2015 11 – Parliamentary Notes (2)

Parliament Notes (Part2)

by Dick Barry

Charter for Budget Responsibility

MPs debated the Charter for Budget Responsibility: autumn update on 14 October. This was John McDonnell’s first real test as Shadow Chancellor. Twenty one Labour MPs abstained from voting. For reasons of space, a number of interjections have been omitted.

The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne):

I beg to move,

That the Charter for Budget Responsibility: autumn 2015 update which was laid before the House on 12 October, be approved.

Despite all the details of fiscal policy that we will discuss, and the mechanisms in the charter we are debating, the questions before the House and the country are very simple:

is Britain going to pay its way in the world? Are we going to live within our means and bear down on our debts, so that next time disaster strikes we are better prepared? Do we have the strength and determination to finish the job that we started of turning Britain around and providing security to working families at every stage of their lives? Or will we be profligate again and spend money that we do not have, borrow for ever, mortgage the future of our children with debts that we could not pay ourselves, and consign Britain to a future of high debt, instability and low growth? No. Our answer, and the answer in the charter, is that we will put economic security first.

We resolve to put the livelihoods and living standards of working people ahead of the irresolution of politicians who lack the discipline to control public spending and deliver financial stability. We commit to learn from the mistakes of the past, not to repeat them, and we choose to put security first. After all that Britain has been through, it is remarkable that the proposition in this Charter for Budget Responsibility should even be contentious. It states that now the economy is growing we should be reducing our exorbitant debts, and that we should do that each year by reducing the deficit until we eliminate it altogether and run a surplus. Once we have achieved that surplus, in normal times we should continue to raise more than we spend and set aside money for when the rainy days come. It is as simple as that: we should fix the roof when the sun is shining.

Mr Osborne:

I will give way to the former shadow Chancellor.

Chris Leslie (Nottingham East) (Lab/Co-op):

I am clear that we should not turn our face against a surplus, but it is important that the Chancellor’s definition of “normal times” safeguards some of our vital public services and ensures that we protect the most vulnerable in our society. Is there a danger in automatically going for a surplus without protecting some of those very basics for society? [Interruption.]

Mr Osborne:

I was about to pick up on the point that the hon. Member for Bolsover (Mr Skinner) just made, which is that the hon. Gentleman has shifted his position in the last few days. The former shadow Chancellor was telling us that the position adopted by the Labour party on this charter sends the wrong message to the general public, and in the brief period when he was shadow Chancellor he argued from this Dispatch Box that we should run a surplus. At the time I think he was trying to make the argument that the people who suffer most when Governments lose control of the public finances are precisely the most vulnerable in society and those who lose their jobs or get cast out of work. It is not trade union barons who lose their jobs when the economy fails; it is the poorest, not the richest in society who pay the price, and the most progressive thing that a Government can do is to run a sound fiscal policy and provide financial stability to the working people of this country. That is what we are debating.

What are the objections to our approach? There are those who say—including in the last couple of days—that the economy is not strong enough and that we need more growth before we cut the deficit. That advice on growth and the deficit normally comes from those who gave us the greatest recession and the largest deficit in our modern history, but let us put that aside for a moment. The British economy has been pretty much the fastest-growing of any major advanced economy in the world, this year, last year and the year before.

We have had the latest jobs numbers today and they show we have more people in work than at any point in the history of this country—the highest employment rate in the history of this country. Unemployment is down 79,000, full-time work is up and, while inflation is falling, pay is now rising strongly at 3% a year. This is the strong economy that the British people have built with their hard work and sacrifice. If this is not the time to be reducing your deficit and your debt, when is? We are aiming for a budget surplus in 2019, because if we are not running a surplus nine years or more after the end of the recession, when the economy has been growing for these nine years, when will we ever run a surplus? The real answer from people who oppose this charter is never. Speaking of which, we turn to the hon. Member for Bassetlaw (John Mann).

