Do not sell the bonds at a loss. My speech on the Autumn Statement

This autumn statement is quite easy to characterise: it will increase spending a lot, it will increase taxation revenue a lot and it will increase borrowing. I do not recognise all the descriptions by the commentariat and Treasury when they put it rather differently. I do not see this as an austerity package that is half done by public expenditure reductions and half done by tax rises. The tax rises are certainly there, with £260 billion more in tax revenue in the last year of the period, compared with last year. However, there will be £200 billion more of annual spending by the end of the period, compared with last year. Borrowing is also definitely up, with the increases clearly weighted to the current year and next year. I think that is right, because I hope we are trying to offset some of the deflationary and recessionary forces, and a fiscal adjustment in that direction in the next two years clearly makes sense. Arguably, it is a little underdone, when taken in conjunction with the very tough monetary policy that the Bank of England is now providing.

The first point I wish to make to the Government, therefore, is that money policy, which was far too lax last year, as some of us warned, has lurched to being extremely tight. I believe the forecasts that say that inflation will tumble over the next two years, although perhaps not quite as fast and as far as they say—if it was completely abolished by 2025, that would be a remarkably good outcome. However, I do think that inflation will come down, because money has been greatly tightened.

Whenever I make a point about bond buying and selling, quantitative easing and money policy, I am told by all the Opposition parties and by Ministers that the issue is not for us mere mortals, because it is something that the Bank of England does as part of its independence. I therefore need to remind the House of the constitutional position and of the deeds of this and former Governments. When quantitative easing was first introduced under Alistair Darling and the Labour Government, it was decided that it had to be a dual-control policy, where ultimate control rested with the Chancellor and the House of Commons. Every amount of bond buying has been authorised by successive Chancellors and, therefore, endorsed by Parliament.

More importantly, every Chancellor and every parliamentary motion has said that it is down to the Treasury and taxpayers to pay any losses—that includes those that will now be made—on this bond portfolio. That is why the issue should be of great interest to this House and why I find it odd that nobody ever seems to want to debate it. These are colossal sums. We see that in our immediate budget this year, because it has been decided between the Chancellor and the Governor of the Bank of England—indeed the Opposition agreed—that this House will vote for a special subsidy (of £11bn) to the Bank of England for just a five-month period to deal with the losses on the bond portfolio. We do not have a breakdown of all those losses, but clearly quite a lot of them will come from selling the bonds in the market at very depressed prices, compared with the purchase price.

I say again, there is no need to do that. Indeed, it is undesirable, because money policy has already been tightened a lot and that will be a further tightening. On the item where the Bank of England is properly

independent and where Ministers would obviously not comment, I must add that I think it is dreadful that the Bank kept interest rates as low as it did last year and has not raised them sufficiently even this year at the short end. It keeps telling us it will get round to raising the rates to the level needed to kill the inflation, so I say, “Get on with it.”

In the figures given today, it is suggested that the short rates will peak at 4.77%—a very precise and unlikely number. I do not think they need to go that high. They are currently at 3%, for those who can remember, and somewhere short of 4% or maybe 4% is quite high enough to do the job, given the tightening we have already seen. Will the Bank please get there as quickly as possible and then announce that that is the worst of the damage, so the markets can adjust to the appropriate rates?

That leads me on to spending. I think the spending plans go too far. I welcome the sensible spending on trying to ease the squeeze, on upgrading pensions and all the other necessary measures, and I am glad the Government got round to taking them. But it would be a good start to stop the big subsidies and interventions to the Bank of England; we need to look at the total interest rate costs, because one of the biggest increases in spending is on interest rates, which is why I have made more comments on them.

I do not know whether enough has been put into the figures to reflect the very odd way the Bank of England and the Treasury express the interest rate charges, including the valorisation of the index-linked bonds, which is not a cash item and is not paid month by month or year by year, but is rolled up to maturity. That was the biggest element of the big increase in interest costs when last reported, but presumably that disappears to nothing when we get to the point in the forecast in 2024-25 when they tell us there will be no inflation. I hope enough credit is given in those figures, because quite a lot of the extra increase is coming through that interest rate programme.

Along with many other colleagues on both sides of the House, I am impatient for the Government to get on with encouraging, helping and mentoring more people, who are currently on benefits and may need that extra bit of help, into all those jobs we still have, before the recession really hits. Will the Government please get on with it? Billions could be saved and people could be better off if several hundred thousand of them could be persuaded into some of those 1.2 million jobs that are still available. It would be a win-win all around: for the people concerned, for the taxpayer and for the state.

I echo the comments of my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) on HS2. While I fully accept that the Government are completely committed and do not want to cancel the whole scheme, they could certainly have another look at controlling the costs and the phasing on such projects, because in the next two or three years we are pretty short of cash and the borrowing levels are very high. I think something could be done along those lines.

There is also plenty of work to be done on migration. Others will agree that by cutting out the business model of those who traffic people across the channel, and

having more appropriate accommodation for those who come here legally, we will save hotel costs. The cost to the state of the legal migration for low pay model is not to be recommended. If we invite a lot of people in for relatively low-paid jobs, they will need a lot of financial support from the state for social housing, extra school places, extra medical facilities and so forth. Indeed, when the EU had an inward migration crisis in 2016, under Mrs Merkel, it reckoned that the capital cost to set up a migrant family with social housing, along with the extra public facilities and extra capacity required in respect of transport, energy and so forth, was €250,000. We are talking about very large sums. If we invite in hundreds of thousands of people a year, we need to build a new city every year to accommodate them in decent conditions, and I do not think we are making that kind of provision in our budgets. The Chief Secretary to the Treasury should have a good look at all that.

Finally, we can do a lot more on growing revenues, particularly in energy, where we are still not getting on with the licences, permits and encouragements and incentives to invest. If we produced a lot more of our own energy, it would cut the carbon dioxide—it is particularly intensive to import liquefied natural gas—and generate a lot of extra tax for the British Treasury instead of our giving all the money to the Qatari and American Treasuries, as we do under the import model.