horrified people when they heard about what happened to baby P only a few miles to the north in Haringey. I, as a Member of Parliament, and my local councillors, can understand that although that sort of thing is not exactly a norm, it is not entirely out of the ordinary. Such events are worrying signs of the polarised society in which we live. That level of polarisation has always been fairly apparent in our capital city, certainly in central London, but I fear that it is becoming even stronger in many other parts of the country, and that it will have profound impacts on the whole issue of justice and the way in which we tackle law and order in the years ahead.
In addition, we must ensure that the public understand the international implications of our country’s continued indebtedness and severely weakened economic clout. We are witnessing the first signs of a seismic and rapid shift of power from the United States and Europe to China, India, Russia and even the Gulf states. The near collapse of the global banking industry is not just an issue of restoring confidence, important though that is, and the Government have tried to take important steps in that direction; it is also about the trust of our electors and of those who use the financial services industry. However, those issues will only accelerate trends that are already in play. The US economy may never recover its dominant position in global markets, and we have to accept that the City of London’s position as a leader in the provision of financial and business services will be sorely tested in the years ahead.
In the midst of all the damage and destruction to the value of the west’s financial resources, we face a major loss of economic power and international prestige. Put simply, money is power, and such financial means go hand in hand with global political leadership. The bail-out of US and European banks will be underwritten by the flooding, in the global capital markets, of US and European Government bonds, which will be mopped up by cash-rich sovereign wealth funds, particularly in China, the Gulf and Russia. The power that this money buys will allow them to exert far more political influence, and I believe that in places such as China and Russia, that will be backed up by military force around their borders. I fear that the model of democracy, open societies and free markets supported by the G7 will be sorely put to the test in the years to come.
In recent months, we have seen that one of the few impediments to Russia exercising military power beyond its borders is the influence of an educated, wealthy and fast-growing domestic middle class. To date, India and China—beyond their problems in Kashmir, Burma and Tibet—have shown relatively little interest in exercising their own military muscle. I believe, however, that as their global financial clout becomes more apparent, so too will their appetite for interference in world affairs. I also fear that some elements of the Islamic world will have regard to the west’s ongoing economic crisis. In spite of the Government’s projected figures, this crisis will not have gone away by the end of 2009. It is a crisis of economic confidence that will take up the rest of this decade and continue well into the 2020s. We have to ask who in the west will have the financial clout, let alone the political will, to spend money on policing any new flashpoints in the middle east or in parts of Asia.
I have visited China three times in the past five years, and I have been blown away by the pace of development there. If the US and Europe lose their moral leadership in the management of global financial markets, there is little doubt that, within a decade, the west will be forced to accept China as an economic and political equal.
I have also visited India twice since 2004. It is a nation under the international spotlight, as the monstrous hand of terrorism visited the great commercial city of Bombay last week. I am pleased that my own police force in the City of London and many other institutions under the Home Office have played a role in assisting India with aspects of terrorism in the past, and I hope that they will give it a great deal of co-operation in the future.
India has been sadly familiar with terror attacks, but the scale of the assault on Bombay, and the western targets involved, bestow on that city the dubious honour of being considered a global financial centre worthy of such an intricately planned outrage. As appalling as recent events have been, I also believe that they have exposed India for the first time in the eyes of many westerners as a real force to be reckoned with as a country. Bombay’s debut as a prominent item on global news bulletins might be viewed in retrospect as the formal recognition of its growing prominence in the international financial system. There is no doubt that that outward-looking, cosmopolitan, dynamic city will bounce back with resilience and confidence, as it services an ever-stronger internal market and continues its search for global trading partners.
Let us make no mistake: a formal shift of power eastwards will present opportunities as well as challenges. Our nation must be ready to exploit those opportunities, but I am increasingly concerned that the twin burden of high levels of public and private debt, along with a rudderless, untrusted financial sector, risks the movement of global business away from our shores. No doubt we will also face the emergence of deep social divides, should we continue down the dangerous path of consuming today and making future generations pay tomorrow for what we consume.
As a great defender of free markets, free trade and global capitalism, I am willing to bet that, while the Government currently have an important role in stabilising and revitalising our confidence-battered economy, it will eventually be hard work, enterprise and freedom in the marketplace that will ensure that our economy thrives again. If the best of economic times are to lie ahead, the moral and economic case must also be made for a smaller, more efficient state, and the untapped appetite among our fellow Britons for financial discipline and prudence must be encouraged.
We face letting down a whole generation, but the Conservative party already has a wide range of solutions to our declining competitiveness through our education and social affairs agenda. Long term, we must focus on promoting diverse and versatile skills, aspiration and mobility among our population. Yes, there is no doubt that the state must offer some security in these times of extreme need, but that aspect of its function should not overshadow the long-term importance of promoting flair, innovation and entrepreneurial spirit. It is only through those three factors that we can ensure prosperous times ahead.
I am sorry that my message is slightly negative and depressing, but we are living in difficult times. I hope that the Government will take on board many of these issues, including the many long-term concerns that should be in the forefront of our minds as we look in the short term at the proposals in the Queen’s Speech. I look forward to hearing other Members’ contributions, even if they stick rather more closely to the home affairs and justice agenda.