John Mann (Bassetlaw) (Lab):

When the Labour Members of the Treasury Committee rightly identified this proposal as a gimmick in the Treasury Committee hearings in July, did the Governor of the Bank of England, or any of the other eminent economic brains we questioned, give a single word of defence for this political gimmick?

Mr Osborne:

It is not a political gimmick to have sound public finances. What is a political gimmick is coming out on the eve of your conference with some policy that says you support what we are doing, and then two weeks later turning up in the House of Commons and voting against it. Indeed, the hon. Member for Bassetlaw has described the policy of the Labour party as “a huge joke”. The truth is that the people who oppose this charter never want a surplus. They want to run a deficit forever. They never want Britain to be earning more than it spends. [Interruption.] They say “Nonsense.” Will they give me a date when they would like a surplus to be run from? I am setting a date—2019, years from now, at the end of this decade, nine years after the end of the recession. That is the date we are voting on. The truth is that they want to borrow forever. They want to run a deficit forever. They believe our debts should rise and rise, and never come down; they just do not have the courage to admit it to the British people.

Ian Austin (Dudley North) (Lab):

The Chancellor is completely wrong. The objection to the game he is playing and the trap he thinks he has so cleverly set is that he has completely failed to hit all of the promises and all of the targets that he has established. Instead of indulging in this ridiculous game-playing, he should be concentrating on preparing Britain to weather the international storm and preparing for the problems we could face as a result of the slide in China.

Mr Osborne:

That is precisely what we are doing. We are precisely preparing Britain to weather the storms. We came in five years ago. We promised to turn this economy around. We promised to take Britain back from the brink of disaster. And do you know what? We have a record number of people in work. I can see my right hon. Friend the Secretary of State for Work and Pensions over there. A record number of children are no longer in workless households. We have the gender pay gap at the lowest rate in its entire history. Inequality is down, child poverty is down and the shambles we were left, as Ben from Exeter might put it, by the Labour party is what we are clearing up right now and we will continue to do so.

The second objection to the charter is that somehow reducing the deficit and running a surplus is inconsistent with a progressive state and great public services. Tell that to the Canadians or the Swedes, two great social democracies with surplus rules for two decades or more. Tell that to all the other countries in the world which, like Britain under this Government, are on course to run a surplus by 2020—Australia, Germany, Cyprus, New Zealand, Norway, Singapore and Korea. Tell that to the British taxpayers, who have seen the deficit reduced while their public services have improved over the past five years, with crime down, satisfaction with local government services up, and more children than ever in outstanding schools. The truth is that running a deficit forever is not socialist compassion; it is economic cruelty and Britain wants no more of it.

The very purpose of this charter is that we prepare for the future, reduce our debts and run a surplus in normal times, precisely so that we do have the resources to help the poorest and the most vulnerable when economic bad times come.

We do not stand here and claim we have abolished boom and bust—that ridiculous and dangerous suggestion that got Britain into this mess in the first place. We know there are ups and downs to the economic cycle. We warn again and again of the risks out there—from slowing emerging markets to the endemic weakness of the eurozone—and it is precisely because no one knows when the economy will be hit by the next shock that we should take precautions now. That is what we are doing in this charter.

Britain’s national debt as a share of its national income is more than 80% of our GDP. Unless we reduce it, we will not be able to support the economy and the British people in the way we would like to do when the shock comes, because we would not have the room for manoeuvre. Failing to address that is deeply irresponsible.

Steve Brine (Winchester) (Con):

According to today’s figures, unemployment among 18 to 24-year-olds in my constituency is down 72% since the Chancellor walked into No. 11. That is what budget responsibility looks like. Will he promise to stay in the centre, moderate ground of British politics and keep fixing the roof while the sun is shining and reject the hard-left nonsense we are hearing from the Opposition?

Mr Osborne:

I absolutely give my hon. Friend that commitment, because we have a responsibility to represent the working people of this country, who have been completely abandoned by the Labour party. That makes us the true party of labour here in this House of Commons. Of course, the problem with people who say that now is a good time to borrow is that they always say it is a good time to borrow: in bad times they say we should borrow because we cannot afford not to, and in good times they say we should borrow because we can afford it. According to them, there is never a right time to stop borrowing and start saving. That is precisely the thinking that got Britain into a mess eight years ago.

This budget charter provides the discipline we need along with the flexibility we might require. It says that debt as a share of GDP should be falling every year when the economy is growing normally, but when recessions come or economic growth is very weak and below 1% the rule is suspended and the automatic stabilisers kick in. Then the Chancellor of the day will come to Parliament and present a plan to return the public finances to health and Members will either support or reject that plan. That is simple, clear, accountable, strong and flexible. It is a commitment to sound money and stability—the bedrock of economic security for working people.

The third argument we have heard today is that we do not need fiscal rules at all and that they are meaningless. Again, I disagree. I believe that democratic Governments should set out their approach to public spending. It is the public’s money, after all, and we should be held to account by them. Successful countries do set out long-term objectives and hold their Government Departments to account, rather than lurch from one year to another.

Of course, rules are meaningless if people are their own judges of the rules they set—we know that from the golden rule the Labour party set when it was in office—but we have an independent Office for Budget Responsibility and it is the impartial judge of whether we deliver what we promise.

There is an argument that because we have the OBR it can come to its own conclusion about the soundness of our fiscal policy, but that is profoundly undemocratic. Public spending should be determined by this House of Commons. That is why we are having this debate and this vote tonight. Under our system, the rules are set democratically and are independently judged, and the people can hold us to account.

Caroline Lucas (Brighton, Pavilion) (Green):

This might be clever politics, but it is staggeringly bad economics. The Chancellor is incredibly irresponsible to imply that borrowing is always bad. If we borrow to invest, we increase jobs, stabilise the economy and increase tax revenues. That is good for the economy, not bad for it.

Mr Osborne:

That is borrowing forever. There is never—[Interruption.] When would the hon. Lady stop borrowing and run a surplus? I am happy to give way to her as the representative from the Green party. When is the moment to stop borrowing and run a surplus?

Caroline Lucas:

The moment to stop borrowing is when we can no longer afford to pay it back—[Laughter.] We can perfectly afford to pay back our investment, which is why economists are laughing at the Chancellor—[Interruption.] If we are investing in jobs, that gets taxes going back into the Revenue, which is good for the economy. That is why economists are saying that the Chancellor’s silly trick is very bad economics, even if it is very clever politics to make all his friends laugh a lot. People across the country are not laughing, because he is increasing austerity and increasing the burden on the poorest.

Mr Skinner:

If everything in the Tory garden is lovely and if the Chancellor believes in fixing the roof while the sun is shining, why did he desert the people of Redcar?

Mr Osborne:

We have not deserted the people of Redcar. We have provided £80 million of support to local people affected by the closure of that steel plant. That steel plant tragically closed under the previous Labour Government and there was nothing like that support for the workers then. We stand behind the workers of Redcar and we stand behind the workers in every steel plant to see what we can do, but I can tell the hon. Gentleman this: we will not have steel plants or any other plants open in this country if we do not have economic stability in Great Britain.

That point brings me to the final and perhaps most dangerous objection to this charter rule, which is when people say that Britain does not have to go to the bother of saving money and trying to pay for things but can instruct the Bank of England to print the money and use it to finance Government spending directly. The leader of the Labour party calls it

“quantitative easing for people instead of banks”—

that is an accurate quote from his leadership campaign. It sounds seductive, but it is actually called monetary financing. It might be a novel argument in this House of Commons and in the British political debate, but that is because no one has seriously proposed that approach in our country in recent decades. It is a very old argument.

Monetary financing is a very old argument in the economic history of the world and we know that it invariably leads to rising prices, soaring inflation, savings being wiped out, money being debased, stability being destroyed, jobs being lost and total economic chaos. It might sound new and attractive, but it is in fact very old and very dangerous.

This is what current and former Labour Members have said about that approach. The right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper), the former Chief Secretary to the Treasury, warns that it is “really bad economics”. Jack Straw, pointing to the history of Weimar Germany and Venezuela, said it was

“bound to end in tears”.

The last Labour—[Interruption.] The Labour party now dismisses the views of Jack Straw and the right hon. Member for Normanton, Pontefract and Castleford. It probably also dismisses those of the hon. Member for Nottingham East (Chris Leslie), who said to me a few weeks ago, “This approach will hurt the very people we should be standing up for, they will pay the price—the poor and the vulnerable.” Yet it is the much advertised economic policy of the shadow Chancellor and his Labour leader. It has been supported by the Labour movement, and it must be challenged and defeated.

I welcome the shadow Chancellor to his place, and I look forward to working with him when we can agree. In that respect, he made a good start, with his first big pronouncement on Labour’s approach to fiscal policy two weeks ago. He said: “We will vote for it on the basis that we want to assure people that we will tackle the deficit, we will balance the budget, we will live within our means”. That is precisely what the charter is for, and I thank him for encapsulating precisely the basis on which I urge all Members to support it, whatever their party. If they cannot support us, I urge them at least to abstain.

Of course, since the shadow Chancellor spoke a couple of weeks ago, he has performed the most spectacular U-turn. We were told when he got the job that he would be a divisive figure. I just did not realise the split would be between two opposing views both held by himself. I have been standing at these two Dispatch Boxes for 10 years, and today, as on such occasions in the past, I have a sheaf of quotes from people in the Labour party from the past couple of days. I could read them all out, but the truth is that the complete chaos, confusion and incredibility of Labour’s economic policy is more eloquently expressed by Labour MPs than by any of my colleagues. To call the whole episode a shambles is an understatement—like saying the charge of the Light Brigade did not achieve all its objectives.

The serious point is this: in my experience, shadow Chancellors come and go, but what is permanent is the economic approach the Labour party is committing itself to tonight. It is becoming the party of permanent fiscal irresponsibility and never-ending borrowing, the party that would run a deficit forever—a Labour party that is a standing threat to the economic security of the working people of this country. It is not too late for Labour MPs to dissociate themselves from this reckless cause that their party has embarked upon, so I say to them: join us tonight, vote for budget responsibility and economic sanity, for eliminating our deficit and for reducing our debt, and help us prepare Britain for an uncertain future. Let us give those who elect us a Government that live within their means, a country that earns its way in the world, and economic security for the working people of Britain. I ask the whole House to support the charter tonight.

John McDonnell (Hayes and Harlington) (Lab):

I suppose I should deal straightforwardly with the U-turn. Yes, two weeks ago, I recommended that Labour MPs vote for the charter, and today I shall urge them to vote against it. Is that embarrassing? Yes, of course, but a bit of humility among politicians never goes amiss. When circumstances and judgments change, it is best to admit to it and change as well, so I would like to take this opportunity to welcome the Prime Minister’s change of heart on the bid for the Saudi prisons contract.

Let me clear: I have changed my mind not on the principles of the need to tackle the deficit, but on the parliamentary tactics for dealing with this charter. Labour will tackle the deficit. [Interruption.] The Chancellor has a record of ignoring the targets he sets in these charters and mandates, treating his own charter with contempt, so I recommended two weeks ago that we should do the same. It is difficult to take seriously the charters and mandates when time after time the Chancellor has come to Parliament to revise his own charter. It is difficult to take it seriously when he has consistently failed to meet his own targets.

I remember the promises; I was here. The Chancellor promised to wipe out the deficit in one Parliament, but he did not get through half. In 2010, he promised to reduce borrowing to £37 billion by 2014-15. Last year, it was £87 billion—135% more than forecast. He promised public sector net debt would fall to 69% of gross domestic product in 2014-15. Today, it stands at 80% and above. It is no wonder that the charter has been seen as one of the puerile political traps the Chancellor likes to set.

Voting against the charter makes someone a deficit denier; voting for it would lead to the Chancellor claiming for the next five years that we had signed up to support every one of his cuts in public services and benefits. I regret that the procedure followed today is an unamendable order—a take-it-or-leave-it order. My initial view was to use today’s debate for a bit of traditional parliamentary knockabout to ridicule the Chancellor’s performance against his own charter. I admit it: I was trying to out-Osborne Osborne.

Apart from the economic analysis and professional advice I have received, what really changed my mind was a trip to Redcar last week, where I met steelworkers and their families in tears at losing their jobs, their livelihoods, their futures. The Government’s failure to invest in our manufacturing industry, even if only to mothball the plant until better times arrive, has meant the end of steelmaking in Teesside and immense distress to families. The Government’s refusal to invest will be embedded in this charter as it now moves on to limit all public sector borrowing.

This charter will be used time and again as an excuse for the Government’s refusal to intervene and invest, but the more we know about its potential use, the more my view is strengthened—it has to be vigorously opposed. It will be used to justify cutting services and support to families across the UK, including the cuts to tax credits, which are the working families’ penalty. I cannot support the cuts to tax credits for working families. These are people who have done everything asked of them: they have gone to work and looked after their children, yet because of the policy direction in this charter they are going to be hit with a £1,300 cut. Neither can I support the continuing attack on disabled people, which is inherent in this fiscal mandate.

Disabled people are already harassed—some to death—by the brutal work capability assessment and often by benefit sanctions, yet they are to lose over £30 a week. Disabled people under this Government and under the coalition, have been hit 18 times harder than other citizens by the impact of cuts. I do not want the Labour party to be associated in any way with these policies, and to dissociate ourselves clearly we need to vote against them tonight.

Sir Edward Leigh (Gainsborough) (Con):

Everyone understands the hon. Gentleman’s views, but he has to explain to the House what circumstances have changed in the last two weeks. There has to be some element of consistency, and of trust in the Opposition: trust that, in future, he will not be blown off course so easily.

John McDonnell:

The hon. Gentleman has clearly not been listening. It was professional advice. It was watching the economic headwinds grow. But, in addition to that, it was meeting families who had lost their futures in Redcar that made me decide that we need a Government who would invest and would not leave them adrift. It is increasingly clear that the charter and the fiscal mandate are not economic instruments, but political weapons. This is not an economic debate. It is about the politics of dismantling the welfare state, the closing down of the role of the state, and the redistribution of wealth from the majority to the minority. Austerity is not an economic necessity; it is a political choice.

Over the last five years, the focus of the economic debate on the deficit has reflected the capture of the economic narrative by the right since the crisis in 2008. Over six years, the Conservatives have managed to convince many people that the economic crisis and the deficit were caused by Labour Government spending. It has been one of the most successful exercises in mass public persuasion and the rewriting of history in recent times. Today I am going to correct the record.

The facts speak for themselves. The Conservatives backed every single penny of Labour’s spending until Northern Rock crashed. The average level of spending under Labour was less than it was under Mrs Thatcher. It was not the teachers, the nurses, the doctors and the police officers whom Labour recruited who caused the economic crisis; it was the recklessness of the bankers speculating in the City, and the failure of successive Governments to ensure effective regulation. In opposition, this Chancellor and his colleagues wanted even less regulation of the banking sector that crashed our economy. The deficit was not the cause of the economic crisis, but the result of the economic crisis.

Mr Clarke:

What happened under the last Government was that the Chancellor and his regulatory authorities allowed first the dotcom bubble and then the crazy credit boom. Tax revenues temporarily soared to astonishing levels. The Labour Government carried on running a deficit on top of those tax revenues, and then the revenues collapsed, leaving us with the worst annual deficit in the G20. The last Government were complicit in the consequences of 2008.

John McDonnell:

And when that expenditure was being determined in the House, this side supported it, and never objected. The right hon. and learned Gentleman may well have rejected it, but I remember his Budgets. His Budgets balanced, but when they balanced, there were 40,000 homeless families in London. People were dying on waiting lists before they got their operations. Those were the consequences of his economic policies.

Focusing on the deficit continues to mask the underlying weaknesses and failures of our unreformed economic system. We are witnessing a recovery based on rising house prices, growing consumer credit, a ballooning current account deficit and still inadequate reform of the finance sector. I worry that some of the warning signs are reappearing. But the Conservatives have adhered to their dictum: never let a crisis go to waste. They have skilfully used their narrative of the deficit to enable them to cut public services, slash benefits, and give tax cuts to the rich and corporations. Successive charters and fiscal mandates brought before this House have been cynically used as a weapon in that cause.

The purpose of the original Fiscal Responsibility Act 2010, brought in by Labour, was to bolster the then Government’s economic credibility. I recall what the current Chancellor said. He described it as little more than a political stunt. But he soon learned what a useful tool charters and mandates can be, and immediately upon the coalition’s election, he introduced his own. The fact that he missed most of his targets was irrelevant to him; what was more valuable was that charters could be picked up whenever needed and prayed in aid to excuse any attack on the welfare state and any cut in benefits, and provide a means to redistribute wealth upwards.

The charter before us today also has little basis in economics. Let me quote Dr Ha-Joon Chang, Professor Thomas Piketty, Professor David Blanchflower, Mariana Mazzucato and Simon Wren-Lewis. Those eminent economists in our society said that it has

“no basis in economics. Osborne’s proposals are not fit for the complexity of a modern 21st-century economy and, as such, they risk a liquidity crisis that could also trigger banking problems, a fall in GDP, a crash, or all three.”

They go on to say that if the Government

“chooses to try to inflexibly run surpluses…Households, consumers and businesses may have to borrow more overall, and the risk of a personal debt crisis to rival 2008 could be very real indeed.”

Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op):

We are getting to the crux of this debate, which is that this fiscal charter is intellectually moronic. It essentially commits this House to never borrowing to invest, even when the cost-benefit analysis of that investment is such that the country would benefit greatly. That is why it has not one serious economist backing it, other than the self-styled experts on the Government Benches.

John McDonnell:

I could not have said it better myself. Can we move on?

The Chancellor may not appreciate these economic points, but I believe many of his advisers do. That is why there is a sizeable get-out clause for the charter rules not to apply outside normal times when there is a significant negative shock to the UK economy. Not only are the social consequences of this programme devastating, but the scale of the cuts we are witnessing represents a false economy. They jeopardise the long-term economic prosperity of our country. It is a false economy to cut adult social care when the burden is shifted on to hospitals and accident and emergency departments. It is a false economy to pursue an ideological sell-off of council housing eventually to put up the rents and eventually increase housing benefit. It is a false economy, ironically, that when this Government came to office there were 70,000 people at HMRC and within the next year that is planned to fall to 52,000—a cut of more than 25% in the number of tax-collecting staff, when HMRC says that tax evasion is as high as £10 billion a year. But the worst false economy is the failure to invest. This will be a direct result of Government policy embedded in this charter, with its limits on all public sector borrowing. Economists from across the spectrum have written and commented on the need for investment for the future. The World Economic Forum ranks the UK 10th for the quality of our infrastructure, behind Germany, France, the Netherlands and Spain. This Chancellor’s strategy has given us investment as a share of GDP lower than all the other G7 countries, falling even further behind the G7 average in recent years.

That is why business leaders, trade unions and a host of others are calling for investment. It is incomprehensible for the Chancellor to rule out the Government playing a role in building our future. For him to constrain himself from doing so in the future, no matter what the business case for a project, has no basis in economic theory or experience. We also face an uncertain medium-term future for the global economy. In recent weeks there has been mounting evidence of a decline in global demand, particularly in the emerging markets.

Economists have warned of the potential for a future slowdown in western economies as a result. Former chief economist at the World Bank, Larry Summers, wrote last week that the dangers facing the global economy are more severe than at any time since the height of the crisis. Faced with these potential challenges, it makes no sense to close down the fiscal options available, especially when there is a possibility that monetary policy options may also be constrained.

I want to break the stranglehold that the focus on deficits has had on the economic debate in this country in recent years. Yes, the deficit is vitally important, but we need a paradigm shift to open up the wider debate on what makes a healthy economy, a prosperous economy, in which everybody shares in that prosperity and in which everybody is secure, not just the wealthy few, where everybody has a decent home in a sustainable environment, is able to develop their talents to the full, has secure, stable, well-paid and rewarding employment, and support when they fall on hard times. We will tackle the deficit, yes, but we will not tackle—[Interruption.] Hon. Members should listen and they will hear.

We will not tackle the deficit on the backs of middle and low earners, and especially not on the backs of the poorest in our society. We will tackle the deficit, but we will do it fairly and to a timescale that does not jeopardise sustainable growth in our economy. We will balance day-to-day spending and invest for future growth, so that the debt to GDP ratio falls, paying down our debts. We will do this, first, by ending this Government’s programme of tax cuts to the wealthiest in our society. This winter, when the letters go through the letterboxes telling working families how much they will lose in tax credits, we will be reminding them that their tax credit cut has paid for a cut of billions of pounds in the inheritance taxes of the richest families in this country.

Secondly, we will give HMRC the resources and powers to tackle tax evasion and avoidance—no more Facebooks paying less than £5,000 in tax despite £35 million in bonuses and total global profits of £1.9 billion—but above all else we will grow our economy. We will use smart Government institutions to strategically invest in the key areas that increase GDP in the future: education, health, research, technology, human capital formation and training—a progressive economic agenda that recognises that wealth creation is a collective process, working in partnership with businesses, workers, public institutions, and civil society organisations that create wealth in this country. That is why we will establish a national investment bank to invest in innovation across the entire supply chain, from the infrastructure we need to the applied research and early stage financing of companies. To tackle the growing skills shortages we will prioritise education in schools and universities along with a clear strategy for construction, manufacturing, and engineering skills to build and maintain sustainable economic growth. The proceeds of that growth will reach all sections of our society.

So we are launching the debate on the economy we need and the economic instruments and policies needed to achieve that prosperous and sustainable growth. That is why we are reviewing every aspect of economic policy and systematically assessing our economic institutions, the Bank of England, HMRC and the Treasury.

Today I can announce that I have appointed a former member of the Monetary Policy Committee, Professor David Blanchflower, to lead a review into whether the Monetary Policy Committee should be given a broader mandate. He is joined by Lord McFall, the former Chair of the Treasury Committee.

This is Labour’s radical project. It is based upon the sound advice of some of the best economic brains in the country. We will be testing our policies and economic instruments and we will be asking the Chancellor to give us access to the resources of the Office for Budget Responsibility to model our proposals. I am asking the same of the Governor of the Bank of England.

We are seeking the widest public engagement in our economic policy discussions. The dividing lines between us and the Government are not just on how to tackle the deficit and who pays for the crisis. They are more fundamental. It is about for whom the economy works and the role of the strategic state in this process. So today we will oppose this charter as an instrument for imposing austerity on our community unnecessarily. We are bringing to an end the petty game playing and moving on to a more serious debate of how the economy can work for everybody.

The vote was carried in favour of the Government by 320 votes to 258.

The 21 Labour MPs who abstained were: Rushanara Ali, Ian Austin, Adrian Bailey, Ben Bradshaw, Anne Coffey, Simon Danczuk, Chris Evans, Frank Field, Mike Gapes, Margaret Hodge, Tristram Hunt, Graham Jones, Helen Jones, Liz Kendall, Chris Leslie, Fiona Mactaggart, Shabana Mahmood, Jamie Reed, Andrew Smith, Graham Stringer, Gisela Stuart. (Ian Austin and Chris Leslie spoke against Osborne’s Charter and then abstained from voting.)

MPs who voted with 195 (of 232) Labour MPs were: 50 (of 56) SNP, 8 (of 8) Liberal Democrat, 3 (of 3) Plaid Cymru, 1 (of 1) Green Party, 1 (of 3) SDLP. The 8 DUP MPs did not vote, nor did the 2 Ulster Unionists and the Independent MP Lady Hermon.